Republic of Korea WT/TPR/S/204/Rev.1 
 Page 37 
 
 
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.  Steps have been ta ken to facilitate trade and increase transparency.  
However, some protection measures continue to sh ield domestic producers, especially farmers, from 
foreign competition. 
2. The tariff remains one of the main trade polic y instruments and a significant source of tax 
revenue (4.6% of total tax revenue in 2007).  Th e introduction of the 2007 version of the Harmonized 
System of Tariff Classification (HS), in January 2007, increased slightly the number of tariff lines 
(468 more lines in 2008 than in 20 04).  Almost all tariff lines are ad valorem , contributing 
significantly to tariff transparency.  Nonetheless, the tariff remains relatively complex, involving a 
multiplicity of rates (83 ad valorem,  41 alternate duties) often involving small rate differences and 
decimal points.  No tariff cuts occurred during the period under review.  The applied MFN rate 
averages 12.8% in 2008 (same as 2004), which is high by OECD country standards, thereby requiring tariff concessions or drawbacks to ensure that ta riffs on intermediate inputs do not feed through to 
become taxes on exports;  these measures add to the complexity of border taxation.  Peak ad valorem  
rates have remained unchanged and apply to agricu lture (WTO definition);  tariff rates range from 
zero to 887.4%;  86.6% of rates were 10% or belo w in 2008.  Korea applies tariff rate quotas under its 
multilateral agricultural market-ac cess commitments; in-quota tariff rates range from zero to 50%.  
Other measures (e.g. "autonomous" tariff quotas, "usage" tariffs, and duty concessions) that 
selectively reduce tariffs on inputs, often according to  end-use, may constitute a potential impediment 
to efficient resource use and add to tariff complexity and uncertainty.
1  Although 90.8% of tariff rates 
are bound, the predictability of the tariff is eroded by  the leeway to raise applied tariffs provided by 
the average gap of 4.3 percentage points (9 percen tage points for agricultural items) between applied 
and bound MFN rates.  Korea has continued to use this gap to apply higher MFN duties (e.g. 
adjustment duties) termed as "flexible tariffs", which the authorities maintain are within WTO 
bindings.  Korea intends to reduce or remove gradually the non- ad valorem  duties and the "flexible 
tariffs" in line with the reduction undertaki ngs resulting from the DDA and FTA negotiations. 
3. Korea has streamlined and modernized its cust oms procedures by moving further towards an 
"intelligence oriented customs administration";  in light of the expanding network of its preferential 
arrangements, customs clearance has become more complicated, particularly rules of origin 
requirements of individual agreemen ts.  As regards customs valuation, an early warning system was 
established to block undervalued imports of agricultural goods, plants, and fisheries.  
4. Rice remains subject to import quota restricti ons under Korea's WTO minimum market access 
(MMA) commitments until 2014;  by that date, rice imports are expected to double and cover 8% of 
domestic consumption.  Import licensing requirements and prohibitions are maintained mostly for the 
protection of public morals, human health, h ygiene and sanitation, animal and plant life, 
environmental conservation or essential security interests in compliance with domestic legislation requirements or international commitments.  Kore a has used anti-dumping provisions, mainly against 
imports of chemicals, machinery, paper and paperboard, and wood articles.  It has also made use of 
the special safeguard provisions (SSG) under of the WTO Agreement on Agriculture. 
                                                     
 
1 The authorities maintain that their tariff rate quota system is designed to facilitate imports by reducing 
tariffs on certain products in order to promote smooth supply and demand, strengthen the related industry's 
competitiveness, and stabilize domestic prices while aiming to correct imbalances in tariff rates among similar 
products and maximize the effici ency of resource distribution. WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 38 
 
 
5. Korea periodically restricts or monitors expor ts of certain products (e.g. rice) to ensure 
adequate domestic supplies, and thereby possibly assisting downstream processing of these products;  
rice has been subject to quantitative export restri ctions since 2007.  Direct export subsidies are 
maintained to reduce marketing costs for certain agri cultural products (e.g. fru it, vegetables, flowers, 
kimchi, ginseng, and livestock) in accordance with Article 9.4 of the WTO Agreement on Agriculture.  
A drawback scheme provides refunds of border taxes;  internal taxes are also reimbursed.  Exporters 
benefit from export credit insurance, finance, and the promotional activities provided by state-owned 
institutions. 
6. A range of measures involving grants, tax con cessions or low-interest loans are used to 
support production and trade of a range of agricultural, forestry, fishing, and manufactured products 
as well as to encourage SME, R&D, and environmen tal-protection activities.  Although tax incentives 
were to terminate automatically at end 2003 in accord ance with sunset clauses, many were extended.  
SMEs, whose eligibility criteria were streamlined  in 2006, are among the beneficiaries of these 
measures, which are especially generous for inform ation technology activities.  Agriculture receives 
substantial domestic financial s upport in line with the relevant WTO provisions.  Agriculture and 
manufacturing benefit from the lowest electricity tariffs among different c onsumer groups.  Farmers 
and manufacturers adversely affected by a bilateral free-trade agreement may seek compensation or adjustment support. 
7. Korean industrial standards have doubled over the last five years and seem to be used 
increasingly as a basis for international norms.  Effo rts to review food labelling standards to better 
reflect international requirements have continued.   State involvement in the economy persists as 
privatization efforts during the period under revi ew have been put virtually on hold; the new 
Government seems committed to resuming divestment  activities.  Certain government procurement is 
still not covered by Korea's co mmitments under the WTO Govern ment Procurement Agreement 
(GPA);  in procurement from SMEs, private (n on-competitive) tendering prevailed until 2007.  
Despite the lack of domestic price preferences, gove rnment procurement is still seemingly used as an 
instrument of economic policy, including regional a nd industrial development;  new legislation has 
required priority to be given to environment-friendly products.  Procurement has become more 
decentralized. 
8. During the period under review Korea completed the implementation of its three-year Market 
Reform Roadmap, by establishing and revising comp etition laws and regulations and strengthening 
institutions in this area.  Chaebols  are subject to special regulation,  including ceilings on the total 
amount of shareholdings in other domestic compani es.  Certain "collective actions with specific 
requirements" undertaken by SMEs remain exem pt from competition legislation.  Consumer 
protection has also been improved. 
9. Korea's extensive range of intellectual propert y rights (IPRs) legislation has been further 
strengthened with the amendment of the copyri ght legislation, the reinforcement of border 
enforcement, and conclusion of the Kore a–US Free Trade Agreement (KORUS FTA).  
(2) M
EASURES DIRECTLY AFFECTING IMPORTS  
(i) Customs procedures 
10. Korea has pursued the streamlining and mode rnization of its customs procedures, and 
reinforced border protection for intellectual prope rty rights and origin marking falsifications 
(sections (ix)(c) below and (4)(vii)(e)).  The Korea Cu stoms Service (KCS) is considered to be at the Republic of Korea WT/TPR/S/204/Rev.1 
 Page 39 
 
 
cutting edge of international best practice.2  It has attracted intern ational acknowledgement by 
maintaining an impressive record of technolo gy advancement to: improve efficiency; enhance 
transparency;  slash clearance ti mes;  enhance probity and integrity;  and employ sophisticated 
intelligence and risk management systems. 
(a) Registration, documentation, and clearance requirements  
11. Only consignors, customs brokers, associati ons or corporations for customs clearance  can 
make import declarations.  Required documen tation includes the commercial invoice, price 
declaration, and duplicates of the bill of lading.   Where applicable, a detailed packing list, import 
approval document, sanitary and phytosanitary certificates (most agricultural goods and processed 
foods), and certificate of origin for goods subject to tariff preferences should be submitted.  Qualified 
importers (approved by Customs based on their im port record) receive expedited customs clearance 
and more convenient methods for paying duties.3 
12. Import clearance, including declaration procedures, and cargo management systems are fully 
computerized.  In an effort to further streamlin e the clearance procedure and reduce the cost burden, 
the KCS has operated a web-based clearance system since October 2005.4  This handles export/import 
clearance operations, while the single window system  (see below) covers requirement-confirmation 
processes, including quarantine and inspection as well as customs clearance at a single point.  The 
KCS is linked to all 32 agencies responsible for a pproving certain imports (e.g. Ministry for Health, 
Welfare and Family Affairs and Ministry for Food, Agriculture, Forestry and Fisheries) to enable 
import requirements to be electronically verified.  The number of tariff items needing such checks has 
decreased from 4,810 items in 2004 to 4,356 items in 2008, under 49 laws including the 
Pharmaceutical Act and Food Sanitation Act, and is  to fall below 4,000 under the 2003 trade-related 
regulatory reform process (Chapter II).  The paperless clearance system has expanded;  by mid 2007 there were 42,000 companies in the trading sector using Electronic Data Exchange (EDI).
5  In 2008, 
cargo management was 100% paperl ess and import declarations 80%.   In 2008, KCS processed an 
average of 12 million e-customs transa ctions (10 million in June 2003). 
13. As from February 2007, the KCS has operated a web-based import/export 
requirement-confirmation through a single window system on behalf of 12 major government 
agencies handling 93% of total import verification.6  The system encompasses the import 
requirements administered by the Korea Food and Drug Administration, the National Fisheries Products Quality Inspection Service, and the Nationa l Veterinary Surgeon an d Quarantine Service.  
Not all relevant government agencies have yet (as of mid 2007) joined the single window system: 
their doing so would further improve the efficac y of the border clearance system.  Between 
March 2006 and December 2007, the system dealt with 74,435 cases;  the number of users also increased substantially, from 827 companies to 1,255 companies.  This rapid increase is due to time 
                                                     
 
2 APEC (2007). 
3 Benefits include immediate release of goods before submission of the import declaration, paying 
customs duties and taxes after release of the goods or on a monthly basis, and exemption from collateral deposit 
requirements. 
4 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_01.html&mc=ENGLISH_
FACILITATION_IMPORT [8 October 2007]. 
5 APEC (2007). 
6 APEC (2007). WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 40 
 
 
and cost requirements (compared with the EDI-b ased system discussed above) as well as its improved 
user convenience.7 
14. In 2008, declarations were processed in 1.2 hour s on average (1.3 hours in 2003).  Prior-entry 
import declarations (up to five days for sea and one day for air) are allowed.  Most imports (about 
80%) are cleared after being taken into a bonded area;   the average clearance times from port entry to 
release from a bonded warehouse was 3.54 days in 2007 (1.78 days for air and 5.85 days for sea cargo), down from 9.6 days (4.6 days for air and 16.2 days for sea cargo) in early 2003.  A cargo selectivity system automatically selects high-risk  cargo for documentary and possible physical 
inspection.
8  The KCS operates, on request, an "on-dock" immediate clearance system at the major 
ports of Busan, Incheon, and Gwangyang, to allow im ports of reputable companies to be released 
before submission of import declarations (required w ithin ten days).  Some 60% of inward cargo uses 
this system;  goods are cleared without being moved to a warehouse outside the port. 
15. Amongst other developments, a self-assessment system for customs duties and taxes was 
introduced in 2004, and an e-bidding system in customs auctions since 2006.9  As of 2008, the KCS 
plans to establish the web 2.0-based new gene ration knowledge management portal system.   
16. Since August 2005, the KCS has applied more rigorous customs inspections on agricultural 
products, including especially peppers, garlic, ses ame seeds, onions, carrots, and seasoning powders, 
to help protect local farmers and producers ag ainst increased imports due to undervalued import 
declarations.10  The import sample inspected to check pri ces was also raised to 20%.  The authorities 
indicate that these measures were implemented not to restrict 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.  The sample size used for analysis was lowered for 
qualified importers with good compliance records (including "Faithful Partner of Customs")
11 as from 
March 2004. 
17. According to the authorities, blended products  are classified based on their intrinsic 
characteristics as found in the Harmonized System  (HS) Convention, HS Explanatory Notes and 
provisions of the General Rules for Interpretation of Nomenclature.  When a dispute occurs over 
classification of a certain product, the KCS Tariff Classification Committee, consisting of experts from the public and private sector, makes the fina l decision.  If the committee fails to reach 
agreement, it requests an opinion from the World Customs Organization Secretariat. 
18. The KCS has also expanded the scope of ad ministrative information made public and 
enlarged its workforce to provide more prompt resp onses to enquiries made online.  It has developed a 
Roadmap for Integrity including the signing of the Customs Business Integrity Pact in March 2005.   
As from 2004, the KCS has run a Customs Irregular ities Reporting Centre and the Cyber Corruption 
Report Center, which advises Customs staff as well as other stakeholders to make a report on Customs 
                                                     
 
7 Korea Customs Service online information, "Rushing to Single Window - 278% year-on-year 
increase in use", 13 July 2007.  Viewed at:  http://e nglish.customs.go.kr/kcsweb/us er.tdf [5 October 2007]. 
 8 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.  
9 APEC (2007). 
10 KCS News Release, 11 August 2003, "Agency Tightens Customs Inspection over Agricultural 
Products".  
11 "Faithful Partner of Customs" is a system in which the customs authorities provide taxpayers with a 
high degree of compliance with advantag es in clearance and audit processes. Republic of Korea WT/TPR/S/204/Rev.1 
 Page 41 
 
 
irregularities to the KCS web site.12  A Customs Ombudsman, appointed from the private sector and 
assisted by one customs staff member in each Cu stoms house, handles disputes and complaints over 
clearance and valuation processes.  The number of disputes has been decreasing since 2005 after 
reaching a peak of 150, to 108 in 2006.   KCS maintains an Audit Bureau and a Differentiated 
Management System by Companies to target suspect ed high-risk importers.  A Code of Conduct for 
the Integrity of Customs Officers h as been in effect since May 2003. 
19. Korea acceded to the revised Kyoto Conven tion in February 2003, subject to certain 
reservations13;  the Convention took effect in February 2006. 
20. Following the signature of MoUs between the KCS and the Export-Import Bank of Korea 
(February 2006), the Korea Trade and Investment  Promotion Agency (KOTRA) (September 2006) 
and the Asian Development Bank (ADB) (November  2006) and the establishment of the Korea 
Customs UNI-PASS Information Association (CUPIA) (September 2006)14, efforts have been made 
to disseminate KCS advanced customs techniques worldwide. 
21. Korea does not require preshipment inspection of imports. 
(b) Free-trade zones (FTZs)  
22. The Customs free zones, which provided simplif ied customs procedures for certain activities 
were incorporated into FTZs (Chapter II) in 2 004 (Act on Designation and Management of Free Trade 
Zones, 2004).  They are exclusive areas outside the national customs boundary, exempt from customs requirements.  They 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 the Free Trade Zone Committee) designates such zones upon request from regional 
governments.  Activities in the zone may be exem pt from import procedures and customs duties, and 
receive tax relief (e.g. VAT and reduced corporate tax).  Foreign cargo may enter and leave freely.  
Simple processing is allowed.  Korean goods enteri ng the zone are treated as  exports and entitled to 
tariff drawback.  Goods entering or processed in these zones are principally intended for export, but if 
sold domestically, are subject to import duties and domestic taxes, such as VAT.  According to the 
authorities, this treatment does not constitute a s ubsidy 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 S ubsidies and Countervailing Measures.  The FTZs 
are located at the Incheon International Airport, and the ports of Busan, Gwangyang, Incheon, Masan, 
Iksan, Gunsan, Daebul, Donghae, and Yulchon. 
                                                     
 
12 Korea Customs Service information available onlin e.  Viewed at:  http://english.customs.go.kr/ 
[5 October 2007]. 
13 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 . 
14 UNI-PASS is the world's first 100% electroni c clearance portal system, uniting in a customs 
declaration all clearance procedures from ex/import clearance to drawback, in/outbound passenger control and 
tracking of bonded cargoes.  Korea Customs Service online information titled "KCS, signing an MOU with 
KOTRA to speed up exportation of UNI-PASS", 18 Sept ember 2006.  Viewed at:  http://english.customs.go.kr/ 
kcsweb/user.tdf [5 October 2007]. WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 42 
 
 
(ii) Customs valuation 
23. 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).  When this cannot be used, va luation is determined using, in order, identical 
goods, similar goods, domestic sales price, or computed value. 
24. 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.  However, as a last r esort, Customs may determine their valuation using 
"reasonable standards", whereby prices paid are adjusted based on appraised prices from certified 
appraisal institutes, domestic wholesale prices, or ot her recognized price lists.  To prevent tax evasion, 
the KCS tightened checks on declared values of imported used cars, including comparisons with 
transaction values of new cars of the same model that  have been recognized as customs values, with 
the deduction of depreciation ("depreciated value").   According to the authorities, the transaction 
value is accepted where significant differences exist,  unless there is reason to suspect the authenticity 
or accuracy of the declared value,  when an alternative WTO-consiste nt valuation method is used.  The 
use of the "depreciated value" would be applied onl y as a last resort.  Documentary requirements were 
also changed to include a letter of technical inspection from an automobile performance-testing 
institute.15  
25. Following the launch of the process of "standardization of item names"  of imported 
agricultural, forest, and fisheries products in c ooperation with the Ministry for Food, Agriculture, 
Forestry and Fisheries (MIFAFF) and the Korea Forest Service (KFS), in August 2007 the KCS 
established SIREN, an early warning system to  block undervalued imports of agricultural goods, 
plants, and fisheries.16  SIREN is designed to screen out undervalued products by calculating the 
proper import prices of the products and comparing the prices with the declared prices.17  Based on 
the result, under-valued products go through audit,  while normal products are cleared promptly.  The 
authorities seem to consider the "standardizati on" process and the SIREN as tools against fraud and 
for speedy clearance of normal imports and fair competition in the domestic market;  these tools seem 
to have had a tax revenue increase  and an import substitution effect estimated at W 97.5 billion and 
W 178.6 billion respectively.18  The operation of SIREN has resulted in considerable decrease in 
under-valuation and subsequent re duction in the time required for clearance of normal goods and 
audit workload. 
26. 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 period 
                                                      
