Doing business in South Korea: South Korea trade and export guide

Updated 23 November 2015

1. South Korea export overview

In 2014 South Korea was the world’s 13th largest economy by Gross Domestic Product (GDP) Purchasing Power Parity (PPP) according to the International Monetary Fund (IMF). It has a GDP per capita (PPP) of USD 35,277 – 3 times that of China and almost equal to Japan’s.

Contact a Department for International Trade (DIT) South Korea export adviser for a free consultation if you’re interested in exporting to South Korea.

Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for South Korea.

There are over 150 British companies currently doing business in South Korea. Well known brands such as Standard Chartered, Jaguar Land Rover, BA, Bentley and Burberry currently have an active presence in the South Korean market.

Benefits for UK companies exporting to South Korea include:

  • the European Union (EU)-Korea Free Trade Agreement (FTA), the only EU FTA in east Asia/Pacific, is estimated to be worth over £500 million to UK business each year
  • South Korea is a designated high growth market for UK exports, increasing year on year since 2009
  • Korean public has a taste for British culture and respect for UK goods
  • President Park’s ‘creative economy’ policy is pushing Korean businesses towards sectors and industries of traditional UK strength
  • close proximity to the wider Asia-Pacific region and markets

Strengths of the Korean economy include:

  • world leader in electronics, shipbuilding, steel and automotive
  • ranked first in Bloomberg’s Global Innovation Index 2015
  • 74% of South Koreans undertake postgraduate-level education, with 7% of Gross Domestic Product (GDP) spent on education
  • highest level of broadband penetration in the world, with speeds of 100 megabytes
  • leads the world in 4G mobile usage, with plans to invest USD1.7 billion in 5G by 2020
  • 15 Free Trade Agreements (FTA) currently in place and 11 more under negotiation

2. Challenges for UK companies

Entering the South Korean market is relatively easy since the signing of the EU-Korea Free Trade Agreement in July 2011.

All exporters and importers (UK and Korean) need approved status before shipments take place.

A ‘direct transport rule’ is in place for shipments to Korea. UK companies are not fully benefitting from the tariff liberalisation schedule, as most UK shipments tend to go via Singapore or Hong Kong. Department for International Trade (DIT) South Korea are pushing for this rule to be amended.

Sector specific challenges in the market include:

  • certification processes for labelling foods as ‘organic’
  • low pricing structures and reimbursement for pharmaceuticals
  • restrictions in the provision of legal and professional services
  • language barrier means translators and interpreters will be needed for certain aspects of business

3. Growth potential

3.1 Economic growth

South Korea has a GDP of over USD 1.7 trillion in 2014, around 1.6% of global GDP.

South Korea is currently taking measures to fight slowing economic growth, but despite this the economy grew by 3.3% in 2014 and according to the Bank of Korea, is predicted to grow by 2.8% in 2015.

3.2 Free Trade Agreements

In July 2011, the EU-South Korea FTA came into force. This is the most comprehensive FTA ever agreed between 2 parties. It’s predicted to be worth at least £500 million per annum to the UK economy.

97% of tariff barriers between Korea and the EU will be eliminated within 3 years and EUR 1.6 billion of duties for EU exporters will be abolished annually.

South Korea also has 14 other free trade agreements currently agreed.

These free trade agreements mean that parties enter into legally binding commitments to relax access to each other’s markets’ for goods, services and investment.

3.3 Major global conglomerates

Korean companies such Samsung (the world’s largest electronics company), LG and Hyundai are now global names.

There are opportunities to work with them on every continent, but particularly in the Middle East and Association of Southeast Asian Nations (ASEAN). This is where their contracting companies use international services and specialist foreign made equipment and components.

Major Korean contractors are beginning to win projects and invest in developed markets, particularly in energy and rail.

3.4 Foreign Direct Investment (FDI) incentives

The South Korean government aims to transform the country into one of the top 10 business friendly economies in the world. It’s keen to encourage foreign investors and has been making efforts to ease excessive regulations and provide incentives for FDI.

