RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/W/146
6 April 1999
(99-1366)
Council for Trade in Goods Original: English
TRADE FACILITATION
National Experience Paper – Revision of the Customs Act of Korea for Trade Facilitation
Communication from the Republic of Korea
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1. Introduction
The Korean Government, recognizing that the existing customs administration, including the
customs procedures, should contribute to inducing  foreign direct investment and enhancing the
competitiveness of domestic enterprises, amended the existing provisions stipulated in the Customs
Act of Korea, thereby introducing a new system in the customs administration, effective of1 January 1999.  The amendment is also designed to reach a level of transparency and rationality
compatible with international standards in customs administration.
2. Overview of the Amendments of the Customs Act of Korea
2.1 Introduction of the Omnibus Bonded Area System
The purpose of the bonded area system is to ensure the correct procedures for customs
clearance of import or export goods as well as to contribute to convenient and smooth transactions of
imported goods and promote the development of transit and processing trade.
In any bonded area, the loading or unloading, conveyance, storage, manufacturing or
exhibition of foreign goods may be conducted.  To assure the collection of customs duties and to
enforce legitimate control, the foreign goods and others stored in bonded areas are placed under the
supervision of the customs collector.  The bonded areas system may broadly be divided into the
system of the bonded area and that of transportation in bond.
In connection with the operation of the bonded area system, the Korean government has
newly introduced a system of the "omnibus bonded area" where a person or an enterprise can perform
a combination of functions, each of which are specific to a particular kind of bonded area in
combination.
Previously, the Customs Act provided eight types of bonded area.  Specifically, bonded areas
were divided into designated bonded areas and licensed bonded areas:  designated bonded areas were
divided into designated storage and customs inspection places;  and licensed bonded areas were
divided into bonded storage places, bonded warehouses, bonded factories, bonded exhibition places,
bonded construction sites and bonded sales shops.  However, no omnibus bonded area system was
provided for in the Customs Act.G/C/W/146
Page 2
2.2 Purpose and function of the bonded areas
The purpose and function of each type of the existing bonded areas are as follows:
1. The designated bonded area, comprised of designated storage places and customs inspection
places, is a place where foreign goods may be loaded, unloaded, conveyed or stored
temporarily in order to obtain simplified and prompt handling of customs formalities in any
open seaport or customs airport.  Designated storage place means such place, as designated by
the customs collector, for the temporary storage of goods which are subject to customs
clearance procedures.  Duration of storage of g oods in designated storage places is designated
by the Commissioner of the Korean Customs Service but shall not six months.  Meanwhile,
customs inspection place means such place, as designated by the customs collector, forinspecting goods which are subject to customs clearance procedures.  The customs collector
may introduce, in whole or in part, goods into a customs inspection place in order to inspect
them.  Goods to be introduced into a customs inspection place are gathered and transported by
persons who fulfill the requirements prescribed by the regulation of the Ministry of Finance
and Economy.  The designated bonded area may be designated by the customs collector fromland, buildings and other facilities owned or managed by the State, local government or
corporation which is managing airport or seaport facilities.  The goods stored in the
designated bonded area may be inspected, repacked or sorted, displayed as samples and
simply processed.  The same operations may also be authorized in the bonded storage place
and bonded warehouse.
2. The licensed bonded area, comprising bonded storage places, bonded warehouses, bonded
factories, bonded exhibition places, bonded construction sites and bonded sales shops, is
permitted by the customs collector as a place mainly to store the proprietor's goods.
a. Bonded storage place
The bonded storage place is a place for the storage of goods which are subject to customs
clearance procedures.  Any goods the import declaration of which is accepted, should be
carried out of the bonded storage place within ten days as of the date of acceptance, except in
the case where permission is obtained from the customs collector to store these  goods for a
longer period.  The license period for the establishment and operation of a bonded storageplace shall not exceed ten years, but may be renewed.  The duration of storage for goods in a
bonded storage place shall not exceed one year.
b. Bonded warehouse
The bonded warehouse is a place for the storage of foreign goods.  The license period for the
establishment and operation of a bonded warehouse shall not exceed ten years, but may be
renewed.  The duration of storage in a bonded warehouse shall be two years for foreign goods
from the date of the warehousing of such goods.  However, the customs collector may, when
he/she deems it necessary with respect to foreign goods, extend the period by one year or less.
c. Bonded factoryThe bonded factory is a place for manufacturing, processing or performing similar work using
foreign goods, or both foreign and domestic goods as raw or intermediate materials.  In abonded factory, work using only domestic goods as raw or intermediate materials may be
undertaken within the limit permitted by the customs collector.  The business categories of a
bonded factory, which aims at manufacturing and processing imported goods, shall be
determined by the Regulation of the Ministry of Finance and Economy.G/C/W/146
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The duration of storage for goods in bonded factories shall be for the same period as the
licence period granted by the customs collector.
