RESTRICTED  
  
WT/TPR/S/346  
6 September 2016  
(16-4723) Page: 1/185 
Trade Policy Review Body   
 
TRADE POLICY REVIEW  
REPORT BY THE SECRET ARIAT  
REPUBLIC OF KOREA 
This report, prepared for the seventh Trade Policy Review of the Republic of Korea, has been 
drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the 
Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement 
Establishing the World Trade Organization), sought clarification from the Republic of Korea on its 
trade policies and practices.  
 
Any technical questions arising f rom this report may be add ressed to Sergios Stamnas 
(tel: 022 739 5382) and Zheng Wang (tel: 022 739 5288).  
 
Document WT/TPR/G/346 contains the policy statement submitted by the Republic of Korea.  
 
 
Note: This report is subject to restr icted circulation and press embargo until the end of the 
first session of the meeting of the Trade Policy Review Body on the Republic of Korea. This report 
was drafted in English.  WT/TPR/S/346 • Republic of Korea  
 
- 2 - 
 
  CONTENTS  
SUMMARY  ................................ ................................ ................................ ........................  8 
1   ECONOMIC ENVIRONMENT  ................................ ................................ ........................  12 
1.1   Overview  ................................ ................................ ................................ ................... 12 
1.2   Recent Eco nomic Performance  ................................ ................................ ..................... 14 
1.2.1    Growth, income, and employment  ................................ ................................ ............. 14 
1.2.2    Prices  ................................ ................................ ................................ ..................... 17 
1.3   Main Macroeconomic Policy Developments  ................................ ................................ .....17 
1.3.1    Monetary and exchange rate policy  ................................ ................................ ............ 17 
1.3.2    Fiscal pol icy ................................ ................................ ................................ ............ 18 
1.3.3    Structural policies  ................................ ................................ ................................ ....18 
1.3.3.1    Tax reform  ................................ ................................ ................................ ........... 18 
1.3.3.2   Privatization  ................................ ................................ ................................ ......... 19 
1.3.3.3    Competition policy  ................................ ................................ ................................ 19 
1.3.3.4    Corporate governance and the cost of capital  ................................ ........................... 19 
1.3.3.5    Labour market policies  ................................ ................................ ........................... 20 
1.4   Balance of Payments  ................................ ................................ ................................ ...20 
1.5   Compos ition and Pattern of Trade  ................................ ................................ ................. 22 
1.6   Trends and Patterns in Foreign Direct Investment  ................................ ........................... 24 
2   TRADE AND INVESTMENT  REGIME  ................................ ................................ ............  28 
2.1   Introduction  ................................ ................................ ................................ ............... 28 
2.2   General Constitutional and Institutional Framework  ................................ ........................ 28 
2.3   Structure of Trade Policy Formulation  ................................ ................................ ............ 29 
2.4   Trade Policy Objectives  ................................ ................................ ............................... 30 
2.5   Trade Laws and Regulations  ................................ ................................ ......................... 31 
2.5.1    Regulatory reform  ................................ ................................ ................................ ....31 
2.5.2    Trade -related legislation  ................................ ................................ ........................... 32 
2.5.3    Transparency  ................................ ................................ ................................ .......... 33 
2.6   Trade Agreements and Arrangements  ................................ ................................ ........... 35 
2.6.1    WTO ................................ ................................ ................................ ...................... 35 
2.6.2    Regional and preferential agreements  ................................ ................................ ........ 36 
2.6.3    Preferential trade agreements  ................................ ................................ ................... 39 
2.6.4    Other agre ements and arrangements  ................................ ................................ ......... 39 
2.6.4.1    Asia-Pacific Economic Cooperation (APEC)  ................................ ................................ 39 
2.6.4.2    Asia-Europe Meetings (ASEM)  ................................ ................................ ................. 40 
2.6.4.3    Trade with the Democratic People's Republic of Korea  ................................ ............... 40 
2.7   Foreign Direct Investment  ................................ ................................ ........................... 40 
2.7.1    Overview  ................................ ................................ ................................ ................ 40 
2.7.2    FDI restrictions  ................................ ................................ ................................ ........ 41 
2.7.3    FDI incentives  ................................ ................................ ................................ ......... 43 WT/TPR/S/346 • Republic of Korea  
 
- 3 - 
 
  2.7.3.2    Tax incentives  ................................ ................................ ................................ ......43 
2.7.3.3    Cash grants  ................................ ................................ ................................ .......... 44 
2.7.3.4    Industrial site support  ................................ ................................ ........................... 45 
2.7.4    Other  ................................ ................................ ................................ ..................... 45 
3   TRADE POLICIES AND P RACTICES BY MEASURE  ................................ ........................  47 
3.1   Introduction  ................................ ................................ ................................ ............... 47 
3.2   Measures Directly Affecting Imports  ................................ ................................ .............. 49 
3.2.1    Customs procedures ................................ ................................ ................................ .49 
3.2.2    Customs valuation  ................................ ................................ ................................ ...52 
3.2.3    Tariffs  ................................ ................................ ................................ .................... 53 
3.2.3.1    Applied MFN rate  ................................ ................................ ................................ ..53 
3.2.3.2    MFN tariff dispersion and escalation  ................................ ................................ ........ 56 
3.2.3.3    "Flexible" tariffs  ................................ ................................ ................................ ....57 
3.2.3.4    Bound tariff  ................................ ................................ ................................ .......... 59 
3.2.3.5    Duty concessions/exemptions  ................................ ................................ ................. 59 
3.2.3.6    "Usage" tariff rates ................................ ................................ ................................ 59 
3.2.3.7    Tariff preferences and rules of origin  ................................ ................................ .......59 
3.2.4    Tariff quotas  ................................ ................................ ................................ ........... 62 
3.2.4.1    Agricultural tariff quotas  ................................ ................................ ........................ 62 
3.2.4.2    Autonomous tariff quotas  ................................ ................................ ....................... 63 
3.2.5    Other levies and charges  ................................ ................................ .......................... 63 
3.2.6    Import licensing, quotas, and prohibitions  ................................ ................................ ...63 
3.2.6.1    Licensing  ................................ ................................ ................................ ............. 63 
3.2.6.2    Quotas  ................................ ................................ ................................ ................ 64 
3.2.6.3    Prohibitions  ................................ ................................ ................................ .......... 64 
3.2.7    State trading  ................................ ................................ ................................ ........... 65 
3.2.8   Contingency measures  ................................ ................................ ............................. 66 
3.2.8.1    Anti-dumping and countervailing measures  ................................ .............................. 66 
3.2.8.2    Safeguards  ................................ ................................ ................................ ........... 67 
3.2.9    Standards and other technical requirements  ................................ ............................... 68 
3.2.9.1    Standards, testing, and certification  ................................ ................................ ........ 68 
3.2.9.1.1    Voluntary, compulsory, national, and aligned standards  ................................ .......... 69 
3.2.9.1.2    Food, health -related and other measures  ................................ .............................. 70 
3.2.9.1.3    Conformity assessment  ................................ ................................ ....................... 71 
3.2.9.1.4    Transparency  ................................ ................................ ................................ .....73 
3.2.9.2    Sanitary and phytosanitary measures  ................................ ................................ ......74 
3.2.9.2.1    Food standards -setting framework  ................................ ................................ .......74 
3.2.9.2.2    Quarantine regulations ................................ ................................ ........................ 76 
3.2.9.2.3    Transparency  ................................ ................................ ................................ .....77 
3.2.9.3    Labelling  ................................ ................................ ................................ .............. 77 WT/TPR/S/346 • Republic of Korea  
 
- 4 - 
 
  3.2.10    Government procurement  ................................ ................................ ....................... 78 
3.3   Measures Directly Affecting Exports  ................................ ................................ .............. 83 
3.3.1    Registration, documentation, and clearance  ................................ ................................ 83 
3.3.2    Export prohibitions, restrictions, and licensing  ................................ ............................. 84 
3.3.2.1    Export prohibitions  ................................ ................................ ................................ 84 
3.3.2.2    Export l icensing and restrictions  ................................ ................................ ............. 84 
3.3.3    Export subsidies  ................................ ................................ ................................ ......84 
3.3.4    Duty and tax concessions  ................................ ................................ ......................... 85 
3.3.5    Export finance, guarantees, and insurance  ................................ ................................ ..85 
3.3.6    Export promotion and marketing  ................................ ................................ ............... 86 
3.4   Measures Affecting Production and Trade  ................................ ................................ .......86 
3.4.1    Taxation  ................................ ................................ ................................ ................. 86 
3.4.1.1    Indirect taxation  ................................ ................................ ................................ ...87 
3.4.1.2    Direct taxation  ................................ ................................ ................................ ......89 
3.4.1.3    Tax incentives  ................................ ................................ ................................ ......89 
3.4.2    Financial assistance  ................................ ................................ ................................ .90 
3.4.2.1    Loans, guarantees, and other financial measures  ................................ ...................... 90 
3.4.2.2    Other subsidies  ................................ ................................ ................................ .....92 
3.4.3    Foreign investment location incentives  ................................ ................................ .......94 
3.4.4    State -owned enterprises and privatization  ................................ ................................ ..94 
3.4.5    Competition and consumer policy  ................................ ................................ .............. 97 
3.4.5.1    Competition policy  ................................ ................................ ................................ 97 
3.4.5.2    Price controls and monitoring  ................................ ................................ ...............  102 
3.4.5.3    Consumer protection  ................................ ................................ ...........................  102 
3.4.6    Intellectual property rights  ................................ ................................ ......................  103 
3.4.6.1   Industrial property  ................................ ................................ ..............................  104 
3.4.6.2    Copyright and related rights  ................................ ................................ .................  108 
3.4.6.3    Enforcement  ................................ ................................ ................................ ....... 110 
4   TRADE POLICIES BY SE CTOR  ................................ ................................ ...................  113  
4.1   Introduction  ................................ ................................ ................................ .............  113 
4.2   Agriculture and livestock  ................................ ................................ ...........................  114 
4.2.1    Main features  ................................ ................................ ................................ ........  114 
4.2.2    Policy developments  ................................ ................................ ...............................  114 
4.2.2.1    Border measures  ................................ ................................ ................................  115 
4.2.2.1.1    Tariffs and tariff quotas  ................................ ................................ .....................  115 
4.2.2.1.2    State trading, import quotas and tariffication, imp ort licensing, and SSGs  ...............  116 
4.2.2.1.3    Export restrictions, and export subsidy programmes  ................................ .............  117 
4.2.2.2    Domestic support  ................................ ................................ ................................  117 
4.2.2.2.1    OECD indicators  ................................ ................................ ...............................  117 
4.2.2.2.2    WTO notifications  ................................ ................................ .............................  119 WT/TPR/S/346 • Republic of Korea  
 
- 5 - 
 
  4.2.3    Key sub -sectors  ................................ ................................ ................................ ..... 119 
4.2.3.1    Rice ................................ ................................ ................................ ..................  119 
4.2.3.2    Beef ................................ ................................ ................................ ..................  120 
4.2.3.3    Biotech crops  ................................ ................................ ................................ ..... 121 
4.3   Fisheries  ................................ ................................ ................................ ..................  122 
4.3.1    Overview  ................................ ................................ ................................ ..............  122 
4.3.2    Border policy  ................................ ................................ ................................ .........  123 
4.3.3    Domestic support ................................ ................................ ................................ ... 123 
4.3.4    IUU fishing  ................................ ................................ ................................ ............  125 
4.4   Energy  ................................ ................................ ................................ ....................  125 
4.4.2    Hydrocarbons  ................................ ................................ ................................ ........  126 
4.4.2.1    Oil ................................ ................................ ................................ .....................  126 
4.4.2.2    Natural gas  ................................ ................................ ................................ ........  127 
4.4.3    Electricity  ................................ ................................ ................................ .............  128 
4.4.4    Coal ................................ ................................ ................................ .....................  129 
4.5   Manufacturing  ................................ ................................ ................................ ..........  129 
4.5.1    Steel ................................ ................................ ................................ ....................  130 
4.5.2    Automotive  ................................ ................................ ................................ ...........  131 
4.5.3    Shipbuilding  ................................ ................................ ................................ ..........  132 
4.5.4    ICT industry  ................................ ................................ ................................ ..........  135 
4.6   Services  ................................ ................................ ................................ ..................  135 
4.6.1    Features  ................................ ................................ ................................ ...............  135 
4.6.2    Financial services  ................................ ................................ ................................ ... 136 
4.6.2.1    Banking  ................................ ................................ ................................ .............  138 
4.6.2.1.1    Structure and ownership  ................................ ................................ ...................  138 
4.6.2.1.2    Profitability and non -performing loans  ................................ ................................  139 
4.6.2.1.3    Non-banking  ................................ ................................ ................................ .... 140 
4.6.2.2    Insurance  ................................ ................................ ................................ ..........  141 
4.6.2.2.1    Recent developments  ................................ ................................ .......................  141 
4.6.2.2.2    Regulatory framework  ................................ ................................ ......................  141 
4.6.3    Communications and postal services  ................................ ................................ ........  142 
4.6.3.1    Commun ications  ................................ ................................ ................................ . 142 
4.6.3.2    Postal services  ................................ ................................ ................................ .... 145 
4.6.4    Transport services  ................................ ................................ ................................ . 145 
4.6.4.1    Maritime transport  ................................ ................................ ..............................  146 
4.6.4.2    Air transport  ................................ ................................ ................................ ....... 147 
4.6.4.3    Land transport  ................................ ................................ ................................ .... 148 
4.6.5    Distribution services  ................................ ................................ ...............................  149 
4.6.6    Tourism  ................................ ................................ ................................ ................  149 
4.6.6.1    Recent developments  ................................ ................................ ..........................  149 WT/TPR/S/346 • Republic of Korea  
 
- 6 - 
 
  4.6.6.2    Regulatory framework  ................................ ................................ .........................  150 
REFERENCES  ................................ ................................ ................................ ................  151  
5   APPENDIX TABLE S ................................ ................................ ................................ .. 156  
 
CHARTS  
 
Chart 1.1 Product composition of merchandise trade, 2011 and 2014  ................................ .......23 
Chart 1.2 Direction  of merchandise trade, 2011 and 2014  ................................ ....................... 24 
Chart 3.1 Average applied MFN and bound tariff rates, by HS section, 2012 and 2016  ................ 55 
Chart 3.2 Distribution of MFN tariff rates, 2012 and 2016  ................................ ....................... 56 
Chart 3.3 Tariff escalation by 2 -digit ISIC industry, 2012 and 2016  ................................ .......... 57 
Chart 4.1 Deliveries of newly built vessels, 2014  ................................ ................................ .. 133 
Chart 4.2 Postal services, 2015  ................................ ................................ ..........................  145 
 
TABLES  
 
Table 1.1 Selected macroeconomic indicators, 2011 -15 ................................ .......................... 12 
Table 1.2 Basic economic and social indicators, 2011 -15 ................................ ......................... 15 
Table 1.3 Balan ce of payments, 2011 -15 ................................ ................................ .............. 21 
Table 1.4 Stock of outward foreign direct investment, 2011 -13 ................................ ............... 25 
Table 1.5 Stock of inward foreign di rect investment, 2011 -14 ................................ .................. 26 
Table 2.1 Main trade - and investment -related legislation amended since 2012  .......................... 33 
Table 2.2 Korea's not ified RTAs in force: main features, 2016  ................................ .................. 36 
Table 2.3 FDI restricted sectors  ................................ ................................ ........................... 41 
Table 2.4 Summary of FDI tax incentives, 2016  ................................ ................................ .....43 
Table 2.5 Industrial sites for foreign investors as of 2016  ................................ ........................ 45 
Table 3.1 Tariff structure, 2012 and 2016  ................................ ................................ ............. 54 
Table 3.2 Summary analysis of the preferential tariff, 2016  ................................ ..................... 60 
Table 3.3 Structure of Direct and Indirect Tax Revenue, 2008 -15 ................................ ............ 87 
Table 3.4 State involvement in the economy, 2016  ................................ ................................ 95 
Table 4.1 Output of some major agricultural products, 2011 -15 ................................ .............  114 
Table 4.2 Agricultural support by commodity, 2011 -15 ................................ .........................  118 
Table 4.3 Direct payments and general services support, 2011 -15 ................................ .........  118 
Table 4.4 Subsidies notified, 2013 -14 ................................ ................................ .................  119 
Table 4.5 Rice production, 2011 -15 ................................ ................................ ....................  120 
Table 4.6 Bee f production, supply, and demand, 2014 -16 ................................ .....................  121 
Table 4.7 Import of LMO soybean and corn, 2011 -15 ................................ ...........................  121 
Table 4.8 Seafood trade data , 2011 -15 ................................ ................................ ...............  122 
Table 4.9 Fisheries subsidies, 2011 -14 ................................ ................................ ...............  124 
Table 4.10 World market share in the iron and steel industry, 2010 –14 ................................ .. 130 
Table 4.11 Steel developments, 2011 -15 ................................ ................................ ............  131 WT/TPR/S/346 • Republic of Korea  
 
- 7 - 
 
  Table 4.12 Automobile supply and demand, 2010 -13................................ ............................  131 
Table 4.13 Shipbuilding trends, 2010 -14 ................................ ................................ .............  132 
Table 4.14 Top five shareholders of listed shipbuilding companies, 2014  ................................ . 133 
Table 4.15 Supply -demand trends in the ICT industry  ................................ ..........................  135 
Table 4.16 Structure of the financial system, 2011 and 2015a ................................ ...............  137 
Table 4.17 Government and foreign ownership of commercial banks, December 2015  ..............  138 
Table 4.18 Banking indicatorsa, 2010 -15 ................................ ................................ .............  140 
Table 4.19 Substandard and below loans, 2009 -15 ................................ ..............................  140 
Table 4.20 Selected telecommunications indicators, 2011 -15 ................................ ................  142 
Table 4.21 Ownership structure of major telecom operators, December 2015 and 
May 2016 ................................ ................................ ................................ ........................  143 
Table 4.22 Air transport, 2011 -15 ................................ ................................ ......................  147 
Table 4.23 Tourism enterprises (2014) and employment (2010 -14) ................................ ....... 150 
 
 
APPENDIX TABLES  
 
Table A1.1 Merchandise exports by group of products, 2011 -14 ................................ .............  156 
Table A1.2 Merchandise imports by group of products, 2011 -14 ................................ ............  157 
Table A1.3 Merchandise exports by destination, 2011 -14 ................................ ......................  158 
Table A1.4 Merchandise imports by origin, 2011 -14 ................................ .............................  159 
 
Table A2.1 Notifications to the WTO, June 2012 -19 July  2016 ................................ ................  160 
Table A2.2 Foreign investment location incentives, as of 2016  ................................ ...............  162 
 
Table A3.1 Tariff summ ary, 2016  ................................ ................................ .......................  166 
Table A3.2 Non -ad valorem  applied tariffs and ad valorem  equivalents of their specific duty 
component  ................................ ................................ ................................ ......................  168 
Table A3 .3 Adjustment tariff, 2015 and 2016  ................................ ................................ ...... 170 
Table A3.4 Tariff quotas on agricultural products, 2015 and 2016  ................................ ..........  171 
Table A3.5 Fill rat ios for main agricultural tariff -rate quotas, 2015  ................................ .........  177 
Table A3.6 Republic of Korea's autonomous tariff quotas in 2016  ................................ ...........  179 
Table  A3.7 Domestic agricultural support notified to the WTO, 2011  ................................ ....... 182 
 
Table A4.1 Republic of Korea's Air Transport Agreements, 2016  ................................ .............  183 
 
 WT/TPR/S/346 • Republic of Korea  
 
- 8 - 
 
  SUMMARY  
1. Since its previous Trade Policy Review in 2012, the Republic of Korea's relatively strong 
fundamentals and solid buffers to external  shocks  have helped maintain macro economic  stability 
and ensure the resilience of its export -led economy . Durin g the review period, annual GDP growth 
ranged from 2.3% (2012) to 3.3% (2014), and its annual average rate for the period 2012 -15 
stood at 2.8%, a major slowdown compared to previous performance (averaging at 4.4% over 
2001-11). M onetary and fiscal stimulu s measures  are being used to spur economic recovery . Major 
developments in Korea's position among the most competitive economies in the world involve  lack 
of improvement in labour productivity growth  and, in particular,  total factor productivity  (TFP)  
growth, but also weaknesses in several areas  where reforms are under way. Whereas in 2015  
headline inflation dropped progressively to 0.7% (a third of its 2012 level), the unemployment rate 
remained relatively stable (3.6% ) and below target .  
2. During the review  period , trade and trade -related structural reforms (e.g. rice  tariffication, 
taxation, and competition policy) were undertaken. Reforms aimed at spurring broad -based 
productivity growth, thereby improving Korea 's international competitiveness . The enhanc ement of 
growth and domestic demand is  under way  in areas such as taxation, SME support, state 
enterprises, innovation , and labour market rigidities. Since July 2012 , the Bank of Korea has 
progressively cut its policy rate from 3% to a record -low 1.5% , and fiscal surplus has been in 
decline  to accommodate additional government spending to support consumption and investment .  
3. The responsiveness of the  floating exchange rate system to economic developments 
provide d an important buffer against external shocks a nd facilitates adjustment toward domestic 
sources of growth . The nominal exchange rate has slightly depreciated (except in 2013  and 2014 ) 
while the effective exchange rates appreciated owing to  external and internal factors , inter alia, 
involving global ri sk-on risk -off investment behaviour, changes in major advanced economies ' 
monetary policies , and trends in the current account balance . The current account registered a 
substantially larger overall surplus, averaging 6% of GDP during 2012 -15 compared to 1 .9% over 
2007-11, reflecting weak domestic demand and falling global oil prices . Foreign exchange reserves 
have increased steadily  due to continuously increasing returns from the management of reserve 
assets . Gross external debt increased during the period 2012-14, and dropped in 2015 . 
4. The openness of the Korean  economy to international trade, and its integration into the 
world economy continued to be reflected by the high  ratio of its trade (exports plus imports) in 
goods and services to GDP that stood at 84.8% in 201 5, though  significantly lower  than in 2012. 
International trade and foreign direct investment (FDI) trends reflect the continu ed importance of 
Asia-Pacific as Korea's main regional market and supplier, thoug h China, the EU, and the 
United  States  remain its major individual trading and FDI partners; furthermore, trade under 
regional ( free trade ) agreements ( RTAs/ FTAs) has risen during the review period . Korea's FDI 
policy remains unchanged. FDI caps are in place in several sub -sectors, including: beef cattle 
farming, inshore and coastal fishing, transmission and distribution of electric power, air transport 
and supporting services, publishing activities, broadcasting and telecommunication services. 
Official approval is required for foreign investme nt in financial services, while prior notification by 
foreigners is needed in various other subsectors.  Incentives to FDI are mainly in the form of tax 
exemptions/reductions, cash grants, and industrial site support. The cost effectiveness of these 
incenti ves remains questionable.   
5. A 2013 government restructuring exercise affected a number of public institutions; for 
example, the Ministry of Trade, Industry and Energy (MOTIE), which formulates and implements 
trade and industrial policies, replaced the Minis try of Knowledge Economy (MKE). Korea, a global 
leader in e -government, has been implementing a Smart Government Strategy 2011 -15.  
6. As an original Member of the WTO, Korea grants at least MFN treatment to all its trading 
partners. The general trade policy objective remains to build a free and open economy based on 
market principles, and the Government has been rigorously pursuing market opening opportunities 
through not only multilateral, but also regional trade agreements. Six RTAs entered into force 
during the review period (with China, New Zealand, Viet Nam, Canada, Australia, and Turkey), 
adding to the existing RTA network with large economic blocs and newly emerging markets (with 
ASEAN, APTA, Chile, EFTA, the EU, India, Peru, Singapore, and the United S tates). Rice remains  
excluded from all the RTAs. Maintaining its developing country status, Korea has been eligible for 
trade preferences under the GSP schemes of Australia, Belar us, Kazakhstan, and the WT/TPR/S/346 • Republic of Korea  
 
- 9 - 
 
  Russian  Federation. Korea has continued to provide du ty-free treatment to most imports from 
LDCs.  
7. The Government has continued to improve its regulatory framework to reduce the burden of 
doing business . In 2014, the Government launched  the "cost -in, cost -out" approach to avoid 
introducing unnecessary new re gulations . From January 2014 to January 2015, the number of 
economic regulations  was cut by 10%.  Korea has taken steps to fulfil its transparency obligations 
at the multilateral level by, inter alia , meeting its WTO notification requirements, though 
notifications in certain areas (e.g. government procurement, export subsidies, and domestic 
support in agriculture) have been subject to long submission gaps.   
8. The tariff remains one of Korea 's main trade policy instruments, and a significant , albeit 
declining , source of tax revenue . The 201 6 customs tariff remains transparent but is relatively 
complex, involving a multiplicity of rates (85 ad valorem  duties , 44 alternate duties, and 1 specific 
duty)  often with small rate differences and some involving decimal po ints. As a result of changes 
relating to the insertion of 16 tariff lines at 513% (rice and rice products), the splitting of tariff 
lines with high rates and the merger of tariff lines with low rates, the average applied MFN  tariff 
rate increased from 13.3 % in 201 2 to 14.1%  in 2016. This remains high by OECD -country 
standards, thereby requiring tariff concessions or drawbacks to ensure that tariffs on intermediate 
inputs do not become taxes on exports , adding to the complexity of border taxation.  Peak 
ad valorem  rates also remained unchanged and concentrated in agricultural items (WTO 
definition); applied MFN tariff rates range d from zero to 887.4% (for manioc). As was the case in 
2012, 85% of rates were 10% or below in 201 6. Tariff-rate quotas are in place under Korea's 
multilateral agricultural market access commitments, with in -quota rates ranging from zero to 
50% (201 6) compared with out -of-quota rates of up to 887.4%, and with a decreasing average fill 
rate of 59.5% (2015). Other measures (e.g. "autonomo us" tariff quotas, usage tariffs, and duty 
concessions) selectively reduce tariffs on inputs. Korea has bound 9 0.1% of its tariff lines; that is, 
99.6% of agricultural lines (excluding seaweeds and bait for fishing ) and 88.6% of its 
non-agricultural lines (WTO definitions). The gap of 4.4 percentage points between the average 
bound and applied MFN tariff rates imparts a degree of unpredictability to the tariff regime and 
provides scope for the authorities to raise applied rates within the bindings. Korea ha s continued 
to use this gap to apply higher MFN duties (e.g. adjustment duties) termed "flexible tariffs", which 
the authorities maintain are within WTO bindings; product coverage under "flexible tariffs"  fell 
from 216 (HS six -digit)  items  in 2012 to 145 i n 2016.   
9. During the review period, trade facilitation improvements include d the ratification of the 
WTO Trade Facilitation Agreement (TFA) in 2015, the expan sion of  the authorized economic 
operator -related mutual recognition arrangements, and the introduc tion of a de minimis clearance 
process for consum er goods purchased  online . Regarding customs valuation, legislation allowing 
for joint application of a unilateral advance pricing arrangement and an advance customs valuation 
arrangement  were introduced.  Activities to help companies utilize RTA/FTA trade preferences , 
inter alia, subject to diverse and complicated rules of origin were continued.  
10. Rice import quotas were replaced as of 1 January 2015 by a tariff -rate quota of 5% and a 
virtually prohibitive 513% out-of-quota duty.  Import  licensing requirements cover numerous tariff 
items and prohibitions are maintained mostly for the protection of public morals, human health, 
hygiene and sanitation, animal and plant life, environmental conservation or essential se curity 
interests in compliance with domestic legislation requirements or international commitments.  
Korea intensified the use of anti-dumping provisions, mainly against imports of chemicals, plastics, 
and stainless steel ; it initiated 20 anti-dumping  investigations  (2011 -2015)  and ha d 32 final 
measures in effect on imports from 1 1 countries, mostly in Asia . Price-based special safeguard 
provisions (SSG) have been imposed on ginseng and rice and related products , while volume -
based SSGs were imposed for the first time since 2007 on ground -nuts, rice and related products, 
cereal flour and other worked grain.   
11. Korea continued to maintain the option to  restrict or monitor exports  of certain  products  to 
ensure adequate domestic supplies, thereby possibly assistin g downstream processing of these 
products. Quantitative export restrictions (recommendations) on rice were removed in March 2015 
although, in practice, there has been no trade -restrictive effect; no quantitative export restrictions 
for any other agricultur al products are in place . Export prohibitions are aimed at protecting animal 
rights and endangered species, and conserving natural resources. Direct export subsidies are 
maintained to reduce marketing costs for certain agricultural products. In addition to  the tariff WT/TPR/S/346 • Republic of Korea  
 
- 10 - 
 
  drawback scheme, excises and VAT are rebated at the border . Furthermore,  income tax relief is 
accorded to enterprises located in free  trade zones. Exporters continue to benefit from export 
credit insurance, finance, and the promotional activiti es provided by state -owned institutions.  
12. Several  measures, involving grants, tax concessions or low -interest loans, continue to 
support the production and trade of a range of products and to encourage SMEs, R&D, and 
environmental -protection activities. Although tax incentives were to terminate automatically in 
accordance with "sunset " clauses, many were extended.  SMEs remain among the major 
beneficiaries of these measures, which are especially generous for information technology 
activities, although  a new 2015 policy direction was aimed at reducing guarantees to mature SMEs 
and focusing on start -ups and early -stage SMEs; those facing problems of access to raw materials 
are supported by a fund.  Agriculture continues to receive substantial domestic financial s upport in 
line with the relevant WTO  provisions. Compensation or adjustment support for farmers and 
manufacturers adversely affected by a bilateral free trade agreement remains in place.  
13. Korean industrial standards have been reduced over the review period  and those adopted in 
mandatory technical regulations decreased by 39%; the share of those harmonized with 
international standards increased. During the review period , a mandatory organic certification 
programme was introduced and changes were made , inter alia, in the areas of reporting, 
declaration of conformity, testing and environmental impact review as well as maximum residue 
limits, food additives, and genetically engineered animals. A traceability system for infant/baby 
food and health functional food s, and labelling requirements for tobacco health warnings and 
biotech crops and food were introduced.  
14. Despite the lack of domestic price preferences, Korea has continued to use government 
procurement as an instrument of economic policy for promoting SMEs,  companies in a 
disadvantageous position (firms owned by women  and disabled people ), regional development, 
and green purchasing.  Although no substantial changes were made to the main government 
procurement legislation, since 14 January 2016 , additional mar ket opening commitments in the 
form of a reduction of threshold values and a slight expansion of entities ' coverage have been 
undertaken as a result of the implementation of the revised WTO Agreement on Government 
Procurement (GPA); nevertheless, the alrea dy small share of foreign supplies continued to fall 
during the review period.  Consequently, foreign suppliers accounted for only 0.9% of the Public 
Procurement Service's total purchase operations in 2015. P rocurement remains decentralized  as 
more than 70%  of the market involves direct purchases by public institutions.  
15. State involvement in the economy (e.g. agriculture , mining and energy, financial services , 
broadcasting  and media , and t ransport ) persists , as the limited privatization efforts during the 
review period were widely opposed; however, action inter alia  involving increase d transparency, 
reduction of the debt level, and improved management efficiency of public institutions was 
undertaken.  One government agency remains responsible for imports of al l rice within the tariff 
quota  and another state entity for those of some other agricultural items; their operations allow 
for important price mark -ups.  
16. During the review period, several legislative changes , necessary for the realization of 
economic democ ratization  intended to narrow the wealth divide , as well as to reflect the actual 
market situation and improve regulations , were undertaken  in the competition policy framework ; 
its sectoral coverage exemptions and price controls remain unchanged . A prohibi tion on new 
cross-shareholding  (i.e. circular -shareholding)  between subsidiaries under large business group s, 
many of which are family -controlled, was introduced . Nonetheless,  market concentration remains 
relatively high. Large corporations and SMEs contin ue to b e encouraged to voluntarily sign an 
agreement on fair trade and shared growth.  Consumer protection has been reinforced  by 
strengthening law enforcement with respect to products and areas that closely affect consumers , 
such as daily necessities and e -commerce.  
17. Korea's extensive intellectual property rights legislation has been further strengthened with 
wide-ranging amendments, including the expansion of copyright protection to the duration of  the 
author's life plus 70  years, inter alia , to facilitate  the implementation of the Government's 
"creative economy" vision. Protection was further enhanced with the expansion of international 
commitments, and other enforcement improvements. Parallel imports of genuine products 
compliant with certain requirements  remain allowed, in the interest of competition and thus 
consumers.   WT/TPR/S/346 • Republic of Korea  
 
- 11 - 
 
  18. The agriculture sector remains heavily protected; its contribution to GDP (2.3%) was little 
more than its support ( 1.8%). In 2015, Korea replaced its import quota regime on rice with a ta riff 
quota system, and abolished its rice export quota regime. Other agricultural policies have 
remained largely unchanged  since the previous R eview in 2012. At the border, tariffs continue to 
be the main instrument supporting domestic prices, particularly  on rice. The average applied MFN 
tariff for agricultural goods reached 60% in 2016, up from 55% in 2012, and is more than nine 
times the average for non-agricultural goods (6.6%). Tariff quotas are utilized, administered or 
allocated by state -trading enti ties or industry associations. Domestic support continued to affect 
agricultural production and trade, and Korean consumers had to pay much higher prices than the 
world levels (1.9 times). Domestic support for fishing has fallen significantly. The Governme nt 
introduced more severe sanctions in recent years to fight against illegal, unreported and 
unregulated fishing.  
19. The energy sector has not seen any significant reform s since 2012. Korea relies heavily on 
imported energy and its per capita energy consumpti on is three times the world average. The 
Government has adopted various measures including financial and technical support and tax 
credits, for energy saving and to promot e renewable energy. It has been encouraging 
diversification of crude oil supply throu gh subsidizing up to 100% of the additional transport cost 
of importing crude oil from non -Middle East countries. State -owned companies continue to play a 
major role, and prices are often regulated (for natural gas and electricity). In addition,  agricultur e 
consumers benefit from lower energy prices, reflecting cross -subsidies between consumer  group s.  
20. Manufacturing contributed to about 30% of GDP, 17% of total employment and around 85% 
of total merchandise exports. Manufacturing activities are dominated by  large conglomerates, w ith 
a large  labour productivity gap between large firms and SMEs. The simple average applied MFN 
tariff rate was 11.3% (ISIC 3) on imports of manufacturing products, and the rate was 6.3% on 
manufacturing excluding food processing pr oducts; both are much lower than the rates for 
agricultural products.  Sector-specific support included incentives  to upgrade the steel industry, and 
the financing arrangement of the shipbuilding industry.  
21. The share of services to GDP  and total employment i ncreased slightly to 59.7% and 69.8% 
in 2015 ; the same year they represented 17.8% of total exports . Labour productivity of the 
services sector is only half that of the manufacturing sector, reflecting policies favouring the 
manufacturing sector  (including  tax incentives and sector -specific supports ). Foreign equity 
restrictions apply to several services sectors, notably  facilities -based basic  telecommunications , air 
transport and maritime services. The Government has been encouraging banks, which had a 
traditionally close relationship with large conglomerates and their subsidiaries, to shift lending to 
consumers and SMEs, and to invest overseas. None of the major players in both fixed -line and 
mobile phone market are state owned.  Restrictions are also appli ed on the access of large retailers 
(super supermarkets) to traditional markets. Korea has made commitments beyond GATS in the 
context of some RTAs, although its GATS commitments remain unchanged .  
22. Korea's economic growth is expected  to gradually gain mome ntum in 2017.  Despite Korea's  
mainly solid economic fundamentals, downside risks to the economic outlook remain.  
Notwithstanding the considerable success of its existing buffers, the economy  remains vulnerable  
to exogenous shocks such as a delayed rebound in international trade, particularly due to its heavy 
reliance on exports of manufactures produced mostly by a few large business conglomerates, and 
global financial linkages.  Future prosperity and sustainable growth depend on the Government 
implementing TFP-enhancing structural reforms, especially those aimed at  closing productivity 
gaps in the non -traded sector  as well as addressing issues relating to unviable SMEs,  the rapid 
ageing of the population and the associated decline in the labour force . These a nd related reforms, 
including tax, privatization and continued regulatory reforms, would increase the flexibility of the 
Korean economy and its ability to respond to growing external competition , thus enabling it to 
continue meeting its broad -based economi c and welfare objectives  including inclusive growth and 
narrower wealth divide .  
 
 WT/TPR/S/346 • Republic of Korea  
 
- 12 - 
 
  1  ECONOMIC ENVIRONMENT  
1.1  Overview  
1.1.  Since its previous Trade Policy Review in 2012, the Republic of Korea's relatively strong 
fundamentals and solid external buffers have helped maintain macro financial stability and ensure 
the resilience of its export -led dualistic economy.1 However, after decades of robust and sustained 
growth, the slowdown in world trade, strong competition from emerging economies, an 
appreciated currency, and domestic demand constrained by structural problems such as high 
household debt, stagnant service -sector productivity and struggling small and medium -sized 
enterprises (SMEs), have slowed Korea's economic performance, although its growth rate still 
exceeds that of many of its peers.2 Developments in Korea's position among the most competitive 
economies in the world reflect lack of improvement in labour productivity growth and, in particular, 
total factor productivity growth (Table  1.1, Section  1.2.1) – a key  long-term determinant of 
international competitiveness and domestic living standards, but also weaknesses in several areas 
where reforms are under way (Section 1.3.3).3 Whereas headline inflation dropped progressively 
to a third of its  2012 level (0.7% in  2015), the unemployment rate remained relatively stable at 
above 3%, peaking at 3.6% in 2015. Despite remaining a very high human development country, 
Korea's performance in this area has slightly deteriorated, though its income inequality index 
remains a t OECD average level.4 International trade and foreign direct investment (FDI) trends 
reflect the continued importance of Asia -Pacific as Korea's main regional market and supplier, 
though China, the European Union, and the United States remain its major in dividual trading and 
FDI partners. Furthermore, trade under free trade agreements (FTAs) has risen during the review 
period (Section  2.6). 
Table 1.1 Selected macroeconomic indicators, 2011 -15  
  2011  2012  2013  2014  2015a 
National accounts  (Percentage change, unless otherwise indicated)  
Real GDP (at 2010 prices)  3.7  2.3  2.9  3.3  2.6  
 Consumption  2.7  2.2  2.2  2.0  2.4  
 Private consumption  2.9  1.9  1.9  1.7  2.2  
 Government consumption  2.2  3.4  3.3  3.0  3.4  
 Gross fixed capital formation  0.8  -0.5  3.3  3.4  3.8  
 Exports of goods and non -factor services (XGS)  15.1  5.1  4.3  2.0  0.8  
 Imports of goods and non -factor services (MGS)  14.3  2.4  1.7  1.5  3.2  
 XGS/GDP (%) (at current market pri ce) 55.7  56.3  53.9  50.3  45.9  
 MGS/GDP (%) (at current market price)  54.3  53.5  48.9  45.0  38.9  
Unemployment rate (%)  3.4  3.2  3.1  3.5  3.6  
Productivity  (Percentage change)  
Labour productivity  9.9  2.6  -0.4  0.4  ..  
Total factor productiv ity 0.3  1.2  0.6  ..  ..  
                                                
1 In 2015, Korea ranked 70th out of 130 countries in the FM Global Resilience Index , a position that it 
has kept over the previous three years. Despite its strengths in the economic and supply chai ns factors, its 
position is apparently hindered by its exposure to natural hazards and its relatively low ability to respond 
effectively to them (Section 1.2.1). Oxford Metrica (2015); IMF (2015).  
2 Exports are at the centre of these trends, accounting fo r both the period of rapid growth and the 
slowdown; they represent nearly 60% of total demand and exceed 50% of GDP, significantly higher than the 
OECD average. Growth was driven in large part by the emergence of Korea's flagship companies to world -class 
status and accompanied by a sizeable gain in global market share. IMF (2015); OECD (2016c).  
3 In 2015, Korea ranked 25th out of 61 countries (22nd out of 59 countries in 2011 and 2012) in the IMD 
World Competitiveness Yearbook . Furthermore, in 2015/16, Kore a ranked 26th among 140 economies (24th out 
of 142 in 2011/12) in the WEF Global Competitiveness Index . According to the WEF, in 2015/16, despite 
improvements in several areas, policy instability, restrictive labour relations (Section 1.3.3.5) and the fall ing 
innovation potential remained a concern. WEF (2015a).  
4 In 2014, Korea ranked 17th out of 188 countries in the UNDP's human development category (12th out 
of 186 in 2012). In 2013, its income inequality index (Gini coefficient) stood at 0.302, near the  average for 
OECD countries (0.308); a value of zero represents absolute equality, a value of 1 absolute inequality. 
However,  there are underlying trends pointing to increasing polarization. Income inequality in Korea is closely 
related to the difference i n labour productivity between those employed in the tradeable (mostly 
manufacturing) sector and those employed in the non -tradeable (mostly services) sector, as well as to labour 
market practices. UNDP (2013); UNDP (2015); OECD (2016c); IMF (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 13 - 
 
    2011  2012  2013  2014  2015a 
Prices and interest rates  (%) 
Inflation (CPI, % change)  4.0  2.2  1.3  1.3  0.7  
 Core inflation (% change)  ..  1.7  1.6  2.0  ..  
Loans and discounts rate  5.76  5.40  4.64  4.26  3.53  
Savings deposit rate  3.69  3.43  2.73  2.43  1.74  
Exchange rate       
Won/US$ (annual average)  1,108.1   1,126.9   1,095.0   1,053.2   1,131.5   
Real effective exchange rate (% change)  -4.9  3.6  6.9  6.4  3.1  
Nominal effective exchange rate (% change)  -1.1  0.8  7.3  6.6  3.5  
 (% of GDP, un less otherwise indicated)  
Consolidated fiscal balance  1.4  1.3  1.0  0.6  -0.01  
Consolidated revenue  21.9  22.6  22.0  21.6  21.8  
   Tax revenue  14.4  14.7  14.1  13.8  14.0  
Consolidated expenditure and net lending  20.5  21.3  21.0  21.0  21.8  
Central government total debt  31.6  32.2  34.3  35.9  37.9  
Saving and investment       
Gross national savings  34.6 34.2 34.3 34.5 35.4 
Gross domestic investment  32.9 30.8 29.0 29.3 28.5 
Savings -investment gap  1.7 3.4 5.3 5.2 6.9 
External sector       
Current account balance  1.6  4.2  6.2  6.0  7.7  
Net merchandise trade  2.4  4.0  6.3  6.3  8.7  
 Merchandise exports  48.8  49.4  47.4  43.5  39.8  
 Merchandise imports  46.4  45.3  41.0  37.2  31.1  
Services balance  -1.0  -0.4  -0.5  -0.3  -1.1  
Capital account  -0.0  -0.0  -0.0  -0.0  -0.0  
Financial account  -2.0  -4.2  -6.1  -6.3  -8.0  
 Direct investment  -1.7  -1.7  -1.2  -1.3  -1.6  
Balance of payments  1.2  1.1  1.2  1.3  0.9  
Terms of trade (2010=100)  89.8  88.3  91.3  92.8  103.9  
Merchandi se exportsb (% change)  26.6  2.8  2.4  -0.8  -10.5  
Merchandise importsb (% change)  34.2  -0.7  -3.4  -2.1  -18.2  
Service exportsb (% change)  9.2  13.9  0.2  8.1  -12.7  
Service importsb (% change)  5.8  5.4  1.4  5.0  -1.9  
International reservesc (US$ billion, end -period)  306.4  327.0  346.5  363.6  368.0  
Foreign exchange reserves (US$ billion, end -period)  298.2  316.9  335.6  353.6  358.5  
 in months of imports of goods and services  5.4  5.7  6.2  6.6  7.9  
Total external debt (US$ billion; end -period)  400.0  408.9  423.5  424.4  396.6  
 of which short term  139.8  128.0  111.8  116.4  108.7  
Debt service ratiod ..  7.0  7.2  7.9  8.4  
.. Not available  
a Estimates.  
b Growth rates are based on US$.  
c Including foreign exchange reserves, gold, spe cial drawing rights and IMF reserve position.  
d Debt service on medium - and long -term debt in % of exports of goods and services.  
Source : Bank of Korea Economic Statistics System online information. Viewed at: http:// ecos.bok.or.kr/ ; 
IMF eLibrary data; and data provided by the Korean authorities.  
1.2.  Despite Korea's mainly solid fundamentals, downside risks to the economic outlook remain. 
Domestic/endogenous risks to the economy stem, inter alia , from its high reliance on  
manufacturing export -led growth, the large productivity gaps in the non -traded sector, the rapid 
ageing of the population and the associated decline in the labour force, the weight of households' 
concerns about future house price and wage growth impact on  consumption, and subdued WT/TPR/S/346 • Republic of Korea  
 
- 14 - 
 
  business confidence on prospects for investment.5 The main external/exogenous risks include a 
delayed rebound in world trade (particularly in Korea's main markets and oil -exporting countries), 
a sharper -than-expected slowdown in C hina, a persistently weak yen, global financial market 
turbulence and weakness in emerging market economies.6 According to the IMF, future prosperity 
depends on success in closing productivity gaps, inter alia,  by means of investment in R&D, thus 
fostering  more broad -based productivity growth.7 An active structural, fiscal and monetary policy 
approach to boost near -term aggregate demand and longer -run productivity would also help 
reduce external imbalances, reinforcing their importance in bringing about a m ore stable, resilient, 
and durable structure to the economy while reducing the role of net exports as a source of 
demand -side growth.  
1.2  Recent Economic Performance  
1.2.1   Growth, income, and employment  
1.3.  During the review period, Korea's annual GDP growth ranged fro m 2.3% (2012) to 3.3% 
(2014), and its annual average rate for the period 2012 -15 stood at 2.8%, a major slowdown 
compared to the average of 4.4% over 2001 -11 (Table 1.1). According to the IMF and the OECD, 
the reasons for these developments include: the sl owdown in world trade since 2010 intensified by 
a marked drop in demand from China and other Asian countries in 2015; strong export 
competition from emerging economies, notably China; prosperity concentrated within the highly 
competitive export -oriented co nglomerates employing a small share of the population; falling 
performance in some major manufacturing industries; struggling SMEs; sluggish household income 
growth and service sector productivity; high savings and low investment; and, an outbreak of the 
Middle East respiratory syndrome, leading to a contraction in private consumption in the second 
quarter of 2015.8 Recognizing the challenging growth environment, the authorities put in place a 
number of measures to spur economic recovery, in addition to loo sening the monetary policy 
stance (Section 1.3.1). These included: direct budget stimulus in form of financial support for 
home buyers/renters and social spending; increased support for policy -based lending (e.g. capital 
injection to the Korean Development  Bank to support new growth source projects); ad hoc  tax 
measures to incentivize firms to allocate idle cash to wages, dividends, or investments; and 
measures to revive the housing market (e.g.  removing regulatory roadblocks for housing 
reconstruction proj ects) (Section s 1.3.2 , 1.3.3.1 , and 3.4.2.1) .9 A 2013 "creative economy" 
initiative driven, in part, by regulatory reform and increased competition, is to generate new jobs 
and economic revitalization, stimulate entrepreneurship and improve efficiency, esp ecially in SMEs, 
through innovation (Section 2.4). A 2014 Three -Year Plan for Economic Innovation is to raise the 
potential growth rate to 4% by 2017  (Sections 1.3.1 and 1.3.3) .10 According to the IMF and OECD, 
growth is projected to gradually gain momentum , reaching 2.7% in 2016 and 2.9% -3% in 2017.11 
A pick -up in private consumption is projected to increase output growth, whereas the free trade 
agreements with Australia, Canada and New Zealand in 2014, and with China in 2015 are 
expected to support export g rowth (Section 2.6). On the other hand, according to the Asian 
Development Bank (ADB), against a backdrop of subdued external demand, growth is likely to 
                                                
5 Korea  is expected to become one of the oldest countries in the OECD by 2050 with the dependency 
ratio increasing rapidly. IMF (2015).  
6 IMF (2015); OECD (2016c); Asian Development Bank (2016).  
7 Korea's market share has been at a standstill since 2011 with cont inued gains in electronics offset by 
stable or falling shares for other leading export products. IMF (2015).  
8 Korea's household debt was 164% of household disposable income in 2014, well above the OECD 
average of 126%. Rising household debt and large corp orate loans to weak sectors, such as shipbuilding, have 
boosted the banking sector's risk -weighted assets. In 2015, the ratio of regulatory Tier 1 capital to 
risk-weighted assets was the lowest in the OECD at 11.7%, still above the 8% standard set by the B ank for 
International Settlements. IMF (2015); OECD (2016c).  
9 IMF (2015); OECD (2016c).  
10 Despite innovation concerns, Korea ranked at the top of the 50 most innovative countries in the 2016 
Bloomberg Innovation Index . Korea notched top scores for manufac turing value added as well as for tertiary 
efficiency (e.g. enrolment in higher education and the concentration of science and engineering graduates). It 
was second for R&D intensity, high -tech density and patent activity, and ranked sixth for researcher 
concentration. Bloomberg , "These Are the World's Most Innovative Economies" , 19 January 2016. Viewed at: 
http://www.bloomberg.com/news/articles/ 2016-01-19/these -are-the-world -s-most-innovative -economies . 
11 OECD (2015c); OECD (2016c).  WT/TPR/S/346 • Republic of Korea  
 
- 15 - 
 
  stagnate at 2.6% in 2016 and edge up to 2.8% in 2017, assuming stable expansion in the global 
economy.12  
1.4.  Since 2012, changes in the overall sectoral pattern of Korea's GDP and employment 
consisted of minor increases in the contribution of services – accounting for 59.7% of economic 
activity – well below the OECD average, construction and electricity, gas, and water, as well as a 
slight decline in manufacturing (hit by slack domestic demand and declining export orders) and 
agriculture (Table 1.2). Labour productivity has slowed markedly and total factor productivity 
(TFP) has been weak in Korea's dualistic e conomy, slowing the rise of incomes and well -being 
(Table 1.1).13 Productivity growth impediments include: low service sector productivity; an 
un-dynamic SME sector; and, labour market rigidities and distortions leading to underutilization of 
productive res ources (Section 1.3.3.5). Korea is well integrated into global value chains (GVCs), as 
reflected in the country's top exports and imports, which prominently feature intermediate goods 
(e.g. electronic circuits, motor parts and liquid crystal devices).14 In 2011, its participation in GVCs 
(62.1%) and domestic value added in exports (58%) stood above the average level of developing 
and developed exporting economies.15 To increase the forward participation in GVCs while 
remaining competitive, investment in secto rs (e.g. service links and software) that are less 
fragmented than manufacturing could be considered.16  
Table 1.2 Basic economic and social indicators, 2011 -15 
  2011  2012  2013  2014  2015  
Real GDP at market pr ices 
(₩ billion, 2010 prices)  1,311,892.7  1,341,966.5  1,380,832.6  1,426,972.4  1,464,244.0  
Real GDP at market prices 
(US$ billion, 2010 prices)  1,184.1  1,190.9  1,260.9  1,354.8  1,294.1  
Current GDP at market prices 
(₩ billion)  1,332,681.0  1,377,456.7  1,429,4 45.4 1,486,079.3  1,558,591.6  
Current GDP at market prices 
(US$ billion)  1,202.7  1,222.4  1,305.4  1,410.0  1,377.5  
GDP per capita at current 
market prices ( ₩ '000) 26,772.0  27,547.0  28,464.0  29,472.0  30,792.0  
GDP per capita at current 
market pric es (US$)  24,159.8  24,445.1  25,993.4  27,982.5  27,213.5  
GDP by economic activity at constant 2010 prices (Percentage change)  
Agriculture, forestry and fishing  -2.0 -0.9 3.1 3.6 -1.5 
Mining and quarrying  -1.0 -0.3 8.1 -0.1 -0.7 
Manufacturing  6.5 2.4 3.6 3.5 1.3 
Electricity, gas and water  0.2 4.0 -0.3 2.6 6.2 
Construction  -5.5 -1.8 3.0 0.8 3.0 
Services  3.1 2.8 2.9 3.3 2.8 
 Wholesale and retail trade  6.5 3.9 3.3 2.4 3.0 
 Accommodation and food 
service activities  0.6 1.5 0.9 2.4 -0.7 
 Transport and  storage  3.6 1.6 1.4 2.3 2.7 
 Finance and insurance  1.5 3.9 4.0 5.6 6.3 
 Real estate and leasing  2.6 -0.2 0.9 3.3 1.9 
 Information and 
communication  5.7 4.7 5.1 4.5 2.3 
                                                
12 Asian Development Bank (2016).  
13 Korea's dualistic economy is characterized by large productivity gaps between manufacturing and 
services, large and small firms, a nd regular and non -regular workers (Section 1.3.3.5). Overall productivity 
was only 55% of the top half of OECD countries in 2014. The level of labour productivity in the services sector 
was only about half of that in manufacturing, compared to an average of 92% in the OECD, whereas SMEs' 
productivity was only 30.5% of that in large firms. SMEs provide the bulk of services and employ around 90%  
of the workforce . IMF (2015); OECD (2016c).  
14 The share of intermediate goods in trade is marginally higher in Kor ea (23%) than the Asia -Pacific 
region overall (22%) in the case of imports, and much higher in Korea (24%) than Asia -Pacific (18%) in the 
case of exports. United Nations Economic and Social Commission for Asia and the Pacific (2015).  
15 The GVC participatio n rate indicates the share of a country's exports that is part of a multi -stage 
trade process. Online WTO information. Viewed at: 
https://www.wto.org/english/res_e/stati s_e/miwi_e/countryprofiles_e.htm . 
16 Horj (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 16 - 
 
    2011  2012  2013  2014  2015  
 Business activities  3.8 3.0 4.7 4.8 4.0 
 Public administration and 
defence  2.2 2.9 2.5 2.4 2.7 
 Education  0.1 0.9 0.6 0.1 0.6 
 Health and social work  3.5 7.1 5.2 6.8 5.6 
 Culture and other services  1.1 1.6 2.2 1.3 -0.1 
Share of sectors in current GDPa (%) 
Agriculture, forestry and fishing  2.5 2.5 2.3 2.3 2.3 
Mining and quarrying  0.2 0.2 0.2 0.2 0.2 
Manufacturing  31.4 31.0 31.0 30.2 29.5 
Electricity, gas and water  2.0 2.1 2.3 2.8 3.2 
Construction  4.8 4.8 4.9 5.0 5.1 
Services  59.1 59.5 59.3 59.6 59.7 
 Wholesale and retail trade  9.1 9.1 8.9 8.6 8.3 
 Accommodation and food 
service activities  2.6 2.6 2.6 2.6 2.7 
 Transport and storage  3.5 3.5 3.6 3.7 4.0 
 Finance and insurance  6.4 6.1 5.6 5.6 5.5 
 Real estate and leasing  7.8 7.9 7.9 8.1 8.1 
 Information and 
communication  3.9 3.9 3.9 3.9 3.8 
 Business activities  6.9 7.1 7.3 7.4 7.5 
 Public administration and 
defence  6.9 7.1 7.2 7.3 7.4 
 Education  5.5 5.5 5.5 5.5 5.4 
 Health and social work  3.9 4.0 4.1 4.2 4.3 
 Culture and other services  2.7 2.7 2.7 2.7 2.6 
Share of sector in total employment  
Agriculture, forestry and fish ing 6.4 6.2 6.1 5.7 5.2 
Mining and quarrying  0.1 0.1 0.1 0.1 0.1 
Manufacturing  16.9 16.6 16.7 16.9 17.3 
Electricity, gas and water  0.3 0.3 0.4 0.3 0.4 
Sewerage, waste management, 
materials recovery  0.3 0.3 0.3 0.3 0.3 
Construction  7.2 7.2 7.0 7.0 7.0 
Services  68.9 69.3 69.5 69.7 69.8 
 Wholesale and retail trade  15.0 14.9 14.6 14.8 14.6 
 Accommodation and food 
service activities  7.6 7.7 7.9 8.2 8.4 
 Transport and storage  5.5 5.6 5.6 5.5 5.4 
 Finance and insurance  3.5 3.4 3.4 3.3 3.0 
 Real estate and leasing  2.0 2.0 1.9 2.0 2.1 
 Information and 
communication; publishing, 
visual entertainment  2.9 2.8 2.8 2.8 3.0 
 Professional, scientific and 
technical activities  4.0 4.2 4.1 4.0 4.0 
 Business facilities 
management and business 
support services  4.5 4.5 4.7 4.6 4.8 
 Public administration and 
defence; compulsory social 
security  3.9 3.9 3.9 3.7 3.6 
 Education  7.0 7.1 7.0 7.1 7.0 
 Health and social work  5.4 5.7 6.2 6.6 6.8 
 Culture and other services  7.6 7.6 7.5 7.1 6.9 
a Percentage of gross value added at basic prices.  
Source : Bank of Korea Economic Statistics System online information. Viewed at: http://ecos.bok.or.kr/ ; and 
data provided by the Korean authorities.  WT/TPR/S/346 • Republic of Korea  
 
- 17 - 
 
  1.5.  During the review period , Korea's unemploymen t rate remained relatively stable at above 
3%, peaking at 3.6% in 2015 (Table 1.1), inter alia,  as a result of a governmental job creation 
policy with a roadmap for achieving a 70% employment rate by promoting flexible part -time jobs, 
providing employment services and vocational training, and adopting youth employment measures 
(Section 1.3.3.5). According to the OECD, with the improvement of economic conditions, the 
unemployment rate for 2016 and 2017 is expected to drop to 3.5% and 3.4%, respectively.  
1.2.2   Prices 
1.6.  Headline inflation dropped gradually to 0.7% in 2015, about one sixth of its 2011 level, and 
as from 2012 it has remained below the Bank of Korea's target, inter alia , on account of sluggish 
growth and falling oil prices. Core inflation, which excludes  energy and food, picked up in 2014 
(Table 1.1, Section 1.3.1). According to the ADB and the OECD, faster output growth, a sustained 
and moderate expansion in domestic demand, and the expected oil price prospects are to increase 
headline inflation to 1 -1.4% in 2016 and 1.7% -2% in 2017.17  
1.3  Main Macroeconomic Policy Developments  
1.3.1   Monetary and exchange rate policy  
1.7.  Monetary policy has been conducted by the independent Bank of Korea (BOK) mainly on the 
basis of an inflation target which was set at a range of 2.5 -3.5% for 2013 -15, and at 2% for the 
period 2016 -18.18 With inflation undershooting its target range since 2012, the BOK has cut its 
policy rate progressively by removing 0.25 percentage points seven times since July 2012 from 
3% to a record -low 1.5% (11 June  2015) amidst concerns of a larger -than-expected output gap, 
low inflation pressure, and more recently the need to take pre -emptive action against downside 
risks.19 According to the ADB and the OECD, with price pressures subdued, the BOK is likely to 
mainta in its accommodative monetary policy stance to stimulate domestic demand, while 
remaining vigilant about any further build -up in household debt and the risk of capital outflows.20  
1.8.  Korea has maintained its floating exchange rate system which provides an imp ortant buffer 
against external shocks and facilitates adjustment toward domestic sources of growth, thereby 
reducing external imbalances to levels consistent with Korea's fundamentals.21 According to the 
IMF, the won should remain market determined with int ervention limited to smoothing excess 
volatility.22  
1.9.  During the review period, the nominal ₩/US$ exchange rate has slightly depreciated (except 
in 2013 and 2014) (Table 1.1); in trade -weighted terms, overall the effective exchange rate 
appreciated, thus reducing Korea's international competitiveness and help ing to rebalance the 
economy toward domestic demand, one of the main objectives of the Three -Year Plan for 
Economic Innovation (Sections 1.2.1 and 1.3.3).23 Exchange rate movements were driven by both 
external and internal factors. External factors included  global risk -on risk -off investment 
behaviour, depending on changes in major advanced economies' monetary policies and concerns 
over economic slowdown in China, whereas internal factors included trends in the current account 
balance following export and im port, foreign capital flows, changes in domestic monetary policy, 
                                                
17 Asian Development Bank (2016); OECD (2016c).  
18 In addition to monetary policy, in order t o mitigate the rise in inflation, the Government has been 
implementing, inter alia,  administrative price stabilizat ion measures,  including flexible customs tariffs, 
autonomous tariff quotas, flexible individual consumption (special excise) tax rates, and price controls 
(Sections 3.2.3.3, 3.2.4.2, 3.4.1.1, and 3.4.5.2). Bank of Korea (2015); and online BOK information. Viewed 
at: http://eng.bok.or.kr/broadcast.action?menuNaviId=1612 . 
19 IMF (2015).  
20 Asian Development Bank (2016); IMF (2015); OECD (2015c); OECD (2016c).  
21 IMF (2015).  
22 According to th e authorities, the e xchange rates should be freely determined by the market so as to 
reflect economic fundamentals and market supply/demand, and any deliberate foreign exchange rate policy 
tailored to exchange rate levels, exports, or price levels is inadv isable. WTO document WT/TPR/S/268/Rev.1, 
8 November 2012.  
23 OECD (2015c).  WT/TPR/S/346 • Republic of Korea  
 
- 18 - 
 
  and the geopolitical risk related to the Democratic People's Republic of Korea . According to the IMF 
methodology, the exchange rate remains undervalued, a view not shared by the authorities.24  
1.3.2   Fiscal policy  
1.10.   Korea's prudent fiscal policy shifted to an expansionary more pro -growth stance to support 
consumption and investment, a move consistent with utilizing fiscal space when needed while 
preserving longer -term fiscal sustainability.25 Consequen tly, the fiscal surplus declined steadily 
from 1.4% of GDP (including social security surplus) in 2011 to 0.6% in 2014 and to a slight deficit 
of 0.01% in 2015 (Table 1.1), due to increased spending, including a supplementary budget and 
fiscal stimulus mea sures equivalent to 0.5% and 1% of GDP in 2014 and 2015 respectively 
(Section 1.2.1).26 The Government is to raise spending by 2.9% in 2016 to bolster domestic 
demand, and expects fiscal revenues to increase by 2.3%. Consequently, in February 2016, it 
annou nced measures to boost growth involving: frontloading 40% of government spending in the 
first quarter of 2016; expanding policy lending by public financial institutions by 15.4% in 2016; 
and, extending the cut in the excise tax on cars (from 5.0% to 3.5%) during the first half of 2016. 
According to the OECD, the fiscal situation is sound.27  
1.3.3   Structural policies  
1.11.   Trade and domestic reform are considered as intrinsically linked. The Government's 
Three -Year Plan for Economic Innovation, announced on 25 February 2014, is aimed at creating an 
economy based on strong fundamentals and dynamic innovation, and balanced between domestic 
demand and exports (Section 2.4).28 It involves, inter alia,  public sector reform, developing 
creative industries, investing for the fut ure, making inroads into overseas markets, deregulation in 
the most promising service industries (healthcare, education, finance, tourism and software), and 
job creation to stimulate domestic demand. According to the IMF, as of 2015, key priority areas for  
raising productivity include: promoting competition in health, education, and other protected 
professions; phasing out government support to unviable SMEs (Sections 1.1, 1.2.1 and 3.4.2.1); 
and reducing labour market rigidities.29  
1.3.3.1   Tax reform  
1.12.   Tax reform un der the vision of a "competitive, fair, and principles -based tax system" was 
undertaken in 2013 and included: support of the national policy agenda through tax incentives for 
R&D, SMEs, mergers and acquisitions (M&As) (Section 3.4.5.1), and the KONEX marke t 
(Section  3.4.2); securing a citizen -oriented tax system; and achieving fairer taxation and 
base-broadening.30 In 2014, a tax code revision under the vision of a "competitive, fair, and 
principles -based tax system", was focused on economic stimulation and stability of the public 
livelihood as top priorities, while realizing fair taxation and rationalizing the tax system. The 2014 
Three Tax Schemes for Boosting Household Income were introduced to stimulate domestic 
consumption.31 The initiative included: a 10 % tax credit for firms (5% for conglomerates) that 
have granted a wage increase that is higher than the average of the preceding three years; a tax 
rate cut on dividends from 14% to 9% to revitalize the stock market; and an additional tax of 10% 
levied on those firms whose investment, wage payments and dividends do not reach a certain 
                                                
24 In addition, as of April 2016, the United States placed Korea together with other countries on its 
monitoring list with regard to the possibility of foreign exchange rate manipula tion. According to the 
authorities, there can be different views on the appropriate level of the exchange rate depending on its models, 
time horizons and research/analysis methods, and assessing its level could provoke market turmoil. They 
consider that th e won's real effective exchange rate (REER) deviation from its historic average is minor. IMF 
(2015); BusinessKorea,  "FX Rate Manipulation Treasury Department of U.S. Put South Korea on Monitoring 
List", 2 May 2016. Viewed at: http://www.businesskorea.co.kr/english/news/money/14559 -fx-rate-
manipulation -treasury -department -us-put-south -korea-monitoring -list#sthash.luKTM0Q5.dpuf . 
25 IMF (2015).  
26 OECD (2015c); Asian Development Bank (2016).  
27 OECD (2016c).  
28 Korea.net , " President Park announces three -year plan for economic innovation", 27  February 2014. 
Viewed at: http://www.korea.net/NewsFocus/Policies/view?articleId=117839 ; Australian Government online 
information. Viewed at: http://dfat.gov.au/people -to-people/foundations -councils -institutes/australia -korea -
foundation/Pages/koreas -3-year-plan-for-economic -innovation.aspx . 
29 IMF (2015).  
30 Ministry of Strategy and Finance (2015).  
31 OECD (2016c).  WT/TPR/S/346 • Republic of Korea  
 
- 19 - 
 
  level. Support for SMEs and venture firms has been reinforced, inter alia,  through simplified 
requirements on firms eligible for tax incentives, and an extended sunset period for special tax 
reductions/exemptions. Measures were taken to reinforce the protection of taxpayers' rights and 
reduce compliance cost. According to the IMF, Korea's tax revenue is low relative to most OECD 
countries at similar levels of development in par t reflecting weak compliance and high levels of 
exemptions (Sections 3.2.3.5 and 3.4.1.3); tax reform focused on broadening the base would 
reduce rather than increase policy distortions and improve productivity.32 As of June 2016, tax 
reform plans were unde r consideration.  
1.13.   In 2015, the tax reform was aimed at: providing economic stimulus for boosting the young 
employment rate, encouraging consumer spending, and enhancing export and investment; 
stabilizing public livelihood by supporting property "formation of labourers " and expanding tax 
benefits for the self -employed, etc.; improving fairness, rationalizing tax reduction schemes, 
enhancing transparency in revenues, and preventing tax evasion; and protecting tax payers' rights 
and rationalizing the level of the tax burden. The 2016 tax reform is designed to revitalize and 
drive a structural change in the real economy, as well as to support sustainable growth and ensure 
stable tax revenues. Under the 2016 tax reform, more tax benefits will be offered to indust ries 
with high potential for economic growth and job creation. Non -taxation or tax reductions and 
exemptions will be realigned/revised whenever their objectives are achieved or their policy effects 
are less than expected. At the same time, taxes on off -shore incomes will be imposed in a stricter 
manner by collecting information on their off -shore taxation and by improving the current regime. 
Regarding financial incomes, the taxation structure will be realigned as at present there are 
inefficient procedures and red tape in the system.  
1.3.3.2   Privatization  
1.14.   Similarly to the previous Review, despite the Government's commitment to privatization of 
some state -owned enterprises there has been virtually no progress in its few attempts in this area. 
Instead, to boost effici ency of the public sector, rather than introducing a sweeping privatization 
campaign, a 2013 Public Institution Reform Plan, inter alia,  involving efforts to reduce the debt 
level of public institutions and improve their productivity was launched and is un der way 
(Section  3.4.4). Faced with spending pressures, it is essential for Korea to enhance public -sector 
efficiency, as planned in the Three -Year Plan for Economic Innovation (Section 2.4).33  
1.3.3.3   Competition policy  
1.15.   During the review period, Korea undertook s everal legislative changes in this area, 
inter alia, to expand the number of institutions with a right to file criminal complaint, prohibit new 
circular (i.e.  cross) -shareholdings between subsidiaries under a large business group, and assess 
dominance resu lting from a merger or acquisition; at the same time it took action to activate the 
M&As market (Section 3.4.5.1).34 Market and industry concentration remains relatively high, and 
large business and state conglomerates continue to be monitored. Efforts to p romote fair trade 
and mutual growth between large companies and SMEs through voluntary fair trade agreements 
and sub -contracting continue.  
1.3.3.4   Corporate governance and the cost of capital  
1.16.   Good corporate governance contributes to sustainable economic developmen t by enhancing 
the performance of companies and increasing their access to outside capital.35 Despite a strong 
drive to reform business practices regarding large business conglomerates, their dominance 
continues to be reflected in corporate governance in Ko rea and contributes to the so -called "Korea 
discount" (10 -40% less in 2010), i.e. the amount by which investors undervalue Korean stocks 
                                                
32 IMF (2015).  
33 OECD (2016c).  
34 In general, distortions to competition can be the consequence of interventionist policies in certain 
areas, but also possibly some weakness in addressing anticompetitive practice s of large business 
conglomerates ( chaebols ), that may abuse their dominant market position to the detriment of consumers and 
SMEs, not to mention productivity. The authorities do not share these views and point to their globally 
recognized strong competit ion law enforcement. More information on the competition -related challenges in the 
Korean market is available in WTO  document WT/TPR/S/268/Rev.1, 8 November 2012.  
35 Online World Bank information. Viewed at: http://elibrary.worldbank.org/doi/full/10.1596/978 -1-
4648-0484-7_corporate_governance .  WT/TPR/S/346 • Republic of Korea  
 
- 20 - 
 
  owing to the perceived higher investment risk in Korea compared with other countries.36 The 
authorities consider that th is causal link is ambiguous.  
1.3.3.5   Labour market policies  
1.17.   Labour market rigidities remain in place. Employment protection, involving laying -off costs, 
has been a key reason for the rise in the share of non -regular workers (i.e. fixed -term, dispatched 
and part -time workers) to around a third of employment.37 As of July 2014, a new basic pension 
for those aged over 65 has been operated at a maximum monthly amount of ₩200,000 (US$197, 
6.2% of the average wage) for those at the lower 70% income bracket; the remaining  were 
assured lower amounts but no less than ₩100,000 per month.38 To promote social cohesion, the 
Government is pushing for labour market reforms and aims to boost employment to 70% of the 
working -age population (Section 1.2.1). A September 2015 Tripartite  Agreement between the 
Government, workers and employers aims to, inter alia : increase youth employment; alleviate the 
dual structure of the labour market (regular and non -regular workers), a major cause of income 
inequality; and, expand the social safety net. According to the IMF, reducing labour market 
rigidities by addressing gaps in legal protection for regular and non -regular workers, moving to 
performance and task rather than seniority -based wages, reducing incentives for forcing early 
retirement, and  improving unemployment insurance, as well as increasing female labour force 
participation, inter alia,  by improving public support for childcare, facilitating part -time work, and 
enhancing job search and training support, form part of the reform issues in  this area.39 As of 
2016, firms with over 300  workers were required to set a mandatory retirement age at the age of 
60 (previously 58) or above, and the law is to be extended to smaller firms in 2017.40 The Korea 
Trade -Investment Promotion Agency (KOTRA) con tinues to operate its Contact Korea programme 
with the aim of attracting highly specialized foreign professionals to Korea by offering special 
privileges regarding immigration.  
1.4  Balance of Payments  
1.18.   In line with its traditional strategy of encouraging expor t-led growth based on 
manufactures, Korea continues to run a rising surplus in merchandise trade and a deficit in 
services (Table 1.3). The merchandise trade surplus considerably exceeded the deficit in services. 
Consequently, despite the real exchange rat e appreciation, the current account registered a 
substantially larger overall surplus, averaging 6% of GDP during 2012 -15 (7.7% in 2015) 
                                                
36 The prime cause of the discount is more likely to be poor corporate governance at the family -run 
business conglo merates, but also to, inter alia , geopolitical risks in the Korean peninsula, investors' concern 
over the high level of household debt, Korea's reputation for labour militancy, and Korea's low albeit improved 
ranking on Transparency International's Corrupt ion Perceptions Index  (CPI) (37th out of 167 countries in 2015, 
43rd out of 183 in 2011). According to the Korea Fair Trade Commission (KFTC), as of end -2015 the share of 
owners or immediate family who are listed as members of the board at affiliates of la rge family -run 
conglomerates stood at 21.7%, whereas the share of outside directors of large conglomerates stood at 49.5%. 
More information on the relation ship between  corporate governance, large business groups and the Korea 
discount is available in WTO d ocument WT/TPR/S/268/Rev.1, 8 November 2012. The Economist , "Minority 
report – The Korea discount – Corporate governance explains South Korea's low stockmarket ratings", 
11 February 2012. Viewed at: http://www.economist.com/node/21547255 ; Yon hap News Agency, " S. Korean 
conglomerates backtracking on responsible governance commitment" , 23 December 2015. Viewed at: 
http://english.yonhapnews.co.kr/search1/2603000000.html?cid=AEN20151223004700320 ; Transparency 
International (2015), Corruption Perceptions Index 2015 . Viewed at: http://www.transparency.org/cpi2015 . 
37 Regular workers receive high employment protection as a result of government policies, business 
practices, social customs and labour unions. Consequently, in 2014, the share of temporary workers was 22%, 
double the OECD average; they earned only 62% as  much per hour as regular workers, boosting inequality and 
relative poverty. Korea ranked 115th out of 140 countries in its flexibility in hiring and firing in the 2015 -16 
World Economic Forum Global Competitiveness Index , while its highly inflexible labou r market (121st) impeded 
allocation of workers to their most productive uses. OECD (2016c); WEF (2015a).  
38 Yonhap News Agency, " Gov't to launch basic pension program for senior citizens" , 29 June 2014. 
Viewed at: http://english.yonhapnews.co.kr/search1/2603000000.html?cid=AEN20140629001800320 . 
39 IMF (2015).  
40 According to the OECD, this policy, inter alia,  places additional burdens on firms, to the extent that 
the higher retirement age is respected, by widening the gap between productivity and wages; to limit the 
negative impact, the Government is paying various subsidies to maintain the employment of older workers. 
OECD (2016c).  WT/TPR/S/346 • Republic of Korea  
 
- 21 - 
 
  compared to 1.9% over 2007 -11, reflecting weak domestic demand and falling global oil prices.41 
The overall current acco unt surplus reflects the extent to which gross national saving (35.4% of 
GDP, 2015) continues to increasingly exceed the weakened gross domestic investment (28.5% of 
GDP) (Table 1.1). According to the ADB and the OECD, the current account surplus is expect ed to 
narrow to 6.5% in 2016 and further to 5.5% in 2017 as, inter alia,  import growth driven by 
stronger domestic demand is expected to outpace export growth.42 According to the authorities, 
these forecasts are mainly attributable to temporary and structur al factors.43  
1.19.   Korea's gross external debt increased by 3.8% during the period 2012 -14, and dropped by 
6.6% to US$396.6 billion in 2015 (Table 1.1); as a result the debt service ratio rose from 7% to 
8.4% over the same period. As a percentage of GDP, gross external debt dropped from 33.5% in 
2012 to 28.8% in 2015. According to the IMF, Korea's reduced and now modest level of short -term 
external debt  as of 2015 was projected to remain relatively low over the medium term.44  
Table 1.3 Balance of payments, 2011 -15 
(US$ million)  
  2011  2012  2013  2014  2015  
Current account  18,655.8  50,835.0  81,148.2  84,373.0  105,870.7  
Goods and services balance  16,810.8  44,192.4  76,281.8  85,206.9  104,581.9  
 Trade balance  29,089.9  49,406.0  82,781.0  88,885.4  120,290.0  
 Exports  587,099.7  603,509.2  618,156.9  613,020.6  548,837.8  
 Imports  558,009.8  554,103.2  535,375.9  524,135.2  428,547.8  
 Services balance  -12,279.1  -5,213.6  -6,499.2  -3,678.5  -15,708.1  
 Receipts  90,900.1  103,533.2  103,73 9.2 112,105.9  97,877.0  
 Transportation  37,184.9  41,669.9  37,772.6  38,316.7  32,668.3  
 Travel  12,475.5  13,428.5  14,628.8  17,835.7  15,284.9  
 Payments  103,179.2  108,746.8  110,238.4  115,784.4  113,585.1  
 Transportation  30,815.5  31,492.5  30,419.9  32,128.5  29,644.0  
 Travel  19,920.3  20,644.9  21,647.6  23,192.0  24,957.9  
Income balance  6,560.6  12,116.7  9,055.7  4,150.8  5,901.7  
 Credit  27,436.2  30,160.5  30,108.3  26,817.1  28,023.6  
 Compensation of employees  751.4  711.2  721.0  767.9  868.6  
 Investment income  26,684. 8 29,449.3  29,387.3  26,049.2  27,155.0  
 Debit  20,875.6  18,043.8  21,052.6  22,666.3  22,121.9  
 Compensation of employees  1,182.5  1,150.1  1,169.0  1,219.4  918.1  
 Investment income  19,693.1  16,893.7  19,883.6  21,446.9  21,203.8  
Current transfers  -4,715.6  -5,474.1 -4,189.3  -4,984.7  -4,612.9  
 Credit  8,432.2  8,558.0  8,778.6  8,873.9  8,922.5  
 Debit  13,147.8  14,032.1  12,967.9  13,858.6  13,535.4  
Capital and financial account  -24,427.8  -51,624.1  -80,131.6  -89,342.9  -109,794.7  
Capital account  -112.0  -41.7 -27.0 -8.9 -64.7 
Financial account  -24,315.8  -51,582.4  -80,104.6  -89,334.0  -109,730.0  
 Direct investment  -19,931.7  -21,136.2  -15,593.2  -18,765.6  -22,597.8  
 Korea's direct investment abroad  -29,704.7  -30,632.1  -28,359.8  -28,039.2  -27,639.8  
 Foreign direct investme nt in Korea  9,773.0  9,495.9  12,766.6  9,273.6  5,042.0  
 Portfolio investment  13,142.7  6,747.8  -9,344.5  -30,608.9  -48,592.8  
 Assets  -4,138.4  -26,079.5  -27,494.2  -39,816.8  -41,305.4  
 Equity securities  -988.8  -14,619.5  -13,759.1  -13,963.3  -16,072.3  
 Debt se curities  -3,149.6  -11,460.0  -13,735.1  -25,853.5  -25,233.1  
                                                
41 According to the IMF, Korea's underlying current account surplus is larger than would be consistent 
with its economic and policy fundamentals. This gap reflects a number of factors including precautionary 
savings related to a relatively weak social safety net. IMF (2015); OECD (2016c).  
42 OECD (2015c).  
43 Temporary factors include improvement in the terms of trade stemming from low oil prices, and the 
slowing domestic economy that has synchronized with the sluggish global economy. Structural factors include 
increased savings in line with population aging.  
44 IMF (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 22 - 
 
    2011  2012  2013  2014  2015  
 Liabilities  17,281.1  32,827.3  18,149.7  9,207.9  -7,287.4  
 Equity securities  -6,851.4  16,572.5  4,383.2  6,753.2  -1,987.0  
 Debt securities  24,132.5  16,254.8  13,766.5  2,454.7  -5,300.4  
 Financial der ivatives  -1,031.3  2,627.8  4,410.3  3,826.9  -2,532.5  
 Assets  43,553.9  33,454.3  29,795.5  35,773.1  46,061.6  
 Liabilities  -44,585.2  -30,826.5  -25,385.2  -31,946.2  48,594.1  
 Other investment  -2,542.7  -26,637.3  -43,281.1  -25,900.6  -23,954.3  
 Assets  -22,166.4  -8,600.1  -37,096.7  -38,410.0  -15,499.7  
 Trade credits  -673.0  369.1  -1,683.4  -1,595.5  3,393.0  
 Loans  -14,211.5  -5,566.5  -22,584.8  -10,461.2  -9,666.6  
 Currency and deposits  -5,869.1  -3,765.9  -14,338.3  -21,183.6  -12,361.9  
 Other assets  -1,412.8  363.2  1,509 .8 -5,169.7  3,135.8  
 Liabilities  19,623.7  -18,037.2  -6,184.4  12,509.4  -8,454.6  
 Trade credits  -1,451.6  -1,817.1  293.0  -544.2  -4,077.2  
 Loans  11,549.7  -13,050.6  -6,273.2  10,894.4  -2,057.7  
 Currency and deposits  10,714.7  -3,454.6  -109.1  1,181.3  -2,696.9  
 Other liabilities  -1,189.1  285.1  -95.1 977.9  377.2  
 Reserve assets  -13,952.8  -13,184.5  -16,296.1  -17,885.8  -12,052.6  
Net errors and omission  5,772.0  789.1  -1,016.6  4,969.9  3,924.0  
Source : Bank of Korea Economic Statistics System online information. Vi ewed at: http://ecos.bok.or.kr/ . 
1.20.   Since 2012, Korea's foreign exchange reserves have increased steadily by an overall 13.1% 
largely due to continuously increasing returns from the management of reserve assets (Table 1 .1); 
in 2015 they were equivalent to 26% of GDP, 7.9 months of imports of goods and services, and 
more than three times its short -term external debt. As of end -March 2016, foreign exchange 
reserves stood at US$360.8 billion, equivalent to nearly 9 months o f imports of goods and 
services. According to the IMF, based on measures of adequacy, Korea's reserves should be 
sufficient to buffer against a range of possible external shocks and reduce the cost of foreign 
borrowing.45  
1.5  Composition and Pattern of Trade  
1.21.   The openness of the Korean economy to international trade, and its integration into the 
world economy continued to be reflected by the high ratio of its trade (exports plus imports) in 
goods and services to GDP; nevertheless, this ratio dropped progressivel y and significantly from 
109.8% in 2012 to 84.8% in 2015, partly due to export and import growth slowdown on account 
of weaker global demand and strong competition from other Asian countries, import compression 
resulting from the decline in oil prices, and  domestic demand contraction (Table 1.1). The 
authorities indicated that the decline of exports was also due to changes in China's growth 
strategy, intensified competition with neighbouring countries and overseas expansions of Chinese 
exporters.46  
1.22.   Since it s previous R eview, Korea's merchandise trade has remained largely and increasingly 
dependent on manufactures (Chart 1.1, Tables A1.1 and A1.2). The share of office machines and 
telecom equipment, chemicals, electrical machines and non -electrical machinery in total exports 
has risen, whereas the share of transport equipment and agriculture dropped. Fuels continued to 
account for a third of total imports, whereas agriculture for about 7%.  
1.23.   At the same time, while Korea's merchandise trade with countries in th e region remained 
virtually unchanged for exports, the pattern of imports shifted away from Asia -Pacific as a result of 
the increase in the share of the European Union, possibly relating to the entry into force of the FTA 
with this partner (Chart 1.2, Tabl es A1.3 and A1.4, Section 2.6.2). Notwithstanding some 
fluctuation in trade shares, more than 66.2% of total merchandise trade has continued to be 
                                                
45 IMF (2015).  
46 China's accelerated replacement of imported intermediate goods with those provided by its own 
manufacturers negatively affected Korea's exports, as a majority of these exports are intermediate goods. 
Howev er, despite the decreasing share of intermediate goods exports in Korea's total exports to China, Korea 
is taking a steadily increasing share of China's total imports, suggesting Korea's growing complementary 
relationship with China.  WT/TPR/S/346 • Republic of Korea  
 
- 23 - 
 
  conducted with trading partners from the Asia -Pacific Economic Cooperation (APEC) and 12.6% 
with ASEAN member s. Reportedly trade under FTAs rose from 24.6% (2011) to 36% (2013) of 
total trade and should have risen further with the entry into force of the FTAs with the 
United  States and Canada.47 Korea's main individual trading pa rtners remain China, the 
United  States, the European Union and Japan. Whereas China's merchandise trade shares for both 
imports and exports increased, those of Japan fell.  
Chart 1.1 Product composition of merchandise trade, 2011 and 2014  
Chart 1.1    Product composition of merchandise trade, 2011 and 2014
2011 2014
(a)    Exports (f.o.b.)
Other consumer goods
10.6%
Manufactures
85.3%
Total:  US$555.2 billion Total:  US$573.1 billion
(b)    Imports (c.i.f.)
Chemicals  9.1%Transport 
equipment
3.7%
Manufactures
51.0%Office machines &
telecom equipment  9.9%Other electrical 
machines  4.3%
Non-electrical 
machinery  7.5%Other  0.3%Other electrical 
machines  4.3%Office machines & 
telecom equipment  19.0%
Other semi -manuf.  
3.7%
Chemicals  9.0%Manufactures
52.4%Office machines & 
telecom equipment  11.0%
Total:  US$524.4 billion Total:  US$525.6 billionManufactures
86.4%Other electrical
machines  6.9%
Other mining
2.0% Other electrical 
machines  5.7%
Other consumer 
goods  8.8%  
Other  0.4%Office machines & 
telecom equipment  17.3%Iron & steel
5.7%
Iron & steel  4.9%Other semi -
manuf.  4.2% Non-electrical 
machinery  8.2%Transport equipment  
21.0%
Other mining
2.3%
Source :  UNSD, Comtrade database (SITC Rev.3).Other consumer
goods  8.0%Other consumer goods
10.3%
Fuels  9.2%
Other semi -
manuf.  3.9%Non-electrical 
machinery  7.8%
Other semi -manuf.
3.5%Transport equipment  
23.3%
Agriculture
6.7%Agriculture
6.6%Transport 
equipment
4.0%Chemicals  10.9% Chemicals  11.8%Agriculture  2.3%
Agriculture  2.1% 
Fuels  9.6%
Fuels  33.4%Fuels  33.1%
Other mining
7.1%Other mining  
8.9%Non-electrical
machinery  7.7%Other  0.3%Other  0.6%
Iron & steel
5.1%
Iron & steel  4.0%
 
