Korea bound 92 percent of its tariff-line items as a result of the Uruguay Round negotiations with its average basic tariff at about 7.9 percent. Duties still remain very high on a large number of high-value agricultural and fisheries products. For example, Korea imposes tariff rates of 30-100 percent on many agricultural and horticultural products of interest to U.S. suppliers. Under WTO “Zero for Zero” initiatives, Korea is in the process of reducing tariffs to zero on most or all products in the following sectors: paper products, toys, steel, furniture, semiconductors, and farm equipment.
Tariff reduction or elimination was also a key subject under discussion in the bilateral U.S.-Korea Free Trade Agreement (KORUS-FTA) negotiations. The KORUS-FTA has been signed by the parties and is awaiting parliamentary passage in the Korean National Assembly and the U.S. Congress. The KORUS-FTA offers the prospect, once ratified, of immediate elimination on hundreds of Korean tariff lines, on U.S. exports with a value of billions of dollars, with tariff elimination phased in over a three-, five-, or ten-year period for many others. Economists have forecasted that a ratified Korean-U.S. FTA could add an additional USD 10 billion in U.S. exports to Korea.
Korea also maintains a tariff quota system designed to stabilize domestic commodity markets. Customs duties can be adjusted every six months within the limit of the basic rate plus or minus 40 percent.
In accordance with the Information Technology Agreement (ITA), Korea reduced tariffs on 203 types of telecommunication and information related equipment to zero. Korea is also a party to the Government/Authorities on the Manufacture of Semiconductors (GAMS) Agreement to Eliminate Tariffs on Multi-Chip Integrated Circuits.
Korea has a flat 10 percent Value Added Tax on all imports and domestically manufactured goods. A special excise tax of 10-20 percent is also levied on the import of certain luxury items and durable consumer goods. Tariffs and taxes must be paid in Korean Won within 15 days after goods have cleared customs.
Tariffs for agricultural products vary considerably from product to product. In general, tariff rates are higher for products that are produced domestically. Processed products generally have lower tariffs. Exporters can contact the U.S. Agricultural Trade Office for specific information on tariff rates.
Most duties are assessed on an ad valorem basis. Specific rates apply to some goods, while both ad valorem and specific rates apply to a few others. The dutiable value of imported goods is the cost, insurance, and freight (C.I.F.) price at the time of import declaration.
Import duties are not assessed on capital goods and raw materials imported in connection with foreign investment projects. Authorization to import on a duty-free basis is usually accompanied by the Ministry of Finance and Economy’s approval of a foreign investment project.