15 KCS News Release, 12 May 2003, "Documentary Requirements for Import of Used Cars to 
Change". 
16 The "standardization" efforts, initiated in October 2006, involved experts from the public and private 
sectors and relevant agencies, distributors, research institu tes, etc.  By mid 2008, 122 item names of agricultural, 
forest and fisheries products including garlic, hot pepper , cuttlefish, chestnut, etc. had been "standardized".  
Korea Customs Service online information, "KCS, Launching Early Warning System for Undervalued 
Declaration", 22 August 2007.  Viewed at:  http://eng lish.customs.go.kr/kcsweb/user.tdf [5 October 2007]. 
17 Using the Kalman filter model, a statistic model for calculating a proper import price. 
18 Korea Customs Service online information, "KCS, Launching Early Warning System for 
Undervalued Declaration", 22 August 2007.  Viewed  at:  http://english.customs.go.kr/kcsweb/user.tdf 
[5 October 2007]. Republic of Korea WT/TPR/S/204/Rev.1 
 Page 43 
 
 
of 60 months).  Criminal penalties (up to three year s imprisonment or a fine of five times the evaded 
duty) apply for fraudulent declaration of dutiable value or incorrect tariff classifications. 
27. Customs decisions can be appealed to the KCS Commissioner or to the National Tax 
Tribunal.  The Tariff Review Commission, comprisng five customs officers and seven experts, assists 
the Commissioner on appeals.  Decisions  can be appealed to the courts. 
(iii) Tariffs 
28. Korea adopted the 2007 version of the Harmonized System of Tariff Classification (HS) from 
1 January 2007;  this added 442 ten-digit lines to th e previous customs tariff.  The 2008 tariff consists 
of 11,729 ten-digit lines; 26 more lines than the 2007 schedule.  The tariff schedule is set from 
January to December;  most tariff changes at the si x-digit level are introduced annually.  Requests to 
modify tariff rates are submitted by the relevant ministries and interested parties to the Ministry of Strategy and Finance (MOSF), which presents the case to the Customs and Tariff Deliberation 
Committee.
19  If accepted by the Committee, any modification is submitted to the State Council.  
After approval by the State Council, the modificatio n is enacted as part of the Customs Act, by the 
National Assembly, in the form of an Annex to the Act. 
29. The tariff comprises several different rates accord ing to the source of imports.  These are the 
MFN tariffs from non-preferential sources, and several preferential tariffs, including for imports from other members of the Asia Pacific Trade Agreem ent (Bangkok Agreement), le ast developed countries 
(LDCs), Chile, Singapore, EFTA and ASEAN (Chapt er II).  The WTO concession (i.e. bound) rates 
are also contained in the tariff.  
(a) Applied MFN rate 
30. The tariff structure has changed little since th e last Review of Korea.  The 2008 simple 
average (unweighted) MFN tariff is 12.8% (as in 2004) (Table III.1 and Chart III.1).
20  Tariff 
protection varies substantially across and within sectors, averaging 53.5% for agricultural products) 
and 6.5% for industrial goods in 2007 (WTO definitions).21  Average tariffs are highest for vegetable 
products (HS section 2), at 101.6%.  Manufacturing ta riffs are highest for footwear and headgear 
(HS section 12) at 10.1%, and for textiles and articles  (HS section 11) at 9.8%.  By according varied 
and substantial levels of protec tion to selected industries, especially agriculture, tariffs distort 
competition by favouring some activities.  Reduci ng high tariffs (mainly out-of-quota agricultural 
duties) would therefore improve Korea's resource allocation and national welfare. 
                                                      
19 This consists of academics, customs officials, journalists, and representatives from non-governmental 
groups, including consumer and business organizations, and from relevant ministries.  
20 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 ad valorem  equivalents 
are unavailable, as for Korea.  As ou t-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 greater" rate, will understate tariff pr otection when the alternate 
specific rate is operative.  Higher adjustment tariffs are also excluded.  In 2007, th e simple average MFN tariff 
rate was 12.7%;  the 2008 increase is due to the additional tariff lines that were created by splitting tariff lines bearing relatively high rates of duty. 
21 WTO definition of industrial products covers all non-agricultural products, i.e. products not covered 
by the WTO Agreement on Agriculture.  "WTO agricu ltural products" include all processed and unprocessed 
agricultural commodities (HS Chapters 1 to 24, less fish and fish products, plus some additional HS items). WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 44 
 
 
Table III.1 
Structure of MFN tariffs, 2004 and 2008 
(Per cent) 
    2004 2008 Final bounda 
 Bound tariff    
1. Bound tariff lines (% of all tariff lines) 91.5 90.8 90.8 
2. Simple average bound rate 17.2 17.1 17.1 
 Agricultural products (HS01-24) 61.1 61.7 61.7 
 Industrial products (HS25-97) 10.0 9.8 9.7 
 WTO agricultural products 61.1 62.5 62.5 
 WTO non-agricultural products 9.7 9.4 9.3 
 Textiles and clot hing 18.5 18.4 18.4 
3. Duty-free tariff lines (% of lines) 14.2 15.4 15.5 
4. Non- ad valorem  tariffs (% of lines) 1.0 1.0 1.0 
5. Non- ad valorem  tariffs with no AVEs (% of lines) 1.0 1.0 1.0 
6. Nuisance bound rates (% of lines)b 2.1 2.0 2.0 
 Applied tariff    
7. Simple average applied rate 12.8 12.8 .. 
 Agricultural products (HS01-24) 47.9 47.8 .. 
 Industrial products (HS25-97) 6.6 6.5 .. 
 WTO agricultural products 52.2 53.5 .. 
 WTO non-agricultural products 6.7 6.5 .. 
 Textiles and clothing 9.8 9.7 .. 
8. Tariff quotas (% of all lines) 1.7 1.7 .. 
9. Domestic tariff "peaks" (% of all lines)c 2.5 2.6 .. 
10. International tariff "peaks" (% of all lines)d 8.9 8.9 .. 
11. Overall standard deviati on of tariff rates 52.0 52.1 .. 
12. Coefficient of variation 4.1 4.1  
13. Duty-free tariff lines (% of all lines) 13.3 15.9 .. 
14. Non- ad valorem  tariffs (% of all lines) 0.6 0.7 .. 
15. Non- ad valorem  tariffs with no AVEs (% of all lines) 0.6 0.7 .. 
16. Nuisance applied rates (% of all lines)b 2.7 1.9 .. 
.. Not available. 
a Based on 2008 tariff schedule.  Implementa tion of final bound rates to be reached in 2009.  Currently all but 266 tariff line s have 
reached the U.R. implementation rates. 
b Nuisance rates are those greater than zero, but less than or equal to 2%. 
c Domestic tariff peaks are defined as those exceeding three ti mes the overall simple average applied rate (indicator 7). 
d International tariff peaks are defined as those exceeding 15%. 
Note: The 2004 tariff, based on HS02 nomenclat ure, consisted of 11,261 tariff lines;  the 2008 tariff is based on HS07 nomencla ture 
and consists of 11,729 tariff lines.  Calculations include out -of-quota rates (thereby excluding lower in-quota rates) and the 
ad valorem  part of alternate rates. 
Source:  WTO Secretariat calculations , based on data provided by  the Korean authorities. 
31. Over 99% of tariffs are ad valorem  duties.  This simplifies the tariff structure and improves 
transparency.  However, there are some 124 different rate bands (83 ad valorem , 41 alternate duties), 
mainly associated with agricultural tariffs , of which about 44 have decimal duties22;  alternate duties 
                                                      
22 Excluding tariff quotas and alternate tariffs, Kor ea's tariff rates still range from zero to 72%, and 
have many different (over 30) bands, often with very sm all rate differences and deci mal rates.  For example, 
there are over 15 ad valorem  rate bands of 10% or below, and 9.8% of tariff lines have the rate of 6.5%.  Republic of Korea WT/TPR/S/204/Rev.1 
 Page 45 
 
 
apply to 0.7% of total tariff lines (about 81).  Tari ff rates range from free to 887.4% (Table AIII.1).  
Some 87% of rates are 10% or below (in 2008);  60.1% of rates are between 5% and 10%;  the modal rate is 8% (Chart III.2).  Rates of over 30% apply to 2.9% of tari ff items (2.8% in 2004);  "nuisance" 
applied MFN rates (2% or less) apply to 1.9% of tariff lines, and 2.6% of lines have domestic tariff 
"peaks" (rates over 38.3%).  Although the share of duty-free tariff lines increased between 2004 and 
2007, from 13.3% to 15.9%, scope remains to rationa lize the Korean tariff, for example, by reducing 
the large number of rate bands and removing decimal duties to, inter alia , obtain some gains in 
economic efficiency. 
0.010.020.030.040.050.060.070.080.090.0100.0110.0
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21Calculations include out-of-quota rates (thereby excluding lower in-quota rates) and the ad valorem  part of alternate rates.  
Averages for 2004 are based on HS02 nomenclature, and for 2008 on HS07.  Only HS sections 03, 12, 14, 19 and 21 are fully bound .   
Final bound rates are based on the 2008 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, 2004 and 2008
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 & articles10   Pulp, paper, etc.11   Textiles & articles12   Footwear, headgear13   Articles of stones
14   Precious stones, etc.15   Base metals and products16   Machinery17   Transport equipment18   Precision instrument19   Arms & ammunition
20   Miscellaneous manuf.21   Works of art, etc.MFN 2004
MFN 2008
Final bound
Average applied rate 
2004 and 2008 
(12.8%)Average final bound rate
(17.1%)
 
32. 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.  Alternate duties also apply to a number 
of agricultural tariff items as out-of-quota duties, which also provide very high minimum ad valorem  
rates, generally of well over 100% (exceeding 500% on sesame seeds and oil, jujubes and pine nuts).  
Tariff quotas on agricultural tariff lines (1.5% of to tal items) have out-of-quota rates expressed in 
form of alternate duties (section (2)(iv)(a)). WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 46 
 
 
0.5%3.6%4.8%61.7%13.3%
11.2%
2.1%
2.8% 3.6% 
0.5%4.4%60.1%10.6%15.9%
2.0%
2.9%
01,0002,0003,0004,0005,0006,0007,0008,000
Duty Free >0%-5% >5%-10% >10%-15% >15%-20% >20%-25% >25%-30% >30%
Note:    Includes out-of-quota rates for tariff  quotas (excludes lower in-quota rates) and the ad valorem  part of alternate duties.   
              Percentages denote the share of total lines.  Totals do not add to 100% as no  tariff rates were provided for 16 l ines
              (import restriction, representing 0.1% of total lines).  The 2004 estimates are based on HS02 nomenclature and 20 08
              on HS07.MFN 2004
MFN 2008Number of tariff linesChart III.2
Distribution of MFN tariff rates, 2004 and 2008
Tariff rates
Source :      WTO Secretariat calculations, based on data provided by the Korean authorities. 
33. Korea has expressed its support in the DDA negotiations for the elimination of 
non-ad valorem  duties in order to enhance transparency, ta riff predictability, and comparison of tariff 
rates among countries.  Non- ad valorem  duties would be removed from Korea's tariff schedule if so 
agreed at the DDA negotiation.23  
(b) MFN tariff dispersion and escalation  
34. Summary indicators of overall tariff dispersion show relatively wide dispersion in applied 
MFN tariff rates (ranging from ze ro to 887.4%), with little narrowi ng of disparities between 2004 and 
2008.  While the standard deviation rose slightly fro m 52 to 52.1, the coefficient of variation remained 
unchanged at 4.1 (Table III.1). 
35. The pattern of tariff escalation has change d little since 2004 (Table AIII.3).  Escalation 
remains most pronounced in semi -processed food, beverages and th roughout all production stages of 
textiles and leather, basic metal products, and non-me tallic mineral products (Chart III.3).  However, 
de-escalation has persisted for semi-manufactures co mpared with finished items mainly for food, 
beverages and tobacco, and fabricat ed metal products and machinery. 
 
                                                      
23 APEC (2007). Republic of Korea WT/TPR/S/204/Rev.1 
 Page 47 
 
 
0102030405060708090100
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishing Chemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machineryOtherChart III.3
MFN tariff escalation by 2-digit ISIC industry, 2004 and 2008
Not applicable.
Includes out-of-quota rates for tariff quotas (excludes lower in-quota rates) and the ad valorem  part of 
alternate duties.  2004 averages are based on HS02 nomenclature and 2008 on HS07.  WTO Secretariat calculations, based on data provided by the Korean authorities.0102030405060708090100
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishing Chemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machineryOtherAverage applied rate in manufacturing
(10.6% )
n.a.
Note:
Source :Per cent
First sta ge of processin g Fully processed Semi-processedPer cent
2008
Average applied rate in manufacturing
(10.5%)2004
n.a.n.a.
n.a.n.a.
 WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 48 
 
 
(c) "Flexible" tariffs 
36. Korea applies temporary higher MFN duties (terme d as flexible tariffs) than those set at the 
customs tariff schedule (section (a) above);  the flexible tariffs mechanism includes adjustment, 
safeguard, special safeguard, and seasonal duties.24  Through a number of different mechanisms and 
rationales, the system allows the authorities to increa se or decrease certain tariffs at their discretion, 
with differentials of as much as 40% above or below a fixed tariff rate.25  This provides considerable 
scope to encourage or discourage imports of par ticular items, for inflation-control and industrial 
policy purposes.26  Flexible tariffs are claimed to observe  WTO bindings.  Reportedly, in certain 
cases, the flexible tariff rate regime reflects the significant gap between bound and applied rates.27  
37. The number of items covered by the broad "flexible tariff" description has been cut in recent 
years from 203 (HS ten digits) in 2004 to 101 in 2007.28  The authorities intend to reduce or remove 
gradually these tariffs in line with the reduc tion of tariff rates resulting from the DDA and FTA 
negotiations (Chapter II). 
Adjustment duties 
38. Adjustment duties protect domestic industries fro m import surges and lighten the shock from 
trade liberalization.  They are set annually by MOSF.  The Customs and Tariff Deliberation 
Committee considers MOSF's proposals, and if approve d by the State Council, adjustment duties are 
implemented by Presidential decree.   
39. Use of adjustment duties has remained virtually unchanged.  In 2007, they applied to 
21 six-digit tariff items covering mainly certain  fish, rice preparations, sauces, and plywood 
(Table AIII.4).  Goods no longer subject to adjustment  duties since the last Review include bananas.  
Duties currently range from 11% on plywood to 57% on croakers.  Alternate duties where duties are 
the higher of an ad valorem  or a specific duty, are applied to six of the six-digit tariff lines.  Several 
products that were subject to adjustment duties in 2007, such as several fish and plywood items, 
remained unbound. 
Special safeguard and safeguard tariffs  
40. Korea reserved the right to take special safe guard action (SSG) on cr op and related products 
(e.g. grains, potatoes, ginseng, and soybean) under the WTO Agreement on Agriculture (section (viii)(b)). 
41. Safeguard, including provisional, tariffs may al so apply to imports that have surged and 
caused or threaten to cause materi al injury to domestic producers, where deemed necessary to protect 
domestic industries (Customs Act).  Safeguard tariffs apply for up to four years (200 days if 
provisional), but can be extended by four years subject to a further review.  Since the previous Review 
in 2004, no safeguard tariffs have been applied. 
                                                     
 
24 Autonomous tariff quotas are also referred to as flex ible tariffs, and are discussed in section (iv)(b).  
25 EIU (2007). 
26 Reportedly, some items are selected to align tariff rates between similar lines of products and to 
protect certain industry sectors from imports. But the ar bitrary application of import tariffs often draws criticism 
from foreign companies operating in Korea, and the cust oms service plans to standardize these flexible rates 
(EIU, 2007). 
27 APEC (2007). 
28 APEC (2007). Republic of Korea WT/TPR/S/204/Rev.1 
 Page 49 
 
 
Seasonal duties 
42. Seasonal duties may be levied on goods with fluctuating seasonal prices, to protect domestic 
industries against competing imports that threaten to "disrupt" production.  Seasonal duties were put 
in place in 2004 on grapes imported from Chile unde r the KCFTA:  preferential duties are applied 
only to grapes imported during the Korean off-seas on (Chapter II).  No other seasonal duties have 
been applied during the period under review. 
(d) Bound tariff 
43. Korea bound 90.8% of all tariff lines in the Uruguay Round.  Some 98.7% of agricultural 
tariff lines (excluding mainly rice) and 89.5% of industrial tariff lines (WTO definitions) are bound.  
On a tariff classification basis, 84.4% of agricultu ral tariff lines (HS Chapters 01-24) and 91.9% of 
industrial lines (HS Chapters 25-97) are bound.29 
44. The simple average bound tariff rate fell sli ghtly from 17.2% in 2004 to 17.1% in 2008 
(Table III.1);  a further decrease should take pl ace in 2009 when all Uruguay Round commitments are 
to be fully implemented.30  Following "tariffication" of non-tariff measures, except on rice, very high 
bound (and applied) tariffs, often seemingly prohibiti ve, apply to many commodities, such as cereals 
and dairy products.  Korea's average bound rat es on agricultural and industrial products (WTO 
definitions) are 62.5% and 9.4%, respectively (in 2008).  Since no major changes were brought to bound and applied MFN tariff rates during the peri od under review, the overall gap between the two 
has remained unchanged, i.e. at 4.3 percentage poi nts.  The gap remains wider for rates affecting 
agricultural items (9 percentage points).  Korea u ses this scope mainly to raise MFN tariffs annually 
by applying higher adjustment duties (section (iii)(c )) on a number of products to temporarily protect 
domestic producers. 
45. Korea has been included in several collective waivers that suspend the application of the 
provisions of Article II of GATT 1994 in order to al low it to reflect the changes resulting from the HS 
(2002) nomenclature in its Schedule of concessi ons.  The current waiver is valid until end 2008.
31  
The transposition procedures envisage the possibilit y of having Article XXVIII negotiations under 
certain circumstances;  at the time of completi on of this report, these negotiations were ongoing.32  
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;  this is also valid until end 2008.33  
The authorities indicate that they will initiate the transition process into HS 2007 as soon as the transition process to HS 2002 has been completed.  
(e) Duty concessions/exemptions 
46. The application of import duty relief throug h duty concessions and exemptions has not 
changed since the last Review of Korea.  The Mi nister of Strategy and Finance (MOSF) may grant 
reductions or exemptions of import duties for various purposes, such as industrial development 
(Articles 88-109, Customs Act).
34  MOSF determines tariff concessions  in consultation with relevant 
ministries.  The authorities indicate that revenue forgone from import duty relief was US$915 million 
                                                      
29 WTO (2004). 
30 When all commitments are fully implemented, the average bound tariff on industrial products will 
fall only marginally to 9.3% (WTO definition).  
31 WTO document WT/L/712, 21 December 2007. 
32 Decision of 15 February 2005, WTO document WT/L/605. 
33 WTO document WT/L/713, 21 December 2007. 
34 WTO (2004). WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 50 
 
