With its strong economic ties to Australia and growing demand for various Australian products, South Korea presents a lucrative market for Australian companies. If your business is looking to tap into this promising market, we've compiled a comprehensive guide to walk you through all the essentials of exporting to South Korea.
Australia and South Korea enjoy a robust bilateral relationship characterised by shared strategic interests and the complementary nature of their economies. This is especially true in trade, with figures from Statista showing that South Korea was Australia's third-largest export market in 2023. The diversity of Australian exports welcomed in the Korean market is vast. As of March 2024, the top imports from Australia to South Korea included aluminium articles and precious stones, metals, and pearls, as the Observatory of Economic Complexity (OEC) reported.
Is there a free trade agreement between Australia and South Korea?
Given the close trade ties between Australia and South Korea, both countries stand to benefit from closer economic cooperation. One way this is achieved is through the inking of the Korea-Australia Free Trade Agreement (KAFTA).
Since its enforcement in December 2014, 84% of Australian exports to South Korea have had zero tariffs. This figure will rise to 95.7% by 2025 and 99.8% once KAFTA is fully implemented, playing an instrumental role in further streamlining trade between both countries by eliminating tariffs on nearly all Australian exports to South Korea.
Notably, tariffs of up to 300% are being progressively eliminated for various Australian agricultural products exported there. Among these include items like beef, sugar, wheat, dairy, wine, horticulture, and seafood, all of which are high-demand products in Korea. Meanwhile, tariffs on resources, energy, and manufactured goods are also being removed, thereby protecting and boosting the competitive edge of Australian businesses in the competitive South Korean market.
At the same time, the breadth of goods covered under KAFTA also diversifies the opportunities for Australian businesses looking to capitalise on this market.
Successfully navigating South Korea’s customs and regulations
If you are keen to export from Australia to South Korea, it’s crucial to note that doing business varies from country to country. Taking time to understand the customs regulations and duty rates can go a long way in ensuring smooth clearance and international shipping operations.
1. Prohibited and restricted goods
But before getting down to the detailed procedure for sending packages from Australia, a key question to clarify is whether your goods can be exported to the said market. Generally, most products are permitted unless they fall within this list of items banned from import into Korea or are subject to stringent trade restrictions.
Prohibited items:
- All weapons, including replicas and decorations (e.g., guns, swords, explosives and toxins).
- Illegal drugs (e.g., opium, marijuana/cannabis and cocaine).
- Wildlife protected under the Convention on International Trade in Endangered Species (CITES) and products made from these animals (e.g., ivory, medicine, bags and wallets).
- Materials that violate public peace and constitutional orders.
- Items containing confidential government or intelligence information.
- Counterfeit or fake money, bank notes, bonds, and securities.
Restricted exports:
- Goods regulated under waste management laws.
- Agricultural and forestry products.
- Animal products, including meat, skin, fur, livestock, and animal fodder.
- Precious metals (excluding daily-use jewellery) and securities.
2. Customs duties and taxes
Besides this, business owners will also benefit much from understanding how import tariffs, or customs duties imposed on foreign goods, are calculated in South Korea. This is because an incorrect declaration not only increases one’s cost of exporting abroad but can also result in shipment delays that have negative long-term implications on one’s business reputation. Fortunately, KAFTA reduces such trade barriers in this regard by simplifying the tax procedures for Australian business owners into four straightforward steps:
- Determine your tariff classification: You can use the Korean Customs Service Tariff Database Inquiry to search for your product by name. If you are unsure of your HS classification, it is advisable that you contact the Korea Customs Service to request an advance ruling.
- Find out how your goods will be treated under KAFTA: You can check South Korea's tariff schedule to understand the tariff elimination process. Categories range from '0' (immediate elimination) to '20' (gradual elimination over 20 years), with further explanation for each category detailed in Annex 2-A Section B: Tariff Schedule of Korea.
- Determine if your goods meet 'rules of origin' (ROO) requirements: Your goods must originate in Australia or South Korea to be eligible for KAFTA’s preferential duty rates. This can be through production in these countries or by using materials from or outside of these countries that meet specific rules.
Goods that do not meet the ROO requirements stipulated in Chapter 3: Rules of Origin and Origin Procedures and Annex 3-A: Schedule of Product Specific Rules will be subject to the general rate of duty instead. Additionally, a 10% Value Added Tax (VAT) is applied to most shipments to South Korea. However, certain goods and specific eligible services are zero-rated. These include basic life necessities, duty-exempt goods and services related to unprocessed foodstuffs and agricultural products, medical, health services, financial, insurance and international transportation.
You can also save on some costs by taking advantage of South Korea’s de minimis limit of US$150, which exempts you from customs duties if the package you ship has a value below this amount.
3. Documentation requirements
Once you’ve determined that your exports qualify for preferential tariff treatment under KAFTA, you will need to present the Certificate of Origin (COO). This document can be obtained from authorised bodies like the Australian Chamber of Commerce and Industry (ACCI), the Australian Industry Group (Ai Group), International Export Certification Services (IECS), or TradeWindow Origin (TWO). Alternatively, you can prepare the document by yourself using KAFTA Annex 3D as a reference.
The certificate will be able to cover a single shipment or multiple shipments of goods with the same description for at least two years. However, a COO is not always necessary if the total customs value of your goods is US$1,000 or less. Nevertheless, it is always a good practice to check with the relevant customs authorities in South Korea for the most current information. Besides the COO, other essential shipping documents include:
- Commercial invoice;
- Packing lists;
- Product-specific certification.
4. Packaging and labelling requirements
With your documents in order, the final step to ensure compliance and avoid delays is to meet the packaging and labelling requirements stipulated by the Korean government. For starters, all international commercial shipments to South Korea must include a country of origin label. You can refer to the list of country of origin labelling requirements provided by the Korean Customs Service (KCS) by searching with your Harmonised System (HS) code. Additionally, the information on the English labels must match the Korean labels.
Further labelling is also required for pharmaceutical exports to meet the standards set by the respective government agencies. Meanwhile, you will also need a Korea Certification (KC Certification) when shipping consumer goods, children’s products, or electronic products to prove that your products conform to Korean safety standards.
