Voluntary Report - public distribution

**Date:** 8/6/2004

**GAIN Report Number:** KS4041

KS4041

**Korea, Republic of**

**Product Brief**

**Confectionery Market**

**2004**

**Approved by:**

![](media/image1.wmf)Marcus E. Lower, Director

Agricultural Trade Office, Seoul

**Prepared by:**

Seh Won KIM, Marketing Specialist

**Report Highlights:**

Total imports of confectionery products reached \$167 million in 2003,
up 11 percent from 2002. The United States was the largest supplier with
a 24.5 percent market share, at \$40.9 million, up 11.5 percent from the
previous year. Imports of confectionery products are expected to expand
by about 10 percent annually over the next few years.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Seoul ATO \[KS2\]

\[KS\]

Table of Contents

[**SECTION I. MARKET OVERVIEW 3**](#section-i.-market-overview)

[SECTION II. MARKET SECTOR OPPORTUNITIES AND THREATS
3](#section-ii.-market-sector-opportunities-and-threats)

[A. Entry Strategy 4](#a.-entry-strategy)

[B. Local Business Customs 4](#b.-local-business-customs)

[C. Market Size, Structure and Trends
5](#c.-market-size-structure-and-trends)

[D. Distribution Channel 7](#d.-distribution-channel)

[E. Company Profiles 9](#e.-company-profiles)

[SECTION III. COSTS AND PRICES 9](#section-iii.-costs-and-prices)

[A. Tariff Rates 9](#a.-tariff-rates)

[B. Costs, charges and expenses from imports of confectionery
10](#b.-costs-charges-and-expenses-from-imports-of-confectionery)

[C. Markups 10](#c.-markups)

[D. Transportation 11](#d.-transportation)

[SECTION IV. MARKET ACCESS 11](#section-iv.-market-access)

[Food Standards and Regulations 11](#food-standards-and-regulations)

[Korea Food & Drug Administration (KFDA) Import Procedures
11](#korea-food-drug-administration-kfda-import-procedures)

[Labeling Requirements 12](#labeling-requirements)

[Labels should have the following inscriptions printed in letters large
enough to be readily legible:
12](#labels-should-have-the-following-inscriptions-printed-in-letters-large-enough-to-be-readily-legible)

[Food Additive Code (Administered by KFDA)
13](#food-additive-code-administered-by-kfda)

[SECTION V. KEY CONTACTS AND FURTHER INFORMATION
13](#section-v.-key-contacts-and-further-information)

# 

# SECTION I. MARKET OVERVIEW

The gross sales of confectionery products in South Korea (Korea) were
about \$1.8 billion in 2003, up four percent from 2002. The four major
players accounted for over 60 percent of total sales. The confectionery
industry is expected to grow 3-5 percent annually over the next few
years.

Confectionery products are imported into Korea from many countries. The
total imports of confectionery products amounted to \$167 million in
2003. The United States was the dominant origin in 2003 with a 24.5
percent market share and \$40.9 million in sales, followed by China (14
percent, \$23.4 million) and Australia (7.1 percent, \$11.8 million).
Imports of confectionery products are expected to expand by about 10
percent in the foreseeable future. Korea also exports about \$100
million of confectionery products annually to other countries, including
Japan, China and the U.S.

**Imports of Confectionery Products by Country**

![](media/image2.wmf)

# SECTION II. MARKET SECTOR OPPORTUNITIES AND THREATS

Advantages and Challenges for U.S. Confectionery Products

+-----------------------------------+-----------------------------------+
| ###### Opportunities              | ###### Challenges                 |
+-----------------------------------+-----------------------------------+
| Relatively low customs duties for | U.S. companies generally do not   |
| confectionery products            | provide Korean language labels    |
+-----------------------------------+-----------------------------------+
| U.S. package designs are good     | U.S. package sizes are generally  |
|                                   | too big                           |
+-----------------------------------+-----------------------------------+
| U.S. has strong brand power and   | U.S. shelf life is not shown in   |
| country image in Korea            | calendar date but in code         |
+-----------------------------------+-----------------------------------+
| U.S. confectionery products are   | U.S. companies are slow to reply  |
| competitively priced              | and act on inquiries from Korean  |
|                                   | buyers                            |
+-----------------------------------+-----------------------------------+
| Diminishing resistance to         | Food safety concerns              |
| imported foods                    |                                   |
+-----------------------------------+-----------------------------------+
| Young generation is becoming more | Frequent changes in Korean food   |
| Westernized                       | regulations                       |
+-----------------------------------+-----------------------------------+

## A. Entry Strategy

When considering the Korean market, exporters should conduct preliminary
research to determine if the market is appropriate for the product.
Lists of Korean importers, by product, can be obtained from the U.S.
Agricultural Trade Office Seoul (ATO) or through the Foreign
Agricultural Service in Washington, D.C. (See Section V.) The next step
might include sending catalogues, brochures, product samples, and price
lists to prospective importers as a way of introducing the exporting
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.
There is no substitute for face-to-face meetings. The supplier or
exporter should bring product samples, company brochures and other
relevant information, including price lists, shipping dates, available
quantities, and any other information needed to negotiate a sales
contract.