                                                
47 FTA utilization rate s stood at 78.4% for Chile, 80.5% for EFTA, 38.5% for ASEAN, 43% for India, 
80.9% for the EU, 92% for Peru, 76.4% for the United States and 70.2% for Turkey; the main reason for 
non-utilization being the lack of knowledge. Online presentation by a Korea Cu stoms Service ( KCS) officer at 
the WCO Origin Conference 2014 titled Korea Customs' FTA Outreach Program for Small and Medium -sized 
Enterprises , 21 January 2014.  WT/TPR/S/346 • Republic of Korea  
 
- 24 - 
 
  Source: UNSD, Comtrade database (SITC Rev.3).  
Chart 1.2 Direction of merchandise trade, 2011 and 2014  
Chart 1.2
Direction of merchandise trade, 2011 and 2014
2011 2014
(a)    Exports (f.o.b.)
Asia/Pacific  
59.1%
Total:   US$555.2 billion Total:  US$573.1 billion
(b)    Imports (c.i.f.)
Other 
4.8%
EU28
9.0%Australia
5.0%
Qatar
4.0%United States
8.5%ASEAN
10.1%
EU28
11.9%ASEAN
10.2%
Qatar
4.9%United States
8.7%
Total:   US$524.4 billion Total:   US$525.6 billionChina
24.2%
Other Middle 
East  10.1 %China
17.1%China
16.5%United States
10.2%Other Asia
9.2%
United States
12.3%
Middle East
5.2%
Source:  UNSD Comtrade database.Japan
10.2%Viet Nam  
3.9%
EU28
9.1%Other ASEAN 
9.2%
Japan
13.0%
Other  
6.7%Other Asia
4.9%Hong Kong, China
4.8%
EU28
10.2%Middle East
5.2%Singapore
3.8%Other America
8.1%Hong Kong, China
5.6%
China
25.4%Other Asia
9.1%
Other Middle 
East  11.5%Other Asia   
5.4%Japan
7.1%
Singapore
4.2%Other ASEAN
6.7%
Asia/Pacific  
46.3%Asia/Pacific  
50.0%Asia/Pacific  
59.7%
Other America
4.5%Other America
5.1%Other America
7.1%
Australia
3.9%
Saudi Arabia
7.1%Saudi Arabia
7.0%Japan
5.6%
Other 
6.7%Other
7.2%
 
Source:  UNSD Comtrade database.  
1.6  Trends and Patterns in Foreign Direct Investment  
1.24.   Korea remains not only a ma jor exporter of goods, but also of capital. FDI outflows (on a 
balance -of-payments basis) peaked in 2012 and dropped gradually by an overall 9.8% (Table 1.3). 
Nevertheless, the global expansion of major Korean multinational enterprises, such as Samsung, 
continues to translate into significant outflows, increasingly to low -income economies within the WT/TPR/S/346 • Republic of Korea  
 
- 25 - 
 
  region, especially in Viet Nam.48 According to data supplied by the authorities, in 2014 they were 
largely concentrated in services (finance, insurance, real est ate), manufacturing, and mining and 
quarrying activities. At the same time, the main individual destinations were China, the United 
States, and the European Union, while 14.4% of total outflows were directed to ASEAN countries. 
The FDI outward stock increa sed steadily since 2011 by 37.6% (Table 1.4); in 2013, it was 
estimated at US$23 8.0 billion and allocated to services (mainly finance and insurance, and 
wholesale and retail trade), manufacturing, and mining and quarrying; its main locations were 
China, th e United States, and the EU. Korea was the largest investor in landlocked developing 
countries (LLDCs) in 2012 and has been promoting investment ties with Central Asian LLDCs, 
particularly Uzbekistan, where a further US$5 billion worth of FDI in the natura l gas and chemicals 
sectors was announced; in 2015 Posco's announced investment in Turkmenistan was the 
7th largest greenfield investment project in LLDCs.49 Korea's 2013 "Eurasia Initiative" aims to boost 
connectivity and economic ties between Korea and Eu rope. 
Table 1.4 Stock of outward foreign direct investment, 2011 -13  
  2011  2012  2013  
Total outward stock (US$ million)  173,002.1  202,801.7  237,985.2  
 (% of total)  
By sector     
Agriculture, forestry and  fishing  0.5  0.4  0.3  
Mining and quarrying  15.4  16.7  12.8  
Manufacturing  42.0  40.9  41.7  
Electricity, gas and water  1.0  1.3  1.0  
Construction  1.9  2.2  1.3  
Services  39.3  38.5  42.9  
 Wholesale and retail trade, and repairs  14.3  14.5  15.0  
 Accommodation and food service activities  1.0  0.8  0.7  
 Transport and storage  1.4  1.3  1.0  
 Information and communication  0.4  0.5  1.1  
 Financial and insurance activities  8.0  7.5  17.7  
 Real estate activities  4.4  4.2  3.8  
 Business servi ce activities  7.7  8.0  3.0  
 Other services  2.2  1.8  0.6  
By destination     
Netherlands  2.2  2.6  3.0  
United Kingdom  3.2  2.9  2.7  
Germany  1.9  1.8  1.6  
Czech Republic  0.6  0.7  0.8  
Ireland  1.0  0.6  0.6  
Russian Federation  1.3  1.4  1.2  
United States  16.6  17.0  18.1  
Cayman Islands  1.4  1.4  2.0  
Canada  3.2  2.9  2.0  
Brazil  1.6  1.9  1.7  
Mexico  0.5  0.7  0.8  
Bermuda  1.2  1.6  0.7  
Australia  2.7  3.1  3.6  
China  25.8  24.9  27.6  
Hong Kong, China  5.9  5.7  5.1  
Viet Nam  3.7  3.5  3.3  
Singapore  2.4  2.2  2.2  
Japan  2.4  1.8  2.1  
Indonesia  2.5  2.5  1.9  
India 1.9  1.9  1.5  
Malaysia  1.9  2.1  1.5  
                                                
48 UNCTAD (2016).  
49 UNCTAD (2015b); UNCTAD (2016).  WT/TPR/S/346 • Republic of Korea  
 
- 26 - 
 
    2011  2012  2013  
Philippines  0.8  1.1  1.3  
Thailand  1.0  1.3  1.0  
Myanmar  0.6  0.7  0.8  
Kazakhstan  0.9  0.9  0.7  
Other  12.8  12.6  12.1  
Source:  Data provided by the authorities of the Republic of Korea.  
1.25.   Inward FDI is not only an additional source of capital , but it  also brings with it 
entrepreneurship, management skills, and especially new technology, which contribute to 
improved total f actor productivity. During the review period, FDI inflows remained much lower 
than outflows; between 2012 and 2015 they ranged from 18.2% (2015) to 45% (2013) of the 
outflow amount (Table 1.3). The reasons for these relatively low FDI inflows remain unclea r, 
although they may be partly related to the "Korea discount" factors (Section 1.3.3.4) as well as 
Korea's manufacturing -based industrial structure. According to the OECD, barriers to trade and 
investment help to explain why the stock of FDI as a share of  GDP in Korea was the third -lowest in 
the OECD area, at 13% in 2014.50 FDI inflows (on a balance -of-payments basis) peaked in 2013 
(US$12.8 billion) and bottomed in 2015 (US$5 billion) (Table 1.3) due to a major divestment by 
Tesco (United Kingdom) in order  to consolidate its global operation and focus more on its home 
market.51 In addition to explicit barriers, the low stock of FDI reflects the business environment 
and other domestic restrictions, making regulatory reform key to attracting more FDI. The FDI 
inward stock peaked in 2013, and then dropped to US$170.7 billion in 2014 (Table 1.5). As of 
2014, it was largely allocated to services (mainly finance and insurance) and manufacturing; it 
mainly originated in the European Union (36.7%), Japan and the Unit ed States. The authorities 
indicated that the amount of newly realized FDI has increased since 2013, but it was offset by 
some large divestments, mostly because of the uncertainty of the global economy, including the 
eurozone.  
Table 1.5 Stock of inward foreign direct investment, 2011 -14 
  2011  2012  2013  2014  
Total inward stock (US$ million)  133,665.0  156,141.6  172,554.0  170,703.8  
 (% of total)  
By sector      
Agriculture and fishing  0.1  0.2  0.1  0.1  
Mining and quarrying  0.0  0.0  0.0  0.0  
Manufacturing  40.5  40.8  40.5  38.2  
Electricity, gas and water  0.3  0.5  0.5  0.5  
Construction  0.7  0.1  0.1  0.1  
Services  59.7  39.4  58.7  61.1  
     Trade and repairs  8.3  8.1  9.4  9.6  
     Hotels and restaurants  8.5  8.2  8.3  7.8  
     Transport, storage and communication  2.2  2.1  5.8  6.5  
     Financial intermediation  33.0  35.2  28.4  29.2  
     Real estate, renting and business activities  7.1  8.6  5.5  7.5  
     Other services  0.4  0.6  1.3  0.4  
Unallocated  -1.3  19.0  0.0  0.0  
By origin  95.5  96.3  97.1  96.8  
Austria  0.6  0.7  0.6  0.5  
France  3.8  3.9  4.1  3.3  
Germany  4.8  4.3  3.6  3.7  
Hungary  2.5  2.3  2.1  2.4  
Ireland  0.8  0.8  1.0  1.0  
Luxembourg  0.6  0.5  0.8  0.2  
Malta 1.0  2.1  2.7  2.8  
Netherlands  11.1  11.8  9.6  9.5  
                                                
50 OECD (2016c).  
51 UNCTAD (2016).  WT/TPR/S/346 • Republic of Korea  
 
- 27 - 
 
    2011  2012  2013  2014  
Sweden  1.1  1.2  1.2  1.0  
United Kingdom  9.0  9.7  7.9  7.8  
Norway  0.9  0.6  0.7  0.9  
Switzerland  1.4  1.6  2.0  2.3  
Canada  0.6  0.6  0.8  0.8  
United States  22.3  19.1  18.1  18.8  
Austr alia 0.5  1.1  0.8  0.6  
Japan  25.5  26.8  27.8  28.1  
New Zealand  0.0  0.0  1.9  1.7  
China  1.1  1.3  1.4  1.6  
Hong Kong, China  2.5  2.1  2.5  2.6  
Malaysia  1.1  1.4  1.3  1.1  
Singapore  3.1  3.6  3.7  4.6  
Saudi Arabia  0.0  0.0  1.1  0.4  
British Virgin Islands  0.2  0.0  0.7  0.7  
Cayman Islands  0.7  0.8  0.6  0.7  
Other  4.5  3.7  2.9  3.2  
Source:  Data provided by the authorities.  
 WT/TPR/S/346 • Republic of Korea  
 
- 28 - 
 
  2  TRADE AND INVESTMENT  REGIME  
2.1  Introduction  
2.1.  The Republic of Korea has continued to improve its business environme nt since the previous 
Review in 2012. The Government issued its Three -Year Plan for Economic Innovation in 
February  2014, covering the period up to February 2017, and aiming at improving economic 
fundamentals and increasing the GDP growth rate. Korea, a gl obal leader in e -government, has 
been implementing a Smart Government Strategy 2011 -15. The Government also continued to 
improve its regulatory framework, through several initiatives, to reduce the burden of doing 
business. The economic democratization mea sures were intended to narrow the wealth divide and 
promote fair competition between large and small companies.  
2.2.  The general trade policy objective remains to build a free and open economy based on 
market principles, and the Government has been rigorously pursuing market opening opportunities 
through not only multilateral  initiatives , but also regional trade agreements (RTAs). Six RTAs 
entered into force from 2013 to 2016 (with China, New Zealand, Viet Nam, Canada, Australia, and 
Turkey). This added to the existing RTA network with large economic blocs and newly emerging 
markets (with ASEAN, APTA, Chile, EFTA, the EU, India, Peru , Singapore, and the United States). 
Agriculture remains partly covered, and rice is excluded from all the RTAs. Korea ratified the  WTO 
Trade Facilitation Agreement (TFA) on 30 July 2015, and the revised Agreement on Government 
Procurement (GPA) in January 2016. Korea maintains its developing country status, and remains a 
major donor to WTO Trade -Related Technical Assistance (TRTA) ac tivities. Korea has continued to 
provide duty -free treatment to most imports from LDCs, and has been eligible for trade 
preferences under the GSP schemes of Australia, Belarus, Kazakhstan, and the Russian Federation. 
During the review period, Korea was dir ectly involved in four disputes at the WTO: two as a 
complainant, two as a respondent. It also participated as a third party in 33 dispute settlement 
cases.  
2.3.  Korea has the third -lowest FDI stock in the OECD area, which is due in part to the remaining 
trade and investment barriers. Foreign investment is regulated under the Foreign Investment 
Promotion Act, which was most recently amended in 2016 to attract investment from global 
companies. FDI in a few sectors remains restricted: out of 1,145 categories of bu sinesses, foreign 
investment is not permitted in 5.2% of businesses activities (such as nuclear power generation, 
broadcasting, and rice and barley growing), and is partially permitted in 2.5% of business 
activities (such as transport services, broadcastin g and telecom services, and some financial 
services). Apart from these, foreigners are allowed to invest  in the country without restraint. 
Incentives to FDI are given by the central and local governments, mainly in the form of tax 
exemptions/reductions, ca sh grants, and industrial site support. The cost effectiveness of these 
incentives remains questionable.  
2.2  General Constitutional and Institutional Framework  
2.4.  Korea is a democratic unitary republic, with a presidential parliament ary system. Since the 
previous  Review, there have been no changes to the general constitutional and institutional 
framework of Korea. The Constitution was most recently amended in 1987.1 
2.5.  The National Assembly, with 300 fixed members (253 members elected in local 
constituencies and 47 e lected by political parties), exercises legislative power by enacting laws and 
monitoring state administration including control of the Budget. Members of the current National 
Assembly (May 2016 to May 2020) were elected in April 2016.  
2.6.  According to the Co nstitution, the executive authority rests with the President and the State 
Council (Cabinet), which is chaired by the President and comprises the Prime Minister and the 
members of the State Council including ministers. The President is elected through dire ct election 
for a term of five years, and cannot be re -elected for a second term. The current President was 
elected in December 2012 and was inaugurated in February 2013. The President appoints the 
Prime Minister (subject to approval by the National Assemb ly), and ministers from among 
members of the State Council on the recommendation of the Prime Minister. In the absence of the 
                                                
1 Korea.net  online information. Viewed at: http://www.korea.net/Government/Constitution -and-
Government/Executive -Legislature -Judiciary . WT/TPR/S/346 • Republic of Korea  
 
- 29 - 
 
  President, the Prime Minister controls the ministries of the Government on his/her behalf. At 
present, the executive branch of the  government operates one board, one agency, five offices, 
22 ministries, 16 administrations, and six committees.  
2.7.  In descending order of importance, the Constitution is followed by acts to realize the 
constitutional notions, and administrative legislation including presidential decrees, ordinances, 
and administrative rules (called directives, regulations or public notices).  Since the previous 
review, there have been no changes to the legislative procedures.2 Legislation is mainly introduced 
into the Nationa l Assembly by the executive, through relevant ministers. Members of the National 
Assembly may also introduce bills. The President must promulgate bills passed by the National 
Assembly within 15 days by publication in the Official Gazette, unless vetoed by him/her. Laws and 
subordinate statutes generally enter into force 20  days after publication.  
2.8.  Treaties concluded and promulgated under the Constitution, as well as generally recognized 
rules of international law, have the same effect as domestic laws. Prop osed treaties must be 
deliberated on by the State Council. The National Assembly has the right to consent to the 
conclusion and ratification of treaties, including on trade, and the President must ratify them.  
2.9.  The judicial branch of the government is compo sed of the Supreme Court, appellate courts, 
district courts, family courts, administrative courts, and the patent court, among others. The 
Supreme Court Chief Justice is appointed by the President with the consent of the National 
Assembly, and other Suprem e Court justices are appointed by the President upon the 
recommendation of the Chief Justice. The term for the Chief Justice and other justices is six years. 
Korea was a pioneer in using electronic features to streamline court processes. Since the launch o f 
the electronic case filing system in 2010, by 2014, more than half of the civil cases had been 
e-filed.3 As a consequence, according to the World Bank's Doing Business Report, resolving a 
standard contract enforcement dispute takes 230 days and costs 10%  of the claim (the OECD 
high-income averages are 538  days and 21% of the claim), making Korea the second -best in 
189 economies in the ranking of the ease of enforcing contracts.4  
2.3  Structure of Trade Policy Formulation  
2.10.   Following the most recent presidential  election in 2012, there was a restructuring of the 
Government in 2013. The authorities indicated that the objective was to, inter alia , utilize science 
and ICT as the key sources for a creative economy. Changes included: the establishment of new 
ministrie s (the Ministry of Science, ICT and Future Planning, and the Ministry of Ocean and 
Fisheries); the restructuring of the Korea Food and Drug Administration (KFDA) to become the 
Ministry of Food and Drug Safety (MFDS); and the restructuring of agencies leadi ng to the 
reallocation of tasks in certain areas (Section 3). Under a 2013 Public Institution Reform Plan, the 
Government developed measures involving increasing transparency and improving management 
efficiency (Section 3.4.4).  
2.11.   In particular, trade and ind ustrial policies are formulated and implemented by the Ministry 
of Trade, Industry and Energy (MOTIE), which replaced the Ministry of Knowledge Economy (MKE) 
in 2013.5 The MOTIE formulates trade policies and makes policy decisions in consultation with the 
relevant stakeholders, including not only representatives from other government ministries such 
as the Ministries of Strateg y and Finance; Agriculture, Food and Rural Affairs; Justice; Land, 
Infrastructure and Transport; but also stakeholders from the priv ate sector such as the Korea 
Chamber of Commerce and Industry (KCCI), and the Korea International Trade Association (KITA). 
The MOTIE and the Korea Trade -Investment Promotion Agency (KOTRA) jointly hold Foreign 
Investment Advisory Council meetings regularl y, where foreign firms may advise the Government 
on foreign investment policy (Section 2.7).  
2.12.   Public research institutes continue to work on trade -related research topics, including on 
multilateral and bilateral policy issues. They include the government -funded think -tanks Korea 
Institute for International Economic Policy (KIEP), Korea Institute for Industrial Economics and 
                                                
2 For details of the le gislative procedures, see WTO (2012).  
3 World Bank (2016b); and information provided by the authorities.  
4 World Bank (2016a).  
5 MOTIE online information. Viewed at: http://english.motie.go.kr/?cat=52 . WT/TPR/S/346 • Republic of Korea  
 
- 30 - 
 
  Trade (KIET), Korea Development Institute (KDI), Korea Economic Research Institute (KERI), and 
Korea Rural Economic Institute (KREI).  
2.13.   To improve transparency in public finance, in  January 2007, the Ministry of Strategy and 
Finance (MOSF) implemented a Digital Budget and Accounting System (DABS), which is an 
integrated financial management information system. The DABS, also known as "dBrai n", manages 
the entire fiscal process, ranging from budget formulation to accounting, and links the fiscal 
information of all public entities (51 central government agencies and 55 external systems and 
local governments, public entities and subordinate org anizations). This system further reinforced 
risk managing capacity by enabling real -time information sharing in public finance.6 
2.14.   The Government has been implementing a Smart Government Strategy (2011 -2015)7, 
which has involved:  
a. identifying and developing i nnovative services using mobile devices (mobility, 
location -based, and camera, etc.), and expanding the provision of government policy 
information and interactive communication channels with citizens by using social 
network services (such as Twitter and Fa cebook);  
b. trying to achieve "Connected Government", where information flows freely between 
government and citizens, and between government and businesses; and  
c. making efforts to ensure accessibility for the marginalized population, by creating 
information ne tworks in villages, supplying assistance devices for disabled people, and 
offering relaying services, home -visiting IT education services, and video conference 
services for multicultural families.  
2.15.   Korea was ranked the top performer in 2014 by the United N ations in its e -Government 
Survey.8 The Government started implementing the Advancement of e -Government Strategy in 
2007, and reached a fully digitized public administration with government -to-citizen (G2C) and 
government -to-business (G2B) service delivery  and multi -channel communication and 
transactions. Reflecting its developed telecommunications infrastructure, strong national education 
policy and high GDP per capita, Korea took the lead globally in e -government ranking. According 
to the United Nations e -Government survey, Korea established a world -class transparent and 
efficient online presence and an equally impressive e -mobile presence.  
2.4  Trade Policy Objectives  
2.16.   Korea issued its Three -Year Plan for Economic Innovation in February 2014, covering the 
period up  to February 2017. The Plan aimed at increasing real and potential GDP growth rates and 
improving economic fundamentals by stepping up structural reforms.9 In accordance with the Plan, 
Korea is to build itself into an economy with:  
a. strong fundamentals , through reforming the public sector, building a rules -based market 
 economy, and establishing a strong social safety net;  
b. dynamic innovation, through developing creative industries, investing for the future, and 
 exploring overseas markets; and  
c. a balance  between domestic demand and exports, through improving the investment 
 environment, strengthening domestic demand, and encouraging the labour force 
 participation of young people and women.  
2.17.   Korea's general trade policy objective remains to build a free an d open economy based on 
market principles. To promote international competitiveness of its businesses and economic 
growth, Korea has been making efforts to improve access to key markets, through participation in 
                                                
6 UNPACS online information. Viewed at: https://publicadministration.un.org/egovkb/en -
us/Data/Country -Information/id/138 -Republic -of-Korea . 
7 NIPA (2012).  
8 UN (2015).  
9 OECD (2014).  WT/TPR/S/346 • Republic of Korea  
 
- 31 - 
 
  multilateral negotiations, as well as negoti ations for more RTAs and close economic cooperation 
with its trading partners. The Ministry of Trade, Industry and Energy (MOTIE) aims at building a 
creative economy, expanding growth engines, creating better jobs, and supporting balanced 
growth among indu stries. To accomplish these goals, MOTIE identified the following policy 
priorities:10 
 promoting industrial convergence to maximize economic growth potential and 
provide high -quality employment opportunities;  
 fostering a cooperative industrial ecosystem, es pecially for small and medium -sized 
businesses, by enforcing market rules;  
 seeking balanced regional development to revitalize local economies and 
employment;  
 pursuing a trade policy devoted to the national interest and economic benefits, by 
preparing a tr ade strategy that will earn more public support through better 
communication with related interest groups and other ministries (according to the 
authorities, objectives of the current trade strategy include: actively pursuing mega 
free trade agreements (FT As) aiming at regional economic integration; seeking new 
FTAs with promising emerging economies on a reciprocal basis; and actively 
participating in the WTO's multilateral/plurilateral negotiations on further trade 
liberalization with a view to helping Kor ea bring innovative changes to its domestic 
industrial structure); and  
 establishing a safe and reliable energy system.  
2.5  Trade Laws and Regulations  
2.5.1   Regulatory reform  
2.18.   Despite Korea's efforts in pursuing trade liberalization through RTA negotiations with its 
major trade partners (Section 2.6.2), the OECD index of trade and investment barriers was the 
second -highest in the OECD area in 2013. This index helped to partly explain why Korea had the 
third-lowest FDI stock in the OECD area, at 13% of GDP in 2014.11 Barriers to entrepreneurship in 
Korea were the ninth -highest in the OECD area in 2013.  
2.19.   Recognizing the costs of overly burdensome regulation, the Government continued to 
improve its regulatory framework. From January 2014 to January 2015, the Government cut the 
number of economic regulations (9,876) by 10%. As more restrictive regulation leads to lower 
aggregate productivity, reducing regulatory burden tends to stimulate private investment in 
innovative activities, the diffusion of knowledge, improved manager ial performance and entry by 
new firms.12 
2.20.   The impact of regulation is bigger in the services sector than in the manufacturing sector.13 
By 2013, there were 4,336 regulations in the services sector, four times that in manufacturing. As 
part of the efforts to reform the regulatory framework in the services sector, the Government 
announced a package of Measures to Stimulate Investment: Fostering Promising Service Industries 
in August 2014. Seven services industries were selected based on their expected ability t o create 
jobs and enhance the growth potential of the Korean economy: medical care, tourism, culture, 
education, finance, logistics, and software. Nearly half of the regulations covering the services 
sector are applied to these seven services industries.  
2.21.   The Regulatory Reform Committee (RRC), established in 1998, is responsible for responding 
to public opinion, reviewing new and amended regulations, and evaluating each ministry's efforts 
to improve regulations. It consists of 19 private -sector experts and six government ministers. The 
                                                
10 MOTIE online information. Viewed at: http://english.motie.go.kr/?cat=50 . 
11 OECD (2016a).  
12 OECD (2016a).  
13 OECD (2016a).  WT/TPR/S/346 • Republic of Korea  
 
- 32 - 
 
  Government established a regulatory information disclosure portal in October 2013 
(www.better.go.kr), allowing the public to follow regulatory developments. In the services sector, 
regulatory reform measures are decided by the  Service -Sector Advancement Committee under the 
MOSF, and are aimed at promoting competition, and exploring new export markets.  
2.22.   During the review period, the Government also introduced several initiatives to supplement 
the work of the RRC. In particular, t he Government launched a "cost -in, cost -out" (CICO) approach 
in 2014: any new regulation that is expected to impose a direct incremental net cost on business 
must be offset by measures that provide savings of at least the same amount. Costs and savings 
are estimated through regulatory impact assessments (RIAs). Two RIA centres were established, 
under the Korea Development Institute (KDI) and under the Korea Institute of Public 
Administration (KIPA).14 Those regulations relating to protecting people's lives a nd safety are 
exempt from this requirement. CICO was first introduced in eight ministries and agencies, and 
expanded to 14 in 2015 and 22 in 2016.  
2.23.   Other regulatory initiatives include the following:  
a. The Regulatory Reform Ministerial Meeting, chaired by th e President, met for the 
first time in March 2014. The meetings are attended by ministers, directors of major 
economic organizations, academic experts and the general public, and the focus is on 
priorities for job creation and economic revitalization via r egulatory reforms.  
b. The Sin -Moon -Go campaign, introduced in March 2014, allows citizens to suggest 
regulatory reforms. Once an idea is submitted, the relevant ministry has two weeks to 
determine whether or not to pursue the reform; if approved, it must be r esolved within 
three  months. The number of citizen requests for specific regulatory reforms increased 
sharply after the launch of this campaign, from 300 in 2013 to 7,963 in 2014, with the 
acceptance rate of such proposals rising from 8% to 38%.  
c. The Regula tory Guillotine, introduced in 2015, solicits reform ideas from major business 
organizations. From 329 proposals made during the first and second rounds, 
189 regulations were improved or eliminated by the end of 2015.  
d. The Thorn under the Nail initiative, i ntroduced in 2015, aims at addressing chronic 
regulatory problems that are burdensome to small firms. Of the 426 proposals received, 
386 had been resolved by the end of 2015.  
2.24.   The Government is trying to ensure that SMEs in particular benefit from regulator y reform.15 
Measures adopted in this regard also include economic democratization, which aims to narrow the 
wealth divide and promote fair competition between conglomerates and smaller companies.  
Considering that the traditional growth pattern led by large businesses had not contributed 
sufficiently to the improvement of living standards for the Korean people, the Government has 
been making efforts to achieve economic democratization and improve welfare. For example, the 
Government suggested reform measures in the area of competition policy to support the 
development of SMEs and micro enterprises (Section 3.4.5). Indeed, Article  119 of the 
Constitution states that: the economic order is based on respect for the freedom and creative 
initiative of enterprises a nd individuals in economic affairs, and that the State may regulate and 
coordinate economic affairs to maintain balanced growth and stability of the economy, to ensure 
proper income distribution, and prevent market domination and the abuse of economic powe r.  
2.5.2   Trade -related legislation  
2.25.   The main legislation on international trade remains the Foreign Trade Act, and the Customs 
Act. Since the previous Review in 2012, the following trade -related legislation has been amended  
(Table 2.1).  
                                                
14 OECD (2015d).  
15 OECD (2016a).  WT/TPR/S/346 • Republic of Korea  
 
- 33 - 
 
  Table 2.1 Main trade - and investment -related legislation amended since 2012  
Subject  Legislation  
Customs procedures  Customs Act, most recently amended in 2015  
Act on Special Cases Concerning the Refund of Customs Duties etc. 
Levied on Raw Materials for Export, most recently amended in 2015  
Act on Special Cases of the Customs Act for the Implementation of 
Free Trade Agreements, most recently amended in 2015  
General import and export procedures  Foreign Trade Act, most recently amended  in 2014  
Standards and technical requirements  Framework Act on National Standards, most recently amended in 
2016  
Sanitary and phytosanitary 
requirements  Food Sanitation Act, most recently amended in 2015  
Plant Protection Act, most recently amended in 2 015  
Act on the Prevention of Contagious Animal Diseases, most recently 
amended in 2015  
Government procurement  Government Procurement Act, most recently amended in 2016  
Zones  Act on Designation and Management of Free Economic Zones, most 
recently amended  in 2016  
Tax and incentives  Framework Act on National Taxes, most recently amended in 2015  
Special Tax Treatment Control Act, most recently amended in 2015  
Income Tax Act, most recently amended in 2015  
Corporate Tax Act, most recently amended in 2015  
Inheritance Tax and Gift Tax Act, most recently amended in 2015  
Value Added Tax Act, most recently amended in 2015  
Individual Consumption Tax Act, most recently amended in 2015  
Traffic, Energy and Environmental Tax Act, most recently amended in 
2015 
Act on Spe cial Rural Development Tax, most recently amended in 
2015 
Education Tax Act, most recently amended in 2015  
Securities Transaction Tax Act, most recently amended in 2015  
Competition policy/price controls  Monopoly Regulation and Fair Trade Act (MRFTA), most  recently 
amended in 2015  
State -owned enterprises, 
privatization, and state trading  Act on the Improvement of Managerial Structure and Privatization of 
Public Enterprises, most recently amended in 2013  
Intellectual property rights protection  Utility Mode l Act, most recently amended in 2015  
Patent Act, most recently amended in 2015  
Trademark Act, most recently amended in 2016  
Copyright Act, most recently amended in 2016  
Agriculture  Framework Act on Agriculture and Fisheries, Rural Community and 
Food Ind ustry, most recently amended in 2015  
Energy and natural resources  Energy Act, most recently amended in 2014  
Financial services  Electronic Financial Transactions Act, most recently amended in 2016  
Use and Protection of Credit Information Act, most recentl y amended 
in 2015  
Telecommunications  Framework Act on Telecommunications, most recently amended in 
2015 
Transportation  Marine Transportation Act, most recently amended in 2016  
Foreign investment  Foreign Investment Promotion Act, most recently amended i n 2016  
Source:  Information provided by the authorities.  
2.5.3   Transparency  
2.26.   Korea signed the United Nations Convention against Corruption (UNCAC) in 2003, which 
took effect in April 2008 in the country. Korea continued to make efforts to implement the G20 
Anti-Corruption Action Plan, while regulating to counter money laundering activities using financial 
transactions and prevent crimes by improving the supervision of financial institutions. In addition, 
a Government Welfare Fraud Report Centre was launched in Oct ober 2013: it is a hotline for 
welfare fraud reports to monitor and crack down on illegal payments of government welfare 
benefits. Korea ranked 37th (43rd in 2011) out of 183 countries in 2015 on Transparency WT/TPR/S/346 • Republic of Korea  
 
- 34 - 
 
  International's Corruption Perceptions Index (C PI), which measures the perceived level of public 
sector corruption.16 
2.27.   Korea attaches great importance to ensuring transparency and accessibility of its legislation 
to the public, including foreigners. The Ministry of Government Legislation (MOLEG) makes la ws 
and regulations available on its Internet homepage in English and Korean, and publishes 
regulations affecting foreign trade in the  Consolidated Public Notice on Guidelines of Exports and 
Imports.  The authorities indicated that English translation for mo st of the Acts and Presidential 
Decrees are already available, the MOLEG is making continued efforts to have the Ordinances of 
the Prime Minister and Departmental Ordinances translated into English as well.  
2.28.   The implementation and promotion of anti -corrupti on policy in Korea is an administrative 
goal of the President. The Anti -Corruption & Civil Rights Commission (ACRC) remains the national 
anti-corruption agency. Since the previous Review, a number of anti -corruption laws were 
amended or revised. In particu lar, the Improper Solicitation and Graft Act was promulgated in 
2015 and is to be enforced in September 2016 (one year and six months after its promulgation).17 
This Act aims at eradicating improper solicitations that undermine the performance of public 
officials' duties, and punishing public officials who offer or accept money/gifts/other items of value, 
whether or not such an offer is given in connection with their official duties or in exchange for any 
favours. In accordance with this Act, public official s are to be punished by imprisonment for not 
more than three years or by a fine of not more than ₩30 million (roughly US$30,000) if they 
receive money or other valuables in excess of ₩1 million (roughly US$1,000) at a time, or 
₩3 million (roughly US$3,000)  in a fiscal year from the same person.  
2.29.   Other recent amendments or newly issued legislation related to anti -corruption include:  
a. the Public Interest Whistle -Blower Protection Act, enacted in 2011, to encourage people 
to report violations of the public inte rest (including acts that infringe on the health and 
safety of the public, the environment, consumer interests, and fair competition) to 
prevent such violations;  
b. the Act on Special Cases Concerning Forfeiture for Offences of Public Officials, revised in 
 July 2013, to extend the period for confiscating property from former public officials to 
 ten years, and to allow the forfeit of those criminal proceedings that have been 
 transferred to a third party or a family member;  
c. the Enforcement Decree of the Act  on Regulation of Punishment of Criminal Proceeds 
 Concealment, entered into force in May 2014, to reward up to ₩100 million to a person 
 who contributes to the recovery of criminal proceeds;  
d. the Act on Real Name Financial Transactions and Confidentiality, revised in May 2014, to 
 ban illegal transactions under borrowed names regardless of "consent" between 
 actual owners and individuals whose names are on the account;18 
e. the Public Service Ethics Act, revised in March 2015, to extend the period preventing 
 retired officials from taking jobs in the private sector from two to three years; and  
f. the Act on Combating Bribe ry of Foreign Public Officials in International Business 
 Transactions, revised in October 2014 (see below).  
2.30.   Korea is a signatory to the OECD Convention on Combating Bribery of Foreign Public 
Officials in International Business Transactions. In accordance  with the OECD recommendations, 
the Government revised the Act on Combating Bribery of Foreign Public Officials in International 
Business Transactions in October 2014. As a result, Korean companies face criminal punishment if 
they provide small facilitatio n payments to foreign officials.  
                                                
16 Transpa rency International online information. Viewed at: http://www.transparency.org/cpi2015 . 
17 ACRC online information. Viewed at: http://www.acrc.go.kr/eng_ index.html .  
18 Before the revision, the law allowed transactions under borrowed names when the two parties 
expressed "consent".  WT/TPR/S/346 • Republic of Korea  
 
- 35 - 
 
  2.6  Trade Agreements and Arrangements  
2.6.1   WTO  
2.31.   Korea's trade policies have been re viewed six times, and the last R eview took place in 2012. 
Korea accords at least MFN treatment to all WTO Members, and to 18 non -WTO Members.19 Korea,  
a member of the WTO Committee on Government Procurement, has been implementing the 
revised Agreement on Government Procurement (GPA) since 14 January 2016 (Section 3.2.10). 
Korea is also a party to the Information Technology Agreement (ITA). Korea ratifie d the WTO 
Trade Facilitation Agreement (TFA) on 30  July 2015, the 10th WTO Member to ratify this 
agreement.20  
2.32.   Korea, maintaining its developing country status, participates actively in the WTO work and 
attaches high priority to the successful conclusion of  the Doha Development Agenda. It is part of a 
number of negotiation groups: the Asian Group of Developing Members, the APEC group, the G -10 
group, the G -33 group, the Friends of Anti -Dumping Negotiations (FANs) group, and the Joint 
Proposal (in intellectua l property) group.21 It has developed detailed positions in all negotiation 
areas.  
2.33.   Korea remains a major donor to WTO Trade -Related Technical Assistance (TRTA) activities. 
In December 2015, Korea donated US$350,000 (about SwF 352,735) to the Doha Developme nt 
Agenda Global Trust Fund; this brought Korea's total contribution to WTO trust funds to 
SwF 4.6 million.22 Korea's contribution is to support the WTO's training programmes aimed at 
helping developing countries and least developed countries (LDCs) partici pate more effectively in 
WTO negotiations and other WTO activities. The programmes also help these countries meet their 
WTO obligations and fully benefit from their WTO membership.23 
2.34.   Between May 2012 and 20 June 2016, Korea was directly involved in four dis putes, two as a 
complainant24 and two as a respondent.25 It also participated as a third  party in 33 cases.26 On 
19 April 2016, the United States filed a notice of appeal in the dispute (DS464) with Korea 
                                                
19 These include : Afghanistan, Andorra, Belarus, Bhutan, Ethiopia, Iran, Iraq, Lebanon, Liberia, Monaco, 
Nauru, San  Marino, Som alia, Syrian Arab Republic, Sudan, Union of the Comoros, Uzbekistan, and the Holy 
See. 
20 WTO online news. Viewed at: https://www.wto.org/english/news_e/news15_e/fac_03aug15_e.htm . 
21 WTO online information on negotiation  groups. Viewed at: 
https://www.wto.org/english/tratop_e/dda_e/negotiating_groups_e.htm#grp023 . 
22 WTO online news. Viewed at : https://www.wto.org/english/news_e/pres15_e/pr762_e.htm . 
23 Since its accession to the OECD Development Assistance Committee (DAC) in 2010, Korea has 
actively participated in providin g Official Development Aid (ODA). In 2015, its ODA amounted to 
US$1.91  billion, comprising of US$1.45 billion in bilateral aid, and US$452.7 million in multilateral aid. The 
Korea International Cooperation Agency (KOICA) is the leading implementing agency to grant aid . Ministry of 
Foreign Affairs  (MOFA ) online information. Viewed at: 
http://www.mofa.go.kr/ENG/policy/oda/index.jsp?menu=m_20_110 . 
24 These disputes involved: (i) on 29 August 2013, Korea requested consultations with the United States 
concerning anti -dumping and countervailing measures relating to large residential washers from Korea; (ii) on 
22 December 2014, Korea requested consultations with the United States regarding  certain anti -dumping 
measures on oil country tubular goods (OCTG) from Korea and the investigation methodology underlying such 
measures. In the first case, a panel was established and  a panel report was circulated. On 19  April 2016, the 
United States noti fied the Dispute Settlement Body  (DSB) of its decision to appeal and on 25 April 2016, Korea 
filed a notice of other appeal. In the second case, the parties agreed on the composition of the panel. Viewed 
at: https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds464_e.htm  and 
https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds488_e.htm .  
25 On 21 May 2015, Japan requested consultations with Korea regarding: (i) import bans on certain food 
products; (ii) additional testing and certification requirements regarding the presence of certain radionuclides; 
and (iii) a number of alleged omissions concer ning transparency obligations under the SPS  Agreement. Korea's 
measures were adopted subsequent to the accident at the Fukushima Daiichi nuclear power plant in 
March  2011. The DSB established a panel. Viewed at: 
https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds495_e.htm . On 15 March 2016, Japan requested 
consultation s with Korea regarding measures imposing anti -dumping duties on valves from pneumatic 
transmission from Jap an and the documents and factual information underlying the imposition of those duties. 
Viewed at: https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds504_e.htm . 
26 WTO onli ne information. Viewed at: 
https://www.wto.org/english/thewto_e/countries_e/korea_republic_e.htm . These are cases with dates of 
request for consultation between May 2012 and 12 May 2016.  WT/TPR/S/346 • Republic of Korea  
 
- 36 - 
 
  concerning "anti -dumping and countervailing measures o n large residential washers from Korea".27 
On 25 April, Korea filed a notice of other appeal in DS464.  
2.35.   Korea has submitted a number of notifications to the WTO during the review period 
(Table  A2.1) , although notifications in certain areas (e.g. government p rocurement, and export 
subsidies, special safeguards and domestic support in agriculture) have been subject to long 
submission gaps . The Government plans to submit notifications to the WTO in the areas with 
notification gaps before the end of 2016.  
2.6.2   Regiona l and preferential agreements  
2.36.   Korea continues to actively pursue RTAs with its key trading partners. Over the review 
period, six FTAs entered into force: with China (on 20 December 2015), with New Zealand (on 
20 December 2015), with Viet Nam (on 20 Decembe r 2015), with Canada (on 1 January 2015), 
with Australia (on 12 December 2014), and with Turkey (on 1  May 2013). Korea also signed an 
FTA with Colombia (on 21 February 2013), which has not yet entered into force.28 Korea already 
has RTAs with ASEAN, some As ia-Pacific countries under APTA, Chile, EFTA, the EU, India, Peru, 
Singapore, and the United States. It made early announcements to the WTO of negotiations with 
Mexico and Japan. The key features of these RTAs are set out in Table 2.2.  
Table 2.2 Korea's notified RTAs in force: main features, 2016  
RTAS ENTERED INTO FORCE DURING THE REVIEW PERIOD (2012 –16) 
Korea –China  
Type of agreement  Free trade agreement and economic integration agreement  
Date of signatur e  01/06/2015  
Entry into force  20/12/2015  
End of transition period for Korea  2035 
Coverage (selected features)  Goods and services  
Korea's merchandise trade with China 
(2014)  17.1% of total imports; 25.4% of total exports  
WTO consideration status  Factual presentation not distributed  
WTO document series  WT/REG370/N/1 -S/C/N/854, 2 March 2016  
Korea –New Zealand  
Type of agreement  Free trade agreement and economic integration agreement  
Date of signature  23/03/2015  
Entry into force  20/12/2015  
End of tr ansition period for Korea  2034  
Coverage (selected features)  Goods and services  
Korea's merchandise trade with New 
Zealand (2014)  0.3% of total imports; 0.3% of total exports  
WTO consideration status  Factual presentation not distributed  
WTO document s eries WT/REG367/N/1 -S/C/N/855, 4 January 2016  
Korea –Viet Nam  
Type of agreement  Free trade agreement and economic integration agreement  
Date of signature  05/05/2015  
Entry into force  20/12/2015  
End of transition period for Korea  2029  
Coverage (selec ted features)  Goods and services  
Korea's merchandise trade with Viet  Nam 
(2014)  1.5% of total imports; 3.9% of total exports  
WTO consideration status  Factual presentation not distributed  
WTO document series  WT/REG371/N/1 -S/C/N/861, 10 March 2016  
Korea –Canada  
Type of agreement  Free trade agreement and economic integration agreement  
Date of signature  22/09/2014  
Entry into force  01/01/2015  
End of transition period for Korea  2032 
Coverage (selected features)  Goods and services, investment  
Korea's me rchandise trade with Canada 
(2014)  1.0% of total imports; 0.9% of total exports  
WTO consideration status  Factual presentation distributed  
WTO document series  WT/REG362/N/1 -S/C/N/789, 20 January 2015  
Korea –Australia  
Type of agreement  Free trade agreemen t and economic integration agreement  
                                                
27 WTO online information. Viewed at: 
https://www.wto.org/english/news_e/news16_e/ds464apl_19apr16_e.htm . 
28 UNCTAD online information. Viewed at: 
http://investmentpolicyhub.unctad.org/IIA/CountryOtherIias/111#iiaInnerMenu . WT/TPR/S/346 • Republic of Korea  
 
- 37 - 
 
  Date of signature  08/04/2014  
Entry into force  12/12/2014  
End of implementation period  2033 
Coverage (selected features)  Goods and services, investment  
Korea's merchandise trade with Australia 
(2014)  3.9% of total  imports; 1.8% of total exports  
WTO consideration status  Factual presentation distributed  
WTO document series  WT/REG 359/N/1 -S/C/N/786, 22 December 2014  
Korea –Turkey  
Type of agreement  Free trade agreement  
Date of signature  01/08/2012  
Entry into force  01/05/2013  
End of implementation period  2023 
Coverage (selected features)  Goods  
Korea's merchandise trade with Turkey 
(2014)  0.1% of total imports; 1.2% of total exports  
WTO consideration status  Factual presentation distributed  
WTO document series  WT/REG339/N/1, 1 May 2013  
RTAS ENTERED INTO FORCE BEFORE 2012  
ASEAN –Republic of Korea Free Trade Area (AKFTA)  
Type of agreement  Free trade agreement and economic integration agreement  
Date of signature  24/08/2006 (goods)  
21/11/2008 (services)  
Entry in to force  01/01/2010 (goods)  
01/05/2009 (services)  
End of transition period for Korea  On 1 June 2007 for goods, and on 1 May 2009 for services.  
 
Korea's tariff rates on 90.8% of all products were reduced gradually to 
zero in 2010, and the rates on 5.4% of  items are to be reduced to a 
range from zero to 5% by 2016. Trade in 3.1% of tariff items are 
liberalized in four  ways: 50% tariff rate capping; tariff reduction by 
20%; tariff reduction by 50%; or tariff quota system. The remaining 
0.77% of tariff items (including rice) are exempted from tariff 
concessions.  
Coverage (selected features)  Goods and services. A Korea –ASEAN FTA in Trade in Investment was 
signed on 2 June 2009, and entered into force in September 2009 for 
Korea.  
Korea's merchandise trade wit h ASEAN 
(2014)  10.2% of total imports; 14.8% of total exports  
WTO consideration status  Factual presentation not distributed  
WTO document series  WT/REG287/N/1 -S/C/N/559, 8 July 2010; and 
WT/COMTD/N/33 -S/C/N/560, 8 July 2010  
Asia-Pacific Trade Agreement ( APTA)  
Parties  Bangladesh; China; India; Korea, Republic of; Lao People's Democratic 
Republic; Sri Lanka  
Type of agreement  Partial scope agreement  
Date of signature  31/07/1975  
Entry into force  17/06/1976  
Remarks  Formerly known as "Bangkok Agreement".  Entry into force of the 
amended Agreement: 01/09/2006.  
End of implementation period  02/11/1976  
Under this agreement, Korea grants concessions on 1,367 ten -digit HS 
items.  
Coverage  Goods  
Korea's merchandise trade with other 
APTA members (2014)  18.2% of total imports; 27.9% of total exports  
WTO consideration status  Report adopted  
WTO document series  WT/COMTD/N/22, 27 July 2007; WT/COMTD/ 62, 27 July 2007  
Korea –Chile  
Type of agreement  Free trade agreement and economic integration agreement  
Date of signature  01/02/2003  
Entry into force  01/04/2004  
End of transition period for Korea (goods 
liberalization)  Korea undertook to eliminate tariffs on over 96% of its tariff lines within 
ten years, under a phased elimination schedule.  
Coverage (selected fe atures)  Goods, services, investment  
Korea's merchandise trade with Chile 
(2014)  0.9% of total imports; 0.4% of total exports  
WTO consideration status  Factual presentation distributed  
WTO document series  WT/REG 169/N/1 -S/C/N/302,  19 April 2004  
Korea –EFTA  
Parties  Iceland; Liechtenstein; Norway; Switzerland; Korea, Republic of  
Type of agreement  Free trade agreement and economic integration agreement  
Date of signature  15/12/2005  
Entry into force  01/09/2006  
End of transition period for Korea (goods Korea eliminated tariffs on 88% -88.5% of its tariff lines (excluding basic WT/TPR/S/346 • Republic of Korea  
 
- 38 - 
 
  liberalization)  agricultural items) by 2016.  
Coverage (selected features)  Goods and most services  
Korea's merchandise trade with EFTA 
members (2014)  1.1% of total imports; 0.4% of tot al exports  
WTO consideration status  Factual presentation distributed  
WTO document series  WT/REG217/N/1 -S/C/N/373, 28 August 2006  
Korea –EU 
Type of agreement  Free trade agreement and economic integration agreement  
Date of signature  06/10/2010  
Entry in to force  01/07/2011  
End of transition period for Korea (goods 
liberalization)  By the end of the implementation period (2031), 11,843 of Korea's tariff 
lines (99.5%) will be duty -free for imports from the EU, representing 
more than 99.99% of the value of K orea's imports from the EU; 
practically all customs duties on industrial goods will be fully removed 
within the first five years of implementation;  
Korea's 40% customs duty on beef is to be phased out over a period of 
16 years; rice and a few other agricu ltural products (57 tariff lines), of 
which the EU is not a significant exporter, are excluded from the 
agreement.  
Coverage (selected features)  Goods and services  
Korea's merchandise trade with the EU 
(2014)  11.9% of total imports; 9.1% of total exports  
WTO consideration status  Factual presentation distributed  
WTO document series  WT/REG296/N/1 -S/C/N/594, 8 July 2011  
Korea –India  
Type of agreement  Free trade agreement and economic integration agreement  
Date of signature  07/08/2009  
Entry into force  01/01/2010  
End of implementation period  Korea eliminated or reduced immediately tariffs on 93% of tariff items 
and 90% of the trade value of Indian goods. Trade liberalization 
excludes highly sensitive agriculture, fisheries and forestry products.  
Coverag e (selected features)  Goods, services  
Korea's merchandise trade with India 
(2014)  1.0% of total imports; 2.2% of total exports  
WTO consideration status  Factual presentation not distributed  
WTO document series  WT/REG 286/N/1 -S/C/N/558, 1 July 2010; WT/COM TD/N/36 -S/C/N/570, 
29 September 2010  
Korea –Peru  
Type of agreement  Free trade agreement and economic integration agreement  
Date of signature  21/03/2011  
Entry into force  01/08/2011  
End of implementation period  2027. All tariffs on the items currently t raded between the two countries 
will be eliminated within ten  years. Both parties agreed to exclude rice 
from all concessions. Korea limits preferential treatment on several 
other sensitive agricultural goods with seasonal tariffs or safeguard 
measures.  
Coverage (selected features)  Goods, services  
Korea's merchandise trade with Peru 
(2014)  0.3% of total imports; 0.2% of total exports  
WTO consideration status  Factual presentation distributed  
WTO document series  WT/REG298/N/1 -S/C/N/598, 10 August 2011  
Korea–Singapore  
Type of agreement  Free trade agreement and economic integration agreement  
Date of signature  04/08/2005  
Entry into force  02/03/2006  
End of implementation period  Immediate liberalization of 59.7% of Korea's goods imports from 
Singapore. T he end of the implementation period is 2016.  
Coverage (selected features)  Goods and services  
Korea's merchandise trade with Singapore 
(2014)  2.2% of total imports; 4.2% of total exports  
WTO consideration status  Factual presentation distributed  
WTO docu ment series  WT/REG210/N/1 -S/C/N/363, 24 February 2006  
Korea –United States (KORUS FTA)  
Type of agreement  Free trade agreement and economic integration agreement  
Date of signature  30/06/2007  
Entry into force  15/03/2012  
End of implementation period  2031. Korea undertook to eliminate tariffs on 96% of its 
non-agricultural tariff lines within five years, with virtually all remaining 
tariffs eliminated within ten years. Tariffs and quotas on a broad range 
of agricultural products will be eliminated immediat ely or phased out; 
40% of Korea's agricultural product tariff lines or almost two thirds (by 
value) of its agriculture imports from the United States became duty -
free upon entry into force.  
Rice is exempted from any tariff obligation.  
Coverage (selected f eatures)  Goods, services  WT/TPR/S/346 • Republic of Korea  
 
- 39 - 
 
  Korea's merchandise trade with the United 
States (2014)  8.7% of total imports; 12.3% of total exports  
WTO consideration status  Factual presentation distributed  
WTO document series  WT/REG311/N/1 -S/C/N/621, 16 March 2012  
Source:  WTO Secretariat, based on information from the WTO RTA database. Viewed at: 
http://rtais.wto.org/UI/PublicSearchByMemberResult.aspx?MemberCode=410&lang =1&redirect=1 ; 
UNCTAD online information. Viewed at: 
http://investmentpolicyhub.unctad.org/IIA/CountryOtherIias/111#iiaInnerMenu ; and information 
provided by the a uthorities.  
2.37.   Korea is also a party to the Trade in Services Agreement (TISA) negotiations. In 
November  2012, the launch of Korea -China -Japan RTA and the RCEP (Regional Comprehensive 
Economic Partnership) negotiations were officially announced. Korea is cur rently negotiating 
bilateral FTAs with six Central American countries (El Salvador, Panama, Guatemala, Honduras, 
Nicaragua and Costa Rica) and with Ecuador. On 24 May 2016, Korea reached an agreement with 
Israel to launch FTA negotiations.  
2.38.   Korea also provi des preferential tariff treatment to a limited number of imports from other 
developing countries.29 Based on the 2016 tariff schedule in HS 2012 nomenclature:  
a. out of 30 ten -digit HS 2012 tariff items subject to tariff preferences for 43  countries 
under the  Global System of Trade Preferences  (GSTP), 9 are subject to a rate lower than 
the MFN applied rate;  
b. under the GATT Protocol Relating to Trade Negotiations Among Developing Countries 
(TNDC) for 12 countries, out of 22 ten -digit HS 2012 tariff items, 6 are subject to a rate 
lower than the MFN applied rate.  
2.39.   In 2015, annual imports subject to actual preferential rates under these schemes were: 
US$32.3 million or 0.01% of total imports under the GSTP, and no imports under the TNDC.  
2.6.3   Preferential trade agreement s 
2.40.   Korea has been providing duty -free market access for imports from 48 UN -defined least 
developed countries (LDCs) (Table 3.2). On the other hand, Korea, as a developing country, is 
eligible for trade preferences under the GSP schemes of Australia, Belarus , Kazakhstan, and the 
Russian Federation.30  
2.6.4   Other agreements and arrangements  
2.6.4.1   Asia-Pacific Economic Cooperation (APEC)  
2.41.   APEC's trade efforts focus on its members meeting unilateral targets for liberalization and 
for better quality measures in a broad range of areas, from customs procedures and standards to 
subsidies and contingency measures.31 Korea intends to meet APEC's voluntary target of free and 
open trade, including in services and investment by 2020. Korea's latest IAP (Individual Action 
Plan) on the a ssessment of achievements of the Bogor Goals, which is a roadmap (updated every 
two years) containing APEC members' intended actions in 15  policy areas to achieve APEC's 
liberalization goals, was done in 2014.32 According to this IAP, Korea planned to make further 
improvements in the following areas: tariffs; non -tariff measures; services; investment; standards 
and conformance; customs procedures; intellectual property rights; government procurement; and 
deregulation and regulatory review.  The authorities in dicated that an update for 2016 was 
submitted.  
                                                
29 WTO RTA database. Viewed at: 
http://rtais.wto.org/UI/PublicShowMemberRTAIDCard.aspx?rtaid=146 . 
30 WTO PTA database. Viewed at: http://ptadb.wto.org/Country.aspx?code=410 . 
31 APEC's 21 member economies are: Australi a; Brunei Darussalam; Canada; Chile; China; 
Hong Kong,  China; Indonesia; Japan; Republic of Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; 
Peru; the Philippines; Russian Federation; Singapore; Chinese Taipei; Thailand; the United States; and 
Viet Nam.  
32 APEC online information. Viewed at: http://www.apec.org/About -Us/About -
APEC/Achievements%20and%20Benefits/2014 -Bogor -Goals.aspx . WT/TPR/S/346 • Republic of Korea  
 
- 40 - 
 
  2.6.4.2   Asia-Europe Meetings (ASEM)  
2.42.   The Asia -Europe Meetings are informal dialogues and cooperation programmes among 
53 European and Asia -Pacific partners33. Summits are held every two years with discussions on a 
range of economic, political, security and social issues. ASEM has been working on a Trade 
Facilitation Action Plan (TFAP) for some years, aiming to reduce non -tariff barriers, increase 
transparency, and promote trade opportunities within the two regions. It s pecifies biannual goals 
in the priority areas of customs, standards and conformity assessment, public procurement, 
quarantine and SPS, intellectual property, mobility of business people, and other trade activities, 
such as market access in distribution.  
2.6.4.3   Trade with the Democratic People's Republic of Korea  
2.43.   Korea regards trade with the Democratic People's Republic of Korea  as intra -Korean 
commerce in accordance with the 1992 Agreement on Reconciliation, Non -Aggression and 
Exchange and Cooperation. Such trade  is therefore exempt from tariffs, although approval must be 
obtained from the Minister of Unification of the kind of products traded, the type of transaction, 
and the settlement method. However, trade with the Democratic People's Republic of Korea  has 
been prohibited since 24 May 2010, except for goods manufactured in the Gaeseong Industrial 
Complex (located in the Democratic People's Republic of Korea ). On 10  February  2016, the 
Government closed down the Gaeseong Industrial Complex (Section 3.2.6).  
2.7  Foreig n Direct Investment  
2.7.1   Overview  
2.44.   According to the World Bank's Doing Business 2016 report, Korea's rank improved further 
from 8th in 2012, to 4th in 2016 out of 183 countries in overall terms of the ease of doing 
business.34 It ranked 23rd in terms of the ease  of starting a business, up from 24th in the 2012 
report. According to the 2016 report, entrepreneurs have to go through 3 steps to start a 
business, which takes on average 4  days; in the OECD area, the average is 4.7 procedures and 
8.3 days.35 Korea abides  by OECD Codes of Liberalization of Capital Movements and of Current 
Invisible Operations, and the National Treatment Instrument.  
2.45.   The main legislation governing foreign investment, the Foreign Investment Promotion Act, 
was most recently amended in January 2016 (by Act No. 13426, which will enter into force on 
28 August  2016), with a view to simplifying procedures including those for FDI notifications and 
registrations. Recent a mendments to the Foreign Investment Promotion Act also allowed 
exceptions to the Monopoly Regulation and Fair Trade Act. In accordance with the Monopoly 
Regulation and Fair Trade Act, to prevent excessive concentration of economic power, every 
second -tier subsidiary of a general holding company is prohibited from holding stocks of any 
domestic affiliate, except when a second -tier subsidiary holds the total outstanding stocks of a 
domestic affiliate company. However, the amended Foreign Investment Promotion Act allows 
second -tier subsidiaries to hold 50% or more of the domestic affiliate , while the foreign partner 
holds 30% or more.36  
2.46.   FDI is regulated by the Foreign Investment Committee, which consists of representatives of 
various agencies and ministries including the MOSF and the MOTIE. The central and local 
government agencies designat e foreign investment promotion offices to provide support for foreign 
investment, and the Korea Trade -Investment Promotion Agency (KOTRA) facilitates and promotes 
FDI (Section 2.3). KOTRA operates a number of Korea Business Centres (KBCs) worldwide. The 
main business arm of KOTRA – InvestKorea, functions as a one -stop shop for foreign investors. 
The Office of the Foreign Investment Ombudsman (and its grievance resolution body), under 
                                                
33 The partners are: the 28 EU member States , the European Commission, the ASEAN 10 , the ASEAN 
Secretariat, and Australia, China, India, Japan, Republic of Korea, Mongolia, New Zealand, Pakistan, and the 
Russian Federation.  
34 World Bank online information. Viewed at: 
http://www.doingbusiness.org/data/exploreeconomies/korea/ . 
35 World Bank online information. Viewed at: 
http://www.doingbusiness.org/data/exploreeconomies/korea/ #starting -a-business . 
36 KOTRA (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 41 - 
 
  KOTRA, handles specific grievances encountered by foreign investors in Kor ea. The number of 
cases handled by the Office of the Foreign Investment Ombudsman increased from 383 in 2013 to 
462 in 2015.37  
2.47.   The Government tries to attract FDI by issuing an FDI Promotion Policy annually. The main 
target is to attract high -value -added p rojects by making the regulatory environment more 
business friendly and enhancing policy transparency.38 Also, meetings between foreign investors 
and relevant government officials have been held regularly since 2015, to facilitate communication 
between the two sides. The Government introduced a global headquarter and R&D centre 
programme in October 2014: employees working at global headquarters and R&D centres may 
obtain cash grants and income tax reductions or exemptions. Furthermore, from October 2014, 
businesses renting state/public properties began to benefit from different discount rates on their 
rents depending on the number of job opportunities created.  
2.48.   Prior notification by foreign investors is needed: foreign investors or their agents must 
inform KO TRA, Korean Business Centres (KBC) of KOTRA, headquarters and branches of foreign 
exchange banks, or domestic branches of delegated foreign banks, of their investment. According 
to the Banking Act, Insurance Business Act, and Financial Investment Services and Capital Market 
Act, foreign financial institutions must be approved by the Financial Services Commission (FSC). 
Approval from the Government is only required in the case of financial services and the defence 
industry .39 
2.49.   Land acquisition by foreigners in  Korea is governed by the Foreign Investment Promotion 
Act, the Foreigner's Land Acquisition Act, and the Foreign Exchange Transactions Act. Acquisition 
procedures are different for those areas requiring permission, and those requiring reporting. The 
autho rities stated that regulations and limitations on the acquisition, usage, and development of 
land are applied uniformly to Koreans and to foreign nationals.  
2.7.2   FDI restrictions  
2.50.   Except as otherwise prescribed by other legislation of the Republic of Korea, a f oreigner may 
conduct, without restraint, various activities related to  foreign investment in the country. Foreign 
investment restrictions apply in the following cases: where it threatens the maintenance of 
national safety and public order; where it has har mful effects on public hygiene or environmental 
preservation or is against Korean morals and customs; and where it violates the Acts and 
subordinate statutes of the Republic of Korea. According to the authorities, out of a total of 
1,145  categories of busi nesses under the Korean Standard Industrial Classification (KSIC), foreign 
investment is not permitted in 60 categories (5.2%) of businesses including public administration, 
diplomacy, and national defence (unpermitted category of business), while it is pa rtially permitted 
in 29 categories (2.5%) of businesses (restricted category of business), as prescribed by the 
Foreign Investment Promotion Act (Table 2.3).  
Table 2.3 FDI restricted sectors  
Sector/business  FDI limitation  
A. Closed   
Nuclear power generation  Wholly closed  
Broadcasting   
 Radio broadcasting  Wholly closed  
 Over-the-air broadcasting  Wholly closed  
B. Partially closed   
Growing of crops  Allowed, except for rice and barley growing  
Farming of a nimals  Allowed, except for beef cattle (less than 50% foreign equity)  
Fishing  Allowed, except for inshore and coastal fishing (less than 50% 
foreign equity)  
Manufacture of chemicals and chemical 
products, and manufacture of basic Allowed, excluding the manufacture and supply of fuel for nuclear 
power generation  
                                                
37 Office of the Foreign Investment Ombudsman (2016).  
38 Foreign Investment Regulatory Reforms Plan, 6 May 2015. Viewed at: 
http://www.investkorea.org/en/news/notice.do?mode=download&articleNo=32701&attachNo=7561 . 
39 Where a foreign investor intends to make foreign investment in a defence industry company, the 
foreign investor must obtain permission from the MOTIE in advance. The MOTIE must consult with the Ministry 
of National Defence before determining on the permission.  WT/TPR/S/346 • Republic of Korea  
 
- 42 - 
 
  Sector/business  FDI limitation  
metal products  
Electricity    
 Hydroelectric, fire, and other power 
 generation (except for nuclear power 
 generation)  Foreign nationals may pu rchase from the KEPCO (Korea Electric 
Power Corporat ion) no more than 30% of all domestic power 
generation facilities  
 Transmission and distribution of 
 electric power  Less than 50% foreign equity, and the largest shareholder is Korean  
Waste collection, disposal and material 
recovery  Allowed, except for d isposal of radioactive waste  
Wholesale trade and commission trade  Allowed, except for wholesale of meat (less than 50% foreign equity)  
Water transport  Allowed between the Republic of Korea and the Democratic People's 
Republic of Korea ; less than 50% fore ign equity ; foreign investors 
must enter into joint ventures with domestic shipping companies  
Not allowed for coastal water passenger/freight transport  
Air transport  Less than 50% foreign equity  
Supporting air transport activities  Allowed, except for ai rcraft maintenance, repair and overhaul (less 
than 50% foreign equity)  
Publishing activities    
 Publishing of newspapers  Less than 30% foreign equity  
 Publishing of magazines and 
 periodicals  Less than 50% foreign equity  
Broadcasting    
 Programme dist ribution  No more than 49% foreign equity (no more than 20% foreign equity 
for general service programming; and no more than 10% foreign 
equity for specialized programming of news reports)  
No foreign equity restriction for:  
(1) programme providers, except for general service programming, 
specialized programming of news reports, or specialized 
programming of sales;  
(2) according to the FTA between Korea and the United States  
 Cable networks  No more than 49% foreign equity (wholly closed for cable CATV 
broadcasting business)  
 Broadcasting via satellite and other 
 broadcasting  No more than 49% foreign equity (no more than 20% foreign equity 
for general service programming; and no more than 10% foreign 
equity for specialized programming of news reports)  
No foreign equity restriction for:  
(1) Internet mul timedia broadcast services, except for general 
service programming, specialized programming of news reports, or 
specialized programming of sales;  
(2) according to the FTA between Korea and the United States  
Telecommunications (wired, wireless, 
satellite, and other telecommunication)  No more than 49% foreign equity (no more than 20% foreign equity 
for Internet multimedia broadcast service which provide general 
service programming or specialized programming of  news reports)  
No foreign equity restriction for:  
(1) taking  the examination of the Public Interest Examination 
Committe e; 
(2) under  the FTA between Korea and the United States, and 
between Korea and the EU  
Information service activities  Allowed, except for news agency activit ies (less than 25% foreign 
equity)  
Financial institutions  Allowed, except for special banks  
Source:  Information provided by the Korean authorities.  
2.51.   Since the previous Review, there have not been any major changes in the country's F DI 
restrictions. However, some changes were made regarding the broadcasting and 
telecommunications sectors. In 2015, the Government stipulated exceptions to foreign investment 
restrictions in domestic laws40 regarding the broadcasting sector (including prog ramme distribution 
and internet multimedia broadcast services) and telecommunications businesses, to reflect the 
requirements of some RTAs.  
                                                
40 These include the Broadcasting Act, Internet Multimedia Broadcasting Business Act, and 
Telecommunications Business Act.  WT/TPR/S/346 • Republic of Korea  
 
- 43 - 
 
  2.7.3   FDI incentives  
2.52.   The Government has been providing various incentives to attract foreign investment. The 
incentives ty pically take the form of tax incentives, cash grants, and industrial site support.  
2.7.3.2   Tax incentives  
2.53.   Korea provides a range of tax incentives for FDI (Table 2.4). They are provided for limited 
periods and on an MFN basis. Minimum investment requirements appl y in some cases.  
Table 2.4 Summary of FDI tax incentives, 2016  
(a) National tax (corporation tax, income tax) and local taxa (acquisition tax, property tax) reductions  
 
Business category  Investment amount  Reduction period and details  
Industry support services & high degree technology businesses  Seven years in total according to 
the following ratio (amount 
multiplied by the foreign 
investment ratio)  
- 100% for five years after 
income creation  
- 50% for next tw o years  Businesses in stand -alone -type foreign investment zones (FIZ)b 
Manufacturing  Over US$30 million  
Tourism  Over US$20 million  
Logistics  Over US$10 million  
R&D Over US$2 million, with more than 
10 employees with Ma ster's degree or 
above  
Businesses in free economic zones (FEZ), including Saemangeum 
Area Five years  in total  according to 
the following ratio (amount 
multiplied by the foreign 
investment ratio)  
- 100% for three years after 
income creation  
- 50% for next two years  
Manufacturing  Over US$10 million   
Tourism  Over US$10 million   
Logistics  Over US$ 5 million   
Medical institutions  Over US$ 5 million   
R&D Over US$1  million   
Free economic zones (FEZ), including Saemangeum Area, 
developers   
 Over US$30 million; over 50% of 
foreign share s and US$500 million on 
business costs   
Jeju investment promotion district developers   
 Over US$10 million; over 50% of 
foreign shares and US$100 million on 
business costs   
Businesses in complex -type foreign investment zones (FIZ)b  
Manufacturing  Over US$10 million   
Logistics  Over US$ 5 million   
Businesses in business city development zones   
Manufacturing  Over US$10 million   
Engineering   
Additional communication   
Information processing & other 
computer operation -related 
businesses   
Science & te chnology services   
Tourism   
Culture industry   
Various facilities   
Renewable energy generation   
R&D Over US$ 2 million   
Logistics  Over US$5 million   
Business city developers   WT/TPR/S/346 • Republic of Korea  
 
- 44 - 
 
   Over US$30 million;  over 50% of 
foreign shares and US$500 million on 
business costs   
Businesses in free trade zones   
Manufacturing  Over US$10 million with more than 
100 full-time employees  
Logistics  Over US$5 million  
 
(b) Exemption of tariffs, special excise tax, VAT, etc.  
 
Business category  Taxes  Items  Remarks  
Indus try support services & high 
degree technology businesses  Tariff;  individual 
consumption 
tax; VAT Capital goods imported 
with invested cash or as 
investment objects  On condition of 
import within  five 
years from the day of 
declaring foreign 
investment  Busin esses in stand -alone -type 
foreign investment zones (FIZ)  Tariff;  individual 
consumption 
tax; VAT 
Free economic zones (FEZ), 
including Saemangeum Area, 
developers  Tariff 
Jeju investment promotion district 
developers  
Businesses in complex -type 
foreign investment zones (FIZ)  
Businesses in free trade zones 
(FTZ)  
a According to the local government regulations, the period of local tax reduction may be extended up 
to 15 years, or the reduction ratio may be increased.  
b Free export zones (Iksan, Massan) are considered as stand -alone -type foreign investment zones, 
with no limitations on investment amount for establishing factory facilities.  
Source:  Information provided by the Korean authorities.  
2.54.   As tax incentives may contribute to inefficient alloc ation of resources, and their cost 
effectiveness is questionable, the Government has been paying attention to ensure that the 
financial and efficiency costs of incentives do not exceed their stated benefits. Efforts made in this 
regard include:  
a. establishin g the maximum amount of cumulative tax incentives to prevent excessive tax 
exemptions and reductions, i.e. the amount equals 50% (or 40%) of accrued foreign 
investment in the case of 7 -year (or 5 -year) tax exemptions and reductions;  
b. establishing the maximu m amount of ceiling extension for job creation, i.e. the amount 
equals 40% (or 30%) of accrued foreign investment in the case of 7 -year (or 5 -year) tax 
exemptions and reductions;  
c. publishing annually tax expenditures for the previous/current/following years , to improve 
transparency in the tax incentive system.  
2.7.3.3   Cash grants  
2.55.   Where foreign investment meets certain conditions, the central and local governments 
provide cash grants for projects such as the construction of a new factory. These conditions 
include wh ether the relevant foreign investment incorporates advanced technology, the effect of 
technology transfer, the extent of job creation, the "propriety of the location" in which foreign 
investment is to be made, and the effect on the local and national econo my. The exact cash grant 
ratio is determined through negotiations with the investor. To be eligible for cash grants, a foreign 
investor must own at least 30% of the equity.41  
                                                
41 KOTRA (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 45 - 
 
  2.7.3.4   Industrial site support  
2.56.   In accordance with the Foreign Investment Promotion Act, the Special Act on Designation 
and Management of Free Trade Zones, and the Special Act on Designation and Management of 
Free Economic Zones, t he Government may designate foreign  investment zones (FIZs), free trade 
zones (FTZs), and free economic zones (FEZ s) to attract foreign investment (Table 2.5). The 
locations designated for FDI may vary in terms of eligibility for occupation, targeted industries, 
and investment incentives (rent, taxation, customs duty, and cash grants) (Table A2.2).  
Table 2.5 Industrial sites for foreign investors as of 2016  
Industrial site system  Designated region  No. of locations  
Foreign 
investment zone  Complex -type  Jangan H igh-Tech Industrial Complex 
No. 1 & No. 2, Oseong Industria l 
Complex, Dang -dong Industrial Complex, 
Cheonan Industrial Complex, Cheonan 
Industrial Complex No.  5, Inju Industrial 
Complex, Ochang Industrial Complex, 
Woljeon Industrial Complex, Daebul 
Industrial Complex, Iksan Industrial 
Complex (parts), Mieum Parts Industrial 
Complex in Busan, Sacheon Industrial 
Complex, Jisa Industrial Complex, 
Changwon Industrial Complex (parts), 
Dalseong Industrial Complex, Pohang 
Industrial Complex (parts), Gumi 
Industrial Complex (parts), Munmak 
Industrial Complex, Jincheon -Sansu 
Industrial Complex, Songsan 2 Industrial 
Complex, Iksan Food Cluster  21  
Individual -type  
 
 
Service -type Manufacturing industry (65 companies), 
service industry (10 companies)  
 
IDS-K (Daejeon)  75  
 
 
1 
* Rental complex 
for foreign -
invested 
companies in 
Gyeonggi 
Province  Hyeongok Industrial Complex, Poseung Industrial Complex, 
Chupal Industrial Complex, Eohyeon -Hansan Industrial Complex  4  
Free trade zone  Industrial complex -
type  Ulsan Free Trade Zone, East Sea Free 
Trade Zone, Gunsan Free Trade Zo ne, 
Gimje Free Trade Zone, Daebul Free 
Trade Zone, Yulchon Free Trade Zone, 
Masan Free Trade Zone  7  
Ports and airports -
type  Port of Busan, Port of Pohang, Dangjin -
Pyeongtaek Port, Port of Gwangyang, 
Port of Incheon, Incheon International 
Airport  6  
Free economic 
zone  Busan -Jinhae Free Economic Zone, Gwangyang Bay Area Free 
Economic Zone, Incheon Free Economic Zone, Yellow Sea Free 
Economic Zone, Daegu -Gyeongbuk Free Economic Zone, 
Saemangeum -Gunsan (Saemangeum project area) Free 
Economic Zone, East Coast Free Economic Zone, Chungbuk Free 
Economic Zone  8  
Source:  KOTRA (2015), Doing Business in Korea , 24 September. Viewed at: 
http://www.investkorea.org/e n/published/publications.do?mode=view&articleNo=71376 . 
2.7.4   Other  
2.57.   Korea is a member of the World Bank 's Multilateral Investment Guarantee Agency (MIGA), 
the International Convention on the Settlement of Investment Disputes between States and 
Nationals of othe r States (ICSID Convention), and party to the Convention on the Recognition and 
Enforcement of Foreign Arbitral Awards (the New York Convention). Several of its RTAs contain WT/TPR/S/346 • Republic of Korea  
 
- 46 - 
 
  investment provisions, such as those with Australia, Canada, Chile, China, Colombi a, India, Peru, 
Singapore, and the United States.42  
2.58.   Korea has 95 bilateral investment treaties (BITs) in force. During the review period, Korea 
signed a BIT with Myanmar (in 2014), which has not yet entered into force.  
2.59.   As of end -July 2015, Korea has bilat eral tax treaties (conventions for the avoidance of 
double taxation and the prevention of fiscal evasion with respect to taxes on income and capital) in 
force with 85 countries. The MOSF considers that, in addition to the primary objective of avoiding 
international juridical double taxation, tax treaties serve purposes such as promoting the 
introduction of advanced technology and capital from abroad as well as encouraging business 
expansion of domestic companies in foreign countries.43 Among the 85 bilateral  tax treaties, eight 
entered into force since 2012 (with Bahrain, Colombia, Ecuador, Gabon, the Kyrgyz  Republic , 
Panama, Peru, and Uruguay).  
2.60.   The authorities indicated that Korea does not maintain any restrictions on investment 
abroad. Investors are require d to give their bank prior notice or an ex post facto  report.  
 
