G/SCM/N/253/KOR
6 November 2013
(13-6145)  Page: 1/26
Committee on Subsidies and Countervailing Measures  Original: English
 
SUBSIDIES 
NEW AND FULL NOTIFICATION PURSUANT TO ARTICLE XVI:1 OF THE 
GATT 1994 AND ARTICLE 25 OF THE AGREEMENT ON 
SUBSIDIES AND COUNTERVAILING MEASURES 
KOREA, REPUBLIC OF  
The following communication, dated 8 October 2013, is being circulated at the request of the 
Delegation of the Republic of Korea.  
 
_______________ 
 
 
The following notification is submitted for the pu rposes of transparency and without prejudice to 
the legal status and nature, including specificity, or effects of the notified programmes or 
measures under the ASCM and GATT 1994.   
 
 
 
  G/SCM/N/253/KOR 
 
- 2 - 
 
  TABLE OF CONTENTS 
  Page 
1   AGRICULTURE ............................................................................................................. 3  
1.1   Foodgrain Mana gement Programme ............................................................................. 3  
1.2   Variable Direct  Payment fo r Rice .................................................................................. 4  
1.3   Support For Marketing And Promotion Of  Agricultural And Li vestock Prod ucts ..................... 5  
1.4   Support For Livestock Products .................................................................................... 5  
2   FORE STRY .................................................................................................................. . 7 
2.1   Plywood and Board Assistance Pr ogramme .................................................................... 7  
2.2   Wood Utilization Assistance Pr ogramme ........................................................................ 8  
3   FISHERY ...................................................................................................................... 9  
3.1   Support for Developmen t of Deep-Sea  Fishery ............................................................... 9  
3.2   Support for Fishery Products Processing Development .................................................... 10 
3.3   Support For Fi shing Activities ..................................................................................... 11 
3.4   Support for Aquacult ure Fishery Development .............................................................. 12 
3.5   Support for Old Fishing Ve ssels and Equipmen t Replac ement .......................................... 12 
3.6   Support for Ve ssel Decommi ssioning ........................................................................... 13 
4   COAL INDUSTRY ........................................................................................................ 14  
5   MANUFACTURIN G INDUST RY .................................................................................... 15  
5.1   Support for Foreig n Invested En terpri ses ..................................................................... 15 
5.2   Tariff Reductio n on Aircra ft Parts ................................................................................ 17 
5.3   Support for Farm Machinery Manu facturing .................................................................. 17 
6   ENVIRONMENT, RESEAR CH AND DEVE LOPMENT ....................................................... 18  
6.1   Environmental Improvement Loan Programme .............................................................. 18 
6.2   Support for R&D of Environmenta l Technology Develo pment Projects ............................... 19 
6.3   Project on the Emission Reduction for Diesel Vehicles in Operation ................................... 20 
6.4   Natural Gas Bus Supply Project .................................................................................. 21 
6.5   Support for Recycling Equipment and Technology Development ....................................... 22 
6.6   Support for the Tele Metering System .......................................................................... 23 
6.7   Project on the Distri bution Of Low NOX Burn ers ............................................................ 24 
6.8   Loan Programme for R&D of  information and communication .......................................... 25 
 
 
 G/SCM/N/253/KOR 
 
- 3 - 
 
  1  AGRICULTURE 
1.1  Foodgrain Management Programme 1. Title of the subsidy programme 
 
Foodgrain Management Programme.   
 2. Period covered by the notification 
 2011-2012.    3. Policy objective and/or purpose of the subsidy 
 To maintain and manage adequate food stock of  basic agro products for food security.   
 
4. Background and authority for the subsidy 
 
Law. 
 
- Foodgrain Management Act (Article 4).   - Agro-Fisheries Marketing and Price Stabilization Act (Article 10).  
Authority: Ministry of Agriculture, Food and Rural Affairs.   
 5. Form of the subsidy 
 Grants and loans.    
6. Recipients and terms 
 
Grants 
 
- Recipients: Farms that produce barley, soybeans, and corn.   
- Content of subsidy: The government purchases a certain volume from the producing farms.   
 
Loans 
 
- Recipients: Enterprises that purchase soybeans.   
- Content of subsidy: The government provides the enterprises with loans so that they can 
purchase soybeans from the producing farms.   - Loan interests and duration: 3 per cent and 11 months.    
7. Amount of the subsidy 
 
 (Unit: million KRW) 
 * The benefit of loan is estimated based on the di fference between the loan ra te and the market rate.  
 
8. Duration of the subsidy 
 Barley - Direct subsidy: through 2011 
- Loans: through 2013 Item Type 2011 2012 
Barley Direct subsidy(a) 5,982 - 
Loan - 3904 
Benefit of loan*(b) - 81 
Total(a+b) 5982 81 
Soybeans Direct subsidy (a) - - 
Loan 6,700 6,204 
Benefit of loan* (b) 127.3 116.6 
Total (a+b) 127.3 116.6 G/SCM/N/253/KOR 
 
- 4 - 
 
  Soy Beans 
- No fixed duration.    9. Trade effects of the subsidy 
 The government is implementing the foodgrain pu rchase system with a view to achieving food 
security of basic agro products. It is estimated that support for the purchase of foodgrain has a 
minimal effect on trade because of Ko rea’s low food self-sufficiency.   
 1.2  Variable Direct Payment for Rice 
1. Title of the subsidy programme 
 
Variable Direct Payment for Rice.    
2. Period covered by the notification 
 
2011-2012. 
 
3. Policy objective and/or purpose of the subsidy 
 To stabilize the income of rice producing farmers against falls in the price of rice.   
 