Another way of finding potential importers is to participate in local
food shows to showcase products to a larger audience. Many Korean
importers attending these shows are looking to establish reliable
long-term trading relationships. Show participation enhances initial
contacts with importers, agents, wholesalers, distributors, retailers
and others in the Korean food industry.

The Food & Hotel Korea 2005 show, for example, is an excellent
opportunity to explore possible market opportunities in Korea. The event
will be held in Seoul at the COEX, March 16-18, 2005. This show is a
**[trade only]{.underline}** event and targets importers, wholesalers,
distributors, retailers, hotels, restaurants, food processors, media,
etc. It is currently the only U.S. Department of Agriculture
(USDA)-supported food show in Korea.

U.S. companies should be sensitive to the uniqueness of the Korean
market. An approach or a product that was successful in another market
does not mean it will be applicable to Korea. It is necessary to renew
the product, design, packaging and market approach in terms of the
Korean situation, consumer requirements and tastes. A well-developed
relationship with a Korean importer is an asset when determining how
best market a product.

For exporters of high-value niche market products, the Mid-America
International Agri-Trade Council (MIATCO) offers a Distributor
Development Service (DDS), which provides a series of cost-effective
services designed to assist U.S. suppliers with specific information on
whether and how to approach the Korean market. MIATCO will also assist
U.S. food companies in establishing and solidifying contacts in the
Korean import, distribution, retail, food service, or food processing
sectors through trade servicing and in-market assistance. For
information on the MIATCO DDS, see contact information in Section V.

Finally, in the Korean market never take anything for granted. Be ready
for the unexpected. Just because the first container cleared customs
does not mean the second one will. Be open to new information,
attentive, polite and patient.

## 

## B. Local Business Customs

The following are some business tips U.S. company representatives should
keep in mind when dealing with Korean buyers, prospective and
established.

1\. Obtaining Information: To obtain information from a Korean importer,
it is best to ask directly and explain why information is important.

2\. Relationships: Personal relationships are very important. Koreans
like to maintain long-term relationships and are often very loyal.
Developing a relationship with a potential Korean partner is vital to
establishing your credibility. If a seller has already entered this
market, the established contacts can help build trust with a new one.

3\. Introductions: It is very helpful to have a formal introduction to
the person or company with whom the seller wants to do business in
Korea. Meeting the right person in a Korean company is almost always
dependent on having the right introduction.

4\. Evening Gatherings: The office may not be the best place to discuss
business matters or propose new ideas, especially when dealing with the
older generation. It is helpful to get together in the evening for a
less formal, but no less important, meeting.

5\. Name Cards and Address: The exchange of name cards is usually the
first item of business. In Korea people seldom call others by their
first names. Instead, they use surnames (such as Mr. Hong) or title and
surname together (such as President Hong).

6\. Meetings: Small talk is a good way to break the ice at the beginning
of a meeting, and a short, orderly meeting, with an agenda provided in
advance, will go along way towards the completion of a successful first
encounter.

7\. Dress: It is recommended to wear a conservative business suit and
tie when meeting or visiting Korean importers for the first time. First
impressions are important and Koreans tend to be very traditional.

8\. Face-to-face Communications: One idiosyncrasy of the Korean language
is that Koreans say "yes" when they might mean "no" or vice versa. For
instance, in Korean, "Wouldn't you like to go home?" if answered with a
"yes" means 'that's right, I would not like to go home\". To avoid
confusion, reply with a full sentence, "yes, I would like to go home."

9\. Surroundings: Pay close attention to what is going on. Watch Korean
mannerisms: how they present and receive business cards, bow, shake
hands, pour drinks (never pour your own nor let others pour their own --
be it water or wine), etc. The ability of a U.S. company representative
to incorporate some of those "little things" can go a long way to
facilitating the establishment of a relationship, as it shows an
interest that a Korean will notice immediately and appreciate.

## C. Market Size, Structure and Trends

**Market Size**

The total sales of confectionery products in Korea were about \$1.8
billion in 2003, up four percent from 2002. The local confectionery
industry grew by about six percent annually over the past three years.
The confectionery industry is expected to grow by 3-5 percent annually
over the next few years.