 
                                                
42 UNCTAD o nline information. Viewed at: 
http://investmentpolicyhub.unctad.org/IIA/CountryOtherIias/111#iiaInnerMenu . 
43 Ministry of Strategy and Finance (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 47 - 
 
  3  TRADE POLICIES AND P RACTICES BY MEASURE  
3.1  Introduction  
3.1.  Since its previous Trade Policy Review, the general thrust of the Republic of Korea's trade 
policy has remained relatively unchanged. Whil e no unilateral liberalization has been undertaken, 
there have been policy developments in certain areas including trade facilitation, rice tariffication, 
preferential trade agreements, sanitary and phytosanitary requirements, government 
procurement, compe tition policy, and intellectual property rights. Some measures continue to 
protect domestic producers, especially farmers, from foreign competition.  
3.2.  The tariff remains one of the main trade policy instruments and a significant, albeit declining, 
source of  tax revenue (3.9% of total tax revenue in 2015). Although most tariff lines are 
ad valorem , and therefore transparent, the tariff involves a multiplicity of rates (85  ad valorem 
duties, 44  alternate duties, and 1 specific duty). As a result of the inserti on of 16 tariff lines at 
513% (rice and rice products), the splitting of tariff lines with high rates and the merger of tariff 
lines with low rates, the average applied MFN  tariff rate increased from 13.3% in 2012 to 14.1% in 
2016, which remains high by OE CD-country standards, thereby requiring tariff concessions or 
drawbacks to ensure that tariffs on intermediate inputs do not become taxes on exports; these 
measures add to the complexity of border taxation.  
3.3.  Peak ad valorem  rates continue to apply to agric ulture (WTO definition). Tariff rates range 
from zero to 887.4% (manioc); similarly to 2012, 85% of rates were at 10% or below. Under its 
multilateral agricultural market -access commitments, Korea applies tariff -rate quotas; some of its 
out-of-quota rates are sufficiently high to, in effect, constitute quantitative restrictions whereas 
in-quota tariff rates are much lower, ranging from zero to 50%. Nevertheless, the persistently 
large proportion of these quotas that are unfilled is largely due to lack of su fficient domestic 
demand as well as an increase in international prices, more imports from regional (or bilateral) 
free trade agreement (RTA/FTA) partners, or sanitary measures related to the outbreak of 
diseases in exporting countries, rather than the adm inistration and allocation of these quotas. 
Other measures, such as autonomous tariff quotas that selectively reduce tariffs on inputs, are a 
potential impediment to efficient resource use and add to tariff complexity and uncertainty.1 While 
90.1% of tarif f rates are bound, the average gap of 4.4  percentage points between applied and 
bound MFN rates (8.6 percentage points for agricultural items (WTO definition)), allows leeway to 
raise applied tariffs. Indeed, Korea has used this leeway to apply higher MFN tariff rates, termed 
"flexible tariffs", which the authorities maintain are within WTO bindings; during the review period 
the role of the "flexible tariffs" on price stabilization was reduced , inter alia, due to low inflation. 
Korea intends to reduce, or r emove gradually, non -ad valorem  tariffs, and "flexible tariffs" in line 
with the reduction undertakings resulting from RTAs/FTAs.  
3.4.  Korea's customs clearance performance is welcome  at international level. During the review 
period , its trade facilitation deve lopments include the ratification of the WTO Trade Facilitation 
Agreement (TFA) in 2015, the expansion of its authorized economic operator -related mutual 
recognition arrangements, and the introduction of a de minimis clearance process for consumption 
goods  purchased online as from 2014. Regarding customs valuation, it reduced the dutiable freight 
charge for express cargo with a weight of 3  kg or less, passed legislation allowing the joint 
application of a unilateral advance pricing arrangement, and enacted an advance customs 
valuation arrangement. RTA/FTA promotion activities to help companies utilize trade preferences 
inter alia  subject to diverse and complicated rules of origin were continued.  
3.5.  Rice import quotas under Korea's WTO minimum market access (MMA ) commitments were 
replaced as of 1 January 2015 by a tariff -rate quota of 5% and a virtually prohibitive 513% 
out-of-quota duty. Import licensing requirements cover numerous tariff items and prohibitions are 
maintained mostly for the protection of public morals, human health, hygiene and sanitation, 
animal and plant life, environmental conservation, or essential security interests in compliance 
with domestic legislation requirements or international commitments. Korean industrial standards 
have been reduce d over the review period and those adopted in mandatory technical regulations 
decreased by 39%; the share of those harmonized with international standards increased. During 
the review period, a mandatory organic certification programme was introduced and c hanges were 
made, inter alia,  in the areas of reporting, declaration of conformity, testing and environmental 
                                                
1 The authorit ies consider that autonomous tariff quotas are raising efficiency of resource use.  WT/TPR/S/346 • Republic of Korea  
 
- 48 - 
 
  impact review as well as maximum residue limits, food additives, and genetically engineered 
animals. As of 2015, Korea has been shifting its maxim um residue limits system to a new "positive 
list" system (PLS) for agrochemical residues inhibiting the use of non -registered pesticides which 
are not evaluated by scientific assessment. A traceability system for infant/baby food and health 
functional food s, labelling requirements for tobacco health warnings and biotech crops and food 
were introduced. During the period under review, recourse to anti -dumping action doubled; Korea 
continued to use anti -dumping provisions, mainly against imports of chemicals, plastics, and 
stainless steel originating mostly in Asia. Price -based special safeguard provisions (SSGs) under 
the WTO  Agreement on Agriculture have been used on ginseng and rice and related products, 
while volume -based SSGs were imposed for the first tim e since 2007 on ground -nuts, rice and 
related products, cereal flour and other worked grain.  
3.6.  Korea continued to maintain the option to restrict or monitor certain exports to ensure 
adequate domestic supplies, thereby possibly assisting downstream processi ng of these products. 
From 2008 to March 2015, rice was the only product subject to quantitative export restrictions 
(recommendations) although, in practice, there has been no trade -restrictive effect; currently no 
quantitative export restrictions for rice  or any other agricultural products are in place. On the other 
hand, direct export subsidies are maintained to reduce marketing costs for certain agricultural 
products. A drawback scheme continues to provide refunds of border taxes on raw materials used 
in exports. Internal indirect taxes are reimbursed on exports, while income tax relief is accorded 
only to foreign investment enterprises located in free trade zones (FTZs). Exporters benefit from 
export credit insurance, finance, and the promotional activit ies provided by state -owned 
institutions.  
3.7.  Measures involving grants, tax concessions, and low -interest loans continued to support 
production and trade of various agricultural, forestry, fishing, coal mining and manufactured 
products, and to encourage SMEs,  R&D, and environmental -protection activities. Although tax 
incentives were to terminate automatically in accordance with sunset clauses, many were 
extended. SMEs remain among the major beneficiaries of these measures, which are especially 
generous for inf ormation technology activities. However, a 2015 policy direction is aimed at 
reducing guarantees to mature SMEs and focusing on start -ups and early -stage SMEs; those facing 
problems of access to raw materials are supported by a fund.  Agriculture receives s ubstantial 
domestic financial support. Compensation or adjustment support for farmers and manufacturers 
adversely affected by a bilateral free trade agreement remains in place.  
3.8.  State involvement in the economy persists as the limited privatization efforts  during the 
review period were widely opposed; however, action inter alia  involving increased transparency, 
the reduction of the debt level, and improved management efficiency of public institutions was 
undertaken.  The Ministry of Agriculture, Food and Rur al Affairs (MAFRA) is the sole entity 
responsible for imports of all rice within the tariff quota, and the state -owned Korea Agro -Fisheries 
and Food Trade Corporation (aT) for some other agricultural items; their operations allow for 
important price mark -ups. Although no substantial changes were made to the main government 
procurement legislation, since 14 January 2016, additional market opening commitments in the 
form of a reduction of threshold values and a slight expansion of entities cover ed have been 
undertaken as a result of the implementation of the revised WTO Agreement on Government 
Procurement (GPA); nevertheless, the already small share of foreign supplies continued to fall 
during the review period. Meanwhile, government procurement is still seemi ngly used as an 
instrument of economic policy for promoting SMEs, companies in a disadvantageous position (firms 
owned by women and disabled people), regional development, and green purchasing despite the 
non-utilization of price preference schemes. Most p rocurement remains decentralized.  
3.9.  During the review period, several legislative changes necessary for the realization of 
economic democratization as well as to reflect the actual market situation and improve regulations 
were undertaken under  the competiti on policy framework; its sectoral coverage exemptions 
remain unchanged. A prohibition on new cross -shareholding (i.e. circular -shareholding) between 
subsidiaries under large business groups, many of which are family -controlled ( chaebols ), was 
introduced, b ut market concentration remains relatively high. Large corporations and SMEs are 
encouraged to voluntarily sign an agreement on fair trade and shared growth.  Consumer 
protection has been reinforced by strengthening law enforcement with respect to products and 
areas that closely affect consumers such as daily necessities and e -commerce. Korea's intellectual 
property rights legislation has been strengthened with wide -ranging amendments, including the 
expansion of copyright protection during the author's life plus 70  years, inter alia,  to facilitate the WT/TPR/S/346 • Republic of Korea  
 
- 49 - 
 
  implementation of the Government's "creative economy" vision. Protection was further enhanced 
with the continuous expansion of international commitments, and other enforcement 
improvements.  
3.2  Measures Directly Aff ecting Imports  
3.2.1   Customs procedures  
3.10.   Import declarations must be made by consignees, customs brokers or corporations for 
customs brokerage/clearance.  
3.11.   Customs clearance, including declaration procedures, and cargo management systems are 
fully computerized. T he Korea Customs Service (KCS) operates a seven -fields paperless 
e-clearance system (UNI -PASS, a KCS brand name) to handle export/import clearance operations , 
import cargo management, duties collection, the duties drawback system, and a single window 
system  covering requirement -confirmation processes (see below), including quarantine and 
inspection . The UNI -PASS portal, which allows for trade and customs formalities anytime without 
having to visit each government entity, continues to be exported to other cou ntries and was last 
updated in April 2016.2 The KCS's single window system is linked to 40 (34 in 2012) agencies 
(handling 88% of total import verification at end -2015) responsible for approving certain imports 
subject to requirements that need to be verif ied electronically.3 The number of items requiring 
such clearance -related checks under Article 226 of the Customs Act and another 38  laws 
(previously 35) increased from 5,527 ten -digit HS items in 2012 to 5,566 in 2016. The payment of 
commissions or fees f or regulatory permits and licences as well as duties and taxes for the 
clearance of merchandise is done online anytime. The use of the paperless clearance system 
expanded significantly; as of May 2016 there were 300,125 (110,000 in mid -2012) companies in 
the trading sector using electronic data exchange (EDI). In 2016 , cargo management and import 
declarations remain 100% paperless.   
3.12.   Since 2009, Korea has used a standard e -document management system, a tool for 
connecting customs networks around the world, t o promote trade efficiency and security within the 
framework of a global (networked) single window concept consisting of an export declaration in 
one country substituting the import declaration in the country of destination.4 Considering the 
need for inter connectivity with neighbouring countries and foreign customs in achieving the 
objective of a global single window, the UNI -PASS system applies international standards such as 
World Customs Organization (WCO) Data Model (DM) 3.0, UN Codes, and open technolo gy 
standards.5 To expand the application of the global standard of customs administration, the KCS 
uses the system to design e -documents circulated within its internal networks; at present 96.9% 
(21% in 2012) of XML documents used within KCS's network are based on WCO DM. A one -stop 
FTA Support Centre has operated at six main customs offices spread nationwide since 2010; it 
                                                
2 Since 2005, the UNI -PASS e -clearance scheme, the world's first 100% electronic clearance portal 
system, has been exported to : Kazakhstan (2005), the Kyrgyz  Republic  (2008) , the Dominican  Republic 
(2008), Mongolia (2009), Guatemala (2009), Ecuador (2010, 2011), Nepal (2011), Tanzania (2011, 2012), 
Uzbekistan (2012), and Cameroon (2015), thus generating total revenue amounting to US$335.6  million. Since 
2011, the previous UNI -PASS system continued to be upgraded with its 4th generation system in operation as 
from April 2016. The 4th generation system was developed, aiming at user -centric services (i.e.  users having 
more control, more choices or more flexibility), the Smart cle arance system, and creation of integrated IT 
infrastructure for information resources. The Smart customs administrations use mobile devices (e.g. small 
computing device) to provide services to the public such as clearance of moving items, checking export d ata, 
as well as more assistance services to customs offices involving registration of import examination and 
checking of exported cars.  
3 Since 2012 the Korea Feed Association, the Korea Feed Ingredient Association, the Animal and Plant 
Quarantine Associa tion, KOTITI Testing and Research Institute, and the Korea Gas Safety Corporation were 
among the agencies that joined the system.  
4 More information about this system is available in WTO document WT/TPR/S/268/Rev.1, 
8 November  2012. There is considerable impetus in regional and international fora for greater connectivity 
between countries, regions and across continents. The implementation of the full y fledged ASEAN Single 
Window (ASW) Pilot Project Component 2, the first regional initiative that seeks to e nhance regional 
connectivity, has begun in stages since April 2015. Viewed at: http://asw.asean.org/about -asw. United Nations 
Economic and Social Commission for Western Asia (ESCWA) (2011).  
5 Korea Customs Ser vice (2014).  WT/TPR/S/346 • Republic of Korea  
 
- 50 - 
 
  provides personalized consultations for any difficulties arising within the RTA/FTA utilization 
process as well as post -management comp any assistance (Section 3.2.3.7).6 
3.13.   Clearance proceeds through a two -track control management system consisting of low -risk 
(safe track) fast clearance (e.g. exemption of inspection, and self -audits), and high -risk (non -safe 
track) (e.g. document audits and  physical inspections).7 Since 2009, an Authorized Economic 
Operator (AEO) Programme has been implemented for 9 types of entity: exporters, importers, 
customs brokers, warehouse operators, bonded transporters, freight forwarders, sea carriers, air 
carriers  and ground handlers.8 As of April 2016, under Enforcement Rule on the Authorization and 
Management of Authorized Economic Operators (AEO Enforcement Rule), 788 certified entities 
(199 in 2011) were qualified for special treatment in customs procedures, in cluding less physical 
inspection, exemption from customs audit, and less administrative fines. In 2015, 26% (0.3% in 
2012) of Korea's imports entered under the AEO system. Korea has significantly expanded its 
AEO-related mutual recognition arrangements (MR As); as of April 2016, it had signed MRAs with 
13 partners : the United States (25 June 2010); Canada (25 June 2010); 
Singapore  (25 June 2010); Japan (20 May 2011); New Zealand (25 June 2011); 
China  (27 June 2013); Hong  Kong, China (13 February 2014); Mexic o (11 March 2014); 
Turkey  (9 June 2014); Israel (22  March  2015); the Dominican Republic (23 April 2015); 
India (8 October 2015); and the Separate Customs Territory of Taiwan, Penghu, Kinmen and 
Matsu (Chinese  Taipei ) (22 December  2015). As of May 2016, MRA s with Viet  Nam and Thailand 
were to be signed, and negotiations with Australia and the EU were to start.   
3.14.   In 2015, customs declarations were processed within 2 hours on average, compared to 
1.75 hours in 2011; the increase was due to enhanced inspection f or safety management of 
imports including in relation to anti -terrorism. Prior -entry import declarations are allowed (up to 
five days for sea and one day for air).9 Most imports (about 96%) are cleared after being taken 
into a bonded area; the average clea rance time from port entry to release from a bonded 
warehouse was 2.1 days in May 2016, down from 2.3 days in 2012. During the review period , the 
KCS conducted time release studies (TRS) in line with the WCO's guidelines but it was unable to 
disclose their  results due to the comprehensiveness of the issue. A cargo selectivity system 
automatically selects high -risk cargo for documentary and possibly physical inspection; between 
2011 and 2015, an annual average of 3% of customs clearance cases were subject to  physical 
inspection compared to 3.4% (293,340 cases) in 2008 -11. The KCS operates, on request, an 
"on-dock" immediate clearance system at the major ports of Busan, Incheon, and Gwangyang, to 
allow imports of reputable companies (with a good law compliance  record) to be released before 
submission of import declarations (required within ten  days). Some 42% (40% in 2011) of inward 
cargo uses this system; goods are cleared without being moved to a warehouse outside the port.  
3.15.   Since July 2014, a de minimis  clearance process for consumption goods purchased online 
and priced at US$100 – and as from December 2015 US$150 – or lower have been exempt from 
documentation and taxation requirements; for goods bought from US websites the cap is raised to 
US$200 under the K ORUS FTA.10 To ensure consumer safety, foodstuff subject to quarantine 
                                                
6 Post management is what AEO -certified companies should do after the AEO authorization in order to 
maintain its validity. More specifically, it means management of post -authorization acts such as reporting any 
changes, conducting regular self -inspections, performing comprehensive audits, etc.  Korea Customs Service 
online information. Viewed at: 
http://www.customs.go.kr/ kcshome/main/content/ContentView.do?contentId=CONTENT_ID_000003180&layo
utMenuNo=31121  and 
http://english.customs.go.kr/kcshome/main/content/ContentView.do;jsessionid=kF9xPxWB37mWScpgBdpn1h
3p3ybjy6FlGmTG8FGzyl6X22gJJS7Q!3799452?contentId=CONTENT_ID_000001329&layoutMenuNo=21046  . 
7 High-risk cargo is screened  out for audit and inspection through automatic checks on the degree of 
risk, based on compliance record, type of item, etc. Audit and inspection by customs authorities mainly aim at 
preventing illicit importation and tax evasion.  
8 An AEO is a company val idated and authorized by the KCS in accordance with criteria under the Law 
on Compliance, Internal Control System, Financial Solvency and Security Management. Viewed at: 
http://aeo.or.kr/eng/aeoAboutaeo.d o. These criteria enable eligible companies to qualify for different controls 
and benefits depending on their AEO classification level.  
9 According to World Bank Doing Business data, importing a shipment of goods required border and 
documentary compliance  equivalent to 6 hours and US$315, and 1 hour and US$27 , respectively. World Bank 
(2016a).  
10 Yonhap News Agency , "Customs clearance to be simplified for products purchased through foreign 
websites ", 9 April 2014. Viewed at: 
http://english.yonhapnews.co.kr/search1/2603000000.html?cid=AEN20140409000700320 . WT/TPR/S/346 • Republic of Korea  
 
- 51 - 
 
  requirements and certain medication are not eligible for the simplified process; previously its scope 
covered only six items (including clothing and shoes). Of the 11.2 million e -transac tions tallied in 
2013, 34% benefited from the simplified clearance procedure; this ratio was to increase by over 
50% in 2014 and 2015. In 2015, there has been an annual increase of 35%, and a total of 57.2% 
of e-transactions were processed through the simp lified clearance procedures.  
3.16.   The KCS's 2015 Future Customs Administration Strategy for the medium and long term 
constitutes a response to the rapidly changing customs environment by eliminating non -tariff 
barriers through improved RTA/FTA utilization and e xpansion of AEO programmes. Action is 
envisaged in several areas including: the setting of a new silk trade road using FTAs and AEO 
programmes; the creation of an advanced import/export environment via cross -national risk 
management; the prevention of tax avoidance -related fraudulent practices; the eradication of illicit 
trade; the provision of high quality public services; and, the overall reorganization of the national 
trade information system. Korea ratified the WTO Trade Facilitation Agreement (TFA) by depositing 
its instrument of acceptance on 30  July 2015; according to the authorities the TFA has reflected 
practices of the Korean Single Window of the UNI -PASS system.11 It is estimated that "full" 
implementation of the TFA will reduce trade costs for Kor ea by 11.3%.12 Korea acceded to the 
revised Kyoto Convention (International Convention on the Simplification and Harmonization of 
Customs Procedures) in February 2003, subject to certain reservations; the Convention took effect 
in February 2006.13  
3.17.   Korea's t rade facilitation efforts are appreciated at international level and the KCS 
considered at the cutting edge of international best practice .14 According to World Bank Doing 
Business data, in 2016 Korea ranked 31st among 189 countries (30th in 2015) in ease o f trading 
across borders; at the same time it ranked 30th out of 138 countries in the World Economic 
Forum's Enabling Trade Index in 2014, and 19th in its efficiency and transparency of border 
administration sub -index, while estimates of gains from its tra de facilitation by 2020 are estimated 
to attain 2.18% of GDP (US$29 billion) and 8.18% of exports (US$52 billion).15 According to the 
OECD trade facilitation indicators, as of 2015, Korea matched or exceeded best performance 
across the 133 participating cou ntries in the areas of information availability, simplification of 
documents, external border agency cooperation and governance and impartiality. Between 2012 
and 2015, performance improved in the areas of information availability, involvement of the trade  
community, simplification of documents, streamlining of border procedures, external border 
agency cooperation, and governance and impartiality.16 In the areas of appeal procedures, fees 
and charges, and automation some ground was lost. Performance in the a reas of involvement of 
the trade community, advance rulings, appeal procedures, fees and charges, automation, 
streamlining of border procedures and internal border agency cooperation is below best 
performance. Both the OECD and the World Economic Forum app raisals suggest that amidst a 
challenging overall environment reform remains possible in these areas.  
3.18.   According to the authorities, blended products remain classified depending on their 
materials or components with intrinsic properties; the KCS is enforci ng an advanced classification 
ruling under the WCO's recommendation.17 When a dispute occurs, the KCS Tariff Classification 
Committee, consisting of experts from the public and private sector, makes the final decision. 
                                                
11 Korea Customs Service (2014).  
12 OECD (2015h).  
13 Korea accepted 14 of the 25 Chapters in Specific Annexes of  the Protocol, and maintained 
reservations on 18 recommended practices, mainly relating to areas unsuitable to Korea's trade environment.  
14 Between April 2013 and May 2016, the KCS invested ₩174.2 billion to establish the integrated 
customs information system; the project involved the reorganization of the entire business process and the 
integration of 58 administrative systems to 16 systems.  At the time of the previous R eview , the KCS estimated 
that it spent some US$38 million annually on its information technology infrastructure, US$9 million of which 
was for the single  window system. But the estimated benefits, US$2 billion -US$3.3 billion a  year according to 
KCS, far outweighed the costs. See WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  
15 According to the World Economic Forum 's assessment , Korea's trade enabling performance is 
relatively uneven due to its low marks in the market access sub-index and, to a lesser extent, for the quality of 
its operating environment; furthermore, it is indicated that various aspects of the institutional framework, from 
red tape to the judiciary, as well as the access to finance, and the inward looking natu re of certain regulations, 
remain problematic. World Bank (2016a); World Economic Forum (2014); and, WTO document 
WT/TPR/S/268/Rev.1, 8 November 2012.  
16 OECD trade facilitation indicators identify areas for action and enable the potential impact of reform s 
to be assessed. OECD (2015g).  
17 WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  WT/TPR/S/346 • Republic of Korea  
 
- 52 - 
 
  Whenever necessary, the Committee requ ests an opinion of the WCO Secretariat or its Harmonized 
System Committee through the Ministry of Strategy and Finance; since 2012 the number of 
advance rulings in this area increased rapidly with over 5,000 advance rulings issued per year 
compared to 7,01 0 in the entire period between 2008 and 2011.  
3.19.   The KCS provides prompt responses to enquiries made online and maintains a Roadmap for 
Integrity. A  Customs Irregularities Reporting Centre is in place and the Cyber Corruption Report 
Centre advises customs st aff and other stakeholders to report customs irregularities to the KCS 
website; no enquiries have been received at the Centre since 2007. Currently, a Customs 
Ombudsman is operated for the public on the KCS official website; no cases were examined during 
the review period. A Code of Conduct for the Integrity of Customs Officers has been in effect since 
May 2003.  
3.20.   Seized items at customs offices are auctioned through electronic bids after they are handed 
over to a commissioned company for sale through electr onic bids, the internet or display of the 
items. The authorities indicated that they included gold, jewellery, cosmetics, clothes, imported 
liquors and watches.  
3.2.2   Customs valuation  
3.21.   According to the authorities, Korea's customs valuation legislation (sub -section 2 of the 
Customs Act 1949) is in line  with the WTO Agreement on Customs Valuation. Imports are valued 
at their c.i.f. price; a 30% decrease of the dutiable freight rate applied to express cargo with a 
weight of 3  kg or less became effective on 14 Octo ber 2015. The main method used is transaction 
value (based on the price actually paid or to be paid by the buyer); about 96% of imports are 
subject to this method. When the transaction value method cannot be used, valuation is 
determined using, in order, i dentical goods, similar goods, domestic sale price, or computed value; 
upon the importer's request, the order of application of value based on domestic sale price and 
computed value may be reversed.18  
3.22.   While the KCS may, in principle, set special customs va luation and documentary 
requirements for second -hand imports (Presidential Decree of the Customs Act), it applies the 
same customs valuation methods as for new items. However, as a last resort, Customs may 
determine their valuation using "reasonable standa rds", whereby prices paid are adjusted based 
on appraised prices from certified appraisal institutes, domestic wholesale prices or other 
recognized price lists. To prevent tax evasion, the KCS checks declared values of imported used 
cars, including compari sons with transaction values of new cars of the same model that have been 
recognized as customs values, with the deduction of depreciation (depreciated value). According to 
the authorities, the transaction value is accepted  where insignificant differences exist, unless there 
is reason to suspect the authenticity or accuracy of the declared value, in which case an 
alternative WTO -consistent valuation method is used. The use of the "depreciated value" would be 
applied only as a last resort. Documentary requir ements include a letter of technical inspection 
from an automobile performance -testing institute.19  
3.23.   In response to taxpayer concerns, in 2012, Korea's international taxation and customs laws 
were amended to require that the National Tax Service (NTS) and t he KCS respect an adjustment 
made by the other.20 In 2015, legislation was amended with the insertion of three new provisions 
(Paragraph 1, Article 37 of the Customs Act, and Paragraphs 2 and 3 of Article 31 of the 
Enforcement Ordinance). In accordance with  these provisions, in cases where taxpayers apply to 
                                                
18 Article 7, Paragraph 2 of the Agreement on Implementation of Article VII of the GATT 1994 stipulates 
that no customs value shall be determined on the basis of, inter alia, the selling price in the country of 
importation of goods produced in the country, or the price of goods on the domestic market of the country of 
exportation. Viewed at: http://www .wto.org/english/docs_e/legal_e/20 -val_01_e.htm . 
19 WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  
20 Historically, there has been a disconnect between transfer pricing and customs valuations, and this 
has been a long -standing issue encountered by multin ational enterprises undertaking cross -border trade 
transactions. Online KPGM information. Viewed at: 
https://home.kpmg.com /xx/en/home/insights/2015/06/korea -transfer -pricing -customs -valuations -advance -
arrangements.html . An MOU signed in January 2009 by the KCS, the Ministry of Strategy and Finance (MOSF), 
and the NTS had addressed the issues of transfer pricing and customs v aluation, two areas in which 
multinational corporations faced difficulties while doing business in Korea. WTO document 
WT/TPR/S/268/Rev.1, 8 November 2012.  WT/TPR/S/346 • Republic of Korea  
 
- 53 - 
 
  the KCS Commissioner for an advance customs valuation arrangement (ACVA), they are also 
allowed to request an advance pricing arrangement (APA) at the same time. Under three additional 
amendments (Paragr aph 3, Article 6 of the Act of the Coordination of International Tax Affairs, and 
Paragraphs 7 and 8 of Article 14 of the Enforcement Ordinance), a joint mediation process in which 
the Commissioners of the KCS and the NTS work closely together to determine  how to calculate 
customs value has been introduced. These legislative amendments were undertaken to promote 
communication between the two tax authorities and reduce the burden on multinational 
corporations of "double" tax audits.  
3.24.   Between 2012 and 2015, ₩ 73.7 billion was collected on undervalued imports, compared to 
₩124.3 billion in the period 2008 -11. The 2007 SIREN, a KCS early warning system to block 
undervalued imports of agricultural goods, plants, and fishery products  remains in place.21 Based 
on the  result, undervalued products go through audit, while normal products are cleared promptly. 
In the past , SIREN seemed to have increased tax revenue and had an import substitution effect.  
3.25.   Customs duties (including domestic taxes) must be paid within 15 day s of acceptance of the 
import declaration (where a security has been lodged). Late payments are subject to an additional 
3% of the amount owed for the first month, and 1.2% for each month thereafter (up to a 
maximum of 60  months). Criminal penalties (up to  three years imprisonment with "hard" labour or 
a fine not exceeding the higher amount between five times the amount of evaded customs duties 
and the prime cost of the relevant goods) apply for fraudulent declaration of dutiable value, false 
tariff rates o r incorrect tariff classifications with the intention of affecting the determination of the 
amount of duty to be paid. They also apply for imports of goods as components and other 
unfinished, incomplete or finished goods having major characteristics as par tial components for the 
purpose of avoiding import restrictions imposed under statutes.  
3.26.   Customs decisions may be appealed to the KCS Commissioner, to the National Tax Tribunal 
or to the Board of Audit and Investigation. In this case, the Customs Appeal Co mmittee comprising 
five KCS internal staff members and six external experts (in the public sector) makes a decision 
after an in -depth examination. A lawsuit may be filed against its decisions.  
3.2.3   Tariffs  
3.27.   Since January 2012, Korea has used the 2012 version of  the Harmonized System of Tariff 
Classification (HS), at present consisting of 12,243 ten -digit lines (11 more lines than in 2012). 
The general tariff schedule is in the form of an Annex to the Customs Act. It is revised whenever 
required to, inter alia , implement changes relating to the use of "flexible tariffs" (Section 3.2.3.3) 
under procedures involving the relevant ministries and interested parties, including the Ministry of 
Strategy and Finance (MOSF), the Customs and Tariff Deliberation Committee, th e State Council, 
and the National Assembly. Its basic/general structure remains unchanged since 2013.  
3.28.   The tariff comprises several rates according to the source of imports. These are the 
MFN tariffs from non -preferential sources (termed general rates), an d various preferential tariffs, 
including for imports from other members of the Asia Pacific Trade Agreement (Bangkok 
Agreement), RTA/FTAs and least developed countries (Sections 2.5 and 3.2.3.7). The WTO bound 
rates are also contained in the tariff.  
3.2.3.1   Applied MFN rate  
3.29.   The tariff structure has changed little since the last Trade Policy Review of Korea. The 2016 
simple average (unweighted) MFN tariff increased to 14.1% (13.3% in 2012) (Table 3.1  and 
Chart  3.1) mainly as a result of the insertion of 16 tariff  lines (out -of-quota rates for rice and rice 
products) at 513% (Section 3.2.6.2), the splitting of tariff lines with high rates and the merger of 
tariff lines with low rates.22 Tariff protection varies substantially across and within sectors, 
                                                
21 SIREN is designed to screen out undervalued products by calculating the proper import prices of t he 
products and comparing them with the declared prices. The Kalman filter model, a statistical model, is used for 
calculating a proper import price. See WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  
22 The tariff analysis follows the Secretariat's prac tice of including out -of-quota duties for tariff quotas 
(i.e. excluding the in -quota rate) and the ad valorem  part of alternate -type duties when official ad valorem  
equivalents are unavailable, as for Korea. As out -of-quota rates are much higher than in -quota rates, this is 
likely to overstate tariff protection where no out -of-quota imports occur. However, using the ad valorem  rate of WT/TPR/S/346 • Republic of Korea  
 
- 54 - 
 
  averaging 60% for agricultural products and 6.6% for industrial goods in 2016 (WTO definitions).23 
Average tariffs are highest for vegetable products (HS  section 2), at 108.2% (Chart  3.1). 
Manufacturing tariffs are highest for footwear and headgear (HS  section 12) at 10. 1%, and for 
textiles and articles (HS  section  11) at 9.7%. According to Korea's submission to the WTO Trade 
Monitoring Exercise, as of 1 January 2016, the MFN applied tariff rates on 54 items contained in 
the September 2012 APEC List of Environmental Goods  (EGs) that directly and positively 
contribute to green growth and sustainable development objectives were 5% or less; however, 
according to the 2016 customs tariff supplied for this trade policy review exercise, some of these 
items remain subject to an 8%  tariff rate, which in virtually all cases reflects the implementation 
terms of this commitment.24 By according varied and substantial levels of protection to selected 
industries, especially agriculture, tariffs distort competition by favouring some activit ies. Reducing 
high tariffs (mainly out -of-quota agricultural duties) would improve Korea's resource allocation and 
national welfare, a view not shared by the authorities. The authorities indicated that agricultural 
tariffs, including out -of-quota duties, a re maintained in line with corresponding international and 
domestic laws, taking market conditions into account.  
3.30.   Over 99% of tariffs are levied at ad valorem  duties, and therefore transparent. There are 
some 130 (same as in 2012) different rate bands (85  ad valorem duties, 44  alternate duties, and 
1 specific duty) of which about 43  involve decimal rates25; alternate duties apply to 0.8% of total 
tariff lines (93). Tariff rates continue to range from zero to 887.4% (Table  A3.1). Similarly to 
2012, slightly m ore than 85% of rates are 10% or below, and rates of over 30% apply to 3.4% of 
tariff items (Chart  3.2). The Korean tariff could be rationalized, for example, by reducing the large 
number of rate bands and removing decimal rates.  
Table 3.1 Tariff structure, 2012 and 2016  
(%, unless otherwise indicated)  
 MFN applied  Final bounda   2012  2016  
Bound tariff lines (% of all tariff lines)  89.9 90.1 90.1 
Simple average rate  13.3 14.1 18.5 
 WTO agricultural product s 55.0 60.0 68.6 
 WTO non -agricultural products  6.6 6.6 9.3 
Duty-free tariff lines (% of all tariff lines)  16.2 15.9 14.0 
Simple average of dutiable lines only  15.9 16.8 21.9 
Tariff quotas (% of all tariff lines)  1.9 1.9 1.9 
Non-ad valorem  tariffs (% of all tariff lines)  0.8 0.8 1.0 
Domestic tariff "peaks" (% of all tariff lines)b 3.0 2.7 2.0 
International tariff "peaks" (% of all tariff lines)c 10.5 10.7 18.5 
Coefficient of variation  4.0 4.1 3.1 
Nuisance applied rates (% of all tariff lines)d 1.7 1.8e 1.7 
Total number of tariff lines  12,232  12,243  12,243  
 Ad valorem  rates 10,138  10,197  9,196  
 Duty-free rates  1,983  1,952  1,720  
                                                                                                                                                  
Korea's alternate tariffs, which apply "whichever is the greater" rate, will slightly understate tariff protection 
when the alternate specific rate is operative. Higher adjustment tariffs are also excluded.  
23 WTO definition of industrial products covers all non -agricultural products, i.e. products not covered by 
the WTO Agreement on Agriculture. WTO agricultural products inclu de all processed and unprocessed 
agricultural commodities (HS Chapters 1 to 24, less fish and fish products, plus some additional HS items).  
24 The authorities indicated that there are three ways to apply the 5% or less tariff rate to the APEC 
EGs: apply 5%  or less tariff rates by using HS 6 -digit codes; identify each one of the 54 HS sub -headings in 
their national tariff lines (TLs) (for Korea, HS 10 -digit) and then decide whether to reduce rates for all imports 
under the provision of an existing TL or for a more narrowly -defined range; or examine each item's 
sub-positions and then decide whether to apply or not a 5% or less tariff rate. Document titled The APEC 
Environmental Goods List Implementation Reference Guide, Submitted by New Zealand and the United States , 
March 2015, and based on the publicly available APEC Environmental Goods List. Viewed at: 
http://www.apec.org/Meeting -Papers/Leaders -Declara tions/2012/2012_aelm/2012_aelm_annexC.aspx . 
25 Excluding tariff quotas and alternate tariffs, Korea's tariff rates still range from zero to 72%, and have 
around 38 bands, often with very small rate differences and decimal rates. For example, there are 
17 ad valorem  rate bands of 10% or below, and 37.5% and 11.6% of tariff lines have the rate of 8% and 
6.5%, respectively.  WT/TPR/S/346 • Republic of Korea  
 
- 55 - 
 
   MFN applied  Final bounda 
 Alternate rates  95 93 119 
 Specific rates  0 1 0 
 Missing/Unbound  16 0 1,208  
Note:  2012 and 2016 tariffs are based on  HS 12 nomenclature. Calculations include the ad valorem  part of 
alternate rates. For 2016, AVEs are provided by the authorities for 64 out of 94 non -ad valorem  
rates (based on 2 014 import data) . Figures for 2016 remain the same including or excluding AVEs  
(except for nuisance applied rates).  
 
a Based on 2016 tariff schedule. Calculations are based on 11,035 bound tariff lines.  
b Domestic tariff peaks are defined as those exceeding three times the overall simple average applied 
rate. 
c International tariff peaks are defined as those exceeding 15%.  
d Nuisance rates are those greater than zero, but less than or equal to 2%.  
e 1.9% including AVEs.  
Source:  WTO Secretariat calculations, based on data provid ed by the Korean authorities.  
Chart 3.1 Average applied MFN and bound tariff rates, by HS section, 2012 and 2016  
0%20%40%60%80%100%120%
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
Calculations for averages exclude in -quota tariff rates and include the ad valorem part of alternate rates.   Only HS sections 0 3, 
12, 14, 19 and 21 are fully bound.  Final bound rates are based on the 2016 tariff schedule.
WTO Secretariat calculations, based on data provided by the Korean authorities.Chart 3.1         Average applied MFN and bound tariff rates, by HS section, 2012 and 2016
Note:
Source:01   Live animals & products        
02   Vegetable products
03   Fats & oils      
04   Prepared food, etc.
05   Mineral products
06   Chemicals & products07   Plastic & rubber
08   Hides & skins
09   Wood & articles
10   Pulp, paper, etc.
11   Textiles & articles
12   Footwear, headgear13   Articles of stones
14   Precious stones, etc.
15   Base metals & products
16   Machinery
17   Transport equipment
18   Precision instrument19   Arms & ammunition
20   Miscellaneous manufacturing
21   Works of art, etc.Average applied rate 2012 and 2016 
(13.3% and 14.1%, respectively)Average final bound rate
(18.5%)MFN 2012 
MFN 2016
Final bound
 
Note:  Calculations for averages exclude in -quota tariff rates and include the ad valorem  part of alternate 
rates. Only HS sections 03, 12, 14, 19 and 21 are fully bound. Final bound rates are based on the 
2016 tariff schedule.  
Source:  WTO Secretariat calculations, based on data provided by the Korean authorities.  
3.31.   Non-ad valorem  tariffs continue to consist of alternate duties on several tariff items, mai nly 
manufacturing products such as cinematographic film and diagnostic or laboratory reagents, as 
well as a specific duty on recorded video tapes (previously an alternate duty) (Table A3.2). They 
generally apply the greater (agricultural products) or the l ower (other items)26 component, 
i.e. either an ad valorem  or a specific duty, whereby the ad valorem  alternate rate sets a floor or a 
ceiling on the import duty rate. According to calculations of the authorities, in 2016 the ad valorem 
equivalents (AVEs) of  the specific part of alternate duties could range from zero (cinematographic 
film HS3706901000) to 377.2% (ginger), and most of them were lower than the ad valorem  
component of the alternate duty (Table A3.2)27; these alternate duties form part of Korea's WTO 
                                                
26 The authorities indicated that no specific regulations of application of alternate duties existed for 
manufacturing items. Therefore, at  present manufacturing items are subject to the lower of an ad valorem  or a 
specific duty.  
27 AVEs were calculated on the specific duty components of 63 of 93 ten -digit tariff lines subject to 
alternate duties and the rate of the sole specific duty. In 9 ca ses (involving oak mushrooms, fruits of the genus WT/TPR/S/346 • Republic of Korea  
 
- 56 - 
 
  tariff binding commitments. Alternate duties also apply to 43 agricultural tariff lines as 
out-of-quota duties; these involve very high minimum ad valorem  rates and exceed 500% on 
sesame seeds and oil, jujubes and pine nuts (Section  3.2.4.1).  
Chart 3.2 Distribution of MFN tariff rates, 2012 and 2016  
Number of tariff lines  
(16.2%)
(11.0%)(58.0%)
(4.1%) (4.6%) (4.3%)
(1.1%)(0.4%)(15.9%) 
(11.4%)(57.8%)
(4.1%) (4.7%) (4.4%)
(1.1%) (0.5%)
05001,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,0006,5007,0007,500
Duty free >0%-5% >5%-10% >10%-15% >15%-20% >20%-50% >50%-500% >500%-750%
Figures in parentheses indicate the share of total lines.   Calculations exclude in -quota rates and include the ad valorem part of 
alternate rates.   In 2012 totals do not add up to 100% as no tariff rates were provided for 16 lines  (import restriction, 
representing 0.1% to total lines).  In 2016 one specific tariff rate is excluded.
WTO Secretariat calculations, based on data provided by the Korean authorities.Number of tariff linesChart 3.2  Distribution of MFN tariff rates, 2012 and 2016
Note:
Source:MFN 2012 MFN 2016
 
Notes:  Figures in parentheses indicate the share of total lines. Calculations exclude in -quota rates and 
include the ad valorem part o f alternate rates. In 2012 totals do not add up to 100% as no tariff 
rates were provided for 16 lines (import restriction, representing 0.1% of total lines). In 2016 , 
one specific tariff rate is excluded.  
Source:  WTO Secretariat calculations, based on data  provided by the Korean authorities.  
3.32.   In the Doha Development Agenda (DDA) negotiations, Korea had supported the elimination 
of non -ad valorem  duties to some extent. At the time of the previous Review , the authorities had 
indicated that non -ad valorem  duties would be removed to a large extent from Korea's tariff 
schedule if agreed at the DDA  negotiation.  
3.2.3.2   MFN tariff dispersion and escalation  
3.33.   Similarly to the previous R eview, indicators of tariff dispersion and escalation show little 
change during the period  under review (Table  3.1 and Chart 3.3).  
                                                                                                                                                  
Capsicum , ginkgo nuts in shell, carrots, and cinematograph film) the specific duty component was higher than 
the ad valorem  part of the alternate rate whereas 46 AVEs were lower and 7 were equal. These calc ulations are 
based on the 2014 import value and volume supplied by the Korean authorities.  WT/TPR/S/346 • Republic of Korea  
 
- 57 - 
 
  Chart 3.3 Tariff escalation by 2 -digit ISIC industry, 2012 and 2016  
n.a.n.a.
0%10%20%30%40%50%60%70%80%90%100%
Food,
beverages and
tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishingChemicals Non-metallic
mineral
productsBasic metal Fabricated
metal products
and machineryOtherChart 3.3    Tariff escalation by 2 -digit ISIC industry, 2012 and 2016
n.a.n.a.0%10%20%30%40%50%60%70%80%90%100%
Food,
beverages and
tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishingChemicals Non-metallic
mineral
productsBasic metal Fabricated
metal
products and
machineryOtherAverage applied rate in manufacturing
(10.8%)
Not applicable.
WTO Secretariat calculations, based on data provided by the Korean authorities.n.a.
Source :First stage of processing Fully processed Semi -processedAverage applied rate in manufacturing
(11.3%)2012
2016
 
n.a. Not applicable.  
Source:  WTO Secretariat calculations, based on data provided by the Korean au thorities.  
3.2.3.3   "Flexible" tariffs  
3.34.   Korea applies temporary MFN duties (termed as "flexible" tariffs). The flexible tariffs 
mechanism includes not just the adjustment and seasonal duties (described below), but also 
autonomous tariff quotas and "usage" tariffs as  well as safeguard and special safeguard duties 
(Sections 3.2.4.2, 3.2.3.6, and 3.2.8.2).28 The system allows the authorities to increase or 
decrease certain tariffs at their discretion providing considerable scope to encourage or discourage 
                                                
28 Autonomous tariff quotas are also referred to as flexible tariffs, and are discussed in Section 3.2.3.3. 
See WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  WT/TPR/S/346 • Republic of Korea  
 
- 58 - 
 
  imports of part icular items  to stabilize prices, protect local producers and ensure a steady supply.29 
In 2016, the authorities reduced the role of the flexible tariff system on price stabilization, 
considering the country's low inflation and continued drops in prices of oil and other raw materials 
and sought to increase its support for export companies and other vulnerable industries.30 In 
2015, nine industrial materials and parts used to produce display panels, semiconductors and 
secondary batteries, the country's key exp ort goods, benefited from autonomous tariff quotas 
(Section  3.2.4.2); the authorities indicated that the autonomous tariff is not designed to boost 
exports, as tax refund for exporting processed raw materials is in place (Section 3.3.4). To help 
offset a r ecent rise in costs for farmers, the Government would offer lower import duties on animal 
feed.  
3.35.   The number of items covered by flexible tariffs dropped from 216 (HS six -digits) in 2012 to 
145 in 2016. According to the authorities, the leading principle of  flexible tariffs is to maintain its 
application to a minimum as prescribed by the law. At the time of the previous Review , the 
authorities intended to reduce or remove gradually these tariffs in line with the reduction of tariff 
rates resulting from the D DA and RTA negotiations.  
Adjustment duties  
 
3.36.   Adjustment duties aim to protect domestic industries from import surges and lighten the 
shock from trade liberalization. They only affect MFN rates and are set annually by the MOSF.  
3.37.   In 2016, they apply to 18  six-digit tariff items (or 13 different types of product) covering 
mainly certain fish and seafood, rice preparations, sauces, and plywood, compared to 18  six-digit 
tariff items (or 15 different types of product) until 2015 (Table  A3.3). Ad valorem  adjustmen t 
duties continue to range from 10% on plywood to 50% on steamed or boiled rice compared to 
general rates ranging from 8% (e.g. rice, plywood, sauces) to 30% (oak mushrooms) with the 
biggest difference affecting rice preparations. Alternate duties , where a pplicable duties are the 
higher of an ad valorem  or a specific duty, affect five six -digit tariff lines in 2016. Several products 
subject to adjustment duties, such as certain fish and plywood items, remain unbound; 
adjustment duties rates for the four bou nd items are below their binding level. In 2015, 
adjustment tariffs for four commodities (eels, sea bream, Alaskan pollack, and shrimps) were 
lowered because high protection of these domestic products was considered unnecessary, and 
gochujang  sauce was lis ted; in 2016 croaker and maejoo  sauce were delisted, inter alia , in 
consideration of the fact that there are no aquaculture farms for live croaker in Korea and croaker 
caught in the domestic sea is an expensive sashimi dish rather than a staple of Korean c onsumer 
diets.31  
Seasonal duties  
 
3.38.   The authorities indicated that no seasonal duties have been applied on an MFN basis during 
the period under review. Preferential tariff treatment of certain agricultural items under the 
RTA/FTAs with Chile, the EU, Peru, a nd the United States is applied only during the Korean 
off-season. In the case of the Korea –Chile FTA, seasonal preferential duties have been levied on 
grapes imported from Chile since 2004; under both the Korea –EU FTA and the Korea –Peru FTA, 
seasonal pref erential duties on grapes and oranges originating in these trading partners have been 
in place since 2011. Under the Korea –US FTA, seasonal preferential duties have applied to 
potatoes for chipping, fresh or chilled, in addition to oranges and grapes, sinc e the entry into force 
of the agreement in March 2012. Seasonal preferential duties are also levied: on potatoes for 
chipping and pumpkins (buttercup squash) from New Zealand since 2015 under the Korea –New 
Zealand FTA; on potatoes (for chipping) from Canad a since 2015 under the Korea -Canada FTA; 
and, on potatoes for chipping (fresh or chilled), oranges, mandarins, grapes and kiwis from 
Australia since 2014 under the Korea -Australia FTA.  
                                                
29 The Korea Herald , "Korea to expand flexible tariff list in 2016" , 29 December 2015. Viewed at: 
http://m.koreaherald.com/view.php?ud=20151229000374#jyk . 
30 The Korea Herald , "Korea to exp and flexible tariff list in 2016" , 29 December 2015. Viewed at: 
http://m.koreaherald.com/view.php?ud=20151229000374#jyk . 
31 USDA Foreign Agricultural Service (2015a).  WT/TPR/S/346 • Republic of Korea  
 
- 59 - 
 
  3.2.3.4   Bound tariff  
3.39.   Korea bound 90.1% (2016 tariff schedule) of all tariff l ines in the Uruguay Round, covering 
99.6% of agricultural tariff lines (excluding seaweeds and bait for fishing) and 88.6% of industrial 
tariff lines (WTO definitions). On a tariff classification basis, 81.3% of agricultural tariff lines 
(HS Chapters 01 -24) and 92% of industrial lines (HS Chapters 25 -97) are bound.  
3.40.   The simple average bound tariff rate rose slightly during the review period due to the 
inclusion of rice products (Table  3.1); as of 2009, all Uruguay Round commitments were fully 
implemented. Fo llowing the "tariffication" of non -tariff measures, very high bound (and applied) 
tariffs apply to many commodities. Korea's average bound rates on agricultural and industrial 
products (WTO  definitions) are 68.6% and 9.3%, respectively (in 2016). The overa ll gap between 
the simple average MFN applied and bound rates has remained at 4.4  percentage points. The gap 
is 8.6  percentage points for rates affecting agricultural items. Korea uses this scope mainly to raise 
MFN tariffs annually by applying higher adju stment duties (Section 3.2.3.3) on a number of 
products to temporarily protect domestic producers.  
3.41.   Korea has been included in several collective waivers that suspended the application of the 
provisions of Article II of GATT 1994 in order to allow it to ref lect the changes resulting from the 
HS 2002 and HS 2007 nomenclatures in its Schedule of T ariff Concessions. T hese modifications 
and rectifications to Schedule LX became effective as of 1 July 2011 and 5 November 2015 
(pursuant to the Committee on Market A ccess approval on 7 July 2015), respectively .32 Since 
1 January  2012, Korea has benefited from collective waivers for the introduction of HS  2012 
changes in its Schedule of Tariff Concessions; as of January 2016, HS  2012 transposition had not 
begun for any Member.33 The authorities indicated that they would start working on transposition 
of Schedule LX to HS  2012 in the course of 2016.  
3.2.3.5   Duty concessions/exemptions  
3.42.   The application of import duty relief through duty concessions and exemptions granted by 
the Min istry of Strategy and Finance (MOSF) for various purposes, such as industrial development 
(Articles 88 -109, Customs Act), has not changed since the last Trade Policy Review of Korea. The 
revenue forgone from import duty relief was  US$1 billion  (₩1,175 bill ion) in 2015 (equivalent to 
12.1% of total tariff revenue) up from US$693  million (7%) in 2010.  
3.43.   Tariff concessions also apply under other legislation. The Promotion Act for the Development 
of Aircraft and Space Industries also allows duty -free imports of parts n ot produced domestically 
(with resulting revenue forgone amounting to ₩70.8 billion in 2014, up from ₩33.1 billion in 
2010).34  
3.2.3.6   "Usage" tariff rates  
3.44.   Imported inputs for specified end -uses may be exempt from tariffs under the "usage" tariff 
rates scheme (Art icle 83, Customs Act). Korea continues to treat "usage" tariff rates, autonomous 
tariff quotas, and duty concessions on inputs as part of its industrial policy, to encourage certain 
manufacturing activities (Sections 3.2.3.5 and 3.2.4.2). Since 2012, "usag e" tariff rates have been 
used for inputs in activities such as sowing, animal feeding, and semiconductor manufacturing. No 
further information on this policy instrument was available from the authorities.  
3.2.3.7   Tariff preferences and rules of origin  
Preferences  
 
3.45.   Korea's efforts to expand its bilateral and regional free trade agreements during the review 
period meant that its simple average tariff rate on imports from RTA/FTAs (e.g. 4.6% for imports 
from the United States, 4.9% from the EU, and 5.3% from ASEAN an d Viet Nam), the Asia -Pacific 
Trade Agreement (APTA) (13.8%) and LDC trading partners (7.8%) remained considerably below 
                                                
32 WTO documents  WT/L/808, 16 December 2010; WT/Let/804, 25 July 2011; and WLI/100, 
23 November 2015.  
33 WTO documents WT/L/834, 5 December 2011; and WT/L/969, 2 December 2015.  
34 WTO documents G/SCM/N/220/KOR, 23 September 2011; and G/SCM/N/284/KOR, 6 July 2015.  WT/TPR/S/346 • Republic of Korea  
 
- 60 - 
 
  the 14.1% MFN average tariff rate (Table 3.2). However, it remains unchanged for imports from 
countries receiving preferences under the  Global System of Trade Preferences Among Developing 
Countries (GSTP) and the GATT Protocol Relating to Trade Negotiations Among Developing 
Countries (TNDC) (Section 2.6, Table 3.2). Since its last Trade Policy Review, Korea has kept 
virtually unchanged th e number of items eligible for unilateral (non -reciprocal) duty -free and 
quota -free tariff preferences to LDCs (Section 2.6.3, Table  3.2). The Minister of Strategy and 
Finance may withdraw or modify unilateral trade preferences if considered inappropriate taking 
into account the country's income level, volume of imports, and international competitiveness of 
the product and country concerned. The KCS maintains a webpage containing all preferential 
import tariffs ( http://www.customs.go.kr/kcshome/site/importtariff/ImportTariff.do ).  
Table 3.2 Summary analysis of the preferential tariff, 2016  
 Total  WTO agriculture  WTO non -
agricultur e 
  Average  
(%) Duty -
free 
linesa 
(%) Coverageb 
(%) Average  
(%) Duty -
free 
linesa 
(%) Average  
(%) Duty -
free 
linesa 
(%) 
MFN 14.1 15.9  60.0 5.5 6.6 17.7 
Regional agreements         
 APTAc 13.8 16.0 10.7 59.9 5.5 6.3 17.7 
 APTA for Lao PDR and 
 Bangladesh  13.7 17.1 12.5 59.8 5.5 6.1 19.0 
 ASEAN  5.3 91.3 81.9 35.5 68.5 0.4 95.0 
Bilateral agreements         
 Australia FTA  7.6 82.5 82.1 50.7 27.4 0.5 91.6 
 Canada FTA  7.7 80.0 81.7 50.4 26.9 0.7 88.7 
 Chile FTA  7.0 95.7 79.8 49.5 69.9 0.0 99.9 
 China FTA  10.8 49.4 76.5 57.1 13.1 3.2 55.3 
 EFTA FTA         
 Iceland  8.2 88.5 77.0 58.2 21.3 0.1 99.6 
 Norway  8.3 88.2 75.4 58.4 19.4 0.1 99.6 
 Switzerland  8.3 88.0 74.1 58.2 17.3 0.1 99.6 
 EU FTA  4.9 92.5 83.3 33.5 62.7 0.2 97.4 
 India CEPAd 8.2 78.6 75.9 55.2 14.4 0.5 89.2 
 New Zealand FTA  8.5 74.6 81.7 54.8 16.5 0.9 84.2 
 Peru FTA  5.6 90.7 83.0 39.0 53.8 0.1 96.8 
 Singapore FTA 7.3 89.5 73.9 47.4 66.3 0.7 93.3 
 Turkey FTA  8.7 80.1 76.5 57.6 10.8 0.7 91.5 
 United States FTA  4.6 90.9 83.5 30.9 60.6 0.3 95.9 
 Viet Nam FTA  5.3 92.2 82.6 35.6 68.4 0.3 96.1 
TNDC  14.1 15.9 0.05 60.0 5.5 6.6 17.7 
GSTP  14.1 15.9 0.1 60.0 5.5 6.6 17.7 
LDC 7.8 90.3 74.5 51.5 59.3 0.6 95.4 
a Duty-free lines as a percentage of total tariff lines.  
b % of total number of lines . Only rates that are lower than the corresponding MFN rate are taken into 
account.  
c Preferential rates under APTA are applicable to China, Sri Lanka, Bangladesh, India, and Lao  PDR. 
d Comprehensive Economic Partnership Agreement.  
Note:  Calculations are b ased on national tariff line level (10 -digit); excluding in -quota rates and specific 
rates and  including the ad valorem  part of alternate rates.  
Source:  WTO Secretariat calculations, based on data provided by the authorities of the Republic of Korea.  WT/TPR/S/346 • Republic of Korea  
 
- 61 - 
 
  Rules  of origin  
 
3.46.   Preferential rules of origin apply to imports under preferential trading arrangements and 
RTA/FTAs, which increases the complexity of implementing preferential tariffs.35 Korea considers 
that rules should be transparent and promote trade and inv estment. Rules of origin covering 
imports under APTA, GSTP, TNDC, and LDC preferential treatment are based on the provisions of 
the Korea Customs Act. For LDCs to receive duty -free access on eligible imports, goods must be 
either "wholly produced or obtain ed" in the exporting country, or manufactured from originating 
materials comprising at least 40% of the finished product's f.o.b. price (i.e.  non-originating 
materials must not exceed 60% of the f.o.b. price). Vessels catching fish must be registered in th e 
exporting country and have at least 60% domestic equity. Under the Asia -Pacific Trade 
Agreement, eligible imports  are subject to APTA preferential rules of origin.  
3.47.   All of Korea's RTA/FTAs are based on common principles, such as "goods wholly obtained" 
and the "substantial transformation" criteria, under the FTA Special Customs Act. The value -added 
rule is also applied to selected agricultural and industrial products in the form of the regional value 
content (RVC) method or the import content (MC) method. Regarding RVC, some of Korea's 
RTA/FTAs allow exporters to use a "build -up" or a "build -down" method on a selective basis; for 
example, the Korea –Peru FTA provides for RVC of not less than 45% using the "build -down" 
method or of not less than 35% under the  "build -up" method for automobiles and some electronic 
devices.36 A number of clothing items are subject to specific -process rules. In addition to the 
"build -up" and the "build -down" methods, based on the value of non -originating materials, the 
Korea –US FTA  provides also for the "net cost" (NC) method, based on the production costs for 
certain automotive goods; furthermore, de minimis  clauses allow for a good containing a non -
originating material that does not undergo the tariff classification change to stil l originate if either 
the value of all non -originating materials does not exceed 10% of the adjusted value of the good 
(non-textiles), or the total weight of all fibres or yarns in a component of a textile or apparel good 
is not more than 7% of the total w eight of that component.37 Under the Korea –Canada FTA, 
product -specific rules of origin require, inter alia , a change from a heading, whether or not there is 
also a change from any other heading, provided that the value of the non -originating materials of 
the heading does not exceed 10% or 55% of the transaction value or ex -works price of the good.38  
3.48.   The KCS has continued to undertake RTA/FTA promotion activities to help companies utilize 
trade preferences subject to diverse and complicated rules of origin. For the simplification of proof 
of origin and supporting documents, since 2010, the KCS has been operating a system whereby an 
exporter with the capability to prove the country of origin of its products is designated as an 
approved exporter. As from  7 Sept ember 2010, it has also operated a paperless FTA -PASS for 
origin determination and management purposes; it also made the FTA -PASS connectable to 
UNI-PASS (Section 3.2.1) so that origin supporting documents can be issued promptly and 
conveniently. Since 201 0, the KCS has operated an FTA Utilization e -Alert System that indicates 
the goods subject to preferential tariff treatment on the e -Customs Clearance System at the time 
of importation. For SMEs (Section  3.2.10), a self -origin management solution program me, which 
determines the origin status of goods, was developed by the KCS and has been distributed online, 
free of charge, since September 2010.39 Since October 2010, it has operated a website 
(http://yesFTA.customs .go.kr ) providing access to information and data about all RTA/FTAs 
concluded so far. Efforts to raise public awareness are made through seminars, workshops, 
contests, and RTA/FTA -related courses. As from 6  January  2015, an Import and Export Business 
Support Centre has been leading education on RTA/FTA utilization and consultation.  
                                                
35 WTO docume nt WT/TPR/S/268/Rev.1, 8 November 2012.  
36 Build-down method is based on: RVC = (Adjusted Value - Value of Non -Originating 
Materials)/Adjusted Value X 100; or RVC = ( f.o.b.  - Value of Non -Originating Materials)/ f.o.b.  X 100. The 
build-up method derives from : RVC = (Value of Originating Materials/Adjusted Value) X 100. The adjusted 
value or f.o.b.  is applied in accordance with the Agreement.  
37 The "net cost" method derives from RVC = (NC  - Value of Non -Originating Materials)/NC X 100. The 
basis of the Origin Criteria under the Korea -US RTA/FTA on HS  2002 has been changed to HS  2012 since 
1 January  2014. Korea Customs Service (2012).  
38 Online information. Viewed at: http://www.international.gc.ca/trade -agreements -accords -
commerciaux/agr -acc/korea -coree/03 -1.aspx?lang=eng . 
39 Online presentation by a KCS officer at the WCO Origin Conference 2014 titled Korea Customs' 
RTA/FTA Outreach Program f or Small and Medium -sized Enterprises , 21 January 2014.  WT/TPR/S/346 • Republic of Korea  
 
- 62 - 
 
  3.49.   Korea applies non -preferential rules of origin to all other imports. Korea's non -preferential 
rules of origin are also based on the "wholly obtained goods" and "substantial tra nsformation" 
criteria.  The tariff shift rule is applied, except on cameras (value -added rule) and textile articles 
(specified process rule). The rule of origin for certain live animals is determined by the territory 
where they were bred for over six (bovin e) or two (swine) months.  
3.2.4   Tariff quotas  
3.2.4.1   Agricultural tariff quotas  
3.50.   Korea applied tariff -rate quotas (TRQs), under its multilateral  agricultural market -access 
commitments, on 227 ten -digit tariff items (including rice as from 2015 (Sections 3.2.6.2 
and 4.2)) in 2015 and 2016 (Table A3 .4) compared to 187 (excluding rice) in 2011.40 Whereas 
in-quota tariff rates are much lower, ranging from zero to 50%, many out -of-quota rates remain 
very high (e.g.  beans, pine nuts, green tea, jujubes, cereal grains, starches , ginseng) and peak at 
887.4% (manioc) ad valorem . Many out -of-quota rates are alternate duties. According to the 
latest data provided by the authorities, the average fill rate of tariff quotas dropped to 57% in 
2014 (66.2% in 2011) and rose to 59.5% in 20 15.41 Fill ratios were low for several product 
groupings (Table  A3.5). According to the authorities, the consistently large unfilled share of tariff -
rate quotas on some items, even with relatively low in -quota tariffs, resulted, inter alia,  from lack 
of suf ficient or decreased domestic demand, increased imports from RTA/FTA partners, increased 
domestic production, imports of substituting items, increased import prices or sanitary measures 
related to the outbreak of diseases in exporting countries, such as BS E. They also indicated that 
the fill rate of TRQ products allocated through state trading or auctioning (see below) is much 
higher (78% in 2015) than the level attained under the first come, first served allocation method 
(42% in 2015). Moreover, when cert ain TRQ volume is below domestic demand, MAFRA increases 
TRQ import volume by expanding quotas; as of 2015, 17 products were imported at a much higher 
level than originally committed, and in volume terms, 5,069,283 tonnes of additional TRQ products 
entered  the Korean market.  
3.51.   Tariff quotas, and the import quota on rice (until end -2014), are administered or allocated 
by 24 different organizations (as of 2016) including ministries, state trading entities (such as the 
Korea Agro -Fisheries and Food Trade Corpor ation (aT) commissioned by the Ministry of 
Agriculture, Food and Rural Affairs (MAFRA) (until March 2013, Ministry for Food, Agriculture, 
Forestry and Fisheries)), and various producer associations. In some cases, the administering 
agency is owned or contr olled by domestic producers competing with the imported item. With the 
exception of the National Agricultural Cooperatives Federation, the National Forestry Cooperative 
Federation, and the Jeju Citrus Growers' Agricultural Cooperative, producers associatio ns include 
members that process foodstuffs imported under tariff quotas. Credible import administration 
would require that directly interested parties are not directly involved in controlling imports. The 
authorities indicated that in most cases the admini stering agency (e.g. Korea Feed Association, the 
Korea Corn Processing Industry Association, the Korea Paper Association, the Korea Dairy Industry 
Association, and the Korean Soybean Processors' Association) does not produce goods competing 
with the import ed items but utilizes them for processing foodstuff or for breeding animals as 
domestic agricultural production cannot meet demand for ingredients or raw materials used for 
processed food.  
3.52.   Mechanisms used for quota allocation (depending on the product) in clude the auctioning of 
quotas, allocation to designated agency, real demand allocation42, and a combination thereof. 
State -trading enterprises impose additional mark -ups on top of the in -quota tariff on various items 
(Section 3.2.7) . Most state -trading ent erprises are engaged directly in marketing imports by 
selling through wholesale markets or distributing directly to final users. State -trading enterprises, 
producer associations, processor associations and importing companies allocate quotas. The 
authoriti es indicated that, as of 2016, only 1 item (rice) was state traded, 2 items (chestnuts and 
                                                
40 As a result of the revision of the HS  2012 nomenclature , the tariff lines for some product groupings 
(including ginseng, barley, ginger,  and buckwheat) were further divided , increasing the total nu mber of tariff 
lines to 211; another 16 tariff lines were added by the tariffication of rice in 2015 (Section 3.2.6.2).  
41 However, according to the authorities , when excluding some TRQ product groups with no domestic 
demand (including silkworm eggs, mulbe rry trees, and cattle for breeding), the annual average fill rate rises to 
more than 80% for the period 2013 -15. WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  
42 This term refers  to quota allocation on a first come , first served basis without any qualif ication 
requirement or quota allocation to buyers meeting certain qualification requirements.  WT/TPR/S/346 • Republic of Korea  
 
- 63 - 
 
  ginseng) were auctioned, 49 items (including maize, barley, and potatoes) were allocated on a real 
demand basis, and 11 other items (including ginger and onio n) were  allocated through 
state-trading and other methods.  
3.2.4.2   Autonomous tariff quotas  
3.53.   Korea grants concessional tariffs using autonomous tariff quotas, mainly for raw materials, 
inputs, semi -processed goods, components, parts, and machines (Table  A3.6); this measur e is 
aimed at helping stabilize prices through increased supply and/or increasing the competitiveness of 
the domestic agricultural and livestock industries, which are faced with increasing pressure from 
imports under RTA/FTA preferential treatment challeng ing domestic products.43 In 2016, these 
TRQs covered 116  six-digit tariff items (including 4 additional sub -items under the same tariff line) 
(235 in 2012), of which 91 items were quota -free. In 2015, Korea proceeded with: listing 
import -depending feeding c ommodities (whey, manioc pellets, unhulled barley, and oats); 
establishing a tariff quota for beet -pulp, cotton seed oil cake for mushroom growing and young 
eels for aquaculture in order to mitigate high prices for imports of these items; and, increasing t he 
tariff quota for refined sugar from 40,000 MT to 90,000 MT to stabilize domestic retail prices. 
In 2016, inter alia , the tariff quota for eels, animal/vegetable fats, and refined sugar was reduced, 
whereas for whey, fodder roots it was increased; tariff  quotas for cotton seeds were opened to all 
imports. In -quota tariff rates continued to range from zero to 10% (manioc chips for alcoholic 
beverages), whereas out -of-quota rates ranged from 1% to 40% (whey for feeding). Autonomous 
tariff quotas are revised  annually.  
3.2.5   Other levies and charges  
3.54.   A surcharge levied on petroleum imports (Petroleum Bus iness Act, 1977) provides funds to 
ensure adequate supply and price stability. The surcharge on crude oil remains at ₩16 per litre 
and Korea's refiners get a similar amount of rebate on oil product exports. The Government 
promotes oil imports from the Amer icas, Africa, and Europe, including the Russian Federation 
(Section 4.4.1.1), a non -attained objective during the review period.44 Surcharges on non -Middle 
East oil imports are lower to offset their higher transport costs. In 2014, Korea renewed efforts to 
reduce the country's heavy reliance on Middle East crude imports by compensating refiners that 
import far away from the Middle East for about 100% of additional costs; budgetary outlays 
relating to these costs amounted to ₩44 billion in 2015.45  
3.2.6   Import lice nsing, quotas, and prohibitions  
3.2.6.1   Licensing  
3.55.   Import approval is governed by the Foreign Trade Act and 56 other laws.46 The Consolidated 
Public Notice, containing all export and import certification requirements stipulated in the 
56 separate laws, is updated by  the Ministry of Trade, Industry and Energy (until 2013, Ministry o f 
Knowledge Economy (Section 2.3 )) when there is a legislative change. Import licensing procedures 
are maintained in order to protect national security, human, animal or plant life or healt h, and the 
environment and are not intended to restrict the quantity or value of imports. In 2016, these 
requirements covered some 3,000 six -digit HS tariff items (1,000 in 2008), including petroleum, 
LPG (liquefied petroleum gas), agricultural fertilizers , crop seeds, animals, and animal products, 
nuclear materials, narcotics, foods and food additives, foreign publications, firearms and 
explosives.  
3.56.   Implementation of the c ertification, permission, and type approval requirements is the 
responsibility of 13 ministries and/or agencies . According to the authorities, import licence 
applications are screened or checked in a "fair" manner. Korea is a party to the Convention on 
International Trade in Endangered Species of Wild Fauna and Flora (CITES).  
                                                
43 WTO document WT/TPR/S/268/Rev.1, 8 November 2012; USDA Foreign Agricultural Service (2015a).  
44 Middle East oil dependency has dropped slightly from 86.19% (2011 ) to 82.3% (2015).  
45 Platts , "South Korea refiners say incentives to diversify crude import sources too low" , 16 July 2014. 
Viewed at: http://www.platts.com/latest -news/oil/seoul/south -korea -refiners -say-incentives -to-diversify -
26835016 . 
46 WTO document G/LIC/N/3/KOR/11, 30 October 2015.  WT/TPR/S/346 • Republic of Korea  
 
- 64 - 
 
  3.57.   At the time of the previous Review, Korea provided regular Replies to the Questionnaire on 
Import Licensing Procedures to the WTO Committee on Import Licensing; during the review period 
there was only one notification, which was submitted on 27  October  2015.47  
3.2.6.2   Quotas  
3.58.   Korea liberalized its rice market through tariffication, as its import quota was replaced by a 
tariff-rate quota of 5% (408,700 tons) and a virtually prohibitive 513% out -of-quota duty as of 
1 January 2015 (see below and Sections 3.2.4 and 4.2.2). The auth orities indicated that this out -
of-quota rate was calculated in conformity with the principles of the WTO Agreement on 
Agriculture.48 Until 2014, rice was subject to import quota restrictions in accordance with Korea's 
WTO minimum market access (MMA) commit ments under Annex 5 of the WTO Agreement on 
Agriculture. Under arrangements re -negotiated in 2004, Korea was obliged to import close to 8% 
of its domestic consumption of rice until 2014.49 Country -specific quotas previously given to 
Australia, China, the Un ited States, and Thailand have all been cancelled and replaced by a global 
tariff quota allocated on an MFN basis according to Korea's schedule (G/MA/TAR/RS/98) as of 
2015.50 MAFRA has been the only organization in charge of importing and managing MMA 
commi tments on rice since 1995; its agency, the Korea Agro -Fisheries and Food Trade Corporation 
(aT), has been in charge of rice trading. Consequently, the Ministry accounted for 100% of rice 
imports in 2012, 2013, 2014 and 2015.51 Imported rice is procured thro ugh open bidding; rice for 
table use is sold by aT through open bidding, and rice for food processing by local authorities on 
behalf of MAFRA .52 Rice imports under the MMA commitments have increased steadily, rising from 
347,658  tonnes in 2011, to 368,000 t onnes in 2012, 388,353 tonnes in 2013, and 408,700 tonnes 
per year in 2014 and 2015.53 Under the tariff quota regime, in 2 015 Korea had auctioned 
348,700  tonnes of brown rice and 60,000 tonnes of milled rice.  
3.59.   According to data supplied by the authorities a t the time of the previous R eview, the cost of 
rice producers' protection in terms of consumer burden, i.e. the ratio of the domestic price 
compared to the international price, had dropped from 3.7  (2006 -07) to 2.0 (2011). The 
authorities indicated that, a s Korea continued to impose the in -quota tariff of 5% after tariffication, 
the implementation of the 513% out -of-quota rate would not affect the ratio, which was estimated 
to be less than 2.0 in 2015; nevertheless, according to other estimates t he eventual  
implementation of the 513% out -of-quota rate was to triple the 2011 ratio to 6.1.54  
3.2.6.3   Prohibitions  
3.60.   Korea prohibits a few imports, mainly to protect health, safety, security, public morality, the 
environment, and natural resources, and to prevent deceptive p ractices. Korea does not maintain 
any trade embargoes with other countries. Trade with the Democratic People's Republic of Korea 
requires approval from the Ministry of Unification (Section 2.5.4); bilateral trade, which was 
first legalized in 1988, rose st eadily to almost US$1.82 billion in 2008. It declined sharply 
thereafter, until it was prohibited by the Republic of Korea as of 24 May 2010, except for goods 
                                                
47 Article 7.3 of the Agreement on Import Licensing Procedures stipulates that "Members undertake to 
comp lete the annual questionnaire on import licensing procedures promptly and in full". WTO document 
G/LIC/N/3/KOR/11, 30 October 2015.  
48 USDA Foreign Agricultural Service (2014).  
49 According to Korea's latest WTO notification s on state trading , domestic sale s by MAFRA (i.e. 
imported rice) represented 4.6% , about 4%, about 2% and 1.4%  of national consumption in 2012 , 2013, 
2014, and 2015, respectively. The quantity of rice imported by MAFRA in 2014 was 408,700 tonnes and 
represented 9.2% of national consumptio n (4,436,000 tonnes). WTO documents WT/TPR/S/268/Rev.1, 
8 November 2012 ; G/STR/N/15/KOR, 17  October  2014; G/AG/W/147, 4 December 2015 ; and 
G/STR/N/16/KOR, 14 July 2016 . 
50 Between 2012 and 2014 , country -specific quotas (CSQ) involving 116,159 tonnes from Ch ina, 
50,076  tonnes from the United States, 29,963 tonnes from Thailand, and 9,030 tonnes from Australia were 
implemented. A certain amount of rice from China and Australia was not imported through CSQ in 2012 and 
2013 due to the market conditions in the ex porting countries.  
51 WTO document G/STR/N/15/KOR, 17 October 2014.  
52 Imported table rice reaches consumers through trade marketing routes, wholesalers, and dealers. In 
2015, 592 companies were participating in the public auction, including grain wholesale companies (329) and 
agricultural produce wholesale or retail companies (263). In practice, any compan y can participate in the 
auction as long as it is registered and equipped with the required facilities.  
53 WTO documents WT/TPR/S/268/Rev.1, 8 November 201 2; and G/STR/N/15/KOR, 17 October 2014.  
54 USDA Foreign Agricultural Service (2014).  WT/TPR/S/346 • Republic of Korea  
 
- 65 - 
 
  manufactured in the Kaesong (Gaeseong) Industrial Complex (located in the Democratic People's 
Republic of Korea).55 On 10 February 2016, the Government of the Republic of Korea completely 
shut down operations at the Gaeseong Industrial Complex, and since then there has been no trade 
related to the complex. All of the tenant companies of the Republic of  Korea withdrew from the 
complex and were to be compensated for losses resulting from this development.  
3.61.   On 21 May 2015, Japan notified the WTO Secretariat that it wished to initiate new dispute 
settlement proceedings against Korea regarding certain import  bans and additional testing and 
certification requirements that have affected the importation of food products from Japan since the 
2011 Fukushima Daiichi Nuclear Power Plant accident (Sections 2.6.1, 3.2.9.2.2 and 3.2.9.2.3). On 
8 February 2016, a panel was composed to deal with this case.  
3.2.7   State trading  
3.62.   Despite privatization efforts, the State participates in a wide range of trade and/or 
trade -related activities (Section 3.4.4). According to Korea's latest WTO notifications on state 
trading (see below), s ince 2012, two government agencies (the Ministry of Agriculture, Food and 
Rural Affairs (MAFRA), and the Korea Agro -Fisheries and Food Trade Corporation (aT)) have been 
authorized to allocate and/or operate tariff quotas as well as quotas, in the context o f Korea's 
WTO commitments in agriculture, thus affecting quota utilization and price mark -ups 
(Section  3.2.4); prior to that date, the National Forestry Cooperatives Federation (NFCF) was also 
involved.56 Since 1995, MAFRA has  maintained  exclusive rights on  rice imports within the tariff 
quota and controlled the importation of MMA -related rice in order to, inter alia,  smoothly 
implement WTO commitments, ensure food security and avoid domestic market disturbances 
caused by a sudden influx of rice (Section 3.2 .6.2). The operations of the Korea Agro -Fisheries and 
Food Trade Corporation are, inter alia,  aimed at stabilizing the domestic market  for some other 
agricultural items . Since 2012, MAFRA has been the sole importer of rice, while aT undertook some 
imports of other agricultural items; all agricultural items were subject to important mark -ups, but 
at much lower level than at the time of the previous Review, except for rice, which was not at that 
time subject to such a practice.57  
3.63.   During the review period, Kor ea improved its record on WTO notification o f state trading by 
making t hree submissions in August 2012 , October 2014 , and July 2016 , compared to past 
practice where a ten -year period (1998 -2009) passed without notifications.58 No written questions 
                                                
55 In response to concerns that goods from the Democratic People's Republic of Korea may illegally 
enter the Republic of Korea via third  countries, the KCS maintains variou s measures covering clearance, 
investigation, and in "audit fields" to cut off illegal entry of goods made in the Democratic People's Republic of 
Korea. The Gaeseong Industrial Complex has been a large -scale industrial complex which combined capital and 
technologies of the Republic of Korea with land and workforce of the Democratic People's Republic of Korea. 
According to Ministry of Unification online data, as of the end of 2015, 125 (123 in 2012) tenant businesses of 
the Republic of Korea were operating i n the Gaeseong Industrial Complex, employing 54,988 workers of the 
Democratic People's Republic of Korea. The annual production in the complex totalled US$563.3 million in 
2015, while between 2012 and 2014 its annual output remained steady at about US$470 million, except for a 
drop to about US$224 million in 2013, a crisis year when the Government of the Democratic People's Republic 
of Korea removed all its workers from the park. Goods originating in the Gaeseong Industrial Complex were 
exempt from taxes un der Article 12 of the Inter -Korean Exchange and Cooperation Act.   
56 Korea's rights to impose mark -ups on WTO -related TRQs are stipulated in Note 4, Section 1: 
Agricultural Products, Part 1: Most -Favoured -Nation Tariff of Schedule LX of the Republic of Kore a on 
Agricultural Products (WTO documents WT/LET/492, 12 April 2005 ; and WT/LET/504, 5 December 2005).  
57 In 2012 and 2013 , the share of sales of aT to national domestic consumption of items concerned 
varied, e.g. up to 81.7% for soybeans, 81.6% for small r ed beans, 74.8% for green beans, 18.7% for 
buckwheat, 2.3% for genus Capsicum , 5.8% for garlic, 1,6% for ginger, and 50.2% for sesam e seeds. 
Considerable mark -ups (average import price higher than average representative domestic sales price) 
affected soybe ans (up to 48.7%), small red beans (up to 25.7%), green beans (up to 61.7%), buckwheat (up 
to 69%), genus Capsicum  (up to 7.6%), garlic (up to 24.2%), onions (up to 9.3%), ginger (up to 61.2%),  and 
sesam e seeds (up to 31.7%). In 2012 and 2013 , mark-ups of 34.4% and 40.9% , respectively , were imposed 
on rice (HS 10006.30.1000). According to the authorities the mark -up for imported table rice is not 
pre-determined but presumably ex post facto  the gap between the purchase price from abroad and the sales 
price o f domestic buyers; concerning rice for processing usage, the mark -ups are not imposed because its 
selling price is lower than the import price due to low consumer preference. WTO document G/STR/N/15/KOR, 
17 October  2014.  
58 WTO documents WT/TPR/S/268/Rev.1,  8 November 2012 ; G/STR/N/14/KOR, 14 September 2012 ; 
G/STR/N/15/KOR, 17 October 2014 ; and G/STR/N/16/KOR, 14 July 2016 . WT/TPR/S/346 • Republic of Korea  
 
- 66 - 
 
  were subm itted by Members regarding these notifications, and no questions were raised at the 
meetings of the Working Party on State Trading Enterprises held during the review period.  
3.2.8   Contingency measures  
3.64.   Contingency (trade remedy) measures are authorized under the Customs Act and the Act on 
the Investigation of Unfair International Trade Practices and Remedy Against Injury to Industry 
(2001). The Korea Trade Commission (KTC), under MOTIE,  administers the  measures and 
investigates and determines whether imports are d umped or subsidized and whether they cause or 
threaten to cause injury to the domestic industry. KTC investigations under emergency safeguard 
provisions determine whether imports have caused or threatened to cause "serious" injury to 
domestic industry. The  decision on the imposition of anti -dumping and countervailing duties is 
taken by the Ministry of Strategy and Finance (MOSF).  
3.65.   According to Korea's WTO notification, parts of the Customs Act and its sub -regulations on 
anti-dumping measures have been in fo rce and unchanged since March 2011.59 Since 2012, Korea 
has entered into five RTAs, each containing a specific trade remedies chapter in which the parties' 
WTO rights and obligations concerning the application of safeguards, anti -dumping and 
countervailing measures, are preserved60. This is subject to certain clarifications and requirements, 
including with respect to: (i) the possibility of excluding imports of products covered under the 
relevant bilateral agreement from the application of safeguard measures61; (ii) the provision of 
written notice of an application for anti -dumping measures62, or anti -dumping and countervailing 
measures, prior to the initiation of an investigation63; (iii) the possibility of holding a meeting or 
consultations prior to the initiat ion of an anti -dumping and countervailing measure investigation64; 
(iv) the transmission of written information regarding procedures for requesting price undertakings 
and an obligation to duly consider or give reasonable consideration to undertakings propos ed or 
requested by exporters65; (v) the consideration of applications for anti -dumping measures with 
respect to goods on which anti -dumping measures have been terminated in the previous 
12 months as a result of a review66; (vi) the application of the de mini mis dumping margin 
threshold set out in Article 5.8 of the Anti -Dumping Agreement in new shipper reviews67; and 
(vii) the creation of a Committee on Trade Remedies, to be convened at least once a year, to 
oversee the trade remedies chapter of the relevant R TA and to discuss various other matters 
relating to trade remedies agreed by the parties.68 
3.2.8.1   Anti-dumping and countervailing measures  
3.66.   During the period under review, recourse to anti -dumping action doubled.69 Between 2012 
and 2015, Korea initiated 20  anti-dumping investigations (8 in 2008 -11) involving aluminium 
bottle can (Japan), plywood (China), oriented polypropylene film (China, Indonesia, and Thailand), 
PET film (Japan), ethanolamine (Japan, Malaysia, Thailand, and United States), polyester filament 
partially oriented yarn (India, Malaysia, and Thailand), valves for pneumatic transmissions 
(Japan), structural steel sections (China), ethyl acetate (India), and coniferous wood plywood 
                                                
59 WTO document G/ADP/N/1/KOR/6, 23 March 2011.  
60 Articles 6.5 and 6.8(1), Korea –Australia FTA; Articles 7.1(1) and 7.7(1)(a), Korea –Canada FTA; 
Articles 7.5 and 7.7, Korea –China FTA; Articles 7.6 and 7.7(1), Korea –New Zealand FTA; and Articles 7.5 and 
7.6(1), Korea –Viet Nam FTA.  
61 Article 6.5, Korea –Australia FTA; Article 7.1(1), Korea –Canada FTA; Article 7.6, Korea –New Zealand 
FTA; and Ar ticle 7.5, Korea –Viet Nam FTA.  
62 Article 6.9(1), Korea –Australia FTA; Article 7.8(1), Korea –New Zealand FTA.  
63 Article 7.7(2), Korea –Canada FTA; Article 7.8, Korea –China FTA; and Article 7.7, Korea –Viet Nam 
FTA. 
64 Article 7.7(2), Korea –Canada FTA; Article 7.8, Korea -China FTA; and Article 7.7, Korea –Viet Nam 
FTA. 
65 Article 6.10, Korea –Australia FTA; Article 7.7(4), Korea –Canada FTA; Article 7.9, Korea –China FTA; 
Article 7.9, Korea –New Zealand FTA; and Article 7.8, Korea –Viet Nam FTA.  
66 Article 7.12, Korea –China FTA; and Article 7.9, Korea –Viet Nam FTA.  
67 Article 7.14, Korea –China FTA.  
68 Article 7.8, Korea –Canada FTA; Article 7.15, Korea –China FTA; and Article 7.11, Korea –Viet Nam 
FTA. 
69 With 127  cases initiated between 1995 and 2014, Korea was the world's 12th major user of 
anti-dumping measures. WTO online information. Viewed at: 
https://www.wto.org/english/tratop_e/adp_e/adp_e.htm . WT/TPR/S/346 • Republic of Korea  
 
- 67 - 
 
  (China).70 As of December 2015, 32  anti-dumping measures were in force on 12 products, mainly 
choline chloride (4 cases), ethanolamine (4 cases), ethyl acetate (3 cases), PET film (3 cases), 
oriented polypropylene film (3 cases), and stainless steel bar/plate (2 cases); 31 measures were in 
place in March 2012. Action affected mo stly products originating in Asia (28,  mainly China (10), 
Japan (7), India (3), Malaysia (3), and Thailand (2)), and to a lesser extent Canada, the EU 
(Spain) and the United States.71 Virtually all final measures consisted of definitive duties. Between 
2012 and 2015, Korea completed 13 sunset reviews, of which 12 resulted in the extension of 
measures and 1 in termination; 3 measures were terminated without a review. In January 2016, 
1 sunset review was under way. On 15 March 2016, Japan requested consultatio ns with Korea 
under the dispute settlement system concerning measures imposing anti -dumping duties on valves 
for pneumatic transmission ("pneumatic valves") from Japan (Section 2.5.1).  
3.67.   Korea has never taken countervailing measures. Since its last Trade Policy Review, Korea 
has regularly submitted semi -annual reports on anti -dumping and countervailing actions to the 
relevant WTO  Committees.  
3.2.8.2   Safeguards  
General  
 
3.68.   Safeguard measures, including provisional measures, may be applied where as a result of 
unforese en developments and the effect of obligations incurred under the GATT 1994, increased 
imports cause or threaten to cause serious injury to domestic producers of a like or directly 
competitive product. In deciding on the type and duration of measures to be imposed, the KTC 
takes into account the impact on the industries concerned, domestic price levels, consumer 
interests, and international trade relations.72 Safeguard measures apply for up to four years 
(200 days if provisional), but may be extended by four years subject to a further review.73 Since 
the previous Review in 2012, no safeguard measures have been applied; the last investigation in 
this area dates back to 1999.  
Sector -specific  
 
3.69.   Since its last Review, Korea has had recourse more frequently to the s pecial safeguard 
(SSG) provisions under Article 5 of the WTO  Agreement on Agriculture. Korea reserved the right to 
take SSG action on crop and related products (e.g. grains, potatoes, ginseng, and soybean) under 
the WTO Agreement on Agriculture. The decisi on to implement such measures is made annually by 
the MOSF through a ministerial ordinance, at the request of MAFRA. Korea reserved the right to 
apply SSG provisions to 124 agricultural ten -digit tariff items (as of 2011), but so far they have 
been applied  to a small sub -set of items. The Special Safeguard Tariff Schedule is issued annually 
to implement these provisions; its coverage was raised as from 2015, inter alia , due to the 
introduction of rice and rice items eligible for volume - and/or price -based a ction.74 Korea's 
first WTO notification in this area since 2007 was submitted in January 2012 and covered SSGs 
implemented from 2005 to 2010.75 Notifications covering the period from 2011 to 2013 indicate 
price-based SSG measures on raw ginseng (2011 and 17. 4.2012 -13.12.2012), white ginseng 
(11.1.2011), and ginseng root (24.4.2013 -24.12.2013); similar measures affected ginseng in the 
period 2014 -16 and rice and related products in 2015 -16. Volume -based SSGs have been used on 
ground -nuts (2012 -13), rice and re lated products (2014 -15), cereal flour and other worked grain 
(HS 1102.90.9000, HS 1103.11.0000, HS 1104.22.0000, HS 1104.29.9000) 
                                                
70 WTO documents G/ADP/N/230/KOR, 6 August 2012; G/ADP/N/23 7/KOR, 4 February 2013; 
G/ADP/N/244/KOR, 2 August 2013; G/ADP/N/252/KOR, 4 March 2014; G/ADP/N/259/KOR, 
10 September  2014; G/ADP/N/265/KOR, 9 February 2015; G/ADP/N/272/KOR, 19 October 2015; and, 
G/ADP/N/280/KOR 6 April 2016.  
71 WTO document G/ADP/N/280/KOR , 6 April 2016.  
72 Article 17 of Law No. 6417 in WTO document G/SG/N/1/KOR/5, 26 October 2001.  
73 Article 19.5 of Law No. 6417 in WTO document G/SG/N/1/KOR/5, 26 October 2001.  
74 The Special Safeguard Tariff Schedule covered 22 ten -digit items eligible for price-based action and 
22 for volume -based action in 2012 and 2013, 18 ten -digit items eligible for price-based action in 2014, and 
38 ten-digit items eligible for price-based action and 27 for volume -based action in 2015 and 2016, as 
compared to 33 ten -digit items in 2008, 29 in 2009, 25 in 2010, and 23 in 2011 eligible for price -based action 
only. 
75 WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  WT/TPR/S/346 • Republic of Korea  
 
- 68 - 
 
  (16.5.2015 -31.12.2015) for the first time since 2007.76 Korea's latest SSG measures were notified 
to the WTO Committee on Agri culture in July 2016.77  
3.2.9   Standards and other technical requirements  
3.2.9.1   Standards, testing, and certification  
3.70.   During the review period, the institutional setting in this area remained relatively 
unchanged.78 The Korean Agency for Technology and Standards (KATS),  an affiliate of MOTIE , 
sets, administers, and disseminates Korean Industrial Standards (KSs) on the basis of the National 
Standardization Act and the Industrial Standardization Act. In December 2013, KATS was 
reorganized to strengthen the role of industri al standards and to augment their economic added 
value. KATS, the official enquiry point on industrial products under the WTO Agreement on 
Technical Barriers to Trade,  is in charge of planning and coordinating national standards policy.  
The Korea Standards  Association (KSA), a KATS affiliate with public and private sector 
membership, provides comprehensive knowledge services (standardization, standards, certification 
and training), and several private bodies perform standardization -related tasks.79 Other bod ies 
performing standards -related work include the Korea Research Institute of Standards and Science 
(responsible for metrology standards and measurement) (KRISS), and the Telecommunications 
Technology Association (TTA), an agency affiliated with the Korea Communications Commission, 
which is responsible for group standards for telecommunications, information technology, radio 
communications, and broadcasting.80 The National Standards Council reviews general plans for the 
introduction of national standards and  coordinates the standards -related activities of the different 
ministries.   
3.71.   Standard development remains government -led, and is a significant element of Korea's 
industrial policy. The KATS implemented its fourth National Standards Plan (2016 -20) with key 
policy goals including the development of standards for new growth engine activities, for improving 
people's daily life, and the eradication of redundant certification systems. Its third National 
Standards Plan (2011 -15) had the same key policy goals. At pr esent, it aims to advance the 
national standards system, strengthen the standard technology infrastructure, actively participate 
in international standardization activities, and assist the private sector in increasing its capacity to 
develop standards.81  
3.72.   Under the Framework Act on Administrative Regulations (last amended by Act No. 9965, 
25 January 2010), a regulatory impact analysis (RIA), including cost -benefit analysis, has been 
required since 1997, prior to introducing a new regulation or reinforcing ex isting regulations.82 The 
                                                
76 WTO documents G/AG/N/KOR/47, 25 January 2013 ; and G/AG/N/KOR/49, 8 January 2015.  
77 WTO document G/AG/N/KOR/5 5, 18 July 2016.  
78 Korea faces huge testing and certification demand, and according to the authorities it provides speedy 
and inexpensive services, and has a high level of digitalization and the ability to respond quickly  to market 
changes. Nevertheless, i ts testing and certification agencies appear to lag behind their counterparts overseas 
(e.g. BV of France, SGS of Switzerland, and Intertek of the UK) , inter alia , in terms of brand power, and 
service diversity. As of 2014 , their overall capabilities were considered to be around 65.4% of those of global 
leading agencies; more specifically, their service expansion capabilities and the testing and certification 
standardization capabilities were just 46.9% and 53.6% of those of the global leading institutes re spectively. 
Interview with Seong Si -heon, administrator of KATS , published in the online Business Korea  article titled 
"Korean Agency for Technology and Standards – Augmenting Added Value by Strengthening Industrial 
Standards" , 31 January  2014. Viewed at: http://www.businesskorea.co.kr/english/features/special -
reports/3370 -korean -agency -techno logy-and-standards -augmenting -added -value#sthash.cbQ06lXW.dpuf . 
79 In 2013 , the KSA opened a KS Certification Support Centr e and a Global Standardization Support 
Centr e. Online MOTIE and KSA information. Viewed at: http://english.motie.go.kr/?cat=58&paged=4  and 
http://www.ksa.or.kr/eng/index.jsp . 
80 The TTA sets industry standards and has been instrumental in creating the current Korean 
Information  and Communication Standards. The TTA also collaborates with international and national standards 
organizations, such as the ITU. KRISS is a public institute registered in the Ministry of Education, Science and 
Technology (MEST), and it mainly serves as th e national metrology institute (NMI). KRISS also manages 
National Centr e for Standard Reference Data (NCSRD).  
81 Between 2010 and 2013 , Korea made 236 proposals for new international standards at ISO (168) and 
IEC (68). KATS online information. Viewed at: http://www.kats.go.kr/en/content.do?cmsid=404  and 
http://www.kats.go.kr/en/content.do?cmsid=407 . 
82 The authorities indicated that KA TS continues to prepare, adopt and apply standards in line with the 
provisions of Annex 3 of the WTO TBT Agreement (Code of Good Practice). SPS measures are taken mainly 
against diseases that are new to Korea and that are subject to strict domestic prevent ive measures.  WT/TPR/S/346 • Republic of Korea  
 
- 69 - 
 
  RIA has been carried out by three Ministry of Food and Drug Safety (MFDS) divisions in different 
fields. KATS is implementing a technical regulatory impact assessment (TRIA) aiming to 
comprehensively review costs, advantages, impac ts and compatibility of regulations for technical 
regulation issues. In 2015, out of 602 cases suggested for adjustment 52% were adjusted.  
3.2.9.1.1   Voluntary, compulsory, national, and aligned standards  
3.73.   The Korean standardization system consists of technical regu lations (mandatory standards) 
developed by ministries and government agencies, as well as standards (voluntary) set by KATS 
(KSs) and the Radio Research Agency (Korea Communications Standards, KCSs). As of 2015, the 
KCSs, set on the basis of the Framework Act on Broadcasting and Communications Development 
and operated by the Ministry of Science, ICT and Future Planning, were "consolidated" into KSs 
(Korean Standards). As from 2015, KATS has re -organized the KSs to better reflect current market 
demand and te chnological development, and moved ahead with a new standards development 
system.83 The KSs with lower utilization are being repealed, and those affecting consumer safety 
and requiring compliance with international standards are to be updated. As from 2015,  
seven  ministries and one agency (Ministry of Science, ICT and Future Planning; Ministry of 
Environment; Ministry of Agriculture, Food and Rural Affairs; Ministry of Employment and Labour; 
Ministry of Oceans and Fisheries; Ministry of Food and Drug Safety;  and Korea Forest Service) 
have participated in developing KSs. On the basis of the expertise of each ministry, Korea is to 
develop KSs and improve efficiency in adopting standards and technical regulations. The standards 
enactment and revision procedure w ill be improved so that the relevant agencies can 
independently work on and manage their standardization plans; so far the KS processes have been 
handled by KATS only.  
3.74.   KATS prepares the roadmap for standardization and carries forward standard development 
in connection with government policies and R&D. In 2011, eight sectors were subject to national 
standards coordination projects: smart grid, 3D businesses, electric cars, cloud computing, nuclear 
power, smart media, smart logistics, and smart medical infor mation; as of 2016, KATS was to 
proceed with the same type of projects in the fields of smart factory, smart health, next 
generation steel, next generation material and wearable smart -equipment.  
3.75.   As of April 2016, about 3,072  (about 15% of all standards) K Ss (5,000, or 24.6%, in 2010) 
were contained in 5,470 (15,375 in 2010) technical regulations issued by 19  government 
ministries. At the end of April 2016, 20,495  KSs had been adopted (23,622  in 2010). The 
allocation of all KSs by sector was: chemicals, tex tiles, and ceramics (4,518, 22%); machinery 
(3,120, 15%); electricity (3,469, 17%); metal, mining, and construction (2,368, 11.5%); 
transportation machines, shipbuilding, and the aerospace industry (1,522, 7.4%); information 
technology (1,636, 8%); and foo d, environment, etc. (3,862, 19%). At April 2016, 19,880 (97%) 
of KSs had been harmonized with corresponding international standards, compared to 
14,157  (59.9%) in 2010. Non -harmonized standards, i.e. those that are either unique to Korea, 
with no correspo nding international norm (e.g. for kimchi), or cannot be harmonized because of 
their link to other domestic regulations, remain in place; no information on developments on 
"Korea -specific" standards since 2012 was available from the authorities.84 Roughly 3 % (2.5% in 
2010) of KSs have been established without any reference to international standards. In 
April 2016, approximately 66% (60% in 2010) of KSs were subject to international ISO/IEC 
harmonization.  
3.76.   At March 2016, Korea maintained bilateral MoUs with 42 agencies (46 in 2011) from 
31 (33 in 2011) countries for mutual cooperation in global standardization activities, exchange of 
                                                