4. Background and authority for the subsidy 
 
Law: the Act on Payment Programme for Rice Income, Etc. (Article 11).   
Authority: Ministry of Agriculture, Food and Rural Affairs.    
5. Form of the subsidy 
 
Grants.    
6. Recipients and terms 
 
Recipients 
 - Farmhouses whose use of agrochemicals and ch emical fertilizers meets the standard, among 
those who produce rice by storing water in rice fi elds that were used for rice farming from 1998 
to 2000.   
 Contents of the Subsidy 
 
- Partial support for the difference in amount between the target price and the average price 
during the harvest season of the year.    
7. Amount of the subsidy 
 (Unit: million KRW)  
Type 2011 2012 
Lump sum transfer(a) 750,144 - 
Loan - - 
Benefit of loan(b) - - 
Total (a + b) 750,144 - 
 * The benefit of loan is estimated based on the di fference between the loan rate and the market rate. 
 
8. Duration of the subsidy 
 
No fixed period.   
 9. Trade effects of the subsidy 
 
There will be a minimal effect on trade because the program is being implemented in order to 
stabilize the income of domestic rice producing farmhouses.   G/SCM/N/253/KOR 
 
- 5 - 
 
  1.3  Support For Marketing And Promotion Of Agricultural And Livestock Products 
1. Title of the subsidy programme 
 
Support for Marketing and Promotion of Agricultural and Livestock Products.   
 
2. Period covered by the notification 
 
2011-2012. 
 3. Policy objective and/or purpose of the subsidy 
 
To improve the quality and reduce the logistical co sts of agro-livestock products (fruits, flowering 
plants, Kimchi, vegetables, ginseng and livestock products).    
4. Background and authority for the subsidy 
 
Law: Framework Act on Agriculture and Fisheries, Rural Community and Food Industry 
(Article 59).   
 Authority: Ministry of Agriculture, Food and Rural Affairs.  
5. Form of the subsidy 
 
Grants.   
 
6. Recipients and terms 
 
Recipients 
 
- Exporters of fruits, flowering plants, Kimchi, vegetables, ginseng, and livestock products.   
 
Contents of the Subsidy 
 
- Partial support for costs in sorting, packaging, and transporting.   
 
7. Amount of the subsidy 
 (Unit: million KRW)  
Type 2011 2012 
Lump sum transfer(a) 35,455 36,952 
Loan - - 
Benefit of loan(b) - - 
Total (a + b) 35,455 36,952 
 * The benefit of loan is estimated based on the di fference between the loan rate and the market rate. 
 
8. Duration of the subsidy 
 No fixed time period.    9. Trade effects of the subsidy 
 Although this program supports the partial cost of  packaging and transporting, the impact of the 
program on trade is expected to be minimal.   
 
1.4  Support For Livestock Products 
1. Title of the subsidy programme 
 
Support for Quality Improvement, Production Cost Reduction and Stabilization of the Hanwoo Production Base (native Korean cattle).    G/SCM/N/253/KOR 
 
- 6 - 
 
  2. Period covered by the notification 
 
2011-2012.  
3. Policy objective and/or purpose of the subsidy 
 
- To improve the competitiveness and income of  Hanwoo farmhouses by reducing production 
costs. 
- To secure the Hanwoo production base by stabilizing calf breeding and management. 
- To produce high-quality beef and reduce production cost by improving cowshed facilities.  
 
4. Background and authority for the subsidy 
 
Law: Livestock Act (Article 3 and Article 32).   
Authority: Ministry of Agriculture, Food and Rural Affairs.   
 5. Form of the subsidy 
 Grants.    6. Recipients and terms 
 (a) Calf Breeding Stabilization Schedule  
Recipients 
 
- Cattle farmers who joined the Calf Breeding Stabilization Schedule.   
 
Contents of the Subsidy 
 - Support is provided to compensate for losses in cases where the average market price of a 
calf is lower than the standard price of the schedule.   
 (b) Quality Improvement Program 
 
Recipients 
 
- Cattle farmers.  
 Contents of the Subsidy 
 
- Provide consulting services to cattle farmers, support fees for a grading test and engage in 
beef promotion.  
(c) Support for high-quality beef production 
 Recipients 
 - Producers’ cooperation for the promotion and marketing of Hanwoo, livestock farming 
management bodies and corporations.   
Contents of the Subsidy 
 
- Support is provided to improve fa cilities for livestock production. 
 G/SCM/N/253/KOR 
 
- 7 - 
 
  7. Amount of the subsidy 
 (Unit: million KRW)  
 Type 2011 2012 
Calf breeding stabilization schedule Direct Payment 1,898 47,575 
Quality Improvement Program Direct Payment 920 964 
Support for high-quality beef production Direct Payment 1,440 892 
Total 4,258 49,431 
 * The benefit of loan is estimated based on the di fference between the loan ra te and the market rate.  
 
8. Duration of the subsidy 
 
No fixed time period.   
 
9. Trade effects of the subsidy 
 
The impact of the program on trade is expected to be minimal because the purpose of the program 
is to stabilize the income of farmers.   2  FORESTRY 
2.1  Plywood and Board Assistance Programme 
1. Title of the subsidy programme 
 
Plywood and Board Assistance Programme. 
 2. Period covered by the notification 
 2011-2012.  3. Policy objectives and /or purpose of the subsidy 
 To facilitate the use of called-out trees, small unmarketable trees and recycling waste wood materials. 
 
4. Background and authority for the subsidy  
 
Law: Act on the Promotion of Forestry and Mountain Villages (Article 10). 
Authority: Korea Forest Service.  5. Form of the subsidy  
 Loans - Source of funding: Special Account for the Structural Improvement of Rural Areas. 
 