The incentives include:

  • tax support
  • cash grants
  • site location support

Find out more information about South Korea’s FDI incentives. These incentives are mostly in effect in the country’s 8 Free Economic Zones.

4. UK and South Korea trade

The EU-Korea FTA is estimated to be worth £49 billion to Korea and the EU. This represents a doubling in EU-Korea bilateral trade in the next 20 years compared to a scenario without the FTA.

UK goods exports to South Korea have risen 47.5% from 2010, the year preceding the FTA, to 2014. Korea made the single largest contribution to UK goods export growth in 2012 and exports reached a new historical peak in 2013.

South Korea is the third largest market in Asia/Oceania for UK exports (excluding the transport hub of Hong Kong) and the 13th worldwide overall.

Top 10 UK exports of goods (2014 - excluding oil):

  1. Nuclear reactors, boilers, machinery, parts.
  2. Road vehicles.
  3. Optical, measuring, precision, medical and surgical instruments.
  4. Electrical machinery, sound recorders, television image.
  5. Pharma products.
  6. Pearls, Semi-Precious stones and precious metals.
  7. Beverages and spirits.
  8. Iron or steel.

Over the last 45 years, the UK has been the second largest EU investor in South Korea, in cumulative terms.

Major UK investors include: Standard Chartered, HSBC, Prudential, Barclays, Fidelity Asset Management, Diageo, Burberry, Edwards, AMEC, Rolls-Royce, Shell and BP.

5. Opportunities for UK businesses in South Korea

Department for International Trade (DIT) provides free international export sales leads from its worldwide network. Search for export opportunities.

Department for International Trade (DIT)’s strategic priority sectors for South Korea are aerospace, creative industries (design) and ICT (communications, industrial electronics, consumer electronics), automotive, consumer products, fashion, food and drink, education, energy, environment, financial and legal services, life sciences and sports infrastructure.

5.1 Nuclear and nuclear decommissioning

South Korea’s 23 (20,716 Mwe) nuclear power plants supply about 30% of national electricity.

Under the National Energy Plan Korea will:

  • increase nuclear’s share of generation to 59% of national electricity demand
  • have 41% of installed nuclear electricity generation capacity in place by 2030
  • have 11 new nuclear power plants in commercial operation by 2021

South Korea’s oldest operating reactor unit, Kori 1, will close in 2017 without a licence extension. It will become South Korea’s first nuclear power unit to enter the decommissioning phase. Korea is fairly new to decommissioning and waste management and there are opportunities for UK expertise in this field.

There are also opportunities in new build nuclear plants in third countries. Korea construction and infra firms have increased their reach across Asia-Pacific and the Middle East. This includes the construction of nuclear power plants, most notably in the United Arab Emirates (UAE) where 4 nuclear reactors are being built under a USD 20 billion contract. There are opportunities for UK companies to work with these Korean firms.

There are also specialist opportunities in:

  • water and waste management
  • air pollution abatement

Contact Trade Officer for more information on nuclear power opportunities.

5.2 Fast Moving Consumer Goods (FMCG) and online retail

South Korea is an enticing market for competitive British retail brands. Following the EU-Korea FTA, there has been a consistent growth in the demand for UK retail brands in Korea, specifically for fashion, cosmetics, food and drink, baby and other consumer goods.

Growing numbers of lifestyle shops is contributing to the diversification of distribution channel in the market and this is generating new opportunities for UK’s small, but competitive consumer goods brands.

The Korean fashion market is a major location for many international brands. Despite strong competiton from local brands, there is still growing demand for new international fashion items. Currently, men’s fashion, casual wear, casual footwear, fashion accessories are seeing increasing demand.

The Korean cosmetics market is highly advanced with Korean cosmetics shopping enticing visitors from the rest of the Asia-Pacific region. As consumers are becoming more knowledgeable, their interest in the natural and organic skincare market has grown rapidly.

Department for International Trade (DIT) South Korea is exploring new online sales channels and E-Exporting opportunities for all these sectors.

Contact Trade Officer for more information on opportunities in retail

Contact Trade Officer on E-Exporting.

