Republic of Korea WT/TPR/S/268 
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  III. TRADE POLICIES AND PRACTICES BY MEASURE 
(1) INTRODUCTION  
1. Since its previous Trade Policy Review, the general thrust of Korea's trade policy has 
remained relatively unchanged.  Korea has take n steps to facilitate trade and promote green 
technology.  However, despite FTA-driven liberali zation some measures continue to protect domestic 
producers, especially farmers, from foreign competition.   
2. Korea has pursued its broad trade facilitation effo rts by further streamlining, and modernizing 
(and diffusing overseas) its fully computerized cust oms procedures, in line with its World's Best 
Customs 2012+ plan.  Transfer pricing and custom s valuation, two areas in which multinational 
corporations faced difficulties while doing business in Korea, were addressed. 
3. The tariff remains one of the main trade po licy instruments and a significant and increasing 
source of tax revenue (6% of total tax reve nue in 2010).  Almost all tariff lines are ad valorem .  
Nonetheless, the tariff involves a multiplicity of rates (84 ad valorem and 46 alternate duties).  As a 
result of the adoption of the HS 2012 tariff nomen clature the average applied MFN tariff rate 
increased from 12.6% in 2011 (virtually the same as in 2008) to 13.3%, which is high by 
OECD-country standards, thereby requiring tariff con cessions or drawbacks to ensure that tariffs on 
intermediate inputs do not feed through to become  taxes on exports;  these measures add to the 
complexity of border taxation. 
4. Peak ad valorem  rates apply to agriculture (WTO definition).  Tariff rates range from zero to 
887.4%;  85.2% of rates were 10% or below in 2012.  Under its multilateral agricultural 
market-access commit ments, Korea applies tariff-rate quotas;  some of its out-of-quota rates are 
sufficiently high to, in effect, constitute quantitative r estrictions.  In-quota tariff rates are much lower, 
ranging from zero to 50%.  Nevertheless, the pers istently large proportion of these quotas that are 
unfilled in some instances suggests that, in add ition to the lack of sufficient domestic demand, 
increase of import price, or sanitary measures related to the outbreak of diseases in exporting 
countries, the administration and allocation of these quotas may also be restricting imports.  Other 
measures that selectively reduce tariffs on inputs are a potential impediment to efficient resource use 
and add to tariff complexity and uncertainty.  While  89.98% of tariff rates are bound, the average gap 
of 4.3 percentage points between applied and bound MFN rates (8.4 percentage points for agricultural 
items (WTO-definition)), allows considerable leeway to raise applied tariffs.  Indeed, Korea has used 
this leeway to apply higher MFN tariff rates, term ed "flexible tariffs", which the authorities maintain 
are within WTO bindings.  Korea intends to reduce, or remove gradually, non- ad valorem  tariffs, 
which tend to conceal peak rates of up to 1,506.3%  (cinematographic film), and "flexible tariffs" in 
line with the reduction undertakings resulti ng from FTA, and, eventually DDA negotiations. 
5. Rice remains subject to import quota restricti ons under Korea's WTO minimum market access 
(MMA) commitments until 2014;  rice imports have in creased steadily and are expected to double to 
cover 8% of domestic consumption.  Import licen sing requirements 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.  Automatic licensing procedures were applied to 
128 basic steel products from 2007 to 2009.   
6. Korea has used anti-dumping provisions, mainly ag ainst imports of chemicals, kraft paper, 
plastics, stainless steel and particle board originati ng mostly in Asia.  Price-based special safeguard WT/TPR/S/268 Trade Policy Review 
Page 46 
  
  provisions (SSG) under the WTO Agreement on Agricu lture have been used  less frequently since 
2008, while volume-based SSGs were not used at all.  
7. Korea restricts or monitors certain exports to  ensure adequate domestic supplies, thereby 
possibly assisting downstream processing of these pr oducts.  For example, since 2008, rice has been 
subject to quantitative export restrictions (recommenda tions) although, in practice, they have not had 
a trade-restrictive effect .  On the other hand, direct export subsidies are maintained to reduce 
marketing costs for certain agricultural products  in accordance with Article 9.4 of the WTO 
Agreement on Agriculture.  A drawback scheme provid es refunds of border taxes.  Internal indirect 
taxes are reimbursed on exports, while income tax relief is accorded to enterprises located in 
free-trade zones (FTZs).  Exporters benefit from expor t credit insurance, finance, and the promotional 
activities provided by state-owned institutions. 
8. Measures involving grants, tax concessions, a nd low-interest loans support production and 
trade of various agricultural, forestry, fishing, and manufactured products, and encourage SME, R&D, 
and environmental-protection activities.  Although tax incentives were to term inate automatically in 
accordance with sunset clauses, many were extended .  SMEs are among the beneficiaries of these 
measures, which are especially gene rous for information technology activities;  those facing problems 
of access to raw materials are supported by a fund.  Financial assistance to "new growth engine" 
activities in green technology, high-tech "convergen ce", and high value-added services is emphasized.  
Agriculture receives substantial domestic financial support in line with the relevant WTO provisions, 
and benefits from the lowest electricity tariffs among consumer groups.  Comp ensation or adjustment 
support has been increased for farmers and manufactur ers adversely affected by a bilateral free-trade 
agreement. 
9. Korean industrial standards have increased over the l ast five years in an effort to ensure that 
new standards are in harmony with new interna tional standards but the share of non-harmonized 
standards has increased considerably ;  at the same time, the number of mandatory standards increased 
by about 70%.  New food labelling requirements relate to children's favourite food products, 
nutritional labelling, and irradiated ingredients.  Developments in standard s and food regulations are 
aimed at improving national standards and food safety controls coordination, the supply of scientific 
information, and quality management.  
10. State involvement in the economy persists as priv atization efforts, seemingly a priority during 
the period under review, have accomplished little (e ight firms have been privatized) despite the 
Government's resolve to proceed with divestment s.  Two government agencies and one producers 
association are responsible for imports of all rice a nd some other agricultural items imports;  their 
operations allow for important price mark-ups.  The value of contracts subject to Korea's WTO 
Government Procurement Agreement (GPA) co mmitments increased, though certain procurement 
remains uncovered by these undertakings;  the fo reign supplies' already small share has dropped 
steadily since the previous Review.  Despite the lack of domestic price preferences, government 
procurement is still seemingly used as an instru ment of economic policy for promoting SMEs, 
companies in a disadvantageous position, region al development, and green purchasing.  Most 
procurement remains decentralized. 
11. During the review period, Korea undertook effort s to remove anti-competitive provisions of 
competition laws and regulations; monopoly power h as decreased steadily, but market concentration 
remains relatively high.  Large business conglomerates, many of which are family-controlled 
(chaebols ), are subject to special regulation, and cr oss-shareholding between subsidiaries under the 
same holding company is banned.  Ceilings on the total amount of shareholdings in other domestic 
companies were removed in 2009.  Large corporatio ns and SMEs are encouraged to voluntarily sign Republic of Korea WT/TPR/S/268 
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  an agreement on fair trade and shared growth;  future work is focused on improving competition 
conditions for SMEs.  Consumer protection has been  improved by helping cons umers to better protect 
their rights and interests themselves, as well as by  ensuring that FTA-driven liberalization benefits 
final consumers rather than firms only;  privacy -related concerns top the e-commerce legislative 
agenda. 
12. Korea's intellectual property rights legislation has been strengthened with amendments owing 
partly to the implementation of commitments unde r the FTAs with the EU and the United States.  
Protection was further enhanced with the expansio n of international commitments, the reinforcement 
of border enforcement, and other improvements.  
(2) MEASURES DIRECTLY AFFECTING IMPORTS  
(i) Customs procedures 
13. Korea has continued to make wide-ranging tr ade facilitation efforts and remains a world 
leader in this area.1  Under its June 2008 vision of World's Best Customs 2012+ for an Advanced 
Trading Nation and the CLEAR (Creativity, Listeni ng, Energy, Action, Relationship) Conduct Code, 
which was designed to overcome the global economic crisis and cope with drastic change in the 
global trade environment, the Korea Customs Servi ce (KCS) aims to achieve a world-class customs 
by providing prompt customs service and protecting society from illegal transactions.2  The World's 
Best Customs 2012+ plan consist of five strate gies and 80 mid- and long-term specific reform 
initiatives.  Its main implementation directives are:  cooperating with the private sector for 
governance-based customs administration, emphasizing both self-regulation and participation of every company;  expanding the role of customs to secure  public health and welfare;  re-aligning customs 
procedures, practices, rules, and re gulations with international sta ndards (including the revised Kyoto 
Convention);  and improving the u-Customs level of KCS.
3  
14. The KCS is considered to be at the cutting edge of  international best practice.  It has attracted 
international acknowledgement by maintaining an im pressive record of technology advancement to:  
improve efficiency;  enhance transparency;  slash cl earance times;  enhance probity and integrity;  and 
employ sophisticated intelligence and risk management systems.   
(a) Registration, documentation, and clearance requirements 
15. Import declarations must be made by consignors,  customs brokers or corporations for customs 
brokerage/clearance.  The commercial invoice, price declaration, and duplicates of the bill of lading 
must accompany the import declaration.  Where ap plicable, a detailed packing list, import approval 
document (e.g. licence), sanitary and phytosanitary certificates (most agricultural goods and processed 
foods), and certificate of origin for goods subj ect to tariff preferences should be submitted.4  I n  
addition, an application for duty exemption/abatem ent, preferential tariff rate, etc. is required 
                                                      
1 According to a World Bank report, in 2011 Korea ranked 4th among 183 countries (10th in 2010) in 
ease of trading across borders (World Bank/IFC, 2011a and b). 
2 Online KCS notice, "World's Best Customs for an Advanced Trading Nation", 17 June 2008.  Viewed 
at:  http://english.customs.go.kr/kcsweb/user.tdf;  and Korea Customs Service (2009).  
3 The term u-Customs stands for ubiquitous Customs, i.e. a customs authority providing relevant 
administrative service regardless of time and location and via various channels. 
4 WTO document WT/TPR/S/204/Rev.1, 4 December 2008 , and KCS online information.  Viewed at:  
http://english.customs.go.kr/kcsw eb/user.tdf?a=common.HtmlApp&c=1501&&page=/english/html/kor/ 
facilitation/facilitation_01_ 01.html&mc=ENGLISH_FA CILITATION_IMPORT. WT/TPR/S/268 Trade Policy Review 
Page 48 
  
  whenever applicable.  Qualified importers (i.e. compliant with import clearance regulations) receive 
expedited customs clearance and more  convenient methods for paying duties.5  
16. Import clearance, including declaration procedures, and cargo management systems are fully 
computerized.  The KCS operates a seven-fields paperless e-clearance system (UNI-PASS, a KCS 
brand name)6 to handle export/import clearance opera tions, import cargo management, duties 
collection, duties drawback system, and a singl e-window system covering requirement-confirmation 
processes (see below), including quarantine and inspection.7  The KCS is linked to 34 agencies 
responsible for approving certain imports subject  to requirements that need to be verified 
electronically.  The number of items needing such  clearance-related checks under Article 226 of the 
Customs Act increased from 4,356 in 2008 to 5,527 ten-digit items in January 2012, under 35 laws.  
The paperless clearance system has expanded:  th ere are 110,000 (42,000 in mid-2007) companies in 
the trading sector using Electronic Data Exchange (EDI).  In 2012, cargo management and import declarations (80% in 20 08) were 100% paperless.  
17. The KCS web-based import/export requirement confirmation single window system, which 
operates on behalf of 34 major government agenci es handling 97% of total import verification, 
encompasses the import requirements administered by the Korea Food and Drug Administration, the 
National Fisheries Products Quality Inspection Serv ice, and the National Veterinary Surgeon and 
Quarantine Service.  Not all relevant government agencies have yet (as of 2012) joined the single 
window system.  Requirement confirmation cases through the single window increased from 24,320 (4.3% of 567,211 cases) in 2006, to 985,509 (97% of 1,019,817 cases) at end 2011.   
18. A self-assessment system is in place for cust oms duties and taxes (since 2004), as well as an 
e-bidding system in customs auctions of seize d items (since 2006).  As from 2008, the KCS has 
operated the latest version of the web-based Cu stoms Knowledge Management Portal system.  
19. In response to the changing international trade environment and in line with its World's Best 
Customs 2012+ plan, as from April 2009, the KCS has implemented the Authorized Economic 
Operator (AEO) Program to, inter alia,  support domestic exporters, accommodate the U.S. 
strengthened trade security measures, and harmonize tr ade security and facilitation at the level of the 
World Customs Organization (WCO).
8  At end 2011,  the Notification on AEO Certification and 
                                                      
5 Benefits include immediate release of goods before submission of the import declaration, payment of 
customs duties and taxes after the release of the goods or on a monthly basis, and exemption from collateral 
deposit requirements. 
6 Since 2005, the UNI-PASS e-clear ance scheme has been exported to:  Kazakhstan in 2005 at 
US$420,000;  Kyrgyzstan in 2008 at US$470,000;  the Dominican Republic in 2008 at US$28.5 million;  
Mongolia in 2009 at US$5.54 million;  Guatemala in 2009 at US$3 million;  Ecuador in 2010 at 
US$24.19 million;  Nepal in 2011 at US$3.83 million;  Tanzania in 2011 at US$2.66 million, and Ecuador in 2011 at US$15.82 million.  UNI-PASS is the world's first 100% electronic clearance portal system;  it is claimed 
to have cut import cargo clearance time to an average of 1.5 hours, helping traders slash their logistical costs 
(online KCS notice, "KCS UNI-PASS to expand overseas UNI-PASS promotional booth at WCO IT Conference", 20 April 2009.  Viewed  at:  http://english.customs.go.kr/kcsweb/user.tdf;  and WTO document 
WT/TPR/S/204/Rev.1, 4 December 2008). 
7 WTO document WT/TPR/S/204/Rev.1, 4 Decembe r 2008;  and Korea Customs Service online 
information.  Viewed at:  http://english.customs.go.kr/kcsweb/user.tdf?a=common.HtmlApp&c=1501&&page= 
/english/html/kor/facilitation/facilitation_01_0 1.html&mc=ENGLISH_FA CILITATION_IMPORT 
[8 October 2007]. 
8 The term AEO refers to a party involved in the international movement of goods that has been 
approved by a national customs administration as complying with WCO or equivalent supply chain security 
standards.  Companies must meet standards of law ob servance, internal management, financial stability, and Republic of Korea WT/TPR/S/268 
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  Management provided 199 certified firms with special treatment in customs procedures, including less 
physical inspection, exemption from customs audit, less administrative fines, etc.  By April 2012, 
0.3% of Korea's imports entered under the AEO system.  Korea has signed mutual recognition 
arrangements (MRAs) with the United States, Cana da, Singapore, Japan, and New Zealand;  MRAs 
with China, India, and Israel are under negotiation. 
20. In June 2009, the KCS completed developmen t of the standard e-document management 
system, a tool for connecting customs networks ar ound the world, to promote trade efficiency and 
security within the framework of a global single wi ndow concept, consisting of an export declaration 
in one country substituting the import decl aration in the country of destination.  To expand the 
application of the global standard of customs ad ministration, the KCS adopted the WCO Data Model 
(DM) and takes advantage of the standard e-doc ument management system to write e-documents 
circulated within its internal networks;  17% of XML documents used within KCS's network are 
based on WCO DM, and the KCS plans to increase th is ratio.  The 'standard e-document management 
system', which enables search and comparison of international and domestic standards9, is expected to 
play an important role in the conformity of domestic  e-documents with international standards, as well 
as making Korea a leader in international standard s.  The KCS has exchanged customs data with 
Belgium and the Philippines, and plans to expand the project to major trading partners and FTA 
partners.  The KCS conducted pilot programmes on export clearance data exchange with Belgium, 
Malaysia, and the Philippines in 2009.  In Nove mber 2010, it signed a memorandum on clearance data 
exchange with the Russian Federation;  and bilate ral discussions on pilot programmes are under way.  
The KCS also signed Terms of Reference (TOR) with Australia on guidelines for data exchange after 
discussing the exchange of data related to strategi c materials, and it was agreed to initiate data 
exchange operations as from 2012.  
21. Other improvements brought under World's Best Customs 2012+ plan as from 2009 include:  
extension of the time limit for claiming refunds for overpaid or erroneously paid duties from 
three years to five years;  extension of the period in which importers can correct declaration mistakes 
without paying "additional tax" (i.e . penalty) from three months to six months;  minimization of the 
occurrence of "double" tax audits" (section (2)(ii)) of multinational corporations (section (2)(ii));  implementation of a CARE Plan (Customs Assistan ce for Recovery and Encouragement Plan) helping 
companies in financial difficulty to pay duties and taxes within an extended timeframe or in monthly 
instalments (as from 2008)
10;  and development of 20 customized business models for private 
companies to make effective use of preferential tari ff rates and cope efficiently with complicated FTA 
                                                                                                                                                                     
safety control under the WCO Framework of Standa rds to Secure and Facilitate Global Trade (SAFE 
Framework).  Since the United States introduced the pr ogramme in 2002, 54 countries including Korea have 
adopted it ( Korea Herald,  "Korea vows to play leading role in global trade flow", 16 April 2012.  Viewed at:  
http://www.koreaherald.com/national/D etail.jsp?newsMLId=20120416000747 [4 May 2012];  and online KCS 
notice, "Speedier Customs Clearance for Law-abid ing Traders", 15 April 2009.  Viewed at:  
http://english.customs.go.kr/kcsweb/user.tdf). 
9 With efforts for both trade security and facilita tion continuing through the WCO SAFE Framework, 
the US Safe Port Act, etc., major trading countries are tr ying to get their own e-document standard to be adopted 
as an international standard as it will directly serve th eir national interests (online KCS notice, "KCS, a leader in 
international move for standardization of customs e-document", 5 August 2009.  Viewed at:  http://english.customs.go.kr/kcsweb/user.tdf). 
10 In 2008, the first year of the global economic crisis, KCS supported companies in financial difficulty 
with US$569 million of deferred tax payments.  It has operated the system continuously, covering 1,124 companies from potential bankruptcy and to "normalize" their business.  The support amounted to 
US$1.9 billion in 2009, US$375 million in 2010, and US$55 million in 2011.  Tax deferral constitutes tax relief 
and therefore financial assistance to the comp anies involved (Korea Customs Service, 2009). WT/TPR/S/268 Trade Policy Review 
Page 50 
  
  rules of origin criteria.11  To turn around the economy's sudde n recession caused by the 2008 global 
financial crisis, comprehensive measures were ta ken in expedited customs clearance, support for 
newly emerging businesses, reduction of  financial burden for traders, and immediate elimination of 
field bottlenecks;  they comprised 15 specific initia tives to support foreign trade-related business.  
These measures were expected to involve US$667  million worth of financial aid to the trade 
community every year. 
22. In 2011, customs declarations were processed in 1.75 hours, on average, up from 1.58 hours 
in 2008;  the increase was due to a larger number of declarations being processed by a limited number of staff and increased volume of agricultural im ports from China requiring time-consuming food 
inspection and quarantine.  Prior-entry import declar ations are allowed (up to five days for sea and 
one day for air).  Most imports (about 95%) are cl eared after being taken into a bonded area;  the 
average clearance times from port entry to release from a bonded warehouse was 2.3 days in 2012, down from 3.54 days in 2007.  A cargo selectivity system automatically selects high-risk cargo for documentary and possible physical inspection;  between 2008 and 2011, an annual average of 3.4% (293,340) of customs clearance cases were subject to physical inspection.
12  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 40% (60% in 
2008)  of inward cargo uses this system;  goods are cleared without being moved to a warehouse 
outside the port.  
23. According to a 2011 World Bank report, Korea's clearance delays are very short;  the KCS 
estimates that predictable cargo processing times and rapid cargo turnover by ports and warehouses 
benefit the Korean economy by some US$2 billion annually.
13  For Korean-based companies such as 
Samsung and LG, the rapid and predictable turn around times are an important part of their 
competitiveness strategies.  The KCS estimates that  it spends some US$38 million annually on its 
information technology infrastructure, US$9 million of which is for the single-window system.  But 
the estimated benefits, US$2 billion-US$3.3 billion a y ear according to KCS, far outweigh the costs.   
24. Since August 2005, the KCS has applied more ri gorous customs inspections to agricultural 
products, including peppers, garlic, sesame seeds,  onions, carrots, and seasoning powders, to help 
protect local farmers and producers against increased imports due to undervalued import declarations.  
These measures have been implemented not to restri ct imports, but to prevent illegal importation and 
duty evasion from under-invoicing, and to meet the need for increased laboratory analysis under 
paperless customs clearance.14   
25. According to the authorities, blended products re main classified on the basis of their intrinsic 
characteristics as found in the Harmonized System  (HS) Convention, HS Explanatory Notes and 
                                                      
11 The 5 basic models are:  export expansion, cost reduction, overseas production, export assistance, 
and FTA hub and logistics cost saving.  Thereafter the KCS developed 20 FTA utilization business models.  In 
2008, the KCS developed 7 region-specific models to help companies to utilize the FTA more conveniently.  In 
addition, from 2009, the KCS held an annual FTA Utilization Contest in order to share and promote the best practices based on the FTA business models.  As of 2008, 144 companies benefited from such models;  no 
recent data were available from the au thorities (Korea Custom s Service, 2009). 
 12 High-risk cargo is screened out for audit and insp ection through automatic checks on the degree of 
risk, based on compliance record, type of item, etc.  Audit and inspection by the customs authorities mainly aim 
at preventing illicit importation and tax evasion.  
13 World Bank/IFC (2011a). 
14 WTO document WT/TPR/S/204 /Rev.1, 4 December 2008.  Republic of Korea WT/TPR/S/268 
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  provisions of the General Rules for Interpretation of  Nomenclature.  To help  importers and exporters, 
the KCS is enforcing an advanced classificati on ruling under the World Customs Organization's 
recommendation.  When a dispute occurs over clas sification of a certain product, the KCS Tariff 
Classification Committee, consisting of experts fro m the public and private sector, makes the final 
decision.  If the Committee fails to  reach agreement, it requests an  opinion from the World Customs 
Organization Secretariat or a decision from its Harmonized System Committee;  between 2008 and 
2011, 7,010 advance rulings were issued in this area.   
26. The KCS provides prompt responses to enquiri es made online and maintains a Roadmap for 
Integrity including a 2005 Customs Business Inte grity Pact.  A Customs Irregularities Reporting 
Centre is in place and the Cyber Corruption Report Centre advises Customs staff and other 
stakeholders to report Customs irregularities to th e KCS website;  no enquiries have been received at 
the Centre since 2007.  A Customs Ombudsman, appoi nted from the private sector and assisted by 
one customs staff member in each Customs house,  handles disputes and complaints over clearance 
and valuation processes.  KCS maintains an Audit Bureau and a Differentiated Management System 
by Companies to target suspected high-risk impor ters.  A Code of Conduct for the Integrity of 
Customs Officers has been in  effect since May 2003.  
27. Korea acceded to the revised Kyoto Conven tion in February 2003, subject to certain 
reservations15;  the Convention took effect in February 2006.   
28. Korea does not require preshipment inspection of imports. 
(b) Free-trade zones (FTZs)  
29. FTZs (Chapters I and II) operate under the 2004 Ac t on Designation and Management of Free 
Trade Zones;  they are exclusive areas outside the national customs boundary, exempt from customs 
requirements.  FTZs facilitate flows of goods and services, including distribution, at busy airports, 
seaports, and storage complexes/cargo terminals.  The Minister of Knowledge Economy (in 
consultation with related ministers) designates such zones upon request from regional governments.  
Activities in the zone may be exempt from import procedures and customs duties, and receive relief 
from direct taxes (notably corporate income tax) as  well as indirect taxes (e.g. VAT)).  Foreign cargo 
may enter and leave freely.  Simple processing is allo wed.  Korean goods entering the zone are treated 
as exports and eligible for tariff drawback.  Goods entering or processed in these zones are principally 
intended for export, but if sold domestically, are subj ect to import duties and domestic taxes, such as 
VAT.  According to the authorities, this treatment does not constitute a subsidy specifically provided to an enterprise or industry or group of enterprises or industries;  therefore, it is not subject to notification to WTO pursuant to Article 25 of the WTO Agreement on Subsidies and Countervailing 
Measures.  In December 2008, the Ministry of Knowledge Economy designate d four industrial parks 
and seaports as FTZs, bringing their number to 13.
16  Between 2008 and 2010, the FTZs located in 
industrial parks generated US$8.3 billion of imports and US$14.6 billion of exports;  the firms in 
these FTZs employed 13,676 persons.  No estimates were available from the authorities of forgone 
direct and indirect tax revenues relating to the operation of FTZs since 2008.   
                                                      
15 Korea accepted 14 of the 25 Chapters in Speci fic Annexes of the Protocol, and maintained 
reservations on 18 recommended practices, mainly relating to  areas unsuitable to Korea' s trade environment.  It 
had adopted the core principles of the revised Kyoto Convention in July 1999, and accepted further principles 
by amending the Customs Act in 2000, 2001, and 2002.  
16 The FTZs are located at the Inch eon International Airport;  the ports of Busan, Gwangyang, Incheon, 
Pohang, and Pyongtaek-Dangjin;  and the industrial parks of Masan, Gunsan, Daebul, Donghae, Yulchon, 
Kimje, and Ulsan.   WT/TPR/S/268 Trade Policy Review 
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  (ii) Customs valuation 
30. According to the authorities, Korea's custom s valuation legislation (sub-section 2 of the 
Customs Act 1949) complies with the WTO Agreement on Customs Valuation.  Imports are valued at 
their c.i.f. price.  The main method used is transac tion value (based on the price actually paid or to be 
paid by the buyer);  about 96% of imports are s ubject to the transaction value.  When this method 
cannot be used, valuation is dete rmined using, in order, identi cal 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 comput ed value may be reversed.17   
31. While the KCS may, in principle, set sp ecial customs valuation and documentary 
requirements for second-hand imports (Presidential D ecree of the Customs Act) , it applies the same 
customs valuation methods as for new items.  Howeve r, as a last resort, Customs may determine their 
valuation using "reasonable standards", whereby pri ces 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 comparisons 
with transaction values of new cars of the same mo del that have been rec ognized as customs values, 
with the deduction of depreciation (depreciated valu e).  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 decl ared value, in which case an alte rnative WTO-consistent valuation 
method is used.  The use of the "depreciated value" would be applied only as a last resort. 
Documentary requirements include a letter of technical inspection from an automobile 
performance-testing institute.18  
32. An MOU signed in January 2009 between Ko rea Customs Service (KCS) and the National 
Tax Service (NTS) addressed the issues of transfer pricing and customs valuation, two areas in which 
multinational corporations faced diffi culties while doing business in Korea.19  These two agencies 
were expected to minimize the occurrence of " double" tax audits of multinational corporations 
through joint tax audits, informati on exchange, and mutual training.20  
33. Between 2008 and 2011, a total of ₩ 124.3 billion was collected on under-valued imports.  
The 2007 SIREN, a KCS early warning system to block undervalued imports of agricultural goods, 
plants, and fisheries, remains in place21  Based on the result, under-valu ed products go through audit, 
while normal products are cleared pr omptly.  At the time of the previous TPR of Korea, SIREN 
seemed to have increased tax revenue and ha d an import substitution effect estimated at 
₩ 97.5 billion and ₩ 178.6 billion respectively;  no recent data  in this area were available from the 
authorities.   
                                                      