6. Recipient and terms 
 
Recipient: plywood and board producers. 
Conditions: Interest rate of 4.0 per cent. Terms of the loan: 10 years (7-year repayment period with a 3-year grace period).  
7. Amount of the subsidy 
 
  (Unit: million KRW)  
 2011 2012 
Lump sum transfer (a) - - 
Loan 4,000 4,000 
Benefit of loan*(b) 147 140 
Total (a + b) 147 140 
 * The subsidy effect is estimated based on the di fference between the loan rate and the market rate. 
 G/SCM/N/253/KOR 
 
- 8 - 
 
  8. Duration of the subsidy 
 
No fixed time period.  
9. Trade effects of the subsidy   
 
Most of these products are used to meet domestic demand. Therefore, the effect on trade is 
presumed to be insignificant. 
 
Production, Consumption and Trade 
 (Unit: 1,000m3) 
 2011 2012 
Production 3,062 2,948 
Imports 2,035 2,082 
Exports 68 111 
Consumption 5,029 4,919 
 * The benefit of loan is estimated based on the di fference between the loan rate and the market rate. 
 
2.2  Wood Utilization Assistance Programme 
1. Title of the subsidy programme  
 
Wood Utilization Assistance Programme. 
 
2. Period covered by the notification 
 
2011-2012. 
 3. Policy objectives and /or purpose of the subsidy 
 
To provide financial assistance for the modernization of forestry machinery and facilities. 
 4. Background and authority for the subsidy  
 
Law: Act on the Promotion of Forestry and Mountain Villages (Article 10). Authority: Korea Forest Service. 
 
5. Form of the subsidy 
 
Loans. 
Source of funding: Special Account for Structural Improvement of Rural Areas. 
 6. Recipient and terms 
 
Recipient 
- Plywood and board producers  
 
Conditions 
- Interest rate of 3.0~ 4.0 per cent 
 
Terms of the loan 
- 10 years (7-year repayment period with a 3-year grace period).  
 
7. Amount of the subsidy  
  (Unit: million KRW)  
 2011 2012 
Lump sum transfer (a) - - 
Loan 4,400 4,400 
Benefit of loan*(b) 184 176 
Total (a+b) 184 176 
 * The subsidy effect is estimated based on the difference between the loan rate and the market rate.  
 G/SCM/N/253/KOR 
 
- 9 - 
 
  8. Duration of the subsidy 
 
No fixed time-period.  
9. Trade effects of the subsidy 
 
Most domestic wood production is used to meet domestic demand. Therefore, the effect on trade is 
presumed to be insignificant. 
 
Export and Import 
  (Unit: 1,000m3) 
  2011 2012 
Export Round wood - - 
Sawn wood 10 9 
Fibreboard 60 105 
Particleboard 1 2 
Import Round wood 4,030 3,686 
Sawn wood 1,499 1,623 
Fibreboard 124 127 
Particleboard 772 743 
 
3  FISHERY 
3.1  Support for Development of Deep-Sea Fishery 
1. Title of the subsidy programme 
 
Support for development of deep-sea fisheries.    
2. Period covered by the notification 
 
2011-2012. 
 
3. Policy objectives and /or purpose of the subsidy 
 
To support the stable production and management of deep-sea fishery.  
 4. Background and authority for the subsidy 
 
Law: Article 87 of the Fisheries Act.   
Authority: Ministry of Oceans and Fisheries.    
5. Form of the subsidy 
 
Grants.   
 
6. Recipient and terms 
 Recipient 
 - Deep-sea fishing companies, overseas resource development companies.   
Terms of the grants. 
- The government provides grants to a cooperative fund to compensate for a loan at a lower 
interest rate provided to deep-sea fishing companies or overseas resource development companies.   
 G/SCM/N/253/KOR 
 
- 10 - 
 
  7. Amount of the subsidy 
 (Unit: million KRW) 
 2011 2012 
Lump sum transfer(a) 4,834 4,622 
Loan - - 
Benefit of loan(b) - - 
Total (a+b) 4,834 4,622 
 * The benefit of loan is estimated based on the di fference between the loan rate and the market rate. 
 
8. Duration of the subsidy 
 
No fixed time period.   
 
9. Trade effects of the subsidy 
 
It is difficult to estimate the effect on trade be cause the program is not trade-conditioned support.  
 3.2  Support for Fishery Products Processing Development 
1. Title of the subsidy programme 
 
Support for the development of fishery products processing.    
2. Period covered by the notification 
 
2011-2012.   
 
3. Policy objectives and /or purpose of the subsidy 
 To ensure the food safety of fishery products an d provide high quality products to consumers.   
 
4. Background and authority for the subsidy 
 
Law: Article 15 and 16 of the Fisheries Products Quality Control Act.   
Authority: Ministry of Oceans and Fisheries.    
5. Form of the subsidy 
 
Grant and loans.  
6. Recipient and terms 
 
Recipient 
- Companies and people engaged in the handling, storing and processing of fishery products.   
 Terms of the grant 
- 30 to 50 per cent of expenses.   
 Terms of the loan 
- 1 to 10 years’ loan at an annual interest rate of 3 to 4 per cent.   
 
7. Amount of the subsidy 
(Unit: million KRW) 
 2011 2012 
Lump sum transfer (a) 40,498 42,605 
Loan 26,640 23,976 
Benefit of loan* (b) 519 467 
Total (a+b) 41,017 43,072 
* The benefit of loan is estimated based on the difference between the lo an rate and the market rate.   
 G/SCM/N/253/KOR 
 
- 11 - 
 
  8. Duration of the subsidy 
 
No fixed time period.    
9. Trade effects of the subsidy 
 
It is not possible to measure the impact on trade, because the program is not trade-conditioned 
and the beneficiary may decide to sell products either in the export market or the domestic market 
at his discretion.   However, the impact on trade, if any, is likely to be minimal because most beneficiaries operate 
small scale businesses and most of the products are presumed to be consumed in domestic 
markets.  
3.3  Support For Fishing Activities 
1. Title of the subsidy programme 
 
Support for fishing activities.   
 2. Period covered by the notification 
 
2011-2012.   
 3. Policy objectives and /or purpose of the subsidy 
 To relieve financial burden and support stable fishing operations by providing loans with lower interest rates.   
 
