# ![](media/image1.jpeg){width="0.7395833333333334in" height="0.78125in"} Doing Business In Korea

# A Country Commercial Guide for U.S. Companies

# 

# 

# INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

-   [Chapter 1: Doing Business In
    Korea](#chapter-1-doing-business-in-korea)

-   [Chapter 2: Political and Economic
    Environment](#chapter-2-political-and-economic-environment)

-   [Chapter 3: Selling U.S. Products and Services](#ch3)

-   [Chapter 4: Leading Sectors for U.S. Export and Investment](#ch4)

-   [Chapter 5: Trade Regulations and Standards](#ch5)

-   [Chapter 6: Investment Climate](#ch6)

-   [Chapter 7: Trade and Project Financing](#ch7)

-   [Chapter 8: Business Travel](#ch8)

-   [Chapter 9: Contacts, Market Research and Trade
    Events](#chapter-9-contacts-market-research-and-trade-events)

-   [Chapter 10: Guide to Our Services](#ch10)

#   {#section-2 .unnumbered}

# Chapter 1: Doing Business In Korea

-   [Market Overview](#market-overview-return-to-top)

-   [Market Challenges](#market-challenges-return-to-top)

-   [Market Opportunities](#market-opportunities-return-to-top)

-   [Market Entry Strategy](#market-entry-strategy-return-to-top)

## Market Overview [**Return to top**](#chapter-1-doing-business-in-korea)

-   **National Capital:** Seoul

-   **Population:** 48.4 million

-   **Land Area:** 98,477 sq km (slightly larger than Indiana)

-   **GDP:** USD 797.4 billion (2006)

-   **GDP Growth:** 5.0% (2006)

-   **Industries:** Electronics and electrical products, motor vehicles,
    shipbuilding, mining and manufacturing, petrochemicals, industrial
    machinery, textiles, footwear.

-   **U**.**S. Exports to Korea:** USD 32.46 billion (2006)

-   **U**.**S. Share of Korean Imports:** 10.9% (2006)

-   **Korea's Imports:** USD 309.3 billion (2006)

-   **Korea's Exports:** USD 325.7 billion (2006)

-   **U.S. Trade Balance:** -USD 13.37 billion (2006)

-   **Korea's Import Trade Partners:** Japan (16.8%), China (15.7%),
    U.S. (10.9%), Saudi Arabia (6.6%) (2006)

## Market Challenges [**Return to top**](#chapter-1-doing-business-in-korea) 

-   Korea continues a process of economic liberalization and
    deregulation. The Korean government has yet to adopt a hands-off
    policy where the economy and trade are concerned.

-   The market is advanced in most sectors and competition from Korean
    companies is considerable.

-   Protection of Intellectual Property Rights is crucial. Register your
    Intellectual Property before you come into the market.

-   See the latest \"[Exporter
    Guide](http://www.fas.usda.gov/gainfiles/200610/146249108.pdf)\"
    prepared by the Foreign Agricultural Service\'s [Agricultural Trade
    Office in Seoul](http://www.atoseoul.com/) for updated information
    on this topic.

## Market Opportunities [**Return to top**](#chapter-1-doing-business-in-korea)

-   U.S. companies will find excellent niche markets for their goods and
    services across virtually every sector.

-   Best Prospects for U.S. exports are in the following sectors:

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-   Automotive Parts and Accessories

-   Broadcasting Services and Equipment

-   CNC Machine Tools

-   Computer Software

-   Cosmetics

-   Defense Industry Equipment

-   Drugs and Pharmaceuticals

-   Education and Training Services

-   Electrical Power Systems

-   Engineering Services

-   Medical Equipment and Devices

-   Pollution Control Equipment

-   Radio Frequency Identification Technology

-   Security Services and Products

-   Specialty Chemicals

-   Travel & Tourism

-   Wireless Broadband Equipment and Services.

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```
-   The U.S.-Korea Free Trade Agreement (KORUS-FTA), currently under
    negotiation, aims at the removal of trade and investment barriers
    thereby easing American business access to the Korean market. More
    information is available from the office of the [United States Trade
    Representative](http://www.ustr.gov/Trade_Agreements/Bilateral/Republic_of_Korea_FTA/Section_Index.html).

-   Korea is a highly advanced, tech-oriented economy that can utilize
    and generate significant demand for state of the art technologies.

-   Korea has several mega-projects underway aimed at establishing the
    country as an international business center for North-East Asia, as
    well as a major financial and logistics hub.

-   Korea has a steady and diversified growth of 4.6%, with SMEs taking
    on stronger and more dynamic roles with the economy, opening new
    opportunities for partnering with U.S. SMEs.

-   Korea has strong military ties with the U.S. and continues as one of
    the top markets for U.S. defense equipment in the world.

-   Korean fascination with the "American Lifestyle" and related
    Americana, continues to draw interest and attention among Korean
    consumers. See [CS
    Korea](http://www.buyusa.gov/korea/en/contactuslink.html) for more
    information.

-   Specific opportunities are described in greater detail in Chapter 4
    (Leading Sectors for U.S. Export and Investment).

## Market Entry Strategy [**Return to top**](#chapter-1-doing-business-in-korea)

-   Local representation is essential for the success of American firms
    in the Korean market.

-   The most common means of establishing a presence in Korea include:
    retaining an agent or distributor, naming a registered trading
    company as an agent or establishing a branch sales office.

```{=html}
<!-- -->
```
-   See the latest \"[Exporter
    Guide](http://www.fas.usda.gov/gainfiles/200610/146249108.pdf)\"
    prepared by the Foreign Agricultural Service\'s [Agricultural Trade
    Office in Seoul](http://www.atoseoul.com/) for updated information
    on this topic.

```{=html}
<!-- -->
```
-   Business relationships are built on personal ties. Companies should
    visit Korea to cultivate contacts and to better understand business
    conditions.

-   CS Korea can help U.S. companies activate the right connections in
    Korea through a wide range of marketing services which include
    identifying and arranging contact with potential buyers,
    distributors and importers. For more information, please visit CS
    Korea's website: (<http://www.buyusa.gov/korea/en/ourservices.html>)
    to see the menu of CS Korea services for U.S. companies.

[Return to table of contents](#doing-business-in-korea)

#   {#section-3 .unnumbered}

# Chapter 2: Political and Economic Environment

For background information on the political and economic environment in
Korea, please click on the link below to the U.S. Department of State
Background Notes.

<http://www.state.gov/r/pa/ei/bgn/2800.htm>

[Return to table of contents](#doing-business-in-korea)

[[]{#ch3 .anchor}Return to table of contents](#doing-business-in-korea)

# Chapter 3: Selling U.S. Products and Services 

-   [Using an Agent or
    Distributor](#using-an-agent-or-distributor-return-to-top)

-   [Establishing an Office](#establishing-an-office-return-to-top)

-   [Franchising](#franchising-return-to-top)

-   [Direct Marketing](#direct-marketing-return-to-top)

-   [Joint Ventures/Licensing](#door-to-door-sales)

-   [Selling to the
    Government](#selling-to-the-government-return-to-top)

-   [Distribution and Sales Channels](#defense-procurement)

-   [Selling
    Factors/Techniques](#selling-factorstechniques-return-to-top)

-   [Electronic Commerce](#electronic-commerce-return-to-top)

-   [Trade Promotion and Advertising](#tradepromotion)

-   [Pricing](#pricing-return-to-top)

-   [Sales Service/Customer
    Support](#sales-servicecustomer-support-return-to-top)

-   [Protecting Your Intellectual
    Property](#protecting-your-intellectual-property-return-to-top)

-   [Due Diligence](#due-diligence-return-to-top)

-   [Local Professional
    Services](#local-professional-services-return-to-top)

-   [Web Resources](#web-resources-return-to-top)

## Using an Agent or Distributor [**Return to top**](#ch3)

The most common means of representation are: 1) appointing a registered
commissioned agent (commonly known as an "offer agent" in Korea) on an
exclusive or non-exclusive basis, 2) naming a registered trading company
as an agent, or 3) establishing a branch sales office managed by home
office personnel with Korean staff.

Any businessperson registered with the Korean government can import
goods in his/her own name. Appointing a registered trading company
(rather than an \"offer agent\") as an agent has its advantages because
these agents can handle all of the import paperwork and imports for
their own account. Registered trading companies tend to be larger firms
that split their businesses between exports and imports. However, these
larger firms may be less attentive to building the U.S. supplier\'s
business, placing a higher emphasis on diversifying their portfolio of
products from different countries. Similarly, while the larger general
trading companies may be influential and well known in the market, they
also may not devote as much attention to a single product as do smaller
firms.

To find a local representative, a good place to begin is with the
[International Partner Search
(IPS)](http://www.buyusa.gov/korea/en/ips.html) offered by the U.S.
Export Assistance Centers (USEAC) located throughout the United States
and by the Commercial Service Korea (CS Korea). CS Korea's industry
specialists utilizing their network of industry contacts and trade
associations, can identify pre-screened partners for the U.S. client.
The IPS provides the U.S. client an annotated list of three to five
potential, qualified representatives. Given time and resource abilities,
the preferred alternative is the [Gold Key
Service](http://www.buyusa.gov/korea/en/gks.html) [(GKS),]{.underline}
whereby the U.S. client is in country to meet face-to-face with
prospective candidates. The GKS is a very successful program providing
full-service support that can often includes briefings, translation and
transportation (fee based).

CS Korea strongly recommends that U.S. companies seek legal counsel
prior to signing a contract. Most experts also recommend hiring a local
attorney prior to making major business decisions with Korean companies.
A final recommendation is that any distribution or agency contract
include a termination clause. Otherwise, Korean Commercial Arbitration
bodies may specify the terms for termination, including compensation
claims against the principal. A mutually signed contract between a
supplier and an agent/distributor with termination provisions would take
precedence and avoid placing the U.S. company at risk.

U.S. companies should also seek legal counsel with regard to protecting
their intellectual property. Trademark and patent registration (if
applicable) with the [Korea Intellectual Property Office
(KIPO)](http://www.kipo.go.kr/kpo2/user.tdf?a=user.english.main.BoardApp&catmenu=ek)
is the minimum safeguard for your intellectual property rights. U.S.
companies are advised to seek the services of a local attorney to
directly register their trademarks and/or patents in their own names. In
order to have control over IPR, registration must be done in the U.S.
company's name and not the Korean agent's name. Under Korean law,
applications must be done in Korean and submitted to KIPO.

To view a list of useful contacts for agents or distributors, go to the
link below.

<http://www.buyusa.gov/korea/en/agentscontacts.html>

## Establishing an Office [**Return to top**](#ch3)

Most foreign companies in Seoul are located in the following four
well-known districts: 1)

Kangnam \-- the expensive, bustling, new city center south of the Han
River where one can find the World Trade Center complex and the American
Chamber of Commerce in Korea; 2) City Hall \-- the historic CBD area
where the U.S. Embassy and a few Korean ministries are located; 3) Yoido
\-- or \"Manhattan Island,\" which is adjacent to the Han River, where
many financial firms and the National Assembly can be found; and 4) Mapo
District -- which is halfway between Yoido and City Hall. While heavy
urban traffic is an ongoing source of frustration and delay, Seoul has
an excellent public transportation system that allows foreign investors
to consider various locales for their Korean offices.

The following section provides some basic guidelines on how to set up an
office in Korea. In addition, a list of real estate consultancy,
taxation and human resource search services in Korea are provided.

Step 1: Assess Your Company's Commitment to Establishing a Presence in
Korea

Potential investors can take advantage of the many services offered by
[Invest KOREA](http://www.investkorea.org/), the primary investment
promotion agency for Korea. Invest Korea is an arm of the Korea
Trade-Investment Promotion Agency (KOTRA), a government-sponsored
non-profit organization. The operation is staffed by KOTRA personnel and
complimented by officials from relevant government ministries and
specialists from the private sector in areas such as law and accounting.

Invest KOREA provides assistance in the following areas:

● Identify the necessary administrative procedures.

● Consult on forms of investment, including M&A, joint ventures and real

estate acquisition.

● Provide legal and taxation advice

Invest KOREA also provides investment planning, ongoing support and
follow-up support. Invest Korea also maintains an Ombudsman ready to
address foreign investors' grievances.

Step 2: Receive Authorization to Proceed with an Investment

Foreign investment projects require notification to the Ministry of
Commerce, Industry, & Energy (MOCIE) or its delegated authority -- the
head office of a major Korean commercial bank or [Invest
Korea](http://www.investkorea.org/). (A list of major banks in Korea can
be found at
[www.buyusa.gov/korea/en/bankcontacts.html](http://www.buyusa.gov/korea/en/bankcontacts.html).)
Investment notification in liberalized sectors can be handled through
banks, however other sectors (see Chapter on Investments, pg. 88)
require greater review or documentation.

Step 3: Identify an Office Site

Companies unfamiliar with Korean real estate should consult reputable
real estate agents or a real estate consulting firm, especially one
experienced in dealing with foreign firms. A list of select such agents
can be found at:
<http://www.buyusa.gov/korea/en/realestatecontacts.html#_section1>.

While office space may be easing in Seoul's Central Business District
(CBD), given the high demand for land in Seoul, rental rates are high
even by U.S. and Asian standards. A recent survey indicated that the
average monthly rent in the CBD was USD 75 per pyong (equal to 3.3
square meters) with rents in the popular Gangnam District even higher.
Experts expect rents to rise 4% over the next year. These rates are
inclusive of maintenance fees and are based on gross floor area, which
include common areas.

In addition to monthly rent, another expense is a deposit payment (or
\"key money\"), a one-time charge refundable upon termination of the
lease. Nearly all Korean landlords require key money, which ranges from
USD 3,000 to USD 6,000 per pyong. There are various combinations of
monthly rental fees and key money deposits, and the price per pyong
varies based on the negotiated terms. Office parking, another scarce
commodity in Seoul, is usually available for a monthly fee.

Under the Foreign Land Acquisition Law foreigners are allowed to
purchase land regardless of size or purpose. Local zoning laws do
regulate categories of activity permitted, and should be investigated
prior to making final investment decisions.

Step 4: Register with the Nearest Tax Office

Investors should register with the nearest tax office in their local
jurisdiction for tax reporting purposes. Given the complexity of Korean
tax laws and the potential for misunderstanding provisions, companies
should consider hiring a local accounting firm to file taxes. A list of
local accounting firms can be found at:

<http://www.buyusa.gov/korea/en/realestatecontacts.html#_section2>.

Step 5: Seek Qualified Employees

Local Koreans are attracted to U.S. firms given salary rates, prestige,
opportunities for travel, the ability to use and learn English and the
possibility to transfer to the company's home office or another foreign
branch office.

Korea has a large pool of conscientious and highly educated workers.
Female employees are especially strong candidates given the prevalence
of traditional cultural attitudes in many Korean companies.

Whether seeking to hire local or foreign staff, U.S. companies should
consult an employment agency in Korea. Click here to view a list of
employment agencies:

<http://www.buyusa.gov/korea/en/realestatecontacts.html#_section3>

To view the list of real estate consultants, accounting firms and human
resource agencies, go to the link below.

<http://www.buyusa.gov/korea/en/realestatecontacts.html>

## Franchising [**Return to top**](#ch3)

**Franchising**

Korea's franchising industry led by fast food restaurants has developed
rapidly in the last few years. This growth has expanded to include
family restaurants, discount stores, clothing, mailing services,
cleaning services, as well as educational institutions. In general,
Koreans are attracted to American franchises given their global brand
recognition, management support, and overall positive reputation.

Part of the interest in franchising stems from the "new generation" of
affluent Korean consumers coupled with changes in Korea's distribution
sector that favor new product and marketing concepts. The market value
of the Korean franchise industry is estimated at USD 64.2 billion. This
figure includes all franchise and sub-franchise fees, and royalties. Of
the total franchise market, 45 percent (USD 28.9 billion) is accounted
for by food services, including fast food services and family
restaurants. A list of food/fast-food franchises in Korea is available
on pg. 20 & 21 located at the following linked site: [U.S. food and
beverage
franchises](http://www.fas.usda.gov/gainfiles/200610/146249108.pdf).
Finally, the retail franchise sector, such as convenience stores and
consumer goods, comprise 25 percent of the franchise industry (USD 16.0
billion).

Regarding franchise services, such as education, real estate, cleaning
services, mailing services, and others, account for 30 percent (USD 19.2
billion in sales). Koreans are very conscious of health and beauty
products and are fond of foreign cosmetics. With more Korean women
entering the labor force and higher incomes, upscale products are more
attainable. Korean men are increasingly using cosmetics. This heightened
demand is helping create opportunities for foreign cosmetics franchises.
On a per capita basis, Koreans spend more on prestige cosmetics than any
country in the world.

Franchise activity related to children\'s educational services and
services tied to sports and leisure activities are also becoming very
popular, especially with Korean parents\' increased interest in
providing better educational opportunities for their children. Korea
places a high emphasis on education and most students engage in
after-school study programs at private academies known as hakwon or
at-home with tutors. At the same time, interest in activities such as
field trips to the countryside, camping excursions, creative thinking
classes, and book clubs is increasing, as highlighted by the recent
successes of foreign companies such as Gymboree, New Horizon,
Montessori, and Mad Science in entering this market.

Although U.S. franchises are sought after in Korea, challenges remain.
Some business representatives may not be familiar with standard
franchise requirements, fee schedules, and royalty rates. Others may
raise concerns over minimum facility size or progressive expansion of
the franchise as a condition of the contract.

There are no specific legal requirements for U.S. franchises to operate
in the Korean market. However, franchisees need to comply with the
Sub-franchisee's Fair Trade Act, which closely parallels the rules that
exist for sub-franchisees in the U.S.

## Direct Marketing [**Return to top**](#ch3)

The [Korea Online Shopping Association (KOLSA)](http://www.kolsa.or.kr/)
estimates that for 2006, there were approximately 100,000 direct
marketing firms in Korea. Gross revenues for Korean direct marketing
from January to December 2005, including catalog sales and TV and
Internet shopping, are as follows:

Catalog sales: USD 0.44 billion

TV home shopping: USD 3.53 billion

[Internet shopping: USD 6.65 billion]{.underline}

Total: USD 15.30 billion

Direct marketing primarily takes the form of catalog sales, TV home
shopping, and Internet shopping. Korea also has a large market for
door-to-door sales and multi-level marketing.

##### Door-to-Door Sales

Of the direct marketing total, approximately one-quarter were
door-to-door sales firms in Korea. Major door-to-door sales items
include home education materials, books, household consumer goods,
cosmetics, health foods, sporting goods, and service products, such as
insurance and travel counseling. According to the Korea Direct Selling
Association (KDSA), the Korean door-to-door sales market for 2005
totaled USD 6.3 billion.

##### Multi-level Marketing:

Korea's multi-level sales for 2005 reached USD 3.6 billion. As of
December 31, 2005, 128 multi-level marketing (MLM) registered companies
employing about 3.1 million distributors. Over the years, MLM has come
under a cloud as an "undesirable or inappropriate business form" for
Korea, claiming that it neglects consumer safety, excessive profits, and
threatens the Korean social fabric through its \"pyramid schemes.\"
However, MLM's negative image in Korea appears to be changing due to the
combined efforts of the Korea Direct Selling Association (KDSA) (whose
membership includes almost all U.S. MLM companies doing business in
Korea), and many governmental representatives on both sides of the
Pacific.

In keeping with deregulation of sectors of the economy, the Korean
government eliminated most existing market barriers against MLM
products, such as the obligation to disclose retail prices on the MLM
product label. The authority to oversee the MLM industry rests with the
Fair Trade Commission (FTC).

As a result, multi-level marketing activities by U.S. firms in the
cosmetics, cleaning products, and kitchenware sectors have been
expanding. Prior knowledge of the market conditions can help prevent
unnecessary conflicts with government officials, consumer 'watchdog'
groups, or industry groups.

## Joint Ventures/Licensing [**Return to top**](#ch3)

The Korean government aggressively promotes foreign investment. Recent
policies have liberalized investment including the lifting of foreign
equity ownership limits in selected sectors. President Roh and the Prime
Minister\'s Office have spearheaded efforts to de-regulate and
liberalize the economy. Foreign operations have welcomed such moves and
encouraged further such steps.

Selecting the appropriate partner is one of the most difficult and
critical aspects of establishing a joint venture in Korea. Large Korean
conglomerates, known as Chaebols, still exercise considerable influence
over the Korean government and financial institutions. The Korean
government has recently adopted a policy shift promoting small and
medium-sized businesses. With the decreasing influence of Chaebols and
greater concern of for anti-monopolistic behavior, joint venturing in
Korea has become more diversified. Regardless of the scale of Korean
partner, there is a tendency within Korean business culture to maintain
local control, regardless of the percentage invested by foreign
entities. A U.S. company should take into account such cultural aspects
to ensure policies and operations are conducted in the best interest of
the U.S. partner.

Management control must be evaluated on three levels: 1) shareholder
equity; 2) representation on the board of directors; and 3) active
management (representative director and subordinate management*).*
Legally, Korean board meetings require the physical presence of all
members as well as a quorum of the directors. Therefore, if a foreign
investor intends to exercise day-to-day management, a representative
director who resides in Korea must be appointed. Moreover, the
representative director will need the support of and access to key
functional areas of the company in order to manage in accordance with
the foreign investor's wishes. Therefore, the internal organization of a
joint venture company as well as key management appointments should be
worked out and agreed upon by all involved parties as early as possible.

Compatibility of goals between the Korean and foreign partners is also
crucial to the joint venture\'s success. For example, a foreign
investor\'s primary goal may be to send profit dividends offshore while
the Korean counterpart may be more concerned with corporate growth in
Korea, particularly by exporting to overseas markets.

Another fundamental issue to be faced is how contractual agreements are
treated. To most Koreans, a contract represents the current
understanding of a \"deal\" and is the beginning, rather than an end, to
negotiations. If changing circumstances result in omissions or points
that no longer accurately reflect the original agreement, then problems
will arise. The same is true if the contracting parties change. This
type of experience in Korea has led many foreigners to believe that
Koreans place less importance on a written contract than Westerners.
Though Americans may regard a written contract as legally binding,
Koreans may regard the same contract as a \"gentlemen\'s agreement\"
subject to further negotiations should conditions change.

Contract negotiations with Koreans therefore should be viewed as an
on-going process of dialogue having the following objectives: 1)
reaching a common understanding of the deal that includes each party's
responsibilities; 2) recording the detailed understandings; and, 3)
being prepared to modify the terms of the agreement should there be a
change in circumstances.

Certain terms of the commercial relationship between joint venture
partners, such as technology transfer, raw material supply, marketing,
and distribution should be agreed on in detail in the joint venture
agreement.

American companies should proceed with caution when they enter into a
technology licensing agreements. A company's intellectual property is
not necessarily protected and may be vulnerable in the later stages of a
business relationship when the survival of the Korean company is
dependent on the technology. Although U.S. companies frequently register
their patented technology with the [Korean Intellectual Property Office
(KIPO)](http://www.kipo.go.kr/) before entering into a licensing
agreement, successful companies often retain cutting edge technology or
key processes. This preventive strategy allows the U.S. party to control
the use of the licensed technology as well as maintain the integrity of
the licensing agreement.

Korea's legal procedures can be lengthy, cumbersome and expensive when
dealing with contract violations. If at all possible, the best strategy
is to prevent possible conflicts. The identification of a viable and
trustworthy business partner from the outset is essential, therefore
foreign investors should conduct thorough assessments and due diligence
when selecting a business partner.

Legal advice is always a solid move. A list of attorneys is available at
the end of this chapter. In addition to consulting with an attorney,
foreign investors can also consult with the Korean Commercial
Arbitration Board (KCAB), which advises foreign companies on contract
guidelines. A KCAB counselor can also review contracts and identify
areas of potential concern. Information on the KCAB can be found at:
[http://www.kcab.or.kr](http://www.kcab.or.kr/)

## Selling to the Government [**Return to top**](#ch3)

Korea joined the World Trade Organization's Government Procurement
Agreement (GPA) on January 1, 1997. The GPA establishes
non-discriminatory procedures for the procurement process so that a
maximum number of qualified suppliers can fairly compete. In its
accession offer, Korea agreed to cover procurements valued over certain
"threshold" amounts made by Korean central government agencies, their
subordinate entities, Korean provincial and municipal governments, and
some two dozen government-invested companies. Korea included procurement
of services and construction services. Other features of the GPA for
Korea include a prohibition against offsets as a condition for awarding
contracts on covered procurements, and a provision requiring procuring
entities to allow suppliers to pursue alleged violations of the
agreement through GPA-defined bid challenge procedures. The Korean
Ministry of Finance & Economy (MOFE) has established an International
Contract Dispute Settlement Committee to deal with any challenges by
foreign suppliers that Korean procuring entities have not complied with
GPA provisions.

The annexes to Korea's accession document specify certain thresholds,
below which GPA rules do not apply. Thus, the threshold for Annex 1
(central government) entities for supplies and services is approximately
USD 180,000, and for construction services approximately USD 7 million.
Thresholds for supplies/services and construction services are
considerably higher for Annex 2 (sub-central government entities) and
Annex 3 (government-invested corporations). Korea also specified certain
categories of purchases that would be exempt from GPA coverage
altogether, including procurement related to national security and
defense, Korea Telecom's purchases of telecommunications commodity
products and network equipment, procurement of satellites, and purchase
by the Korea Electric Power Corporation (KEPCO) of certain electrical
transmission and distribution equipment.

The [Public Procurement Service (PPS)](http://www.pps.go.kr/english/) is
responsible for the purchase of goods and incidental services required
by central and sub-central government entities, government construction
contracts and stockpiling raw materials. Not all GPA-covered procurement
is handled by the PPS. In the case of Korean government-invested
corporations (listed in Annex 3 of Korea's accession agreement),
procurement is handled in-house, with these entities following the same
GPA rules. Thus, tendering under open, formal procedures are required.

All bidders who wish to participate in PPS tenders for supplying goods
and services must register with PPS at least one business day prior to
the date of the bid opening. However, foreign bidders are allowed to
register with PPS prior to entering into a contract. Failure to register
constitutes cause for rejection of the bid. Korea began the [Government
e-Procurement System (GePS)](http://www.g2b.go.kr/) in October of 2002,
a single window for public procurement which digitalized the entire
process from order to payment for all public organizations. Bids can be
viewed on the PPS website and are valid for at least 45 days after the
bid opening date shown on the site. Additionally, as required by the
GPA, the procuring entity must publish information on bid opportunities
in at least two sources: the daily newspaper Seoul Shinmun (daily
newspaper) and the Korean Government Gazette. While these sources are
published in the Korean language, any given tender announcement must be
accompanied by a summary in English, including the subject matter of the
contract, the deadline for submission of tenders, and the address and
contact point from which full documents relating to the contracts may be
obtained. The tender announcement must contain a statement that the GPA
covers the bid.

The U.S. is currently negotiating a Free Trade Agreement (FTA) with
Korea. Government Procurement is one of the chapters under negotiation
in the FTA. For further information please visit the website for the
Office of the United State Trade Representative at
<http://www.ustr.gov/>.

For more information on the Korean Public Procurement Service, please
visit their website at <http://www.pps.go.kr/english/>

##### Defense Procurement

The Defense Acquisition Program Administration (DAPA) was launched on
January 2, 2006 as a streamlined military procurement agency, replacing
the former Defense Procurement Agency (DPA). DAPA is responsible for
defense industry equipment purchases. The new agency was formed in order
to ensure transparency in the defense procurement process and
consolidates eight organizations that were responsible for procurement
and the development of technology that were formerly under the purview
of the Ministry of National Defense and the separate military services.
The DPA was managed by the military. However, DAPA is a civilian agency
with military support. DAPA continues to report to the Defense Minister,
who is a civilian. Please visit the DAPA website at
[www.dapa.go.kr](http://www.dapa.go.kr/) for further details on the
agency.

U.S. defense industry equipment standards are generally accepted in
Korea since most Korean defense systems are based on American standards.
Defense equipment is marketed in Korea through the following channels:
direct purchase, sales agents, and importers. U.S. manufacturers and
suppliers of defense equipment generally use a well-qualified agent in
Korea who is familiar with the Korean defense system and who knows key
members of the Republic of Korea Air Force (ROKAF), ROK Navy (ROKN), ROK
Army, and the Agency for Defense Development (ADD). The selected agent
can provide U.S. suppliers with information about the status of bids and
procurement plans for defense equipment. Former ROKAF, ROKN, and ROK
Army officials have good potential as agents in Korea. Local agents
should register and be certified by the DAPA to supply their products
and services to the Ministry of National Defense (MND).

For enquiries on the current status of DAPA, please contact Mr. Yong Tak
Lee at <Yong.Tak.Lee@mail.doc.gov>.

## Distribution and Sales Channels [**Return to top**](#ch3)

Local representation is essential for the success of foreign firms in
the Korean market. This is especially true when considering the fact
that business relationships in Korea are built upon personal ties and
social introductions, and that much of the major third-country
competition is only a few flight-hours away. In addition, for sectors
that involve any type of government procurement, an entity must be
registered with the Korean government in order to bid on procurement
projects. Hence, many American firms enter into a consortium with a
Korean company or enter into a representative agreement, especially for
the purposes of market entry. Finally, the language barrier and
established social/ business circles make it extremely difficult to
enter the Korean market without a qualified Korean representative.

Distribution methods and the number and functions of intermediaries vary
widely by product area and local conditions. The market for most
consumer products is concentrated in major cities. The traditional
retail distribution network of small family-run stores, stalls in
markets, and street vendors is changing rapidly toward large-size
discount stores. There are many large retail stores in the major cities,
especially Seoul, Daegu, Busan, and the outlying suburbs. Recently,
retailing concepts such as Full-Line Discount Stores (FDS) have gained
popularity. U.S. based Price Costco has entered the Korean FDS market
and are successfully competing against their growing Korean rivals
E-mart and Lotte mart. Rapid expansion of these discount chain stores is
planned nationwide, with suburban satellite cities attracting the
greatest number of stores. Distribution of goods through large discount
chains is one of the best ways to market foreign products to Korean
consumers.

Parallel imports can legally enter Korea. Parallel imports marginally
reduce the value of an exclusive distribution agreement. Many American
companies continue to give exclusive contracts, since they have in place
territorial limits in neighboring countries that enhance the value of
the exclusive in any one country. Likewise, any parallel importer in
Korea that is not receiving the support of the OEM, and does not deal in
the same volume, cannot be guaranteed a steady source of supply. As
noted above, the legitimate exclusive distributor still has considerable
advantages in Korea.

Most products enter Korea by air and sea at Incheon and Busan, after
which they are transferred to major distribution centers by rail or
road. Korea's main distribution centers are
[Busan](http://www.portbusan.or.kr/),
[Incheon](http://www.incheon.go.kr/),
[Daegu](http://english.daegu.go.kr/), and
[Gwangyang](http://www.gwangyang.go.kr/english/index.html).

## Selling Factors/Techniques [**Return to top**](#ch3)

Three practices are essential for success in the Korean market: (1)
adapting products and procedures to Korean tastes and conditions, (2)
regular communication with Korean business partners and customers, and
(3) consistently exhibiting a firm commitment to the Korean market over
the long run.

In selling to manufacturers, personal contact is important not only
because of the value placed on direct discussions and on building
long-term relationships but in obtaining a first-hand acquaintance with
new processes and equipment. In light of competition offered by Japanese
suppliers, who often visit potential and existing customers throughout
Korea, U.S. suppliers should consider (1) making visits to Korea to
augment the efforts of the local representative; (2) bringing
representatives back to the home office periodically to ensure they are
fully informed, motivated and up-to-date on the supplier and its
offerings; (3) allowing the distributor or agent to appropriately select
from the U.S. company's full product line items for sale in the market,
(4) holding demonstrations, seminars and exhibitions of products in
Korea; (5) increasing the distribution of technical data and descriptive
brochures; and (6) improving follow-up of sales leads.

## Electronic Commerce [**Return to top**](#ch3)

[]{#tradepromotion .anchor}In 2006, the total amount of E-Commerce
transactions in Korea was estimated to have reached approximately USD
400 billion, a 9 percent increase from 2005. This figure is projected to
grow at an average annual rate of 10 percent over the next five years.
In Korea, the B2B, B2G and B2C transactions account for 88.6, 8.2 and
2.3 percent of the E-commerce sector respectively. There are
approximately 4,524 B2C cyber shopping malls in Korea with estimated
sales of USD 9.0 billion in 2006.

The transaction volume of Korean Electronic Commerce (EC) is forecast to
grow rapidly over the next several years. Major factors driving the
growth include a nationwide broadband infrastructure with 35 million
Internet users from a total population of 48 million, and introduction
of Wireless Broadband (WiBro) and 3.5G mobile High Speed Data Packet
Access (HSDPA) services through mobile computing and communication
devices in 2007. Increased EC transactions will lead to growing demand
for E-commerce solutions, a variety of equipment, networking, software,
and services, to develop and support E-commerce-related web-sites and
transactions. The electronics and metal manufacturing industries that
account for nearly 70 percent of total B2B transactions are willing to
spend in order to achieve efficient and secure use of EC tools. However,
U.S.-based E-Commerce companies need to monitor the Personal Information
Protection Act and Ministerial data privacy/SPAM regulations that are
being drafted for enactment in 2007. Although the new regulations are
likely to reflect concerns voiced by the public and the industry to the
government, it may still be restrictive for E-Commerce firms managing
user data globally to some extent.

