Indonesia's trade relationship with South Korea has grown significantly, with a trade surplus of US$712.3 million recorded between January and October 2022, data from the country’s Trade Ministry revealed. Bilateral trade during this period reached US$20.58 billion, a 40.36% increase from the US$14.66 billion registered during the same period in the previous year. Indonesian exports to South Korea amounted to US$10.65 billion, while imports from South Korea stood at approximately US$9.93 billion. This thriving trade partnership is a testament to the profitability of the relationship between the two countries.
Indonesia is now the second-largest destination for South Korean foreign direct investment (FDI) in ASEAN, trailing only Vietnam, the ASEAN Briefing reported. The bond between Indonesia and South Korea has continuously strengthened since the implementation of the Korea‑Indonesia Comprehensive Economic Partnership Agreement (CEPA) negotiations on 1 January 2023.
The CEPA has further boosted this trade relationship by reducing tariffs, making the Korean market an increasingly attractive export destination for Indonesian businesses. In this guide, we will explore the key aspects of shipping goods from Indonesia to South Korea, helping you ensure a smooth business expansion and delivery experience.
The CEPA is a free trade agreement between Indonesia and South Korea that seeks to bolster trade and economic cooperation. The agreement achieves this by eliminating import tariffs on 95.5% of Indonesia's exports to South Korea and 93% of South Korea's exports to Indonesia. This level of tariff reduction under CEPA’s trade policy is notably higher than the ASEAN-Korea Free Trade Agreement (AKFTA), which eliminated 90.2% and 80.1% of export tariffs from Indonesian and South Korean exports, respectively. With reduced trade barriers, Indonesian businesses enjoy lower costs when exporting to and importing from South Korea. This translates to increased competitiveness, market access and potential growth opportunities.
According to the ASEAN Briefing, Indonesia's main exports to South Korea include coal, copper, rubber, plywood, tin and other raw materials. These goods are essential for South Korea's manufacturing and construction industries, driving the demand for Indonesian products in the Korean market.
To smoothen the shipping and customs clearance process when shipping to South Korea from Indonesia, businesses must consider the following aspects:
When exporting to South Korea, it is essential to consider the standard customs duties and taxes applied to your goods. The average import duty in South Korea is around 8% of the value of the items being shipped, with varying rates for specific products such as seafood, clothing and tobacco. The duty payable is determined by the Harmonised System (HS) code, a classification tariff schedule that allows customs to apply the appropriate duty rate.
In addition to import duties, South Korea imposes a standard 10% Value Added Tax (VAT) on all imports, which is a consumption tax levied at each stage of production. Some luxury and durable consumer goods are also subject to an excise duty of between 10% and 20%. Furthermore, alcohol imports are charged a liquor tax; for example, beer incurs a tax rate of 72% per litre. As a result, it's crucial for businesses to understand and factor in these costs when calculating the overall shipping expenses to South Korea.
That said, with the CEPA, you can enjoy further reduced tariffs as per the agreement’s schedule. However, do pay attention to any possible restrictions to the tariff eliminations. For instance, goods not originating from Indonesia may not qualify for full duty reduction.
Before shipping goods to South Korea, it is essential to be aware of the country's prohibited and restricted items. Ensuring compliance with these import regulations will help prevent any delays or issues during the customs clearance process. It can also help you avoid unnecessary extra shipping costs.
Prohibited goods are strictly not allowed entry into South Korea and are immediately confiscated and disposed of by customs authorities. These products include:
Narcotics and psychotropic substances
Counterfeit goods, including currency and documents
Pornographic or obscene materials
Subversive or treasonous materials
Explosives and fireworks without proper permits
Weapons, ammunition and related items without authorisation
Endangered species and their by-products, as per CITES regulations
Restricted goods are those that require pre-approvals or licences before being allowed to clear customs, as per South Korea’s import regulations. These products include:
Plants and plant products
Animals and animal products
Chemical substances and hazardous materials
Alcohol and tobacco products
Telecommunication and radio equipment
Artworks, antiques and cultural properties
It is crucial to familiarise yourself with these lists and obtain any necessary permits or licences before shipping to the Korean market to ensure a smooth customs clearance process and avoid any potential issues or penalties.
Proper documentation is essential when shipping internationally. The key shipping documents when exporting overseas required include:
Bill of lading or air waybill
Customs export declaration
Export declaration of goods
Certificate of origin
Additionally, you may need specific documents when importing into South Korea for restricted goods, such as licences from the food and health regulatory bodies.
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