Imported confectionery products amounted to \$167 million in 2003.
Imports of confectionery products are expected to expand by about 10
percent annually in the foreseeable future.

Sales of Korean Confectionery Products (US\$ Millions)

+---------------+----------+----------+----------+----------+----------+
| Item          | 2000     | 2001     | 2002     | 2003     | Change   |
|               |          |          |          |          |          |
|               |          |          |          |          | \        |
|               |          |          |          |          | '03/\'02 |
+---------------+----------+----------+----------+----------+----------+
| Chewing Gum   | 154      | 215      | 286      | 283      | -1.0%    |
+---------------+----------+----------+----------+----------+----------+
| Candies       | 138      | 139      | 156      | 155      | -0.6%    |
+---------------+----------+----------+----------+----------+----------+
| Cookies       | 352      | 375      | 411      | 454      | 10.5%    |
+---------------+----------+----------+----------+----------+----------+
| Chocolates    | 179      | 180      | 205      | 221      | 7.8%     |
+---------------+----------+----------+----------+----------+----------+
| Choco Pie     | 116      | 123      | 137      | 139      | 1.5%     |
+---------------+----------+----------+----------+----------+----------+
| Snacks        | 528      | 501      | 483      | 500      | 3.5%     |
+---------------+----------+----------+----------+----------+----------+
| Others        | 51       | 49       | 51       | 47       | -7.8%    |
+---------------+----------+----------+----------+----------+----------+
|               |          |          |          |          |          |
+---------------+----------+----------+----------+----------+----------+
| Total         | 1,518    | 1,582    | 1,729    | 1,799    | 4.0%     |
+---------------+----------+----------+----------+----------+----------+

Source: Korea Food Distribution Year Book 2004

**Imports of Confectionery Products (Calendar Year, US**\$1,000)

+-----------+----------------+--------+--------+------+------+------+
| HS Code   | Description    | Total\ | Total\ | U    | U    | U.S. |
|           |                | 2002   | 2003   | .S.\ | .S.\ |      |
|           |                |        |        | 2002 | 2003 | Cha  |
|           |                |        |        |      |      | nge\ |
|           |                |        |        |      |      | \'03 |
|           |                |        |        |      |      | /'02 |
+-----------+----------------+--------+--------+------+------+------+
|           |                |        |        |      |      |      |
+-----------+----------------+--------+--------+------+------+------+
|           |                |        |        |      |      |      |
+-----------+----------------+--------+--------+------+------+------+
|           |                |        |        |      |      |      |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Chew gum       | 3,811  | 4,678  | 630  | 1    | 9    |
| 704100000 |                |        |        |      | ,245 | 7.6% |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Liquorice      | 95     | 114    | 82   | 99   | 2    |
| 704901000 | extract        |        |        |      |      | 0.7% |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Drops          | 6,990  | 6,669  | 682  | 503  | -2   |
| 704902010 |                |        |        |      |      | 6.2% |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Caramels       | 1,803  | 1,610  | 14   | 38   | 17   |
| 704902020 |                |        |        |      |      | 1.4% |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Other candies  | 25,243 | 29,018 | 3    | 4    | 3    |
| 704902090 |                |        |        | ,168 | ,421 | 9.6% |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Other sugar    | 8,849  | 9,518  | 354  | 968  | 17   |
| 704909000 | conf           |        |        |      |      | 3.4% |
+-----------+----------------+--------+--------+------+------+------+
| 　        | **SUB TOTAL**  | **46   | **51   | *    | *    | *    |
|           |                | ,791** | ,607** | *4,9 | *7,2 | *47. |
|           |                |        |        | 30** | 74** | 5%** |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Chocolate conf | 13,522 | 14,727 | 7    | 7    | 0.9% |
| 806201000 |                |        |        | ,093 | ,158 |      |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Cocoa          | 17,727 | 13,012 | 2    | 961  | -5   |
| 806209010 | preparation    |        |        | ,386 |      | 9.7% |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Other          | 1,758  | 2,278  | 851  | 1    | 4    |
| 806209090 |                |        |        |      | ,270 | 9.2% |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Filled choco   | 28,134 | 33,291 | 10   | 9    | -    |
| 806311000 | conf           |        |        | ,102 | ,363 | 7.3% |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Other filled   | 1,616  | 1,907  | 305  | 1    | -9   |
| 806319000 |                |        |        |      |      | 9.7% |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Not filled     | 5,475  | 6,371  | 1    | 1    | 4    |
| 806321000 | choco          |        |        | ,326 | ,981 | 9.4% |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Other          | 60     | 314    | 36   | 57   | 5    |
| 806329000 |                |        |        |      |      | 8.3% |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Other choco    | 18,811 | 20,718 | 6    | 7    | 1    |
| 806901000 | conf           |        |        | ,471 | ,675 | 8.6% |
+-----------+----------------+--------+--------+------+------+------+
| 　        | **SUB TOTAL**  | **87   | **92   | **   | **   | *    |
|           |                | ,103** | ,618** | 28,5 | 28,4 | *-0. |
|           |                |        |        | 70** | 66** | 4%** |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Sweet biscuits | 2,589  | 4,460  | 0    | 0    | n/a  |
| 905310000 |                |        |        |      |      |      |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Waffles and    | 646    | 894    | 36   | 307  | 75   |
| 905320000 | wafers         |        |        |      |      | 2.8% |
+-----------+----------------+--------+--------+------+------+------+
| 1         | Bi             | 12,860 | 17,329 | 3    | 4    | 5    |
| 905901040 | scuits/cookies |        |        | ,131 | ,839 | 4.6% |
+-----------+----------------+--------+--------+------+------+------+
| **　**    | **SUB TOTAL**  | **16   | **22   | *    | *    | *    |
|           |                | ,095** | ,683** | *3,1 | *5,1 | *62. |
|           |                |        |        | 67** | 46** | 5%** |
+-----------+----------------+--------+--------+------+------+------+
| **　**    |                |        |        |      |      | 　   |
+-----------+----------------+--------+--------+------+------+------+
| **　**    | **GRAND        | **149  | **166  | **   | **   | *    |
|           | TOTAL**        | ,989** | ,909** | 36,6 | 40,8 | *11. |
|           |                |        |        | 67** | 86** | 5%** |
+-----------+----------------+--------+--------+------+------+------+