4. Background and authority for the subsidy 
 Law: Article 86 of the Fisheries Act.   
Authority: Ministry of Oceans and Fisheries.   
 5. Form of the subsidy 
 Loans.    
6. Recipient and terms 
 
Recipient: Fishermen duly licensed under the relevant domestic fisheries legislation.   Terms: One year loan with an annual interest rate of 3 per cent.   
 
7. Amount of the subsidy 
  (Unit: million KRW) 
 2011 2012 
Lump sum transfer (a) - - 
Loan 1,686,333 1,814,048 
Benefit of loan* (b) 52,363 50,743 
Total (a + b) 52,363 50,743 
 * The benefit of loan is estimated based on the difference between the loan rate and the market rate.   
 
8. Duration of the subsidy 
 No fixed time period.    
9. Trade effects of the subsidy 
 
It is not possible to measure the impact on trade, because the program is not trade-conditioned and the beneficiary may decide to sell the products either in the export market or the domestic 
market at his discretion. 
 G/SCM/N/253/KOR 
 
- 12 - 
 
  3.4  Support for Aquaculture Fishery Development 
1. Title of the subsidy programme 
 
Support for Aquaculture Fishery Development.   
 
2. Period covered by the notification 
 
2011-2012.   
 3. Policy objectives and /or purpose of the subsidy 
 
To ensure a stable supply of fishery products by supporting the development of aquaculture fishery 
in the context of changing circumstances in the production environment for domestic and overseas 
fisheries.   
 
4. Background and authority for the subsidy 
 
Law: Article 79 and 86 of the Fisheries Act.   
Authority: Ministry of Oceans and Fisheries.    5. Form of the subsidy 
 Grants and loans.    
6. Recipient and terms 
 
Recipient: Aquaculture fishermen.   
Terms of the grant: 30 to 100 per cent of expenses depending on business type.   
Terms of the loan: 2 to 10 years’ loan at an annual interest rate of 3 to 4 per cent.    7. Amount of the subsidy 
  (Unit:  million KRW) 
 2011 2012 
Lump sum transfer (a) 15,026 24,115 
Loan 6,929 3,560 
Benefit of loan* (b) 249 60 
Total (a+b) 15,275 24,175 
 * The benefit of loan is estimated based on the difference between the lo an rate and the market rate.   
 
8. Duration of the subsidy 
 
No fixed time period.   
 
9. Trade effects of the subsidy 
 
It is difficult to estimate the effect on trad e because the program is not trade-conditioned.  
 3.5  Support for Old Fishing Vessels and Equipment Replacement 
1. Title of the subsidy programme 
 
Support for Old Fishing Vessels and Equipment Replacement.    
2. Period covered by the notification 
 
2011-2012.   
 
3. Policy objectives and /or purpose of the subsidy 
 To ensure navigational safety through the replacement of old vessels and vessel equipment.   
 G/SCM/N/253/KOR 
 
- 13 - 
 
  4. Background and authority for the subsidy 
 
Law: Article 11 of the Special Act for the Developm ent of Agricultural and Fishing Communities.   
Authority: Ministry of Oceans and Fisheries.   
 
5. Form of the subsidy 
 
Loans.   
 6. Recipient and terms 
 
Recipient: Fishermen.   
Terms of the loan: 15 years’ loan at the annual interest rate of 4 per cent.    
7. Amount of the subsidy 
 (Unit: million KRW)  
 2011 2012 
Lump sum transfer (a) - - 
Loan 29,662 20,451 
Benefit of loan * (b) 504 347 
Total (a + b) 504 347 
 * The benefit of loan is estimated based on the difference between the lo an rate and the market rate.   
 
8. Duration of the subsidy 
 
No fixed time period.   
 9. Trade effects of the subsidy 
 
It is difficult to estimate the effect on trad e because the program is not trade-conditioned.  
 3.6  Support for Vessel Decommissioning 
1. Title of the subsidy programme 
 
Support for Vessel Decommissioning.   
 
2. Period covered by the notification 
 2011-2012.   
 
3. Policy objectives and /or purpose of the subsidy 
 
To support vessel decommissioning to maintain fleet size at sustainable level for coastal and 
offshore fishery resource.    
4. Background and authority for the subsidy 
 
Law: Article 13 of the Act on Structural Improvements and Support for Domestic Fisheries.   Authority: Ministry of Oceans and Fisheries.   
 
5. Form of the subsidy 
 
Grant.   
 6. Recipient and terms 
 Recipient: Coastal and offshore fishermen.   Terms of the grant: 100 per cent of the expe nses paid in the form of vessel buy-back. 
 G/SCM/N/253/KOR 
 
- 14 - 
 
  7. Amount of the subsidy 
 
   (Unit:  million KRW) 
 2011 2012 
Lump sum transfer (a) 37,214 29,795 
Loan - - 
Benefit of loan(b) - - 
Total (a + b) 37,214 29,795 
 * The benefit of loan is estimated based on the di fference between the loan rate and the market rate. 
 
8. Duration of the subsidy 
 
For coastal and offshore fisheries, the subsidization will continue until 2016.   
 9. Trade effects of the subsidy 
 It is difficult to estimate the effect on trad e because the program is not trade-conditioned.  
 4  COAL INDUSTRY 
1. Title of the subsidy programme  
 
Coal Industry Support in the Special Account for Energy and Resources. 
 
2. Period covered by the notification   
 
2011-2012. 
 
3. Policy objectives and /or purpose of the subsidy 
 
To support restructuring of the coal industry by, for example, abandoning mines and reducing 
production in the inefficient anthracite manufacturing business.  
To support the margin between the production cost and selling price of coal and briquette under 
price controls.  
4. Background and authority for the subsidy  
 
Law: Article 26 and Enforcement Ordinance No.22 of the Coal Industry Act. Authority: Ministry of Trade, Industry & Energy. 
 