17 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 (http://www.wto.org/english/docs_e/legal_e/20-val_01_e.htm).  
18 KCS News Release, 12 May 2003, "Documentary Requirements for Import of Used Cars to 
Change". 
19 Action by KCS and NTS may be n ecessary to address tax avoidance,  if not evasion, resulting from 
"aggressive" transfer pricing by multinationals, although  such action should not be excessive and involve high 
compliance costs (Won-Kee P ae and Sang-Min Ahn, 2009). 
20 Korea Customs Service (2009). 
21 SIREN is designed to screen out undervalued products by calculating the proper import prices of the 
products and comparing them with the declared prices.  The Kalman filter model, a statistical model is used for 
calculating a proper import price (WTO docu ment WT/TPR/S/204/Rev .1, 4 December 2008). Republic of Korea WT/TPR/S/268 
 Page 53 
 
 
  34. Customs duties (including domestic taxes) must be paid within 15 days of acceptance of the 
import declaration (where 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 im prisonment with hard labour or a fine equivalent 
to five times the evaded customs duties or the cost  of the relevant goods, wh ichever is lower) apply 
for fraudulent declaration of dutiable value, false tari ff rate or incorrect tariff classifications with the 
intention of affecting the determinati on of the amount of duty to be paid.  
35. Customs decisions may be appealed to the KC S Commissioner, to the National Tax Tribunal 
or to the Board of Audit and Investigation.  The Tariff Examination Committee, comprising 
five customs officers and six experts, assists the Commissioner on appeals.  Its decisions may be filed for a lawsuit.   Discretionary tariff (or other tax) "remissions" by the KCS Commissioner or Minister 
of Strategy and Finance may be revoked if recei ved in an unjustifiable manner or used for an 
unintended purpose during a period of post-control;  such revocation can be appealed to the KCS 
Commissioner.   Between 2008 and 2011, there were 2 63 administrative litigations and 
1,268 administrative appeals.   
(iii) Tariffs 
36. In January 2012, Korea introduced the 2012 version of the Harmonized System of Tariff 
Classification (HS) consisting of 12,232 ten-digi t lines (503 more lines than the 2008 schedule and 
332 more than in 2011).  The tariff schedule is set from January to December;  most tariff changes at 
the six-digit level are introduced annually in the form of an Annex to the Customs Act under 
procedures involving the relevant ministries and interested parties, including the Ministry of Strategy 
and Finance (MOSF), the Customs and Tariff Delib eration Committee, the State Council, and the 
National Assembly.
22  
37. The tariff comprises several rates according to the source of imports.  These are the MFN 
tariffs from non-preferential sources (termed general rates), and various preferential tariffs, including 
for imports from other members of the Asia Pacific Trade Agreement (Bangkok Agreement), FTAs 
and least developed countries (section (2)(iii)(g), and Chapter II).  The WTO bound rates are also 
contained in the tariff.  
(a) Applied MFN rate 
38. The tariff structure has changed little since the l ast Review of Korea.  As a result of the 
expansion of tariff lines under the HS2012 tariff nomen clature, the 2012 simple average (unweighted) 
MFN tariff increased to 13.3% (12.8% in 2008) (Tab le III.1 and Chart III.1), mainly as a result of the 
increase in lines subject to high rates of duty.23  Tariff protection varies substantially across and 
within sectors, averaging 55% for agricultural prod ucts and 6.6% for indus trial goods in 2012 (WTO 
                                                      
22 For more information about tariff changing procedures and the institutions involved see WTO 
document WT/TPR/S/204/Rev.1, 4 December 2008. 
23 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 Ko rea.  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 
Korea's alternate tariffs, which apply "whichever is the gr eater" rate, will slightly understate tariff protection 
when the alternate specific rate is operative.  Higher adjustment tariffs are also excluded.   WT/TPR/S/268 Trade Policy Review 
Page 54 
  
  definitions).24  Average tariffs are highest for vegeta ble products (HS section 2), at 101.2% 
(Chart III.1).  Manufacturing tariffs are highest fo r footwear and headgear (HS section 12) at 10.1%, 
and for textiles and articles (HS section 11) at 9.7%.  By according varied and substantial levels of 
protection to selected industries, especially agricu lture, tariffs distort competition by favouring some 
activities.  Reducing high tariffs (mainly out-of- quota agricultural duties) would improve Korea's 
resource allocation and national welfare. 
39. Over 99% of tariffs are ad valorem  duties.  There are some 130 different rate bands 
(84 ad valorem , 46 alternate duties), mainly associated w ith agricultural tariffs, of which about 
46 have decimal duties25;  alternate duties apply to 0.8% of to tal tariff lines (95).  Tariff rates range 
from zero to 887.4% (Table AIII.1).  More than 85% of rates are 10% or below (86.2% in 2008) 
(Chart III.2).  Rates of over 30% apply to 3.3% of  tariff items (2.9% in 2008).  The Korean tariff 
could be rationalized, for example, by reducing th e large number of rate bands and removing decimal 
duties. 
Table III.1 
Tariff structure, 2008, 2011, and 2012 
(%, unless otherwise indicated) 
MFN applied 
Final bounda   2008 2011 2012 
Bound tariff lines (% of all tariff lines) 90.8 90.8 89.9 89.9 
Simple average rate 12.8 12.6 13.3 17.6 
   WTO agricultural products 53.6 52.8 55.0 63.4 
   WTO non-agricultural products 6.5 6.5 6.6 9.2 
Duty-free tariff lines (% of a ll tariff lines) 15.9 16.5 16.2 14.2 
Simple average rate of dutiable lines only 15.2 15.1 16.2 20.9 
Tariff quotas (% of all tariff lines)b 1.6 1.6 1.9 1.9 
Non- ad valorem  tariffs (% of all tariff lines) 0.7 0.7 0.8 1.0 
Domestic tariff "peaks" (% of all tariff lines)c 2.7 2.6 3.0 2.8 
International tariff "peaks" (% of all tariff lines)d 9.1 9.0 10.5 18.1 
Overall standard deviation of  tariff rates 52.2 51.3 53.6 56.6 
Coefficient of variation of tariff rates 4.1 4.1 4.0 3.2 
Nuisance applied rates (% of all tariff lines)e 2.0 1.8 1.7 1.8 
a Final bound rates are based on the 2012 tari ff schedule in HS12 nomenclature.  Implem entation of final bound rates was reache d 
in 2009. 
b Excluding tariff quotas applicab le to rice and rice products. 
c Domestic tariff peaks are defined as those exceed ing three times the overall average applied rate. 
d International tariff peaks are defined as those exceeding 15%. e Nuisance rates are those greater than zero, but less than or equal to 2%. 
Note: The 2008 and 2011 tariff schedules are based on HS07 nomen clature, consisting respectively of 11,729 and 11,900 tariff li nes.  
The 2012 tariff schedule is based on HS12 nome nclature, consisting of 12,232 tariff lines.  Calculations for averages are based  on 
national tariff line level (10-digit), ex cluding in-quota rates and including the ad valorem  part of alternate rates.   Including AVEs 
for non- ad valorem  rates the simple average rate rises to 13.6% in 2012. 
Source:  WTO Secretariat calculations, based on data provided by the Korean authorities.    
                                                      
24 WTO definition of industrial products covers all non-agricultural products, i.e. products not covered 
by the WTO Agreement on Agricultu re.  WTO agricultural products incl ude all processed and unprocessed 
agricultural commodities (HS Chapters 1 to 24, less fish and fish products, plus some additional HS items). 
25 Excluding tariff quotas and alternate tariffs, Kor ea'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 
16 ad valorem  rate bands of 10% or below, and 38.1% and 11.2% of tariff lines have the rate of 8% and 6.5%, 
respectively.  Republic of Korea WT/TPR/S/268 
 Page 55 
 
 
  0102030405060708090100110
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 03, 12, 14, 
19 and 21 are fully bound.  Final bound rates are based on the 2012 tariff schedule.
WTO Secretariat calculations, based on data provided by the Korean authorities.Per centChart III.1                       
Average applied MFN and bound tariff rates, by HS section, 2008 and 2012
Note:
Source :01   Live animals & products        
02   Vegetable products03   Fats & oils      
04   Prepared food, etc.
05   Mineral products06   Chemicals & products07   Plastic & rubber
08   Hides & skins09   Wood & articles
10   Pulp, paper, etc.
11   Textiles & articles12   Footwear, headgear13   Articles of stones
14   Precious stones, etc.15   Base metals & products
16   Machinery
17   Transport equipment18   Precision instrument19   Arms & ammunition
20   Miscellaneous manufacturing21   Works of art, etc.Average applied rate 2008 and 2012
(12.8% and 13.3%, respectively)Average final bound rate
(16.8%) MFN 2008 
MFN 2012
Final bound
 
40. Non- ad valorem  tariffs consist of alternate dutie s on several manufacturing tariff items, 
mainly cinematographic film, diagnostic or laborat ory reagents, raw silk, and recorded video tapes 
(Table AIII.2).  These generally apply the greater of an ad valorem  or a specific duty, whereby the 
ad valorem  alternate rate sets a floor on the import duty rate.  According to WTO Secretariat 
calculations, in 2010 the ad valorem equivalents (AVEs) of the specific part of alternate duties ranged 
from 0.005% (cinematographic film HS3706901000)  to 1,506.3% (cinematographic film, 
HS3706903020), and virtually all were lower than the ad valorem  component of the alternate duty 
(Table AIII.2)26;  these alternate duties form part of Korea's WTO tariff binding commitments.  
Non- ad valorem  tariffs tend to conceal high tariff protection;  2 out of 3 AVEs in the top 20 peak 
tariff rates exceed the highest ad valorem  rate of the customs tariff schedule.  Alternate duties also 
apply to 1.6% of agricultural tariff items as out-o f-quota duties;  these involve very high minimum 
ad valorem  rates and exceed 500% on sesame seeds and oil, jujubes and pine nuts) 
(section (2)(iv)(a)). 
                                                      
26 AVEs were calculated on the specific duty components of 69 of 95 ten-digit tariff lines subject to 
alternate duties.  In 8 cases (involving oak mushrooms, fruits of the genus capsicum , ginkgo nuts shelled, 
carrots, cinematograph film) the specific duty component was higher than the ad valorem  part of the alternate 
rate.  These calculations are based on the 2010 import value and volume supplied by the Korean authorities.  
When these AVEs are taken into consideration for the tariff  analysis presented in Table III.1, the simple average 
MFN applied rate is 13.6% and those of agricultural an d non-agricultural products (WTO definition) 55.9% and 
6.7%, respectively. WT/TPR/S/268 Trade Policy Review 
Page 56 
  
  (15.8%)
(10.6%)(59.8%)
(4.6%)(3.6%) (4.1%)
(1.0%) (0.4%)(16.2%) 
(11.0%)(58.0%)
(4.1%) (4.6%) (4.3%)
(1.1%)(0.4%)
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.   Totals do not add up to 100% as no tariff rates were provided for 16 lines  for both years (import
restriction, representing 0.1% to total lines).
WTO Secretariat calculations, based on data provided by the Korean authorities.Number of tariff linesChart III.2
Distribution of MFN tariff rates, 2008 and 2012
Tariff rates (%)
Note:
Source :MFN 2008
MFN 2012
 
41. In the DDA negotiations, Korea ha s supported the elimination of non- ad valorem  duties to 
some extent.27  Non- ad valorem  duties would be removed to a la rge extent from Korea's tariff 
schedule if agreed at the DDA negotiation.  
(b) MFN tariff dispersion and escalation  
42. Indicators of tariff dispersion and escalation show little change during the period under 
review (Table III.1 and Chart III.3). 
(c) "Flexible" tariffs 
43. Korea applies temporary higher MFN duties (termed as "flexible" tariffs) (section (2)(iii)(a)).  
The flexible tariffs mechanism includes not just the adjustment and seasonal duties (described below), 
but also autonomous tariff quotas (section (2)(iv)(b )) as well as safeguard (section (2)(viii)(b)) and 
special safeguard (section (2)(viii)(b)) duties.28  The system allows the authorities to increase or 
decrease certain tariffs at their discretion providi ng considerable scope to encourage or discourage 
imports of particular items. 
                                                      
27 The authorities indicated that Korea has been maintaining the same voice with the G10 group in 
converting 90% of the non- ad valorem  duties into ad valorem  duties when the Tariff Simplification agenda was 
discussed at the DDA negotiations on agriculture. 
28 Autonomous tariff quotas are also referred to as flexible tariffs, and are di scussed in section (iv)(b) 
(WTO document WT/TPR/S/204 /Rev.1, 4 December 2008). Republic of Korea WT/TPR/S/268 
 Page 57 
 
 
  
n.a.n.a.0102030405060708090100
Food,
beverages and
tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishingChemicals Non-metallic
mineral
productsBasic metal Fabricated
metal
products and
machineryOtherChart III.3
Tariff escalation by 2-digit ISIC industry, 2008 and 2011
n.a.n.a.0102030405060708090100
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
(10.6%)
Not applicable.
Calculations exclude in-quota rates and incdlue the ad valorem part of alternate rates.
WTO Secretariat calculations, based on data provided by the Korean authorities.n.a.
Note:
Source :Per cent
First stage of processing Fully processed Semi-processedPer cent
Average applied rate in manufacturing
(10.4%)2008
2011
 WT/TPR/S/268 Trade Policy Review 
Page 58 
  
  44. The number of items covered by flexible tariffs  increased from 134 (HS ten digits) in 2007 to 
334 in 2012.  The authorities intend to reduce or remove gradually these tariffs in line with the 
reduction of tariff rates resulting from the DDA and FTA negotiations (Chapter II).   
Adjustment duties 
45. Adjustment duties protect domestic industries fro m import surges and lighten the shock from 
trade liberalization.  They are set annually by MOSF.   
46. In 2011, they applied to 20 six-digit tari ff items covering mainly certain fish, rice 
preparations, sauces, and plywood (Table A III.3), and following the adoption of HS2012 
nomenclature they increased to 22;  surface mount m achines for electronic parts of gantry type are no 
longer subject to adjustment duties.  Duties currently range from 10% on plywood to 50% on steamed 
or boiled rice.  Alternate duties where duties are the higher of an ad valorem  or a specific duty, apply 
to six six-digit tariff lines.  Several products subject  to adjustment duties, such as certain fish and 
plywood items, remain unbound; adjustment duties ra tes for the seven bound items are below their 
binding level. 
Seasonal duties 
47. The authorities indicated that no seasonal duties have been applied on an MFN basis during 
the period under review.  Preferential tariff treat ment of certain agricultural items under the FTAs 
with Chile, the EU, Peru, and the United States is a pplied only during the Korean off-season.  In the 
case of the Korea-Chile FTA, seasonal preferential duties are levied on grapes imported from Chile since 2004;  under both the Korea-EU FTA and th e Korea-Peru FTA, seasonal preferential duties on 
grapes and oranges originating in these trading part ners have been in place since 2011.  Under the 
Korea-U.S. FTA, seasonal preferential duties have app lied to potatoes for chipping, fresh or chilled, in 
addition to oranges and grapes, since the entry in force of the agreement in March 2012.  
(d) Bound tariff 
48. Korea bound 89.9% of all tariff lines in the Uruguay Round, covering 98.4% of agricultural 
tariff lines (excluding mainly rice) and 88.4% of indu strial tariff lines (WTO definitions).  On a tariff 
classification basis, 80.4% of agricultural tariff lines (HS Chapters 01-24) and 91.8% of industrial 
lines (HS Chapters 25-97) are bound. 
49. The simple average bound tariff rate rose slightly  during the review period (Table III.1);  as of 
2009, all Uruguay Round commitments were fully implemented.  Following "tariffication" of 
non-tariff measures, except on rice (section (2)(vi)(b)), very high bound (and app lied) tariffs apply to 
many commodities.  Korea's average bound rates on agricultural and industrial products (WTO 
definitions) are 63.4% and 9.2%, respectively (in 2012).  The overall gap between the two has 
remained at 4.3 percentage points.  The gap is 8. 4 percentage points for rates affecting agricultural 
items.  Korea uses this scope mainly to raise MF N tariffs annually by applying higher adjustment 
duties (section (iii)(c)) on a number of products to temporarily protect domestic producers. 
50. Korea has been included in several collective wa ivers that suspended the application of the 
provisions of Article II of GATT 1994 in order to allow it to reflect the changes resulting from the 
HS (2002) nomenclature in its Sc hedule of concessions.  These modifi cations and rectifications to 
Schedule LX became effective as of 1 July 2011,  although in April 2012 the authorities indicated that 
the transposition was "almost completed" (i.e. th e provisional Consolidated Tariff Schedules (CTS) Republic of Korea WT/TPR/S/268 
 Page 59 
 
 
  Files were not transferred to the Approved CTS Files).29  Since 1 January 2007, Korea has also 
benefited from similar collective waivers for the introduction of Harmonized System 2007 changes in 
its Schedule of concessions  upon completion of  transposition work to HS2002 the authorities 
indicated that they would initiate the transposition process into HS2007.30  In addition, as from 
January 2012 Korea has benefited from a collective waiver for the introduction of HS2012 changes in 
its Schedule of tariff concessions.31 
(e) Duty concessions/exemptions 
51. The application of import duty relief throug h duty concessions and exemptions has not 
changed since the last Review of Korea.  The revenue forgone from import duty relief was 
US$693 million in 2010 (equivalent to 7% of to tal tariff revenue) down from US$727 million (8.4%) 
in 2007.  
52. Tariff concessions also apply under other le gislation.  The Promotion Act for the 
Development of Aircraft and Space Industries also allows duty-free imports of parts (revenue forgone 
of ₩ 33.1 billion in 2010, down from ₩ 50.2 billion in 2008).32   
(f) "Usage" tariff rates 
53. Imported inputs for specified end-uses under "usag e" tariff rates may be exempt from tariffs 
under "usage" tariff rates (Article 83, Customs Act) .  The Government of Korea treats usage tariff 
rates, autonomous tariff quotas, and duty concessions on inputs as part of Korea's industrial policy, to 
encourage certain manufacturing activities.  Since 2008 "usage" tariff rates have been used for inputs 
in activities such as sowing, animal feeding, semiconductor manufacturing, etc.  
(g) Tariff preferences and rules of origin 
Preferences  
54. Korea's efforts to expand its b ilateral and regional free-trade agreements during the review 
period means that its simple average MFN tariff ra te at 13.3 % fell considerably for imports from 
FTA and LDC trading partners (e.g. to 6.3% fo r imports from ASEAN and Chile).  However, it 
remains unchanged for imports from countries receiving preferences under the Asia-Pacific Trade 
Agreement (APTA), the Global System of Trad e Preferences Among Developing Countries (GSTP) 
and the GATT Protocol Relating to Trade Ne gotiations Among Developing Countries (TNDC) 
(Chapter II(6)(iv), Table III.2).  Since its last Re view, Korea has gradually increased the number of 
items eligible for unilateral (non-reciprocal) dut y-free and quota-free tariff preferences to LDCs 
(Chapter II(6)(iv), Table III.2);  according to the au thorities, the scope was expanded to cover 75% of 
the dutiable items of the  tariff schedule in 2008, 80% in 2009, 85% in 2010, and 90% in 2011, and 
progress to 95% is planned in 2012.33  The Minister of Strategy and Finance (MOSF) may withdraw 
                                                      
29 WTO document WT/L/808, 16 December 2010, and WT/Let/804, 25 July 2011. 
30 WTO document WT/L/809, 16 December 2010, and WT/L/833, 5 December 2011.  
31 WTO document WT/L/834, 5 December 2011. 
32 WTO documents G/SCM/N/186/KOR, 7 May 2010 and G/SCM/N/220/KOR, 23 September 2011. 
33 In 2011, the 253 additional items included non-sensitive agricultural and fisheries products such as 
flowers, spice (peppers, etc.), oil and fat (olive oil, etc. ) and textiles, garments, instruments, and other industrial 
products (MOSF Press Release, "The number of items eligible for preferential tariffs for least-developed 
countries will be increased", 17 November 2010.  Viewed at: http://english.mosf.go.kr/eco/econo.do? 
bcd=E0003 [4 October 2011]). WT/TPR/S/268 Trade Policy Review 
Page 60 
  
  or modify unilateral trade preferences if consider ed inappropriate taking into account the country's 
income level, volume of imports, and interna tional competitiveness of the product and country 
concerned.    
Table III.2 
Summary analysis of the Korean preferential tariff, 2012 
(%) 
Total WTO agriculture WTO non-agriculture 
Average 
(%) Duty-free 
ratesa (%) Coverageb 
(%)  Average 
(%) Duty-free 
ratesa (%)  Average 
(%) Duty-free 
ratesa (%) 
MFN 13.3 16.2 55.0 5.5 6.6 18.0 
Regional agreement 
   APTAc 13.1 16.2 10.0 54.9 5.6 6.3 18.0 
      APTA for Lao PDR and 
Bangladesh 12.9 17.4 11.8  54.8 5.6  6.2 19.3 
   ASEAN 6.3 91.4 76.2 41.8 68.4 0.5 95.2 
Bilateral agreement 
   Chile FTA (KCFTA) 6.3 92.5 79.7 45.2 55.9 0.0 98.5 
   Singapore FTA (KSFTA) 7.3 76.0 73.7 45.2 43.3 1.2 81.4 
   EFTA FTA 
        Iceland 7.6 85.6 76.7 53.2 20.8 0.2 96.1 
        Norway 7.6 85.3 75.2 53.5 18.7 0.2 96.1 
        Switzerland 7.5 84.9 73.9 53.1 16.2 0.2 96.1 
   U.S. FTA (KORUS FTA) 7.4 77.8 82.0 45.8 36.4 1.2 84.6 
   India CEPAd 8.8 58.6 75.1 52.4 9.6 1.8 66.6 
   EU FTA 7.5 79.6 82.6 46.8 40.7 1.2 86.0 
   Peru FTA (KPFTA) 7.0 82.8 82.3 46.4 25.9 0.6 92.1 
TNDC 13.3 16.2 0.0 55.0 5.5 6.6 18.0 
GSTP 13.3 16.2 0.1 55.0 5.5 6.6 18.0 
LDC 7.0 90.4 74.2 46.4 59.7 0.6 95.4 
a Duty-free lines as a percen tage of total tariff lines. 
b Per cent of total number of lines.  Only  rates that are lower than the corres ponding MFN rate are taken into account. 
c Preferential rates under APTA are applicable to th e China, Sri Lanka, Bangladesh, India, and Lao PDR. 
d Comprehensive Economic Partnership Agreement. 
Note: Calculations are based on national tariff line level (10-digit);  excluding in -quota rates and specific rates and includi ng the 
ad valorem  part of alternate rates. 
Source:  WTO Secretariat calculations, ba sed on data provided by the auth orities of the Republic of Korea. 
Rules of origin  
55. Preferential rules of origin apply to imports  under preferential trading arrangements and FTAs 
(see below), which increases the complexity of implementing its preferential tariffs.34  K o r e a  
considers that rules should be transparent and promot e trade and investment.  Rules of origin covering 
imports under APTA, GSTP, TNDC, and LDC preferentia l 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 obtained" in the exporting country, or manufactured from originating 
materials comprising at least 50% of the product's f.o.b. price.  Vessels catching fish must be 
                                                      
34 WTO document WT/TPR/S/204 /Rev.1, 4 December 2008. Republic of Korea WT/TPR/S/268 
 Page 61 
 
 
  registered in the 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.   
56. All of Korea's FTAs are now based on the common principles such as "goods wholly 
obtained" and the "substantial transformation" cr iteria under the FTA Special Customs Act.  The 
value-added rule is also applied to selected agricu ltural and industrial products in the form of the 
regional value content (RVC) method or the import c ontent (MC) method.  Regarding RVC, some of 
Korea's 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.35  
A number of clothing items are subject to only specific-process rules.   
57. The KCS has undertaken FTA promotion ac tivities to help companies utilize trade 
preferences subject to diverse and complicated rul es of origin.  Since 2010, 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, a self-origin management solution program, which determines the origin stat us of goods, was developed by the KCS and has 
been distributed online, free of charge, since Se ptember 2010.  Efforts to raise public awareness are 
made through seminars, workshops, c ontests, and FTA-related courses.   
58. Korea applies non-preferential rules of origin to  all other imports.  Ko rea's non-preferential 
rules of origin are also based on the "wholly obtai ned goods" and "substantial tr ansformation" 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 (bovine) or two (swine) months.  
(iv) Tariff quotas 
(a) Agricultural tariff quotas 
59. Korea applied tariff quotas, under its multilatera l agricultural market-access commitments, on 
about 187 (excluding rice) ten-digit tariff items in 2011 (Table AIII.4).
36  Many out-of-quota rates are 
very high and some are at 887.4% ad valorem .  Many above-quota rates are alternate duties.37  
According to the latest data provided by the author ities, the average fill rate of tariff quotas dropped to 
around 62.7% in 2010 (68.3% in 2006) but rose to 66. 2% in 2011.  Fill ratios were low for several 
product groupings (Table AIII.5).  The consistently large unfilled share of tariff quotas on some items, 
even with relatively low in-quota tariffs, suggest s that their administration and allocation may, 
inter alia,  be restricting imports;  nevertheless, the authorities indicate that low TRQ fill rates 
resulted, inter alia,  from lack of sufficient domestic demand, increase of import price or sanitary 
measures related to the outbreak of diseases in exporting countries, such as BSE.  
60. Tariff quotas, and the import quota on rice, are administered or allocated by 24 different 
organizations (as of 2011) including ministries, state-trading entities (such as the Korea 
                                                      
35 Build-down method is based on:  Regional Value Content (RVC) = ((Adjusted Value - Value of 
Non-Originating Materials)/Adjusted Value) X 100.  The Build-up method derives from:  Regional Value 
Content (RVC) = (Value of Originating Materials/Adjusted Value) X 100.   
36 Excludes 16 tariff items for rice, which, although grouped by the authorities as tariff quotas, are 
actually covered by import quota (section (2)(vi)(b)).  
37 WTO document WT/TPR/S/204 /Rev.1, 4 December 2008. WT/TPR/S/268 Trade Policy Review 
Page 62 
  
