As the encroachment of Chinese e-commerce platforms (C-commerce) such as Ali, Temu, and Shien into the domestic market intensifies, the activities of the task force (TES), established for a government-wide response, appear sluggish. After a ban on overseas direct purchasing of products that did not receive the Korea Certification (KC) was thwarted due to consumer backlash last May, only one inspection meeting has been held up to now. Additionally, the impeachment situation has also hindered the momentum needed to推进 key measures such as the reform of the 'tax exemption system for small imported goods'.
According to the government on the 17th, the 'Overseas Direct Purchase Comprehensive Measures Task Force' has not held any additional meetings since its last inspection meeting in August of last year. The task force was formed on March 7 last year to develop consumer protection measures as the number of domestic consumers engaging in overseas direct purchasing surged. It includes 14 ministries participating under the leadership of the Office for Government Policy Coordination, such as the Ministry of Economy and Finance, the Ministry of Trade, Industry and Energy, the Fair Trade Commission, the tariff office, the Ministry of Food and Drug Safety, and the Personal Information Protection Commission.
Earlier, the task force announced a plan for strengthening consumer safety and enhancing corporate competitiveness, which included a ban on overseas direct purchases of non-certified KC products as its first consumer protection measure after its launch on May 16 last year. The purpose was to filter out harmful products entering the country during the overseas direct purchasing process. However, it soon faced backlash over the notion that 'the government is effectively blocking overseas direct purchases,' and within three days, withdrew the policy of mandating KC certification.
The plan also included a review of the 'tax exemption system for small imported goods,' but the discussions have been suspended until now. Since then, the task force's activities have been limited to checking and investigating the status of harmful product sales rather than devising additional measures, merely revisiting other policies announced last May.
A source from the Office for Government Policy Coordination noted, "After the consumer backlash caused by the KC certification issue last May, we decided to check each department's policies on a semi-annual basis," and explained that "Currently, safety investigations are being conducted primarily by the tariff office, the Ministry of Environment, and the Ministry of Food and Drug Safety, and the inspection results are being made known to the public."
The domestic retail sector is demanding that the halted review of the tax exemption system be restarted. Under the current system, when bringing in purchased goods for personal use from overseas, products priced at $150 (compared to $200 in the United States) are exempt from import declaration and tariff and value-added taxes.
This situation is a factor that makes consumption through Chinese platforms cheaper than domestic consumption, creating reverse discrimination against domestic corporations. Because of this, major overseas countries such as the United Kingdom, the European Union (EU), and Japan are imposing tariffs on small Chinese goods.
Recognizing this situation, the Ministry of Economy and Finance established a legal basis for requiring foreign e-commerce companies to register with the tariff office by partially revising the tariff law in December last year. It has created a foundation for tax collection concerning C-commerce companies. However, given the sluggish activities of the task force at the government level, it appears to feel burdened in promoting system reform.
A government official involved in the task force said, "Since the KC certification issue in May last year, the task force has taken a breather, and following the impeachment of Prime Minister Han Duck-soo in December, the momentum to lead the task force has also decreased." However, a source from the Office for Government Policy Coordination drew a line, stating, "Tax exemption is a matter for review by the Ministry of Economy and Finance."
While the government has shown a passive stance, the onslaught of C-commerce has intensified. According to the Statistics Korea, the estimated amount of overseas direct purchases made by domestic consumers from China last year was 4.77 trillion won, accounting for 60% of the total direct purchase amount of 7.96 trillion won. This is an increase of approximately 40 percentage points compared to just 23.9% in 2020. Additionally, there are projections that Chinese companies, facing challenges in their U.S. operations since the inauguration of the Trump administration last January, will embark on a more aggressive low-price offensive towards Korea.