KnowSouth Korea

Getting The Goods To Your Customers

PREPARING YOURSELF FOR THE LOGISTICAL CHALLENGES

  • Ranked 21st out of 160 countries in the World Bank’s 2014 International Logistics Performance Index.
  • Total surface area of 100,150km2 – making it about the same size as Iceland – with more than 70% of the terrain being mountainous. South Korea is a peninsula, and so is surrounded by sea on three sides.
  • One of the planet’s most densely populated countries, with the citizens largely centred in and around South Korea’s most populous cities.
  • A nation of consumers with high expectations for delivery. South Koreans are accustomed to rapid delivery speeds and expect to wait a maximum of 4 days for a domestic order.
  • Same-day delivery is a common and popular option for e-Commerce shops within South Korea, with major retailers such as Coupang offering free delivery within two days.
  • South Koreans expect very advanced tracking services for online orders, and local providers tend to deliver accurate and quick results.
  • 88% of consumers expect purchases to be delivered directly to their door.
  • Around 50% of South Koreans surveyed reported that slow delivery is one of their primary concerns with online shopping, and approximately 46% of these consumers have experienced problems due to slow delivery times.

SOUTH KOREA’S LARGEST CITIES

LOGISTICS NETWORK

South Korea has an advanced and extensive logistical infrastructure. The road system is the predominant form of freight transport, with more routes constantly under design and construction. South Korea additionally boasts a highly advanced rail network, with bullet-style trains that can reach up to 350km/h.

The major expressways and rail routes are shown in the graphic below.

Importantly for those shipping their goods overseas, South Korea has major port and airport facilities. Busan is the country’s largest port and the fifth-largest in the world, and it is well connected to Seoul and the rest of South Korea by the KTX high-speed rail system. Incheon also has a major international port at Yeongjong. Incheon International Airport, one of the most technologically advanced airports in Asia, is the main gateway to this territory, and it’s located just over an hour west of Seoul. Other international airports include Gimpo Airport and Gimhae Airport.

Key logistics operators

Sea and air freight services to South Korea are provided by a range of companies, and freight-forwarding companies can provide advice on the best way to ship goods.

Seoul-based Korea Post is the national postal service of South Korea, and other local logistics providers include:

  • CJ Korea Express
  • Ilyang Logistics
  • Pantos Logistics
  • Sarang Logistics

CUSTOMS CONSIDERATIONS

The Korea Customs Service (KCS) is the primary South Korean authority involved in the import clearance process, though other entities may be involved in regulating imports through the administration of licenses or quotas. The Ministry of Food and Drug Safety (MFDS), the Ministry of Agriculture, Food and Rural Affairs (MAFRA), and the Quarantine Inspection Agency (QIA under MAFRA) may be involved, depending on the goods to be imported.

Due to the complex nature of the customs clearance process, licensed customs brokers are typically hired to alleviate the logistical burden.

PROCESS

Customs formalities in South Korea can largely be grouped into three categories – de minimis, informal and formal, each of which has different eligibility requirements and procedural effects.

General commodities up to a value of $100¹ qualify for de minimis clearance, and thus a simplified declaration procedure, although restrictions apply to specified goods identified by the KCS. On the whole, however, e-commerce shipments (B2C) are declared via formal entry regardless of value; de minimis clearance is not permitted unless e-traders who import B2C goods into South Korea are approved and registered by the KCS for the entry of goods according to the de minimis method.

A vast majority of foreign goods imported into South Korea for general consumption (i.e. those that have commercial value) must be declared to and accepted by the Korean Customs Service (KCS) under the formal system in order to be released. All goods are screened prior to import, though – depending on the value, origin and category of the import – documentary burdens can vary.

The typical customs procedures involved are as follows:

  • Goods are stored in a bonded area upon arrival until they are customs cleared.
  • Upon the arrival of goods to be imported, the importer/customs broker must electronically or manually submit an import declaration and supporting documentation to the customs house where the goods are to be cleared. The KCS has been operating a web-based clearance system, ‘UNI-PASS’, since October 2005.
  • Document review of import declaration and associated documentation, and cargo inspection.
  • Assessment and payment of duty.
  • Issuance of a customs importation certificate upon customs clearance and release of goods.
  • Import declarations are generally accepted by the KCS if they satisfy the required formalities, but customs authorities may conduct a physical inspection of the goods for import before accepting a declaration.

Once the KCS approves an import declaration, the importer/customs broker must pay any applicable taxes and tariffs before customs will complete the clearance. Once the duties are paid and the relevant agencies have authorised entry, a customs importation certificate is issued. This certificate confirms that the goods have been properly imported and are customs cleared.

¹ The de minimis clearance threshold is up to $200 for the USA and Puerto Rico, based upon the KORUS FTA.

DOCUMENTATION

The basic documentation required for imports into South Korea includes:

Commercial invoices;
Bill of ladings (or air way bills);
Packing lists;
Certificates of origin
Additional documentation will be required if the goods for import must be licensed or are restricted by government agencies/ associations.