5.3 Fintech

Korea is a digitally advanced and highly connected nation with smartphone penetration of 83% and advanced 4G infrastructure.

Korea’s financial technology industry was until recently constrained by government regulation and a lack of domestic venture capital. Korea is now looking to turn this situation around and seeking support from more experienced fintech markets, such as the UK.

Entiq (Level39), world’s leading Fintech accelerator in London has recently signed Memorandum of Understanding (MoUs) with Korea’s Financial Services Commission (FSC) as well as Seoul Metropolitan City to work together in Fintech and other ICT fields, as the UK is widely recognised in Korea as an expert in this field.

Contact Trade Officer for more information on fintech opportunities.

5.4 Advanced automotive

Korea is world’s fifth largest automobile producer by units produced.

It’s looking use its strong base as traditional automotive manufacturing power to expand into advanced automotive technology and innovation, especially around low carbon vehicles and driverless technology.

An eco-friendly vehicle programme has been created by the government to support these technologies’ development. South Korea aims to be among the global top 4 nations for low carbon and green vehicles.

The UK is increasingly gaining attention in Korea as an innovation leader, especially in driverless technology, and opportunities are increasing from this.

Contact Trade Officer for more information on automotive opportunities.

5.5 Sports infrastructure

South Korea has a proven track record of delivering large scale sporting and entertainment events, and will be hosting the Winter Olympics in Pyeongchang 2018.

There are opportunities for companies who excel in:

  • marketing and ticketing
  • hospitality and catering
  • advanced IT
  • green building and design, including stadium and accommodation build
  • low carbon solutions
  • legacy planning

Contact Trade Officer for more information on opportunities in the global sports sector.

6. Start-up considerations

You can set up a representative office, a branch office, a joint venture or a wholly foreign owned enterprise in South Korea.

The most common form of operation is distribution via an agent. Entering a market by working with an agent or distributor can have several advantages including:

  • reducing time and costs
  • gaining local knowledge
  • accessing networks of the agent or distributor

However, there are also some disadvantages when employing a third party including:

  • additional cost to your products
  • losing control and visibility over sales and marketing

Since the Free Trade Agreement it’s increasingly easy and common to set up as Foreign invested enterprises (FIEs).

Taxation and legal obligations differ depending on which business structure you choose.

Contact the Department for International Trade (DIT) team in South Korea to help find tax and legal advisers before entering into agreements.

Korea has aimed to create a business friendly legal environment over the past decade. However the legislative structure means that laws can change frequently and rapidly.

The 3 main bodies in charge of legislation implementation and information are:

Contact the Department for International Trade (DIT) team in South Korea to help find tax and legal advisers before entering into agreements.

7.1 Standards and technical regulations

The Korean Agency for Technology and Standards (KATS) administers and monitors Korea’s Industrial Standards (KS).

KATS are frequently referenced in government regulations and technical specifications, and implemented by public agencies in procurement. KATS are continually working to bring Korean standards in line internationally.

There are separate standards boards for:

7.2 Intellectual Property Rights (IPR)

You should register your patents and trademarks with the Korean Intellectual Property Office (KIPO) before you commit to any important deals with South Korean companies.

The patent and trademark registration system in South Korea favours the first company to register successfully with KIPO. Therefore, the sooner you register the better. Companies that do not register in South Korea will be disadvantaged in any future legal disputes over IPR.

Read guidance on how to protect and enforce your intellectual property rights in South Korea.

Contact the Department for International Trade (DIT) team in South Korea to help find tax and legal advisers before entering into agreements.

7.3 Labelling

Country of origin labelling is needed for commercial shipments entering South Korea. Korean language labels must be shown at the time of customs clearance. They can be attached locally on products in the bonded area, either before or after clearance.

Further labelling and marking requirements for products such as pharmaceuticals and food, are covered by regulations from the government agencies responsible for them.

The Korea Food and Drug Administration is responsible for setting and enforcing Korean labels for food products, other than livestock products. These are regulated by the Ministry of Food, Agriculture Forestry and Fisheries.

