Korean Customs Takes Steps to Prevent Illegal Transshipments
The Korean Customs Service states it is taking significant steps to prevent illegal transshipment and document falsification, in order to prevent companies in other countries from fraudulently obtaining preferential tariff treatment once the pending U.S.-Korea Free Trade Agreement (KORUS) and the EU-Korea FTA take effect.
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(KCS states that there have recently been rising concerns that products transshipped through Korea could include false identification information to obtain preferential tariff treatment that products in the U.S. or EU will enjoy, once these FTAs take effect.)
Both FTAs Already Require Greater Controls over Transshipment
KORUS and the EU-Korea FTA already contain provisions requiring greater controls to prevent illegal transshipments. Under the agreements, KCS has agreed to: (i) enhance its inspection and control level on high risk transshipments; (ii) commit to a high level of inspection on potentially illegal transshipments before and after implementation of the FTAs; and (iii) prevent unnecessary hurdles for normal transshipments by adopting a more systemic inspection method.
KCS Has Established New Bureau with 157 Officers to Verify Country of Origin
As part of its strategy to enhance enforcement, KCS has established a new bureau to take charge of policy planning for implementation of the FTAs, with 157 new officers assigned to work exclusively to verify the accuracy of country of origin information for products going to a country with which Korea has an FTA. KCS states that it has a plan to build a system to manage the whole procedure, including entry, unloading, transportation, shipping and departure.
Strategy Includes Targeting Companies, Enhanced Controls, Etc.
KCS has established an overall strategy to deal with cargo being transshipped through Korea, which focuses on companies involved with transshipment rather than dealing with each case individually. Elements of the strategy include the following:
- Targeted inspection of high risk cargo. KCS will considerably increase inspection rates for high-risk companies after assessing the possibilities of unfair trade targeted at 178 companies engaging in unloading, transporting and storing at Busan Port, Inchoen Air Port and other sea- and air-ports in Korea. All textile and apparel goods are automatically categorized as high-risk and are subject to both X-ray control and physical inspection.
- Real time tracking system. KCS will select high-risk cargo in advance by enhancing pre-analysis of transshipments information, and by tracking and monitoring illegal moving and devanning containers in real-time using GPS technologies. In April 2011, KCS started to use the e-Seal tracking system to track and manage high-risk cargo and the Customs Border Control Center will take immediate action if suspicious movement is detected.
- Evaluation of company compliance. KCS has adopted an evaluation system to categorize companies according to their compliance. This system includes calculating the correctness of their manifests, previous violations, cooperation records, management, facility evaluation or internal control levels. All companies will be reevaluated on an annual basis.
- Enhanced controls on longer-term cargo. Cargo that stays in a warehouse longer is more prone to origin fraud, so all transshipped cargo that does not leave 30 days after submission of the inbound manifests is subject to special inspections.
Will Share Info with Int'l Customs Agencies, Seek MOU with FTA Partners
The FTAs will require greater cooperation in the exchange of information between the customs authorities. The Korean government will seek Memoranda of Understanding with FTA partners in order for both countries to better communicate the results of their investigations into origin fraud and to control the importing companies’ ability to ship goods into the importing country.
KCS has also conducted working group meetings to share information with the customs authorities of the originating countries of transshipped goods such as Japan, China and Russia, in order to improve enforcement within the country of origin. KCS states this helps to prevent illegal transshipment which uses third countries as transshipping point.
(See ITT's Online Archives or 05/27/11 news, 11052726, for BP summary of testimonies at a Senate Finance hearing on specific provisions in KORUS, etc.
See ITT's Online Archives or 05/06/11 and 02/18/11 news, 11050622 and 11021826, for BP summaries of the EU-Korea FTA, which takes effect July 1, 2011.)
Press release, dated 06/03/11, is available on the KCS website here.
KCS Document on this strategy is available by emailing documents@brokerpower.com.