Logistics Terms Customs Duties & Customs Clearance

Customs duties refer to the taxation imposed by the country on goods passing through the customs frontier. There are three types, which are import tax, export tax, and transit duty, and there is only import tax in the Republic of Korea.

The customs frontier is the border of the point, where the customs laws are regulated. Usually, it coincides with the borderline, but there are cases where it varies due to the bonded area or free trade area.

Import tax is a tariff levied on imported goods to protect the country’s industry and increase domestic imports.

Export tax is a tariff levied on exported goods to prevent the outflow of rare domestic goods abroad and to secure national imports of special products.

Transit duty is a tariff levied on transit cargo exported from Korea to another country. It has now been abolished according to the principle of freedom of transit.

Taxation refers to the imposition of taxes, and it is determined based on various factors.

- Ad Valorem Duty

The ad valorem duty is a tariff that imposes a tax rate on the price of imported goods according to the number of taxable objects such as manufacturing cost or import price. It is characteristic that the price fluctuates according to the fluctuations of the economy.

- Specific Duties

Specific duty is levied using the quantity, weight, length, etc. of imported goods as the tax base. Compared to the ad valorem duty, the tax amount is easier to calculate.

- Dutiable Goods

Dutiable goods refer to objects of taxation, and the Customs Act clearly stipulates that imported goods are subject to taxation. Exported goods, transshipment goods, and transit goods are not imported goods, and they are not subject to customs duties.

- Tax Base

The tax base is the quantity or price of a dutiable good that is the basis for determining the amount of tax. If the tax base is price, it is called ad valorem duty. If it is quantity, it is called specific duty.

- Tariff Rate

The tariff rate is the tax rate levied on imported or exported goods according to the tax base. The types of tariff rates are basic tax rate, provisional tax rate, flexible tariff rate, and conventional tariff.

A. Basic Tax Rate

The basic tax rate is established as the basic tax rate in the tariff schedule attached to the Customs Act and is applied to imported goods.

B. Provisional Tax Rate

The provisional tax rate is a tax rate for temporary applications when the basic tax rate cannot be applied. It is indicated together with the basic tax rate.

C. Flexible Tariff Rate

The flexible tariff rate is a tax rate applied by delegating the right to change the tariff rate to the administration within the scope of the law so that it can respond flexibly to the changing economic and trade environment. Types of flexible tariffs include anti-dumping duty, countervailing duty, retaliatory duty, emergency duty, the special emergency tariff on agricultural, forestry, and livestock products, beneficial duty, international cooperation tariff, adjusted duty, seasonal (custom) duty, autonomous tariff, and generalized preferential tariff.

Anti-dumping Duty

If the goods are imported below the normal trading price in the domestic market of the exporting country that it causes or may cause substantial harm to the domestic industry or delays the establishment of domestic industry (dumping act), then an anti-dumping duty is imposed within the range of the difference between the normal trading price and the dumping price in the domestic market.
*Dumping : Refers to the act of exporting goods at low prices in order to gain advantage in international competition.

Countervailing Duties (CVD)

The countervailing duty, like the anti-dumping duty, is one of the differential duties. When an exporting country damages the domestic industry of an importing country through subsidies, etc., it is a customs duty that imposes a premium duty equal to the amount of subsidy amount according to the effect.

Emergency Duty

Emergency duty is a customs duty levied to protect domestic industries that produce the same or directly competitive products due to increased imports of certain products or are likely to suffer damage.

Retaliatory Duty

This is a premium duty imposed on major imported goods from the country that incurred emergency duty when the domestic industry is damaged due to the invocation of emergency duty. In the WTO, unilateral retaliatory duties are not recognized.

Special Emergency Tariff

The special emergency tariff is a customs duty that imposes an excess tax rate on the price difference at home and abroad in the case of a sharp increase in the import volume of agricultural, forestry, and livestock products negotiated in accordance with the implementation of the WTO agreement or a decrease in the import price.

Beneficial Duty

Beneficial duty is a customs duty system that imposes benefits granted according to the provisions of treaties with foreign countries on products of countries that do not benefit from customs-related treaties, etc. This means that Korea unilaterally grants most-favored-nation treatment to countries that do not have treaty obligations.

International Cooperation Tariff

The international cooperative tariff is a flexible tariff system that allows for adjustment within the range of 50/100 of the basic tax rate through consultation with a specific country or international organization when the necessity is recognized for the purpose of promoting foreign trade.

Adjustment Duty

The adjusted duty is a flexible tariff system. It is a duty that additionally imposes duties within 100% of the basic duty in order to balance the tax rate among goods that have been unstable due to changes in the industrial structure, etc.

Seasonal (Customs) Duty

The seasonal customs duty applies to goods that vary greatly depending on the season, such as agricultural products. When there is a risk that the production base in the domestic market is likely to collapse due to similar goods, etc., a premium or discount is imposed at a rate equivalent to the domestic and foreign price difference.

Autonomous Tariff

An autonomous tariff is a type of flexible tariff, in which a low tariff rate is imposed on a certain number of imports, but a higher tariff rate is applied to the excess amount of imports. Certain import promotion and restraints may be imposed at 60% or 140% in some cases.

Generalized Preferential Tariff

The generalized preferential tariff is a tariff imposed on goods originating in developing countries and stipulated by Presidential Decree at a lower rate than the basic tax rate.

D. Conventional Tariff

A conventional tariff is a tax rate determined by a treaty or administrative agreement with a specific country or international organization when necessary to promote foreign trade.

Customs clearance means exporting, importing or returning goods in compliance with customs law procedures. Exported or imported goods must go through customs clearance procedure.

Import clearance reports the goods to be imported to the head of the customs office, and the head of the customs office accepts the declaration if it has been done legally in accordance with the Customs Act and other laws. It refers to the process of issuing a certificate of import declaration so that imported goods can be taken out.

Export clearance refers to the process of exporting the goods to be exported to the customs office and accepting the export declaration, and then loading the goods on a foreign trade vessel.

List-clearance is a customs clearance system that can be processed only with an invoice that contains the name, contact number, address, product name, price, and weight of the consignor and consignee. In the case of personal express delivery, it is necessary to submit the consignee's personal customs clearance code (or date of birth) to prevent the theft of another person's name.

Simplified clearance applies only to items that the public can bring in for personal use, such as personal items, consignments, separate shipment, and postal items. Unlike the formal import declaration procedure, it is possible with a simple declaration.

General clearance refers to the auditing of whether import documents and customs goods are allowed to be brought into Korea. Items excluded from list-clearance or items that exceed the duty-free amount allowed for customs clearance are classified as general clearance.

If the clearance is withdrawn at the discretion of the Korea Customs Service during the list- clearance process, the clearance fee and customs duty must be paid.

A customs broker is an agent who is delegated authority from an importer to handle complicated import and export procedures on behalf of the importer for overseas imports.

If an individual consistently makes similar purchases of items directly within the scope of the exemption from paying customs duty, customs will judge it to be a frequent carry-in, and he will have to pay customs duty despite the price being less than $150. If the direct purchase item is not confirmed through customs inspection, that individual may be penalized under the relevant laws.

It should be noted that reporting the price of imported goods lower than the actual value is an act that violates the Customs Act. It is a crime.

A tracking number is a parcel delivery waybill number that is verified when an overseas seller sends a product like delivery in Korea. The location of the item can be checked by using the tracking number.

A bonded area is a site to store foreign goods for customs clearance, manufacturing and process using foreign and domestic goods as raw materials, display foreign goods, construct using foreign goods, and inspect import and export goods in a location designated or permitted by the head of customs office due to the need for efficient cargo management and customs administration.