  Agro-Fisheries and Food Trade Corporation (aT)38 commissioned by the Ministry for Food, 
Agriculture, Forestry and Fisheries (MIFAFF) for ri ce and barley), and various producer associations.  
In some cases, the administering agency is ow ned or controlled 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 associations include members that process  foodstuffs imported under tariff quota.  Credible 
import administration would require that directly in terested parties are not directly involved in 
controlling imports. 
61. Mechanisms used for quota allocation (depending on the product), include the auctioning of 
quotas, allocation to designated agency, real demand allocation39, and a combination thereof.  
State-trading enterprises impose additional mark-ups  on top of the in-quota tariff on various items 
(section (2)(vii)).  Most state-trading enterprises ar e engaged directly in marketing imports by selling 
through wholesale markets or distributing directly to final users.  State-trading enterprises and 
producer associations allocate quotas.  As of 2011,  3 items (rice, garlic and sesame seeds) were 
state-traded, 8 items (orange, citrons, ginseng, conde nsed milk, whole milk powder, chestnuts, jujube, 
and pine nuts) were auctioned, 41 items (maize, barley, potatoes, sweet potatoes, starch, etc.) were 
allocated on a real demand basis, and 11 other items  (ginger, onion, sesame seeds, peppers, etc.) were 
allocated through state-trading and other methods.  
(b) Autonomous tariff quotas 
62. Korea grants concessional tariffs using autonom ous tariff quotas, mainly for raw materials, 
inputs, semi-processed goods, components, parts, and e ngines (Table AIII.6);  this measure is aimed 
at helping stabilize prices through increased supply.40  These quotas covered approximately 
235 six-digit tariff items in 2011 (45 in 2007);  live animals, meat, fish, cheese, eggs, coffee, 
vegetable oils, urea, chemicals, agricultural chem icals, tires, wood boards, silk, artificial fibres, 
aluminium, titanium, and manganese were among the ite ms added to the list.  In-quota tariff rates 
ranged from zero to 24% (groundnuts).41  Autonomous tariff quotas are revised annually. 
(v) Other levies and charges 
63. A surcharge levied on petroleum imports (Petroleum Business Act, 1977) provides funds to 
ensure adequate supply and price stability .  The surcharge is currently set at ₩ 16 per litre.  The 
Government promotes oil imports from the Americas, Africa, and Europe, including the Russian Federation (Chapter IV(4)(i)).
42  Surcharges on non-Middle East oil imports are lower to offset their 
higher transport costs.  
                                                      
38 This is the new name of the Agricultural an d Fishery Marketing Corporation (AFMC) as from 
26 January 2012. 
39 This term refers to quota allocation on a first come first served basis without any qualification 
requirement or quota allocation to buyers mee ting with certain qualification requirements. 
40 MOSF Press Release, "Some tariff quotas to be exte nded with other items to be added in the second 
half", 21 June 2011.  Viewed at: http://english.mo sf.go.kr/eco/econo.do?bcd=E0003 [4 October 2011]. 
41 WTO document WT/TPR/S/204/Rev.1, 4 D ecember 2008, Chapter III(2)(iv)(b). 
42 Middle East oil dependency has been lowered from 90% (1980s) to 81% (2010) and 87% (2011).  Republic of Korea WT/TPR/S/268 
 Page 63 
 
 
  (vi) Import licensing, quotas, and prohibitions 
(a) Licensing 
64. Import approval is governed by the Foreign Trade Act and 51 other laws.43  The Consolidated 
Public Notice, containing all export and import certif ication requirements stipulated in the 51 separate 
laws, is updated by MKE semi-annually.  These requi rements cover numerous tariff items (1,000 in 
2008), including petroleum, LPG, agricultural fer tilizers, crop seeds, animals and animal products, 
nuclear materials, narcotics, foods  and food additives, foreign publica tions, firearms, and explosives.  
Between 1 January 2007 to 31 December 2009, automatic licensing procedures were applied to 
128 basic steel products from all countries;  these procedures were not intended to restrict the quantity 
or value of imports.44   
65. Implementation of the Certification, permi ssion, and type approval requirements is the 
responsibility of 14 ministries and/or agencies.45  According to the authorities, import licence 
applications are screened or checked in a "fai r" manner.  Korea belongs to the Convention on 
International Trade in Endangered Species of Wild Fauna and Flora (CITES).   
66. Korea submits regular Repli es to the Questionnaire on Import Licensing Procedures to the 
WTO Committee on Import Licensing;  its latest notification was on 21 September 2011.46  
(b) Quotas 
67. Rice is subject to import quota restrictions  under Korea's WTO minimum market access 
(MMA) commitments under Annex 5 of the WTO Ag reement on Agriculture.  Under arrangements 
re-negotiated in 2004, Korea is obliged to import clo se to 8% of its domestic consumption of rice by 
2014;  no data on this issue were available with the authorities, but it seems that this target has been 
met.47  The volume of rice imports available for tabl e consumption were to increase from 10% of the 
quota in 2005 to no less than 30% by 2010;  no data  on this issue were available from the authorities, 
but quota levels seem to be ta king into account this objective.48  The state agency Korea 
Agro-Fisheries and Food Trade Corporation (aT) , which has been in charge of importing and 
managing MMA commitments on rice since 2008, acc ounted for 100% of rice imports in 2011 (76% 
in 2007)49;  aT is purchasing imported rice on behalf of the MIFAFF through open bidding;  table rice 
is sold directly by aT, through open bidding, and rice for food processing is sold by local authorities.50  
Rice imports under the MMA commitments have in creased steadily, rising from 286,617 tonnes in 
2008, to 347,658 tonnes in 2011.   
                                                      
43 WTO document G/LIC/N/3/KOR/10, 27 September 2011.   
44 WTO document G/LIC/N/2/KOR/1/Rev.1, 27 July 2009. 
45 More information on the institutional setting and product coverage of the import licensing regime 
may be found at WTO document G/LIC/N/3/KOR/10, 27 September 2011.  See also WT/TPR/S/204/Rev.1, 
4 December 2008. 
46 WTO document G/LIC/N/3/KOR/10, 27 September 2011. 
47 USDA Foreign Agricultural Service (2012). 
48 USDA Foreign Agricultural Service (2012). 
49 Online information about the activities of the Kor ea Agro-Fisheries Trade Corporation is available 
at:  http://www.at.or.kr/contents/apen321000/view.action?2_1. 
50 Imported table rice reaches consumer s through trade marketing routes, wholesalers, and dealers.  In 
August 2009, 428 companies were participating in the public auction, including grain wholesale or retail 
companies (316), grain wholesale brok ers (67) and agricultural produce wholesale or retail companies (45).  In 
practice the companies dealing with rice handled im ported rice regardless of their size (WTO document 
G/AG/W/71, 8 September 2009). WT/TPR/S/268 Trade Policy Review 
Page 64 
  
  68. According to data supplied by the authorities, the cost of this protection in terms of consumer 
burden, i.e. the ratio of the domestic price compar ed to the international price, has dropped from 
3.7 (2006-07) to 2.0 (2011).  
(c) Prohibitions 
69. Korea prohibits a few imports, mainly to protect health, safety, security, public morality, the 
environment, and natural resources, and to preven t deceptive practices.  Korea does not maintain any 
trade embargoes with other countries.  Trade with North Korea requires approval from the Ministry of Unification (Chapter II(6)(i));  bilateral trade, which was first legalized in 1988, rose steadily to 
almost US$1.82 billion in 2008.  It declined sharpl y thereafter until it was prohibited by the Republic 
of Korea, except for goods manufactured in th e Gaesung Industrial Complex (located in North 
Korea), as of 24 May 2010.
51   
(vii) State trading 
70. Despite privatization efforts, the State participates in a wide range of trade and/or 
trade-related activities (section (4)(iii)).  According to Korea's latest WTO notification on state trading 
(see below), two government agencies and one pr oducers association (the Ministry for Food, 
Agriculture, Forestry and Fisheries (MIFAFF), th e Korea Agro-Fisheries & Food Trade Corporation 
(aT), and the National Forestry Cooperatives Federa tion (NFCF)) are authorized to allocate and/or 
operate tariff quotas as well as quotas, in the contex t of Korea's WTO commitments in agriculture, 
thus affecting quota utilization and pri ce mark-ups (section (iv)(a) and (vi)(b)).52  The MIFAFF  
directly controls the importation of MMA-related rice and has exclusive rights to import rice in order 
to, inter alia,  smoothly implement WTO commitments a nd avoid domestic market disturbances 
caused by a sudden influx of rice;  aT and NFCF operations are, inter alia,  aimed at stabilizing the 
domestic market.  During 2008-09, MIFAFF (via aT) was the sole importer of rice, while aT and 
NFCF undertook some imports of other agricultura l items;  all agricultural items, except for rice 
subject to state trading, were subject to important mark-ups.53  
71. After a ten-year period without any notifications  in this area, Korea updated entirely its WTO 
notification on state trading with data from 1998 to 2009, and replied to Members questions at a 
                                                      
51 In response to concerns that goods from North Korea may illegally enter South Korea via 
third countries, the KCS has drawn up various measures c overing clearance, investigatio n, and audit fields to cut 
off illegal entry of goods made in North Korea.  The Gaesung Industrial Complex is a large-scale industrial complex which combines capital and techno logies of the South with land and workforce of the No rth.  There are 
123 South Korean manufacturing companies in the complex.  Goods originating in the Gaesung Industrial 
Complex are exempt from taxes under Article 12 of the Inter-Korean Exchange and Cooperation Act.  
52 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 Ta riff of Schedule LX of the Republic of Korea on 
Agricultural products (WTO documen ts WT/LET/492 of 12 April 2005, and WT/LET/504, 5 December 2005). 
53 The share of aT (previously AFMC) and NFCF to total imports of the items concerned varied, e.g. up 
to 83.8% for soybeans, 73.2% for small red beans, 35.6 % for green beans, 27% for buckwheat, 60.3% for genus 
capsicum, 79.15 for garlic, 10.8% for ginger, 58.6% for sesamum seeds, and 31.9% for groundnuts.  Considerable mark-ups (average import price higher than  average representative domes tic sales price) affected 
soybeans (up to 17.5%), small red beans (19%), green beans (158%), buckwheat (up to 253%), genus capsicum 
(up to 176%), garlic (287%), onions (up to 44%), ginger (up to 130.6%), sesamum seeds (up to 134.3%);  and ground nuts (up to 135.5%).  The authorities clarified th at mark-ups are not imposed on rice, because its selling 
price is lower than the import price (processing rice as from  2006, table rice as from 2009) due to low consumer 
preference (WTO document G/STR/N/11/KOR, G/ STR/N/12/KOR, G/STR/N/13/KOR, 2 July 2010). Republic of Korea WT/TPR/S/268 
 Page 65 
 
 
  meeting of the Working Party on State Tr ading Enterprises held on 16 October 200954;  its latest 
notification was in July 2010.  In February 2012, the authorities were collecting state-trading data and 
expected to submit a notification in the course of the year.  
(viii) Contingency measures 
72. Contingency (trade remedy) measures are aut horized 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 the MKE, administers the measures and investigates and determines whether imports are dum ped 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). 
73. According to Korea's WTO notification, parts of the Customs Act and its sub-regulations on 
anti-dumping measures were revised and have been in force since March 2011.
55  
(a) Anti-dumping and countervailing measures 
74. During the period under review, recourse to anti-dumping action dropped markedly.56  
According to the authorities, this  was because Korea overcame the global economic crisis rapidly;  
therefore, enterprises were satisfied with thei r business performance.  Be tween 2008 and end 2011, 
Korea initiated 8 anti-dumping investigations (47 in  2003-07) involving stainless steel plate (Japan), 
plywood (Malaysia), particle board (Malaysia, Th ailand), polyester yarn (China, Chinese Taipei), 
propylene oxide (Japan), adipic acid (Unite d States), and aluminum bottle can (Japan).57  As of March 
2012, 31 anti-dumping measures were in force on 13 products, mainly kraft paper (5 cases), polyester 
filament (5 cases), choline chloride (4 cases), stai nless steel (4 cases), ethyl acetate (3 cases), PET 
film (2 cases), and particle board (2 cases);  34 measures were in force on 31 December 2007.  Action 
affected mostly products originating in Asia (26,  mainly China (12), Japan, India, and Malaysia 
(3 each)), but also Canada and the United States (2 each).58  Virtually all final measures consisted of 
definitive duties.  Between 2008 and 30 June 2011 , Korea completed 14 sunset reviews, of which 
12 resulted in the extension of measures and 2 in te rmination;  2 measures were terminated without a 
review.  At 30 June 2011, 12 sunset reviews were  under way.  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. 
                                                      
54 The previous review of Korea noted that it had not updated its WTO notification on state trading 
since 1998 (WTO documents WT/TPR/S/204/Rev.1, 4 December 2008;  G/STR/M/19, 25 January 2010;  
G/STR/N/5/KOR, G/STR/N/6/KO R, G/STR/N/8/KOR, G/STR/N/ 9/KOR, 16 December 2010;  
G/STR/N/7/KOR, G/STR/N/10/KOR, 27 August 2009;  and G/STR/N/11/KOR, G/STR/N/12/KOR, 
G/STR/N/13/KOR, 2 July 2010).   
55 WTO document G/ADP/N/1/KOR/6, 23 March 2011. 
56 With 110 cases initiated between 1995 and 2010, Korea was the world's 11th major user of 
anti-dumping measures (WTO online information.  Vi ewed at:  http://www.wto.org/english/tratop_e/adp_e/ 
adp_e.htm [23 April 2010]). 
57 WTO documents G/ADP/N/180/KOR, 3 March 2009;  G/ADP/N/188/KOR, 9 October 2009;  
G/ADP/N/202/KOR, 5 October 2 010;  G/ADP/N/209/KOR, 4 April 2011;  G/ADP/N/216/KOR, 
23 September 2011;  and G/ADP/N/223/KOR, 22 March 2012. 
58 WTO document G/ADP/N/2 16/KOR, 23 September 2011. WT/TPR/S/268 Trade Policy Review 
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  (b) Safeguards  
General 
75. Safeguard measures, including provisional, may be applied where increased imports cause or 
threaten to cause serious injury to domestic producer s 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, on domestic price leve ls, consumer interests, and international trade 
relations.59  Safeguard measures apply for up to four years (200 days if provisional), but may be 
extended by four years subject to a further review.60  Since the previous Review in 2008, no safeguard 
measures have been applied;  the last inves tigation in this area dates back to 1999.   
Sector-specific 
76. Since its last Review, Korea has had recourse less frequently to the special safeguard (SSG) 
provisions under Article 5 of the WTO Agreement on Agriculture.  Korea reserv ed the right to take 
SSG action on crop and related pr oducts (e.g. grains, potatoes, gi nseng, and soybean) under the WTO 
Agreement on Agriculture.  The decision to implem ent such measures is made annually by MOSF 
through a ministerial ordinance, at the request of the MIFAFF.  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 Tari ff Schedule is issued annually to implement these 
provisions;  it covered 33 ten-digit items in 2008, 29 in 2009, 25 in 2010, and 23 in 2011.  Korea's 
first WTO notification in this area since 2007 was submitted in January 2012 and covers SSGs 
implemented during 2005 to 2010 only.61  All 13 SSG measures implem ented from 2008 to 2011 were 
price-based;  no volume-based SSGs have been used  since 2007.  At the March 2012 meeting of the 
WTO Committee on Agriculture, Korea replied to qu estions from Australia and the EU on issues 
relating to transparency and trigger calculations, a nd further clarifications were to be sought by 
Australia.62  
(ix) Standards and other technical requirements 
(a) Standards, testing, and certification 
77. During the review period, the institutional setting in this area remained unchanged.63  T h e  
Korean Agency for Technology and Standards (K ATS), under the Ministry of Knowledge Economy 
(MKE), sets, administers, and disseminates Korean Industrial Standards (KS) on the basis of the 
National Standardization Act and the Industrial Sta ndardization Act.  The National Radio Research 
Agency (RRA), under the Korea Communications  Commission (KCC), sets, administers, and 
disseminates Korea Communications Standards (KCS) on the basis of the Framework Act on 
Broadcasting and Communications Development.  KATS, the official enquiry point on industrial 
products under the WTO Agreement on Technical Barri ers to Trade, is in charge of planning and 
                                                      
59 Article 17 of Law No. 6417 in WTO document G/SG/N/1/KOR/5, 26 October 2001. 
60 Article 19.5 of Law No. 6417 in WTO document G/SG/N/1/KOR/5, 26 October 2001. 
61 WTO documents G/AG/N/KOR/39, 1 March 2007;  G/AG/N/KOR/45, 31 January 2012;  and 
G/AG/N/KOR/46, 30 March 2012. 
62 Korea indicated that a price-based SSG becomes applicable once the import price of the product 
concerned falls below a trigger price;  a surge in imports is  not required for such a measure to be taken.  Data on 
import prices, number of shipments, and duties applied are considered only when applying SSGs and are not 
publicly available (WTO document G/AG/W/94, 7 May 2012). 
63 For more information about this issue see WTO document WT/TPR/S/204/Rev.1, 4 December 2008. Republic of Korea WT/TPR/S/268 
 Page 67 
 
 
  coordinating national standards polic y.  Several private bodies perform standardization-related tasks.  
Other bodies performing standards-related work incl ude the Korea Research Institute of Standards 
and Science (responsible for metrology standards and measurement), and the Telecommunications 
Technology Association (TTA), an agency affiliated with the KCC, is responsible for group standards 
for telecommunications, information technol ogy, radio communications, and broadcasting.64  
78. Standard development in Korea remains government led, and is a significant element of 
Korea's industrial policy.  The KATS is implemen ting its third National Standards Plan (2011-15) 
with key policy goals including the development of standards for Korea's new growth engine 
activities (sections (4)(iii) and (4)(iv)), for impr oving people's daily life, and the eradication of 
redundant certification systems.  The National St andards Council reviews general plans for the 
introduction of national standards and coordinates the standards-re lated activities of the different 
ministries.  
79. The Korean standardization system consists of  technical regulations (mandatory standards) 
developed by ministries and government agencies, as well as standards (voluntary) set by KATS (KSs) and the RRA (Korea Communications Standards, KCSs).
65  As of December 2010, about 
5,000 (24.6% of all standards) mandatory Korean st andards (2,945 or 15% in 2006) were contained in 
15,375 technical regulations issued by 18 government ministries.  At the end of 2010, 23,622  Korean 
(industrial) standards had been adopt ed (22,760 in 2007).  The allocation of all KSs by sector was:  
chemicals, textile, ceramics (21%);  machinery (17%);   electricity (16%);  metal, mining, construction 
(13%);  transportation machines, shipbuilding, aerospace industry (11%);  information technology 
(8%);  and food, environment, etc. (14%).  At  end 2010, 14,177 (around 60%) of Korean standards 
that had corresponding ISO/IEC standards (internati onal standards) had been harmonized, compared 
to 13,957 (99.9%) in 2007.  Non-harmonized standards,  i.e.  those that are either unique to Korea (see 
below), with no corresponding international norm (e.g . for kimchi), or cannot be harmonized because 
of their link to other domestic regulations, rema in in place.  Roughly 2.5% of KSs have been 
established without any reference to international st andards.  In 2010, approximately 60% (61.4% in 
2007) of Korean Standards were subject to intern ational ISO/IEC harmonization.  Korean standards 
are to be harmonized in 2012-13 either by adoptin g international standards as new KSs or by revising 
existing relevant KSs.  No business area takes prio rity over any other in the harmonization of existing 
standards. 
80. KATS has developed standards in numerous areas including service and social welfare, e.g. 
national standards for transportation cards  and mobile keypad inputting methods.   
81. At end 2011, Korea had concl uded bilateral MoUs with 46 agencies from 33 countries for 
mutual cooperation in global standardization activiti es, exchange of technical information related to 
standards and conformity assessment, organization of standardization mee tings, operation of joint 
education programmes, and exchange of experts.  
82. According to the authorities there are very few "Korea-specific" standards, and these are 
maintained only where there are no equivalent inte rnational standards and when there is sufficient 
justification.  Moreover, "Korea-specific" standard s are not aimed at creating unnecessary obstacles to 
international trade.  Korea has developed standard s for Korean traditional food products and related 
                                                      
64 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 IT U (U.S. Commercial Service, 2011).   
65 As of December 2011, 587 KCSs ( 553 in 2008) were in place and a llocated as follows:  information 
technology (345), telecommunication (193), and radio communication (49).   WT/TPR/S/268 Trade Policy Review 
Page 68 
  
  items, such as gwamegi  (dried Pacific saury or mackerel pike), doenjang  (fermented soybean paste), 
gochujang  (thick soy and red pepper paste), and kimc hi refrigerators.  In 2011, KATS launched a 
national standards coordinator system for the indus trialization of national R&D efforts and to support 
Korean technologies' advance in to the international market.66  In 2011, eight sectors were subject to 
standards coordination projects:  smart grid, 3D businesses, electric cars, cloud computing, nuclear 
power, smart media, smart logistics, and smart medical information.   
Food and health-related products 
83. Legislative responsibility for regulating food saf ety and quality is dive rsified and overlaps 
with several ministries, which often perform si milar activities.  Food safety, pharmaceuticals, and 
cosmetics is under the Ministry of Health and We lfare (MOHW) and its agency, the Korea Food and 
Drug Administration (KFDA).67  KFDA ensures that domestic an d imported food products (except 
meat, dairy, and egg products, wh ich are handled by the MIFAFF) are sanitarily safe and correctly 
labelled.  The MIFAFF is responsible for agricultu ral and fishery products, and its Animal, Plant and 
Fisheries Quarantine and Inspection Agency (QIA) inspects imported and exported agricultural and 
fish products.  The KFDA regulates domestic and imported salts, except for industrial salt and solar 
salt, which are inspected by the QIA.  On 30 Ap ril 2009, the KFDA established the National Institute 
of Food and Drug Safety Evaluation,  a think-tank that provides scien tific information to KFDA policy 
makers. 
84. Reportedly, Korea's regulatory system, origin ally modelled on the United States system, 
seems to be gradually shifting towards a precautiona ry management system based on that of the EU, 
Japan, etc.  The regulatory system takes into acco unt the opinions of consumers and industry, and 
reflects them in the decision making process.68  The main laws affecting food standards and 
specification are the Food Sanitation Act of 2011, the Food Code and the Food Additive Code.  
Following the protests in 2008 against beef imports , and in line with the Framework Act on Food 
Safety, a Food Safety Policy Committee, in which the Prime Minister is the chief commissioner, was 
set up in June 2008 to comprehensively revise and c oordinate food safety management tasks dispersed 
across the various ministries and agencies.  Under the Act each relevant agency was tasked with 
developing a comprehensive three-year food safety plan.69  
                                                      
66 According to the KATS admini strator, "Korea's portion of R&D relative to total GDP is the 
third largest in the world, but its technology trade deficit is the fifth highest in the world.  This means that Korea 
needs to enhance the efficient industri alization of R&D achievements.  In or der to achieve this, Korea should tap 
into the global market through international standardization of its home-grown technologies" (KATS online information, "KATS Launches National Standard s Coordinator", 13 May 2011.  Viewed at:  
http://www.kats.go.kr/en_kats/news/KAEU04_1_2. asp?sub_menu=1&page=2&startPage=&En_Idx=557 
[14 October 2011]). 
67 The KFDA's Food Safety Bureau is responsible for overall food safety management including 
development of food safety control policies and compre hensive plans, establishment and amendment of safety 
management standards for food, instruction and supervision of food-related business managers, inspection of imports and exports and establishment of labelling standards for foods.  
68 For example, the 2008 campaign to win back consumer confidence in the nation's food safety system 
introduced some needed science-based improvements;  the use of tar colours (Red 102) in children's favourite foods was banned as a preventive measur e to secure the health of the children who are especially vulnerable to 
food safety;  this ban was based on the EU's 2007 research (USDA Foreign Agricultural Service, 2011). 
69 The Committee members incl ude:  the Minister of Strategy and Finance, the Minister of Education, 
Science and Technology, the Minister of  Justice, the Minister for Food, Agri culture, Forestry and Fisheries, the 
Minister of Health and Welfare, the Minister of Environment, the Commissioner of the Korea Food and Drug 
Administration, and the Minister of  the Prime Minister's Office (USDA Foreign Agricultural Service, 2011). Republic of Korea WT/TPR/S/268 
 Page 69 
 
 
  85. Under the Framework Act on Administrative Re gulations (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 existing regulations.
70  
During 2007-09, 30 cases of tightening standards or labelling requirements for pesticides, heavy 
metals, and microorganisms in foods were subject to RIA.71 
86. Environmental risk assessments (ERAs) are mandatory on biotechnology crops.  The KFDA 
maintains a policy of zero tolerance for the presence  of biotechnology products in processed food that 
is labelled as organic (section (2)(ix)(c)).  KFDA has authority to conduct mandatory safety assessments to evaluate genetically modified organisms (GMOs) in products used for human 
consumption;  Korea implements the Advance In formed Agreement Procedure as well as labelling 
requirements for GMOs and living modified  organisms (LMOs) (section (2)(ix)(c)).
72  The KFDA 
intended to expand the applications of the Hazard An alysis Critical Control Point (HACCP) system to 
2,500 firms by 201273;  by February 2012, 1,837 compan ies were HACCP-approved of which 
1,590 since 2008.  
87. All food additives require prior approval.  In  November 2011, Korea had a positive list of 
601 approved food additives and mixtures of approved additives.74  Food additives are grouped into 
four categories:  (a) chemical synthetics, 402 items, (b) natural additives, 199 items, (c) mixture 
substances, seven categories of mixture of appr oved additives, and (d) sterilizing/disinfecting 
apparatus, 11 items.  Reportedly, even though ther e may be an established CODEX standard for a 
given food additive, domestic or imported foods with  "reasonable" levels of food additive may not be 
marketed either because their food additive is not registered in the Korean Food Additive Code, or 
because it failed to comply with item-specific sta ndards specified in the Food Additive Code or its 
usage in a certain food product is not specified in the existing Food Additive Code.75  Getting a new 
additive added to the approved list usually takes a year or more.  
88. Following a 2008 melamine incident76, as from 2009, a system of managing safety of OEM 
(Original Equipment Manufacturing) food imports ha s been in place; the system mandates OEM food 
importers to take an on-spot a nd self-quality control for OEM food products, which are food and food 
additive imports other than agricultural items, forest ry items and alcoholic beverages manufactured by 
overseas contractors and labelled with the contractor's brand.77  KFDA and cities/provinces 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 restored.  
                                                      
