Korean Job Discussion Forums

[GoldMember]

We all know how imported products here are outrageously priced. Well here is an example of how the import tax system works.

Info is from Aus Trade:-

Imports into Korea are controlled by the Ministry of Commerce, Industry and Energy and the import duty for wine is 30 per cent.

The tariff and tax system is as follows:

Import Tariff - 15 per cent
Liquor Tax - 30 per cent
Education Tax - 10 per cent
Value Added Tax (VAT) - 10 per cent
The following outlines the effect of taxes and mark-ups on a $10 CIF bottle of wine:

A. CIF value: A$10.00

B. Tariff (Customs Duty): A x 15% = $1.50

C. Wine tax: (A+B) x 30% = $3.45

D. Education Tax: C x 10% = $0.35

E. Subtotal: A+B+C+D = $15.30

F. Value Added Tax*: E x 10% = $1.53

G. Fees for Customs Clearance, etc.**: A x 8% = $0.80

H. Customs cleared cost of wine: E+F+G = A$17.63

* The Value Added Tax is refunded to the importer because the tax is carried over to the final consumer.


** In addition to duties and taxes, an additional cost of 7-8% of CIF value will occur due to customs clearance fee, warehousing fee, transportation fee, etc. The amount of this additional cost depends mainly on the kind of inspection the shipment is subject to. For example, the warehousing fee will increase significantly if a detailed inspection is required.


Typical importer mark-ups
Each mark-up calculation is based on A$16.10, the customs cleared cost (H) less VAT.

Importer's price to discount store: $20.92 (30 per cent)
Importer's price to supermarket/liquor store: $22.53-24.14 (40-50 per cent)
Importer's price to luxury hotel: $22.53 (40 per cent)
Importer's price to wholesaler: $18.51-20.92 (15-30 per cent)
Typical retailer mark-ups
Discount store retail price: $22.59-25.10 (8-20 per cent)
Supermarket & liquor store retail price: $29.29-31.54 (30-40 per cent)
Luxury hotel restaurant retail price: $45.06-90.12 (200- 400 per cent)
Thus, a CIF $10 bottle of wine is typically sold for $22-$25 in discount stores, $29-$32 in supermarkets and liquor stores, and $45-$90 in hotel restaurants.

Ok, so this example is wine, but it applies across the board to vitually all imported products. What would happen to Korea and Korean industry, if other countries put a 40-70% tax on Korean products?
What I don't understand is why other countries willingly take Korean products when Korea itself is so protectionist.
Korea was built on exports to the US, whilst at the same it heavily restricting imports from the US.
Only conclusion I can make is:
Foreign governments dumb, Korean government smart.

[Octavius Hite]

The Koreans have always been gotten a break on their protectionist polices mostly so that they could help us win the cold war. Also, a prosperous SK was better than a failed state (like NK).

HOWEVER

Times, they are a changin! With the collapse of Doha more and more countries are closing their doors and putting up restrictions.

I am opposed to any kind of protectionism, open, free and fair trade between developed countries.

[Major Kong]

Reap the benefits!, enjoy watching your money hard at work.
You have subsidized this great nation! Welcome to free trade.
Well..., perhaps not so free.

[Ya-ta Boy]

Thanks, that was informative. It helps explain why our income tax is so low.

[mindmetoo]

I'm still trying to figure out the price of coffee. Why Korean pay about 3 times more for coffee beans than North Americans. While one might understand Korea putting heavy duties on food products to protect local farmers, I'm not aware of Korea being a coffee producer. Not really anyone on Jeju growing coffee, right? So why the huge price? Huge duty? But then again, Carrefour used to sell a brick for $3. When they become Homever that brick was jacked up to $7. So it might be the case the grocery stores just price fix. Western food = Koreans happy to pay three times the world price.

[Major Kong]

Hmmm, Juan Valdez, Mrs. Folgers, perhaps the Hills Brothers. Get real!,
your coffee, bagels, cream cheese, olive oil, Kahlua, and every other
quality of life issue has gone thru at least 3 middlemen enroute to your table...$.

[Captain Corea]

[eddie1983man]

I got $300 worht of stuff recently in the mail and didnt have to pay anything. It just arrived at my doorstep one day.

[Octavius Hite]

[PRagic]

As opposed to England? I swear, the brits just take dollar signs and switch them over to pound signs. 10 bucks in the U.S.? 10 quid in G.B. And this is all with a currency that is the strongest it's been in almost 20 years!

[ddeubel]

Good comments and there is a lot that goes into any "final price". But,

[Vancouver]

100 grams of chorizo is 9,900 won =.=

[Justin Hale]

[earthbound14]

While this was clearly done to help Korea grow, times are changing. As much as many Koreans hate the FTA, I think in some respects the country is ready for it. It will take some time before prices start to come down. Of course after years of paying such high prices for imported (quality gear) the local companies have learned to charge similar rates. I think Koreans are now accustom to paying through the nose for fashion and quality and this may keep prices high compared to back home. At least this isn't the UK.

Another thing, while Americans seem to say "I got this huge thing for a great price" Koreans seem happy to say "I got this brand new thing for the highest price possible". If it didn't cost much it surely isn't that good kind of mentality.

[jeffkim1972]

Koreans are just greedy.

Starter motor for a marine engine (one real life example).

Korea = 2,400,000Won
England = $900 (air shipping was included in this price).

Not just fashion, clothing, vitamins, etc.

The less they sell something, they higher they mark it up to make it all back all on one sell. On larger items (over the million US), their mentality is the "lottery jackpot" method of selling. It's as if they don't want to work anyone after this sell.

You'll hear many excuses. "oh i must make a living". well buddy, that's not my problem.

Italian furniture store in Gangnam where it's supposed to be "authentic" italian furniture. But the secret is the Italians themselves get it made it in China for a fraction of the price, do the last 3% of the work and stamp the "Made in italy" on it. Dinner table for 8 (just the table, about ~US10,000)

This store was the most expensive Italian furniture store in the world.

It was owned by the wife of one of the large Chaebul Chairman so they had the money.

This new president wants to bring up the Income per Capita up to $40,000, (which would be more than the US right now). But the only way to achieve this is to have a value-added and service industry, which Korea doesn't have, or hardly has.

If they try to achieve this with commodity manufacturing and marked up imports it'll be difficult for Koreans.

They make cars, but don't make high-end cars, same with their shipbuilding and their semiconductors (memory rather than processors).