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[S. Korea‘s Reduction and Exemption of Customs Duties]
■ Outline
Tax reduction and exemption of Korea is based on Articles 88 through 101 of the Customs Act.
The possibility of reduction and exemption of customs duties(hereinafter referred to as "reductions") is quite significant factors to determine competitiveness of not only importers but exporters in international trade.
But, like other countries, the legal system in Korea defines the time of application for reductions as the time of import declaration. If applicants fail to apply for reductions until this time, they may lose opportunity to obtain reductions. In addition, feasible opportunity to claim requirements of reductions in the future doesn't exist.
Accordingly, the matter of reductions is a barometer to tell a lazy person from a diligent person.
Even though if it is same goods, purpose and condition of goods, date of import, have to declare import since the tax reduction is decided according to the applicable laws and regulations and must apply for reductions before import declaration accepted. If the goods are not exported from the bonded area, it can be applied for reductions within 15 days from the date of receipt of the import declaration.
■ The Category of Reductions
Generally, customs duty is imposed on imported goods. Exempt some or all customs duties if there are certain requirements. Tax reduction and exemption is divided into, in conditions to use for certain purpose, conditional exemption for exemption from customs and unconditional exemption for exemption without designated use.
☉ Unconditional Reductions
Unconditional reductions are defined that once reductions at the time of import clearance into Korea are obtained, the importer can use goods for any purposes without government's interference.
Type of exemption | Purpose | Object | Notice |
Exemption of such as diplomatic goods | | Diplomatic representative’s business supplies and uses Foreign contractors and technicians business supplies and uses | Limitation : It can not be transfered for it’s intended use within three years from the date of receipt of the import declaration |
Goods exemption of imbalance tax rate ( other medium-sized enterprises : Tax reduction） | | Aircraft (parts included) | No after service |
Semiconductor manufacturing equipment (additional equipment included) | within 3 month (Until all used days when it is not used for 3 months or more) can not be used or transferred out of purpose | ||
Exemption of governments goods | Customs convenience for nontrade goods | Goods donated to national or local governments | Don’t need after service |
Exemption of small amount of goods | Customs convenience for small amount of goods | Recorded documents, commercial goods, small goods etc. | Don’t need after service |
Exemption of traveler ‘s belonging | Customs clearance convenience for traveler | traveler or crew ‘s belonging, separate post | - |
Exemption of re-import | Exemption from Tax on export goods, international commerce facilitation etc. | Goods imported within two years as export goods | - |
Reduction of damaged product | Before acceptance of an import declaration, tax reduction for damaged part | Changed before acceptance of an import declaration, damaged product | - |
Reduction of overseas processed goods | Reduce customs when importing goods made from exported raw materials | Manufactured and processed products (Electronic devices and camera) repair and processed products | - |
☉ Conditional Reduction
On the contrary, conditional reductions regulate that the importer can't use goods for other purpose than originally purposed usage and transfer to others within the period that the head of Korea Customs Service determines in range of 3 years from the date of the acceptance of import declaration, and post-management is followed concerning those matters.
Type of exemption | Purpose | Object | Notice |
Exemption of academic research supplies | Academic and educational support | academic research supplies, educational supplies, laboratory supplies | ” |
Exemption of religious goods | Support for social welfare, charity, and the disabled | religious, charity, disabled goods etc. | ” |
Exemption of specific goods | Support for specific projects. | Items for breeding of animals and plants, aquaculture, etc | It can not be used or transfered within 3 years besides purpose from the date of receipt of the import declaration |
Reduction for prevention of environmental pollution article | Support for environmental pollution, high-tech business | Machinery, apparatus, etc. for preventing or treating pollutant | It can not be used or transfered within 3 years besides purpose from the date of receipt of the import declaration |
Exemption of re-import | Promotion of customs clearance for export of temporary goods | Goods designated by the Minister of Finance and Economy (Packaging items for imported goods) | Can not be used or transfered besides purpose within re-export period |
Reduction of re-import | Enhancement of customs clearance for export for long-term use goods | the articles specified by the Minister of Finance concerning the lease contract and the completion of contract | ” |
☉ Reductions by the Subject of Import and Reductions by Usage
The possibility of reductions varies according to the factors such as who an importer is, and what imported goods are used for. To avoid disadvantages, importers themselves are required to gain the understanding of the possibility of reductions because the subject of imports and usages can vary dynamically case by case.