70 The authorities indicated that  KATS prepares, adopts and app lies standards in line with the 
provisions of Annex 3 of the WTO TBT Agreement (Cod e of Good Practice).  SPS m easures are taken mainly 
against diseases that are new to Korea and that are subject to strict domestic preventive measures. 
71 Information provided by the Korean authorities and extracted from Kwak, No-Seong (2010). 
72 This procedure refers to the first intentional transboundary movement of living modified organisms 
(LMOs) for intentional introduction into the environment of Korea (APEC, 2007). 
73 HACCP  is a systematic preventive approa ch to food safety and pharm aceutical safety that addresses 
physical, chemical, and bi ological hazards as a means of prevention ra ther than finished product inspection.  
HACCP is used in the food industry to identify potential food  safety hazards, so that key actions can be taken to 
reduce or eliminate the risk of the hazar ds being realized (KFDA, 2009).   
74 USDA Foreign Agricultural Service (2011). 
75 EU Chamber of Commerce in Korea online information, "Trade Issues and recommendations 2010".  
Viewed at:  http://trade.eucck.org/site/2010/en/mar ket06.htm [14 October 2011];  and USDA Foreign 
Agricultural Service (2011). 
76 In 2008, food products that were thought to be domestically produced turned out to be OEM 
imported food products. 
77 KFDA online information.  Viewed at:  http://eng.kfda.go.kr/index.php. WT/TPR/S/268 Trade Policy Review 
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  89. KFDA is responsible for regulating pesticide re sidues in foodstuffs, in accordance with the 
maximum residue levels (MRLs) set in the Food Code and applied for bot h domestic and foreign 
products.  If an MRL is established in the Food C ode for a pesticide on a particular agricultural 
product, it is harmonized to the CODE X tolerance levels;  if the standa rd is different to that of the 
CODEX, it is reassessed, to promote standards harmonization.  The Food Code lists MRLs for 
83 pesticides in meat, fish, eggs, and milk produc ts, and 142 veterinary dr ugs in livestock products, 
fisheries products, and honey.  The KFDA has set up  an MRLs database (Pesticide Residue database) 
for agricultural products, in Korean with English subtitles.78  Food importers have to provide lists of 
all food ingredients and additives to the KFDA and the National Plant Quarantine Service (NVRQS, 
section (2)(iv)(b)) for customs clearance;  the ingredient  content ratio (mixture ratio of materials) is 
not required.  Under Article 14 of the Imported F ood Inspection Instruction, the declared minimum 
import weight of "food" and "food apparatus, cont ainer and package" for sanitary inspection by 
KFDA is 100 kg.79  Cheese imports must meet Korea's pasteurization requirements.80   
90. Imports of pharmaceuticals require a free sale certificate, issued by an authority of the 
exporting country, showing that the product in ques tion is in free circulation in the country of 
export.81  Any person intending to import medical devices or pharmaceuticals must obtain an 
item-specific approval from or file a notification w ith the KFDA in accordance w ith the relevant law. 
91. Pharmaceuticals require item- specific pre-approval from the KFDA, involving the submission 
of extensive clinical trials data and other saf ety and efficacy-related data as prescribed by the 
Pharmaceutical Affairs Act Enforcement Decree.82  Manufacturers must submit detailed data on 
certain active pharmaceutical ingredients under the KFDA's Drug Master File.   
92. Each batch of imported pharmaceutical produc ts requires batch release testing by the 
healthcare authorities, although they have already be en 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 Phar maceutical Affairs Act to domestically distributed 
biologics (domestically produced and imported) , and results of tests conducted by foreign 
manufacturers or health authorities of the export count ry must not substitute results of batch or lot 
release tests conducted by the KFDA.83  A health technology product (i.e. a medical device) must be 
on the reimbursement list to be put on the market (so that the company is able to sell it);  its health 
                                                      
78 See KFDA online information.  Viewed at:  h ttp://fse.foodnara.go.kr/residue/pesticides/pesticides_ 
info.jsp;  and http://eng.kfda.go.kr/file/Pesiticide MRLs.pdf. 
79 Imports of less than 100 kg may also be imported:  they must undergo sanitary inspection by the 
KFDA upon the first importation;  exemption for the same product from the same manufacturer may be applied 
thereafter.  However, the exemption does not apply for subsequent imports over 100 kg, but the fees incurred from the test (inspection fee) is wa ived.  This measure is intended to pr event manufacturers r eceiving inspection 
for a small quantity of quality products and benefiting from import clearance for a large quantity that does not 
comply with the inspection standards.  
80 In Korea, low temperature past eurization is regarded as 63-65 Ԩ for 30 minutes rather than 72-75 Ԩ 
for 15 seconds or equivalent methods (EU Chamber of Commerce in Korea online information, "Trade Issues 
and recommendations 2011".  Viewed at:  http://trade.eucck.org/site/2011/en/market_10.htm  
[19 October 2011]). 
81 U.S. Commercial Service (2011). 
82 Most of KFDA's regulations in this area ar e harmonized with the In ternational Conference on 
Harmonization (ICH) guidelines, even th ough it is not a member of the ICH. 
83 Furthermore they clarified that the KFDA conducts basic release tes ting on biologics such as vaccine 
and plasma-derived products;  such release testing is part of the national lot release system that is generally used 
worldwide (EU Chamber of Commerce in Korea online information, "Trade Issues and recommendations 
2011".  Viewed at:  http://trade.eucck.org/site /2011/en/market_10.htm [19 October 2011]). Republic of Korea WT/TPR/S/268 
 Page 71 
 
 
  technology assessment and registration may allegedly de lay its launch in the Korean market by up to 
three years, depending on the product. 
93. KFDA administers registration requirements on imported and domestically produced 
"functional" cosmetics.  Importe rs must conduct "self-regulated" qua lity inspection (see below) for 
each product type to ensure conformity with the co smetic standards and test methods according to the 
24 February 2012 revision of Enforcement Rule of  the Cosmetics Act.  Cosmetics importers are 
required to file a customs report to and obtain pr ior approval from the Korea Pharmaceutical Traders 
Association (KPTA) on all products ;  importers are also verified and managed by KFDA local 
offices.84  In a move towards self-regulation, Korea introduced the concept of "marketing 
authorization holder" (including importers), a co smetics ingredients management system based on a 
negative list, and a substantiation system of co smetics labelling and adve rtisement (Cosmetics Act 
Revision, implementation date 5 February 2012).  Test results submitted by overseas manufacturers 
using quality standards that are inte rnationally accepted or certified, or that are more stringent than the 
Korea Cosmetic Good Manufacturing Practice (KCGMP ) standards, are accepted without the need for 
additional quality testing in Korea.  Quality insp ection by the importer of cosmetics is required, 
according to manufacturing serial/batch number.  Pr oducts 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.85  The authorities indicated that these products are 
currently under review for future reclassification as cosmetics.    
Conformity assessment 
94. KATS is responsible for conformity assessment, certification, registration and testing of 
industrial products for voluntary (KS) standards.  It runs the Korea Laborat ory 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 2011, there were 403 accredited testing 
laboratories, 193 calibration laboratories, 46 inspec tion bodies, and 16 product certification bodies.  
KOLAS is recognized by the International La boratory Accreditation Cooperation (ILAC).   
95. The revised Framework Act on National Standa rds and its Enforcement Decree introduced a 
single national integrated certification mark, the Ko rea Certification (KC) mark on 1 July 2009, fully 
implemented on 1 January 2011.  The KC mark in tegrated and unified all 13 legally compulsory 
certification marks86;  it also reduced the number of standard certification audit systems based on 
ISO/IEC Guide 67 from 20 to 9.  Diverse certification marks have caused confusion among 
consumers, and have also proven costly and time consuming for businesses.   
96. In 2011, KATS established a five-year comprehens ive plan on quality management to identify 
quality-related issues that could be addressed to expand and support a base for sustainable growth 
amid intensifying global competition;  the plan will be strategically pursued to enhance national 
                                                      
84 EU Chamber of Commerce in Korea online information, "Trade Issues and recommendations 2010".  
Viewed at: http://trade.eucck.org/site/2010/en/market0 6.htm [14 October 2010];  and "Trade Issues and 
recommendations 2011".  Viewed at:  http://trade.eucck.o rg/site/2011/en/market_ 10.htm [19 October 2011]. 
85 EU Chamber of Commerce in Korea online information, "Trade Issues and recommendations 2011".  
Viewed at:  http://trade.eucck.org/site/2011 /en/market_10.htm [19 October 2011]. 
86 These marks could be used alongside the KC mark until 30 June 2011;  as of 1 July 2009, companies 
were required to attach the KC mark to all new products,  which are subject to legally compulsory certification.  
KATS online information.  Viewed at:  http://www.kats.go.kr/en_kats/news/KAEU04_6.asp?sub_menu=6 
[12 October 2011]. WT/TPR/S/268 Trade Policy Review 
Page 72 
  
  competitiveness.87  The plan lays out 15 major actions and strategies to spur Korea's economic 
growth, and to strengthen and support its quality competitiveness in order to rank 10th in terms of 
global quality competitiveness by the year 2015.  
97. Certification authorities are encouraged to  negotiate mutual recognition arrangements 
(MRAs) with foreign counterparts.  KOLAS is a signatory to the ILAC Multilateral Recognition 
Arrangement (MLA) for testing and for calib ration; 72 accreditation bodies from 59 countries 
participate in the MLA.  KAS is a signatory to the International Accreditation Forum (IAF) MLA for 
bodies operating product certification systems.  Kor ea also maintains an extensive network of MRAs, 
especially with APEC economies.  KAS forms part of the Pacific Accreditation System (PAC).  KAB 
is a signatory of the IAF MLA for Quality Manageme nt 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.   
98. 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 recogniti on of conformity assessment for telecommunications 
equipment;  and an MRA with Singapore (2006) on  electrical and electronic appliances under the 
Korea-Singapore FTA.  The NEP (New Excellent Product) certification system covers products 
manufactured with new technologies developed fi rst in Korea or with innovative technologies 
improved from existing technologies.  The certificate is  valid for three years.  NEP-certified products 
receive government support to expand sales channels  and accelerate techno logy development.  
Products certified as NEP receive an additional qualif ication point in procurement by government and 
public organizations.  The authorities indicated that  the NEP system does not affect international 
trade;  no data on the coverage of the system were made available to the Secretariat.  
99. KFDA facilitates food imports through the "autho rization of foreign official laboratories" 
system and the "pre-confirmed registration system of imported foods".  The first covers inspection 
agencies established by or officially authorized by the government of the exporting country or 
"officially authorized foreign inspection agen cy" established overseas by KFDA-approved local 
inspection agencies, and includes 53 ag encies in 9 countries.  Test r esults issued by these agencies are 
recognized by the KFDA and therefore relevant im ports are exempt from laboratory inspection.  
Under the "pre-confirmed registration system of  imported foods", foods tuffs 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 labor atory inspection.  Korea has not joined the APEC 
MRA on Conformity Assessment of Foods and Food Products. 
100. In the case of organically processed foods, only four overseas certification bodies are 
recognized by the Ministry for Food, Agriculture , Forestry and Fisheries (as of late 2011) in 
conformity with the 2009 Guideline on Management  of the Certification System for Organically 
Processed Foods.
88  The MIFAFF introduced a mandatory organic certification programme for 
processed food products in June 2008 to efficien tly manage organic foods;  the new programme, 
which will require all domestic and imported organic processed pr oducts to be certified by an 
                                                      
87 KATS online information, "KATS Establishes 5-y ear Comprehensive Plan on Quality Management", 
31 May 2011.  Viewed at:  http://www.kats.go.kr/en_kats/news/KAEU04_1_2.asp?sub_menu=1&page=2&start 
Page=&En_Idx=559 [14 October 2011]. 
88 Ministry for Food, Agriculture, Forestry and Fisheries Notice No. 2009-415, 16 December 2009;  
and EU Chamber of Commerce in Korea online informat ion, "Trade Issues and recommendations 2010".  
Viewed at: http://trade.eucck.org/site/2010/en/market06.htm [14 October 2010]. Republic of Korea WT/TPR/S/268 
 Page 73 
 
 
  MIFAFF accredited certifying body, will be fu lly implemented as from 1 January 2013.89  Imported 
organic agricultural produce requires certification from  an official certification agency recognized by 
the MIFAFF.  In response to consumer demand for a higher standard of environment-friendly 
agricultural products, Korea stopped issuing new certif ication for low pesticide organic agricultural 
produce from 2010 because this category will be discontinued in 2016.90  
WTO notification and disputes 
101. New and/or revised legislation and the implementing guidelines are published in the 
government gazette for public comments;  these ch anges are also notified regularly to the WTO for 
Members' comments.  Between January 2008 and 20 11, Korea made 182 notifications under the WTO 
Agreement on Technical Barriers to Trade;  the ma jority were under Article 2.9 of the Agreement 
(176), and in more than half of these cases (141)  the timeliness of the submission allowed for a 
comment period of 60 days or more, while in only 27 cases the period was less than 45 days.91  To 
help Korean companies respond to technical barrier s 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.92  KATS runs 
a TBT Notifications Alert Service, which transmits TBT notifications to stakeholders by e-mail and 
encourages them to submit their comments.   
102. Between January 2008 and July 2012, 177 no tifications were submitted under the WTO 
Agreement on Sanitary and Phytosanitary Measures (the SPS Agreement).  This includes 148 regular 
notifications, 4 emergency notifica tions, and 25 addenda/corrigenda.   
103. During the review period, Korea provided clarifi cations on Members' concerns raised in the 
Committee on Technical Barriers to Trade about seve ral measures (e.g. chemical material, thin-film 
solar panels, PCV flooring material and wallpaper a nd paper linoleum, automobile standards, organic 
food).93   
(b) Quarantine regulations 
104. Korea's main laws on quarantine requirement s for imports (and exports) are the Plant 
Protection Act and the Contagious Animal Disease Prevention Act.  Animal, plant, and fisheries 
quarantine and inspection are handled by the Anim al, Plant and Fisheries Quarantine and Inspection 
Agency (QIA), under the MIFAFF.94 
                                                      
89 Products produced according to KFDA's labelling requirements, which clear customs on or before 
31 December 2012, will be eligible to  be sold in the marketplace until th eir shelf life expi res (USDA Foreign 
Agricultural Service, 2011). 
90 Sustainable agricultural produce is classified in to three categories: orga nic produce, no-pesticide 
produce, and low-pesticide produce, and can be labelled accordingly.  For livestock products, two categories of 
certification are available;  organic livestock and no antibiotic livestock (USDA Foreign Agricultural Service, 
2011). 
91 WTO documents G/TBT/23, 20 February 2008;  G/TBT/25, 4 March 2009;  G/TBT/28, 
5 February 2010;  G/TBT/29, 8 March 2011;  and G/TBT/31, 2 March 2012. 
92 Viewed at:  http://www.knowtbt.kr/eng/index.aspx/. 
93 WTO documents G/TBT/M/46, 23 January 2009;  G/TBT/M/47, 5 June 2009;  G/TBT/M/48, 
29 September 2009;  G/TBT/M/49, 22 December 20 09;  G/TBT/M/50, 28 May 2010;  G/TBT/M/52, 
10 March 2011;  G/TBT/M/54, 20 September 2011.    
94 On 15 June 2011, the National Veterinary Research and Quarantine Service, the National Plant 
Quarantine Service, and the National Fisheries Products Quality Inspection Service were consolidated into a 
single entity, the Animal, Plant and Fisheries Quarantine and Inspection Agency (QIA). WT/TPR/S/268 Trade Policy Review 
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  105. The QIA inspects imported plants and plant pro ducts.  Imports 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 banne d.  Imports of rice in the husk, chaff, rice straw 
from all countries, except Japan and Chinese Taipei, ar e prohibited for pest reasons.  Plants from most 
countries for planting are also prohibited or restricted.95  Following the disaster at the Fukushima 
nuclear plant, since March 2011 the KFDA has tem porarily prohibited imports of 16 agricultural 
products from 7 prefectures that Japan put on shipping restriction.96   
106. Korea's legislation on the marketing of genetica lly modified agricultural products (GMAPs), 
such as seeds and grains (Act on Transboundary Movement of Genetically  Modified Organisms), 
apply equally to domestic and imported GMAPs.   As from January 2008, the KFDA has been 
responsible for risk assessment fo r human health of food-related GMAPs.  The Rural Development 
Administration (Crop Cultivation Environment), the National Institu te of Environmental Research 
(National Ecosystem), and the National Fisherie s Research and Development Institute (Marine 
Ecosystem) are responsible for environmental ri sk assessment.  Since 1 January 2008, Korea has 
allowed GMAPs production and imports.  In Febr uary 2012, food safety approval for GMAPs had 
been given to 22 varieties of soybean, maize (since 2008), and cotton.  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.97  
107. 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 brought into Korea a nd that no hazard is posed to public health.  Korea 
bans import of animals and their products from countri es affected by exotic an imal diseases such as 
foot-and-mouth disease and BSE.98  Upon request of the exporting country the import ban may be 
lifted depending on the outcome of import risk anal ysis.  Imports from countries affected by HPAI 
(Highly Pathogenic Avian Influenza) is banned, but imports of poultry meat that is heat-processed to 
kill the HPAI virus is allowed.  According to the authorities, Korea applies the same animal 
quarantine and livestock product health requirement s to domestic production a nd imports.  Canada's 
complaint against Korea's measures affecting imports of its bovine meat and meat products led to the 
establishment of a WTO dispute settlement panel in August 200999;  the MIFAFF notified its Import 
Health Requirements for Canadian Beef on 22 January 2012 and imports resumed.  
108. Since 1 January 2008, Korea has implemented th e Convention on Biological Diversity (CPB).  
By end 2011, the MIFAFF had completed 72 out of 95 applications for review of environmental risks 
of LMOs;  in February 2012, it was conducting 23 reviews.   
                                                      
95 WTO document WT/TPR/S/204 /Rev.1, 4 December 2008. 
96 As of December 2011, the items subject to this prohibition included  rice, tea, spinach, mushrooms, 
chestnuts, kiwi, certain vegetables, and bamboo shoots.  
97 USDA, Foreign Agricultural Service information c ited in the Australian Department of Agriculture, 
Fisheries and Forestry online information, "Appendix A - Regulatory Arrangements for GMOs and GM products in Australia and Australia's Major Export Markets for Canola and Cottonseed" .  
Viewed at:  http://www.daff.gov.au/a griculture-food/biotechnology/repor ts/maintaining_product_integrity_in_ 
the_australian_seed_and_grain_supply_chain/appendixes/appendix_a#Korea.   
98 On 6 March 2006, the Korean beef market was open ed to boneless U.S. beef and beef products of 
cattle under 30 months of age;  following further negotiati ons, on 26 June 2008 beef an d beef products including 
bones were added, but were limited to beef and beef products of cattle under 30 months of age until consumer confidence in Korea recovers.  
99 WTO document G/SPS/53, 3 May 2010, and online information.  Viewed at:  http://www.wto.org/ 
english/tratop_e/dispu_e/cases_e/ds391_e.htm. Republic of Korea WT/TPR/S/268 
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  109. Korea has signed MoUs on food safety and quality standards with China's General 
Administration of Quality Supervision, Inspecti on and Quarantine (signed January 2003, revised 
November 2007), Chile (May 2009), Viet Nam (May 2009), the Australia/New Zealand Food 
Standards (FSANZ) (July 2011), and the Philippin es (Manila) WHO Western Pacific Regional Office 
(WPRO) (July 2011).100  
(c) Marking and labelling 
110. KDFA has continued to review food labelling st andards in order to update and harmonize 
them with international requirements.  Followi ng a May 2009 revision to the Special Act on 
Children's Dietary Life Safety Management, a vol untary colour-coded labelling system (traffic-light 
labelling) for children's preferred food prod ucts was introduced and implemented from 
January 2011.101  As from December 2009, requirements for a voluntary inner labelling programme 
and a voluntary guideline for nutritional labelling on the principal display panel of food products have 
been updated.102  As of 30 April 2010, the use of photos or pictures of fruit was no longer permitted 
on the label unless the product contained the corres ponding natural flavour or ingredient.  On 
29 July 2010, labelling requirements for irradiated  food products were improved by allowing for the 
use of a tag as a labelling option, and a description of  "contains irradiated ingredients" when it is 
difficult to verify which ingred ients were actually irradiated.103  As a result of the revision of the 
labelling standards for food products, labelling re quirements for gluten-free food products were 
established on 6 November 2011;  food products that do not contain wheat, rye, and barley, and have 
less than 20 mg/kg of gluten are allowed to bear a 'Gluten Free' label.  Importers are sometimes 
requested to remove some wording in the language of  the exporting country if it does not fit into the 
Korean labelling standards.104   
111. According to a major trading partner, Korea's labelling requirements appear to exceed those 
of the CODEX Alimentarius general standard, in part icularly those for alcohol products;  an allegedly 
excessive amount of information is required on the label.105  The authorities consider that alcohol 
products are subject to the same labelling requireme nts as other food products.  Frequent changes of 
labelling requirements make it difficult for importe rs to satisfy each new requirement that is 
introduced without a grace period or sufficient time for its implementation.  In 2011, seven government agencies were re gulating labelling requirements, and it appears that each agency 
proposes regularly a new requirement.
106  To minimize inconvenience in  this area, a grace period of 
one year is given to conform with the labelling st andards for food products that are controlled by the 
KFDA, and their implementation date is set at 1 January of the relevant year.   
                                                      
100 KFDA online information.  Viewed at:  http ://www.kfda.go.kr/eng/eng/index.do?nMenuCode=27 
&searchKeyCode=65&page=1&mode=view&boardSeq=66524. 
101 The Special Act on Children's Di etary Life Safety Management, inter alia,  restricts the sale and 
advertisement of high-calorie low-nutrient food products.  Since 7 September 2010, the KFDA Commissioner has been empowered to limit or prohibit TV advertisements of high-calorie low-nutrient food products 
designated by KFDA (USDA Foreign Agricultural Service, 2011). 
102 USDA Foreign Agricultural Service (2011). 
103 USDA Foreign Agricultural Service (2011). 
104 EU Chamber of Commerce in Korea online information, "Trade Issues and recommendations 2011".  
Viewed at:  http://trade.eucck.org/site/2011 /en/market_10.htm [19 October 2011]. 
105 EU Chamber of Commerce in Korea online information, "Trade Issues and recommendations 2011".  
Viewed at:  http://trade.eucck.org/site/2011 /en/market_10.htm [19 October 2011]. 
106 The government agencies concerned are the Nati onal Tax Service (NTS), the KFDA, the KFTC, the 
Ministry of Environment, the KCS, the MHW, and th e Ministry of Gender Equality  and Family (MOGEF) (EU 
Chamber of Commerce in Kor ea online information, "Trade Issues and recommendations 2011".  Viewed at:  
http://trade.eucck.org/site/2011/en/market_10.htm [19 October 2011]). WT/TPR/S/268 Trade Policy Review 
Page 76 
  
  112. Origin labelling is mandatory for food and many  other imports (664 four-digit tariff lines in 
2011).  The use of the term "Assembled in C ountry X" has been allowed since October 2010.107  The 
Korea Customs Service (KCS)'s Origin Mark Regi stration and Retrieval System enables users to 
check origin markings by trader or item.108  
113. As of January 2012, genetically modified co rn, 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 KFDA, were subject to mandatory GMO labelling requirements.  Korea accepts a notarized self-declara tion, instead of requiring full documentation, to 
certify products that are exempt from biotechnolog y requirements.  Importers or manufacturers must  
keep records for up to two years to prove that unl abelled foods subject to GMO labelling requirements 
are GMO free.  
(x) Government procurement 
114. In 2010, Korea's government procurement market was ₩ 104 trillion or about 8.9% of GDP 
(10% in 2006).
109  Although government procurement is directed at achieving "value for money",  it 
also focuses on promoting SMEs, companies in a "disadvantageous position"110, regional 
development, and green purchasing.111  Korea operates international tendering and other procurement 
procedures in accordance with its multilateral co mmitments under the WTO Plurilateral Agreement 
on Government Procurement (GPA);  its list of public entities subject to GPA provisions was revised 
on 20 July 2009, 2 November 2009, and 13 October 2010.112  Korea's international tendering system 
is based on open competitive tendering;  according to the authorities, restricted tendering is rarely 
used (see below).113  Since the entry in force of the KORUS FTA (15 March 2012, 
Chapter II(6)(iii)(d)), the threshold for goods and ser vices from the United States  has been lowered to 
₩ 100 million (the WTO GPA threshold is ₩ 250 million).114  No statistical data on the participation 
of WTO GPA-covered entities were made availa ble by the authorities between Korea's last 
notification in 2006 (2004 data) a nd December 2011 (2010 data only).115  Contracts subject to Korea's 
WTO GPA commitments represented 59.4% of to tal procurement (above the threshold) of 
                                                      
107 U.S. Commercial Service (2011). 
108 Korea Customs Service online information, "KCS launched Origin Mark Registration and Retrieval 
System", 21 November 2005.  Viewed at:  http://eng lish.customs.go.kr/kcsweb/user.tdf [5 October 2007]. 
109 Public Procurement Service (2011). 
110 The authorities indicated that the term "companies in a disadvantageous position" refers to 
enterprises owned by women, veterans service organizations, or social welfare organizations. 
111 Public Procurement Service (2011),  PPS Annual Report 2010 , 24 August.  Viewed at:  
http://www.pps.go.kr/english/ [14 October 2011]. 
112 The revision of the list aimed to reflect a reshuf fle of organizations, and the actual level of Korea's 
GPA coverage was not changed (WTO document WT/Let/649, 3 August 2009, WT/Let/660, 
10 November 2009, and WT/Let/685, 25 October 2010). 
113 Restricted tendering consists of limited (by inv itation) or nominated (by nomination) competitive 
bidding and private contracts wh ere a specific supplier is used. 
114 Furthermore, Korean pr ocuring entities should not require a Un ited States supplier/bidder to have 
been previously awarded one or more contracts by a procuring entity in Korea or to have had prior work experience in Korea in order to partic ipate in procurement or be awarded a contract (Notification of trade and 
trade-related measures by the Repub lic of Korea, 25 April 2012).   
115 At the time of the previous TPR, the authorities indicated that more recent data were not available 
due to institutional change of responsibilities for data collection in this area.  For the period currently under 
review, they indicated that data collection was suspended until 2010 (WTO documents GPA/84/Add.1, 
12 October 2006, and GPA/108/Add.3, 2 December 2011). Republic of Korea WT/TPR/S/268 
 Page 77 
 
 
  GPA-covered entities in 2010.116  More than 4.82% (by value) of these contracts were awarded using 
restricted (limited) tendering.  Above thres hold procurement by GPA-covered entities represented 
36.8% of Korea's total procurement (excluding  defence equipment) in 2010 (44.9% in 2004). 
115. During the review period, no substantial cha nges were made to the main government 
procurement legislation (Act on Contracts to which the State is a Party, 1995).  In February and 
December 2011, its enforcement ordinan ces and regulations were amended to, inter alia,  extend the 
"compulsory joint sub-contracting and single sour ce contracting system" for the Four Major River 
Restoration Project and the Innovative City Project until end 2013117;  reduce contract fees and 
contract deposit for Green companies;  expand lim ited bidding rights to companies caught offering 
bribes at bids of non-central government agencies or SOEs;  and extend the application of the lowest 
bid award system for construction works exceeding ₩ 10 billion from 2012 to 2014.118  T h e  
legislation covers international 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 Party, and the 
Act on the Management of Non-Departmental Pub lic 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 which the State is a Party.  Procurement from 
SMEs is covered by the main procurement legisl ation and the Act on SMEs Products Promotion and 
Market Access.  The 2005 Act on Encouragement of Purchase of Green Products (until 2010 known 
as Law on the Promotion of Environmentally Friendly Product) requires government agencies and 
SOEs to purchase environment-fri endly products;  it applies to 49 central government agencies, 
244 local government bodies, and 380 public institutions  and SOEs affiliated with central and local 
government agencies (869 agencies in total).  Although the law makes mandatory the purchase of 
environmentally friendly products it provides excep tions for quality and availability reasons, as well 
as emergency procurement needs.  
116. Contracts are awarded through open competitive tender, unless there are reasons (of "purpose, 
nature, size, etc. of a contract") for awarding by restricted tender.  According to the authorities, 
restricted tendering is allowed in some rare cases (see below);  the authorities indicate that the share 
of open competitive tendering is cons tantly increasing, whereas that of restricted and private tendering 
is decreasing, e.g. their share of total PPS (see below) procurement methods dropped from 13.8% (2008) to 11.1% (2010).  Although defence procurement is covere d by the main procurement 
legislation (but not by Korea's WTO GPA oblig ations) 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 (see 
below).  
                                                      