## Trade Promotion and Advertising [**Return to top**](#ch3)

The Commercial Service section of the U.S. Embassy in Korea is the
primary US government trade promotion agency. Among the non-USG
organizations, the Korea International Trade Association (KITA) is the
largest trade association in country. As a member of the World Trade
Centers Association (WTCA), KITA explores new trade opportunities for
Korea by organizing trade missions and market survey teams to a number
of foreign countries on a regular basis. KITA\'s Trade Service Center
also assists potential foreign buyers or sellers. The Center also offers
on-the-spot consultation and personalized advisory service regarding
trade rules and regulations, export and import procedures, business
management, market research, technology development, and taxation. In
addition, KITA maintains six overseas branch offices, two of which are
based in Washington D.C. and New York.

Seoul maintains the largest trade show venue in Korea, the Convention
and Exhibition Center, popularly known as \"COEX.\" Covering 36,027
square meters of exhibition space, COEX is a full-service trade
organization offering multi-lingual simultaneous translation,
world-class audio-visual equipment, state-of-the-art lighting and sound
systems, and up-to-the-minute information services. The Seoul Trade
Exhibition Center (SETEC) is also in Seoul and is operated by the Korea
Trade- Investment Promotion Agency (KOTRA).

In addition the second largest city in Korea, Busan, located in
southeastern part of Korea currently holds national exhibitions. The
Busan Exhibition & Convention Center (BEXCO) has a floor space of 26,446
square meters. There is also an outdoor exhibition site that is 13,223
square meters in size.

######### Advertising

Korea's advertising market is open to 100 percent foreign equity
participation. Foreign advertising agencies now control more than 50
percent of the Korean advertising market. Today, all the major
international agencies are present in Korea.

There are four major broadcast networks (television and radio) in Korea.
KBS I and KBS II are owned and operated by the Korean government, while
MBC and SBS are independently operated. However, government influence
remains since advertising time on these and other broadcast networks is
sold exclusively through the government organization known as the [Korea
Broadcast Advertising Corporation
(KOBACO)](http://www.kobaco.co.kr/eng/index.asp). Companies must
register with this corporation if they intend to advertise in either of
these two media. As of 2006, approximately 256 foreign and Korean
agencies were registered with this corporation.

Though censorship in advertisement is still practiced in Korea, it is
not as strict as it was in the past. The Korea Advertising Review Board
(KARB), which consists of advertising and industry associations,
currently controls advertising censorship procedures. In addition, the
government's Korean Fair Trade Commission is responsible for determining
whether an advertisement makes accurate claims.

Several local TV stations have been established in recent years. This
development, as well as the advent of cable television in 1995, has
expanded advertising\'s potential reach to Korean audiences. As of
December 2006, the Korean cable industry was served by 111 system
operators and about 173 program providers offering diverse cable
programs such as business news, sports, music, Buddhist programming,
shows on the Korean board game, baduk ("Go"), etc. There are also five
shopping channels, including CJ 39, Hyundai, LG, Woori, and Nongsusan.
Estimated total sales for these five shopping channels in 2005 was USD
1.7 billion.

Advertising market opportunities are predicted to show strong growth as
more Koreans gain access to electronic media. Cable television in Korea
currently has an audience of over 12 million households. Additionally,
the government took steps to promote broadcast satellite television in
digital format in 2001, with expectations of nationwide coverage by
2010. Korea Digital Broadcasting (KDB), a subsidiary of state-run Korea
Telecom, holds the contract for digital broadcasting. In 2005, KDB
broadcast 208 satellite channels reaching an estimated 1.9 million
households.

Internet advertising also offers significant market growth potential,
since the number of computer users will further increase in the coming
years. There are currently 12.7 million Internet using households in
Korea, which amounts to about 88 percent of total households in Korea.

##### Local Fair Authorities

-   Convention and Exhibition Center (COEX)

> Tel: 82-2-6000-0114
>
> Website: [www.coex.co.kr](http://www.coex.co.kr/)

-   Busan Exhibition and Convention Center (BEXCO)

> Tel: 82-51-740-7300
>
> Fax: 82-51-740-7320
>
> Website:
> [www.bexco.co.kr/eng/index.php](http://www.bexco.co.kr/eng/index.php)

-   Seoul Trade Exhibition Center (SETEC)

> Tel: 82-2-2222-3800
>
> Fax: 82-2-2222-3820
>
> Website: [www.setec.or.kr](http://www.setec.or.kr/)

-   Daegu Exhibition and Convention Center (EXCO Daegu)

Tel: 82-53-601-5000

Fax: 82-53-601-5029

Website: [www.excodaegu.com](http://www.excodaegu.com/)

KITA US Offices

-   KITA NY Office

Tel: 212-421-8804(ext. 26)

Fax: 212-223-38270

E-Mail: <kitany@kita.net>

Website: <http://www.kita.org/kita/kita_index.jsp?siteUrl=usny.html>

-   KITA Washington Office

Tel: 917-699-2032, 703-242-5713

Fax: 703-242-5714

E-Mail: <wayne@kita.net>

Website: <http://www.kita.org/kita/kita_index.jsp?siteUrl=usny.html>

-   Korea Trade Investment Promotion Agency (KOTRA)

Tel (rep): (82-2) 3460-7114\
Fax(rep) : (82-2) 3460-7777

Website: <http://www.kotra.or.kr/>

To view the list of major newspaper agencies in Korea, go to the link
below.

<http://www.buyusa.gov/korea/en/newspapercontacts.html>

CS Korea, provides the [Single Company
Promotion](http://www.buyusa.gov/korea/en/scp.html) service to U.S.
firms through which firms can promote their products in Korea.
Additionally, the "Featured U.S. Exporters (FUSE)" site provides
information on how a company can advertise products on the Commercial
Service's worldwide website in various languages for free. Click on
"[FUSE](http://www.buyusa.gov/home/fuse.html)" for more information.

## Pricing [**Return to top**](#ch3)

U.S. goods have a reputation among Korean buyers of having high quality
and performance; however, since Korean manufacturers are
price-conscious, they often perceive U.S. products to be very expensive.
In an export-oriented economy where finished products must meet keen
competition in the world market, many Korean manufacturers believe that
it is essential to buy the cheapest raw materials and equipment, even at
the expense of quality. Goods from Japan and elsewhere are often
considered to be better buys than goods from the U.S. In addition,
Korean manufacturers often seek to offset labor wages with low-cost
inputs. However, as Korea continues to move toward exporting higher-end
and manufacturer-branded products, and tries to combat criticism of poor
quality control among certain Korean products in recent years, the
emphasis manufacturers place on price as a buying factor may be somewhat
tempered. Other characteristics in Korean price considerations are the
tendency to seek "bundled" prices and to undervalue \"software\"
(engineering and other services components), particularly in the
procurement of major systems.

Considering the factors outlined above, U.S. exporters might
consider: 1) adapting their products to Korea by marketing basic units,
2) taking into account in their price quotations the likelihood of
repeat business for spare parts and auxiliary equipment, and most
importantly, 3) emphasizing and marketing the idea that the superior
quality of U.S. manufactured input products ultimately results in lower
production costs.

Another pricing factor that merits consideration is commissions. The
commission rate for using an agent or distributor varies depending on
the type of product and the transaction amount. On average, Korean
agents require a 10 percent commission, particularly when a transaction
is conducted on a spot basis, but this varies for different products.
Generally, a 5-7 percent commission applies to product categories such
as general machinery, including packaging, construction, and material
handling equipment. Meanwhile, more sophisticated products such as
medical, laboratory, and scientific analytical instruments usually
require a commission of 15-18 percent or more, since these are products
for which after-sales service is considered to be very important.

Korea has consumer-protection legislation that requires consumer items
be labeled with both the manufacturer's sales price to the retailer and
the marked-up retailer's price to the consumer. The mark-up from
manufacturer to consumer ranges from 50 percent to 150 percent.

Korea has a 10 percent sales tax that is included in the price of
taxable items. There is a 10 percent VAT on services provided in Korea.

## Sales Service/Customer Support [**Return to top**](#ch3)

Sales and after-sales service is generally secondary to product and
price considerations. Following the Korean War, at a time when foreign
exchange was exceedingly scarce, Korean plant operators learned to rely
on their own resources or on the many small machine shops in order to
service machinery. This tradition of self-reliance and improvisation is
still evident in contemporary Korean business practices. However, with
heavy competition among foreign suppliers in the Korean market,
servicing has become an increasingly important component of selling.

Private traders and offer agents often hire in-house engineers to
install equipment. For specialized installations, however, the best
sources of assistance include resident and offshore foreign engineers in
coordination with local engineers, whose services are available on
contract.

Japan\'s geographical proximity to Korea as well as the similarities in
business culture between the two countries allow Japan to send teams of
specialists to Korea at minimal cost and effort in order to offer
skilled advice in installation, maintenance and repair. U.S. firms
should consider establishing regional servicing facilities that can
effectively service and support equipment sold in Korea. The emphasis
given recently by some American firms on the training of personnel,
often through U.S.-based programs, has proven beneficial.

## Protecting Your Intellectual Property [**Return to top**](#ch3)

Please refer to Chapter 6 (Investment Climate), for further details on
the protection of intellectual property rights with regard to patents,
copyrights, trademarks and their policy implications. For the purposes
of this chapter on how to market U.S. products and services in Korea,
however, we have briefly outlined measures U.S. firms should take to
protect their Intellectual Property Rights (IPR) in Korea.

**Why You Should Register Your Intellectual Property in Korea**

Intellectual property laws exist in Korea. However, protection of
intellectual property and the laws governing enforcement of these
protections are not necessarily extra-territorial. What is understood
and practiced in the United States is not always practiced in Korea.
U.S. companies wishing to sell their products or services in Korea
should first and foremost find out if they have to register their
intellectual property rights (copyright, trademark or patents) in Korea.
The speediest means to enforce the right-holders' claim is to have their
intellectual property recognized by the Korean authorities and
government.

*[Trademark]{.underline}*

One of the most frequent IPR problems facing U.S. businesses in Korea is
trademark protection. Unlike the trademark registration system in the
United States, which is based on "first commercial use" or "first intent
to use," the trademark registration system in Korea is based on
"first-to-file," or more accurately, first to successfully register with
the [Korea Intellectual Property Office
(KIPO)](http://www.kipo.go.kr/kpo/user.tdf?a=user.eng.main.BoardApp). If
a U.S. company is considering entering the Korean market it is highly
advisable that the U.S. company register their trademark first before an
unauthorized party has the opportunity to register the trademark. The
company will save much time, energy, resources and legal fees in the
long run. Since registration of trademarks is in Korean, in order to
successfully register a trademark, the U.S. company should hire a
qualified local attorney who is familiar with registration procedures.
To have maximum effect, a company should be prepared to register its
trademark in every applicable product class category for the product(s).
Protection is not generally provided under the Korean legal system if
the company has not registered in the relevant product class category.
Should the trademark registration remain unchallenged, the entire
registration process should take eleven months from the date you submit
your application form to KIPO.

During the course of trademark registration, information on pending
applications initially becomes available in publications of the Korea
Invention and Patent Association two to three months after the initial
application. Official announcements of pending applications are
published for comment by KIPO in its Official Gazette. Generally, U.S.
companies hire a local attorney and ask the firm to look into the status
of the company's trademark in Korea. Sometimes, the U.S. company
discovers from the aforementioned publications that an unauthorized
party has already filed the trademark and is awaiting registration. In
this case the company is eligible to file an Opposition Action Petition
within a 30-day period of official publication. In an opposition action
petition, the company states their case as to why the unauthorized
party's application should be rejected during the course of initial
review. After reviewing the opposition action petition, KIPO can decide
either to proceed with registering the unauthorized trademark
application or to reject the trademark application, clearing the path
for the U.S. company to register at a later date.

At a minimum, American companies that plan to enter the Korean market in
the future should monitor KIPO public notices to ensure that their
trademark has not been registered. Since the public notices are only in
Korean, if the U.S. company cannot monitor the situation from America,
the company should consider hiring someone in Korea, such as an
attorney, who can.

The 1998 Trademark Act provides KIPO with grounds to reject third-party
applications of the same or similar trademarks if KIPO is convinced that
the registration is done in \"bad faith.\" As capable as trademark
examiners can be, some trademark registrations by unauthorized
registrants have slipped through the cracks and have been successfully
registered. Registration by an unauthorized party can include "predatory
registration" (i.e., knowing that the mark belongs to another company,
the unauthorized applicant registers the mark, with no intention of
using it but rather to sell the trademark registration when the
legitimate trademark owner tries to enter the Korean market).

In such cases, because the Korean legal system is based on "first to
file", and because the unauthorized registrant successfully registered
with KIPO, the unauthorized registrant is the legal owner of the
trademark in Korea---even if it is the U.S. company's mark and the
American company has been using it in international business for several
years. Provided that the mark was not used commercially by the
successful but unauthorized registrant in Korea for the previous three
years, the U.S. company can file a Cancellation Action petition to
cancel the existing mark. If the cancellation action is successful and
there is no appeal, the U.S. company can immediately file to register
the trademark with KIPO, thereby reclaiming the trademark.

The most contentious scenario takes place when an unauthorized trademark
application has been successfully registered with KIPO, and the party is
actually using the U.S. company's trademark commercially in Korea. In
this case, the legal remedy available is an Invalidation Action. An
invalidation action petition can be filed anytime during the course of
the 10-year life of a trademark, provided the unauthorized registrant is
actually using the trademark. The American company's petition should
outline why the unauthorized trademark owner's registration should be
voided (invalidated), i.e. that the American company is the legitimate
and original trademark owner, and that consumers know the trademark to
be associated with the U.S. company.

If the company follows either the invalidation or cancellation action
routes, the burden of proof lies with the petitioner. U.S. companies
should be prepared to provide documentation showing commercial use
(include samples of the product and illustrating the uniqueness of the
trademark and product), to substantiate financial investment in
advertisements (include all examples of actual advertisements or
promotional materials that appeared in the media), even to provide
results of any surveys that show that the brand name is publicly
recognized in Korea and that the company is the source of the legitimate
goods promoting the trademark.

Provided that the company and their attorneys put forth a convincing
argument with meticulously documented details as to why the company is
the legitimate trademark owner, the company has a good chance of winning
the case before the KIPO Trial Board. However that may not be the final
hurdle since there is an appeals process for cancellation and
invalidation actions from the KIPO Tribunal Board to the Korean Patent
Court and finally to the Supreme Court of Korea. The rule of thumb for a
trial date is first come, first served \-\-- petitions are filed by date
with the trial dates occurring in order of the date of petition. A final
judgment on a petition can be a long process due to the length of time
it takes to go from the KIPO Tribunal Board, via the Korean Patent
Court, to the Korean Supreme Court. Four years or more is not unheard of
for a final decision using the legal process and even then there is no
guarantee that the U.S. company will be successful. Regardless of the
approach taken, good legal counsel is essential.

Unlike successful cancellation actions where the company may file for
the trademark immediately with KIPO, successful invalidation actions
have a one-year moratorium from the invalidation action date before a
U.S. company can officially register a trademark. However, US companies
can seek enforcement measures from the date of invalidation of the
Korean registration.

##### How and Where to Register Your Intellectual Property in Korea

Both the United States and Korea are members of the Madrid Protocol,
which allows companies from the member nations to apply for trademark
ownership in several member nation countries simultaneously. In Korea, a
U.S. company can register their trademark and patents with the [Korea
Industrial Property Office
(KIPO)](http://www.kipo.go.kr/kpo/user.tdf?a=user.eng.main.BoardApp).
Foreign applicants are required to retain a licensed local attorney in
order to prepare applications in Korean and to conduct necessary
follow-up correspondence locally. Under international law, copyrights do
not have to be registered in order to be protected; however, similar to
the U.S., registration is also possible in Korea with the Ministry of
Culture and Tourism. Enforcement of legally registered copyrights,
trademarks, and patents are under the jurisdiction of the Prosecutor\'s
Office in Korea.

+----------------------------------+-----------------------------------+
| **Type of Intellectual           | **Where to Register**             |
| Property**                       |                                   |
+----------------------------------+-----------------------------------+
| Trademark, Patent                | Korea Industrial Property Office  |
|                                  | (KIPO)                            |
|                                  |                                   |
|                                  | [[www.kipo.go.kr]{.un             |
|                                  | derline}](http://www.kipo.go.kr/) |
+----------------------------------+-----------------------------------+
| Copyright                        | Ministry of Culture and Tourism   |
|                                  | (MCT)                             |
|                                  |                                   |
|                                  | [[http://www.mct.go.kr/]{.u       |
|                                  | nderline}](http://www.mct.go.kr/) |
|                                  |                                   |
|                                  | Copyright Registration Division:  |
|                                  | Copyright Deliberation and        |
|                                  | Conciliation Committee            |
|                                  |                                   |
|                                  | [[www.copyright.or.kr]{.underli   |
|                                  | ne}](http://www.copyright.or.kr/) |
+----------------------------------+-----------------------------------+

When registering a copyright, trademark, or patent, US companies should
maintain control of their intellectual property (e.g., registering in
the U.S. company's name) even if they request their Korean agent to do
the processing. This control is particularly important should the
relationship dissolve. In previous cases where the Korean agent
maintained control of the intellectual property, long, costly legal
battles ensued in order for the U.S. company to register their
trademark.

##### Need for a Local Attorney

A large number of Korean law firms focus on international business. Most
experts advise engaging a local attorney before making major business
decisions in dealing with Korean companies. In addition to advice on
structuring deals or arranging contracts, Korean law firms are usually
well connected into the power structure and have extensive contacts in
government ministries.

Although it is important to have legal representation when a business in
Korea reaches even a modest level of complexity, it is important to
remember two things. First, as a matter of legal culture, Korean lawyers
do not see themselves as businessmen and try to avoid intruding on
business judgments. It is rare for Korean lawyers to venture far from
recitation of applicable statutes. This is one reason why it is a good
idea to seek a Korean firm employing foreign legal consultants who tend
to provide a proactive, commercial-oriented philosophy. Although major
Korean legal firms have extensive and excellent contacts with the Korean
bureaucracy, for anyone planning long-term business in Korea, it is
useful to establish direct contacts with officials who oversee any given
industry.

To learn more about intellectual property laws, enforcement bodies and
issues in Korea, visit the IPR toolkit at
<http://www.buyusa.gov/korea/en/iprtoolkit.html>.

For list of major law firms in Korea, go to
[www.buyusa.gov/korea/en/lawfirmcontacts.html](http://www.buyusa.gov/korea/en/lawfirmcontacts.html).

## Due Diligence [**Return to top**](#ch3)

Local representation is essential for the success of foreign firms in
the Korean market. Due diligence is critical, especially when selecting
a local partner for joint ventures, licensing, and distribution. A due
diligence check on a potential Korean business partner should include an
evaluation of the company's financial and operational history,
accounting practices, hidden ownership interests, corporate
relationships with other Korean companies, and position in the market
for the product(s) you are exporting.

CS Korea offers a fee-based service called the [International Company
Profile](http://www.buyusa.gov/korea/en/icp.html), which provides
information on potential Korean business partners to help American
companies obtain accurate, up-to-date information. The report includes
financial information on Korean companies from D&B Korea Co., Ltd. D&B
Korea Co., Ltd. and Kroll International, Inc. (<http://www.kroll.com/>)
are also providers of due diligence services.

## Local Professional Services [**Return to top**](#ch3)

Korea has a highly developed economy with a full range of professional
services. For more information on professional services, please see the
links below:

List of agents/distributors:
<http://www.buyusa.gov/korea/en/agentscontacts.html>

List of law firms: <http://www.buyusa.gov/korea/en/lawfirmcontacts.html>

List of major banks: <http://www.buyusa.gov/korea/en/bankcontacts.html>

List of major real estate and real estate consultancy firms, accounting
companies and human resources firms in Korea:
<http://www.buyusa.gov/korea/en/realestatecontacts.html>

List of major newspaper contacts:
<http://www.buyusa.gov/korea/en/newspapercontacts.html>

The U.S. Commercial Service, Korea, provides the [Single Company
Promotion](http://www.buyusa.gov/korea/en/scp.html) service to U.S.
firms. Additionally, the "Featured U.S. Exporters (FUSE)" site provide
information on how you can advertise your products on our worldwide
website in various languages for free. Click on
"[FUSE](http://www.buyusa.gov/home/fuse.html)" for more information.

## Web Resources [**Return to top**](#ch3)

Busan Exhibition and Convention Center (BEXCO):

[www.bexco.co.kr/eng/index.php](http://www.bexco.co.kr/eng/index.php)

Contacts for Accounting Firms in Korea:

<http://www.buyusa.gov/korea/en/realestatecontacts.html#_section2>

Contacts for Agents or Distributors in Korea:

<http://www.buyusa.gov/korea/en/agentscontacts.html>

Contacts for Employment Agencies in Korea:

<http://www.buyusa.gov/korea/en/realestatecontacts.html#_section3>

Contacts for Major Banks in Korea:

[www.buyusa.gov/korea/en/bankcontacts.html](http://www.buyusa.gov/korea/en/bankcontacts.html)

Contacts for Major Law Firms in Korea:

<http://www.buyusa.gov/korea/en/lawfirmcontacts.html>

Contacts for Major Newspaper Agencies in Korea:

<http://www.buyusa.gov/korea/en/newspapercontacts.html>

Contacts for Real Estate Consultants, Accounting Firms and Human
Resource Agencies:

<http://www.buyusa.gov/korea/en/realestatecontacts.html>

Convention and Exhibition Center (COEX):

[www.coex.co.kr](http://www.coex.co.kr/)

Daegu Exhibition and Convention Center (EXCO Daegu):

[www.excodaegu.com](http://www.excodaegu.com/)

Defense Procurement Agency (DPA):

<http://www.dpa.mil.kr/English/jsp/index.jsp>

Dun and Bradstreet:

<http://www.dnbkorea.com/>

Featured U.S. Exporters (FUSE)

<http://www.buyusa.gov/home/fuse.html>

Government e-Procurement Service (GePS):

<http://www.g2b.go.kr/>

International Company Profile:

<http://www.buyusa.gov/korea/en/icp.html>

Invest KOREA:

<http://www.investkorea.org/>

KITA NY Office:

<http://www.kita.org/kita/kita_index.jsp?siteUrl=usny.html>

KITA Washington Office:

<http://www.kita.org/kita/kita_index.jsp?siteUrl=usny.html>

Korea Broadcast Advertising Corporation (KOBACO):

<http://www.kobaco.co.kr/eng/index.asp>

Korean Commercial Arbitration Board:

[http://www.kcab.or.kr](http://www.kcab.or.kr/)

Korea Importer's Association (KOIMA)

<http://www.koima.or.kr/>

Korea Intellectual Property Office (KIPO):

<http://www.kipo.go.kr/kpo/user.tdf?a=user.eng.main.BoardApp>

Korea's Main Distribution Centers:

Busan: <http://www.portbusan.or.kr/>

Daegu: <http://english.daegu.go.kr/>

Gwangyang: <http://www.gwangyang.go.kr/english/index.html>

Incheon: <http://www.incheon.go.kr/>

Korea Online Shopping Association

<http://www.kolsa.or.kr/>

Korea Trade Investment Promotion Agency (KOTRA):

<http://english.kotra.or.kr/wps/portal/dken>

Kroll Korea:

<http://www.krollworldwide.com/>

Public Procurement Service (PPS):

<http://www.pps.go.kr/english/>

Seoul Trade Exhibition Center (SETEC)

[www.setec.or.kr](http://www.setec.or.kr/)

[Single Company Promotion](http://www.buyusa.gov/korea/en/scp.html): A
service provided by the U.S. Commercial Service for U.S. firms wishing
to enter the Korean market.

World Federation of Direct Selling Associations

<http://www.wfdsa.org/>

[Return to table of contents](#doing-business-in-korea)

[[]{#ch4 .anchor}Return to table of contents](#doing-business-in-korea)

# Chapter 4: Leading Sectors for U.S. Export and Investment 

**Commercial Sectors**

The following Best Prospects for U.S. Exports are arranged
alphabetically.

-   [Automotive Parts and
    Accessories](#automotive-parts-and-accessories)

-   [Broadcasting Service and
    Equipment](#broadcasting-service-and-equipment)

-   [CNC Machine Tools](#cncmachinetools)

-   [Computer Software](#computer-software)

-   [Cosmetics](#cosmetics)

-   [Defense Industry Equipment](#defense-industry-equipment)

-   [Drugs and Pharmaceuticals](#drugs-and-pharmaceuticals)

-   [Education and Training Services](#education-and-training-services)

-   [Electrical Power Systems](#electrical-power-systems)

-   [Engineering Services](#engineeringservices)

-   [Medical Equipment and Devices](#medical-equipment-and-devices)

-   [Pollution Control Equipment](#pollution-control-equipment)

-   [Radio Frequency Identification
    Technology](#radio-frequency-identification-technology)

-   [Security Services and Products](#security-services-and-products)

-   [Specialty Chemicals](#specialtychemicals)

-   [Travel and Tourism](#travelandtourism)

```{=html}
<!-- -->
```
-   [Wireless Broadband Equipment and Services](#wirelessbroadband)

> **Agricultural Sector**

-   [Agricultural Sector](#agricultural-sectors-return-to-top)

## Automotive Parts and Accessories

ITA CODE: APS

### Overview [**Return to top**](#ch4)

+------------------------+-------------+-----------+------------------+
|                        | **2004**    | **2005**  | **2              |
|                        |             |           | 006(estimated)** |
+------------------------+-------------+-----------+------------------+
| #######                | 45,119      | 46,105    | 44,484           |
| ##  Total Market Size  |             |           |                  |
+------------------------+-------------+-----------+------------------+
| **Total Local          | 48,616      | 50,865    | 50,138           |
| Production**           |             |           |                  |
+------------------------+-------------+-----------+------------------+
| **Total Exports**      | 7,022       | 8,241     | 9,111            |
+------------------------+-------------+-----------+------------------+
| **Total Imports**      | 2,790       | 3,481     | 3,457            |
+------------------------+-------------+-----------+------------------+

(Unit: USD million)

(Source: The above statistics are unofficial estimates based upon Korea
Automotive Industry Cooperative Association reports)

\[USD 1= 1,200 Won (2004), 1100 Won (2005), 950 Won (2006)\]

In 2005, Korea manufactured 3.5 million automotive vehicles, making it
the sixth largest car manufacturer in the world after the U.S., Japan,
Germany, China and France. The total size of the automotive parts market
was estimated at USD 44 billion in 2006, an 11 percent increase over
2005 levels. The OEM market segment accounted for about 93 percent of
total market demand and the aftermarket represented the remaining 7
percent.

Imports increased to USD 3.5 billion in 2006 from 2.8 billion in 2005,
accounting for 8 percent of the total market demand. Forecasts are for
continue growth with the value of imports reaching USD 4.2 billion in
2008. Japan is the principal foreign supplier with a 36 percent market
share, followed by Germany and the U.S. who covers 21 percent and 16
percent, respectively.

U.S. exports were estimated at \$549 million in 2005. Major U.S. export
items include gearboxes, wheels, steering parts, and engine parts, among
others, which together represent about half of the entire U.S. exports.

While local suppliers have greatly improved their technology prowess,
mostly through technology transfer and M&A with foreign companies, they
still lack core technologies in engine design, core parts development,
manufacturing, innovative engine technologies including hybrid and full
cell engines, precision equipment, safety equipment, etc. The Korean
government evaluates Korean auto parts suppliers' technical prowess at
77 percent of most advanced technologies. For the lack of local
technologies, OEMs are still heavily relying on advanced import
products, and are expected to expand global outsourcing practices. Also,
Korean industry sources predict that the launch of Hyundai Motor's
manufacturing in Alabama will accelerate the trend toward global
procurement.

OEMs are placing great emphasis on clean fuel technology development.
Hyundai spent \$1.7 billion in 2005 for hybrid engine development, 73%
of its total R&D expenditure, \$2.2 billion. It plans to spend another
\$3.2 billion in 2007 for clean fuel technology development. Hyundai
aims to start commercial production of 300,000 hybrid cars in 2010, and
is on the constant lookout for advanced import technologies.

### Best Products/Services [**Return to top**](#ch4)

For OEMs:

-   leading-edge engine designing, engine control units (ECU),
    electronic engine parts

-   advanced core parts including automatic transmissions, anti-lock
    brake systems and air bags

-   hybrid car and pollution-free car related technologies

For the aftermarket:

-   road wheels

-   replacement parts

-   spark plugs

-   ignition cables

-   timing belts

-   wiper blades

-   high-end car audio systems and components

-   high-performance automotive chemicals, such as wax and rust-proofing
    solutions and accessories like window films.

### Opportunities [**Return to top**](#ch4)

Partnering with qualified and capable Korean distributors who maintain
sales networks to serve end-users is strongly recommended. Exhibiting at
local automotive trade shows can be a useful platform to explore the
market and gain exposure to end-users.

To take advantage of growing market opportunities, several non-Korean
parts suppliers have established wholly owned manufacturing plants or
joint ventures with local Korean companies. According to the latest
statistics, there are about 920 auto parts manufacturers operating in
Korea, and 240 of them are non-Korean owned, either fully or partially.

### Resources [**Return to top**](#ch4)

# [Trade Show]{.underline}

Korea Autoparts & Accessories Show 2007 (KOAAshow 2007)

# [**http://www.koaashow.com/**](http://www.koaashow.com/)

# [Key Contact]{.underline}

Ministry of Construction and Transportation

<http://www.moct.go.kr/EngHome/>

# [Local Contact]{.underline}

(Mr.) Young Wan Park

Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4164

Fax: 82-2-739-1628

Email: <young.park@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Broadcasting Service and Equipment

ITA CODE: AUV

### Overview [**Return to top**](#ch4)

+-------------------------+--------------+--------------+--------------+
|                         | **2004**     | **2005**     | **2006       |
|                         |              |              | (            |
|                         |              |              | estimated)** |
+-------------------------+--------------+--------------+--------------+
| ####                    | 258          | 230          | 238          |
| ##### Total Market Size |              |              |              |
+-------------------------+--------------+--------------+--------------+
| **Total Local           | 21           | 24           | 27           |
| Production**            |              |              |              |
+-------------------------+--------------+--------------+--------------+
| **Total Exports**       | N/A          | N/A          | 10           |
+-------------------------+--------------+--------------+--------------+
| **Total Imports**       | 237          | 197          | 201          |
+-------------------------+--------------+--------------+--------------+

(Unit: USD million)

\[USD1= 1,200 Won (2004), 1,100 Won (2005), 950 (2006)\]

(Source: Ministry of Information and Communication)

Starting with terrestrial TV in 2001, digital broadcasting service is
slated for full implementation by 2010 in Korea. Driving the development
of digital content are new and potentially exclusive channels, basic and
premium tier channels, plus on-demand content from domestic and foreign
program suppliers. The business of digital programming and content is
made highly attractive by significant competition from cable, the rise
in direct to home (DTH) services, the advent of internet protocol
television (IPTV), a projection that the digital TV universe will be
almost all-pay by 2015, and major gains in consumer purchases of digital
set-top-boxes (STBs). It is forecast that total subscription revenues
for pay TV will grow from USD 131 million in 2004 to over USD 427
million by 2010 and will be USD 658 million by 2015.

Cable TV was launched in Korea with analog broadcasting service in 1995
featuring 24 channels (program providers) delivered by 54 cable system
operators (SOs). Currently 119 SOs are transmitting cable TV content.
With the introduction of Korea's digital terrestrial TV in 2001, Korea
digital cable TV services launched in 2004. As a result, Korean cable TV
SOs and program providers need to digitize most of their broadcasting
facilities from 2003 to 2008. After the legalization of DTH services in
2000, the Korea Digital Satellite Broadcasting consortium (KDB) acquired
the necessary license and launched pay TV services in March 2002 via its
DTH satellite platform SkyLife. SkyLife acquired more than 1.9 million
digital DTH subscribers in 2006, a 13.75% penetration rate of TV
households in Korea.

Attracting portable TV viewers is becoming more competitive.
SinceDecember 2005, terrestrial providers moved into digital multimedia
broadcasting (DMB), which allows viewers to watch TV via a cell phone.
The rapid growth of DMB has become a hot trend, drawing the attention of
the media and consumers. According to the Ministry of Information and
Communication (MIC), over 1.6 million units of DMB-capable handsets were
sold between January and September 2006. They are projecting that a
total of 2.5 million DMB-capable handsets will sell by the end of 2006.
The number of satellite DMB subscribers reached over 700,000 as of
August 2006. These new satellite DMB services enable viewers to consume
different types of video content, but they are finding out that content
is severely lacking. As an example, a free IPTV provider added the 30
finalists of the Jeju independent film festival to its menu. Lack of
available content has forced providers to show amateur videos -- to fill
time, a provider broadcast the finalists of a university student video
contest. According to the Korea IT Industry Promotion Agency, the market
demand for digital video content is relatively small at approximately
5.5 billion Won, around USD 5.4 million, in 2005. However, the industry
is forecast to grow to be worth several billion dollars by 2010 as new
service platforms are implemented.