 
(equivalent to 7.5% of total tari ff revenue) in 2007 (US$424 million or about 5% of tariff revenue in 
2003). 
47. Tariff concessions also apply under other legi slation.  For example, capital goods imported 
for foreign investment projects located in special zones (e.g. foreign investment zones), are exempt 
from customs duties, generally for up to three years (Chapter II).  Customs duties on certain imported 
goods and for certain importers can be paid in instal ments over five years.  The Promotion Act for the 
Development of Aircraft and Space Industries also allows duty-free imports of parts (revenue forgone 
of W 44.6 billion in 2007, up from W 25.9 billion in 2004).35   
(f) "Usage" tariff rates 
48. Imported inputs for specified end-uses under "usag e" tariff rates may be exempt from tariffs 
under "usage" tariff rates (Article 83, Customs Act) .  Autonomous tariff quotas also provide lower in-
quota duties for certain imported inputs, including tho se used in specified end-uses (section (iv)(b)).  
Korea Customs Service is responsible for post-audit monitoring to ensure that the inputs meet the end-
use criteria;  full duty is collected on inputs used for other purposes.  Usage tariff rates, autonomous 
tariff quotas and, to a lesser extent, duty concessions on inputs seem to be an important component of 
Korea's industrial policy, whereby the Governme nt encourages certain manufacturing activities. 
(g) Tariff preferences and rules of origin 
Preferences  
49. Korea grants limited recipro cal tariff preferences to developing countries under the Global 
System of Trade Preferences Among Developing C ountries (GSTP) and the GATT Protocol Relating 
to Trade Negotiations Among Developing Countries (TNDC) (Chapter II, Table III.2).  It also 
provides unilateral (non-reciprocal) duty-free an d quota-free tariff preferences to LDCs;  as of 
January 2008, their scope was expande d to cover 75% of the national tariff schedule.  The Minister of 
Strategy and Finance (MOSF) may withdraw or modify unilateral trade preferences if considered inappropriate taking into account the country's inco me level, volume of im ports, and international 
competitiveness of the product and country concerned.  
50. At present, Korea's reciprocal concessions unde r the Asia-Pacific Trade Agreement (APTA) 
are mostly at either 50% or 30% of the MFN tari ff rate.  Special concessions apply to Bangladesh and 
to Lao PDR, at mainly 100%, 50% or 30% of the MFN duty (on 300 tariff items). 
51. Korea's simple average tariff rate remains at th e MFN average of 12.8% (the same as in 2004) 
for imports from countries receiving preferences under the GSTP, and TNDC;  it falls slightly to 12.3% (12.5% in 2004) and 9.2% (according to the authorities) for imports from APTA countries and 
LDCs, respectively.  However, this is changing rapidly in line with Korea's move to expand its 
bilateral and regional free-trade agreements, concluded with ASE AN (in effect as from 2007), Chile
36, 
Singapore, and EFTA, and the United States.  It is in the process of talks with Japan, Canada, Mexico, 
and India (Chapter II), and is looking to open discussions with China, GCC, MERCOSUR, and possibly Israel.
37  
                                                      
35 WTO documents G/SCM/N/71/KOR, 2 August 2001 and G/SCM/N/123/KOR, 24 January 2006. 
36 The average tariff rate for imports covered by the Korea-Chile FTA is 6.3% (in 2008). 
37 Online information viewed at:  http://www.bilaterals.org/rubrique.php3?id_rubrique=89 
[10 December 2007]. Republic of Korea WT/TPR/S/204/Rev.1 
 Page 51 
 
 
Table III.2 
Preferential trading arrangements, 2008 
Agreement Participants Coveragea 
(No. of lines) Preferential margin 
Asia Pacific Trade Agreement    
APTA I China, India, Sri Lanka 1,282  5% to 98% of MFN rate 
APTA II Bangladesh, Laos 1,505  5% to 100% of MFN rate 
Global System of Trade Preferences 
(GSTP) 43 countries 29  10% to 73% of MFN rate 
Least Developed Countries (LDCs) 50 countries 5,522  100% of MFN rate 
TNDC 14 countries 13  10% of MFN rate 
Korea-Chile FTA (KCFTA) Chile 9,407  8% to 100% of MFN rate 
Korea-Singapore FTA (KSFTA) Singapore .. .. 
Korea-EFTA FTA Iceland, Liechtenstein, Norway, 
Switzerland .. .. 
Korea-United States (KORUS FTA) 
(ratification pending) United States .. .. 
Korea-ASEAN FTA ASEAN countries .. .. 
.. Not available. 
a Based on 10-digit tariff lines.  Only rates that are lowe r than the corresponding MFN rate are taken into account. 
Source:  WTO calculations based on data provided by the Korean authorities;  and further co mments by the authorities. 
Rules of origin  
52. Korea continues to operate both preferential and non-preferential rules of origin.   
53. Preferential rules apply to imports under prefer ential trading arrangements;  Korea has no 
common rules in this area.  Korea considers that rules should be transparent and promote trade and 
investment.  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 registered in the 
exporting country and have at least 60% domestic e quity.  Under the Asia-Pacific Trade Agreement, 
eligible imports  are subject to APTA preferential rules of origin (since the entry into force of the 
agreement in September 2006). 
54. Each of Korea's FTAs has separate and non-id entical rules of origin, which increase the 
complexity of its tariff.  For example, rules of origin under the Korea-Chile FTA, are based on the "goods wholly obtained" and the "substantial tran sformation" criterion.  Substantial transformation 
requires goods to be sufficiently processed in either  Korea or Chile to cha nge tariff classification 
(chapter, heading, or subheading).  Agricultural pr oducts require mainly a change in tariff chapter 
(CC);  a change in tariff heading (CTH) is requi red for certain foodstuffs, such as cocoa paste and 
cocoa butter.  Changes in tariff heading or subhead ing (CTSH) are used for industrial products, often 
combined with a value-added rule or for tex tiles and clothing a specific-process rule.  The 
value-added rule is also applied to  selected agricultural and industrial products.  It usually stipulates a 
regional value content of not less than 45% usi ng the build-down method, and of 30% under the 
build-up method.
38  A number of clothing items are subject to only specific-process rules.   
                                                      
38 Several tariff items specify a higher value added of 80% using the build-down method.  Under the 
build-up method, regional value added is calculated as the value of originating materials used in production as a percentage of the imported goods' f.o.b. value.  The build-down method deducts non-originating materials used WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 52 
 
 
55. Divergent and complex rules of origin, which di ffer in concept, detail, and administrative 
process, add to the trading costs, thus  complicating the trade facilitation process.39  Due to the 
expanding network of preferential arrangements, cu stoms clearance has become complicated as the 
procedures are needed to assess whether products meet  the rules of origin of individual agreements.  
According to KCS, it has also been  necessary to employ more staff. 
56. Korea applies non-preferential rules of origin equally to all other imports.  Origin is 
determined on request by the MKE (former MOCIE).  Korea's non-preferential rules of origin are 
based on the wholly obtained goods a nd substantial transformation criterion.   The tariff shift rule 
(change in six-digit HS classification) is applie d, except on cameras (value-added rule) and textile 
articles (specified process rule);  for certain live an imals, the rule of origin is determined by the 
territory where they were bred for over six (bovin e) or two (swine) months.  There have been no 
significant changes in non-preferential rules of origin since the last Review of Korea. 
57. Since 2005, the KCS has intensified action agai nst false origin marking (sections (ix)(c) 
and (4)(vi)(a)). 
(iv) Tariff quotas 
(a) Agricultural tariff quotas 
58. Korea applied tariff quotas, under its multilatera l agricultural market-access commitments, on 
about 179 (excluding rice) ten-digit tariff items in 2007 (Table AIII.5)40;  in 2008, there were ten more 
tariff items under this regime due to the splitting of tariff lines (section (iii)(a)).  In-quota tariff rates 
range from zero to 50%.  Out-of-quota rates are ge nerally very high;  many  are well over 100% and in 
certain cases 887.4% ad valorem .  Many above-quota rates are alternat e duties.  Quota levels are often 
small as their volume is based on consumption le vels in 1986-88, in accordance with the UR 
modality.41  Some tariff quotas operate, in effect, as quantitative restrictions, whereby seemingly 
prohibitively high out-of-quota tariffs prevent out-of-quota imports;  the authorities indicate that the high out-of-quota tariff rates resulted from the "t ariffication" exercise and reflect a gap between 
domestic and foreign market prices at the time of the Uruguay Round.  According to the latest data 
provided by the authorities, in 2006 the average fill rate of tariff quotas was around 68.3%.  Fill ratios 
were low for several product groupings (Table AIII.6).  The consistently large unfilled share of tariff 
quotas on some items, even with relatively low in-quot a tariffs, suggests 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 or sanitary measures related to 
the outbreak of diseases in exporting countries, such as the BSE, foot and mouth disease, and avian influenza.  
59. Tariff quotas, and the import quota on rice, are allocated or operated by some 22 different 
organizations including ministries, state-trading en tities, such as the Ministry  for Food, Agriculture, 
Forestry and Fisheries (MIFAFF) for rice and barl ey, and various producer associations, including the 
                                                                                                                                                                    
 
in production from the import's value and expresses this amount as a percentage of its value.  This method 
implicitly includes the product's non-material costs, such as labour, as originating materials.  Accumulation of 
originating materials is allowed.  De minimis provisions allow goods not undergoing a tariff shift to be 
considered as originating if non-originating mate rials do not exceed 8% of their f.o.b. value.  
39 APEC (2007). 
40 Excludes 16 tariff items for rice, which, although grouped by the authorities as tariff quotas, are 
actually covered by import quota.  
41 WTO document MTN.GNG/M A/W/24, 20 December 1993. Republic of Korea WT/TPR/S/204/Rev.1 
 Page 53 
 
 
National Agricultural Cooperatives Federation an d the Korea Feed Ingredients Association.42  In some 
cases, the administering authority is owned or controlled by domestic producers competing with the imported item.  With the exception of the Nationa l Agricultural Cooperatives Federation, the National 
Forestry Cooperative Federation, and the Jeju C itrus Growers' Agricultural Cooperative, producers 
associations include members that process foodstuffs  imported under tariff quota.  Credible import 
administration would require that directly interested  parties were not directly involved in controlling 
imports.
43  The authorities indicate that, given the allocation methods in place, there is no concern 
over the influence members might exercise with regard  to reallocation.  The Korean Government can 
monitor the performance of state-trading enterpri ses and producer associations entrusted with the 
administration of tariff quotas, and demand the subm ission of necessary materials and, if necessary, 
take punitive measures. 
60. Different mechanisms are used for quota allocation and administration depending on the 
product;  they include the auctioning of quotas, allocation to designated agency, real demand 
allocation, and a combination thereof.  Korea argue s that the different administration methods and the 
diverse range of entities reflect different character istics, and the distribution system of different 
imported items, and that they efficiently manage market access volumes.44  State-trading enterprises 
impose additional mark-ups on top of the in-quota ta riff on items such as rice, garlic, onions, pine 
nuts, sesame, ground-nuts, buckwheat, peppers, m ung beans/red beans, and soybeans.  Most 
state-trading enterprises are engaged directly in  marketing imports by selling through wholesale 
markets or distributing directly to final users.  State-trading enterprises and producer associations 
allocate quotas usually on a real demand basis taki ng into account import performance, facilities, and 
capacity, or by auctioning import entitlements for cer tain commodities.  Reflecting the outcomes from 
the ongoing DDA negotiations, the authorities intend to improve the current quota administration system whenever necessary.
45   
(b) Autonomous tariff quotas 
61. Korea grants concessional tariffs using autonom ous tariff quotas, mainly for raw materials, 
inputs, semi-processed goods, components, parts, a nd engines (Table AIII.7).  These quotas covered 
approximately 45 six-digit tariff items in 2007 (about 180 in 2004);  wool- and cotton-related 
materials were among the items removed from the li st.  In-quota tariff rates ranged from zero (maize, 
petroleum) to 35% (sugar). 
62. Since 2001, autonomous tariff quotas have been revised annually;  they are administered by 
the Ministry of Strategy and Finance (MOSF).  C overage is based on government agency requests and 
recommendations from designated industry associations .  MOSF submits proposals for review by the 
Customs and Tariff Deliberation Committee, which are sent for approval by the State Council.  
Autonomous tariff quotas are implemented by Presiden tial decree, and are often administered through 
supervised industry associations.  Quotas are a llocated on a first-come first-served basis. 
(v) Other levies and charges 
63. A surcharge is levied on petroleum imports (Pet roleum Business Act, 1977) to provide funds 
to ensure adequate supply and price stability.  Th e surcharge paid by petroleum refiners and oil 
importers is currently set at W 16 per litre.  Since 1982, the Government also has promoted diversification of oil imports away from the Middle East towards other regions, especially the 
                                                     
 
42 Korea notified the WTO of the methods and agencies of administrating TRQ goods in May 1995, 
and will notify any changes at a later date. 
43 APEC (2007). 
44 APEC (2007). 
45 APEC (2007). WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 54 
 
 
Americas, Africa, and Europe, including the Russian Federation.46  To this end, surcharges on 
non-Middle East oil imports are lower to offset their higher transport costs.  
64. There are no other additional levies or surcharg es applied to imports, apart from domestic 
indirect taxes, which apply equally to domestically produced goods. 
(vi) Import licensing, quotas, and prohibitions 
(a) Licensing 
65. In addition to the Foreign Trade Act, 48 separat e laws stipulate requirements for approval or 
authorization of certain items, which can be importe d by obtaining certification, permission, and type 
approval.47  These requirements are maintained mostly fo r the protection of public morals;  human 
health, hygiene, and sanitation;  animal and plan t life;  environmental conservation;  or essential 
security interests, in compliance with domestic legi slation requirements or in ternational commitments.  
To enhance transparency and for the convenience of  trading companies, the Consolidated Public 
Notice, containing all export and import certificati on requirements stipulated in the 48 separate laws, 
is updated by MKE semi-annually.  These requireme nts cover about 1,000 tariff items, including 
petroleum, LPG, agricultural fertilizers, crop seeds, animals and animal products, nuclear materials, 
narcotics, foods and food additives, forei gn publications, firear ms, and explosives.  
66. Fourteen ministries and/or agencies oversee the implementation of the certification, 
permission, and type approval requirements.48  According to the authorities, import licence 
applications are screened or checked in a "fai r" manner by the relevant government agency or 
producer association commissioned by that agen cy to ensure that the product meets import 
requirements.  Since the agency responsible for checking conformity with these requirements must 
produce a confirmation paper, granting this authorit y to producer associations does not, according to 
the authorities, disadvantage imports through potential  conflict of interest.  Health- or safety-related 
products, such as pharmaceuticals, require add itional testing or certification by designated 
organizations before clearing customs.  Imports th at do not comply with standards and/or testing 
requirements may be banned.  MKE also approves special items defined in its Annual Trade Plan 
(firearms, illicit drugs).  The Ministry of Environmen t is responsible for impor t and export permits of 
endangered species.  Korea belongs to the Conventio n on International Trade in Endangered Species 
of Wild Fauna and Flora (CITES).   
67. Since 2004, Korea has submitted regular Replie s to the Questionnaire on Import Licensing 
Procedures to the WTO Committee on Import Licensing;  its latest notification was on 
24 September 2007.49  
(b) Quotas 
68. Only rice remains subject to import quota rest rictions under Korea's WTO minimum market 
access (MMA) commitments under Annex 5 of the WTO Agreement on Agriculture (so-called 
"special treatment"), which permitted the continua tion of quota restrictions with a growing MMA 
undertaking over a ten-year period (i.e. until 2004).50  In 2004, Korea negotiated a ten-year extension 
of the MMA arrangement.  Under the re-negotiated a rrangements, Korea is obliged to import close to 
                                                      
46 Middle East oil dependency has been lowered from 90% (1980s) to 80%. 
47 WTO document G/LIC/N/3/KOR/6, 27 September 2007. 
48 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/6, 27 September 2007. 
49 WTO document G/LIC/N/3/KOR/6, 27 September 2007. 
50 APEC (2007);  and USTR (2007). Republic of Korea WT/TPR/S/204/Rev.1 
 Page 55 
 
 
8% of its domestic consumption of rice by 2014.  The extension called for Korea to double its total 
rice imports over the ten years from 2004, increasing the MMA quota from 205,228 tonnes (on a milled basis) to 408,700 tonnes in 2014.
51  Under the revised arrangements rice imports available for 
table consumption should increase from 10% of the quota in 2005 to no less than 30% by 2010.  Due 
to the delayed ratification process in the National Assembly (23 November 2005) after the conclusion 
of the rice negotiation, the MMA commitments are cont racted at the end of the year and imported and 
sold the next year (Chapter IV).  The Korea Ag ro-Fisheries Trade Corporation, which has been in 
charge of importing and managing MMA commitment s on rice since 1999, accounted for 76% of rice 
imports in 2007.  Imported rice is purchased thr ough open bidding and on-sold to the MIFAFF at 
import price.52  It is used for food processing or is sold  directly to consumers (since April 2006).  
69. The cost of this type of protection to the Ko rean consumer is reflected by the differential 
between the average price on the international market  for rice and Korea's farm gate price for rice.  
According to data supplied by the authorities, this  price ratio, i.e. domestic price compared to 
international price, has dropped from 5.2 (2001-02) to 3.7 (2006-07). 
(c) Prohibitions 
70. Korea prohibits a few imports, mainly to protect health, safety, security, public morality, the 
environment, and natural resources, and to prevent deceptive practices, in accordance with 
multilateral trade and other agreements, according to the authorities.  Prohib ited products include:  
certain pornographic and other unacceptable materi al;  goods that reveal confidential government 
information or intelligence activities;  and counterfe it currency or financial instruments.  Korea does 
not maintain any trade embargoes with other count ries.  Trade with North Korea requires approval 
from the Ministry of Unification;  it grew steadily between 2004 and 2007. 
(vii) State trading 
71. Korea has not updated its WTO notification on state trading since 199853;  the authorities 
indicate their intention to submit a notification in 2009.  Despite privatization efforts, the State 
participates in a wide-range of trade and/or trade- related activities (section (4 )(iv)).  In addition to 
enterprises owned and controlled by the Central G overnment, there are public enterprises with 
multiple and strong managerial and operational ti es to the Government, and enterprises owned and 
controlled by local authorities.  Government agen cies (e.g. MIFAFF and the Korea Agro-Fisheries 
Trade Corporation) are authorized to allocate and/or operate tariff quotas as well as quotas in the context of Korea's WTO commitme nts in agriculture, thus affecting quota utilization and price 
mark-ups (section (iv)(a) and (vi)(b)).  A number of products (potatoes, ginger, sesame, etc.) are no 
longer imported exclusively by the designated agency, but are also imported by private importers 
buying quotas at agency auctions.   
(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 
                                                     
 
51 Korea's minimum market access commitments are ba sed on fiscal year while imports are based on 
crop year (1 November to 30 October of the following year).  The modifications and rectifications to Schedule 
LX – Republic of Korea, relating to the rice import ta riff quota, were certified in April 2005 and became 
effective on 23 November 2005  (WTO documents WT/LET/492 of 12 April 2005, and WT/LET/504, 
5 December 2005). 
52 Imported table rice is sold through open bidding and reaches consumers through trade marketing 
routes, wholesalers, and dealers. 
53 WTO  document G/STR/N/4/KOR, 10 December 1998 . WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 56 
 
 
(2001).  The Korea Trade Commission (KTC) admi nisters the measures and investigates and 
determines whether imports are du mped or subsidized and whether they cause or threaten to cause 
injury to the domestic industry.  KTC investiga tions under emergency safegua rd provisions determine 
whether imports have caused or threatened to cau se "serious" injury to domestic industry. The 
decision on the imposition of anti-dumping and count ervailing duties is taken by the Ministry of 
Strategy and Finance (MOSF). 
73. Korean legislation on contingent protection a nd KTC's practices has not changed substantially 
during the period under review.  An early 2008 am endment stipulated that the review process of 
anti-dumping duties is to be conducted identically to  the original investigation process;  it also 
stipulated the calculation method of the dumping marg in pursuant to paragraph 4 of Article 9 of the 
WTO Agreement on Anti-dumping. 
(a) Anti-dumping and countervailing measures 
74. Between 2003 and end 2007, Korea initiated 47 an ti-dumping investigations involving mainly 
chemicals, paper and paperboard, wood articles, and machinery from mainly  China, Japan, the EC, 
and the United States (Chart III.4).  In June 2007, Korea had final measures consisting mostly of 
definitive duties on imports from ten countries (Table III.3).  Korea has taken no countervailing 
measures since its last Review.  
75. Since its last Trade Policy Review, Korea has regularly submitted semi-annual reports on 
actions in this area to the relevant WTO Committees. 
(b) Safeguards  
General 
76. Safeguard measures include tariff adjustment s and import quotas to facilitate structural 
adjustment. 
77. During the period under review, Korea has not used safeguards to protect domestic industries. 
Sector-specific 
78. Since its last Review, Korea ha s used the special safeguard provisions (SSG) under Article 5 
of the WTO Agreement on Agriculture, allowing for an additional duty of up to a third of the level of 
the applied tariff on agricultural imports if thei r prices (or quantities) fall below (or rise above) 
specified trigger levels.  The decision to impl ement such measures is made annually by MOSF 
through a ministerial ordinance, at the request of the MIFAFF.  Where both volume-based and 
price-based SSGs could be triggered, they are to be invoked selectively in order to avoid concurrent 
invocation.  While Korea reserved the right to apply SSG provisions to 125 agricultural ten-digit tariff 
items in 2007, they are in practice applied to a sm all sub-set of items.  To implement these provisions, 
a Special Safeguard Tariff Schedule is issued annua lly:  it covered 61 items in 1998, 45 in 2004, and 
33 in 2008.54  The 33 SSGs currently in place, comprise 8 volume-based (e.g. buckwheat and wheat 
groats), 20 price-based (e.g. wheat starch, ra w ginseng, red ginseng) and 5 both price- and 
volume-based (e.g. green and red beans).  
 