116 Data supplied by the authorities and covering en tities listed in Annexes 1, 2 and 3 of Korea's 
schedule of commitments.   
117 The compulsory joint-venture system (up to ₩ 9.5 billion as from 2010) requires a bidder to form a 
joint venture with a company located in the construction region.  It applies only to projects whose estimated 
value does not exceed the WTO GPA threshold. 
118 Ministry of Strategy and Finance online Press Release, "The Promulgation and Enforcement of 
amendment of Ordinance of State Contract Law and Bylaws", 8 February 2011.  Viewed at:  
http://epic.kdi.re.kr/epic_attach/2011/R1102075-1.pdf. WT/TPR/S/268 Trade Policy Review 
Page 78 
  
  Public Procurement Service (PPS) 
117. Some government procurement is conducted by  the central procurement agency Public 
Procurement Service (PPS).  Central government agencies must use the PPS to procure goods and 
services above ₩ 100 million (foreign goods and services over US$200,000).119  Below that threshold 
individual government agencies may conduct thei r own purchasing directly.  All other public 
institutions, including SOEs, may procure goods an d services directly or through the PPS.  Local 
governments are authorized to procure goods and services independently and to conduct foreign procurement.
120  Since 2010, local governments have al so procured all construction works 
independently;  however, for construction works with an estimated value exceeding ₩ 10 billion, the 
PPS reviews the cost calculation basis of the construc tion 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 use121;  contracting and managing public works;   stockpiling 14 types of essential raw and 
construction materials to secu re price stability and supplies122;  coordinating and auditing government 
goods and real estate property management;  and operating the Korea ON-line E-Procurement System 
(KONEPS) (previously known as Governme nt's e-procurement system, GePS).  
118. All bidders wishing to participate in PPS-conduc ted tenders must register with PPS.  For 
construction works below ₩ 30 billion it uses an "eligibility screening system".  "Abnormally low or 
dumping" tenders are rejected.123  For contracts exceeding ₩ 30 billion, it uses the lowest bid award 
system after conducting a pre-qualification evaluation;  the lowest bid award system is to expand to 
contracts exceeding ₩ 10 billion from 2014 onwards.124  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 lowest bid award system.  Separate pre-qualification lists are maintained for each construction project, based on objective 
criteria.
125  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 rest rictions imposed on foreign suppliers.   
119. The PPS handles procurement from SMEs and other socially weak sectors, such as regional 
companies and female-owned businesses.126  The Small and Medium Business Administration 
provides the list of set-asides products to be pr ocured through competition among SMEs only as an 
                                                      
119 A higher threshold of ₩ 3 billion applies to construction contracts.  
120 Foreign procurement refers to purchase of goods and services that are not domestically produced or 
supplied, and therefore procured th rough international tendering in accord ance with international commercial 
practice. 
121 Defence-related procurement is conducted by the Defence Acquisition Program Administration. 
122 Each year the Minister of St rategy and Finance determines which essential materials are highly 
dependent on imports.  On December 2011, the PPS had b een designated 6 base metals including aluminium, 
copper, and nickel, and 8 rare metals including silicon, co balt, indium, and lithium.  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. 
123 Bids are evaluated based on estimated prices pr epared by PPS.  Those that exceed these estimates 
are precluded, as are bids that fall below a certain level. 
124 Construction News , "Improvement of Local Contract System Delayed", 28 August 2011.  Viewed 
at:  http://www.cnews.co.kr/uhtml/r ead.jsp?idxno=201108261310508960621. 
125 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).  
126 The precise definition of an SME differs between sectors.  In manufacturing it is a company 
employing fewer than 300 persons or with paid-up capital of less than ₩ 8 billion. Republic of Korea WT/TPR/S/268 
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  exception under the GPA.127  The PPS implemented various po licies to increase opportunities for 
SMEs.  PPS's "competitive bidding system restricted by region" and "compulsory joint sub-contracting and single source contrac ting system" expands regional opportunities.
128  O n  
2 August 2011, the PQ System was amended to broa den participation of SMEs in tendering including 
a new factor in their evaluation criteria, the ratio of SME participation in a project proposal.129  Under 
its 18 August 2010 notice "Competitive Bidding among Joint Venture of SMEs" the PPS designated 
20 standard items, including ready-mixed concrete, for which only joint ventures with at least 20% 
small-sized suppliers may compete.130  Between 2008 and 2010, the share of PPS's purchases of goods 
from SMEs rose from 69.5% to 75.2% of total domestic procurement of PPS.131   
120. In line with the Government's Low Carbon Gr een Growth policy, the PPS established an 
Action Plan for Green Purchasing in November 2009 and issued Purchasing Guidelines for the 
Promotion of Public Purchase of Green Products in December 2010;  these Guidelines specified the 
scope of green purchasing public organizations, and ensured the effectiveness of green purchasing.132  
To expand demand for green products, 50 items highl y demanded by public sector entities, such as 
office machines, recycled products, LED lamps, h ybrid vehicles, high efficiency equipment, and 
synthetic wood were designated by the PPS as Minimu m Environmental Standard products for Public 
Procurement as of December 2011;  PPS plans to in crease the number of items to 100 by 2013.  The 
PPS expanded incentives for purchasing green produc ts and removed barriers to green products 
entering the public procurement market.  In 2009, the PPS revised the scoring criteria of its eligibility 
tests, raising the reliability score allocated to those with eco-friendly certificates.  It provided 
preferential treatment for companies with green construction works in pre-qualification eligibility 
examination, and made it mandatory for newly cons tructed government buildings to comply with the 
Energy Efficiency Grade 1 and Eco-friendly D esign Standard.  Between 2008 and 2010, the PPS 
purchased green products accounting for about 11% of  the total value of domestic procurement of 
goods;  this share increased to 20.4% or ₩ 3 trillion in 2011. 
121. The PPS handled 36.2% (30% in 2008) of Ko rea's total domestic and foreign government 
procurement of goods and services (excluding defen ce equipment) and constr uction contracting in 
2010.  PPS's total annual procur ement has grown rapidly, from ₩ 29.7 trillion in 2008 to 
₩ 44.1 trillion (2009) but fell slightly to ₩ 38.3 trillion in 2010, of which 52.3% were public works 
                                                      
127 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 are 196 SME products for set-asides until 2012. 
128 The competitive bidding system "restricted by region" applies to projects valued up to ₩ 7.6 billion 
(₩ 5 billion in 2007), and allows companies located in the construction region to participate in the open 
competitive tender.  The compulsory joint-venture system (up to ₩ 9.5 billion as from 2011,  previously 
₩ 7.4 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. 
129 Financial News , "PPS Amends  PQ Standards", 2 August 2011.  Viewed at:  
http://www.fnnews.com/view?ra=Sent1201m_View& corp=fnnews&arcid=110802 133512&cDateYear=2011&c
DateMonth=08&cDateDay=02. 
130 In December 2011, the 20 designated items were  ready-mixed concrete, asphalt concrete, manhole 
boxes, concrete flumes, conduit, polyethylene pipes, water meters, iron poles for street lighting, stainless water tanks, stone blocks, PVC pipes (vinyl chloride pipes), reinforced spun concrete pipes,  vinyl insulated wire, 
aluminium cable steel reinforced (ACSR), stranded electrical wire, control cables, iron manhole rims and 
covers, gabions, welded wire mesh, and reinforced concrete under-drain blocks. 
131 Domestic procurement refers to goods, services, and leases produced or supplied domestically 
(Public Procurement Service, 2011, Part II). 
132 Public Procurement Service (2011). WT/TPR/S/268 Trade Policy Review 
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  contracts.133  The share of foreign supplies has dropped steadily, from 3.5% (2008) to 1.6% of PPS's 
total procurement operations in 2010, 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% of the agency's purchases.134  Foreign suppliers continue to lose 
ground due to the highly sophisticated and increasingly competitive domestic suppliers of 
manufactures and construction services, as well as th e discontinuation of go vernment purchases based 
on international public loans (IBRD, OECF), wh ich required international competitive tendering.  As 
Korea advances in respect of technology, replacement  of foreign equipment with domestic items is 
expected to accelerate;  further challenges are expected in light of the environmental-friendly and 
diversifying needs of purchasing entities.  Most foreign procurement is undertaken by central 
government (43.7% of the total in 2010) and local authorities (21.2%).  More than 90% of foreign 
procurement was subject to competitive tendering du ring the review period.  Foreign commodities 
procured ranged from books to sophisticated sy stem equipment, including science and research 
equipment, state-of-the-art me dical equipment, and helicopters.135  
122. The value of transactions conducted through KONEPS, an internationally acclaimed single 
window for procurement with a digitalized purchasing process, fell slightly, from ₩ 85.8 trillion, or 
70.2% of total government procurement in 2009 to ₩ 75.1 trillion or 71.9% of total government 
procurement in 2010.  As of 2011, KONEPS was in use by 42,042 public organizations and 
218,719 private businesses. 
Other procurement  
123. Some 63.3% of Korea's procurement market involves procurement directly by public 
institutions (i.e. outside the PPS's scope). 
(3) MEASURES DIRECTLY AFFECTING EXPORTS  
(i) Registration, documentation, and clearance 
124. More than 95% of export declarations are submitted electronically to Customs without 
supporting documents, and accepted automatically by th e e-clearance system.  Clearance time is under 
two minutes on average, and export time seven  days (lower than the OECD average).136  A s  f r om  
June 2011, the KCS prohibits third-party goods fro m falsely claiming Korean origin;  measures to 
control illegal transhipments were reinforced, an d punishment for transhipment falsification was 
strengthened.137  Cases of third-party goods falsely clai ming Korean origin, with the intention of 
obtaining preferential tariff treatment, are expect ed to increase once major FTAs (e.g. with the EU 
and the United States) take effect.  In July 2011, the KCS was to establish and operate a new office to 
control illegal transhipments;  it also planned to build a system to manage the whole procedure, 
including entry, unloading, transportation, shipping a nd departure.  It planned to considerably increase 
inspection rates for high-risk companies after assessing the possibilities of unfair trade practices by 
178 companies engaging in unloading, transporting and storing merchandise at Busan Port, Inchoen 
                                                      
133 Public Procurement Service (2011). 
134 PPS's foreign procurement peaked in 2009 (US$1 billion), and subsequently dropped by 48.1% due 
to the lack of contracts above ₩ 170 billion, and the won's depreciation against the U.S. dollar.   
135 Public Procurement Service (2011). 
136 Korea Customs Service (2009);  and World Bank/IFC (2011a and b). 
137 KCS online notice, "KCS, intensively cracking down on trans-shipment fraud", 3 June 2011.  
Viewed at:  http://english.customs.go.kr/kcsweb/user.tdf. Republic of Korea WT/TPR/S/268 
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  Air Port and other sea- and air-ports in Korea.  In addition, KCS was to share information about 
potential falsified origin with customs au thorities from the EU and the United States.   
(ii) Export prohibitions, restrictions, and licensing 
(a) Export prohibitions 
125. The negative list of banned exports has not ch anged 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).   
(b) Export licensing and restrictions 
126. Sand and gravel-related items are restricted to protect natural resources;  in doing so, the 
authorities assist downstream processing of these resources.138   
127. Korea may restrict exports of certain products  periodically to ensure adequate domestic 
supplies, again potentially assisting downstrea m processing of these products.  Following the 
February 2008 revision of the Grain Management  Act Enforcement Regulation, rice is the only 
product requiring export authorization (termed as "recommendation" by the authorities) by the 
MIFAFF.  The authorities indicated that rice is a st aple grain whose "tariffication" was delayed and 
that it requires supply and demand management.  Quotas have been set on the basis of an export-need recommendation for rice exports:  for 2008 (47,000 tonnes), 2009 (63,000 tonnes), 2010 (79,000 tonnes), 2011 (98,000 tonnes), and 2012 (104,000 tonnes).  Quota allocation is on a 
first-come, first-served basis.  There are no qualifi cation requirements for exporters.  According to the 
authorities, export quota levels, which were simila r to those of rice import quota levels, remain little 
utilized, i.e. 566 tonnes in 2007, 358 tonnes in 2008,  4,495 tonnes in 2009, 3,815 tonnes in 2010, and 
3,564 tonnes as of November 2011.
139   
(iii) Export subsidies 
128. Korea does not have export subsidy commitments;  it maintains export subsidies for certain 
farm products under the provisions of Article  9.4 of the WTO Agreement on Agriculture.140  In 2008, 
these subsidies, which were notified to the WTO Committee on Agriculture, totalled ₩ 32.68 billion 
(₩ 25.59 billion in 2004), and covered fruit ( ₩ 10.85 billion), flowers ( ₩ 5.39 billion), vegetables 
(₩ 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).141  The subsidies were 
used to reduce exporters' marketing costs, and are exempt from WTO reduction commitments.  The 
authorities indicated that data on export subsidies from 2008 onwards will be notified in the course of 
                                                      
138 Exports of sand and gravel items require approva l by the Korean Aggregat e Association.  Export 
quotas for sand are allocated based on applicants' pr oduction capacity.  Only sand and gravel that are a 
by-product of raw ore processing are approved for export.  
139 These data differ slightly from those available in UNSO Comtrade and the KCS contained in USDA 
Foreign Agricultural Service (2012). 
140 Korea considers that, in line with the 2005 Hong K ong Ministerial Declaration, which stipulates that 
"Developing country Members will conti nue to benefit from the provisions of Article 9.4 of the Agreement on 
Agriculture for five years after the end-date for eliminatio n of all forms of export subsidies" (2016), it would be 
entitled to maintain exports subsidies listed in paragr aphs 9.1 (d) and 9.1 (e) of the Agreement until 2021. 
141 WTO documents G/AG/N/KOR/36, 27 February 2007;  and G/AG/N/KOR/42, 4 October 2010. WT/TPR/S/268 Trade Policy Review 
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  2012.  Korea does not consider that corporate income tax relief to industries located in FTZs is subject 
to WTO notification (section (2)(i)(b)).  
(iv) Duty and tax concessions 
129. Raw materials used in exports are exempt from customs duties (section 2(iii)(e)), and a 
customs drawback scheme provides refunds.  The Korea Customs Service operates an Internet 
drawback system allowing refund requests to be file d online;  a real time electronic treasury transfer 
system allows the Bank of Korea to make elect ronic refunds to exporters.  Refunds totalled 
US$3.5 billion in 2010 and US$4.4 billion in 2011 (US$2.6 billion in 2007), equivalent to about 
24.8% and 29% of tariff revenue, respectively.  No  information on the drawback calculation method 
and data on the value of exports benefiting fro m drawback since 2008 was available from the 
authorities. 
(v) Export finance, guarantees, and insurance 
130. The government-owned Export-Import Bank of Korea (EXIM-Bank) provides export credit 
and financial guarantees to support Korean  enterprises in conducting overseas business.  
Project-related guarantees are also provided to foreign bu yers in the event of exporters' failure to meet 
contractual arrangements.142  The Government ensures the Bank's solvency by covering any net losses 
beyond reserves;  government funding of ₩ 150 billion in 2010 and ₩ 1.1 trillion in 2011 helped the 
Bank accumulate ₩ 5.2 trillion and ₩ 6.3 trillion, respectively, in paid-up capital.  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 th e "minimum foreign exchange earnings ratio" is 
no less than 25%.  Export credits are subject to the minimum commercial interest reference rate 
(CIRR) and other terms.143  Korea EXIM-Bank support for ship exports meets the requirements of 
OECD's Sector Understanding on Export Credits for Sh ips.  In 2010, it increased its volume of credit 
facilities by 15%, to ₩ 64 trillion, and expanded the number of supported companies by 18%;  this 
amount was to be further increased to ₩ 66 trillion in 2011.144  In 2010, ships comprised the largest 
portion of items supported under export credit, with ₩ 6.1 trillion (US$5.4 billion, 22.6%), followed 
by industrial plants ( ₩ 4 trillion), and machinery ( ₩ 1.99 trillion).  Under the Interbank Export Credit 
(IEC) facility offered to foreign banks in the form of a credit line that can be utilized for loans to their 
clients importing Korean goods or conducting business transactions with Korean subsidiaries, the 
amount disbursed increased by 90.0% to ₩ 973 billion (US$855 million) in 2010 from ₩ 512 billion 
(US$439 million) in 2009;  major clients of this  programme included banks in emerging countries 
such as the Russian Federation, Uzbekistan, and India. 
131. The state-owned Korea Trade Insurance Corpora tion (K-sure, previously KEIC), under MKE, 
provides export credit insurance against non- payment risks (Trade Insurance Act, 1968).145  I t  
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 
                                                      
142 Korea EXIM Bank online information.  Viewed at:  http://www.koreaexim.go.kr/. 
143 Korea fully implemented the OECD Arrangement as from 31 March 2002 when transitional 
arrangements expired.  Maximum repayment periods are:  12 years for ships, non-nuclear power plants;  
18 years for nuclear power plants;  and 5-10 years for other products, pursuant to the OECD Arrangement 
(Korea EXIM Bank online information.  Viewed at:  http://www.koreaexim.go.kr/en/ banking/export/loan_01.jsp 
[27 October 2010]). 
144 Korea EXIM Bank (2010).   
145 K-sure online information.  Viewed at:  http://w ww.ksure.or.kr/english/index.jsp [28 October 2011]. Republic of Korea WT/TPR/S/268 
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  government-supported foreign export credits.  K-sure supplies export insuran ce against losses due to 
political and commercial risks, whole-turnover in surance policies at a 50% discount to specific 
policies.  It offers 13 different types of expor t insurance and 2 types of guarantees, but most 
underwriting takes the form of short-term insura nce.  The maximum coverage for medium- and 
long-term export insurance is 100% of the contr act 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 co mmunication, and IT items) and capital goods (e.g. 
industrial plant, machinery, and vessels).  Tota l exports underwritten ro se by 44.4% from 2008 to 
2010, to ₩ 187.4 trillion (22.9% of total exports)146;  in 2011, they rose by 2.6% to ₩ 192.2 trillion 
(88.8% of covered short-term insurance). 
(vi) Export promotion and marketing 
132. Korean exporters benefit from the promotiona l activities of the state- owned Korea Trade and 
Investment Promotion Agency (KOTRA).  With 111 Korea Business Centers in over 76 countries, the 
agency operates a "business matchmaking" servi ce introducing foreign importers to Korean 
businesses.  KOTRA also organizes or assists with trade missions and exhibitions domestically and 
overseas, providing SMEs with export-related in formation and consulting services.  Other than 
supporting the globalization of SMEs, KOTRA also works as a help centre providing useful information to foreign investors.  No recent da ta on total government prom otional expenditure on 
exports (₩ 34.1 billion in 2007) were available from the authorities.  
(4) M
EASURES AFFECTING PRODUCTION AND TRADE  
(i) Taxation147 
133. Total taxes as a share of GDP remain relatively low (18.6% in 2009, Table I.1).  Korea relies 
on indirect taxes for 48.1% of tax revenues.148  VAT remains the main indirect (consumption) tax 
component, followed by the transportation-energy-environment tax.  As a result of a steadily rising trend due to increased imports, customs duties contri buted a substantial 6% to total tax revenues in 
2010 (Table III.3).  Corporate and personal income  taxes are also important sources in total tax 
receipts.  Overall, the tax system, in particular its trade-related part, remains complicated by the 
so-called tax-on-tax (cascading) schemes and various surtaxes.
149  According to the authorities, the 
Korean tax regime adheres to the globally accepte d OECD International Tax Standards on exchange 
of information.  The introduction of "Partner ship (2009)" and "Consolidated Tax Return (2010)" 
contributed to the rationalization of corporate taxati on.  Korea is pursuing efforts to simplify its tax 
system and to increase the ease of compliance through, inter alia,  the adoption of e-government tools 
such as "HomeTax" (UN award for best practices in 2010).   
(a) Indirect taxation 
134. Korea's relatively complex indirect tax structure comprises a broad-based VAT, individual 
consumption (special excise) taxes, and other tax es on liquor, property transactions (stamp tax), and 
securities transactions.  There is also a transportati on (energy-environment) tax, education tax, and 
                                                      
146 K-sure (2011). 
147 For more information on taxes see Ministry of Strategy and Finance/National Tax Office (2010). 
148 The authorities indicated that the distinction between direct and indirect taxes is mainly based on the 
incidence of taxes affecting the same taxpayers.  However, this distinction is no longer considered applicable for 
analysing tax statistics, as the burden of direct and indirect taxes can be shifted to others.  
149 EIU (2011a). WT/TPR/S/268 Trade Policy Review 
Page 84 
  
  special tax on rural development.  Exports are generally exempt from i ndirect taxes, except mainly for 
individual consumption and transportation-energy-e nvironment taxes applied to inputs of petroleum 
products used in their production.  Exports are zero-rated for VAT. 
Table III.3 
Structure of direct and indirect tax revenue, 2004-10 
    2004 2005 2006 2007 2008 2009 2010 
Total tax revenue (US$ billion) 102.9  124.4  144.5  173.8  151.7 128.9 153.7 
(% of total) 
Direct taxes 42.4 44.2 45.5 47.8 46.8 43.8 43.8 
Income tax 19.9 19.3 22.5 24.1 21.7 20.9 21.1 
Corporation tax 21.0 23.4 21.3 21.9 23.4 21.4 21.0 
Inheritance tax 1.5 1.5 1.7 1.8 1.7 1.5 1.7 
Indirect taxes 48.5 46.9 44.8 41.7 42.9 44.2 46.0 
Value-added tax 29.3 28.3 27.6 25.4 26.2 28.6 27.6 
Transportation tax 7.3 8.1 6.9 7.1 7.1 6.1 7.9 
Customs duties 5.8 5.0 5.0 4.6 5.2 5.6 6.0 
Special consumption tax 3.9 3.5 3.6 3.2 2.7 2.2 2.9 
Liquor tax 2.2 2.0 1.7 1.4 1.7 1.7 1.6 
Othera 9.1 8.9 9.7 10.5 10.3 12.0 10.2 
a Unspecified revenue information. 
Source: Data provided by the Ministry  of Strategy and Finance. 
135. The VAT, at 10%, applies to goods and services.   Exemptions cover unprocessed foodstuffs, 
social welfare services, books, educational services, and financial and insurance services.  The VAT is 
levied on top of other taxes, including import duties, where applicable.150   
136. The individual consumption (special excise) ta x applies to a wide range of goods, including 
luxury products.  Rates vary from 5% on cars of le ss than 2,000 cc and motor cycles, to 20% (e.g. 
motorboats, yachts, luxury items).  Flexible rat es 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.  Individual  consumption tax rates on vehicles were lowered 
temporarily by 30% via the implementation of flexible rates from 19 December 2008 to 
30 June 2009.151  Hybrid cars (from 2009 to 2012) and electric cars (from 2012 to 2014) are exempt 
from the individual consumption tax (up to ₩ 1 million and ₩ 2 million, respectively) and high 
energy consuming home appliances (air conditioner,  refrigerator, TV, drum-type laundry machine) 
are subject to a 5% rate of individual consump tion tax (from 2010 to 2012).  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.152   
137. Under another 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 2012 (instead of the individual consum ption tax).  Flexible transportation-energy-
                                                      
150 The VAT base for imports is the c.i.f. price plus customs duties and other taxes, where applicable.  
151 This measure lowered the 5% individual consumption tax on vehicles with engine of between 
1,000 and 2,000 cc to 3.5%;  the 10% tax on vehicles with engines larger than 2,000 cc was lowered to 7%.   
152 Other products taxed are heavy fuel oil ( ₩ 17 per litre), kerosene ( ₩ 90 per litre), natural gas 
(₩ 60 per litre), fuel oil ( ₩ 17 per litre), LPG-butane ( ₩ 252 per kg, but ₩ 275 per kg is applied under the 
flexible rates), and LPG-propane ( ₩ 20 per kg). Republic of Korea WT/TPR/S/268 
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  environment tax rates may apply to gasoline and di esel oil within a 30% range of the statutory tax 
rates, i.e. ₩ 529 per litre and ₩ 375 per litre, respectively from 21 May 2009.  Conditional 
exemptions apply to petrol and diesel used in the manufacture of medical goods, fertilizers and petro-chemicals, vehicles for handicapped persons or rental usage.  The liquor tax on alcoholic 
beverages remains unchanged.
153  
138. The securities transaction tax is levied on transf ers of shares or stocks of a business entity.  
The standard rate of 0.5% applies to the value of securities transferred.  A re duced rate of 0.15% (plus 
0.15% of special tax for rural development) and 0.3% apply to transactions on the securities market 
and on the KOSDAQ market, respectively.   
139. 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), is 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%).  
140. The special tax for rural development is a surt ax levied on income exempted from company 
and personal tax, on the value of customs dut y concessions, and the amount of individual 
consumption tax and securities transaction tax.
154  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 
second ten-year period on 1 July 2004.  
141. Korea imposes environmental waste charges on certain items that contain harmful substances 
and are difficult to recycle (Act on Promotion of Sa ving 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.155 
Local taxes 
142. Following the 2010 amendment of local tax laws, as from 2011 the 16 local taxes were 
integrated into 11 taxes, leading to some rati onalization in the unwieldy system of local taxation.156  
Province and city governments apply a range of i ndirect taxes, including an acquisition tax, to 
purchases of real estate, motor vehicles, heavy equipmen t, and boats.  A registration tax is levied on 
property and motor vehicles, boats, aircraft, and construction machines, as well as certain business 
registrations and intangible assets, such as transf ers of mining, fishing, and intellectual property 
rights.  An automobile tax applies to passenge r vehicles (depending upon engine size), buses, and 
trucks (depending upon carrying capacity).  A tobacco  consumption tax is levied at various specific 
rates.  
                                                      
153 See WTO document WT/TPR/S/204/Rev.1 , 4 December 2008 for more details. 
154 It includes exemptions specified under the Speci al Tax Treatment Control Law, the Local Tax Law, 
and the Customs Law.  Exemptions und er the Company Tax Law, Income Tax Law, and the Foreign Investment 
Promotion Law are excluded. 
155 The charges are set at, e.g. ₩ 24.9 per plastic container of insecticide or ₩ 30.7 if it exceeds 
500 ml;  and ₩ 75 or ₩ 150 per kg of the plastic or synthetic resin used for domestic goods. 
156 EIU (2011a). WT/TPR/S/268 Trade Policy Review 
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  (b) Direct taxation 
143. Personal income tax and corporation tax remain  the second and third largest single sources of 
revenue after VAT.  Progressive personal inco me tax rates range from 6% (income of ₩ 12 million or 
less) up to 38% (over ₩ 300 million).157  Certain foreign workers are exempt from income tax.  
Corporation tax rates have become increasingly more  competitive in an effort to make the business 
climate more attractive to domestic and foreign co mpanies.  The lower income bracket was raised, 
and the corporation tax rate was reduced in  2010 from 13% to 10% for income up to ₩ 200 million 
(previously ₩ 100 million), and from 25% to 22% for higher income.158  The corporation tax rate for 
middle income ( ₩ 200 million- ₩ 20 billion) was further reduced  in 2012 from 22% to 20%.  A 
foreign corporation without a permanent residen ce in Korea is subject to withholding taxes. 
(c) Tax incentives 
144. Tax incentives are used extensiv ely as an instrument of industrial policy to encourage 
investment, especially from overseas, and production of certain goods, including by SMEs (Special 
Tax Treatment Control Law 1999, STTCL).  They cove r 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 exempti ons and zero-rating).  Many tax incentives under 
the STTCL have expiry dates and are extended peri odically;  in July 2011, the Government was 
considering various modifications to the STTCL in  order to stimulate more job creation.  Tax 
incentives were to terminate at end 2003 but many were extended until end 2009, 2010, 2011 or 
2012.159  According to the authorities, out of 42 "non- taxation" and tax reductio n/exemption benefits 
due to expire in 2011, 30 were extended while th e remainder were abolished or scaled back;  3 tax 
incentives with no expiry date were scaled back or repealed in 2010 and 2011.  In determining 
whether to repeal or scale back a certain tax incentive, factors taken into account included the extent 
to which the objective had been achieved and whet her the benefit was in line with "international 
standards".  
145. Associated with the above income tax incentives, Korea had 141 (143 in 2007) tax 
expenditures under its income taxes in 2010.  The ge neral business incentives category counts for the 
highest number of tax expenditures followed by specific industry relief.160  Korea had another 93 tax 
expenditures under other taxes in 2010;  the two la rgest contributing taxes were the VAT (26 tax 
expenditures in each year), and the securities transact ion tax (17).  The effectiveness of tax incentives, 
both in terms of meeting specific objectives and im pact on the economy's overall efficiency, needs to 
be reviewed regularly.  Forgone tax revenues for tax years 2008, 2009, 2010, and 2011 are estimated 
at ₩ 29 trillion, ₩ 31 trillion, ₩ 30 trillion, and ₩ 30 trillion, respectively.  From 2011, an annual 
report on tax expenditure for the previous, current, and following years was to be published;  no 
information about this report was available from th e authorities.  SMEs benefit substantially from tax 
incentives.161  SMEs in wholesale, retail, medical services, or auto repairs located in non-metropolitan 
                                                      