Source: Korea Trade Information Service

**Imports of Confectionery Products by Country: 2003 (US\$1,000)**

  ------------------------- ------------------------- -------------------
  Country                   Value                     Market Share

  U.S.                      40,886                    24.5%

  China                     23,444                    14.0%

  Australia                 11,815                    7.1%

  Japan                     10,142                    6.1%

  Italy                     8,761                     5.2%

  Spain                     8,425                     5.0%

  Belgium                   8,190                     4.9%

  Turkey                    7,099                     4.3%

  Netherlands               6,577                     3.9%

  Indonesia                 5,130                     3.1%

  Germany                   4,270                     2.6%

  France                    4,256                     2.5%

  Switzerland               3,367                     2.0%

  New Zealand               3,124                     1.9%

  Brazil                    2,192                     1.3%

  Others                    19,231                    11.5%

  **Total**                 **166,909**               **100%**
  ------------------------- ------------------------- -------------------

Source: Korea Trade Information Service

## 

## D. Distribution Channel

Korean retailers rarely import food products directly, including
confectionery products. Buying food products from importers and/or
wholesalers in the norm. However, foreign retailers, such as Wal-mart
and Carrefour, import a limited amount of food products directly from
overseas suppliers.

***Sector trends***

There is a general preference for national brand products and/or
products that have long been recognized in the market. Chocolates sell
well during certain seasons. About 60 percent of chocolates sell during
the Valentine Day season in February, about 10 percent each during the
White Day season in March, Christmas season in December and university
entrance examination season in November. About 70 percent of candies
sell from October through March.

The long-term growth of the confectionery sector is forecast by local
contacts to slacken over time. A key reason identified by local
manufacturers is the falling birth rate and, thus, the anticipated
reduction in the number of consumers' ages 10 to 19 years old. As a
result, manufacturers can no longer rely on bright, colorful new product
launches targeting children to maintain sales. There is a corresponding
need, therefore, for manufacturers to become increasingly sophisticated
with product development and marketing to target the emerging consumer
groups, such as working females, parents and those over 60.\
*Imported brands are increasingly valuable*\
\
Sales of imported confectionery items are persistently growing as a
result of their brand recognition and vigorous promotional activities.
In 2003, Snickers and Hershey\'s Kisses, for example, both grew very
fast in both volume and value terms. Moreover, Halls and Polo products
are expanding market share within the confectionery sector. As imported
brands are aggressively penetrating the Korean confectionery market,
product life cycles are shortening, leaving both domestic and
international players to constantly reinvigorate established items and
launch new products.

As imported brands successfully penetrate the market, the shares held by
local players are shrinking and, as a result, competition particularly
for chocolate sales, is becoming more severe. Local players -- Lotte
Confectionery, Haitai Confectionery, Tong Yang Confectionery and Crown
Confectionery -- hold about a 60 percent share of local sales (value).
While there is expected to be little change in the major players in the
foreseeable future, the increasing penetration of imported brands is a
cause for concern for the local companies.

