Overview of the Korean Classification Regime and Notable Matters (Part I)

Abstract

Classification refers to identification of the classification code of a certain imported/exported good in accordance with standards and system of harmonized system. Classification is used as a standard in determining the tariff rate/exemption/origin, and accuracy in classification is required. Six digit codes provided under the HS convention are commonly used world-wide. Korea uses ten digit codes in accordance with Korea’s appendix to Customs Act and Harmonized System of Korea (HSK). For purposes of accurate classification, (1) possibility for error arising from amendment of HS to reflect development of new products and changes in the trade environment should be minimized, (2) appropriate response should be made to different classifications for the same goods due to differences in interpretations adopted by each country, and (3) grounds for classification should be prepared to secure accuracy in determination of origin for purposes of Free Trade Agreement (FTA) benefits. In addition, classification should be made in accordance with established standards, with no regard for customs rate applicable to a certain good. However, since Korea Customs Service tends to prefer classification yielding a high tariff rate due to its nature as a revenue agency, taxpayers should consider active response to customs audit.