The Korean Customs Service publishes a list of the country of origin labelling requirements by Harmonized System Code number (an international classification system managed by the World Customs Organisation).

The Certificate of Origin should indicate the item’s description, quantity, price, place of origin, exporter and importer, and be written in English, Korean or French. For items shipped directly to South Korea from their country of origin, the Certificate of Origin should be issued by the relevant customs authorities or Chamber of Commerce. The items should be clearly marked with their country of origin.

8. Tax and customs considerations

8.1 Sales tax

South Korea has a basic Value Added Tax (VAT) rate of 10%. The sale of cultural items, eg newspapers, books, magazines may be exempt.

The following transactions qualify for zero rated tax status:

  • the export of goods
  • the supply of services outside Korea
  • the supply of international transportation services by vessel or aircraft
  • the supply of certain goods or services paid in foreign exchange

8.2 Company tax

Korea’s corporate tax rates as of January 2015 are:

  • 10% on the first KRW 200 million
  • 20% for the tax base between KRW 200 million and 20 billion
  • 22% for the excess

There are special tax exemptions under the FDI incentives scheme. For more go to

8.3 Income tax

South Korea’s Income tax for non-residents applies only to their Korean earned income. Korea has both a flat tax option of 17.5% and a progressive tax option that will reflect income.

Regional tax offices can be found at the National Tax Service website.

The National Tax Service and InvestKorea provide further information on the South Korea’s tax system.

8.4 Customs

There are 2 methods of determining a duty amount:

  • declaration and payment
  • notice of assessment

In declaration and payment, the person wanting to import goods makes a declaration on the payment of the customs duties direct to the customs house.

In notice of assessment, the customs house imposes and collects customs duties.

In most cases, businesses use the declaration and payment method. The notice of assessment system is mainly used for the imposition of minor customs duties, such as on passengers’ and crews’ goods, unaccompanied baggage and postal matters.

Check the Korea Customs Service website for more information and customs forms.

You can find more about import tariffs in the Market Access Database.

8.5 Documentation

Companies with no record of trade law violations don’t need customs inspection. The only exception relates to high-risk items imported into South Korea.

Importers can make an import declaration online using the Korean Customs Service’s (KCS) Electronic Data Interchange (EDI) system for paperless import clearance. You don’t need to visit the customs house.

Import declarations may be filed at the customs house before a vessel enters a port or before the goods are unloaded into bonded areas. Goods don’t have to be stored in the bonded area if the import declaration is accepted.

Exporters can file an export notice to Korean Customs using computer based shipping documents at the time of export clearance. All commodities can be freely exported unless they are included on the negative list.

Korean Customs allows free customs entry to goods brought into South Korea that are carried by hand by foreign business people (such as laptop personal computers) for use during their stay in the country.

Generally, Korean Customs makes a note on the traveller’s passport which requires them to take the items out of South Korea when they leave.

The Korea Customs Service provides further details on customs regulations.

9. Business behaviour

South Korea is a vastly modernised and business friendly environment. However there are some cultural differences to be aware of. These include:

  • Korea’s numerical system counts differently from the UK’s so make sure all numbers are written down and fully understood in negotiations
  • Korea has a culture of dynamic, rapid action so be prepared for expectations of fast delivery and occasional last minute alterations
  • a slight bow, followed by a handshake, is the preferred way of greeting in the modern Korean business environment

Contact for our ‘Ten Tips’ advice pack on Korean business and social etiquette.

10. Entry requirements

All visitors must have a valid passport and visa, although UK nationals can stay up to 90 days without a visa.

Foreign investors need to apply for a Foreign Investment Visa, known as a D-8. You need to apply for a D-8 to the South Korean embassy in London. Your agent will fill in a form that has to be submitted to the immigration authorities.

Anyone staying in South Korea for more than 90 days must apply for an alien registration card via the South Korean embassy in London.

10.1 Travel advice

If you’re travelling to South Korea for business, check the travel advice beforehand.

11. Contacts

Contact the team in South Korea for more information and advice on opportunities for doing business in South Korea.