■ Our Program is..
ㅇ First, general requirements of reductions by categories are explained. Then, with respect to the goods whose possibility of reductions are determined, frequency of import is high and amount of import is big, simulation program is automatically recognizing and showing reductions rate, reductions amount, standards for reductions. (Four categories of reductions including factory automation reductions)
ㅇ With respect to the categories whose reductions amount is big and coverage of reductions is large, this program sets up its item names, usages and standards, prescribed by Ordinance of the Ministry of Strategy and Finance, and for such goods only whose requirements are coincided with legal requirements, it approves reductions.(It's required to apply for reductions until the time of customs clearance on applicants' own.)
ㅇ Following contents are about four major reductions categories and their legal bases that the program is introducing by HS codes or separately.
☉ Factory Automation Reductions
ㅇ Legal Base
Article 95 paragraph 1 subparagraph 3 of the Customs Act ⇒ Article 46 paragraph 2 of the Regulation Enforcement of the Customs Act(the Ordinance of the Ministry of Strategy and Finance) ⇒ Goods, item number 4 of Schedule 2 of Article 46 paragraph 2 of the Regulation Enforcement of the Customs Act
ㅇ Requirements
Machinery, apparatus and equipments(including their parts of equipments) for factory automation, applying engineering and electronic technology or information processing technology, and their core parts, prescribed by Ordinance of the Ministry of Strategy and Finance
☉ Environmental Pollution Prevention Reductions
ㅇ Legal Base
Article 95 paragraph 1 subparagraph 1 of the Customs Act ⇒ Article 46 paragraph 1 subparagraph 1 of the Regulation Enforcement of the Customs Act(the Ordinance of the Ministry of Strategy and Finance) ⇒ Goods, item number 2 of Schedule 2 of Article 46 paragraph 1 subparagraph 1 of the Regulation Enforcement of the Customs Act
ㅇ Requirements
An importer is required to be an end user or a builder(including a subcontractor)
Machinery, apparatus and equipments, prescribed by Ordinance of the Ministry of Strategy and Finance, used for preventing release of pollutants and their disposal.
☉ Industrial Technology Search Reductions
ㅇ Legal Base
Article 90 paragraph 1 subparagraph 4 of the Customs Act ⇒ Article 37 paragraph 4 subparagraph 1 of the Regulation Enforcement of the Customs Act(the Ordinance of the Ministry of Strategy and Finance) ⇒ Goods, Schedule 1 of Article 37 paragraph 4 subparagraph 1 of the Regulation Enforcement of the Customs Act
ㅇ Requirements
① The subject of importation is a company that has research centers attached with the company or research and development task forces, or is scheduled to report to establish them. Or, it's required to be a research association of industrial technology.
② Goods are required to be imported for the purpose of research and development of industrial technology.
■ The Permission Matter of Double Reductions
In case that same imported goods are subject to several grounds of reductions, double reductions aren't permissible. It's required to choose one of reductions grounds that reductions rate is high, or that verifying reductions ground is easy, etc.
■ Other Necessary Comments
It's very important for importers to take care of their own reductions, not entrusting others(including expertises) because it's easy to miss reductions chance by a small mistake. Following are details of the reasons.
① The importers are well aware of the purpose and usage of imported goods.
② The importers are well aware of precise standards and technological traits concerning relevant goods
③ The importers have advantage of adjusting requirements of reductions in consultation with exporters.
④ Without paying commission to an expert, it's hard to expect him/her to positively invest great amount of time in dealing with it.