                                                      
54 WTO document G/AG/N/KOR/39, 1 March 2007. Republic of Korea WT/TPR/S/204/Rev.1 
 Page 57 
 
 
05101520
2003 2004 2005 2006 2007Initiations
Final measuresa
Source :  Notifications to the WTO.Singapore
4.3United States
12.8
 EC25
14.9India
6.4Vegetable
 fats & oils
6.4(b) Initiations b y product 
Per cent(c) Initiations b y origin 
Per centChart III.4
Anti-dumping cases, 2003-07
(a) By number of initiations and final measures
Ceramics, 
glassware  4.3
Textiles 
6.4
China
25.5Canada
6.4Othera
14.9
Plastics
12.8Japan
14.9
a             Argentina, Brazil, Chinese Taipei, Indonesia, Malaysia, New Zealand, and the Russian Federation with one 
               case each.a     Final measures for the reported initiations.
Machinery & 
mechanical appliances
10.6
Base metals 
6.4
Paper & 
paperboard
17.0Chemicals
23.4Wood & articles 
thereof
12.8
 WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 58 
 
 
Table III.3 
Anti-dumping measures, end-December 2007 
Country Product Date of definitive measure 
Definitive duties in force 
Canada Choline chloride 20/10/04 
China Ferro-silico manganesea 03/12/03 
 Uncoated woodfree papera 07/11/03 
 Sodium dithionite 23/06/04 
 Choline chloride 20/10/04 
 Titanium oxides 02/03/05 
 Ceramic tile 30/12/05 
 Polyester filament draw textured yarn 20/10/06 
 Polyvinyl alcohol 12/12/06 
India Choline chloride 20/10/04 
 Stainless steel bar 30/07/04 
Indonesia Uncoated woodfree papera 07/11/03 
Japan Aluminum hydroxidea 18/07/03 
 Stainless steel bara 30/07/04 
 PVC platea 20/12/04 
 Industrial robot with 6-axis vertical  multi-articulation structure  18/04/05 
 Guide hole puncher 23/11/06 
Malaysia Polyester filament draw textured yarn 20/10/06 
Spain Stainless steel bar 30/07/04 
Singapore Polyvinyl alcohol 12/12/06 
Chinese Taipei Polyester filament draw textured yarn 20/10/06 
United States Choline chloride 20/10/04 
 Polyvinyl alcohol 12/12/06 
Price undertakings in force 
China Ferro-silico manganeseb 03/12/03 
 Uncoated woodfree paper 01/06/07 
Indonesia Uncoated woodfree paperb 01/06/07  
Japan Aluminium hydroxideb 18/07/03 
 Stainless steel barb 30/07/04 
 PVC plateb 20/04/05 
a Price undertakings also apply. 
b Anti-dumping measures also apply. 
Source:  WTO notifications (document G/ADP/N/166/KOR, 16 April 2008).  
(ix) Standards and other technical requirements 
(a) Standards, testing, and certification 
79. The Korean Agency for Technology and St andards (KATS), under the Ministry of 
Knowledge Economy (MKE), sets, administers, and disseminates Korean Indus trial Standards (KS) 
on the basis of the National Standardization Act and the Industrial Standardization Act.  In 
October 2007, administrative responsibility for the Industrial Standardization Act was transferred 
from MKE to KATS, extending the role of KATS to include planning and coordinating of national 
standards policy.  KATS represents Korea at in ternational bodies, such as the International Republic of Korea WT/TPR/S/204/Rev.1 
 Page 59 
 
 
Electrotechnical Commission (IEC) and the Internati onal Organization for Standardization (ISO).  It 
is the official enquiry point on industrial products under the WTO Agreement on Technical Barriers to Trade, and has accepted the Code of Good Practice fo r the Preparation, Adop tion and Application of 
Standards (Annex 3, WTO Agreement).  Several priv ate bodies perform standardization-related tasks.  
Other bodies designated by KATS to perform sta ndards-related work incl ude the private Korea 
Research Institute of Standards and Science (responsible for metrol ogy standards and measurement). 
80. The process of standard development in Korea is  government led, and is a significant element 
of Korea's industry policy.  The National Standard s Council (chaired by the Prime Minister), which 
has been in charge of standards developmen t and the approval process since 2007, approved the 
second National Standards Plan (2006-2010) in May 2006.  Under the Plan key policy goals are, 
inter alia,  to continue promoting the alignment of Ko rea's national standards with international 
standards, remove technical barriers to trade by  improving the national conformity assessment system 
and ensure active participation in internationa l standardization activities and mutual recognition 
agreements.
55  Regulatory authorities are to adopt, wher e possible, international standards when 
setting up or modifying technical or voluntary standa rds.  The National Standards Council reviews all 
standards and coordinates domestic and international standards.  
81. The Korean standardization system consisting of  technical regulations (mandatory standards) 
developed by ministries and government agencies, and standards (voluntary) (KSs) set by KATS.  In 2006, 2,945 Korean standards were contained in t echnical regulations by 22 government ministries 
under 65 regulations.
56  At end 2006, mandatory standards repre sented 15% of total KSs.  At the end 
of 2007, 22,760 Korean (industrial) standards had b een adopted, an increase of 702 over the previous 
year;  the number of Korean industrial standards ha s doubled over the last five years.  By 2007, the 
allocation of all KSs on a sectoral basis, was:  chemicals, clothing, ceramics (24%);  machinery (18%);  electricity (15%);  steel, mining, construc tion (13%);  transportation, shipbuilding, aircraft 
(10%);  information industry (8%);  and health, food, etc. (12%).  At end 2007, 13,957 of 13,969 Korean standards that had corresponding ISO/IE C standards (international standards) had been 
harmonized.  About 30% of Korean standards had been  established by reference to other international 
standards excluding ISO or IEC.  Non-harmonized sta ndards are those that are either unique to Korea, 
with no corresponding international norm, such as for kimchi, or cannot be harmonized because of their link to other domestic regulations;  roughly 9% of KSs have been established without any 
reference to international standards.  In 2007, appr oximately 61.4% of Korean Standards were subject 
to international ISO/IEC harmonization.  Another 150  Korean standards are to be harmonized in 
2008-09 either by adopting international standards as new KSs or by revising existing relevant KSs.  
82. Reportedly, Korean standards are being adopt ed with increasing frequency as international 
norms, not least in the semiconductor and electronics fields.
57  Four digital signature technologies 
proposed by Korea have been published as ISO/IEC standards, and five electronics technologies have 
been published as IEC standards.  The IEC is currently assessing 16 Korean technologies in the 
semiconductor and display device fields for possible adoption.  
83. KATS reviews standards every five years, or earlier if required.  New or revised standards are 
published in the Official Gazette .  KATS has operated a web-based KS Development System to 
support establishment, revision, and withdrawal of KSs since 2003;  in 2006, KATS improved, 
                                                      
55 APEC (2007). 
56 APEC (2007). 
57 APEC (2007). WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 60 
 
 
inter alia,  the functions of the system to achieve faster and more accurate processing of work along 
with an e-payment settlement system, and rein forced the historical management function.58 
84. Priorities for standards harmonization are new technology products, including IT, and 
services (since December 2001).  In 2007, KATS select ed five priority areas from which to develop 
about 916 new KSs:  next-generation growth engines;  service industries;  public safety and 
convenience sector;  energy development sector;  and national infrastructure sector.59 
85. At end 2007, Korea had concl uded bilateral MoUs with 30 agencies from 24 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.60  To help Korean companies duly and swiftly 
respond to technical barriers to trade, KATS establishe d a TBT division to address  related issues;  the 
division is exclusively responsib le for WTO/TBT-related affairs.61  Starting on 1 February 2007, 
KATS launched an information service on technological regulations of respective countries, which are 
notified to the WTO.  In February 2007, KATS al so launched a TBT Notific ations Alert Service, 
which transmits TBT notifications to stakeholders  by e-mail and encourages them to submit their 
comments. 
86. The authorities indicate that there are very fe w "Korea-specific" standards and that these are 
only maintained where there are no equivalent inte rnational standards and when there is sufficient 
justification to maintain them.  Moreover, "Korea- specific" standards are not prepared, adopted or 
applied with a view to creating unnecessary obstacles to international trade.  Transparency and the 
opportunity for interested-parties to participate in  the development or review process of KSs are 
ensured.  KATS is in charge of efforts to adopt uniform standards among ministries, which is the goal 
of the Second National Standards Plan 2006-10. 
Food and other non-industrial products 
87. Legislative responsibility for regulating food saf ety and quality is dive rsified and overlaps 
with several ministries, which often perform simi lar activities.  Responsibility for food safety, 
pharmaceuticals, and cosmetics rests with the Mini stry of Health, Welfare and Family Affairs 
(MIHWFA) and its agency, the Korea Food and Drug Administration (KFDA).62  KFDA ensures that 
domestic and imported food products (except meat, dairy, and egg products, which are handled by the 
MIFAFF) are sanitarily safe and correctly labelled.  The MIFAFF is responsible for fish products, and 
its National Fisheries Products Quality Inspection Se rvice inspects fish imports (and exports).  The 
KFDA regulates domestic and imported salts, except fo r industrial salt, which is inspected by MKE.  
The KFDA also inspects imported alcoholic beverages.   The Ministry of Environment is responsible 
for the safety of bottled water.  
88. The main laws affecting food standards and sp ecification are the Food Sanitation Act of 1986 
(amended in 2008), the Food Code and the Food Add itive Code.  To facilitate harmonization, the 
Food Code and the Food Additives Code have b een modified significantly (twice in 2006), and 
further changes are expected.  All f ood additives require pre-approval.  
                                                      
58 MOCIE/KATS (2007). 
59 MOCIE/KATS (2007).  See also APEC (2007). 
60 MOCIE/KATS (2007). 
61 MOCIE/KATS (2007). 
62 The Food Safety Bureau develops general policies on food safety management and provides 
guidance to food-related businesses.  It supervises  overall food hygiene accordin g to Codex provisions, and 
manages import and export inspection and certification systems.   Republic of Korea WT/TPR/S/204/Rev.1 
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89. Environmental risk assessments on biotechnol ogy crops, became mandatory when Korea 
ratified the Cartagena Bio-safety Protocol on 3 Octo ber 2007 and entered in force on 1 January 2008.  
The KFDA maintains a policy of zero tolerance for the presence of biotechnology products in 
processed food that is labelled as organic.63  KFDA has authority to conduct mandatory safety 
assessments to evaluate genetically modified organisms (GMOs) in products used for human 
consumption;  Korea implements the Advanced Informed Agreement Pro cedure and Labelling as well 
as labelling requirements for GMOs and LMOs.64  
90. Pharmaceuticals require pre-approval from the KFDA, often involving extensive clinical 
testing and other requirements.  Manufacturers must submit detailed data on certain active 
pharmaceutical ingredients under the KFDA's Drug M aster File.  KFDA may require foreign drug 
companies to duplicate overseas clinical t ests in Korea to obtain local test data.65  In addition, claims 
persist that KFDA's requirements for a Bridging Study to register a new product are inconsistent with 
international practices.  The authorities indicate that  the submission of a Bridging Study is based on 
ICH E5 (ethnic factors in the acceptability of foreig n clinical data), and if the product proves its ethnic 
insensitivity, it is exempt from such requirement in accordance with the Regulation on Review of 
Safety and Efficacy of Pharmaceutical Products.  No  change has been made to the Pharmaceutical 
Equivalence Testing (PET) requirements since 2004. 
91. KFDA administers registration requirements on imported and domestically produced 
"functional" cosmetics;  all cosmetics must pass quality tests set for each product type by KFDA.  
Regulations on "functional" cosmetic s (e.g. sunscreen lotion) have been applied since 2000 (Cosmetic 
Act).  Korea is moving to a system of self-regula tion;  in December 2007, the Enforcement Rule of 
the Cosmetic Act provided for exemptions of f unctional cosmetics from sc reening requirements.  
Quality testing results submitted by overseas ma nufacturers with internationally accepted quality 
standards are accepted without the need for additional quality testing in Korea.  Quality inspection by 
the importer of cosmetics is required, according to batch numbers. 
Conformity assessment 
92. 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 provid es accreditation for product certification bodies.  
Accreditation accords with internationally recognized  standards.  There are currently 280 accredited 
testing laboratories (182 in 2004), 194 calibrati on laboratories (164 in 2004), 89 inspection bodies 
(22 in 2004), and 9 product certification bodies.   KOLAS is recognized by the International 
Laboratory Accreditation Cooperation (ILAC).  The relevant regulatory authority processes 
certification for technical regulations using test  reports from government-designated laboratories.66  
The Korean Accreditation Board (KAB), a non-profit , private organization, is one of the accreditation 
bodies dealing with certification of quality (ISO 9000)  and environmental management systems (ISO 
14000).  It has accredited 34 certification bodies (sam e as in 2004) for Quality Management Systems 
(QMS) and 30 for Environmental Management Systems (25).  
                                                      
63 USTR (2007). 
64 This procedure refers to the first intentional transboundary movement of living modified organisms 
(LMOs) for intentional introduction into the environment of Korea (APEC, 2007). 
65 EU Chamber of Commerce in Korea online information, "Trade Issues and recommendations 2007".  
Viewed at:  http://trade.eu cck.org/site/2007/en/trade16. htm [20 December 2007]. 
66 Seven ministries, one agency and one commission operate government-designated testing 
laboratories under 29 regulations as per the mandatory certification system.  WT/TPR/S/204/Rev.1 Trade Policy Review 
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93. In 2007, KATS planned to establish a module sc heme of conformity assessment for the legal 
mandatory certification system.67  It also planned to use a National Mark, integrating the different 
legal mandatory certification marks of several ministries.  KATS plans to promote private certification to create environments for self-regulat ory growth and development with the goal of 
minimizing market intervention. 
94. Certification authorities are encouraged to  negotiate mutual recognition arrangements 
(MRAs) with foreign counterparts.  KOLAS signe d the ILAC Multilateral Recognition Arrangement 
(MLA) in 2000 for testing and in 2001 for ca libration; 58 accreditation bodies from 46 countries 
participate in ILAC MLA.  KAS became a signatory  to the International Accreditation Forum (IAF) 
MLA for bodies operating product certification systems in 2007.  Korea also has an extensive network of MRAs, especially with APEC economies.  KAS joined the Pacific Accreditation System (PAC) in 
2001.  KAB signed the IAF MLA for Quality Manageme nt Systems in 1999, and joined the IAF MLA 
for Environmental Management Systems in 2004.  Korea is also a member of the APEC MRA on 
Conformity Assessment of Telecommunications Equipment (Phase I) and of Part I of the APEC 
Electrical MRA.  It is considering whether to participate in Parts II and III.  
95. Korea maintains an APEC-TEL MRA with Ca nada (1997), the United States (2005), and 
Viet Nam (2006) on recognition of test results fo r telecommunications equipment, and an MRA with 
Singapore (2006) on telecommunicati ons equipment and electrical and electronic appliances under the 
Korea-Singapore FTA.
68  Over recent years, according to the OECD, substantial improvement has 
been made in Korea's automobile standards and cer tification procedures.  In the area of automobile 
certification, under a self-certification system, in place since 2003, vehicles must be labelled as such and manufacturers or importers are liable for product defects.  All new standards on safety were based 
on international standards (i.e. ISO/IEC st andards, UN/EEC regulations and FMVSS).  
96. A NEP (New Excellent Product) certification syst em has been in place since January 2006.  
NEP certification is provided for products manufactured with new technologies developed first in 
Korea or with innovative technologies improved from existing technologies.  The certificate is valid for three years.
69  NEP-certified products receive government support for expansion of sales channels 
and for acceleration of technology development.  Products certified as NEP receive an additional 
point in procurement by government and public organizations. 
97. KFDA has facilitated food imports through two syst ems:  the "officially authorized inspection 
agencies in foreign countries" (since 1996) includ es 47 agencies in 9 countries.  Certified imports 
from these agencies are not inspect ed in Korea;  under the "pre-confirmed registration system of 
imported foods" (since August 2002), foodstuffs pre- approved and registered based on advanced test 
certification and pre-inspection at the exporter's pr emises are exempt from import inspections.  Such 
approval is provided on a product-by-product basis;  non-processed products are excluded.  Overseas 
test results submitted by foreign inspection agen cies are accepted by KFDA for imported food, which 
is therefore exempt from KFDA testing.  Kor ea has not joined the APEC MRA on Conformity 
Assessment of Foods and Food Products. 
98. To further facilitate expeditious entry of imported food, the KFDA has reformed its 
inspection system.  It abolished the periodic laborator y test for agricultural products (every year) or 
processed food/food additives (every  three years) for the same food from the same company.  
According to its Information Strategy Plan 200 4-2006, the KFDA established the electronic civil 
                                                      
