(Last updated: 17 Mar 2011)

Business opportunities

Austrade’s business development specialists have prepared a range of market profiles that offer potential to assist in your exporting investigations. Austrade’s in-market teams have identified opportunities for Australian exporters in various industries (see 'Profiled industries in this market' on the left side of this page).

Business etiquette

Business tips

Having a basic understanding of Korean culture and business etiquette will encourage better business relationships. Korean society is based on Confucianist beliefs, which means respect for superiors and parents, duty to the family, loyalty to friends, humility, sincerity and courtesy. One of the most important aspects of Korean society that Australian business people should be aware of is its hierarchical nature.

Formal introduction - Koreans want to do business with people they have a personal connection with. It is crucial that you are introduced to a prospective business associate through an intermediary. The higher the social standing of the intermediary, the more successful you are likely to be at making contact with the right people. Note that cold calling will not work.

Business cards - in Korean business organisations, everyone has a distinctive place in the organisational hierarchy. A Korean business person is not comfortable until your position and company name is known. Business cards should be left on the table in front of you for easy reference. When translating your card into Korean it is only necessary to translate your name and title. A direct translation of the title into Korean can be misleading so beware. For example, Managing Director in Korea corresponds with President in Korea. Finally, you should avoid using Japanese language business cards in Korea.

Building relationships - is vital that you build human relationships with the people you are doing business with in Korea. Relationships are developed through informal social gatherings that often involve a considerable amount of drinking and eating. Such informal gatherings also present both sides to discuss business in more friendly surroundings. Koreans do not hesitate to discuss business over dinner.

Legal documents - legal documents are not as important in Korea as they are in Australia as trust plays a far greater role. Koreans treat most legal documents as Memorandums Of Understanding (MOU) - ie documents that, no matter how specific or complicated, sets out the broad outlines of a relationship.

Losing face - Koreans are extremely sensitive to having and maintaining face. The easiest way to cause someone to lose face is to insult them or criticise them in front of others. Never treat them as an underling when their status is high within the company. Sensitive matters may often be raised indirectly through the intermediary that first made the introductions.

Don’t be too pushy - Korean business people are reputed internationally to be good negotiators. Be prepared to be patient, gentle but firm. Be as dignified as possible and don’t push your position too hard. Be prepared for the ‘price war’ but don’t give in easily as Koreans are persistent and admire this quality in others.

Make sure you are understood - speak slowly and clearly and repeat any points that you want to emphasise. It may be worthwhile exchanging notes (minutes) after the meeting further ensuring that each other has been understood.

Gifts - corporate gifts (ties, pens, etc) are often exchanged after courtesy calls between senior managers.

Please also note: Bribery of foreign public officials is a crime. Australian individuals and companies can be prosecuted in Australia for bribing foreign officials when overseas. For more information, go to the Attorney General's Department on foreign bribery.

Tariffs and non-tariff barriers

Tariffs are based on the two column Harmonised System - most goods are subject to rates shown in the ‘general’ column.

Annual duty rate reductions occur in a wide range of product classification.

Specific imports from GATT member countries receive a concession rate.

Temporary rates are also utilised.

Duties are mainly a percentage of the cost, insurance and freight (CIF) value provided such value is based on current domestic value at date of export.

A fluctuating list of products is subject to tariff quotas.

Customs authority contact details:

Korea Customs Service
920 Doonsan dong
Seo-ku, Taejon 302-701
Tel: +82 42 481 4114

Non-tariff barriers

Import licenses are valid for one year. The term of validity of the import license may vary, as can the approval authorities dependent on the import. License applications must be accompanied by the purchase contract, offer sheet and any other documents required by the respective bank or Ministry and only registered traders are authorised to import goods in their own names. Imports are controlled by the Ministry of Commerce, Industry and Energy and are classified into three categories:

1. Prohibited (unable to be imported)
2. Restricted (requires an import license)
3. Automatic approval (no special license required)

The Korean Central Bank authorises banks to allocate foreign exchange.

Methods of quoting and payment

Unless otherwise specified, popular price quotations are in US dollars. Sometimes it is requested that they be broken down into FOB, C&F and CIF values (Incoterms 1990).

