The procedure for issuing certificates of origin will be simplified to make it easier to utilize free trade agreements (FTAs) for K-beauty and K-food products. Previously, it was necessary to submit eight types of supporting documents, including certificates of origin and origin verification materials, but in the future, only the domestic manufacturer confirmation certificate or a certification issued by a relevant organization will need to be submitted. For used cars, which previously found it difficult to trace origin information, proof of origin can now be established with just one type of used car chassis number confirmation.
The Korea Customs Service announced its 'customs administration push strategy for FTA utilization support' at the inter-ministerial meeting on national issues, economic relations, and industrial competitiveness on the 12th.
According to the government, South Korea currently has 22 FTAs in effect with 59 countries. The utilization rate of FTAs is 86.3% for exports and 85.4% for imports. A government official noted, 'While the FTA utilization rate for exports to countries like the United States and the European Union (EU) has reached 90%, there are still opportunities for utilization in K-beauty products.'
They added, 'It is expected that the verification of origin by importing countries for South Korean exports will continue to increase due to enhanced protectionism,' and 'As the violation rate for export verification among exporting companies is on the rise, thorough preparation is necessary.' In fact, the violation rate for export verification rose from 11.5% in 2020 to 15.6% last year.
The strategy indicates that the government will provide pinpoint support for items that have marketability, such as K-beauty and K-food products, but have difficulty in providing origin verification materials like bills of materials (BOM). The required supporting documents for origin proof will be simplified from eight types, including certificates of origin, BOM, manufacturing process, raw material procurement details, raw material inventory records, cost calculation details, supply contracts, and certificates of origin, to one type: a domestic manufacturer confirmation certificate or a certification from a relevant organization.
The government will designate six cosmetic items, including lipsticks, face masks, eye shadows, and mascaras, as items for simplified origin verification in K-beauty in the first half of this year. In the second half, five items in K-food, such as wild yellowtail, colored barley, and chicken, will be designated as items for simplified origin verification. Relevant organizations will be authorized to verify and certify the origins.
It will also simplify origin verification for used cars and recycled products in domestic distribution. Even if these products are made in Korea, the difficulty in tracing distribution history and origin information since production to export has led to low utilization of FTAs.
The government plans to facilitate discussions to issue certificates of origin using just one type of chassis number confirmation for used cars that can verify domestic manufacturing. In the second half of this year, products made from recycled raw materials retrieved from waste batteries and waste plastics will also be added to the list for simplified issuance of certificates of origin.
The government will also provide focused support for export items, regions, and corporations with low FTA utilization. It selected as targets for concentrated support items with annual export volumes exceeding $10 million that have an FTA utilization rate of less than 30% and items with annual export volumes exceeding $1 million that have not utilized FTAs. They plan to analyze reasons for poor performance with relevant industry associations and improve issues through cause-specific consulting and cooperation with related ministries.
Regionally, the government plans to establish a Pyeongtaek Customs Export-Import Business Support Center to enhance support capability. It also plans to operate dedicated customs for specific industries in Incheon (cosmetics, used cars), Seoul (food, bio, cosmetics), Busan (seafood), and Daegu (textiles). A collaborative system with related organizations such as the regional FTA trade promotion centers and the Small and Medium Business Corporation will be established to support specialized FTA training and overall export consulting for corporations.
In addition, the government will provide customized consulting for 370 small and medium enterprises at high risk of origin violation and strengthen post-management for 15,000 certified exporters.
The government will also collaborate with the Financial Services Commission, Industrial Bank of Korea, and the Korea Trade Insurance Corporation to provide financial support. Benefits such as low-interest loans and insurance for uncollected payments will be expanded for small and medium export enterprises that meet the requirements, such as being recognized as excellent users of FTAs. The lending scale amounts to 106.8 billion won. The group insurance premium is 54.8 million won, providing a compensation limit of 13.69 billion won.
Moreover, the government plans to ease the uncertainty of utilizing FTAs for imports by revitalizing pre-origin review and expanding the application period for correction reports on insufficient tax amounts due to changes in item classifications. They will also expand the electronic exchange system for certificates of origin to allow for the omission of the mandatory paper certificates of origin needed to receive FTA benefits.
A government official noted, 'We will improve international cooperation to strengthen post-clearance resolution of customs difficulties and mitigate risks associated with FTA utilization,' adding, 'We expect to enhance economic and livelihood vitality by supporting the exploration of export channels utilizing FTAs.'