 67 MOCIE/KATS (2007). 
68 APEC (2007). 
 69 MOCIE/KATS (2007).  Republic of Korea WT/TPR/S/204/Rev.1 
 Page 63 
 
 
service system to provide the public and industry with integrated administrative service including 
registering and licensing of business, reporting of food imports, etc. 
WTO enquiry points, notification, and disputes 
99. Between April 2004 and December 2007, some 140 notifications were submitted under the 
WTO Agreement on Sanitary and Phytosanitary Measures (the SPS Agreement).  This includes 
125 regular notifications of new or changed SPS re gulations and two emergency notifications;  the 
rest are updates.  During the same period, Korea made 96 notifications under the WTO Agreement on Technical Barriers to Trade. 
100. Although national standards or t echnical regulations in any country are sometimes perceived 
as barriers to foreign competition, in recent years no country has found sufficient grounds or reason to 
challenge Korea's industrial standards in the WTO.
70  One dispute related to the shelf life of food 
products (see below) was resolved without recourse to a dispute settlement panel.  Since April 2004, 
three Members have raised specific concerns in  the SPS Committee about measures maintained by 
Korea.71 
(b) Quarantine regulations 
101. Korea is a member of the FAO/WHO Codex Alimentarius Commission (Codex), World 
Organisation for Animal Health (OIE), and FAO In ternational Plant Convention (IPPC);  it applies 
animal and plant quarantine requirements based on th ese international standards.  Its main laws on 
quarantine requirements for imports (and exports) are the Plant Protection Act and the Act for 
Prevention of Livestock Epidemics.  Plant quarantin e and phytosanitary controls are handled by the 
National Plant Quarantine Service (NPQS);  the Na tional Veterinary Research and Quarantine Service 
(NVRQS) conducts animal quarantine and sanitary regulations.  Both agencies are under MIFAFF. 
102. NPQS inspects imported plants or plant pr oducts.  Imports must have a phytosanitary 
certificate issued by the competent authority in the exporting country.  Imports of soil, plants with 
soil, and import prohibited plants or vegetable ma terials are banned.  Imports of rice in the husk, 
chaff, rice straw are prohibited from all countries, except Japan and Chinese Taip ei, for pest reasons.  
Plants for planting are also prohibited or restricted from most countries.72 
103. Korea's guidelines on the marketing of genetically  modified agricultural products (GMAPs), 
such as seeds and grains (Cons olidated Notice on the Transboundary Movement of Genetically 
Modified Organisms), apply equally to domestic and imported GMAPs.   The Administrator of Rural 
Development Administration must approve importation/production based on the applicant's 
environment risk assessment, which must provide supporting scientific and ri sk-assessment data.  The 
Government also conducts its own environment risk  assessment, and confined field trials in Korea 
may be also required.  As from 1 January 2008,  Korea has allowed GMAP  production and imports.  
Quarantine funding has been increased s ubstantially to detect GMAPs.   
                                                      
70 APEC (2007). 
71 The United States raised a concern related to citrus exports from California, which Korea has banned 
since April 2004 due to concerns related to the presence of certain fungi.  This concern was subsequently 
reported as resolved.  In 2007, Canada, supported by the European Communities, raised a concern regarding 
Korea's BSE-related measures.  Canada had formally requested a justification of this measure, which went beyond international standards.  Also in 2007,  Brazil expressed concerns about Korea's lack of recognition of 
regionalization (Article 6 of the SPS Agreement) with respect to foot-and-mouth disease.  These concerns have 
apparently not yet been resolved. 
72 WTO (2004). WT/TPR/S/204/Rev.1 Trade Policy Review 
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104. Animal and animal products are subject to laboratory (microbiological, seriological, and 
pathological) testing and epidemiological investigations to verify they are not from disease-infected import-prohibited regions.  Korea bans imports, fo r example, of live cattle, sheep, and goats, and 
certain products from countries where BSE and foot and mouth diseases are known to occur.
73  It also 
extended bans on imports of poultry and relate d products to China and Thailand following the 
outbreak of bird flu in January 2004.  According to  the authorities, Korea applies the same quarantine 
measures to domestic a nd imported products.   
105. Korea ratified the Convention on Biological Dive rsity (CPB) in 2007 and has implemented it 
since 1 January 2008.  In order to implement th e CPB domestically, Korea notified the revised LMO 
Act (2007) to the WTO74;  since then opinions of exporting countries have been collected and are 
considered.  The MIFAFF has completed 44 out of 52 applications for review of environmental risks 
of LMOs. 
(c) Marking and labelling 
106. KDFA has continued to review food labelling st andards to update and harmonize them with 
international requirements, especially the Codex ge neral standard, the Codex general standard for 
food additives, the Codex general guidelines on claims, and the Codex guidelines on nutrition 
labelling.75  In August 2007, the requirements for end-u se labelling of alcoholic beverages other than 
soju, beer, whisky and brandy, were changed;  th is may result in a reduction of the inventory burden 
for importers.  In March 2007, ne w labelling rules requiring the name of the domestic manufacturers 
or the importer to figure on some form of label or hangtag on every garment were put in place.    
107. Origin labelling requirements are applied equa lly to imported and domestic goods.  Origin 
labelling is mandatory for food and many othe r imports (674 four-digit tariffs).  Since 
November 2005, the Korea Customs Service (KCS) has operated an Origin Mark Registration and 
Retrieval System, which records digital images of origin marks on import goods and enables users to 
check the markings by trader or item.76  The system protects consumers' interests by matching origin 
marks of goods at the importation point and the post-clearance stage;  the KCS has cracked down on 
manipulation and destruction of markings ( section (4)(vii)(e)).  At end-December 2007, 
923,166 origin marks were registered in the system's database. 
108. Mandatory biotechnology labelling requirements apply for genetically modified corn and 
soybeans as well as for processed foods containing these products, including soybean sprouts and 
fresh biotechnology potatoes.  Since September 2002,  Korea has accepted a notarized self-declaration, 
instead of requiring full documentation, to certif y products that are exempt from biotechnology 
                                                      
73 At high-level negotiations with the United States on 18 April 2008, Korea agreed to expand imports 
of U.S. beef in stages by amending the Health Requirements.  At a first st age, Korea planned to allow imports of 
U.S. beef and beef products (including de-boned and bone-in beef, offals and variety meats and products) from 
cattle under 30 months of age.  At a second stage, it planned to permit imports of beef from cattle aged 
30 months or older if the United States promulgates the enhanced feed ban (21 CFR 589 2001) recommended by 
the OIE.  The United States promulgated the enhanced feed ban rule on 25 April 2008.  On 26 June 2008, the 
Korean beef market was opened to U. S. beef and beef products with a priv ate sector transitional arrangement to 
only trade in U.S. beef from animals under 30 months of age until Korean consumer confidence improves.  The 
United States established a Quality System Assessment (QSA) programme for Korea to facilitate the private 
sector arrangement. 
74 WTO documents G/SPS/N/KOR/198, 10 January  2006, and G/SPS/N/KOR/2 56, 27 August 2007. 
75 APEC (2007). 
76 Korea Customs Service online information, "KCS launched Origin Mark Registration and Retrieval 
System", 21 November 2005.  Viewed at: http://englis h.customs.go.kr/kcsweb/user.tdf [5 October 2007]. Republic of Korea WT/TPR/S/204/Rev.1 
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requirements.  Importers or manufacturers must  keep records for up to two years to prove that 
unlabelled foods subject to GMO labelling requirements are GMO free. 
(x) Government procurement 
109. In 2006, Korea's government procurement market was about 10% of GDP (12% in 2004).  
Korea operates international tendering and othe r procurement procedures in accordance with its 
commitments under the WTO Plurilateral Agreement on Government Procurement (GPA).  Although 
government procurement is directed at achieving "value for money", it also focuses on promoting SMEs and regional development.
77  Korea's international tendering system is based on open 
competitive tendering.  According to authorities, restricted tendering is rarely used.78  F o r  
GPA-covered entities, contracts subject to Korea' s commitments represented about 38.4% of total 
GPA-covered procurement in 2004.79  More than 3% (by value) of these contracts were awarded using 
restricted (limited) tendering.  Procurement by GPA-covered entities repres ented 44.9% of Korea's 
total procurement (excluding defence equipment) in  2004.  More recent data were not available from 
the authorities due to institutional change of respons ibilities for data collection in this area as of 2006.  
110. The main government procurement legislation (Act  on Contracts to which the State is a Party, 
1995) has not changed substantially during the revi ew period;  the Local Government Procurement 
Law (2006) and the Public Enterprises' Contracting Affair Rules (2007) were passed.  The legislation 
covers international and domestic  procurement of goods and services (including construction) by all 
central government agencies.  Procurement by su b-central government entities and public entities are 
regulated by the Act on Contracts to which the St ate is a Party and the Act on the Management of 
Non-Departmental Public Entities.  Although purcha se 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.  Proc urement from SMEs is covered by the procurement 
legislation and the Promotion of SMEs and Encour agement of Purchase of Their Products Act.  The 
comprehensive 2004 Law on the Promotion of Envi ronmentally Friendly Product (implemented in 
July 2005) requires government agencies and SOEs to give top priority to environment-friendly 
products;  it applies to 55 central government agencies, 444 local government bodies, and 220 enterprises affiliated with central and local government agencies.
80  The law makes mandatory the 
purchase of environmentally friendly products but provides exceptions for quality and availability 
reasons as well as emergency procurement needs.  
111. Some government procurement is conducted by  the central procurement agency Public 
Procurement Service (PPS).  The role of the PPS is changing progressively and, by implication, responsibility for purchasing will be further decentrali zed to agencies.  As of 2008, local governments 
are fully authorized to procure goods and servi ces independently.  Construction works by local 
governments will be contracted as from 2010.  Ce ntral government agencies must use the PPS to 
procure goods and services above W 100 milli on (foreign goods and services over US$200,000, 
previously US$100,000);  below that threshold i ndividual government agencies can conduct their own 
purchasing directly.
81  All other public institutions, includi ng SOEs, can procure goods and services 
                                                      
77 APEC (2007). 
78 This consists of limited (by invitation) or nominated (by nomination) competitive bidding and private 
contracts where a specific supplier is used. 
79 WTO document GPA/84/Add.1, 12 October 2006. 
80 EIU (2007). 
81 A higher threshold of W 3 billion applies to cons truction activity on behalf of central government.  
Local governments are required to use PPS for construction projects to be contracted through design-build 
tendering or alternative tendering.  For other types of construction, local governments are allowed to conclude 
contracts independently. WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 66 
 
 
directly, but may choose to use the PPS.  Except fo r defence-related procurem ent, which is conducted 
by the Defense Acquisition Program Administration, the PPS has the following five main functions:  
supply goods and services for government use;  c ontract and manage public works;  stockpile 
13 items of raw materials, such as aluminium and construction materials, to  secure price stability and 
supplies82;  coordinate and audit government goods and real estate property management;  and 
manage and operate the Korea ON-line E-Procurement System (KONEPS) (previously called Government's e-procurement system , GePS).  This system, which is a single window for procurement, 
has digitalized the purchasing process, including regi stration, public notice, bidding, contracts, and 
payment.  PPS's total annual procurement has grown steadily, from W 19.6 trillion in 2002 to 
W 28.3 trillion (2007), of which W 14.4 tr illion was on public works construction.
83  
112. The PPS was in charge of about 30% of Kore a's total government pr ocurement of goods and 
services (excluding defence equipment) in 2005.  So me 70% of Korea's procurement market therefore 
involves procurement directly by public institutions .  Foreign supplies accounted for about 3.1% of 
PPS's total business receipts in 2005, a significa nt drop compared with the period 1991-95, 
immediately prior to Korea's acces sion to the GPA, when government procurement of foreign sourced 
goods by the Office of Supply averaged 9.9% of the agency's purchases.   Reportedly, foreign 
suppliers appear to be losing ground in the Korean  government procurement market due to the highly 
sophisticated and increasingly competitive domest ic suppliers of manufactures and construction 
services, as well as the discontinuation of government  purchases based on international public loans 
(IBRD, OECF), which required international competitive tendering.84 
113. Reportedly, the KONEPS, inter alia,  minimized the risk of untoward influence on purchasing 
decisions.85 It is highly-regarded and acclaimed inte rnationally.  KONEPS has ensured that 
transparency and openness of decision-making ha ve greatly improved.  Transactions conducted 
through KONEPS were approximately W 43.8 trilli on, or 52% of total government procurement 
(W 83.8 trillion) in 2006.  KONEPS is estimated to save US$4.5 billion in costs per year when both the private and public sector benefits are taken into  account, although in a recent review of regulatory 
reform in Korea, the OECD argues that there is room for improvement in utilizing KONEPS.
86   
114. All bidders wishing to participate in PPS-conduc ted tenders must register with PPS.  For 
construction works, it evaluates bids of less than  W 30 billion using an "eligibility screening system" 
based on factors such as past performance, including record in meeting previous contracts, technical 
capability, financial status, adequacy of management  plans, and price.  "Abnormally low or dumping" 
tenders are rejected.87  For contracts exceeding W 30 billion,  PPS uses the lowest bid award system 
after conducting a pre-qualification evaluation.  A pre- qualification system is also used to determine 
eligible bidders for large-scale and complex constr uction projects, if the estimated value exceeds 
W 20 billion and the construction involves one or more  of the 18 trades specified in the relevant law 
(e.g. bridges, tunnels, and subways).  Separate  pre-qualification lists are maintained for each 
                                                      
82 The Minister of Strategy and Finance specifies an nually essential materials that are highly dependent 
on imports.  As of 2007, PPS stockpiled 13 items cons isting of 5 items of non-ferrous metals including 
aluminium and copper, 7 items of rare metals such as nickel and ferro silicon, and chemical pulp.  They are 
purchased by the PPS using international competitive tender s.  On request, these stocks are made available to 
the private industry including SMEs at th e prevailing international market price. 
83 PPS (2007). 
84 APEC (2007). 
85 APEC (2007). 
86 OECD (2007h), page 107. 
87 Bids are evaluated based on estimated prices prep ared by PPS.  Those that exceed these estimates are 
precluded, as are bids that fall below a certain level. Republic of Korea WT/TPR/S/204/Rev.1 
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construction project, based on objective criteria.88  Bid results, including scoring criteria, tenders, 
pre-qualification evaluation, and contract awards  are released on the KONEPS Internet site 
(http://www.g2b.go.kr).  Entities procuring directly  also conduct pre-qualification reviews to 
determine tender eligibility based on similar criteria used by PPS.  Acco rding to the authorities, there 
are no special pre-qualification requirements or restrictions imposed on foreign suppliers.   
115. Contracts are awarded through open competitive tender, unless there are reasons (of "purpose, 
nature, size, etc. of a contract") for awarding by rest ricted tender.  According to the authorities, private 
contract is allowed in some rare cases;  while no data were made available, the authorities indicate 
that the share of open competitive tendering is cons tantly increasing, whereas th at of restricted and 
private tendering is decreasing.  Although defenc e procurement is covere d by the procurement 
legislation (but not by Korea's WTO procurement obligations) and, in principle, conducted by open 
competition, procurement procedures tend to foll ow defence acquisition management practices, 
whereby restricted and private tendering is often used.  With the abrogation of collective private 
tendering system for SMEs in 2006, goods manufactur ed by SMEs are in principle procured under 
competitive tendering as from 2007.  Although private contracts are occasionally used for purchases 
of goods and services not exceeding W 50 million in va lue (W 200 million for construction works) in 
accordance with relevant laws, competitive contra cting is generally used for such purchases from 
SMEs.  The PPS handles procurement from SMEs and other socially weak sectors, such as regional 
companies and female-owned businesses.89  Procurement of goods manufactured by SMEs accounts 
for about 70% of PPS's total domestic procurement of supplies (excluding construction);  total 
government procurement from SMEs was W58. 5 trillion in 2006, of which PPS handled 13%.90  The 
Small and Medium Business Administration provides the criteria of SME products for single tendering procurement and the list of set-asides pr oducts, which are allowed as an exception under the 
GPA.
91  PPS's "competitive bidding system restricted by region" and "compulsory joint sub-
contracting and single source contracting system" has expanded regional opportunities.92  
(3) MEASURES DIRECTLY AFFECTING EXPORTS  
(i) Registration, documentation, and clearance 
116. Most (95% of cases) export declarations that  are submitted electroni cally without supporting 
documents are accepted automatically without exam ination; for goods subject to documentary and 
physical inspection, exporters are required to s ubmit export declarations a nd supporting documents in 
paper to the Customs.  Electronic applications  have expanded and pape rless export clearances cover 
94% of export shipments:  clearance time is under two minutes on average.  
                                                      
88 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).  
89 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 W 8 billion. 
90 Domestic procurement refers to goods, services and leases produced or supplied domestically.  
Page 41 of Part III of PPS (2007). 
91 The scope of single tendering procurement includes five types of technology development products 
and products provided by SMEs in four special support regions.  There are 226 SME products for set-asides in 
2007. 
92 The competitive bidding system "restricted by region" applies to projects valued up to W 5 billion, 
and allows companies located in the construction region to participate in the open competitive tender.  The 
compulsory joint venture system (up to W 7.4 billion as from 2007) 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. WT/TPR/S/204/Rev.1 Trade Policy Review 
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(ii) Export prohibitions, restrictions, and licensing 
117. All commodities may be exported from Kor ea unless included on the negative list (see 
below).  Export prohibitions or restrictions are im posed to enforce quality and sanitary controls or to 
meet international commitments under multilateral e xport control regimes with respect to security, 
e.g. on nuclear products, arms, missile technolog y (Wassenaar Arrangement), chemical weapons 
(Chemical Weapons Convention), c onservation of wildlife (CITES), a nd environmental protection.   
(a) Export prohibitions 
118. 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 
119. Sand and gravel-related items are restricted, to protect natural resources.93  The export quota 
on silk waste to Japan, due to Japanese import rest rictions, was abolished as scheduled in 2005.  
Exports of certain passenger motor vehicles to Chin ese Taipei have been subject to a tariff-rate quota 
since 1977;  this quota with utilization rates ranging from 5.3% (2007) to 61.7% (2005), is to be 
eliminated as of 2011.94   
120. Korea periodically restricts exports of certain pr oducts to ensure adequate domestic supplies.  
Certain agricultural commodities require export authorization by MIFAFF.  Korea "eased" the restrictions on exports of rice and non-beer barley in  2007;  it abolished those on non-beer barley in 
April 2008.  Quotas have been set on the basis of an export-need recommendation for rice exports for 
2007 (34,000 tonnes) and 2008 (47,000 tonnes);  quota allocation takes place on a on a first-come-first-served basis.  There are no qualification require ments for exporters.  According to the authorities, 
export quota levels, which were si milar to those of rice import quo ta levels, were poorly utilized 
(500 to 1,000 tonnes expected in 2008).  In light of the high domestic price and self-sufficiency in rice, it is difficult to understand the rationale for this measure. 
(iii) Export subsidies 
121. 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 (though 
these provisions expired at the end of the Urugua y Round implementation period).  In 2004, these 
subsidies, which  were notified to the WTO Co mmittee on Agriculture, totalled W 25.59 billion, and 
covered fruit (W 11.6 billion), flowers (W 4.2 billion), vegetables (W 6.56 billion), kimchi 
(W 2.05 billion), ginseng (W 1.04 billion), and livestock (W 0.14 billion).
95  The subsidies were used 
to reduce exporters' marketing costs, and are exem pt from WTO reduction commitments.  Korea does 
not consider that income tax relief to industries located in FTZs is subject to WTO notification (section (2)(i)(b)).   
                                                     
 
93 Exports of sand and gravel items have to be approved by the Korean Aggregate 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.  
94 The quota is maintained for nine years (i.e. 2002-10) under the terms of Chinese Taipei's WTO 
accession.  
95 WTO document G/AG/N/KOR/36, 27 February 2007. Republic of Korea WT/TPR/S/204/Rev.1 
 Page 69 
 