In 2005, market demand for TV broadcasting equipment and services
reached an estimated USD 240 million. Although equipment is currently
being procured primarily for terrestrial TV broadcasting, the market
demand for digital equipment for cable and satellite TV services is
forecast to be very strong over the next three to five years. There are
no major market access barriers for broadcasting equipment, and most
categories of equipment enter Korea with an eight percent duty based on
Cost-Insurance-Freight (c.i.f.) value.

Spending among the multi-station operators (MSO) has driven
opportunities for suppliers of digital equipment for terrestrial
broadcasting. In March 2004, the National Assembly revised the
broadcasting law allowing for the establishment of digital services. The
law also allows increased foreign investment in Korean SOs and program
providers. This investment will speed up the deployment of digital cable
TV, which in turn means increased opportunities for equipment suppliers
and program providers.

### Best Products/Services [**Return to top**](#ch4)

-   Broadcasting equipment (encoding/multiplexing/modulating equipment)

-   Test and measurement equipment

-   Graphic equipment

-   Production equipment

-   Video servers and switchers

####### The shortage of quality content to supply the growing new service platforms represents a real opportunity for U.S. content providers. The best prospects for imported content and programming are in the areas of movies, sports, animation, drama, and documentaries.

### Opportunities [**Return to top**](#ch4)

The surge of investment in new broadcasting services represents
important opportunities for U.S. program providers (PPs). Korea
currently has four terrestrial TV networks, 83 satellite TV channels,
and approximately 70 cable TV channels. After the launch of digital
satellite and digital cable TV services, the total number of Korea's
satellite and cable channels is expected to reach approximately 200 over
the next three years. Also, the number of subscribers to the satellite
and expanded cable TV services is projected to increase dramatically and
will create great demand for foreign programming. Currently, U.S.
programming accounts for approximately 70 percent of all imported
programming. With the popularity of U.S. programming in Korea and the
enormous projected increase in channels, U.S. PPs are well positioned to
expand rapidly in Korea's growing market. As of March 2006, there were
about 200 registered PPs in Korea. Among this number, approximately 70
PPs are responsible for the majority of activity in the market,
providing programming both to satellite and cable TV channels. Although
digital broadcasting equipment for terrestrial TV services is forecast
to remain the largest market segment through 2010, Korea's launch of
digital satellite and digital cable TV broadcasts will continue to
bolster strong market demand over the next three years.

KDB, the platform operator for satellite TV in Korea, has projected
purchases of USD 100 million worth of digital broadcasting systems
equipment, an average of USD 14.5 million annually. However, the
investment plan will be contingent upon increases in the numbers of
subscribers. Also KT and Hanaro are looking to launch and aggressively
promote digital video services (or IPTV) over ADSL, VDSL, and Fiber to
the Home (FTTH) networks. This may take longer to execute due to
regulatory restrictions, but the threat of an integrated product bundle
will clearly be a challenge to cable. As a result, SOs are increasingly
focusing their efforts on deploying digital set-top-boxes in volume,
bundled with both Internet and, in the future, VoIP services.

### Resources [**Return to top**](#ch4)

#### **Trade Shows**

Korea Electronics Show

<http://kes.org/kes2006/eng/main/index.html>

Korea International Broadcast, Audio and Lighting Equipment Show (KOBA)

<http://www.koba.or.kr/eng/main.asp>

Digital Multimedia Broadcasting Expo

<http://www.dmbexpo.com/>

##### Key Contacts 

Ministry of Information and Communication (MIC)

<http://www.mic.go.kr/index.jsp>

Korea Broadcasting Commission

<http://www.kbc.go.kr/english/index.jsp>

#### **Local Contact**

(Ms.) Alex Choi

Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4466

Fax: 82-2-739-1628

Email: <alex.choi@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## CNC Machine Tools

ITA CODE: MTL

### Overview [**Return to top**](#ch4)

+--------------------+---------------+-------------+------------------+
| #########          | #             | ###         | #########        |
|                    | ######## 2004 | ###### 2005 |  2006 (estimated |
+--------------------+---------------+-------------+------------------+
| #########          | ##            | ####        | ######### 3,800  |
|  Total Market Size | ####### 3,600 | ##### 3,800 |                  |
+--------------------+---------------+-------------+------------------+
| **Total Local      | 2,600         | 2,900       | 3,300            |
| Production**       |               |             |                  |
+--------------------+---------------+-------------+------------------+
| **Total Exports**  | 1,000         | 1,150       | 1,350            |
+--------------------+---------------+-------------+------------------+
| **Total Imports**  | 2,000         | 2,000       | 1,800            |
+--------------------+---------------+-------------+------------------+

(Unit: USD million)

(Source: Korea Machine Tools Manufacturers Association)

\[USD 1= 950 Won\]

Korea's market for machine tools has shifted from standard,
cost-effective or general products to high-precision, high-speed and
high-powered machine tools. In 2005, computerized numerically controlled
(CNC) cutting machine tools, including lathes, milling machines, and
machining centers, represented 78 percent of total domestic machine
tools demand while non-CNC and metal forming machines including presses
represented the remaining 22%. The biggest demand for machine tools
exists in the automotive production, metal processing, electronics and
precision machine industries.

The Korean Machine Tools Manufacturers Association estimates that the
import market decreased 10% from 2005 - 2006. This is largely due to the
decreasing production of semi-conductor parts. According to the Korean
Customs Service, the United States is the second largest importer of
machine tools to Korea, with 33% market share. Japan has 42% market
share and Germany 10%. Trends over the past three years have shown the
import market to be very volatile. For example, imports of US machines
tools rose from \$20 million in September 2004 to \$120 million January
2005. Imports then declined to \$20 million, and then rose to \$80
million in November 2005. Imports of Japanese machine tools were also as
volatile, while German imports remained rather steady.

The Korean CNC machine tools industry continues to be led by investment
in production facilities by major manufacturing industries such as
automobiles, shipbuilding, telecommunications, construction equipment
and electronics, including the semiconductor sector. In particular, many
companies are investing in factory automation that will account for
growing market demand in advanced machine tools. Given the volatility of
the market and the ability of Korean competitors to produce quality
machine tools, US importers are most successful where they offer a cost
or technological edge.

### Best Products/Services [**Return to top**](#ch4)

-   CNC turning centers

-   CNC vertical machining centers

-   CNC horizontal machining centers

-   CNC 4 & 5-axis machining centers

-   Machines for the production & processing of semiconductor wafers

-   Machines for dry-etching patterns on semiconductor materials

-   Laser cutters for the production of semiconductors

### Opportunities [**Return to top**](#ch4)

For exporters of U.S. products to Korea, establishing strategic
alliances, such as joint ventures or licensing agreements, with leading
Korean machine tool manufacturers is recommended. Hiring local agents or
distributors also is one of the most effective ways to sell U.S.
products in the Korean market. Large machine tool manufacturers have
expressed interest in partnering with U.S. CNC machine tool
manufacturers.

### Resources [**Return to top**](#ch4)

######## **Trade Shows** 

Seoul International Tool & Related Equipment Exhibition

[www.tool.or.kr](http://www.tool.or.kr/)

Korea Machinery Fair (KOMAF) 2007

[www.komaf.org](http://www.komaf.org/)

Seoul International Machine Tool Show (SIMTOS) 2007

[www.komma.org](http://www.komma.org/)

**[Key Contacts]{.underline}**

Industrial Machinery Division of the Ministry of Commerce, Industry &
Energy: [www.mocie.go.kr](http://www.mocie.go.kr/)

Korea Machine Tool Manufacturers Association:

[www.komma.org](http://www.komma.org/)

Korea Tools Industry Cooperative:

[www.tool.or.kr](http://www.tool.or.kr/)

Korea Association of Machinery Industry:

[www.koami.or.kr](http://www.koami.or.kr/)

Korea Construction Equipment Manufacturers Association:

[www.kocema.org](http://www.kocema.org/)

Korea Automobile Manufacturers Association:

[www.kama.or.kr](http://www.kama.or.kr/)

Korea Automotive (Auto Parts) Industries Cooperative Association:

[www.kaica.or.kr](http://www.kaica.or.kr/)

Korea Aerospace Industries Association:

[www.aerospace.or.kr](http://www.aerospace.or.kr/)

Korea Aerospace Research Institute:

[www.kari.re.kr](http://www.kari.re.kr/)

#### **Local Contact** 

Nathan Huh

Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4130

Fax: 82-2-737-5357

E-mail: <nathan.huh@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

[]{#cncmachinetools .anchor}

## Computer Software 

ITA CODE: CSF

### Overview [**Return to top**](#ch4)

  ----------------------- --------------- --------------- ----------------
                          2004            2005            2006 (estimated)

  Total Market Size       887             960             1008

  Total Local Production  349             388             411

  Total Korean Exports    95              98              101

  Total Imports into      633             670             699
  Korea                                                   
  ----------------------- --------------- --------------- ----------------

(Unit: USD million)

\[Source: The above statistics are unofficial estimates by Commercial
Service Korea for the packaged software market.\]

\[ USD1= 1,200 Won (2004), 1,100 Won (2005), 950 Won (2006) \]

The Korean market demand for packaged software, including systems
infrastructure software (e.g. operating systems, security software),
application software (e.g. Word, Excel, enterprise solution package) and
application development/deployment software, was valued at USD 1.0
billion in 2006. Forecasts are for the market to reach USD 1.1 billion
in 2007 and grow at an average annual rate of 8% for the next five
years. Korea's global leadership in wireless communications and
broadband Internet access services has spawned tremendous demand for all
types of software, especially for specialized and innovative
technologies, providing opportunities for sales of advanced and highly
specialized U.S. software solutions. U.S. suppliers\' willingness to
customize their software to meet specific user needs is a critical
factor in end-user purchase decisions. Although U.S. software is
considered superior, Korean end-users, more often than not, will avoid
purchasing from U.S. suppliers if localization cannot be achieved.

In 2006, the total import market for packaged software, valued at USD
699 million, represented 3.5% of the total market demand, which, in
general, consists of packaged software, computing-related
services/software and digital contents. Although the statistics show the
import market share to be relatively low, in reality, the substantial
amount of localized or customized software and Systems Integration (SI)
services provided by major U.S. subsidiaries that participate in large
projects as strategic partners is counted in the total Korean software
market share.

U.S.-sourced packaged software accounts for more than 80% of Korea's
software import market, and U.S. suppliers are expected to remain the
principal suppliers of packaged software to Korea for the next several
years. Technological advancements in Korea's software sector is still
behind that of the U.S. and Japan, a result of Korea's relatively recent
computerization and an acute shortage of highly qualified software
engineers. Korea's systems integration companies and software developers
are actively trying to develop partnerships with global leaders in every
segment of IT services and solutions to deliver total solutions to
clients in a time-to-market manner and to target the domestic and global
market at the same time. U.S. suppliers will continue to enjoy the
competitive advantages of strong project management and marketing
skills, compared to Korean firms and third-country suppliers.

The overall market demand for packaged software has been growing in
relation to the development of Korea's advanced IT infrastructure and
related services in the e-commerce and telecom segments and will
continue to grow at an average annual rate of 9% for the next three
years. The fact that the Korean government has increased efforts to
strengthen its IPR protection and enforcement through the Computer
Program Protection Law (CPPL) has also contributed to the strong growth
in demand for both Korean and imported packaged software.

### Best Prospects/Services [**Return to top**](#ch4)

-   Systems Integrations/ IT Services in finance, telecom and public
    sectors

-   Digital content development services / Internet Protocol TV

-   Enterprise Solutions upgrade projects by both major Enterprise and
    small-and-medium firms

### Opportunities [**Return to top**](#ch4)

The market demand for IT services, digital content and security software
are forecast to experience strong growth, driven by Korea's mergers and
acquisitions (M&As) among financial institutes, continued investment in
wireline/wireless broadband convergence infrastructure as well as by
growing demand for upcoming Internet Protocol TV.

### Resources [**Return to top**](#ch4)

#### **Trade Shows**

######### 

######### The 20th Solution & Contents Exhibition of Korea (Jun 20-23, 2007)

######### [[http://www.sek.co.kr]{.underline}](http://www.sek.co.kr/)

SecurityWorld Expo 2007 (Jun 27-29, 2007)

[[http://www.secuexpo.com]{.underline}](http://www.secuexpo.com/)

[Card](http://www.coex.co.kr/eng/)Tech Korea & RFID World 2007 (Jul
11-13, 2007)

[[www.cardtechkorea.com]{.underline}](http://www.cardtechkorea.com/)

2007 IT EXPO BUSAN (Sep 12-15, 2007)

[[http://www.itexpo.or.kr]{.underline}](http://www.itexpo.or.kr/)

KES 2007 (Oct 9-13, 2007)

[[http://www.kes.org]{.underline}](http://www.kes.org/)

RFID/USN KOREA 2007 (Oct 31-Nov 2, 2007)

[[http://www.rfidkorea.or.kr]{.underline}](http://www.rfidkorea.or.kr/)

**[Key Contacts]{.underline}**

Ministry of Commerce, Industry and Energy (MOCIE)

[[http://www.mocie.go.kr/eng/default.asp]{.underline}](http://www.mocie.go.kr/eng/default.asp)

Ministry of Information and Communication (MIC)

[[http://www.mic.go.kr/index.jsp]{.underline}](http://www.mic.go.kr/index.jsp)

Radio Research Lab (RRL)

[[http://www.rrl.go.kr/eng/index.jsp]{.underline}](http://www.rrl.go.kr/eng/index.jsp)

Korea Association of RFID/USN (KARUS)

[[http://karus.or.kr/]{.underline}](http://karus.or.kr/)

##### [Local Contact]{.underline}

(Mr.) Chris Ahn,

Senior Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4186

Fax: 82-2-737-5357

E-mail: <chris.ahn@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Cosmetics

ITA CODE: COS

### Overview [**Return to top**](#ch4)

+---------------------------+------------+------------+---------------+
|                           | **2004**   | **2005**   | **2006        |
|                           |            |            | (estimated)** |
+---------------------------+------------+------------+---------------+
| ##                        | 6,238.6    | 6,359.7    | 5,767.1       |
| ####### Total Market Size |            |            |               |
+---------------------------+------------+------------+---------------+
| **Total Local             | 5,796.7    | 5,990.0    | 5,431.9       |
| Production**              |            |            |               |
+---------------------------+------------+------------+---------------+
| **Total Exports**         | 276.6      | 331.2      | 300.4         |
+---------------------------+------------+------------+---------------+
| **Total Imports**         | 718.4      | 700.9      | 635.6         |
+---------------------------+------------+------------+---------------+
| **Total Imports from      | 180.6      | 152.9      | 138.7         |
| U.S.**                    |            |            |               |
+---------------------------+------------+------------+---------------+

*(Unit: USD million)*

*\[(USD1= 1,200 Won (2004), 1,100 Won (2005), 950 Won (2006)\]*

*(Source: Korea Pharmaceutical Trade Association, Korea Food & Drug
Administration)*

Over the past few years, Korean women have become more receptive to
western products, especially foreign health and beauty items. As more
Korean women enter the labor force and experience rising incomes, they
have become avid users of imported cosmetics, yielding significant gains
for U.S. suppliers. In tandem with the continued strong expansion of the
Korean market for imported cosmetics, other important trends have
developed , including the introduction of cosmetics in pharmacies/drug
stores, continued growth in market demand for imported cosmetics in
non-traditional retail channels, such as on-line shopping malls and
television home shopping channels, and the further expansion of
cosmetics use by Korean men.

New developments include the introduction of cosmetic franchises
targeting the lower end of the market and continuous modifications to
the Korean government's regulations on testing new cosmeceuticals (a new
classification by the Korea Food & Drug Administration (KFDA) covering
\"functional cosmetics,\" such as whitening, anti-aging and sun care SPF
products). Newly-introduced cosmeceutical products are gaining
widespread consumer acceptance since they often provide for a wide
variety of skin care needs. Most cosmetic companies have added these
items to their product lines. According to the KFDA, as of July 2006, a
total of 6,877 cosmetic products have been approved and registered as
cosmeceuticals since KFDA registered the first cosmeceuticals product in
February 2001.

Sales of men's cosmetics in Korea have increased significantly and
additional market outlets such as men's skin care salons, opened in many
Korean office buildings, providing one-stop total beauty and hair care
services, including hair cutting, perms, treatments, as well as facials.
Cosmetic companies also have broadened their line of men's cosmetics to
include not only after-shave and lotions but also men's cleaning foams,
facial scrubs, facial packs, essences, and other functional cosmetics.

According to research from the Korea Cosmetic News, skin care products
make up about 15 percent of the total cosmetic market, or about USD 865
million. About 50 percent of the USD 865 million was contributed by
imported cosmetic skin care products, which totaled about USD 411.9
million. The most sought after products by consumers are cosmeceuticals
such as whitening and anti-wrinkle products. Also, as more consumers
become aware of natural ingredients, and as their preference for
natural/organic products increases, local industry is focusing on
developing natural/organic products.

### Best Prospects/Services [**Return to top**](#ch4)

\- Men's Cosmetics

\- Natural/organic Skincare Products

\- Cosmeceuticals

### Opportunities [**Return to top**](#ch4)

The cosmetics/cosmeceuticals industry\'s retail distribution channels
have expanded in the last few years. The recent introduction of on-line
shopping malls, television home-shopping channels such as QVC,
pharmacies/drug stores and catalogue orders have emerged as challengers
to traditional retail channels such as direct selling, multi-level
marketing, \"mom and pop\" stores, specialty retail establishments,
department stores, discount stores, etc.

There are currently three major franchised drug stores competing with
each other, Olive Young by CJ, W-Store by Kolon, and GS Watson's by GS
in partnership with Watson's. These retailers target customers focusing
on wellness products by providing organic/natural cosmetics, nutritional
supplements, OTC drugs, and general consumer goods. U.S. companies
should seek opportunities in line with this new retail concept.

### Resources [**Return to top**](#ch4)

**[Major Show]{.underline}**

Name: Cosmobeauty Seoul

[[http://www.cosmobeautyseoul.com/kr/down/2007cosmobeauty-en.pdf]{.underline}](http://www.cosmobeautyseoul.com/en)

**[Key Contacts]{.underline}**

Korea Food & Drug Association (KFDA)

<http://www.kfda.go.kr/>

Korea Pharmaceutical Traders Association (KPTA)

<http://www.kpta.or.kr/E_main.asp>

**[Local Contact]{.underline}**

Grace Sung

Commercial Specialist

Commercial Service Korea

U.S. Embassy in Korea

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4324

Fax: 82-2-739-1628

Email: <grace.sung@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

### Defense Industry Equipment 

ITA CODE: DFN

### Overview [**Return to top**](#ch4)

+-----------------------+--------------+-----------+--------------------+
|                       | **2004**     | **2005**  | **2006             |
|                       |              |           | (estimated)**      |
+-----------------------+--------------+-----------+--------------------+
| ######                | 4,595        | 4,468     | 4,900              |
| ### Total Market Size |              |           |                    |
+-----------------------+--------------+-----------+--------------------+
| **Total Local         | 4,400        | 4,100     | 4,200              |
| Production**          |              |           |                    |
+-----------------------+--------------+-----------+--------------------+
| **Total Exports**     | 417          | 262       | 300                |
+-----------------------+--------------+-----------+--------------------+
| **Total Imports**     | 612          | 630       | 1,000              |
+-----------------------+--------------+-----------+--------------------+

(Unit: USD million)

\[Source: Ministry of National Defense (MND), Korea Defense Industry
Association (KDIA) , Joint US Military Affairs Group-Korea (JUSMAG-K)\]

\[ USD1= 1,200 Won (2004), 1,100 Won (2005), 950 Won (2006)\]

The Republic of Korea (ROK) is currently seeking to modernize its armed
forces to a level commensurate with its economic strength. The ROK is in
need of significant materiel modernization and replacements that will
involve major investments. Although U.S. defense companies have been
very successful in selling their products to Korea, future sales could
be influenced by European competitors who are becoming increasingly
significant in the market. Nevertheless, Korea should continue to be a
good market for U.S. defense companies especially when competitive
products and services and good offset packages are offered.

The 2007-2011 mid-term plan was developed in 2006, with an emphasis on
research and development and allocating 20 percent of arms buildup
expenditures to improve domestic defense technology as well as defense
industry development. The Ministry of National Defense (MND) plans to
steadily raise defense spending to 2.89 percent of Gross Domestic
Product (GDP), from the current 2.57 percent level, by 2011. The
military plans to invest about USD156 billion in force improvement
programs, during 2007-2011, to acquire advanced weapons and equipment as
well as change the command structure.

Recently interoperability has become less of a factor, when purchasing
equipment, due to Korea's desire to diversify sources of supply. It is
also expected that there will continue to be tension between indigenous
development and cost-effective acquisition. The MND is trying to solve
this dilemma by demanding a high degree of technology transfer and
offsets for projects. Currently the most important elements for
purchasing decisions by MND are price, technology transfer and offsets.
The MND is aggressively seeking to increase competition and diversify
their sources of supply. U.S. industry must closely follow any and all
developments in programs and be prepared to move quickly if the need
arises. The Korean government has made it clear that they will procure
leading edge technologies to defend Korea, which presents opportunities
for the U.S. defense industry.

### Best Products/Services [**Return to top**](#ch4)

\- Military Aerospace (fighters)

\- Avionics

\- C4I

### Opportunities [**Return to top**](#ch4)

F-15 Follow-on (FX-follow on; est. \$2 billion)

The ROKAF strongly supports an additional procurement of 20 F-15Ks.
Currently, 20 "F-15K Class" fighters are in the ROK Defense Mid-Range
Plan (DMP) with a 2007 program start planned.

Airborne Mine-sweeping Counter Measures (AMCM; est. \$500 million)

The ROKN plans to procure eight MH-60 class mine warfare helicopters by
2011.

Next Generation Frigates (FFX)

The ROKN plans to deploy a total of nine 2,500 ton class frigates by
2018. The delivery of one ship per year will begin from 2010-2018.

### Resources [**Return to top**](#ch4)

######## **Trade Shows**

Korea Aerospace & Defense Exhibition (Seoul Air Show 2007)

October 16--21, 2007

[www.seoulairshow.com](http://www.seoulairshow.com/)

Naval & Defense 2007

October 24-27, 2007

[www.marineweek.org](http://www.marineweek.org/)

**[Key Contacts]{.underline}**

Ministry of National Defense (MND)

[www.mnd.go.kr](http://www.mnd.go.kr/)

#### **Local Contact** 

(Mr.) Yong Tak Lee

Senior Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4509

Fax: 82-2-739-1628

Email: <yong.tak.lee@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Drugs and Pharmaceuticals

ITA CODE: DRG

### Overview [**Return to top**](#ch4)

+------------------------+-------------+-----------+------------------+
|                        | **2004**    | **2005**  | **2006           |
|                        |             |           | (estimated)**    |
+------------------------+-------------+-----------+------------------+
| # Total Market Size    | 8,671       | 11,010    | 10,554           |
+------------------------+-------------+-----------+------------------+
| **\*Total Local        | 8,064       | 10,144    | 9,724            |
| Production**           |             |           |                  |
+------------------------+-------------+-----------+------------------+
| **\*\*Total Exports**  | 374         | 439       | 421              |
+------------------------+-------------+-----------+------------------+
| **\*\*Total Imports**  | 981         | 1,305     | 1,252            |
+------------------------+-------------+-----------+------------------+
| **\*\*Imports from the | 112         | 159       | 158              |
| U.S.**                 |             |           |                  |
+------------------------+-------------+-----------+------------------+

Unit: USD million

(Sources: Compiled by U.S. Commercial Service, Korea), \* Korea
Pharmaceutical Manufacturers Association (KPMA); \*\* Korea
Pharmaceutical Traders Association (KPTA)

USD1= 1,200 Won (2004), 1,100 Won (2005), 950 Won (2006)

Note:

1)  Local production includes production by multinational firms.

2)  Total market size was estimated using the following formula: Total
    Local Production + Total Imports -- Total Exports = Total Market
    Size. However, according to IMS Korea statistics, Total Market Size
    reached USD 6.0 billion in 2004; USD 7.7 billion in 2005; and an
    estimated USD 8.5 billion in 2006. IMS data is primarily sourced
    from end-users.

The Korean market, the 12^th^ largest pharmaceutical market in the
world, was valued at USD 7.7 billion in 2005. According to industry
sources, Korean market demand for pharmaceuticals is estimated to have
grown by 11 percent in 2006 to reach USD 8.5 billion and is forecast to
grow at an average annual rate of 10 percent over the next few years
since the need for medical treatment for senior citizens is rapidly
increasing.

The Korean pharmaceutical market has continued to experience
unprecedented restructuring since 1999, when the Korean government
implemented significant reforms to improve transparency in the health
care system. These reforms have helped increase transparency in the
reimbursement system and have, to some degree, leveled the playing field
for multinationals. There have also been positive changes in the
regulatory climate that have allowed smoother and earlier market access
for new, innovative drugs. Multinationals have expanded their share of
the total therapeutic (ethical and over-the-counter) pharmaceutical
market in recent years.

Over the next few years, one important factor that may slow the growth
rate in overall market demand and hamper patient access to innovative
pharmaceuticals will be the measures taken by the Korean government to
finance the national healthcare insurance system. The Korean government
implemented the National Health Insurance (NHI) Drug Expenditure
Rationalization Plan (DERP) on December 29, 2006. The key contents of
the DERP included a change in the NHI drug management system from a
Negative List System, in which all medicines were, in principle, covered
by insurance, to a Positive List System in which explicit item-by-item
approval is needed for reimbursement. In future, cost effectiveness will
also be a key consideration in the decision whether to reimburse for
insurance purposes. Additionally, the NHI Corporation, the single payer,
has introduced a price negotiation procedure which determines whether a
new drug should be listed and at what price.

Notwithstanding the Korean government's cost containment measures, the
U.S. government will continue to work closely with and advocate on
behalf of U.S. exporters' market access concerns. This includes
continuing to encourage the Korean Government to make the market more
transparent, to reimburse innovative drugs at appropriate levels, and to
ensure Korean patients' access to innovative pharmaceuticals. Industry
sources speculate that the Korean government's need to reduce costs will
be balanced by satisfying consumer demands for advanced health care over
the next few years. We advise U.S. exporters of research-based,
innovative drugs to evaluate the impact of the new reimbursement system
on their potential sales before entering this lucrative and growing, but
challenging, market.

With the Korean government's encouragement, the Korean biotech
pharmaceutical industry is striving to invest more in R&D (currently
only 4-5 percent based on sales revenue) and diversify from the
production of generics and antibiotics. This trend presents excellent
opportunities for U.S. biotech firms to participate in Korea's strategic
biotech sector. Although Korea's pharmaceutical industry is competitive
in terms of chemical synthesizing technologies, it is much less
competitive in drug screening, safety evaluation and clinical trials.
Korean companies are pursuing strategic alliances with multinational
firms to finance R&D for new products or for cross-licensing of existing
technologies. Industry experts predict that the U.S. market share will
increase as more U.S. biotechnology-based products become commercially
available over the next few years.

### Best Products/Services [**Return to top**](#ch4)

-Therapeutic pharmaceuticals

### Opportunities [**Return to top**](#ch4)

The Osong Bio-technopolis, under the Korean Ministry of Health and
Welfare, is seeking foreign investment for biotechnology industry
development in the high-tech science park at Osong. The 4,633,000 square
meter science park will have two major focuses: pharmaceuticals and
cosmetics (59.7 percent) and medical devices (25.8 percent). Since the
Korean biotech industry is still relatively undeveloped, the timing may
be good for U.S. companies interested in getting in on the ground floor.

### Resources [**Return to top**](#ch4)

**[Trade Shows]{.underline}**

N/A

**[Key Contacts]{.underline}**

Ministry of Health and Welfare

[www.mohw.go.kr](http://www.mohw.go.kr/)

Korea Food & Drug Administration

[www.kfda.go.kr](http://www.kfda.go.kr/)

Health Insurance Review Agency

[www.hira.or.kr](http://www.hira.or.kr/)

#### **Local Contact**

(Ms.) Yoon-Shil Chay

Senior Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4439

Fax: 82-2-739-1628

Email: <yoon.shil.chay@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Education and Training Services

ITA CODE: EDS

### Overview [**Return to top**](#ch4)

+-------------------------+--------------+--------------+--------------+
|                         | **2004**     | **2005**     | **2006       |
|                         |              |              | (            |
|                         |              |              | estimated)** |
+-------------------------+--------------+--------------+--------------+
| ####                    | 102,044      | 97,750       | 104,018      |
| ##### Total Market Size |              |              |              |
+-------------------------+--------------+--------------+--------------+
| **Total Local           | 97,683       | 93,018       | 98,740       |
| Production**            |              |              |              |
+-------------------------+--------------+--------------+--------------+
| **Total Exports**       | N/A          | N/A          | 2            |
+-------------------------+--------------+--------------+--------------+
| **Total Imports**       | 4,361        | 4,732        | 5,275        |
+-------------------------+--------------+--------------+--------------+

(Unit: USD million)

\[USD1= 1,200 Won (2004), 1,100 Won (2005), 950 (2006)\]

(Source: Ministry of Education and Human Resources, Korea National
Statistical Office)

Korea's education market plays a significant role in the country's
overall economy and offers exceptionally good opportunities for the U.S.
education sector. According to the Organization for Economic Cooperation
and Development (OECD), Korea is among the highest education investors
among developed countries. Korea's education segment offers good
opportunities for U.S. educational institutions because Koreans still
prefer the U.S. to other nations competing for education dollars. The
Korean market also looks promising for cooperative programs involving
e-learning and educational training in the fields of language training,
business administration, and technical programs.

Higher education throughout Korean history has been synonymous with
privilege and power. A degree from a well-known institution is a status
symbol and essential for finding the right job in the right company.
Coveted spaces in Korea's top schools are open for competition from all
students, but are attainable only by a few. Many talented students opt
for the best schools overseas. The desire to obtain a diploma from an
accredited overseas school translates into opportunities for U.S.
schools to recruit some of Korea's most talented students, and Koreans
remain willing to spend a large portion of their income on education.

The market for overseas education continues to grow and is being
augmented by

e-learning as well as business training. According to the Institute of
International Education Open Door report, in the 2005/2006 academic
year, 58,847 students from Korea were studying in full-time degree
programs in the U.S., which represents the largest increase among the
top ten countries sending students to the U.S. Korea demonstrated strong
growth in 2005/2006 with an increase of 10 percent over the previous
year's number of students in the U.S. Korea is the third-leading
supplier of foreign students to America, after China and India, for the
third year in a row.

  -------------- -------------- -------------- -------------- --------------
  Rank           Place of       2004/2005      2005/2006      2005/2006
                 Origin                                       

  1              India          80,466         76,503         \- 5%

  2              China          62,523         62,582         Less than 1%

  3              S. Korea       53,358         58,847         10%

  4              Japan          42,215         38,712         -8%
  -------------- -------------- -------------- -------------- --------------

Source: Institute of International Education

Korean Ministry of Education statistics indicate that as of April 2006,
a total of 190,364 Korean students are studying abroad. The United
States (30.4 percent), China (15.3 percent), U.K. (9.9 percent),
Australia (8.9 percent), Japan (8 percent), Canada (6.6 percent), and
other countries (20.9 percent) host most of these Korean students. Over
the past few years, the U.S. share of the Korean study abroad market has
remained fairly constant, although from 2001 it began to see a slight
erosion as some Korean students considered other options to U.S.
schools, primarily because of relatively higher costs to attend American
schools and perceived challenges to receiving a U.S. F-1 student visa.
Although American schools and institutes remain very popular with
Koreans, other countries such as Britain, China, Australia, Japan, and
Canada are also vigorously promoting themselves as attractive
destinations for Korean students.

### Best Products/Services [**Return to top**](#ch4)

-   6-12 month business, finance, or IT training for mid-career
    professionals

-   Community colleges

```{=html}
<!-- -->
```
-   Vocational training in the manufacturing sector

-   Short-term English language training

### Opportunities [**Return to top**](#ch4)

Market demand continues to grow for short-term (four weeks to two
months) or long-term (one year) English language training in U.S.
schools for college students during summer (typically from the middle of
June until the end of August) and/or winter breaks (typically from the
end of December until the end of February). Among Korean college
students, English language training in the U.S. not only improves
language skills but also provides a U.S. school and cultural experience.
This experience leads many students to choose the U.S. for subsequent
academic study.

Participation in education fairs held in Korea is one way to recruit.
The fairs are categorized by level of schools (high schools, community
colleges, four-year colleges and graduate programs). Almost all
education fairs are held during the spring (March) and fall (Sep. and
Oct.).