157 Taxation for higher income (i.e. above ₩ 12 million) consists of a fixed amount (from 
₩ 0.72 million up to ₩ 90.1 million depending on the income scale)  plus a percentage on the amount exceeding 
the lowest value of the tax base. 
158 Taxation for higher income consists of ₩ 20 million plus the percentage of the amount exceeding 
₩ 200 million. 
159 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 implementation) is generally included.   
160 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 (OECD, 2010c). 
161 See WTO document WT/TPR/S/204/Rev.1 , 4 December 2008 for more details. Republic of Korea WT/TPR/S/268 
 Page 87 
 
 
  areas receive a 5% rate reduction.  SMEs also re ceive larger tax incentives than those generally 
available, for example, much larger tax credits  for investment in technology and human resource 
development.  
146. Tax credits apply to investment in technol ogy and human resources development (extended 
until end 2012);  as from 2010, the R&D expenses fo r new growth engine industries and source 
technologies (section (4)(ii)) have been eligible for tax credits.162  A concessional income tax rate of 
8% (12% in 2008) applies to certain activities to  enhance social welfare, including fisheries 
cooperative associations and the tobacco production association.  There is a 50% tax exemption for 
forestry income.  Interest income (up to ₩ 20 million) and partnership dividends (up to ₩ 10 million) 
are non-taxable for farmers and fishermen.  Prim ary producers also benefit from zero-rating for VAT 
on machinery, fertilizer, and pesticides, and on fishin g gear, including nets;  and exemption of taxes 
on petroleum products used in agriculture and fishing.  
147. Under the National Finance Act, limits on the maximum of cumulative tax incentives apply to 
overall tax reduction or exemption measures, in cluding those claimed under the STTCL.  The 
authorities indicated that the upper limit for cumula tive 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. 
(ii) Financial assistance  
(a) Loans, guarantees, and other financial measures 
148. State-owned financial institutions have a major role in assisting Korea's industrial 
development.  State intervention dominates the la rge 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 to the formation of the 
private venture investment market.  In late 2011, the Fund of Funds amounted to ₩ 1.36 trillion 
(₩ 630.1 billion in 2007), was mostly financed by government funds, and had invested in five areas 
(SMEs, culture, broadcasting, movies, patents).  The number of venture corporations increased from 
7,967 in 2004 to 24,645 in 2010.   
149. Two major public institutions, the Industria l Bank of Korea (IBK) and the Korean 
Development Bank (KDB), play a substantial role in industrial development;  the latter is to, 
inter alia,  support the new growth engine industries for the next decade.  They are run commercially, 
but by owning over 50% of the KDB Financial Group the Government guarantees KDB's solvency.163  
While the Government has no direct control over their lending programmes, it has injected approximately ₩ 2.4 trillion since 2004 for recapitalization purposes;  no replenishment of losses has 
been made for the IBK since 2004.  All commercial ba nks that grant 45% of their loans to SMEs may 
provide low-interest-rate loans to SMEs.  To alle viate the financial crunch on SMEs triggered by the 
global financial crisis, between  2008 and 2009, government funding (via KCGF and KOTEC) of 
support for payment guarantee coverage w as increased by 44.7% to a peak of ₩ 64.8 trillion in 2010;  
in 2011, as a result of the economic recovery there was a slight drop, to ₩ 62.8 trillion.   
                                                      
162 Korea's Five-Year Plan for Gree n Growth (2009-13) aims to secure new economic growth engines 
and focus R&D on 27 core technologies (EIU, 2011a). 
163 As of October 2009, the KDB Financial Group is  made up of KDB Bank, Daewoo Securities, KDB 
Capital, KDB Asset Management and Korea Infrastructure Investments Asset Management (KIAMCO) (Korean 
Development Bank Financial Group, 2010). WT/TPR/S/268 Trade Policy Review 
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  150. The IBK supports SMEs mainly through low interest loans in line with government policy for 
working capital for technology development, produc tivity improvement or automation, constructing 
facilities, and buying plant and machinery.  At end-December 2011, loans extended to SMEs 
amounted to ₩ 94.5 trillion ( ₩ 65.7 trillion in 2007), or 76.4% of total IBK loans.  No information 
on the annual interest rates for loans funded by th e Korean Government or governmental agencies 
were available from the authorities.  Most SME lo ans 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.  No data on this fund ing was available.  IBK does not maximize profits 
given its public policy role;  its financial performance is directly influenced by government policies.
164  
151. The KDB provides a broad range of industrial capital, including loans to finance tangible and 
intangible (e.g. R&D) investments, underwrite co rporate mergers and acquisitions, and as operating 
capital.  The KDB offers corporate banking services by extending corporate loans generated through 
the issuance of industrial finance bonds in the market .  The KDB lending rate is  ostensibly determined 
by market principles and no loans are extended at a pref erential rate to firms of a particular industry.  
Nevertheless, lower interest ra tes are seemingly available for SMEs willing to relocate production 
facilities to rural areas (excluding Seoul, Kyeonggi-d o, and Chungchong-do) (ar ound 1.25 percentage 
points lower rates) or regional development purposes.165  Even when using government funds, KDB 
extends loans under the same conditions as commerc ial banks but focusing on fostering strategic 
industries.  KDB Financial Group's loan extensi ons originating from government funds and their 
proportion of total loans were ₩ 1.25 trillion and 3.4% of total loans of KDB in 2011, up from 
₩ 1 trillion and 3.1% in 2010, and ₩ 571.2 billion and 2.1% in 2007.  
152. The Korea Credit Guarantee Fund (KODIT) and KIBO Technology Fund 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, the 
Government would cover any losses.  The Govern ment's financial assistance for KODIT and KIBO 
Technology Fund amounted to ₩ 11.2 trillion and ₩ 6.5 trillion respectively until 2009, and as of 
2010, KODIT and KIBO became financially sel f-sufficient).  KIBO Technology Fund also 
administers technology appraisal systems for selecting beneficiaries of various government funds.  
153. A ₩ 100 billion Urgent Management Stabilisati on Fund, to provide low-interest and 
long-term financing to SMEs facing problems of acce ss to raw materials mainly due to high oil prices 
was created on 15 June 2011 and was operational as from the second half of the year.  In addition, the 
state-run Korea Trade Insurance Corporation was to extend import insurance coverage for SMEs. 
154. In line  with Article 32 of the Low-Carbon, Green-Growth Framework Act (effective 
14 April 2010), in August 2010 the MKE passed measures to promote green certification.  These measures entail:  extending loans for the purpose of  disseminating new renewable energy;  providing 
linkages to the SME policy fund;  intensive suppo rt for technology guarantees;  support for export 
financing and insurance.  In the context of effort s to promote the green certification by expanding the 
certification fields as well as improving the certifica tion criteria, a reduction in the cost of quality 
inspections for green SMEs was set in February  2011:  as from May 2011, the MKE has reimbursed 
50% of the green technology quality inspection fee (up to ₩ 1 million) for green-certified SMEs.   The 
                                                      
164 The authorities indicated that IBK is competing with other commercial banks for the same target 
market with identical funding and op erating scheme;  SMEs became more dependent to IBK's financing due to 
the global financial crisis as private banks reduced th eir exposure to loans with potentially high risks.  
165 Regional development is promoted by providing loans whose interest is partially covered by local 
authorities or the bank itself.   Republic of Korea WT/TPR/S/268 
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  MKE expected about 300 local SMEs to be certif ied as green and to benefit from this financial 
assistance programme in 2011.   
(b) Other subsidies  
155. Korea has notified several direct support pr ogrammes to the WTO Committee on Subsidies 
and Countervailing Measures.  Its latest notifica tion, in September 2011, covered the period 2009-10 
and indicated that there were 24 subsidy schem es, of which 22 were also notified in 2009.166  Grants, 
tax concessions or concessional loans are used to assi st a range of agricultural, forestry, fishing, 
manufacturing R&D, and environmental protection activ ities.  No expiry date was indicated for the 
notified schemes except for measures relating to re placement of old coastal and offshore fishing 
vessels (until 2016), and support for the telemetering system (2009-10).  
156. In 2011, sector-specific support measures benef ited shipbuilding, automotive, pharmaceutical, 
and steel-industry activities (Chapter IV).  In April 2011, the Government decided to provide 
₩ 6.5 trillion financial assistance to new growth engine activities in green technology, high-tech 
convergence167, and high value-added services.168  The assistance includes low in terest loans, and is to 
be allocated as follows:  ₩ 1.7 trillion in policy funds;  ₩ 100 billion in financing start-ups;  
₩ 1.3 trillion in on-lending funds;  ₩ 3 trillion on technology appraisals and guarantees;  
₩ 300 billion in collateralized bond obligations;  and ₩ 100 billion in secondary funds.  Policy funds 
would focus on R&D.  
157. Korea heavily subsidizes agriculture, especially ri ce (Chapter IV).  The importance of direct 
government payments to specific agricultural comm odities producers was provisionally estimated by 
the OECD at ₩ 1.2 trillion in 2010 (up from ₩ 689 billion in 2008).169  These relate mainly to overall 
farming income or receipts, and area planted or animal  numbers.  In 2011, electricity tariffs charged to 
agricultural activities represented a 32.8% of power  production cost recovery, compared with 94.4% 
for electricity tariffs affecting manufacturing. 
158. According to Korea's latest WTO notification of September 2011, as a result of the 
elimination of the Rice Purchase Programme in 2005 the current total Aggregate Measure of Support, 
(AMS) dropped to ₩ 33.1 billion in 2008 (much be low its final bound level of ₩ 1.49 trillion), in 
line with WTO provisions and scheduled commitments.170  It consisted solely of market price support 
for barley ( ₩ 33.1 billion).  Total domestic agricultura l support notified by Korea (including green 
box, development programmes subject to special and differential treatment, and de minimis  support 
not subject to reduction commitments), was ₩ 5.6 trillion in 2008 ( ₩ 879 billion excluding green box 
and S&D assistance (Table AIII.7).  De minimis  support included:  additi onal market price support 
                                                      
166 WTO documents G/SCM/N/155/KOR, 4 May 2009, and  G/SCM/N/220/KOR,  23 September 2011. 
167 National Science and Technology Commission (undated). 
168 The green technology activities comprise renewable energy, low carbon energy, advanced 
wastewater treatment, LED application,  green transportation systems, and state-of-art green city development.  
The high-tech convergence activities cover broadcasting and telecommunications convergence, IT convergence systems, robot application, new nano convergence, biopharmaceutical and medical equipment, and high 
value-added food production.  The high value-added services involve global healthcare, global education 
services, green finance, "contents and software", MICE  (meeting, incentives, convention, and exhibition) and 
tourism (MOSF online information, "Gov't Boosts Financial Assistance for New Growth Engines", 
26 May 2011.  Viewed at:  http://english.mosf .go.kr/eco/view.do?bcd=E0009&seq=26&bPage=1 
[7 November 2011]). 
169 OECD (2011a), Table III.57. 
170 Schedule LX – Republic of Korea (WT/LET/804, 25 July 2011), Part IV Section I;  and WTO 
documents  G/AG/N/KOR/43,  16 September 2011, and G/AG/N/KOR/43/Corr.1, 25 January 2012. WT/TPR/S/268 Trade Policy Review 
Page 90 
  
  (on barley, maize, and soybean);  other product-specific assistance (e.g. milk support ₩ 24.27 billion, 
rice deficiency payment ₩ 286.32 billion, beef deficiency payment of ₩ 13.18 billion);  and 
non-product-specific support of ₩ 291.04 billion (mainly concessional loans, subsidized inputs, and 
crop insurance).  In 2008, green box support was more than five times the size of Korea's total product 
and non-product specific AMS.   
159. Under the Act on Trade Adjustment Assi stance (TAA), since April 2007, Korean 
manufacturers adversely affected by a bilateral free-trade agreement may seek compensation from 
MKE and MOL (Ministry of Labour) through loans,  investments, and job-placement support for 
workers (Chapter II(6)(iii)).  Measures to facilita te industry adjustment are adopted if sales or 
production is reduced by more than 25% over an ex tended period because of import competition.  In 
light of the recent FTAs signed by Korea, in August 2011, the authorities planned to increase the 
budgeted funds by ₩ 1 trillion to a total of about ₩ 22.1 trillion;  this is intended,  inter alia , to 
compensate farmers who suffer income losses due to cheaper imports.171  
160. It seems that few firms are using this support system and only a minimal part of the budget 
put aside as TAA support has been used;  between 2008 and 2009, five firms were designated as 
recipients of TAA benefits (four in food processing, one in manufacturing).172  
(iii) State-owned enterprises and privatization  
161. State involvement in the economy (Table III.4) pe rsists despite recent privatization efforts, 
particularly in the services sector (Chapter IV).  The number of SOEs operating in the country varies 
depending on the source.  According to a 2011 OECD  paper, Korea had 59 SOEs in 2009 with assets 
valued at US$177.6 billion employing 120,655 pers ons.  This was the highest valuation of SOEs 
among 27 OECD reporting countries (although, if a valu ation of French statutory corporations had 
been available, France would almost  certainly have overtaken Korea).173  No recent data were 
available from the authorities on employment by SOEs (88,000 in 2008) or their assets (US$267 billion in 2008) or data re lating to their contribution to GDP, their incidence in domestic 
production and trade (domestic, foreign), losses o ccurred by their operations, and budget outlays 
provided to cover them (since 2008).  
162. While privatization has been officially a pr iority, little was accomplished during the period 
under review.  The Government aims to improve e fficiency through privatization, reduction of 
personnel, and the merger and a bolition of public institutions by, inter alia,  revamping compensation 
methods through a downward adjustment of  excessive salaries and a shift to results -based systems.
174 
163. Its 2008/09 six-stage "plan for advancement of SO Es" comprised:  privatization of 27 entities, 
merger of 2 institutions into 1, and restructuri ng of 12 (by 11 August 2008);  privatization of 1, 
merger of 29 institutions into 13, elimination of  3, and restructuring of 7 (by 26 August 2008);  
privatization of 10, merger of 7 into 3, eliminati on of 2, and restructuring of 1 (by 10 October 2008);  
increase of productivity in 69, staff reduction by 19,383 employees, sale of assets worth ₩ 8.5 trillion 
                                                      
171 Chosunilbo , "Gov't Raises Financial Support Over FTA Effects", 22 August 2011.  Viewed at:   
http://english.chosun.com/site/data/html_dir/2011/08/22/2011082200989.html. 
172 Inkyo Cheong and Jungran Cho (2011). 
173 OECD (2011f). 
174 Nevertheless, at the same time the MOSF contributed to the recovery of public institutions from the 
economic crisis, providing ₩ 46.9 trillion worth of liquidity to public financial institutions in 2009;  from 2009 
to 2010, these institutions added 11,000 personnel thro ugh overseas expansion and growth of public services 
(Ministry of Strategy and Finance (undated)). Republic of Korea WT/TPR/S/268 
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  (65 cases), and budget savings of more than ₩ 1.7 trillion (by 22 December 2008);  sale of shares 
held in 113 government-funded entities (out of a to tal of 273 institutions), liquidation of 17, and 
absorption of 2 by parent company (by 13 January 2009);  and targeting improvement of 10% in the 
efficiency in 60 entities through abolition/reduction of activities, outsourcing and improvements in 
their operating system (annual salary, "wage peak system",  etc.) (by 31 March 2009).175  The last 
stage of the plan would lead to a reduction of 2,981 employees, sales of assets worth ₩ 56.5 billion, 
and budget savings of more than ₩ 130 billion.  In 2009, 24 SO Es were selected by the SOE 
Privatization Committee to be privatized176;  in 2011, eight had been su ccessfully privatized by selling 
off all stock or listing shares at the Seoul stock exchange as planned.177  Efforts have also been made 
to sell private companies that became partly owned by state-run institutions as a result of public funds 
transfers in the wake of the 1997 Asian fina ncial crisis;  these companies include Daewoo 
Shipbuilding & Marine Engineering, Hynix Se miconductor, SK telecom, STX Group and KCC 
Engineering & Construction.  Privatization effort s are ongoing for financial-sector SOEs involving, 
inter alia,  the Korean Development Bank, and the Woori Finance Holdings Co.  Privatization efforts 
for Korea Airports Corp., New Seoul Country Cl ub, Korea Real Estate Investment & Trust, 
Kyungbuk Tourism Corp., Korea Construction Mana gement Corp., 88 Country Club, and SSangyong 
Engineering & Construction have not been successful so far.178  
Table III.4 
State involvement in the economy, 2012 
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) C onstruction 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 product 100% / .. 
Table III.4 (cont'd)
                                                      
175 Hyung-Gon Jeong et al. (2010), Table 5-7. 
176 These entities were:  Korea Development Bank (KDB), KDB Capital Corporation, KDB Asset 
Management Corporation, Industrial Bank of Korea (IBK ), IBK Capital Corporation, IBK Credit Information, 
and IBK System, Incheon International Airport Corpora tion, New Seoul Country Club, Korea Asset Investment 
Trust, Korea Real Estate Investment & Trust, Korea Construction Management Corporation, Kyongbuk Tourism Development, Korea Airport Corporation, Ansan Urban Development Incorporation, Incheon 
Integrated Energy Network, Korea Housing Guarantee Corporation, 88 Country Club (88 golf course), Grand 
Korea Leisure, Farmland Improvement, Enterprise Data , Korea District Heating Co rporation, Korea Electric 
Power Company, and Korea Plan t Service and Engineering. 
177 Of these SOES three were fully privatized (Korea Asset Investment Trust, Ansan Urban 
Development Incorporation, Farmland Improvement) and fo ur were partly privatized (Grand Korea Leisure, 
Korea District Heating Corp oration, Korea Electric Power Company, Korea Plant Service and Engineering) 
(Chosunilbo,  "SOE Privatization, Was it just Pretence?", 18 August 2011.  Viewed at:  http://news.chosun.com/ 
site/data/html_dir/2011/08/18/2011081802500.html. 
178 Chosunilbo, "Privatization without Consensus and Strategy", 23 August 2011.  Viewed at:  
http://news.chosun.com/site/data/html_dir/2011/08/23/2011082300582.html?Dep0=chosunnews& Dep1=related 
&Dep2=related_all. WT/TPR/S/268 Trade Policy Review 
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  Entity Activity Degree of state ownership (%)/Situation in 
privatization programme 
Korea Gas Corp. (KOGAS)  Production a nd distribution of natural gas;  
exploration and import/e xport of natural gas 26.9% / .. 
Korea Electric Power Corp. (KEPCO) Powe r generation;  power transmission and 
distribution;  electricity sales 51.1% / generation sector split into GenCo in 
2001;  distribution sector restructured into 
Strategic Business Unit (business entity operated independently by region) in 2006  
Korea District Heating Corp. (KDHC) Th ermal energy supply for space heating, 
cooling, tap-water heating, and industrial process heating 34.5% / .. 
SERVICES  
Financial services   
Industrial Bank of Korea Specialized bank 65.1% / .. 
Korea Deposit Insurance Corp. (KDIC)  100% / .. 
Korea Development Bank Deve lopment institution 100% / .. 
Export-Import Bank of Korea Development in stitution 60.1% / .. 
Korea Asset Management Corporation 
(KAMCO) Collect public funds through resolving 
non-performing loans acquired by financial 
institutions and to perf orm public sale of the 
assets entrusted by the government agencies 
and others 42.3% / .. 
Korea Housing Finance  17.7% / .. 
Woori Bank  77.9% / .. 
Communications and media   
Korea Broadcasting System Public broadcasting service 100% / .. 
The Seoul Shimmun Newspaper publishing 30.5% / .. 
Transport    
Korea Highway Corp. Highway cons truction and management 87.7% / .. 
Korean National Railways Construction a nd management of railways 100% / .. 
Busan Port Authority  100% / .. 
Incheon Port Authority  100% / .. 
Incheon International Airport Corp. Inch eon International Airport development 
and operation 100% / .. 
Other   
Korea Agricultural and Rural Infrastructure 
Corp. Improvement projects 100% / .. 
Korea Appraisal Board Appraisal;  real estate consulting;  real estate 
transaction information network 49.4% / .. 
Korea Minting and Security PrintingCorp. 
(KOMSCO) Local currency supply 100% / .. 
Korea Land & Housing Corp. (LH) Acquis ition, development, and management 
of land, housing construction/improvement/ 
sales/rent/ management, production and 
supply of construction material 86.0% / .. 
Korea Housing Guarantee Corp. Housi ng guarantee for tenants 55.0% / .. 
Korea National Tourism Corp. Overseas  publicity of Korean tourism;  
managing an overseas marketing network 55.2% / .. 
Korea Rural Community and Agriculture 
Corp. Contribution to rural economic and social 
development;  developm ent of agricultural 
land and ground water resources;  
improvement of rural living environment 100% / .. 
Table III.4 (cont'd)Republic of Korea WT/TPR/S/268 
 Page 93 
 
 
  Entity Activity Degree of state ownership (%)/Situation in 
privatization programme 
Korea Water Resources Corp. Water supply, and distribution-related 
works;  water qua lity improvement 90.3% / .. 
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 structure 
and mineral deposit;  t echnical and monetary 
subsidy 100% / .. 
.. Not available. 
Source :  Information provided by the Korean authorities. 
(iv) Competition and consumer policy 
(a) Competition policy 
Framework 
164. Responsibility for competition policy rests primarily with the independent Korea Fair Trade 
Commission (KFTC) (under the Monopoly Regulati on and Fair Trade Act (MRFTA) 1980, last 
amended in 2010);  the KFTC shares regulatory responsibilities with other agencies.  Following a 
2009 amendment of the MRFTA regulations on la rge business groups, more emphasis was put on 
self-regulation of the market.  The ceiling on total in vestment in other compan ies (cross-shareholding) 
implemented for 13 years on large business congl omerates' (many of which are family-controlled 
(chaebols )) affiliates, was lifted in March 2009.  Instead , large business groups are obliged to disclose 
information on the general conditions and current st atus of their stockholding.  Cross-shareholding 
between subsidiaries under a large business group (i.e. not less than ₩ 5 trillion of total assets) is 
completely banned under the MRFTA;  55 large busin ess conglomerates (see below) were officially 
designated as large business groups as of May 2011.  The obligation to notify a merger involving a 
large enterprise within 30 days after the contract date  was abolished to allow a merger to be notified at 
any time prior to the date of the completion of the transaction. 
165. Competition law covers all sectors.  State entiti es are covered, including public utilities with 
their own regulatory regime, and the scope of ex emptions from competition law is now limited.  
Exemptions include liner shipping conferences.  Voluntary associations established to aid small-scale 
enterprises, including agricultural, forestry, and li vestock industries, which meet certain conditions 
may also be exempt, unless engaging in "unfair trade practices or price hikes by unfairly restricting competition".
179  
166. Legislation covers all principal competition ar eas, including horizontal constraints (cartels 
and collusion), vertical constraints, abuse of domi nant market position, and mergers.  It prohibits:  
unfair collaborative acts and unfair trade practices;  resale price maintenance, unless exempt by the KFTC;  and abuse of dominant position.  An enterp rise is presumed to be market-dominating if its 
                                                      
179 Conditions include having a goal of mutual cooperation and benefits for small businesses and 
consumers, and that members are free to enter and exit, and have equal voting rights.   WT/TPR/S/268 Trade Policy Review 
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  total annual sales exceed ₩ 4 billion, and its 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%.180  
167. Mergers to "practically suppress competition" ar e prohibited, unless par ties can prove to the 
KFTC that efficiency gains will ex ceed the anti-competitive effects (o r the acquired firm is insolvent 
and no alternative, less anti-competitive outcome is  available to maintain production).  The KFTC 
may approve a merger subject to certain conditio nal corrective measures to address anti-competitive 
concerns, such as limiting the scope of the merged firm's operations.  Parties must notify proposed mergers to the KFTC, and require its approva l if assets or turnover of one party exceed ₩ 200 billion 
and those of the other exceed ₩ 20 billion.  Following the 2009 amendment of the MRFTA, the 
obligation to notify a merger involving a large- scale enterprise (assets or turnover above ₩ 2 trillion) 
within 30 days after the date of the transaction w as abolished;  at present a merger should be notified 
any time prior to the date of completion of th e transaction.  KFTC has monitored mergers and 
acquisitions (M&As) involving foreign enterprises e xporting to Korea since July 2003.  The number 
of notifications concerning M&As involving a fo reign company decreased steadily from 115 in 2007 
to 76 in 2011, as the threshold of notification of  assets or turnover in Ko rea, was in creased from 
₩ 3 billion to ₩ 20 billion in November 2007.
181  Parties to a merger may appeal a decision within 
30 days to the KFTC, which has 60 days (extendable to 90 days) to decide.  KFTC decisions may be 
challenged in the courts;  and the KFTC may a pply to the courts to nullify unapproved mergers.   
168. The Government pledged to lift some of the restrictions on large business conglomerates 
activities as they  are synonymous with economies of scale that are essential for them to compete in 
the global market.182  Regulating large business conglomerates  is a major KFTC function.  There are 
extensive legislative provisions on corporat e and financial structures to control possible 
anti-competitive effects from concentrated economic  power (Chapters I and IV).  Large business 
conglomerates-related policies incl ude bans on cross-shareholding a nd debt guarantees for affiliated 
companies.183  The 2009 amendment to the MRFTA lifted a measure prohibiting a large affiliate with 
assets of at least ₩ 2 trillion, of a business group with assets of at least ₩ 10 trillion, from investing 
more than 40% of net assets in other compani es.  The threshold asset level for regulating 
cross-shareholdings and debt guarantees is now ₩ 5 trillion.  Voting rights for a finance or insurance 
company belonging to a large business conglomerate are also allowed up to 15% of its shares in a 
domestic affiliated company in certain cases, includi ng alteration of the articles of incorporation, and 
merger of the affiliated company with another company.184   
Policy and operational developments 
169. Amid the global financial crisis that began in 2008, the KFTC placed its policy focus on 
achieving a mature market economy and a balan ced development of the national economy by 
increasing the autonomy of market stakeholders including enterprises and consumers.185  Since 2009, 
the KFTC has been eliminating or lowering entry barriers that restrict market competition and 
undermine consumer welfare (section (4)(iv)(c)).  A September 2009 agreement between the KFTC 
and other relevant administrative authorities set areas for improvements in two stages.  The first stage 
                                                      