 
(iv) Duty and tax concessions 
122. Imported raw materials used in exports ar e exempt from customs duties.  A customs 
drawback scheme provides refunds, including of intern al taxes (Act on Special Cases Concerning the 
Drawback of Customs Duties and Other Taxes Le vied on Raw materials for Export).  The scheme 
also covers supplies to vessels and aircraft operati ng internationally and to pelagic fishing vessels.  
Since October 2005, the Korea Cust oms Service has been operating an  Internet drawback system 
allowing refund requests to be filed online.  As from 2003, a real time electronic treasury transfer 
system has allowed the Bank of Korea to make electronic refunds to exporters.  The seemingly 
complex method used to calculate the amount of draw back has not changed since the last Review of 
Korea.  Refunds totalled US$2.6 billion in 2007 (US$1. 8 billion in 2003), equivalent to about 
one quarter of tariff revenue.  
(v) Export finance, guarantees, and insurance 
123. The government-owned Export-Import Bank of Korea (EXIM-Bank) provides export and 
trade finance to Korean firms and foreign buyers.  Guarantees are also provided to foreign buyers 
against exporters' failure to meet contractual arrangements.96  The Government ensures the Bank's 
solvency by covering any net losses beyond reserves.  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) is 
available provided the "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, such as 
maximum repayment periods, specified in the OE CD Arrangement on Officially Supported Export 
Credits.97  EXIM-Bank support for ship exports meets the requirements of OECD's revised Sector 
Understanding on Export Credits for Ships.  In 2 007, ships comprised the largest portion among items 
supported under export credit with W 2,476 billion (18. 1% of the total), followed by industrial plant 
with W 1,759 billion (12.9%), and machinery with W 725 billion (5.3%).98 
124. The state-owned Korea Export Insurance Cor poration (KEIC), under MKE, provides export 
credit insurance against non-payment risks (Export In surance Act, 1968).  It promotes exports by 
insuring against risks that are not privately in surable and, according to the authorities, assists 
exporters to compete on a level playing field with competitors assisted by government-supported foreign export credits.  KEIC supplies export insu rance against losses due to political and commercial 
risks.  The maximum coverage for medium- and l ong-term export insurance is 100% of the contract 
value (less any required cash payment) as per OE CD Guidelines on Officially Supported Export 
Credits.  Most beneficiaries are exporters of ca pital goods (e.g. industrial plant, machinery, and 
vessels).  Total exports underwritten rose by 13% to W 82.66 trillion (almost one fifth of total 
exports) in 2006 (73% covered short-te rm insurance) compared with 2005.
99  
(vi) Export promotion and marketing 
125. Korean exporters benefit from the promotiona l activities of the state- owned Korea Trade and 
Investment Promotion Agency (KOTRA).  It ope rates a "business matchmaking" service introducing 
                                                      
96 EXIM Bank online information.  Viewed at:  http://www.koreaexim.go.kr/. 
97 Korea fully implemented the OECD Arrangemen t as from 31 March 2002 when transitional 
arrangements expired.  Maximum repayment periods are:  12 years (ships, non-nuclear power plants);  15 years (nuclear power plants);  and 5-10 years for other products, pursuant to the OECD Arrangement. 
98 EXIM Bank online information.  Viewed at:  http://www.koreaexim.go.kr/en/about/m01/s08_01.jsp 
[16 January 2008]. 
99 KEIC (2007). WT/TPR/S/204/Rev.1 Trade Policy Review 
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foreign importers to Korean businesses.  KOTRA also organizes or assists with trade missions and 
exhibitions domestically and overseas.  MKE also  operates 11 export centres to provide SMEs with 
export-related information and consulting services.  In 2007, total government promotional 
expenditure on exports was W 34.1 billion;  most of which financed participation in overseas trade 
missions and exhibitions.  
126. Since 2001, the Government has helped compani es develop "world class products", mainly by 
funding participation in international trade fairs.  World class products receive an additional point in 
the appraisal process for R&D grants;  584 items we re classified as world class products in 2007. 
(4) MEASURES AFFECTING PRODUCTION AND TRADE  
(i) Taxation100 
127. Total taxes as a share of Korean GDP remain relatively low (19.5% in 2006, Table I.2).  
Korea relies on indirect taxes for 48.1% of tax revenues.  VAT remains the main indirect tax component followed by the transportation (energy-e nvironment) tax;  despite a steadily declining 
trend, customs duties contributed a substantial 4.6%  to total tax revenues in 2007 (Table III.4).  The 
corporation tax and the income tax are also important sources, accounting for 21.9% and 24.1%, 
respectively, of total tax receipts. 
Table III.4 
Structure of direct and indirect tax revenue, 2001-07 
  2001 2002 2003 2004 2005 2006 2007 
Total tax revenue (US$ billion) 74.2  83.1  96.2  102.9  124.4  144.5 173.8 
 (Per cent of total) 
Direct taxes 40.6 40.0 43.6 44.6 46.9 49.0 51.9 
Income tax 19.5 18.4 18.1 19.9 19.3 22.5 24.1 
Corporation tax 17.7 18.5 22.4 21.0 23.4 21.3 21.9 
Inheritance tax 1.0 0.8 1.1 1.5 1.5 1.7 1.8 
Other 2.4 2.3 2.0 2.2 2.7 3.5 4.1 
Indirect taxes 59.4 60.0 56.4 55.4 53.1 51.0 48.1 
Customs duties 6.2 6.3 6.0 5.8 5.0 5.0 4.6 
Value-added tax 27.0 30.4 29.2 29.3 28.3 27.6 25.4 
Special consumption tax 3.8 4.1 4.1 3.9 3.5 3.6 3.2 
Liquor tax 2.6 2.6 2.4 2.2 2.0 1.7 1.4 
Securities transaction tax 1. 9 2.0 1.4 1.1 1.9 1.8 2.1 
Transportation tax 10.7 7.8 7.5 7.3 8.1 6.9 7.1 
Other 7.2 6.8 5.8 5.8 4.3 4.4 4.3 
Source:  Data provided by the Minist ry of Strategy and Finance.  
(a) Indirect taxation 
128. Korea's relatively complex indirect tax struct ure comprises a broad-based VAT, special excise 
(individual consumption) taxes, and other taxes on liquor, property transactions (stamp tax), and 
securities transactions.  There is also a transportati on (energy-environment) tax, education tax, and 
special tax on rural development.  The VAT is levied  on top of other taxes, including import duties, 
where applicable.  Exports are generally exempt fro m indirect taxes, except mainly for special excise 
                                                      
100 For more information on taxes see Ministry of Strategy and Finance (2007). Republic of Korea WT/TPR/S/204/Rev.1 
 Page 71 
 
 
and transportation taxes applied to inputs of pe troleum products used in their production.  For 
example, exports are zero-rated for VAT so that VAT  paid on inputs by exporters and other users is 
fully rebated.  According to the authorities, all i ndirect taxes levied by na tional and sub-governments 
apply equally to imported and domestically produced goods.101  
129. The value-added tax of 10% applies to mo st goods and services;  exemptions cover 
unprocessed foodstuffs, social welfare services, books, educational services, and financial and 
insurance services.   
130. The special excise (individual consumption) ta x applies to a wide range of goods, including 
luxury products.102  Rates vary from 20% (e.g. motorboats, yachts, video cameras) to 5% on cars of 
less than 2,000 cc and motor cycles;  the taxati on of cars will be substantially altered upon 
implementation of the KORUS-FTA.  Special excise du ties also apply, in principle, to petroleum 
products, such as petrol (W 630 per litr e) and diesel oil (W 454 per litre).103  Under a three-year 
extension of its sunset clause, the transportation (e nergy-environment) tax is to be levied on gasoline 
and diesel oil until 2009 (instead of the special ex cise tax).  Flexible transportation tax rates may 
apply to gasoline and diesel oil within a 30% range of  the legal tax rates:  currently, W 472 (25%) and 
W 335 (26%), respectively.  Excise (individual consump tion) tax also applies to certain entertainment 
services, such as casinos (W 3,500 per pe rson), and taverns or saloons (10%).  
131. A special liquor tax on alcoholic beverages is set at ad valorem  rates of:  5% on Takju;  30% 
on Yakju, Cheongju, and fruit wine;  72% on dist illed and diluted soju, whisky, brandy, general 
distilled spirits, liquors and beer.  Spirits (alcohol c ontent 95% or more) are du tiable at a specific rate 
of W 57,000 per kl (plus W 600 for every additional 1% of alcohol). 
132. The securities transaction tax is levied on transf ers of shares or of a business entity.  The 
standard rate of 0.5% applies to the value of secu rities transferred.  A reduced 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. 
133. Conditional exemptions apply to petrol and diesel used in the manufacture of medical goods, 
fertilizers and petro-chemicals.  The education tax,  levied on banking and in surance services, and all 
goods subject to the special excise (individual consumption) tax, the transportation (energy-
environment) 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 special excise (individual consumption) tax (15% in the case of kerosene, 
heavy oil, butane or LPG, and nonanes plus gas (C9+));  15% of the transportation (energy-
environment) tax;  and 10% of the liquor tax (30% for liquors taxed at over 70%).  
134. The special tax for rural development f unds various programmes to support rural 
communities and the agriculture and fisheries sector.  It is a surtax levied on the amount of income exempted from company and personal tax, on th e value of customs duty concessions, and on the 
amount of special excise (individual consumption) tax and securities transaction tax.
104  The current 
rates are:  0.15% for the amount of the securities transaction tax, 5% or 20% for the special excise 
                                                      
101 The VAT base for imports is the c.i.f. price plus customs duties and other taxes, where applicable.  
102 See WTO (2004), Chapter III(4)(i). 
103 Other products taxed are kerosene (W 181 per litre), natural gas (W 60 per litre), fuel oil (W 17 per 
litre), LPG-butane (W 360 per kg) and LPG-propane (W 40 per kg). 
104 It includes exemptions specified under the Special  Treatment Control Law, the Local Tax Law, and 
the Customs Law.  Exemptions under the Company Tax Law, Income Tax Law, and the Foreign Investment Promotion Law are excluded. WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 72 
 
 
(individual consumption) tax, and 20% for exemp tions of company and income taxes as well as 
customs duties.  The tax was extended for a second ten-year period on 1 July 2004. 
135. Some 53 items (35 in 2004) (including red peppe rs, garlic, ginger, natural honey, crude oil, 
gasoline, kerosene, cigarettes, spri ng water, insecticide, chewing gum, diapers, tyres, lubricant, and 
fluorescent lamps) are subject to levies according to 16 relevant laws.  These levies affect domestic 
and imported products and their rates seem to va ry depending on the "circumstances" (projects, 
regulation). 
136. Korea imposes environmental waste charges on cer tain products, materials, and containers 
that contain harmful substances and are difficu lt to recycle (Act on Promotion of Saving and 
Recycling of Resources).  Product categories cover:  containers of insecticid es and poisonous goods;  
anti-freeze solutions;  chewing gum;  disposable nappi es;  cigarettes;  and products made of plastic 
and plastic used in packaging for goods distributed in the market.  The charge is intended to ensure 
that manufacturers bear the cost of processing wast e.  It applies equally to imports and domestic 
goods.105  
Local taxes 
137. Province and city governments apply a range of indirect taxes (16 in 2007), including an 
acquisition tax, to purchases of real estate, motor vehicles, heavy equipment, and boats.  A registration tax is levied on property and motor vehi cles, boats, aircraft, and construction machines, as 
well as certain business registrations and intangible asset s, such as transfers of mining, fishing, and 
intellectual property rights.  An automobile tax applies to passenger vehicl es (depending upon engine 
size), buses, and trucks (depending upon carrying capac ity).  A tobacco consumption tax is levied at 
various specific rates. 
(b) Direct taxation 
138. Personal income tax and corporation tax are th e second and third largest single sources of 
revenue after VAT.  Progressive personal income tax rates range from 8% (income of W 10 million or 
less) up to 35% (over W 80 million).
106  Certain types of foreign workers employed in Korea are 
exempt from income tax.  The corporation tax rate was further reduced in 2005 from 15% to 13% for 
income under W 100 million, and from 27% to 25% for higher income.107 
(c) Tax incentives 
139. 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).  They cover a ra nge of activities, and include income tax relief 
(rate reductions, exemptions, concessions, special in come tax deductions), or credits and commodity 
tax concessions (such as VAT exemptions and zero-rating).  Although tax incentives were to 
terminate at end 2003, many were ex tended twice, until end 2008 or 2009.108  According to the 
                                                      
105 The charges are set at, e.g., W 24.9 per plastic container of insecticide or W 30.7 if it exceeds 
500 ml;  and W 75 or W 150 per kg of the plastic or synthetic resin used for domestic goods. 
106 Taxation for higher income (i.e. W 10 million and above) consists of a fixed amount plus a 
percentage of the amount exceeding the tax base. 
107 Taxation for higher income consists of W 13 million plus 25% of the amount exceeding 
W 100 million. 
108 Currently, the sunset clauses on most tax incentiv es take 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. Republic of Korea WT/TPR/S/204/Rev.1 
 Page 73 
 
 
authorities, out of 55 "non-taxation" and tax reduc tion/exemption benefits due to expire in 2006, 
32 were extended while the remainder were abo lished or scaled back;  15 tax incentives with no 
expiry date were scaled back or repealed in 2006 an d 2007.  In determining whether to repeal or scale 
back a certain tax incentive, factors taken into account included whether the objective had been fully 
achieved and whether the benefit was in  line with international standards. 
140. The effectiveness of tax incentives, both in te rms of meeting specific objectives and impact 
on the economy's overall efficiency, needs to be re viewed regularly.  Forgone tax revenues for tax 
years 2004, 2005, and 2006 are estimated at W 18.3  trillion, W 20.2 trillion, and W 21.3 trillion, 
respectively.  With regard to tax expenditure  estimates, under the National Finance Act 2007, the 
annual increment in tax expenditure is maintained at  a certain level (i.e. 0.5% of three-year average 
increment).  From 2010 onwards an annual report on tax expenditure for the previous, current and 
following years will be published, thereby improving fiscal transparency. 
141. SMEs still benefit substantially from tax incentiv es including:  tax credits (3% of investments 
in machinery and equipment, until end 2009);  and an income tax holiday (half the rate for six years) 
for new SMEs located outside the Seoul metropolitan  area (property tax on business assets is also 
reduced by half for five years, and the acquisition and registration taxes abolished for two years (until 
end 2009)).  Special income or corporation tax in centives of a 5% to 30% rate reduction (10% to 20% 
respectively if located in metropolitan areas) also apply (until end 2008) to SMEs in many activities, 
including manufacturing, fishing, tourism, stoc k raising, and telecommunications.  SMEs in 
wholesale, retail, medical services, or auto repair s located in non-metropolitan areas receive a 5% rate 
reduction.  SMEs also receive larger tax incentives th an those generally available, for example, much 
larger tax credits for investme nt in technology and human resource development.  The 2006 tax 
reform streamlined eligibility requirements for tax incentives available to SMEs  by excluding unlisted 
companies with assets of W 500 billion or more from that category.109  
142. Tax incentives also apply to R&D and human re sources development.  Tax credits apply to 
investment in technology and human resources de velopment, and 50% of income from technology 
transfers is exempt (until end 2009).  Income tax holidays also promote balanced development by 
encouraging firms to re-locate outside metropo litan areas, such as Seoul (until end 2009).  A 
concessional income tax rate of 12% applies to certa in 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 W 20 million) and part nership dividends (up to 
W 10 million) are non-taxable for farmers and fish ermen.  Primary producers also benefit from 
zero-rating for VAT on machinery, fertilizer, and pes ticides, and on fishing gear, including nets;  and 
exemption of taxes on petroleum products used in agriculture and fishing.   
(ii) Financial assistance 
(a) Loans, guarantees, and other financial measures 
143. 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).  The venture investment system has cha nged greatly since 2005.  The Fund of Funds, created 
in 2005, invests in LPFs and contributes to the form ation of the private venture investment market.  
The Government moved from direct support for LPFs to indirect support for the Fund.  Since 2005, 
investment in information and communications technology has decreased, while there has been 
diversified investment in future-growth industries su ch as biotechnology.  As of late 2007, the Fund of 
                                                      
109 EIU (2007). WT/TPR/S/204/Rev.1 Trade Policy Review 
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Funds amounted to W 630.1 billion, and is to be expanded further.  In 2007, the volume of new 
venture investment registered a record high of W 1.2 trillion, after the venture boom in 2000.  The Fund of Funds is expected to play an important  role as a source of venture capital investment. 
144. Two major public institutions, the Industria l Bank of Korea (IBK) and the Korean 
Development Bank (KDB), play a substantial role  in industrial development.  They are run 
commercially, and while the Government has no di rect control over their lending programmes, it 
tends to use them as an arm of i ndustry and regional development policy.
110  Government guarantees 
any losses.111  No capital injection or replenishment of  losses have been made since 2004.  All 
commercial banks granting 50% of their loans to SM Es can provide low-interest-rate loans to SMEs. 
145. The IBK supports SMEs mainly through loans for working capital, constructing facilities or 
buying plant and machinery.  It also provides low interest loans to SMEs in line with government 
policy, such as to support technology development,  productivity improvements or automation.  At 
end-December 2007, loans extended to SMEs amounted  to W 65.7 trillion, or 81% of total IBK loans 
in won.  Annual interest rates for loans funded by  the Korean Government or governmental agencies 
may vary from 2.0% to 5.9%, while the commercia l rates averaged 7.31% at end-December 2007.112  
Most SME loans are financed by retail banking or DCM (debt capital market) funding just like other 
commercial banks in Korea, while some are funded through government-originated loans or 
borrowings (9.6% of IBK's liabilities in 2007).  They are, inter alia,  financed from the Government's 
SME Promotion and Industrial Development Fund (W 6.6 trillion in 2007).  IBK does not maximize 
profits given its public policy role; its financial pe rformance is directly influenced by government 
policies.113 
146. 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.  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 determined by market 
principles and no KDB loans are extended at a preferen tial rate to firms of a particular industry.  
Nevertheless, lower interest rates are seemi ngly available for SMEs willing to relocate 
(1.25 percentage points lower rates) or regional development purposes.114  Even when using 
government funds, KDB extends loans under the sa me conditions as commercial banks.  The volume 
of KDB's loan extension originating from government  funds and its proportion of total funding were 
minimal at W 732.9 billion and 3% of total funds in 2006; and W 5 71.2 billion and 2.1% in 2007.  
147. Other state-owned entities providing credit facilities include the Korea Credit Guarantee Fund 
(KODIT) and KIBO Technology Fund.  Both provide  credit guarantees to enable emerging firms, 
especially SMEs, to gain access to finance.  Th ey are commercially run and their operations are 
conducted according to market principles;  howev er, the Government would cover any losses.  
Operations are funded by financial institutions and government contributio ns; the Government's 
                                                      