### Resources [**Return to top**](#ch4)

#### **Trade Shows**

MBA Tours

<http://www.thembatour.com/index.shtml>

American Education Fair

<http://www.isnexpo.com/>

University Fair organized by [Linden
Tours](http://www.lindentours.com/univ_officials/tours/asia_spring_05.shtml)

<http://www.lindentours.com/int_students/fairs/upcoming_fairs.shtml>

#### 

Korea Student Fair

<http://www.aief-usa.org/>

#### **Key Contacts** 

Ministry of Education and Human Resources

<http://english.moe.go.kr/>

Fulbright (Korean-American Educational Commission)

<http://www.fulbright.or.kr/english/pages/home-e.html>

KOSA (Korea Overseas Studying Agencies)

<http://www.kosaworld.org/>

#### **Local Contact** 

(Ms.) Alex Choi

Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4466

Fax: 82-2-739-1628

Email: <alex.choi@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Electrical Power Systems

ITA CODE: ELP

### Overview [**Return to top**](#ch4)

+---------------------+---------------+---------------+---------------+
|                     | **2004**      | **2005**      | **2006        |
|                     |               |               | (estimated)** |
+---------------------+---------------+---------------+---------------+
| ########            | 6,320         | 6,476         | 6,500         |
| # Total Market Size |               |               |               |
+---------------------+---------------+---------------+---------------+
| **Total Local       | 4,250         | 4,400         | 4,500         |
| Production**        |               |               |               |
+---------------------+---------------+---------------+---------------+
| **Total Exports**   | 2,350         | 2,787         | 2,800         |
+---------------------+---------------+---------------+---------------+
| **Total Imports**   | 4,420         | 4,863         | 4,800         |
+---------------------+---------------+---------------+---------------+

(Unit: USD million)

\[Source: Korea Electrical Manufacturers Association (KOEMA), Korea
International Trade Association (KITA)\]

\[ USD1= 1,200 Won (2004), 1,100 Won (2005), 950 Won (2006)\]

Korea's ambitious energy program will provide great opportunities for
electrical power systems manufacturers over the next few years. The U.S.
continues to be the leading import supplier of major equipment such as
turbines, generators, and nuclear reactors. However, future sales could
be influenced by European and Japanese competitors who are becoming
increasingly significant in the market. The U.S. import market share
will continue to increase because Korea plans to make major purchases of
nuclear power generation equipment, most of which will be sourced from
the U.S.

To meet future electricity demand, the government and the private sector
plan to invest US\$34.4 billion to increase the country's power
generation capacity to 94,278 MW. The plan includes building 89 power
plants, including those currently under construction with a combined
capacity of 37,730 MW. These plants are targeted for completion by the
year 2020. The government will invest \$18.3 billion for the
construction of nuclear power plants. These nuclear plants will have a
combined capacity of 9,600 MW, and they are also targeted for completion
by 2020. During the 14-year period covered by the most recent plan,
Korea will build eight nuclear power plants (of which four will be 1,400
MW Advanced Power Reactors), 15 coal-fired power plants, 21 oil-fired
power plants, 19 Liquefied Natural Gas (LNG) power plants, eight of
hydroelectric power plants, and 18 co-generation power plants, including
power plants using alternative energy. Considering the number of power
plants to be constructed, Korea has one of the most rapidly growing
power generation markets in the world.

It is expected that Korea will heavily rely on imported electrical power
systems as it rapidly expands its power generation capacity. U.S.
electrical power systems are well known and respected in Korea, and U.S.
firms have historically fared well in competition with other foreign
suppliers.

### Best Products/Services [**Return to top**](#ch4)

\- Nuclear Power Generation Installation

\- Thermal Power Generation Installation

### Opportunities [**Return to top**](#ch4)

Incheon Combined Cycle Plant Unit 2: Korea Midland Power (KOMIPO) plans
to construct a 500 MW combined cycle power plant by 2009.

Yongwol Combined Cycle Plant Unit 1 and 2: Korea Southern Power (KOSPO)
plans to construct two 450 MW plants by 2010.

### Resources [**Return to top**](#ch4)

##### [Trade Show]{.underline}

Seoul International Electric Fair (SIEF) 2007

[www.sief.co.kr](http://www.sief.co.kr/)

###### **Key Contacts** 

Ministry of Commerce, Industry and Energy (MOCIE)

[www.mocie.go.kr](http://www.mocie.go.kr/)

Korea Electric Power Corporation (KEPCO)

[www.kepco.co.kr](http://www.kepco.co.kr/)

##### [Local Contact]{.underline}

(Mr.) Yong Tak Lee

Senior Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4509

Fax: 82-2-739-1628

E-mail: <Yong.Tak.Lee@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Engineering Services 

ITA CODE: ACE

### Overview [**Return to top**](#ch4)

+--------------------+---------------+-------------+------------------+
| #########          | #             | ###         | #########        |
|                    | ######## 2004 | ###### 2005 |  2006 (estimated |
+--------------------+---------------+-------------+------------------+
| #########          | ##            | ####        | ######### 5,046  |
|  Total Market Size | ####### 4,732 | ##### 4,889 |                  |
+--------------------+---------------+-------------+------------------+
| **Total Local      | 4,919         | 5,083       | 5,252            |
| Production**       |               |             |                  |
+--------------------+---------------+-------------+------------------+
| **Total Exports**  | 325           | 336         | 346              |
+--------------------+---------------+-------------+------------------+
| **Total Imports**  | 138           | 142         | 147              |
+--------------------+---------------+-------------+------------------+

(Unit: USD Million)

(Source: The above statistics are unofficial estimates based upon
reports from Korea Engineering and Consulting Association and
Construction & Economy Research Institute of Korea.)

\[USD 1= 1,200 Won (2004), 1,100 Won (2005), 950 Won (2006)\]

The Korea engineering services market has been driven by demands from
three diverse, yet closely linked construction sub-sectors: Korean
government-initiated infrastructure projects, residential buildings and
commercial/industrial facilities. The construction industry has grown
over the past several years due to the continued strength of these three
sub-sectors. In 2005, Korea's spending on government infrastructure
projects was estimated at USD 38 billion. Korean residential
construction was estimated to be USD 52 billion while Korean investment
in commercial/industrial facilities stood at USD 32 billion. In 2006,
the size of these construction markets is forecast to slightly increase
0.4% due to increased residential redevelopment and government projects,
estimated at USD 100 billion.

The Korean engineering services market will continue to seek new
engineering technologies available in such markets as the United States.
Foreign engineering firms have been filling the important gap between
the lack of domestic availability and U.S. products. Key engineering
technologies will be in demand for tourism infrastructure, information &
telecommunications, urban planning, water supply, sewage and waste
treatment and disposal, earthquake-proof buildings, and industrial
processing facilities. As the Korean engineering services market
evolves, the demand for technically advanced services will rise,
creating additional demand for creative and innovative services and
technologies from the U.S, Europe, and Japan. U.S. engineering firms
working in Korea are well positioned to expand their activities to
Korea, given the popularity of U.S. services and technologies.

### Best Products/Services [**Return to top**](#ch4)

-   Engineering consulting

-   Urban planning

-   Project management

-   Structural/mechanical engineering services

-   Earthquake-proof engineering

### Opportunities [**Return to top**](#ch4)

New Songdo City development project \-\-- Construction of International
Business Complex, High-Tech Industry Park and Biological Industry
Complex.

Incheon International Airport Project Phase II \-\-- Construction of a
runway, a passenger terminal and cargo terminals.

Incheon Bridge Construction -- Bridge linking Incheon International
Airport with New Songdo City, measured 10.25 kilometers in length and 75
meters above sea level.

Seoul Subway Line No. 9 Project Phase II \-\-- Construction of a 12.5
kilometers subway in southeast area of Seoul.

Digital Media City (DMC) project in Seoul \-\-- Construction of a
high-technology media, entertainment and information technology industry
complex.

### Resources [**Return to top**](#ch4)

#### **Trade Shows**

N/A

#### **Key Contacts** 

Ministry of Construction & Transportation

[www.moct.go.kr](http://www.moct.go.kr/)

Seoul Metropolitan City Government

[www.seoul.go.kr](http://www.seoul.go.kr/)

Incheon Metropolitan City Government

[www.incheon.go.kr](http://www.incheon.go.kr/)

Gyunggi Provincial Government

[www.gg.go.kr](http://www.gg.go.kr/)

Construction Association of Korea

<http://www.cak.or.kr/>

Korea Engineering & Consulting Association

[www.kenca.or.kr](http://www.kenca.or.kr/)

Korea Institute of Construction Technology

[www.kict.re.kr](http://www.kict.re.kr/)

Construction & Economy Research Institute of Korea

[www.cerik.re.kr/](http://www.cerik.re.kr/)

**Local Contact**

Nathan Huh

Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4130

Fax: 82-2-737-5357

E-mail: <nathan.huh@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

[]{#engineeringservices .anchor}

## Medical Equipment and Devices

ITA CODE: MED

### Overview [**Return to top**](#ch4)

+------------------------+-------------+-----------+------------------+
|                        | **2004**    | **2005**  | **2006           |
|                        |             |           | (estimated)**    |
+------------------------+-------------+-----------+------------------+
| #####                  | 2,107.5     | 2,658.2   | 2,613.5          |
| #### Total Market Size |             |           |                  |
+------------------------+-------------+-----------+------------------+
| **Total Local          | 1,356.5     | 1,787.7   | 1,753.4          |
| Production**           |             |           |                  |
+------------------------+-------------+-----------+------------------+
| **Total Exports**      | 598.3       | 750.8     | 778.1            |
+------------------------+-------------+-----------+------------------+
| **Total Imports**      | 1,384.9     | 1,621.4   | 1,638.3          |
+------------------------+-------------+-----------+------------------+
| **Imports from the     | 447.0       | 545.6     | 560.7            |
| U.S.**                 |             |           |                  |
+------------------------+-------------+-----------+------------------+

(Unit: USD million)

(Source: Korea Medical Devices Industry Association)

\[USD1= 1,200 Won (2004), 1,100 Won (2005), 950 Won (2006)\]

One of the largest Asian markets for medical devices, the Korean market
was valued at USD2.7 billion in 2005 and is expected to increase to
approximately USD2.6 billion in 2006. According to industry sources, the
medical equipment market is forecast to grow at an average annual rate
of 10-15 percent over the next few years. However, one important factor
that may slow the growth rate will be the pricing and reimbursement
measures that the Korean government adopts to deal with the increasing
costs of their national healthcare insurance system.

Korea depends on advanced medical devices from the U.S., Japan, and the
EU to supply about 60 percent of total market demand. In 2006, total
imports of medical devices were estimated to be USD1.8 billion. U.S.
imports were estimated to be USD 638 million, representing a 34 percent
import market share. Market demand for advanced and innovative medical
devices is forecast to remain strong in 2006 and over the next few
years, as Korea's hospitals continue to purchase advanced technology
products from abroad and with growing numbers of elderly Korean patients
requiring sophisticated medical procedures. In general, Koreans are
increasingly demanding better care from their national healthcare system
as the standard of living continues to improve in the world's eleventh
largest economy. Another factor favoring the use of imported advanced
medical equipment and devices is the growing number of Korean doctors
educated in the U.S. and Europe.

### Best Products/Services [**Return to top**](#ch4)

\- Stents\
- Artificial joints

\- Magnetic resonance diagnostic devices

\- Cardiovascular instruments

\- Radiological devices

\- Invitro diagnostic products

\- Dental implants and supplies

\- Surgical apparatus (laser and electric)

\- Catheters

\- Ophthalmic equipment

\- Laser instruments

### Opportunities [**Return to top**](#ch4)

The Korean government is in the process of establishing world-class
hospitals with 600-800 beds in the Incheon Free Economic Zone (IFEZ).
One to two foreign hospitals will be permitted to operate in the FEZ,
with the first hospital targeted to open in 2008. Since this is the
first time that Korea has invited foreign capital participation in
healthcare (moreover outside of the national healthcare system), the
development of the Incheon FEZ provides a good export opportunity for
U.S. suppliers of high-end medical equipment and devices.

### Resources [**Return to top**](#ch4)

**[Trade Shows]{.underline}**\
\
Korea International Medical, Clinical, Laboratories & Hospital Equipment
Show 2007

[www.kimes.co.kr](http://www.kimes.co.kr/)

[**Key Contacts**]{.underline}\
\
Ministry of Health and Welfare

[www.mohw.go.kr](http://www.mohw.go.kr/)

Korea Food & Drug Administration

[www.kfda.go.kr](http://www.kfda.go.kr/)

Health Insurance Review Agency

[www.hira.or.kr](http://www.hira.or.kr/)

#### **Local Contact** 

(Ms.) Yoon-Shil Chay

Senior Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4439

Fax: 82-2-737-5357

Email: <yoon.shil.chay@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Pollution Control Equipment 

ITA CODE: POL

### Overview [**Return to top**](#ch4)

+---------------------+---------------+--------------+-----------------+
|                     | **2004**      | **2005**     | **2006          |
|                     |               |              | (estimated)**   |
+---------------------+---------------+--------------+-----------------+
| ########            | 6,731         | 6,671        | 6,253           |
| # Total Market Size |               |              |                 |
+---------------------+---------------+--------------+-----------------+
| **Total Local       | 6,417         | 6,404        | 6,023           |
| Production**        |               |              |                 |
+---------------------+---------------+--------------+-----------------+
| **Total Exports**   | 327           | 375          | 372             |
+---------------------+---------------+--------------+-----------------+
| **Total Imports**   | 642           | 640          | 602             |
+---------------------+---------------+--------------+-----------------+

(Unit: USD million)\
(Source: The above statistics are unofficial estimates by Commercial
Service Korea.)\
\[USD 1=1,200 Won (2004), 1,100 Won (2005), 950 Won (2006)\]

As Korea's industrialization and urbanization raise new environmental
concerns, the Korean government continually initiates national
environmental projects and strengthens regulatory requirements for
polluting industries. This policy enforcement is the key factor driving
the pollution control equipment industry in Korea.

CS Korea estimates the size of the pollution control equipment industry
at USD 6 billion in 2005. According to industry experts, imports account
for about 10 percent of the total market. Japan is the principal foreign
supplier with about 47 percent market share, followed by the U.S. with
32 percent market share, Germany and France.

Local environmental equipment manufacturers in Korea have supplied a
major portion of environmental projects with medium-level technology and
medium-cost products. While they have significantly improved their
technology prowess mostly through technology transfer and merger with
non-Korean suppliers, they still lack the core technologies to supply
the products that meet the government's stringent regulatory
requirements, and are seeking more advanced import products and
technologies.

### Best Products/Services [**Return to top**](#ch4)

-   Volatile organic compounds (VOCs) control in oil-refineries and
    petrochemicals

-   Dioxin abatement in municipal and industrial incinerators

-   Advanced sulfur oxides/nitrogen oxides abatement in power plants and
    steel mills

-   Energy saving and waste-to-energy in steel mills and municipal
    landfills

-   Pollution-free and low-emission vehicles in engineering technology,
    engine components and parts for Compressed Natural Gas (CNG);
    pollution abatement technologies for automobile and oil refinery
    industries

-   Advanced water pollution control technology

-   Environmentally friendly construction materials

### Opportunities [**Return to top**](#ch4)

The Korean government plays a key role in the pollution control
equipment industry, as the regulatory body and, also as the biggest
end-user. According to Bank of Korea statistics, the Korean government's
expenditure for environmental protection was estimated at about USD 9
billion in 2005, half of the total national expenditures, (USD 18
billion). The general industry and pollution control service providers
followed spending USD 5.5 billion and USD 3.5 billion, respectively. For
government projects, the tenders are announced on the Korean government
procurement (PPS) website with detailed information on the project scope
and contact information.

To enter the pollution control equipment market, U.S. suppliers are
strongly recommended to partner with qualified and capable Korean
companies who maintain their existing sales network to serve end-users,
and are fully aware of regulatory changes that drive the market.
Exhibiting at local environmental trade shows can be a good platform to
explore the market as well as gain exposure to end-users.

### Resources [**Return to top**](#ch4)

#### **Trade Show**

International Exhibition on Environmental Technologies (ENVEX)

<http://www.envex.or.kr/envex/eng/index.asp>

**[Key Contacts]{.underline}**

Ministry of Environment

<http://eng.me.go.kr/docs/index.html>

Public Procurement Service (PPS)

<http://www.pps.go.kr/english/>

#### **Local Contact**

(Mr.) Young Wan Park

Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4164

Fax: 82-2-739-1628

Email: <young.park@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Radio Frequency Identification Technology

ITA CODE: TEL

### Overview [**Return to top**](#ch4)

+----------------------+-------------+-------------+------------------+
|                      | **2004**    | **2005**    | **2006           |
|                      |             |             | (estimated)**    |
+----------------------+-------------+-------------+------------------+
| #######              | 146.1       | 209.5       | 346.4            |
| ## Total Market Size |             |             |                  |
+----------------------+-------------+-------------+------------------+
| **Total Local        | 145.0       | 207.4       | 334.5            |
| Production**         |             |             |                  |
+----------------------+-------------+-------------+------------------+
| **Total Korean       | 8.3         | 8.4         | 16.8             |
| Exports**            |             |             |                  |
+----------------------+-------------+-------------+------------------+
| **Total Imports into | 9.4         | 10.5        | 28.7             |
| Korea**              |             |             |                  |
+----------------------+-------------+-------------+------------------+

(Unit: USD million)

\[Source: The above statistics are unofficial estimates by Commercial
Service Korea.\]

\[ USD1= 1,200 Won (2004), 1,100 Won (2005), 950 Won (2006) \]

There is strong demand in the Korean market for Radio Frequency
Identification (RFID) technology that includes various new applications
in supply chain management, security, transportation and the healthcare
industry.

As a result, the Korean Ministry of Information and Communication (MIC)
plans to encourage RFID technology development and commercialization
throughout Korea. MIC also forecasts that the development of new devices
and related services and applications to commercialize RFID technology,
will generate more than 50 percent growth over the next few years. RFID
pilot projects conducted by the Korean government, including MIC and the
Ministry of Commerce, Industry and Energy (MOCIE), are expected to have
large ripple effect across industries and create even more demand for
new technologies for various services.

MIC aims to encourage standards development in technologies of spectrum
distribution and transmission, RFID code identification, code search
engines, middleware software and mobile RFID applications. Global
companies, including, HP, IBM and Motorola as well as other major firms
are also establishing Research & Development (R&D) centers to
collaborate with local research institutes related to ubiquitous
communication technologies and RFID applications development.
Furthermore, given Korea's advanced wireless/ wireline telecom
infrastructure, early adopters of new technologies and various
government matching funds are attracting multinational companies'
investment in R&D for new technologies.

Currently RFID use in Korea is expanding and mobile RFID is expected to
contribute significantly to broaden the commercial use of RFID
technology in the Business to Consumer (B2C) sector as well as in B2B.
RFID applications will be embedded in mobile phones/devices and operate
on existing mobile or wireless broadband network to read RFID tag
information and create new information. Many analysts believe that RFID
has the potential to revolutionize a wide variety of industries,
especially on the supply side. Areas such as retail, manufacturing,
logistics, inventory management and shipment tracking stand ready to
save billions of dollars if cost effective RFID solutions can be
developed. The potential for RFID is so great that some analysts even
predict that the new technology will eventually replace traditional bar
code scanning.

The primary Korean end uses of RFID technology are in retail,
manufacturing, distribution, public transportation systems, environment,
healthcare and livestock. Retail stores can use RFID to manage product
inventory, and automatically re-order supplies of dwindling products.
The technology can also replace bar code scanning in the final purchase
of products by customers. Manufacturing and distribution benefit by
using RFID to control items on assembly lines and track and identify
shipments. Public mass transportation systems can use RFID as a fast and
convenient way for passengers to pay fares or track and maintain
effective use of rail cars. RFID can be used in the livestock industry
to locate and control animals and the final product.

Competition in Korea's IT market is extremely fierce and only firms that
can provide affordable solutions and up-to-date technology achieve
success. Although the Korean government seeks to become the chief
exporter of RFID technology, they are still a few years behind other
RFID developers abroad in the technologies including, RFID tag, antenna,
sensor node and reader. Given the enormous growth potential of the
global RFID market, and the substantial savings and additional revenue
for retailers and supply side firms, Korea's relative lack of R&D
creates strong opportunities for US firms to enter the market.

### Best Prospects/Services [**Return to top**](#ch4)

RFID Technology and Solutions

\- RFID R&D

### Opportunities [**Return to top**](#ch4)

In order to enhance global competitiveness and become a leader in the
Information Technology market, MIC has declared RFID an important
technology of the future and plans to aggressively pursue its
development, along with a host of other new technologies. MIC is
expected to spend USD 140 million to develop and commercialize core
technologies and to create a Ubiquitous Sensor Network (USN) for RFID
technology by 2010. USD 71 million will be allocated for research and
development and USD 55 million will be reserved for pilot projects.
Korean public and private sectors are expected to invest approximately
USD 140 million in 2007 alone in RFID and USN projects.

MOCIE is taking the lead in the development of RFID systems in Supply
Chain Management (SCM) and distribution. MIC will focus on advanced
technology development for RFID/Ubiquitous Sensor Network (UNS)
deployment, excluding SCM and distribution.

The Korean government is looking for offshore investment in R&D. MIC's
RFID development plan encourages private Korean companies to invest in
RFID technology and to strengthen cost competitiveness. US technology
players are already setting up RFID R&D centers in Seoul, and several
Korean firms, including LG, Hyundai, and Samsung, have plans to
collaborate with U.S. firms on RFID development. There will be strong
market opportunities for U.S. suppliers of RFID equipment and solutions
over the next several years.

### Resources [**Return to top**](#ch4)

#### **Trade Shows**

The 20th Solution & Contents Exhibition of Korea (Jun 20-23, 2007)

[[http://www.sek.co.kr]{.underline}](http://www.sek.co.kr/)

SecurityWorld Expo 2007 (Jun 27-29, 2007)

[[http://www.secuexpo.com]{.underline}](http://www.secuexpo.com/)

[Card](http://www.coex.co.kr/eng/)Tech Korea & RFID World 2007 (Jul
11-13, 2007)

[[www.cardtechkorea.com]{.underline}](http://www.cardtechkorea.com/)

2007 IT EXPO BUSAN (Sep 12-15, 2007)

[[http://www.itexpo.or.kr]{.underline}](http://www.itexpo.or.kr/)

KES 2007 (Oct 9-13, 2007)

[[http://www.kes.org]{.underline}](http://www.kes.org/)

RFID/USN KOREA 2007 (Oct 31-Nov 2, 2007)

[[http://www.rfidkorea.or.kr]{.underline}](http://www.rfidkorea.or.kr/)

**[Key Contacts]{.underline}**

Ministry of Commerce, Industry and Energy (MOCIE)

[[http://www.mocie.go.kr/eng/default.asp]{.underline}](http://www.mocie.go.kr/eng/default.asp)

Ministry of Information and Communication (MIC)

[[http://www.mic.go.kr/index.jsp]{.underline}](http://www.mic.go.kr/index.jsp)

Radio Research Lab (RRL)

[[http://www.rrl.go.kr/eng/index.jsp]{.underline}](http://www.rrl.go.kr/eng/index.jsp)

Korea Association of RFID/USN (KARUS)

[[http://karus.or.kr/]{.underline}](http://karus.or.kr/)

##### [Local Contact]{.underline}

(Mr.) Chris Ahn,

Senior Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4186

Fax: 82-2-737-5357

E-mail: <chris.ahn@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Security Services and Products

ITA CODE: SEC

### Overview [**Return to top**](#ch4)

+----------------------+-----------+-----------------+-----------------+
|                      | **2004**  | **2005**        | **2006          |
|                      |           |                 | (estimated)**   |
+----------------------+-----------+-----------------+-----------------+
| #######              | 2,063     | 1,964           | 2,134           |
| ## Total Market Size |           |                 |                 |
+----------------------+-----------+-----------------+-----------------+
| **Total Local        | 865       | 838             | 911             |
| Production**         |           |                 |                 |
+----------------------+-----------+-----------------+-----------------+
| **Total Exports**    | N/A       | N/A             | N/A             |
+----------------------+-----------+-----------------+-----------------+
| **Total Imports**    | 1,123     | 1,069           | 1,158           |
+----------------------+-----------+-----------------+-----------------+

(Unit: USD million)

(Source: The above statistics are unofficial estimates by CS Korea. The
total market size includes services and equipment. Statistics for local
production and import data do not include security services.)

\[ USD1= 1,200 Won (2004), 1,100Won (2005), 950Won (2006)\]

In 2006, the overall size of Korea's security industry, including
equipment and services, was estimated to be USD2.1 billion. Provision of
security guard services continued to account for over 50 percent of the
total security market following by leased and installed security
equipment, which accounted for 25 percent of the market. Security
devices took a 15 percent share. In 2006, the size of the security
industry market increased by around 10%. In that year, airports and
ports started to replace existing security systems while large private
companies showed increasing interest in installing integrated security
systems. The security industry is projected to grow by an average of 10
percent per year for the next few years.

Total imports of security equipment and related products in 2006 were
estimated at USD1.2 billion. U.S. firms are the major suppliers of
airport and port security equipment, which includes X-ray scanning
systems, computerized tomography X-rays, metal detectors, hand-held
detectors and explosive trace detectors. Total imports of airport and
port security equipment in 2006 were estimated at USD617.5 million. U.S.
imports accounted for 25 percent at USD154 million. CS Korea expects
that U.S. imports will maintain a steady market share in Korea's import
security industry for the foreseeable future.

### Best Products/Services [**Return to top**](#ch4)

-   Simulation chambers for passenger baggage and cargo

-   Walk-through visitor surveillance systems

-   Drug/explosive product detect/analyzing systems

\- Explosives detection security systems integration for ports and
airports

### Opportunities [**Return to top**](#ch4)

The local security industry's technology level lags behind that of
advanced countries, especially in the area of providing high-end
security solutions to meet end-user requirements. As a result, the
industry's major Korean players, who are also systems integrators, are
seeking opportunities to develop top-notch technology in cooperation
with foreign companies.

Government agencies are end-users for integrated systems for security
devices. In particular, airports, ports, and customs offices are seeking
advanced integrated security systems devices. U.S. companies have a
larger share of the Korean market for X-ray detection systems and
container inspection systems than European and Japanese firms. U.S.
systems, certified by the Transportation Security Administration (TSA)
and the Federal Aviation Administration (FAA), should have growing
market opportunities in Korea due to confidence in the quality of
systems with these certifications. U.S. companies are encouraged to
monitor government procurement plans and establish consortia with prime
Korean contractors in systems integration.

### Resources [**Return to top**](#ch4)

######## **Trade Shows**

SecuWorld 2007 (Annual)

<http://www.secuexpo.com/>

Korea International Safety & Security Exhibition

[www.KISS21C.org](http://www.KISS21C.org/)

**[Key Contacts]{.underline}**

Civil Aviation Safety Authority

[www.casa.go.kr](http://www.casa.go.kr/)

Incheon International Airport Corporation (IIAC)

[www.airport.or.kr](http://www.airport.or.kr/)

Korea Fire Equipment Inspection Corporation

<http://www.kfi.or.kr/>

Korea Occupational Safety & Health Agency

[www.kosha.net](http://www.kosha.net/)

Civil Defense and Disaster Management Bureau

Ministry of Government Administration and Home Affairs

[http://www.mogaha.go.kr](http://125.60.34.1/gpms/ns/mogaha/user/nolayout/main/english/userEngMainDisplay.action)

Fire Administration Bureau

Ministry of Government Administration and Home Affairs

[http://www.mogaha.go.kr](http://125.60.34.1/gpms/ns/mogaha/user/nolayout/main/english/userEngMainDisplay.action)

Anti Terror Division

National Police Agency

<http://www.npa.go.kr/eng/index.jsp>

[**Local Contact**:]{.underline}

(Mrs.) Myoung Soo Lah

Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4516

Fax: 82-2-739-1628

Email: <myoung.soo.lah@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Specialty Chemicals

ITA CODE: ICH

### Overview [**Return to top**](#ch4)

+-----------------------+--------------+------------+-----------------+
|                       | **2004**     | **2005**   | **2006          |
|                       |              |            | (estimated)**   |
+-----------------------+--------------+------------+-----------------+
| ######                | 25,093       | 25,775     | 27,292          |
| ### Total Market Size |              |            |                 |
+-----------------------+--------------+------------+-----------------+
| **Total Local         | 20,139       | 20,563     | 22,000          |
| Production**          |              |            |                 |
+-----------------------+--------------+------------+-----------------+
| **Total Exports**     | 2,934        | 3,042      | 3,612           |
+-----------------------+--------------+------------+-----------------+
| **Total Imports**     | 7,889        | 8,254      | 8,903           |
+-----------------------+--------------+------------+-----------------+

(Unit: USD million)

(Source: Korea Specialty Chemical Industry Association)

\[ USD1= 1,200 Won (2004), 1,100Won (2005), 950Won (2006)\]

Korean demand for high quality, sophisticated chemical products and
associated substances for the development of new products is steadily
increasing. In 2005, the total market size of Korea's specialty
chemicals was USD25.8 billion**,** a two percent increase over 2004.
Total imports of specialty chemicals increased by 9 percent in 2005,
during which time imports from the U.S. increased by six percent to
USD1.27 billion. The U.S. has a 14 percent market share of the specialty
chemicals industry.

The specialty chemical industry is projected to grow by seven percent
over the next few years and is expected to result in a nine percent
annual increase in demand for specialty chemical imports. In the
specialty chemicals area, Korea lacks advanced chemical materials and
technology, and has not made significant investments in R&D despite
growing demand in the pharmaceutical, cosmetic/perfume, photochemical,
and paint and ink industry sectors. As a result, Korea continues to
heavily depend on imports to meet demand for intermediate raw materials
and newly developed chemical products.

### Best Products/Services [**Return to top**](#ch4)

\- Specialty chemicals for the medical and pharmaceutical industries

\- Specialty chemicals for the cosmetics industry

### Opportunities [**Return to top**](#ch4)

Market demand continues to grow especially from Korean companies in the
medical, pharmaceutical and cosmetic industries. These companies are
very interested in using advanced chemical materials to produce new
products. The technological level of domestic producers appears to be on
par with advanced countries in terms of basic science and technology;
consequently, newer technology is also very welcome. Korea is still
developing an awareness of the importance of safety standards during the
production of chemical products. Korean government agencies are actively
strengthening alliances with multinational companies in advanced
countries to secure components for the production of high-tech medical,
pharmaceutical, cosmetics and biochemistry products.

### Resources [**Return to top**](#ch4)

######## 

######## **Trade Show**

XpoChem Conference 2006 (Annual)

Date to be determined\
[www.kscia.or.kr](http://www.kscia.or.kr/)

**[Key Contact]{.underline}**

Ministry of Environment

[www.me.go.kr](http://www.me.go.kr/)\
\
Ministry of Labor

[www.molab.go.kr](http://www.molab.go.kr/)

**[Local Contact]{.underline}**

(Mrs.) Myoung Soo Lah

Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4516

Fax: 82-2-739-1628

Email: <myoung.soo.lah@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Travel and Tourism

[]{#travelandtourism .anchor}ITA Industry Code: TRA

## Overview [**Return to top**](#ch4)

  --------------------------- ----------- ------------ -------------------
                              **2004**    **2005**     **2006 (Jan. --
                                                       Jun.)**

  **Outbound Travel**         8,825,585   10,080,143   5,431,308

  **Outbound Travel to the    627,575     665,181      339,238
  U.S.**                                               

  **Inbound Travel**          4,184,992   4,347,318    2,058,919
  --------------------------- ----------- ------------ -------------------

Source: Korea Tourism Organization

Koreans' rapidly rising GDP, their gradual increase in leisure time,
heightened globalization, and greater awareness and interest in
developments outside the Korean peninsula are spurring their interest in
international travel. Korea\'s per capita GDP has risen to almost USD
16,291, placing it securely in the ranks of high-income countries.
Korean consumer confidence also has increased along with a sharp rise in
discretionary spending for such activities as overseas travel for both
business and leisure. Korea also has begun to upgrade its domestic
tourism sector infrastructure.

With these changing cultural and income factors, conditions look
promising for more growth in the outbound Korean travel market. Koreans
are showing an increased desire to travel to the United States despite
the lengthy travel time and the airfares required to make the trip. The
ever-present U.S. influence in Korean mass media, including movies,
advertising, popular culture, and most recently the Internet, continue
to accentuate Koreans\' interest in U.S. travel destinations. Koreans
overwhelmingly choose the U.S. as a non-Asian destination because of the
diversity of tourism opportunities not easily available back home,
including U.S.-style shopping, theme parks, cultural attractions in
major U.S. cities, relatively inexpensive golfing experiences, and the
major U.S. national parks.