83 Interview with the administrator of KATS published in the online Business Korea  article titled "Korean 
Agency for Technology and Standards – Augmenting Added Value by Strengthening Industrial Standards" , 
31 January 2014. Viewed at: http://www.businesskorea.co.kr/english/features/special -reports/3370 -korean -
agency -technology -and-standards -augmenting -added -value#sthash.cbQ06lXW.dpuf . 
84 At the time of the previous R eview , according to the authorities , there were very few "Korea -specific" 
standards, and these were maintained only where there were no equivalent international standa rds and when 
there was sufficient justification. Moreover, "Korea -specific" standards were not aimed at creating unnecessary 
obstacles to international trade; they involved Korean traditional food products and related items, such as 
gwamegi  (dried Pacific saury or mackerel pike), doenjang  (fermented soybean paste), gochujang  (thick soy 
and red pepper paste), and kimchi refrigerators.  WT/TPR/S/346 • Republic of Korea  
 
- 70 - 
 
  technical information related to standards and conformity assessment, organization of 
standardization meetings, operation of jo int education programmes, and exchange of experts.85  
3.2.9.1.2   Food, health -related and other measures  
3.77.   Legislative responsibility for regulating food safety and quality remains divided between 
several ministries. The Ministry of Food and Drug Safety (MFDS) regulates  food safety (including 
foods of plant, animal and aquatic origin), whereas the Ministry of Agriculture, Food and Rural 
Affairs (MAFRA) deals with animal and plant health (including import quarantine measures for 
animal, livestock products and plants). The  Ministry of Oceans and Fisheries deals with aquatic 
health including import quarantine measures for fishery products and safety for exporting fishery 
products. Safety of foods, pharmaceuticals, medical devices and cosmetics is governed by the 
Ministry of Food and Drug Safety (MFDS), formerly the Korea Food and Drug Administration 
(KFDA) – a government body upgraded to ministerial level in March 2013 .86 MFDS's main role is to 
protect public health and safety, including the safety of food and livestock produc ts. MFDS, with its 
six regional offices, and the National Institute of Food and Drug Safety Evaluation, a think -tank, 
are responsible for establishing and enforcing basic legislation and its implementing regulations, as 
well as setting standards and specif ications for domestic and imported foods, including livestock 
products, functional foods, food additives, food packaging, containers and equipment 
(Section  3.2.9.2).87 As from March 2013, standards and specifications for meat, dairy, and egg 
products have b een handled by the MFDS, whereas quarantine  standards  for animals and animal 
products have been handled by MAFRA. The MFDS regulates domestic and imported salts for 
domestic consumption, with the exception of industrial salt and solar salt, which are inspe cted by 
the Animal and Plant Quarantine Agency (QIA).  
3.78.   Imports of pharmaceuticals continue to require a free sale certificate, issued by an authority 
of the exporting country. Any person intending to import medical devices or pharmaceuticals must 
obtain an  item-specific approval from , or file a notification with , the MFDS in accordance with the 
relevant law. Item -specific pre -approval involves the submission of extensive clinical trial data and 
other safety and efficacy -related data as prescribed by the Pha rmaceutical Affairs Act Enforcement 
Decree.88 Manufacturers must submit detailed data on certain active pharmaceutical ingredients 
under the MFDS's Drug Master File.  
3.79.   Each batch of imported pharmaceutical products remains subject to batch release testing by  
the healthcare authorities, even if  they have already been tested and released by the 
manufacturer and the health authority of the country of origin. The authorities indicated that the 
same rules and regulations are applied in accordance with the Pharmace utical Affairs Act to 
domestically distributed biological drugs (locally and foreign produced), and results of tests 
conducted by foreign manufacturers or health authorities of the exporting country must not 
substitute results of batch or lot release tests  conducted by the MFDS. For some medical devices 
used for medical practice, the Government needs to determine whether they are eligible for 
reimbursement before they are used at healthcare institutions including hospitals, since all 
healthcare institutions  in Korea are reimbursed by the Government for medical services provided 
to patients. With regard to medical devices subject to health technology assessment, under the 
relevant laws , it takes up to about 17 months (or 510 days) from the date of application  for MFDS 
approval by a device manufacturer to the date when the MFDS approval is granted and the product 
is launched onto the market: approval takes 80 days; health technology assessment 280 days; 
and listing the product for reimbursement 150 days.  
                                                
85 Online KATS information. Viewed at: http://www.kats.go.kr/en /content.do?cmsid=408 . 
86 Following the March 2013 revision of the National Government Organization Act, the policy -making 
function of the Ministry of Health and Welfare (MOHW) regarding food and drug safety, and the duties of the 
former Ministry for Food,  Agriculture, Forestry and Fisheries regarding sanitation and safety of agro -livestock 
fishery products were transferred to the MFDS. Online MFDS information. Viewed at: 
http://mfds.go.kr/eng/index. do?nMenuCode=9 .  
87 USDA Foreign Agricultural Service (2015d).  
88 Most regulations in this area are harmonized with the International Conference on Harmonization 
(ICH) guidelines . Since March 2016 , the MFDS has participate d in ICH as an observer and it is consider ing 
becoming a regular member.  WT/TPR/S/346 • Republic of Korea  
 
- 71 - 
 
  3.80.   Cosme tics are regulated by the MFDS and fall under two categories: "functional" cosmetics 
and regular cosmetics.89 "Functional" cosmetics include whitening, anti -wrinkle, and sunscreen and 
tanning products. The MFDS reviews only "functional" cosmetics for pre -market approval. For all 
other regular cosmetics, the Korea Pharmaceutical Traders Association (KPTA) has been authorized 
by the MFDS to review and certify import permission requests submitted by the Korean importer. 
The MFDS administers registration require ments on imported and domestically produced 
"functional" cosmetics. Importers must conduct "self -regulated" quality inspection for each product 
type to ensure conformity with the cosmetic standards and test methods.90 Cosmetics importers 
are required to fil e a customs report to , and obtain prior approval from , the Korea Pharmaceutical 
Traders Association (KPTA) on all products. Test results submitted by overseas manufacturers 
using quality standards that are internationally accepted or certified, or that are  more stringent 
than the Korea Cosmetic Good Manufacturing Practice (KCGMP) standards, are accepted without 
any additional quality testing in Korea. Quality inspection by the importer of cosmetics is required, 
according to manufacturing serial/batch number . Certain products classified as cosmetics 
(e.g. depilatory, hair dye products) overseas are not considered as such in Korea; reportedly, this 
makes it hard to harmonize regulations with other countries. The MFDS is revising the Cosmetics 
Act; depilatories  and hair dye products are to be classified as cosmetics by the end of 2017.  
3.2.9.1.3   Conformity assessment  
3.81.   KATS is responsible for conformity assessment, certification, registration and testing of 
industrial products for voluntary (KS) standards. It runs the Kore a Laboratory Accreditation 
Scheme (KOLAS), which accredits testing and calibration laboratories and inspection bodies, as 
well as the Korea Accreditation System (KAS), which accredits product certification bodies . 
Accreditation accords with internationally  recognized standards. In 2015, there were 487 (403 in 
2011) accredited testing laboratories, 209 (193 in 2011) calibration laboratories, 55 (46 in 2011) 
inspection bodies, 8 proficiency testing providers in KOLAS and 20 (16 in 2011) product 
certification bodies in KAS.91  
3.82.   Korea maintains a single national integrated certification mark, the Korea Certification (KC) 
mark, fully implemented as from January 2011.  
3.83.   In 2011, KATS set a five -year comprehensive plan on quality management to identify 
quality -related  issues that could be addressed to enhance sustainable growth and Korea's 
international competitiveness. The plan laid out 15 major actions and strategies in order to rank 
10th in terms of global quality competitiveness by the year 2015; its results have b een generally 
satisfactory and at present KATS is working on a basic plan of quality management for 2016 to 
2020.  
3.84.   Certification authorities are encouraged to negotiate mutual recognition arrangements 
(MRAs) with foreign counterparts. KOLAS is a signatory to the International Laboratory 
Accreditation Cooperation (ILAC) Multilateral Recognition Arrangement (MLA) for testing and for 
calibration; as of May 2016, 89 accreditation bodies from 74 countries participated in the MLA. 
KATS is a signatory to the Inter national Accreditation Forum (IAF) MLA for bodies operating 
product certification systems. Korea also maintains an extensive network of MRAs, especially with 
APEC economies. The Korean Accreditation Board (KAB) and KAS form part of the Pacific 
Accreditatio n System (PAC). KAB is a signatory of the IAF MLA for Quality Management Systems, 
and participates in the IAF MLA for Environmental Management Systems. Korea is also a member 
of the APEC MRA on Conformity Assessment of Telecommunications Equipment (Phase I  and II) 
and of Part I of the APEC Electrical MRA; it does not intend to participate in Part II and III of the 
latter. It joined the MRA on Conformity Assessment of Electrical and Electronic Equipment in 
2015.92  
                                                
89 Korea is the world's 10th largest cosmetics market, representing nearly 2.8% of the global market and 
worth US$7.8 billion (2014). Viewed at: 
http://www.export.gov/southkorea/doingbusinessinskorea/leadingsectorsforusexportsinvestment/cosmetics/in
dex.asp . 
90 WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  
91 Online KOLAS information. Viewed at: https://www.kolas.go.kr/english/ . 
92 Online APEC information. Viewed at: http://w ww.apec.org/Groups/Committee -on-Trade -and-
Investment/~/media/7F1C151806EE44D48FC04FA3D4BFDD49.ashx . WT/TPR/S/346 • Republic of Korea  
 
- 72 - 
 
  3.85.   Korea maintains: an APEC -TEL MRA with Canada  (1997), the United States (2005), 
Viet Nam (2006), and Chile (2007) on recognition of test results for telecommunications 
equipment; an FTA with the EU with provisions on recognition of conformity assessment for 
telecommunications equipment; and an MRA wi th Singapore (2006) on electrical and electronic 
appliances under the Korea –Singapore FTA. Under the Industrial Technology Innovation Promotion 
Act, the NEP (New Excellent Product) certification system continues to cover products 
manufactured with new tech nologies developed first in Korea or improved with innovative 
technologies. The certificate is valid for three years. NEP -certified products receive government 
support to expand sales channels and accelerate technology development. Products certified as 
NEP receive an additional qualification point in procurement by government and public 
organizations. At the time of the previous Review, the authorities indicated that the NEP system 
does not affect international trade. No data on the specific product covera ge of and financial 
support under the NEP system was available from the authorities.  
3.86.   The MFDS facilitates food imports through the "authorization of foreign official laboratories" 
system and the "pre -confirmed registration system of imported foods". The f ormer covers 
inspection agencies authorized by the Government of the exporting countries and the MFDS; it 
includes 59 agencies in 9 countries. Test results issued by these agencies are recognized by the 
MFDS and therefore relevant imports are exempt from l aboratory inspection. Under the "pre -
confirmed registration system of imported foods", foodstuffs pre -approved and registered based on 
site inspection at the exporter's premises and advanced test certification of an officially authorized 
agency are exempt from laboratory inspection. Korea has not joined the APEC MRA on Conformity 
Assessment of Foods and Food Products.  
3.87.   Following the revision of the Act on the Management and Support for the Promotion of 
Eco-Friendly Agriculture/Fisheries and Organic Foods (N ew Organic Act) in 2012, as from 
1 June 2013 a mandatory organic certification programme requires all domestic and imported 
organic fresh (unprocessed) and processed produce and livestock products to be certified by a 
MAFRA accredited certifying body.93 As of December 2015, 15  Korean certifying agencies and four 
foreign certifying agencies were accredited by MAFRA's National Agricultural Products Quality 
Management Service (NAQS) for certification of organic processed food products. Korea maintains 
a zero -tolerance policy for the inadvertent presence of biotech content in processed organic 
products (Sections  3.2.9.2.1 and 3.2.9.3); any organic products tested positive for genetically 
modified organisms  (GMOs) importers/producers can be instructed to remove an  organic claim 
from the product label and NAQS may investigate the case to see if there is any intentional 
violation.94 In response to consumer demand for a higher standard of environment -friendly 
agricultural products, Korea stopped issuing new certificati on for low pesticide organic agricultural 
produce in 2010 in view of the discontinuation of this category in 2016.95 In lieu of certification by 
accredited certifying agents, the 2012 Act allowed MAFRA to have an equivalency agreement on 
processed organic p roducts with foreign trade partners. On 1 July 2014, the United  States and 
Korea adopted an equivalency arrangement allowing processed food products certified as organic 
in the United States or Korea to be sold as organic in either country without having t o go through 
a costly certification process again under the importing country's standards.  
3.88.   During the review period, action was also taken in the areas of reporting, declaration of 
conformity, testing and environmental impact review. In 2013, an Act on th e Registration and 
Evaluation of Chemicals requiring manufacturers and importers of chemical substances to register 
and comply with annual reporting requirements was enacted and notified to the WTO TBT 
Committee; on 18 February 2014, the Ministry of Enviro nment (MOE) released implementing 
regulations in force as of 1 January 2015.96 A new regulation requiring companies to make 
                                                
93 The certification for organic produce is classified into two categories: organic and no -pesticide. For 
livestock products, two categories of certificatio n are available: organic livestock and no -antibiotic livestock. 
USDA Foreign Agricultural Service (2015d); USDA Foreign Agricultural Service (2015b).  
94 USDA Foreign Agricultural Service (2015c).  
95 Sustainable agricultural produce has been classified into t hree categories: organic produce, 
no-pesticide produce, and low -pesticide produce (until 2015), and can be labelled accordingly. For livestock 
products, two categories of certification are available : organic livestock and no -antibiotic livestock 
(WTO  docum ent WT/TPR/S/268/Rev.1, 8  November 2012).  
96 Concerns remain with these registration and reporting requirements, in particular the high costs and 
potential release of sensitive business information , as well as the 20 days for interested parties to submit 
comments prior to implementation. USTR (2015). WTO documents G/TBT/N/KOR/305, 9 March 2011; WT/TPR/S/346 • Republic of Korea  
 
- 73 - 
 
  information on chemical products, such as the name and quantity of chemical products in 
production facilities, publicly available was  implemented as of 1 January 2016.97 KATS released its 
final Safety Regulations rule for information technology equipment, effective 1 July 2013; these 
regulations expanded the scope of products subject to a supplier's declaration of conformity, and 
adopted  the most current International Electrotechnical Commission (IEC) standard.98 In 
March  2014, an environmental impact review on the use of cadmium in solar panels determined 
that a hazard existed for using Cadmium Telluride (CdTe).99 Pursuant to an amendment of the 
Motor Vehicle Management Act, Korea requires, as of 8  January  2015, that all auto manufacturers 
or dealers report vehicle repair histories to vehicle purchasers in order to account for any damages 
taking place between the manufacturing site and cust omer delivery.100  
3.2.9.1.4   Transparency  
3.89.   New and/or revised legislation and the implementing guidelines are published in the 
government gazette for public comments; these changes are also notified regularly to the WTO for 
Members' comments. Between 2012 and 2015, Kor ea made 281 new notifications under the 
WTO Agreement on Technical Barriers to Trade (the TBT Agreement); the majority remained under 
Article 2.9 of the Agreement, and in 91.1% of the notified cases the timeliness of the submission 
allowed for a comment pe riod of 60 days or more, while in only 11 cases the period was less than 
45 days.101 To help Korean companies respond to technical barriers to trade, KATS maintains a 
TBT division, which is exclusively responsible for WTO/TBT -related affairs. KATS maintains an 
online information service on technical regulations of respective countries, which are notified to the 
WTO.102 KATS runs a TBT Notifications Alert Service, which transmits TBT notifications to 
stakeholders by email and encourages them to submit their comm ents.  
3.90.   During the review period, Members raised specific trade concerns (STCs) at the Committee 
on Technical Barriers to Trade regarding several measures under consideration or taken by Korea 
(e.g. relating to chemical material; thin -film solar panels; PCV  flooring material, wallpaper and 
paper linoleum, and toys; wood products; automobile standards; tyres for motor vehicles; cell 
phone electromagnetic values/exposure; cosmetics; radio -frequency identification tags for 
imported whiskeys; and energy efficien cy of windows).103  
                                                                                                                                                  
G/TBT/N/KOR/305/Add.1, 30 August 2013; G/TB/N/KOR/478 , 28 February 2014; and, G/TBT/N/KOR/592, 
5 August 2015.  
97 USTR (2016).  
98 Nevertheless, concerns remain as the re gulation requires separate safety certification with respect to 
each factory's products, even for identical products produced by the same company but in a different factory , 
and does not establish a certificate renewal process. Furthermore, despite being a  member of the IEC System 
for Conformity Testing and Certification of Electrical and Electronic Components, Equipment and Products 
Certification Bodies' Scheme (CB), KATS is not currently accepting CB reports without additional testing. 
Finally, the final rule imposes burdensome labelling requirements for information that could be disclosed 
instead in an insert or manual. USTR (2015); USTR (2016).  
99 Korea requires solar panels to be certified by the Korea Management Energy Corporation (KEMCO) 
before they ca n be sold for projects receiving government support provided to the vast majority of solar 
projects in the country. KEMCO maintains a standard for thin -film solar panels that can only be satisfied by 
panels manufactured from amorphous silicon and copper indium gallium selenide. Over recent  years Korea was 
urged at WTO TBT Committee meetings to adopt in full the relevant international standard, IEC 61646, without 
limiting its application solely to the type of thin -film solar panel its industry produces. USTR  (2015).  
100 This new reporting requirement seems to discriminate against auto importers because local auto 
manufacturing sites are co -located with the Pre -Delivery Inspection (PDI) facility, thus vehicles are unlikely to 
require any reportable reconditionin g; since imported vehicles routinely undergo some kind of reconditioning 
that would require reporting under this law, consumers perception of imported  vehicles could be harmed. 
USTR  (2015); USTR (201 6). 
101 In 2014 and 2015 , Korea made 35 and 71 online notif ication submissions (TBT NSS) , respectively. 
WTO documents G/TBT/33, 27  February 2013; G/TBT/34, 7 March 2014; G/TBT/36, 23 February 2015; and 
G/TBT/38/Rev.1, 24 March 2016.  
102 Viewed at: http://www.know tbt.kr/eng/index.aspx/ . 
103 Historically, Korean measures are frequently subject to TBT STCs. Overall, from 1995 to 2015, 
30 new STCs have been raised against Korean measures before the TBT Committee. This makes Korea the 
4th WTO Member with most measures d iscussed in the Committee, only behind the EU, China and the 
United  States. However, in 2015 , Korea was not among even the top 8 Members in terms of measures subject 
to STCs. WTO documents G/TBT/33, 27 February 2013; G/TBT/34, 7 March 2014; G/TBT/36, 
23 February  2015; and, G/TBT/38/Rev.1, 24 March 2016.  WT/TPR/S/346 • Republic of Korea  
 
- 74 - 
 
  3.2.9.2   Sanitary and phytosanitary measures  
3.2.9.2.1   Food standards -setting framework  
3.91.   Korea's regulatory system takes into account the opinions of consumers and industry, and 
reflects them in the decision -making process.104 The main laws affecting food stan dards and 
specification are the Food Sanitation Act (last amended in 2016), the Food Code and the Food 
Additive Code. Since 2008, a Food Safety Policy Committee comprehensively revises and 
coordinates food safety management tasks dispersed across the vario us ministries and agencies; 
so far each relevant agency has developed comprehensive three -year food safety plans (2008 -11, 
2012-14, 2015 -16) to carry out food safety control schemes to prevent hazardous food at all 
stages of the food chain from production to distribution. Following efforts to consolidate all 
imported food regulations, which were scattered among various acts, into a single act, a Special 
Act on Imported Food Safety Management, effective as of 4 February 2016, requires all foreign 
food facili ties and establishments to be registered by the MFDS. Reportedly, this act is to facilitate 
sound transactions and enhance public health by guaranteeing the safety of imported foods in the 
domestic market and food exported overseas, to promote quality, and  to provide correct 
information, as well as to provide the legal grounds to take measures if foreign manufacturers 
decline audits.105 A six-month grace period for foreign facility registration, until 3 August 2016, 
was granted to allow a smooth transition.  
3.92.   As from March 2013, the responsibility of implementing the Hazard Analysis of Critical 
Control Point (HACCP) programme (see below) and the recall systems for food, livestock, and dairy 
products were transferred from MAFRA to the MFDS. The MFDS expanded the  application of the 
Hazard Analysis Critical Control Point system to 13,991 firms by December 2015 compared to 
2,500 firms in 2012. In addition, the MFDS sets and implements regulations governing safety 
evaluations of agricultural products that have been e nhanced through biotechnology and labelling 
requirements for both agricultural products and processed food products manufactured using GMO 
ingredients (Section 3.2.9.3).106  
Maximum residue levels  
3.93.   The MFDS remains responsible for regulating pesticide residue s in foodstuffs, in accordance 
with the maximum residue levels (MRLs) set in the Food Code and applied for both domestic and 
foreign products.107 The authorities indicated that MRLs are established based on the scientific 
residue data, and the MFDS tries to harmonize them with the CODEX tolerance whenever possible 
until full enforcement of the "positive list" (see below); if the standard is different to that of the 
CODEX, it is reassessed to promote standards harmonization.108 As of December 2015, the MFDS 
had set MRLs for 449 pesticides in agricultural products and 79 pesticides in ginseng products. The 
Food Code also lists MRLs for 82 pesticides and 147 veterinary drugs in meat, fish, eggs and milk 
products that remain virtually unchanged since the previous Review. In addition to the Food Code, 
the MFDS maintains an MRLs database (Pesticide Residue Database) for agricultural products, in 
Korean with English translations.109 Food importers have to provide lists of all food ingredients and 
additives to the MFDS and  the QIA for customs clearance; the ingredient content ratio (mixture 
ratio of materials) is not required.  
                                                
104 WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  
105 As for establishments of livestock products , including dairy products, the MFDS w ill recognize 
establishments that have a record of export to Korea prior  to the implementation of the Special Act. Those 
establishments with a record will not require any additional registration. For any new establishment that wishes 
to export products to Korea, registration shall be made through the exporting Government. USDA  Foreign 
Agricultural Service (2015c).  
106 USDA Foreign Agricultural Service (2015d).  
107 In addition to MFDS , MAFRA and the Ministry of Environment (MOE) handle pesticide -related 
matters. MAFRA is responsible for pesticide registration and the MOE is respon sible for testing pesticide levels 
in water, soil and agricultural products. USDA Foreign Agricultural Service (2015d).  
108 If an MRL is established in the Food Code for a pesticide in a particular agricultural product, other 
tolerance levels, such as CODEX , are not accepted. However, for pesticides where tolerance levels have not 
been established in the Korean Food Code, the following rules apply: the CODEX standards set for a particular 
agricultural product (excluding crop groupings) in question shall appl y; if the previous provision is not 
applicable, the lowest residue limit for the pesticide in question for a similar agricultural product shall apply; 
and if both previous provisions are not applicable, the lowest of the residue limits of the pesticide for  any 
agricultural crop appl ies. USDA Foreign Agricultural Service (2015d).  
109 See 2009 KFDA online information. Viewed at: http://eng.kfda.go.kr/policy/pesticides.php . WT/TPR/S/346 • Republic of Korea  
 
- 75 - 
 
  3.94.   Since 2015, Korea has been in the process of shifting to a new positive list system (PLS) for 
agrochemical residues which would inhibit the use of n on-registered pesticides which are not 
evaluated by scientific assessment and would no longer allow imports of food containing 
agrochemical residues unless the substance has been listed, or approved, for the commodity in 
question and an MRL has been establ ished. The MFDS plans to first complete the transition to the 
PLS for tropical fruit and nuts/seeds by the end of 2016; it then plans to complete the transition 
for all other crops by the end of 2018 and veterinary drugs by 2020. In the process of making t his 
shift, Korea is requiring new import tolerances for agrochemicals not already registered for use in 
the country.110 This process may prove a significant challenge to exporters of fruit and grain if 
import tolerances are not set at an appropriate level an d in a timely manner; sufficient time for a 
smooth transition to the PLS may be required.111 After a single MRL violation by an export 
shipment to either Korea or another country, Korea may impose restrictive import requirements on 
that product's grower, shi pper, and importer, and may require a number of compliant shipments to 
Korea before the requirement is removed.  
Food additives  
3.95.   All food additives require prior approval. As of December 2015, Korea had a positive list of 
605 (601 in 2011) approved food add itives.112 Food additives and related items are grouped into 
three categories: (a)  chemical synthetics (408 items), (b) natural additives (197 items), and 
(c) mixed substances (7 categories of mixture of approved additives). Reportedly, even though 
there may  be an established CODEX standard for a given food additive, domestic or imported 
foods with "reasonable" levels of a food additive may not be marketed, either because their food 
additive is not registered in the Korean Food Additives Standards Code, or be cause it failed to 
comply with item -specific standards specified in the Code or its usage in a certain food product is 
not specified in the existing Food Additive Code.113 Getting a new additive added to the approved 
list usually takes a year or more. In 201 5, food additives were to be reclassified based on the 
Codex Alimentarius Commission; a revised plan for the classification system for food additives was 
to bring them in line with that of advanced countries.114 The authorities indicated that, since 2012, 
eight new food additives were authorized, and the relevant standards and specifications have been 
consistently revised for their harmonization with global standards.115  
3.96.   A 2009 system of managing safety of OEM (original equipment manufacturing) food imports 
mandates OEM food importers to perform on -the-spot inspection and self -quality control for OEM 
food products (food and food additive imports other than agricultural items, forestry items and 
alcoholic beverages manufactured by overseas contractors and labell ed with the contractor's 
brand). The MFDS and city/province authorities conduct regular on -site inspections for 
domestically produced food products. If imported OEM food products prove to be safe, their 
imports are to increase once consumer confidence is r estored.  
Genetically modified products and living modified organisms  
3.97.   Korea's legislation on the marketing of genetically modified agricultural products (GMAPs), , 
continues to apply equally to domestic and imported GMAPs.  Since 1  January  2008, Korea has 
implemented the Act on Transboundary Movement of Living Modified Organisms (LMO Act), the 
law implementing the Cartagena Protocol on Biosafety to the Convention on Biological Diversity. 
Imports of biotech grains, as well as genetically engineered animals, a re regulated under the Food 
Sanitation Act and the LMO Act, which was last revised in December 2012 and became effective on 
12 December 2013, to, inter alia , provide a definition of stacked events116; its Enforcement 
Decree, the Enforcement Regulations, and the Consolidated Notice were revised in 2014.  
                                                
110 If no domestic MRL has bee n established, then an import tolerance will be required in order to import 
foods containing substance s not approved for use in Korea. If no import tolerance is set, 0.01  ppm will be 
applied as the default tolerance. USDA Foreign Agricultural Service (2015 d); USTR (2016).  
111 USTR (2015).  
112 USDA Foreign Agricultural Service (2015d).  
113 WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  
114 Ministry of Food and Drug Safety (2013).  
115 These items are polyvinyl alcohol, urease, sodium fluoride, potassium iodate, but ane, ammonium 
phosphatides, polyethylene glycol, and calcium caseinate.  
116 Despite the revisions , it appears that the regulations still do not distinguish between biotech for food, 
feed and processing (FFP) and biotech seed, do not eliminate the redundant r isk assessment process, and do WT/TPR/S/346 • Republic of Korea  
 
- 76 - 
 
  3.98.   Food safety and environmental risk assessments (ERAs) are mandatory on biotechnology 
crops and LMOs. The authorities indicated that, in accordance with CODEX guidelines and OECD 
Biosafety Consensus Documents, safety of LMOs for food is evaluated under the principle of 
substantial equivalence based on scientifically valid and justified data such as comparison of 
toxicity, allergenicity and the nutrients of the GM food in question and its non -GM counterpart; 
they consider that the approval procedure is legitimate and does not lead to unnecessary 
delays.117 The MFDS remains responsible for risk assessment for human health of food -related 
GMAPs and maintains a policy of zero tolerance for the presence of biotechnology  products in 
processed food that is labelled as organic (Section 3.2.9.1.3).  It has authority to conduct 
mandatory safety assessments to evaluate genetically modified organisms (GMOs) in products 
used for human consumption. The Rural Development Administra tion (crop cultivation 
environment), the National Institute of Ecology overseen by MOE (as from end -2013, replacing the 
National Institute of Environmental Research) (natural ecosystem), and the National Fisheries 
Research and Development Institute (marine  ecosystem) are responsible for environmental risk 
assessment (ERA). According to the LMO Act, the MFDS implements risk assessment for human 
health on food, and the Korea Centre for Disease Control and Prevention (KCDC) does the same on 
feed for industrial  use. The authorities indicated that there are neither overlaps of data 
requirements nor unnecessary delays in the LMO food approval process. GMAPs production and 
imports have been allowed since 2008. As of May 2016, food safety approval for GMAPs had been  
given to 139  varieties of soybean, maize, cotton, canola, sugar beet and alfalfa, out of 
150 submissions. So far, no GM crops have been grown in Korea and, therefore, the process for 
crop and food approval has only been applied to imported products. By Ma rch 2016, MAFRA had 
completed a total of 131  out of 151 applications for review of environmental risks of LMOs; as of 
April 2016, it was conducting 11 reviews and had completed a total of 6 out of 14 applications for 
environmental risk assessment on food.  
3.99.   Korea implements the Advance Informed Agreement Procedure as well as labelling 
requirements for GMOs and LMOs (Section 3.2.9.3).  
3.2.9.2.2   Quarantine regulations  
3.100.   Korea's main laws on quarantine requirements for imports (and exports) remain the Plant 
Protection Act,  the Contagious Animal Disease Prevention Act, and the Aquatic Creatures Disease 
Control Act.  As from March 2013, the Animal, Plant and Fisheries Quarantine and Inspection 
Agency was divided into the Animal and Plant Quarantine Agency (QIA) and the Nationa l Fishery 
Products Quality Management Service (NFQS). Thus, animal and plant quarantine and inspection 
are handled by the QIA under MAFRA, and fisheries by the NFQS under the Ministry of Oceans and 
Fisheries.  
3.101.   Imports of plants and plant products must have  a phytosanitary certificate issued by the 
competent authority in the exporting country. Imports of soil, plants with soil, and certain plants 
or vegetable materials are banned. Imports of rice in the husk, chaff, and rice straw from all 
origins , except Ja pan and Chinese Taipei, are prohibited for pest reasons. Plants from most 
countries for planting are also prohibited or restricted. Following the disaster at the Fukushima 
nuclear plant, since March 2011, Korea has prohibited imports of 27  agricultural pro ducts from 
13 prefectures that were under distribution restriction in Japan (Section 3.2.6.3).118 Food products 
with possible radioactive contamination from these prefectures have been subject to certificate of 
origin requirements and a test certificate issu ed by the Japanese Government that proves the food 
products in question are not contaminated. Following the discovery of continuing leakages of 
contaminated water in 2013, Korea implemented temporary measures including the extension of 
the import ban and t esting requirements. Some of these measures led to a dispute settlement 
case in 2015 (Sections 2.5.1 and 3.2.9.2.3). In August 2012, Korea prohibited the importation of 
                                                                                                                                                  
not provide a workable definition of adventitious presence. The authorities do not share this assessment. USDA 
Foreign Agricultural Service (2015c).  
117 Certain documentation requirements for biotech approvals seemingly go beyo nd the provisions of the 
Cartagena Protocol on Biosafety; it appears that data and information requests may lead to delays in the 
approval of new products and at times lack scientific justification. USTR (2015).  
118 The items subject to this action included rice, tea, spinach, mushrooms, chestnuts, kiwi, leafy 
greens, and bamboo shoots. Online MFDS information. Viewed at: 
http://mfds.go.kr/eng/eng /index.do?nMenuCode=75&searchKeyCode=134&page=1&mode=view&boardSeq=6
7404.  WT/TPR/S/346 • Republic of Korea  
 
- 77 - 
 
  fresh potatoes from the states of Idaho, Oregon, and Washington (United States) due to the 
presence of zebra chip in the region.119  
3.102.   Animal and animal products are subject to inspection and quarantine. Document and 
organoleptic inspection, and laboratory testing, if necessary, are undertaken to verify that no 
contagious animal disease is broug ht into Korea and that no hazard is posed to public health. 
Korea bans the import of animals and their products from countries affected by exotic animal 
diseases such as foot -and-mouth disease and bovine spongiform encephalopathy (BSE). Upon 
request of the  exporting country the import ban may be lifted depending on the outcome of import 
risk analysis. Imports from countries affected by HPAI (highly pathogenic avian influenza) are 
banned, but those of poultry meat that is heat -processed to kill the HPAI viru s are allowed. 
According to the authorities, Korea applies the same animal quarantine and livestock product 
health requirements to domestic production and imports. On 19 November 2015, Korea lifted the 
import ban on poultry and poultry meat products from t he United States that had been imposed in 
December 2014 due to the outbreak of HPAI.120 Cheese imports must meet Korea's pasteurization 
requirements.121 Under Article 14 of the Imported Food Inspection Instruction, the declared 
minimum import weight of "food" and "food apparatus, containers and packages" for sanitary 
inspection by MFDS is 100 kg.122  
3.2.9.2.3   Transparency  
3.103.   Between January 2012 and mid -June 2016, 161 notifications were submitted under the 
WTO Agreement on Sanitary and Phytosanitary Measures (the SPS Agreem ent). This includes 
367 regular notifications, 4 emergency notifications, and 21 addenda/corrigenda. During the 
review period, STCs involving Korea's strengthened import restrictions on food and feeds with 
regard to radionuclides (first raised on 16 Octobe r 2013, Japan, STC 359) and import restrictions 
due to African swine fever (first raised on 15 July 2015, EU, STC 393) were raised at the meetings 
of the WTO SPS Committee.123 On 21 May 2015, Japan requested consultations with Korea 
regarding: (a) import ban s on certain food products; (b) additional testing and certification 
requirements regarding the presence of certain radionuclides; and (c) a number of alleged 
omissions concerning transparency obligations under the SPS Agreement.124 As of February 2016, 
a panel was composed to examine the case (Sections 2.6.1 and 3.2.6.3); Brazil, Canada, China, 
the European Union, Guatemala, India, New Zealand, Norway, the Russian  Federation, 
Chinese  Taipei, and the United States reserved their third -party rights.  
3.104.   Korea mai ntains MoUs on food safety and quality standards with China's General 
Administration of Quality Supervision, Inspection and Quarantine (signed January 2003, revised 
November 2007), Chile (May 2009), Viet Nam (May 2009), Food Standards Australia New Zealand  
(FSANZ) (July 2011), and the Philippines (Manila) WHO Western Pacific Regional Office (WPRO) 
(July 2011).125 
3.2.9.3   Labelling  
3.105.   During the review period, the MFDS introduced a traceability system for infant/baby food 
and health functional foods in three stages.126 As the first stage, the MFDS mandated the 
                                                
119 USTR (2015); USTR (2016).  
120 USDA Foreign Agricultural Service (2015d).  
121 In Korea, low temperature pasteurization is regarded as 63 -65°C for 30 minutes, 72 -75°C for 
15 seconds o r equivalent methods.  
122 Imports o f less than 100 kg may also be allowed  but: they must undergo sanitary inspection by the 
MFDS upon the first importation; exemption for the same product from the same manufacturer may be applied 
thereafter. However, the exe mption does not apply for subsequent imports over 100 kg, but the fees incurred 
from the test (inspection fee) are waived. This measure is intended to prevent manufacturers receiving 
approval  for a small quantity of quality products and benefiting from imp ort clearance for a large quantity that 
does not comply with the inspection standards.  
123 WTO document WT/TPR/OV/18, 17 November 2015.  
124 WTO online information , "Dispute  DS495 : Korea – Import Bans, and Testing and Certification 
Requirements for Radionuclid es". Viewed at: 
https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds495_e.htm . 
125 KFDA online information. Viewed at: http://www.kfda.go.kr/eng/eng/index.do?nMenuCode=27 
&searchKeyCode=65&page=1&mode=view&boardSeq=66524 . 
126 USDA Foreign Agricultural Service (2015d).  WT/TPR/S/346 • Republic of Korea  
 
- 78 - 
 
  traceability for domestic manufacturers whose annual sales value exceeds ₩5 billion (approx. 
US$4.3  million) beginning 1 December 2014. From 1 December 2015, this requirement was 
expanded to those domestic manufacture rs whose annual sales value exceeds ₩1 billion; it will be 
further expanded to business with annual sales of ₩0.1 billion by 1 December 2016, and all 
businesses by 1  December 2017. Importers will need to establish the traceability system from the 
entry poi nt of products in Korea throughout their distribution in the country. For infant/baby food 
importers, as the first stage, the MFDS mandated the traceability for businesses whose annual 
sales value exceeded ₩1 billion in 2013 (approx. US$ 0.84 million) begi nning 4 February 2016; as 
from 1  December 2016, it will be expanded to those with annual sales from ₩100 million to 
₩1 billion in 2013 (approx. US$84,000 to 0.84 million), and to businesses with annual sales of 
₩0.1 billion in 2013 (approx. US$84,000) as f rom 1 December 2017. For health functional food 
importers, the MFDS mandated the traceability for businesses whose annual sales value exceeded 
₩5 billion in 2013 (approx. US$4.2 million) beginning 4 February 2016; as from 1 June 2016, this 
requirement will  be expanded to those with sales of more than ₩1 billion in 2014 
(approx.  US$0.84 million), and to those with annual sales of more than ₩0.1 billion in 2015 
(approx. US$84,000) from 1 June 2017 onwards. The revised National Health Promotion Act that 
makes it mandatory for tobacco makers to present stronger warning messages and pictures on the 
packaging of cigarettes was passed on 22 June 2015 and is to take effect on 23 December 2016 
after years of controversy.  
3.106.   Genetically modified corn, soybeans, cotton, rape and sugar beet (including sprouts 
originating from these items), as well as foods suitable for consumption containing these products 
and notified as such by the MFDS, remain subject to mandatory GMO labelling requirements.127 
GMO foods for which identit y preservation documents or government -issued certificates were 
submitted are exempted from GMO labelling requirements. On the other hand, concerning food 
from the United States, Korea accepts a notarized self -declaration, instead of requiring full 
documen tation, to certify products that are exempt from biotechnology requirements. Importers or 
manufacturers must  keep records for up to two years to prove that unlabelled foods subject to 
GMO labelling requirements are GMO free. On 24 April 2014, the MFDS comb ined the three 
existing labelling standards, i.e. the Labelling Standards for Recombinant Food, Guidelines for 
Labelling of Genetically Modified Agricultural Products, and Labelling Standards in the LMO Act 
(Section  3.2.9.2.1) to provide standards required  for the labelling of biotech crops and food, 
including processed food products containing corn, soybeans, cotton, canola, and sugar beets with 
3% or higher GMO content.128 While several proposals to expand biotech labelling dating back to 
2008 and 2013 are still pending in the National Assembly and/or the Prime Minister's Office, the 
MFDS announced its plan in early 2015 to expand mandatory biotech labelling to include all 
products with detectable biotech ingredients. Under the 31 December 2015 revision of t he Food 
Sanitation Act and the Functional Health Foods Act, the scope of the GM labelling requirement was 
expanded to any food products that contain genetically modified DNA or genetically modified 
proteins on 3 February 2016, effective as from 4 February 2017. Under the current system, 
biotech labelling is not required for products that contain biotech ingredients beyond the top five 
ingredients. On the other hand, highly refined food such as sugars and oils will continue to be 
exempt from the mandatory bi otech labelling requirement as genetically modified DNA and 
genetically modified proteins are removed during the processing procedures.  
3.107.   Origin labelling is mandatory for food and many other imports of 674 four -digit tariff lines 
(2015) (664 in 2011). The u se of the term "Assembled in Country X"  has been allowed since 
October 2010. The Korea Customs Service's Origin Mark Registration and Retrieval System enables 
users to check origin markings by trader or item.  
3.2.10   Government procurement  
3.108.   Korea's government proc urement market grew almost steadily from ₩104.4 trillion or 
8.9% of GDP (2010) to ₩111.5 trillion (2014) or about 7.5% of GDP.129 Although government 
procurement is directed at achieving "value for money", as of 2014, it also focused on: 
"future -oriented pub lic procurement" promoting the development of new growth -driving industries; 
                                                
127 Following the 2013 government reorganiz ation (Section 2.3) , the authority for biotech labelling of 
unprocessed crops was transferred from MAFRA to MFDS without any change in labelling requirements. USDA 
Foreign Agricultural Service (2015d).  
128 USDA Foreign Agricultural Service (2015d) ; and USDA Foreign Agricultural Service (2015c).  
129 Public Procurement Service (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 79 - 
 
  "quality -first procurement", inter alia , raising quality standards for safety and health -related 
products and reinforcing action against untruthful contract deliveries; "socially responsible public 
procurement", allowing easier entry and broader market opportunities for social enterprises, SMEs, 
and other socially disadvantaged businesses130; preparing for "global public procurement" with 
plans to launch an online global procurement marketplace (Section 3.3.6), and expand its 
cooperation with foreign public procurement authorities.131  
3.109.   Korea operates international tendering and other procurement procedures in accordance 
with its commitments under the WTO Plurilateral Agreement on Govern ment Procurement (GPA). 
As of 14 January 2016, the revised GPA came into force for Korea, thus opening its government 
procurement market to more international competition. During the review period, its list of public 
entities subject to GPA provisions was revised on 22 September 2013 and on 8 May 2016, and 
information on its respective threshold figures in national currency was provided.132 As from 
18 December 2015, the WTO GPA threshold has been ₩210 million, down from ₩250 million (or 
from SDR 450,000 to SD R 400,000), whereas since the entry into force of the KORUS FTA 
(15 March 2012, Section 2.6.2), the threshold for goods and services from the United States has 
remained at ₩100  million.133 Korea's international tendering system is based on open competitive 
tendering; according to the authorities, restricted tendering is rarely used (see below).134 
According to the authorities, the value of contracts subject to Korea's WTO Government 
Procurement Agreement (GPA) commitments dropped to about ₩6.3 billion in 2015 ( ₩6.7 billion 
in 2014), equivalent to about 6% of the value of the entire government procurement market. In 
the case of contracts subject to Korea's WTO GPA commitments, centralized procurement (see 
below, Public Procurement Service  (PPS) ) represents 15% of  total procurement of GPA -covered 
entities. No detailed statistical data on the participation of WTO GPA -covered entities in the 
government procurement market operations were available from the authorities; Korea's only 
notifications over the past ten -year period were in 2006 (2004 data) and 2011 (2010 data).135  
Legislation  
3.110.   During the review period, no substantial changes were made to the main government 
procurement legislation (Act on Contracts to which the State is a Party, 1995). The legislation 
covers in ternational and domestic procurement of goods and services, including construction, by 
all central government agencies. Procurement by local government entities and public entities is 
regulated by the Act on Contracts to which the Local Government is a Par ty, and the Act on the 
Management of Non -Departmental Public Entities. Although purchase of agricultural, fisheries, and 
livestock products is not subject to international tendering under the GPA, their procurement is 
covered by the Act on Contracts to whi ch the State is a Party. Procurement from SMEs is covered 
by the main procurement legislation and the Act on SMEs' Products Promotion and Market Access. 
The 2005 Act on Encouragement of Purchase of Green Products (known as the Law on the 
Promotion of Envir onmentally Friendly Products) requires government agencies and state -owned 
enterprises (SOEs) to purchase environment -friendly products; as of 2015, it applied to 50 (49 in 
                                                
130 The authorities indicated that the term "companies in a disadvantageous position" refers to 
enterprises owned by women, veterans' service organizations, or social welfare organiz ations.  
131 Public Procurement Service (2015).  
132 The revision of the list aimed to reflect a reshuffle of organizations, and the actual level of Korea's 
GPA coverage in the Annex III group ( other entities), which includes major Korean SOEs, was expanded to 
cover additional sub -central government procuring entities under three local governments (Metropolitan 
Government s of Seoul, Busan and Incheon). WTO documents WT/Let/909 -WLI/100, 21  October 2013; 
WLI/100, 16  December 2015; GPA/134, 16 November 2015; GPA/W/3 36/Add.6, 29  January 2016; and, 
WT/Let/1162 -WLI/100, 24 May 2016.  
133 Furthermore, Korean procuring entities do not require a United States supplier/bidder to have been 
previously awarded one or more contracts by a procuring entity in Korea or to have had pr ior work experience 
in Korea in order to participate in procurement or be awarded a contract. WTO  document 
WT/TPR/S/268/Rev.1, 8 November 2012.  
134 Restricted tendering consists of limited (by invitation) or nominated (by nomination) competitive 
bidding and private contracts where a specific supplier is used.  
135 At the time of the 2008 TPR, the authorities indicated that more recent data were not available due 
to institutional change of responsibilities for data collection in this are a. At the time of the prev ious R eview , 
they indicated that data collection was suspended until 2010. According to their 2011 notification, in 2010 , 
contracts subject to Korea's WTO GPA commitments represented 59.4% of total procurement (above the 
threshold) of GPA -covered entities.  In the same year , above -threshold procurement by GPA -covered entities 
represented 36.8% of Korea's total procurement (excluding defence equipment). WTO documents 
GPA/84/Add.1, 12  October  2006; and GPA/108/Add.3, 2 December 2011.  WT/TPR/S/346 • Republic of Korea  
 
- 80 - 
 
  2012) central government agencies, 438 (244 in 2012)  local government bodies, and 4 05 (380 in 
2012) public institutions and SOEs affiliated with central and local government agencies 
(893 agencies in total). Although the law makes mandatory the purchase of environmentally 
friendly products , it provides exceptions for quality and availabi lity reasons, as well as emergency 
procurement needs. The Monopoly Regulation and Fair Trade Act, which was revised on 
16 July 2013 and came into effect on 17 January 2014, enabled the PPS to request the Korea Fair 
Trade Commission to lodge complaints on a lleged violations with the Prosecution 
(Section  3.4.5.1); in 2014, the PPS set new standards to deal with collusion investigation requests 
and accusation requests.136  
3.111.   Information on Korea's government procurement framework and operations are available 
at: the Republic of Korea Government Gazette or its Electronic Gazette ( http://gwanbo.moi.go.kr ); 
the Korea Ministry of Government Legislation website ( http://www.law.go.kr ); and the  Korea 
Online e -Procurement System website ( http://www.g2b.go.kr ).137 
Procurement methods  
3.112.   Contracts are awarded through open tender, unless there are reasons (of "purpose, 
nature, size, etc. of a contract") for awarding by selective tender or private (limited) tender. 
According to the authorities, selective tendering and private tendering are allowed in some rare 
cases (see below); the authorities indicated that the share of open tendering is slightly decreasing, 
whereas that of selective and private tendering is increasing, e.g. their share of total PPS 
procurement methods rose from 11.1% (2008) to 15.4% (2015). Although defence procurement is 
covered by the main procurement legislation (but only partly by Korea's WTO GPA  obligations) 
and, in principle, conducted by open competition, procurement procedures tend to follow defence 
acquisition management practices, and private tendering is often used. Although private contracts 
are occasionally used for purchases of goods and  services not exceeding ₩ 50 million 
(₩200  million for construction works) in accordance with relevant laws, competitive contracting is 
generally used for such  purchases from SMEs . Following a revision of the Enforcement Decree of 
the Act on Contracts to wh ich the State is a Party, as of 1 January 2014, the amount for direct 
contracts to firms owned by women and disabled people has been increased.138 No price 
preference schemes in favour of SMEs and other socially disadvantaged sectors were introduced or 
maint ained.  Korea launched the Network Verification Scheme (NVS) on 1 October 2014. The NVS 
sets forth new Korea -specific requirements for network equipment such as routers or switches 
procured by Korean government entities, and requires agencies to submit proc ured equipment to 
the National Intelligence Service (NIS) for mandatory testing.139  
Public Procurement Service (PPS)  
3.113.   Some government procurement is conducted by the central procurement agency, the 
Public Procurement Service (PPS). Central government agencie s must use the PPS to procure 
goods and s ervices above ₩100 million (foreign goods and services over US$200,000).140 Below 
that threshold, individual government agencies may conduct their own purchasing directly. All 
other public institutions, including SOEs, may procure goods and services directly  or through the 
PPS. Local governments are authorized to procure goods and services independently and to 
conduct foreign procurement.141 Since 2010, local governments have also procured all construction 
works independently; however, for construction works wi th an estimated value exceeding 
                                                
136 Public Procurement Servi ce (2015).  
137 WTO document GPA/W/324/Add.13, 21 December 2015.  
138 Public organizations subject to the Act had their minimum amount of direct contracting to these firms 
increased from below ₩20 million to below ₩50 million. For general -purpose construction pr ojects between 
₩50 million and ₩100 million, only these firms are allowed to compete in biddings. Following a 17  March 2014 
revision of the same Decree, firms led by women and disabled people  can compete for direct contracts for 
technology -based service pr ojects below ₩50 million. Public Procurement Service (2015).  
139 Despite Korea's membership as a certificate producer to the inter -governmental Common Criteria 
Recognition Arrangement (CCRA), which sets cybersecurity standards for government -procured IT equi pment, 
NIS does not accept CCRA -certified equipment as compliant with the NVS without additional in -country testing. 
USTR (2015).  
140 A higher threshold of ₩3 billion applies to construction contracts .  
141 Foreign procurement refers to purchase of goods and s ervices that are not domestically produced or 
supplied, and therefore procured through international tendering in accordance with international commercial 
practice.  WT/TPR/S/346 • Republic of Korea  
 
- 81 - 
 
  ₩10 billion, the PPS reviews the cost calculation basis of the construction budget prior to the 
tendering procedure, so as to prevent possible budget waste. The PPS's main functions are: 
supplying goods and services for government use142; contracting and man aging public works; 
stockpiling 15 types of essential raw and construction materials to secure price stability and 
supplies143; coordinating and auditing government goods and real estate property management; 
and operating the Korea Online e -Procurement Syste m (KONEPS). KONEPS has links with 
58 external systems including 17 banks, 10 guarantee corporations, 7 construction -related 
associations, and 6 certified authorities ( http://www.pps.go.kr/eng/js p/koneps/major.eng ). The 
Act on Use and Promotion of Electronic Procurement of 2013 opened KONEPS services to private 
entities for their procurement needs.144  
3.114.   All bidders wishing to participate in PPS -conducted tenders must register with the PPS. For 
const ruction works below ₩30 billion it uses an "eligibility screening system". "Abnormally low or 
dumping" tenders are rejected.145 Upon the entry into force of the revised Enforcement Decree of 
the Act on Contracts to which the State is a Party on 31 December 2015, the lowest bid award 
system was replaced by the best value award method which is used for contracts exceeding 
₩30 billion after conducting a pre -qualification evaluation which is followed by a comprehensive 
evaluation on the bid price, performance and social responsibili ty to determine the successful 
bidder. A pre -qualification system (PQ  System) is also used to determine eligible bidders. While 
the procuring entities may decide to use the PQ system, its utilization is compulsory for 
construction projects subject to the b est value award method. Separate pre -qualification lists are 
maintained for each construction project, based on objective criteria.146 Bid results, including 
tenders, pre -qualification evaluation, and contract awards are released on the KONEPS Internet 
site (http://www.g2b.go.kr ). According to the authorities, there are no special pre -qualification 
requirements or restrictions imposed on foreign suppliers.  
3.115.   The PPS handles procurement from SMEs and other socially disadvan taged sectors, such as 
regional companies and women -owned businesses.147 The Small and Medium Business 
Administration (SMBA) provides the list of set -aside products to be procured through competition 
among SMEs only as an exception under the GPA.148 The PPS ma intains various policies to increase 
opportunities for SMEs. The PPS's "competitive bidding system restricted by region" and 
"compulsory joint subcontracting and single source contracting system" expands regional 
opportunities.149 Under its 18 August 2010 no tice "Competitive Bidding among Joint Ventures of 
                                                
142 Defence -related procurement is conducted by the Defence Acquisition Programme Administrat ion. 
143 Each year t he Minister of Strategy and Finance determines which essential materials are highly 
dependent on imports. As of June 2016, the PPS had been designated 6 base metals (aluminium, copper, lead, 
zinc, tin, and nickel) and 9 rare metals (silic on, cobalt, vanadium, indium, lithium, strontium, manganese, 
bismuth, and tantalum). These metals are purchased by the PPS using international competitive tenders, and, 
upon request, the stocks are made available to the private industry, including SMEs, at  the prevailing 
international market price.  
144 Public Procurement Service (2014).  
145 Bids are evaluated based on estimated prices prepared by the PPS. Those that exceed these 
estimates are precluded, as are bids that fall below a certain level . 
146 Bidding is only open to suppliers that receive a certain pass score in a comprehensive evaluation 
based on experience, technical capacity, financial status, and credibility (record of the supplier's integrity in 
abiding by relevant laws).  
147 As of 2015 , the approach for defining SMEs was revised from "the production input type" to "the type 
[of firm] to boost growth and create jobs" and the criteri on is now the average sales in the past three years. 
The average sales criteri on is different for each industry. For examp le, the average sales  amount  for 
manufacturing industries such as clothes, bags/shoes, or primary materials is ₩150 billion , whereas for the 
transportation industry it is ₩80 billion. Until 2014 , the definition of an SME differed between sectors; in 
manufa cturing it was a company employing fewer than 300 persons or with paid -up capital of less than 
₩8 billion. The authorities indicated that this definition had its limits in grasping the level of a company's 
output. In particular, the "choosing one among sev eral standards " system in which a company chooses a 
standard to be used for it to be decided as a SME had led to the Peter Pan Syndrome, in which a company 
artificially refuses to grow and a grown company continues to be considered as an SME. SMBA o nline 
information. Viewed at: http://www.smba.go.kr/eng/smes/scope.do?mc=usr0001146 . 
148 The scope of restricted tendering procurement includes five types of technology development 
products, and products provided by SMEs in four special support regions. The list is renewed every three years, 
from 2009. There were 204 SME products for set -asides until 2018 (SMBA Notification No.  2015-69).  
149 The competitive bidding system "restricted by region" app lies to projects valued up to ₩8.2 billion 
(₩9.5 billion in 2012), and allows companies located in the construction region to participate in the open 
competitive tender. The compulsory joint -venture system (up to ₩8.2 billion as from 2016, previously WT/TPR/S/346 • Republic of Korea  
 
- 82 - 
 
  SMEs" the PPS designated 10  standard items, including ready -mixed concrete, for which only joint 
ventures with at least 20% ownership by small -sized suppliers may compete.150  
3.116.   To support liquidity, SMEs are e ntitled to an upfront payment of up to 70% of the value of 
a government contract.151 In many cases, SMEs are also entitled to instant payment upon 
presentation of an accepted invoice – and KONEPS facilitates this payment in four working hours. 
SMEs are offer ed loans of up to 80% of the value of a government contract with no other 
collateral. Additional programmes encourage growth and innovation through the awarding of 
certificates that allow for preferential purchasing or direct award. Awarded by both the PPS  and the 
SMBA, these programmes include many specific certifications that provide distinct benefits. 
Excellent Government Supply Product certification, the highest offered, allows direct contracting 
with any public entity. Between 2011 and 2015, the share of PPS's purchases from SMEs rose from 
66.3% to 73.9% of total procurement of goods and services and construction works of the PPS.152 
3.117.   During the review period, the PPS maintained its 2009 Action Plan for Green Purchasing 
and its 2010 Purchasing Guidelines f or the Promotion of Public Purchase of Green Products; these 
Guidelines specify the scope of green purchasing public organizations, and ensure the 
effectiveness of green purchasing. To expand demand for green products, as of 2015, 100 items 
(50 in 2011) hi ghly demanded by public sector entities, such as office machines, recycled 
products, LED lamps, hybrid vehicles, high efficiency equipment, and synthetic wood were 
designated by the PPS as Minimum Environmental Standard products. The PPS provides 
preferent ial treatment for companies with green construction works in pre -qualification eligibility 
examination, and it is mandatory for newly constructed government buildings to comply with the 
Energy Efficiency Grade 1 and Eco -Friendly Design Standard. In 2011 an d 2015, the PPS 
purchased green products accounting for 10.2% and 18.6% of the total value of domestic 
procurement of goods respectively.  
3.118.   The PPS handled 30% (33.3% in 2011) of Korea's total domestic and foreign government 
procurement of goods and service s (excluding defence equipment) and construction contracting in 
2014.153 PPS's total annual procurement has grown rapidly, from ₩33.2 trillion in 2011 to 
₩37.8 trillion (2013), but in 2014 it fell slightly to the same level as in 2011, of which 66.3% 
(52.8% in 2011) were public works contracts. Despite action to encourage foreign procurement 
through collective purchasing of foreign goods, the elimination of reserve deposit requirements for 
foreign procurement contracts, and the reduction of the documentation burden, foreign suppliers 
continue to lose ground due to the highly sophisticated and increasingly competitive domestic 
suppliers of manufactures and construction services.154 The share of foreign supplies continued to 
drop steadily, from 1.4% (2011) to 1% o f the PPS's total procurement operations in 2014 and 
0.9% in 2015, a significant decline compared with 1991 -95 (immediately prior to Korea's 
accession to the GPA), when government procurement of foreign sourced goods by the Office of 
Supply averaged 9.9% o f the agency's purchases.155 More than 91% of foreign procurement was 
subject to competitive tendering during the review period. In 2014, foreign supplies involved 
                                                                                                                                                  
₩9.5 billion) requires a bidder to form a joint venture with a company located in the construction region. Both 
methods apply only to projects whose estimated value does not exceed the WTO GPA threshold.  
150 In April 2016, the 10 designated items were ready -mixed concrete, asphalt concrete, m anhole boxes, 
iron poles for street lighting, stainless water tanks, vinyl insulated wire (2 items), stranded electrical wire 
(2 items), and reinforced concrete under -drain blocks.  
151 OECD (2016e).  
152 Public Procurement Service (2015).  
153 Public Procurement S ervice (2015).  
154 Firstly, i n 2013 , the PPS introduced a pilot programme that allows collective purchasing of foreign 
procured goods demanded by multiple organizations. In 2014, the programme was  expanded to include 
five items (lab digestion systems, centri fuges, glassware washers, ultra -low-temperature freezers, and gene 
amplifier s) based on the previous year's purchasing results; as of June 2014, it arranged collective purchasing 
of these items for 17 agencies including the Ministry of Food and Drug Safety , allowing them to purchase at 
prices 11% lower than the average budgeted prices. Secondly, the PPS abolished the requirements for a 
reserve deposit of foreign procurement contracts aimed at guaranteeing quality and faithful implementation of 
contracts. Th irdly, as of 2014 , it raised the bidding amount for benefiting from simplified documentation from 
US$20,000 to US$40,000. Public Procurement Service (2015).  
155 During the review period , the PPS's foreign procurement peaked in 2011 ( ₩687.5 billion), and 
subsequently dropped by 32.6% to rise progressively until 2014; in 2015 it dropped to ₩396.3 billion.  WT/TPR/S/346 • Republic of Korea  
 
- 83 - 
 
  research (47.7%), transport (23%), computer (11.2%), communications (8%) and measuring 
(7.5%) equipment originating mainly from the Americas (48.1%) and Europe (32.2%).156  
3.119.   The value of transactions conducted through KONEPS rose from ₩63.8  trillion, or 63.9%, 
of total government procurement in 2011 to ₩72.7 trillion, or 64.3%, of total government 
procurement in 2013, before dropping to ₩67.3 trillion or 60.4% of total government procurement 
in 2014. As of 2016, KONEPS was in use by 50,840  public organizations and 329,331  suppliers' 
businesses representing an increase of 12.8% and 312.2%, respectively,  compared to 2012.  
3.120.   The KONEPS Online Shopping Mall provides a catalogue of more than 360,000 product 
models with capabilities for purchasers to order directly, and discounted quotations can be 
requested for orders larger than US$42,400.157 In 2014, US$13.6 billion were processed as orders 
through the Online Shopping Mall, representing 60% of PPS purchasing of goods and services. The 
PPS operates a Multiple Award Schedules (MAS) system of framework agreements, i.e. contracts 
containing set terms from which in dividual orders can be placed. As of December  2015, 
360,964  items were contracted with MAS, which accounts for 88.1% of total goods registered in 
KONEPS, totalling US$53.9 million. According to the OECD, framework agreements are an 
important driver of effi ciency in public procurement, allowing for reduced administrative 
duplication as well as potential savings from centralized purchasing.  
3.121.   According to a 2015 OECD assessment of the PPS procurement system, KONEPS 
contributes substantially to the efficiency, effectiveness and integrity of public procurement in 
Korea.158 It facilitates competition by lowering barriers to entry for suppliers and other public 
procurement stakeholders. KONEPS is estimated to generate administrative savings of 
approximately US$8 bill ion per year, with more than 80% of these savings accruing to private 
sector participants. Implementation of MAS contracting offers good practices, particularly in the 
areas of standardization, efficiency and competition. Offering MAS contracts on a rollin g timetable 
encourages broad participation from suppliers, while standard processes for establishing and 
ordering from contracts lowers barriers for suppliers of all sizes by clarifying expectations. PPS 
implementation of secondary policy objectives goes b eyond the awarding of contracts to support 
liquidity and encourage growth among targeted social enterprises.  
Other procurement  
 
3.122.   As of 2014, some 70.9% (66.7% in 2011) of Korea's procurement market involved 
procurement directly by public institutions (i.e.  outside the PPS's scope).159 
3.3  Measures Directly Affecting Exports  
3.3.1   Registration, documentation, and clearance  
3.123.   More than 95% of export declarations are submitted electronically to Customs without 
supporting documents, and accepted automatically by the e -cleara nce system. Clearance time is 
under two minutes on average, and export time seven days (lower than the OECD average).160 As 
from June  2011, the KCS has prohibited third -party goods from falsely claiming Korean origin; in 
relation to according preferential ta riff treatment, the authorities indicated that during the review 
period there were cases where the certificate of origin was unduly produced, or where origin 
requirements were violated without providing any details on specific cases. Action in form of orde r 
of correction and fines can be taken against high -risk companies engaging in unloading, 
transporting and storing merchandise at sea - and air -ports in Korea; no details on such action 
taken during the review period were available from the authorities. The  Government introduced a 
simplified export declaration process for e -commerce in the second half of 2014 to boost online 
                                                
156 Public Procurement Service (2015).  
157 OECD (2016e).  
158 OECD (2016e).  
159 Public Procurement Service (2015).  
160 According to World Bank Doing Business data, exporting a shipment of goods required border and 
documentary compliance equivalent to 14 hours and US$185, and 1 hour and US$11 ( lower than the OECD 
average except for cost of border compliance ) respectively in 2015. World Bank (2016a ). WT/TPR/S/346 • Republic of Korea  
 
- 84 - 
 
  markets.161 The reform takes into account the nature of e -commerce trade, in which traded goods 
are small in volume and high in diversity .  
3.3.2   Export prohibitions, restrictions, and licensing  
3.3.2.1   Export prohibitions  
3.124.   The negative list of banned exports has not changed during the period under review. 
Export prohibitions, affecting 11  six-digit HS  items, protect animal rights (dog furskins and their 
products), endangered species (whale meat and its products), and preserve natural resources 
(uncut pieces of natural granite stones).  
3.3.2.2   Export licensing and restrictions  
3.125.   Sand and gravel -related items are subject to non -automatic licensing to protect natural  
resources.162  
3.126.   Korea may restrict exports of certain products periodically to ensure adequate domestic 
supplies, again potentially assisting downstream processing of these products. At the time of the 
previous Review, and until March 2015, rice was the only  product requiring export authorization 
(termed as "recommendation" by the authorities) (Section 4.2.3.1). Quotas for rice exports were 
110,401 tonnes in 2013, 116,505 tonnes in 2014 and 122,610 tonnes in 2015; their utilization 
levels remained minimal and  stood at 3,824 tonnes in 2011, 2,305 tonnes in 2012, 1,754 tonnes 
in 2013, 1,992 tonnes in 2014, and 348 tonnes in 2015. Quota allocation was on a first come, first 
served basis. There were no qualification requirements for exporters. Currently there are no 
quantitative export restrictions for rice or any other agricultural products.  
3.127.   On 20 July 2015 and 11 March 2016, the MOTIE amended the Regulations on Export 
Control of Strategic Goods ("Regulations").163 The 2015 amendment involved the revision of the 
definition of eligibility for an export licence, the expansion of exemptions from the export licence 
requirement, and the exemption from the export licence requirement of the transfer of strategic 
technology to the expatriate employees and executives who have  an employment agreement with 
a Korean entity. The 2016 amendment was to reflect the United Nations Security Council 
Resolution 2231 relating to transactions with Iran in the export control guidelines. Furthermore, 
MOTIE revised the list of the National Co re Technologies whose export is controlled under the Act 
on Prevention of Leakage and Protection of Industrial Technology; as of 7 September 2015, a total 
of 47 categories were listed.  
3.3.3   Export subsidies  
3.128.   Korea does not have export subsidy commitments; durin g the review period, it continued 
to use export subsidies for certain farm products under the provisions of Article 9.4 of the 
WTO Agreement on Agriculture for developing countries but no recent data on the amounts 
involved were available from the authorit ies.164 These subsidies, which were last notified to the 
WTO Committee on Agriculture in 2010, totalled ₩32.68  billion (2008) and covered fruit, flowers, 
vegetables, kimchi, ginseng, livestock, grain and processed food, and traditional liquor.165 The 
subsidies were used to reduce exporters' marketing costs, and are exempt from WTO reduction 
                                                
161 OECD (2016c).  
162 Exports of sand and gravel items require approval by the Korean Aggregate Association. Only sand 
and gravel that are a by -product of raw ore processing are approved for export. The authorities indicated that 
that no export quotas for t hese items were operated during the review period.  
163 TheLegal500 online information. Viewed at: http://www.legal500.com/c/south -
korea/developments/30749#sthash.eKg kiKAV.dpuf . 
164 Korea considers that, in line with the 2005 Hong Kong Ministerial Declaration, which stipulates that 
"Developing country Members will continue to benefit from the provisions of Article 9.4 of the Agreement on 
Agriculture for five years after  the end -date for elimination of all forms of export subsidies" (i.e. 2016), and the 
2015 Nairobi Ministerial Declaration, which specifies that they "shall continue to benefit from the provisions of 
Article 9.4 of the Agreement on Agriculture for five year s after the end -date for elimination of all forms of 
export subsidies (i.e. 2018), it would be entitled to maintain exports subsidies covering marketing and 
transport costs for agriculture exports listed in paragraphs 9.1 (d) and 9.1 (e) of the Agreement u ntil the year 
2023.  
165 WTO documents G/AG/N/KOR/36, 27 February 2007; and G/AG/N/KOR/42, 4 October 2010.  WT/TPR/S/346 • Republic of Korea  
 
- 85 - 
 
  commitments. At the  time of the previous Review, the authorities indicated that data on export 
subsidies from 2008 onwards were to be notified in the course of  2012, though no notification had 
been submitted as of June 2016; they now intend to notify these subsidies in the c ourse of 2016. 
Korea does not consider that corporate income tax relief to industries located in FTZs is subject to 
WTO notification (Section 3.4.3).  
3.3.4   Duty and tax concessions  
3.129.   Raw materials used in exports are exempt from customs duties (Section 3.2.3.5), and a 
customs drawback scheme provides refunds. The Korea Customs Service operates an Internet 
drawback system allowing refund requests to be filed online; a real -time electronic treasury 
transfer system allows the Bank of Korea to make electronic refunds to exporters. Refunds totalled 
US$3.4 billion (US$4.4  billion in 2011) in 2015 and US$16.5 billion in years from 2012 to 2015, 
equivalent to about 29% and 30% of tariff revenue, respectively.  
3.3.5   Export finance, guarantees, and insurance  
3.130.   The government -owned Export -Import Bank of Korea  (EXIM Bank), classified in 2013 as a 
"highly indebted" public institution (Section 3.4.4) despite its high marks by international credit 
rating firms, provides export credit and financial guarantees to support Korean enterprises  in 
conducting overseas business. Project -related guarantees are also provided to foreign buyers in 
the event of exporters' failure to meet contractual arrangements.166 The Government ensures the 
Bank's solvency by covering any net losses beyond reserves; go vernment funding of ₩510 billion 
in 2014 and ₩130 billion in 2015 helped the Bank accumulate ₩7.7 trillion and ₩8.9 trillion, 
respectively, in paid -up capital. 167 Direct loans to foreign buyers and export loans to Korean firms, 
its primary activities, cover  mainly capital goods, such as industrial plant, machinery, and ships. 
Export loans of up to 100% of the contract value (less any required cash payment) are available 
provided the "minimum foreign exchange earnings ratio" is no less than 25%. Export credit s are 
subject to the minimum commercial interest reference rate (CIRR) and other terms. Korea EXIM 
Bank support for ship exports meets the requirements of the OECD's Sector Understanding on 
Export Credits for Ships.168  
3.131.   In 2014, overall export -related loan d isbursements involving export promotion loan, 
growth, project and facilitation tools showed a slight increase of 5.2% from ₩37.8  trillion 
(US$34.5 billion) in 2013 to ₩39.8 trillion (US$37.8 billion).169 The industrial plant construction 
industry accounted f or the largest portion of items supported under export credit, with 
₩12.7 trillion (US$12 billion, 31.9%), followed by the shipbuilding industry and petrochemical 
products which received ₩5.5 trillion (US$5.3 billion, 13.9%) and ₩5.1 trillion (US$4.8 billi on, 
12.8%), respectively in 2014. Under the Interbank Credit Facility offered to creditworthy foreign 
banks in the form of a credit line that can be utilized for loans to local clients importing Korean 
goods, t he amount disbursed during the year increased by 20.1% to ₩2.2 trillion (US$2.1 billion) 
in 2014 from ₩1.8 trillion (US$1.7 billion) in 2013. As of 31 December 2014, t he total volume of 
credit lines stood at US$5.8 billion for 34  banks in 17 countries such as the Russian  Federation, 
India, and Uzbekis tan. To strengthen the competitiveness of SMEs, in 2014, the Bank continued to 
expand support mostly provided in the form of comprehensive export loans for SMEs (₩9.3 trillion 
or US$8.5 billion, 35.3%) and trade finance (₩2.8 trillion or US$2.5  billion, 10 .4%). The total 
loans to SMEs in 2014 amounted to ₩24.4 trillion (US$23.2  billion), accounting for 42.1% of the 
Bank's total loans, while the total volume of credits, including loans and guarantees, to SMEs 
represented 33.1% of its total credits. Korea plans to increase export financing by ₩20 trillion to 
₩271  trillion in 2016, as well as reform export support programmes in the Korea EXIM Bank, 
KOTRA and other public institutions to focus more on new product development and market 
exploration.170  
                                                
166 Korea EXIM Bank online information. Viewed at: https://www.koreaexim.go.kr/site/main/ind ex002 . 
167 For the past seven years, the Government has continuously made capital injections, doubling up the 
Bank's paid -in capital amount. Korea EXIM Bank (2015).  
168 Korea has fully implemented the OECD Arrangement as from 31  March  2002 when transitional 
arrangements expired. Maximum repayment periods are: 12 years for ships, and non-nuclear power plants; 
18 years for nuclear power plants; and 5 -10 years for other products, pursuant to the OECD Arrangement.  
169 Korea EXIM Bank (2015).  
170 Online Ministry of Str ategy and Finance information , "2016 Economic Policies ". Viewed at: 
http://english.mosf.go.kr/popup/23_PolicyFocusBanner/popup.html . WT/TPR/S/346 • Republic of Korea  
 
- 86 - 
 
  3.132.   The state -owned Korea Trade Insurance Corporation (K -sure, previously KEIC), under 
MOTIE, provides export credit insurance against non -payment risks (Trade Insurance Act, 
1968).171 It promotes exports by insuring against risks that are not privately insurable and, 
according to the authorities, assists exporters to compete on a level playing field with competitors 
assisted by government -supported foreign export credits. K -sure supplies ex port insurance aga inst 
losses due to political and commercial risks, and whole -turno ver insurance policies at a 50% 
discount to specific policies. It offers 13 different types of export insurance and 2 types of 
guarantees, but most underwriting takes the form of short -term insurance. The maximum 
coverage for medium - and long -term export i nsurance is 100% of the contract value (less any 
required cash payment) as per OECD Guidelines on Officially Supported Export Credits. The largest 
beneficiaries remain exporters of major items (e.g. semiconductors, wireless communication, and 
IT items) and  capital goods (e.g. industrial plant, machinery, and vessels). K -sure's underwriting 
volume rose from ₩202 trillion underwritten in 2012 to ₩204 trillion in 2013, and subsequently 
dropped to ₩190 trillion in 2014, and ₩168 trillion in 2015.172 Total exports  underwritten by 
K-sure represented 22% of total exports and 88% of covered short -term insurance. K-sure was 
planning to provide ₩196 trillion (US$160 billion) worth of trade cover in 2016 to support exports 
at a time when they were faltering (Section 1.4) .173  
3.3.6   Export promotion and marketing  
3.133.   Korean exporters benefit from promotional activities of the state -owned Korea Trade and 
Investment Promotion Agency (KOTRA). With 126 Korea Business Centres in over 86  countries, 
the agency operates a "business matchmakin g" service introducing foreign importers to Korean 
businesses. KOTRA also organizes or assists with trade missions and exhibitions domestically and 
overseas, providing SMEs with export -related information and consulting services. Other than 
supporting the globalization of SMEs, including the establishment of the Global M&A Centre in 
January 2013 to meet the global increase in cross -border M&A opportunities and to help address 
the growing interest of Korean SMEs in mergers and acquisitions (M&As), KOTRA also  operates as 
a help centre providing useful information to foreign investors.174  
3.134.   As from 31 December 2015, the Public Procurement Service (Section 3.2.10), has 
operated and managed The Global Korea Market, an online export promotion tool where 
government pr ocurement -related products of Korean companies with an excellent domestic 
government procurement record can also be sold to foreign companies.175 As of 2015, there were 
261 domestic companies under this project.  
3.4  Measures Affecting Production and Trade  
3.4.1   Taxati on176 
3.135.   Total tax revenue as a share of GDP declined and remains relatively low (14% in 2015, 
Table 1.1). Since 2010, Korea's reliance on indirect taxes was slightly reduced to 40.4% of tax 
revenues (Table  3.3) due to an increase in corporation tax revenues ca used by reduced tax reliefs, 
an increase in the amount of income tax revenues resulting from a downward adjustment of tax 
brackets to which the highest tax rate is applicable, the upswing in the real estate markets, a rise 
in the individual consumption tax  revenues from the addition of cigarettes to the list of items 
subject to this tax, and a decrease in the revenues from VAT and customs duties caused by 
sluggish imports. VAT remains the main indirect (consumption) tax component, followed by the 
transporta tion-energy -environment tax. As a result of a decrease of import volume and the 
expansion of preferential tariffs coverage, customs duties accounted for 3.9% of total tax revenues 
in 2015 (Table 3.3). Personal income and corporation taxes are also importan t sources in total tax 
receipts. Overall, the tax system, in particular its trade -related part, remains complicated by the 
                                                
171 Online K -sure information. Viewed at: http://www.ksure.or.kr/english/index.jsp . 
172 EIU (2015).  
173 InsuranceAsia News , "K-Sure to provide US$160bn trade insurance in 2016" , 18 February  2016. 
Viewed at: http://insuranceasianews.com/news/korea -trade-insurance -corp-to-provide -us160bn -trade-
insurance -in-2016/ . 
174 KOTRA online information. Viewed at: 
http://english.kotra.or.kr/foreign/biz/KHENKO160M.html?TOP_MENU_CD=INVEST . 
175 Global Korea Market o nline information. Viewed at: 
http://www.globalkoreamarket.go.kr/global/portal/aboutGM.do . 
176 For more information on taxes see Ministry of Strategy and Finance (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 87 - 
 
  so-called tax -on-tax (cascading) schemes and various surtaxes. According to the authorities, the 
Korean tax regime adheres to the glo bally accepted OECD International Tax Standards on 
exchange of information.177  
3.4.1.1   Indirect taxation  
3.136.   Korea's relatively complex indirect tax structure remains unchanged. It comprises a 
broad -based VAT, individual consumption (special excise) taxes, and other ta xes on liquor, 
property transactions (stamp tax), and securities transactions. There is also a transportation 
(energy -environment) tax, education tax, and special tax on rural development. Exports are 
generally exempt from indirect taxes, except mainly for  individual consumption and transportation -
energy -environment taxes applied to inputs of petroleum products used in their production, 
though the amount of paid tax is refundable or deductible. Exports are zero -rated for VAT.  
Table 3.3 Structure of Direct and Indirect Tax Revenue, 2008 -15 
 2008 2009 2010 2011  2012  2013  2014  2015  
Total tax revenue 
(US$ billion)  151.7  128.9  153.7  173.6  180.3  184.4  195.1  192.6  
 (% of total)   
Direct taxes  46.8 43.8 43.8 47.0 47.1 47.5 49.0 50.9 
 Income tax  21.7 20.9 21.1 22.0 22.5 23.7 25.9 27.9 
 Corporation tax  23.4 21.4 21.0 23.3 22.6 21.7 20.8 20.7 
 Inheritance tax  1.7 1.5 1.7 1.7 2.0 2.1 2.3 2.3 
Indirect taxes  42.9 44.2 46.0 42.9 43.1 43.7 42.6 40.4 
 Value added tax  26.2 28.6 27.6 27.0 27.4 27.7 27.8 24.0 
 Transportation tax  7.1 6.1 7.9 6.0 6.8 6.6 6.5 6.5 
 Customs duties  5.2 5.6 6.0 5.7 4.8 5.2 4.2 3.9 
 Individual consumption tax  2.7 2.2 2.9 2.9 2.6 2.7 2.7 3.7 
 Liquor tax  1.7 1.7 1.6 1.3 1.5 1.5 1.4 1.5 
Othera 10.3 12.0 10.2 10.1 9.8 8.8 8.4 8.8 
a Unspecified revenue information.  
Source:  Data provided by the Ministry of Strategy and Finance.  
3.137.   The VAT applies to goods and services at a rate of 10%. As from 1 July 2015, the sales of 
digital services on offshore ope n market app stores and non -traditional financial services including 
investment advisory, insurance and pension actuarial services, real estate trust business and 
investments in real estate and non -financial assets have also been made subject to VAT.178 
Exem ptions cover, inter alia , unprocessed foodstuffs, anthracite coal (see below), piped water, 
certain passenger transportation services, social welfare services, books, educational services, and 
financial and insurance services. The VAT is levied on top of o ther taxes, including import duties, 
where applicable.179  
3.138.   The individual consumption (special excise) tax applies to a wide range of goods, including 
luxury products. Rates vary from 5% on cars of less than 2,000 cc and motor cycles, to 20% 
(e.g. luxury ite ms including bags (as from 2014)). Flexible rates are used to boost or discourage 
consumption of certain products to allow efficient management of the economy in case of need of 
business cycle adjustment, price stabilization, etc. Hybrid cars (from 2009 to  2018) and electric 
cars (from 2012 to 2017) remain exempt from the individual consumption tax (up to ₩1 million 
and ₩2 million, respectively). High -energy -consuming home appliances (e.g. air conditioners, 
refrigerators, televisions, and drum -type laundry machines) have been subject to a 5% rate of 
individual consumption tax (2010 -2015). Individual consumption taxes also apply, in principle, to 
petroleum products other than petrol and diesel oil that are also subject to a transportation 
(energy -environment)  tax. Produced anthracite coal, a domestically produced item (Section 4.4.3), 
                                                
177 WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  
178 EIU (2015).  
179 The VAT base for imports is the c.i.f. pr ice plus customs duties and other taxes, where applicable.  WT/TPR/S/346 • Republic of Korea  
 
- 88 - 
 
  is not subject to this tax. The rate of the tax on bituminous coal was increased twice during the 
review period.180  
3.139.   The transportation -energy -environment tax law was amended in 20 16. Under this 
third three -year extension of its sunset clause, the transportation -energy -environment tax 
continues to be levied on gasoline (₩475  per litre) and diesel oil (₩340 per litre) until end -2018 
(instead of the individual consumption tax); its ra tes remain unchanged. As of 2016, the flexible 
transportation -energy -environment tax framework set on 21  May 2009 continued to apply to 
gasoline and diesel oil within a 30% range of the statutory tax rates, i.e. ₩529 per litre and 
₩375 per litre, respectiv ely. Conditional exemptions apply to petrol and diesel used in the 
manufacture of medical goods, fertilizers and petro -chemicals, vehicles for disabled persons or 
rental usage. The liquor tax on alcoholic beverages, i.e. spirits (₩57,000 per kl (₩600 is ad ded for 
every additional 1% which exceeds 95% of alcohol content)) and liquor (5% (Takju), 30% (Yakju, 
Cheongju, fruit wine) and 72% (Soju, beer, whisky, brandy, liqueur, etc.)), remains unchanged.  
3.140.   The securities transaction tax continues to be levied on transfers of shares or stocks of a 
business entity. The standard rate of 0.5% remains unchanged and applies to the value of 
securities transferred. Reduced rates of 0.15% (plus 0.15% of special tax for rural development) 
and 0.3% apply to transactions on t he securities market and on the KOSDAQ market, respectively.   
3.141.   The education tax, levied on banking and insurance services, and all goods subject to the 
individual consumption tax, the transportation tax, and the liquor tax (excluding spirits, Takju, and 
Yakju), remains set at: 0.5% of gross receipts for banking and insurance (includes commissions, 
interest, dividends, and insurance premiums); 30% of the individual consumption tax (15% in the 
case of kerosene, heavy oil, butane or LPG, and nonanes plus gas ( C9+)); 15% of the 
transportation tax; and, 10% of the liquor tax (30% for liquors taxed at over 70%).  
3.142.   The special tax for rural development is a surtax levied on income exempted from 
company and personal tax, on the value of customs duty concessions, and on the amount of 
individual consumption tax and securities transaction tax.181 The current rates are: 0.15% for the 
amount of the securities transaction tax, 10% or 30% (golf courses) for the individual 
consumption tax, and 20% for exemptions of company and income taxes as well as customs 
duties. The tax was extended for a third ten -year period on 1 July 2014 and was scheduled to end 
on 30 June 2024.  
3.143.   Korea imposes environmental waste charges on certain items that contain harmful 
substances and are difficult to recycle (Act on Promotion of Saving and Recycling of Resources). 
The charge is intended to ensure that manufacturers bear the cost of processing waste. It applies 
equally to imports and domestic goods.182  
Local taxes  
 
3.144.   During the review period, Korea's 11  local taxes remained unchanged. Province and city 
governments apply a range of indirect taxes, including an acquisition tax, to purchases of real 
estate, motor vehicles, heavy equipment, and boats. A registration tax is levied on property and 
motor vehicl es, boats, aircraft, and construction machines, as well as certain business registrations 
and intangible assets, such as transfers of mining, fishing, and intellectual property rights. An 
                                                
180 Other products taxed continued to be heavy fuel oil ( ₩17 per litre), kerosene ( ₩90 per litre, 
₩63 per litre as from 1 July 2014), natural gas ( ₩60 per kg, ₩42 per kg effective from 1 July 2014),  fuel oil 
(₩17 per litre), LPG -butane ( ₩275 per kg ), LPG -propane ( ₩20 per kg, ₩14 per kg effective from 
1 July 2014), and bituminous coal (effective from 2 February 2016) ( ₩27 per kg applicable to net calorific 
value of 5,500 kcal per kg or more, ₩24 per k g applicable to net calorific value of 5,000 kcal to 5,500 kcal per 
kg or ₩21 per kg applicable to net calorific value of less than 5,000 kcal per kg). Between 1 July 2014 and 
February 2016 , bituminous coal was taxed as follows: ₩19 per kg applicable to ne t calorific value of 5000 kcal 
per kg or more, or ₩17 per kg applicable to net calorific value of less than 5000 kcal per kg. Ministry of 
Strategy and Finance (2015), Korean Taxation . 
181 It includes exemptions specified under the Special Tax Treatment Contr ol Law, the Local Tax Law, 
and the Customs Law. Exemptions under the Company Tax Law, Income Tax Law, and the Foreign Investment 
Promotion Law are excluded.  
182 The charges are set at, e.g. ₩24.9 per plastic container of insecticide or ₩30.7 if it exceeds 50 0 ml; 
and ₩75 or ₩150 per kg of the plastic or synthetic resin used for domestic goods.  WT/TPR/S/346 • Republic of Korea  
 