110 For example, they receive gove rnment approval each fiscal year  for their financing and lending 
programmes.  
111 Following the Asian financial crisis, both banks r eceived substantial government capital injections 
to boost their capital adequacy ratios (IBK:  W 1.7 trillion in October 1998 and W 100 billion in January 1999;  and KDB:  W 3.050 trillion in 2001). 
112 Industrial Bank of Korea (2007). 
113 The authorities indicate that IBK is competing with other commercial banks for the same target 
market with identical funding and operating scheme.  The Government is also considering deregulating IBK to a 
similar level to that of commercial banks. 
114 Regional development is promoted by providing loans whose interest is partially covered  by local 
authorities or the bank itself (KDB, 2006, p. 20;  and KDB, 2005, p. 15).   Republic of Korea WT/TPR/S/204/Rev.1 
 Page 75 
 
 
financial assistance for KODIT and KIBO Te chnology Fund amounted to US$140 million and 
US$210 million, respectively, in 2007.  KIBO  Technology Fund also administers technology 
appraisal systems for selecting beneficiaries of various government funds.115  
(b) Subsidies 
148. Korea has no laws specifically limiting subsidy programmes that may be anti-competitive.  
No government agency comprehensively controls s ubsidies, and they have received little attention 
from the Korea Fair Trade Commission. 
149. Korea has notified several direct support pr ogrammes to the WTO (Committee on Subsidies 
and Countervailing Measures).  Its latest notifica tion, in January 2006, covered the period 2003-04 
and indicated that there were 22 subsidy schemes (19 in 2001), of which 17 were also notified in 
2001.116  Grants, tax concessions or concessional loans are used to assist a range of agricultural, 
forestry, fishing, manufacturing R&D, and environm ental protection activities.  No expiry date was 
indicated for the notified schemes except for me asures relating to purchase of rice (until 2004), 
replacement of old coastal and offshore fishing vessels (decommissioning until 2010, replacement until 2011), replacement of old deep-sea fishing vessels (until 2012), emission reduction for diesel 
vehicles (until 2014), supply of natural gas bu sses (until 2010), and building and acquisition of 
international line and deep-sea fishing vessels (until 2012);  some of these expiry dates, indicated by 
the authorities, exceed those in the notification.  
150. R&D spending accounted for 3.23% of GDP in 2007 and is expected to reach 5% by 2012 in 
order to ensure sustainable growth.
117  Projects are supported by tax benefits and other incentives as 
well as channelling unused private sector funds into corporate R&D financing projects.  The need to 
fuel private sector R&D is crucial since this account ed for over 70% of all outlays in 2006, as opposed 
to 30% from state-run laboratories and the Gove rnment.  In 2006, Korea ranked sixth among the 
world's top R&D spending countries. 
151. Korea heavily subsidizes agriculture, especially ri ce (Chapter IV).  The importance of direct 
government payments to specific agricultural co mmodities was provisionally estimated by the OECD 
at almost W 1 trillion in 2006 (down from W 1.5 trillion in 2005).118  These relate mainly to overall 
farming income, area planted or animal numbers, and input use. 
152. According to Korea's latest WTO notifica tion of November 2006, the total Aggregate 
Measure of Support, (AMS) dropped to W 1.46 tr illion in 2004 (below its final bound level of 
W 1.49 trillion), in line with WTO provisions and scheduled commitments.119  It consisted mainly of 
market price support for rice (W 1.371 trillio n), soyabean (W 47.3 billion) and barley 
(W 39.6 billion).  Total domestic agricultural support notified by Korea (including green box, development programmes subject to special and di fferential treatment and de minimis support not 
subject to reduction commitments), was W 6.9 tr illion in 2004 (W 2 trillion excluding green box and 
S&D assistance (Table AIII.8).  De minimis support included:  additional market price support (e.g. 
                                                     
 
115 WTO (2004). 
116 WTO documents G/SCM/N/71/KOR, 2 August 2001, and G/SCM/N/123/KOR, 24 January 2006. 
117 KOIS online information:  "Incoming gov't to push for robust growth in R&D to fuel economy", 
22 January 2008.  Viewed at:  http://www.korea.net/News/News/NewsView.asp?serial_no=20080122005 
[23 January 2008];  and "Korea's R&D spending to rise 11% this year", 6 January 2008.  Viewed at:  http://www.korea.net/New s/News/NewsView.asp?serial_no= 20080106002 [23 January 2008]. 
118 OECD (2007c), Table III.25. 
119 Schedule LX – Republic of Korea, Part IV Section I;  and WTO document G/AG/N/KOR/37, 
28 February 2007. WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 76 
 
 
on maize and rapeseed);  other product-specific assistance (e.g. milk support W 30.5 billion, beef 
subsidy of W 13.7 billion);  and non-product specific support of W 437.17 billion (mainly 
concessional loans, subsidized inputs and irrigation facilities).  In 2004, green box assistance more than doubled Korea's total product and non-product specific AMS.  
153. Manufacturing activities benefit from lower electri city tariffs than other consumer groups 
(Chapter IV).  The authorities indicate that this wa s not due to subsidies but to the adjustment of 
tariffs for non-industrial users at hi gher levels;  in addition, the gap between different tariffs has been 
on the decline since 2003.  
154. Under the Act on Trade Adjustment Assist ance, implemented in 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.
120  Measures to facilitate industry adjustment are adopted if sales or production is reduced by 
more than 25% over an extended period because of  import competition.  For 2008, W 32 billion was 
budgeted for this type of adjustment. 
(iii) Price controls and monitoring 
155. According to the authorities, in principle, retail prices are determined by individual 
corporations depending on the pr evailing market conditions.  Exceptionally, charges on public goods 
and services can be adjusted by central and regi onal governments, which have the authority to 
increase prices of 19 items, including rail and mail se rvices, whenever price-rising factors occur.  For 
some of these items (taxi, inner-city bus, subway , liquified natural gas, sewage and waterwork 
services, garbage bag, septic tank cleaning, entran ce fees of local museums and memorials, and high 
school tuition) charges are determined by local governments depending on  local conditions.  The 
Government does not provide any formal or info rmal price-setting guidelines or related rules on 
goods and services except for these 19 items.  The author ities indicate that such controls have been 
used in one instance. 
(iv) State-owned enterprises and privatization 
156. State involvement in the economy (Table III.5) pe rsists;  privatization, particularly in the 
services sector (Chapter IV), was put virtually on hold during the review period.  Currently 24 SOEs 
employ 88,000 persons and represent assets of US$267 billion.  The new Government is to consider 
the restructuring and privatization of SOEs to streamline the public sector and improve its overall 
competitiveness, by examining all 298 state-run firm s, institutions, and those that received public 
bailout funds.121  In late 2007, the authorities considered plans to allow local SOEs, Korea District 
Heating Corp. and Korea Plant Service & Engineeri ng Co., to list their shares on the Seoul stock 
exchange, as well as privatizing part of the operations of the KDB122, and selling 50% of the State's 
                                                      
120 EIU (2007). 
121 KOIS online information:  "Korea set to review public-sector overhaul", 4 January 2008.  Viewed 
at:  http://www.korea.net/News/News/N ewsView.asp?serial_no=20080104013;  "Korea plans for listing of three 
state-run firms on local bourse", 30 July 2007.  Viewed at:  http://www.korea.net/News/News/ 
NewsView.asp?serial_no=20070730020;  "New gov't pushing to privatize state-run development bank", 
7 January 2008.  Viewed at:  http://www.korea.net/News/News/NewsView.asp?serial_no=20080108001;  and 
"Korea to sell 50% Woori stake to strategic investor", 10 September 2007.  Viewed at:  http://www.korea.net/ 
News/News/NewsView.asp?serial_no=20070910026 [24 January 2008]. 
122 KDB is to be transformed into a financial hold ing company during 2008, and be privatized through 
disposal of its shares from 2009 onwards. Republic of Korea WT/TPR/S/204/Rev.1 
 Page 77 
 
 
stake in Woori Finance Holdings Co. to a strategic investor.  No recent data relating to the incidence 
of SOEs in domestic production and trad e were available from the authorities. 
Table III.5 
State involvement in the economy, 2008  
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% / .. 
Manufacturing   
Mining and energy   
Korea Coal Corp. Price stabiliza tion;  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;  stockpiling, transportation;  
and lease 100% / .. 
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) 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 46.1% / .. 
SERVICES  
Financial services   
Industrial Bank of Korea Specialized bank 51.0% / .. 
Korea Deposit Insurance Corp. (KDIC) Non- capital based special corporation 100% / .. 
Korea Development Bank Development institution 100% / .. 
Export-Import Bank of Korea Development institution 60.2% / .. 
Korea Asset Management Corporation 
(KAMCO) Collect public fund 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  72.9% / .. 
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% / .. 
Table III.5 (cont'd)WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 78 
 
 
Entity Activity Degree of state ownership (%)/Situation 
in privatization programme 
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 Corp. (KoLand) Acquisiti on, development and management 
of land 73.3% / .. 
Korea National Housing Corp. (KNHC) Land development, housing 
construction/improvement/sales/rent/ 
management, production and supply of 
construction material 88.0% / .. 
Korea Housing Guarantee Corp. Housing 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% / .. 
Korea Water Resources Corp. Water supply, and distribution-related 
works;  water quality 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 100% / .. 
.. Not available (no final comments were received by the authorities on the content of this table). 
Source :  Ministry of Planning and Budget (2007);  EIU (2007), Country Commerce South Korea .  Viewed at:  
www.eiu.com [20 November 2007];  and inform ation provided by the Korean authorities.  
(v) Competition and consumer policy 
(a) Competition policy 
Framework 
157. Responsibility for competition policy rests primarily with the independent Korea Fair Trade 
Commission (KFTC) (the Monopoly Regulation and Fa ir Trade Act (MRFTA) 1980, last amended in 
2007).  During the period under review, the KFTC co mpleted the implementation of the three-year 
Market Reform Roadmap, launched in 2003.123  In this context, it established and revised competition 
laws and regulations, in response to  globalization and digitization de velopments, and has made efforts 
to secure effectiveness of competition policy.  K FTC started implementing its "Business Review" in 
December 2004:  from December 2004 to December  2007, it reviewed 70 cases, and notified the 
                                                      
123 Its major goals were to:  make business more  accountable and transpar ent;  improve corporate 
ownership and governance structure of large business conglomerates (such as greater disclosure requirements on 
corporate ownership and improved regulations on total equity investments);  enhance market competition 
(streamlining anti-competitive regulations, including abolishi ng certain cartels;  and strengthen notification and 
examination of mergers and acquisitions.   Republic of Korea WT/TPR/S/204/Rev.1 
 Page 79 
 
 
companies of the results.  Between 2004 and 2005, it agreed (with the relevant ministries) to eliminate 
or reform 107 anti-competitive regulations under la ws and notifications, such as those on price 
controls and entry barriers; 74 of these regulati ons have been eliminated or reformed.   
158. 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, such as agricultural, forestry, and livestock industries, that meet certain conditions may 
also be exempt, unless engaging in "unfair trade practices or price hikes by unfairly restricting 
competition".124 
159. 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 
total annual sales exceed W 4 billion, and its market sh are 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%.
125 
160. 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 outco me is available to maintain production).126  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 if assets or turnover of an y party exceeds W 100 billion.  Mergers of a "large-
scale enterprise" (assets or turnover above W 2 trillion)  must be notified within 30 days from the date 
a merger contract or a contract for takeover of business is concluded or at other dates set by a 
Presidential Decree, and wait a further 30 da ys for the KFTC to decide on approval.127  Other mergers 
need only be notified within 30 days of co mpletion.  As from November 2007 the reporting 
requirements for a small domestic deal (assets and sa les of less than W 20 billion) were waived;  the 
exemption privilege was to cover some 25% of the market for business combinations.  KFTC has 
monitored mergers (and acquisitions) between foreign enterprises exporting to Korea since July 2003.  
They are notified if total assets or turnover of at least one of the merging parties exceeds W 100 billion and where each party has Korean sa les exceeding W 20 billion.  The number of 
notifications concerning M&As be tween foreign enterprises rose fro m 58 in 2004 to 114 in 2007.  
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 can be challenged in the courts;  and the KFTC may apply to the courts to nullify unapproved mergers. 
161. Regulating chaebols is a major KFTC function.  There are extensive legislative provisions on 
corporate and financial structures to control po ssible anti-competitive effects from concentrated 
economic power (Chapters I and IV).  Chaebol -related policies include a ceiling on total shareholding 
in other domestic companies outside the conglomer ate, and bans on cross-shareholding and debt 
guarantees for affiliated companies.
128  As the ceiling on total shareholding in other domestic 
companies is deemed to restrict free business activ ities, the KFTC planned to abolish this in the 
                                                      
124 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.   
125 See also WTO (2004). 
126 WTO (2004).   
127 The KFTC may extend this period by 90 days.  
128 Corporate governance issues relating to chaebols  are discussed in previous TPR reports as well as 
Chapters I and IV of  the present report. WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 80 
 
 
first half of 2008.  Companies with asset s of W 2 trillion or more affiliated with chaebol  with total 
asset worth W 10 trillion or more are prohibited from  acquiring or owning stocks worth more than 
40% of their net assets in other domestic companies, including subsidiaries.129  Twenty-five 
companies affiliated with 7 chaebols  were subject to the ceiling, a nd cross-shareholdings were banned 
for the top 62 chaebols as of late 2007.130  The threshold asset level for regulating cross-shareholdings 
and debt guarantees is set at W 2 trillion.  Voting ri ghts for a finance or insurance company belonging 
to a chaebol  are also allowed up to 15% of its shares in  a domestic affiliated company in certain cases, 
including alteration of the articles of incorporation,  and merger of the affiliated company with another 
company.  
Policy and operational developments 
162. Monopoly power has decreased steadily, but mark et concentration remains relatively high.  
The market concentration ratio of the top three leading manufacturing companies fell from 64.6% in 
2002 to 59% in 2005.  A total of 62 chaebols controlled 1,196 companies in mid 2007.131   
163. Under the Clean Market Project, the KFTC has followed a "pro-active", comprehensive 
approach since 2001, initiating investigations in targeted sectors.  Between 2004 and 2005, the KFTC 
implemented the project in ten sectors, covering:  broadcasting, private education, finance, energy, 
information technology, medicine and pharmaceuti cals, construction, real estate, harbours, and 
textiles.  Since 2006, the KFTC has focused on st rengthening monitoring of activities such as PC 
operating systems, subscription-based TV, Internet portals, and movies, where there are increasing signals of monopoly and oligopoly cases.    
164. KFTC operates a permanent monitoring system to detect and prevent bid-rigging in the public 
sector.  When a central administrativ e agency, a local municipality, or a corporation in which the State 
has a shareholding of 50% or more makes a bid for a construction work worth W 5 billion or for procurement of goods or services worth W 500 milli on or more, it is required to submit information 
on the project bidding to the KFTC.  Strict penalties and criminal prosecutions are imposed on bid-riggers.  In 2004, the KFTC revised upwards the maximum surcharge for bid-rigging from 5% of 
the relevant turnover to 10%.  Accordingly, the total surcharges imposed for bid-rigging rose from 
W 1.483 billion in 2004 to W 42.337 billion in 2007.   
Enforcement 
165. The KFTC has several measures to improve en forcement and compliance.  It can issue 
warnings or corrective measures, impose surcharges a nd fines, and request criminal prosecutions.  To 
encourage companies to police them selves, the KFTC may reduce surcharges up to 30% if a firm has 
a compliance programme in place (and up to 50% if they also correct the violation themselves).  In 2006, KFTC handled 4,437 cases viola ting laws under its jurisdiction (4,299 in 2005);  it issued 
warnings or more severe sanctions in 3,348 cases (up from 3,318 cases in 2005).
132  T h e r e  w e r e  
1,036 violations of the Monopoly Regulation and Fair Trade Act, a 2.7% decrease from 2005, and a 
                                                      
129 Certain exemptions apply, such as for subsidiari es in which foreign investors have at least a 10% 
stake or where foreign investors have a say in management, such as the right to name some executives.  Subsidiary investments in certain private investment co mpanies, a public company to  be privatized, a company 
in the same or similar industry, and a company more  than 30% government owned, are also exempt from 
controls.   
130 Reportedly, companies in a group avoided this regulation by owning shares in other companies in 
the group, which in turn owned shares of other companies in the same group (EIU, 2007). 
131 EIU (2007). 
132 KFTC (2007). Republic of Korea WT/TPR/S/204/Rev.1 
 Page 81 
 
 
total of W 155.9 billion was imposed in surcharge,  down from W 259 billion.  This drop is due to 
various unexpected events, such as the record  level of surcharges on a cartel in the 
telecommunications sector in 2005.  The KFTC put emphasis on detecting and correcting cartels, 
which remain prevalent across Korea's economic sector s.  In 2006, 31 cartels were corrected, with 
total surcharges of W 110.5 billion on 27.  In 2007, the KFTC reviewed 857 merger 
notification-related cases, imposing corrective measures in three.  Increased use of criminal sanctions 
in hard-core cartel cases, to make the threat of  individual liability more realistic, depends on 
cooperation with prosecutors;  eliminating c onstraints in professions remains a challenge.133   
166. Korea is strengthening institutions to ensure fair business competition, and is aware of its 
importance as a trade facilitation measure.134  The KFTC staff structure was reorganized to reflect the 
three-year Market Reform Roadmap, notably by reducing the staff administering the regulation of 
cross-holdings among affiliates.  However, it seems that the KFTC still lacks a "dawn raid" power to 
enter premises and take possession of evidence.135 The KFTC shares regulatory responsibilities with 
other agencies.  Generally cooperation has been sm ooth, but there have been occasional tensions in 
sectors such as insurance and cable television, wh ich have exposed businesses to some uncertainty.   
167. Extra-territorial application of competition polic y to pursue international cartels exporting to 
Korea has been maintained.  The KFTC has investigated alleged in ternational cartels in marine 
transportation and DRAM chips, and currently, is i nvestigating several international cartels including 
one on air fares.  KFTC has signed memoranda of understanding on competition policy dialogue, 
establishing the basis for a formal dialogue on comp etition law enforcement, with Australia, Canada, 
the EC, Mexico, Romania, the Russian Federation,  and Turkey;  at present Korea is negotiating 
bilateral cooperation agreements w ith the United States and the EC. 
(b) Consumer protection 
168. Korea has four policy areas in securing consumer benefits:  the reinfo rcement of consumer 
sovereignty, creation of competitive market enviro nment, development of mechanisms for prevention 
and remedy of consumer damage, and enhancement of efficiency in consumer policy enforcement.136  
The Framework Act on Consumers, which sets the b asic direction and implementation mechanism for 
consumer policy, was overhauled in 2006 and became effective in March 2007.137  The consumer 
policy function of the KFTC was expanded to c over establishment and implementation of sectoral 
consumer policies including consumer  safety, information provision, education and damage redress, 
and the focus of consumer policy shifted fro m consumer protection to "consumer (rights) 
empowerment".  The KFTC's assumption of juri sdiction over consumer policy has enabled an 
institutional linkage between competition policy and consumer policy;  as from February 2008, the 
KFTC has been the only institution dealing with consumer policy enforcement.  It now has the 
authority to support and monitor the Korea Consum er Protection Agency.  Since 2004, consumer 
protection cases have dealt with: false and ex aggerating labelling (duck down jackets) and 
advertisement (silver nano baby bottles);  and unfair advertising and market position abuse (ten school 
uniform makers and sellers).   
                                                      
