Korea’s duty exemption threshold for cross-border shopping is set at US$150 per day. This limit is now on the table. It is blamed on the fact that Chinese e-commerce companies such as AliExpress, Temu, and Shein selling ultra-low-priced goods can quickly expand their presences in the Korean market thanks to the duty exemption threshold, some experts say.
Small and medium-sized Korean businesses are complaining of damage due to a surge in direct cross-border sales of ultra-low-priced goods made in China, and voices are growing to ask for an improvement in the Korean government’s cross-border sales tax exemption regulations, according to sources in the distribution and trade industry on March 17.
Since Nov. 17, 2022, the Korea Customs Service has used the rule that goods purchased from different cross-border shopping sites or from the same cross-border shopping site on different days are not subject to combined taxation even if they arrive on the same days in Korea. This is seen as a significant advantage for Chinese cross-border sellers that send ultra-low-priced goods to Korea.
“In theory, you can buy Chinese products from multiple Chinese cross-border shopping sites on the same day for well over US$150 and still pay no duty,” said a Korean retail industry insider. “This is less of a problem if a cross-border shopping product is purchased for your own use in Korea, but many products are imported from China through cross-border shopping for resale in Korea.”
This issue was also raised in the 2020 Parliamentary Audit in Korea. According to the data, the average number of purchases per month for the top 20 cross-border shoppers in Korea stood at 71 and the figure translates into 567 per year. The average monthly purchase amount was 6.1 million won so the amount was 48,850,000 won in a year. In an extreme case, one person made more than 200 purchases per month.
The lack of an annual cumulative tax-free limit is also a problem. Currently, no matter how many times a person makes and no matter how much they purchase through cross-border shopping, the person only needs to comply with the “US$150 or less per purchase” rule. If you order US$150 from AliExpress and US$150 from Temu, you can order US$300 in a single day and still be free from the tax-free limit now that the sites are different.
On Nov. 26, 2020, the Korea Customs Service laid out a plan to improve the distribution and safety management system for cross-border purchases, stating that it would consider introducing a cumulative duty-free limit for cross-border purchases. But since then, no related news has come out over the past four years.
“There are many problems in current regulations that allow low-priced overseas goods to be imported to Korea through cross-border shopping without any limit, I believe,” said an industry official. “It is also problematic that all discussions are now centered on consumer protection and cracking down on counterfeits.”
Another problem is that most of the so-called “luxury brand knockoffs” that infringe on intellectual property rights (IPR) come from China. In 2023, 66,000, or 96 percent of the 68,000 IPR-infringing goods seized by Korea Customs Service authorities were made in China. Market insiders think that there are many Chinese-made luxury brand knockoffs selling in the Korean market that go undetected due to a lack of human resources.
Chinese cross-border shopping has been making a foray into the Korean retail market while the Korea Customs Service looks the other way. In terms of numbers, the number of cases of cross-shopping from China increased nearly eightfold from 11.61 million in 2019 to 88.82 million in 2023. This was a 70.3 percent increase from the previous year (52.54 million), almost twice as steep as the growth rate (36.7 percent) of all the customs clearance goods. The share of Koreans’ cross-border shopping from China climbed to 70 percent in three years, up from 43 percent in 2020. Korean’s cross-border purchases from China also ascended fivefold, from US$662 billion in 2019 to US$3,287 billion in 2023.