*Sugar-free, low carbs and functional added-value products*\
\
Sugar-free, low carbs and functional products are expected to account
for an increasing proportion of new confectionery products. Items
fitting into the Korean "well-being" trend are supplanting traditional
sugar-based confectionery goods. Young women, and many men, are
increasingly anxious to keep slim, fit and healthy. Dieting is a big
business in Korea and related sectors, such as low fat foods and health
drinks, have increased significantly. Functional candies, such as throat
candies, sell well. The success of sugar-free products with
health-enhancing ingredients reflects prevailing consumption trends in
Korea.

*Change of distribution*

The rise of hypermarkets makes it easier for imported brands to
penetrate the Korean confectionery sector. Traditionally, international
suppliers were hampered by an inability to create effective distribution
networks to reach the large number of independent \"mom and pop\" stores
that were important outlets for confectionery sales. However, it will be
increasingly easy for foreign players to deal with
supermarket/hypermarket and convenience store chains., With one central
buying contract, per company, foreign suppliers will be better able to
introduce, market and promote new products for nationwide distribution.

Retail sales of Confectionery Products by Distribution

  --------------------------- --------------------- ---------------------
  Distribution Type           1998                  2003

  Supermarkets/hypermarkets   53.7%                 65.0%

  Independent food stores     23.1%                 9.1%

  Convenience stores          7.6%                  13.0%

  Confectionery shops         1.4%                  1.5%

  Internet sales              0%                    0%

  Others                      14.2%                 11.4%

  Total                       100.0%                100.0%
  --------------------------- --------------------- ---------------------

Source: Euromonitor

## E. Company Profiles

Local Confectionery Company Profiles

+------------+---------+--------+---------+----------+--------------+
| Company    | Sales   | E      | Plant   | Pu       | Contacts     |
|            |         | nd-use | L       | rchasing |              |
| Product    | 2003    | C      | ocation |          |              |
| types      |         | hannel |         | Channels |              |
|            | (\$M    |        | (No. of |          |              |
|            | illion) |        | Plants) |          |              |
+------------+---------+--------+---------+----------+--------------+
| Lotte      | 921     | Retail | Korea   | Direct   | P.           |
| Con        |         |        | (4)     | and      | 02-670-6114  |
| fectionery |         |        |         |          |              |
| (Conf      |         |        | U.S.    | other    | F.           |
| ectionery, |         |        | (1)     | i        | 02-6672-6600 |
| chewing    |         |        |         | mporters |              |
| gum, ice   |         |        | Vietnam |          | W.           |
| cream)     |         |        | (1)     |          | lot          |
|            |         |        |         |          | teconf.co.kr |
|            |         |        | Russia  |          |              |
|            |         |        | (1)     |          |              |
|            |         |        |         |          |              |
|            |         |        | China   |          |              |
|            |         |        | (1)     |          |              |
+------------+---------+--------+---------+----------+--------------+
| Haitai     | 511     | Retail | Korea   | Direct   | P.           |
| Con        |         |        | (2)     | and      | 02-709-7766  |
| fectionery |         |        |         |          |              |
| (Conf      |         |        | U.S.    | other    | F.           |
| ectionery, |         |        | (1)     | i        | 02-790-8123  |
| chewing    |         |        |         | mporters |              |
| gum, ice   |         |        |         |          | W. ht.co.kr  |
| cream)     |         |        |         |          |              |
+------------+---------+--------+---------+----------+--------------+
| Orion      | 426     | Retail | Korea   | Direct   | P.           |
| (conf      |         |        | (3)     | and      | 02-710-6000  |
| ectionery, |         |        |         |          |              |
| chewing    |         |        | Japan   | other    | F.           |
| gum &      |         |        | (1)     | i        | 02-719-2582  |
| snacks)    |         |        |         | mporters |              |
|            |         |        |         |          | W.           |
|            |         |        |         |          | orion.co.kr  |
+------------+---------+--------+---------+----------+--------------+
| Crown      | 329     | Retail | Korea   | Direct   | P.           |
| Con        |         |        | (2)     | and      | 02-3415-2854 |
| fectionery |         |        |         |          |              |
|            |         |        |         | other    | F.           |
| (c         |         |        |         | i        | 02-3415-2859 |
| hocolates, |         |        |         | mporters |              |
| candies,   |         |        |         |          | W.           |
| biscuits,  |         |        |         |          | crown.co.kr  |
| wafers)    |         |        |         |          |              |
+------------+---------+--------+---------+----------+--------------+

\*P stands for phone number, \*F for fax number and \*W for Website.