- 89 - 
 
  automobile tax applies to passenger vehicles (depending upon engine size), buses, and trucks 
(depending upon carrying capacity). A tobacco consumption tax is levied at various specific rates.  
3.4.1.2   Direct taxation  
3.145.   Personal income tax and corporation tax remain the second - and third -largest single 
sources of revenue after VAT. P rogressive personal income tax rates range from 6% (income of 
₩12 million or less) up to 38% (over ₩150  million since 2014, down from to ₩300 million).183 
Certain foreign workers (i.e. labourers hired on a daily basis) are exempt from income tax. 
Corporation  tax rates remain virtually unchanged since 2010. The lower income bracket stands at 
10% for income below ₩200  million, 20% for income from ₩200  million to ₩20 billion, and 22% 
for higher income over ₩20 billion. In 2015, the Corporate Tax Act was amended to introduce a 
10% additional levy on corporate income for large companies whose net equity exceeds 
₩50 billion and are not classified as SMEs.184  
3.4.1.3   Tax incentives  
3.146.   Tax incentives are used extensively as an instrument of industrial policy to encourage 
investme nt, especially from overseas, and production of certain goods, including by SMEs (Special 
Tax Treatment Control Law 1999, STTCL). They cover a range of activities, and include income tax 
relief (rate reductions, exemptions, credits, special deductions and other concessions), or credits 
and commodity tax concessions (such as VAT exemptions and zero -rating). Many tax incentives 
under the STTCL have expiry dates and are extended periodically. Tax incentives were to 
terminate at end -2003, but at the time of the  previous Review many were extended until end 
2009, 2010, 2011 or 2012; similarly, as of 2015, many incentives were scheduled to terminate in 
2012, 2013, 2014, 2015, 2016 or 2017.185 According to the authorities, out of 88 (42 in 2012) 
"non-taxation" and tax  reduction/exemption benefits due to expire in 2015, 62 (30 in 2012) were 
extended while the remainder were abolished or scaled back; 2 (3 in 2012) tax incentives with no 
expiry date were scaled back or repealed. In determining whether to repeal or scale b ack a certain 
tax incentive, factors taken into account included the extent to which the objective had been 
achieved and whether the benefit was in line with "international standards".  
3.147.   Associated with the above income tax incentives, Korea had 153 (141 in 2010) tax 
expenditures under its income taxes in 2014. At the time of the previous Review , the general 
business incentives category counted for the highest number of tax expenditures followed by 
specific industry relief.186 Korea had another 77 (93 in 2010) tax expenditures under other taxes in 
2014; the two largest contributing taxes remained the VAT (39 tax expenditures in 2014, 26 in 
2010), and the individual consumption tax (13 in 2014) which replaced the securities transaction 
tax (17 in 2010) in terms o f importance. According to government data, rising tax expenditures 
stood at US$29.6 billion, US$30.9 billion, and US$32.6 billion in 2012, 2013 and 2014, 
respectively, or 2.3% of GDP over these years; in 2014, the main recipients remained industry, 
SMEs a nd energy (30.6%), social welfare (23.4%), agriculture, forestry and fisheries (17.3%), and 
health (11.6%). The effectiveness of tax incentives, both in terms of meeting specific objectives 
and impact on the economy's overall efficiency, needs to be review ed regularly. Forgone tax 
revenues for fiscal years 2012, 2013, 2014, and 2015 are estimated roughly at US$179.6 billion, 
US$178.6  billion, US$181.8 billion, and US$192.8 billion, respectively. From 2011 to 2015, an 
annual report on tax expenditure was pub lished in the Korean language only.  
3.148.   SMEs continue to benefit substantially from larger tax incentives than those generally 
available; for example, much larger tax credits for investment in technology and human resource 
development.  As of 2016, they benefi ted, inter alia , from income tax or corporation tax credit for 
investment in business assets (extended until 31  December  2018); a five -year 50% income tax or 
                                                
183 Taxation for higher income (i.e. above ₩12 million) consists of a fixed amount (from ₩0.72 million 
up to ₩37.6 million ( ₩90.1 million in 2012) depending on the incom e scale) plus a percentage on the amount 
exceeding the lowest value of the tax base.  
184 EIU (2015).  
185 The sunset clauses on most tax incentives took effect in 2009. In creating a new tax incentive, a 
sunset clause (i.e. phase -out after 2 to 3 years of impl ementation) is generally included. More information on 
the type of tax and non -tax incentives in place or due to expire is available in Ministry of Strategy and Finance 
(2015).  
186 Korea's tax expenditures under the income taxes equalled 1.76% of GDP in 2006 ; those under other 
taxes were 0.72% of GDP, of which almost two thirds came under the VAT . WT/TPR/S/346 • Republic of Korea  
 
- 90 - 
 
  the corporation tax reduction for newly established SMEs  in areas other than the Seoul 
metropolita n area or its adjacent areas (extended until 31 December 2018); and, a special tax 
incentive for SMEs  involving corporation tax or income tax reductions of 10% or 20% 
(metropolitan area). SMEs receive a 1 –3% tax credit for investment in business assets if they 
maintain status quo employment; this credit was also available to large companies but was 
abolished in January 2015.  
3.149.   Several tax credits continue to apply to investment in technology, human resources 
development and the R&D expenses for growth indust ries and basic technologies (extended until 
end-2018). The method by which this tax credit is calculated was amended  in 2013 ; broadly, a 
firm receives a tax credit equivalent to 40% of its incremental R&D expense in any given year; this 
tax credit is raise d to 50% for an SME.187 Investments in facilities or equipment to improve 
productivity or increase safety made before end -2017 receive a 3% tax credit (7% for SMEs). 
Investment in facilities for the purpose of environmental conservation made before end -2016 
receive a 3% (up to 10% for SMEs) tax credit, which may be carried forward five years if unused.  
3.150.   A concessional income tax rate of 9% (8% in 2012) continues to apply to certain activities 
to enhance social welfare, including fisheries cooperative associati ons and the tobacco production 
association. A 50% tax exemption for forestry income remains in place. Interest income (up to 
₩30 million) and partnership dividends (up to ₩10 million) are non -taxable for farmers and 
fishermen. Primary producers also continue to benefit from zero -rating for VAT on machinery, 
fertilizer, and pesticides, and on fishing gear, including nets; and exemption of taxes on petroleum 
products used for auxiliary private power generation for island areas where it is impossible or 
difficult for a considerable period to supply electricity.  
3.151.   Under the STTCL, limits on the maximum of cumula tive tax incentives apply to some tax 
reduction or exemption measures, including those claimed under the STTCL. According to the 
authorities, the upper limit for cumulative tax incentives for domestic investment is 50% of the 
accumulated investment amount,  and the lesser amount between the value derived by multiplying 
the number of regular workers at the beneficiary company by ₩10 million, and the value 
equivalent to 20% of the accumulated investment amount.  
3.152.   Under an amendment to the STTCL, as from January  2013, expatriates have been subject 
to a flat tax rate of 17% (18.7% after the resident surcharge), compared to a rate of 15% until 
December 2012, rather than the country's complex income tax regulations (Section 3.4.1.2); from 
1 January 2014, any new app licants can avail themselves of the flat tax rate for a maximum of 
five years.188  
3.4.2   Financial assistance  
3.4.2.1   Loans, guarantees, and other financial measures  
3.153.   State -owned financial institutions have a major role in assisting Korea's industrial 
development. State i ntervention dominates the large venture capital market, which benefits mainly 
SMEs. Venture capital is invested through venture capital firms (VCFs) and limited partnership 
funds (LPFs). Since 2005, the Fund of Funds, has invested in LPFs and contributed t o the formation 
of the private venture investment market. As of 2015, the Fund of Funds' assets amounted to 
₩2.23 trillion (₩1.36  trillion in 2011), were mostly financed by government funds, and had been 
invested in six areas (SMEs, culture, movies, futures, patents, and health). The number of venture 
corporations increased from 24,645 in 2010 to 31,260 in 2015.   
3.154.   A Korea New Exchange (KONEX) was launched in July 2013 to help SMEs and venture 
businesses obtain direct financing from the capital market.189 KONEX increased from 21 listed 
companies at its start to 89 by end -2015, while market capitalization reached ₩3.7  trillion. The 
Government announced a strategy in 2015 to revitalize KONEX by encouraging the listing of more 
start-ups and attracting more venture capital.  
                                                
187 EIU (2015).  
188 EIU (2015).  
189 OECD (2016c).  WT/TPR/S/346 • Republic of Korea  
 
- 91 - 
 
  3.155.   Two major public institutions, the Industrial Bank of Korea (IBK) and the Korean 
Development Bank ( KDB), play a substantial role in industrial development. In 2015, the KDB 
aimed at providing financing to industries bearing relatively high risks, and reinforcing the 
partnership with promising SMEs with cutting -edge technology through innovative financia l 
products, while doing its utmost to act as a market safety net to ensure a stable financing 
environment for its corporate clients. In principle, the IBK and the KDB are run commercially, but, 
by owning 100% of the KDB Financial Group, the Government guar antees the KDB's solvency.190 
While the Government has no direct control over their lending programmes, it has injected 
approximately ₩4.5 trillion since 2004 for recapitalization purposes; no replenishment of losses 
has been made for the IBK since its establishment. Government funding was provided to KDB for 
its facility investments and corporate investment promotion programme; it stood  at ₩10 billion in 
2013, ₩20 billion in 2014, and ₩205.5  billion in 2015. There is concern that the KDB as a 
state-owned enterprise providing government assistance to local companies could place their 
competitors at a disadvantage.191  
3.156.   The IBK supports SMEs mainly through low interest loans in line with government policy 
for working capital for technology development, productivity improvement or automation, 
constructing facilities, and buying plant and machinery. At March 2016, loans extended to SMEs 
amounted  to ₩128.6 trillion (₩94.5 trillion in 2011), or 77.5% of total IBK loans. Most SME loans 
are financed by retail banking or DCM (debt capital market) funding, just like other commercial 
banks in Korea, while some are funded through government -originated loans;  as at March 2016, 
the average interest rate for new loans stood at 3.89%. The IBK does not maximize profits given 
its public policy role; its financial performance is directly influenced by government policies.192  
3.157.   The KDB provides a broad range of industri al capital, including loans to finance tangible 
and intangible (e.g. R&D) investments, underwrite corporate mergers and acquisitions, and as 
operating capital. The KDB offers corporate banking services by extending corporate loans 
generated through the iss uance of industrial finance bonds in the market. The KDB lending rate is 
ostensibly determined by market principles, and no loans are extended at a preferential rate to 
firms of a particular industry. Nevertheless, lower interest rates are seemingly availa ble for SMEs 
willing to relocate production facilities to rural areas (excluding Seoul, Kyeonggi -do, and 
Chungchong -do) (around 1  percentage point lower than commercial rates) or for regional 
development purposes.193 Even when using government funds, the KDB  extends loans under the 
same conditions as commercial banks but focusing on fostering strategic industries. In 2014, KDB 
loans to SMEs accounted for only 17% of its total corporate loans. In the same year, as a result of 
improvement in overall income, the  KDB recorded a net profit of ₩1.1 trillion, a sharp increase 
from the net loss of ₩1.5 trillion of 2013 that occurred for the first time in 13 years due to a 
significant amount of non -performing loans resulting from a recession in the shipbuilding, shipping 
and construction industries .194 In 2015, the KDB was faced with a net loss of ₩1.9 trillion, 
inter alia, due to deterioration of interest income, huge bad debt expenses and impairment losses 
from the recession in the shipping and shipbuilding sectors.  
3.158.   The Korea Credit Guarantee Fund (KODIT) and Korea Technology Finance Corporation 
(KOTEC) provide credit guarantees to enable emerging firms, especially SMEs, to gain access to 
finance. They are commercially run and their operations are conducted according to market 
principles; however, t he Government would cover any losses relating to the operations of the 
funds. KIBO Technology Fund also administers technology appraisal systems for selecting 
beneficiaries of various government funds. Under a July -2014 initiative to promote 
technology -based loans providing greater financing for start -ups without collateral, 
four institutions, including the Korea Technology Finance Corporation (KTFC), were designated as 
                                                
190 As of October 2009, the KDB Financial Group was made up of KDB Bank, Daewoo Securities, KDB 
Capital, KDB Asset Managem ent and Korea Infrastructure Investments Asset Management (KIAMCO). After the 
amendment of the KDB Act in May 2014, KDB integrated with KDB Financial Group and Korea Finance 
Corporation on 31 December 2014 to become more competitive, more sustainable and m ore global , as well as 
to better respond to new policy finance demands and changes in the financial industry. KDB Bank (2015).  
191 USTR (2016).  
192 According to the authorities , the IBK is competing with other commercial banks for the same target 
market with i dentical funding and operating scheme; SMEs became more dependent on IBK's financing due to 
the global financial crisis , as private banks reduced their exposure to loans with potentially high risks.  
193 Regional development is promoted by providing loans wh ose interest is partially covered by local 
authorities or the bank itself.   
194 KDB Bank (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 92 - 
 
  Technology Credit Bureaus (TCBs), and an Information Providing Service was launched base d on 
the technology -credit appraisal system. According to a government survey, TCB -linked loans 
reached ₩51.5 trillion (6.7% of bank lending to the corporate sector) in the fourth quarter of 
2015.195 The around -4% average interest rate on TCB -linked loans was lower than the overall 
average rate of 4.3%.  
3.159.   According to the OECD, SME policy in Korea is particular ly focused on providing financing, 
given market failures that limit market -based funding.196 The share of government financing 
increased from 11.4% (2009) to 14.9% (2013) of total SME financing. Government financing of 
SMEs amounted to around 6% of GDP, whic h is high compared to OECD countries such as France 
and the United States. Moreover, government guarantees amounted to 14.6% of lending to SMEs, 
one of the highest shares in the OECD. In addition to positive effects such as the improvement of 
financial per formance and reduction of bankruptcy cases, public support through direct credit and 
guarantees to SMEs has seemingly had negative effects as it,  inter alia , apparently benefited 
non-viable SMEs, did not help improve productivity, and provided guarantees t o highly rated 
companies that were more than ten years old crowding out support for start -ups and highly 
innovative young firms. In line with past OECD  recommendations, the Government announced in 
November 2015  a new policy direction for reducing guarantee s to mature SMEs (i.e. more than 
five years old) to focus more on start -ups and early -stage SMEs, where the difficulty of securing 
market financing is greatest. In 2015, six SME programmes were eliminated and 13 merged, 
resulting in budget savings.  
3.160.   In line  with Article 32 of the 2010 Low -Carbon, Green -Growth Framework Act measures to 
promote green certification entail: extending loans for the purpose of disseminating new 
renewable energy; providing linkages to the SME policy fund; intensive support for tech nology 
guarantees; and, support for export financing and insurance. No data on budgetary outlays 
disbursed for implementing this initiative and its beneficiaries/participants since 2012 were 
available from the authorities.  
3.4.2.2   Other subsidies  
3.161.   Korea has notifi ed several direct support programmes to the WTO Committee on Subsidies 
and Countervailing Measures. Its latest notification, in June 2015, covered the period 2013 -14 and 
indicated that there were 22 subsidy schemes, all of which were also notified in 2013.197 Grants, 
tax concessions or concessional loans continue to be used to assist a range of agricultural, 
forestry, fishing, coal mining, energy, environmental technology R&D, and environmental 
protection activities. No expiry date was indicated for the notif ied schemes except for measures 
relating to vessel decommissioning (until 2018) and tariff reduction on aircraft parts (until 2020 for 
non-SMEs). A concern was expressed at the WTO's TRIMs Committee of 5 October 2015 relating to 
Korea's assistance measures  for agricultural machinery (Japan); the authorities indicated that 
these measures have never been implemented.198 
3.162.   During the period under review, sector -specific support measures benefited shipbuilding, 
automotive, pharmaceutical, and steel -industry activit ies (Section 4.5). In November 2013, Korea 
announced a ₩900 billion (€662.4  million ) support scheme for the development of the offshore 
infrastructure sector through public -private partnerships to preserve its status on the global 
shipbuilding and maritime industry market.199 This scheme was to favour Korean equ ipment 
through various policy means and would rely on the use of the Korea EXIM Bank and K -sure to 
guarantee orders for the Korean yards (Section 3.3.5).  
3.163.   Energy subsidization appears to remain in place for the coal industry and electricity 
production and pricing (Section 4.4.2). Korea has few explicit subsidies for fossil fuels and these 
subsidies do not protect any important domestic industries; the main subsidy (VAT and individual 
consumption tax relief, and grants) is for the production of anthracite co al used in the form of 
charcoal briquettes by low -income households and is to end in 2020 (Section 3.4.1.1). According 
to the IEA, the overall recovery rate, the unit price as a share of the total unit cost, has fallen from 
                                                
195 OECD (2016c).  
196 OECD (2016c).  
197 WTO documents G/SCM/N/253/KOR, 6 November 2013 ; and G/SCM/N/284/KOR, 6 July 2015.  
198 WTO document WT/TPR/OV/18, 17 November 2015 . 
199 European Commission (2014).  WT/TPR/S/346 • Republic of Korea  
 
- 93 - 
 
  93.8% in 2007 to 90.2% in 2010, indicating that electricity prices did not cover costs; this means 
that there is a direct subsidy in place in the form of the sale of electricity at prices below costs.200 
Furthermore, the electricity price varies widely between sectors, creating significant  
cross-subsidies between consumers; tariffs for industrial, residential, and commercial consumers 
remain higher than those for agricultural consumers. According to the authorities, electricity prices 
should not be seen as a subsidy because the cost recover y rate rose to a reasonable level in 2014; 
furthermore, as the total unit cost includes the power generation cost and compensation on 
investment for power supply facilities, the fact that the cost recovery rate is less than 100% does 
not indicate the exist ence of a subsidy.201 No recent data on cost -recovery rates and 
cross-subsidization were available from the authorities. Korea operates subsidies, loans and tax 
incentive programmes for the deployment of new and renewable energy.  
3.164.   Korea continues to heavily s ubsidize agriculture, especially rice, and the ratio of total 
support to GDP was estimated at 1.9%, which is much above the OECD average (0.7%) 
(Section  4.2.2).202 Following a reduction in 2010, support in 2012 -14 increased back to previous 
levels due to a r ebound in domestic rice prices and decreasing world rice prices. Market price 
support remained dominant; more than 90% of producer support is commodity specific, and 
concentrates on a small number of products (barley, garlic, red pepper, Chinese cabbage, r ice, 
soybean, milk, beef and veal, pig meat, poultry and eggs). The development of biotech crops is 
being led by various government agencies, universities and private entities with substantive public 
funding (Section 4.2.3.3).203 
3.165.   According to Korea's latest WTO notification of December 2014, covering the period 
2009-11, the current total aggregate measure of support (AMS) dropped from ₩28.5 billion in 
2009 (much below its final bound level of ₩1.49  trillion), in line with WTO provisions and 
scheduled commitme nts, to zero in 2011 (i.e. below its de minimis  level).204 Barley remained the 
only item subject to market price support; this support dropped from ₩28.5  billion in 2009 to 
₩4.8 billion in 2011. Total domestic agricultural support notified by Korea (includin g green box, 
development programmes subject to special and differential treatment, and de minimis  support 
not subject to reduction commitments), rose considerably from ₩5.6  trillion in 2008 (₩879  billion 
excluding green box and S&D assistance) to ₩8.8  trillion in 2011 (₩1.1 trillion excluding green 
box and S&D assistance) (Table  A3.7). In 2011, de minimis  support included: market price support 
(barley); other product -specific assistance (e.g. rice deficiency payment of ₩750.1  billion, beef 
deficiency paymen t of ₩1.9  billion, and loan interest subsidies for several items); and 
non-product -specific support of ₩286.5 billion (mainly crop insurance, input subsidies, and 
subsidies for farm facilities). In 2011, green box support remained more than five times the size of 
Korea's total product - and non -product -specific AMS.  
3.166.   Under the Act on Trade Adjustment Assistance (TAA), since April 2007, Korean 
manufacturers adversely affected by a bilateral free trade agreement may seek compensation from 
the MOTIE and the MOL (Ministry of Labour) through loans, investments, and job -placement 
support for workers. Measures to facilitate industry adjustment are adopted if sales or production 
are reduced by more than 10% (since 2012; reduced from 25% to 20% in 2011) or, considering  
the operating income, number of employees, operation rate, inventory, etc. of the enterprise, the 
damage is deemed to amount to more than 10% over an extended period because of import 
competition. No data on TAA -related support were available from the aut horities.  
                                                
200 OECD/International Energy Agency (2012).  
201 In addition, the authorities consider that the cost recovery rate in the case of electricity for industrial 
use is higher than those for other usages, and objective and consistent  standards are applied to all calculations 
of the costs of any usage; therefore, they disagree that a subsidy is being given to this industry. They also 
indicated that the U.S. Department of Commerce ruled on the US steel industry's complaint against Korea  and 
regarding  the request for imposition of countervailing duties on line -pipes by confirming that a subsidy was not 
provided in the form of the sale of electricity at prices below cost in Korea.  
202 The OECD has been publishing reviews of agricultural poli cies in Korea, other OECD countries, and 
some other economies for several years. In these publications, the value of transfers to agricultural producers 
is measured using the producer support estimate (PSE) and associated indicators. The methodology for 
calculating these indicators is different from that used to calculate the aggregate measure of support (AMS), 
and the two sets of data are neither compatible nor comparable. The authorities consider that the level of 
domestic agricultural support for the pur pose of the WTO Trade Policy Review should be calculated in the 
context of WTO rules described in the Agreement on Agriculture. OECD (2015a).  
203 USDA Foreign Agricultural Service (2015c).  
204 Schedule LX – Republic of Korea (WT/LET/804, 25 July 2011), Part IV , Section I; and WTO document 
G/AG/N/KOR/53, 20 January 2015.  WT/TPR/S/346 • Republic of Korea  
 
- 94 - 
 
  3.4.3   Foreign investment location incentives  
3.167.   During the review period, Korea continued to promote or induce FDI (including 
joint-ventures with domestic investors) with the operation of foreign investment zones (FIZs), 
export -oriented free trade zones ( FTZs), and free economic zones (FEZs) that are divided into 
complex -type, individual -type and service -type zones (Section 2.6).205 Their location varies in 
terms of eligibility for occupation, targeted industries, and investment incentives in form of rent 
reduction/fixing, corporate/income/acquisition/property tax holidays, customs duty/VAT 
exemption, and cash grant, depending on their purpose of designation (Table A2.2). The eligibility 
for and extent of these incentives depends on certain criteria, includin g the degree of FDI 
participation.206 This assistance was notified to the WTO pursuant to Article XVI:1 of the GATT 
1994 and Article 25 of the Agreement on Subsidies and Countervailing Measures in 2013 and 
2015.207 According to the 2015 WTO notification, the a mount of cash grants resulting from this 
type of support stood at ₩14 billion in 2011, ₩10 billion in 2012, ₩5.8 billion in 2013, and about 
₩20 billion in 2014; in addition, according to national statistics, the support in the form of forgone 
tax revenue f rom the reduction or exemption of corporation tax for all foreign -invested 
corporations in FIZs and FEZs stood at ₩170 billion in 2011, ₩80 billion in 2012, ₩44 billion in 
2013, and ₩57 billion in 2014.208 As of end -2015, there were 98 FIZs, 13 FTZs and 8 FE Zs; 
between 2012 and 2014, no new foreign direct investment promoting sites were set except for 
four new complex -type FIZs (Cheonan, Woljeon, Munmak, and Jincheon -Sansu). As of 2015, total 
FDI in these zones, where 682 companies employing 149,000 persons o perated, amounted to 
US$14  billion. No data on the share of these zones ' contribution  to Korea's GDP and total 
imports/exports were available from the authorities.   
3.168.   Industrial complexes specializing in parts and materials – a complex -type of FIZ that, in 
addition to other incentives, benefits from 100% rent reduction (compared to 75% at general 
complex -type FIZs) – are, inter alia , expected to facilitate the introduction of advanced foreign 
technology in parts and materials (from Japan, Germany, etc.) by in ducing foreign investment.209 
At the time of the previous Review, five such complexes operated in Gumi, Pohang, Iksan, and 
Changwon as well as the Busan -Jinhae FEZ due, inter alia , to their proximity to large Korean 
companies. Targeted industries included di splay, mobile, electronic materials, electronics, steel, 
shipbuilding, shipbuilding materials, automotive, machinery, equipment, and chemicals. No similar 
information for the current review period was available from the authorities.  
3.4.4   State -owned enterprise s and privatization  
3.169.   State involvement in the economy (Table 3.4) persists, as the limited privatization efforts 
during the review period were widely opposed. State -owned enterprises (SOEs) produced 3.2% of 
GDP in 2013 (UNSNA standard), the same since 2007 .210 At the time of the previous Review, the 
number of SOEs operating in the country varied depending on the source. According to a 2011 
OECD paper, Korea had 59 SOEs in 2009, with assets valued at US$177.6  billion and employing 
120,655 persons. This was the  highest valuation of SOEs among 27  OECD reporting countries. No 
recent data were available from the authorities on employment by SOEs (88,000 in 2008) or their 
assets (US$267  billion in 2008), nor were data relating to their contribution to GDP, their inc idence 
in domestic production and trade (domestic and foreign), losses occurred by their operations, and 
budget outlays provided to cover them (since 2008).   
3.170.   The brief push to restart privatization of public services (e.g. Korea Rail), the KDB, the 
IBK, th e Woori Financial Group, and the Incheon International Airport in 2013 led to strikes or 
criticism from opposition parties and civic groups and the Government appear ed to have lost the 
                                                
205 Korea Trade -Investment Promotion Agency (2015).  
206 For example, to be eligible to move into a complex -type FIZ, a company should be registered as a 
foreign -invested company, have a foreign inve stment ratio of 30% or higher, and operate a business defined 
under the basic management plan (mostly manufacturing businesses).  
207 WTO document s G/SCM/N/253/KOR, 6 November 2013 ; and G/SCM/N/284/KOR, 6 July 2015.  
208 National Tax Service o nline data. Viewed at: 
http://stats.nts.go.kr/national/major_detail.asp?year=2015&catecode=A12015 . 
209 Korea Trade -Investment Promotion Agency (2015).  
210 Asia-Pacific Economic Cooperatio n Economic Committee (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 95 - 
 
  political appetite amid a faltering economy.211 The authorities added tha t the policy stance on the 
privatization of public services was to reflect the general public's opinion in decision -making.  
3.171.   Under a 2013 Public Institution Reform Plan, the Government developed measures 
involving: increased transparency by making informat ion on public institutions' debt burdens and 
fringe benefit expenditures accessible; reducing the debt level of public institutions below 200% of 
their total capital by 2017; improving public institutions' management efficiency; and, reducing the 
pay of pu blic institution executive board members. At a 2014 mid -term evaluation of the reform 
plans, 18 "highly indebted" and 20 "recklessly managed" public institutions were to reduce debt by 
₩110 trillion by 2017 in order to keep the public institution debt rati o under 200%, and were also 
to cut annual employee benefit expenditures by ₩190 billion.212 In 2015, a 2nd Round of Public 
Institution Reform was launched to strengthen public institutions' core functions and improve their 
productivity in order to provide hi gh quality public services. The Government has been merging 
similar or overlapping functions, reducing or eliminating projects that do not require the direct 
involvement of public institutions, and streamlining support divisions that are deemed to be 
exces sive. Human and financial resources that are freed up from these efforts will be redirected 
toward strengthening public institutions' core functions.  
Table 3.4 State involvement in the economy, 2016  
Entity  Activity  Degree of state ownership 
(%)/Situation in privatization 
programme  
GOODS  
Agriculture    
Korea Agro -Fisheries Trade Corp.  Manufacture and export of 
agricultural products, seafood, and 
beverages  100% / ..  
Mining and energy   
Korea Coal Corp.  Price stabilization; stockpiling coal  100% / ..  
Daehan Oil Pipeline Corp. 
(DOPCO)  Construction and management of oil 
pipelines; delivery and stockpiling of 
oil products  9.8% / ..  
Korea National Oil Corp.  Domestic and overseas oil 
exploration and development; 
export, import stockpiling, 
transportation; lease, and sales of 
crude oil and its products  100% / ..  
Korea Gas Corp. (KOGAS)  Production and distribution of 
natural gas; exploration and 
import/export of natural gas  26.2% / ..  
Korea Electric Power Corp. Power generation; power 51.1% / ..  
                                                
211 In April 2014 , the Woori group reached an agreement to sell stakes in its brokerage unit and two 
other assets to NH Financial Group in a bid to make the Government's eventual sale of Woori more attractive. 
This sale was appr oved in June 2014. The Government has been trying to sell its 57% stake in the Woori 
Financial Group, which controls eight subsidiaries including Woori Bank (the second -largest commercial bank), 
for several years, without success. In July 2015 , it was repo rted that the administration was to break up its 
majority stake in Woori into parcels of 4 –5% to attract buyers, although the response to this proposal has been 
lukewarm. The Government is planning to initiate the sales procedure as soon as sufficient inve stment demand 
is identified. EIU (2015).  
212 The 18 "highly indebted" institutions were: LH, K -Water, KORAIL, Korea Rail Network Authority, 
Korea Expressway Corporation, Korea Electric Power Corporation, Korea Hydro and Nuclear Power Corporation, 
Korea South -East Power Co., Korea Southern Power Co., Korea East -West Power Co., Korea Western Power 
Co., Korea Midland Power Co., Korea Gas Corporation, Korea National Oil Corporation, KORES, Korea Coral 
Corporation, Korea Deposit Insurance Corporation, and Korea St udent Aid Foundation. The 20 "recklessly 
managed" institutions were: Korea Exchange, Korea Racing Authority, KOSCOM, Export Import Bank of Korea, 
Kangwon Land, Incheon International Airport, Korea Securities Depository, Korea Gas Technology Corporation, 
Korea Housing Guarantee Corporation, KOMSCO, Busan Port Authority, Korea Institute of Nuclear Safety, 
KEPCO Engineering and Construction Company, Pusan National University Hospital, Korea Broadcast 
Advertising Corporation, Korea District Heating Corporation,  Korea Investment Corporation, Korea Trade 
Investment Corporation, Korea Agro -Fisheries and Food Trade Corporation, and Grand Korea Leisure Co. 
Ministry Of Strategy and Finance online information , "Public Institution Reform Measures" , 11 December  2013. 
Viewed at: http://english.mosf.go.kr/eco/view.do?bcd=E0004&vbcd=N0001&seq=3470&bPage=1 ; "Mid-Term 
Evaluation Reveals Public Institution Debt Reduction Ahead of Schedul e", 30 October 2014. Viewed at: 
http://english.mosf.go.kr/eco/view.do?bcd=E0004&vbcd=N0001&seq=3723&bPage=1 ; and "Government 
Announces New Reforms for Public Institutions" , 26 May 2015. Viewed at: 
http://english.mosf.go.kr/eco/view.do?bcd=E0004&vbcd=N0001&seq=3845&bPage=1 . WT/TPR/S/346 • Republic of Korea  
 
- 96 - 
 
  Entity  Activity  Degree of state ownership 
(%)/Situation in privatization 
programme  
(KEPCO)  transmission and distribution; 
electricity sales  
Korea District Heating Corp. 
(KDHC)  Thermal energy supply for space 
heating, cooling, tap -water heating, 
and industrial process heating  34.5% / ..  
SERVICES  
Financ ial services    
Industrial Bank of Korea  Specialized bank  50.6% / ..   
Korea Deposit Insurance Corp. 
(KDIC)  Management of deposit insurance 
funds; risk management; resolution 
of insolvent financial institutions; 
management of bankruptcy estates; 
insolvency -related investigations  100% (Non -capital special 
corporation) / ..  
 
Korea Development Bank  Development institution  100% / ..   
Export -Import Bank of Korea  Development institution  70.5% / ..  
Korea Asset Management 
Corporation (KAMCO)  Collect public funds  through 
resolving non -performing loans 
acquired by financial institutions, 
and perform public sale of the 
assets entrusted by the government 
agencies and others  56.8% / ..   
Korea Housing Finance Corp. 
(KHFC)  Mortgage securitization and 
management of hous ing credit 
guarantee fund  64.8% / ..  
Broadcasting and media    
Korea Broadcasting System  Public broadcasting service  100% / ..  
The Seoul Shimmun  Newspaper publishing  30.5% / ..  
Transport    
Korea Expressway Corp.  Expressway construction and 
management  84.1% / ..  
Korean Railroad Corp.  Railway operation and maintenance  100% / ..  
Busan Port Authority  Management and development of 
the port  100% / ..  
Incheon Port Authority  Management and development of 
the port  100% / ..  
Incheon International Airport 
Corp. Incheon International Airport 
development and operation  100% / ..  
Other    
Korea Appraisal Board  Appraisal; real estate consulting; 
real estate transaction information 
network  49.4% / ..  
Korea Minting and Security 
Printing Corp. (KOMSCO)  Local currenc y supply  100% / ..  
Korea Land & Housing Corp.  (LH) Acquisition, stockpiling, 
development, and supply of land, 
urban development and 
maintenance, housing construction, 
supply, and management  87.2% / ..  
Korea Housing & Urban Guarantee 
Corp.  Housing guarant ee for tenants and 
guarantee for construction 
companies; urban regeneration  
 55.0% / ..  
 
Korea National Tourism Corp.  Overseas publicity of Korean 
tourism; managing an overseas 
marketing network  55.2% / ..  
Korea Rural Community Corp.  Contribution to rura l economic and 
social development; development of 
agricultural land and ground water 
resources; improvement of rural 
living environment  100% / ..  
Korea Water Resources Corp.  Water supply, and distribution -
related works; water quality 
improvement  91.3% / . . WT/TPR/S/346 • Republic of Korea  
 
- 97 - 
 
  Entity  Activity  Degree of state ownership 
(%)/Situation in privatization 
programme  
Korea Labour Welfare Corp.  Implementation of welfare 
programme for workers; collection 
of employment insurance premium: 
collection of industrial accident 
compensation insurance premium 
and payment of insurance money  100% / ..  
Korea Resources Corp.  Support of domestic mining 
industry; survey and research of 
geological structures and mineral 
deposits; technical and monetary 
subsidies  100% / ..  
.. Not available.  
Source:  Information provided by the Korean authorities.  
3.4.5   Competition and consumer policy  
3.4.5.1   Compet ition policy  
Framework  
 
3.172.   Responsibility for competition policy rests primarily with the independent Korea Fair Trade 
Commission (KFTC) which is the only government agency that administers competition law.  
3.173.   During the review period, the 1980 Monopoly Regulat ion and Fair Trade Act (MRFTA) was 
amended in 2013, 2014, and 2016, and several implementing guidelines were issued to finalize 
major legislative changes necessary for the realization of economic democratization as well as to 
reflect the actual market situ ation, adapt regulations to international standards, and to clarify 
provisions allowing businesses to easily detect  whether they are violating the law or not 
(Section  2.4 and below).213 The 2013 MRFTA amendments eliminated the KFTC's exclusive right to 
file criminal complaints (see below), relaxed the requirements for establishing "unfair assistance", 
imposed additional administrative fines on entities that benefited from "unfair assistance", and 
prohibited the act of assisting "specially -related parties".214 Following the 2014  amendments of the 
MRFTA, it has been prohibited to take retaliatory measures such as suspension of transactions, 
reduction in supply, and other disadvantageous activities against businesses which, directly or 
through an affiliated company  or another business, report unfair trade activities, apply for dispute 
mediation, or cooperate with the KFTC. Other amendments made it possible to reward 
self-reporting of anticompetitive practices and to delay payment of penalty surcharges and allow 
paym ent in instalments.215 The 2014 amendment of the Enforcement Decree of the Monopoly 
Regulation and Fair Trade Act covered, inter alia , modifications to details regarding prohibition on 
cross-shareholding (i.e. circular -shareholding), the increase in number o f instalments relating to 
the extension of the due date for payment of a penalty surcharge (see below), and the lowering of 
the mark -up rate of additional return for penalty surcharge by taking into account the recent 
interest rates of finance companies. T he 2016 amendment to the MRFTA strengthened the 
disclosure duty of the corporate ownership structure of large business groups. Regarding dispute 
mediation, it allowed the application for mediation to have the effect of interrupting statute of 
limitations a nd made the conciliation protocol have the effect of a consent judgment. Furthermore, 
it improved the leniency programme by limiting the leniency benefits of repetitive cartelists.  
3.174.   Competition law covers all sectors and all undertakings, including state e ntities. However, 
liner shipping conferences are exempted. Voluntary associations established to assist SMEs in the 
agricultural, forestry, and livestock industries, which meet certain conditions may also be 
                                                
213 KFTC online information. Viewed at: 
http://eng.ftc.go.kr/bbs.do?command=getList&type_cd=62&pageId=0401 . 
214 TheLegal500 online information , "South Korea: Major Amendments to Fair Trade Laws" , 
October  2013. Viewed at: http://www.legal500.com/c/south -
korea/developments/24339#sthash.KkPYs1Ce.dpuf . 
215 Korea Fair Trade Commission (2016).  WT/TPR/S/346 • Republic of Korea  
 
- 98 - 
 
  exempted, unless they engage in "unfair trade pr actices or price hikes by unfairly restricting 
competition".216  
3.175.   Legislation covers all principal competition areas, including horizontal practices (cartels and 
collusion), vertical constraints, abuse of dominant market position, and mergers. It prohibits: 
unfair collaborative acts and unfair trade practices; resale price maintenance, unless exempt by 
the rule of reason; and, abuse of dominant position. An enterprise is presumed to be 
market -dominant if its market share is at least 50% or where the share of t he largest three firms 
is at least 75%, except for enterprises whose market share is less than 10% or their annual sales 
or procurement of related goods or services in a relevant market is less than ₩4 billion.217  
3.176.   Mergers to "practically suppress competitio n" are prohibited, unless parties can prove to 
the KFTC that the efficiency enhancing effect will exceed the anticompetitive effects or the 
acquired firm is insolvent. The KFTC may approve a merger subject to certain conditional 
corrective measures to addr ess anticompetitive concerns, such as limiting the scope of the merged 
firm's operations. Following the December 2012 amendment of the 2007 KFTC guidelines on 
mergers and acquisitions (M&As), the criteria to assess dominance (i.e. control over the acquired  
firm) resulting from a merger or acquisition now consider whether the acquiring firm can influence 
the targeted firm through agreements with other shareholders (including veto rights). In addition, 
companies engaged in entirely different businesses are no w subject to a simplified review, where 
regulators assume that unless any specific instance raises concerns, there is no anticompetitive 
activity being undertaken.218 Parties must notify proposed mergers to the KFTC if assets or 
turnover of one party exceed ₩200 billion and those of the other exceed ₩20 billion. A merger 
involving a large -scale enterprise (assets or turnover above ₩2  trillion) should be notified any time 
prior to the date of completion of the transaction and the transaction must not be comple ted until 
the KFTC finishes the review. The Government launched a plan in 2014 to activate the M&As 
market by easing restrictions on investors in order to attract potential buyers, providing financial 
support for sellers and reducing restrictions on M&A pr ocedures and tax disincentives.219 Between 
2012 and 2015, there were 1,825 M&As, of which about 46% involved manufacturing.220 KFTC has 
monitored M&As involving foreign enterprises with a turnover over ₩20 billion in Korea since July 
2003. The number of notifications concerning M&As involving a foreign company rose from 76 in 
2011 to 103 in 2015. Parties to a merger may appeal a decision within 30  days to the KFTC, which 
has 60  days (extendable to 90 day s) to decide.  
3.177.   During the review period, a prohibition on new cross -shareholding 
(i.e. circular -shareholding) between subsidiaries under a large business group was introduced and 
became effective as from July 2014, thus reversing to some extent the emphasi s on self -regulation 
of the market under a 2009 amendment of the MRFTA regulations.221 Not all circular -shareholdings 
were banned; those already in place were exempt. Circular -shareholdings, which have greatly 
decreased even prior to the enforcement of the l imitations on new circular -shareholding, continue 
to decrease after the ban's enforcement. In 2013, 15 business groups held a total of 
97,658  circular -shareholdings, but this drastically decreased to 8 business groups and 
94 circular -shareholdings in 2015.  Circular -shareholding between subsidiaries under a large 
business group (i.e. not less than ₩5 trillion of total assets) is completely banned under the 
MRFTA; 65 (55 in 2011) large business conglomerates (see below) were officially designated as 
large business groups as of 1 April 2016. The merger involving a large enterprise must be notified 
at any time prior to the date of the completion of the transaction. A financial or insurance company 
                                                
216 Conditions include having a goal of mutual cooperati on and benefits for small businesses and 
consumers, and that members are free to enter and exit, and have equal voting rights.  
217 MRFTA Article 4.  
218 EIU, "Mergers" , 8 September 2015. Viewed at: 
http://country.eiu.com/article.aspx?articleid=1523487136&Country=South 
Korea&topic=Regulation&subtopic=Competition+policy&subsubtopic=Merg ers&oid=1473487131&aid=1 .  
219 OECD (2016c).  
220 Korea Fair Trade Commission (2015).  
221 This prohibition was the authorities' response to action of a certain large business group that secured 
fictitious voting rights without an external capital inflow through cross-shareholding and used them to unfairly 
maintain and strengthen the group owner family's control over the group and for the expedient succession of 
management rights and support of marginal businesses  as well . The ceiling on total investment in other 
companies (cross -shareholding) implemented for 13 years on large business conglomerates' (many of which 
are family -controlled (chaebols)) affiliates, had been lifted in March 2009. Instead, large business groups were 
obliged to disclose information on the general conditions and current status of their stockholding. Korea Fair 
Trade Commission (2016); WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  WT/TPR/S/346 • Republic of Korea  
 
- 99 - 
 
  belonging to a large business conglomerate is allowed to exercise its voting right for up to 15% of 
its shares of a domestic non -financial or insurance affili ated company in certain cases, including for 
the merger of the affiliated company with another company. The KFTC requires large business 
groups to prepare combined financial statements as well as their normal consolidated financial 
statements.222 A combined financial statement puts together balance -sheet accounts or income 
statement accounts of a related group of entities as a single reporting entity. Foreign -invested 
companies, as recognized under the Foreign Investment Promotion Act of 1998 (Section 2.6), a re 
exempt from regulations affecting domestic large business groups.   
Policy and operational developments  
 
3.178.   As of 2014, the KFTC's policy of "creating a fair and lively market based on the principle of 
economic democratization" sought to: remedy abnormal tr ade practices; create an 
innovation -friendly market environment; prevent consumer harm by strengthening its law 
enforcement with respect to products and areas which closely affect consumers' lives (e.g. daily 
necessities and e -commerce); create tangible ou tcomes through flawless implementation of the 
eight economic democratization tasks passed into law in 2013; and, actively deal with the 
"globalization of competition law" (cross -border anticompetitive practices).223  
3.179.   Monopoly power seems unchanged and market  concentration relatively high. According to 
KFTC measurements, the market concentration ratio of the top three leading manufacturing 
companies on a weighted average basis has remained relatively stable from 2009 to 2011, from 
67.7% to 67.6%, while the ind ustry concentration ratio rose from 55.8% to 56.1%. On the other 
hand, 61 large business conglomerates  (55 in 2011)  and state conglomerates with control on over 
1,674  companies (1,618  companies in 2011) were on the KFTC's watch list as of 1  August 2015.224 
When necessary for antitrust purposes, certain enterprises are presumed to be market -dominating 
if their market share is at least 50% or where the share of the largest three firms is at least 75%, 
except for enterprises whose market share is less than 10% o r their total annual sales or 
procurement of related goods or services is less than ₩4 billion.  
3.180.   Despite action taken by the authorities to encourage large corporations and SMEs to 
voluntarily sign agreements under the 2007 Fair Trade and Mutual Growth Pact between Large 
Companies and SMEs and efforts of a government -set Korea Commission for Corporate Partnership 
(KCCP), large business groups are still considered as stifling growth of the country's SMEs in 
certain activities.225 Under the Pact, large companies promise fair transactions in subcontracting 
such as reflection of an increase in t he raw material price when determining the unit price of a 
contract product, increment of the cash payment ratio, shortening of payment terms, etc. In 
return, SMEs promise to grow together through innovation activities such as the improvement of 
productivi ty and technology development for cost savings, process improvement, quality 
improvement, logistics improvement, etc. The fair trade agreement system is about enhancing the 
competitiveness of both SMEs and large companies. In 2011, the KCCP issued a list o f business 
sectors where large companies would be excluded in favour of smaller ones, covering 16 goods 
ranging from everyday items to high -tech products, including tofu, and light -emitting diodes 
(LEDs, until 2015); the list was expanded to include 73 ite ms as of May 2016. Voluntary fair trade 
agreements can be signed and the KFTC assesses the execution status of the firms involved and 
rewards excellent companies with incentives such as an exemption from its investigation. To 
induce more companies to sign these agreements, the KFTC identified 12 exemplary cases where 
                                                
222 EIU (2015).  
223 Economic democratization, which aims to narrow the wealth divide and promote fair competition  
between conglomerates and smaller companies, was a key election campaign pledge of rival parties during the 
2012 presidential election. Abnormal trade practices refer to those undertaken by public enterprises with 
monopoly power, unfair trades between lar ge and small and medium -sized businesses in the distribution, 
agency, and subcontract areas, and practices which limit the growth of IT and other new growth industries. 
Korea Fair Trade Commission (2015).  
224 EIU (2015).  
225 Since December 2010, the KCCP, cons isting of representatives from industry and academia, has 
aimed to broker a broad profit -sharing deal among large and small companies; its mandate was controversial 
from its inception, coming under criticism from the Federation of Korea Industries (FKI), r epresenting the 
country's largest companies. Reportedly, major companies use their economic weight and purchasing power to 
force smaller companies supplying them to accept low margins. WTO document WT/TPR/S/268/Rev.1, 8 
November 2012; Yonhap  News Agency,  "Chaebol's system integrators hike internal deals in 2014" , 27 April 
2015. Viewed at: http://english.yonhapnews.co.kr/search1/2603000000.html?cid=AEN201504270010 51320 ; 
EIU (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 100 - 
 
  mutual cooperation resulted in developing technologies, reducing costs, replacing imports and 
expanding exports, and has pursued multi -faceted campaigns aiming at promoting the signing of 
the a greement. Between 2013 and 2015, the number of companies signing cooperation 
agreements increased continuously by an average annual rate of 8 -9%, increasing from 
177 companies in 2013 to 192 companies in 2014, and 209 companies in 2015. From 2007 to 
2014, 817 large companies entered into subcontracting agreem ents with approximately 
182,000  SMEs (based on cumulative number of companies); between 2009 and 2014, 387 large 
companies were appraised, of which 209 (54%) qualified for a grade of "outstanding" or hi gher 
thus receiving incentives such as exemption from KFTC's written surveys.226  
3.181.   Since 2013, big retail groups have been required to close some stores every other Sunday 
across the country to give smaller competitors opportunities to grow, large chains have  been 
banned from opening mini -markets close to smaller stores without getting the consent of the local 
community, and franchise companies cannot open new restaurants within 150 metres of existing 
small restaurants. These regulations have been criticized b y large business groups, who claim they 
benefit foreign firms, which are not bound by the regulations, rather than domestic SMEs.227  
3.182.   In 2014, the KFTC was to strengthen its monitoring and sanctioning of unfair trading 
behaviours and promote corporate partne rships and mutual cooperation between large companies 
and SMEs.228 It was to continue to eradicate problems by intensively checking and correcting 
unfair subcontracting behaviours such as the non -payment of contract proceeds, and by publicizing 
more actively  successful examples of mutual cooperation between large companies and SMEs.  
Enforcement  
 
3.183.   Following the June 2013 MRFTA amendments in response to criticism against the KFTC for 
failing to properly exert its authority, three other organizations, the Board of Audit and Inspection, 
the Public Procurement Service (Section 3.2.10) and the Small and Medium Business 
Administration (SMBA), were also enabled to request the KFTC to lodge complaints for alleged 
violations of the Act from 17 January 2014 onwards.229 Upon receiving a request from any of these 
agencies, the KFTC is required to file a complaint with the Prosecutor's Office. Notwithstanding this 
amendment, entities filing for leniency in cartel cases will remain exempt from criminal 
prosecution. As of April 2016, the Public Procurement Service and the SMBA had requested the 
KFTC to refer 12 enterprises to the Prosecution; the KFTC immediately filed criminal complaints 
with the Prosecution against 10 of them, and decided not to charge the remaining two compani es 
as they applied for leniency and were exempted from criminal charges.  
3.184.   The KFTC may issue warnings or corrective measures, impose penalty surcharges and 
fines, and request criminal prosecutions.230 Between 2012 and 2014, law enforcement continued to 
be focused on preventing consumer harm in areas closely related to the livelihood of people such 
as daily necessities and electronic commerce. In 2014, the KFTC handled 4,079 cases allegedly 
violating laws under its jurisdiction (9 laws including the MRFTA, and  laws on consumer protection, 
subcontracts and franchise transactions), a 10.6% decrease from 2012; the same year it issued 
voluntary corrections, warnings, or more severe sanctions in 2,435 cases.231 In the same year, the 
number of complaints under the MRFT A provisions continued dropping from 1,050 to 857, and 
related largely to unfair business practices (470), abuse of business position (230), improper 
concerted act (207), and prohibited acts of trade associations (enterprise organizations) (100). 
The numbe r of warnings (133) exceeded that of corrective orders (75) and voluntary corrections 
(54), while fines (52) and surcharges (83) were imposed in a reduced number of cases in 2014. 
According to the authorities, 62 criminal complaints were filed during the p eriod 2012 -14, and 
corrective recommendations were issued in 27 cases in 2014. Despite a gradual decline in recent 
years, the cases of unfairly luring customers continued to account for the largest share of law 
                                                
226 Korea Fair Trade Commission (2016).  
227 EIU online information, "South Korea – Regulation: Competition policy" , 8 September 2015. Viewed 
at: http://country.eiu.com/article.aspx?articleid=1473487131&Country=South 
Korea&topic=Regulation&subtopic=Competition+policy&subsubtopic=Overview .  
228 Korea Fair Trade Commission (2016).  
229 EIU (2015); The legal 500 online information. Viewed at: http://www.legal500.com/c/south -
korea/developments/24339#sthash.XlDQFSWa.dpuf . 
230 Korea Fair Trade Commission (2016).  
231 Korea Fair Trade Commission (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 101 - 
 
  enforcement under the MRFTA in 2011 -14 (955 c ases)232; other anticompetitive practices were 
increased complaints over abuse of dominant position (854 cas es), refusal to deal/trade 
(147 cases)233, interference with the business activities of other companies (114 cases), coercion 
in commercial dealings (86  cases), transactions based on restrictive conditions (52 cases), and 
unfair assistance (52 cases).  
3.185.   Between 2011 and 2014, penalty surcharges were levied on 442 cases; in 2014, the total 
amount of penalty surcharges rose by 92.2% to ₩804.3 billion, compared to ₩418.4 billion in 
2013.234 Ranking high on the list of high -fine cases were mostly unlawful collusions, including 
collusion by 28 companies that participated in the bidding for 13 construction sites 
(₩347.8  billion); 21 constructi on companies bidding in a turnkey project for the second line of the 
Inchon Subway (₩132.2 billion); 5 white duplex board manufacturers (₩105.6 billion); and 
5 automobile meter manufacturers (₩97 billion).  
3.186.   The KFTC operates a permanent monitoring system to  detect and prevent bid -rigging in 
the public sector; bid -rigging is defined as a type of illegal cartel conduct. When a central 
administrative agency, a local municipality, or a corporation in which the State has a shareholding 
of 50% or more makes a bid for a construction work worth ₩5 billion or for procurement of goods 
or services worth ₩500 million or more, it is required to submit information on the project bidding 
to the KFTC. Strict penalties are imposed on bid -riggers, and criminal prosecutions are possible. 
The maximum surchar ge for bid -rigging is 10%. In 2013, a new KFTC division, the Bid Rigging 
Investigation Division, was created to ensure efficient handling of bid -rigging cases regarding 
government contracts, so that long pending cases whose period of prescription is soon t o end can 
be settled in time. Between 2011 and 2014, the KFTC uncovered 121 bid -rigging cases, which 
account for the biggest portion of the offences and are followed by price fixing (80 cases).235 In 
2014, the KFTC uncovered 56 cases of collusion in public b ids involving infrastructure projects 
(e.g. Daegu Metropolitan Transit, the Gyeongin Canal, Busan Subway, and Honam High -Speed 
Train), and areas affecting people's livelihood (e.g. boilers, rental cars, and unmanned security 
systems), and levied penalty su rcharges totalling ₩769.4 billion.  
3.187.   Since 2010, the government -funded Korea Fair Trade Mediation Agency has, inter alia,  
carried out assessments of companies participating in the 2001 Compliance Programme (CP), 
which promotes voluntary compliance with the MRFTA. A corporatio n that qualifies for grade A or 
higher benefits from immunity from investigation for a certain period. The reductions in surcharges 
ranging from 10% to 20% available at the time of the previous Review were abolished in 2014. By 
December 2015, 636 (475 in 2 011) companies were participating in the CP.  
3.188.   Korea's extraterritorial application of its competition law remains unchanged. The KFTC has 
jurisdiction to address international cartels exporting to Korea especially in areas such as critical 
parts and materi als that can cause direct and extensive harm to the domestic market.236 If a cartel 
is formed inside the country, Korea applies pertinent laws following international norms, regardless 
of the origin of participants. Also, irrespective of the jurisdiction of a cartel, if such an attempt 
could have a negative effect on competition in the domestic market, Korea applies the law 
extra-territorially. In 2014, international cartels were uncovered in the markets for commercial 
bearings, bearings for steel, and small bearings, and penalty surcharges totalling ₩77.4 billion 
were levied on nine German and Japanese companies; bearings are a critical component for 
Korea's major backbone industries, such as automobile, steel, and electronics manufacturing, and 
their manufac turing is a large equipment -based and technology -intensive industry dominated by a 
handful of major global companies. The authorities indicated that Korea's extraterritorial 
application intends to protect competition rather than Korean companies.  
                                                
232 "Unfairly luring consumers" is where an enterprise engages in a fraudulent method or transaction 
disruption by providing unfair benefits or wrong information on goods or services to lure a rival company's 
customers. The Enforcement Decree defines such behaviour as using unfair benefits, fraudulent methods, and 
other improper inducements.  
233 The term "refusal to deal" means, inter alia,  to decline to start a deal, to discontinue a deal, and to 
limit considerably  the quantity or terms and conditions of a deal.  
234 Korea Fair Trade Commission (2016); Korea Fair Trade Commission (2015).  
235 Korea Fair Trade Commission (2016); Korea Fair Trade Commission (2015).  
236 As of 2014, over 60 nations exercised their authority ext ra-territorially, making extraterritorial 
application an international norm. Korea Fair Trade Commission (2016).  WT/TPR/S/346 • Republic of Korea  
 
- 102 - 
 
  3.189.   During t he review period, the KFTC has maintained close cooperation with foreign 
competition authorities to ensure effective investigation and sanctioning of international cartels as 
well as to prevent any disadvantages to Korean enterprises in their overseas acti vities. In addition 
to the 2009 Korea -EU cooperation agreement on the application and enforcement of competition 
laws in relation to anticompetitive practices, Korea's RTA/FTAs with Chile (2004), Singapore 
(2006), EFTA (2006), India (2010), the EU (2011), Peru (2011), the United States (2012), Turkey 
(2013), Australia (2014), Canada (2015), China (2015), New Zealand (2015), and Viet Nam 
(2015) contain provisions on competition matters. The KFTC maintains memoranda of 
understanding on competition policy dial ogue, establishing the basis for a formal dialogue on 
competition law enforcement as well as exchange of information, with the competition authorities 
of the Russian  Federation (1999), Romania (2002), Australia (2002), Latvia (2003), the 
Commonwealth of In dependent States (2003), Mexico (2004), the  EU (2004), Turkey (2005), 
Canada (2006), China (2012), Indonesia (2013), Brazil (2014) and Japan (2014). The KFTC, which 
participates in the International Competition Network (ICN), continued to provide technical  support 
to developing countries, transition countries, and other countries that are inexperienced in 
understanding and enforcing competition policies. As of March  2014, 56  workshops, for over 
1,400  participants from 35 countries had been held under the OE CD-Korea Policy Centre 
Competition Programme.237 
3.4.5.2   Price controls and monitoring  
3.190.   Price controls remain in place in specific areas.238 The President can order the control of 
prices on a range of products through "emergency demand and supply adjustment measure" 
decrees239; no such measures have been adopted since 2012. The Government may, when 
deemed necessary to stabilize the people's livelihood and the national economy, designate a 
ceiling price on important commodities, rent for real estate, etc., or charges for s ervices.240 Price 
controls and monitoring are operated under the Coal Business Law, the Petroleum Business Law, 
and the MRFTA. According to the authorities, in principle, prices are determined by the market 
with no intervention from the Government except for  in the following exceptional circumstances. 
First, the Government can approve the price adjustment of public goods or services that are 
deemed necessary to stabilize the people's livelihood or supplied by a monopoly state -owned 
provider upon their provide r's requests. Second, in case of urgent financial or economic crises or 
other extraordinary circumstances including natural disasters and emergencies at home or abroad, 
an emergency demand and supply adjustment measure can be adopted. Third, if necessary, the 
Government may designate a ceiling price if a commodity's supply condition changes dramatically 
to stabilize the livelihood of consumers or spur industrial restructuring. Charges on public goods 
and services may be adjusted by central and regional gove rnments. The central government 
approves: the wholesale price of coal products used for home heating; the rates for metropolitan 
region waterworks service (wholesale only) and electricity; fees for telecoms, television services 
and postal services; and, fa res for railway, intercity bus fares, motorway tolls and international 
airfares. The regional governments are responsible for determining: the retail price of coal 
products used for home heating; the ticket price of art exhibitions and performances; rates for 
water and sewage; fares for inner city buses and taxis; entrance fees of local museums and 
memorials; the price of septic tank cleaning and food garbage bags; and, high school tuition fees.  
3.4.5.3   Consumer protection  
3.191.   Since 2008, the KFTC has been the sole co mpetent authority in consumer policy. It 
remains in charge of setting the consumer policy plan and monitoring the Korea Consumer 
Agency. Its jurisdiction covers, inter alia , the Framework Act on Consumers, the Product Liability 
Act, the Consumer's Cooperat ive Union Act, the Electronic Commerce Act, and the Act on the 
Regulation of Terms and Conditions. During the review period, it enacted the 2014 Compliance 
Measures for Mobile Electronic Commerce Businesses regarding the Electronic Commerce Act. The 
measur es aim to ensure that consumers in the rapidly growing mobile e -commerce industry are 
provided with all the information necessary for making purchasing decisions and that enterprises 
can easily observe the Act. In addition, they revised the standard adhesi on contract in 
e-commerce to protect online personal information.  
                                                
237 OECD/Korea Policy Centre Competition Programme (2014).  
238 WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  
239 Article 6 of the Price Stabiliza tion Act.  
240 Article 2 of the Price Stabilization Act.  WT/TPR/S/346 • Republic of Korea  
 
- 103 - 
 
  3.192.   The KFTC establishes a basic master plan for consumer policies every three years, which 
serve as a baseline for all the central administrative bodies including the KFTC itself, as well as 
17 local metropolitan governments, the Korea Consumer Agency, the Korea Financial Supervisory 
Service and other consumer groups. Its third basic Consumer Policy Master Plan, for the period 
2015-17 contains policy goals, inter alia , focused on: support and r einforcement of consumer 
capability in a creative economy; expansion of a safe and credible market environment; and, the 
setting of a global private/public cooperation system.241 Parallel imports continued to be accepted 
as a necessary mechanism to ensure co nsumer protection from unfair product pricing; parallel 
imports of genuine products may enter Korea legally, in some circumstances, provided they meet 
certain requirements (Section 3.4.6.1).242  
3.193.   During the review period, action to prevent consumer harm by st rengthening law 
enforcement with respect to products and areas which closely affect consumer lives such as daily 
necessities and e -commerce was taken.243 The KFTC continued imposing sanctions against 
deceptive practices in the digital content area, including  the smartphone application market, digital 
music and internet protocol television (IPTV), and acts of deliberately withholding information from 
consumers by providers of postnatal care services and overseas study programmes. Based on 
injuries -related info rmation collected through organizations such as the Consumer Counselling 
Centre, fire stations, and hospitals, the Korea Consumer Agency proceeded with actions (such as 
recommendations of correction, notifications to the authorities concerned, improvement of 
systems for the enterprises involved) to resolve a total of 373 injuries.244 As of 2014, the 
comprehensive online consumer information network, "Smart Consumer", brought together an 
increased volume of scattered consumer information from 102 websites of 6 8 institutions in a 
single space, compared to 40 websites of 22 organizations in 2012. The Consumer -Centred 
Management (CCM) certification system, which is run by the Korea Consumer Agency, continued 
to evaluate whether or not an enterprise is conducting a ll its activities from a consumer's 
perspective and is consistently improving its management in a consumer -centred way; as of end -
2014 there were 130 CCM certified companies, compared to 108 in 2011. Between 2011 and 2014, 
4,832 consumer -related complaint cases were dealt with by the KFTC; they related mostly to 
unfair labelling and advertising, adhesion contracts, and e -commerce issues. In 2014, 
1,090  corrective measures mostly related to e -commerce (536), unfair adhesion contracts (265), 
and fair labellin g and advertising (231) were taken; most action was in the form of voluntary 
correction (821) rather than fines (80), corrective orders (77), warnings (71) or surcharges (5).245  
3.4.6   Intellectual property rights  
3.194.   Korea's policy stance remains that consistent prot ection of intellectual property rights 
(IPRs) is an important infrastructure for enhancing national and corporate competitiveness in its 
economy. According to the authorities, Korea's "creative economy", which has formed part of the 
Government's national a genda for stimulating economic growth since 2013, is closely connected 
with intellectual property rights.246 During the review period, legislative amendments in this area, 
inter alia , affected the Patent Act, the Utility Model Act, the Trademark Act, the Des ign Protection 
Act, and the Unfair Competition Prevention and Trade Secret Protection Act, and were designed to 
enhance convenience for applicants and improve the IPR system (Section 3.4.6.1). At the time of 
the previous Trade Policy Review, a Framework Ac t on Intellectual Property (IPFA), in force from 
20 July 2011, became the basis for setting laws, systems, and policies governing the creation, 
protection, and use of IPRs including patents, trademarks and copyrights. Under IPFA provisions, a 
Presidential Council on Intellectual Property (PCIP) was established, on 28  July 2011, to review 
                                                
241 Korea Fair Trade Commission (2016).  
242 Parallel imports must meet the following requirements: (i) they must be genuine; (ii) they must be 
of the same quality as goods sold in Korea; and (iii) the party  that placed the trademark on the parallel 
imports must be the Korean trademark holder or closely related. WTO document WT/TPR/S/268/Rev.1, 
8 November 2012; Yonhap News Agency , "Customs clearance to be simplified for products purchased through 
foreign webs ites", 9 April 2014. Viewed at: 
http://english.yonhapnews.co.kr/search1/2603000000.html?cid=AEN20140409000700320 . 
243 Korea Fair Trade Commission (2016).  
244 The C onsumer Counselling Centre with its network of 1,372 agencies run jointly by the public sector 
and private consumer groups continues to enable quick responses to consumer complaints; the telephone 
counselling system allows for efficient counselling service s by networking 10 consumer agencies, the Korea 
Consumer Agency, and 17 metropolitan governments' counsellors. Korea Fair Trade Commission (2016).  
245 Korea Fair Trade Commission (2015).  
246 Korean Intellectual Property Office (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 104 - 
 
  and adjust the Government's key IP policies, as well as to evaluate and monitor the progress of IP. 
The PCIP formulated, and has been implementing, the First Strategic Plan  for National Intellectual 
Property (2012 -16). An Action Plan is formulated every year for implementing its policy objectives; 
in this regard, the PCIP launched the implementation of a system to advance IP creation, 
protection and utilization, all of which  continue to be a national concern.   
3.195.   As of April 2016, Korea participated in 19 out of 25  treaties administered by the 
World  Intellectual Property Organization (WIPO) and is a party to the International Convention for 
the Protection of New Varieties of Pla nts (UPOV) Convention. During the review period, it 
expanded its commitments by becoming a party to the Hague Agreement Concerning the 
International Registration of Industrial Designs, in force as of 1 July 2014, the Marrakesh VIP 
Treaty, which Korea ratif ied on 8 October 2015, and the Singapore Treaty on the Law of 
Trademarks on 1 April 2016, effective as of 1 July 2016.247 Korea is a signatory to the October 
2011 Anti -Counterfeiting Trade Agreement (ACTA) establishing international standards on 
intellectual  property rights enforcement, which has not entered in force so far.248 The TRIPS 
Council reviewed Korea's IPR legislation in 2000.  
3.4.6.1   Industrial property  
3.196.   The Korean Intellectual Property Office (KIPO) handles industrial property protection. 
It examines and re gisters patents, utility models, industrial designs, trademarks (including service 
marks) and layout designs of integrated circuits, and develops policies to protect trade secrets. It 
resolves IPR disputes through "trial decisions" (administrative judgemen ts) of the Intellectual 
Property Trial and Appeal Board (IPTAB). Trial decisions on patents, utility models, trademarks and 
industrial designs can be appealed to the Patent Court and subsequently to the Supreme Court. 
The Patent Court is a court of special  jurisdiction that hears appeals from trial decisions of the 
IPTAB and IPR infringement litigation appeals (Section  3.4.6.3). Korea restricts parallel imports 
except where specific legal criteria are met (Section  3.4.5.3).249 Despite the lack of official dat a on 
parallel imports, according to a major trading partner, for some brands, at the time of the previous 
Trade Policy Review, parallel import sales volumes were estimated at 50% to 80% of authorized 
sales.  
3.197.   Penal provisions for right infringements of pate nts, utility models, trademarks and 
industrial designs remain: imprisonment of up to seven years or a fine of up to ₩100 million; or 
imprisonment of up to three years or a fine of ₩20 million for falsely indicating such a right or 
fraudulently obtaining one. Civil remedies include injunctions against further infringement and 
damages. Provisional measures for preventing infringements are provided in each industrial 
property act and the Civil Execution Act. Specific criteria exist for increasing or decreasing fines.  
3.198.   After steady improvements over several years, IPR administration continued to raise its 
already high effici ency level.250 The rate of electronic application s ("e-application") made to KIPO 
has remained among the highest in the world since 2005; in 2015, 96.3% (94.3% in 2009) of all 
applications were filed online. In 2015, KIPO's first action pendency period (i.e.  the time it takes 
for a new application to receive an initial response) was an average of 10 (18.5 in 2010) months 
for patent and utility model examinations, and 4.7 (10.6 in 2010) and 4.4 (10 in 2010) months for 
trademark and design examinations, respect ively. In 2015, 101,873 patents; 3,253  utility models; 
54,551 industrial designs; and 114,747 trademarks were registered, representing a total increase 
of 71.5% compared to 2010. According to KIPO, 475,802 IPR applications including patents, utility 
models , designs, and trademarks were filed in 2015, 28.6% higher than in 2010; 213,694 were 
patent applications (an 25.6% increase from 2010), 46,421 (21.7%) of which were from 
non-residents.  
                                                
247 The VIP Treaty is to en ter into force three months after 20 eligible parties have deposited their 
instruments of ratification or accession. Korea was the 11th party to ratify this VIP Treaty, and , as of 
15 May 2016, a total of 18 parties had ratified or acceded to the Treaty. WI PO online information. Viewed at: 
http://www.wipo.int/treaties/en/ShowResults.jsp?country_id=95C . 
248 Other ACTA signatories are Australia, Canada, the EU (22 members only), Japan , Mexico, Morocco, 
New Zealand, Singapore, and the United States. The ACTA can enter into force only upon ratification by 
six countries; so far only one signatory has done so.  
249 Korea considers that parallel imports promote competition  and lower prices . Therefore, it prohibits 
conduct that unreasonably restricts parallel imports, and treats them as unfair trade practices. Parallel imports 
infringing trademark rights are banned . WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  
250 EIU (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 105 - 
 
  Patent and utility models  
 
3.199.   Patent protection under the Patent Act of 1946 (last amended in 2015) is for 20 years from 
the date of filing (extendable for up to five years for pharmaceuticals and agricultural chemicals 
undergoing certain market -approval procedures). Both product and process patents may be 
granted. The grace p eriod for filing is twelve months, and the term of the patent right may be 
extended when its registration is delayed by more than four years after the filing date, or three 
years after request for examination when the reason is not attributable to the appl icant. Green 
technology benefiting from government -supported R&D is allowed speedy screening/examination. 
The document format for patent applications is identical to the United States, Japanese, and the 
EU model. The KIPO may grant a compulsory non -exclusi ve licence to work a patent if the holder 
has not worked it for more than three  consecutive years.251 To date, one compulsory licence has 
been issued. Under the present legislation (including the Patent Act and the Unfair Competition 
Prevention and Trade Sec rets Protection Act), penalties for patent violations can reach 
₩100 million in fines or seven years in prison.   
3.200.   The 2013 amendments to the Patent Act were, inter alia , aimed at: providing greater 
opportunity for renewing extinguished patent applications or rights; making applications more 
expedient; expanding the avai lability of refunds for patent fees (effective as of 1 July 2013); and, 
submitting applications with specifications in foreign languages through the introduction of foreign 
language patent applications (as from January 2015).252 Moreover, as a result of 2014  
amendments, as from July 2015, the time period for invoking the grace period, which previously 
ended at the time of application, has been extended all the way to patent registration, and 
divisional applications were made possible even after the examiner d ecides to grant the patent.253  
3.201.   The Utility Model Act (1961, last amended in 2014) protects the shape, structure, or 
combination of articles/products for ten years from the date of filing the application. The same 
procedures for establishing patent rights ap ply to utility models. It is mandatory for utility model 
applications to disclose information on prior art related to the invention. Submission of claims in 
foreign languages is allowed. Commercial acts of manufacturing, assigning, leasing or importing a 
product embodying the utility model are deemed to infringe the exclusive right of the holder or 
licensee of a registered utility model, and are therefore prohibited.  
3.202.   The 2013 amendments to both the Patent Act and Utility Model Act allowed for an 
applicatio n date to be acknowledged even if a claim has not yet been submitted, thus providing 
applicants with means for more quickly acquiring an application date.254 To ensure accurate 
examinations on newly introduced foreign language applications, in 2014, the pate nt and utility 
model examination guidelines were revised to include, as from January 2015, procedures for 
correcting mistranslations, translation errors, etc.255  
Trademarks  
 
3.203.   The Trademark Act (1949, last revised in 2013) protects trademarks on goods and ser vices 
for ten years upon registration, renewable indefinitely for ten -year periods. Following the entry 
into force of the KORUS FTA, an April 2012 amendment to the Trademark Act allows the 
trademarking of sounds and scents if they are capable of visual rep resentation.256 It is also 
possible to apply for and obtain certification marks that verify the origin, quality or method of 
production. Trademark registrations may be rejected for a lack of intent to use. In 2013, the 
Trademark Act was further amended in a holistic manner for the first time in more than 23 years 
to address prior use of trademarks to, inter alia , protect owners of small businesses who had 
previously been forced to amend their trading names if challenged by new owners of trademarks. 
Consequent ly, the 2013  amendments (effective as of 11 June 2014) included measures to stop the 
                                                
251 Except for s emi-conductor technology, for which this is only possible after four years, and when 
consultations with the patent holder or exclusive licensee were not possible or did not enable an agreement.  
252 Korean Intellectual Property Office (2014).  
253 Korean Intelle ctual Property Office (2015).  
254 Korean Intellectual Property Office (2014).  
255 Korean Intellectual Property Office (2015).  
256 EIU, "Protection of intellectual property" , 8 September 2015. Viewed at: 
http://country.eiu.com/article.aspx?articleid=1893487173&Country=South 
Korea&topic=Regulati on&subtopic=Intellectual+property+and+e -
commerce&subsubtopic=Protection+of+intellectual+property&oid=1873487171&aid=1 . WT/TPR/S/346 • Republic of Korea  
 
- 106 - 
 
  unjust registration and exercise of trademark rights (such as preventing the acquisition of rights in 
violation of the principle of good faith), solve the problem of the p rior application principle, and 
crack down on trademark brokers. Under the 2013 amendments, effective as of 6 October 2013, a 
party that, without bad -faith intent, uses a trademark in its name or any personal identifiers, in 
accordance with customary pract ices, will be able to continue doing so as long as such usage 
started before the application date of a trademark claim. It is now possible for examiners to 
correct minor errors made by applicants and extend the period of redress from 14 days to 
2 months in  cases where certain procedures were missed due to unavoidable circumstances.257 
In 2013, the examination standards were revised to allow examiners to investigate, amend, or 
reject trademarks that are highly likely to disturb market order by mimicking famous  trademarks, 
or that are filed to acquire rights to valuable pre -existing trademarks.258 The trademark 
examination standards amendments allowed the rearrangement of the previous legal provisions by 
classifying them according to "part, chapter, and number" an d the updating of other examples and 
cases, thus ensuring that trademark examination standards are easy to understand and that 
examinations are conducted in accordance with the fundamental purpose of the trademark 
system.259 A new chapter for non -visual trad emarks (e.g. sounds and scent marks) was added in 
the examination standards. As of 2015, KIPO had designated 45,000 (15,000 in 2014) names of 
goods and services as a reference for applicants in order to increase their convenience and reflect 
industrial dev elopment.  
3.204.   The Unfair Competition Prevention and Trade Secrets Protection Act prohibits unfairly 
tarnishing a well -known mark or causing confusion by use of a similar or identical mark, including 
distributing, importing or exporting such goods. Civil remed ies include injunctions to stop improper 
use, compensation for damages, and restoration of reputation. Penal provisions are up to three 
years' imprisonment or a fine of up to ₩30 million.  
Geographical indications  
 
3.205.   The Trademark Act denies application for registration of Geographical Indications (GIs) 
that are the same or similar to GIs protected under multilateral or bilateral agreements; material 
used in infringement of GIs and trademarks is confiscated in addition to the equipment and 
infringing products . Under the Unfair Competition Prevention and Trade Secrets Protection Act, 
unauthorized use of geographical indications is penalized. Foreign GIs can be registered according 
to the same procedures and criteria as for domestic goods  and are protected under  various laws, 
including the Trademarks Act, and the Unfair Competition Prevention and Trade Secrets Protection 
Act; they receive the same protection as domestic registered GIs. The Trademark Act bans 
registration of labels that violate GIs; it also preven ts deceptive labelling and advertising, including 
any vague or false labelling or advertising that may mislead consumers as to the product's origin. 
The trademark legislation prevents registration of trademarks consisting of a "conspicuous 
geographical nam e"; it allows them to be registered as geographical collective marks. The owner 
of a GI collective mark has the right to use it exclusively and prevent others from using identical or 
similar signs for identical goods, where it might result in confusion. Im ports or exports with false 
origin indications or infringing GIs are prohibited (Foreign Trade Act).  
3.206.   The Agricultural and Fishery Product Quality Management Act (2011) specifies GIs for 
agricultural and fish products. These must be registered with the Geo graphical Indication 
Registration Council of the National Agricultural Products Quality Management Service, the Korea 
Forest Service, or the National Fishery Products Quality Management Service. Using a false mark 
of a registered GI on agricultural or fish ery products is punishable by imprisonment of up to three 
years or a maximum fine of ₩30 million.   
3.207.   A trademark containing geographical indications for wines or spirits originating in any WTO 
Member may not be registered (Trademark Act, Article 7(1)(xiv)). The use of GIs to identify wines 
or spirits that do not originate in the place indica ted is prohibited, even if the true origin is given or 
the GI uses expressions such as "kind", "type", "style", or "imitation".  
                                                
257 Korean Intellectual Property Office (2014).  
258 Korean Intellectual Property Office (2014).  
259 Korean Intellectual Property Office (2015) . WT/TPR/S/346 • Republic of Korea  
 
- 107 - 
 
  Plant variety protection  
 
3.208.   Protection for plant varieties is administered by MAFRA. In line with its "2020 Seed 
Industry Promoti on Plan", the Seed Industry Law (1997) was separated into the Seed Industry 
Law (2013) and the New Varieties of Plants Protection Act (2013) in June 2013; the main changes 
included the expansion of plant variety under the Act and the increase in the penalt y level for the 
infringers of a plant variety right. Breeders' rights are protected for 20 years from the registration 
date (25 years for fruit and forest trees).   
Industrial designs and layout designs of integrated circuits (topographies)  
 
3.209.   Protection unde r the Design Law (1961, last amended in 2016) is for 20  years 
(non-renewable) from the filing date and extends to partial designs and typeface. The Act prohibits 
copying the shape of goods produced by another person. In 2013, the scope of protection was 
expanded to cover computer generated images as screen savers, websites, icons, and graphic user 
interfaces that are applied to digital devices such as smart phones, televisions, and computers.260 
Consequently, it has become possible to acquire a wide range of design rights by simply 
submitting a single application indicating the name of the newly designed product – such as 
"display panel" or "LCD panel" – without the need for plural designations.  
3.210.   The registered owner has the exclusive right to work a registere d design, commercially and 
industrially. The design registration system is based on substantive examination; examinations are 
accelerated for some articles with short life cycles, such as textiles and clothing subject to partial 
examination which does not examine the novelty requirement. The 2014 complete revision to the 
Design Protection Act was meant to align it more closely with international standards; it broadened 
the protection of creative designs by recognizing the need to register component designs and 
system designs.261 Under this complete revision, the design creativity requirements have been 
increased in order to allow examiners to reject applications for designs that mimic well -known 
forms or shapes.262 To maximize convenience for applicants, the new  rules enable them to apply 
for as many as 100 designs in a multiple design application, and the grounds for granting re -
examination requests were expanded. Applicants may now submit documentation for claims for 
exception to lack of novelty at the same tim e as an application for design registration is filed, or a 
letter of opinion on the notice of the ground for refusal is submitted, or a written answer to a 
petition for objection to partially -examined design registration is submitted. A  time limit (one yea r 
from the filing date of the principal design) that applicants must comply with when registering 
related designs was introduced. Furthermore, special cases and procedures for implementing the 
Geneva Act of the Hague Agreement Concerning the International Registration of Industrial 
Designs in Korea were introduced, and the Locarno Agreement Establishing an International 
Classification for Industrial Designs (the Locarno Classification) was put in place effective as of 
1 July 2014. In accordance with the Loc arno Classification, the products subject to partial 
examination (non -substantive examination system (NSES)) are allocated to class 2 for items 
(clothes and fashion accessories), class 5 (fibre products and sheet fabrics (artificial or natural)), 
and class  19 (stationery, office goods, artists' and teaching materials); the number of NSES 
products was reduced from 18 categories (more than 6,200 items (2011)) to 3 categories (about 
2,500 items (2015)).  
3.211.   Layout designs of semi -conductor integrated circuits (to pographies) are protected (under 
the Semiconductor Integrated Circuits Layout Design Act, 1992). The registered owner has the 
exclusive right of commercial use of layout design. Protection is for 10 years from the registration 
date (not exceeding 10 years from initial commercial use or 15 years from creation date). Civil 
remedies include "cease and desist" orders, destruction of offending circuits, damages, and 
royalties. Penal provisions also apply: up to three years imprisonment and/or a fine of up to 
                                                
260 Korean Intellectual Property Office (2014).  
261 However, an application to register such a design is not convertible to an application to cover the 
entire product, or vice versa. If a set of articles fulfils the requirements for registration as a whole, it will be 
allowed registration as a set or system design even though individual articles constituting the set are not 
registered. EIU , "Protection of intellectual property" , 8 September 2015. Viewed at: 
http://country.eiu.com/article.aspx?articleid=1893487173&Country=South 
Korea&topi c=Regulation&subtopic=Intellectual+property+and+e -
commerce&subsubtopic=Protection+of+intellectual+property&oid=1873487171&aid=1 . 
262 Korean Intellectual Property Office (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 108 - 
 
  ₩50 million, for right infringements; and up to one year, or ₩3 million, for falsely marking a 
circuit as registered or obtaining registration fraudulently.  
Trade secrets  
 
3.212.   Protection under the Unfair Competition Prevention and Trade Secrets Protection Act 
(1961) (last amended in 2016) covers information acquired by an "act of improper acquisition" 
(e.g. theft, deception or coercion), or subsequently used or disclosed  secret information; trade 
secrets are defined as technical or business information useful to business activities. The 
2016 amendment alleviated the maintenance requirement for trade secrets from considerable 
efforts to reasonable effort s. Injunctions may be obtained against disclosure, and damages 
awarded for infringement. The infringement of trad e secrets is a criminal offence, with punitive 
measures of prison terms and/or fines. Fines are up to ₩50 million for domestic infringement and 
₩100  million for international infringement. But if the illegally obtained monetary profit exceeds by 
10 times t he maximum amount of the fine, the fine can be equivalent to 2 -10 times the profit.  
3.213.   The July 2013 amendments to the Unfair Competition Prevention and Trade Secret 
Protection Act were aimed at better responding to diverse new types of unfair competition an d, 
inter alia , involved: a broader legal basis for punishing acts involving unauthorized use of another 
person's creative achievements; a legal basis for the Trade Secret Certification Service; 
regulations for a system compensating the reporting of counter feit goods; and, the expansion of 
the legal definition of trade secret possessors from "enterprises" to "individuals".263 To alleviate 
the difficulty of authenticating trade secret ownership during infringement litigation as from 
June 2012, the Trade Secret Protection Centre ( http://www.tradesecret.or.kr ) has provided useful 
information for protecting corporate trade secrets; a total of 93,256 cases had been received by 
the end of December 2015.264 In addition, a st andard management system to provide low -cost 
management with minimal staff requirements for companies struggling to effectively manage their 
trade secrets was developed.  
3.214.   Confidential data submitted to authorities for marketing approval of pharmaceuticals and 
agricultural chemicals are prohibited from public disclosure unless the authorities see a public 
interest need (i.e. health, safety, or environmental protection), particularly with respect to 
pesticides and their ingredients (Agrochemicals Control Act and the Pharmaceuticals Affairs Act). 
Penalties are up to three  years' imprisonment or fines of up to ₩30 million for pharmaceuticals 
and ₩15  million for agri -chemicals. Unfair commercial use of such data is also prohibited.   
3.215.   Officials involved in register ing layout designs for semi -conductor integrated circuits must 
maintain confidentiality (Semiconductor Integrated Circuits Layout Design Act). Imprisonment of 
up to five years or fines of up to ₩50 million apply to those infringing the legislation.  
3.4.6.2   Copyri ght and related rights  
3.216.   According to the authorities, i n order to create a healthy copyright ecosystem in which the 
establishment of a virtuous cycle of creation -distribution -use will help to realize the Creative 
Economy, while allowing for comfortable crea tion, convenient distribution, and free use, the 
Government set its policy goal as the "creation of a copyright ecosystem promoting balance and 
coexistence." The Government decided to pursue three main projects: strengthening the copyright 
protection syste m; supporting the active use of copyrighted works; and, forming the basis for 
further development of the copyright industry.265 In response to changes in the global copyright 
policy environment, as of 2013, Korea's policy vision of "building a Korea with cre ative culture 
through advancement of copyright" was focused on: improving the foundation for use of 
copyrighted works and their distribution environment; advancing the copyright protection system; 
cultivating capacity for voluntary respect for copyright; a nd, enhancing positive perceptions on 
                                                
263 KIPO online information. Viewed at: 
http://kipo.go.kr/kpo/user.tdf?a=user.english.html.HtmlApp&c=91022&catmenu=ek02_06_01 . 
264 This service operates by taking the hash values from trade secret e -documents and combining them 
with autho rized time values from trusted third  parties, thereby creating time stamps. Time stamps are then 
registered with the Korea Institute of Patent Information (KIPI) to prove the existence of original copies of 
trade secrets, and well as their initial dates of  possession. KIPO online information. Viewed at: 
http://kipo.go.kr/kpo/user.tdf?a=user.english.html.HtmlApp&c=91022&catmenu=ek02_06_01 . 
265 Ministry of Cult ure, Sports and Tourism/Korea Copyright Commission (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 109 - 
 
  copyright.266 In 2013 , action was taken to respect the rights of creators and to promote the growth 
and development of diverse culture industries. Strong copyright protection, including crackdown on 
illegal reproductions , was enforced (Section 3.4.6.3) while striving to create an optimal 
environment for fair distribution and utilization of copyrighted works. In 2014, a variety of policies 
under the theme of "cultural prosperity" to protect the rights of the creator while facilitating the 
use of the created works were pursued including: the introduction of an open licence system for 
public copyrighted works; the development of copyright protection technology for the smart device 
environment; the strengthening of monitoring of illegal websites; and, the improvement of 
copyright awareness through education and promotion. A 2011 White Paper on Copyright was 
expected to lay the foundation for building a healthy copyright "ecosystem" bringing Korea a step 
closer to a country with  an advanced and mature copyright system. The Ministry of Culture, Sports 
and Tourism (MCST) and its Korea Copyright Commission and the government -financed Copyright 
Protection Centre, an operational body under the Korea Federation of Copyright Organizatio ns, 
remain in charge of policy formulation and implementation in this area.267  
3.217.   According to the authorities, during the review period, copyright protection was raised to 
advanced countries ' level. Although c opyrights need not be registered to obtain protect ion during 
the author's life plus 70 years (as from 1 July 2013, previously 50 years), registration offers 
advantages.268 The term of protection for the rights of performers and phonogram producers, who 
have neighbouring rights, was also extended to 70 years  after the date of performance or 
publication, effective as of 1 August 2013. A registered author is the presumed genuine author, 
and the work is presumed to have been first published on the date reported on the registration. 
Compulsory/statutory licences (e.g. where the right holder cannot be identified or traced) relating 
to uses of performances, phonograms, broadcasts and databases may be granted under strict 
procedural conditions; 22 licences on literary, cinematographic and musical works were granted 
from 2012 to 2015 compared to 24 from 2008 to 2011. Copyright also applies to "interactive 
transmissions" for authors. Databases, including compilation of data in machine -readable form, 
may be protected.  
3.218.   The Copyright Act was last amended in 2016. Its 2013 amendment, related to permission 
for reproduction for persons with hearing impairments, and permission to freely use copyrighted 
public works produced and announced by the State or local governments without obtaining 
additional approvals, became effective on 1 July 2014.269 Furthermore, the controversial rate 
system which charged copyright fees "per subscriber" (the so -called "unlimited flat rate system") 
was changed to a system that charges fees "per use" (the so -called "usage -based rate system") 
that entere d into force on 1 May 2013.  The 2016 amendment to the Act, effective as of 
23 September 2016, covers, inter alia , the establishment of a Copyright Protection Agency under 
the MCST, the consolidated collection of royalties or remuneration derived from music  
performances using phonograms, and the clarification of the definition of a "phonogram" to include 
a so-called digital phonogram.  
3.219.   RTA/FTA -driven amendments to the Copyright Act continued to bring improvements to 
copyright protection. Intellectual property  rights provisions are included as a separate part in 
virtually all RTA/FTAs (except for the Korea –ASEAN FTA) signed between Korea and other 
countries.270 Among them, the KORUS, the Korea –EU FTA, the Korea –Australia FTA, the 
Korea -Colombia FTA, the Korea –China FTA, and the Korea –Viet Nam FTA stipulate a number of 
TRIPS -Plus provisions that go beyond TRIPS negotiation criteria.  
3.220.   Copyright cases are handled by ordinary courts. Civil remedies against copyright 
infringements (including computer programs) include injunctions, destruction of counterfeit 
products, and damages. Penal provisions of up to five years' imprisonment or a fine of up to 
₩50 million also apply for copyright infringements. With heightened public awareness of copyright 
in recent years, the numb er of disputes ha s also been on the rise. In order to resolve such 
                                                