In 2005, a record-breaking 10 million Koreans traveled abroad, an
increase of 14.2% over 2004. According to the Korean Tourism
Organization (KTO), 665,181 Koreans traveled to the U.S. in 2005, a 6%
decrease over 2004, when 627,575 visited America. The number of Korean
travelers to the U.S. has varied greatly over the past decade. Prior to
the Asian Financial Crisis in 1997, 806,264 Koreans traveled to the
U.S., then sharply decreased. Since then, the numbers slowly picked up
back to 719,227 by 2000. However, the September 11, 2001, terrorist
attacks caused the number of travelers to the U.S. to decrease. Only
recently are the numbers beginning to gradually increase. Korea does not
participate in the Visa Waiver Program. This has increased the
competitiveness of other destinations that do not require visas, such as
Japan and southeast Asian countries. Thailand is becoming a popular
honeymoon destination. The stricter U.S. visa regime put in place
following 9/11, which requires the U.S. Embassy to fingerprint and
interview all applicants for U.S. visas, has dampened some interest in
leisure travel to the United States.

As reported by the U.S. International Trade Administration, Korea is
currently the fifth largest source for inbound travel to the United
States, behind the United Kingdom, Japan, Germany, and France.

## Best Prospects/Services [**Return to top**](#ch4)

\- High quality Group package tours to the U.S.

\- Family / Leisure Trips

## Opportunities [**Return to top**](#ch4)

Korean Tourism Organization figures indicate that in 2005, a record 10
million Koreans traveled to other countries. Out of the top five
favorite destinations for Koreans, China ranked number one, followed by
Japan, the U.S., Thailand, and the Philippines.

With 6.5% of the Korean outbound tourism market, the United States
ranked third in market share. China and Japan have a larger market share
that is easily explained by their geographical proximity and language
and cultural similarities to Korea. Koreans usually travel to the U.S.
on package group tours or individually to visit their friends, families,
and relatives. The market for group tours needs to be upgraded to
provide a higher class of product that provides a variety of activities
and caters to the more sophisticated tastes of seasoned Korean
travelers. Koreans who travel to the U.S. are very much interested in
visiting not only museums and amusement parks, but in looking for
bargains at fashion outlets and visiting wineries. Following traditional
travel patterns and because the U.S. is a country that offers a variety
of activities, climates, and cultural experiences, the U.S. is by far
the leading non-Asian destination for Koreas. Korean travel industry
sources indicate that Los Angeles, San Francisco, Las Vegas, and Seattle
are the most popular U.S. destinations, followed by the East Coast New
York-Washington D.C route. Following United Airlines' expansion of its
routes to include direct service between Seoul and San Francisco in
March 2006 and Korean Air's inauguration of direct flights between Seoul
and Las Vegas in September 2006, Delta Air Lines is inaugurating a
direct link between Seoul and Atlanta in June 2007.

## Resources [**Return to top**](#ch4)

**[Major Show]{.underline}**

Name: Korea World Travel Fair

<http://www.kotfa.co.kr/eng/main/main.htm>

#### **Key Contacts**

Korea Tourism Organization

<http://english.tour2korea.com/07T2KZone/aboutUs/top_tour2korea.asp?konum=1&kosm=m7_7>

Ministry of Culture and Tourism (MCT)

<http://www.mct.go.kr/english/index.jsp>

##### [Local Contact]{.underline}

Grace Sung

Commercial Specialist

Commercial Service Korea

U.S. Embassy in Korea

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4324

Fax: 82-2-739-1628

Email: <grace.sung@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Wireless Broadband Internet Equipment and Services 

[]{#wirelessbroadband .anchor}ITA CODE: CSV

### Overview [**Return to top**](#ch4)

+----------------------+------------+-------------+-------------------+
|                      | **2004**   | **2005**    | **2006            |
|                      |            |             | (estimated)**     |
+----------------------+------------+-------------+-------------------+
| #######              | N/A        | N/A         | 445               |
| ## Total Market Size |            |             |                   |
+----------------------+------------+-------------+-------------------+
| **Total Local        | N/A        | N/A         | 307               |
| Production**         |            |             |                   |
+----------------------+------------+-------------+-------------------+
| **Total Exports**    | N/A        | N/A         | 10                |
+----------------------+------------+-------------+-------------------+
| **Total Imports**    | N/A        | N/A         | 148               |
+----------------------+------------+-------------+-------------------+

(Unit: USD million)

\[Source: The above statistics are unofficial estimates by Commercial
Service Korea.\]

\[ USD1= 1,200 Won (2004), 1,100 Won (2005), 950 Won (2006) \]

Korea ranks among the top countries in the world for internet usage and
broadband penetration and has one of the highest number of broadband
subscribers among all OECD countries. Korea's total number of broadband
subscribers is estimated to have reached 90 percent of the nation's 15
million households as of the end of 2006 and therefore, service
providers are planning for more valued-added services including wireless
broadband service and Intern Protocol Television (IPTV).

Wireless Internet access service in Korea can be categorized into two
major services; fixed wireless Internet (WLAN) based on WiFi technology,
and mobile internet based on Code Division Multiple Access (CDMA)
technology. Mobile and WLAN services enable users to access full
Internet services on handheld devices without cable connections,
allowing mobility and convenience. However, in order to satisfy demand
for higher bandwidth and mobility over the existing wireless Internet,
new "mobile Wimax", or "Wireless Broadband" (WiBro) service was
commercialized in early 2006, using 2.3GHz spectrum by KT and SK Telecom
with limited coverage in Seoul. WiBro will become the foundation of
"Ubiquitous-Korea", a seamless Internet access/ communication
environment planned by the Korean government in cooperation with
industry. The WiBro service market is expected to attract 600,000
subscribers reaching USD 130 million in 2007, driving more demands in
hardware and applications.

WiBro technology is part of the IEEE802.16 family of wireless Internet
specifications, Wimax, and is expected to offer up to 5-15Mbps bandwidth
to mobile devices traveling at over 60 kilometers per hour. Major local
companies, including Samsung, LG, and PosData as well as the Electronic
Technology Research Institute (ETRI), a Ministry of Information and
Communication (MIC)-sponsored R&D think tank, are developing a new
standard with the help of the Telecom Technology Association (TTA). The
development includes the evaluation and adaptation of different types of
foreign and local technologies. ETRI will play a major role in
developing and localizing WiBro core technology. The institute plans to
make at least 20 percent of the technology home-grown in order to
minimize the payment of licensing fees to foreign firms. This aggressive
agenda calls for Immediate R&D and infrastructure investment for new
WiBro technologies by foreign companies since Korean government realized
the importance of global standardization in order to export new
technologies.

In fact, in 2006, America's third-largest communication company, Sprint
Nextel, agreed to establish portable internet communications network
with Samsung Electronics, Intel and Motorola and experts expect that up
to USD \$ 4 billion would be financed building a new communication
system across the U.S, targeting 100 million subscribers.

Korea's global leadership in wireless communications and broadband
Internet access services has spawned tremendous demand for all types of
equipment, contents and solutions, especially for specialized and
innovative technologies, providing opportunities for sales of advanced
and highly specialized U.S. telecommunications equipment, solutions and
contents.

### Best Prospects/Services [**Return to top**](#ch4)

-   WiBro technologies

-   Internet Protocol (IP) TV

-   High Speed Data Packet Access (HSDPA) 3.5G technology

### Opportunities [**Return to top**](#ch4)

Market demand for WiBro services should drive investment in the telecom
sector for the next five years. National-wide infrastructure
installation for WiBro will be deployed in 2007 and more "killer
applications" and relevant services including Triple Play Services
(TPS), Internet Protocol TV and Video on Demand (VoD) are expected to be
introduced by KT, SK Telecom, Hanaro Telecom, etc. triggering more
service and content demand.

According to the Ministry of Information and Communication (MIC), the
market demand for WiBro service is expected to reach USD 3.7 billion by
2011 with nine million subscribers and eventually transition to 4^th^
Generation Next Generation Network (NGN) telecom network. The total
market demand for mobile WiMax equipment and solutions is expected to
reach a total of USD 2 billion over the next three years.

In parallel, the mobile date services market, the size of which
accounted for USD 3.5 billion in 2006, is expected to continue its
growth due to the deployment of a 3.5 Generation mobile internet
service, High Speed Downlink Packet Access (HSDPA)

### Resources [**Return to top**](#ch4)

#### **Trade Shows**

######### 

Korea IT Show 2007 (April 19-22, 2007)

[[http://www.kisexpo.co.kr]{.underline}](http://www.kisexpo.co.kr/)

Smart Home Network Show (May 30-Jun 2, 2007)

[[http://www.smarthomeshow.com]{.underline}](http://www.smarthomeshow.com/)

######### 

######### The 20th Solution & Contents Exhibition of Korea (Jun 20-23, 2007)

[[http://www.sek.co.kr]{.underline}](http://www.sek.co.kr/)

2007 IT EXPO BUSAN (Sep 12-15, 2007)

[[http://itexpo.or.kr]{.underline}](http://itexpo.or.kr/)

KES 2007 (Oct 9-13, 2007)

[[http://www.kes.org]{.underline}](http://www.kes.org/)

#### 

#### **Key Contacts** 

Ministry of Information and Communication (MIC)

[[http://www.mic.go.kr/index.jsp]{.underline}](http://www.mic.go.kr/index.jsp)

Radio Research Lab (RRL)

[[http://www.rrl.go.kr/eng/index.jsp]{.underline}](http://www.rrl.go.kr/eng/index.jsp)

Telecommunications Technology Association (TTA)

[[http://www.tta.or.kr/English/new/main/index.htm]{.underline}](http://www.tta.or.kr/English/new/main/index.htm)

Electronics and Telecommunications Research Institute (ETRI)

[[http://www.etri.re.kr/www_05/e_etri/]{.underline}](http://www.etri.re.kr/www_05/e_etri/)

##### [Local Contact]{.underline}

(Mr.) Chris Ahn,

Senior Commercial Specialist

Commercial Service Korea

U.S. Embassy

32 Sejong-ro Jongro-gu

Seoul 110-710 Korea

Tel: 82-2-397-4186

Fax: 82-2-737-5357

Email: <chris.ahn@mail.doc.gov>

Website: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Agricultural Sectors [**Return to top**](#ch4)

For a listing of the best prospective U.S. agricultural and food
products for the Korean market, see page 25 of the Foreign Agricultural
Service's [Exporter
Guide](http://www.fas.usda.gov/gainfiles/200610/146249108.pdf) for
Korea. Additional detailed information for each food sector can be found
by searching the [Attaché
reports](http://www.fas.usda.gov/scriptsw/attacherep/default.asp) for
Korea.

Korea is the fifth largest market for U.S. agricultural products. U.S.
exports of agricultural products to Korea totaled USD 16.4 billion in
2006.

Changes in Korean lifestyle and dietary culture, along with remarkable
development in socio-economic environment, have resulted in
significantly expanded demand for processed food and beverage products.
Increasing affluence, more women in the workforce, and a well-traveled
younger generation looking for foods with an international flavor are
promoting the rise in popularity of convenience stores, bulk retail
outlets, and western-style and family restaurants. The demand for
products, such as frozen vegetables, sauce preparations, and
confectionery items is growing and the domestic processing industry
lacks the capability to supply these items. Additionally, local
agricultural output currently does not meet the demand of the local
processing industry.

When considering the Korean market, U.S. food exporters should conduct
preliminary research to determine if the market is appropriate for the
product. Possible sources of market information include Korean
importers, [U.S. state departments of
agriculture](http://www2.nasda.org/NASDA/), the [U.S. Agricultural Trade
Office in Seoul](http://www.atoseoul.com/) and the [U.S. Department of
Commerce](http://www.buyusa.gov/korea). Lists of Korean importers, by
product, can be obtained from the [U.S. Agricultural Trade
Office](http://www.atoseoul.com/), or through the [Foreign Agricultural
Service](http://www.fas.usda.gov/agx/buying_us/foreign_buyers_exporters.asp)
in Washington, D.C. The next step might include sending catalogues,
brochures, product samples, and price lists to prospective importers as
a way of introducing the company and products.

Once contact is established, it is advisable to visit the importer(s) in
person, which will increase the seller\'s credibility with the Korean
importer and give an opportunity to see the Korean market first hand. In
Korea the clichés about \"seeing is believing\" and \"one visit is worth
a 1,000 faxes\" are especially true. There is no substitute for
face-to-face meetings. The supplier or exporter should bring samples as
well as product and company brochures including price lists, shipping
dates, available quantities, and any other information needed for
negotiating a contract. While information in English is acceptable,
having it in Korean is helpful. A general overview of the firm in Korean
is a good place to start.

The [Seoul Food & Hotel
2007](http://www.fas.usda.gov/agexport/Whats Hot/2007/koreabrochure.pdf)
show will be held in Ilsan April 24-27, 2007. It presents an excellent
opportunity to explore possible market opportunity-es in Korea. This
show is a trade only show and targets importers, wholesalers,
distributors, retailers, hotels, restaurants, food processors, media,
etc. It is currently the only [USDA-supported food
show](http://www.fas.usda.gov/agexport/TS_WhatsHot.html) in Korea.

[Return to table of contents](#doing-business-in-korea)

[[]{#ch5 .anchor}Return to table of contents](#doing-business-in-korea)

# Chapter 5: Trade Regulations and Standards

-   [Import Tariffs](#import-tariffs-return-to-top)

-   [Trade Barriers](#trade-barriers-return-to-top)

-   [Import Requirements and
    Documentation](#import-requirements-and-documentation-return-to-top)

-   [U.S. Export Controls](#u.s.-export-controls-return-to-top)

-   [Temporary Entry](#temporary-entry-return-to-top)

-   [Labeling and Marking
    Requirements](#labeling-and-marking-requirements-return-to-top)

-   [Prohibited and Restricted
    Imports](#prohibited-and-restricted-imports-return-to-top)

-   [Customs Regulations and Contact
    Information](#customs-regulations-and-contact-information-return-to-top)

-   [Standards](#twentyfive)

-   [Trade Agreements](#trade-agreements-return-to-top)

-   [Web Resources](#web-resources-return-to-top-1)

## Import Tariffs [**Return to top**](#ch5)

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](http://english.customs.go.kr/kcsweb/user.tdf?a=user.customtariff.CustomTariffApp&c=1001&mc=ENGLISH_INFORMATION_KOREA)
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 is also a key subject under discussion
in the bilateral U.S.-Korea Free Trade Agreement (KORUS-FTA)
negotiations that began in June 2006. The KORUS-FTA offers the prospect,
once signed, 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.

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. On
December 29, 2006, the Ministry of Finance and Economy (MOFE) released
the 2007 list of products subject to adjustment tariffs and quota rates.
Sixteen agricultural and fishery products are subject to adjustment
tariffs (a decrease of two \-- bananas and frozen skate \-- compared to
2006) and 30 are subject to quota tariffs (a decrease of 59 compared to
2006).

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, and
was expected to reduce its tariffs on this type of semiconductor to zero
during 2006.

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](http://english.customs.go.kr/kcsweb/user.tdf?a=user.customtariff.CustomTariffApp&c=1001&mc=ENGLISH_INFORMATION_KOREA)
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](http://www.atoseoul.com/) for specific
information on tariff rates.

##### 

##### Customs Valuation

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.

## Trade Barriers [**Return to top**](#ch5)

Korea continues a process of economic liberalization and deregulation,
but the Korean government (ROKG) has yet to adopt a fully hands-off
policy where the economy and trade are concerned. The U.S. Embassy, in
addition to the American Chamber of Commerce (AmCham) in Korea, works
actively to lift or loosen the many regulatory trade restrictions that
currently exist.

Overcoming regulatory barriers to trade is also a major focus of the
U.S. in negotiating the KORUS-FTA. Transparency, due process, public
comment and appeals procedures, and timely and written administrative
procedures are among the topics under discussion, and affect a number of
the sector-specific negotiating chapters.

Information on specific trade barriers in Korea, including agricultural
products such as the beef ban and restrictions on rice imports, is
available in the [2006 National Trade Estimate Report on Foreign Trade
Barriers for
Korea.](http://www.ustr.gov/assets/Document_Library/Reports_Publications/2006/2006_NTE_Report/asset_upload_file929_9220.pdf)

## Import Requirements and Documentation [**Return to top**](#ch5)

Rice is the only agricultural commodity that continues to have
quantitative import restrictions. All commodities, except rice, can be
freely imported, subject to special registrations and import approvals
for categories like pharmaceuticals and medical devices, unless they are
included on the Negative List, which includes commodities that are
either prohibited or restricted. The Negative List is officially known
as the Export and Import Notice, which stipulates requirements and
procedures for importing certain products (about 1,074 items, or 1
percent of all items) to ensure the protection of public health and
sanitation, national security, safety, and the environment.

Applications for licenses to import items on the Negative List are
approved on a case-by-case basis after screening and approval by the
government agencies concerned, or by the relevant manufacturer's
association. Typically, health or safety related products, such as
pharmaceuticals and medicines, require additional testing or
certification by recommended organizations before clearing customs. In
addition, special items defined by the Ministry of Commerce, Industry
and Energy (MOCIE) in its Annual Trade Plan require approval by the
Minister of [MOCIE](http://www.mocie.go.kr/english/home/default.asp). In
most cases, the supplier's qualified local agent completes the
registration process.

An overview of Korean import requirements for food is contained in the
[Exporter
Guide](http://www.fas.usda.gov/gainfiles/200610/146249108.pdf).
Additional detailed information about import requirements and
documentation needs for agricultural and food products (including
biotechnology products) is included in the [Food and Agricultural Import
Regulations and
Standards](http://www.fas.usda.gov/gainfiles/200612/146269861.pdf)
(FAIRS) report for Korea. The Korean Food and Drug Administration (KFDA)
provides information on maximum residue levels and import procedures on
the [KFDA website](http://www.kfda.go.kr/). Additional detail on the
[maximum residue
limits](http://www.fas.usda.gov/gainfiles/200408/146107093.pdf) allowed
by Korean food authorities and reports on import requirements for
[organic
products](http://www.fas.usda.gov/gainfiles/200408/146107229.pdf) are
also available on the FAS website. Exporters of organic products should
also review the FAS report on Korean regulatory requirements for
[transgenic content in
organic](http://www.fas.usda.gov/gainfiles/200504/146119394.pdf)
processed food products.

Current information on which U.S. livestock and poultry products are
eligible for export to the Korean market can be found on the website of
the [Food Safety and Inspection
Service](http://www.fsis.usda.gov/Regulations_&_Policies/Republic_of_Korea_Requirements/index.asp)
of the U.S. Department of Agriculture. This website also provides
guidance on the documents Korea requires for livestock product shipments
destined for Korea.

## U.S. Export Controls [**Return to top**](#ch5)

The Department of Commerce, Bureau of Industry and Security (BIS)
develops, implements, and interprets U.S. export control policy for
dual-use commodities, software, and technology. Dual-use items subject
to BIS regulatory jurisdiction have predominantly commercial uses, but
may also have military applications. For basic information on U.S.
export controls, please visit the following website,
<http://www.bis.doc.gov/licensing/exportingbasics.htm>. For information
on export controls administered by other U.S. Government agencies,
please visit

<http://www.bis.doc.gov/About/reslinks.htm>.

Most goods exported to Korea are not subject to U.S. export controls,
however, please visit the above listed websites for detailed information
on U.S. export controls.

## Temporary Entry [**Return to top**](#ch5)

Korea has three kinds of bonded areas where goods can temporarily enter
Korea for storage, manufacture, processing, sale, construction, or
exhibit without going through customs clearance.

The three types of bonded areas are: 1) designated bonded areas
(designated storage sites and customs inspection sites); 2) licensed
bonded areas (bonded warehouses, bonded exhibition sites, bonded
construction sites, and bonded sales shops); and, 3) integrated bonded
areas. The period for which goods may be stored in a licensed bonded
warehouse is one year and can be extended for another year. Duties are
payable only when goods are cleared through customs. Storage fees are
relatively high, and the availability of a bonded warehouse to maintain
inventories is limited. The storage period does not apply to the storage
of live animals or plants, perishable merchandise, or other commodities
that may cause damage to other merchandise or to the warehouse. The
Collector of Customs bears no responsibility for goods while they are
stored in customs facilities.

Integrated bonded areas have no time limit for storage. Hence, storage,
manufacturing, processing, building, sales and exhibition can be
comprehensively carried out. U.S. exporters can store shipped goods and
still maintain title until they are cleared through

customs by normal import procedures. Korea\'s customs laws specify that
any person who wishes to establish a bonded warehouse shall obtain a
license from the director of each Customs Zone. Applications must
include the name of the bonded warehouse, location, structure, numbers
and sizes of buildings, storage capacity and types of products to be
stored. In addition, articles of incorporation and corporate
registration must be submitted, when applicable.

Goods entering Korea for exhibition purposes must be stored in a bonded
area. For example, the Korea Exhibition Center (COEX) is a bonded area.
Exhibition goods will be held without charge at COEX during the
exhibition period, after which they must be either: 1) reshipped
directly out of Korea without payment of duty; 2) presented at Customs
for payment of regular duty on value declared at time of entry; or, 3)
transferred to the Seoul Customs house bonded storage area. Goods stored
in a bonded warehouse may incur storage costs, customs brokerage
charges, local transportation costs and moving equipment fees.

Korea Customs have simplified clearance procedures for goods with
particular purposes (samples, goods for warranty and non-warranty
repair).

The ATA Carnet is an international Customs document that a traveler may
use to temporarily import certain goods into a country without having to
engage in the Customs formalities usually required for the importation
of goods, and without having to pay duty or value-added taxes on the
goods. Korea allows for the temporary importation of commercial samples,
professional equipment and certain advertising materials by a
nonresident individual. For more information about carnet in Korea,
please click
[here](http://english.customs.go.kr/kcsweb/user.tdf?a=common.HtmlApp&c=1501&page=/english/html/kor/personal/personal_01_07.html&mc=ENGLISH_PERSONAL_TRAVELERS_070).

For more detailed information about guidelines for temporary entry of
items into Korea, please visit the [Korea Customs
website](http://english.customs.go.kr/).

## Labeling and Marking Requirements [**Return to top**](#ch5)

Country of origin labeling is required for commercial shipments entering
Korea. The Korean Customs Service (KCS) publishes a list of country of
origin labeling requirements by Harmonized System Code number. Please
visit [Labeling and Marking](#labeling-and-marking-return-to-top) for
more detailed information about labeling requirements.

Korea has specific labeling and market requirements for organic and
functional food as well as food produced through biotechnology. Details
regarding these and other general labeling and market requirements can
be found on the Foreign Agricultural Service website in the [Food and
Agricultural Import Regulations and
Standards](http://www.fas.usda.gov/gainfiles/200612/146269861.pdf)
(FAIRS) report for Korea.

## Prohibited and Restricted Imports [**Return to top**](#ch5)

Please visit the [Department of Commerce, Bureau of Industry and
Security](http://bxa.fedworld.gov/) for detailed information about
export controls to the Republic of Korea. [The Korean
Customs](http://www.customs.go.kr/eng/) also maintains a list of
prohibited imports to the Republic of Korea.

## Customs Regulations and Contact Information [**Return to top**](#ch5)

[]{#twentyfive .anchor}Korea maintains an import declaration system that
allows for the immediate release of goods upon acceptance of an import
declaration filed without defect. With the exception of high-risk items
related to public health and sanitation, national security, and the
environment, which often require additional documentation and technical
tests, goods imported by companies with no record of trade law
violations are released upon the acceptance of the import declaration
without customs inspection. The Korean Customs Service's (KCS)
Electronic Data Interchange (EDI) system for paperless import clearance
allows importers to make an import declaration by computer without
visiting the customs house.

Import declarations may be filed at the Customs House before a vessel
enters a port or before the goods are unloaded into bonded areas. In
both cases, goods are released directly from the port without being
stored in a bonded area if the import declaration is accepted.

Exporters can file an export notice to Korean Customs by computer based
shipping documents at the time of export clearance. All commodities can
be freely exported unless they are included on the negative list.

With rare exceptions, Korean Customs allows free customs entry of goods
brought into Korea that are hand-carried by foreign businesspersons
(such as laptop personal computers) for use during their stay in Korea.
In such cases, Korean Customs makes a note on the traveler's passport
and then requires the traveler to take the item(s) out of Korea when
departing.

To view customs regulations, go to the website below.

Korea Customs Service

Tel. 82-42-472-2196

Fax. 82-42-481-7969

Email: <kcstcd@customs.go.kr>

Website: [www.customs.go.kr/eng/](http://www.customs.go.kr/eng/)

## Standards [**Return to top**](#ch5)

-   [Overview](#overview-return-to-top-17)

-   [Standards Organizations](#standards-organizations-return-to-top)

-   [Conformity Assessment](#conformity-assessment-return-to-top)

-   [Product Certification](#product-certification-return-to-top)

-   [Accreditation](#accreditation-return-to-top)

-   [Technical Regulations](#technical-regulations-return-to-top)

-   [Labeling and Marking](#labeling-and-marking-return-to-top)

-   [Contact Information](#contact-information-return-to-top)

### Overview [**Return to top**](#twentyfive)

The Korean Government adopted the ISO 9000 system (modified as the KSA
9000) as the official standard system in April 1992 and published
related regulations in September 1993. In 1997, Korean companies also
adopted the ISO 14000 environment management system. However, there are
still concerns over Korea's implementation of the commitments that were
made when the GATT Agreement on Technical Barriers to Trade (the
"Standards Code") was signed in 1980. Korea seems to develop standards
that effectively block imported goods by affecting only imported goods
or which are not applied in an equal manner to domestic products. In
addition, the Korean government sometimes issues new regulations without
adequate public consultation procedures. The absence of a comment period
and adequate time for industries to adjust can be a significant barrier
to trade. Finally, implementation periods sometimes do not give foreign
exporters sufficient time to comply, which often leads to unnecessary
and costly interruptions in trade. In light of the fact that Korean
firms consider compliance with the ISO 9000 necessary to compete in
international markets, the Korean government has indicated that it will
address such problems and reduce barriers.

The Korean Agency for Technology and Standards (KATS), under the
Ministry of Commerce, Industry and Energy (MOCIE), is undertaking a
program to make Korean standards consistent with international
standards. Stronger recognition of this necessity has developed from the
need to protect global consumers (i.e. electrical products safety), to
facilitate trade for small and medium sized Korean companies, to
increase overall efficiency of production as well as limit unnecessary
barriers to legitimate trade. The Korean Industrial Standardization Act
requires 60 days' notice before implementing new standards. Whenever
there is a change in standards, the government is required to notify the
WTO's Committee on Technical Barriers to Trade (TBT).

The Korean Food and Drug Administration (KFDA) generally accepts
internationally accepted standards, or equivalents, of advanced
countries or consensus standards. Included in this list of standards
recognized by Korea are those of the International Standard
Organizations (ISO), the American Society for Testing and Materials
(ASTM), the International Electro-technical Commission (IEC), the U.S.
Pharmacopoeia (USP), the British Pharmacopoeia (BP), the European
Pharmacopoeia (EP), and the Japanese Pharmacopoeia (JP).

Korea has reduced some barriers in the automotive industry. The Korean
government has promised not only to lower Korea's WTO tariffs on motor
vehicles and actively participate in future multilateral tariff
reduction negotiations, but also to change standards and certification
procedures that increase costs and cause delays to market entry due to
excessive documentation and testing. In October 20, 1998, the U.S. and
Korea signed an MOU for improved market access for U.S. and other
foreign motor vehicles into the Korean market. Although the MOU was
targeted at ongoing government efforts to improve public perceptions of
imports, mainly by preventing discriminatory procedures and promoting
benefits of open trade and competition, the most useful outcome of the
MOU was the self-certification system granted to U.S. manufacturers in
2002. This agreement made Korea the third country, after the U.S. and
Canada, to introduce a self-certification system in the industry.

Despite selected improvements, however, some Korean standards are still
inconsistent with international standards, and a lack of clear standards
guidelines persists. KFDA has established standards for only 76 of its
950 device classifications. These few standards serve as the lower limit
criteria for product approval. With many KFDA standards yet to be
established, a product may meet other non-KFDA standards but not fit
into KFDA's existing standards, causing delays in some cases.

U.S. companies have often faced difficulties due to rejection of
equivalent standards in Korea, particularly for food, nutritional
products, cosmetics, pharmaceuticals, medical devices and electronic
products.

Details regarding standards and import regulations for food and
agricultural products can be found in on Foreign Agricultural Service
website in the [Food and Agricultural Import Regulations and
Standards](http://www.fas.usda.gov/gainfiles/200612/146269861.pdf)
(FAIRS) report for Korea.

For standards contact information, go to the link below:

<http://www.buyusa.gov/korea/en/standardscontacts.html>

### Standards Organizations [**Return to top**](#twentyfive)

The Korean Agency for Technology and Standards (KATS), under the
Ministry of Commerce, Industry and Energy (MOCIE), develops standards
for capital goods, including construction materials and consumer
products, as well as products for logistics operations. The development
of standards and unification of Korean Standards (KS) with other
government regulations under KATS' jurisdiction. The agency consults
with other private organizations to develop standards and
certifications.

Every five years, KATS reviews KS to validate, revise or withdraw
standards depending on the needs of industry. KATS may make adjustments
in KS between five-year intervals to ensure conformance with
international standards or to facilitate the development of new
technologies. KS are then established by consensus with the Korean
Industrial Standards Council (KISC). KISC members are technical experts
from industry, academia, R&D organizations and consumer groups. They
review and decide on KS standards as well as on Korea's acceptance of
international standards. KISC currently consists of 39 division councils
of 300 members, supported by 594 technical committees with 6,808
members.

The Korean Food and Drug Administration (KFDA), similar to its
counterpart in the U.S., sets standards for research, new product
evaluation, test method development, product monitoring for food and
drugs as well as radiation safety regulations that apply to all
radiation-emitting devices distributed within Korea.

The [Telecommunications Technology Association
(TTA)](http://www.tta.or.kr/English/new/main/index.htm) covers
telecommunications, information technology, radio communications and
broadcasting. The Association establishes industry standards and has
been instrumental in creating the current Korean Information and
Communication Standards. With the opening of an IT Testing Laboratory in
December 2001, TTA has been able to provide a one-stop service center;
from the establishment of IT standards to the testing and certification
for IT standards products. TTA also collaborates with international and
national standards organizations such as ITU, ETSI, T1, TTC, ARIB,
TSACC, ACIF and etc.

### Conformity Assessment [**Return to top**](#twentyfive)

KATS establishes guidelines for government and private sector institutes
to perform reliability assessment and certification. It also performs
market surveillance on KS-marked products and penalizes products that do
not meet KS requirements.

Korea has a fairly extensive [regulatory system for biotechnology
products](http://www.fas.usda.gov/gainfiles/200508/146130572.pdf). The
Ministry of Agriculture & Forestry (MAF) regulates labeling of
unprocessed biotech products and

conducts environmental risk assessments (ERAs) of biotech crops. The
Korea Food & Drug Administration (KFDA) regulates food safety approval
of biotech crops and labeling of processed food products containing
biotech components

The National Plant Quarantine Service conducts post-entry quarantine
inspection of plants and plant products. It was designated as an
independent agency in 2001 and is affiliated with the Ministry of
Agriculture and Forestry

Ministry of Health and Welfare (MOHW) regulates products are required to
have locally based (pharmacists/chemists/Korean pharmaceutical trade
associations/etc.) tests on every batch of all shipments. Products
tested outside Korea are frequently not accepted.

Products requiring Electro Magnetic Interference (EMI) product testing
must be done by government-approved testing companies. Modems and
monitors require homologation approval even if already approved in the
country of origin.

The Korea Toy Industry Cooperative (KTIC) Inspection Team tests moving
toys. Currently it is the only officially designated toy-testing agency.
The Cooperative was incorporated in 1967 as a national nonprofit
organization for toy manufacturers and traders.

The Korea Environment & Merchandise Testing Institute (KEMTI) (formerly
the Korea Merchandise Testing & Research Institute -- KOMTRI) has been
accredited under the Korea Laboratory Accreditation Scheme (KOLAS) for
tests covering hardline products, footwear, textiles, packaging and
testing equipment. This qualification is granted only to laboratories
that meet certain quality and technical laboratory requirements based on
ISO 17025.

The Korea Testing & Research Institute for Chemical Industry (KOTRIC),
Quality Assurance Department, tests batteries, tires and safety glasses.
It was accredited under the Korea Laboratory Accreditation Scheme in
1994. KOTRIC is an affiliated institute under the Ministry of Commerce,
Industry and Energy.

The Korea Machinery-Meter and Petrochemical Testing & Research Institute
(MPI), Quality Assurance Team, tests motor brake fluids, engine coolants
and washer fluids. It was designated as a KOLAS institute in 1994.

The Fabric Inspection Testing Institute (FITI) - Testing & Research
Institute tests fabrics. It was designated as a reliability assessment
organization by MOCIE in 2001 and is accredited by KOLAS for a range of
tests.

In terms of new legislation, the Ministry of Commerce, Industry and
Energy's Living Modified Organism (LMO) Act is Korea's legislative
response to the implementation of the Cartagena Bio-Safety Protocol
(BSP). Environmental risk assessments for biotechnology crops will
become mandatory. Several applications have already been submitted,
however, none have yet been completed. The assessments will be similar
to food safety assessments for biotechnology crops for human
consumption. The U.S. Government is urging Korea to adopt a sufficient
grace period and minimize restrictive measures to avoid major trade
interruptions. Additionally, Korea is required to notify the World Trade
Organization (WTO) of any new revised requirements.