Goods produced using foreign goods or both foreign and domestic goods as raw materials or
as intermediate materials shall be regarded as imported foreign goods;  however, when
foreign and domestic goods have been used in combination upon approval from the customs
collector, such portion of the products as is equivalent to the foreign goods in quantity and
value shall be deemed to be the imported foreign goods.
In the case of importation of goods manufactured in bonded factories, if foreign goods used as
raw materials in manufacturing the goods have been previously inspected, upon applicationby the importer at the time of introduction thereof, the customs duty shall be levied on the
basis of the quality and quantity of the raw materials at the time of the inspection.
d. Bonded exhibition place
The bonded exhibition place is a place that is used for storing, displaying or utilizing foreign
goods for the operation of expositions, exhibitions or trade fairs ("exhibition, etc.").  The
licence period for the establishment and operation of a bonded exhibition place shall be
determined by the customs collector, taking into account the duration of such exhibitions, etc.
The duration of storage of goods in a bonded exhibition place shall be the same period as the
licence period granted by the customs collector.  When a licence for the establishment and
operation of a bonded exhibition place is no longer valid, the proprietor or his/her successor
shall without delay withdraw foreign goods still stored therein and transfer them to another
bonded area.
e. Bonded construction siteThe bonded construction site is an area where construction work is taking place either
installing or utilizing foreign goods including machinery, installation items or engineering
and construction equipment as required in the construction of industrial facilities.
f. Bonded sales shop (duty free shop)
The bonded sales shop is a place where foreign goods are sold on condition that such goods
should be utilized by those who may benefit from duty exemption, or that such goods shall be
exported to a foreign country.  The customs collector may restrict the kinds, quantity orstorage place etc. relating to saleable goods at bonded sales shops.
2.3 Operation of the omnibus bonded area
The omnibus bonded area is designated by th e Commissioner of the Korea Customs Service,
ex officio, or after reviewing a request made by the minister of the ministry concerned or the governor
of the local government.  The operator of the omnibus bonded area can perform a combination of
functions, each of which is specific to a particular kind of bonded area.  In order to carry out any of
these functions, no license is required, but a declaration  to the Commissioner needs to be made.
The Korean Government applies no restrictions which would prevent the entry or release of
goods except where it is necessary to protect public moral principles, human, animal or plant life or
health, or national security interests; likewise, no restrictions are applied which would prevent anyG/C/W/146
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country from taking any action in pursuance of its obligations under the United Nations Charter for
the maintenance of international peace and security.
In addition, the goods which enter the omnibus bon ded area may be, in principle, without any
restrictions freely loaded, unloaded stored, warehoused, conveyed, preserved, bulk-broken, mixed,blended, changed, manufactured, processed, sold on-the-spot, displayed, constructed, transported,
transhipped, or utilized.  The duration of storage for goods in an omnibus bonded area shall be subject
to limitation.  Also the goods which enter the omnibus bonded area shall be exempt from customs
duty.
A person who enters goods into an omnibus bonded area shall declare such goods before a
customs collector.
2.4 Statistics of bonded area
The bonded area systems are widely used and the number of bonded areas has been gradually
increasing in recent years.  As to the number of bonded areas, there are currently 95 designatedbonded areas, 984 designated bonded storage places, 63 licensed bonded warehouses, 171 licensed
bonded factories, 11 bonded exhibition places, 37 bonded construction sites, and 20 bonded sales
shops (duty free shops) in Korea.  In addition, the Korean government has not licensed an omnibus
bonded area as of March 1999, but it will grant a licence, starting from mid-1999 on.
Statistics of bonded areas
(As of 1 February 1998)
Kind Classification Number of places etc.