266 Ministry of Culture, Sports and Tourism/Korea Copyright Commission (2014).  
267 The Copyright Protection Centr e is entrusted with: cracking down on illegal reproductions online and 
offline; the esta blishment of an IT -based enforcement system; and the implementation of the "Clean Project" 
aimed at protect ing copyright and conducting research and public awareness activities. Ministry of Culture, 
Sports and Tourism/Korea Copyright Commission (2014).  
268 Ministry of Culture, Sports and Tourism/Korea Copyright Commission (2014).  
269 Ministry of Culture, Sports and Tourism/Korea Copyright Commission (2014).  
270 Ministry of Culture, Sports and Tourism/Korea Copyright Commission (2014).  WT/TPR/S/346 • Republic of Korea  
 
- 110 - 
 
  disputes in a fair manner, the MCST runs a wide range of dispute resolution systems.271 In 2013, a 
court-connected mediation system was launched to induce parties in a dispute to reach consen sus 
before the case is brought to the court. In 2013, the Seoul Central District Court was the only 
court applying this court -connected mediation system and, as of September 2014, the Seoul 
Southern District Court joined the system. Between 2013 and 2015, a total of 446 cases were 
dealt with and the settlement rates were 40.4% in 2013, 44.9% in 2014 and 28.9% in 2015.   
3.4.6.3   Enforcement  
3.221.   Korea generally provides strong IPR protection and enforcement.272 Between 2007 and 
2013, despite a rise in value terms, its unlic ensed software installation rates were estimated to 
have dropped from 43% (US$549 million) to 38% (US$712 million).273 As of 2014, the piracy rates 
for music, films, TV programmes, entertainment software (games) and books were 31.1%, 24.1%, 
10%, 13.9%, and 6 .8%, respectivel y. At the time of the previous R eview, Korea's counterfeit 
market was consisted m ainly of auto parts, medicines , luxury goods, and fake banknotes; it was 
estimated to be worth US$14.2 billion, including auto parts and domestically produced "super 
fakes". No recent appraisal of the counterfeit market was available from the authorities.  
3.222.   Most IPR prosecutions, with the exception of trademarks, require a complaint from the 
right holder. KIPO can initiate investigations of unfair competition, su ch as the manufacture, sale, 
import or export of counterfeit goods (Unfair Competition Prevention and Trade Secrets Protection 
Act). KIPO reinforced investigations into counterfeit goods that greatly impact people's lives, such 
as large -scale illegal manuf acturing and the distribution of counterfeits related to health and 
safety, thereby eradicating their distribution channels. Since 2006, KIPO has implemented a 
reward system to encourage the reporting of counterfeit goods and their distribution.274 By 2015, 
there had been 1,294 reported cases with a total of ₩1.9 billion awarded; the seized counterfeit 
goods were valued at ₩3.15 trillion when matched to the retail prices of the genuine articles. 
Between 2011 and 2015, the number of arrests increased 2.7 -fold and the number of confiscated 
goods rose 42  fold. Between 2011 and 2015, the Special Judicial Police Force for Trademark Rights 
arrested 1,625 individuals producing and/or selling counterfeit goods (including clothes, shoes, 
health foods, and medicines), a nd a total of 3,294,412 counterfeit items were seized. Through its 
Online Counterfeit Products Monitoring System action was taken to suspend sales by illegal selling 
sites, or close down the sites entirely, and online sellers of counterfeit goods were arre sted.  
3.223.   Customs is authorized to investigate, ex officio,  IPR infringements concerning imports and 
exports. It can initiate investigations, including of criminal activity, and will suspend release of 
counterfeit goods that infringe patent, trademark, design , plant variety protection, or copyright 
rights (Customs Act, Foreign Trade Act, and Customs Clearance Regulation of Counterfeit Goods); 
the border protection of patent and design rights was initiated as of 1 July 2013. When goods 
suspected of infringing I PRs are detected in the course of the import/export process, the KCS 
electronically informs the IPR holders who in return can register their assessment of the case at a 
customs office online; between 2012 and 2015, there were 6,330 cases of IPR infringemen t 
appraised through this system. Right holders may request Customs to suspend the release of 
suspected counterfeit goods, on payment of collateral of 120% of the dutiable value of the goods. 
Suspension is for ten days, during which time the applicant must initiate legal action. The KCS 
withholds clearance of goods suspected of violating intellectual property rights; clearance 
suspensions fell from cases worth US$729,000 in 2011 to cases worth US$571,000 in 2015. In 
cooperation with Japanese and Chinese cust oms authorities, the KCS has implemented the Fake 
                                                
271 Ministry of Culture, Sport s and Tourism/Korea Copyright Commission (2014).  
272 In 2015 , Korea ranked 8th in Asia and the Pacific (out of 20 countries) and 38th in the world (out of 
129 countries) on the International Property Rights Index which , since 2007 , has serve d as a barometer for the 
status of property rights across the world and consists of three core components: the legal and political 
environment; the physical property rights; and, the intellectual property rights. Online information. Viewed at: 
http://internationalpropertyrightsindex.org/country?s=Korea  and 
http://internationalpropertyrightsindex.org/about . Korea was removed for the fi rst time from the USTR's 
Special 301 Watch List in 2009 and never inserted again . WTO document WT/TPR/S/268/Rev.1, 
8 November  2012.  
273 In 2013 , Korea was estimated to rank 19th (after Thailand and Australia) out of the top 20  economies 
in terms of commercia l value of unlicensed PC software. Business Software Alliance (2014).  
274 KIPO online information. Viewed at: 
http://kipo.go.kr/kpo/user.tdf?a=user.english.h tml.HtmlApp&c=91022&catmenu=ek02_06_01 . WT/TPR/S/346 • Republic of Korea  
 
- 111 - 
 
  Zero Project for exchanging information on counterfeit activities from 2007 to 2011 and its 
operation is to resume in 2016.  
3.224.   In 2014 and 2015, KCS border seizures related to counterfeit items and items that  violated 
international intellectual property rights were estimated at ₩516.2 billion and ₩462.4 billion, 
respectively.275 At the time of the previous Trade Policy Review, most seizures related to 
trademark infringement and fake goods included bags, home app liances, Viagra medicine, and 
watches, as well as labels and moulds bearing forged world -renowned trademarks; the vast 
majority of these seiz ures originated in China where Korean producers of counterfeit items had 
reportedly relocated.276 No similar informat ion for the current review period was available from the 
authorities.  
3.225.   Following the recently concluded RTA/FTAs with major trading partners, such as China and 
Viet Nam, a comprehensive policy to protect Korean brands (K -brands) in regions where the 
distrib ution of counterfeit Korean products is continuously increasing was established in 2014.277 
Its main objectives are as follows: building a system for responding to foreign brokers of Korean 
trademarks; launching a support centre for crackdowns on imported co unterfeit goods jointly 
engaging industries in recognizing and cracking down on counterfeits; and, enhancing international 
border measures with foreign customs offices. In early 2016, Korea was to join forces with major 
trading partners (United States, the  EU, Japan) to crack down on the proliferation of counterfeit 
Korean products by sharing information on counterfeits of K -brand names in global circulation, and 
if necessary taking joint action to keep those fake products from crossing borders.278 In an effo rt 
to enhance the creation and protection of IPRs owned by Korean industries and put them to use in 
foreign markets, as of 2015, KIPO operated IP Desks in 11 cities: Beijing, Shanghai, Qingdao, 
Shenyang, and Guangzhou (China); Bangkok (Thailand); H o Chi Mi nh City (Viet Nam); 
Los Angeles and New York ( United States); Frankfurt (Germany); and, Tokyo (Japan). During the 
review period, Korea (e.g. KIPO) continued to benefit from and actively participate in several 
international cooperation projects with WIPO, APEC, and leading IPR protection partners (e.g.  the 
EU, Japan, and the United  States).279  
3.226.   The MCST may collect, delete or destroy illegally acquired computer programs, and instruct 
internet service providers to reject, suspend or limit pirated products and services. In an effort to 
create a "copyright ecosystem of balance and shared prosperity" through the establishment of an 
airtight copyright protection network, in 2013, the Government expanded investigation into 
violators of the Copyright Act, while reinf orcing online monitoring in vulnerable hours such as night 
hours and public holidays by expanding the number of online monitoring staff.280 Action was taken 
in the form of: expanded operation of the Digital Copyright Evidence Collection & Analysis 
Investigat ion Support System281; administrative measures against copyright infringement282; 
creation of an environment for fair use of software copyright involving inspection activities against 
illegal reproduction of software among government and public agencies and SM Es283; special 
investigation into new types of copyright infringements using a torrent program, an online P2P 
                                                
275 Yonhap News A gency , "Illegal trade cases top 9 tln won in 2014: report" , 17 September  2015. 
Viewed at: http://english .yonhapnews.co.kr/search1/2603000000.html?cid=AEN20150917001300320 . 
276 WTO document WT/TPR/S/268/Rev.1, 8 November 2012.  
277 Korean Intellectual Property Office (2015).  
278 Knockoff Korean goods confiscated by Hong Kong, China customs increased from US$110,000  in 
2014 to US$1.44 million in 2015; in 2015, ₩500 million worth of Korean cosmetic counterfeits failed to pass 
customs inspections in Thailand. Yonhap News A gency , "S. Korea to join forces with big trading partners to 
crackdown on counterfeits" , 24 February 2016. Viewed at: 
http://english.yonhapnews.co.kr/search1/2603000000.html?cid=AEN20160224009700320 . 
279 For more information on the latest international cooperation activities, see Korean Intellectual 
Property Office (2015); and, Ministry of Culture, Sports and Tourism/Korea Copyright Commission (2014) . 
280 Ministry of Culture, Sports and Tourism/Korea Copyright Commission (2014).  
281 The numbers of digital copyright forensic investigation support cases have st eadily increased from 
94 cases in 2010 to 291 cases in 2011, 323 cases in 2012 and 372 cases in 2013.  
282 The MCST issued 85,085 recommendations in 2010, followed by 107,724, 250,039, and 170,867 in 
2011, 2012, and 2013, respectively.  
283 The rates of illegal  software production show steady downwards trends with 0.51% in 2011, 0.24% 
in 2012, and 0.12% in 2013.  WT/TPR/S/346 • Republic of Korea  
 
- 112 - 
 
  (peer -to-peer) file transmission protocol, and torrent sites, along with webhards (see footnote); 
and, enhanced response to online/offline copyright  infringements.284  
3.227.   In 2013, the Standing Inspection Teams (SITs) under the MCST were incorporated into a 
Copyright Special Judicial Police (CSJP) that investigates counterfeit computer software, sound 
recordings, and video movies, including through online a ctivities. Its human resources increased 
and are assigned to regional offices in major cities (Seoul, Busan, Daejeon, Gwangju and 
Daegu).285 Intensive crackdowns on key distribution bases of illegal reproductions, such as the 
Yongsan Electronics Market, and crackdowns on illegally copied publications (see below) in campus 
areas ahead of new semesters, were conducted. In addition, the CSJP visited 2,401 SMEs to 
promote the use of authentic software and prevent illegal software reproduction activities. The 
same  year it performed searches and seizures of 11 server locations for 10 major torrent sites 
(peer -to-peer file sharing used to distribute data over the Internet) and 15 hosting and domain 
registration companies. As a result, 12 torrent site operators and 41  persons who uploaded more 
than 1,000  seed files were prosecuted. Overall, the number of cases of copyright infringers sent to 
the prosecution by the CSJP significantly rose from 11 persons in 2008 to 312 persons in 2009, 
539 persons in 2010, 1,115 persons  in 2011, 1,803 persons in 2012, 1,192 persons in 2013, 
2,136  persons in 2014, and 1,091 persons in 2015.  
3.228.   Under the Publishing Industry Promotion Act, the MCST has administrative authority to 
inspect business establishments, and to seize and order disposa l of illegally copied publications. 
Relatively small fines, of up to ₩3 million, may be levied for refusal to obey such orders. Copyright 
enforcement activities for illegally copied publications are carried out mainly by the MCST's 
Copyright Protection Cen tre (Section 3.4.6.2). Cases of seizure of illegally copied publications 
online increased from 22,466 in 2011 to 39,033 in 2015, while those of publications offline rose 
from 489 in 2011 to 510 in 2015.  
3.229.   During the review period, both KIPO and the MCST, in  collaboration with the Korea 
Customs Service, local governments and non -governmental organizations (NGOs), have 
concentrated on education and public awareness programmes on the importance of copyright, 
urged consumers to buy genuine goods, and implemented  a wide range of policy measures to alert 
consumers to the safety issues surrounding counterfeits and trade secret leakage, as well as to 
nurture a culture that is respectful of IPRs.286 The public awareness initiatives have been 
implemented in the form of a  range of campaigns, inter alia , via various media channels 
(e.g. televised advertisements, social media), portal websites, and participatory contests. A 
campaign named "Counterfeits OUT, Originals IN" was launched in 2014. In 2016, the MCST 
introduced a s pecialized mark called "Ban -d-C" to be used for public awareness on copyright 
protection; the mark is to be exploited by various media.  
3.230.   To improve criminal prosecutions, an IP Right Violation Crimes Investigation Headquarters 
is in place in the Supreme Pu blic Prosecutor's Office, as well as nationwide crackdown committees. 
Between 2011 and 2014, trial requests concerning industrial property issues dropped gradually 
and totalled 60,421 cases; most cases continued to involve patents (58.2%) and trademarks 
(35.2%) and were mostly requested by Korean holders (55.1%).287 Between 2011 and 2015, there 
were 5,283 cases (mostly patent -related) filed at the Patent Court, an appellate -level court, of 
which 515 were pending (2015).288 At the time of the previous Trade Policy Review, it seemed that 
sentences for IP infringements remained lower than international norms, and in particular 
compared with other countries in Asia and Europe.  
                                                
284 In 2013 , online infringement cases were mostly related to cinematographic works (86.4% of cases) 
and comics (67.6% of articles) , whereas offline cases  largely involved musical works (41.3% of cases and 
98.5% of articles). A "webhard " is a cyber -locker or a cloud -like service where only the users with specific IDs 
and passwords can upload or download contents. Ministry of Culture, Sports and Tourism/Kore a Copyright 
Commission (2014).  
285 Ministry of Culture, Sports and Tourism/Korea Copyright Commission (2014).  
286 Ministry of Culture, Sports and Tourism/Korea Copyright Commission (2014); Korean Intellectual 
Property Office (2015); and, KIPO online informatio n. Viewed at: 
http://kipo.go.kr/kpo/user.tdf?a=user.english.html.HtmlApp&c=91022&catmenu=ek02_06_01 . 
287 KIPO online statistics. Viewed at: 
http://www.kipo.go.kr/kpo/user.tdf;jsessionid=9863ca6b30d58217d03a1a7f4297a1f88b 94ce46e1df.e34RahyT
bxmRb40LaxyPahaRaNmKe0?a=user.english.html.HtmlApp&c=97000&catmenu=ek07_03_01 .  
288 Patent Court online statistics. Viewed at: 
http://patent.scourt.go.kr/p atent_e/judicial/judicial_02/index.html . WT/TPR/S/346 • Republic of Korea  
 
- 113 - 
 
  4  TRADE POLICIES BY SE CTOR  
4.1  Introduction  
4.1.  In 2015, the Republic of Korea replaced its import quota regime on rice with a tariff quota 
system, and abolished its rice export quota regime. Other agricultural policies have remained 
largely unchanged since the previous Review in 2012. Korea is a land -scarce country with a high 
population density, and i s a net food importer. In 2015, agriculture (including forestry and 
fisheries) contributed to 2.3% of GDP and accounted for 5.2% of total employment. Border 
protection continued to be the main instrument supporting domestic prices, with tariffs peaking at 
887.4%. The average applied MFN tariff protection for agricultural goods reached 60% in 2016, up 
from 55% in 2012, and is more than nine times the average of non -agricultural goods (6.6%). 
Tariff quotas are administered by state trading arrangements and in dustrial associations. Domestic 
support continues to affect agricultural production and trade, and Korean consumers had to pay 
much higher prices than the world levels (1.9 times).  
4.2.  Korea remains a world leading fish producer and consumer. Fish production is not expected 
to increase due mainly to reductions in fish resources in adjacent waters and constraints in its 
bilateral and multilateral fishing accords. Border protection measures mainly take the form of 
tariffs and adjustment tariffs, while domestic s upport for fishing has been falling. The Government 
introduced more severe sanctions in 2014 and 2015 to fight against illegal, unreported and 
unregulated fishing.  
4.3.  The energy sector has not seen any significant reform since 2012. Korea is an 
energy -intens ive country, with per capita energy consumption three times the world average. 
Industry remains the largest consumer of energy. Korea relies heavily on imported energy, and 
energy imports accounted for one third of the import bill. To reduce energy intensi ty, Korea's 
energy policy was targeted at energy efficiency, security, and being environmental friendly. To 
achieve these objectives, various measures including financial and technical support, as well as tax 
credits, are applied. State -owned companies con tinue to play a major role, and prices are often 
regulated (for natural gas and electricity). Agricultural consumers benefit from lower energy 
prices, reflecting cross -subsidies between consumers.  
4.4.  The share of manufacturing in GDP fell, while its share in employment increased slightly. The 
sector is heavily export -oriented, and remains a world leader in steel, automobiles, shipbuilding, 
and ICT, among others. Manufacturing activities are dominated by large conglomerates, while 
labour productivity of SMEs is  less than one third of that of large firms. Several tax and non -tax 
incentives continue to be used to facilitate the development of SMEs, while border measures are 
confined to tariffs, adjustment duties, and autonomous tariff quotas. The simple average ap plied 
MFN tariff rate was 11.3% (ISIC 3) on imports of manufacturing products, and the rate was 6.3% 
on manufacturing excluding food processing products; both are much lower than the rates for 
agricultural products. Sector -specific supports include those t o upgrade the steel industry, and the 
financing arrangement of the shipbuilding industry.  
4.5.  Whereas the growth rate of the manufacturing sector slowed during the review period, that of 
the services sector remained rather stable. The share of services to GDP also remained unchanged 
(59%). However, labour productivity of the services sector is only half that of the manufacturing 
sector, reflecting policies favouring the manufacturing sector. Foreign equity restrictions apply to 
several services sectors, notably  facilities -based basic telecommunications, air transport and 
maritime services. Korea has not revised its GATS commitments, while commitments beyond GATS 
were undertaken in the context of some RTAs. The Government has been encouraging banks, 
which had a t raditionally close relationship with large conglomerates and their subsidiaries, to shift 
lending to consumers and SMEs, and to invest overseas. The insurance sector, already large, 
continued to grow, particularly in retirement saving products reflecting d emographic ag eing 
expectations. None of the major players in both the fixed -line and mobile phone markets are state 
owned. Restrictions are applied on the access of large retailers (super supermarkets) to traditional 
markets.  WT/TPR/S/346 • Republic of Korea  
 
- 114 - 
 
  4.2  Agriculture and livestock  
4.2.1   Main features  
4.6.  The agriculture sector (including forestry and fisheries) registered positive growth in 2013 
(3.1%) and 2014 (3.6%), respectively, before it declined in 2015 ( -1.5%) (Table 1.2). Agriculture 
contributed to 2.3% of GDP in 2015 (down from 2.5% in  2011) and accounted for 5.2% of 
employment (down from  6.4% in 2011). Korea is a land -scarce country with a high population 
density. Farmland continued to decline, from 1.73 million hectares in 2012 to 1.68 million hectares 
in 2015. More than half of the fa rmland (about 54%) is in rice paddies.1 Most farms are small 
family farms: by 1 December 2014, there were 1,121 thousand farm households (a drop of 1.9% 
from 2013), of which 65% farm on an agricultural area of under 1 hectare.2 
4.7.  Korea is a net agro -food imp orter, with the share of agro -food imports in total imports 
around 5%, while that of exports is less than 1%. Korea maintains a trade deficit in most 
agricultural products. The difference between the world market price and the price paid to farmers 
is part icularly high for pig meat, milk, red pepper, and rice (Table 4.1).  
Table 4.1 Output of some major agricultural products, 2011 -15 
(₩ billion)  
 2011  2012  2013  2014  2015  
Total value of production (at farm gate)  41,358  44,300  44,609  44,919  44,421  
 Of which: share of MPS (market price support) 
commodities (%)  58.8 57.6 61.3 63.0 67.1 
Total value of consumption (at farm gate)  59,380  57,717 52,449  54,040  52,414  
Consumer NPC (nominal protection coefficient)a 
Barley 1.18 1.12 1.22 1.43 1.39 
Rice 2.09 2.38 2.49 2.29 1.93 
Soybeans  1.80 1.64 1.79 1.46 1.40 
Milk 1.77 2.14 1.98 2.08 2.56 
Beef and veal  1.45 1.45 1.48 1.47 1.46 
Pig meat  2.77 2.09 2.02 1.99 2.59 
Poultry meat  1.97 1.67 1.53 1.36 1.37 
Eggs  1.14 1.03 1.33 1.45 1.57 
Chinese cabbage  1.27 1.27 1.27 1.27 1.27 
Garlic  3.69 1.97 1.70 1.71 1.08 
Red pepper  5.03 4.08 3.73 2.87 2.32 
a Consumer NPC (nominal protection coefficient) is the ratio between the average price paid by 
consumers at farm gate, and the border price measured at farm gate.  
Source:  OECD Statistics. Viewed at: http://stats.oecd.org . 
4.2.2   Policy developments  
4.8.  The OECD considers that Korea has gradually reduced its support to agriculture, especially in 
the last decade, but very modest progress has been made towards more market -oriented policies.3 
Its support levels remain much higher than the OECD average (Section 4.2.2.2). The authori ties 
disagree, and pointed out that the market has been opened and import s have increased 
substantially in the agriculture sector under many RTAs.  
4.9.  The agriculture sector is regulated under the Framework Act on Agriculture, Rural Community 
and Food Industr y, which in 2015 was replaced by the Framework Act on Agriculture, Fisheries, 
Rural Community and Food Industry.  Based on the Framework Act, in 2013, a five -year (2013 -17) 
implementation plan – Agriculture and Rural Community and Food Industry Development Plan – 
                                                
1 KOSIS online information, Agricultural land area. Viewed at: 
http://kosis.kr/eng/statisticsList/statis ticsList_01List.jsp?vwcd=MT_ETITLE&parentId=F#SubCont . 
2 KOSAT online information, Farm Household Economy – Results of the farm and fishery household 
economy survey in 2014 . Viewed at: 
http://kostat.go.kr/portal/eng/pressReleases/2/4/index.board?bmode=read&bSeq=&aSeq=335513&pageNo=1
&rowNum=10&navCount=10&currPg=&sTarget=title&sTxt =. 
3 OECD (2016 b).  WT/TPR/S/346 • Republic of Korea  
 
- 115 - 
 
  was announced.4 It aims at increasing the volume -based self -sufficiency ratio of grains (including 
animal feed) to 30% in 2017, from 23.1% in 2013, via measures such as expanding the 
agriculture production infrastructure, and encouraging economies o f scale for rice production, 
distribution and consumption.  
4.10.   The five -year Plan emphasized adding value to agricultural products in an innovative way, 
and creating jobs by converging agriculture with other industries such as manufacturing, 
processing, and i nformation and communication technology. Further, in January 2016, MAFRA 
presented "Measures to boost rural economy and export by transferring agriculture into the 
6th industry", to link agricultural manufacturing, distribution, and export, with tourism. M easures 
proposed include: expanding smart farms5, revitalizing food manufacturing/processing and the 
food industry, enhancing distribution efficiency and expanding export, and inviting tourists into 
rural areas.6 The authorities indicated that support meas ures include export subsidies to some 
agricultural products under Article 9.4 of the Agreement on Agriculture, joint marketing services, 
and promoting services for local products.  
4.11.   A number of policy changes were introduced during the review period; in par ticular, Korea 
terminated the import -quota -only regime for rice from 1 January 2015, and replaced it with an 
import tariff of 513%, and reserved the right to use the special agricultural safeguard on imports 
of rice while maintaining the 408,700 MT quota w ith an in -quota tariff of 5%.7 
4.12.   Following the amendment of the Law on the Traceability of Cattle and Beef, the Government 
started to implement a traceability system for pork in December 2014, covering breeding, 
butchering, packaging, and sales. A traceabili ty system for cattle and beef has been implemented 
since 2009; the traceability of pork is to enable the authorities to provide customers with 
information about the location of domestic pork breeders, dates of slaughter, and slaughter 
inspection results.  
4.13.   By 2016, the product coverage of the agriculture insurance scheme increased to 66 items 
(50 crops and 16 types of livestock). The Government participate s financially in this scheme to 
cover part of the losses caused by natural perils. A pilot project of th e agricultural revenue 
insurance scheme was introduced for onions, soybeans and grapes in January 2015 for a period up 
to December  2017. For farmers farming these products, if their revenue falls below the average 
revenue for the most recent five years, th e Government covers part of the revenue decrease.  
4.14.   From 2014, the Government began to monitor the status and performance of farmers 
through a Farm Registration Programme, an integrated database system containing data on each 
farm such as area of farmland, sales earnings and support payments. This is to avoid fraud with 
direct payments, and to verify that payments were made to eligible landowners.8  
4.15.   Foreign investment is allowed in the growing of cereal crops and other crops for food, 
except for rice and bar ley growing. Foreign investment is allowed for the farming of animals, 
except farming of beef cattle where a less than 50% foreign equity restriction applies (Table  2.3). 
4.2.2.1   Border measures  
4.16.   Tariffs continue to be the main instrument supporting domestic prices , particularly on rice 
(Section 4.2.3.1). Other border measures include: import licensing, special safeguard measures, 
and export subsidies.  
4.2.2.1.1   Tariffs and tariff quotas  
4.17.   MFN tariffs remain high on agricultural products, with the highest rate applying to mani oc 
(887.4%). Alternative duties and possibly prohibitive out -of-quota rates remai n in place for many 
commodities . The average MFN tariff on agricultural products (WTO definition) reached 60% in 
                                                
4 OECD (2015a).  
5 Smart farm is an automated farm facility where communication devices and environmental 
management software are installed, so that the farm  can be controlled remotely.  
6 MAFRA online information. Viewed at: http://english.mafra.go.kr/main.jsp . 
7 WTO document G/MA/TAR/RS/396, 30 September 2014.  
8 OECD (2015a).  WT/TPR/S/346 • Republic of Korea  
 
- 116 - 
 
  2016, up from 55% in 2012, mainly as a result of the insertion  of 16 tariff lines which are 
out-of-quota rates for rice and rice products at 513% (Section 3.2.3.1). The simple average MFN 
tariff for agricultural products remained much higher than the tariff rate for non -agricultural 
products (6.6%).  
4.18.   As noted in prev ious reviews, Korea continues to apply, from time to time, "flexible" tariffs, 
such as adjustment duties, seasonal tariffs, autonomous tariff quotas, "usage" tariffs, and 
safeguard and special safeguard duties (Section 3.2.3.3).9 The Ministry of Strategy a nd Finance 
(MOSF) sets "adjustment tariffs" annually. In December  2014, the MOSF announced an updated 
list of adjustment tariffs and tariff quotas for certain agricultural, forestry and fishery products, 
effective from 2015 (Section 3.2.3.3, Table A3.3). D uring the review period, no seasonal tariffs 
were applied on an MFN basis; rather, they were applied under preferential tariff treatment under 
some RTAs (Section 3.2.3.3). The Government may also apply "usage" tariff rates on imported 
inputs in activities such as animal feeding (Section 3.2.3.6).  
4.19.   Korea applied agricultural tariff quotas (TQs) on 227 ten -digit tariff lines in 2016 
(Section  3.2.4.1). In -quota tariffs range from zero to 50%, while out -of-quota rates range from 
9% to 887.4% (for manioc). The a verage fill ratio of TQs was 59.5% in 2015, down from 66.2% in 
2011 (Table A3.5). Country -specific quotas on rice were replaced by a global quota on an MFN 
basis (Section 3.2.6.2). Currently , all tariff quotas are global quotas. Quotas are valid for the 
whole calendar year, and import permits (valid for either 30 days or 90 days) are required. Tariff 
quotas are utilized, administered, or allocated by state -trading entities or industry associations. 
Allocation of tariff quotas to importers may be based on: a  first come, first served method; 
auctioning; allocation to designated agencies; or a combination thereof (Section 3.2.4.1).  
4.20.   Korea also applies autonomous tariff quotas aiming at, inter alia , helping to stabilize prices 
through increased supply, or increa sing the competitiveness of the domestic agriculture and 
livestock industries, which are facing pressures from Korea's RTA partners (Section 3.2.4.2, 
Table  A3.6).10 In 2016, the autonomous tariff quotas covered 25 six -digit tariff items for 
WTO agricultural  products. In -quota tariff rates ranged from zero to 10%, whereas out -of-quota 
rates ranged from 1 -30% (Section 3.2.4.2).  
4.2.2.1.2   State trading, import quotas and tariffication, import licensing, and SSGs  
4.21.   Korea notified two state -trading arrangements involving: th e Ministry of Agriculture, Food 
and Rural Affairs (MAFRA) for the importation of rice within the tariff quota, and the Agro -Fisheries 
& Food Trade Corporation (AT) for the importation of a number of agricultural products (genus 
Capsicum , garlic, onions, se same seeds, soya beans, green beans, small red beans, buckwheat, 
and ginger. Private companies are allowed to import part of the quotas through open bidding) 
(Section  3.2.7).11 
4.22.   Import quotas on rice were terminated in 2014, and were replaced by a tariff -based 
system.12 On 18 September 2014, MAFRA issued a press release, announcing the liberalization of 
its rice market through tariffication. From 1 January 2015, Korea has imposed a tariff of 513% on 
imports of rice above the quota of 408,700 MT, while the in -quota tariff rate is 5%.13 At the same 
time, the Government planned to ban the mixing of domestic and imported rice for sales and 
distribution. MAFRA still has the exclusive right to import rice within the quota.  
4.23.   Import licensing procedures are maintained on , inter alia , agricultural fertilizers, crop seeds, 
animals, and animal products, and foods and food additives (Section 3.2.6.1).  
                                                
9 See also WTO documents WT/TPR/S/204/Rev.1, 4 December 2008; WT/TPR/S/268/Rev.1, 
8 November 2012; WT/TPR/S/S/137, 18 August 2 004; WT/TPR/S/73, 28 August 2000; and WT/TPR/S/19, 
28 August 1996.  
10 USDA (2016).  
11 WTO document s G/STR/N/15/KOR, 17 October 2014 ; and G/STR/N/16/KOR, 14 July 2016 .  
12 Before 2015, MAFRA had the exclusive right to import rice; according to the authorities,  this was to 
avoid domestic market disturbances caused by a sudden influx of imported rice. Country -specific quotas had 
previously been given to Australia, China, the United States, and Thailand. Domestic sale prices of rice for 
households were determined by open auction, while domestic sale prices of rice for processing were 
determined by MAFRA based on import prices, management costs, domestic consumer prices, consumer 
preference and the level of demand of processing companies.  
13 WTO document G/MA/TAR/RS/ 396, 30 Sept ember  2014.  WT/TPR/S/346 • Republic of Korea  
 
- 117 - 
 
  4.24.   Price-based and volume -based special safeguard (SSGs) measures were imposed on certain 
items (ginseng, rice, cereal flour and other worked grain) during the review period 
(Section  3.2.8.2)  
4.2.2.1.3   Export restrictions, and export subsidy programmes  
4.25.   Korea abolished its export restriction on rice in March 2015, as rice exports were too low 
(Section 3.3.2.2). The authorities stated that cur rently Korea has no export restriction on its 
agricultural products.  
4.26.   The last notification from Korea on its export subsidy programme for certain farm products 
was in 2010, for the years from 2005 to 2008. In 2008, export subsidies totalled ₩32.68 billion, 
and covered fruits (₩10.85 billion), flowers (₩5.39 billion), vegeta bles (₩11.02  billion), kimchi 
(₩3.03  billion), ginseng (₩0.92 billion), livestock (₩1.26 billion), grain and processed food 
(₩0.08 billion), and traditional liquor (₩0.13 billion).14 These subsidies were used to reduce 
exporters' marketing costs, and are ex empt from the WTO reduction commitments.  
4.2.2.2   Domestic support  
4.27.   In 2016, budgetary outlays for agriculture were ₩19.4 trillion, or 5% of total spending 
(₩19.3 trillion in 2015).15 
4.2.2.2.1   OECD indicators  
4.28.   The OECD has been publishing reviews of agricultural policies in K orea, other OECD 
countries, and some other economies for several years (Section 3.4.2.2). In these publications, 
the value of transfers to agricultural producers is measured using the producer support estimate 
(PSE) and associated indicators. The methodolo gy for calculating these indicators is different from 
that used to calculate the aggregate measure of support (AMS), and the two sets of data are 
neither compatible nor comparable. The total PSE is: "The annual monetary value of gross 
transfers from consum ers and taxpayers to agricultural producers, measured at the farm gate 
level, arising from policy measures that support agriculture, regardless of their nature, objectives 
or impacts on farm production or income. It includes market price support, budgetary  payments 
and budget revenue foregone, i.e. gross transfers from consumers and taxpayers to agricultural 
producers arising from policy measures based on: current output, input use, area planted/animal 
numbers/receipts/incomes (current, non -current), and no n-commodity criteria."16 Thus, the PSE 
includes estimates for the value of transfers provided by market access measures, such as tariffs 
and tariff quotas, as well as input subsidies, direct payments to producers that are coupled to 
prices or production, an d direct payments decoupled from prices and production.17  
4.29.   According to the OECD, support to agriculture remains high in Korea, and is mostly financed 
by transfers from consumers. Korea's total support estimate (TSE) – average annual total 
agricultural supp ort net of specific sectoral budget receipts – was equivalent to 1.8% of GDP, 
much higher than the OECD average (0.7%).18 This percentage, however, declined from 1.95% in 
2011 to 1.66% in 2015 (Table 4.2). The percentage of producer support estimate (PSE) t o gross 
farm receipts is still almost three times higher than the OECD average19, although it declined from 
53.3% in 2011 to 48.9% in 2015. About 90% of the producer support remains in the potentially 
most production and trade distorting forms: the level an d development of market price support 
(MPS) reflect border protection on a number of commodities, of which rice is the major 
contributor. Transfers to specific commodities (as defined by the OECD single commodity transfers 
(SCT)) ranged from 3.05% (eggs in  2012) to 90.8% (soybeans in 2011) of the commodity gross 
farm receipts.  
                                                
14 WTO document G/AG/N/KOR/42, 4 October 2010.  
15 MOSF online information. Viewed at: http://english.mosf.go.kr/ . 
16 OECD (2016b).  
17 OECD (2014a), p. 49.  
18 OECD (2015a).  
19 OECD (2016b).  WT/TPR/S/346 • Republic of Korea  
 
- 118 - 
 
  Table 4.2 Agricultural support by commodity, 2011 -15 
(₩ billion)  
 2011  2012  2013  2014  2015  
Total support estimate (TSE)  26,068  26,261  26,884  25,874  25,943  
Percentage of TSE to GDP (%)  1.95 1.9 1.88 1.74 1.66 
Total PSE  23,261  22,984  23,523  22,930  22,760  
 Support based on commodity output – MPS 20,940  21,526 21,950  21,313  20,671  
 Direct payment  2,321  1,458  1,573  1,617  2,088  
Percentage PSE to gross farm receipts (%)  53.3 50.2 50.9 49.3 48.9 
General services support estimate (GSSE)  2,761  3,229  3,314  2,903  3,144  
Consumer support estimate (CSE)  -29,632  -27,678 -24,944  -24,304  -23,557  
Total producer SCT (₩ billion)  21,745  21,527  22,024  21,367  .. 
Share of producer SCT in total PSE (%)  93.4 93.6 93.3 92.6 .. 
Percentage SCT (%)       
Barley  49.3 47.7 55.3 68.4 68.5 
Rice 56.5 58.0 59.9 56.3 49.5 
Soybeans  90.8 87.7 88.1 78.6 81.9 
Milk 43.8 53.3 49.6 52.0 61.0 
Beef and veal  31.2 31.1 32.7 32.2 31.8 
Pig meat  63.9 52.3 50.7 49.9 61.5 
Poultry meat  49.5 40.3 34.7 26.8 27.4 
Eggs 12.7 3.04 24.9 31.5 36.4 
Chinese cabbage  21.25  21.25  21.25  21.25  21.25  
Garlic  72.9 49.2 41.5 41.9 7.8 
Red peppe r 80.1 75.5 73.2 65.2 56.9 
.. Not available.  
Source:  OECD Agriculture Statistics. Viewed at: http://stats.oecd.org/BrandedView.aspx?oecd_bv_id=agr -
data-en&doi= data-00737 -en#. 
4.30.   Market price support (MPS), which peaked at ₩22 trillion in 201320, is implemented through 
government purchases and public stockholding schemes, suppo rted by trade barriers 
(Section  4.2.2.1). In the period 2011 -14, Korean agricultural commo dity prices averaged 1.9  times 
world levels (consumer nominal assistance coefficient (NAC)), compared to 1.7 times in 2008 -10, 
and total transfers from consumers to producers amounted to an average of ₩19.3  trillion.  
4.31.   Direct payment programmes have been imp lemented with different objectives, including 
early retirement payment, rice income compensation (Section 4.2.3), promotion of 
environmentally friendly agriculture, maintaining agriculture in less -favoured areas, and rural 
landscape conservation. The share  of direct payment to total PSE fell from about 10% in 2011, to 
about 9% in 2015 (Table 4.3). General services support reached its peak in 2013; in 2015, it 
accounted for 12% of TSE.  
Table 4.3 Direct payments  and general services support, 2011 -15 
(₩ billion)  
 2011  2012  2013  2014  2015  
Direct payment  2,321  1,458  1,573  1,617  2,088  
Share of direct payment to PSE (%)  10 6.3 6.7 7.1 9.2 
 Based on input use  589 552 547 554 683 
 Based on current area planted/anima l 
 numbers/receipt/income, production required  1,080  254 300 264 521 
 Based on non -current area planted/animal numbers/ 
 receipt/income, production not required  653 652 726 798 884 
General services support estimate (GSSE)  2,761  3,229  3,314  2,903  3,144  
 Agricultural knowledge and innovation system  722 756 865 735 799 
 Inspection and control  170 195 196 195 229 
 Development and maintenance of 
 infrastructure  1,433  1,617  1,682  1,689  1,754  
 Marketing and promotion  69 72 65 69 37 
 Cost of public stockhold ing 366 589 505 216 325 
Percentage GSSE (% of TSE)  10.6 12.3 12.3 11.2 12.1 
Source:  OECD Agriculture Statistics. Viewed at: http://stats.oecd.org/BrandedView. aspx?oecd_bv_id=agr -
data-en&doi=data -00737 -en#. 
                                                
20 Market price support (MPS) is net of producer levies and excess feed cost.  WT/TPR/S/346 • Republic of Korea  
 
- 119 - 
 
  4.2.2.2.2   WTO notifications  
4.32.   The last notification made by Korea to the WTO regarding its domestic support to 
agriculture covers the 2011 calendar year (Section 3.4.2, Table A3.7).21 According to this 
notification, trad e-distorting support (Amber Box) occupied about 12% of total domestic support in 
2011, and market price support measures were used less frequently and applied only to barley in 
2011.  
4.33.   In 2011, Green Box support amounted to ₩7.7 trillion (up from ₩6.8 trillion in 2010); 48% 
of this was spent on general services (mostly on infrastructural services), 24% for relief from 
natural disasters, 12.5% for decoupled income support, 6.7% for environmental programmes, 5% 
for structural adjustment assistance through inve stment aids, 2.4% for public stockholding for 
food security purposes, and less than 1% for producer retirement programmes and regional 
assistance programmes. Product -specific support to barley, potatoes, soybeans, red peppers, 
garlic, onions, Welsh onions,  carrots, apples, pears, Korean citrus, sweet persimmons, ginseng 
roots, Chinese cabbage, rice, beef, Daikon, flowering plants, and non -product specific AMS, 
amounted to ₩1.07 trillion.22 All support was  de minimis,  and took the form of market price 
support  for barley, non -exempt direct payments to rice and beef, and other product -specific 
support.  
4.34.   Korea notified its direct support programmes to the WTO Committee on Subsidies and 
Countervailing Measures, a number of which were provided to the agriculture se ctor 
(Section  3.4.2). Its 2015 notification covered the subsidy programmes for the period 2013 -14.23 
Grants or concessional loans were the main forms used (Table 4.4).  
Table 4.4 Subsidies notified, 2013 -14 
(₩ million)  
Items  Type  2013  2014  
Food grain management programme  
Barley  Direct subsidy  n.a. n.a. 
 Loan 10,658  458 
 Benefit of loana  97 3.8 
 Total (direct subsidy + benefit of loan)  97 3.8 
Soybeans  Direct subsidy  34,214  39,270  
 Loan 5,120  6,200  
 Benefit of loana  46.6 51.5 
 Total (direct subsidy + benefit of loan)  34,260.6  39,321.5  
Support for marketing and promotion of agricultural and livestock products  
Exporters of fruits, flowering 
plants, kimchi, vegetables, 
ginseng, and livestock product s Lump sum transfer (partial support for costs in 
sorting, packaging, and transporting)  31,053  31,576  
Support for livestock products  
Calf breeding stabilization 
schedule  Direct payment  999 809 
Quality improvement programme  Direct payment  839 n.a. 
Total   1,838  809 
n.a. Not applicable.  
a Benefit of loan was estimated based on the difference between the loan rate and the market rate.  
Source:  WTO document G/SCM/N/284/KOR, 6 July 2015.  
4.2.3   Key sub -sectors  
4.2.3.1   Rice 
4.35.   Rice production increased slightly during the re view period despite the continuing decrease 
of its area planted (Table 4.5), reflecting an upward trend of production per cultivated area. Rice 
consumption continued to drop, as a result of a changing diet and the high domestic price. The 
authorities disag ree, and consider that rice consumption levels are not related to rice price levels. 
                                                
21 WTO document G/AG/N/KOR/53, 20 January 2015.  
22 WTO document G/AG/N/KOR/53, 20 January 2015.  
23 WTO document G/SCM/N/284/KOR, 6 July 2015.  WT/TPR/S/346 • Republic of Korea  
 
- 120 - 
 
  Korea remains a net rice importing country. Imported rice represented 9.7% of national 
consumption in 2015, up from 7.5% in 2012.   
Table 4.5 Rice production, 2011 -15 
 2011  2012  2013  2014  2015  
Rice area (1,00 ha)  854 849 833 816 799 
Yield (kg/ha)  4,956  4,726  5,085  5,204  5,418  
Production (milled, 1,000 MT)  4,224  4,006  4,230  4,241  4,327  
Source:  USDA (2015), 2015 Rice Productio n Update. Viewed at: 
http://gain.fas.usda.gov/Recent%20GAIN%20Publications/2015%20Rice%20Production%20Upda te
_Seoul_Korea%20 -%20Republic%20of_11 -23-2015.pdf . 
4.36.   Rice remains heavily protected by a combination of border measures and domestic support. 
Direct involvement in rice (and barley) farming remains closed to FDI. Rice is excluded from the 
scope of concessio ns in all RTAs.24 In 2015, its domestic price was 1.93 times world levels 
(consumer NPC), up from 1.7 times in 2010, but in a downward trend since 2000. Rice has been 
one of the most sensitive products, and its import quota regime was replaced by a tariff q uota 
system in 2015 (Sections 3.2.6.2 and 4.2.2). Exports of rice were subject to a quota system until 
March 2015 (Section 4.2.2.1.3).  
4.37.   A public stockholding scheme for rice is maintained, which is a purchase and release 
mechanism to deal with emergency sit uations such as grain shortages and natural disasters. 
MAFRA is responsible for public stockholding for rice. The Government purchases domestic paddy 
rice during harvest season (October -December) and sells it during non -harvest periods, both at 
the prevail ing market prices. Purchase under this scheme ranged between 8.3% and 9.1% of 
domestic production in 2012 -15.  
4.38.   The rice income compensation scheme, introduced in 2005, includes both fixed and variable 
payments. Fixed payment for paddy fields was increased from ₩800,000 (US$727) per hectare on 
average in 2013, to ₩900,000 (US$818) in 2014, and then to ₩1 million (US$909) in 2015. 
Variable payment is determined according to the difference between a target price and each year's 
post-harvest price. If the post -harvest price is lower than the target price, farmers receive 85% of 
the difference, after deduction of the fixed payment. The target price is changed every five years 
and it is ₩188,000 (US$171) per 80 kilograms of rice from 2013 to 2017, up from 
₩170,083  (US$155) before 2012. According to the OECD, the variable payment was not triggered 
for 2011 and 2012, but was paid in 2014 due to the decrease of the post -harvest price of rice and 
the increase of the target price in 2013.25 The rate of the variable payme nt was ₩4,226  (US$4) 
per 80 kilograms, amounting to ₩266,238 (US$242) per hectare. In 2014, combined support 
payment totalled ₩950 billion (compared with ₩617 billion in 2011).   
4.2.3.2   Beef 
4.39.   Consumption of beef continued its upward trend, and imports have been increasing . In 
2014, 91% of beef imports came from Australia and the United States, for which the tariff rates 
are lower than the MFN tariff rates under  the RTAs signed (Table 4.6). Korea also signed an FTA 
with Canada; imports of beef from Canada were suspended tem porarily from February 2015 due to 
a BSE case in Canada but resumed at end -December 2015.  
4.40.   Assistance to beef (percentage SCT) remained at around 32% from 2011 to 2015. The 
domestic price of beef was 1.46 times world levels (consumer NPC)  in 2015, slightly  up from 
1.45 times in 2011. Foreign direct investment of less than 50% of investment assets is permitted 
in cattle -raising and meat wholesale.  
                                                
24 USDA (2014).  
25 OECD (2015a).  WT/TPR/S/346 • Republic of Korea  
 
- 121 - 
 
  Table 4.6 Beef p roduction, supply, and demand, 2014 -16 
(1,000 he ad), (1,000 MT CWE)  
 2014  2015  2016  
Total supply  807 776 785 
Beginning stocks  80 59 21 
Production  335 317 310 
Imports  392 400 454 
Exports  3 5 5 
Total domestic 
consumption  745 750 755 
Ending stocks  59 21 25 
Beef KORUS FTA  Korea –Australia FTA  Korea –Canada FTA  
Content of the FTA  Duty phased out in 
15 years, plus 
agricultural safeguard  Duty phased out in 
15 years, plus 
agricultural safeguard  Duty phased out in 
15 years, plus 
agricultural safeguard  
MFN tariff 2016 (same 
as 2012)  40% 40% 40% 
Applied d uty in 2016  26.6%  32.0%  34.6%  
Source:  USDA (2015), Korea – Republic of, Livestock and Products Annual . Viewed at: 
http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Livestock%20and%20Products%20Annua
l_Seoul_Korea%20 -%20Republic%20of_9 -22-2015.pdf . 
4.2.3.3   Biotech crops26 
4.41.   In Korea, only a limited number of food products are made from biotech ingredients, while 
the bulk of livestock feed is made from biotech and soybean meal. Korea does not commercially 
produce any biotech crops, and does not export any. Korea imports biotech crops and products for 
food, feed and processing (Table 4.7) ; importation is regulated unde r the Living Modified Organism 
(LMO) Act, revised in 2012.  
Table 4.7 Import of LMO soybean and corn, 2011 -15 
(1,000 MT)  
Classification  2011  2012  2013  2014  2015 
Soybean  Food (crushing)  850 897 729 1,021  1,029 
Corn Food  1,025  1,052  918 1,262  1,116  
Feed  5,847  5,779  7,049  8,357  7,935  
Oilseeds  Feed  130 146 147 181 156 
Note:  Statistics are on an import approval basis.  
Source:  Information provided by the Korean authorities.  
4.42.   Biotech crops must undergo a f ood safety assessment and environmental risk assessment 
(Section 3.2.9.2.1). Several agencies are involved in the assessment process. The Rural 
Development Administration (RDA) conducts environmental risk assessment, in consultation with 
the National Insti tute for Ecology (NIE), the National Fisheries Research & Development Institute 
(NFRDI), and the Korea Centres for Disease Control & Prevention (KCDC). The Ministry of Food 
and Drug Safety (MFDS) conducts a safety assessment for food grains containing biot ech 
ingredients.  
4.43.   The development of biotech crops is being led by various government agencies, universities 
and private entities. Research is mainly focused on second - and third -generation traits, such as 
drought and disease resistance, nutrient enrichmen t, transformation techniques, and gene 
expression. In May 2015, the RDA released the results of the first phase for the Next Generation 
Bio-Green 21 Project: with a total investment of ₩271.4 billion (approximately US$236 million), 
the RDA decoded genomes for nine items including pepper and ginseng, and developed 
anthracnose resistant pepper and other products between 2011 and 2014. The RDA is to invest 
another ₩300 billion (US$260  million) by 2020 to commercialize the technology developed by it.  
                                                
26 USDA Forei gn Agricultural Service (2015c).  WT/TPR/S/346 • Republic of Korea  
 
- 122 - 
 
  4.44.   The Science Technology Basic Plan announced by the Ministry of Science, ICT and Future 
Planning (MSIP) in July 2013 is to continue until 2017. In accordance with the Plan, the 
Government is to i nvest ₩9.2 trillion (US$8 billion) in science technology R&D for five years. The 
MSIP designated 30 focused technologies and genetic resource technologies to develop and 
commercialize value -added life science resources.  
4.45.   MAFRA also announced in 2015 its second c omprehensive plan to foster agriculture, food 
industry and science technology, with a focus on developing s mart farms, creating high 
value -added food products, responding to climate change, and commercializing agro -biological 
resources. In 2014, MAFRA plan ned to invest a total of US$893 million for R&D, up by 5.9% from 
2013, to improve competitiveness and create a new future economic growth engine. To achieve 
these targets, MAFRA and the RDA continued to carry out: inter alia , the development of 
technology for the agro -biological resource industry, a golden seed project, genome research, and 
the development of new bio materials. MAFRA and the RDA are also financing a research project to 
obtain a stable supply of food grains with improved productivity and qua lity, and are developing 
biotechnology.  
4.46.   In February 2015, the NIE was designated as the natural environmental risk assessment 
agency. The NIE also carries out consultation review of LMO food, feed and processing to assess 
the impact on the natural ecosyst em, and monitors the contamination of imported LMOs in Korea.  
4.3  Fisheries  
4.3.1   Overview  
4.47.   Korea remains a leading fish producer and consumer in the world. Its seafood production 
increased from 3.1 million metric tons in 2013, to 3.3 million metric tons in 2015. I n 2014, 
production from distant waters increased by 19% from 2013, while production from adjacent 
waters was up 2.7%.27 Reflecting reductions in fish resources in adjacent waters, the enforcement 
of exclusive economic zones by Korea's neighbouring countries , and constraints built into bilateral 
and multilateral fishing accords, fish production in Korea is not expected to increase significantly in 
the future. The Government has been making efforts to boost aquaculture production in the 
shallow sea areas.  
4.48.   Korea is also a major consumer of fish, and annual per capita seafood consumption in Korea 
was 54.7 kg in 2013, much higher than the world average (Table 4.8). Major sources of imports 
include China, the Russian Federation, Viet Nam, and the United States. Ma jor export destinations 
were Japan, China, the United States, and Thailand.  
Table 4.8 Seafood trade data, 2011 -15 
 2011  2012  2013  2014  2015  
Supply       
 Production (1,000 MT)  3,256  3,183  3,135  3,295  3,331  
 Imports (1,000 MT)  4,846  4,829  5,387  5,231  5,504 
 Inventory (1,000 MT)  6.7 7.5 19.4 24.2 24.1 
 Imports ( US$ million)  4,191  3,975  3,895  4,506  4,556 
Demand       
 Domestic consumption (1,000 MT)  3,813  4,024  3,642  .. .. 
 Exports (1,000 MT)  687 708 687 702 651 
 Carry over (1,000 MT)  639 877 1,214  .. .. 
 Exports ( US$ million)  2,308  2,361  2,151  2,067  1,924 
Self-sufficiency ratio  81% 74.8%  76.8%  .. .. 
Per capita consumption (kg/year)  58.1 54.2 54.7 .. .. 
.. Not available.  
Source:  Ministry of Oceans and F isheries (MOF).  
                                                
27 USDA (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 123 - 
 
  4.49.   Fisheries are regulated by the Ministry of Oceans and Fisheries (MOF), created in 2013, 
which is responsible for providing a fully integrated approach to all marine issues.28 The Korea 
Fisheries Resources Agency (FIRA) was established in 20 11, targeting at recovering and managing 
fisheries resources in a more systematic manner. It aims to create productive and healthy oceans 
by restoring and enhancing fisheries resources and the marine ecosystem. Over the 2009 -15 
period, 9,144 hectares of ma rine forest were created and the target of the FIRA is to create 
54,000 hectares of marine forest by 2030.  
4.50.   The FIRA monitors the total allowable catch (TAC) data, which is applied to offshore and 
coastal fishing. It established 392,424 MT as the TAC for 20 15 (down by 5.5% from the previous 
year), covering 11 species: mackerels, Jack mackerels, red snow crabs, snow crabs, purplish 
Washington clams, pen shells, horned turban, blue crabs, squid, sailfin sandfish, and mottled 
skate. 60% of the TAC quotas are al located to fishermen in proportion to the catch in the 
three  most recent years and the gross tonnage of fishing vessels, and the rest on a "first come, 
first served" basis. Quotas are transferable but not tradable.  
4.51.   The number of fishing vessels has been de creasing, reflecting the reduction in fishery 
resources. The Government has continued to downsize the Korean fishing fleet. In 2014, the 
number of fishers, the number of fish farmers, the total number of fishing vessels, and the total 
tonnage of the fleet decreased by 2.8%, 7.3%, 4%, and 3.6%, respectively, from the previous 
year.  
4.52.   Efforts have been made to restore fishery resources by regulating bycatch and 
strengthening TAC. Bycatch, including instalment of bycatch reduction devices, is governed by 
Article 41 of the Fisheries Act, and Article 27 (2) of the Enforcement Ordinance of the same Act. 
Bycatch of TAC -covered species by vessels subject to the TAC system is deducted from allocated 
quotas. The TAC -covered species are required to be landed at designat ed landing points, 
monitored by the FIRA, and relevant vessels must make TAC catch reports.  
4.3.2   Border policy  
4.53.   Fish and fisheries products are subject to tariffs ranging from 0 to 35%, with a simple 
average applied tariff rate of 16.9% in 2016 (Table A3.1) (co mpared to tariffs ranging from 
0-40%, with a simple average applied rate of 17.1% in 2012). Adjustment tariffs ranging from 
22-35% are maintained for seven fish species that are not subject to tariff bindings in the WTO. 
The fishery traceability scheme has  expanded to include more than 30 major species (from 
18 species in 2011).  
4.54.   Foreign investment in coastal and offshore fishing ventures is generally limited to less than 
50%. Permission from local government is required for coastal fishing. There has been n o foreign 
investment in fishing since 2012.  Vessels from China and Japan are allowed to fish in Korea's 
waters, and Korean vessels operate in foreign waters under similar bilateral agreements with 
China, Japan, Kiribati, Papua New Guinea, the Russian Feder ation, Solomon Islands, and Tuvalu. 
Quotas for foreign vessels are renewed annually, in consideration of fish stock developments.  
4.3.3   Domestic support  
4.55.   The Government continued to provide financial support to the fisheries sector, although the 
financial suppor t has been decreasing: from ₩151 billion in 2011, to ₩82 billion  in 2014. Korea 
notified that support was given in the form of grants or low interest loans (Table 4.9), in 
accordance with the Fisheries Act, the Distant Water Fisheries Development Act, or t he Act on 
Structural Improvements and Support for Domestic Fisheries.  
4.56.   Korea has been participating in the WTO Negotiating Group on Rules, including negotiations 
on disciplines in fisheries subsidies.  
 
                                                
28 OECD (2015e).  WT/TPR/S/346 • Republic of Korea  
 
- 124 - 
 
  Table 4.9 Fisheries subsidies, 2011 -14 
(₩ million)  
Item  Type  2011  2012  2013  2014  
Support for fishing activities  
To relieve financial burden 
and support stable fishing 
operations.  
Terms of the loan: one 
year loan at an annual 
interest rate of 3%.  Lump sum transfer  n.a. n.a. n.a. n.a. 
Loan 1,686,333  1,814,048  1,916,814  1,978,786  
Benefit of loana 52,363  50,743  41,513  36,565  
 Total (lump sum transfer + 
benefit of loan)  52,363  50,743  41,513  36,565  
Support to aquaculture fishery development  
 
To aquaculture fishermen.  
Terms of the grant: 
30-50% of business 
expenses.  
Terms of the loan: 2 -10 
years loan at an annual 
interest rate of 1 -4%. Lump sum transfer  15,026  24,115  16,150  22,593  
Loan 6,929  3,560  7,231  4,581  
Benefit of loana 249 60 1,058  2,583  
 Total (lump sum transfer + 
benefit of loan)  15,275  24,175  17,208  25,176  
Support for replacement and modernization of old distant -fishing vessels and its equipment  
 
To ensure navigation 
safety.  
3-year grace period and 
7-year repayment at an 
annual interest rate of 
3%. Lump sum transfer  n.a. n.a. n.a. n.a. 
Loan 29,662  20,451  40,500  27,772  
 Benefit of loana 504 347 n.a. n.a. 
 Total (lump sum transfer + 
benefit of loan)  504 347 n.a. n.a. 
Support for vessel decommissioning  
 
To maintain fleet size at a 
sustainable level for 
coastal and offshore 
fishery resources.  
100% grant to coastal 
fishermen and 80% grant 
to offshore fishermen.  
To be continued 
provisionally until 2018.  Lump sum transfer  37,214  29,795  24,886  20,529  
Loan n.a. n.a. n.a. n.a. 
Benefit of loana n.a. n.a. n.a. n.a. 
 Total (lump  sum transfer + 
benefit of loan)  37,214  29,795  24,886  20,529  
Support for management of distant water fisheries  
 
To compensate for the 
difference between 
market interest rate, and 
the loan interest rate, for 
distant -water fisheries 
operators or overseas 
resource development 
companies.  Lump sum transfer  4,834  4,622  n.a. n.a. 
Loan n.a. n.a. 2,530  2,372  
Benefit of loana n.a. n.a. n.a. n.a. 
 Total (lump sum transfer + 
benefit of loan)  4,834  4,622  n.a. n.a. WT/TPR/S/346 • Republic of Korea  
 
- 125 - 
 
  Item  Type  2011  2012  2013  2014  
Support for fishery products processing develop mentb 
 
 Lump sum transfer  40,498  42,605  n.a. n.a. 
 Loan 20,640  23,976  n.a. n.a. 
 Benefit of loana 519 467 n.a. n.a. 
 Total (lump sum transfer + 
benefit of loan)  41,017  43,072  n.a. n.a. 
Total  151,207  152,754  83,607  82,270  
n.a. Not applicable.  
a The be nefit of the loan is estimated based on the difference between the loan rate and the market 
rate.  
b Support for fishery products processing development was discontinued in 2013.  
Source:  WTO document G/SCM/N/284/KOR, 6 July 2015; and information provided b y the Ministry of Oceans 
and Fisheries.  
4.3.4   IUU fishing  
4.57.   To fight against IUU (illegal, unreported and unregulated) fishing, the Government amended 
the Distant Water Fisheries Development Act in 2014 and 2015, which introduced more severe 
sanctions on IUU fis hing:  
a. an imprisonment of up to five years;  
b. a criminal fine of up to five times the wholesale value of illegal catches, or a criminal fine 
of at least ₩ 500 million , whichever is higher;  
c. mandatory installation of a vessel monitoring system (VMS) on all dist ant fishing vessels 
and carrier vessels;  
d. pre-authorization requirements for transhipment; and  
e. monitoring of all distant water fishing vessels.  
4.58.   A Fisheries Monitoring Centre was established and started operation in March 2014.  
4.4  Energy  
4.59.   Korea is an energy -intensive nation. In 2013, Korea ranked 8th globally in terms of primary 
energy consumption, with a 1.9% share of the world's entire energy consumption, at 13,541  Mtoe 
(tonnes of oil equivalent). Energy consumption per capita in Korea is almost three times as high as 
the world average, and higher than the OECD average. Industry remains the largest consumer and 
its share in final consumption has remained around 54%. The power sector was the second -largest 
consuming sector, accounting for 38% of total energy c onsumption in 2013.  
4.60.   Korea relies heavily on imported energy: 95.2% of its total energy consumption in 2014 
was imported, and US$174 billion was spent on importing energy, accounting for 33% of the 
import bill and making Korea the fourth -largest energy imp orter in the world.29 In 2014, the main 
energy sources were petroleum (37%), coal (30%), LNG (17%), and nuclear energy (12%).  
4.61.   Energy Vision 2030 aimed at reducing energy intensity, with three basic directions: energy 
security, energy efficiency, and environ mental friendliness. In 2008, the Basic Energy Law was 
enacted, in accordance with which the Basic National Energy Plan 2008 -2030 established Korea's 
energy efficiency objective: to reduce energy intensity. In 2013, the second Energy Master Plan 
2013-35 wa s announced, aiming at reducing energy consumption by 13% by 2035, through 
measures in areas such as demand management, establishment of a generation system, 
environment protection and public safety, energy security and stable supply. The overall energy 
                                                
29 IEA PowerPoint presentation. Viewed at: https://www.ief.org/_resources/files /events/korean -energy -
day/mr. -shim-jae-hyuns -presentation.pdf . WT/TPR/S/346 • Republic of Korea  
 
- 126 - 
 
  saving goal for 2035 is nearly 34 Mtoe: 47% in industry (16 Mtoe), 36% in the transport sector 
(12 Mtoe), 13% in the residential and commercial sector (4 Mtoe), and 4% in the public sector 
(1.3 Mtoe). The Government plans to rely more on environmentally frie ndly new and renewable 
energy such as photovoltaic energy and wind power energy (increasing their share from 3.9% in 
2014 to 11% by 2035), and reduce its reliance on fossil fuels.  
4.62.   To reach the target, the Government is to follow the following steps: improv ing energy 
efficiency and reducing energy consumption; increasing the supply of clean energy and reducing 
the use of fossil fuels; boosting the green energy industry; and ensuring that Korean citizens have 
access to affordable energy.  
4.63.   The energy efficienc y programmes are implemented by the Korea Energy Agency (KEA), 
created under the Rational Energy Utilization Act. Businesses that invest in energy -saving 
technologies are entitled to financial and technical support, and tax credits (up to 6% of the 
investm ent cost). Large energy consumers must conduct energy audits every five years, while up 
to 70% of the audit costs for small - and medium -sized enterprises (under 10  ktoe/year) are 
subsidized. Industries investing in CHP (combined heat and power) plants for their own heat 
supply are entitled to tax reductions.  
4.64.   Factories consuming more than 2 K toe, and operating in four sectors (paper, petrochemical, 
food, electrical and electronics) may participate in the Energy Saving Partnership Programme 
(ESP), which aims  to share new energy saving technologies within the industry. In 2015, a total of 
102 companies were involved in this programme, sa ving 64 K toe of energy.  
4.65.   The Ministry of Trade, Industry and Energy (MOTIE) is in charge of energy policy 
development and imp lementation. Energy -related environmental policy is overseen by the Ministry 
of Environment. The Korea Electricity Commission (KOREC) is the electricity supply regulator. In 
addition, a number of SOEs play an active role in the energy sector, such as the K orea National Oil 
Corporation (KNOC), the Korea Gas Corporation (KOGAS), and the Korea Electric Power 
Corporation (KEPCO). Reportedly, the Government is considering partially privatizing KEPCO and 
KOGAS.30 
4.66.   Korea does not have any cross -border gas pipelines,  cross-border oil pipelines, or 
cross-border electricity transmission lines.  
4.4.2   Hydrocarbons  
4.4.2.1   Oil 
4.67.   Korea imports 99% of its crude oil requirements. Imports of oil came largely from the 
Middle East (82.3% of total crude imports in 2015, down from 87% in 2011), with another 10.4% 
from Asia, 5% from the Russian Federation, and 2.4% from the United Kingdom. Diversification of 
crude oil supply has been encouraged by the Government, through subsidizing up to 100% of the 
additional transport cost of importing crude oi l from non -Middle East countries (Section 3.2.5).  
4.68.   Less than 0.1% of total demand for oil is realized through domestic production.  The Korea 
National Oil Corporation (KNOC), a state -owned enterprise, dominates the upstream oil market. It 
is responsible for  domestic and overseas exploration, development and production of oil and 
natural gas.  
4.69.   In 2016 (same as in 2012), imported crude oil is subject to a tariff of 3% and refined 
products to tariffs of zero (such as naphtha and natural liquid gas), 3%, 5%, 7%,  and 8% (such as 
greases and waxes), which is intended to encourage domestic refining. In 2016, autonomous tariff 
quotas are applied to the imports of petroleum oils and oils obtained from crude bituminous 
minerals (HS 270900) (Table A3.6):  
a. For manufactur ing naphtha: an in -quota rate of 0.5% is applied to imports within 
200 million bbl, with an out -of-quota rate of 3%;  
                                                
30 Chosun Ilbo , "Korea to Privatize Power Grid ", 15 June 2016. Viewed at: 
http://english.chosun.com/sit e/data/html_dir/2016/06/15/2016061501198.html . WT/TPR/S/346 • Republic of Korea  
 
- 127 - 
 
  b. For manufacturing propane or butanes: an in -quota rate of 2% is applied to imports 
within 30,000 bbl, with an out -of-quota rate of 3%.  
4.70.   In addition to a tariff, a surcharge (₩16 per litre on crude oil) is levied on petroleum 
imports.  
4.71.   Until end -2018, a transportation -energy -environment tax continues  to be levied on gasoline 
(₩475  per litre) and diesel oil (₩340 per litre), instead of the indiv idual consumption tax 
(Section  3.4.1.1). As of 2016, flexible transportation -energy -environment tax rates were applied 
to gasoline and diesel oil within a 30% range of the statutory tax rates, i.e. ₩529 per litre and 
₩375 per litre, respectively. Condition al exemptions apply to petrol and diesel used in the 
manufacture of medical goods, fertilizers and petro -chemicals, vehicles for disabled persons or 
rental usage.   
4.72.   Demand for crude oil remained relatively flat during the review period, and is forecasted to  
gradually decrease. Over half of the oil (58%) is used in the industry sector, while the transport 
and transformation/energy sector accounted for 33% and 1.6% of oil demand, respectively.  
4.73.   Korea is a net exporter of refined products, and its main export ma rkets are Singapore 
(16%), China (15%), Australia (12.2%), and Japan (12%). Four private refining companies 
dominate the downstream market: SK Innovation, GS Caltex, Hyundai Oilbank, and S -Oil (whose 
controlling shareholder is the Saudi Aramco). Korea has five refineries, two of which are owned by 
SK Innovation, while the other three are each owned by the other three refining companies. They 
also dominate the retail market: in 2015, among the 12,398 fuel stations, 87% were owned by 
four refineries.  
4.74.   Daehan O il Pipeline Corporation (DOPCO) is the major oil pipeline company, responsible for 
operating the nationwide oil pipeline system consisting of six oil pipelines. DOPCO is jointly owned 
by: SK Innovation (41%), GS Caltex (28.62%), S -Oil (8.87%), Hyundai Heav y Industries (6.39%), 
Korean Air (3.1%), and the Korean Government (9.76%).  
4.75.   According to the IEA, import and export restrictions on oil and oil products were removed, 
and prices were fully liberalized. The oil sector is subject to the regulation of the Fai r Trade 
Commission, and the IEA considered that there were technically no non -market barriers to entry 
into the Korean refining and retail markets by new competitors, or to their accessing the DOPCO 
pipelines on a commercial basis.31  
4.4.2.2   Natural gas  
4.76.   Natural ga s accounted for 16.9% of total primary energy supply, and 22% of electricity 
generation in 2015. Korea imports 99.7% of its demand for LNG. The Korea Gas Corporation 
(KOGAS) is the largest single buyer of LNG in the world, importing 95% of Korea's total ga s 
imports.32 LNG comes mainly from Qatar (38%), Oman (12%), Indonesia (11%), and Malaysia 
(11%). Domestic gas production is negligible. Korea National Oil Corporation (KNOC) started its 
commercial gas production in July 2004, and production is expected to b e terminated in 2019.  
4.77.   In 2016 (same as in 2012), autonomous tariff quotas, which give concessional tariff 
treatment for imports of inputs, are applied to liquefied natural gas (HS 271111, 271121): an 
in-quota rate of 2% is applied to all imports, instead of a general rate of 3% (Table A3.6).  
4.78.   KOGAS imports LNG either through long -term contracts at a rate indexed to crude oil prices, 
or through the spot market. Ten companies such as POSCO, SK E&S, and KOMIPO, have been able 
to obtain licences to import gas for their "own use". There are seven LNG receiving terminals in 
Korea: 4 owned by KOGAS, 1 by POSCO, 1 jointly owned by SK E&S and GS Energy (Boryung, to 
be operational from late 2016), and 1 under construction. KOGAS is the only wholesaler and is also 
the TSO (transmission system operator) of gas in Korea. KOGAS is listed on the Korean Stock 
Exchange, and its owners include the central government (26.15%), KEPCO (20.47%), local 
governments (7.93%), and the Treasury (5.07%).  
                                                
31 IEA (2013 ). 
32 IEA (2013).  WT/TPR/S/346 • Republic of Korea  
 
- 128 - 
 
  4.79.   KOGAS supplied natural gas to 3 1 private city gas companies for retail distribution, and to 
39 power generating plants (owned by 23 power producers) at the end of 2015. The Fair Trade 
Commission has recommended that the Government slowly open up the country's gas import and 
distribution  market, as the gas prices for the industrial sector in Korea tend to be more expensive 
than those in other OECD countries. The authorities stated that gas price is high as Korea imports 
virtually all of its gas demand, and gas can only be imported by ship s, not pipelines.  
4.80.   Wholesale prices are regulated by MOTIE, while retail prices are regulated by local 
governments (Section 3.4.5.2). The wholesale gas price is composed of raw material cost plus a 
supply margin:  
a. Raw material costs include the cost of LNG,  gas transportation expenses, insurance 
premiums and taxes, and import tariffs;  
b. Supply margins include the supply cost of KOGAS (i.e. depreciation, labour costs, and 
general and administrative expenses), plus returns based on the assets used in the 
distribution of natural gas.  
4.81.   The r etail price is composed of the wholesale price and retail supply cost. The raw material 
costs are adjusted every two months if the fluctuation in raw material costs exceeds 3%. The 
supply margin is adjusted every year. KOGAS sub mits a report to MOTIE whenever the cost is 
adjusted to obtain its approval. In 2013, the IEA suggested that the Government set up a sector 
regulator to examine the potential for introducing market -based tariffs. The authorities stated that 
gas price is st rictly determined in accordance with the Government's guideline, and the 
Government inspects and supervises it through independent accounting firms. Thus the authorities 
are not considering setting up a separate institution for tariff regulation.  
4.82.   The Gove rnment has been making efforts to increase competition in the gas sector  since 
1999. Measures adopted by the Government include introducing an open -access policy in 
December 2007 to give direct importers improved access to the KOGAS transmission network an d 
LNG facilities. However, according to the IEA report, third -party access to the transmission 
network, LNG storage facilities and import terminals which KOGAS owns and operates is still 
limited. The authorities indicated that the transmission network is o perated as r -TPA (regulated 
third-party access), while the LNG terminal is operated as n -TPA (negotiated third -party access). 
The Government has deregulated a number of areas for direct importers, such as the registration 
conditions, and the resale of thei r unused LNG to overseas market, among others.  
4.4.3   Electricity  
4.83.   Electricity consumption per capita in Korea was more than three times as high as the world 
average, and almost 38% higher than the OECD average in 2013.33 Total electricity consumption 
kept growin g. In 2015, electricity was generated from coal (40%), nuclear power (31%), natural 
gas (22%), oil (2%), and renewables (3.5%). It is mostly used in industry (57%), commercial and 
public services (21%), and the residential sector (14%). Korea's rate of tra nsmission and 
distribution losses is among the lowest in the world (3.6% in 2015).  
4.84.   The Korean Electricity Commission (KOREC) is the sector regulator, responsible for 
overseeing matters related to granting licences to market participants, restructuring the  power 
sector, approving electricity tariffs, and acting as an arbitrator in cases of conflict between 
electricity companies and consumers. Competition -related matters (such as monopoly behaviour 
and unfair business practices) are regulated by the Fair Tra de Commission (FTC). The FTC and the 
KOREC have memoranda of understanding on their respective roles and functions in the electricity 
sector.  
4.85.   The Korea Electric Power Corporation (KEPCO), a government -owned corporation, 
dominates the electricity sector. A s of 8 March 2016, the Government holds 18.2% of KEPCO's 
equity, Korea Development Bank holds 32.9%, National Pension Corporation 6.9%, foreign 
investors 31.9%, and Korean investors the remaining 10.1%. In 2001, KEPCO was split into 
six competing generatin g companies, one of the six – Korea Hydro and Nuclear Power (KHNP) – 
                                                
33 ABB (2013).  WT/TPR/S/346 • Republic of Korea  
 
- 129 - 
 
  owns all the hydro and nuclear assets in Korea. All six companies remain state owned, despite the 
Government's efforts to privatize them. In 2011, the Government designated these six  comp anies 
as "market -oriented public enterprises", with an intention for them to compete for efficiency.  
4.86.   KEPCO generates about 82% of electricity in Korea, and the rest is generated by some 
independent (gas -fired) power producers (IPPs). KEPCO purchases all p ower generated through 
the Korea Power Exchange (KPX), and then supplies power to consumers. KEPCO owns and 
operates the national power grid, and all distribution networks. Foreign nationals may purchase 
from KEPCO no more than 30% of all domestic power ge neration facilities. Foreign investment in 
transmission and distribution of electric power faces an equity limit of 50%, and the largest 
shareholder must be Korean (Table 2.3).  
4.87.   The KPX is a state -owned electricity pool, which is compulsory to all generator s (above 
20 MW) with a few exceptions. KPX charges an electricity trading fee to cover the operating 
expenses. Electricity tariffs are set by the KPX, and electricity market operating rules approved by 
MOTIE. Korea introduced separate zonal prices in 2010,  i.e. when purchasing power, IPPs were 
paid a marginal cost -based price (i.e. the bid price of the most expensive generator), except for 
nuclear and coal. For power generated by nuclear and coal, the tariff was a set base -load price, 
which was lower than t he cost -based marginal price.34 The Government introduced a fuel cost 
pass-through system in 2011, but abolished it in 2014.  
4.88.   In addition, tariffs for industrial, residential, and commercial consumers are higher than 
those for agricultural consumers, indicat ing that agricultural consumers are subsidized by other 
consumers in Korea.  
4.89.   Fees are charged on the consumption of electricity (3.7% of the consumption bill), to 
finance the Electric Basis Fund. This Fund was set up in 2001 after the Power Industry Struct ure 
Reorganization to achieve public objectives and to build infrastructure for sustainable growth of 
the power industry. Subsidies are given to, inter alia , the diffusion of electricity generated by 
renewable energy, the maintenance of the stability betwe en electricity demand and supply, and 
R&D activities. The source of the fund includes interest accrued from surplus funds, surcharges 
and transaction fees for REC (renewable energy certificates).  
4.4.4   Coal 
4.90.   Coal is the cornerstone of the power system in Korea, a ccounting for 31% of total primary 
energy supply, and 40 % of electricity generation. Almost all coal used in Korea is imported, and 
imports come mainly from Australia, Indonesia, and the Russian Federation, followed by China and 
South Africa. Korea is the third-largest importer of coal in the world, after Japan and China.  
4.91.   Korea also has about 1.4 billion tonnes of coal resources. It has five coal mines, three of 
which are operated by the state -owned Korea Coal Corporation (KCC). Production of coal is 
subsidized in Korea, and the cost of production is higher than the cost of imports. Subsidies for 
coal production, ranging from ₩151.8 billion in 2012 to ₩236.5 billion in 2014 and then falling to 
₩215 billion in 2015, are to be terminated by 2020. Subsidies  are mainly used for the production 
of coal, and its use in the form of charcoal briquettes by low -income households, covering 
briquette manufacturers, industrial accident insurance premiums, and school expenses for children 
of mine workers. However, as these  subsidies tend to distort resource allocation and encourage 
excessive consumption of coal, the Government may consider other measures to support low -
income groups. The Government provides support to a part of heating cost to low -income groups.  
4.92.   Coal impor ts are duty free. Bituminous coal, with smoke, is subject to a VAT at a rate of 
10%, and an individual consumption (special excise) tax with the rates raised in February 2016 
(Section 3.4.1.1), while anthracite coal (no smoke) is exempted from both taxes.   
4.5  Manufacturing  
4.93.   The growth rate of the manufacturing sector slowed, from 6.5% in 2011 to 1.3% in 2015, 
and the share of manufacturing in GDP fell from 31.4% to 29.5% during the same period, 
                                                
34 WTO (2012) . WT/TPR/S/346 • Republic of Korea  
 
- 130 - 
 
  although its share in total employment increased slightly (Table  1.2). The manufacturing sector 
remains an export -oriented sector, accounting for 86% of total merchandise exports in 2014 
(Table A1.1). In terms of the shipment value, heavy industry accounted for 86% of the total 
manufacturing sector, and the light industr y accounted for 14%.35 Important industries include: 
ICT, automobiles, steel, general purpose machinery, shipbuilding, and petrochemistry.  
4.94.   MOTIE has a number of initiatives to promote the development of the manufacturing sector, 
such as the "Industry Innov ation 3.0", the "Industry Initiatives for the Creative Economy", the 
"Second Basic Plan for Intelligent Robot Development (2014 -18)", the "Development Plan for 
Printed Electronic Industry", and the "Industrialization of bio - and nano -technology".36 The 
authorities stated that important measures adopted include promoting R&D investment, reducing 
and removing regulatory barriers, supplying smart manufacturing systems (smart factory) to 
improve productivity of SMEs, and developing a standards and certification system for new 
technology.  
4.95.   Foreign investment in manufacturing in general is allowed, except for the manufacture and 
supply of fuel for nuclear power generation (Table 2.3). The authorities stated that there are 
around 3,500 foreign -invested companies in the manufacturing sector in Korea.  
4.96.   The simple average applied MFN tariff rate was 11.3% (ISIC 3) on imports of manufacturing 
products, and the rate was 6.3% on manufacturing excluding food processing products 
(Table  A3.1). Adjustment duties protect one in dustrial item – plywood, at 10% instead of 8% 
(Table A3.3). In 2016, autonomous tariff quotas, allowing concessional tariff treatment for imports 
of inputs, were applied to,  inter alia , sugar, manioc chips, silk yarn, and petroleum oil 
(Section  3.2.4.2, Ta ble A3.6).  
4.97.   The manufacturing sector has been dominated by large business conglomerates. The labour 
productivity gap between large firms and SMEs (defined as companies with less than 300  workers) 
is big: output per worker in SMEs was only 30.5% of that of large firms (Sections 1.2.1 and 
1.3.3).37 To facilitate the development of SMEs, several tax and non -tax incentives in several 
policy areas were used (Sections 3.2.10, 3.3.5, 3.3.6, 3.4.1, 3.4.2, and 3.4.5.1).  
4.5.1   Steel  
4.98.   Steel production has been, in general, growing during the review period (except in 2013), 
as a result of continued expansion of production facilities and a rapid increase in demand 
(Table  4.10).38 In 2015, Korea was the sixth -largest steel producer in the world, and steel 
produced by Korea accou nted for 4.4% of the world's crude steel production. Steel is intensively 
used in the manufacturing and export sectors. Exports surpassed imports from 2011. Major steel 
consumers in Korea are: construction (accounting for 29% of the country's total demand for steel), 
automobiles (31%), and shipbuilding (21%).  
Table 4.10 World market share in the iron and steel industry, 2010 –14 
(1,000 tonnes)  
 2010  2011  2012  2013  2014  
Worldwide production  1,433,433  1,538,003  1,560,131  1,650,354  1,670,145  
Production in Korea  58,914  68,519  69,073  66,061  71,543  
Korea's share of the world market (%)  4.1 4.5 4.4 4.0 4.3 
Source:  World Steel Association, Steel Statistical Yearbook 2015 . Viewed at: 
https://www.worldsteel.org/dms/internetDocumentList/bookshop/2015/Steel -Statistical -Yearbook -
2015/document/Steel%20Statistica l%20Yearbook%202015.pdf . 
4.99.   There have been no major changes to the government policy on the iron and steel sector 
since 2012. According to information provided by the authorities, demand for steel, as well as 
                                                
35 Statistics Korea (2015), Explore Korea through Statistics 2014 . Viewed at: 
http://kosis.kr/ups3/upload/101/IC/Explore%20Korea2014/EBook.htm . 
36 MOTIE online information. Viewed at: http://english.motie.go.kr . 
37 OECD (2016c).  
38 Statistics Korea (2015), Explore Korea through Statisti cs 2014 . Viewed at: 
http://kosis.kr/ups3/upload/101/IC/Explore%20Korea2014/EBook.htm . WT/TPR/S/346 • Republic of Korea  
 
- 131 - 
 
  imports, fell to its lowest point in 2013 but pi cked up again in 2014. The share of imports from 
China increased from less than half, to more than 60% of total steel imports in  Korea (Table 4.11).  
Table 4.11 Steel development s, 2011 -15 
(MMT)  
 2011  2012  2013  2014  2015  
Domestic demand for steel  56.4 54.1 51.8 55.5 55.8 
Total imports  23.1 20.7 19.4 22.7 22.1 
Imports from China  10.2 10.2 9.9 13.4 13.7 
Source:  Information provided by the authorities.  
4.100.   Steel production is concentrated, with the largest two s teel makers, POSCO and Hyundai 
Steel, accounting for 84% of total steel production. In 2016, import tariffs on iron and steel range 
from zero to 8%, the same as in 2012. Most tariff lines have their duty rates at zero, while the 8% 
tariff rate applies to s ome articles of iron and steel.  
4.101.   There are about 300 foreign -invested companies in the metal products sector.  
4.102.   The Government has been providing funds to raise the competitiveness of the steel sector 
in producing high -end products: 30 steel products are sel ected over a period of 10 years 
(3 products per year). Financial support of ₩100  billion is to be provided until 2019, with the aim 
of manufacturing the world's best eco -friendly smart steel plates under the World Premier 
Materials project.39 To establish a  "green steel industry", the Government is to provide 
₩150 billion, representing 60% of the firm's total R&D costs (possibly from 2012) for eight years, 
to develop CO 2-free technologies  for the iron and steel sector.  
4.5.2   Automotive  
4.103.   Korea remains the world's fi fth-largest automobile producer, after China, the 
United  States, Japan and Germany. The majority of vehicles produced in Korea are exported 
(Table  4.12). Major export markets are: North America (50%), the EU (18%), the Middle East 
(13%), and Central and So uth America (8%).  
Table 4.12 Automobile supply and demand, 2010 -13 
(1,000 cars)  
  2010  2011  2012  2013  
Production  Passenger cars  3,866  4,222  4,167  4,123  
Commercial vehicles  406 435 395 398 
Total  4,272  4,657 4,562  4,521  
Domestic 
consumption  Passenger cars  1,218  1,211  1,176  1,137  
Commercial vehicles  248 263 235 246 
Total  1,465  1,475  1,411  1,383  
Export  Passenger cars  2,611  2,981  3,013  2,948  
Commercial vehicles  161 171 158 141 
Total  2,772  3,152  3,171 3,089  
Import  Passenger cars  100 113 149 186 
Commercial vehicles  4 5 5 5 
Total  105 118 154 191 
Source:  Statistics Korea (2015), Explore Korea through Statistics 2014 . Viewed at: 
http://kosis.kr/ups3/upload/101/IC/Explore%20Korea2014/EBook.htm . 
4.104.   Imports of automobiles increased during the review period, although they remained much 
smaller than export volumes. According to the Explore Korea through Statistics 2014, this was 
caused by validation of RTAs, particularly the one with the EU. The authorities indicated that 
annual import volumes of automobiles from the EU increased from 62,281  in 2010 to 231,514 in 
2015.   
                                                