Note: Country code for Korea is 82. The \"0\" of the city code is
dropped when calling from abroad.

##### 

# SECTION III. COSTS AND PRICES

## A. Tariff Rates

The tariff rates imposed on imported confectionery products are eight
percent, generally very low compared with other products. There are no
tariff rate quotas for confectionery products. In addition, a 10
percent-valued added tax (VAT) is imposed on the CIF value.

## 

Tariff Rates for Confectionery Products

  --------------------- --------------------------- ---------------------
  **\                   **Description**             **Tariff Rate**
  HS Code**                                         

  1704100000            Chewing gum                 8%

  1704901000            Liquorice extract           8%

  1704902010            Drops                       8%

  1704902020            Caramels                    8%

  1704902090            Other candies               8%

  1704909000            Other sugar confectionery   8%

  1806201000            Chocolate confectionery     8%

  1806209010            Cocoa preparation           8%

  1806209090            Other                       8%

  1806311000            Filled chocolates           8%
                        confectionery               

  1806319000            Other filled chocolates     8%
                        confectionery               

  1806321000            Not filled chocolates       8%
                        confectionery               

  1806329000            Other                       8%

  1806901000            Other chocolates            8%
                        confectionery               

  1905310000            Sweet biscuits              8%

  1905320000            Waffles and wafers          8%

  1905901040            Biscuits/cookies/crackers   8%
  --------------------- --------------------------- ---------------------

Source: Tariff Schedules of Korea

## B. Costs, charges and expenses from imports of confectionery 

Example of one container of confectionery products from the West Coast
of the U.S. to Busan

1\. Freight charge from the West Coast to Busan, Korea: About \$800

2\. Insurance: About \$50 per container of confectionery products

3\. Customs duty: 8% imposed on the CIF value of the shipment

4\. Value Added Tax: 10% imposed on (the CIF value plus Customs duty)

5\. Other expenses and charges: about \$2,800

a\. Inspection fees:

> i\) Detailed inspection fee: \$67-\$167 per item (different depending
> on the number of ingredients to be inspected)

ii\) General inspection fee: \$25 per item

b\. Customs Broker\'s fee: \$23-\$83 (Depending on the value of B/L)

c\. Customs Agents fee: \$83

d\. Port handling and service charges: \$167

e\. Transportation to bonded warehouse: \$125

f\. Devanning fee:

i\) \$125 (palette)

ii\) \$250 (individual boxes)

g\. Warehouse fee: \$250 for an average of 10 days

h\. Stickering fee (printing): \$125

i\. Stickering fee (Labor work for attaching stickers) \$700

j\. Loading fee on palette: \$125

k\. Trucking charge from Busan to Seoul: \$420

## C. Markups

1\. Supermarkets/Department Stores

Importers markups to retailers: 20-30%

Retailer's markups: 25-30%

2\. Discount Stores/Hypermarkets

Importers markups to retailers: 30%

Retailer's markup: 20%

> \*Importers additionally pay about 15 percent of their supplying
> prices to these retailers as sales encouragement fund.

3\. Convenience stores

Importers markups to retailers: 30%

Retailer's markups: 35-38%

> \*Importers additionally pay about 12 percent of their supplying
> prices to these retailers as distribution cost fee.

\*When wholesalers get involved, their markups are about 15-30%.

## D. Transportation

2 weeks 1 week

Via ship Inspections

Stickering Transportation

# SECTION IV. MARKET ACCESS

## Food Standards and Regulations

Food standards and regulations are subject to frequent change. U.S.
exporters need to ensure that all necessary customs clearance
requirements have been verified with local authorities, through their
Korean importer, before the sale conditions are finalized. Final import
approval of any product is always subject to the standards and
regulations as interpreted by the Korean official at the time of product
entry.

The Korea Customs Service (KCS), the Korean Food and Drug Administration
(KFDA) and the National Quarantine Office (for ports that do not have
KFDA regional offices) are the agencies involved in the import clearance
process for confectionery products. Imports of confectionery products
must receive clearance from KFDA. KCS is responsible for ensuring all
necessary documentation is in place before the product is released from
the bonded area.

There are many food standards and regulations. This section describes
only the basic guidelines of Korean import requirements. For details on
Korean import regulation, see the Food and Agricultural Import
Regulations and Standards (FAIRS) Reports (KS4039), dated July 30, 2004,
available on the USDA/Foreign Agricultural Service (FAS) website at
"http://www.fas.usda.gov/scriptsw/attacherep/default.asp".