### Product Certification [**Return to top**](#twentyfive)

Generally, private industrial organizations oversee import certification
procedures. KATS, however, also issues certification marks for new
technologies and recognizes quality products manufactured by Korean
companies mainly to promote exports. The Korea Standards Quality
Certification Association offers consulting advice and preparation for
ISO9000, ISO14000, KS, TS16949, HACCP, UL, and CE.

In the spring of 2001, Korea began requiring ruminant exports to be
certified as BSE-free by the U.S. government. As this requirement proved
highly restrictive, it was resolved for pharmaceutical products. After
an extensive legal review, the Korean government decided to accept
BSE-free certifications by governments, manufacturers, and relevant
suppliers. After the discovery of a BSE-infected cow in the U.S. in
December 2003, however, imports of ruminant products and poultry meal
from countries with a history of BSE cases are highly restricted.

A number of Korea\'s sanitary and phytosanitary certification
requirements continue to limit market access for a variety of imported
products. However, progress was made in market access for cherries. In
April 2003, after lengthy consultations, the Ministry of Agriculture and
Forestry (MAF) ruled that all varieties of cherries would be permitted
to enter Korea under certain conditions. Yet market access for in-shell
walnuts is still hampered by a requirement for pre-export clearance by
MAF inspectors in the country of origin.

##### [Mutual Recognition Agreements (MRAs) with U.S. Organizations]{.underline}

Korea is a member of the ANSI -- RAB (American National Standards
Institute-Registrar Accreditation Board) Multilateral Recognition
Agreement.

### Accreditation [**Return to top**](#twentyfive)

Established in December 1992, the Korea Laboratory Accreditation Scheme
(KOLAS) is the government accreditation body under the KATS Department
of Technology and Standards Planning. KOLAS signed the Asia-Pacific
Laboratory Accreditation Cooperation Multilateral Recognition Agreement
(MRA) for testing in 1998 and for calibration in 2001. In 2000, KOLAS
also signed the International Laboratory Accreditation Cooperation
Multilateral Recognition Agreement on testing and calibration. As a
result, tests that are done in laboratories of ILAC member countries are
mutually recognized by 44 members economies.

There are local testing laboratories authorized to certify firms under
the ISO 9000 system. As Korea has joined the International Accreditation
Forum-Multilateral Recognition Arrangement (IAF-MLA), local
certification for the ISO 9000 system is recognized in the 27 member
countries of the IAF-MLA.

### Technical Regulations [**Return to top**](#twentyfive)

Revised or new standards or technical regulations are published by the
Korean Agency for Technology and Standards (KATS) and made available on
their website at <http://www.ats.go.kr/fm_03/pyojun.asp>. The articles,
more frequently than not, are published only in Korean. All proposed or
newly revised/established technical regulations are consolidated at this
site.

Proposed revisions or establishment of regulations in Korean are made to
the Director of Technical Regulations via the website at
[www.ats.go.kr](http://www.ats.go.kr/). A public meeting consisting of
law-makers as well as relevant private/public industry organizations is
held to comment on proposed regulations. Contact the [U.S. Embassy,
Commercial Section](http://www.buyusa.gov/korea/en/contactuslink.html)
for assistance with revised or new standards.

### Labeling and Marking [**Return to top**](#twentyfive)

Country of origin labeling is required for commercial shipments entering
Korea. The Korean Customs Service (KCS) publishes a list of the country
of origin labeling requirements by Harmonized System Code number. Click
"[Country of
Origin](http://english.customs.go.kr/kcsweb/user.tdf?a=common.HtmlApp&c=1501&&page=/english/html/kor/community/community_05.html&mc=ENGLISH_COMMUNITY_COUNTRY)"
for more information on markings.

Further labeling and marking requirements for specific products, such as
pharmaceutical and food products, are covered by specific regulations
from the Korean Government agencies responsible for these items. Korean
language labels, except for country of origin markings that must be
shown at the time of customs clearance, can be attached locally on
products in the bonded area either before or after clearance. The Korea
Food & Drug Administration (KFDA) is responsible for setting and
enforcing Korean labels for food products other than livestock products.
The MAF regulates livestock products. The MAF also has its own set of
standards for markings for the country of origin labeling of
agricultural products. Local importers usually print Korean language
labels when imported quantities are not large and consult with KCS about
where they can be attached to the product.

For pharmaceuticals, all imported containers and packages must be
conspicuously marked to show:

1\) country of origin and manufacturer's and importer's names and
addresses;

2\) name of product;

3\) date of production and batch number;

4\) names and weights of ingredients;

5\) quantity;

6\) number of units;

7\) storage method;

8\) distribution validity date;

9\) instructions for use;

10\) import license number;

11\) effectiveness;

12\) import price and suggested retail price.

Details regarding labeling and marking regulations for food and
agricultural products can be found on Foreign Agricultural Service
website in the [Food and Agricultural Import Regulations and
Standards](http://www.fas.usda.gov/gainfiles/200612/146269861.pdf)
(FAIRS) report for Korea.

### Contact Information [**Return to top**](#twentyfive)

Korean Agency for Technology and Standards (KATS)

[www.ats.go.kr](http://www.ats.go.kr/)

Published technical regulations and standards

<http://www.ats.go.kr/fm_03/pyojun.asp>

Korean Food and Drug Administration (KFDA

<http://www.kfda.go.kr/>

Korean Laboratory Accreditation Scheme (KOLAS)

[www.kolas.go.kr](http://www.kolas.go.kr/)

#### Local Standards Contacts

Name: Helen Lindsay Peterson

E-mail: <Helen.Peterson@mail.doc.gov>

Web site: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

Name: Kim, Hae-lyong

E-mail: <Haelyong.Kim@mail.doc.gov>

Web site: [www.buyusa.gov/korea](http://www.buyusa.gov/korea)

## Trade Agreements [**Return to top**](#ch5)

The Republic of Korea is a member of the Asia-Pacific Economic
Cooperation (APEC) forum. One goal of APEC, as outlined in its 1994
declaration, is to establish a Free Trade Area among its member
countries by the year 2020. Substantive principles of the APEC forum
include investment liberalization, tariff reduction, deregulation,
government procurement, and strengthening IPR protection. Korea was the
host country for APEC in 2005.

Korea has ratified Free Trade Agreements (FTAs) with Chile and
Singapore. It has signed, but not yet ratified, an FTA with The European
Free Trade Association (Norway, Switzerland, Iceland and Liechtenstein).
Korea is presently negotiating an FTA with the United States that
promises to remove significant trade and investment barriers and
increase access to the Korean market for U.S. businesses.

Korea has signed a framework agreement with the Association of South
East Asian Nations (ASEAN) that will lead to an FTA in goods by the end
of 2006 and other areas by the end of 2008. Korea is in the midst of FTA
negotiations with the U.S. and Canada, as well as exploratory talks with
China and the EU over possible commencement of formal FTA negotiations.

The Republic of Korea is a member of the World Trade Organization (WTO)
and has signed subsidiary agreements including TRIPs (Trade Related
Aspects of Intellectual Property) and the Government Procurement
Agreement. Korea has been a member of the Organization for Economic
Cooperation and Development (OECD) since December 1996.

## Web Resources [**Return to top**](#ch5)

U.S. Agricultural Trade Office- Seoul

[www.atoseoul.com](http://www.atoseoul.com/)

U.S. Department of Agriculture

[www.usda.gov](http://www.usda.gov/)

USDA Agriculture Exporters Guide\
<http://www.fas.usda.gov/gainfiles/200610/146249108.pdf>

USDA Animal Plant and Health Inspection Service (APHIS)

[www.aphis.usda.gov](http://www.aphis.usda.gov/)

USDA Food and Agricultural Import Regulations and Standards

<http://www.fas.usda.gov/gainfiles/200612/146269861.pdf>

USDA Food Safety and Inspection Service

<http://www.fsis.usda.gov/Regulations_&_Policies/Republic_of_Korea_Requirements/index.asp>

Foreign Agricultural Service (FAS), U.S. Department of Agriculture
(Attaché reports)

[www.fas.usda.gov](http://www.fas.usda.gov/)

American Chamber of Commerce Korea

<http://www.amchamkorea.org/about/about.jsp>

U.S. Department of Commerce, Commercial Service Korea

[www.buyusa.gov/korea](http://www.buyusa.gov/korea)

Department of Commerce, Bureau of Industry and Security

<http://bxa.fedworld.gov/>

Korean Agency for Technology and Standards (KATS)

<http://www.ats.go.kr/>

Published technical regulations and standards

<http://www.ats.go.kr/fm_03/pyojun.asp>

Korea Customs Service

<http://www.customs.go.kr/eng/>

Korean Food and Drug Administration (KFDA)

<http://www.kfda.go.kr/>

Korean Laboratory Accreditation Scheme (KOLAS)

[www.kolas.go.kr](http://www.kolas.go.kr/)

Ministry of Commerce, Industry, and Energy

<http://english.mocie.go.kr/index.jsp>

National Trade Estimate

<http://www.ustr.gov/assets/Document_Library/Reports_Publications/2006/2006_NTE_Report/asset_upload_file929_9220.pdf>

Telecommunications Technology Association (TTA)

[www.tta.or.kr](http://www.tta.or.kr/)

[Return to table of contents](#doing-business-in-korea)

[[]{#ch6 .anchor}Return to table of contents](#doing-business-in-korea)

# Chapter 6: Investment Climate

-   [Overview](#overview-return-to-top-18)

-   [Openness to Foreign
    Investment](#openness-to-foreign-investment-return-to-top)

-   [Conversion and Transfer
    Policies](#conversion-and-transfer-policies-return-to-top)

-   [Expropriation and
    Compensation](#expropriation-and-compensation-return-to-top)

-   [Dispute Resolution](#dispute-resolution-return-to-top)

-   [Performance Requirements and
    Incentives](#performance-requirements-and-incentives-return-to-top)

-   [Right to Private Ownership and
    Establishment](#right-to-private-ownership-and-establishment-return-to-top)

-   [Protection of Property
    Rights](#protection-of-property-rights-return-to-top)

-   [Corporate Governance and Investment Decision
    Making](#corporate-governance-and-investment-decision-making-return-to-top)

-   [Transparency of Regulatory
    System](#transparency-of-regulatory-system-return-to-top)

-   [Capital Markets and Portfolio
    Investment](#capital-markets-and-portfolio-investment-return-to-top)

-   [Labor Issues](#labor-issues-return-to-top)

-   [Political Violence](#political-violence-return-to-top)

-   [Corruption](#corruption-return-to-top)

-   [Foreign-Trade Zones and Free Economic
    Zones](#foreign-trade-zones-and-free-economic-zones-return-to-top)

-   [Bilateral Investment
    Agreements](#bilateral-investment-agreements-return-to-top)

-   [OPIC and Other Investment Insurance
    Programs](#opic-and-other-investment-insurance-programs-return-to-top)

-   [Foreign Direct Investment
    Statistics](#foreign-direct-investment-statistics-return-to-top)

-   [Web Resources](#web-resources-return-to-top-2)

## Overview [**Return to top**](#ch6)

In the aftermath of the 1997-98 Asian financial crisis, Korea made rapid
progress in reforming its financial institutions and capital markets.
The Korean government also took steps to tighten competition policy and
enacted measures to enhance foreign investment incentives, and to allow
non-Koreans to own land and real property. In the aftermath of the
financial crisis, the Korean government sold its interest in a number of
large, high-profile companies to foreign investors, and many officials
and Koreans in general began to see more foreign investment as something
positive, even necessary, for the nation. These changes helped make the
Korean economy more attractive to outside investors, and led to a brief
surge of foreign investment. The post-crisis changes also helped the
country start to shed its reputation as a difficult environment for
foreign capital. Foreign direct investment in Korea totaled a
respectable \$11.6 billion in 2005, slightly lower than the prior
year\'s total. Service industries accounted for roughly three-quarters
of that amount, as opportunities in those sectors showed the greatest
promise.

Despite these improvements, the environment for foreign direct
investment (FDI) in Korea is still hampered by significant challenges.
Some Koreans still resent foreign control of Korean companies, and 2005
saw an up-tick in public and media expressions of anti-foreign
investment sentiment, perhaps due to relatively slow growth in
employment and the Korean economy in general. Responding to public
sentiment, some Korean government regulators in 2005 seemed to devote a
disproportionate amount of their energies specifically toward U.S. and
other foreign investors \-- while seeking \"credit\" from the public by
trumpeting their actions in the media. The highest levels of the Korean
government, however, remain committed to maintaining a welcoming
environment for foreign investors, following the principle of the
\"level playing field,\" and many issues involving foreign investors
have eventually found their way to resolution.

The Korean regulatory environment poses a significant challenge for both
foreign and domestic investors. Laws and regulations are often framed in
general terms and are subject to differing interpretations by competing
government ministries. Mergers and acquisitions, meanwhile, are
sometimes hindered by insufficient transparency in corporate governance
and the still-dominant position of Korea\'s \"*chaebol*\" conglomerates
in the domestic economy. The Korean government has initiated a program
of corporate restructuring which aims to make the business activities of
Korean companies, including the *chaebol*, more transparent and more
accountable to shareholders. Reform measures, combined with market
realities, have encouraged some *chaebol* to sell off some of their
constituent companies and have gradually weakened *chaebol* dominance in
the economy at large.

Although Korea boasts a hard-working, educated and highly productive
workforce, foreign investors cite volatility in labor-management
relations and Korea\'s inflexible labor laws as another set of key
problems that hamper direct investment. Korea loses proportionally more
workdays to strikes than any other OECD country. Although the rate of
unionization is not especially high, unions, kept down during decades of
authoritarian rule, are now more forceful and often make high wage and
benefit demands. Korea\'s rigid labor laws make it difficult to dismiss
workers and to hire new staff. A lack of pension mobility in the private
sector is also a problem, as is a weak social safety net for unemployed
workers. Korean management, meanwhile, often takes a confrontational
approach.

While important steps have been taken to improve the protection of
intellectual property rights (IPR) in Korea, the protection of
copyrighted material, particularly as produced by the entertainment
industry, remains an area of concern to the United States. Korea remains
on the U.S. Trade Representative's \"Special 301 Watch List\" following
its removal from the \"Priority Watch List\" in April 2005. Foreign
investors also remain very concerned about problems involving trademark
and patent violations of manufactured goods, including the reluctance of
the Patent Court to provide injunctive relief to protect the
intellectual property of patent-holders.

Korea\'s President Roh Moo-hyun, who entered office in 2003, hopes to
make Korea a financial and logistics \"hub\" to promote long-lasting
regional peace and strengthen Korea\'s economic competitiveness,
particularly within the Northeast Asian region. A government review of
regulations governing the financial services sector, which would further
augment Korea's \"hub\" dreams, is ongoing. The Korean government has
created special economic zones near the ports of Busan, Gwangyang and
the Incheon International Airport. The Korean government has also
enhanced regional cooperation with its neighbors in hopes that
multinational corporations might set up regional headquarters in Korea.

The United States retains the largest single-country share of foreign
direct investment (FDI) in Korea, totaling \$34.9 billion or about 30.3%
of Korea\'s total stock of FDI since the 1960\'s. The EU (25 countries)
has invested \$35.4 billion (30.7% of the total) followed by Japan with
\$17.4 billion (15.1%). Overall, FDI decreased 9.6% year on year in
2005, to \$11.6 billion on a filing basis. The financial, telecom and
other service sectors are expected to absorb the most FDI in Korea in
the near future, largely through mergers and acquisitions (M&A), in line
with global trends.

Foreign portfolio investment into Korea continued at a substantial pace
in 2005, due in large part to ongoing government liberalization
measures. Aggregate foreign investment ceilings at the Korean Stock
Exchange (KSE) were abolished in 1998, and by the end of 2005 foreign
shareholders owned 39.9% of KSE stocks, and 13.5% of the tech-heavy
KOSDAQ. These amounts were down somewhat from peak levels in late 2004
and early 2005.

## Openness to Foreign Investment [**Return to top**](#ch6)

The Korean government\'s attitude toward foreign direct investment is
generally positive and most senior policy makers realize the value of
FDI. Since the 1997-98 Asian Financial Crisis, a Korean government
strategy to pursue reforms, most notably in the financial sector, has
advanced the idea that foreign investment is positive for the country.
As a result, Korea has become more attractive to outside investors and
has begun to shed its long-standing reputation as a difficult
environment for foreign capital. Despite these improvements and attitude
changes, however, FDI in Korea is still hampered by excessive
regulation, insufficient regulatory transparency, high labor costs and
an inflexible labor system, underdeveloped corporate governance,
lingering economic domination by the country\'s remaining conglomerates
\"*chaebol*\" and a need for better protection of intellectual property
rights.

A sluggish domestic economy, which only began to recover in 2005 has
also somewhat dampened the Korean public\'s positive attitude toward
foreign investment. Public pronouncements on the part of some policy
makers reacting negatively to an increase in the market share of FDI in
the financial sector and other parts of the economy have also had a
negative effect. Reacting to significant foreign participation in the
banking sector and in foreign portfolio investment in the Korean stock
exchange, activists on the fringes of the labor union movement have
formed an organization (SpecWatch Korea) to \"monitor\" such
investments. Political figures are sensitive to this possible
antagonistic change in public opinion against \"too much\" foreign
investment.

Korea\'s Foreign Investment Promotion Act (FIPA) went into effect in
late 1998. The FIPA (and related regulations) categorizes business
activities as either open, conditionally or partly restricted, or closed
to foreign investment. The FIPA considerably reduced the number of
restricted sectors, although restrictions remain on 29 industrial
sectors, two of which are entirely closed to foreign investment. The
Korean government reviews restricted sectors from time to time for
possible further openings. According to the Ministry of Commerce,
Industry, and Energy (MOCIE), the number of industrial sectors open to
foreign investors is well above the OECD average.

FIPA highlights included:

-   Simplified procedures, including those for FDI notification and
    registration;

-   Expanded tax incentives for high-technology FDI;

-   Reduced rental fees and lengthened lease durations for government
    land (including local government land);

-   Increased central government support for local FDI incentives;

-   Establishment of a one-stop Investment Promotion Center (IPC) within
    the Korea Trade Promotion Corporation to assist foreign investors in
    dealing with the bureaucracy (since renamed \"Invest Korea\"); and

-   Establishment of an Ombudsman office within the IPC to assist
    foreign investors.

Following is a list of Restricted Sectors for Foreign Investment (as of
March 14, 2004) (Figures in parentheses denote the Korean Industrial
Classification Code):

#### 

#### Completely Closed

-   Radio broadcasting (87211)

-   Television broadcasting (87212)

**[Restricted Sectors (partly closed)]{.underline}**

-   Growing of cereal crops and other food crops (01110)

-   Farming of beef cattle (01212)

-   Inshore fishing (05112)

-   Coastal fishing (05113)

-   Publishing of newspapers (22121)

-   Publishing of magazines and periodicals (22122)

-   Processing of nuclear fuel (23300)

-   Electric power generation (40110)

-   Transmission of electricity (40121)

-   Other transmission/distribution of electricity (40122)

-   Wholesale of meat (51312)

-   Coastal water passenger transport (61121)

-   Coastal water freight transport (61122)

-   Scheduled air transport (62100)

-   Non-scheduled air transport (62200)

-   Leased line services (64211)

-   Wired telephone and other telecommunications (64219)

-   Mobile telephone services (64221)

-   Cellular telephone services (64229)

-   Other telecommunications (64299)

-   Domestic commercial banking (65121)

-   Investment trust companies (65931)

-   Cable networks (87221)

-   Cable and other program distribution (87222)

-   Satellite broadcasting (87223)

-   News agency activities (88100)

-   Radioactive waste disposal (90230)

In categories open to investment, foreign exchange banks must be
notified in advance of applications for foreign investment. (All Korean
banks are permitted to deal in foreign exchange, including branches of
foreign banks.) In effect, these notifications are pro-forma, and
approval can be processed within three hours. Applications may be denied
only on specific grounds, including national security, public order and
morals, international security obligations, and health and environmental
concerns, but it is rare for these grounds to be invoked. Exceptions to
the advance notification approval system exist for project categories
subject to joint-venture requirements and certain projects in the
distribution sector.

Relevant ministries must still approve investments in conditionally or
partly restricted sectors. Most applications are processed within five
days; cases that require consultation with more than one ministry can
take up to 25 days or longer. The Government\'s procurement law no
longer favors domestic suppliers over foreigners, but some
implementation problems remain. Korea changed its procurement law
effective in 1997, to comply with its accession to the WTO Government
Procurement Agreement.

Restrictions on foreign ownership of public corporations remain, though
ownership limit levels have been raised. Currently, foreign ownership is
limited for government-controlled utilities. Foreign ownership in Korean
telecommunications companies is limited to 49%. The Korean government
intends to privatize many of the remaining state-owned corporations.

The Ministry of Finance and Economy (MOFE) administers tax and other
incentives to stimulate advanced technology transfer and investment in
high-technology services. There are three types of special areas for
foreign investment including Foreign Economic Zones, Foreign Investment
Zones and Tariff Free Zones, where favorable tax incentives and other
support for investors are available (see related section below.)

A Korean government initiative to encourage research and development
(R&D) in strategic industries \-- the New Growth-Driving Forces (NGF)
program \-- wound down in 2004. In its place the Korean government has
increased its R&D budget to local areas from 27% to 32% to support its
21^st^ Century Frontier R&D Project, designed to raise Korean technology
to the level of the G-8 countries. Focusing on information technology,
biotechnology, nanotechnology and new materials, the Korean government
launched development programs in 20 new strategic areas at the end of
2003, at a total cost of \$3.5 billion. Much Korean government-funded
R&D taps the expertise of foreign partners.

In 2005, Texas Instruments opened a R&D center in Seoul and several
other U.S. firms have expressed an interest in the dynamic and
fast-growing Korean information technology sector. In financial
services, Standard Chartered Bank's acquisition of Korea First Bank for
\$3.3 billion was the largest single investment in 2005. Prudential and
online merchant e-Bay, meanwhile, announced plans to relocate their Asia
headquarters to Seoul, and logistics firms such as DHL opened regional
Korean distribution centers.

## Conversion and Transfer Policies [**Return to top**](#ch6)

The Korean government has substantially removed restrictions on
financial transfers into and out of Korea. Prior to 1999, the Foreign
Exchange Control Act and associated regulations strictly regulated
foreign exchange transactions. The Korean government subsequently
liberalized transactions in medium-and long-term overseas borrowings,
purchase and sale of local real estate, and trading in over-the-counter
(OTC) stocks and bonds.

In 1999, the Foreign Exchange Transaction Act (FETA) fully liberalized
all current-account transactions by business firms and banks, and pared
down a formerly long list of restricted transactions to five items, most
of which cover foreign exchange transactions by individuals. A
second-stage liberalization dismantled most of the remaining
restrictions in 2001. Only transactions that could harm international
peace and public order, such as money laundering and gambling, remain
controlled. Three specific types of transactions were not liberalized:

1)  Non-residents are not permitted to buy won-denominated hedge funds,
    including forward currency contracts;

2)  The Financial Supervisory Commission will not permit foreign
    currency borrowing by \"non-viable\" domestic firms; and

3)  The Korean government will monitor and ensure that Koreans firms
    that have extended credit to foreign borrowers collect their debts.
    The Korean government has retained the authority to re-impose
    restrictions in the case of severe economic or financial emergency.

Capital account liberalization under the Foreign Exchange Transaction
Act has also been extensive. All capital-account transactions are
permitted unless specifically prohibited. In addition, 72 of the 91
transactions specified by the OECD code of liberalization of capital
movements now are permitted. Non-residents may open deposit accounts in
domestic currency (won) with maturities of more than one year and may
engage in offshore transactions and issue won-denominated securities
abroad.

The right to remit profits is granted at the time of original investment
approval. Banks control the now pro- forma approval process for
FETA-defined open sectors. For conditionally or partially restricted
investments (as defined by the FETA), approval for both the investment
and remittance rests with the relevant ministry.

When foreign investment royalties or other payments are proposed as part
of a technology licensing agreement, the agreement and the projected
stream of royalties must be approved either by a bank or the Ministry of
Finance and Economy (MOFE.) Again, approval is virtually automatic. An
investor wishing to enact a remittance must present an audited financial
statement to a bank to substantiate the payment. To withdraw capital, a
stock valuation report issued by a recognized securities company or the
Korean appraisal board also must be presented. Foreign companies seeking
to remit funds from investments in restricted sectors must first seek
ministerial and bank approval, after demonstrating the legal source of
the funds and proving that relevant taxes have been paid.

## Expropriation and Compensation [**Return to top**](#ch6)

Korea follows generally accepted principles of international law with
respect to expropriation. The law protects foreign-invested enterprise
property from expropriation or requisition. If private property is
expropriated, it can only be taken for a public purpose, and only in a
non-discriminatory manner. Property owners are entitled to prompt
compensation at fair market value. The U.S. Embassy in Seoul is not
aware of any cases of uncompensated expropriation of property owned by
American citizens.

## Dispute Resolution [**Return to top**](#ch6)

Serious investment disputes involving foreigners are the exception
rather than the rule in Korea. The exceptions are cases involving
intellectual property rights protection. There exists a body of Korean
law governing commercial activities and bankruptcies that constitutes
the means to enforce property and contractual rights, with monetary
judgments usually levied in the domestic currency. Foreign court
judgments are not enforceable in Korea.

Although commercial disputes can be adjudicated in a civil court,
foreign businesses often feel that this is not a practical means to
resolve disputes. Proceedings are conducted in Korean, often without
adequate translation. Korean law prohibits foreign lawyers who have not
passed the Korean Bar from representing clients in Korean courts. Civil
procedures common in the United States, such as pretrial discovery, do
not exist in Korea. During litigation of a dispute, foreigners may be
barred from leaving the country until a decision is reached. Legal
proceedings are expensive and time-consuming and lawsuits often are
contemplated only as a last resort, signaling the end of a business
relationship.

Commercial disputes may also be taken to the Korean Commercial
Arbitration Board (KCAB). The Korean Arbitration Act and its
implementing rules outline the following steps in the arbitration
process: 1) parties may request the KCAB to act as informal intermediary
to a settlement; 2) if unsuccessful, either or both parties may request
formal arbitration, in which case the KCAB appoints a mediator to
conduct conciliatory talks for 30 days; and 3) if unsuccessful, an
arbitration panel consisting of one or three arbitrators is assigned to
decide the case. If one party is not resident in Korea, either may
request an arbitrator from a neutral country.

When drafting contracts, it may be useful to provide for arbitration by
a neutral body such as the International Commercial Arbitration
Association (ICAA). U.S. companies may wish to seek local expert legal
counsel when drawing up any type of contract with a Korean entity.

Korea is a member of the International Center for the Settlement of
Investment Disputes (ICSID). It has also acceded to the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards
(New York Convention). Korea is a member of the International Commercial
Arbitration Association and the World Bank\'s Multilateral Investment
Guarantee Agency (MIGA). It is important to keep in mind that Korean
courts may ultimately be called upon to enforce an arbitrated
settlement.

## Performance Requirements and Incentives [**Return to top**](#ch6)

South Korea does not maintain any measures notified to the World Trade
Organization (WTO) as being inconsistent with TRIMs requirements, nor
does the ROKG maintain any measures that are alleged to violate the
WTO\'s TRIMs text. Korea ceased imposing performance requirements on new
foreign investment in 1989 and eliminated all pre-existing performance
requirements in 1992. The ROKG has no requirement that investors
purchase from local sources or export a certain%age of output. There is
no ROKG requirement that Korean nationals must own shares in foreign
investments or that technology be transferred on certain terms. The
Korean government does not impose \"offset\" requirements on investors
to invest in specific manufacturing, R&D or service facilities. There
are also no government-imposed conditions on permission to invest.

The Korean government allows the following general incentives for
foreign investors:

-   Cash grants for the creation and expansion of workplaces for
    high-tech business plants and R&D research centers;

-   Reduced rent for land and site preparation for foreign investors;

-   Grants for establishment of convenience facilities for foreigners;

-   Reduced rent for state or public property; and

Preferential financial support for investing in major infrastructure
projects.

## Right to Private Ownership and Establishment [**Return to top**](#ch6)

Korea fully recognizes rights of private ownership and has a
well-developed body of laws governing the establishment of corporate and
other business enterprises. Private entities may freely acquire and
dispose of assets; however, the Fair Trade Act may limit cross-ownership
of shares in two or more firms if the effect is to restrict competition
in a particular industry.

Korea liberalized its property ownership law in 1998. The Alien Land
Acquisition Act (as amended) grants even non-resident foreigners and
foreign corporations the same rights as Koreans in purchasing and using
land. Korea took further steps to liberalize its property ownership laws
by implementing the Real Estate Investment Trust (REIT) Act in 2001,
which supports sound indirect investments in real estate and
restructuring of corporations. The REIT Act allows investors to invest
funds through an asset management company, and in real property such as
office buildings, business parks, shopping malls, hotels and serviced
apartments.

Almost no restrictions remain on foreign ownership of stock in Korean
firms. As of 2000, Korean law permits foreign direct investment through
mergers and acquisitions with existing domestic firms, including hostile
takeovers. Nonetheless, no hostile takeovers have occurred in Korea
because of the lack of relevant implementation regulations for the
Foreign Investment Promotion Act. In addition, the political environment
for hostile takeovers remains unfriendly. In early 2005, the Ministry of
Finance and Economy (MOFE) announced new stockholding disclosure rules
aimed at further complicating any possible hostile takeover attempts. A
prohibition on cross-ownership between companies was repealed in 1998.

## Protection of Property Rights [**Return to top**](#ch6)

Although respect for basic property rights in Korea, including land use
rights, is solid, and generally a matter of course, Korea has
shortcomings in its protection of intellectual property rights (IPR).
The problem is particularly serious in the area of protection of digital
content \-- where IPR protection is made more complicated by Korea\'s
very high Internet access rate and degree of broadband connectivity. As
a result of these shortcomings, Korea continues to be on the United
States Trade Representative\'s Special 301 \"Watch List.\" While Korea
has made progress on tightening IPR enforcement in recent years, online
music piracy causes serious economic damage to recording companies.
Continued piracy of U.S. motion pictures in Korea has also resulted in
revenue loss for U.S. and Korean copyright holders.

In June 2003, the Ministry of Justice issued a directive to prosecutors
to pro-actively pursue IPR infringement violations. Since that time,
Korean police and prosecutors have conducted more consistent raids
against software end-users. In October 2003, the National Assembly
granted policing authority to the Standing Inspection Team responsible
for investigation of software piracy, which resulted in more frequent
raids based on leads from the software industry.

Protection of digital content has suffered, however, due to some
specific shortcomings in Korean law:

-   *Insufficient Transmission Rights for Sound Recordings*: The U.S.
    Government has expressed concern that on-line piracy rates may
    continue to rise and damage the revenues of both domestic and
    foreign recording industries, and has urged Korea to introduce
    legislation that provides a full set of transmission rights for
    sound recording producers. Responding to concerns expressed by
    Korean and foreign music copyright holders, an amendment to the
    Copyright Act has been proposed that would give copyright holders,
    performers, and phonogram producers significantly enhanced rights to
    control the transmission of their phonograms. As of late 2005, that
    legislation remained pending at the National Assembly.

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-   *Copyright Act Shortcomings:* Revisions to the Copyright Act passed
    by the National Assembly in July 2000 and April 2003 included
    permission for enhanced technical protection measures (TPM\'s) and
    the introduction of a framework for a \"notice and takedown system\"
    to give an Internet service providers (ISP) a legal incentive to
    respond promptly to requests from right holders for removal of
    pirated content. However, in order to fully comply with the WIPO
    Copyright Treaty (WCT) ratified by Korea in 2004, further revisions
    to the Copyright Act are still needed. In particular, Korea remains
    in violation of its obligations under the Berne Convention\'s
    Article 18 and TRIPS Article 14.6 to provide full retroactive
    protection for pre-existing works and sound recordings. In 2005,
    National Assembly representatives proposed three additional bills to
    amend the Copyright Act including measures to limit public
    performances of copyrighted works, and elimination of the complaint
    requirement in limited cases. These measures were deliberated at the
    end of 2005. As of this report, these copyright amendments have not
    been passed.

-   *Computer Program Protection Act Shortcomings:* In December 2002,
    the National Assembly revised the Computer Program Protection Act
    (CPPA) to provide for transmission rights, a critical part of
    effective copyright regimes in the digital age. The revision also
    requires Internet service providers (ISP\'s) to immediately stop
    infringing activity upon request of the copyright owner, for the
    purpose of revising or updating programs, or for encryption
    research. The CPPA should be further strengthened, however, to
    clarify that the right holder has the exclusive right to make
    copies, temporary or permanent, of a work or phonogram. Unlike the
    Copyright Act, the CPPA does have provisions on protection of
    technical protection measures used with computer programs, although
    several broadly worded exceptions still need to be narrowed.