39 WTO (2012) . WT/TPR/S/346 • Republic of Korea  
 
- 132 - 
 
  4.105.   The automotive industry is concentrated, with the three l argest manufacturers: Hyundai, 
GM Korea (formerly Daewoo), and Kia, collectively accounting for about 90% of total production of 
automobiles.  There are about 270 foreign -invested companies in Korea's motor vehicles and parts 
sector. GM Korean is 82.98% ow ned by foreign investors including General Motors and SAIC Motor 
Corporation, while Renault Samsung is 79.9% owned by Renault. Mahindra & Mahindra's share in 
Ssangyong Motors rose from 70.04% in 2011 to 72.85% in 2015.  
4.106.   In 2016 (same as in 2012), the custo ms tariff is 8% on passenger vehicles (HS 8703) and 
averages 9.7% on commercial vehicles.40 The tariff rates are the same for new vehicles as for 
used cars, although a special customs valuation procedure is used for the imports of used vehicles.  
4.107.   The indivi dual consumption tax, which is a special excise tax, applies to cars:  
a. 5% on cars, with a temporary tax cut to 3.5% from 27 August 2015 to end -June 2016, 
to boost consumer spending;  
b. Exempted on mini cars (less than 1,000 cc);  
c. Reduced on hybrid cars (maximu m ₩1 million, until 2018), and electric cars (maximum 
₩2 million, until 2017).  
4.108.   The Government has implemented some tax and other incentives for the automobile sector 
during the review period, to boost consumption. For example, for cars of more than 2,000 c c, 
individual consumption tax was lowered from 10% in 2011 to 5% in 2015, and then to 3.5% from 
27 August 2015 to June 2016; for other cars, the individual consumption tax was lowered from 5% 
to 3.5% from 27 August 2015 to June 2016; for hybrid cars, indiv idual consumption tax, education 
tax, and acquisition tax were reduced (until 2018), and urban rail bond or community development 
bond purchase were exempted; for electric cars, both individual and education tax were reduced 
(until 2017), acquisition tax w as reduced (until 2018), and urban rail bond purchase was 
exempted.  
4.109.   To facilitate the development of "green cars" including electric vehicles (EVs), the 
Government plans to increase the number of public fast charging stations (building 1,400 units of 
EV charging stations by 2020 through public -private collaboration), diversify charging type and 
method, develop infrastructure for the construction of hydrogen filling stations, provide incentives 
(₩27.5 million per vehicle) to FCEVs (fuel cell electric vehicles), and encourage automakers to 
lower prices for FCEVs (by ₩85 million in 2015, and by ₩64 million in 2018).  
4.5.3   Shipbuilding  
4.110.   Korea is the second -largest shipbuilder in the world, after China. The number of ships built 
in both Korea, and the world, started to decline from 2011 (Table 4.13). Shipbuilding orders 
decreased by 38% in 2012, to 7,172,000 CGT.41 The shipbuilding industr y contributed to 1.8% of 
GDP in 2012, down from 1.9% in 2010 and 2011.42 
Table 4.13 Shipbuilding trends, 2010 -14 
(1,000 GT)  
 2010  2011  2012  2013  2014  
Korea  31,698  35,850  31,383  24,504  22,455  
World  96,433  101,845 95,271  70,480  64,442  
Source:  Statistics Korea (2015), Explore Korea through Statistics 2014 . Viewed at: 
http://kosis.kr/ups3/upload/101/IC/Explore%20Korea2014/EBook.htm ; and information provided by 
the authorities.  
                                                
40 The import tariff rate is zero for HS 870410 (dumpers for off -highway  use), and is 10% for the other 
commercial vehicles (HS 8704).  
41 Compensated Gross Tonnage (CGT) is an indicator of the amount of work that is necessary to build a 
given ship and is calculated by multiplying the tonnage of a ship by a coefficient, which is de termined 
according to type and size of a particular ship.  
42 OECD (2015f).  WT/TPR/S/346 • Republic of Korea  
 
- 133 - 
 
  4.111.   Reflecting competition from China, shipbuilders in Korea have moved towards more 
specialized higher value -added ships, such as container ships and oil tankers (Chart 4.1). The 
average vessel value in Korea was  twice that of the global average in 2014.43 
Chart 4.1 Deliveries of newly built vessels, 2014  
Container ships
41.8%
Oil tankers
21.9%
Gas carriers
16.1%Bulk carriers
7.3%Offshore
6.8%Other  3.8%General cargo  1.5%Chemical tankers  0.8%Ferries and passenger 
ships  0.0%Chart 4
Source:  
 
Source:  UNCTAD, Review of Maritime Transport 2015 . Viewed at: 
http://unctad.org/en/PublicationsLibrary/rmt2015_en.pdf . 
4.112.   The shipbuilding industry is concentrated: by 2013, out of a total of  80 shipbuilding 
companies in Korea,  9 were large companies and the other 71 were SMEs. The three largest 
shipbuilders dominate the industry, accounting for 80% of the market share: Hyundai Heavy 
Industries (HHI) (also the world's largest shipbuilder), Samsung Heavy Industries (SHI), and 
Daewoo Shipbuilding & Marine Engineering (DSME).  
4.113.   The Government considered that the increased presence of government and government 
agencies in shipbuilding was based on market transactions, and would be temporary.44 Currently, 
the Korean Development Bank (KDB), the Financial Services Commission (FSC), the Korea Finance 
Corporatio n (KOFC), the Export -Import Bank of Korea (KEXIM), and the National Pension Service 
(NPS) all hold significant shares of major shipbuilding companies (Table 4.14).  
Table 4.14 Top five shareholders of listed sh ipbuilding companies, 2014  
 Investor No. 1  Investor No. 2  Investor No. 3  Investor No. 4  Investor No. 5  
HHI Jeong (Mong 
Jun) 
 Hyundai Mipo 
Dockyard Co. Ltd.  
 National Pension 
Service (NPS)  Asan Social 
Welfare 
Foundation  Hyundai Heavy 
Industries Co. 
Ltd. employees  
% share  10.15  7.98 6.09 2.53 1.55 
DSME  KDB 
 FSC 
 NPS 
 Samsung Asset 
Management Co. 
Ltd BlackRock 
Institutional 
Trust Company, 
N.A. 
% share  31.46  12.15  9.11 1.34 1.01 
SHI Samsung 
Electronics Co. 
Ltd.  NPS Mirae Asset 
Global 
Investment Co. 
Ltd. Samsung Life 
Insurance Co. 
Ltd.  Korean 
Investment 
Management Co. 
Ltd. 
% share  17.62  6.05 5.0 3.52 2.4 
STX KDB 
 NongHyup Bank  
 KOFC  
 KEXIM  
 Woori Bank  
 
% share  35.97  25.10  17.50  13.50  10.69  
Hanjin HI  Jo (Nam Ho)  
 J.P. Morgan Asset 
Management 
(Hong K ong) Ltd.  Dimensional 
Fund Advisors 
L.P. Kim (Yeong Hye)  
 Jo (Won Guk)  
 
% share  46.50  3.71 1.31 0.64 0.61 
                                                
43 OECD (2015f).  
44 OECD (2015f).  WT/TPR/S/346 • Republic of Korea  
 
- 134 - 
 
   Investor No. 1  Investor No. 2  Investor No. 3  Investor No. 4  Investor No. 5  
Hyundai 
Mipo Hyundai Samho 
Heavy 
Industries Co. 
Ltd. NPS 
 Mirae Asset 
Global 
Investment Co. 
Ltd. Hyundai Mipo 
Dockyard 
Company Ltd. 
Employees  Black Rock 
Institutional 
Trust Company, 
N.A. 
% share  45.21  7.38 1.4 1.28 1.08 
Source:  OECD (2015), Peer Review of the Korean Shipbuilding Industry and Related Government Policies , 
13 January 2015.  
4.114.   The Government is trying to maintain a level playing field betw een public and private 
entities, giving particular attention to SMEs. SMEs may be able to play a bigger role as suppliers in 
the value chain of large shipbuilding companies; at the same time, some parts of the shipbuilding 
and marine equipment industry are  clearly more efficient with a larger scale.  
4.115.   In 2016 (same as in 2012), tariff protection for ships ranges from zero to 8%, with a 
simple average of 3.6%:  
a. tariff rate of zero for HS 8901 (cruise ships, excursion boats, ferry -boats, cargo ships, 
barges and  similar vessels for the transportation of persons or goods);  
b. tariff rate of zero for HS 8902 (fishing vessels; factory ships and other vessels for 
processing or preserving fishery products);  
c. tariff rate of zero for HS 8906 (other vessels, including warsh ips and lifeboats other than 
rowing boats);  
d. tariff rate of 5% for HS 8904 (tugs and pusher craft);  
e. tariff rate of 5% for HS 8905 (light vessels, fire -floats, dredgers, floating cranes and 
other vessels the navigability of which is subsidiary to their main  function; floating 
docks; floating or submersible drilling or production platforms); and  
f. tariff rate of 8% for HS 8903 (yachts and other vessels for pleasure or sports; rowing 
boats and canoes).  
4.116.   The authorities indicated that the Government is currently r eviewing the policy related to 
the restructur ing of the shipbuilding sector.  
4.117.   The authorities indicated that there are about 270 foreign -invested companies in Korea's 
shipbuilding sector.  
4.118.   Ship financing is provided mainly through two state -owned export cred it agencies: K -sure 
under the MOTIE, and Korea EXIM -Bank under the MOSF. K -sure mainly deals with export credit 
insurance (covering lender's losses against buyer's non -payment on loans), while Korea 
EXIM-Bank handles export credit loans (direct loans to sh ip owners, or to ship yards for the funds 
needed to produce vessels). In 2014, the shipbuilding industry received ₩5.5 trillion 
(US$5.3  billion), or 13.9% of the total export credit provided by Korea EXIM -Bank (Section 3.3.5). 
Korea also announced in November 2013 a ₩900 billion support scheme, for the development of 
basic research and human resources.  
4.119.   Financing arra ngements provided for shipping services are likely to increase demand for 
vessels, while the increase in government exposure to the industry, via ownership and export 
credit policies, increases the risk to the Government's finances in cases of worsening pe rformance 
of the shipbuilding industry.45 It seems that private financial institutions have been playing an 
increasingly important role in the shipbuilding industry, either through equity positions, or as key 
creditors.46  
                                                
45 OECD (2015f).  
46 OECD (2015f).  WT/TPR/S/346 • Republic of Korea  
 
- 135 - 
 
  4.5.4   ICT industry  
4.120.   The information and co mmunications industry is another growth engine for Korea's 
economy. In 2015, value added produced in the ICT sector accounted for about 10% of GDP. It 
exported US$173 billion, accounting for 32.8% of total merchandise exports (Table  4.15). In 2015, 
the exp ort value of Korea's ICT products accounted for 7.1% of the global market, ranking Korea 
the third -largest ICT exporter in the world, after China and the United States.  
Table 4.15 Supply -demand trends in the ICT industry  
 2010  2011  2012  2013  2014  2015  
GDP (real, ₩ million)  1,265,308  1,311,893  1,341,966  1,380,833  1,426,972  1,464,244  
ICT industry (real, 
₩ million)  109,430  125,672  129,521  138,037  148,056  148,437  
Share in GDP (%)  8.6 9.6 9.7 10 10.2 10.1 
Total merchandise exports 
(US$ million)  466,384  555,214  547,870  559,632  572,665  526,757  
Exports of ICT products 
(US$ million)  153,941  156,617  155,236  172,683  176,233  172,866  
Share of ICT exports to 
total merchandise exports 
(%) 33 28.2 28.3 30.9 30.8 32.8 
Total merchandise imports 
(US$ million)  425,212  524,413  519,584  515,586  525,515  436,499  
Imports of ICT products 
(US$ million)  75,619  81,539  77,954  81,804  88,168  91,329  
Share of ICT imports to 
total merchandise imports 
(%) 17.8 15.5 15 15.9 16.8 20.9 
Source:  IT Statistics of Korea. Viewed at: http://www.itstat.go.kr . 
4.121.   Korea's ratio  of R&D investment in ICT equipment to total business expenditure on R&D 
(BERD) is high among OECD countries: in 2013, ICT  R&D investment accounted for more than half 
of BERD in Korea (54%), the second highest among  OECD economies.47 The share of ICT patents 
in all the applications filed by Koreans with the Patent Cooperation Treaty (PCT) between 2010 and 
2012 reached 47.8%, t he highest in the OECD countries. The rankings of Korea in terms of 
technology cooperation between companies, and in terms of technology transfers between 
companies and universities, have improved: Korea was ranked 25th and 17th respectively among 
60 count ries in 2015, up from 39th and 29th respectively, in 2014.48 
4.122.   Korea is a participant in the WTO Information Technology Agreement (ITA) . Tariffs on ICT 
products are all zero.  There is no foreign investment restriction in the ICT sector.  
4.123.   The Ministry of Scienc e, ICT and Future Planning announced a plan called "K -ICT Strategy" 
to make fundamental improvements to the ICT industry and enhance global cooperation. The Plan 
facilitates joint research among industries, academia and research institutes; fosters global 
convergence clusters in six major domains (transportation, energy, tourism, cities, education, and 
healthcare); removes burdensome regulations; and carries out large -scale demonstration projects 
to demonstrate the benefits of the IoT (internet of things), the cloud, information security, big 
data, and 5G, among others.  
4.6  Services  
4.6.1   Features  
4.124.   During the review period, while the growth rates of the manufacturing sector declined, 
those of the services sector remained rather stable (about 3% annually from 2011 to 20 15) 
                                                
47 Korea Information Society Development Institute (2016).  
48 Korea Information Society Development Institute (2015) ; and  Korea Information Society 
Development Institute (2016).  WT/TPR/S/346 • Republic of Korea  
 
- 136 - 
 
  (Table  1.2). The share of services to GDP increased slightly, from 59.1% in 2011 to 59.7% in 
2015, while its share in total employment increased slightly as well, from 68.9% to 69.8%. The 
largest contributor to gross value added within services remains  wholesale and retail trade, 
followed by real estate and leasing, business activities, and public administration and defence.  
4.125.   Labour productivity of the services sector, although higher than that of the agriculture 
sector, remains at about half of that of  the manufacturing sector and is far below the OECD 
average (86%). The OECD suggested that to develop the services sector, the first priority was to 
level the playing field between services and manufacturing, by eliminating policies favouring 
manufacturing , such as lower tax rates.49 These policies have led resources flowing away from 
services to the manufacturing sector.  
4.126.   During the review period, exports of non -factor services rose from US$91 billion in 2011, 
to US$112 billion in 2014, and fell to US$98 bi llion in 2015 (Table 1.3). The main destinations of 
services exports are China, the United States, and Japan.50 Imports of services rose from 
US$103  billion in 2011 to US$114 billion in 2015, leading to an increased services trade deficit 
(from US$12 billio n in 2011 to US$16 billion in 2015). Transportation and travel are the main 
traded services.  
4.127.   Korea submitted its revised conditional offer concerning services in 2005,51 and has not 
made any new offers since then. Its GATS commitments cover 98 of the 155 se ctors.52 Foreign 
equity limitations of 49% on commercial presence are scheduled for facilities -based basic 
telecommunication services. Specific national treatment limitations and/or additional commitments 
relate to accounting (auditing and book -keeping serv ices), taxation, and architectural services. 
Foreign professionals in law and architecture can provide a limited range of services with approval 
of their qualification. Access to other services is mostly liberalized, except for certain sectors that 
retain regulatory measures (including educational services), and others that are subject to foreign 
equity ceilings (including aircraft rental and credit information services) (Section 2.7).   
4.128.   At the regional level, Korea already adopted services liberalization co mmitments under the 
FTAs with: ASEAN, Chile, EFTA, the EU, India, Peru, Singapore, and the United States. During the 
review period, six RTAs entered into force; among them, five contain services liberalization 
commitments (with Australia, Canada, China, Ne w Zealand, and Viet Nam). One RTA signed , but 
not yet in force , also contains services commitments (with Colombia) (Section 2.6).  
4.6.2   Financial services  
4.129.   Korea's financial services sector performed well during the review period, and reached a 
growth rate of 6. 3% in 2015 (much higher than the growth rate of the services sector – 2.8%). 
The contribution from financial and insurance services to GDP continued to drop, from 6.4% in 
2011 to 5.5% in 2015 (Table 1.2). It accounted for about 3.3% of total employment in 2014. The 
financial sector includes banks, and non -bank financial institutions including insurance companies 
(Table 4.16).  
4.130.   The Financial Services Commission (FSC) and its executive body, the Financial Supervisory 
Service (FSS), continue to regulate the fin ancial services sector. The FSC is in charge of financial 
policies and supervision of financial institutions, while the FSS regulates financial markets and 
institutions under the direction and supervision of the FSC. The Securities and Futures Commission 
(SFC) within the FSC supervises and regulates the securities and futures markets.  
4.131.   The financial services sector is regulated under the Financial Holding Companies (FHCs) 
Act of 2009, the Financial Investment Services and Capital Markets Act, and the Bankin g Act. The 
FSC is in the process of revising the Banking Act, to increase the ownership ceiling to 50% for 
internet -only banks, and to lower the minimum capital level to ₩25 billion for internet -only banks.  
 
                                                
49 OECD (2014).  
50 WTO online information, "Services Profile: Korea" . Viewed at: 
http://stat.wto.org/ ServiceProfile/WSDBServicePFView.aspx?Language=E&Country=KR . 
51 WTO document TN/S/O/KOR/Rev.1, 14 June 2005.  
52 WTO document GATS/SC/48, 15 April 1994.  WT/TPR/S/346 • Republic of Korea  
 
- 137 - 
 
  Table 4.16 Structure of the financial system, 2011 and 2015a 
Institutions  No. of 
establishments  Assets  
(₩ billion)  Loans and discounts  
(₩ billion)  
2011 2015 2011 2015 2011 2015 
Banks  55 56 2,162,404  2,709,032  1,229,585  1,589,088  
Commercial banks  50 51 1,547,829  1,837,716  880,147  1,032,497  
 Nationwide  7 6 1,219,238  1,389,968  765,235  859,743  
 Regional  6 6 135,415  187,294  86,931  124,165  
 Foreign bank branches  37 39 193,176  260,454  27,981  48,588  
Specialized banksb 5 5 614,575  871,316  419,438  556,591  
 KDB 1 1 148,931  255,931  77,404  118,962  
 Korea EXIM  1 1 55,133  81,890  46,277  67,655  
 IBK 1 1 185,976  233,862  124,597  158,172  
Non-bank financial institutions  1,253  1,211  868,015  1,305,885  213,368  306,422  
Mutual savings banks  93 79 60,193  40,192  41,020  32,181 
Credit unions  960 910 49,603  65,820  30,823  43,582  
Specialized credit financial 
companiesc 64 78 158,763   203,167  39,375  49,970  
Life insurance companies  23 25 442,652  724,901  69,996  114,497  
Non-life insurance companies  30  31 123,358  226,057  22,309  49,957  
Asset management companies  82  87 3,889  4,952  -d -d 
Korea Securities Finance 
Corporation  1  1 29,587  40,796  9,845  16,235  
Totale 1,308  1,267  3,030,419  4,014,917  1,512,953  1,895,510  
a End of period figures.  
b These are: the Korea Developme nt Bank (KDB), the Export -Import Bank of Korea (KEXIM), the 
Industrial Bank of Korea (IBK), the National Agricultural Cooperative Federation, and the National 
Federation of Fisheries Cooperatives.  
c These are credit card companies, leasing companies, insta lment financing companies, and venture 
capital finance companies.  
d The authorities stated that AMCs do not provide loans to the market.  
e Does not include other quasi -non-bank financial institutions such as securities companies, 
investment advisory compa nies, futures companies, postal savings, etc.  
Source:  Financial Supervisory Service . 
4.132.   The Korean financial system is dominated by 9 financial holding companies (FHCs) (7 bank 
holding companies, 1 securities holding company, and 1 insurance holding company),  constituting 
about 40% of financial sector assets. The FHCs have 77% of their consolidated assets in banking, 
accounting for about 68% of the banking sector assets. The financial companies under the bank 
holding companies are operating in almost all segme nts of the financial sector.  
4.133.   Foreign investment is allowed in financial institutions, except for special banks (Table  2.3). 
Foreign financial institutions accounted for about 11% of the financial sector assets. Foreign banks 
operate in Korea through locall y incorporated subsidiaries, branches, and representative offices. 
There are 41 foreign -owned banks – 2 subsidiaries and 39 branches – from 16 countries making 
up about 14% of the banking sector. In the insurance sector, 12  insurance companies' subsidiarie s 
from 5 countries make up 10% of the domestic insurance sector. In the securities sector, 
21 foreign companies from 10 countries make up about 6% of the securities sector's assets. 
Non-financial companies' ownership in any commercial bank is restricted to  4% (15% for regional 
banks). This limit may be increased to 10% for special cases, if approved by the FSC.  
4.134.   The Korea Deposit Insurance Corporation provides protection of up to ₩50 million 
(US$42,000) per deposit in the event of a financial -institution failure. It is also the Government's 
bail-out agency, having injected ₩111 trillion into the financial system between November 1997 
and September 2015. As at September 2015, ₩55 tr illion had been recovered.  WT/TPR/S/346 • Republic of Korea  
 
- 138 - 
 
  4.135.   The Korea Credit Information Services (KCIS) was launched in January 2016. It 
consolidated credit information of the banking, financial investment, insurance and credit card 
industries, and provides information to financial insti tutions. Through consolidating information 
that had been previous managed separately, the KCIS improved the ability of insurance companies 
to detect insurance fraud. Also, by providing statistics on credit information, such as big data, to 
financial compan ies, including Fin -Tech (financial technology) start -ups, the KCIS enables 
companies to analyse the market trend and develop new financial products.  
4.6.2.1   Banking  
4.6.2.1.1   Structure and ownership  
4.136.   By the end of 2015, Korea has 56 banks, of which 51 were commercial banks and 5 were 
specialized banks. Among the 51 commercial banks, 6 were nationwide banks, 6 regional banks, 
and 39 foreign bank branches.  
4.137.   The commercial banking sector remains dominated by nationwide banks, which held 
75.6% of the assets of commercial banks i n 2015. Foreign banks accounted for about 14% of the 
assets, and regional banks 10.2%. Foreign holdings in Korean commercial banks have risen 
(Table  4.17).  
Table 4.17 Government and foreign ownership of commer cial banks, December 2015  
(%) 
Commercial bank  Type of ownership  
Government  Foreign  
A. Nationwide banks    
Woori (formerly Hanvit Bank)  KDIC (51.06)  
National Pension Fund (4.33)  Foreigners (20.36)a 
SC Bank Korea  - Standard Chartered  NEA Limited (100)  
Kookmin  - KB Financial Group (100)  
Shinhanb - Shinhan Financial Group (100)  
Citibank Korea  - COIC (Citibank Overseas  Investment 
Corporation) ( 99.98 ) 
KEB Hana  - Hana Financial Group (100)  
B. Local banks    
Daegu  - DGB Financial Group  (100)  
Busan  - BNK Financial Group  (100) 
Kwangju  -  JB Financial Group (56.97)  
Foreigners (5.90)c 
Jejub - Shinhan Financial Group (68.88)  
Foreigners (3.51)d 
Jeonbuk  - JB Financial Group (100)  
Kyongnam  - BNK Financial Group  (100)  
 
a The number of foreign stockholders: 801. 
b Shinhan (100%) and Jeju (68.88%) are owned by the Shinhan Financial group.  
c The number of foreign stockholders: 208.  
d The number of foreign stockholders: 17.  
Source:  Information provided by the Korean authorities.  
4.138.   There are five specialized banks in Korea: the Korea Development Bank (KDB), the 
Export -Import Bank of Korea (KEXIM), the Industrial Bank of Korea (IBK), the National Agricultural 
Cooperative Federation, and the National Federation of Fisheries Cooperatives. Among these five, 
the KDB and the KEXIM are fully government -owned banks. The National Agricultural Cooperative 
Federation is now commercially operating (from 2012), but is still classified as a special ized bank 
according to the FSC.  Privatization efforts of the KDB were suspended in 2 013, when the 
Government prepared measures to consolidate the KDB and the KoFC (Korea Finance 
Corporation), to re -establish it as a financial policy institution. The IBK, which specializes in 
providing loans to SMEs, was initially offered to the public in 1994 on the KOSDAQ market, when 
the Government's ownership was reduced from 99.9% to 64.5%. As of 2015, the Government 
owns 50.6% of IBK's shares.  WT/TPR/S/346 • Republic of Korea  
 
- 139 - 
 
  4.139.   There have been no changes to foreign investment restrictions in the banking sector since 
the previous revie w. Prudential requirements are the same for domestic and foreign financial 
institutions, and are in accordance with internationally accepted standards. A foreign bank branch 
locating in Korea must:  
a. have permission from its own regulatory authority and con duct banking business at 
home under appropriate supervision;  
b. be from a reputable foreign bank;  
c. have the necessary expertise in international banking business;  
d. have proper risk -management procedures, a viable and sound business plan, and be 
able to supply  the FSC with data needed for supervision; and  
e. have core operational funds of ₩3 billion at the time of establishment.53 
4.140.   Since 2009, a private "bad -debt" bank – United Asset Management – has been in operation 
to buy and resell toxic assets. The Korea Asset Management Corporation – a public asset 
management company – is another major "bad-bank" operator, and there are a number of private 
firms operating in the market for non -performing assets. To enhance financial soundness in the 
banking sector, the Korea Asset Management Corporation has purchased ₩16,141 billion of 
impaired loans fro m financial institutions since 2012.  
4.141.   The banking sector is facing pressures from the country's changing economic environment. 
Interest rates are low: the sector's net interest margin (NIM) fell to 1.56% in the third quarter of 
2015 after four 25 -basis-point interest -rate cuts by the BOK since August 2014 (Section 1.3.1). 
Korea's banks have had traditionally close relationships with large conglomerates and their 
subsidiaries, thus the Government has been encouraging banks to shift lending to consumers and 
SMEs, as part of the efforts to diversify the economy. The authorities stated that banks needed to 
change their business approach, given a potential reduction of NIM (net interest margin) resulting 
from low interest rates and low growth trends in the econom y. The Government has been placing 
greater autonomy and responsibility on banks.  
4.142.   The Government has been encouraging banks to invest overseas: in July 2014, the FSC 
announced a policy package allowing banks, insurance companies, and brokerages to diversif y into 
each other's territory in overseas markets, despite the domestic regulations that strictly divide 
lines between different sectors. At the end of 2015, there were 44 subsidiaries and 69  branches of 
Korean banks operating abroad, up from 41 and 63 res pectively at end -2013, with assets 
increasing from US$77.8 billion to US$88.1 billion during the same period.  
4.6.2.1.2   Profitability and non -performing loans  
4.143.   From December 2013, Korea began introducing Basel III capital -adequacy regulations for 
banks. Banks are re quired to meet detailed capital -adequacy ratios for each tier of capital: at least 
3.5% of risk -weighted assets as common -equity capital and 4.5% as tier -1 capital. These ratios 
increased to 4.5% and 6% respectively in January 2015. From January 2016, bank s are required 
to hold a capital conservation buffer, initially set at 0.625% (to rise to 2.5% by 2019). Korean 
banks remain well capitalized: local banks' tier -1 capital and common -equity capital ratios were 
well above the Basel III requirements (Table 4. 18). In December 2015, the FSC and the FSS 
designated a number of banks as "domestic systematically important banks (D -SIBs)", in line with 
the Basel Committee on Banking Supervision's framework for dealing with D -SIBs. These banks 
are: Hana Financial Grou p, Shinhan Financial Group, KB Financial Group, Woori Bank, and NH 
Financial Group.  
                                                
53 This core operational fund is similar to the minimum capital requirement, and it has not changed since  
the previous Review in 2012.  WT/TPR/S/346 • Republic of Korea  
 
- 140 - 
 
  Table 4.18 Banking indicatorsa, 2010 -15 
(%) 
 2010 2011 2012 2013 2014 2015  
Capital adequacy ratio  14.6 14.0 14.3 14.5 14.0 13.9 
Tier-1 capital ratio  11.6 11.1 11.1 11.8 11.4 11.3 
Return on assets  0.5 0.7 0.5 0.2 0.3 0.2 
Net interest margin  2.3 2.3 2.3 1.9 1.8 1.6 
a Includes nationwide commercial banks, regional banks, and specialized banks.  
Source:  IMF (201 5), Republic of Korea: 201 5 Article IV Consultation —Staff Report : Press Release and 
Statement by the Executive Director for the Republic of Korea , IMF Country Report No. 1 5/130. 
Viewed at: https://www.imf.org/external/pubs/cat/longres.aspx?sk=42952.0 ; and information 
provided by the Korean authorities.  
4.144.   According to the IMF, the aggregate bank non -performing loan (NPL) ratio increased in 
2013, although from a low level, driven by a rise in NPLs t o large companies in the shipbuilding 
and construction sectors.54 The ratio of loans classified as sub -standard or below (SBLs) – 
substandard, doubtful, or presumed loss – reached its peak in 2010 and 2013, and fell in 2014 and 
2015 (Table 4.19).  
Table 4.19 Substandard and below loans, 2009 -15 
(% of total loans)  
 2009 2010 2011 2012 2013 2014 2015  
Commercial banks  1.2 1.9 1.3 1.3 1.7 1.4 1.1 
Specialized banks  1.4 2.0 1.5 1.4 1.9 1.8 2.9 
Mutual savings banks  9.3 10.8 16.4 19.8 21.7 15.7 10.2 
Credit unions  3.7 3.7 3.6 4.2 4.6 3.5 2.4 
Source:  IMF (201 5), Republic of Korea: 201 5 Article IV Consultation —Staff Report : Press Release and 
Statement by the Executive Director for the Republic of Korea , IMF Country Rep ort No. 1 5/130. 
Viewed at: https://www.imf.org/external/pubs/cat/longres.aspx?sk=42952.0 ; and information 
provided by the Korean authorities.  
4.6.2.1.3   Non-banking  
4.145.   Non-bank financial inst itutions refer to mutual savings banks (MSBs), specialized credit 
financial business companies, credit unions, and agricultural, fishery and forestry cooperatives. 
Mutual savings banks are small -scale deposit taking institutions. Specialized credit financi al 
business companies comprise credit card companies, instalment financing companies, leasing 
companies, and new technology venture capital companies.  
4.146.   From 2011 to 2015, the number of non -bank financial institutions dropped, while the value 
of total asset s increased by 50% (Table 4.16). Both the number and the asset value of MSBs went 
down (reflecting recessions in the real estate market as MSBs have a large volume of project 
financing), while both increased  for credit specialized financial companies (from  higher  credit card 
sales and automobile leasing). Regarding credit unions, the number of establishments was reduced 
by 5%, but the asset value was increased by 30% (reflecting merger and voluntary dissolution, 
and the increased influx of deposits).  
4.147.   By th e end of 2015, a total of 56 securities companies were in operation in Korea, with 
aggregate assets increasing from ₩270.5 trillion in 2013, to ₩344.4 trillion in 2015. Among them, 
21 were foreign -owned securities companies: 11 subsidiaries and 10 branches. There were 
87 asset management companies: 65  domestic and 22 foreign. Net profit of AMCs more than 
doubled, up fro m ₩219 billion in 2011 to ₩490 billion in 2015 . There were also six futures 
companies, with aggregate assets of ₩3.8 trillion by the end of 2015 (up by 47.5% from 2014). 
When seeking to set up a securities or an asset management company in Korea, a foreign  entity is 
subject to the same requirements as domestic firms, such as: sound and feasible business 
planning, sound balance sheet, sufficient human and physical resources for investor protection and 
a system for preventing conflict of interest.  
                                                
54 IMF (2015).  WT/TPR/S/346 • Republic of Korea  
 
- 141 - 
 
  4.6.2.2   Insurance  
4.6.2.2.1   Recent developments  
4.148.   Korea has a large insurance sector, and ranks high in the world in terms of insurance 
penetration. In 2015, Korea's insurance sector was ranked the eighth -largest in the world in terms 
of the total premium (₩195.6  trillion or US$145 billion). Insurance penetration was 11.3%, the 
4th in the world, and insurance density was US$3,163 per person, the 19th in the world. Korea has 
the third -largest insurance sector in Asia, after Japan and China.  
4.149.   During the review period, the insurance sector continued to grow, particularly in retirement 
saving products reflecting demographic aging expectations. As at June 2015, Korea had 
56 insurance companies – 25 life insurance and 31 non -life insurance companies (Table  4.16). Th e 
authorities stated that, among all the insurance companies, 27  are foreign invested. The aggregate 
assets reached ₩951 trillion at the end of 2015, an increase of ₩88.6 trillion from 2014.  
4.150.   The insurance market is concentrated: the top five insurers have a market share of 61% in 
the life sector, and 73% in the non -life sector. Local companies dominate the industry, wi th 
foreign -owned ventures playing mostly secondary roles. In 2015, the share of foreign firms was 
15.9% in the life insurance sector, and the share of foreign non -life insurers was 3.2%. As of 
April 2016, Korea had 10 re -insurance companies .  
4.151.   A 2016 EIU re port considered that the rapidly aging population in Korea meant that the 
industry's pool of future customers is limited.55 Large insurance companies already began to look 
for growth in overseas markets. Domestically, insurance companies also look to new bu siness 
areas such as medical insurance and retirement products, which offer growth potential.  
4.6.2.2.2   Regulatory framework  
4.152.   The insurance sector is regulated mainly under the Insurance Business Act (recently 
amended in 2014 and 2016), the Commercial Act (most rec ently amended in 2014), and 
subordinate statutes such as: the Enforcement Decree of the Insurance Business Act, the 
Enforcement Rules of the Insurance Business Act, the Regulation on Supervision of Insurance 
Business, and the Detailed Regulations on Superv ision of Insurance Business.56 The authorities 
stated that amendments to the Insurance Business Act were mainly to strengthen protection of 
consumers through, for example, streamlining insurance policy registration procedures, and 
incorporating the provisio n on insurance policy cancellation into the Insurance Business Act 
(previously this provision was contained in the Detailed Regulations on Supervision of Insurance 
Business), so that insurance contracts' cancellation became easier. The section related to 
insurance services in the Commercial Act was amended in 2014, covering,  inter alia :  
a. A requirement for insurers to explain insurance contract provisions to policyholders;  
b. Extension of the cooling -off period; and  
c. Introduction of new insurance policies such a s guarantee insurance and disease 
insurance.  
4.153.   The FSC and the FSS are responsible for supervising the insurance industry, and the FSC 
delegates supervision and inspection activities to the FSS. The Korea Deposit Insurance 
Corporation (KDIC) maintains a pol icy holder protection fund against insurance failure. KDIC is an 
integrated insurance protection body that insures insurers, banks, financial investment businesses 
and mutual savings banks. The KDIC finances its deposit insurance fund with contributions fr om 
insured financial institutions, based on which it performs its functions including paying -out of 
deposit insurance (Section 4.6.2). The Korea Insurance Development Institute (KIDI) calculates 
                                                
55 EIU (2016).  
56 KIDI online information. Viewed at: https://www.kidi.or.kr/eng/other/laws_regulations.asp . WT/TPR/S/346 • Republic of Korea  
 
- 142 - 
 
  and provides reference rates and statistical analysis to insu rers and regulators based on data 
collected from member companies.57  
4.154.   The bancassurance market, under the Insurance Business Act, allows insurance companies 
to sell policies through banking channels. Life and non -life insurance is strictly divided: life 
insurance companies are not allowed to provide non -life insurance business, and vice versa.  
4.155.   The Government announced an insurance industry deregulation package in October 2015, 
containing deregulation in areas from product development, marketing and pricing,  to asset 
management and financing. According to the package, insurers have much greater autonomy over 
insurance products, insurance premiums and interest rates. As part of this initiative, ex -ante 
review (file & use) of insurance products was replaced by an ex -post reporting (use & file) 
requirement. In addition, the standard interest rate system was abolished, to allow greater 
autonomy over insurance premiums and interest rates while leaving the private sector to draft 
standard policy provisions.  
4.156.   There a re no foreign equity restrictions. Insurance companies, both domestic and foreign, 
must maintain funds of at least ₩30 billion to do business in Korea. This requirement changed to 
₩3 billion for insurance branches. If  insurers seek to handle not all but ce rtain insurance products, 
they need to maintain funds of at least ₩5 billion, pursuant to presidential decree.  
4.6.3   Communications and postal services  
4.6.3.1   Communications  
4.157.   The growth rate of the information and communication s sector slowed down from 5.7% in 
2011 to 2 .3% in 2015. It contributed to 3.8% of GDP in 2015, and accounted for about 3% of total 
employment (Table 1.2). Korea has high IT rankings internationally. In 2015, Korea was ranked 
first out of 166 economies in the ITU's ICT Development Index, after ranki ng second in 2014.58 
This is because of Korea's early adoption of information technology, a strong and innovative IT 
industry, high levels of education, government awareness of and support for ICT projects, and an 
ICT culture (a high degree of ICT awareness  and an eagerness to adopt new technologies).59 
According to the World Economic Forum, Korea was ranked 12th in its networked readiness index 
2015, among 148 countries in the world.60 
4.158.   Korea launched the LTE services (long term evolution) in 2011, and has bee n expanding it 
in the country. LTE (and LTE advanced) traffic accounted for 77% of total mobile -communication 
traffic in 2014, up from 9.5% in 2012, reflecting Korea's rapid switch to LTE networks.61 The new 
technologies contributed to improving the speed a nd quality of networks, rather than expanding 
the subscriber base, as the mobile -broadband penetration rate was already high (97.7% in 2010).  
4.159.   Over the review period, fixed -line penetration went down, while mobile phone penetration 
continued to be over 100 %, reaching 115% in 2014 (Table 4.20). Fixed wired broadband 
subscriptions continued to increase, while the percentage of individuals using the Internet 
increased from an already high base (83.7% in 2011) to 84.3% in 2014.  
Table 4.20 Selected telecommunications indicators, 2011 -15 
 2011  2012  2013  2014  2015  
Fixed (number)  29,468,502  30,099,175  30,333,077  29,481,226  28,882,783  
Fixed (per 100 inhabitants)  60.5 61.4 61.6 59.5 .. 
Mobile (number)  52,506,793  53,62 4,427  54,680,840  57,290,356  58,935,081  
Mobile (per 100 inhabitants)  107.7  109.4  111.0  115.7  .. 
Fixed (wired) broadband 
subscriptions (number)  17,859,522  18,252,661  18,737,514  19,198,934  20,024,419  
                                                
57 KIDI online information. Viewed a t: http://www.kidi.or.kr/eng/chairman/message.asp .  
58 ITU (2015).  
59 ITU (2015).  
60 WEF (2015b).  
61 MSIP and KISA (2014), Korea Internet White Paper . Viewed at: 
http://isis.kisa.or.kr/eng/ebook/EngWhitePaper2014.pdf . WT/TPR/S/346 • Republic of Korea  
 
- 143 - 
 
   2011  2012  2013  2014  2015  
Fixed (wired) broadband 
subscriptions (per 100 
inhabitan ts) 36.7 37.3 38.0 38.8 .. 
Percentage of individuals using 
the Internet  83.8 84.1 84.8 84.3 .. 
.. Not available.  
Source:  ITU World Telecommunication/ICT Indicators Database. Viewed at: http://www.itu.int/en/ITU -
D/Statistics/Pages/stat/default.aspx ; and information provided by the Korean authorities.  
4.160.   There are three main providers of fixed -line telecommunications services: Korea Telecom 
(KT), SK Broadband, and LG U+. They provi de local, national, and international telephony 
services. KT is the dominant carrier, accounting for more than 80% of the local market, and 
78.9% of the long -distance market. Some other smaller companies also provide national 
long-distance services and int ernational services. The mobile phone sector has three main 
suppliers: SK Telecom, KT, and LG U+; in 2015 their market shares were 49.1%, 30.6%, and 
20.3%, respectively.62 The shares of foreign participation are listed in Table  4.21, while none of 
these com panies are state owned.  
Table 4.21 Ownership structure of major telecom operators, December 2015 and 
May 2016  
Company  Market share  
(%, as at December 2015)  State participation  Foreign participation  
Fixed l ine  Mobile phone  (% of shares, as at 18 May 2016)  
Korea Telecom  80.5 30.6 None 49.0a 
SK Telecom  n.a. 49.1 None 40.24  
LG U+ 3.1 20.3 None 36.46  
SK Broadband  16.4 n.a. None .. 
n.a. Not applicable.  
.. Not available.  
a Korea's GATS commitments on KT said  that it would not be more than 33% foreign owned, i.e. not 
subject to the normal 49% foreign equity restriction for other infrastructure -based suppliers. 
However, this policy was changed and foreign participation reached 49%.  
Source:  Korea Communications Commission, and the MSIP.  
4.161.   Licensing and pricing of the telecommunications market is the responsibility of the Ministry 
of Science, ICT and Future Planning (MSIP). The Korean Communications Commission (KCC) under 
the President's Office is the regulatory ent ity responsible for the promotion of fair competition and 
consumer protection in the telecommunication market. KCC is also responsible for arbitration in 
disputes between carriers, and between carriers and users. In 2015, 63 arbitration cases were 
submitte d to the KCC for arbitration (up from 15 submissions in 2012, 12 in 2013, and 16 in 
2014). Among the 63 cases, 42 were dropped, 15 were dismissed, and 6 cases were admitted or 
denied by the KCC.  
4.162.   The main legislation governing the information and communicat ions sector comprises:  
a. the Telecommunications Basic Act (providing the basic telecommunications policy 
framework);  
b. the Telecommunications Business Act (regulating the telecommunications sector); and  
c. the Telecommunications Business Act Enforcement Decree of 2010 (providing the 
standards for wholesale providers and their mandatory services for the implementation 
of a wholesale system, and requirements for services resellers).  
                                                
62 Several mobile virtual network operator s (MVNOs ) are also providing mobile telephone services; 
however, their market shares are not significant.  WT/TPR/S/346 • Republic of Korea  
 
- 144 - 
 
  4.163.   Licensing requirements are set out in the Telecommunications Business Act, which was 
most recently amended in 2013.63 Foreign investment in basic telecommunication services is 
subject to a ceiling of 49%, while non -infrastructure based (resale) services and value -added 
telecom services are fully open to foreign investment. The authoriti es stated that, for basic 
telecommunication services, foreign corporations from certain RTA partner s and which had passed 
the public interest review, are not subject to this investment restriction. The MSIP may prohibit a 
foreign shareholder from becoming the largest individual shareholder (5% or more of shares) in 
KT. 
4.164.   As regards audiovisual services, no more than 20% foreign equity is allowed for Internet 
multimedia broadcast service which provides general service programming or specialized 
programming of news reports (Table 2.3).  
4.165.   Universal service is a basic telecommunication service that is provided to all users at an 
appropriate rate anytime, anywhere through, inter alia , fixed -line, or service rate reduction for 
low-income groups. All telecommunication  carriers have the obligation to provide universal service 
in Korea, or compensate any losses caused by the provision of such service ; the MSIP may exempt 
carriers from this obligation. The authorities stated that in practice, there are companies exempt 
from this obligation.  
4.166.   The MSIP evaluates annually market competition in each service segment, and designates 
the services and service suppliers requiring price approvals. KT, in the local fixed -line telephone 
market, and SK Telecom, in the mobile phone mark et, were subject to price approval by the MSIP. 
Price changes are approved within 30 days, with a possibility of a one -time extension. 
Telecommunication tariffs that do not require MSIP approval need to be notified to the MSIP.  
4.167.   To prevent mobile business operators from engaging in illegal mobile phone subsidy 
competition, the MSIP and the KCC enforced the Mobile Device Distribution Improvement Act in 
October 2014. According to this Act, mobile business operators must disclose the price and 
subsidies of the ir mobile devices, and to those who do not receive subsidies, mobile business 
operators must provide a discount rate corresponding to the subsidy. After the enactment of the 
Act, greater competition pushed the three mobile phone operators to release new po licies in rates 
and services that involved scrapping membership fees (ST), removing agreement and termination 
fees (KT), or lowering full retail price of the iPhone 6 (LG U+).64 Household communication 
expenses continued to drop, reflecting a drop in the fa ctory prices of mobile devices, the release of 
more budget -price devices, competition in rates, and more rational consumption patterns. The 
average monthly communication expenses fell from ₩152,792 in 2013, to ₩150,350 in 2014 and 
₩147,725 in 2015.  
4.168.   The MSI P formulates the scope of interconnection agreements, and sets interconnection 
charges based on a long -run incremental cost methodology. Operators must conclude an 
agreement within 90 days of receiving a request from another operator.  
4.169.   In 2012, Korea revis ed its privacy law to require data breach notification, with further 
revisions in 2014 to increase data breach fines and allow individuals to claim statutory 
compensation. Korea's privacy laws also include the Act on Promotion of Information and 
Communicat ion Network Utilization and Information Protection, and the Personal Information 
Protection Act; the latter has a general notification requirement in the event of a data breach.65 
These privacy laws apply to all telecom -related areas, including Internet ser vices, 
telecommunication services, data services, and coverage of data breaches by computer services.  
Personal information is defined as any information related to persons (privacy, address, etc.). 
Following this, in March 2016, Korea introduced punitive d amages of up to 3 times the amount of 
damages in the Network Act in order to strengthen the remedy for data breach victims.  
                                                
63 Telecommunicat ions Business Act. Viewed at: 
http://www.moleg.go.kr/english/korLawEng?pstSeq=47567 . 
64 KCC (2015).  
65 OECD (2015b).  WT/TPR/S/346 • Republic of Korea  
 
- 145 - 
 
  4.6.3.2   Postal services66 
4.170.   Korea Post's postal services have been growing at a rate of 3.5% in 2013 and 4.3% in 
2014, before it contracted by 2.9% in 2015. Postal services fac e competition from express/courier 
services, which have been growing at an average annual rate of 14.5% from 2004 to 2015.  
4.171.   Korea Post is the  national operator of postal businesses in Korea, in accordance with rules 
and regu lations including the Postal Service Act. Korea Post does not assume regulating functions 
except acceptance of business registration for letter delivery.   
4.172.   Some postal services are reserved for Korea Post: delivery of letters if the weight of each 
letter is  not more than 350 grams and the postage charge for each such letter does not exceed ten 
times the ordinary postal charge prescribed by presidential decree. Registered letters dispatched 
by a state agency or local government are also reserved for Korea Pos t. Apart from these reserved 
services, postal services are open to domestic competition.  According to the Foreign Investment 
Promotion Act, postal business is not open to foreign investment .  
4.173.   Universal postal service, reserved for Korea Post, is defined as : 
a. Letters weighing below two kilograms per item;  
b. Parcels weighing below 20 kilograms per item;  
c. Mail items with value added features including recorded items of the above categories.  
4.174.   Korea Post sets postal rates, in consultation with the Ministry of Strateg y and Finance. 
Consultation is not required for postal rates for domestic and international parcels, Express mail 
services and postal money orders. The authorities indicated that in 2015, Korea Post made a profit 
with 39% of its income linked to postal fin ancial services  and 37% to letter services (Chart 4. 2). 
Chart 4.2 Postal services, 2015  
Letter services
37%
Parcel services
22%Postal financial services
39%Other
2%Chart 4.2     Postal services, 2015
Source:  Data provided by the authorities
 
Source:  Information provided by the authorities.  
4.6.4   Transport services  
4.175.   While seaborne transport is used mainly for cargo a nd freight, air dominates the 
international transport of passengers. Around 95% of international tourists come to Korea by air, 
thus an increase in air routes and seat supply is important for the promotion of tourism in Korea. 
Road dominates domestic trans port. Both road and air transportation are subject to competition 
laws, while the international liner transport segment of maritime transport is exempt.  
                                                
66 UPU online information , "Status and Structures of Postal Entities: Ko rea (Rep.)" . Viewed at: 
http://www.upu.int/fileadmin/documentsFiles/theUpu/statusOfPostalEntities/korEn.pdf . WT/TPR/S/346 • Republic of Korea  
 
- 146 - 
 
  4.6.4.1   Maritime transport  
4.176.   According to UNCTAD data, in 2015, Korea had the world's sixth -largest fleet in 
deadweight terms (4.62% of total dwt) consisting of 80.2 million tonnes (1,618 vessels), of which 
80% (in terms of total tonnage, 843  vessels) were foreign flagged.67 The maritime transport sector 
continued to grow: according to ISL (Institute of Shipping Econ omics and Logistics) figures, the 
country's merchant fleet capacity changed from 51 million gross tonnes in 2011, to 82 million 
gross tonnes in 2015. The sector remains concentrated: the five largest operators controlling 
55.2% of the market in 2015, up fr om 53% in 2011.   
4.177.   The maritime sector is regulated by  the Ministry of Oceans and Fisheries, under the 
Maritime Transport Act, which was amended to include the reinforcement of ship safety 
management following the Sewol Ferry Disaster in 2014. Registration r equirements for general 
carriers include capital stock of ₩1 billion or more, and carrier cargo capacity of 10,000 tonnes or 
more.  
4.178.   Foreign investors face a 50% equity limit in maritime transport, and must enter into joint 
ventures with domestic shipping companies. Cabotage is reserved for Korean vessels, except 
transportation between the Democratic People's Republic of Korea  and the Republic of  Korea: 
foreigners may participate in goods and passenger transport between the Democratic People's 
Republic of Korea  and the Republic of  Korea , as a minority joint -venture  partner with a firm  of the 
Republic of Korea . 
4.179.   As in the previous Review, foreign carriers have national treatment at Korean ports and in 
the ship registration process. The captain and chief engineer of a Korean -flagged vessel must be of 
Korean nationality . For specifically designed vessels, the number of foreigners allowed on board is 
limited to six; these vessels include those transporting materials that significantly affect the 
national economy or national security, e.g. military supplies, petroleum, LNG , coal, etc.  
4.180.   According to UNCTAD's Liner Shipping Connectivity Index (LSCI), which aims at capturing 
an economy's level of integration into the existing liner shipping network by measuring liner 
shipping connectivity, Korea ranks fourth (after China;  Singa pore;  and Hong  Kong,  China).68 The 
LSCI is generated from five components: the number of ships; their total container -carrying 
capacity; the number of companies providing services with their own operated ships; the number 
of services provided; and the size (in TEUs) of the largest ship deployed. Liner shipping companies 
are exempted from competition laws, and their concerted actions are allowed.  
4.181.   The Government continued to make efforts to develop Korea as a logistics and shipping 
hub for North East Asia. To reach these objectives, various tax incentives have been used. For 
example, the voluntary tonnage tax system (TTS) continued to be applied to shipping 
companies.69 The TTS is based on the net tonnage of individual vessels. Under the TTS, qualified 
shipping companies may divide their income into shipping income and non -shipping income. The 
mandatory period for application of the TTS is five years, and companies that opt for it must pay it 
even when they experience operating losses. When the operation profits are generated, the TTS 
allows for a lower effective tax rate than the corporate income tax system. 70 companies 
participated in this system in 2015.  
4.182.   International vessels registered under the Minister of Oceans and Fisheries, and hav ing 
one of the ports in  Jeju-do designated as a port of shipment, benefit from tax breaks relating to 
the acquisition, registration and property taxes.  
4.183.   The Ministry of Oceans and Fisheries administers ports. Ports are state -owned and facilities 
are provided free of rent to the K orea Container Terminal Authority, which in turn rents port 
facilities to private terminal operators. Container throughput reached 25.7 million TEU in 2015, up 
from 21.6 million TEU in 2012.70 Transhipment cargoes reached 10,719,000 TEU in 2015, up from 
6,641,000 TEU in 2011. Busan is the largest port in Korea, and the ninth -largest in the world. Its 
berth productivity increased from 80 container moves per ship/per hour on all vessel sizes in 2012, 
                                                
67 UNCTAD (2015a).  
68 UNCTAD (2015a).  
69 Ministry of Strategy and Finance (2012).  
70 UNCTAD (2015a).  WT/TPR/S/346 • Republic of Korea  
 
- 147 - 
 
  to 102 in 2014.71 Most maritime auxiliary services, including  tug services, freight forwarding, and 
maintenance and repair services are provided by the private sector; pilots must be Korean.  
4.184.   The Government is in the process of expanding port infrastructure to facilitate the 
transport of import and export cargo. It h as been promoting public -private partnership as one of 
the means for the early supply of port infrastructure, notably at Busan, Incheon, 
Pyeongtaek -Dangjin, Ulsan, and Gwangyang, as they were developed and operated by private 
funds. For 31 trading ports, n on-profitable facilities such as seawall, dredging, shore protection, 
and hinterland transportation are provided by the Government, while profitable facilities such as 
container terminals are privately operated.  
4.185.   Port charges remain moderate compared with other ports in the region. Port charges 
include those for vessels (port dues, berth hire, anchorage, and laid -up charges), cargo (wharfage, 
demurrage), passenger terminal rental charges, and exclusive usage charges (warehouse and 
yard).72 The authorities in dicated that the port facility usage fee in Korea is about half that in 
Japan and China. Port charges for imports and exports are the same.   
4.6.4.2   Air transport  
4.186.   In terms of aircraft movements, the number of passengers and the volume of freight, 
international sc heduled flights have been growing faster than the do mestic sub -sector 
(Table  4.22).  
Table 4.22 Air transport, 2011 -15 
 2011  2012  2013  2014  2015  
International scheduled flights  
Aircraft movements  267,022  298,517 320,302  349,006  372,752  
Passengers  41,413,167  46,046,712  48,692,732  54,498,445  59,467,874  
Freight (kg)  2,912,838  2,984,302  3,082,960  3,269,230  3,355,255  
Domestic scheduled flights  
Aircraft movements  147,213  148,765  155,952  165,102  179,336  
Passenge rs 20,357,717  20,526,700  21,471,586  23,845,607  27,453,933  
Freight (kg)  275,431  256,975  246,314  275,964  284,360  
Source:  Korea Civil Aviation Development Association, Aviation Statistics 2015 . 
4.187.   Air transport is regulated under the Aviation Act, by the Minis try of Land, Infrastructure 
and Transport. The current aviation policy aims at: building Korea as an aviation powerhouse 
leading the pan Pacific region; expanding the number of cities and international routes to make 
Korea the largest air transport hub in Asia; expanding the international aviation network by 
negotiating with countries in America and Africa, and pursuing open skies agreements with the EU 
and ASEAN; promoting open skies agreements with Asian countries; increasing the supply capacity 
of low co st carrier services; and establishing the second Area Control Centre  by 2017.73  
4.188.   In 2014, Korea ranked the world's sixteenth - and the fourth -largest country in terms of air 
passenger traffic and freight traffic respectively.  Korea has eight national flag ca rriers: two full 
service carriers (Korean Air and Asiana Airlines), and six low cost carriers (Jeju  Air, Air Busan, 
Jin Air, Eastar Jet, t'way, and Air Seoul), and a cargo carrier Air Incheon. All airlines are privately 
owned.  
4.189.   International air services a re governed by bilateral air services agreements (ASAs), and 
Korea has signed bilateral ASAs with 94  countries (92 in 2011),  including open skies agreements. 
Information on 60 of the ASAs is contained in the Table A4.1. Most ASAs date back nearly 20 years 
and score an Air Liberalization Index (ALI) of under 10 (out of a possible maximum of 50).74 This 
                                                
71 UNCTAD (2015a).  
72 Busan Agency online information. Viewed at: http://www.busanagency.kr/html/portcharge.html . 
73 Ministry of Land, Infrastruct ure and Transport (MOLIT ) online information. Viewed at: 
http://english.molit.go.kr/USR/sectoral/m_29572/dtl.jsp . 
74 ALI index is a synthetic measure of the openness of a given ASA devi sed by the WTO Secretariat for 
the purposes of the GATS -mandated Review of the Annex on Air Transport Services. The value of the ALI 
ranges between 0 for very restrictive agreements, and 50 for very open ones. For more information, see WTO 
document S/C/W/2 70/Add.1.  WT/TPR/S/346 • Republic of Korea  
 
- 148 - 
 
  is largely a reflection of the absence of any 7th freedom or cabotage traffic rights, of a withholding 
clause based on "substantial ownership and effective con trol" and of fairly restrictive pricing and 
capacity clauses in those agreements. Notable exceptions are the ASAs concluded with the United 
States and with Japan (which score an ALI of 28 and 26.5, respectively), essentially because of the 
inclusion of mor e liberal pricing and capacity provisions.  
4.190.   Incheon International Airport is Korea's major gateway ; there are another 14 local 
airports. It is operated and managed by the Incheon International Airport Corporation, a 
government -owned entity. It is a global h ub connecting 186 cities in 54 countries. According to the 
Korea Office of Civil Aviation (KOCA) under the Ministry of Land, Infrastructure and Transport 
(MOLIT), once the third phase expansion project is completed by 2017, Incheon airport is 
expected to e merge as a stronger hub airport for northeast Asia, handling over 
62 million  passengers and 5.8 million tonnes of cargo annually.75  
4.191.   There has been no privatization of the airports in Korea since 2012. All local airports 
remain managed and operated by the K orea Airports Corporation, a government -owned entity.  
4.192.   Cabotage is reserved for domestic carriers. There have been no changes to the framework 
regulating foreign participation in the air transport sector. Foreign ownership of Korean airline 
operators is li mited to less than 50%, and operators must register their aircraft in Korea. Foreign 
investment in air transport supporting activities is allowed, except for aircraft maintenance, repair 
and overhaul, where foreign investment is limited to less than 50% (T able 2.3). National carriers 
may have their aircraft repaired/maintained abroad, but only by those overseas mechanics with 
Designated Overseas Maintenance Mechanic Certificates. There is no monopoly computer 
reservation system (CRS) provider, nor an obliga tion to use a certain CRS supplier. Self -handling, 
mutual handling and/or third -party handling are allowed, and there are no limits to the number of 
ground -handling suppliers at major airports.  
4.193.   Take-off and landing slots are allocated in the order of prior ity, according to slots retained 
from the previous season for scheduled air services, slots used for scheduled air services in the 
previous equivalent and non -equivalent season,  and new slots requested for scheduled and 
non-scheduled air services. The land ing charge at Incheon Airport is: ₩8,600 per tonne for 
international routes, and ₩3,000 per tonne for domestic routes.  
4.6.4.3   Land transport  
4.194.   Domestic transport of passenger and freight is dominated by road (in 2013, 87.5% for 
passenger and 90.8% for freight), f ollowed by railways (12.3% for passenger and 2.3% for 
freight).  
4.195.   Road transport is regulated by the Ministry of Land, Infrastructure and Transport (MOLIT). 
Currently Korea has over 106,414  km of road, with 32 expressways and 51 national highways. 
Road tran sport operators must comply with an economic needs test to obtain licences. The 
Government encourages private investment in road construction, through build -transfer -operate 
(BTO) contracts.  
4.196.   Railway transport is regulated under the Railroad Enterprise Act,  by the Rail Policy Bureau 
within the MOLIT. Train fare changes (including freight rates) must be notified to the MOLIT. 
Railway network operation is managed by the Korea Rail Corporation (Korail), a state -owned 
corporation. The Korea Railway Network Autho rity, a state monopoly and owner of the high -speed 
railways, is responsible for railway construction activity.  
4.197.   All railway operators must be licensed, by the MOLIT, and meet the requirements listed in 
the Railroad Enterprise Act. Foreign enterprises may s upply rail transport services for routes built 
since 1 July 2005, on the condition that they comply with an economic needs test and the licensing 
requirements stipulated in the Railroad Enterprise Act. There are three private companies in the 
rail transpor t sector.  
                                                
75 KOCA (2012).  WT/TPR/S/346 • Republic of Korea  
 
- 149 - 
 
  4.6.5   Distribution services  
4.198.   The distribution services (wholesale and retail trade) contributed to 8.3% of GDP in 2015, 
and accounted for almost 15% of total employment (Table 1.2). Its growth rate went down, from 
6.5% in 2011 to 3% in 2015.  
4.199.   The distr ibution sector is regulated under the Distribution Industries Development Act, 
enacted in 1997 and most recently amended in 2015. According to the amendment, local 
government may order hypermarkets and SSMs (super supermarkets) to restrict business hours o r 
suspend a business day or two days in a month to preserve the tradition and history of the local 
distribution industry, and to protect employees' rights and health.  
4.200.   The distribution sector is also subject to the competition policy and consumer protectio n 
legislation (Section 3). The authorities indicated that there have been no anti -competition cases in 
the distribution sector since 2012.  
4.201.   Foreign entry in trading activities is allowed, except: pharmaceuticals, medical, and 
functional goods; firearms, exp losives, and swords; works of art and antiques; and operation of 
distribution services at public wholesale markets for agricultural, fishery, and livestock products. 
Foreign participants are accorded national treatment.   
4.202.   The MOTIE regulates the distributio n services sector: any person (domestic or foreign) 
intending to open a large store or a SSM in any traditional commerce preservation area must 
register with the local government before commencing their business. A licence is not required. 
Restrictions are  applied on the access of large retailers (super supermarkets) to traditional 
markets.  Local governments may enact ordinances to limit access by large retailers and SSMs to 
traditional markets within a 500 m radius. A 2011 amendment to the Act increased th e area of 
limited SSM access to a maximum radius of 1 km, and the validity of the restrictive rules was 
extended from 3  to 5 years. This regulation is valid until 2020, according to an amendment in 
2015.  
4.6.6   Tourism76 
4.6.6.1   Recent developments  
4.203.   Tourism plays an increa singly important role in Korea's economy, accounting for 5.8% of 
GDP in 2014. The total number of employees in the tourism industry (both direct and indirect) was 
estimated to be 1.6 million,  or around 7% of total employment.  Accommodation and food service  
activities accounted for 2.7% of GDP in 2015 and 8.4% of employment (Table 1.2).  
4.204.   Tourism income was US$18.1 billion in 2014, up by 24% from that of 2013. Tourism 
expenditure was US$19.8 billion, and the tourism deficit was US$1.7 billion, the lowest sinc e 2009. 
Tourism income has been rising, because of the increased shopping activities by inbound tourists. 
The OECD estimated that the effect on production due to the tourism expenditure of international 
tourists was US$38.6 billion in 2014, creating 520,00 0 jobs.  
4.205.   The number of international visitors to Korea reached 14.2 million in 2014, up by 16.6% 
from that of 2013, but then dropped to 13.23 million in 2015 owing to an MERS outbreak 
(Table  4.23). Among all the inbound visitors, 43% (6.1 million) came from  China, followed by 
Japan (16%, 2.3  million visitors). The average expenditure of foreign tourists visiting Korea was 
US$1,606 per person.  
                                                
76 OECD (2016d).  WT/TPR/S/346 • Republic of Korea  
 
- 150 - 
 
  Table 4.23 Tourism enterprises (2014) and employment (2010 -14) 
 Number  of 
establishments  Number of persons employed  
2010 2011 2012 2013 2014 
Tourism 
industries  20,769  186,395  204,579  229,658  227,135  230,334  
 Accommodation 
 services  1,278  60,402  62,783  70,803  63,899  67,465  
 Food and 
 beverage serving 
 industry  5,014  36,725 39,715  41,576  42,150  39,506  
 Travel agencies 
 and other 
 reservation 
 services  12,854  49,928  59,287  69,990  70,574  69,400  
 Sports and 
 recreation  946 28,321  30,156  33,690  36,421  36,633  
 Other  677 11,018  12,638  13,599  14,092  17,330  
Tourism flows 
('000)       
 Inbound tourism        
 Total 
 international 
 arrivals   8,798  9,795  11,140  12,176  14,202  
 Outbound tourism        
 Total international 
 departures   12,488  12,694  13,737  14,846  16,081  
 Domestic tourism        
 Total domestic 
 trips  168,148  156,594  213,468  231,035  227,100  
 Overnight 
 visitors   92,174  71,622  92,289  99,667  98,521  
 Same -day 
 visitors   75,974  84,972  121,180  131,868  128,579  
 Nights in all types 
 of accommodation   263,633  201,976  244,102  257,852  269,268  
Source:  OECD Tourism Stat istics.  
4.6.6.2   Regulatory framework  
4.206.   The tourism sector is regulated by the Ministry of Culture, Sports and Tourism (MCST), and 
its Tourism Policy Office. In accordance with the Framework Act on Tourism, the MCST operates 
and manages a Tourism Promotion and Devel opment Fund. Sources of the Fund include 
government funds, profits from the casino industry, a departure tax on Korean tourists going 
abroad, and profits from fund operation. The Fund is used for: constructing and repairing tourism 
facilities; securing and  repairing transportation; constructing and repairing infrastructure of 
tourism related businesses; subsidizing corporations in charge of examination and research of 
tourism policies; and other tourism promotion activities. Total expenditure of the Fund re ached 
US$857.7 million in 2014 (excluding operating costs). Of this, 56% was allocated to loans 
supporting the expansion of tourism facilities and the operation of tourism enterprises, and 44% 
was allocated to support the tourism promotion infrastructure ( US$67.1 million), the tourism 
industry promotion activities (US$99.9 million), and projects to attract foreign tourists 
(US$205.6  million).  
4.207.   The Government set the following objectives to enhance tourism competitiveness and 
create jobs: develop a unique Kor ean-style tourism, establish advanced policies and infrastructure 
systems, conduct strategic marketing management, enhance tourism service quality, facilitate 
development and investment in human resources, and increase demand for domestic tourism. 
More spe cifically, the Government has been focusing on: supporting the destination branding of 
major local tourism products, exempting visa fees and facilitating multiple entry visas, increasing 
air connectivity, implementing differentiated regional marketing stra tegies, marketing the 
Pyeongchang Winter Olympics 2018, improving policies on shared accommodation, and 
strengthening interpretation of tour guides.  
 WT/TPR/S/346 • Republic of Korea  
 
- 151 - 
 
  REFERENCES  
 
ABB (2013), Energy Efficiency Report 2013 – South Korea . Viewed at: 
https://library.e.abb.com/public/557d50223ed20a76c1257beb0044f3bc/South%20Korea.pdf . 
 
Asian Development Bank (2016), Asian Development Outlook 2016 – Asia's Potential Growth , 
March.  Viewed at: http://www.adb.org/publications/asian -development -outlook -2016-asia-
potential -growth . 
 
Asia-Pacific Economic Cooperation Economic Committee (20 15), 2015 APEC Economic Policy 
Report - Structural Reform and Innovation , November. Viewed at: 
http://publications.apec.org/publication -detail.php?pub_id=1686 . 
 
Bank of Korea ( 2015), Monetary Policy Report (November 2015) , 30 December. Viewed at: 
http://eng.bok.or.kr/broadcast.action?menuNaviId=628 . 
 
Business Software Alliance (2014), The Compliance Gap - BSA G lobal Software Survey , June. 
Viewed at: http://globalstudy.bsa.org/2013/ . 
 
EIU (2015), Country Commerce South Korea , London, August. Viewed at: 
http://country.eiu.com/FileHandler.ashx?issue_id=353487019&mode=pdf . 
 
EIU (2016), Industry Report – Financial Services – South Korea , 1st Quarter 2016, London, 
February. Viewed at: http://www.eiu.com/FileHandler.ashx?issue_id=1543981338&mode=pdf . 
 
European Commission (2014), European Commission Directorate -General for Trade 11th Report on 
Potentially Trade -Restrictive Measures Identified in the Context of t he Financial and Economic 
Crisis - 1 June 2013 -30 June 2014 , 13 November. Viewed at: 
http://trade.ec.europa.eu/doclib/docs/2014/november/tradoc_152872.pdf . 
 
Foreign Inves tment Ombudsman (2016), Annual Report 2015. V iewed at: 
http://ombudsman.kotra.or.kr/common.FileDownload.do?file_id=FILE_000000000000346 . 
 
Horj, Alin (2015), Republic of Korea's Participation in Global Value Chains: How to Increase 
Forward Participation , published at the Paul H. Nitze School of Advanced International 
Studies/Johns Hopkins University SAIS U.S. -Korea Yearbook 2014. Viewed at: 
http://uskoreainstitute.org/academics/sais -us-korea -yearbook/2014yearbook/ . 
 
IEA (2013 ), Energy Policies of IEA Countries – the Republic of Korea, 2012 Review . Viewed at: 
https://www.iea.org/publications/freepublications/publication/Korea2012_free.pdf . 
 
IMF (2015), Republic of Korea – Staff Report for the 2015 Article IV Consultation , 23 April,  
Washington D.C. Viewed at: http://www.imf.org/external/pubs/ft/scr/2015/cr15130.pdf . 
 
ITU (2015), Measuring the Information Society Report 2015 , Geneva. Viewed at: 
http://www.itu.int/en/ITU -D/Statistics/Documents/publications/misr2015/MISR2015 -w5.pdf . 
 
KCC (2015), Annual Report 2014 . Viewed at: 
http://eng.kcc.go.kr/user.do?boardId=1053&page=E02020000&dc=E02020000 . 
 
KDB Bank (2015), 2014 Annual Report . Viewed at: https://www.kdb.co.kr/ih/wcms.do . 
 
KOCA  (2012), Korea State Profile. Viewed at: http://koca.go.kr/uploads/20130503101559125.pdf . 
 
Korea Customs Service (2014), Korea Customs e -Clearance System – UNIPASS . Viewed at: 
http://www.customs.go.kr/download/eng/UNIPASS_2014_SPA_KCS_eng.pdf . 
 
Korea Customs Service (2012), Utilization Guide For KORUS RTA/FTA , July. Viewed at: 
http://www.customs.go.kr/kcshome/cop/bbs/selectBoard.do?bbsId=BBSMSTR_1379&nttId=2&lay
outMenuNo=23265 &siteId=engportal&searchCtgry=&searchCnd=&searchWrd=&recordCountPerPa
ge=10 . 
 WT/TPR/S/346 • Republic of Korea  
 
- 152 - 
 
  Korea EXIM Bank (2015), Annual Report 2014 – Trusted Partner for Global Takeoff . Viewed at: 
https://www.koreaexim.go.kr/site/program/board/basicboard/list?boardtypeid=82&phototype=list
&menuid=002001006004 . 
 
Korea Fair Trade Commission (2015), Statistical Yearbook of 2014 , 9 April. Viewed at: 
http://eng.ftc.go.kr/bbs.do?command=getList&type_cd=51&pageId=0303 . 
 
Korea Fair Trade Commission (2016), 2015 Annual Report , 14 March. Viewed at: 
http://eng.ftc.go.kr/bbs.do?command=getList&type_cd=53&pageId=0301 . 
 
Korea Information Society Development Institute (2015), 2015 ICT Industry Outlook of Korea . 
Viewed at: https://www.kisdi.re.kr/kisdi/upload/attach/Outlook_2015.pdf .  
 
Korea Information Society Development Institute (2016), 2016 ICT Industry Outlook of Korea . 
Viewed at: https://www.kisdi.re.kr/kisdi/upload/attach/Outlook_2016.pdf . 
 
Korea Trade -Investment Promotion Agency (2015), Doing Business in Korea , 24 September. 
Viewed at: 
http://www.investkorea.org/en/published/publications.do?mode=view&articleNo=71376 . 
 
Korean Intellectual Property Office (2014), Annual Report 2013 , April. Viewed at: 
http://kipo.go.kr/upload/en/download/annualreport_2013.pdf . 
 
Korean Intellectual Property Office (2015), Annual Report 2014 , June. Viewed at:  
http://kipo.go.kr/upload/en /download/annualreport_2014.pdf . 
 
KOTRA (2015),  Doing Business in Korea , 24 September. Viewed at: 
http://www.investkorea.org/en/published/publications.do?mode =view&articleNo=71376 . 
 
Ministry of Culture, Sports and Tourism/Korea Copyright Commission (2014), 2013 Annual Report 
on Copyright in Korea , October. Viewed at: 
http://www.copyright.o r.kr/eng/doc/activities/2013AR.pdf . 
 
Ministry of Culture, Sports and Tourism/Korea Copyright Commission (2015), 2014 Annual Report 
on Copyright in Korea , Seoul, November.  
 
Ministry of Food and Drug Safety (2013), 2013 MFDS Report , Seoul, December.  
 
Minist ry of Strategy and Finance (2012), 2012 Korean Taxation . Viewed at: 
https://www.nts.go.kr/eng/data/KOREANTAXATION2012.pdf . 
 
Ministry of Strategy and Finance (2015), Korean Taxation . View ed at: 
http://english.mosf.go.kr/upload/eco/2015/08/FILE_IG9I80_20150813161146_1.pdf . 
 
MSIP and KISA (2014), Korea Internet White Paper . Viewed at: 
http://isis.kisa.or.kr/eng/ebook/EngWhitePaper2014.pdf . 
 
NIPA (2012), Korean IT Achievements in 2012 . Viewed at: 
http://www.nipa.kr/eng/boardView.it?boardNo=110&contentNo=19&page=1#.Vwy4n08aBok . 
 
OECD (2014), OECD Economic Surveys: Korea , June. Viewed at: 
http://www.oecd.org/eco/su rveys/Overview_Korea_2014.pdf . 
 
OECD (2015a), Agricultural Policy Monitoring and Evaluation 2015 , 14 August, Paris. Viewed at: 
http://www.oecd -
ilibrary.org/docserver/download/5115081e.pdf?expires=1467983050&id=id&accname=ocid570152
74&checksum=37CCFF98D2B9117D8CC9727AB44A59F6 . 
 
OECD (2015b), OECD Digital Economy Outlook 2015 , OECD Publishing, Pa ris. Viewed at: 
http://www.oecd -ilibrary.org/science -and-technology/oecd -digital -economy -outlook -
2015_9789264232440 -en. 
 WT/TPR/S/346 • Republic of Korea  
 
- 153 - 
 
  OECD (2015c), OECD Economic Outlook , Volume 2015, Issue 2, 2 December, Paris. Viewed at: 
http://www.oecd -ilibrary.org/economics/oecd -economic -outlook -volume -2015-issue-
2/korea_eco_outlook -v2015 -2-29-en;jsessionid=2eti9ud0nj7ql.x -oecd-live-02. 
 
OECD (2015d), OECD Regulatory Policy Outlook 2015 .  
 
OECD (2015e), OECD Review of Fisheries – Policies and Summary of Statistics . Viewed at: 
http://www.oecd -
ilibrary.org/docserver/download/5315021e.pdf?expires =1454930334&id=id&accname=ocid195767
&checksum=81A6140DF792200887D2CC4C483D9028 .  
 
OECD (2015f), Peer Review of the Korean Shipbuilding Industry and Related Government Policies , 
13 January. Viewed at: 
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=c/wp6(2014)10/final&doc
language=en . 
 
OECD (2015g), Trade Facilitation Indicators Country Note – Korea , Paris. Viewed at: 
http://compareyourcountry.org/trade -facilitation . 
 
OECD (2015h), Trade Facilitation Indicators: Asia -Pacific Economic Cooperation (APEC) , August. 
Viewed at: http://www.oecd.org/tad/facilitation/oecd -tfi-apec-july-2015.pdf . 
 
OECD (2016a), 2016 Economic Review – Korea , ECO/EDR(2016)6, 17 February, Paris.  
 
OECD (2016b), Agricultural Policy Monitoring and Evaluation 2016. Viewed at: 
http://www.oecd.org/tad/agricultural -policy -monitoring -and-evaluation -22217371.htm . 
 
OECD (2016c), OECD Economic Surveys: Korea 2016 , 16 May . Viewed at: http://www.oecd -
ilibrary.org/docserver/download/1016141e.pdf?expires=1465299060&i d=id&accname=ocid195767
&checksum=5044169EF640F187385F726FA31D5FCE . 
 
OECD (2016d), OECD Tourism Trends and Policies 2016 – Korea.  Viewed at: http://www.oecd -
ilibrary.org/industry -and-services/oecd -tourism -trends -and-policies -2016/korea_tour -2016-26-en. 
 
OECD (2016e), The Korean Public Procurement Service: Innovating for Effectiveness , OECD Public 
Governance Reviews, 15 January, Pari s. Viewed at:  http://www.oecd -
ilibrary.org/docserver/download/4215251e.pdf?expires=1467982595& id=id&accname=ocid195767
&checksum=9FCBC75D465E7DBC2EDE68D5DAF86314 . 
 
OECD/International Energy Agency (2012), Energy Policies of IEA Countries – The Republic of 
Korea – 2012 Review , Paris. Viewed at: 
https://www.iea.org/publications/freepublications/publication/Korea2012_free.pdf . 
 
OECD/Korea Policy Centre Competition Programme (2014), 2014 Annual Report . Viewed at: 
http://www.oecd.org/daf/competition/OECD -KPC-Competition -2014-Annual -Report.pdf . 
 
Oxford Metrica (2015), FM Global Resilience Index - Annual Report 2015 . Viewed at: 
https://www.fmglobal.com/assets/pdf/Resilience_Methodology.pdf . 
 
Public Procurement Service (2014), PPS Annual Report 2013 , 19 September. Viewed at: 
http://www.pps.go.kr/bbs/selectBoard.do?boardSeqNo=19&pageIndex=1&boardId=ENG005 . 
 
Public Procurement Service (2015), PPS Annual Report 2014 , 4 May. Viewed at: 
http://www.pps.go.kr/bbs/selectBoard.do?boardSeqNo=21&pageIndex=1&boardId=ENG005 . 
 
UN (2015), E -Government Survey 2014. Viewed at: 
https://publicadministration.un.org/egovkb/Portals/egovkb/Documents/un/2014 -Survey/E -
Gov_Complete_Survey -2014.pdf . 
 
UNCTAD (2015a), Review of Maritime Transport 2015 , Geneva, October. Viewed at: 
http://unctad.org/en/PublicationsLibrary/rmt2015_en.pdf . 
 WT/TPR/S/346 • Republic of Korea  
 
- 154 - 
 
  UNCTAD (2015b), World Investment Report 2015 – Reforming International Investment 
Governance , New York and Geneva. Viewed at: 
http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1245 . 
 
UNCTAD (2016), World Investment Report 2016 – Investor Nationality: Policy Challenges , 
New York and Geneva. Viewed at: http://unctad.org/en/PublicationsLibrary/wir2016_en.pdf . 
 
UNDP (2013), Human Development Report 2013 – The Rise of the South: Human Progress in a 
Diverse World . Viewed at: http://hdr.undp.org/en/2013 -report . 
 
UNDP (2015), Human Development Report 2015 – Work for Human Development . Viewed at: 
http://report.hdr.undp.org/ . 
 
United Nations Economic a nd Social Commission for Asia and the Pacific (2015), Asia-Pacific Trade 
and Investment Report 2015: Supporting Participation in Value Chains , 2 November. Viewed at: 
http://www.unescap.org/resources/asia -pacific -trade-and-investment -report -2015-supporting -
participation -value -chains . 
 
United Nations Economic and Social Commission for Western Asia (ESCWA) (2011), Key factors in 
establishing single windows for handling import/export procedures and formalities: Trade 
facilitation and the single window, document E/ESCWA/EDGD/2011/5, 10 November.  
 
USDA (2015), Korea, Republic of – 2015 Seafood Products Market Brief . Viewed at: 
http://gain.fas.usda.gov/Recent%20GAIN%20Publications/2015%20Seafood%20Products%20Mar
ket%20Brief_ Seoul%20ATO_Korea%20 -%20Republic%20of_7 -24-2015.pdf . 
 
USDA (2016), 2016 Korea's adjustment and quota tariffs schedule . Viewed at: 
http://gain.fas.usda.gov/Recent%20GAIN%20Publications/2016%20Korea%27s%20Adjustment%
20and%20Quota%20Tariffs%20Schedule_Seoul_Korea%20 -%20Republic%20of_1 -26-2016.pdf . 
 
USDA Foreign Agricultural Service  (2014), Korean Government's Press Release of Rice 
Tariffication , GAIN report number KS1443, Seoul, 23 October. Viewed at: 
http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Korean%20Governments%20Press%20
Release%20of%20Rice%20Tariffication_Seoul_Korea%20 -%20Republic%20of_10 -23-2014.pdf . 
 
USDA Foreign Agricultural Service ( 2015a), 2015 Korea's Adjustment and Quota Tariffs Schedule , 
GAIN report number KS1505, 10 February. Viewed at: 
http://gain.fas.usda.gov/Recent%20GAIN%20Publications/2015%20Korea's%20Adjustment%20a
nd%20Quota%20Tariffs%20Schedule_Seoul_Korea%20 -%20Republic%20of_2 -10-2015.pdf . 
 
USDA Foreign Agricultural Service (2015b), Korea - Republ ic of, Organic Products Market Brief 
Update , Global Agricultural Network Report Number: KS1515, 15 January. Viewed at: 
http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Organic%20Products%20Market%20Bri
ef%20Update_Seoul%20ATO_Korea%20 -%20Republic%20of_4 -15-2015.pdf . 
 
USDA Foreign Agricultural Service (2015c), Korea - Republic of – Agricult ural Biotechnology 
Annual , Global Agricultural Network Report Number: KS1526, 15 July. Viewed at: 
http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Agricultural%20Biotechnology%20Annu
al_Seoul_Korea%20 -%20Republic%20of_7 -15-2015.pdf . 
 
USDA Foreign Agricultural Service (2015d), Korea - Republic of, Food and Agricultural Import 
Regulations and Standards – Narrative – FAIRS Country Report , Global Agricultural Network 
Report Number: KS1551, 29 December. Viewed at: 
http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Food%20and%20Agricultural%20Impor
t%20Regulations%20and%20Standards%20 -%20Narrative_Seoul_Korea%20 -
%20Republic%20of_12 -29-2015.pdf . 
 
USTR (2015), 2015 National Trade Estimate Report on Foreign Trade Barriers . Viewed at: 
https://ustr.gov/sites/default/files/2015%20NTE%20Combined.pdf . 
USTR (2016), 2016 National Trade Estimate Report on Foreign Trade Barriers . Viewed at: 
https://ustr.gov/about -us/policy -offices/press -office/reports -and-publications/2016 /2016 -national -
trade -estimate . WT/TPR/S/346 • Republic of Korea  
 
- 155 - 
 
   
WEF (2014), The Global Enabling Trade Report 2014 – Insight Report , Geneva. Viewed at: 
http://www3.weforum.org/docs/WEF_GlobalEnablingTrad e_Report_2014.pdf .  
 
WEF (2015a), The Global Competitiveness Report 2015 –2016, 22 September, Geneva. Viewed at: 
https://www.weforum.org/reports/global -competitiveness -report -2015. 
 
WEF (2015b), The Global Information Technology Report 2015 , Geneva. Viewed at: 
http://www3.weforum.org/docs/WEF_Global_IT_Report_2015.pdf . 
 
World Bank (2016a), Doing Busine ss 2016: Measuring Regulatory Quality and Efficiency – 
Economy Profile 2016 Korea, Rep. , Washington, DC. Viewed at: 
http://www.doingbusiness.org/data/exploreeconomies/~/media/giawb/doing%20business/docume
nts/profiles/country/KOR.pdf?ver=3 . 
 
World Bank (2016b), Improving Court Efficiency: the Republic of Korea's e -Court Experience . 
Viewed at: 
http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Annual -
Reports/English/DB14 -Chapters/DB14 -Improving -court-efficiency.pdf .  
 
WTO (2012), Trade Policy Review: Korea , Geneva.  
 
