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How to Receive an Import Tax (VAT) Exemption for Free Issue Items Entering South Korea
May 21, 2024
International manufacturers often outsource manufacturing to South Korea due to the technical expertise, extensive capabilities, and cost-competitiveness of Korean job shops. South Korean contract manufacturers are particularly known for their metal fabrication capabilities attributable to the world-leading steel mill, power plant and shipbuilding industries in the country.
LPR Global provides equipment sourcing and contract manufacturing services out of South Korea for international companies; please contact us to discuss how we can meet your global manufacturing and industrial procurement needs.
What are Free Issue Items?
Contract manufacturing sometimes involves free issue items or catalog items; these materials are supplied by the purchaser to the vendor for the completion of the project. Reasons that companies provide free issue items to contract manufacturers are to comply with the purchaser’s client request, guarantee the quality of a specific component, or supply such items that the vendor would have difficulty procuring within the vendor country. For example, an EPC company may free issue the instrumentation for a piping skid to ensure that the instrumentation on the skid is consistent with the rest of the facility.
Global buyers are often concerned that free issue items will present additional project costs due to import taxes incurred as the materials enter South Korea from their country of origin. However, there is a process to declare free issue items as such and eliminate the need to pay South Korean import taxes. LPR Global has been implementing this process for all our global clients.
How to Receive an Import Tax Exemption for Free Issue Items Entering South Korea
The process of receiving an exemption from paying the import taxes for free issue items entering South Korea is as follows:
1. The buyer is to complete a form declaring the value and country of origin of the free issue items sent to South Korea; the importer of those free issue items are their designated contract manufacturers in South Korea or LPR Global Korea, whoever the buyer’s purchase order has been issued to.
2. LPR Global Korea issues a document of consignment of these free issue items, stating that these free issue items are required to complete a certain project; the free issue items will leave the country with the finished product as the project is completed.
3. The LPR consignment process report is signed by LPR Global and the manufacturing shop and then sent to the Korean federal government.
Unlike European countries, the South Korean government does not limit the period of free issue items staying in Korea as long as the project details and the items’ departure are confirmed.
LPR Global has a proven track record of connecting North American and global buyers in the steel mill, automotive, power generation, automation, and other industries with pre-qualified South Korean vendors with high technical proficiency and expertise. Please contact us to discuss your global industrial needs.