5. Form of the subsidy  
 
Grants. 
 
6. Recipient and terms 
 
The subsidy is provided to coal mine operators, briquette manufacturers, and colliers in the form of subsidies for downsizing, occupational health and safety insurance premiums, briquette manufacturing costs, and school expenses. 
 
7. Amount of the subsidy  
  (Unit: million KRW) 
 2011 2012 
Lump sum transfer (a) 163,617 151,835 
Loan - - 
Benefit of loan(b) - - 
Total (a + b) 163,617 151,835 
* The benefit of loan is estimated based on the di fference between the loan rate and the market rate. 
 G/SCM/N/253/KOR 
 
- 15 - 
 
  8. Duration of the subsidy 
 
No fixed time period.   
9. Trade effects of the subsidy  
 
None. 
 
5  MANUFACTURING INDUSTRY 
5.1  Support for Foreign Invested Enterprises 1. Title of the subsidy programme 
 
Support for Foreign-Invested Enterprises.  
2. Period covered by the notification 
 
2011-2012. 
 
3. Policy objective and /or purpose of the subsidy 
 To attract foreign direct investment (FDI). 
Technology development and regionally-balanced growth through foreign investment. 
 4. Background and authority for the subsidy 
 
(a) Tax reduction 
 
- Laws: Articles 121-2 and 121-3 of the Special Tax Treatment Control Law, Article 9 of the 
Foreign Investment Promotion Act, Regulation of each municipality. - Authority: Ministry of Strategy and Finance, Mini stry of Trade, Industry & Energy, Ministry of 
Security and Public Administration. 
 
(b) Cash Grants 
 
- Law: Article 14-2 of the Foreign Investment Promotion Act. 
- Authority: Ministry of Trade, Industry & Energy. 
 
5. Form of the subsidy 
 
(a) Tax reduction: Tax reduction and reduction in the rental fee of state-owned properties. 
(b) Cash Grants: Grants. 
 
6. Recipient and terms 
 
(a) Tax reduction 
 Recipients 
 - Foreign-invested enterprises which are involved in businesses related to advanced 
technology or engaged in the service sector supporting other industries. - Foreign-invested enterprises doing business in the Foreign Investment Zone, Free Economic 
Zone, Free Trade Zone, Industrial Complex Exclus ively for Foreign Companies, Jeju Investment 
Promotion Zone and Development District of Enterprise New Town.  G/SCM/N/253/KOR 
 
- 16 - 
 
  Terms 
 
Requirement 
taxes Industry support services and 
high-tech industry businesses, 
firms in individual type FIZ 
(Foreign Investment Zone) Firms in the Free Economic 
Zone, Jeju Investment 
Promotion Zone, complex type 
FIZ, and Free Trade Zone, and 
developers in the Free 
Economic Zone 
Corporate tax Income tax A full exemption is granted for 
the first 5 years after income is generated following the initiation of business and a 50 per cent reduction for the next 2 years. A full exemption is given for the 
first 3 years after income is generated following the initiation of business and a 50 per cent reduction for the next 2 years 
Acquisition tax Registration tax Property tax A full exemption is granted for 
the first 5 years after the initiation date of business and a 50 per cent reduction for the next 2 years. A full exemption is given for the 
first 3 years after the initiation date of operation and a 50 per cent reduction for the next 2 years. 
Customs duty 
Individual consumption tax 
Value- added tax (VAT) A full exemption is granted to 
capital goods introduced into Korea by foreign-invested enterprises within 5 years for the purpose of operation of business 
which is eligible for tax 
exemption. Full exemption for customs duties 
 
- Tax is reduced for the rental fee of state-owne d properties for foreign-invested companies. 
 
(b) Cash Grants 
 
Recipients 
- Foreign-invested enterprises that meet the requirements stipulated in the Foreign 
Investment Promotion Act. 
 
Term 
- Meeting the requirements stipulated in the Foreign Investment Promotion Act (e.g. foreign-
invested enterprises that install or expand factory facilities). 
 
7. Amount of the subsidy 
 
(a) Tax reduction 
 No statistics available.  
 
(b) Cash Grants  
 
 (Unit: million KRW) 
 2011 2012 
Lump sum transfer (a) 14,000 10,015 
Loan - - 
Benefit of loan(b) - - 
Total (a + b) 14,000 10,015 
* The benefit of loan is estimated based on the di fference between the loan rate and the market rate. 
 
8. Duration of the subsidy 
 No fixed time period.  
9. Trade effect of the subsidy 
 
(a) Tax reduction: The tax reduction system is aimed at promoting foreign investment, and 
therefore has neither export requirements nor an impact on trade. G/SCM/N/253/KOR 
 
- 17 - 
 
  (b) Cash Grants: The cash grants are aimed at  technology development and regionally-
balanced growth through foreign-investment, and therefore have neither requirements for, nor an impact on trade. 
 
5.2  Tariff Reduction on Aircraft Parts 
1. Title of the subsidy programme 
 
Tariff Reduction on Aircraft Parts. 
 2. Period covered by the notification 
 
2011-2012. 
 3. Policy objective and/or purpose of the subsidy 
 To reduce production costs by encouraging the importation of aircraft parts which are not produced domestically. 
 
4. Background and authority for the subsidy 
 Laws: Article 89 of the Customs Act. 
Authority: Ministry of Strategy and Finance. 
 5. Form of the subsidy 
 Tariff reduction.  
6. Recipient and terms 
 
Those designated as aircraft manufacturers or repairers in accordance with the Promotion Act for the Development of Aircrafts and Space Industries. 
 
7. Amount of the subsidy 
 
 (Unit: million KRW) 
  2011 2012 
Amount of Duty Reduction 56,499 43,951 
 * The benefit of loan is estimated based on the difference between the loan rate and the market 
rate. 
 