In 2002, the National Assembly enacted the Publication and Printing
Business Promotion Act, allowing the private sector to participate in
enforcement activities against book piracy. In 2003, Korean authorities
and the private sector began joint book piracy enforcement efforts,
especially on and near university campuses. In 2004, the Ministry of
Education sent a letter to Korean universities requesting them not to
tolerate copyright infringement on their campuses.

Pirating of audio-visual materials in DVD format, illegally sold by
street vendors, remains a serious problem in Korea. Despite active
Korean National Police enforcement efforts, video-DVD pirates in Korea
have developed increasingly sophisticated production facilities and
distribution methods.

Korean patent law is fairly comprehensive, offering protection to most
products and technologies. Still, despite legislative progress,
deficiencies remain in the interpretation of claims and in the treatment
of dominant and subservient patents. The Korean Intellectual Property
Office (KIPO) strengthened restrictions on patent term extension for
certain pharmaceutical, agrochemical and animal health products that are
subject to lengthy clinical trials and domestic testing requirements,
but problems still remain. Lack of coordination between Korean health
and safety officials and IPR personnel sometimes results in market
approval being granted for products that infringe on existing patents.
Another significant problem is the reluctance of Korea\'s Patent Court
to provide injunctive relief to stop patent infringers from
manufacturing copycat products while patent infringement cases are being
deliberated.

Korea\'s Trademark Act, amended in 1998 to prohibit the registration of
trademarks without the authorization of foreign trademark holders,
allows examiners to reject any registrations made in \"bad faith.\"
Despite this change, the complex legal procedures that U.S. and other
companies must follow to seek cancellation proceedings act as a barrier
to effective enforcement, by discouraging U.S. companies from pursuing
legal remedies.

Concerning counterfeiting and trade secret protection, in revisions to
the Copyright Act made in 2000, textile designs were afforded copyright
protection as well as protection under Korean design law. But
enforcement efforts are not consistent. The Korean Customs Service
upgraded its computer system in 2003 in an effort to enhance border
enforcement against the export of counterfeits.

Korean laws on unfair competition and trade secrets provide a level of
protection in Korea, but are sometimes insufficient. For example, some
U.S. manufacturers report government regulations that require submission
of very detailed information of sensitive products as part of
registration procedures. The Korean Food and Drug Administration (KFDA)
revised the Pharmaceutical Affairs Act implementing regulations to
stipulate that submitted data must be protected from authorized
disclosure when the submitting party requests protection. In 2004, the
Unfair Competition and Trade Secrets Act was amended, strengthening
penalties for disclosing trade secrets.

An Internet Domain Name Dispute Resolution Committee was created in 2002
to arbitrate disputes and minimize court actions. To better protect
trademarks unjustly used as a domain name, the Unfair Competition
Prevention and Trade Secret Protection Act was amended in 2004 to
include such an unjust registration of another person\'s trademark as a
domain name as an unfair competitive act. In addition, the fraudulent
manufacturing and sale of goods for which the trademark has not yet
registered in Korea is also considered an unfair competitive act.

## Corporate Governance and Investment Decision Making [**Return to top**](#ch6)

Investors and financial markets remain wary of corporate governance in
Korea despite significant improvements since the 1997-98 Asian financial
crisis. Concerns about corporate governance mean Korean shares often
trade at earnings below those of comparable companies elsewhere. Korean
policy makers acknowledge that foreign investors often exact a \"Korea
Discount\" when dealing with Korean companies or in making investment
decisions. As the Chairman of the Korean Free Trade Commission (KFTC)
has stated, \"the main reasons for the Korea Discount are opaque
accounting techniques, less respect for minority shareholders,
insufficient openness and excessive control by controlling families.\"

Large gaps exist between the ownership and control of a significant
number of firms in Korea, with many traditional \"*chaebol*\"
conglomerates still being run by their founding families, despite the
family\'s generally small ownership stakes. Korea\'s accounting reform
plan and Code of Best Practices are admirable efforts, but more can be
done in these areas as well. Increasing participation by foreign
investors and stockholders, modernizing business-government relations,
and infusing professionalism in the corporate culture could go a long
way toward improving corporate governance.

Korea\'s development strategy in the latter part of the 20th Century,
which transformed the country from one of the poorest nations in the
world to a member of the OECD, created a number of structural legacies
that increased the country\'s vulnerability during the 1997-1998 Asian
financial crisis. At that time, Korea\'s generally weak corporate
governance framework was compounded by a history of government-directed
financing, creating significant \"moral hazard\" \-- that is, the
assumption that government would make good all losses and not permit
large companies to fail. This allowed large segments of the corporate
sector to become excessively leveraged, increasing vulnerability. Korea
responded to the financial crisis by implementing a number of corporate
reforms that improved accounting transparency, promoted corporate
restructuring, and strengthened the nation\'s insolvency framework.
Nonetheless, corporate governance reforms remain incomplete.

The Korea Fair Trade Commission aims to reduce the gap between ownership
and control by encouraging the *chaebol* to improve internal checks and
balances (for example, by adopting cumulative voting for the selection
of independent directors). The KFTC has also urged the *chaebol* to
adopt a vertical holding company structures so that all of a group\'s
equity investments are held by one company (a common practice in other
OECD countries). As an incentive for firms to pursue these two tracks,
the Korean government has said that it would exempt complying firms from
limits on their equity investments. Few *chaebol* have pursued either
one of these tracks, however, in part because of stringent conditions
regarding the creation of holding companies.

The Anti-Monopoly and Fair Trade Act has been repeatedly changed \--
most recently in 2003 \-- to address the issue of excessive *chaebol*
control over affiliates. In the latest revision to the Act, the Korean
government re-instituted restrictions on *chaebol* cross-ownership,
including a ceiling on *chaebol* investments in affiliated firms equal
to 25% of a *chaebol*\'s net assets. Prior to that, Korea\'s top 30
*chaebol* committed to eliminating all intra-group payment guarantees by
March 2001.

The practical impact of Korea\'s laws and policies regulating
monopolistic practices and unfair competition, however, has been limited
by the long-standing economic strength of the *chaebol*. Management
control at the Korean *chaebol* continues to involve complicated webs of
murky cross-shareholdings among *chaebol* affiliates, and many *chaebol*
still conduct business based on family and personal connections.
Vestigial *chaebol*-government relations can also sometimes influence
the business-government dialogue, to the detriment of foreign and small
and medium-sized enterprises (SME\'s). Thus, *chaebol* influence in the
Korean economy causes some practical business problems for foreign
investors. SME suppliers, for example, may be reluctant to deal with
foreign firms for fear of jeopardizing a prized *chaebol* relationship.
Obtaining access to credit may be complicated by the privileged
relationships competing *chaebol* enjoy with local banks \-- although
this is mitigated by the fact that regulations limit a bank\'s exposure
to any single *chaebol* group\'s companies to 25% of capital, and
stipulate that 35% of all banks\' lending must go to SME\'s.

There are several large Korean corporations that have transformed
themselves into well-managed multinational corporations that have
adopted \"best practices\" in corporate governance consistent with U.S.
and international standards. Some of their \"best practices\" include
more frequent board meetings covering real operational issues; boards
with more independent board members and fewer or no founding family
members; a nominating committee for the board; financial report
certifications; and frequent and substantive outside audits.

Foreign ownership is also playing a significant role in promoting
corporate governance reform in Korea. Korean firms with significant
foreign investment, for example, are generally understood to be more
reluctant to participate in government-sponsored bailouts of troubled
firms, impacting the evolution of Korean financial markets. As foreign
investors now own about 60% of the shares in some of Korea\'s top
companies and nearly 40% of stock listed on Korea\'s main stock
exchange, the rights of minority and non-Korean stockholders are
becoming more clearly expressed. To some extent, this trend has provoked
a backlash against foreign investment on the part of some *chaebol* and
other conservative forces in Korean society. This has led the Korean
government to consider some ill-advised policies, such as limiting the
number of foreign directors allowed on corporate boards or requiring
Korean nationality to sit on a bank\'s board of directors. But few such
policies have actually been implemented thus far, and many corporate
leaders in Korea are starting to understand that \-- as Korean empirical
research has demonstrated \-- companies that have high disparities
between ownership and control also have lower profitability, higher
leverage ratios and lower price-to-earnings ratios.

The Korean government is currently implementing an accounting reform
plan, taken largely from the U.S. Sarbanes-Oxley Act, aimed at making
Korean accounting standards consistent with rigorous international
standards. Key elements of the reform plan encompass measures to
increase the responsibility and accountability of the corporate board,
management, and the audit committee. In parallel, a committee of Korean
private sector experts has established a Code of Best Practices in
response to a tasking by the Ministry of Finance and Economy. The
voluntary recommendations included in this Code are in line with OECD
principles, and the Korea Stock Exchange (KSE) has reinforced the
importance of the Code by requiring that companies listed on the KSE
provide information to investors about the extent to which they conform
to the Code. Following are some of the key recommendations contained in
the Code of Best Practices:

-   Easing of ownership thresholds to allow small shareholders greater
    rights to inspect company books;

-   Having outside or independent directors make up at least half
    (rather than a quarter) of the board members of listed companies;

-   Establishing a nominating committee to choose board members, with at
    least half of the committee consisting of outside directors;

-   Ensuring that outside directors are truly independent, with no
    interests in the company, the management, or the controlling
    shareholder;

-   Having the board of directors meet at least once every three months;
    and

-   Requiring that companies have audit committees consisting of at
    least three directors, of which two-thirds are outside directors.

Korea's Securities Class Action Act came into force in 2005. Minority
shareholders are now able to file class action suits against companies
with assets totaling more than 2 trillion won for manipulation of share
prices, false disclosure of information, and accounting malpractice.
This system is also expected to have a significant long-term impact in
improving corporate governance practices in Korea, although the system
was not yet directly utilized in 2005.

## Transparency of Regulatory System [**Return to top**](#ch6)

The Korean regulatory environment, difficult for domestic companies,
poses an even greater challenge for foreign firms. Laws and regulations
are often framed in general terms and are subject to differing
interpretations by government officials, who rotate frequently. While
the regulatory process has improved since the Asian financial crisis, it
is often not transparent and frequent informal discussions with the
bureaucracy may be necessary. Mid-level bureaucrats often rely on
unpublished office guidelines and unwritten administrative advice for
direction.

Throughout 2005, the U.S. Embassy in Seoul noticed a disturbing trend of
some regulators and economic enforcement officials devoting a large
amount of their energies specifically toward U.S. and other foreign
investors, and seeking \"credit\" from the public by trumpeting their
actions in the media. The matter of foreign equity funds having made
\"too much money\" buying (actually rescuing) distressed Korean
commercial banks in the aftermath of the 1997-98 financial crisis
received much debate. Although senior policy makers publicly announced
that Korea had no intention of discriminating against foreign capital
and foreign investors, public sentiment remained mixed.

During 2005, Korean tax audits focusing on foreign companies were
sometimes carried out in an excessively aggressive manner and press
leaks of such actions by the authorities were common. Such activity
caught the notice of Korea\'s Deputy Prime Minister in charge of
economic affairs, who publicly chided tax officials, urging them to
exercise caution in releasing confidential information during ongoing
tax audits.

Vestiges of Korea\'s former \"industrial policy\" approach to fostering
the economy remain evident in the business environment despite the
efforts of the Kim Dae-jung and Roh Moo-hyun Administrations to increase
regulatory transparency. The Korean government bureaucracy still
influences the decisions of businesses and investors through
prescriptive regulations, policies favoring domestic industry, and even
threats of retaliation. Investors, whether Korean or non-Korean, are
often required to disclose proprietary information to government
officials as part of the regulatory approval process. Some foreign
investors complain that the proprietary nature of the trade information
provided has not been respected and has been obtained by local
competitors.

According to Korea\'s Administrative Procedures Act, proposed laws and
regulations (Acts, Presidential Decrees or Ministerial Decrees) should
be published and public comments solicited for 20 days prior to
promulgation. In 2005 the Korean Government promulgated a recommendation
that all ministries provide a longer (60 day) timeframe for public
comment periods for regulations subject to the APA that are
\"economy-related,\" but there has been no evidence yet that this
extended time frame is being followed. Draft bills are often available
on the web sites of relevant ministries. Nonetheless, the rule-making
process often remains non-transparent, particularly for foreigners.
Proposed rules are not always published prior to promulgation, or are
published with insufficient time to permit public comment and industry
adjustment. For example, regulatory changes originating from legislation
proposed by members of Korea\'s National Assembly are not subject to
public comment periods. When notifications of proposed rules are made
public, they usually appear in the Official Gazette, but not
consistently, and only in the Korean language, meaning that much of the
20-day comment period can be exhausted translating complex
documentation. After promulgation, rules are sometimes applied
arbitrarily.

President Roh Moo-Hyun has made deregulation one of the key elements of
his economic policy, and progress is gradually being achieved. The
Korean government has made efforts to cut back on the number of
regulations, and some important changes have been made. Officials have
charged the Deregulation Taskforce Team, the Corporate Resolution Center
and the standing Regulatory Reform Committee to focus on regulatory
reform. In 2005, Korean officials began to work closely with U.S.
government officials and the U.S. business community to consider
recommendations to these bodies on which Korean regulations might be
improved, or usefully eliminated or amended. Korean officials have also
indicated that they are considering sweeping regulatory changes in the
financial services sector in 2006.

## Capital Markets and Portfolio Investment [**Return to top**](#ch6)

Financial sector reform has been a bright spot for the Korean government
in the past 8-9 years and could provide a positive example for reform
efforts in other sectors of the economy. Financial sector reforms have
aimed to increase transparency and investor confidence, and generally
purge the sector of moral hazard. Since 1997-98, the Korean government
has recapitalized the banks and non-bank financial institutions; closed
or merged weak financial institutions; resolved many non-performing
assets; introduced internationally-accepted risk assessment methods and
accounting standards for banks; forced depositors and investors to
assume appropriate levels of risk; and taken steps to help end the
policy-directed lending of the past. Weak supervision and poor lending
practices in the Korean banking system helped cause and exacerbate the
1997-98 Asian financial crisis.

In the course of stabilizing Korea\'s banking sector during the
financial crisis, the Korean government injected public funds, thereby
acquiring *de facto* ownership of many of Korea\'s commercial banks \--
although it publicly committed to refrain from interfering in bank
lending and management decisions, except with regard to prudential
supervision. In late 2002, the Korean government began its ambitious
plan to re-privatize the banks under its control, with the program was
initially scheduled to end by the first quarter of 2005. Much of this
re-privatization has taken place, although the government continues to
own the majority of shares in Woori Bank and minority shares in some
other banks. Foreign banks are allowed to establish subsidiaries or
direct branches. Further relaxation of regulations has widened
foreigners\' access to Korea\'s capital markets and permitted foreign
financial firms to engage in non-hostile mergers and acquisitions of
local financial institutions. Currently, foreign interests control three
of Korea\'s eight major commercial banks: Citibank Korea (formerly KorAm
Bank); Korea Exchange Bank and SC/Korea First Bank.

Korea routinely permits the repatriation of funds, but reserves the
right to limit capital outflows in exceptional circumstances, such as
situations when uncontrolled outflows might harm the balance of
payments, cause excessive fluctuations in interest or exchange rates, or
threaten the stability of domestic financial markets. The Korean
government did not impose such restrictions even during the height of
the Asian financial crisis.

Foreign portfolio investors now enjoy good access to Korea\'s stock
markets. Aggregate foreign investment ceilings in the Korean Stock
Exchange (KSE) were abolished in 1998, and foreign investors owned 39.9%
of KSE stocks and 13.5% of the KOSDAQ by the end of 2005. The market
turnover rate was 151% of market capitalization in 2004. Retail
investors are extremely active in the Korean stock markets. Some 60.5%
of KSE and KOSDAQ retail trading is conducted online. Thus, a large
majority of retail investors are day traders, implying a constant source
of volatility for the markets. The Korean government permits stock
purchases on margin, requiring that transactions be settled within three
business days.

Portfolio investors have shown less appetite for the smaller, more
volatile, technology-rich KOSDAQ or for Korean fixed-income investments.
Since the 1999 collapse of the Daewoo Group in 1999, Korea\'s largest
corporate bankruptcy, the country\'s bond market has been almost
moribund, as sellers have far outnumbered buyers. The total assets of
Korea\'s commercial banks as of the end of September 2005 were 856
trillion won, or about \$830 billion.

Short-term interest rates remain low, at around 4.1%, and inflation at
2.7% remained fairly low throughout 2005. Inflation for 2006 is expected
to have been around 3.1%. The spread between short-term money (the
overnight call rate) and long-term money (the benchmark 3-year corporate
bond rate) fell from its 400-plus basis points high in 2000 to about
170-basis points in December 2005. The Bank of Korea (BOK) has
maintained its target for the overnight call rate at the record-low
level of 3.25% from November 2004 to September 2005, in consideration of
sluggish domestic consumption and investment. But on October 11 and
December 8, the BOK raised twice its target rate to 3.5% and 3.75%,
respectively, considering consumption recovery and potential inflation
pressure.

## Labor Issues [**Return to top**](#ch6)

While Korea boasts a hard-working, educated and productive workforce,
foreign investors cite volatile labor-management relations and Korea\'s
inflexible labor laws as a primary investment impediment. According to a
2005 International Finance Corporation study, Korea ranked 105 out of
155 countries in labor flexibility. According to this study, hiring a
worker costs about 17% of the worker\'s salary while firing a worker
costs about 90 weeks of the worker\'s wages.

Korea loses proportionally more workdays to strikes than any other OECD
country. In a hopeful sign, according to ROKG figures, the number of
days lost to strikes declined from 1,158,628 in 2004 to 802,224 in 2005.
Although, at around 11%, Korea\'s unionization rate is not especially
high, unions are forceful in making high wage and benefit demands.

Korea\'s out-dated labor laws, designed decades ago with the intention
of encouraging businesses to provide the social safety net the Korean
government could not at that time afford, contribute to the rigidity of
the system and make it difficult to dismiss workers and expensive to
hire new staff. A lack of pension mobility in the private sector
compounds the problem, as does general lack of confidence in the social
safety net for unemployed workers. Korean management, meanwhile, often
takes an old-fashioned, confrontational approach to labor relations.

The Korean labor market is increasingly a polarized one, with a core of
regular workers enjoying a high level of employment protection, and
rapid wage growth, supplemented by a large group of temporary (contract)
workers whose numbers can be more easily adjusted in line with changing
economic conditions. Korean and foreign employers cite the difficulty of
reducing the number of regular workers and the expense of hiring new
workers as reasons for hiring non-regular workers. Temporary workers are
generally not union members and do not demand the higher wage increases
expected by union members, so their wages better reflect the overall
supply and demand conditions of Korea\'s labor market. Contract workers
also most often do not receive fringe benefits, and can be terminated at
the end of their contract without severance benefits \-- compounding
fearful attitudes among workers about the downsides of a flexible labor
market. Many employers have sought to replace retiring regular workers
with temporary ones. Temporary workers usually earn about 60% of what
regular workers make for the same job. The National Statistics office
believes 48.4% of Korean workers can be classified as \"irregular,\"
while the unions claim the real number may be as high as 60%.

The temporary worker phenomenon has a significant downside for
management. Under Korea\'s labor law,if a temporary worker\'s contract
is extended more than once, that worker may become a *de facto*
permanent worker, protected by termination and other benefit provisions.
As a result, many companies limit such contact extensions to just one
time, and regularly turn over a significant part of their work force.
This limits productivity growth for companies, as they must invest
considerable time training new workers, and also impacts on the
employment prospects of both new workers and those being let go. The
Korean government, labor and management sector has yet to come to grips
with this system. As a result, an entrenched unionized workforce
continues to receive significant wages increases every year, while the
remainder of the labor force sees fewer benefits and lower wages and
wage growth, and dimmer prospects for the future.

The government in 2004 proposed legislation that would provide increased
protections for temporary workers. According to one of its key
provisions, a worker must be offered full employee status following
three years of temporary work. However, the legislation has been unable
to overcome fierce opposition from labor groups in the National Assembly
who believe the reforms would further institutionalize the practice of
hiring irregular workers. Umbrella labor groups have engaged in
periodic, and sometimes violent, demonstrations against the law and have
threatened a general strike should the legislation pass. The legislation
remains in limbo as of January 2006.

The Roh Administration initially backed a Tripartite Commission (Labor,
Employers and Government) approach to address these dysfunctions in the
labor sector. In February 2004, the Commission crafted and agreed upon a
\"Social Pact on Job Creation\" in order to promote employment security
and reverse the trend of polarization. Despite high expectations,
progress has been limited in implementing agreed measures. According to
a Commission audit report to the National Assembly, only 6 out of the
total of 49 measures were implemented by the first half of 2005. Many of
these implemented measures focused on providing governmental benefits
and financial assistance to businesses in hiring regular employees, and
failed to address other areas of implementation stipulated in the Pact.
In 2005, labor groups withdrew their participation from the Commission
in protest of the government\'s temporary worker legislation.

In addition to temporary worker reforms, the government has indicated
that implementing a \"Roadmap for Industrial Relations Reform\" would
again be a top priority in 2006. The Roadmap, drafted by the government
in 2003, contained a number of controversial reforms, including:

-   Redefinition of the Basic Wage: Employers argued that the new Basic
    Wage would have raised expenses and impeded the creation of new
    jobs. The roadmap proposed that the new Basic Wage expand the
    definition of a basic wage to include all regular benefits such as
    periodic bonuses, supplementary allowances, raises, bonuses,
    overtime, night work, and work on holidays;

-   No payments of wages to full time union officials: Current laws
    require that companies must pay 100% of the salaries of those whose
    full time job is to run the union at the company. Unions oppose the
    elimination of this provision;

-   Prohibition of any given industry from having more than one union:
    Current laws state otherwise. Unions oppose this change;

-   Replacement workers: Current labor law permits management to hire
    replacement workers only in the case of illegal strikes. The
    government would like to permit the hiring of replacement workers
    without condition in the case of \"public corporations;\"

-   Mandatory maintenance of minimum level of essential public services
    during strikes: Supported by government but opposed by labor.

Korean and foreign experts agree that more attention should be paid to
finding ways to promote labor mobility while stimulating the job market.
According to the Ministry of Labor, 84.9% of all Korean wage and salary
earners in 2004 were eligible for unemployment insurance, but only 54.2%
were actually insured. Expanding coverage would be a step in the right
direction. The government\'s plan to extend unemployment insurance to
daily workers would also help. Exploring ways to better connect workers
with employers could promote labor market efficiencies. Specifically,
the Public Employment Service could seek greater cooperation with
Korea\'s large and long-established network of the more than 5,000
private job placement agencies. Vocational training in Korea lags behind
other countries with a similar level of development. Current programs
could target their participants more carefully, keep the training
programs small in scale, and ensure that the training results in a
qualification that the market recognizes and values.

In the Korean system, government employees and schoolteachers can carry
their pension rights when they quit one occupational plan and enter
another. But there are no such linkages between the National Pension
Scheme (NPS) and occupational pensions. The lack of portability puts
such relatively mobile workers at a disadvantage and discourages
movement between the public and private sectors. More broadly, Korea
lacks a portable 401(K)-type system for corporate pensions. The
establishment of such a system could assist in reducing disincentives to
labor mobility, as well as support the development of financial markets.

In the area of labor-management relations, Korean labor groups are quick
to escalate disputes and commonly resort to work slowdowns, abuse of
leave, and disruption of business by holding rallies, wearing
inappropriate clothing or displaying protest signs at the workplace.
These tactics fall outside the scope of Korea\'s labor law and lead to
confrontations with management and authorities. Sit-in strikes are
common, and workers have occupied company offices and factories. The
\"5-day work week\" system began gradual implementation in July 2004,
and will become universal by 2008. As part of this implementation plan,
the system was expanded to the public sector in July 2005.

While labor disputes are relatively more frequent at Korean companies
than foreign-invested firms, union members at foreign-invested firms
often make greater demands on management. Workers at foreign-owned firms
perceive, most often incorrectly, that job stability and career
prospects are relatively less attractive than at Korean firms, and as a
result, labor is concerned about reductions-in-force and issues such as
severance pay. At times, labor organizers portray disputes with a
foreign employer as issues that offend Korean nationalism, a hot button
for the Korean public psyche. For some companies such as banks, whose
activities are considered to be essential public services, the
government has the right, although seldom used, to order binding
arbitration to solve labor disputes. The Korean government did step in
to halt strikes by pilots at two Korean airlines in 2005, to end
disruptions to the national economy caused by the reduction in service.

Korea joined the International Labor Organization (ILO) in December
1991. However, Korea still has not ratified the basic ILO conventions on
Workers Rights (Convention 87 on freedom of association, Convention 98
on the right to organize and collective bargaining, and Convention 151
on public service employees\' right to organize), and a number of
international and domestic labor groups have filed complaints against
the Korean government with the ILO\'s Committee on Freedom of
Association.

In 1997, Korea amended its labor laws to permit more than one national
labor federation. Korea now has two national federations, the Korean
Confederation of Trade Unions and the Federation of Korean Trade Unions,
along with some 1,600 distinct labor unions. Also, in 1997, the
government repealed its ban on intervention by \"third parties\" in
labor disputes, thus enabling labor unions to seek outside assistance
and counsel.

## Political Violence [**Return to top**](#ch6)

Korea does not have a history of political violence directed against
foreign investors. The Embassy is not aware of any politically motivated
threats of damage to foreign-invested projects or foreign-related
installations of any sort, nor of any incidents that might be
interpreted as having targeted foreign investments. Labor violence
unrelated to the issue of foreign ownership, however, has occurred in
foreign-owned facilities in the past.

The Roo Moo-hyun Administration has continued South Korea\'s policy of
economic cooperation with North Korea, even while maintaining a credible
defense against any possible North Korean hostilities. This North-South
engagement helps ease tensions caused by revelations in 2002 that North
Korea had undertaken a second nuclear weapons program after it had
agreed to freeze an earlier one under the U.S.-DPRK agreement signed in
October 1994. Six party talks involving the two Koreas, the United
States, China, Russia, and Japan on the elimination of the DPRK\'s
nuclear programs continue \-- but the DPRK has still not committed to
dismantling its nuclear programs.

## Corruption [**Return to top**](#ch6)

Despite significant improvements in recent years, Korea\'s political
structure still tolerates a degree of non-transparency in the formation
of laws and regulations, which when combined with still-inadequate
institutional \"checks and balances\" and a societal structure heavily
based on personal ties can create opportunities and incentives for
corruption and influence peddling.

The Korean government\'s hosting of the third Global Forum on Fighting
Corruption in 2003 helped reinvigorate anti-corruption efforts, and the
Roh Moo-hyun Administration began its tenure in 2003 with an ambitious
agenda to reform political funding laws, decentralize government and
compel greater corporate transparency and accountability through a mix
of political pressure and new laws and regulations. The April 2004
National Assembly election, which took place under new, much stricter
campaign finance laws, is widely considered to have been the cleanest
ever, hopefully setting a new precedent whereby Korean corporations are
no longer expected to bankroll political campaigns.

Bribing a Korean official is a criminal act. Penalties for bribery range
from probation to life imprisonment, depending on the amount involved.
Legislation has been approved bringing Korea into compliance with the
OECD initiative against international bribery. The Supreme Prosecutor in
each province is responsible for ferreting out corruption. Many business
leaders and officials, including former ministers and former presidents,
have been found guilty of corruption in recent years, sometimes for
offenses committed years earlier. Still, few have paid heavy fines or
served much time in prison. Amid spreading public sentiment denouncing
bribery and corruption, particularly after the April 2000 general
legislative election, civic groups have become very vocal and achieved
considerable progress by identifying supposedly \"corrupt\" officials
and working against their re-election. Public outrage helped propel Roh
Moo-hyun, viewed by many as an untainted outsider, to the presidency in
2003.

The controversial Anti-Corruption Law passed by the National Assembly in
2002 is now in effect. Most notably, this law created the Korea
Independent Commission Against Corruption (KICAC), which is
semi-autonomous and empowered to investigate public complaints of
corruption at every level of government. KICAC has established
\"reporting centers\" in Korea\'s six largest cities and invites citizen
complaints about their public officials via telephone, facsimile, email
or Internet. Despite KICAC\'s quick start and seeming sincerity, many
Koreans believe corruption is still rampant in Korea, and believe even
the most aggressive independent body will have difficulty rooting it
out.

The National Assembly passed an Anti-Money Laundering Bill in 2001. That
legislation met the objectives of the Financial Action Task Force on
Money Laundering\'s forty recommendations, and created a Financial
Intelligence Unit (FIU) to trace suspect accounts and transactions and
to facilitate international cooperation. The government has cooperated
fully with U.S. and United Nations efforts to identify and shut down
sources of terrorist financing.

## Foreign-Trade Zones and Free Economic Zones [**Return to top**](#ch6)

The Korean government has established three \"Free Economic Zones:\"
near Incheon International Airport outside Seoul, near the port in Busan
and at Gwangyang. When fully developed, these areas are designed to
provide a specially enhanced business environment for foreign-invested
firms. Specific tax and tariff measures and other incentives such as
eased restrictions on foreign investment in certain services (such as
education and hospitals) are still being debated in the National
Assembly. Major infrastructure enhancements at each site are already
underway. The Ministry of Finance and Economy is pushing an agenda that
would allow foreign investors to build hospitals and schools in the
Zones, more freely than is the case nationwide.

There are also six Foreign-exclusive Industrial Complexes in Korea in
different parts of the country, designed to provide inexpensive plant
sites, with the national and local governments providing assistance for
leasing or selling such sites at discounted rates. In addition, there
are four \"Free Trade Zones\" in Iksan, Kunsan, Daebul and Masan where
companies may pursue their business with government support, but without
the usual legal requirements such as approval procedures for export and
imports and customs duties. There are also seven Foreign Investment
Zones designated by local governments to accommodate industrial sites
for foreign investors. Special considerations for foreign investors vary
among these options.

A good source of information on Korea\'s various free trade zone schemes
is the government-run \"Invest Korea,\" an inward investment promotion
organization under the The Korea Trade and Investment Promotion Agency
(KOTRA). It can be reached at:

> Invest Korea, KOTRA Bldg. 300-9
>
> Yomgok-dong, Seocho-gu, Seoul 137-170, Republic of Korea

The Korean government also continues to put significant effort into
programs to enhance the quality of life in Korea for foreign investors
and their families. A second major international school in Seoul will
open its doors in 2007. Local governments have extensive programs aimed
at assisting foreigners residing in Korea.

## Bilateral Investment Agreements [**Return to top**](#ch6)

The United States has a bilateral Treaty of Friendship, Commerce, and
Navigation with Korea, which contains general provisions pertaining to
business relations and investment. During former Korean President Kim
Dae-jung\'s visit to the United States in 1998, President Clinton and
President Kim agreed to negotiate a Bilateral Investment Treaty (BIT)
between the two nations. However, negotiations in 1998 and 1999 stalled
after the two sides could not resolve differences on certain issues,
including Korea\'s screen quota limiting the importation of foreign
motion pictures.

## OPIC and Other Investment Insurance Programs [**Return to top**](#ch6)

U.S. investments in Korea are eligible for insurance programs sponsored
by the U.S. Overseas Private Investment Corporation (OPIC). OPIC has
not, however, guaranteed any U.S. investments in Korea since June 1998,
when OPIC reinstated coverage it had suspended in 1991 due to concerns
about worker rights. Coverage issued prior to 1991 is still in force.
Korea has been a member of the World Bank\'s (IBRD) Multilateral
Investment Guarantee Agency (MIGA) since 1987.

## Foreign Direct Investment Statistics [**Return to top**](#ch6)

+-----------------+----------+----------+----------+-----------------+
| (\$ Millions)   | # Ann    |          |          | #  C            |
|                 | ual Flow |          |          | umulative Stock |
+-----------------+----------+----------+----------+-----------------+
|                 | **[200   | **[200   | **[200   | **[2005         |
|                 | 3]{.unde | 4]{.unde | 5]{.unde | ]{.underline}** |
|                 | rline}** | rline}** | rline}** |                 |
+-----------------+----------+----------+----------+-----------------+
| **Total Inward  | *        | **       | **       | **115,438**     |
| FDI**           | *6,469** | 12,786** | 11,562** |                 |
+-----------------+----------+----------+----------+-----------------+
| United States   | 1,242    | 4,718    | 2,690    | 34,936          |
+-----------------+----------+----------+----------+-----------------+
| EU              | 3,064    | 3,009    | 4,780    | 35,446          |
+-----------------+----------+----------+----------+-----------------+
| Japan           | 540      | 2,258    | 1,878    | 17,398          |
+-----------------+----------+----------+----------+-----------------+
| China           | 50       | 1,165    | 68       | 1,755           |
+-----------------+----------+----------+----------+-----------------+
| Other           | 1,553    | 1,636    | 2,146    | 25,903          |
+-----------------+----------+----------+----------+-----------------+
|                 |          |          |          |                 |
+-----------------+----------+----------+----------+-----------------+
| **Total Outward | *        | *        | *        | **86,931**      |
| FDI**           | *5,911** | *8,062** | *7,905** |                 |
+-----------------+----------+----------+----------+-----------------+
| China           | 2,805    | 3,680    | 3,127    | 21,091          |
+-----------------+----------+----------+----------+-----------------+
| United States   | 780      | 1,421    | 1,103    | 18,254          |
+-----------------+----------+----------+----------+-----------------+
| EU              | 229      | 772      | 1,636    | 9,143           |
+-----------------+----------+----------+----------+-----------------+
| Japan           | 52       | 320      | 196      | 1,512           |
+-----------------+----------+----------+----------+-----------------+
| Other           | 2,045    | 1,869    | 1,843    | 36,931          |
+-----------------+----------+----------+----------+-----------------+

Source: The Export-Import Bank of Korea and Ministry of Commerce,
Industry and Energy

Note: This data is based on the notification of cases. 2005 outflow is
data reported for the first 11 months of the year.