Payment is usually made in US dollars. Settlements can be based on irrevocable letter of credit, D/P D/A or T/T. Australian dollars are becoming prevalent.

Letters of credit may be opened by merchant banks.

Labelling

Labels on most foods must show:

• product name (generic and trade)
• manufacturer's name
• dates of manufacture
• weights or quantities
• ingredients in descending order of composition
• importer's name, address and phone number
• methods of preservation
• places where the product can be returned or exchanged
• expiry dates

Imported foodstuffs and pharmaceutical products must show the above information in the Korean language on the original retail pack. Labels can be either printed or applied via adhesive stickers, provided they are in place prior to customs clearance.

Special certificates

Shipments of plants, seeds, vegetable products, livestock and animal products, including greasy wool and hides, must be accompanied by sanitary certificates issued by the approved authority in the country of origin. In Australia this is the Australian Quarantine and Inspection Service of the Commonwealth Department of Agriculture, Fisheries and Forestry-Australia (AFFA).

Certificates required for all pharmaceuticals, medical devices and health food products include:

• Pharmaceuticals
  • Certificate of Manufacture - must be issued by the approved authority in the country of origin.
  • Certificate of Free Sales - must be issued by the listed or registered authority in the country of sale.
• Medical devices
  • Certificate of Manufacture - must be issued by the approved authority in the country of origin.
  • Certificate of Free Sales - must be issued by the listed or registered authority in the country of sales.
  • GMP Certificate - must be issued by an accredited international institution.
• Health food
  • Accompanying documents including ingredient(s) specifications and manufacturing procedure, and certificate of analysis issued by manufacturer.
  • Other (eg. BSE-free certificate for products in gelatine capsule form imported from non-BSE countries, Certificate of Free Sales, etc).

Documentary requirements

Pro-forma invoice

Required sometimes for importers to open letter of credit conveniently.

Commercial invoice

No special form prescribed. However, standardised form is widely used in Korea for export.

May be printed on firm's letterhead but must be issued and signed by the seller and show unit cost of each article, and, if necessary, other costs.

Should be sent under separate cover to the consignee.

Bill of lading/Airway bill

May be made out To the Order of L/C Opening Bank. May be required to bear the name and address of the consignee.

Packing list

Minimum of two copies required; one copy to be included in the relative package, and one copy to be sent to the negotiating bank. It must also contain a full description of the contents of the shipment.

Certificate of origin

Required only if specified in letter of credit or specifically requested by importer.

Public health requirements

Imports of livestock must be accompanied by a current quarantine certificate issued by the appropriate government agency in the country of origin. In Australia, this is the Australian Quarantine and Inspection Service (AQIS). All permitted plant and vegetable products require health and phytosanitary certificates. Plant quarantine laws ban the import of most Australian fresh fruit and vegetables with the exception of:

• green bananas
• onions
• potatoes
• cut asparagus
• shelled nuts
• oranges and lemons
• mangoes

Certificates of authority to manufacture, issued by the appropriate authority in the exporting country, are required for shipments of pharmaceutical, medical instruments, sanitary material and cosmetics. Only licensed pharmaceutical companies may import pharmaceutical subject to the approval of the Korean Health Authority.

Detailed information on current requirements for export of livestock, horticulture products and livestock products to the Republic of Korea is available from AQIS.

Insurance

Normal commercial practice. In the case of a CIF contract (Incoterms 1990), the policy must cover 110 per cent of the invoice value, be endorsed by the exporters and expressly state that claims are payable in the currency of the draft. Policy should name an insurance agent as the correspondent in Korea for the settlement of any claims.

Certificate of insurance

Must be provided if insurance is arranged by the exporter.

Weights and measures

The metric system.

Taxation

Corporate and personal income taxes in Korea are administered by the National Tax Service. Resident corporations and branches of foreign corporations are subject to corporate tax.

Korea’s corporate tax rate uses a two step progressive approach. There are three types of taxable income falling under corporation tax - annual income (one fiscal year), liquidation income, and capital gains from the transfer of land, etc.

Up-to-date information regarding the taxation system and current rates of taxation in Korea can be found by accessing the Korea Trade-Investment Promotion Agency website.