Designated Bonded Areas Designated storage place
Customs inspection place78
Licensed Bonded Areas Bonded storage place
Bonded warehouse
Bonded factoryBonded exhibition place
Bonded construction site
Bonded sales shop (duty free shop)984
63
17111
37
20
Omnibus Bonded Area Combined functions as applied to each licensed
bonded areaTo be granted a
licence, starting from
mid-1999 on
Total 1,381
Source: Korea Customs Service
2.5 Introduction of the immediate release system
Normally, when a shipment reaches Korea, the importer of record (i.e. the owner or purchaser
of the goods, or licensed customs broker designated by the owner, purchaser, or consignee) will file
entry documents for the goods with the customs office at the port of entry.  Imported goods are not
legally entered until after the goods arrive and are declared before the customs official and estimated
duties have been paid.
The entry of goods is a two-part process consisting of (1) filing the documents necessary to
determine whether goods may be released from customs custody and (2) filing the documents which
contain information for duty assessment and statistical purposes.  In certain instances such as the entry
of goods subject to tariff quotas, all documents must be filed and accepted by customs prior to theG/C/W/146
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release of the goods.  Within 30 days after the goods have been placed in customs bonded warehouse,
entry documents must be filed at a location specified by the customs collector, unless an extension is
granted.  These documents consist of:
(1) Entry Manifest;
(2) Value declaration form;
(3) Commercial invoice;
(4) Bill of lading;
(5) Packing lists;  and
(6) Other documents necessary to determine goods admissibility.
If the goods are to be released from customs custody on entry documents, an entry summary
must be filed and estimated duties deposited at a designated customs office within 15 working days of
the time after an acceptance of import declaration.
However, the Customs Act of Korea, as amended, stipulates a special procedure for
authorized persons which is similar to an immediate release system.  For authorized persons who meetcriteria specified by the customs collector, includ ing having an appropriate record of compliance with
customs requirements and a satisfactory system for managing their commercial records, the customs
collector releases the goods on the minimum information necessary to identify the goods and permit
the subsequent completion of the final goods declaration.
Thus, goods are allowed out of the port without being stored in bonded areas.  In other words,
the customs collector may release the goods entered after he/she accepts the importer's declaration of
release on which the minimum information such as description, size, quantity and tariff classification
of the goods is to be specified.  In this case, the importer shall offer a security to the Customs to
ensure a payment of the customs duty.
In addition, the importer is allowed to file an import declaration within ten days after the
release of the goods, and the customs duty must be paid within 15 days after the customs collector
permits release of the goods.  The introduction of this system is designed to reduce the logistic costs
for the importer and to facilitate trade with foreign countries.
3. Other related reforms
3.1 Implementation of a paperless import customs clearance system
The Korean government will put into practice a paperless import customs clearance system
from July 1999 to save time and help relieve the burden on domestic traders.  A trial operation of thesystem was carried out in February 1999.  With the introduction of the system, the time needed for the
import customs clearance procedures is estimated to be cut in half, as compared with the existing
period of time therefor.
It has been a reality that although Korean exporters could use computer networks for
administrative purposes, the importers have been so far required to submit various kinds of documents
to the governmental agencies, including a value decl aration form, an invoice, a bill of lading (B/L),
packing list and other papers needed for government approval and/or licence or recommendation of
the authorities concerned.
As the new system is in place, importers of cultural properties, for example, will no longer
have to go to the Office of Cultural Properties.  All procedures will be completed as the Office of
Cultural Properties will send the relevant documents to the Korean National Tax AdministrationG/C/W/146
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through the computer network.  As a result, the new system will help reduce the time and costs of
distribution for Korean traders, thereby facilitating trade with foreign countries.
3.2 Extension of the duration of storage of goods for transit cargoes
The Korean Government represented by the Korea Customs Service (KCS) amended the
existing Public Notice of the KCS which prescribed that the duration of storage of goods in a bonded
storage place should not exceed 30 days for transit cargoes whose destination is a third country.  The
new Public Notice, as amended, stipulates that the duration of storage of goods in a bonded storage
place located inside the seaport shall not exceed three months and the bonded storage place outside
the seaport shall not exceed six months, thus extending the existing duration for the purpose of
facilitating cargo movement.
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