180 MRFTA Article 4. 
181 Korea Fair Trade Commission (2011). 
182 EIU (2011a). 
183 For more information about corporate governance issues relating to large business conglomerates 
see Chapter I of this repo rt and WTO doc ument WT/TPR/S/204/R ev.1, 4 December 2008. 
184 Hankyung , "Private Equity Fund Voting Rights Limitation Relaxed", 19 November, 2008.  Viewed 
at:  http://www.hankyung.com/news/app/newsview.php?aid=2008111929901. 
185 Korea Fair Trade Commission (2011). Republic of Korea WT/TPR/S/268 
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  included 12 tasks to reduce public monopolies and expa nd private business areas;  3 tasks to eliminate 
a monopolistic structure and introduce competition;  and 11 tasks to ease unreasonable market entry 
restrictions and promote new market entrance, such  as relaxation of restriction on maritime shipping 
market entry.  In April 2010, a second stage of improvement consisted of 13 tasks to lower entry 
barriers in service industries that are highly effectiv e in job creation;  and 7 tasks to reduce areas of 
public monopoly and expand private business areas.  Since 2011, the KFTC has set up a third stage measure against entry barriers and wo rked to tackle them in 19 cases, in public health and medication, 
culture and tourism, and other service sectors closely related to people's daily life. 
170. In 2008, the KFTC eased or removed 68 anti- competitive decrees and rules of metropolitan 
governments, and in 2010, agreed with local gove rnments to improve 976 anti-competitive provisions, 
including restriction of non-local towing services doing business in the local area, after reviewing 
230 decrees and rules.  It conducted competition impact assessments on 277 proposed enactments and 
revisions in 2010, and considered 12.9% of them (36 regulations) to be "anti-competitive", offering 
market-friendly alternatives, and thus preventing an ti-competitive regulations from being enacted or 
reinforced. 
171. Monopoly power has decreased steadily, but mark et concentration remains relatively high.  
The market concentration ratio of the top thr ee leading manufacturing companies on a weighted 
average basis has increased steadily from 2006 to 2009, from 51.2% to 55.4%.
186  On the other hand, 
55 large business conglomerates  (48 in 2009)  and state conglomerates with control on over 
1,618 companies (1,137 companies in 2009) were on the KFTC's watch list on 3 November 2011.187  
When necessary for antitrust purpo ses, the KFTC also classifies as "market dominators" certain 
enterprises whose annual sales or procuremen t of related goods or services exceed ₩ 4 billion, have a 
market share of at least 50%, and group two or three companies that control at least 75% of the 
market for a particular product.188  
172. 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 ille gal cartel conduct.  When a central administrative 
agency, a local municipality, or a corporation in wh ich 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 inform ation on the project bidding to the KFTC.  Strict 
penalties are imposed on bid-riggers, and crimin al prosecutions are possible.  The maximum 
surcharge for bid-rigging is 10%.  Between 2008 and 2011, the KFTC imposed ₩ 164 billion in 
surcharges for 45 bid-rigging cases.   
173. In 2007, the KFTC and the MKE began to en courage large corporations and SMEs to 
voluntarily sign agreements on fair trade and shared growth, to promote partnership between the large 
business conglomerates  and their, typically small, suppliers.  Since December 2010, a government-set 
Shared Growth for Large and Small Companies (CSGLSC) Committee, consisting of representatives 
from industry and academia, has aimed to broker a broad profit-sharing deal among large and small 
                                                      
186 KFTC online press release, 21 December 2010.  Viewed at:  http://ftc .go.kr/news/ftc/report 
View.jsp?report_data_no=4139&tribu_type_cd=&report _data_div_cd=&currpage=1&searchKey=1&searchVal
=시장집중도 &stdate=&enddate= [7 November 2011]. 
187 EIU (2010) and (2011a);  and Yonhap,  "Corporate regulator puts 13 more firms on watch list", 
3 November 2011.  Viewed at: http://english.yonhap news.co.kr/business/2011/11/02/0502000000AEN201111 
02005500320.HTML. 
188 EIU (2011a). WT/TPR/S/268 Trade Policy Review 
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  companies.189  In 2011, the CSGLSC issued a list of bus iness sectors where large companies would be 
excluded in favour of smaller ones, covering goods ranging from everyday items to high-tech 
products, including tofu, eyewear, and light-emitting diodes (LEDs).  As of end-December 2011, a 
total of 193 large companies had entered in to the arrangement with approximately 
64,000 subcontractors.  The March 2011 amendment of  the Fair Transactions in Subcontracting Act 
laid the foundation for facilitating the signing of vol untary fair trade agreem ents.  The KFTC assesses 
the agreement execution status of the firms involve d and rewards excellent companies with incentives 
such as an exemption from its investigation.   
174. In 2011, the KFTC planned to focus on improving competition conditions for SMEs by 
improving the trading relationship between large business groups and SMEs and thereby giving an 
equal footing to all businesses.190  It intended to detect and correct cartels and other anti-competitive 
activities in areas closely related to the life of  working class people and put under intensive 
monitoring unfair trade practices in distribution and IT sectors.  Furthermore, it would expand 
institutional frameworks to enha nce consumer welfare in banking, electronic commerce, and other 
vulnerable areas.  
Enforcement 
175. The KFTC has several measures to improve en forcement and compliance.  It may issue 
warnings or corrective measures, impose surcharges and fines, and request criminal prosecutions.  
Between 2008 and 2010, law enforcement was focused on the sectors with a direct or indirect impact 
on the everyday life of working class Koreans.  In 2010, KFTC handled 3, 565 cases violating laws 
under its jurisdiction (12 laws including the MRFTA, consumer protection, s ubcontracts and franchise 
transactions), a 16.3% decrease from 2008;  the same year it issued warnings or more severe sanctions in 2,125 cases.
191  The number of complaints under the MFRTA provisions dropped from 1,381 to 
1,040, and related largely to unfair business pr actices (691), prohibited acts of trade associations 
(139), and cartels (103).  The numbe r of warnings (1,151) exceeded that of corrective orders, while 
surcharges were imposed in a consid erable number of cases (479).  In contrast, no criminal complaints 
were filed during this period, and corrective reco mmendations, which had not been used since 1999, 
were issued in 9 cases in 2009.  Cases of unfairly luring customers accounted for the largest share of 
law enforcement in 2008-10 (1,066 cases)192;  other anti-competitive practices dealt with were abuse 
of dominant position (432 cases), refusal to deal/trade  (32 cases)193, resale price maintenance 
(28 cases), transactions based on restrictive conditi ons (24 cases), interference with the business 
activities of other companies (22 cases), and coercion in commercial dealings (21 cases).   
176. In 2009 and 2010, the KFTC issued corrective or ders concerning measures against prohibited 
activities of trade association (cartels), and imposed surcharges on 5 beverage companies and 6 LPG suppliers for price fixing, as well as to 11 soju co mpanies for increasing factory prices.  Cartel cases 
where corrective measures were impos ed surged to 65 in 2008, and then dropped to 62 in 2009 and 
                                                      
189 Reportedly, major companies use their economic weight and purchasing power to force smaller 
companies supplying them to accept low margins (EIU, 2011a;  and Korea Fair Trade Commission, 2011). 
190 Korea Fair Trade Commission (2011). 
191 Korea Fair Trade Commission (2011). 
192 "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. 
193 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. Republic of Korea WT/TPR/S/268 
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  2010, up from an average of 11.5 cases per year fro m 1981 to 1997;  this seems to be due mainly to 
the introduction of leniency and reward programme s, in addition to the increase of cartel activities 
along with the growth of the national economy.194  Corrective orders and surcharges were also, 
inter alia,  imposed on pharmaceutical companies, general hospitals, private educational institutes, as 
well as on companies such as SK Telecom, SK Energy, Qualcomm, and Hyundai Mobis.   
177. Since 2010, the Korea Fair Trade Mediation Agency has, inter alia,  carried out assessments 
of companies participating in the Compliance Progr am (CP), introduced in 2001 to promote voluntary 
compliance with fair trade principles.  A corporation that qualifies for grade A or higher may obtain reductions in surcharges ranging from 10% to 20%, a nd immunity from investigation for a certain 
period.  By 2011, 475 companies were participating in the CP.  
178. Korea has increased its extra-territorial a pplication of competition policy, to pursue 
international cartels exporting to Korea;  action was taken against the copy paper cartel and the 
marine hose cartel, the first case of internationa l bid-rigging that the KFTC detected and took 
sanctions against, in 2009.
195  In 2010, the KFTC imposed corrective orders and surcharges of 
₩ 119.5 billion on 26 air cargo carriers for fixing  air cargo rates for international inbound and 
outbound shipments;  this was the largest internatio nal cartel case that the KFTC had handled in terms 
of the number of cartel participants.  Furthermore,  the KFTC fined 5 colour display tube producers 
(₩ 26.2 billion), 10 liquid crystal display producers ( ₩ 194 billion), and 4 cat hode ray tube glass 
producers ( ₩ 54.5 billion) for participating in internationa l cartels.  The authorities indicated that if a 
cartel is formed inside the country, Korea app lies pertinent laws following international norms, 
regardless of the origin of participants.  Also, irre spective of the jurisdiction of a cartel, if such an 
attempt could have a negative effect on the domestic market, Korea applies the law extra-territorially.  
179. In 2009, Korea signed a cooperation agreem ent with the EU on the application and 
enforcement of competition laws to anti-competitive practices.  In addition, Korea's FTAs with Chile, 
Singapore, the EFTA, the United States, India, th e EU, and Peru contain provisions on competition 
(Chapter II).  The KFTC maintains memoranda  of understanding on competition policy dialogue, 
establishing the basis for a formal dialogue on co mpetition law enforcement, with the competition 
authorities of Australia, Canada, the EU, Mexico, Romania, the Russian Federation, the Commonwealth of Independent States, and Turkey .  The KFTC continued to provide technical 
support to developing countries, transition countries,  and other countries that are inexperienced in 
understanding and enforcing competition polici es.  As of December 2011, 40 workshops, for 
962 participants from 35 countries had been held at the OECD-Korea Center for Competition.  
(b) Price controls and monitoring 
180. Price controls remain in place in specific areas.
196  The President can control prices on a range 
of products through "emergency demand and supply adjustment measure" decrees197;  no such 
measures have been adopted since 2008.  The Gove rnment may, when deemed necessary to stabilize 
the people's livelihood and the national economy, d esignate a ceiling price on important commodities, 
rent for real estate, etc., or charges for services.198  The Government controls retail prices for 
four major categories of goods and services:  coal products used for home heating (Coal Business Law);  diesel fuel, liquefied petroleum gas, and other petrochemical products (Petroleum Business 
                                                      
194 Korea Fair Trade Commission (2011). 
195 Korea Fair Trade Commission (2011). 
196 WTO document WT/TPR/S/204/Rev.1, 4 December 2008;  and EIU (2011a). 
197 Article 6 of the Price Stabilization Law. 
198 Article 2 of the Price Stabilization Law. WT/TPR/S/268 Trade Policy Review 
Page 98 
  
  Law);  items defined as public services (Monopoly Regulation and Fair Trade Act), including 
electricity, entrance fees to national museums/monuments, motorway tolls, postal service, railway and metro fares, telecoms, television services, and ot her public facility fees;  and sanitation services, 
school tuition, taxi and bus fares, and water and sewa ge rates, all controlled by regional governments.  
According to the authorities, in principle, retail prices are determined by individual corporations 
depending on the prevailing mark et conditions.  The Government does not provide any price-setting 
guidelines or related rules on goods and services excep t for these items.  Exceptionally, charges on 
public goods and services may be adjusted by  central and regional governments, whenever 
price-raising factors occur.  For some of these items (taxi, inner-city bus, subway, liquefied natural 
gas, sewage and waterwork services, garbage bag, septic tank cleaning, entrance fees of local 
museums and memorials, and high school tuition), charges are determined by local governments 
depending on local conditions.   
(c) Consumer protection 
181. Since 2008, as part of the effort to eliminate institutional and budgetary duplication within the 
government, the KFTC has been the sole competent authority in consumer policy.
199  It is in charge of 
setting the consumer policy plan and monitoring the Korea Consumer Agency.  Its jurisdiction covers 
the Framework Act on Consumers, the Product Liab ility Act and the Consumer's Cooperative Union 
Act, all previously under MOSF's responsibility.   
182. The KFTC pursued policies to help consumers pr otect their rights and interests, and improve 
their stakeholder capabilities.200  It establishes a basic master plan for consumer policies every 
three years, which serve as a baseline for all th e central administrative bodies including the KFTC 
itself, as well as 16 local metropolitan governme nts, the Korea Consum er Agency, the Korea 
Financial Supervisory Service and other consumer groups.  The KFTC 's first basic Consumer Policy 
Master Plan, for the period 2009-11 contained ten policy goals focused on:  strengthened consumer 
safety;  fair and adequate transactions between business operators and consumers;  promotion of 
consumer training and information provision;  facilitation of consumer relief from damages;  efficient 
mechanisms for implementation of consumer policy;   and customized consumer policy-making.  Its 
second Plan for 2012-20 was designed with the visi on of "realizing a consumer-led market".  In 
April 2012, investigations were under way to ensu re that FTA-driven liberalization benefits final 
consumers rather than only firms, and in this c ontext the role of rigid distribution channels was 
questioned.  Furthermore, a rising trend in pa rallel imports seems to reflect their acceptance 
(section (4)(iv)(a)) as a necessary mechanism to ensure consumer protection from unfair product 
pricing;  parallel imports of ge nuine products may enter Korea legally, in some circumstances, 
provided they meet certain requirements.201 
                                                      
199 The KFTC took over the role of operating th e Consumer Policy Committ ee (Korea Fair Trade 
Commission, 2011). 
200 Korea Fair Trade Commission (2011). 
201 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 who placed the trade mark on the parallel imports 
must be the Korean trade mark holder or closely re lated (http://www.yulchon.com/ENG/resource/Publications/ 
view.asp?CD=203&page=1&SearchString=& sltPractice=46&key word=).  There are restrictions on the type of 
goods that can be imported and how they can be advertised (Managing Intellectual Property online information, "Korea's parallel proms", 1 May 2009.  Viewed a t:  http://www.managingip.com/Article/2191472/Koreas-
parallel-problems.html;  and Infomag,  "Preventing Brand Erosion", December 2010.  Viewed at:  
http://infomag.eucck.org/site/view/view.htm?num=9350). Republic of Korea WT/TPR/S/268 
 Page 99 
 
 
  183. Since 28 June 2011, repeated violations by a company of the Corporation Labelling and 
Advertisement Law may add as much as 50% to th e original surcharge, while by voluntarily 
compensating consumers for damages prior to im position of the surcharge may reduce it by up to 
50%.  Since February 2010, a Consumer Counselli ng Centre, run jointly by the public sector and 
private consumer groups has enabled quick resp onses to consumer complaints;  the telephone 
counselling system enabled efficient counselling services by networking 10 consumer agencies, the Korea Consumer Agency, and 16 metropolitan govern ments' counsellors who worked separately in 
the past.  The KFTC and the Korea Consumer Agency  published the results of a joint survey on the 
gaps between domestic and foreign prices, and proposed actions to the relevant authorities.
202  In 
2011, a daily necessities price information system started operating to info rm consumers and help 
them make reasonable choices.  The system c overs price information on 110 daily necessities, 
including instant noodles and detergents, on a weekly  basis, and price gaps between domestic and 
foreign prices of 48 products, including milk a nd shampoo.  By publishing these gaps, the KFTC 
expects to help consumers make a fully-inform ed decision.  A comprehensive online consumer 
information network, the "Smart Consumer", li nking scattered consumer information from 40 web 
pages of 22 organizations in a single space was la unched by the KFTC in January 2012.  The 2005 
Consumer Complaints Manageme nt System (CCMS) was upgraded  to the Consumer-Centered 
Management (CCM) certification system in Septem ber 2011 to include lead ership and performance 
management factors;  the CCM is run by the Kor ea Consumer Agency.  As of end December 2011, a 
total of 432 enterprises and 1 enterprises' organi zation had adopted the CCM (including the CCMS), 
and 108 entities had been certified.  Between 2008 a nd 2010, consumer complaint cases dealt with by 
the KFTC increased from 914 to 994;  they related mostly to fair labelli ng and advertising, and 
e-commerce issues.  In 2010, 740 corrective meas ures were taken, affecting mostly e-commerce 
(262), and fair labelling and advertis ing (246) practices;  most action was in form of warnings (588) 
rather than corrective orders (75) or surcharges (5).  
184. Privacy-related concerns top Korea's e- commerce legislative agenda, which is, inter alia , 
aimed at increasing personal-data protection in  the public and private sector.  A 2011 Personal 
Information Protection Act provides a single set of rules and regulations, replacing many existing privacy requirements scat tered under different laws
203;  the Act applies to any entity that uses personal 
information for business purposes regardless of the sector.  
(v) Intellectual property rights 
185. Korea's policy stance remains that consistency in intellectual property rights (IPRs) protection 
is an important infrastructure for enhanci ng national and corporate competitiveness in its 
knowledge-based economy.  An April 2011 Framework Act on Intellectual Property (IPFA), in force 
from 20 July 2011, became the basis for setting laws, systems, and policies governing the creation, 
                                                      
202 The price survey covers items closely related to ev eryday lives, those with big price gaps compared 
with foreign products, and those in a monopolistic or oligopolistic market.  The items currently subject to survey 
include:  primary grocery products, confectionery, beverages (3), drinks (1), and others (3);  and secondary grocery products (3), household goods (1), durables (2), general medical supplies (1), and oil products (4) 
(Korea Fair Trade Commission, 2011). 
203 Enacted in 29 March 2011 and effective from 30 September 2011, the Personal Information 
Protection Law establishes informed consent and legal references as mandatory conditions for gathering, using, 
and sharing personal information.  One of the new requirements in the legislation is for businesses and 
organizations to keep vital personal  information such as identificatio n numbers, passwords, and bank account 
numbers in encrypted form.  If a data breach occurs, businesses must inform affect ed individuals immediately 
and provide assistance ( Chosun , "Identification Number No Longer Required for Website Membership", 
29 March 2011.  Viewed at:  http://news.chosun.com/site/data/html_dir/2011/03/ 29/2011032901777.html. WT/TPR/S/268 Trade Policy Review 
Page 100 
  
  protection, and use of IPRs including patents, trad e marks and copyrights;  once fully implemented, it 
is to supersede the stand-alone statutes that deal with different IPRs.204  On 28 June 2011, IPR-related 
legislation (such as the Act on Free Trade Area D esignation and Management, the Trademark Act, the 
Design Act, and the Unfair Competition Prevention and Trade Secrets Protection Act) was amended 
in line with commitments under the Kor ea-EU Free Trade Agreement (Chapter II).205  K o r e a  
participates in 16 out of 24 treaties administered  by the World Intellectual Property Organization 
(WIPO) and is a party to the UPOV Convention.  During the review period, it expanded its commitments by becoming a party to the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Orga nizations, and the WIPO Performances and 
Phonograms Treaty, both in effect as of 18 Ma rch 2009;  the Locarno Agreement Establishing an 
International Classification for Industrial Desi gns, and the Vienna Agreement Establishing an 
International Classification of the Figurative Elements  of Marks, both in effect as of 17 April 2011;  
and the Brussels Convention relating to the Distri bution of Programme-carrying Signals Transmitted 
by Satellite, as of 19 March 2012.
206  Korea is a signatory to the October 2011 Anti-Counterfeiting 
Trade Agreement (ACTA) establishing internatio nal standards on intellectual property rights 
enforcement.207  The TRIPS Council reviewed Korea's IPR legislation in 2000.  
(a) Industrial property 
186. The Korean Intellectual Property Office (KIPO) handles industrial property protection.  It 
examines and registers patents, utility models, i ndustrial designs, trade marks (including service 
marks) and layout designs of integrated circuits, a nd develops policies to protect trade secrets.  It 
resolves IPR disputes through "trial decisions" (a dministrative judgements) of the Intellectual 
Property Tribunal.  Tribunal decisions on patents, ut ility models and trade marks can be appealed to 
the Patent Court and subsequently to the Supreme Court.  The Patent Cour t is a court of special 
jurisdiction that hears appeals from trial decisions of the Intellectual Property Tribunal.  Korea restricts parallel imports except where specific legal criteria are met (section (4)(iv)(c)).
208  Despite 
the lack of official data on parallel imports, accord ing to a major trading partner, for some brands, 
parallel import sales volumes are estimated at 50% to 80% of authorized sales.209   
187. Penal provisions for right infringements of patent s, utility models, trade marks and industrial 
designs are:  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 agains t further infringement and damages.  Provisional 
                                                      
204 EIU (2011a). 
205 MKE online information.  Viewed at:  http ://mke.go.kr/news/coverage/bodoView.jsp?pCtx= 
1&seq=68267, and at http://epic.kdi.re.kr/epic/epi c_view.jsp?num=114532&menu=1 [11 November 2011]. 
206 WIPO online information.  Viewed at:  http://www.wipo.int/treatie s/en/ShowResults.jsp? 
country_id=95C&start_year=ANY&end_year= ANY&search_what=C&treaty_all=ALL.  
207 Other ACTA signatories are Australia, Canada, Japan, New Zealand, Morocco, Singapore, and the 
United States.  
208 Korea considers that parallel imports promote competition and lower prices ( Chosun , "Solutions to 
price stabilization for the people", 2 September,  2010.  Viewed at:  http://news.chosun.com/ 
site/data/html_dir/2010/09/02/2010090200829.html).  Therefore, it prohibits conduct that unreasonably restricts 
parallel imports, and treats them as unfair trade practices .  Parallel imports infringing trade mark rights are 
banned (The Types of Unfair Trade Conducts Regarding Parallel Import, enacted on 29 July 1997 by the Fair 
Trade Commissions Notification No. 1 997-27, amended on 31 December 19 98 by the Fair Trade Commissions 
Notification No. 1998-18;  and Korea Customs Service Notification Regarding the Management of Customs Clearance of Export-Imports for the Purpose of Protecting Intellectual Property Rights). 
209 EU Chamber of Commerce in Korea online information, "Trade Issues and recommendations 2011".  
Viewed at:  http://trade.eucck.org/site/2011 /en/market_16.htm [19 October 2011]. Republic of Korea WT/TPR/S/268 
 Page 101 
 
 
  measures for preventing infringements are provided in each industrial property act and the Civil 
Execution Act.  Legislative amendments in 2011 changed the KIPO Commissioner's role in 
investigation, inspection, corrective recommendations , and imposition of fines;  responsibility is now 
shared between the KIPO commissioner, the governor of the province, the mayor of the city, and head 
chief of borough (self-governing township).  Spec ific criteria were introduced for increasing or 
decreasing fines. 
188. After steady improvements over several years, IPR administration is now considered as 
highly efficient.210  The rate of electronic application ('e-a pplication') made to KIPO has been highest 
in the world since 2005;  in 2009, 94.3% of all applications were filed online.211  In 2010, the KIPO's 
first action pendency period (i.e. the time it takes fo r a new application to receive an initial response) 
was an average of 18.5 months for patent and uti lity model examinations, and 10.6 and 10 months for 
trade mark and design examinations, respectively.212  In 2010, 68,843 patents, 4,301 utility models, 
33,697 industrial designs, and 53,136 trade marks were registered.  According to the KIPO, a total of 
362,074 IPRs applications were filed in 2010, 2. 4% higher than in 2009;  170,101 were patent 
applications (an 8.4% increase from 2009), 38,296 (22.5%) of whic h were from non-residents.  
Patent and utility models 
189. Patent protection under the Patent Act of 1946 (l ast amended in 2011) is for 20 years from the 
date of filing or 15 years from publication, whiche ver is longer (extendable for up to five years for 
pharmaceuticals and agricultural chemicals undergoi ng certain market-approval procedures).  Both 
product and process patents may be granted.  A 2009 amendment of the Patent Act simplified the 
amendment requirements after notification of refusa l;  and a 2011 amendment required an applicant to 
describe the technical background of the inventi on.  As from 2012, the grace period for filing is 
twelve months (extended from six months), and the term of the pate nt 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 applicant.  Green technology benefiting from government-supported R&D has been allo wed speedy screening/examination.
213  The document 
format for patent applications is now identical to th e U.S., Japanese, and the EU model;  this change is 
expected to reduce filing application costs.214  Reportedly, the rate of patent invalidation seems to be 
high compared to other developed countries, par ticularly for the pharmaceutical and chemical 
industries.215  The KIPO may grant a compulsory non-exclusiv e licence to work a patent if the holder 
has not worked it for more than three consecutive years.216  To date, one compulsory licence has been 
issued.  Under the present legislation (including th e Patent Act and the Unfa ir Competition Prevention 
and Trade Secrets Protection Act), penalties for patent violations can reach ₩ 100 million in fines or 
seven years in prison.   
                                                      
210 EIU (2011a). 
211 KIPO online news No. 92, "KIPO ai ms at 100% electronic applications ", 12 April 2010.  Viewed at:  
http://www.kipo.go.kr/kpo/user.tdf [11 November 2011]. 
212 Korean Intellectual Property Office (2010). 
213 KIPO online news No. 126, "Opportunity to acquire patents expands and examination on green 
technology accelerates", 13 July 2009.  Viewed at:  http://www.kipo.go.kr/kpo/user.tdf [11 November 2011]. 
214 Chosun,  "World's first high speed patent in spection", 1 July 2009.  Viewed at: 
http://news.chosun.com/site/data/html_dir/2009/07/01/2009070101298.html. 
215 EU Chamber of Commerce in Korea online information, "Trade Issues and recommendations 2011".  
Viewed at:  http://trade.eucck.org/site/2011 /en/market_16.htm [19 October 2011]. 
216 Except for semi-conductor technology, this is only possible after four years, and when consultations 
with the patent holder or exclusive licensee were not impossible or enabled no agreement. WT/TPR/S/268 Trade Policy Review 
Page 102 
  
