Trade  ( Trade Regulation )

 Other Link : Foreign Trade

Foreign Trade is regulated by various laws, including the External Trade Act governing the export and import of goods, the Foreign Exchange Management Act concerning foreign exchange matters such as the settlement of export or import payments, and the Customs act dealing with customs clearance and collection of tariffs. The prime objective of trade regulations is to promote external trade and to facilitate fair transactions based on the principle of free trade.

External Trade Act

The External Trade Act, which has been effective from July 1, 1987, super-sides three laws - the Export Union Act of 1961, the Trade Transaction Act of 1967, and the Plant Export Promotion Act of 1978. The intention of the new law is to provide a new system for dealing with trade that will enable the government to deal effectively with hte dynamic trade environment at home and abroad. Basic intentions of the Act are:

- To phase out restrictions on both imports and exports as part of a transition from government-managed trade to trade carried out by the private sector;
- To ensure to the maximum possible extent that trade will be conducted in a fair and ethical manner, in order to minimize trade conflicts and problems with trading partners;
- To establish an institutional framework to deal with the effects of import surges occuring after liberalization;
- To simplify and consolidate the system of laws so that people involved in trade can more easily understand and apply them.

The main provisions of the new legislation are:

- Proclamation of a gradual transition toward a free and open trading system
The laws that have governed trade over the last twenty years were aimed at the development of the national economy through export promotion and import regulation. The main purpose of the new law is to further develop the national economy, but through promoting external relationships and through establishing a fair trade order.

- Reducing export and import restrictions
Previous laws contain provisions that give the government the authority to set maximum and minimum prices of imports and exports, and to require the posting of security bonds prior to exporting or importing. while these provisions have never been enforced, they represent a possible hindrance to trade.

- Protection of fair trade
Under the ew law, foreign trademarks or designs which are protected by the laws of foreign countries will receive full protection, and the fasification of country-of-origin labels is prohibited. Those guilty of this practice face penalties up to a one-year suspension of their business license oif the offense has damaged Korea's reputation and adversely affected normal trade.

Foreign Exchange Control Act

The Foreign Exchange Control Act (FECA), a special act to regulate foreign exchange transactions, regulates the exchange rate system, transactions of foreign exchange, concentration of foreign exchange, payment and receipt of foreign exchange, etc., that initiate such payments or receipts and certain capital movements. It also delineates the business and responsibility of exchange regulations authorities such as foreign exchange banks and money-changers. The act basically impose restrictions on such transactions, or sets forth the essential principles by which they are to be regulated. Owing to the variety and constant change in foreign exchange transactions, and the consequent necessity for a flexible application of controls, the act is broad both in the scope and nature of its regulations.

FECA differs from the Foreign Trade Act which regulates the commodity flow in that it regulates money flow. Since money flow generally accompanies commodity flow, some provisions of these two laws overlap. Certain methods have been established to ensure that they do not contradict each other in their implementation, nor involve duplicate work. For Example, if an export and/or import transaction approved under the FTA is to be settled by one of the standard settlement methods stipulated under the Foreign Exchange Control Regulations, separate approval for foreign exchange settlement under the FECA is not required.

Regarding the administration, the Ministry of Finance initiates main policies with respect to foreign exchange operations, payments for non-merchandise transactions, capital transactions and trransfers. The Bank of Korea (BOK), which as the central bank holds and manages the nation's foreign exchange reserves, regulates operations in the exchange market and intervenes in it. The BOK is also delegated by the government to exercise comprehensive control over transactions relating to invisible trade and capital movements, and over some areas relating to visible trade.

Foreign exchange banks, as well as foreign bank branches in Korea, are authorized by the Minister of Finance or the BOK to engage in commercial international banking and dealings in all foreign exchange, with the exception of those expressly prohibited. Their role in foreign exchange regulation is important in as much as they are authorized to screen and give approval to most of the transactions listed in the FECA as well as to license exports and imports according to the FTA. In addition, they undertake the ex post facto management of some of the above transactions. Other institutions such as money-changers, overseas missions of the government, customs houses, post offices and the Office of Supply are administrative bodies of exchange regulation insofar as they perform functions specifically allotted by the FECA.

* Korea is preparing a foreign exchange market reform program for implementation in September 1992.

The Customs Act

The Customs Act provides for customs systems and procedures regarding transportation facilities, bonded areas, transportation, customs clearance, etc., in order to properly control foreign goods and to prevent smuggling.

The laws required for the enforcement of the Customs Act are prescribed by Presidential Decree, Ministerial Notice, Notice of Customs Administration, etc. To encourage exporters and to facilitate customs procedures, the Special Act for Customs Drawback on Raw Materials for Manufacturing Export Goods has been in force since July 1, 1975.

Since 1988, the Korean Customs Tariff Schedule, which is attached to the Act, has been based on the Harmonized Commodity Description and Coding system. The Harmonized system (H.S.) consists of rules for the interpretation of tariff schedules, 21 sections, 97 chapters and 5,019 headings and subheadings.

Under the Act, the tariff application order, valuation of goods and declaration of price are provided. It also allows some flexibility to reduce, exempt, refund and/or pay installment customs duty to accommodate changes in economic, social, educational and other government policies, and is in compliance with the provisions of international conventions, international practices or courtesies.