## Web Resources [**Return to top**](#ch6)

Korean Commercial Arbitration Board

<http://www.kcab.or.kr/>

Korean Fair Trade Commission

<http://www.ftc.go.kr/eng/about_kftc/about_us.php>

Korean Intellectual Property Office

<http://www.kipo.go.kr/kpo/user.tdf?a=user.eng.main.BoardApp>

Korean Ministry of Commerce, Industry and Energy

<http://english.mocie.go.kr/index.jsp>

Korean Ministry of Finance and Economy

<http://english.mofe.go.kr/>

Korean Ministry of Foreign Affairs and Trade

<http://www.mofat.go.kr/me/index.jsp>

Korean Ministry of Labor

<http://english.molab.go.kr/>

Invest Korea

[www.investkorea.org](http://www.investkorea.org/)

[Return to table of contents](#doing-business-in-korea)

[[]{#ch7 .anchor}Return to table of contents](#doing-business-in-korea)

# Chapter 7: Trade and Project Financing

-   [How Do I Get Paid (Methods of
    Payment)](#how-do-i-get-paid-methods-of-payment-return-to-top)

-   [How Does the Banking System
    Operate](#how-does-the-banking-system-operate-return-to-top)

-   [Foreign-Exchange
    Controls](#foreign-exchange-controls-return-to-top)

-   [U.S. Banks and Local Correspondent
    Banks](#u.s.-banks-and-local-correspondent-banks-return-to-top)

-   [Project Financing](#project-financing-return-to-top)

-   [Web Resources](#web-resources-return-to-top-3)

## How Do I Get Paid (Methods of Payment) [**Return to top**](#ch7)

The Korean financial system is perennially hard-pressed to meet the
demand for financing and capital. Foreign companies in a start-up
operation with a Korean partner often invest financial resources for the
joint venture, while their Korean partner makes an investment in kind,
i.e., land or facilities, as the Korean share of equity. Joint-venture
companies and foreign firms often work with branches of foreign banks
for local-currency financing, although the branches of foreign banks
control a small portion of Korean Won availability. Other potential
sources of Korean Won financing include domestic nationwide commercial
banks, regional banks, and specialized banks, including the Korea
Development Bank, the National Agricultural Cooperative Federation, the
Industrial Bank of Korea and the Korea Housing Bank.

There are three documentary practices for settling imports: (1) sight
and usance Letters of Credit, (2) Documents against Acceptance (D/A) and
Documents against Payment (D/P); and, (3) Open Account Transactions. D/A
and usance L/Cs are forms of extended credit in which the importer makes
no payment for the goods until the date called for in the credit;
however, the importer may clear the goods from customs prior to payment.
D/P is the same as D/A except that the importer cannot clear the goods
from customs prior to payment. In some cases an importer can clear goods
prior to payment under a sight L/C. L/C transactions generally follow
standard international Uniform Customs and Practice (UCP) codes.
Limitations on the use of deferred payment terms for imports, D/A and
usance L/Cs have been abolished.

CS Korea recommends that U.S. companies consider dealing on a confirmed
L/C credit basis with new and even familiar customers. A confirmed L/C
through a U.S. bank is recommended because it prevents unwanted changes
to the original L/C, and it places responsibility for collection on the
banks rather than on the seller. This may cost a bit more, but may be
well worth it.

To reduce risk of nonpayment, U.S. companies may contact credit rating
agencies, which can provide fee-based corporate information to evaluate
financial credibility of Korean companies. [Dun & Bradstreet
Korea](http://www.dnbkorea.com/), the [Korea Investors
Service,](http://www.kisrating.com/eng/) and the [Korea Information
Service](http://www.kisinfo.com/) are known to provide fee-based credit
rating services in Korea. Cs Korea can also provide valuable
information, including a company's credit standing, through its
[International Company Profile](http://www.buyusa.gov/korea/en/icp.html)
service. [The Korean Commercial Arbitration Board
(KCAB)](http://www.kcab.or.kr/) and private collection agencies can
provide arbitration and collection services. The KCAB is staffed with
counselors who advise U.S. companies on contract guidelines.

The Commodity Credit Corporation (CCC), U.S. Department of Agriculture,
administers [export credit guarantee
programs](http://www.fas.usda.gov/excredits/exp-cred-guar-new.asp) for
commercial financing of U.S. agricultural exports to Korea. Under the
[GSM-102 Export Credit Guarantee Program for
Korea](http://www.fas.usda.gov/scriptsw/PressRelease/pressrel_dout.asp?PrNum=0165-05),
CCC underwrites credit extended by the private banking sector in the
United States to approved Korean banks using dollar-denominated,
irrevocable letters of credit to pay for food and agricultural products
sold to Korean buyers.

## How Does the Banking System Operate [**Return to top**](#ch7)

Korea's financial system consists of banking and non-bank financial
institutions. The Financial Supervisory Commission
[(FSC)](http://www.fsc.go.kr/eng/index.asp) and the Financial
Supervisory Service [(FSS),](http://english.fss.or.kr/) its regulatory
arm, are responsible for supervising and examining all banks, including
specialized and government-owned banks, as well as securities and
insurance companies. The FSC has played a key role in financial
restructuring and has strengthened the regulatory and supervisory
framework governing the entire financial sector. Oversight standards are
improving but they will need more time to meet international standards.
The Korean branches of international accounting firms generally perform
audits. Although audit quality is improving, it is still far behind
global standards. The government's unlimited guarantee for bank deposits
is 50 million Korean Won (USD 53,000) per account.

## Foreign-Exchange Controls [**Return to top**](#ch7)

Korea has liberalized foreign exchange controls in line with OECD
benchmarks.

A foreign firm that invests under the terms of the Foreign Capital
Promotion Act (FCPA) is permitted to remit a substantial portion of its
profits, providing it submits an audited financial statement to its
foreign exchange bank. To withdraw capital, a stock valuation report
issued by a recognized securities company or the Korean Appraisal Board
must also be presented. Foreign companies not investing under the FCPA
must repatriate funds through authorized foreign exchange banks after
obtaining government approval. Although Korea does not routinely limit
the repatriation of funds, it reserves the right to do so in exceptional
circumstances, such as in situations which may harm its international
balance of payments, cause excessive fluctuations in interest or
exchange rates, or threaten the stability of its domestic financial
markets. To date, the Korean government has had no instances of limiting
repatriation for these reasons, even during and after the 1997-98
financial crisis.

The [Bank of Korea](http://www.bok.or.kr/eng/index.jsp) has detailed
information about foreign-exchange control policies in Korea.

## U.S. Banks and Local Correspondent Banks [**Return to top**](#ch7)

To view the list of major U.S. and Korean banks in Korea, go to the link
below.

<http://www.buyusa.gov/korea/en/bankcontacts.html>

## Project Financing [**Return to top**](#ch7)

Medium and short-term credit is available from Korean and foreign banks
and through the issuance of debentures. Domestic companies generally
have better access to local funding as well as informal and secondary
financial markets charging higher interest rates. Debentures are a
financing alternate, although slightly more expensive than bank
financing. Long-term debt is available from the Korea Development Bank,
but generally for high priority industries.

Several local financial service companies provide project financing for
social infrastructure and private projects in Korea. Project financing
was first introduced in Korea in 1995 for a highway construction project
between Seoul and the Incheon International Airport. Currently, most of
Korea's social overhead capital (SOC) projects are funded by project
financing. Project financing has become a popular method of financing
for private sector projects too, which include real estate development
and buy-outs of financially troubled companies.

As a developed country, there are no multilateral development banks nor
aid funded projects in Korea.

## Web Resources [**Return to top**](#ch7)

Bank of Korea

<http://www.bok.or.kr/index.jsp>

Export Credit Guarantee Program

<http://www.fas.usda.gov/excredits/exp-cred-guar-new.asp>

Export- Import Bank of Korea

<http://www.koreaexim.go.kr/en/>

Export-Import Bank of the United States

[http://www.exim.gov](http://www.exim.gov/)

● Country Limitation Schedule

<http://www.exim.gov/tools/country/country_limits.html>

Financial Supervisory Commission

[www.fsc.go.kr/eng/index.asp](http://www.fsc.go.kr/eng/index.asp)

Financial Supervisory Service

<http://www.fss.or.kr/>

Korea Development Bank

<http://www.kdb.co.kr/>

List of major U.S. and Korean banks in Korea
<http://www.buyusa.gov/korea/en/bankcontacts.html>

OPIC

[http://www.opic.gov](http://www.opic.gov/)

SBA\'s Office of International Trade

<http://www.sba.gov/oit/>

Export Credit Guarantee Program

<http://www.fas.usda.gov/excredits/ecgp.asp>

Trade and Development Agency

<http://www.ustda.gov/>

USDA Commodity Credit Corporation

<http://www.fsa.usda.gov/ccc/default.htm>

[Return to table of contents](#doing-business-in-korea)

[[]{#ch8 .anchor}Return to table of contents](#doing-business-in-korea)

# Chapter 8: Business Travel

-   [Business Customs](#business-customs-return-to-top)

-   [Travel Advisory](#travel-advisory-return-to-top)

-   [Visa Requirements](#visa-requirements-return-to-top)

-   [Telecommunications](#telecommunications-return-to-top)

-   [Transportation](#transportation-return-to-top)

-   [Language](#language-return-to-top)

-   [Health](#health-return-to-top)

-   [Local Time, Business Hours and
    Holidays](#local-time-business-hours-and-holidays-return-to-top)

-   [Temporary Entry of Materials and Personal
    Belongings](#temporary-entry-of-materials-and-personal-belongings-return-to-top)

-   [Web Resources](#web-resources-return-to-top-4)

## Business Customs [**Return to top**](#ch8)

At first glance, Korea appears to be \"just like any other nation.\" Its
capital city, Seoul, is a modern, thriving metropolis with all of the
latest technology the world has to offer. All over Korea, you\'ll find
first-class telecommunications, the requisite five-star hotels, Western
restaurants, modern transport systems (including very efficient subway
networks in Seoul and Busan), innovative architecture, and so forth.
Nonetheless, it is still very Korean and it is imperative that any
American doing business in Korea realizes that Seoul is not Los Angeles
(even though the latter, in fact, has a sizeable Korean community).
Every year Korea becomes more and more modern, but it is important to
recognize that modern does not equal Western. Koreans will not expect
you to be an expert on the nuances of their culture, but they will
appreciate a show of interest in matters that are important to them.
Koreans generally appreciate a foreigner's effort in expressing a thank
you (gam-sa-ham-ni-da) or a hello (an-yong-ha-say-yo) in the Korean
language.

Though Koreans have transitioned greatly into Western society, the
traditional ways of thinking in many areas are still practiced. Koreans
have a great respect for the family and hierarchy. Extended families
(i.e., parents living with middle-aged married "children" and their
grandchildren) are still commonplace, although this is rapidly changing.
Among the older generation, the father is the primary wage earner, while
the mother stays at home. Due to changing social mores and economic
pressures, the necessity for families to have double incomes is rapidly
growing in Korea. Although fathers are the primary income earners, in
the majority of cases, salaries are entrusted to their wives and most
day-to-day consumption decisions are at the discretion of the female
spouse. US companies may wish to take into consideration these
traditional family roles when marketing to Korean consumers.

Even though there are incremental changes in Korean attitudes and women
are making progress, women professionals at the highest levels are still
very rare. In Korean companies, the majority of working women, many with
top university degrees, are still relegated to secretarial jobs,
accounting or educational work. Many qualified women welcome the
opportunity to work as a professional with a foreign company whose
attitudes toward gender equality and professional respect and
responsibility prevail.

Koreans still have a great respect for anyone senior in age, and
intuitively establish their hierarchical position relative to others
based on age. Indeed, one of the fundamental principles of the Korean
language is based on the plethora of verb endings, which indicate the
level of respect accorded to another person. In addition, a man
generally receives more respect in the business world than a woman,
though foreign businesswomen (especially, non-Asian looking women) are
accorded almost an equal amount of respect as foreign businessmen.
Single women generally receive less -respect than married women whose
ties to their husband oftentimes establish their position in society.
The American businessperson, as a foreigner, is generally exempt from
the above societal classification system, although one should be
prepared to answer questions that Koreans may regard as common to
establish societal hierarchy but which foreigners may regard as
personal, such as questions about age and marital status.

Americans should be ready to mix business with social life as the
Koreans base their business relationships on personal ones. The heavy
drinking of the Korean alcohol, Soju, beer, scotch, or other liquor is
commonplace in establishing a personal, business relationship. Also
commonplace is the "no-rae-bang" where a group of businesspeople go to
an establishment to drink and sing along to a video machine playing
music. As most no-rae-bang machines come equipped with songs in English,
a businessperson may want to be prepared to sing at least one song in
order to gain social favor with their Korean counterpart. Although not
as common as the no-rae-bang, businessmen should also be aware of "room
salons" where Korean women serve food and drink to their patrons.

When doing business, Americans should be sensitive to Korea\'s
historical relationship with Japan, which made a virtual colony of the
Korean peninsula. Because of the Japanese colonial period, Koreans have
an emotionally intense reaction at times to things Japanese, though
there is an admiration for Japanese business acumen. A businessperson
should show great respect towards Korean society. Any comparative
mention of Japan versus Korea, where Japan has the upper edge may harm a
business deal.

Korea still observes Confucian ethics based on strong ties to a group.
Whereas an American may think in individual terms, (i.e., what is in my
best interest?), a Korean frequently thinks in group terms, (i.e., what
is in the best interests of the group and how can I help to maintain
harmony within the group?) For this reason, the majority of Koreans are
intensely patriotic, calling Korea by the term, "oo-ri-na-ra," ("our"
country). In order to close a deal when negotiating, the benefits for
the group, whether for the company or country, should be emphasized.

For Koreans, relationships are all important. \"Cold calls\" don\'t work
and introductions are crucial. Koreans want to do business with people
with whom they have formed a personal connection or whereby a mutual
intermediary has made an introduction. As alumni contacts are a major
source of networking in Korea, a particularly well-connected Korean will
have attended a prestigious Korean university such as Seoul National
University, Yonsei University, Korea University or Ehwa Women's
University.

The exchange of business cards is very important and a means by which
Koreans learn about the name, position and status of the other person.
Koreans observe a very strict hierarchical code whereby Koreans will
generally meet to discuss business with persons of the same, parallel
rank. Businesspersons should always have their (preferably bilingual)
business cards ready and should treat the exchange of a Korean
counterpart\'s card with respect. (It is a sign of respect to receive
and present items with both hands, followed in business etiquette by
passing and receiving a card with the right hand. One should never give
a card, or anything else for that matter, with the left hand as it shows
disrespect). For historical reasons, Chinese characters, which Koreans
can generally understand, are regarded as more sophisticated. As such, a
business card written in Chinese characters can serve for a business
trip to Korea, China, and Japan.

Negotiating style is particularly important. Koreans can prove subtle
and effective negotiators, and a commitment to a rigid negotiating
stance early on may work to the American\'s disadvantage. Your offer may
include the best price, technology and profit potential but still be
turned down because the Korean customer does not like your style.

An important point to keep in mind concerns the nature of reaching an
agreement with a Korean firm. Westerners attach great importance to a
written contract that specifies each detail of the business
relationship. Koreans, on the other hand, value a contract as a loosely
structured consensus statement that broadly defines what has been
negotiated, but leaves sufficient room to permit flexibility and
adjustment. The Korean Government has attempted to address this dual
perception by formulating \"model\" contracts for licensing technology
and other arrangements. Both parties must be assured that the
obligations spelled out in a negotiated contract are fully understood.

Most Koreans have three names. These names usually follow the Chinese
pattern of a surname followed by two given names. In a Korean household,
all brothers and sisters have the same last name and a common given
name; the only distinguishing mark is the remaining given name. In
addressing Koreans, foreigners should observe the use of surnames (e.g.,
Mr. Kim; Ms. Lee), using formal titles if possible (e.g. Dr. Yoo;
Director Song). The most common last names are Kim, Lee, and Park. In
the use of formal titles as appropriate, one should always be familiar
with the complete name, including the two given names, for
identification purposes, as there may be several Mr. Park's or Dr. Lee's
in the same company and even the same work space.

## Travel Advisory [**Return to top**](#ch8)

Go to link below for information on traveling to Korea.

<http://travel.state.gov/travel/skorea.html>

## Visa Requirements [**Return to top**](#ch8)

For information about visas to Korea, please go to

<http://www.mofat.go.kr/me/me_a006/me_b025/me06_01.jsp>.

U.S. Companies that require travel of foreign businesspersons to the
United States should allow sufficient time for visa issuance if
required. Visa applicants should go to the following links.

U.S. Embassy Seoul Consular Section Website:
[www.asktheconsul.org](http://www.asktheconsul.org/)

State Department Visa Website: <http://travel.state.gov/visa/index.html>

## Telecommunications [**Return to top**](#ch8)

There are three types of public telephones; prepaid, credit card and
coin phones. If you want to make a local call in the same city or
province, simply dial the phone number with no area code. For
international phone calls, press the red button and then dial 0072911
for AT&T, or 0072916 for Sprint. However, please note that it is often
difficult to find a public pay phone because Korea has one of the
highest penetration rates in the world for mobile phones. The most
convenient way is to rent a mobile phone upon arriving at Incheon
International Airport. You can either contact the numbers below for
reservations or simply sign up for a rental phone at the rental desks at
the airport.

SK Telecom: 82-32-743-4011/4042

KTF: 82-32-743-4018/4078

LG Telecom: 82-32-743-4001/4019

The mobile phone penetration rate in Korea is 78 percent, with nearly 38
million of Korea\'s 48 million population subscribing to three different
local carriers, SK Telecom, KTF, and LG Telecom. Currently Korean mobile
technology is currently based on Code Division Multiple Access (CDMA),
which may not offer roaming capabilities for Global System for Mobile
Communications (GSM) or Time Division Multiple Access (TDMA) based
technologies. According to SK Telecom and KTF investment plans for 2006,
WCDMA infrastructure will be deployed in major cities and may allow
partial roaming services for overseas business travelers.

Korea ranks among the top countries in the world in terms of Internet
usage and broadband penetration, primarily on xDSL or cable networks. KT
and Hanaro Telecom are two major facility-based wireline telephone
operators and broadband service providers. There are also many
small-and-medium sized Internet service providers. Korea also boasts its
unique \'PC Baang (room)\' service that offers broadband access services
outside homes with the latest computer systems, charging by the amount
of time used. Major urban hotels are also fully equipped with broadband
access services for hotel guests\' computers. Several upscale hotels
have established hotspot zones in their lobbies for wireless Internet
access. Satellite Digital Multimedia Broadcasting (S-DMB) and
Terrestrial DMB (T-DMB) services are now available through mobile
operators and broadcasting companies respectively. DMB services allow
users to watch digital TV programs on their DMB-ready mobile devices,
including cell phones, PDAs, and Personal Multimedia Centers (PMCs).

## Transportation [**Return to top**](#ch8)

Flying time for direct flights from the U.S. to Korea ranges from 12-16
hours, depending on the point of departure. Flights with connections can
take as long as 18 hours, door to door.

[Incheon International Airport](http://www.airport.or.kr/eng/airport/)
is the primary gateway for international travel to and from Korea. The
new state-of-the--art airport is one of the most modern in East Asia.
Incheon Airport is currently only accessible by car or bus, however,
construction of the Incheon International Airport Railroad (A'REX) is
nearly complete. The first 37.6 km segment from Incheon Airport to Gimpo
Airport is scheduled to open in 2007. Service to and from Seoul Station
is scheduled to begin in 2010. Airport buses and taxis are widely
available, although availability may be limited late in the evening.
Travel time to Incheon Airport from downtown Seoul typically takes about
one-and-a-half hours. The only road to the new airport is a toll road,
which charges 6,700 Korean Won (approximately USD 6) per passenger
vehicle.

The cost of travel by taxi from downtown Seoul to Incheon Airport
averages 60,000 \~ 80,000 Korean Won (approximately USD 70 \~ USD 90),
although some taxis charge more. Some taxi drivers also charge higher
fares to make up for revenue lost by having to drive back to Seoul
without a passenger. If this happens, the traveler should contact the
airport authority (032-741-2422) and provide the taxi's license plate
number so the authorities can take action and have the driver banned
from driving to the airport.

A less expensive option is the widely available airport bus to/ from
major cities in Korea. City Coach and airport buses cost 8,000\~13,000
Korean Won (approximately USD 9 \~ USD 14) and depart from various
locations throughout Seoul about every 15 minutes. Korean Air offers an
airport/hotel shuttle bus service (KAL LIMOUSINE), which costs 13,000
Korean Won (approximately USD 15). These buses have several different
routes, so it is necessary to check the route prior to boarding. KAL
airport limousine buses depart every 20 minutes from major hotels
throughout the city. Even though these two bus services are
substantially cheaper than taking a taxi to Incheon Airport, passengers
must factor in extra time, given the additional stops to pick up
passengers at the various hotels.

[Seoul's public transportation
system](http://www.lifeinkorea.com/Information/Trans/seoul-trans.cfm) is
very well organized. With nine subway lines and city buses that service
the entire city, as well as a multitude of taxis, traffic is the only
major obstacle to movement. The seemingly endless rush-hour traffic can
be a major hindrance, so early preparation, as well as patience, is
required. Fortunately, buses takes less travel time than taxis because
of a bus-only lane traffic system. The Seoul Metropolitan Government
maintains an English language [interactive bus
map](http://bus.congnamul.com/SeoulRouteWebApp/view_english/map.jsp)
that allows passengers to obtain bus route and schedule information
based on point of origin and destination.

Public transportation is also recommended for travel throughout Korea.
[KTX](http://ktx.korail.go.kr/eng) provides high-speed transportation to
major cities throughout Korea. There are also [urban railway
networks](http://english.tour2korea.com/01TripPlanner/Transportation/rail_main.asp?kosm=m1_4&konum=3)
connecting Seoul to the rest of the country. Travel by
[bus](http://english.tour2korea.com/01TripPlanner/Transportation/bus_main.asp?kosm=m1_4&konum=5)
also provides a cost-effective way of navigating throughout Korea.

## Language [**Return to top**](#ch8)

Korean is the official and accepted business language. English is taught
throughout primary and secondary school, and is spoken at some
government agencies and companies that engage in international business.

## Health [**Return to top**](#ch8)

Go to the link below for more information on health issues:
<http://www.cdc.gov/travel/eastasia.htm>

## Local Time, Business Hours, and Holidays [**Return to top**](#ch8)

-   Local Time Zone:

Korea is 13 hours ahead of Eastern Standard Time during daylight savings
time, and 14 hours ahead of Eastern Standard Time at all other times.
Korea does not subscribe to daylight savings time.

-   Business Hours:

Business hours are normally from 8:30am to 5:30pm Monday through Friday,
and 8:30 am to 1:00 pm on Saturdays for some government agencies.

-   Holidays:

View link for holidays in Korea.
(<http://www.buyusa.gov/korea/en/holidays.html>)

## Temporary Entry of Materials and Personal Belongings [**Return to top**](#ch8)

[Korea]{.underline}

Travelers are allowed to bring USD400 worth of goods into Korea duty/tax
free. Goods bought overseas or bought duty/tax free before leaving Korea
are included when determining your duty free allowance. Common examples
of acceptable items include:

cameras, electronic equipment, leather goods, perfume concentrate,
jewelry, watches, sporting goods, new clothing, footwear, articles for
personal hygiene/grooming, one liter of alcoholic liquor (including
wine, beer or spirits) for travelers aged 20 years and over. The tobacco
allowance is 200 cigarettes, 50 cigars and 250g of tobacco products,
other than cigarettes, for travelers aged 19 years of age and over.

Personal goods that you have used may also be brought into Korea without
payment of duty and tax (proof of the date of purchase may be required).
Your clothing, toilet articles, personal jewelry (including watches)
will be admitted free of duty and other taxes irrespective, if they
accompany you or are sent separately, provided:

1\) They are intended for your own personal use or wear; and

2\) They are not intended for any other person or persons or as a gift,
sale or exchange.

Commercial quantities of individual items are not permitted under the
provisions of this concession since the term \"personal effects\" only
covers used articles or those that a traveler may reasonably require for
his or her personal use during a journey.

Members of the same family who are traveling together may combine their
individual duty/tax free allowances.

Gifts (given to you or intended for others) are counted as part of the
USD400 duty free allowance.

Non-residents must declare in writing to Korean Customs all foreign
currency with a value in excess of USD 10,000 that they carry into or
acquire in Korea. This rule is enforced. When buying Korean Won in
Korea, be sure to keep the receipt(s) because re-exchange is allowed up
to the amount specified in the receipts. Without receipts only USD 500
worth of Korean Won can be re-converted into USD.

##### Articles in Excess of The Duty Free Allowance

All goods and proof of purchase must be declared to the Korea Customs
Service (KCS) for calculation of any duty and tax to be paid. Customs
will collect customs duty, VAT (Value Added Taxes) and special
consumption taxes on imported items. The KCS has adopted a Simplified
Duty Rate that reflects all duties and taxes to facilitate customs
procedures.

General Examples of Simplified Duty Rates

  ------------------- ------------------- ---------------- ----------------
  ***Total value of   ***Less than USD    ***More than USD ***Liquor,
  articles acquired   400, or personal    400 (above duty  Tobacco, etc.***
  or purchased        belongings that     free             
  abroad***           have been used***   allowance)***    

  Customs duty and    None                20\~55%          Individually
  other taxes                                              taxed
  ------------------- ------------------- ---------------- ----------------

It is important to note that there are different rates of duty and tax.
When purchasing items, caution should be exercised to ensure that the
imported items are not in excess of the duty/tax free allowance. For
further information, contact Korean Customs or go to their website at
[www.customs.go.kr/eng/](http://www.customs.go.kr/eng/).

##### Calculation of Customs Duties And Payment Method 

Customs duty and other taxes, where applicable, are levied on the
transaction value of the goods, i.e., the price actually paid for them.
Where there is no identifiable transaction cost (such as a gift),
Customs will endeavor to have the goods valued independently. Payment
will only be accepted in cash and in Korean Won. Passengers cannot pay
Customs duties by credit card or any other means of payment.

##### Business Travelers

Business travelers carrying commercial goods or samples may need to
obtain permits for their goods depending on the nature of the goods,
regardless of value. Quarantine and wildlife regulations and other
restrictions may also apply to certain goods. Laptop computers and other
similar electronic equipment for personal/professional use may be
brought in duty/tax free, provided Customs is satisfied that these items
will be removed from Korea on departure.

##### Temporary Importation Of Commercial Goods 

Carnets may be obtained for temporary duty/tax free entry of goods such
as commercial samples, jewelry, goods for international exhibitions,
equipment for sporting events, professional televisions and film
equipment, etc. Contact your local International Chamber of Commerce for
application details.

For more information on importing goods, the International Cooperation
Division of the Korean Customs Administration can provide assistance
with general customs questions.

Korea Customs Service

Tel: (82)-2-3438-1114

Fax. (82)-2-3438-1665.

[www.customs.go.kr/eng/](http://www.customs.go.kr/eng/)

##### [Returning to the U.S.]{.underline}

Returning U.S. residents can bring duty-free articles totaling USD 400
when the articles are for personal use. After the USD 400 exemption, the
next USD 1,000 worth of personal or gift items are taxed at a flat rate
of 10 percent. Beyond USD 1,400, various duty rates, mostly 20-30
percent, apply according to the item. Both residents and non-residents
are limited to one carton of cigarettes, 100 cigars and one liter of
alcoholic beverages or two ounces of perfume for duty-free import. The
duty-free limit is USD 50 for bona fide gifts mailed to the United
States. Every mail shipment must contain a written declaration.

Non U.S. citizen visitors to the United States are allowed to bring in
duty-free gifts with a value of up to USD100. For travelers within this
limit, no written declaration is required. Additional gifts and other
items that will remain in the United States are taxed at a rate of 10
percent up to USD 1,000, and at variable rates thereafter.

Foreign-made personal articles are dutiable each time they are brought
into the United States, unless one can prove prior possession. Articles
bought in \"duty free\" shops in foreign countries are subject to U.S.
customs duty. Articles purchased in U.S. \"duty free\" shops are also
subject to U.S. duties if they are brought back into the United States.

Americans visiting Korea should be aware of possible trademark and
copyright violations when purchasing articles in Korea. Makes such as
Coach, Reebok, Gucci, Polo, Rolex, Disney, Chanel, Warner Brothers and
computer software are often counterfeit. Due to the high potential for
counterfeiting, items bearing the above-named trademarks (and several
others) can only be legally mailed or carried into the United States, if
they are the authentic articles. By attempting to carry counterfeit
goods through U.S. Customs, one runs the risk of having them
confiscated. Possession of significant amounts of counterfeit goods can
lead to criminal prosecution. Questions regarding the import of
counterfeit goods into the U.S. should be directed to the U.S. Customs
office at the Embassy in Seoul at 82-2-397-4644. The U.S. Customs
website is [www.cbp.gov](http://www.cbp.gov/).

## Web Resources [**Return to top**](#ch8)

Health Issues

<http://www.cdc.gov/travel/eastasia.htm>

Holidays in Korea

<http://www.buyusa.gov/korea/en/holidays.html>

Incheon International Airport

<http://www.airport.or.kr/eng/airport/>

Information about Visas to Korea

<http://www.mofat.go.kr/me/me_a006/me_b025/me06_01.jsp>

Korean Embassy and Consulates in the U.S

[http://www.koreaembassyusa.org](http://www.koreaembassyusa.org/)

KTX

<http://ktx.korail.go.kr/eng/>

State Department Visa Website
<http://travel.state.gov/travel/tips/brochures/brochures_1229.html>

State Department Travel Advisory on Korea

<http://travel.state.gov/travel/skorea.html>

U.S. Customs

[http://www.cbp.gov](http://www.cbp.gov/)

[Return to table of contents](#doing-business-in-korea)

[Return to table of contents](#doing-business-in-korea)

# Chapter 9: Contacts, Market Research, and Trade Events

-   [Contacts](#contacts-return-to-top)

-   [Market Research](#market-research-return-to-top)

-   [Trade Events](#trade-events-return-to-top)

## Contacts [**Return to top**](#chapter-9-contacts-market-research-and-trade-events)

Go to the link below for useful contacts in Korea and the U.S.:
<http://www.buyusa.gov/korea/en/usandcountrycontacts.html>

## Market Research [**Return to top**](#chapter-9-contacts-market-research-and-trade-events)

To view market research reports produced by the U.S. Commercial Service
please go to the following website:
[http://www.export.gov/marketresearch.html](http://www.export.gov/marketresearch.html )
and click on Country and Industry Market Reports.

Please note that these reports are only available to U.S. citizens and
U.S. companies. Registration to the site is required, but free of
charge.

## Trade Events [**Return to top**](#chapter-9-contacts-market-research-and-trade-events)

Please click on the link below for information on upcoming trade events.

<http://www.export.gov/tradeevents.html>

<http://www.buyusa.gov/korea/en/cskoreaupcomingevents.html>

[Return to table of contents](#doing-business-in-korea)

[[]{#ch10 .anchor}Return to table of contents](#doing-business-in-korea)

# Chapter 10: Guide to Our Services

The U.S. Commercial Service offers customized solutions to help your
business enter and succeed in markets worldwide. Our global network of
trade specialists will work one-on-one with you through every step of
the exporting process, helping you to:

-   Target the best markets with our world-class research

-   Promote your products and services to qualified buyers

-   Meet the best distributors and agents for your products and services

-   Overcome potential challenges or trade barriers

For more information on the services the U.S. Commercial Service in
Korea offers U.S. businesses, please click on the link below.

<http://www.buyusa.gov/korea/en/ourservices.html>

[Return to table of contents](#doing-business-in-korea)

# 

U.S. exporters seeking general export information/assistance or
country-specific commercial information should consult with their
nearest **Export Assistance Center** or the **U.S. Department of
Commerce\'s Trade Information Center** at **(800) USA-TRADE**, or go to
the following website: [http://www.export.gov]()\
\
To the best of our knowledge, the information contained in this report
is accurate as of the date published. However, **The Department of
Commerce** does not take responsibility for actions readers may take
based on the information contained herein. Readers should always conduct
their own due diligence before entering into business ventures or other
commercial arrangements. **The Department of Commerce** can assist
companies in these endeavors.