133 OECD (2007h). 
134 APEC (2007). 
135 OECD (2007h). 
136 APEC (2007). 
137 KFTC (2007). WT/TPR/S/204/Rev.1 Trade Policy Review 
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(vi) Intellectual property rights 
169. Korea's policy stance is that consistency in in tellectual property rights (IPRs) protection is an 
important infrastructure for enhancing national a nd corporate competitiveness in the knowledge-based 
economy.  Korea's extensive intellectual property le gislation has been strengthened, since its last 
Review, with the amendment of the copyright legislation (section (b) below) and the strengthening of 
border enforcement.  Korea agreed to undertak e strong and far-reaching IPR commitments under the 
U.S.–Korea Free Trade Agreement (KORUS FTA ) concluded in April 2007 (Chapter II).138  Korea 
participates in 12 out of 24 treaties administered  by the World Intellectual Property Organization 
(WIPO).139  The authorities believe that the Korean IPR legislation complies fully with the WTO 
TRIPS Agreement140;  and according to APEC, Korea's IPR protection policy is on the right track 
towards achieving the Bogor Goals overall.141  The TRIPS Council reviewed Korea's IPR legislation 
in 2000.  
(a) Industrial property 
170. The Korea 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 , and develops policies to protect trade secrets.142  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 bans 
parallel imports except where specific legal criteria are met.143  No data are available with respect to 
action taken against parallel imports  at the border;  there have been no court decisions on cases 
pertaining to parallel imports since 2004.  
171. 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 W 100 million;  or up to three years 
or W 20 million for falsely indicating such a right or fraudulently obtaining one.  Civil remedies 
include injunctions against further infringement and damages.  Provisional measures for preventing 
infringements are provided in each industrial property act and the Civil Execution Act. 
                                                      
138 USTR online information.  Viewed at:  http ://www.ustr.gov/assets/Document_Library/Reports_ 
Publications/2007/2007_Special_301_Review/asset_upload_file60_11126.pdf [23 November 2007]. 
139 Korea's accession to the WIPO Copyright Treaty took effect on 24 June 2004.  WIPO online 
information.  Viewed at:  http ://www.wipo.int/treaties/en/S howResults.jsp?search_what=C&country_id=95C 
[30 January 2008]. 
140 APEC (2007). 
141 APEC (2007). 
142 To reduce the examination period and improve the examination quality, KIPO recruited 
170 additional patent examiners in 2005 (APEC, 2007). 
143 Korea considers that parallel imports promote competition.  So it prohibits conduct that 
unreasonably restricts parallel imports, and treats them as  unfair trade practices.  Parallel imports infringing 
trade mark rights are banned, pursuant to relevant laws (The Types of Unfair Trade Conducts Regarding Parallel 
Import, enacted on 29 July 1997 by the Fair Trade Commissions Notification No. 1997-27, amended on 
31 December 1998 by the Fair Trade Commissions No tification 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). Republic of Korea WT/TPR/S/204/Rev.1 
 Page 83 
 
 
Patent and utility models 
172. The Patent Act of 1947 was totally revised in  1973 and 1990, and last amended in 2007.  The 
2006 amendment, inter alia , abolished limitations relating to pa tentable plants.  The 2007 amendment 
implemented a grace period for submitting claims and the claim-by-claim examination system.  KIPO 
may grant on request a compulsory non-exclusive li cence to work a patent if the holder has not 
worked it for more than  three consecutive years.144  To date, one compulsory licences has been issued.  
Patent protection is for 20 years from the date of filing (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.   
173. The Utility Model Act 1961 was fully revised in 2006 and protects utility models for ten years 
from the date of filing the application.  Its 2007 amendment provides for a grace period for submitting 
claims and introduced the claim-by-claim examination system.  Commercial acts of manufacturing, using, assigning, leasing or importing or offeri ng for assigment or lease a product embodying the 
utility model are deemed to infringe the exclusive right  of the holder or licensee of a registered utility 
model, and are therefore prohibited. 
Trade marks 
174. The Trademark Act (1949) protects trade marks on goods and services initially for  ten years 
upon registration (renewable indefinitely for further ten- year periods).  Legislation was last revised in 
2008.  In 2004, the Trademark Act was amended to protect geographical indications (GIs) by 
introducing the GI collective mark system.  In 2007,  the scope of trade mark protection was extended 
to all types of mark that can be visually rec ognized including colour marks, hologram marks, and 
motion marks.  The latest amendments to the Tr ademark Act and the Design Law were intended only 
to reflect the revision of the Government Organization Act in 2008. 
175. The Unfair Competition Prevention and Trade Secret Protection Law prohibits unfairly 
tarnishing a well-known mark or causing confusion by  use of similar or identical mark, including 
distributing, importing or exporting such goods .  Civil remedies include injunctions stopping 
improper use, damages, and restoration of reputa tion.  Penal provisions are up to three years' 
imprisonment or a fine of up to W 30 million.  
Geographical indications 
176. The Unfair Competition Prevention and Trade Secrets Protection Act prohibits, as unfair 
competition, use of marks identical or similar to another person's name, trade name, emblem or any 
other well known mark, including selling, distributin g, importing or exporting goods so marked, that 
would mislead the public on the place of production.   The Fair Labelling and Advertising Act also 
prevents deceptive labelling and advertising, including  any vague or false labell ing or advertising that 
may mislead consumers on the product's origin.  Trade marks legislation prevents 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 mark has the right to use it 
exclusively and prevent others from using identical or similar signs for identical goods, where it might 
result in confusion.  Imports or exports with fal se origin indications or infringing GIs are prohibited 
(Foreign Trade Act). 
                                                     
 
144 Except for semi-conductor technology, this is only possible after four years from the day of filing, 
and when consultations with the patent holder or exclus ive licensee were not possible or enabled no agreement. WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 84 
 
 
177. The Agricultural Product Quality Management Act (1999) and Fishery Product Management 
Act (2001) specify GIs for agricultural and fish products.  These must be registered with the 
Geographical Indication Registration Council of  the National Agricultural Products Quality 
Management Service or of the National Fishery Pr oducts Quality Inspection Service.  Foreign GIs 
registered according to the same procedures and cr iteria as for domestic goods are protected in Korea 
under various laws, such as the Tr ademarks Act, the Unfair Competition Prevention and Trade Secrets 
Protection Act, and the Agricultural Product Quality  Management Act.  Using a false mark of a 
registered GI on agricultural or fishery products is  subject to imprisonment of up to three years or a 
maximum fine of W 30 million.   
178. Any trade mark containing geographical indications for wines or spirits originating in any 
WTO Member cannot be registered (Trademark Act, Article 7(1)(xiv)).  The use of GIs to identify 
wines or spirits that do not originate in the place indi cated is prohibited, even if the true origin is 
given or the GI uses expressions like "k ind", "type", "style ", or "imitation". 
Plant variety protection 
179. Protection for plant varieties is administered by the MIFAFF (Seed Industry Law, 1997).  
Korea joined the International Convention for the Pr otection of New Varieties of Plants (UPOV) in 
2002.  Breeders' rights are protected for 20 years from the registration date (25 years for ornamental and fruit trees).   Plant invention is protected under the Pa tent Act, which was amended in 2006 to 
allow patent to be granted regardless of whethe r the plant is sexually or asexually reproducible.   
Industrial designs and lay-out designs of integrated circuits (topographies)  
180. The Design Law (1961) was last amended in 2008.  Protection is for 15 years from 
registration.  The scope of protected designs was extended to cover partial designs in 2001 and fonts 
in 2005.  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 accelerated for some 
articles with short life cycles, such as textiles and clothing.  
181. 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 W 50 million, for right infringements;  and up to one year or W 3 million for falsely marking a circuit as registered or 
obtaining registration fraudulently.  
Trade secrets 
182. Protection under the Unfair Competition Preven tion and Trade Secrets Protection Act (1961) 
covers information acquired by an "act of improper acquisition" (e.g. theft, deception or coercion), or 
subsequently used or disclosed.  Injunctions may be obtained against disclosure, and damages 
awarded for infringement.  Employees who disclose trade secrets are liable to criminal penalties of up to seven years imprisonment, with prison labour fine s equivalent to not less than two times to more 
than ten times the amount of profit in property.  Legislative amendments in 2004 introduced criminal 
penalties for disclosing trade secrets to third parties;  broadened the scope of trade secrets to include operational secrets (e.g. business strategies);  an d extended the coverage to include not only 
individuals but also relevant  organizations and businesses that infringe trade secrets.  Republic of Korea WT/TPR/S/204/Rev.1 
 Page 85 
 
 
183. 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 
three years imprisonment or fines of up to W 10 million for pharmaceuticals and W 15 million for 
agri-chemicals.  Unfair commercial us e of such data is also prohibited.   
184. 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 three years or fines of up to W 5 million apply to those infringing the legislation .  
(b) Copyright and related rights 
185. The Ministry of Culture, Sports and Tourism (MCST) handles copyright protection 
(Copyright Act, 1957).  The 2005 amendment of the Copyright Act incorporated interactive transmission rights to performers and producers of phonograms as well as copyright holders in 
accordance with the WIPO Performances and Phonogram Producers Treaty.
145  They also provided 
for enhanced protection of neighbouring rights and introduced public transmission rights and digital 
audio transmission rights so as to protect new types of works.  Matters were clarified in relation to the 
liabilities of online service providers in the case of  copyright infringements.  The production or 
provision of devices or services for circumventing copy control technology is prohibited, and a 
"notice and takedown system" provides legal incentives for online service providers to promptly take 
down infringing materials at the right-holders' re quest.  Non-original databases are protected 
sui generis .  In 2007, the Enforcement Decree of the Co pyright Act was amended to facilitate the use 
of copyrighted works in the digital environment. 
186. Copyright protection for authors is for life plus 50 years;  the bilateral KORUS FTA 
(Chapter II) provides extended terms of copyright protec tion (i.e. life of the author plus 70 years) and 
upon amendment of the domestic law it  will benefit copyrights of all origins on a reciprocal basis.146  
Neighbouring rights are also extended for 70 years for performances, sound recordings, and 
broadcasts.  Databases, including compilation of data  in machine-readable form, can be protected by 
copyright.  Compulsory licences may be granted u nder strict procedural conditions:  eight (one on 
foreign works) were granted until 2007.  Copyrigh t also applies to "interactive transmissions" for 
authors.  The Online Digital Contents Industry De velopment Act, passed in 2002, protects intellectual 
property rights on online digital material. 
187. According to a major trading partner, the Co pyright Act amendments still leave unclear the 
scope of the underlying liability of service provide rs and the limitations on, and exceptions from, 
liability.147  The new law does not address previous s hortcomings in sound recording protection and 
private copying exceptions.  The authorities state th at because digital sound transmission has similar 
aspects to broadcasting the Copyright Act provides "reasonable" remuneration rights to digital sound 
transmission to phonogram producers as to those provi ded for broadcasting.  In addition, regarding 
copying exceptions at the university level, the am ended Copyright Act further limits the purpose of 
use to "class purposes" (formerly, "education purposes" ) and the scope of use to "parts of a work" 
(formerly, "parts of or whole work").  It also re quires payment of royalties upon use.  The authorities 
state that the copyright limitation for universities is very limited and reasonable.  
                                                      
145 APEC (2007). 
146 While copyright protection will be extended to  70 years through amendment of the domestic 
copyright law, a work created by an author whose coun try provides shorter protection may be protected for the 
term provided in their country, in accordance with Article 7(8) of the Bern Convention (APEC, 2007). 
147 USTR (2007). WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 86 
 
 
188. Computer programs are protected under separate legislation (the Computer Program 
Protection Act of 1986,  administered by the Ministry of Culture, Sports and Tourism).  The Act was 
most recently amended in October 2006;  it increa sed the power of the Korea Software Copyright 
Protection Committee (SOCOP), and penalties for assort ed violations of Korean IPR-related laws.148  
Transmission rights were introduced in Decemb er 1998.  Revisions from 1 July 2003 tightened 
liability of internet service providers for copyright infringements.  The right holder has the exclusive 
right to copy computer programs, excluding temporar y copies.  Protection of programs is for 50 years 
from the year following their publication.  Minimum reproduction 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.  The Computer Program Protection Act explicitly stipulates statutory licensing (e.g. where the 
right holder cannot be identified or traced, subject to certain procedural requirements).  No such 
licences have been granted.   
189. Ordinary courts handle copyright cases.  Civil remedies against copyright infringements 
(including computer programs) include injunctions, destruction of counterfeit products, and damages.  
Penal provisions of up to five years imprisonment or a fine of up to W 50 million also apply for 
copyright infringements (up to five years or W 70 million for repeated computer program 
infringements). 
190. Amendments to the Sound Records, Video Produc ts and Game Software Act in January 2004 
eliminated loopholes concerning illegal importation and di stribution of videos by requiring applicants 
for rate classification to present documentary evidence of the due right to produce or distribute videos.  
The Act was separated into  three individual Acts on 29 October 2006 and, currently, the Act on Films 
and Video Products provides the same protection. 
(c) Enforcement 
191. The level of piracy in Korea was estimated to  have dropped to 7% in 2006 on video movies, 
records, and music (20% in 2002), and 45% on business application software (50% in 2002).149  
Piracy of entertainment software, however, was estim ated to have risen substantially, to 68% in 2006 
(36% in 2002).  Piracy of books is thought to be  significant (estimated losses of US$45 million in 
2006).  Although IPR enforcement remains a concern fo r some of Korea's major trading partners, the 
authorities (e.g. KIPO) have benefited from and ac tively participated in several international 
cooperation protects with the WIPO, APEC and majo r individual IPR protection leaders (e.g. the EC, 
Japan, the United States).150 
192. 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 (U nfair Competition Prevention and Trade Secrets Protection Act).  
KIPO introduced an anti-counterfeiting reward system in 2006 to inspire vigilance for anti-counterfeiting activities;  in 2006, KIPO gr anted a total of 107 rewards worth W 323 million 
(US$340,000).
151  KIPO and related agencies identify we bsites selling counterfe it goods and refer to 
the police for criminal investigation or to  the Broadcasting Communication Committee for 
website-closedown. 
                                                      
148 USTR (2007). 
149 International Intellectual Property Alliance (2007). 
150 Korea was moved from the USTR's Special 301 Priority Watch List to the Watch List in 2005 
where it remains. USTR online information.  Viewed  at: http://www.ustr.gov/assets/Document_Library/ 
Reports_Publications/2008/2008_Special_301_Report/asset_upload_file193_14872.pdf [23 June 2008].  For 
more information on the latest internati onal cooperation activities, see KIPO (2007). 
151 KIPO (2007). Republic of Korea WT/TPR/S/204/Rev.1 
 Page 87 
 
 
193. 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 Counter feit Goods).  Since February 2006 the KCS has 
operated a Spider-web system as part of a more vigorous approach to tracking down goods violating 
IPRs;  it has also been operating a com puterized trade mark system since 2001.152  Right holders may 
request Customs to suspend the re lease of suspected counterfeit goods, on payment of collateral of 
120% of the dutiable value of the goods.  Suspension is for ten days, in which time the applicant must 
initiate legal action.   
194. In March 2006, the KCS established Special IP R Enforcement Headquarters consisting of 
98 special investigative teams (446 officers) dedicat ed to information, investigation, and customs 
clearance.153  At a first stage, the special investigative t eams were to carry out intensive investigations 
on exports and imports of fake goods as from Apr il 2006;  after crackdown campaigns in 2006, the 
KCS conducted special investigations into infring ement.  In 2008, it is to carry out extensive 
investigations into automobile parts, medicines and tools, which are directly related to the health and 
safety of the citizens.  The KCS has also created a webpage to help consumers compare genuine 
goods and counterfeits easily (http://www.customs.go. kr/cyber/ index.htm).  The Public-Private 
Council for the Protection of the Intellectual Prope rty Rights was established in February 2006. 
195. Special KCS campaigns were aimed at blocking the trade of fake goods at source, protecting 
consumer interests, establishing fair business trad e and boosting international confidence in Korea.  
During the period under review, the KCS conf iscated IPR goods worth W 159 billion (2005), 
W 2.7 trillion (2006) and W 680 billion (2 007) through continuous crackdown campaigns.154  Most 
cases (99.7% in value terms) involved trade mark vi olations.  Cases of fake goods for export or import 
rose and cases of products with false country of or igin marking soared.  In 2007, seizures of fake 
goods included clocks and watches (67%), clothes (16%) and leather articles (10%) bearing forged 
world-renowned trade marks;  Chinese products repr esented 87.9% of total values of these seizures.  
In a number of cases importers or exporters tried to  exploit simplified customs clearance procedures, 
such as the extra opening out of office hours, or declaration prior to arrival at the bonded area;  the KCS has been determined to block these improper practices. 
196. Standing Inspection Teams (SITs) by the Ministry of Culture, Sports and Tourism (MCST) 
investigate counterfeit of computer software, sound recordings and video movies, including by on-line 
activities.  However, only the MCST's SIT investiga ting computer program piracy has judicial police 
authority, following legislative revisions in October 2003 (Act on a Person with Judicial Police 
Authority and the Scope of the Right).  MCST ma y collect, delete or destroy illegally acquired 
computer programs, and can instruct internet servi ce providers to reject, suspend or limit pirated 
products and services.  A Copyright Protection Center was created in April 2005 to conduct 
systemized and effective anti-piracy activities both online and offline.   
197. The Publication and Printing Business Promotion Act, effective February 2003, provides 
MCST administrative authority to inspect business esta blishments and to seize and order disposal of 
illegally copied publications.  Relativ ely small fines, of up to W 3 million, may be levied for refusal to 
obey such orders.  It is enforced mainly by the Copyright Protection Centre.  Some important steps 
                                                     
 
152 APEC (2007). 
153 Korea Customs Service online information, "La unch Special IPR Enforcement", 15 March 2006.  
Viewed at:  http://english.customs.go.kr/kcsweb/user.tdf [5 October 2007]. 
154 Data provided by the authorities;  and Korea Customs Service online information, "Special 
Crackdown Campaigns Confiscated KRW 19.2 Billion Worth of Counterfeits", 16 March 2006.  Viewed at:  http://english.customs.go.kr/kcsweb/user.tdf [5 October 2007]. WT/TPR/S/204/Rev.1 Trade Policy Review 
Page 88 
 
 
were taken in 2005 to recognize and star t to address serious book-piracy issues by, inter alia,  
separating the licensing functions of the KRTRC from enforcement.155  The publishing industry, with 
some government cooperation, tracked down ma ssive underground printing operations in 2006, 
leading to significant seizures. 
198. To improve criminal prosecuti ons, an IP Right Violation Crim es Investigation Headquarters 
in the Supreme Public Prosecutor's Office, and nationwide crackdown committees are in place.  In 
2007, over 38,919 IPR cases (33,000 in 2002), involvi ng over 48,544 persons ( 40,000 in 2002), were 
prosecuted, with almost 498 arrests (1,000 in 200 2).  In 2007, KIPO uncove red 1,182 (549 in 2003) 
cases of counterfeiting; warnings were issued in 1, 066 of those cases and criminal charges were filed 
in the other 116 cases (332 in 2003).156 
 
                                                      
155 International Intellectual Property Alliance (2007). 
156 KIPO (2007).