PACKAGING AND LABELLING REQUIREMENTS

Like most countries, South Korea has strict packaging and labelling regulations for goods imported into its borders, and different categories of goods have different labelling requirements. Generally:

Metric units of measurement and weight are required.
A marking of the origin of commercial shipments is compulsory and should be indicated either in Korean, Chinese or English; The KCS publishes a list of the country-of-origin labelling requirements by Harmonised System Code number. Each certificate should, however, indicate a description of the item, quantity, price, place of origin and exporter and importer. Country of origin marking must be shown at the time of customs clearance.
The labelling requirements for specific products are regulated by the local government agencies responsible for the goods in question. Pharmaceuticals and food, in particular, have very strict requirements so the websites of the Korea Food & Drug Administration and the Ministry of Food, Agriculture, Forestry and Fisheries should be consulted in this regard.

South Korean legislation additionally sets out specific labelling requirements for textile products, electrical appliances (see, additionally KC certification), cosmetics and consumer goods, amongst others, and labels affixed to products themselves for sale in South Korea must be written in Korean, though supplementary indication in English is permitted.

With the exception of country-of-origin markings, Korean-language labels can be attached to products in a South Korean bonded area either before or after customs clearance.

RESTRICTIONS ON INTERNATIONAL SHIPMENTS SENT TO SOUTH KOREA

Some items are prohibited from import into South Korea altogether, whilst others are restricted. Restricted goods require additional documentation (evidence of licenses, authorisations, certificates etc.), so in these cases it is important to check with an importer that they have the necessary permissions before sending your international shipment to South Korea.

Prohibited Items Restricted Items
Counterfeit; banknote, coin included Antiques
Firearms, parts thereof and ammunition Animal, animal skin and stuffing
Goods from North Korea Banknotes (Korea & Foreign)
Military equipment Chemicals, non-hazardous
Narcotics Cosmetics
Pornography Drug: prescription, non-prescription, disease
Foodstuffs
Medical/dental supplies & equipment
Plants, plant products and seeds
Tobacco, tobacco products

Restrictions can include tariff-rate quotas with prohibitive over-quota tariffs, as well as quarantine approvals.

DUTIES AND TAXES

Regardless of whether they are private individuals or commercial entities, importers must pay import duty and other applicable taxes when importing goods into South Korea. Additional taxes that may become payable include sales tax, education tax, STRD tax, transportation tax, special consumption tax and liquor tax. Transportation tax is charged on particular products based on the quantity imported.

CUSTOM DUTY

South Korea employs a 10-digit Harmonized Tariff Code System, and whilst customs tariffs on imported goods are usually proposed by importers using a self-classification system, the KCS maintains an exclusive right to make a ruling on the Harmonized Tariff Schedule of Korea (HSK) classification of imported products at its discretion.

HSK classification dictates the amount of tariff to be imposed on a good for import, as well as additional import restrictions applied to the product. Should you be unsure about your goods for import, the Korea Customs Valuation & Classification Institute offers an ‘HSK classification pre-review service’ through which traders can receive an official classification ruling on an imported product before the product is brought into Korea for commercial sales.

Duties vary according to commodity type and country of origin and are available in the Harmonized Tariff Database of the KCS.

Most duty rates are between 3% and 15%, and are typically calculated ad valorem as a proportion of the estimated value of the goods concerned, based on transaction value, insurance and freight costs (the CIF value). The average duty rate is 4.17%, and some products, such as books, can be imported duty-free.

Products attracting a higher customs tariff include agricultural products, seafood, alcoholic drinks, textiles and clothing.

VAT

Except where a specific exemption is provided by law, VAT is levied on the supply of all goods and services and the importation of all goods into South Korea at a standard rate of 10%. This rate is applied to the landed cost of the goods in question, i.e. CIF value plus any applicable customs duties.

DUTY-FREE THRESHOLD

South Korea has a low rate of duty exemption of KRW 150,000 (around $128 at the time of writing). If an import’s CIF value is under this threshold, no tax and duties apply to the goods imported.

FREE TRADE AGREEMENTS

At present, South Korea has 12 free trade agreements (FTAs) currently agreed in varying degrees of implementation, covering 50 countries. Six are under negotiation. As a result of these agreements, tariffs charged on imported products may be reduced depending on the goods’ country of origin.

Only goods that ‘originate’ in an eligible country or region are subject to preferential tariff treatment, and there are specific rules to determine eligibility. Goods seeking preferential treatment under FTAs must be accompanied by appropriate documentation, known as a ‘certificate of origin’.

Other areas of interest

Meeting your regulatory responsibilities

There are various options available when it comes to establishing yourself in the South Korean market.

Reaching and engaging your consumers

Consumers in South Korea expect excellent after-sales customer service, including a free local contact number for advice and support.

Receiving Payment From Your Customers

Bank cards are overwhelmingly the most popular payment method in South Korea.

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