8. Duration of the subsidy 
 
- SMEs: No fixed time period. 
- Other Business (reduction rate applied): 100% (2013, 2014) → 80% (2015) → 60% (2016) 
→ 40% (2017) → 20% (2018) → abolition (after 2019).   
 
9. Trade effect of the subsidy 
 
As the tariff reduction is aimed at promoting the importation of aircraft parts, there is no effect on 
trade.  5.3  Support for Farm Machinery Manufacturing 
1. Title of the subsidy programme 
 
Support for Farm Machinery Manufacturing.   
 
2. Period covered by the notification 
 
2011-2012.   
 G/SCM/N/253/KOR 
 
- 18 - 
 
  3. Policy objective and/or purpose of the subsidy 
 
To assist off-season manufacturing of farm machinery and to help machinery manufacturers meet the high demand for farm machinery in the farming seasons.  
 
To promote the manufacturing and supply of high-q uality agricultural machinery made in Korea by 
providing financial resources for the establishment of machinery production facilities required for 
automatization and modernization of agricultural facilities and machinery.   
 4. Background and authority for the subsidy 
 
Law: Farm Mechanization Promotion Law (Article 4).   
Authority: Ministry of Agriculture, Food and Rural Affairs.   
5. Form of the subsidy 
 
Loans.   
 
6. Recipients and terms 
 Recipients 
 - Farm machinery manufacturers and developers of new-tech machinery.   
 
Contents of the Subsidy 
 
- To provide financial assistance for producing agricultural machinery and for establishing and 
constructing agricultural machinery production facilities.   
 7. Amount of the subsidy 
 
  (Unit: million KRW) 
 * The benefit of loan is estimate d based on the difference between the loan rate and the market rate.   
 
8. Duration of the subsidy 
 
No fixed time period.    
9. Trade effects of the subsidy 
 
The effect on trade is expected to be almost non-existent since the amount of the subsidy 
accounts only for 0.02 per cent of the tota l value of farm machinery production.   
 6  ENVIRONMENT, RESEARCH AND DEVELOPMENT 
6.1  Environmental Improvement Loan Programme 
1. Title of the subsidy programme 
 
Environmental Improvement Loan Programme.   
 
2. Period covered by the notification 
 
2011-2012.   
 Type 2011 2012 
Direct subsidy (a) - - 
Loan 91,617 112,195 
Benefit of loan* (b) 1,466 1,795 
Total (a + b) 1,466 1,795 G/SCM/N/253/KOR 
 
- 19 - 
 
  3. Policy objectives and /or purpose of the subsidy 
 
To promote investment in facilities to preven t environmental pollution and to contribute to 
environmental preservation. 
 
4. Background and authority for the subsidy 
 
Laws: Article 56 of Framework Act on Environmental Policy.   
Authority: Ministry of Environment.    5. Form of the subsidy 
 Loans.   - Source of Fund: Public Capital Management Fund.   
 
6. Recipient and terms 
 
Recipient: Firms that install and operate pollution prevention devices and facilities.   
Terms of the loan: 4-year equal repayment period with a 3-year grace period (maximum 3 billion KRW).    
7. Amount of the subsidy 
  (Unit: million KRW) 
 2011 2012 
Lump sum transfer (a) - - 
Loan 40,000 40,000 
Benefit of loan (b)* - - 
Total (a + b) - - 
 * The benefit of loan is estimate d based on the difference between the loan rate and the market rate.   
 
8. Duration of the subsidy 
 
No fixed time period.   
 9. Trade effects of the subsidy 
 None.   6.2  Support for R&D of Environmenta l Technology Development Projects 
1. Title of the subsidy programme 
 
Support for R&D of Environmental Technology Development Projects.   
 
2. Period covered by the notification 
 
2011-2012.   
 3. Policy objectives and /or purpose of the subsidy 
 
To improve the domestic environment by developing cutting-edge environmental technology.   
 4. Background and authority for the subsidy 
 Laws: Development of and Support for Environmental Technology Act (Article 5).   Authority: Ministry of Environment.   
 
5. Form of the subsidy 
 Grants.   
- Source of funding: Special Account for Environmental Improvement. 
 G/SCM/N/253/KOR 
 
- 20 - 
 
  6. Recipient and terms 
 
Recipient: Government-invested research institutions, universities, research institutions and private enterprises that participate in the Envi ronmental Technology Development Project.   
 
7. Amount of the subsidy 
 
  (Unit: million KRW) 
 2011 2012 
Lump sum transfer(a) 126,000 130,000 
Loan - - 
Benefit of loan(b) - - 
Total (a + b) 126,000 130,000 
* The benefit of loan is estimated based on the di fference between the loan rate and the market rate. 
 
8. Duration of the subsidy 
 
No fixed time period.    
9. Trade effects of the subsidy 
 
The effect on trade is expected to be insignifican t because it is focused on the support for R&D of 
fundamental technology in order to improve the environment.  
 6.3  Project on the Emission Reductio n for Diesel Vehicles in Operation 
1. Title of the subsidy programme 
 
Subsidy for the installation of emission reduction devices (DPF, DOC) and "cleaner" engine retrofit 
and for the early scrappage of superannuated vehicles. 
 
2. Period covered by the notification 
 
2011-2012. 
 3. Policy objectives and /or purpose of the subsidy 
 To improve air quality in metropolitan areas including the five metropolitan cities.  4. Background and authority for the subsidy 
 Laws: - Special Act on Metropolitan Air Quality Im provement (Paragraph 6 of Article 25 and 
Article 27). 
- Clean Air Conservation Act (Paragraph 2 of Article 58). 
 
Authority:  Ministry of Environment.   
 5. Form of the subsidy 
 
Grants. 
- Source of funding: Special Account for Environmental Improvement.  
 
