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2009/SOM1/SCCP/029

Agenda Item: 5 (vi)

KoreaCustoms ServicePolicies to Cope with the Global Economic Crisis

Purpose: Information

Submitted by: Korea

/ First Sub-Committee on Customs Procedures Meeting
Singapore
24-26 February 2009

KCS policies to cope with the global economic crisis

■ Background

With the economic recession caused by the global financial crisis that started in the last quarter of 2008 spreading to the real economy, countries around the world including Korea are faced with economic difficulties resulting from diminishing ex/import volume and declining economic growth.

In an effort to overcome the economic crisis, the Korean government is pushing forward drastic tax cuts and expansion of fiscal expenditure, and the Korea Customs Service(KCS) is also expanding its CARE Plan[1] designed to relieve temporary cash crunch of domestic businesses.

■ KCS Business Assistance Policies

We at Korea Customs believe that in order to cope with the tough economic situation, the government including the customs should enforce drastic and prompt economic stimulus policies in a practical and effective way. For stable economic growth and business viability are, as a driving force behind global trade facilitation as well as a source of the national fiscal revenue, directly linked to the national survival strategy. In this respect, Korea Customs would like to share some of the policy efforts it has made to support business activities of Korean traders and boost the domestic economy.

First, KCS has introduced a program in which the customs, based on the liquidity analysis of importing companies, extends the duty payment deadline within the limit of 1 year without provision of collateral or allows installment payment of customs duties, for those which cannot pay them in a lump sum due to a temporary cash crunch or suffer from serious financial difficulties caused by imposition of customs duties, etc. By the end of Dec. 2008, 509 companies benefited from the program for about 2.85trillion won of customs duties and the figure is expected to reach about 4 trillion won in the first half of 2009.

Second, to ease financial burden of delinquent traders, KCS allows customs clearance of imported goods when an importer pays more than 5% of the delinquent duties along with a payment plan for the remaining amount instead of requiring complete payment. In addition, Korea Customs requests financial institutions to withhold or cancel delinquent registration of the companies so that they may not get any disadvantages in their financial transactions due to the delinquency.

Third, in an effort to support small and medium sized exporters, customs duty drawback, which is, in principle, paid back within 3 days after its application following the exportation, is now transferred to SME exporters' bank accounts promptly after the export approval.

Fourth, so as to make a proactive response to rising youth unemployment, KCS plans to employ about 600 administrative interns in 2009 with the government budgetary aid. This action is also expected to reduce work burden of customs officials as they will provide administrative support in the headquarters and regional customs houses.

Fifth, KCS plans to spend over 60% of its expenditure budget for fiscal year 2009 amounting to 396.4billion won in the first half of the year. The early enforcement of the budget aims at increasing financial demands to prop up the real economy and thereby to contribute to economic recovery of the country.

■ What we need now is trade liberalization and facilitation

Leader from over the world including Korean President Lee Myung-bak stressed at the G20 financial summit and the APEC summit held last November that the financial crisis should not be an excuse for a resurgence of protectionism. As many countries are experiencing severe effects of the global economic recession such as reducing fiscal revenue and corporate credit crunch, it is clear that only when businesses survive, trade can continue and so can tax revenue. Therefore, it is imperative for customs authorities around the world to make further efforts for liberalization and facilitation of the global trade and share their experiences and information with each other.

[1]CARE Plan(Customs Assistance for Rehabilitation & Encouragement) : Customs policy designed to help rehabilitation of companies and encourage their business activities