## Korea Food & Drug Administration (KFDA) Import Procedures

1\. The importer or the importer's representative submits the "Import
Declaration for Food and other required documents"

2\. The type of inspection to be conducted is determined in accordance
with the guidelines for inspection of imported food products. The types
of inspection for a given food product include: Document Inspection,
Visible Inspection, Laboratory Inspection, and Random Sampling
Examination.

3\. If a product is subject to visible inspection, laboratory inspection
and/or random sampling, the KFDA inspector will conduct a field
examination and take samples for the laboratory test.

4\. KFDA conducts the conformity assessment from the information
collected, using such items as test results, document inspection
results, etc.

5\. If a product complies with the Korean standards, KFDA issues a
certificate for import. The importer can then clear the product with the
KFDA import certificate.

6\. If a product does not comply with the Korean standards, KFDA will
notify the applicant and the regional customs office on the nature of
the violation. The importer decides whether to destroy or return
shipments to the exporting country or use it for inedible purposes. If
the violation can be corrected, as with labels, the importer can reapply
for the inspection after making the corrections.

\*Processed food products are required to have tests conducted every
three years provided the same company same product rule is followed.

## Labeling Requirements 

Labeling requirements change frequently and importers must keep abreast
of changing regulations. The Food Safety Division, KFDA, is responsible
for establishing the labeling standards for food products. KFDA regional
offices enforce the labeling standards. Provincial government health
officials also have the authority to enforce the labeling standards.

All imported food products are required to be labeled with the necessary
information in the Korean language. Korean language stickers may be used
instead of manufacturer-printed Korean language labels for confectionery
products at the port of entry.

The sticker should not be easily removable and should not cover the
original labeling. For functional food items, however, stickers are not
permitted. Manufacturer-printed Korean language labels must be used on
such products.

## Labels should have the following inscriptions printed in letters large enough to be readily legible:

1\. Product Name: The product name should be identical to the product
name declared to the licensing/inspection authority.

2\. Product type: This is mandatory for specially designated products,
such as teas, health supplementary foods, etc.

3\. Importer\'s name and address, and the address where products may be
returned or exchanged in the event of defects.

4\. Manufactured date (month and year): This is mandatory for specially
designated products, such as lunch box, sugar, liquor, and salts. For
liquors, a manufacture number (lot number) or bottling date can
substitute for the manufactured date.

5\. Shelf life: Food products should identify the
manufacturer-determined shelf life. If various kinds of products are
packaged together, the shelf life expiration date of the product with
the shortest life should be noted on the label.

6\. Contents: Weight, volume or number of pieces. If the number of
pieces is shown, the weight or volume must be indicated in parentheses.

7\. Ingredient(s) or raw material(s) and a percent content of the
ingredient(s): The name of the major ingredient must be included on the
label as well as the names of at least the next four principle
ingredients. These should be listed with the highest percentage
ingredient first, followed in descending order by the others.
Artificially added purified water does not count as one of the five
major ingredients. Some food additives required by the Labeling
Standards for Food et al. need to be indicated on the label. Besides the
top five ingredients and food additives, an indication of food items
known to be food allergens is mandatory. Food items considered as food
allergens include eggs, milk, buckwheat, peanuts, soybeans, wheat,
mackerel, crab, pork, peaches and tomatoes. Any food product containing
one or more of the above 11 items, as a raw ingredient (ingredients),
must indicate the name (names) on the Korean language label.

8\. Nutrients: Only special nutritional foods, health supplementary
foods, bread and bread loaf, noodles (cooked noodle, fried noodle,
gelatinized dry noodle, and improved cooked noodle), retort foods,
products for which nutritional labels are sought, and products for which
a nutrient emphasis mark is desired are subject to nutritional labeling.

9\. Country of origin

10\. Other items designated by the detailed labeling standards for food
et al.: This includes cautions and standards for use or preservation
(e.g., drained weight for canned products, radiation-processed products,
etc.).

## Food Additive Code (Administered by KFDA)

The "Food Additive Code" guides the use of all additives in foods in
Korea. As of July 2004, Korea had a positive list of 615 approved food
additives. Food additives are grouped into three categories: (a)
chemical synthetics, (b) natural additives, and (c) mixture substances.
Most additives and/or preservatives are approved and tolerance levels
are established on a product-by-product basis in Korea. This creates
difficulties as tolerances can vary from product to product. Getting a
new additive added to the approved list can be time consuming and
troublesome. Even though there may be an established CODEX standard for
a given food additive, if that food additive is not registered in the
Korean Food Additive Code, or even if registered but usage in a certain
food product is not specified, use of that food additive in the given
food product is prohibited. This means that only food additives
registered in the Korean Food Additive Code are allowed for use in food
products, in accordance with the usage standards specified in the Food
Additive Code.