6. Recipient and terms 
 
Recipient: 
 
- Diesel vehicles that fail the emission test on designated diesel vehicles* under Paragraph 1, 
Article 25 of the Special Act on Metropolitan Air Quality Improvement. - Diesel vehicles other than designated diesel vehicles* that fail the emission test on 
automobiles in operation under Article 57 of the Clean Air Conservation Act. G/SCM/N/253/KOR 
 
- 21 - 
 
  - Diesel vehicles past their exhaust gas guarantee period that fail the emission test on 
manufactured vehicles.  
* designated diesel vehicl es: diesel vehicles designated by the Special Act on Metropolitan Air Quality 
Improvement.  
 
Terms: To provide part of the costs (90 per ce nt) of installing emission reduction devices, 
retrofitting with "cleaner" engines or early scrapping of vehicles (50 per cent each from central government and local government expenditures).   
 
7. Amount of the subsidy 
  (Unit: million KRW) 
 2011 2012 
Lump sum transfer (a) 107,747 82,155 
Loan - - 
Benefit of loan(b) - - 
Total (a + b) 107,747 82,155 
* The benefit of loan is estimated based on the di fference between the loan rate and the market rate. 
 
8. Duration of the subsidy 
 From 2004.  9. Trade effects of the subsidy 
 This subsidy provides the total cost for a diesel vehicle owner who installs emission reduction devices or retrofits with "cleaner" engines. Therefore, it does not differentiate between a domestic 
and an imported device, which means that a discriminatory trade barrier does not exist.   
 6.4  Natural Gas Bus Supply Project 
1. Title of the subsidy programme 
 
Subsidy for the natural gas bus procurement and fuel expenses.    
2. Period covered by the notification 
 
2011-2012.   
 
3. Policy objectives and /or purpose of the subsidy 
 
To replace frequently-operated and high-exhaust diesel engine buses and garbage trucks with low-
emission and cleaner vehicles to expedite the amelio ration of air quality in metropolitan areas.   
 4. Background and authority for the subsidy 
 Laws: Clean Air Conservation Act (Article 58).   Authority: Ministry of Environment.   
 
5. Form of the subsidy 
 
Grants.   
- Source of funding: Special Account for Environmental Improvement.   
 6. Recipient and terms 
 Recipient:  - In accordance with the Clean Air Conservation Act, grants for natural gas vehicle 
procurement are provided to a person that purchases a natural gas vehicle. 
- In accordance with the Clean Air Conservation Act, grants for fuel expenses are provided to 
a person that intends to supply natural gas for a vehicle that uses natural gas as fuel. 
 G/SCM/N/253/KOR 
 
- 22 - 
 
  7. Amount of the subsidy 
 (Unit: million KRW) 
 2011 2012 
Lump sum transfer(a) 39,536 36,451 
Loan   
Benefit of loan(b) - - 
Total (a + b) 39,536 36,451 
* The benefit of loan is estimated based on the di fference between the loan rate and the market rate. 
 
8. Duration of the subsidy 
 
From 2000.   
 
9. Trade effects of the subsidy 
 
The effect of the subsidy on trade is expected to be insignificant since it is intended to support 
purchasers of natural gas buses and garbage truc ks, without differentiation between domestic and 
imported vehicles, as well as natural gas suppliers to those vehicles, for the improvement of air quality in metropolitan areas.   
 
6.5  Support for Recycling Equipment and Technology Development 
1. Title of the subsidy programme 
 
Loan Programme for Recycling Industry Promotion.    
2. Period covered by the notification 
 
2011-2012.    
3. Policy objectives and /or purpose of the subsidy 
 
To promote and encourage recycling, recycling indu stries and the management of distribution and 
sales, by offering long-term and low interest rate loans to private firms engaged in the recycling 
business for the development of recyclin g equipment and related technology.   
 
4. Background and authority for the subsidy 
 
Laws:   - Article 31 of the Act on the Promotion of Saving and Recycling of Resources.   
- Article 56 of Framework Act on Environmental Policy.   
 Authority: Ministry of Environment.   
 
5. Form of the subsidy 
 
Loans.   
- Source of Fund: Special Account for Environmental Improvement. 
 6. Recipient and terms 
 Recipient: 
 
- A person or business organization, under the Act on the Promotion of Saving and Recycling 
of Resources, engaged in the recycling business th at intends to install recycling equipment.   
- A person who intends to be engaged in R&D activities related to resource saving and 
recycling under the Act on the Promotion of  Saving and Recycling of Resources.   
- A person who intends to install equipment required for the commercialization of a developed 
recycling technology.   - A person, under the Act on the Promotion of Sa ving and Recycling of Resources, engaged in 
recycling, repairing and sales of second-hand electric appliances, furniture, etc.   G/SCM/N/253/KOR 
 
- 23 - 
 
  - A person, under the Act on the Promotion of Sa ving and Recycling of Resources, engaged in 
recycled products sales handling a volume of ge neral manufactures no more than 30 per cent in 
monetary units and a person engaged in the repair  and sales of second-hand electric appliances, 
furniture, etc.   
 
Terms: 
 
- 7-year repayment period with a 3-year grace period at an annual interest rate of 
2.63 per cent (floating interest rate) for recipients of (a), (b), (c). - 3-year repayment period with a 2-year grace period at an annual interest rate of 
2.63 per cent (floating interest rate) for recipients of (d), (e). 
 
7. Amount of the subsidy 
 (Unit: million KRW) 
 2011 2012 
Lump sum transfer (a) - - 
Loan 65,000 65,000 
Benefit of loan* (b) 1,612 1,547 
Total (a + b) 1,612 1,547 
 * The benefit of loan is estimated based on the di fference between the loan rate and the market rate. 
 
