Let’s dial back to 1988. The year 1988 was the year of many changes in Korea. Nationwide preparation for the Seoul Olympics held in September of that year brought the first wave of globalization in the country.
That summer, imports of foreign cigarettes were first permitted and the first McDonald’s branch opened in Seoul. It was also July of that year when mobile phone services were first introduced in Korea ― the price of a mobile phone was 4 million won while a “Pony” passenger sedan was 5 million won. Nordpolitik produced its first tangible result by exchanging permanent missions with Hungary just three days before the start of the Olympic Games. Included among the many changes of 1988 was the increase of the import duty exemption ceiling to $400 (or 300,000 won at that time) from $135 set in 1979.
Notably, the $400 ceiling has not changed since, even if the actual value of $400 has changed substantially over the past 26 years. Korea has also undergone a sea change during the past quarter century ― by way of example, its per capita GDP in 1988 was $4,500, which now stands at $23,000. While various tax credits and exemptions were created and vanished in many categories over the years, simply no activity has been taken in this category through six administrations.
The duty-free allowance also contrasts with Japan’s $2,000, the U.S.’s $800, Australia’s $870 and China’s $800. In fact, the average ceiling for the OECD countries stands at $720.
Actual amounts of exemptions in Korea, however, are somewhat higher than $400 as three categorical exemptions are also provided in tandem with the $400 ceiling ― i.e., one bottle of alcoholic beverage, one bottle of perfume, and 200 pieces of cigarettes are also exempted from import duty payment.
The Korean Customs Service thus states that the actual exemption should be roughly about $500. Still yet, this seems to be out of touch with the drastically changed circumstances.
Since 2011, calls have been made in the National Assembly to adjust the ceiling, but then shelved largely because of the political sensitivity that only a certain select group of people stand to enjoy the benefit of any increased exemption. This concern is valid to some extent, since not all Koreans travel abroad. But at the same time, at a time when 15 million nationals exit airports in any given year, to view foreign travel as reserved for the privileged also loses persuasiveness.
The more fundamental problem of the “out-of-touch” regulation lies in its dubious effectiveness. In sample checkings conducted by the Customs Service in 2010, almost 73 percent of Korean travelers were found to possess foreign-purchased articles that exceeded the $400 ceiling. So, technically 73 percent of travelers are in violation of the Customs Act. And in an ordinary situation, only 1 percent of incoming people are selected for in-depth checking by customs officials upon entry at the airport. Think about the trips you had recently. Almost all people submit their customs declarations marked as “nothing to declare,” and only very few of us are checked. In other words, either knowingly or unknowingly, a majority of travelers are just taking their chances.
On its part, the Customs Act imposes a substantial penalty on any violation. A failure to declare is subject to imprisonment of 5 years or less, payment of an extra 30 percent additional duties or confiscation of the items. As with any other import related law, this provision applies to both Korean nationals and foreign travelers. Provided the Customs Service statistics hold true, apparently the unrealistic law is now turning people ― many of them innocent ― into potential violators. If most people tend to do something in deviation from what is stipulated in the code book, perhaps it is either outdated or requires some serious attention.
By Lee Jae-min
Lee Jae-min is an associate professor of law at Seoul National University. ― Ed.