 
 WT/TPR/S/346 • Republic of Korea  
 
- 156 - 
 
  5  APPENDIX TABLES  
Table A1. 1 Merchandise expor ts by group of products, 2011 -14 
  2011  2012  2013  2014  
Total exports (US$ billion)  555.2  547.9  559.6  573.1  
 (% of total)  
Total primary products  14.1 14.9 13.8 13.3 
 Agriculture  2.3 2.3 2.1 2.1 
 Food 1.1 1.2 1.1 1.1 
 Agricultural raw material  1.2 1.1 1.0 0.9 
 Mining  11.8 12.6 11.6 11.2 
 Ores and other minerals  0.3 0.2 0.2 0.2 
 Non-ferrous metals  2.0 1.9 1.8 1.8 
 Fuels 9.6 10.5 9.7 9.2 
 334 Petroleum oils, other than crude  9.1 10.0 9.1 8.6 
Manufactures  85.3 84.4 85.9 86.4 
 Iron and steel  5.7 5.5 4.8 5.1 
 Chemicals  10.9 11.2 11.8 11.8 
 5112 Cyclic hydrocarbons  1.4 1.7 1.9 1.9 
 5751 Propylene polymers or of other olefins  0.7 0.7 0.8 0.8 
 Other semi -manufactures  3.9 4.2 4.1 4.2 
 Machinery and transport equipment  54.1 52.5 54.6 55.0 
 Power generating machines  0.7 0.9 0.7 0.7 
 Other non -electrical machinery  7.1 7.3 7.3 7.5 
 7284 Machinery and appliances for particular industries, n.e.s.  1.1 0.9 1.1 1.1 
 7232 Mechanical shovels, etc., self -propelled  0.8 0.9 0.7 0.7 
 Office machines & telecommunication equipment  17.3 16.4 18.2 19.0 
 7764 Electronic integrated circuits and microassemblies  7.1 7.5 8.4 9.0 
 7649 Parts and accessories for apparatus of division 76  3.2 2.7 3.5 3.7 
 7643 Radio or television transmission apparatus  2.7 2.2 2.4 2.2 
 7599 Parts and accessories of 751.1, 751.2, 751.9 and 752  0.9 0.6 0.8 1.0 
 7763 Diodes, transistors, etc.  0.9 0.9 0.9 0.8 
 Other electrical machines  5.7 6.9 7.6 6.9 
 7788 Electrical machinery and equipment, n.e.s.  0.7 1.1 1.3 1.0 
 7781 Batteries and electric accumulators, and parts  0.9 0.9 0.8 0.8 
 7722 Printed circuits  0.6 0.8 0.9 0.8 
 7787 Electrical machines/ apparatus with individual functions, 
 n.e.s.  0.4 0.5 0.8 0.7 
 7731 Insulated wire, cable etc.; optical fibre cables  0.6 0.7 0.6 0.7 
 Automotive products  12.5 13.1 13.3 13.2 
 7812 Motor vehicles for the transport of persons, n.e.s.  7.4 7.7 7.9 7.8 
 7843 Other motor vehicle parts and accessories of 722, 781 to 
 783 3.9 4.1 4.3 4.2 
 Other transport equipment  10.8 8.0 7.5 7.8 
 7932 Ships, boats, etc. (excl. pleasure craft, tugs, etc.)  6.9 5.6 4.4 3.8 
 7935 Special purpose vessels; floating docks  2.9 1.3 2.0 2.8 
 Textiles  2.2 2.2 2.2 2.1 
 Clothing  0.3 0.3 0.4 0.4 
 Other consumer goods  8.1 8.4 8.1 7.9 
 8719 Liquid crystal devices, n.e.s.; lasers (excl. laser diodes)  5.0 5.0 4.5 4.3 
Other  0.6 0.6 0.3 0.3 
 Gold 0.6 0.6 0.2 0.2 
Source : UNSD, Comtrade da tabase (SITC Rev.3).  WT/TPR/S/ 346 • Republic of Korea  
 
- 157 - 
 
  Table A1. 2 Merchandise impor ts by group of products, 2011 -14 
  2011  2012  2013  2014  
Total imports (US$ billion)  524.4  519.6  515.6  525.6  
 (% of total)  
Total primary products  48.6 50.1 48.7 47.2 
 Agricultu re 6.6 6.4 6.5 6.7 
 Food 4.8 4.8 4.9 5.1 
 Agricultural raw material  1.8 1.6 1.6 1.5 
 Mining  42.0 43.7 42.2 40.6 
 Ores and other minerals  6.1 5.6 4.9 4.8 
 2815 Iron ores and concentrates, not agglomerated  1.9 1.6 1.5 1.5 
 2831 Copper ores and concentr ates 1.1 0.9 0.8 0.7 
 2882 Other non -ferrous base metal waste and scrap, n.e.s.  0.6 0.6 0.6 0.6 
 2823 Other ferrous waste and scrap  0.8 0.8 0.7 0.5 
 Non-ferrous metals  2.7 2.3 2.3 2.3 
 6841 Aluminium and aluminium alloys, unwrought  0.6 0.6 0.6 0.6 
 6821 Copper anodes; alloys; unwrought  0.7 0.6 0.5 0.6 
 Fuels 33.1 35.8 35.0 33.4 
 3330 Crude oils of petroleum and bituminous minerals  19.2 20.8 19.3 18.1 
 3431 Natural gas, liquefied  4.5 5.3 5.9 6.0 
 334 Petroleum oils, other than crude  4.2 4.9 5.6 5.6 
 3212 Other coal, whether or not pulverized, not agglomerated  3.1 2.8 2.3 2.1 
Manufactures  51.0 49.5 51.0 52.4 
 Iron and steel  4.9 4.1 3.7 4.0 
 6732 Flat, hot -rolled products, iron/steel, not 
 clad/plated/coated  0.9 0.7 0.4 0.5 
 Chemicals  9.1 9.1 9.1 9.0 
 5429 Medicaments, n.e.s.  0.4 0.5 0.5 0.5 
 Other semi -manufactures  3.5 3.6 3.7 3.7 
 Machinery and transport equipment  25.4 24.6 26.1 27.0 
 Power generating machines  0.8 0.8 1.2 1.0 
 Other non -electrical machinery  6.7 6.4 6.4 6.7 
 7284 Machinery a nd appliances for particular industries, n.e.s.  2.4 1.9 1.6 1.9 
 Office machines & telecommunication equipment  9.9 9.3 10.0 11.0 
 7764 Electronic integrated circuits and microassemblies  4.8 4.9 5.4 5.7 
 7649 Parts and accessories for apparatus of divisi on 76  0.8 0.6 0.8 1.3 
 7763 Diodes, transistors, etc.  0.8 0.9 0.9 0.8 
 Other electrical machines  4.3 4.5 5.0 4.3 
 7731 Insulated wire, cable etc.; optical fibre cables  0.5 0.5 0.5 0.5 
 Automotive products  1.9 1.9 2.1 2.5 
 7812 Motor vehicles for the t ransport of persons, n.e.s.  0.7 0.9 1.1 1.5 
 7843 Other motor vehicle parts and accessories of 722, 781 to 
 783 0.8 0.7 0.7 0.7 
 Other transport equipment  1.8 1.7 1.5 1.5 
 Textiles  1.1 0.9 1.0 1.0 
 Clothing  1.2 1.2 1.5 1.6 
 Other consumer goods  5.8 6.0 5.9 6.2 
 8719 Liquid crystal devices, n.e.s.; lasers (excl. laser diodes)  0.6 0.6 0.5 0.6 
Other  0.4 0.4 0.3 0.3 
 Gold 0.3 0.3 0.3 0.3 
Source : UNSD, Comtrade database (SITC Rev.3).  WT/TPR/S/346 • Republic of Korea  
 
- 158 - 
 
  Table A1. 3 Merchandise exports by destina tion, 2011 -14 
  2011  2012  2013  2014  
Total exports (US$ billion)  555.2  547.9  559.6  573.1  
 (% of total)  
 America  18.2 18.3 18.5 19.4 
  United States  10.2 10.7 11.1 12.3 
  Other America  8.1 7.5 7.4 7.1 
   Mexico  1.8 1.7 1.7 1.9 
   Brazil  2.1 1.9 1.7 1.6 
 Europe  11.5 10.2 10.2 10.7 
  EU-28 10.2 9.1 8.8 9.1 
   Germany  1.7 1.4 1.4 1.3 
   United Kingdom  1.0 0.9 0.9 1.1 
   The Netherlands  0.8 0.9 1.0 0.9 
  EFTA 0.3 0.3 0.4 0.4 
  Other Europe  0.9 0.8 1.0 1.2 
   Turkey  0.9 0.8 1.0 1.2 
 Commonwealth of  Independent States (CIS)  2.6 2.9 2.8 2.5 
   Russian Federation  1.9 2.0 2.0 1.8 
 Africa  3.3 2.6 2.7 2.6 
 Middle East  5.2 5.8 5.0 5.2 
   Saudi Arabia  1.3 1.7 1.6 1.4 
   United Arab Emirates  1.3 1.3 1.0 1.3 
 Asia/Pacific  59.1 60.3 60.7 59.7 
   China  24.2 24.5 26.1 25.4 
   Japan  7.1 7.1 6.2 5.6 
   Hong Kong, China  5.6 6.0 5.0 4.8 
   Singapore  3.8 4.2 4.0 4.2 
   Viet Nam  2.4 2.9 3.8 3.9 
   Chinese Taipei  3.3 2.7 2.8 2.6 
   India 2.3 2.2 2.0 2.2 
   Indonesia  2.4 2.5 2.1 2.0 
   Australia  1.5 1.7 1.7 1.8 
   Philippines  1.3 1.5 1.6 1.8 
   Marshall Islands  1.3 0.7 1.3 1.4 
   Thailand  1.5 1.5 1.4 1.3 
   Malaysia  1.1 1.4 1.5 1.3 
 Other  0.1 0.0 0.0 0.0 
Memorandum      
  APEC 69.9 72.3 72.9 72.5 
  ASEAN  12.9 14.4 14.7 14.8 
Source:  UNSD, Comtrade da tabase.  WT/TPR/S/ 346 • Republic of Korea  
 
- 159 - 
 
  Table A1. 4 Merchandise imports by origin, 2011 -14 
  2011  2012  2013  2014  
Total imports (US$ billion)  524.4  519.6  515.6  525.6  
 (% of total)  
 America  13.6 13.1 12.5 13.1 
 United States  8.5 8.4 8.1 8.7 
 Other America  5.1 4.7 4.4 4.5 
 Canada  1.3 1.0 0.9 1.0 
 Brazil  1.2 1.2 1.1 0.9 
 Europe  10.2 11.4 12.3 13.1 
 EU-28 9.0 9.7 10.9 11.9 
 Germany  3.2 3.4 3.8 4.1 
 United Kingdom  0.7 1.2 1.2 1.4 
 France  1.2 0.9 1.2 1.3 
 Italy 0.8 0.9 1.0 1.2 
 EFTA 1.0 1.5 1.2 1.1 
 Other Europe  0.2 0.2 0.2 0.1 
 Commonwealth of Independent States (CIS)  2.3 2.4 2.4 3.3 
 Russian Federation  2.1 2.2 2.2 3.0 
 Africa  1.3 1.5 1.7 2.2 
 Middle East  22.5 24.2 23.9 22.0 
 Saudi Arabia  7.1 7.6 7.3 7.0 
 Qatar  4.0 4.9 5.0 4.9 
 Kuwait  3.2 3.5 3.6 3.2 
 United Arab Emirates  2.8 2.9 3.5 3.1 
 Iraq 1.7 2.0 1.8 1.3 
 Asia/Pacific  50.0 47.4 47.2 46.3 
 China  16.5 15.5 16.1 17.1 
 Japan  13.0 12.4 11.6 10.2 
 Australia  5.0 4.4 4.0 3.9 
 Chinese Taipei  2.8 2.7 2.8 3.0 
 Indonesia  3.3 3.0 2.6 2.3 
 Singap ore 1.7 1.9 2.0 2.2 
 Malaysia  2.0 1.9 2.2 2.1 
 Viet Nam  1.0 1.1 1.4 1.5 
 Thailand  1.0 1.0 1.0 1.0 
 India 1.5 1.3 1.2 1.0 
Memorandum      
APEC 61.8 59.0 58.5 59.4 
ASEAN  10.1 10.0 10.3 10.2 
Source : UNSD, Comtrade database.  WT/TPR/S/346 • Republic of Korea  
 
- 160 - 
 
  Table A2. 1 Notifications to the WTO, June 2012 -19 July  2016  
Agreement/Article  Requirement  Symbol and date of latest 
notification  
Agreement on Agriculture  
Article 18.2  Domestic support (DS:1)  G/AG/N/KOR/53, 20/01/2015  
Article 18.2  Market access, adm inistration of tariff and 
other quota commitments (MA:1)  G/AG/N/KOR/51, 09/01/2015  
Article 18.2  Market access, imports under tariff quotas 
(MA:2)  G/AG/N/KOR/50, 09/01/2015  
G/AG/N/KOR/48, 28/02/2013  
Article 18.3  New or modified domestic support 
measures e xempt from reduction (DS:2)  G/AG/N/KOR/52, 19/01/2015  
Articles 5.7 and 18.2  
 
 
Article 5.7  Market access, special safeguard (MA:5)  
 
 
Market access, special safeguard (MA:3)  G/AG/N/KOR/55, 18/07/2016  
G/AG/N/KOR/49, 08/01/2015  
G/AG/N/KOR/47, 25/01/2013  
G/AG/ N/KOR/54, 08/07/2016  
General Agreement on Trade in Services  
Article V:7(a)  Notification  of regional trade agreement  
 S/C/N/855, WT/REG367/N/1, 
04/01/2016  
S/C/N/789, WT/REG362/N/1, 
20/01/2015  
S/C/N/786, WT/REG359/N/1, 
22/12/2014  
Article III.4 and/or 
IV:2(1) Contact enquiry points  S/ENQ/78/Rev.16, 22/04/2016  
GATT 1994  
Article XXIV:7(a)  Notification  of regional trade agreement  
 S/C/N/861, WT/REG371/N/1, 
10/03/2016  
S/C/N/854, WT/REG370/N/1, 
02/03/2016  
S/C/N/855, WT/REG367/N/1, 
04/01/2016  
S/C/N/789, WT/REG 362/N/1, 
20/01/2015  
S/C/N/786, WT/REG359/N/1, 
22/12/2014  
WT/REG339/N/1, 1/05/2013  
Agreement on the Implementation of Article  VI of the GATT 1994 (anti -dumping)  
Article 16.4  Anti-dumping actions (ad hoc)  G/ADP/N/282, 23/02/2016  
G/ADP/N/281, 21/01/2016  
G/ADP/N/279, 18/01/2016  
G/ADP/N/277, 15/10/2015  
G/ADP/N/270, 16/04/2015  
G/ADP/N/268, 20/02/2015  
G/ADP/N/266, 18/12/2014  
G/ADP/N/263, 15/10/2014  
G/ADP/N/254, 17/02/2014  
G/ADP/N/250, 15/11/2013  
G/ADP/N/247, 13/09/2013  
G/ADP/N/239, 18/02/2013  
G/ADP/N/232, 10/08 /2012  
G/ADP/N/229, 13/06/2012  
 Anti-dumping actions (taken within the 
preceding 6 months)  G/ADP/N/280/KOR, 06/04/2016  
G/ADP/N/272/KOR, 19/10/2015  
G/ADP/N/265/KOR, 09/02/2015  
G/ADP/N/259/KOR, 10/09/2014  
G/ADP/N/252/KOR, 04/03/2014  
G/ADP/N/244/KOR, 02/08/2 013 
G/ADP/N/237/KOR, 04/02/2013  
G/ADP/N/230/KOR, 06/08/2012  
GATT 1994  
Article XVII:4(a)  State trading activities  G/STR/N/16/KOR, 14/07/2016  
G/STR/N/15/KOR, 17/10/2014  
G/STR/N/14/KOR, 14/09/2012  
Agreement on Import Licensing  
Article 7.3  Replies to quest ionnaire  G/LIC/N/3/KOR/11, 30/10/2015  
Decision on Notification Procedures for Quantitative Restrictions  
G/L/59  Quantitative restrictions  G/MA/QR/N/KOR/1, 29/10/2012  
Agreement on Rules of Origin  
Paragraph 4 of Annex Preferential rules of origin  G/RO /N/138, 11/04/2016  WT/TPR/S/ 346 • Republic of Korea  
 
- 161 - 
 
  Agreement/Article  Requirement  Symbol and date of latest 
notification  
II G/RO/N/136, 11/04/2016  
G/RO/N/133, 02/10/2015  
G/RO/N/104, 19/09/2013  
Agreement on Subsidies and Countervailing Measures  
Article XVI:1, Article 
25 Subsidies  G/SCM/N/284/KOR, 06/07/2015  
G/SCM/N/253/KOR, 06/11/2013  
Services LDC waiver  
WT/L/847  Preferential treatment to services and 
services suppliers of LDCs  S/C/N/808, 13/07/2015  
Agreement on Sanitary and Phytosanitary Measures  
Article 7, Annex B  Sanitary/phytosanitary regulations  G/SPS/N/KOR/524 -540, 2016  
G/SPS/N/KOR/489 -523, 2015  
G/SPS/N/KOR/465 -488, 256/R2, 2014  
G/SPS/N/KOR/436 -464, 2013  
G/SPS/N/KOR/415 - 435, 2012  
Agreement on Technical Barriers to Trade (latest document)  
Article 10.7  Notification of agreement reached by 
Members on issues related to technical 
regulations, stand ards or conformity 
assessment procedures  G/TBT/10.7/N/127, 23/09/2015  
Article 2.9  Technical regulations  G/TBT/N/KOR/6 60, 12/07/2016  
Articles 2.9 and 5.6 Proposed amendments to laws and 
regulations  G/TBT/N/KOR/6 58, 07/07/2016  
Article 5.6  Proposed amend ments to laws and 
regulations  G/TBT/N/KOR/6 59, 07/07/2016  
Agreement on Trade Facilitation  
WT/L/911  Category A commitments  WT/PCTF/N/KOR/1, 04/06/2014  
Agreement on Trade -Related Aspects of Intellectual Property Rights  
Article 63.2  Notification of laws  IP/N/1/KOR/6, 30/09/2014  
IP/N/1/KOR/P/7, 30/09/2014  
IP/N/1/KOR/5, 24/02/2014  
IP/N/1/KOR/C/4/Rev.1, 24/02/2014  
Source:  WTO Secretariat.  WT/TPR/S/346 • Republic of Korea  
 
- 162 - 
 
  Table A2. 2 Foreign investment location incentives, as of 2016  
(1) Comparison of FIZ, FTZ and FEZ  
 
Classification  Foreign investment zone (FIZ)  Free trade zone (FTZ)  
Free economic 
zone (FEZ)  Complex type  Individual 
type Industrial 
complex 
type Airport/seaport 
or logistics  
type 
Governing law  Foreign Investment Promotion Act  Act on the Desi gnation & 
Management of Free Trade Zones  Special Act on the 
Designation & 
Management of 
Free Economic 
Zones  
Purpose of 
designation  Foreign capital inducement, 
transfer of advanced technologies, 
job creation  Foreign 
capital 
inducement, 
trade 
promotion,  
regional 
development  Foreign capital 
inducement, 
development of 
international 
logistics base  Foreign capital 
inducement, 
international 
competitiveness 
enhancement, and 
balanced regional 
development  
Location  Inside industrial 
complexes  No limitations   Areas near 
airports or 
seaports, 
industrial 
complexes  Airports or 
seaports, 
logistics 
complexes, cargo 
terminals  Areas near 
international 
airports and 
seaports  
Characteristics  Lease -only 
complexes  Individual 
business 
establishments 
are designated  Customs -free zone  Comparable to 
special 
administrative 
zones 
(cooperatives of 
municipal 
governments)  
* Approx. 65 to 
200 million m2  
Designating 
authority  Mayor or provincial governor  
* Foreign Investment Committee's 
deliberation required  Minister of  Trade, Industry & 
Energy  Minister of Trade, 
Industry & Energy  
* Foreign 
Investment 
Committee's 
deliberation 
required  
Managing 
authority  State industrial complexes: 
Industrial complex management 
authorities  
Others: Mayor or provincial 
governor  Minister of Trade, Industry & 
Energy  Free Economic 
Zone management 
authority  
Eligibility for 
move -in  Foreign 
investment 
ratio of 30% or 
higher  
•Manufacturing, 
logistics, etc.  
•Foreign 
investment 
equal to or 
more than the 
price of the 
leased land 
should be  
executed within 
five years from 
the contract 
date  FDI 
requirements:  
•Manufacturing: 
US$30 million 
or more  
•Tourism: 
US$20 million 
or more  
•Logistics: 
US$10 million 
or more  
•R&D: 
US$2  million or 
more (10 or 
more 
researchers 
holding a 
master's degree 
or higher with 
three or more 
years' 
experience)  •Export -oriented domestic or 
foreign businesses  
•Foreign -invested business es  
•Wholesale businesses mainly for 
import/export  
•Integrated logistics businesses  •Foreign -invested 
businesses  
•Manufacturing, 
logistics, hospitals, 
education facilities, 
foreign 
broadcasting, 
financial service 
institutions, etc.  WT/TPR/S/ 346 • Republic of Korea  
 
- 163 - 
 
  Classification  Foreign investment zone (FIZ)  Free trade zone (FTZ)  
Free economic 
zone (FEZ)  Complex type  Individual 
type Industrial 
complex 
type Airport/seaport 
or logistics  
type 
Requirements 
for tax 
reduction  •Manufacturing: 
US$10 million 
or more  
•Logistics: 
US$5 million or 
more  Identical to 
designation 
requirements 
above  Identical to those applicable to 
complex -type foreign investment 
zones (Article 121, Restriction of 
Special Taxation Act)  •Manufacturing, 
tourism: 
US$10  million or 
more  
•Logistics, medical 
institution: 
US$5  million or 
more  
Taxes reduced  •Corporate tax 
and income 
tax: for 5 years  
•Local tax: For 
up to 15 years  •Corporate tax 
and income 
tax: For seven 
years  
•Local tax: For 
up to 15 years  •Corporate tax and income tax: 
For five years (100% for the first 
three years, 50% for the 
remaining two years)  
•Local tax: Up to 15 years, 
determined by ordinances  •Corporate tax and 
income tax: For 
five years (Seven 
years when 
qualified as an 
individual -type 
foreign investment 
zone)  
•Local tax: Up to 
15 years  
Corporate tax and income tax reduced for seven years (100% for the first five years, 50% 
for the remaining two years) irrespective of the region in the case of industry supporting 
service businesses and businesses accompanying high technology  
Customs duty 
reduction  Exempted for 
five years from 
the day on 
which imported 
capital goods 
have been 
declared  Customs duty 
withheld 
(imported 
goods, capital 
goods)  Customs duty on capital goods exempted for five years  
Rent Approximately 
10/1,000 of the 
site value 
(Specified in 
the basic 
administration 
plan) 
100% 
exemp ted in 
the case of 
state-owned 
properties  Approximately 10/1,000 of the 
site value (Determined by the 
managing authority after 
consultation with the Ministry of 
Strategy and Finance)  Approximately 
10/1,000 of the 
site value  
(Determined by 
the managing 
authority)  
Rent reduction 
rate Businesses 
accompanying 
advanced 
technology 
investing US$1 
million or more: 
100% reduction  
•General 
manufacturing 
businesses 
investing US$5 
million or more: 
75% reduction 
(100% 
reduction in the 
case of 
industrial 
complexes 
specializing in 
parts and 
materials)  
•Manufacturing 
businesses 
investing 
US$2.5 million 
or more and 
employing 
200 workers or 
more: 100% 
exemption  
 Generally, land rent is 100% 
exempted for companies with 
foreign investment of 
US$10  million or more; 
companies with foreign 
investment of US$1 millio n and 
foreign investment ratio of 30% 
or more; and companies 
accompanying advanced 
technology investing US$500,000 
or more  Determined by the 
managing 
authority based on 
ordinances  
(50% -100% 
reduction)  WT/TPR/S/346 • Republic of Korea  
 
- 164 - 
 
  Classification  Foreign investment zone (FIZ)  Free trade zone (FTZ)  
Free economic 
zone (FEZ)  Complex type  Individual 
type Industrial 
complex 
type Airport/seaport 
or logistics  
type 
•Manufacturing 
businesses 
investing 
US$2.5 million 
or more and 
employing 
150 workers or 
more: 90% 
reduction  
•Manufacturing 
businesses 
investing 
US$2.5 million 
or more and 
employing 
70 workers or 
more: 75% 
reduction  
 
(2) Tax reduction: National tax (corporate tax and income tax) and local tax (acquisition tax and property tax)  
 
Eligibility  Tax reduction method  
Reduced tax  Reduction period  Investment requirements  
•Businesses accompanying 
advanced technology and 
industry supporting service 
businesses  
•Companies in individual -
type foreign investment 
zones  •National tax 
(Corporate tax 
and income tax)  
* Local tax 
(acquisition tax 
and property 
tax): Up to 
15 years  •Reduced for seven 
years  
- For five years: 
100%  
- The following two 
years: 50%  •Advanced technolog ies: None  
•Industry:  
- Manufacturing: US$30 million or more  
- Tourism: US$20 million or more  
- Logistics: US$10 million or more  
- R&D: US$2 million or more, 10 or more 
employees holding a master's degree or 
higher  
•Companies in complex -
type foreign investment 
zones  
•Companies in free 
economic zones  
•Companies in free trade 
zones  
•Companies in enterprise 
city development zones  
 •Reduced for five 
years  
- For three years: 
100%  
- The following two 
years: 50%  •Manufacturing: US$10 million or more  
•Tourism: US$10 million or more  
•Logistics: US$5 million or more  
•R&D: US$1 million or more  
•Enterprise cities: US$10 million or more  
•Free economic zone 
development project 
entities  
•Enterprise city 
development project 
entities  
•Jeju Investment 
Promotion Zone 
development project 
entities  •National tax 
(corporate tax 
and income tax)  •Reduced for five 
years  
- For three years: 
100%  
- The following two 
years: 50%  •US$30 million or more  
•Foreign investment share of 50% or 
more, total project amount of US$500 
million or more  
 
(3) Exemption of customs duty, etc. (Article 121 -3, Restriction of Special Taxation Act)  
 
Eligibility  Tax exemption method  
Exempted tax  Exempted period  Eligible capital goods  
• Businesses 
accompanying advanced 
technolog y and industry 
supporting service 
businesses  
• Companies in individual -
type foreign investment 
zones  • Customs duty  
• Special excise 
tax  
• Value added tax  Capital goods that completed 
import declaration within five 
years from signing the move -
in contr act  Capital goods imported through 
investment by acquisition of new 
shares  
As free trade zones are customs -
free zones, customs duties are 
withheld for imported foreign 
goods and customs duties are 
refunded for domestic goods  WT/TPR/S/ 346 • Republic of Korea  
 
- 165 - 
 
  Eligibility  Tax exemption method  
Exempted tax  Exempted period  Eligible capital goods  
• Companies in complex -
type foreign investment 
zones  
• Companies in free trade 
zones  
• Companies in free 
economic zones  • Customs duty  
 
 
(4) Financial ( location) support  
 
Governing law  •Article 14 of the Foreign Investment Promotion Act  
•Article 6 of the guidelines on fundin g local governments' foreign investment attraction 
activities  
Eligible businesses  •Businesses with foreign investment ratio of 30 percent or higher or businesses whose 
largest shareholder is a foreigner  
Support ceiling  •The maximum amount of funds pr ovided for the central or local government's foreign 
investment attraction activities is:  
- The amount equal to 50 percent of the targeted FDI amount; or  
- The amount equal to 25 percent of the sum of the FDI amount and the reinvested 
earned surplus amou nt (The foreign investment ratio should remain at 25% or higher)  
Support provided  Details  
(i) Provision of land for 
lease*  
① Land purchase  Provision of land for lease through designation and purchase of foreign investment 
zones, etc.  
Sharing of land purchase costs:  
•Seoul metropolitan area: 30% by the central government, 70% by the local 
government  
•Areas outside the Seoul  metropolitan area: 60% by the central government, 40% by 
the local government  
② Rent reduced (state -
owned properties)  
* The lease period can be 
renewed by up to 50 years  Eligibility  Rent reduction rate *  
Individual -type foreign investment zones  100% exempted  
Businesses accompanying high 
technology investing US$1 million or 
more  Complex -type 
investment zones  100%  
Industrial complexes  50%  
General manufacturing businesses 
investing US$5 million or more  Complex -type 
investment zones  75%  
Industrial complexes  50%  
Parts and materials businesses investing 
US$5 million or more  Complex -type foreign 
investment zones 
(specializing in parts or 
materials)  100%  
* Rent reduction for government properties is determined by municipal ordina nces. 
(ii) Subsidy for difference 
of sale price  The difference is subsidized when land owned by the central or local government, 
government -invested agencies or individuals is sold below the land development cost  
- The subsidies vary based on municipal ordinances  
(iii) Rent subsidized  When land owned by the central or local government, government -invested agencies or 
individuals is leased to foreign invested businesses at a reduced rental rate, the 
difference between the reduced rent and the original rent is subsidized  
 
(5) Other support  
• Appointment of a Project Manager  
• Cash subsidy for employment or education/training  
• Exemption from mandatory employment of people of distinguished service to the State  
• Exemption from traffic inducement due s for facilities or buildings in foreign investment zones  
Source:  Korea Trade -Investment Promotion Agency (2015), Doing Business in Korea , 24 September.  
 WT/TPR/S/346 • Republic of Korea  
 
- 166 - 
 
  Table A3. 1 Tariff summary, 2016  
 Number 
of lines  Average 
(%) Range 
(%) Coefficient 
of 
variation 
(%) Duty 
free 
(%) 
Total  12,243  14.1 0-887.4  4.1 15.9 
HS 01 -24 2,103  51.3 0-887.4  2.5 2.5 
HS 25 -97 10,140  6.4 0-754.3  2.1 18.7 
By WTO category       
WTO agricultural products  1,726  60.0 0-887.4  2.4 5.5 
 Animals and products there of 210 21.6 0-89.1 0.7 4.8 
 Dairy products  54 61.4 8-176 0.7 0.0 
 Fruit, vegetables, and plants  490 78.7 0-887.4  2.2 0.2 
 Coffee and tea  53 51.4 2-513.6  2.6 0.0 
 Cereals and preparations  215 153.0  0-800.3  1.6 0.5 
 Oils seeds, fats, oil and their produ cts 162 38.4 0-630 3.0 2.5 
 Sugars and confectionary  34 18.0 3-243 2.3 0.0 
 Beverages, spirits and tobacco  106 31.0 8-270 0.9 0.0 
 Cotton  10 0.0 0-0 0.0 100.0  
 Other agricultural products, n.e.s.  392 29.3 0-754.3  2.8 17.6 
WTO non -agricultural products   10,517  6.6 0-50 0.7 17.7 
 Fish and fishery products  540 16.9 0-35 0.3 1.3 
 Minerals and metals  1,793  4.8 0-8 0.7 25.9 
 Chemicals and photographic supplies  2,364  5.7 0-50 0.4 7.1 
 Wood, pulp, paper and furniture  651 2.8 0-13 1.3 57.9 
 Textiles  1,013  8.7 0-13 0.3 1.6 
 Clothing  321 12.5 8-13 0.1 0.0 
 Leather, rubber, footwear and travel goods  367 8.7 0-16 0.4 1.4 
 Non-electric machinery  1,286  5.8 0-13 0.6 24.3 
 Electric machinery  697 5.5 0-13 0.7 30.3 
 Transport equipment  304 6.0 0-10 0.6 21.7 
 Non-agricultural products,  n.e.s.  1,057  6.1 0-13 0.5 21.6 
 Petroleum  124 5.5 0-8 0.4 1.6 
By ISIC sector       
 ISIC 1 - Agriculture, hunting and fishing  867 53.6 0-800.3  2.6 12.2 
 ISIC 2 - Mining  199 2.4 0-8 0.7 22.6 
 ISIC 3 - Manufacturing  11,176  11.3 0-887.4  4.0 16.1 
 Manufacturing excluding food processing  9,834  6.3 0-754.3  1.4 18.0 
 Electrical energy  1 5.0 5 0.0 0.0 
By stage of processing       
 First stage of processing  1,546  41.2 0-887.4  3.1 14.3 
 Semi-processed products  3,868  9.2 0-800.3  4.6 15.4 
 Fully processed products  6,829  10.8 0-800.3  3.1 16.6 
By HS section       
 01  Live animals and products  762 20.5 0-243 1.0 2.8 
 02  Vegetable products  690 108.3  0-887.4  1.9 4.2 
 03  Fats and oils  108 13.4 2-630 4.5 0.0 
 04  Prepared food, beverag es and tobacco  543 29.5 0-754.3  2.4 0.6 
 05  Mineral products  392 3.8 0-8 0.6 12.0 
 06  Chemicals and products thereof  2,299  7.5 0-754.3  3.6 7.6 
 07  Plastics, rubber, and articles thereof  377 6.7 0-8 0.2 1.3 
 08  Raw hides and skins, leather, and its products  242 7.7 0-16 0.6 11.6 
 09  Wood and articles of wood  316 5.8 0-10 0.5 12.0 
 10  Pulp of wood, paper and paperboard  288 0.0 0-0 0.0 100.0  
 11  Textiles and textile articles  1,289  9.7 0-51.7 0.4 2.2 
 12  Footwear, headgear, etc.  100 10.1 8-13 0.2 0.0 WT/TPR/S/ 346 • Republic of Korea  
 
- 167 - 
 
   Number 
of lines  Average 
(%) Range 
(%) Coefficient 
of 
variation 
(%) Duty 
free 
(%) 
 13  Articles of stone, plaster, cement  345 7.8 0-8 0.1 0.3 
 14  Precious stones and metals, pearls  118 5.2 0-8 0.5 4.2 
 15  Base metals and articles thereof  1,037  4.2 0-8 0.9 39.7 
 16  Machinery, electrical equipment, etc.  2,064  5.6 0-13 0.6 27.2 
 17  Transport equipment  333 5.8 0-10 0.6 24.0 
 18  Precision equipment  563 6.7 0-8 0.4 13.7 
 19  Arms and ammunition  81 3.4 0-8 1.2 58.0 
 20  Miscellaneous manufactured articles  281 5.4 0-13 0.7 32.7 
 21  Works of art, etc.  15 0.0 0-0 0.0 100.0  
Note: Including AVEs, as available, provided by the authorities. In case of unavailability of AVEs the 
ad valorem  part of alternate rates is included.  
Source : WTO Secretariat calculations, based on data provided by the authorities.  WT/TPR/S/346 • Republic of Korea  
 
- 168 - 
 
  Table A3. 2 Non-ad valorem  applied tariffs and ad valorem  equivalents of their specific 
duty component   
HS codea Description  MFN 2016b AVE 
0301929090  Other  22% or ₩1,531/kg  27.0%  
0301994090  Other  28% or ₩2,052/kg  28.2%  
0306263000  Shrimps and prawns, salted or in brine  35% or ₩236/kg  - 
0306273000  Shrimps and prawns, salted or in brine  35% or ₩236/kg  35.0%  
0409000000  Natural honey  243% or ₩1,864/kg  11.1%  
07031 01000  Onions  135% or ₩180/kg  70.4%  
0703201000  Fresh peeled garlic  360% or ₩1,800/kg  360.0%  
0703209000  Fresh garlic other than peeled  360% or ₩1,800/kg  210.1%  
0706101000  Carrots  30% or ₩134/kg  29.2%  
0709592000  Oak mushrooms  40% or ₩1,625/kg  41.7%  
07096 01000  Sweet peppers (bell type)  270% or ₩6,210/kg  - 
0709609000  Fruits of the genus Capsicum  or of the genus 
Pimenta  270% or ₩6,210/kg  - 
0711901000  Garlic  360% or ₩1,800/kg  - 
0711905091  Fruits of the genus Capsicum  or of the genus 
Pimenta  270% or ₩6,210/ kg 0.0%  
0712200000  Onions  135% or ₩180/kg  126.6%  
0712319000  Mushrooms other than cultivated  30% or ₩1,218/kg  - 
0712320000  Wood ears ( Auriculari a spp.)  30% or ₩1,218/kg  29.7%  
0712330000  Jelly fungi ( Tremella  spp.) 30% or ₩1,218/kg  30.0%  
0712391020  Oak mushrooms  40% or ₩1,625/kg  40.5%  
0712391030  Ling chiu mushrooms  30% or ₩842/kg  29.8%  
0712391090  Other mushrooms  30% or ₩1,218/kg  26.4%  
0712901000  Garlic  360% or ₩1,800/kg  296.1%  
0712902010  Bracken  30% or ₩1,807/kg  30.2%  
0712902030  Welsh onions  30% or ₩1,159/kg  30.0%  
0712902040  Carrots  30% or ₩864/kg  31.1%  
0712902094  Flowering ferns  30% or ₩1,446/kg  29.9%  
0714201000  Fresh sweet potatoes  385% or ₩338/kg  - 
0802410000  Chestnuts in shell  219.4% or ₩1,470/kg  50.0%  
0802420000  Chestnuts shelled  219.4% or ₩1,470/kg  0.0%  
0802901010  Pine nuts in shell  566.8% or ₩2,664/kg  0.0%  
0802901020  Pine nuts shelled  566.8% or ₩2,664/kg  298.0%  
0802902010  Gingko nuts in shell  27.0% or ₩803/kg  30.1%  
0802902020  Gingko nuts shelled  27.0% or ₩803/kg  27.0%  
0810903000  Jujub es, fresh  611.5% or ₩5,800/kg  0.0%  
0813402000  Jujubes, dried  611.5% or ₩5,800/kg  3.2%  
0904210000  Fruits of the genus Capsicum  or of the genus 
Pimenta , dried  270% or ₩6,210/kg  206.8%  
0904220000  Fruits of the genus Capsicum  or of the genus 
Pimenta , dried  270% or ₩6,210/kg  312.1%  
0910111000  Ginger, fresh or chilled  377.3% or ₩931/kg  234.2%  
0910112000  Ginger, dried  377.3% or ₩931/kg  377.2%  
0910119000  Ginger, other than fresh, chilled or dried  377.3% or ₩931/kg  - 
0910121000  Ginger, fresh or chilled  377.3%  or ₩931/kg  0.0%  
0910122000  Ginger, dried  377.3% or ₩931/kg  279.8%  
0910129000  Ginger, other than fresh, chilled or dried  377.3% or ₩931/kg  377.2%  
1003102000  Unhulled barley  324% or ₩326/kg  0.0%  
1003103000  Naked barley  299.7% or ₩361/kg  0.2%  
1003902000  Unhulled barley  324% or ₩326/kg  0.0%  
1003903000  Naked barley  299.7% or ₩361/kg  0.1%  
1201101000  Soya beans for bean sprouts  487% or ₩956/kg  5.0%  
1201109000  Other soya beans  487% or ₩956/kg  0.0%  
1201901000  Soya beans for soya beans oil and oil cake  487%  or ₩956/kg  0.0%  
1201902000  Soya beans for feeding  487% or ₩956/kg  0.0%  WT/TPR/S/ 346 • Republic of Korea  
 
- 169 - 
 
  HS codea Description  MFN 2016b AVE 
1201903000  Soya beans for bean sprouts  487% or ₩956/kg  4.7%  
1201909000  Other soya beans  487% or ₩956/kg  7.5%  
1207400000  Sesam e seeds  630% or ₩6,660/kg  43.0%  
1207991000  Perilla see ds 40% or ₩410/kg  40.0%  
1515500000  Sesame oil and its fractions  630% or ₩12,060/kg  166.1%  
1902192000  Chinese vermicelli  26% or ₩206/kg  26.0%  
2306901000  Oil cake of sesam e seeds  63% or ₩72/kg  30.8%  
3706101000  Cinematographic film  ₩195/m or 6.5  - 
37061 02000  Cinematographic film  ₩4/m or 6.5  - 
3706103010  Cinematographic film  ₩26/m or 6.5  - 
3706103020  Cinematographic film  ₩468/m or 6.5  - 
3706103030  Cinematographic film  ₩78/m or 6.5  - 
3706104000  Cinematographic film  ₩26/m or 6.5  2.7%  
3706105010  Cinemat ographic film  ₩1,092/m or 6.5  - 
3706105020  Cinematographic film  ₩182/m or 6.5  11.3%  
3706106010  Cinematographic film  ₩1,560/m or 6.5  - 
3706106020  Cinematographic film  ₩260/m or 6.5  0.0%  
3706901000  Cinematographic film  ₩9/m or 6.5  - 
3706902000  Cinematog raphic film  ₩5/m or 6.5  - 
3706903010  Cinematographic film  ₩26/m or 6.5  - 
3706903020  Cinematographic film  ₩468/m or 6.5  - 
3706903030  Cinematographic film  ₩78/m or 6.5  0.0%  
3706904000  Cinematographic film  ₩26/m or 6.5  - 
3706905010  Cinematographic film  ₩25/m or 6.5  - 
3706905020  Cinematographic film  ₩8/m or 6.5  0.9%  
3706906010  Cinematographic film  ₩1,092/m or 6.5  - 
3706906020  Cinematographic film  ₩182/m or 6.5  0.0%  
3822003058  Diagnostic or laboratory reagents  ₩182/m or 6.5  - 
3822003059  Diagnostic or l aboratory reagents  ₩4/m or 6.5  - 
3822003060  Diagnostic or laboratory reagents  ₩26/m or 6.5  - 
3822003061  Diagnostic or laboratory reagents  ₩468/m or 6.5  - 
3822003062  Diagnostic or laboratory reagents  ₩78/m or 6.5  - 
3822003063  Diagnostic or laboratory re agents  ₩1,092/m or 6.5  - 
3822003064  Diagnostic or laboratory reagents  ₩1,560/m or 6.5  - 
3822003065  Diagnostic or laboratory reagents  ₩260/m or 6.5  - 
3822003066  Diagnostic or laboratory reagents  ₩8/m or 6.5  - 
3822003067  Diagnostic or laboratory reagents  ₩25/m or 6.5  4.8%  
5001000000  Silk-worm cocoons suitable for reeling  51% or ₩5,276/kg  2.0%  
5002001020  Raw silk (not thrown)  51.7% or ₩17,215/kg  0.0%  
5002001030  Raw silk (not thrown)  51.7% or ₩17,215/kg  0.0%  
5002001040  Raw silk (not thrown)  51.7% or ₩17,215/kg  0.0%  
5002001050  Raw silk (not thrown)  51.7% or ₩17,215/kg  0.0%  
8523292231  Recorded video tape  ₩20/min  (at standard speed)  0.0%  
Note:  AVEs are calculated using 2014 import data.  
a Based on the 2016 tariff schedule in HS  12 nomenclature.  
b Which ever is the greater for agricultural items; whichever is the lower for manufacturing products.  
Source:  Information provided by the Korean authorities.  WT/TPR/S/346 • Republic of Korea  
 
- 170 - 
 
  Table A3. 3 Adjustment tariff, 2015 and 2016  
HS Description  General  
(%) 2015  
(%) 2016  
(%) 
0301.92  Eels ( Anguilla  spp. excluding glass eels, and young eels 
for aquaculture)  10 22% or 
₩1,531/kg  
whichever is 
greater  22% or 
₩1,531/kg  
whichever is 
greater  
0301.99  Sea-bream (excluding fry (for aquaculture))  10 28% or 
₩2,052/kg  
whichever is 
greater  28% or 
₩2,052/kg  
whichever is 
greater  
0301.99  Sea bass (excluding fry (for aquaculture))  10 28 28 
0303.67  Alaska pollack (excluding its fin, head, tail, stomach, 
other fish offal)  10 22 22 
28 0303.69  
0303.89  Saury, of which the total length exceed s 22 cm from 
head to tail, excluding horn fish  10 28 35% or 
₩236/kg  
whichever is 
greater  
0303.89 Croakers, limited to sciaenidae, excluding yellow corvina 
and yellow croaker  10 28 22 
0306.26  Shrimps and prawns, salted or in brine  20 35% or 
₩236/kg  
whichever is 
greater  40% or 
₩1,625/kg  
whichever is 
greater  
26% or 
₩206/kg  
whichever is 
greater  0306.27 
0307.49  Squid, excluding cuttlefish, arrow squid, loligo and fish 
surimi  10 22 50 
0709.59  Oak mushrooms  30 40% or 
₩1,625/kg  
whichever is 
greater  45 
35 0712.39  
1902.19  Chinese vermicelli  8 26% or 
₩206/kg  
whichever is 
greater  10 
1904.90  Rice in grain form, not containing cocoa, steamed or 
boiled  8 50 0.5 
2103.20  Sauces, preparations therefore and mixed seasonings of 
the following: Containing 20% or above of Capsicum  or 
garlic or onion or ginger, or containing 40% or above of 
any mixture of t hese 8 45 22% or 
₩1,531/kg  
whichever is 
greater  
28% or 
₩2,052/kg  
whichever is 
greater  2103.90  
2103.90  Gochujang  8 35 28 
2103.90  Maejoo  8 13% or 
₩52/kg  
whichever is 
greater  22 
4412.31  Plywood, veneered panels and similar laminated wood, 
of a whole thickness not less  than 6 mm, with each ply 
not exceeding 6  mm thickness  8 10 28 
4412.32  
4412.39  
4412.99  
Source:  Data provided by the Korean authorities.  WT/TPR/S/ 346 • Republic of Korea  
 
- 171 - 
 
  Table A3. 4 Tariff quotas on agricultural products, 2015 and 2016  
HS Code  Description  In-
quota 
rate 
(%) Out-of-quota rate 
(%) Quota levelsa 
0102211000  Cattle: Pure -bred breeding animals ( for 
milk) 0 89.1 1,067 heads  
0102212000  Cattle: Pure -bred breeding animals ( for 
meat)  0 89.1 1,067 heads  
0102219000  Cattle: Pure -bred breedin g animals ( other) 0 89.1 1,067 heads  
0102310000  Pure-bred breeding animals  0 89.1 1,067 heads  
0102901000  Pure-bred breeding animals  0 89.1 1,067 heads  
0103100000  Live swine: pure -bred breeding animals  0 18 1,850 head s 
0105111000  Live poultry: weighing not more than 
185 g: fowls of the species Gallus 
domesticus : pure -bred breeding animals  0 9 461,000 birds  
0105941000  Live poultry: weighing not more than 
2000 g: fowls of the species Gallus 
domesticus  turkeys: pure -bred breeding 
animals  0 9 461,000 birds  
0402101010  Milk and cream: in powder, granules or 
other solid forms, of a fat content, by 
weight not exceeding 1.5%  20 176 1,034 tonnes  
0402101090  Milk and cream: in powder, granules or 
other solid forms, of a fat content, by 
weight not exceeding 1.5%  20 176 1,034 tonnes  
0402109000  Milk and cream: in powder, granules or 
other solid forms, of a fat content, by 
weight not exceeding 1.5%  20 176 1,034 tonnes  
0402211000  Milk and cream: in powder, granules or 
other solid forms, of a fat content, by 
weight exc eeding 1.5%  40 176 573 tonnes  
0402219000  Milk and cream: in powder, granules or 
other solid forms, of a fat content, by 
weight exceeding 1.5%  40 176 573 tonnes  
0402290000  Milk and cream: in powder, granules or 
other solid forms, of a fat content, by 
weight exceeding 1.5%  40 176 573 tonnes  
0402911000  Other milk and cream not containing added 
sugar or other sweetening matter  40 176 130 tonnes  
0402919000  Other milk and cream not containing added 
sugar or other sweetening matter  40 176 130 tonnes  
040299100 0 Other milk and cream  40 176 130 tonnes  
0402999000  Other milk and cream  40 176 130 tonnes  
0403901000  Butter milk  20 89 1,034 tonnes  
040410101 1 Whey: powder  (for feeding)  20 49.5 54,233 tonnes  
0404101019  Whey: powder ( other) 20 49.5 54,233 tonnes  
040410109 1 Whey: other  (For feeding)  20 49.5 54,233 tonnes  
0404101099  Whey: other  20 49.5 54,233 tonnes  
040410211 1 Modified whey: lactose removed  (for 
feeding)  20 49.5 54,233 tonnes  
040410211 9 Modified whey: lactose removed ( other) 20 49.5 54,233 tonnes  
040410212 1 Modified whey: demineralized  (for feeding)  20 49.5 54,233 tonnes  
0404102129  Modified whey: demineralised  (other) 20 49.5 54,233 tonnes  
040410213 1 Modified whey: whey protein concentrates  
(for feeding)  20 49.5 54,233 tonnes  
0404102139  Modified  whey: whey protein concentrates  
(other) 20 49.5 54,233 tonnes  
040410219 1 Modified whey: other  (for feeding)  20 49.5 54,233 tonnes  WT/TPR/S/346 • Republic of Korea  
 
- 172 - 
 
  HS Code  Description  In-
quota 
rate 
(%) Out-of-quota rate 
(%) Quota levelsa 
0404102199  Modified whey: other  20 49.5 54,233 tonnes  
04041029 10 Other modified whey  (for feeding)  20 49.5 54,233 tonnes  
0404102990  Other modified whey  (other) 20 49.5 54,233 tonnes  
0405100000  Butter  40 89 420 tonnes  
0405900000  Other fats  40 89 420 tonnes  
0408991000  Eggs of fowls of the species Gallus 
domesticus  30 41.6 19,515.8 tonnes  
0409000000  Natural honey  20 243% or   
₩1,864 per kgb 420 tonnes  
0506902000  Powder of bones  5 25.6 467.6 tonnes  
0511999010  Silkworm eggs  8 18 9,500 boxes  
0602201000  Apple trees  8 18 145,200 trees  
0602202000  Pear trees  8 18 145,200 trees  
0602203000  Peach trees  8 18 145,200 trees  
0602206000  Citrus trees  8 18 145,200 trees  
0602909030  Mulberry trees  8 18 1,402,700 trees  
0701100000  Potatoes: seeds  0 304 1,898 tonnes  
0701900000  Potatoes: other than seeds  30 304 18,810 tonnes  
0703101000  Onions  50 135% or  
₩180 per kgb 20,645 tonnes  
070320100 0 Garlic: peeled  50 360% or  
₩1,800 per kgb 14,467 tonnes  
0703209000  Garlic: other than peeled  50 360% or  
₩1,800 per kgb 14,467 tonnes  
0709601000  Sweet peppers (bell type)  50 270% or  
₩6,210 per kgb 7,185 tonnes  
0709609000  Other pepper  50 270% or  
₩6,210 per kgb 7,185 tonnes  
0711901000  Garlic - provisional preserved  50 360% or  
₩1,800 per kgb 14,467 tonnes  
0711905091  Fruits of the genus Capsicum  or other 
genus Pimenta  - provisionally preserved  50 270% or  
₩6,210 per kgb 7,185 tonnes  
0712200000  Onions  - dried 50 135% or  
₩180 per kgb 20,645 tonnes  
0712901000  Garlic  50 360% or  
₩1,800 per kgb 14,467 tonnes  
0712902091  Sweet corn for seeds  0 370 247 tonnes  
0712902092  Sweet corn other than those for seeds  3 370 6,102.1 tonnes  
0713311000  Beans  30 607.5  14,694 tonnes  
0713319000  Beans  30 607.5  14,694 tonnes  
0713321000  Small red beans  30 420.8  14,694 tonnes  
0713329000  Small red beans  30 420.8  14,694 tonnes  
0714101000  Fresh manioc  20 887.4  50,000 tonnes  
0714102010  Dried manioc  20 887.4  50,000 tonnes  
0714102020  Dried manioc  3 887.4  1,000 tonnes  
0714102090  Dried manioc  20 887.4  50,000 tonnes  
0714103000  Chilled manioc  20 887.4  50,000 tonnes  
0714201000  Sweet potatoes - fresh 20 385% or  
₩338 per kgb 18,535 tonnes  
0714202000  Sweet potatoes - dried 20 385 18,535 tonnes  
0714203000  Sweet potatoes - chilled  20 385 18,535 tonnes  
0714209000  Sweet potatoes - frozen  20 385 18,535 tonnes  
0714309000  Yam ( Discorea  spp./other)  20 385 326.7 tonnes  WT/TPR/S/ 346 • Republic of Korea  
 
- 173 - 
 
  HS Code  Description  In-
quota 
rate 
(%) Out-of-quota rate 
(%) Quota levelsa 
0714409000  Taro ( Colocasia  spp./other)  20 385 326.7 tonnes  
0714509000  Yautia ( Xanthosoma  spp./other)  20 385 326.7 tonnes  
0714909090  Other roots and tubers  20 385 326.7 tonnes  
080241 0000 Chestnuts in shell  50 219.4% or  
₩1,470 per kgb 2,170 tonnes  
0802420000 Chestnuts - shelled  50 219.4% or  
₩1,470 per kgb 2,170 tonnes  
0802901010  Pine nuts in shell  30 566.8% or  
₩2,664 per kgb 52.9 tonnes  
0802901020  Pine nuts shelled  30 566.8% or  
₩2,664 per kgb 52.9 tonnes  
0805100000  Oranges  50 50 57,017 tonnes  
0805201000  Korean citrus  50 144 2,097 tonnes  
0805209000  Other citrus  50 144 2,097 tonnes  
0805502020  Citrus latifolia  50 144 2,097 tonnes  
0805900000  Other citrus  50 144 2,097 tonnes  
0810903000  Jujubes  50 611.5% or  
₩5,800 per kgb 259.5 tonnes  
0813402000  Jujubes  50 611.5% or  
₩5,800 per kgb 259.5 tonnes  
0902100000  Green tea  40 513.6  7.8 tonnes  
0902200000  Green tea  40 513.6  7.8 tonnes  
09042 10000 Fruits of the genus Capsicum  or Pimenta  
(dried/neither crushed nor ground)  50 270% or  
₩6,210 per kgb 7,185 ton nes 
09042 20000 Fruits of the genus Capsicum  or Pimenta  
(crushed or ground)  50 270% or  
₩6,210 per kgb 7,185 tonnes  
0910111000  Ginger (neither crushed nor ground/fresh 
or chilled)  20 377.3% or  
₩931 per kgb 1,860 tonnes  
0910112000  Ginger (neither crushed  nor ground/dried)  20 377.3% or  
₩931 per kgb 1,860 tonnes  
0910119000  Ginger (neither crushed nor ground/other)  20 377.3% or  
₩931 per kgb 1,860 tonnes  
0910121000  Ginger (crushed or ground/fresh or chilled)  20 377.3% or  
₩931 per kgb 1,860 tonnes  
091012 2000 Ginger (crushed or ground/dried)  20 377.3% or  
₩931 per kgb 1,860 tonnes  
0910129000  Ginger (crushed or ground/other)  20 377.3% or  
₩931 per kgb 1,860 tonnes  
1002100000 Rye for seed  3 108.7  1,327.3 tonnes  
1003101000  Malting barley ( seed) 30 513 30,000 tonnes  
1003102000  Unhulled barley ( seed) 20 324% or  
₩326 per kgb 23,582 tonnes  
1003103000  Naked barley ( seed) 20 299.7% or  
₩361 per kgb 23,582 tonnes  
1003109000  Other barley ( seed) 20 299.7% or  
₩361 per kgb 23,582 tonnes  
1003901000 Malting barley (other) 30 513 30,000 tonnes  
1003902000  Unhulled barley ( other) 20 324% or  
₩326 per kgb 23,582 tonnes  
1003903000  Naked barley ( other) 20 299.7% or  
₩361 per kgb 23,582 tonnes  
1003909000  Other barley ( other) 20 299.7% or  
₩361 per kgb 23,582 tonnes  
1004100000 Oats for seed  3 554.8  597.3 tonnes  
1005100000  Maize (corn) for seed  0 328 247 tonnes  
1005901000  Maize (corn) for feeding  1.8 328 6,102.1 tonnes  WT/TPR/S/346 • Republic of Korea  
 
- 174 - 
 
  HS Code  Description  In-
quota 
rate 
(%) Out-of-quota rate 
(%) Quota levelsa 
1005902000  Maize (corn) - popcorn  1.8 630 6,102.1 tonnes  
1005909000  Maize (corn) - other 3 328 6,102 .1 tonnes  
1006100000  Rice in the husk (paddy or rough)  5 513 408,700 tonnes  
1006201000  Husked (brown) rice ( non-glutinous)  5 513 408,700 tonnes  
1006202000  Husked (brown) rice ( glutinous)  5 513 408,700 tonnes  
1006301000  Semi-milled or wholly milled rice  (non-
glutinous)  5 513 408,700 tonnes  
1006302000  Semi-milled or wholly milled rice 
(glutinous)  5 513 408,700 tonnes  
1006400000  Broken rice  5 513 408,700 tonnes  
1007100000 Grain sorghum  3 779.4  13.7 tonnes  
1008100000  Buckwheat  3 256.1  1,328 tonnes  
1008201000 Foxtail millet for seed  3 18 0.4 tonnes  
1008400000  Fonio ( Digitaria  spp.) 3 800.3  1,328 tonnes  
1008500000  Quinoa ( Chenopodium quinoa ) 3 800.3  1,328 tonnes  
1008600000  Triticale  3 800.3  1,328 tonnes  
1008900000  Other cereals  3 800.3  1,328 tonnes  
1102901000  Barley flour  20 260 23,582 tonnes  
1102902000  Rice flour  5 513 408,700 tonnes  
1102909000  Other flour  5 800.3  14.7 tonnes  
1103110000  Groats and meal of wheat  5 288.2  14.7 tonnes  
1103130000  Groats and meal of maize (corn)  3 162.9  6,102.1 tonnes  
1103191000  Groats and meal ( barley)  20 260 23,582 tonnes  
1103192000  Groats and meal of oats  5 554.8  14.7 tonnes  
1103193000  Groats and mea l (rice) 5 513 408,700 tonnes  
1103199000  Groats and meal: other  5 800.3  14.7 tonnes  
1103201000  Pellets of wheat  5 288.2  14.7 tonnes  
1103202000  Pellets ( rice) 5 513 408,700 tonnes  
1103203000  Pellets ( barley)  20 260 23,582 tonnes  
1103209000  Other pellets  5 800.3  14.7 tonnes  
1104120000  Rolled or flaked grains of oats  5 554.8  14.7 tonnes  
1104191000  Rolled of flaked ( rice) 5 513 408,700 tonnes  
1104192000  Rolled of flaked  (barley)  20 233 23,582 tonnes  
1104199000  Rolled or flaked grains - other  5 800.3  14.7 tonnes  
1104220000  Other worked grains: of oats  5 554.8  14.7 tonnes  
1104230000  Other worked grains: of maize (co rn) 3 167 6,102.1 tonnes  
1104291000  Other worked grains: of coicis semen  5 800.3  14.7 tonnes  
1104292000  Other worked grains ( barley)  20 126 23,582 tonnes  
1104299000  Other worked grains: of other  5 800.3  14.7 tonnes  
1105100000  Flour, meal and powder of potatoes  5.4 304 10 tonnes  
1105200000  Flakes, granules and pellets of powder  5.4 304 10 tonnes  
1107100000  Malt, not roasted  30 269 40,000 tonnes  
1107201000  Malt, smoked  30 269 40,000 tonnes  
1108110000  Wheat starch  8 50.9 227.4 tonnes  
1108121000  Maize (corn) starch: for food  1.8 226 6,102.1 tonnes  
1108129000  Maize (corn) starch: of other  1.8 226 6,102.1 tonnes  
1108130000  Potato starch  8 455 45,692 tonnes  
1108141000  Manioc starch: for food  9 455 2,400 tonnes  
1108149000  Manioc starch: of other  9 455 2,400 tonnes  
1108191000  Starches of seed potato  11 241.2  4,376 tonnes  WT/TPR/S/ 346 • Republic of Korea  
 
- 175 - 
 
  HS Code  Description  In-
quota 
rate 
(%) Out-of-quota rate 
(%) Quota levelsa 
1108199000  Other starches  8 800.3  227.4 tonnes  
1108200000  Inulin  8 800.3  227.4 tonnes  
1201101000  Soya beans ( seed/for bean sprouts)  5 487% or  
₩956 per kgb 1,032,152  
tonnes  
1201109000  Soya beans ( seed/other) 5 487% or  
₩956 per kgb 1,032,152  
tonnes  
1201901000  Soya beans ( other/for soya bean oil and oil 
cake)  5 487% or  
₩956 per kgb 1,032,152  
tonnes  
1201902000  Soya beans ( other/for feeding)  5 487% or  
₩956 per kgb 1,032,152  
tonnes  
1201903000  Soya beans ( other/for bean sprouts)  5 487% or  
₩956 per kgb 1,032,152  
tonnes  
1201909000  Soya beans ( other/other) 5 487% or  
₩956 per kgb 1,032,152  
tonnes  
1202301000  Groundnuts ( seed/in shell)  40 230.5  4,907.3 tonnes  
1202302000  Groundnuts ( seed/shelled)  24 230.5  4,907.3 tonnes  
1202410000  Groundnuts ( other/in shell)  40 230.5  4,907.3 tonnes  
1202420000  Groundnuts ( other/shelled)  24 230.5  4,907.3 tonnes  
1207400000  Sesam e seeds  40 630% or  
₩6,660 per kgb 6,731 tonnes  
1211201100  Ginseng root ( raw ginseng/ wood-cultivated 
ginseng)  20 222.8  56.8 tonnes  
1211201190  Ginseng root ( raw ginseng/ other) 20 222.8  56.8 tonnes  
1211201211  Ginseng root ( white, major roots ) 20 222.8  56.8 tonnes  
1211201219  Ginseng root ( white, other) 20 222.8  56.8 tonnes  
1211201291  Ginseng root ( white, major roots ) 20 222.8  56.8 tonnes  
1211201299  Ginseng root ( white, other) 20 222.8  56.8 tonnes  
1211201311  Ginseng root ( red, major roots ) 20 754.3  56.8 tonnes  
1211201319  Ginseng root ( red, other) 20 754.3  56.8 tonnes  
1211201391  Ginseng root ( red, major roots ) 20 754.3  56.8 tonnes  
1211201399  Ginseng root ( red, other) 20 754.3  56.8 tonnes  
1211202210  Ginseng powder  20 754.3  56.8 tonnes  
1211202220  Ginseng powder  20 754.3  56.8 tonnes  
1211202 290 Ginseng powder  20 754.3  56.8 tonnes  
1211209100  Other ginseng  20 754.3  56.8 tonnes  
1211209200  Other ginseng  20 754.3  56.8 tonnes  
1211209900  Other ginseng  20 754.3  56.8 tonnes  
1214901000  Fodder roots  5 100.5  32,133.3 tonnes  
1214909090  Other forage p roducts  5 100.5  32,133.3 tonnes  
1302191210  Saps and extracts of red ginseng  20 754.3  56.8 tonnes  
1302191220  Saps and extracts of red ginseng  20 754.3  56.8 tonnes  
1302191290  Saps and extracts of red ginseng  20 754.3  56.8 tonnes  
1515500000  Sesame oil and  its fraction  40 630% or  
₩12,060 per kgb 668 tonnes  
1702111000  Lactose  20 49.5 9,400 tonnes  
1702191000  Lactose  20 49.5 9,400 tonnes  
1702901000  Artificial honey  20 243 6 tonnes  
1806902290  Other (containing cocoa/other/mixed and 
doughs for preparation of baker's wares of 
heading  19.05)  5 513 408,700 tonnes  
1806902999  Other (containing cocoa/other/other)  5 513 408,700 tonnes  
1901201000  Rice flour ( mixes and doughs for the 
preparation of baker's wares of heading 5 513 408,700 tonnes  WT/TPR/S/346 • Republic of Korea  
 
- 176 - 
 
  HS Code  Description  In-
quota 
rate 
(%) Out-of-quota rate 
(%) Quota levelsa 
19.05)  
1901209000  Other ( mixes and doughs for the 
preparation of baker's wares of heading 
19.05)  5 513 408,700 tonnes  
1901909091  Other food preparations of goods ( rice 
flour)  5 513 408,700 tonnes  
1901909099  Other food preparations of goods ( other) 5 513 408,700 tonnes  
2008119000  Other groundnuts ( other prepared or 
preserved)  40 63.9 4,907.3 tonnes  
2106903021  Red ginseng tea  20 754.3  56.8 tonnes  
2106903029  Other products of red ginseng  20 754.3  56.8 tonnes  
2207109010  Fermented alcohol for manufacture of 
liquors  30 270 10,333,800 
litres 
2301101000  Flour, meals and pellets, of meat or meat 
offal 5 9 3,210 tonnes  
2306901000  Oil cake of sesam e seeds  3 63% or ₩72 per 
kgb 212 tonnes  
2308009000  Other vegetable materials of a kind used in 
animal feeding  5 46.4 32,133.3 tonnes  
2309901091  Preparations of a kind used in animal 
feeding  4.2 71 627 tonnes  
2309902010  Preparations of a kind used in animal 
feeding  5 50.6 4,171.4 tonnes  
2309902020  Preparations of a kind used in animal 
feeding  5 50.6 4,171.4 tonnes  
2309902099  Preparations of a kind used in animal 
feeding  5 50.6 4,171.4 tonnes  
2309909000  Preparations of a kind used in animal 
feeding  5 50.6 4,171.4 tonnes  
3301904520  Oleoresin extracts of red ginseng  20 754.3  56.8 tonnes  
3505103000  Roasted starches  8 685.7  45,692 tonnes  
3505104010  Pre-gelatinized or swelling starch: for food  8 385.7  45,692 tonnes  
3505104090  Pre-gelatinized or swelling starch: of other  8 385.7  45,692 tonnes  
3505105010  Etherified or esterified starches: for food  8 385.7  45,692 tonnes  
3505105090  Etherified or esterified starches: of other  8 385.7  45,692 tonnes  
3505109010  Other modified starches: for food  8 385.7  45,692 tonnes  
3505109090  Other modified starches: of other  8 385.7  45,692 tonnes  
3505201000  Starch glues  8 201.2  45,692 tonnes  
3505202000  Dextrin glues  8 201.2  45,692 tonnes  
3505209000  Other glues  8 201.2  45,692 tonnes  
5001000000  Silkworm cocoons suitable for reeling  2 51% or   
₩5,276 per kgb 1,143 tonnes  
5002001020  Raw silk more than 20 decitex  8 51.7% or  
₩17,215 per kgb 2,254 tonnes  
5002001030  Raw silk more than 20 decitex  8 51.7% or  
₩17,215 per kgb 2,254 tonnes  
5002001040  Raw silk more than 20 decitex  8 51.7% or  
₩17,21 5 per kgb 2,254 tonnes  
5002001050  Raw silk more than 20 decitex  8 51.7% or  
₩17,215 per kgb 2,254 tonnes  
a Quota levels correspond to the total volume/quantity available to items under the same product 
group, e.g. the quota for live bovine animals is 1,0 67 per head rather than 1,067 per each HS ten -
digit item. These product groups are found in WTO document G/AG/N/KOR/ 50, 9 January  2015. 
b Whichever is the greater.  
Source:  Data provided by the Korean authorities.  WT/TPR/S/ 346 • Republic of Korea  
 
- 177 - 
 
  Table A3. 5 Fill ratios for main agricultural tariff -rate quotas, 2015  
(%) 
Commodity grouping  TRQ fill ratio  Reason for low TRQ fill ratio  
Live bovine animals  0 Lack of demand  
Live swine for pure -bred 
breeding  0 Increase in imports from RTA/FTA partners  
Fowls for pure -bred breeding  0 Increase in imports from RTA/FTA partners  
Skim milk powder  84.2 n.a. 
Whole milk powder  78.7 Decrease in domestic demand  
Evaporated milk  14.8 n.a. 
Whey  37.7 Increase in imports from RTA/FTA partners  
Butter  99.5 n.a. 
Bird's eggs  0 Lack of demand  
Natural honey  90.2 n.a. 
Powder of bones  0 Lack of demand due to BSE  
Silkworm eggs  0 Lack of demand  
Apple, pear, peach and citrus 
trees 0 Lack of demand  
Mulberry trees  0 Lack of demand  
Potatoes for seed  0 Lack of demand  
Other potatoes  24.4 Lack of demand  
Onions  100 Lack of demand  
Garlic  100 Increase in domestic production  
Red peppers  13.9 Decrease in domestic demand and increase in imports of 
substituting items  
Beans (red and green)  100 n.a. 
Manioc  100 n.a. 
Manioc pellets  0 Increased imports of substituti ng items  
Sweet potatoes  0.9 Import ban by plant protection act  
Roots and tubers  83.3 n.a. 
Chestnuts  74.6 n.a. 
Pine nuts  100 Lack of demand  
Oranges  17.9 Increase in imports from RTA/FTA partners  
Korean citrus  21.5 Lack of demand a nd increase in imports of substituting 
items  
Jujubes  3.5 Lack of demand  
Green tea  66.7 Lack of demand  
Ginger  98.1 n.a. 
Rye for seed  100 n.a. 
Ginseng  0 Lack of demand and international price increase  
Malting barley  100 n.a. 
Barley  100 n.a. 
Oats for seed 100 n.a. 
Corn 100 n.a. 
Rice 100 n.a. 
Grain sorghum for seed  60.5 Lack of demand  
Foxtail millet for seed  0 Lack of demand  
Buck wheat  94 n.a. 
Other processed cereals  78.6 n.a. 
Flour of potatoes  100 n.a. 
Malt 100 n.a. 
Wheat starch  100 n.a. 
Potato starch  100 n.a. 
Manioc starch  100 n.a. 
Sweet potato starch  100 n.a. 
Soybeans  100 n.a. 
Groundnuts  100 n.a. 
Maize for seed  100 n.a. 
Sesam e seeds  84.5 n.a. 
Forage products  100 n.a. 
Sesame oil  20.6 Lack of demand  
Lactose  67.5 n.a. 
Artificial honey  99 n.a. 
Undenatured ethyl alcohol  80.7 n.a. 
Flour of meat  6.7 Lack of demand due to BSE  
Oil-cake 34 Increase in international price  
Other mixed feeds  100 n.a. WT/TPR/S/346 • Republic of Korea  
 
- 178 - 
 
  Commodity grouping  TRQ fill ratio  Reason for low TRQ fill ratio  
Supplementary feeds  100 n.a. 
Silk-worm cocoons  0.1 Lack of demand  
White silk  12.4 Lack of  demand  
n.a. Not applicable . 
Source:  The Korean authorities.  WT/TPR/S/ 346 • Republic of Korea  
 
- 179 - 
 
  Table A3. 6 Republic of Korea's autonomous tariff quotas in 2016  
HSK Item  Description  General 
(%) In-
quota 
(%) Quota  
030192  Eels ( Anguilla  spp.) Young eels 
(exceedin g 0.3 g 
and not exceeding 
50 g per unit, for 
aquaculture)  5.0 3.0 All imported  
040410  Whey and modified whey, whether or 
not concentrated or containing added 
sugar or other sweetening matter  For feeding  20.0 0.0 25,875  MT 
10,000  MT 040410  40.0 4.0 
071410 Manioc  (cassava)  Chips for alcoholic 
beverages  20.0 0.0 100,000  MT 
071410  Manioc  (cassava)  Pellets for feeding  7.0 0.0 900,000  MT 
100390  Unhulled barley  For feeding  5.0 10.0 300,000  MT 
100490  Oats For feeding  3.0 1.0 800,000  MT 
100590  Maize  (corn)  For feeding  3.0 0.0 4,000  MT 
120190  Soya beans  For soya beans oil 
and oil cake  3.0 25.0 30,000  MT 
120729  Cotton seeds  For feeding  2.0 0.0 50,000  MT 
121410  Alfalfa  For feeding  1.0 0.0 65,000  MT 
9,010,000  MT 121490  1.0 0.0 
121490  Fodder roots  For fe eding  20.0 1.0 1,250,000  MT 
150,000  MT 230800  5.0 25.0 
151800  Animal or vegetable fats and oils and 
their fractions, boiled, oxidi zed, 
dehydrated, sulphuri zed, blown, 
polymeri zed by heat in vacuum or in 
inert gas or otherwise chemically 
modified, excl uding those of heading 
15.16; inedible mixtures or 
preparations of animal or vegetable 
fats or oils or of fraction of different 
fats or oils of this Chapter, not 
elsewhere specified or included  For feeding 
(excluding 
dehydrated castor 
oil and epoxidi zed 
soya-bean oil)  5.0   
170191  Sugar    30.0 0.0 1,000,000  MT 
125,000  MT 170199  30.0 5.0 
170211  Lactose and lactose syrup  For feeding  20.0  160,000  MT 
170219  20.0 0.0 
170310  Molasses resulting from the 
extraction or refining of sugar  For feeding  3.0 4.0 10,000  MT 
All imported  170390  3.0 0.0 
230230  Bran, sharps and other residues, 
whether or not in the form of pellets, 
derived from the sifting, milling or 
other working of cereals or of 
leguminous plants  Of wheat, for 
feeding  2.0   
230320  Beet-pulp, bagasse and other waste 
of sugar manufacture  For feeding  5.0 0.0 660,000  MT 
230320  For mushroom 
cultivation  5.0   
230330  Brewing or distilling dregs and waste  For feeding  2.0 0.0 50,000  MT 
230400  Oil-cake and other solid residues, 
whether or not grou nd or in the form 
of pellets, resulting from the 
extraction of soyabean oil.  For feeding  1.8 5.0 90,000  MT 
230610  Oil-cake and other solid residues, 
whether or not ground or in the form 
of pellets, resulting from the 
extraction of vegetable fats or oils, 
other than those of heading 23.04. or 
23.05  Of cotton seeds, for 
feeding  2.0   
230610  Of cotton seeds, for 
mushroom 
cultivation  2.0 0.0 4,930  MT WT/TPR/S/346 • Republic of Korea  
 
- 180 - 
 
  HSK Item  Description  General 
(%) In-
quota 
(%) Quota  
230800  Vegetable materials and vegetable 
waste, vegetable residues and by -
products, whether or not in the fo rm 
of pellets, of a kind used in animal 
feeding, not elsewhere specified or 
included  For feeding  5.0   
230800  For mushroom 
cultivation  5.0 0.0 235,000  MT 
230990  Preparations of a kind used in animal 
feeding  Milk preparation for 
feeding (excluding 
dog or  cat food, put 
up for retail sale)  5.0   
270900  Petroleum oils and oils obtained from 
bituminous minerals, crude  For manufacturing 
naphtha  3.0 5.0 168,000  kl 
270900  Petroleum oils and oils obtained from 
bituminous minerals, crude  For manufacturing 
propan e or butanes  3.0 0.0 175,000  MT 
271111  Natural gas  Liquefied  3.0 0.0 200,000  MT 
500,000  MT 271121  In gaseous state  3.0 0.0 
271112  LPG Propane  3.0 0.0 2,700,000  MT 
97,500  MT 271113  Butanes  3.0 0.0 
283620  Disodium carbonate  For manufacturing 
panel g lass 3.0 0.0 100,000  MT 
282550  Materials for manufacturing 
agricultural chemicals  Registered material 
under the 
Agricultural 
Chemicals 
Management Act  2.0 0.0 100,000  MT 
125,000  MT 
3,680  MT 
210,000,000  BBL 
33,000,000  BBL 
All imported  
All imported  
All impor ted 
All imported  
All imported  
5,000  MT 
20,000  MT 282741  2.0 0.0 
283325  2.0 0.0 
290930  2.0 0.0 
291470  2.0 0.0 
291539  8.0 2.0 
291619  8.0 1.0 
291620  2.0 0.0 
291631  2.0 0.0 
291639  2.0 0.0 
291830  2.0 1.0 
291899  2.0 4.0 
291990  2.0 1.0 
292011  2.0 1.0 
292019  2.0 1.0 
292090  2.0 1.0 
292142  2.0 1.0 
292143  2.0 1.0 
292149  2.0 1.0 
292250  2.0 1.0 
292412  8.0 1.0 
292419  2.0 1.0 
292421  2.0 1.0 
292429  2.0 1.0 
292519  2.0 1.0 
292529  2.0 1.0 
292690  2.0 1.0 
292800  2.0 1.0 
293020  2.0 1.0 
293030  8.0 1.0 
293090  2.0 1.0 
293190  2.0 1.0 
293219  2.0 1.0 
293220  2.0 1.0 
293299  2.0 1.0 
293311  2.0 1.0 
293319  2.0 1.0 WT/TPR/S/ 346 • Republic of Korea  
 
- 181 - 
 
  HSK Item  Description  General 
(%) In-
quota 
(%) Quota  
293329  2.0 1.0 
293339  2.0 1.0 
293349  2.0 1.0 
293359  2.0 1.0 
293369  2.0 1.0 
293379  8.0 1.0 
293399  2.0 1.0 
293410  2.0 1.0 
293420  2.0 1.0 
293499  2.0 1.0 
293500  2.0 1.0 
294120  2.0 1.0 
294190  2.0 1.0 
340213  2.0 1.0 
380891  2.0 1.0 
38089 2 2.0 1.0 
380893  8.0 1.0 
382490  2.0 1.0 
292221  8-amino -1-naphthol -3, 6-disulphonic 
acid (H acid) and its salts    3.0   
320411  Preparations based on disperse dyes 
(press cake)    4.0   
320411  Disperse dyes    8.0   
390110  Polyethylene  Excluding  of pulp  8.0   
390120  8.0 2.0 
410411  Tanned or crust hides and skins of 
bovine (including buffalo) or equine 
animals, without hair on, whether or 
not split, but not further prepared.    3.0   
410419  3.0 1.0 
410441  3.0 1.0 
410449  3.0 1.0 
500200  Raw silk (not thrown)    3.0   
500400  Silk yarn (other than yarn spun from 
silk waste) not put up for retail sale    3.0   
500500  Yarn spun from silk waste, not put up 
for retail sale    3.0   
520533  Cotton yarn; Multiple (folded) or 
cabled yarn; Mea suring per single 
yarn less than 232.56 decitex but not 
less than 192.31 decitex (exceeding 
43 metric number but not exceeding 
52 metric number per single yarn)  Unbleached or not 
mercerized  8.0   
848630  Dry etchers for manufacturing flat 
panel displays    5.0   
848630  8.0 0.0 
848630  Deposition machines for 
manufacturing flat panel displays  Operated by 
physical method  5.0   
848630  8.0   
848630  Deposition machines for 
manufacturing flat panel displays  Operated by 
chemical method  5.0 1.0 600,000  MT 
848630  8.0 3.0 140,000  MT 
848630  Ion implanters for manufacturing flat 
panel displays    8.0   
Source:  Data provided by the Korean authorities.  WT/TPR/S/346 • Republic of Korea  
 
- 182 - 
 
  Table A3. 7 Domestic agricultural support notified to the WTO, 2011  
(₩ billion)  
  Below de minimis  level of 
10%a 
Product specific AMS  786.41   
 Barleyb 4.81  Yes 
 Potato  0.20  Yes 
 Soybean  0.14  Yes 
 Red pepper  3.99  Yes 
 Garlic  4.48  Yes 
 Onions  4.39  Yes 
 Welsh onions  0.62  Yes 
 Carrots  0.14  Yes 
 Apple  3.84  Yes 
 Pear 3.32  Yes 
 Korean citrus  1.31  Yes 
 Sweet persimmons  0.46  Yes 
 Ginseng roots  3.34  Yes 
 Chinese cabbage  2.40  Yes 
 Rice 750.14  Yes 
 Beef 1.90  Yes 
 Daikon  0.70  Yes 
 Flowering plants  0.23  Yes 
Non-product specific AMS  286.49   
 Subsidy for farm fac ilities 2.45   
 Input subsidies  113.95   
 Loan programme  13.66   
 Crop insurance  129.18   
 Other  27.25   
Total AMS  1,072.90   
Green box assistance  7,724.41   
 Research  171.54   
 Pest and disease control  309.58   
 Training services  36.39   
 Extens ion and advisory services  19.32   
 Inspection services  37.16   
 Marketing and promotion services  51.80   
 Infrastructural services  3,068.27   
 Public stockholding for food security purposes  184.92   
 Decoupled income support  966.64   
 Payments for re lief from natural disasters  1,860.53   
 Structural adjustment assistance provided through 
 producer retirement programmes  59.28   
 Structural adjustment assistance provided through 
 investment aids  393.95   
 Environmental programmes  516.08   
 Regional assistance programmes  48.95   
S&D assistance  1.57   
 Investment subsidies generally available for 
 agriculture  1.57   
Total notified assistance  8,798.88   
a Based on 2011 value of production.  
b Market price support.  
Source:  WTO document G/AG/N/KOR/53, 20 January 2015.   
  WT/TPR/S/346 •  Republic of Korea  
 
- 183 - Table A4. 1 Republic of Korea's Air Transport Agreements , 2016  
Partner  Date  Entry into 
force  5th1 
7th2 
Cabotage3 
Coop4 
Designation5 
Withholding6 
Pricing7 
Capacity8 
Stat9 ALI 
Algeria  18.01.2005   N N N N M SOEC  DA PD Y 4.0 
Argentina  09.09.1996   N N N N M SOEC  DA PD Y 4.0 
Australia  04.03.2004  04.03.2004  Y N N Y M SOEC  DA PD Y 13.0 
Austria  01.10.1996   Y N N N S SOEC  DA PD Y 6.0 
Bangladesh  13.02.1979   N N N N S SOEC  DA B1 Y 4.0 
Belgium  20.10.1975   N N N N S SOEC  DA PD Y 0.0 
Brazil  11.08.1992  31.05.1995  Y N N N M SOEC  DA PD Y 10.0 
Brunei Darussalam  05.08.1992   N N N N M SOEC  DA B1 Y 8.0 
Cambodia  10.04.2001   N N N N M SOEC  DA B1 Y 8.0 
Canada  25.02.2015  25.02.2015  Y N N N S SOEC  DA PD Y 6.0 
Chile 11.05.2001  01.06.2006  Y N N N M SOEC  DA PD Y 10.0 
China  31.10.1994   N N N N M SOEC  DA PD Y 4.0 
Czech Republic  26.10.1990   N N N N M SOEC  DA B1 Y 8.0 
Djibouti  12.06.1979  13.06.1980  N N N N S SOEC  DA B1 Y 4.0 
Ethiopia  02.07.2010   N N N Y M SOEC  N/A PD Y 7.0 
Finland  20.07.2005   N N N Y M SOEC  DA PD Y 7.0 
France  15.01.1981   N N N N S SOEC  N/A PD Y 0.0 
Gabon  18.11.1982  22.09.1984  N N N N S SOEC  DA PD Y 0.0 
Germany  07.03.1995   N N N N M SOEC  CoO PD Y 7.0 
Hong Kong, China  29.03.1996   N N N N M PPoB DA PD Y 12.0 
India 16.03.1992   Y N N N M SOEC  DA PD Y 10.0 
Iraq 29.05.1985   Y N N N S SOEC  DA PD Y 6.0 
Israel  15.12.1994   Y N N N S SOEC  DA B1 Y 10.0  
  WT/TPR/S/346 • Republic of Korea  
 
- 184 - Partner  Date  Entry into 
force  5th1 
7th2 
Cabotage3 
Coop4 
Designation5 
Withholding6 
Pricing7 
Capacity8 
Stat9 ALI 
Japan  22.12.2010   Y N N Y M SOEC  ZP FD Y 26.5 
Jordan  14.05.1978   Y N N N S SOEC  DA PD Y 6.0 
Kenya  13.01.1981   N N N Y M SOEC  N/A B1 Y 11.0 
Kuwait, the State of  13.10.1981   Y N N N S SOEC  DA PD Y 6.0 
Liberia, Republic of  13.06.1978   N N N N S SOEC  DA PD Y 0.0 
Luxembourg  27.09.2000  21.05.2003  N N N N M SOEC  DA B1 Y 8.0 
Macao, China  03.04.1997   N N N N M PPoB DA B1 Y 16.0 
Malaysia  18.06.1984   Y N N N M SOEC  DA B1 Y 14.0 
Maldives  27.06.1990   Y N N N S SOEC  DA O Y 12.0 
Mexico  03.01.2003  Y N N Y M SOEC  DA PD Y 13.0 
Morocco  01.06.2000   N N N N M SOEC  DA PD Y 4.0 
Mongolia  23.10.1991   N N N Y M SOEC  N/A PD Y 7.0 
Myanmar  28.01.1978   Y N N N S SOEC  DA PD Y 6.0 
Netherlands  24.06.1970   Y N N N S SOEC  DA PD N 7.0 
New Zealand  10.05.1993  20.08.1993  Y N N N M SOEC  DA B1 Y 14.0 
Nigeria  24.07.1985   N N N N S SOEC  DA PD Y 0.0 
Oman  05.05.1983   Y N N N S SOEC  DA PD Y 6.0 
Panama  28.12.1979  14.10.1982  Y N N N S SOEC  DA PD Y 6.0 
Philippines  22.07.1969   Y N N N S SOEC  DA PD N 7.0 
Qatar  27.11.2005   N N N N M SOEC  DA O Y 6.0 
Russian Federation  13.03.2003   N N N N M SOEC  DA PD Y 4.0 
Saudi Arabia, 
Kingdom of  12.11.1976   Y N N N S SOEC  DA B1 Y 10.0 
Seychelles  15.07.2010   N N N Y M SOEC  N/A PD Y 7.0 
Singapore  09.12.1994   Y N N N M SOEC  DA B1 Y 14.0  
  WT/TPR/S/346 •  Republic of Korea  
 
- 185 - Partner  Date  Entry into 
force  5th1 
7th2 
Cabotage3 
Coop4 
Designation5 
Withholding6 
Pricing7 
Capacity8 
Stat9 ALI 
South Africa  07.07.1995   N N N N M SOEC  DA PD Y 4.0 
Spain  21.06.1989  14.01.1991  N N N N S SOEC  DA PD Y 0.0 
Sudan  25.10.1991   N N N N M SOEC DA PD Y 4.0 
Sri Lanka  20.01.1978   Y N N N S SOEC  DA B1 Y 10.0 
Switzerland  15.12.1975   Y N N N S SOEC  DA B1 Y 10.0 
Chinese Taipei  01.09.2004   N N N Y M SOEC  N/A PD Y 7.0 
Thailand  26.05.1970   Y N N N S SOEC  DA PD Y 6.0 
Tunisia  24.11.1994  06.02.1995  N N N N M SOEC  DA B1 Y 8.0 
Ukraine  16.12.1996   N N N N M SOEC  DA PD Y 4.0 
United Kingdom  29.06.2001   Y N N N M SOEC  DA B1 Y 14.0 
United States of 
America  09.06.1998   Y N N Y M SOEC  DD FD N 28.0 
Uzbekistan  06.06.1994   N N N N M SOEC  DA PD Y 4.0 
Zimbabwe  19.10.2015   N N N Y M SOEC  N/A PD Y 7.0 
Note:  1 Fifth freedom rights.  
 2 Seventh freedom rights.  
 3 Cabotage rights.  
 4 Clauses on cooperation between airlines e.g. code -sharing.  
 5 Designation: single by an "S", multiple by an "M".  
 6 Type of withholding  clause: SOEC - Substantial Ownership and Effective Control, PPoB - Principal Place of Business, N/A - not available.  
 7 Type of pricing clause: DA - Double Approval, DD - Double Disapproval, CoO - Country of Origin, ZP - Zone Pricing, FP - Free Pricing, N /A - not available.  
 8 Type of capacity clause: PD - Pre Determination, B1 - Bermuda I, FD - Free Determination, O - other, N/A - not available.  
 9 If an exchange of statistics is foreseen by the agreement.  
Source:  Prepared by the WTO Secretariat, based o n information from the Korean authorities.  
 
__________