Ranked 12th in the 2020 international GDP ranking, South Korea–only half a century ago a welfare state on par economically with Indonesia and Kenya–has come to be seen as one of the world’s most opportune and reliable trading partners. As of this year, South Korea is engaged in as many as 15 Free Trade Agreements (FTA) with 11 more being negotiated, making it–along with the United States, China, Hong Kong, Mexico, and India–a top global importer. If you are a foreign company, looking to expand your overseas export market, it is high time you put South Korea–if it is not there already–on your radar.
Perhaps, you would like to know what lies further down the path of exporting to South Korea before your company or business officially begins doing so. What are South Korea’s import custom clearance procedures (series of procedures for the release of imported goods)? What costs would your company incur during the process? What are the refund procedures?
Before responding to each of these particular questions, however, this article will explore a few key attributes unique to South Korea’s customs clearance process, as they will provide an important framework for understanding the operation as a whole. One distinguishing factor of South Korea’s importation process is that its conducted under an Electronic Data Interchange (EDI) system. Designed to minimize difficulties with and increase the efficiency of customs clearance, EDI allows importers to make an import declaration (a form that allows imported goods to be released immediately under the condition that there is no defect) via computer, without the importer having to set foot in the Customs House.
A second important characteristic is the country’s use of the World Customs Organization’s harmonized system (internationally standardized system of names and numbers to classify traded products) as a basis for tariffs and for the collection of international trade statistics. Used by more than 200 economies as well as most customs unions, South Korea’s abidance to the harmonized system, along with EDI, makes for a relatively simple and efficient customs clearance process.
The third and final feature to be mentioned–at least in this article–is South Korea’s free trade policy and little to no tarrifs, quotas, subsidies, or prohibitions, as the country agreed upon in its multitude of free trade agreement engagements. Partnered with countries sporting the world’s largest economies, such as Australia, Canda, the United States, China, India, the European Union etc., South Korea’s customs tariffs are among the lowest in the world.
Now, we can move on to answering specific questions regarding the South Korean customs clearance. Boiled down to its basic steps, South Korea’s import custom clearance procedures are as follows. First, either the owner of the imported goods or the customs broker must declare import–submit an import declaration form, along with a commercial invoice, a packing list, a B/L, a C/O, a certificate of inspection, etc.–upon the goods’ arrival at the port. Next, the goods undergo an inspection and screening process, the costs of which are borne by the owner of the goods. The purpose of this process is to ensure accuracy of the import declaration and takes the form of cargo inspection or component analysis by the customs labratory. If the Head of customs has found no errors upon the import inspection and documentation check, it will accept the declaration. There are also circumstances under which either correction requests are made or customs clearance is withheld by the Head of customs, which will not be discussed further in this article. When the declaration is accepted, the importer is required to make tax payments, including customs duties and the official certificate of import declaration is issued. The issuane of the certificate of import declaration leads to the release of the imported goods. In the final step, the Head of the customs office cheks whether the goods have met the approval requirements and other conditions for imports under the relevant laws.
Following the customs clearance, the cargo owner must pay taxes incurred within 15 days from the date of the declaration acceptance. Here, we move on to addressing the second question: what costs would your company incur during the process? Customs duties vary according to the imported good as classified under the harmonized system mentioned above (if you’re interested in what the tariff rates are on specific U.S. goods refer to the FTA Tariff Tool online). Relatively low compared to those of other large companies, South Korea’s average tariff rate was approximately 8% as of this year. In addition to customs duties, a value added tax (VAT)–a flat 10% rate–on all imported products must be paid based on the custums value plus duties. For particular luxury items and durable consumer goods, a special excise tax with a rate of 10-20 percent applies.
As the expenses accrued from these aforementioned duties and taxes can be large, it’s important to be knowledgable on the types of tariff refund procedure, which is as follows. If the cargo owner desires a refund, he or she may file a request for a review. According to the Customs Act, any request for review can be made after the passing of one year from the day on which releant anti-dumping duties are imposed or the issuance date of the export country’s countervailing duty or pledge.