  190. The Utility Model Act (1961, last amended in 2011) 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 apply to utility models.  The May 2011 amendment of the 
Utility Model Act made it mandatory for utility model applications to disclose information on prior art 
related to the invention.217  The 2011 amendment of the administra tive rules of the Act extended the 
application term of the grace period for submitting claims by three months, and allowed submissions 
of claims in foreign languages.218  Commercial acts of manufacturing, assigning, leasing or importing 
a product embodying the utility model are deemed to infringe the excl usive right of the holder or 
licensee of a registered utility model, and are therefore prohibited.   
191. Until end 2012, an SME purchasing patent rights or utility-model rights is eligible for a tax 
credit of up to 7% of the purchase price.219   
Trade marks 
192. The Trademark Act (1949, last revised in 2011)  protects trade marks on goods and services 
for ten years upon registration, renewable indefinite ly for ten-year periods.  The 2011 amendment 
tried to rectify some deficiencies in managing the system by specifying the duration period for newly 
added marks.  In 2010, the procedure for extendi ng duration of a trade mark was simplified by 
requiring an application only;  also, to lessen the burden of the registration, registration fees may now 
be paid in two instalments rather than one lump-sum.220  A preferential examination system was 
introduced on 1 April 2009 to help applicants quick ly register their trade marks and service marks 
rights.221  In January 2010, ex officio  correction of obvious and trivia l errors reduced the examination 
period.  
193. The Unfair Competition Prevention and Trade Secret Protection Law prohibits unfairly 
tarnishing a well-known mark or caus ing confusion by use of a similar or identical mark, including 
distributing, importing or exporting such goods.  Ci vil remedies include injunctions to stop improper 
use, compensation for damages, and restoration of re putation.  Penal provisions are up to three years' 
imprisonment or a fine of up to ₩ 30 million.  
Geographical indications 
194. Legislative amendments were made to strengthe n protection of geographi cal indications (GIs) 
and reflect the provisions of the Korea-EU FTA, an example of WTO+.222  In 2011, the Trademark 
Act was amended to deny application for registrati on of GIs that are the same or similar to GIs 
protected under multilateral or bilateral agreements223;  material used in infringement of GIs and trade 
                                                      
217 Online article, "Recent changes to the Korean Patent Act", 17 August 2012.  Viewed at:  
http://www.albrightpatents.co.uk/articles/ko rean-patent-act-update/ [7 May 2012].  
218 KIPO online information.  Viewed at:  http://www.kipo.go.kr/kpo/user.tdf?seq=10133&c=1003&a= 
user.ip_info.amend_law.BoardApp&board_id=amend_law&catmenu=m02_02_02 [16 November 2011]. 
219 EIU (2011a). 
220Korean Intellectual Prope rty Office (2010a);  and Chosun , "Revised Trademark Act to take effect in 
July", 30 May 2010.  Viewed at:  http://biz.chosun.com/site/data/ html_dir/2010/05/30/2010053000643.html. 
221 KIPO online news No. 77, "Eff ective Trademark Preferential Examination", 7 December 2009.  
Viewed at:  http://www.kipo.go.kr/kpo/user.tdf [11 November 2011].  
222 Korea.kr online information. Viewed at:  h ttp://korea.kr/newsWeb/pages /brief/common/download 
FileForDepart.do?idKey=185089180bf979c67002888e1bd4f371. 
223 The Trademark Act, Article 7, Paragraphs 1:16 and 1:17.  Viewed at:  http://likms.assembly.go.kr/ 
law/jsp/law/Law.jsp?WORK_TYPE=LAW_BON&LAW_ID=A1610&PROM_NO=10885&PROM_DT=20110
721&HanChk=Y [16 November 2011]. Republic of Korea WT/TPR/S/268 
 Page 103 
 
 
  marks will be confiscated in addition to  the equipment and infringing products.224  Under the 2011 
amendment of the Unfair Competition Prevention an d Trade Secrets Protection Act, unauthorized use 
of geographical indications is penalized.  The 2011 amendment of the Trademark Act banned 
registration of labels that violate GIs.225  The same Act also prevents deceptive labelling and 
advertising, including any vague or false labelling or advertising that may mislead consumers on the 
product's origin.  The trade marks legislation prev ents registration of trade marks consisting of a 
"conspicuous geographical name".  The Trademark Act (1949) allows them to be registered as 
collective marks.  The owner of a GI collective ma rk has the right to use it exclusively and prevent 
others from using identical or similar signs for id entical goods, where it might result in confusion.  
Imports or exports with false orig in indications or infringing GIs are prohibited (Foreign Trade Act). 
195. The Agricultural and Fishery Product Quality  Management Act (2011) specifies GIs for 
agricultural and fish products.  These must be registered with the Geographical Indication 
Registration Council of the National Agricultural Pr oducts Quality Management Service or with the 
QIA.  Foreign GIs registered according to the sa me procedures and criteria as for domestic goods are 
protected in Korea under various laws, including the Trademarks Act, the Unfair Competition 
Prevention and Trade Secrets Protection Act, and th e Agricultural Product Quality Management Act.  
Using a false mark of a registered GI on agricultural or fishery products is punishable by imprisonment of up to three years or a maximum fine of ₩ 30 million.   
196. A trade mark containing geographical indications for wines or spirits originating in any WTO 
Member may not be registered (Trademark Act, Arti cle 7(1)(xiv)).  The use of GIs to identify wines 
or spirits that do not originate in the place indicated is prohibited, even if the true  origin is given or the 
GI uses expressions like "kind", "t ype", "style", or "imitation".  
Plant variety protection 
197. Protection for plant varieties is administered by the MIFAFF (Seed Industry Law, 1997).  
Breeders' rights are protected for 20 years from the re gistration date (25 years for ornamental and fruit 
trees).   Plant invention is protected under the Patent Act.  In line with its "2020 Seed Industry 
Promotion Plan"
226, by August 2011, Korea considered a major amendment to the Seed Industry Act 
that would, inter alia,  remove existing sections on the protecti on of rights of breeders of new varieties 
of plants and insert them into a separate, new law, the New Varieties of Plants Protection Act.227  The 
amendment to the Seed Industry Act, and a proposal to enact the New Varieties of Plants Protection 
Act, which were submitted to the National Assembly  in December 2011, are expected to be passed in 
the course of 2012 and implemented in 2013.  
                                                      
224 Global Legal Information Network online information.  Viewed at:  http://www.glin.gov/view. 
action?searchDetails.searchAll=true &glinID=252971&searchDetails.query String=insclass%3A%22Law%22& 
fromSearch=true&refineQueryTyp e=BOOLEAN&refineQuery=insclass %3A%22Law%22&refine=&search 
Details.sortOrder=rank&s earchDetails.queryType=BOOLEAN&search Details.showSummary=true&summary 
Lang=en [11 November 2011];  and MKE online information.  Viewed at:  http://epic.kdi.re.kr/epic/epic_ 
view.jsp?num=114532&menu=1 [16 November 2011]. 
225 MKE online information.  Viewed at:  http://epic.kdi.re.kr/epic/epic_view.jsp? 
num=114532&menu=1 [16 November 2011]. 
226 The October 2009 "2020 Seed Industry Promotion Plan" is aimed at promoting the seed industry as 
a high-value adding industry, and increasing seed exports from US$25 million to US$200 million by 2020. 
227 Korea.kr online information.  Viewed at:  h ttp://korea.kr/newsWeb/pages/b rief/partNews2/view.do? 
dataId=155776264&call_from=extlink&call_from=extlink. WT/TPR/S/268 Trade Policy Review 
Page 104 
  
  Industrial designs and layout designs of integrated circuits (topographies)  
198. Protection under the Design Law (1961, last amended in 2011) is for 15 years 
(non-renewable) from registration and ex tends to partial designs and fonts .  The Act prohibits copying 
the shape of goods produced by another person.  The registered owner has the exclusive right to work 
a registered design, commercially and industrially.  The design registration system is based on 
substantive examination;  examinations are accelerat ed for some articles with short life-cycles, such 
as textiles and clothing.  Under the 2011 amendment of the Law, the number of products not subject 
to prior examination (non-substantive examinati on system (NSES)) were increased from 10 categories 
(2,460 items) to 18 categories (more than 6,200 items) to protect high-fashion goods with a short 
life-cycle.228  The authorities revised relevant legislation to reflect provisions of the Hague Agreement 
Concerning the International Deposit of Industrial  Designs, and in Februa ry 2012 its amendments 
were being considered by the National Assembly.229   
199. Layout-designs of semi-conductor integrated ci rcuits (topographies) are protected (under the 
Semiconductor Integrated Circuits Layout Design Ac t, 1992).  The registered owner has the exclusive 
right of commercial use of lay-out design.  Protec tion 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 ₩ 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 
200. Protection under the Unfair Competition Preven tion and Trade Secrets Protection Act (1961) 
(last amended in 2011, see above section on GIs) cove rs information acquired by an "act of improper 
acquisition" (e.g. theft, deception or coer cion), or subsequently used or disclosed  secret information;  
trade secrets are defined as technical or business info rmation useful to business activities.  Injunctions 
may be obtained against disclosure, and damages awarded for infringement.  The infringement of 
trade secrets is a criminal offence, with punitive me asures of prison terms and/or fines equivalent to 
2-10 times the illegally obtained monetary profit.230   
201. Confidential data submitted to authorities fo r marketing approval of pharmaceuticals and 
agricultural chemicals are prohibited from public disc losure unless the authoriti es see a public interest 
need (i.e. health, safety, environmental protection), particularly with respect to pesticides and their 
ingredients (Agrochemicals Control Act and the Ph armaceuticals Affairs Act).  Penalties are up to 
                                                      
228 The new product categories include items like personal goods;  bags or wallets;  hygiene household 
goods;  goods for festivities;  small indoor goods for organization;  advertisement goods, goods for marking and for product display;  and electro nics, calculators, etc.  (KIPO online information.  Viewed at:  
http://www.kipo.go.kr/kpo/user.tdf? a=user.news.press1.BoardApp&board_id=press&cp=1&pg=1&npp=10&cat
menu=m02_01_01_02&sdate=&edat e=&searchKey=2&searchVal=
디자인보호법 &bunryu=&st=&c=1003&seq=1
0217, and http://www.kipo.go.kr/kpo/user.tdf?seq=1441&c=1003&a=user.english.board.BoardApp&board 
_id=kiponews&catmenu=ek06_01_01 [16 November 2011]). 
229 KIPO online information.  Viewed at:  http://www.kipo.go.kr/kpo/user.tdf?a=user.news. 
press1.BoardApp&board_id=press&cp=1&pg=1& npp=10&catmenu=m02_01_01_02&sdate=&edate=&search
Key=2&searchVal= 디자인보호법 &bunryu=&st=&c=1003&seq=9408. 
230 EIU (2011a);  National Industrial Security Center online information.  Viewed at:  
http://service4.nis.go.kr/page?cmd=intro&cd_code=intro_1&menu=EAA00;  and National Assembly online 
information.  Viewed at:  http://likms.assembly .go.kr/law/jsp/law/Law.js p?WORK_TYPE=LAW_BON& 
LAW_ID=A0280&PROM_NO=10810&PROM_DT=20110630&HanChk=Y. Republic of Korea WT/TPR/S/268 
 Page 105 
 
 
  three years imprisonment or fines of up to ₩ 10 million for pharmaceuticals and ₩ 15 million for 
agri-chemicals.  Unfair commercial us e of such data is also prohibited.   
202. Officials involved in registering lay-out designs  for semi-conductor integrated circuits must 
maintain confidentiality (Semiconductor Integrated Ci rcuits Layout Design Act) .  Imprisonment of up 
to five years or fines of up to ₩ 50 million apply to those infringing the legislation .  
(b) Copyright and related rights 
203. The Ministry of Culture, Sports and Tourism (MCST) and its Korea Copyright Commission 
are in charge of copyright protection.  Although copyrights need not be registered to obtain protection during the author's life plus 50 years (70 years as from July 2013, see below), registration offers 
advantages.  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.
231  Compulsory/statutory licences (e.g. 
where the right holder cannot be identified or tra ced, subject to certain procedural requirements) 
relating to uses of performances, phonograms, broad casts and databases may be granted under strict 
procedural conditions; 24 licences on literary, cinema tographic and musical works were granted from 
2008 to 2011.  Copyright also applies to "interactiv e transmissions" for authors.  Databases, including 
compilation of data in machine-readable form, may be protected. 
204. A major amendment to the Copyright Act w as implemented on 23 July 2009, aimed at 
increasing efficiency in policy-making as well as im proving regulatory consiste ncy, and strengthening 
enforcement against online piracy.232  The amendment integrated the Copyright Act and the Computer 
Program Protection Act into a single Act.  The sa me provisions of the Copyright Act apply to the 
protection of software programs, with a few ex ceptions carried over from the Computer Program 
Protection Act, and the Korea Copyright Commissi on absorbed its smaller counterpart, the Korea 
Software Copyright Committee.  Minimum repr oduction is allowed if it does not infringe 
unreasonably the right holder's economic  interests;  this test is ap plied to both foreign and domestic 
works.  On anti-piracy, the expanded law allows telecom companies to restrict service access by 
websites prone to copyright infringement.  Online service providers may close accounts of repeated 
offenders caught spreading pirated materials.  
205. FTA-driven amendments to the Copyright Act br ought improvements to copyright protection.  
The Copyright Amendment Act of 30 June 2011, in  force from 1 July 2011, expanded the statutory 
period of copyright protection (including software programs) from 50 to 70 years, on a reciprocity basis for all WTO Members
233, as from 1 July 2013.  The amendment also toughened requirements for 
technical-protection measures by broadening the an ti-infringement responsibility of content providers 
from use control to access control.  The Copyright  Amendment Act of 2 December 2011, which is to 
expand protection to copyrighted content stored tem porarily in electronic devices, took effect with the 
implementation of the Korea-US FTA;  it requires online service providers to surrender information 
about suspected copyright violators to the authoriti es.  Neighbouring rights are also to be extended for 
70 years for performances, sound recordings, and broadcasts as from 1 August 2013.   
206. In June 2010, the Online Digital Contents Industry Development Act, which protected 
intellectual property rights on online digital material , was changed into a Contents Industry Promotion 
                                                      
231 EIU (2011a). 
232 EIU (2011a);  and MCST online information.  Viewed at:  http://www.m cst.go.kr/web/dataCourt/ 
ordinance/legislation/legislationView.jsp?pSeq=412. 
233 Paragraph 3 of article 3 of the Copyright Act.  WT/TPR/S/268 Trade Policy Review 
Page 106 
  
  Act to further enhance development in the "contents industry".234  The new Act provides for more 
administrative and financial support for the "contents  industry" as well as new policies, including the 
introduction of a quality certification system and a co ntents dispute settlement commission.  The 2009 
amendment to the Copyright Act (see above) set out st rict restrictions on illegal use of copyrights 
online, to discourage illegal webHards235 and peer-to-peer (P2P) file sharing sites.236  In line with this 
amendment, the authorities installed a "three-strikes" programme on illegal file-sharing:  users who download illegally are sent a warning letter, and after three such warnings, the Internet service 
provider suspends the user's Internet account for 6 months;  and the same applies to portal sites.  
Accordingly, the Ministry of Culture, Sports a nd Tourism issued account-suspension orders against 
11 users in 2010 and 17 in 2011.  The Copyright Amendment Act of 2 December 2011, which 
introduced statutory damages for the first time into the Korean legal system for copyright protection, 
entered into force in March 2012, at the same time as the Korea-US FTA.  
207. Copyright cases are handled by ordinary c ourts.  Civil remedies against copyright 
infringements (including computer programs) include  injunctions, destructi on of counterfeit products, 
and damages.  Penal provisions of up to fi ve years imprisonment or a fine of up to ₩ 50 million also 
apply for copyright infringements;  a clause providing for a fine up to ₩ 70 million for repeated 
computer program infringements was abolished unde r the 2009 amendment of the Copyright Act.   
(c) Enforcement 
208. Korea generally provides strong IPR protection and enforcement.
237  In 2008, piracy in Korea 
was estimated to have dropped to 1% for reco rds and music (7% in 2006), and 40% on business 
application software (45% in 2006).238  In 2010, the commercial value of pirated PC software in 
Korea was estimated at US$722 million or 40% of  total sales (45% in 2006), compared with 
US$9.5 billion in the United States and US$7.8 billion in China, and an average worldwide piracy rate 
of 42%.239  According the authorities, the piracy of en tertainment software and books seemed to have 
                                                      
234 The content industry is an umbrella term that encompasses companies owning and providing mass 
media and media metadata;  this includes music and movies, text publications of any kind, ownership of 
standards, geographic data, and metadata about all of the above (http://en.wikipedia.org/wiki/Content_industry) 
(Global Legal Information Network online information.  Viewed at:  http://www.glin.gov/view.action?search 
Details.searchAll=true&search=&sea rchDetails.queryString=pubno%3A%2217274%22&searchDetails.sortOrd
er=reverseChron&searchDetails.queryType=BOOLEAN& searchDetails.showSummary=true&glinID=237394&
summaryLang=en&fro mSearch=true [23 November 2011]). 
235 WebHard (webhard) is an online storage service started by LG U+ in February 2000;  it is now 
considered as the standard for storage services in Korea (https://market.android.com/ details?id=lg.webhard&hl=en).  WebHards are web-base d cyberlockers that offer high-volume storage space, 
some up to a terabyte, for sharing pirated material.  Most WebHards specialize in stolen movies and television 
programmes, as well as music.  The illegal WebHard bus iness is prospering as most WebHards charge for 
downloads. The Korean Government has taken strides to address this problem by prosecuting some WebHard 
operators;  14 WebHard sites were before the criminal appellate court in November 2010 
(http://www.p2pnet.net/story/45385).  In 2011, 40 WebHard sites (10 in 2010) were investigated and 82 people 
(98 in 2010) prosecuted.  
236 Chosunilbo  online article, "Tension in the web, the new Copyright Act", 25 July 2009.  Viewed at: 
http://news.chosun.com/site/data/html_dir/2009/07/25/2009072500202.html. 
237 Korea was removed for the first time from the US TR's Special 301 Watch List in 2009 despite 
contrary recommendations by the International Intellect ual Property Alliance the same year (USTR, 2011;  and 
International Intellectual Property Alliance, 2009). 
238 International Intellectual Property Alliance (2009). 
239 Korea ranked 16th (out of 102 countries) in terms of software piracy losses (Business Software 
Alliance, 2011). Republic of Korea WT/TPR/S/268 
 Page 107 
 
 
  declined considerably in 2010, and were estimated at ₩ 29.2 trillion ( ₩ 88.8 trillion in 2009) and 
₩ 178.9 trillion ( ₩ 309.9 trillion in 2009), respectively.  No recent estimates were available on 
piracy of entertainment software and books.  Kore a's counterfeit market (including domestically 
produced "super fakes")240 is estimated to be worth US$14.2 billion;  the counterfeit auto parts' 
industry is estimated to be worth US$200 million and the pirated movies market US$1 billion.  
Korea's geographical proximity to China greatly af fects the amount of counterfeits it is receiving 
inadvertently.  Although IPR enforcement over ne w forms of online piracy, corporate and public 
sector end-user software piracy241, book piracy in universities, a nd counterfeiting of consumer 
products, remains a concern for some of Korea's ma jor trading partners, the authorities (e.g. KIPO) 
have benefited from and actively participated in several international cooperation projects with the 
WIPO, APEC, and leading IPR protection partne rs (e.g. the EU, Japan, the United States).242  
209. Most IPR prosecutions, with the exception of tr ade marks, require a complaint from the right 
holder.  KIPO can initiate investigations of unfai r competition, such as the manufacture, sale, import 
or export of counterfeit goods (Unfair Competition Pr evention and Trade Secrets Protection Act).  In 
September 2010, KIPO launched the Special Judicial Police Squad for trade marks to more effectively 
crack-down on the production, circulation, and sale of counterfeit goods.243  Between September and 
December 2010, the number of arrests increased thr eefold and the number of confiscated goods rose 
tenfold, compared with the first part of the year .  Since December 2009, KIPO has operated an Online 
Counterfeit Products Monitoring System to erad icate online transactions and distribution of 
counterfeit products, and has taken ac tion to suspend the sale by, if not the closure of, illegal selling 
sites.244  In January 2009, KIPO established the Kore a Intellectual Property Protection Association to 
undertake public campaigns together with C onsumers Korea for jointly protecting IPRs.245   
210. 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 clearly infringe copyright or trade mark rights (Customs Act, Foreign Trade 
Act, and Customs Clearance Regulation of Counterfeit Goods).  The KCS operated a spider-web 
system until the adoption of an advanced risk manageme nt system in 2009 as part of a more vigorous 
approach to tracking down goods violating IPRs;  it has also been operating a computerized trade mark system.  Recognizing the use of the internet in  the entry and trade of items infringing IPRs, the 
KCS operates a citizen cyber watchdog (2,314 partic ipants as of 25 April 2012) to monitor online 
transactions of goods violating inte llectual property rights.  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, in wh ich time the applicant must initiate legal action.   
                                                      
240 "Super fakes" are so good that even the brand owners cannot spot them and have been known to 
inadvertently take them in for repairs under non-exi stent warranties (http://www.notofakes.com/Resources/ 
TravelAdvisory/AsiaAsiaPacific/SouthKorea/tabid/548/Default.aspx).   
241 According to figures from the Korea Copyright Commission, public organizations were cited more 
than 2,600 times through August 2010 for using pirated software ( Korea Times , September 2010.  Viewed at:  
http://www.notofakes.com/Resources/T ravelAdvisory/AsiaAsiaPacific/Sout hKorea/tabid/548/Default.aspx). 
242 For more information on the latest international cooperation activities, see Korean Intellectual 
Property Office (2010a);  and USTR (2011). 
243 Previously, all anti-counterfeiting activities we re conducted in collaboration with local 
municipalities, which were limited to spotting counterfeit products and issuing administrative guidance.  Now 
granted special judicial police author ity, the trade mark police can directly track down counterfeit producers and 
deliver them to prosecutors for criminal proced ures (Korean Intellectual Property Office, 2010). 
244 Korea Intellectual Property Office (2010b). 
245 KIPO news No. 87, "Korea's IPR Enforcement Sy stem Gains Recognition", 4 May 2010.  Viewed 
at:  http://www.kipo.go.kr/kpo/us er.tdf [23 November 2011]. WT/TPR/S/268 Trade Policy Review 
Page 108 
  
  211. Between April and December 2011, the KCS implemented a Special Enforcement scheme246;  
among its seven key objectives for a fairer soci ety was the crack-down on the importation and 
distribution of counterfeit goods.247  In cooperation with Japanese and Chinese customs authorities, 
the KCS has implemented the Fake Zero Project fo r exchanging information on counterfeit activities.  
As a result, Korean counterfeit exports to Japan dropped from 12.4% of all counterfeit exports from 
Korea in 2008 to 6.8% in 2009 and 2% in 2011.248  The KCS withholds clearance of goods suspected 
of violating intellectual property rights:  clearan ce suspensions fell from cases worth US$1.8 million, 
in 2008 to cases worth US$729,000 in 2011.  Super fak es remain a concern, particularly for European 
luxury brands (e.g. Louis Vuitton or Chanel handbags or accessories), many of which are made by 
Korean factories relocated to  China or Southeast Asia.249  The KCS has created a webpage to help 
consumers compare genuine goods with counterfeit items.250   
212. Special KCS campaigns have been aimed at bl ocking the trade of fake goods at source, 
protecting consumer interests, establishing fair business trade, and boosting international confidence 
in Korea.  During the period under review, KCS seizures dropped from 781 cases  of fake merchandise 
worth US$1.1 billion (2009) to 530 cases of fake  merchandise worth US$682.5 million (2011);  most 
seizures relate to trade mark infringement (91.5% of  cases and 78.8% of total seized value in 2011).  
In 2011, seizures of fake goods included bags, hom e appliances, Viagra medicine, and watches, as 
well as labels and moulds bearing forged world-renowned trade marks251;  Chinese products 
accounted for 86.9% of the total value of these seizures.  The KCS has held two Counterfeit 
Comparison Exhibitions (2009, 2011) to help consumers to distinguish genuine from infringing 
products and raise awareness of the importance of protecting intellectual prope rty rights and harmful 
effects of counterfeit goods.252  The KCS received a 2011 Global Anti-Counterfeiting Award from the 
Global Anti-Counterfeiting Group (GACG) for its out standing achievement as a government agency 
in preventing counterfeiting.253  
213. The Standing Inspection Teams (SITs) under the MCST investigate counterfeit computer 
software, sound recordings, and video movies, incl uding by online activities.  However, only the SIT 
investigating computer program piracy has judicial police authority.  MCST may collect, delete or 
destroy illegally acquired computer programs, and in struct internet service providers to reject, 
suspend or limit pirated products and services.  The MCST plans to double the SIT human resources 
                                                      
246 KCS online information.  Viewed at:  http://w ww.customs.go.kr/kcsweb/user.tdf?a=user.board. 
BoardApp&c=2002&seq=1860&ctx=&board_id=GPB_NEWSDATA. 
247 The other objectives consisted of a crack-down on illegal capital flows;  preventing illegal 
importation of high-end luxury goods;  strict response to chronic tax evasion;  crack-down on harmful goods;  
rooting out the manipulation of the country of origin;  and strengthened enforcement on illegal cyber transactions. 
248 Data from the IPR center run by Tokyo Customs;  Hankyung,  "KCS reports counterfeit export to 
Japan drops", 11 April 2011. Viewed at:  http://www.hankyung.com/news/app/newsview.php?aid= 201004117211i. 
249 The Korean Times , "Online counterfeit sales worry luxury br ands", 21 November 2010.  Viewed at:  
http://www.koreatimes.co.kr/www/news/biz/2010/11/123_76713.html [4 June 2012]. 
250 Viewed at:  http://www.customs.go.kr/cyber/index.htm. 
251 KIPO (2010). 
252 KCS online Notice, "Counterfeit Comparison Exhibition 2009", 26 May 2011.  Viewed at:  
http://english.customs.go.kr/kcsweb/user.tdf. 
253 KCS online Notice, "The Counterfeit Comparison Exhibition 2011 held in Seoul on 6 July 2011", 
2 August 2011.  Viewed at:  http://e nglish.customs.go.kr/kcsweb/user.tdf. Republic of Korea WT/TPR/S/268 
 Page 109 
 
 
  from 34 officials to 69 by 2013, and increase SIT locations from 5 (Seoul, Daejon, Busan, Gwangju, 
Daegu) to 7.254  
214. Under the Printing Industry Culture Promotion Act, the MCST has administrative authority to 
inspect business establishments, and to seize and orde r disposal 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 publicati ons are carried out mainly by The Copyright 
Protection Center under the auspices of the MCST.  Cases of seizure of illegally copied publications 
online increased from 7,049 in 2008 to 22,466 in 2 011 while those of publications offline fell from 
615 to 489.  
215. To improve criminal prosecuti ons, an IP Right Violation Crim es Investigation Headquarters 
is in place in the Supreme Public Prosecutor's O ffice, as well as nationwide crack-down committees.  
Between 2008 and 2010, trial requests and decisi ons concerning industrial property issues dropped 
gradually;  most cases involved patents and trade marks.255  In 2010 and 2011, KIPO prosecuted 
184 persons and confiscated  57,218 counterfeit items;  as at e nd-March 2012, anothe r 77 people had 
been prosecuted and 26,518 seized.  No further data  on warnings, criminal charges or sentences were 
made available to the Secretariat.  It seems th at sentences for IP infringements remain lower than 
international norms, and in particular compared  with other countries in Asia and Europe.256 
 
                                                      
254 Chosunilbo,  "500 billion joint investment in contents industry", 8 April 2010.  Viewed at:  
http://news.chosun.com/site/data/html_dir/2010/04/08/2010040801449.html 
255 KIPO online statistics.  Viewed at:  http ://www.kipo.go.kr/kpo/user.tdf?a=user.english. 
html.HtmlApp&c=97000&catmenu=ek07_03_01 [23 November 2011]. 
256 EU Chamber of Commerce in Korea online information, "Trade Issues and recommendations 2011".  
Viewed at:  http://trade.eucck.org/site/2011 /en/market_16.htm [19 October 2011].