The office responsible for approving food additives in KFDA is as
follows:

**Food Additives Evaluation Department**

Korea Food & Drug Administration

\# 5 Nokbeon-dong, Eunpyung-ku

Seoul, Korea 122-704

Phone: 82-2-380-1687; Fax: 82-2-382-4892

# SECTION V. KEY CONTACTS AND FURTHER INFORMATION

***KEY FAS/USDA CONTACTS AND FURTHER INFORMATION***

**For further information about the Korean agricultural market, please
contact:**

**U.S. Agricultural Trade Office**

Korean Address: Room 303, Leema Building

146-1, Susong-dong, Chongro-ku, Seoul, Korea

U.S. Mailing Address: US Embassy Seoul, Unit 15550-ATO, APO, AP
96205-5550

Telephone: 82-2 397-4188 Fax: 82-2 720-7921

E-mail: <atoseoul@usda.gov>

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

**Agricultural Affairs Office**

Korean Address: U.S. Embassy, 82, Sejong-ro, Chongro-ku, Seoul, Korea

U.S. Mailing Address: US Embassy Seoul, Unit 15550-AgAff, APO, AP
96205-5550

Telephone: 82-2 397-4297 Fax: 82-2 738-7147

E-mail: <agseoul@usda.gov>

**For more information on how you can register for USDA/FAS' Supplier
List:**

The United States Department of Agriculture's Foreign Agricultural
Service (USDA/FAS) offers information and services that can be
beneficial to both new and experienced exporters. For example, the U.S.
Suppliers Service is a searchable database of over 5,000 U.S. exporters
and their products, which is used by USDA/FAS to help facilitate
connecting potential buyers with U.S. suppliers. This database is used
by more than 85 USDA FAS Overseas offices to help export agents, trading
companies, importers and foreign market buyers locate U.S. suppliers. It
is also used to recruit U.S. exporters to participate in market
development activities sponsored by USDA and federal export programs.

You can register online for this service at
**http://www.fas.usda.gov/agexport/exporter.html**

AgConnections Team

AgExport Services Division, Foreign Agricultural Service, Washington,
D.C.

Telephone: 202-690-4172 Fax: 202-205-2963

E-mail: <joyce.estep@usda.gov>

Website: www.fas.usda.gov/agx/agx.html

**For further information about sanitary and phytosanitary requirements,
please contact:**

**U.S. Animal Plant and Health Inspection Service (APHIS)**

Korean Address: Room 303, Leema Building

146-1, Susong-dong, Chongro-ku, Seoul, Korea

U.S. Mailing Address: US Embassy Seoul, Unit 15550-APHIS, APO, AP
96205-5550

Telephone: 82-2 725-5495 Fax: 82-2 725-5496

E-mail: aphis@kornet.net

Website: www.aphis.usda.gov

**For information about activities by Strategic Trade Regional Groups,
please contact:**

**Mid-America International Agri-Trade Council (MIATCO)**

400 West Erie Street, Suite 100, Chicago, Illinois 60610

Telephone: 312-944-3030 Fax: 312 944-1144

E-mail: eriggs@miatoco.org

Website: [www.miatco.org](http://www.miatco.org/)

**Western United States Agricultural Trade Association (WUSATA)**

2500 Main Street, Suite 110, Vancouver, WA 98660-2697, USA

Telephone: 360-693-3373 Fax: 360-693-3464

E-mail: <bruce@wusata.org>

Website: [www.wusata.org](http://www.wusata.org/)

**Food Export USA - Northeast Region of the United States**

150 S. Independence Mall West, 1036 Public Ledger Building,
Philadelphia, PA 19106, USA

Telephone: 215-829-9111 Fax: 215-829-9777

E-mail: <jcanono@foodexportusa.org>

Website: [www.foodexportusa.org](http://www.foodexportusa.org/)

**Southern United States Agricultural Trade Association (SUSTA)**

2 Canal Street Suite 2515, New Orleans, LA 70130, USA

Telephone: 504-568-5986 Fax: 504-568-6010

E-mail: <jim@susta.org>

Website: [www.susta.org](http://www.susta.org/)

**For information on the commercial and industrial products in Korea,
please contact:**

**U.S. Commercial Service**

Korean Address: U.S. Embassy, 82, Sejong-ro, Chongro-ku, Seoul, Korea

U.S. Mailing Address: US Embassy Seoul, Unit 15550-USCS, APO, AP
96205-5550

Telephone: 82-2 397-4535 Fax: 82-2 739-1628

E-mail: <Seoul.office.box@mail.doc.gov> Homepage:
[www.buyusa.gov/korea](http://www.buyusa.gov/korea)