8. Duration of the subsidy 
 No fixed time period.    
9. Trade effects of the subsidy 
 
The effect of this subsidy on trade is expected to be insignificant for the following reasons:  
 
- First, it is a loan programme that does not restrict foreign investment or foreign 
participation. Rather, it is a direct subsidy to the recycling industry.   - Second, considering the inferior quality of recycled products in general, they would hardly 
have a consequential competitive edge against general products.   
- Basically, the subsidy aims at promoting domestic waste-resource recirculation and 
recycling, therefore, its impact on international tr ade, either import or export, is estimated to be 
insignificant.  
 6.6  Support for the Tele Metering System 
1. Title of the subsidy programme  
 
Subsidy for the costs of installation and management of the Tele Metering System.  
2. Period covered by the notification 
 
2011-2012. 
 
3. Policy objectives and /or purpose of the subsidy 
 
To support the costs of the installation and management of metering systems installed and 
managed for the purpose of improving air quality through constant metering of air pollutants 
emitted from business sites.     
4. Background and authority for the subsidy  
 
Laws: Clean Air Conservation Act (Article 81).   
Authority: Ministry of Environment.   
 5. Form of the subsidy  
 
Grants.   
- Source of funding: Special Account for Environmental Improvement.   G/SCM/N/253/KOR 
 
- 24 - 
 
  6. Recipient and terms 
 
Recipient: SMEs under Article 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises that have installed metering devices in accordance with the regulations of 
Article 17 of the Enforcement Decree of Clean Air Conservation Act and Article 18 of the 
Enforcement Decree of Special Act on Metropolit an Air Quality Improvement, and whose business 
sites transmit the metered results to a Clean SYS control centre.  
 
Terms: Support for the costs of installation and management of the Tele Metering System (40 per cent from the central government and 20 per cent from the local government).   
7. Amount of the subsidy  
  (Unit: million KRW)  
 2011 2012 
Lump sum transfer (a) 1,884 1,763 
Loan - - 
Benefit of loan(b) - - 
Total (a + b) 1,884 1,763 
 * The benefit of loan is estimated based on the di fference between the loan rate and the market rate. 
 
8. Duration of the subsidy 
 
From 2009.   
 
9. Trade effects of the subsidy  
 
There is no discriminatory trade barrier because this subsidy supports the costs of the installation and management of the Tele Metering System an d does not differentiate between a domestic and 
imported measurement devices.  
 
6.7  Project on the Distribu tion Of Low NOX Burners  
1. Title of the subsidy programme  
 
Project on the Support for Low NOX Burner Installation.    
2. Period covered by the notification 
 
2011-2012.  
3. Policy objectives and /or purpose of the subsidy 
 
To support the installation of low NOX burners at small and medium business sites to improve air 
quality in areas of high concern in metropolitan and rural areas.  
 4. Background and authority for the subsidy  
 
Laws:   - Clean Air Conservation Act (Paragraph 3 of Article 26). 
- Act on the Budgeting and Management of Subsidies. 
- Notifications No. 2009-13 (Subsidy project to su pport low NOX burner installation, delegated 
affairs*) and No. 2009-26 (Subsidy project under th e Ministry of Environment, delegated affairs*) 
of the Ministry of Environment. 
 
* delegated affairs: affairs entr usted to local governments.  
 
Authority: Ministry of Environment.   
 
5. Form of the subsidy  
 
Grants.   
- Source of funding: Special Account for Environmental Improvement.   G/SCM/N/253/KOR 
 
- 25 - 
 
  6. Recipient and terms 
 
Recipient: SMEs under Article 3 of the Enforcement Decree of the Framework Act on Small and Medium Enterprises, non-profit corporations, commercial buildings and apartment houses (with the 
exception of public facilities) replacing regular burners to low NOX burners on regular boilers, 
water chillers/heaters and drying facilities (limited to indirect heating facilities).  
Terms: Fixed support according to volume (local governments support an additional 40 per cent of 
the central government’s support).  7. Amount of the subsidy  
  (Unit: million KRW)  
 2011 2012 
Lump sum transfer(a) 9,669 9,684 
Loan - - 
Benefit of loan(b) - - 
Total (a + b) 9,669 9,684 
 * The benefit of loan is estimated based on the di fference between the loan rate and the market rate. 
 
8. Duration of the subsidy 
 
No fixed time period. 
 
9. Trade effects of the subsidy  
 
The effect of this subsidy on trade is expected to  be insignificant because it supports the costs of 
replacing regular burners to low NOX burners on regular boilers, water chillers/heaters and drying facilities (limited to indirect heating facilities) installed in SMEs, non-profit corporations, commercial buildings and apartment houses for the improvement of air quality.  
 
6.8  Loan Programme for R&D of information and communication 
1. Title of the subsidy programme  
 
Loan Programme for R&D of Information and Communication.  
2. Period covered by the notification  
 
2011-2012.  
3. Policy objectives and /or purpose of the subsidy 
 
To provide loans for large-scale R&D projects on information and communication that involve high 
risks and would otherwise place undue burdens on  businesses wishing to pursue technology 
development.  
4. Background and authority for the subsidy  
 
Law: Information Technology Industry Promotion Act. Authority: Ministry of Science, ICT & Future Planning. 
 
5. Form of the subsidy  
 
Loans. 
 6. Recipient and terms 
 
Recipients: Private firms. Terms: Interest rate changeable de pending on market interest rates. 
 G/SCM/N/253/KOR 
 
- 26 - 
 
  7. Amount of the subsidy  
 
  (Unit: million KRW) 
 2011 2012 
Lump sum transfer (a)   
Loan 30,000 30,200 
Benefit of loan*(b) - - 
Total (a + b)   
* The subsidy effect is estimated based on the difference between the loan rate and the market rate. 
 
8. Duration of the subsidy 
 
No fixed time-period.   
 
9. Trade effects of the subsidy  
 
None. 
  
__________