Korea Import Customs Value: Is the Invoice Enough?

Not always. In Korea, the customs value that import duty is charged on starts from the commercial invoice, but it is adjusted by statutory additions and deductions, so it can differ from the invoice amount (Customs Act Art. 30). If you bought on FOB terms, for example, freight and insurance to the Korean port of import must be added. This guide covers the basic rule, what gets added and deducted, which exchange rate applies, and a worked example.

Key takeaways

• Customs value is the transaction value: the price actually paid or payable, plus additions, minus deductions (Customs Act Art. 30(1) and (2)).
• Freight and insurance to the port of import are additions, so they are added when the invoice price does not include them.
• Royalties and assists are added only when the conditions in the law are met.
• If an addition cannot be supported by objective and quantifiable data, the transaction-value method is not used and the methods in Articles 31 to 35 apply.
• Foreign-currency prices are converted at the weekly customs exchange rate set by the Commissioner of the Korea Customs Service (Art. 18).

How is customs value determined in Korea?

Customs value is the price actually paid or payable by the buyer for goods sold for export to Korea, adjusted by the additions and deductions the law lists (Customs Act Art. 30(1)). This is often called Method 1, and most import declarations are valued this way. Any addition must be based on objective and quantifiable data; without such data, this method cannot be used.

Customs value = price actually paid or payable + additions − deductions

When the transaction value cannot be used, the other methods apply in order: identical goods (Art. 31), similar goods (Art. 32), deductive value based on domestic sale prices (Art. 33), computed value (Art. 34) and a reasonable-means method (Art. 35). At the importer’s request, the computed value method may be applied before the deductive value method. The transaction value is also set aside in the cases listed in Art. 30(3), such as restrictions on the disposal or use of the goods, or a buyer-seller relationship that influenced the price.

What counts as the price actually paid or payable?

The price actually paid or payable is the total payment the buyer made or must make to the seller for the imported goods (Customs Act Art. 30(2)). It covers more than the goods price on the invoice: amounts offset against the seller’s debts, payments of the seller’s debts, and other indirect payments are included. The invoice is the starting point, and money that changes hands under separate agreements has to be considered too.

What is added to and deducted from customs value?

Article 30(1) lists six additions, and the proviso to Art. 30(2) lists four deductions. Additions are costs the buyer bears that are often missing from the invoice price, while deductions are post-import costs or Korean taxes that are separate from the price of the goods. A deduction can be taken only when it can be distinguished from the price actually paid or payable.

Type	Item	Note
Addition	Commissions and brokerage borne by the buyer	Buying commissions excluded
Addition	Cost of containers treated as one with the goods, and packing labour and materials	Borne by the buyer
Addition	Assists	Goods or services the buyer supplied free or at a reduced price, apportioned
Addition	Royalties and licence fees for patents, trademarks and similar rights	When the conditions in Enforcement Decree Art. 19 are met
Addition	Proceeds of later resale, disposal or use that accrue to the seller	Directly or indirectly
Addition	Freight, insurance and other transport-related costs to the port of import	May be partly or fully excluded for goods listed in the Enforcement Rules
Deduction	Post-import construction, installation, assembly, maintenance or technical assistance	When distinguishable from the price
Deduction	Freight, insurance and similar costs after arrival at the port of import	When distinguishable from the price
Deduction	Duties, taxes and other public charges imposed in Korea	-
Deduction	Interest under deferred-payment terms	When distinguishable from the price

Which exchange rate converts the price into won?

A price stated in a foreign currency is converted at the customs exchange rate under Customs Act Art. 18. The Commissioner of the Korea Customs Service sets this rate by averaging the base or arbitrage rates of the week before the week that includes the import declaration date (the date under Art. 17), so it can differ from the market rate on the day you declare. The applicable rate is published as the weekly exchange rate on UNI-PASS, the Korea Customs Service e-clearance system.

How do you calculate customs value and duty?

Add freight and insurance to the port of import to the FOB price to get the customs value in foreign currency, convert it at the customs exchange rate, then apply the duty rate. The figures below are assumptions chosen to show the order of the calculation; real duty rates and exchange rates depend on the product and the declaration date. Import VAT is calculated separately at 10% of the customs value plus duty and certain other taxes.

Assumptions: FOB price USD 10,000, ocean freight USD 500, insurance USD 100, duty rate 8%, customs exchange rate KRW 1,300 per USD

Step	Calculation	Amount
Customs value (USD)	10,000 + 500 + 100	USD 10,600
Customs value (KRW)	10,600 × 1,300	KRW 13,780,000
Duty	13,780,000 × 8%	KRW 1,102,400
VAT base	13,780,000 + 1,102,400	KRW 14,882,400
VAT	14,882,400 × 10%	KRW 1,488,240

Under Value-Added Tax Act Art. 29(2), the VAT base for imported goods is the customs value plus customs duty, individual consumption tax, liquor tax, education tax, special tax for rural development, and transportation-energy-environment tax. The example assumes goods with no tax other than customs duty. Check the duty rate for your product with an HS code lookup first.

What mistakes are common when declaring customs value?

The most common mistake is declaring only the invoice amount on FOB or EXW terms and leaving out freight and insurance. Others include adding costs that should not be added, such as buying commissions, and leaving out royalties without checking the conditions. For transactions between related parties, it is safer to keep evidence that the relationship did not influence the price.

Customs may ask for documents proving the declared price when, for example, it differs markedly from prices of identical or similar goods, or changes markedly even though you keep buying from the same supplier (Customs Act Art. 30(4) and Enforcement Decree Art. 24). If the right valuation method is unclear, you can apply to the Commissioner for an advance ruling before filing the price declaration (Art. 37). For when duty is paid while goods sit in bonded storage, see Bonded Warehouse Korea: When Do You Pay Duty?.

FAQ

Is freight always included in customs value?

As a rule, freight, insurance and other transport-related costs to the port of import are additions. Under CIF terms they are already in the price; under FOB or EXW terms they are added separately. For certain goods listed in the Enforcement Rules of the Customs Act, part or all of these costs may be excluded.

What if the invoice amount differs from the customs value?

Declare the adjusted amount, reflecting the additions and deductions with supporting documents. If an addition cannot be backed by objective data, customs value is determined under Articles 31 to 35 instead of the transaction-value method.

Are royalties always added?

No. Royalties and licence fees for patents, trademarks and similar rights are added only when they meet the conditions in Enforcement Decree Art. 19. Check the licence agreement to see whether the payment relates to the imported goods and is a condition of the sale.

Where can I find the customs exchange rate?

UNI-PASS publishes the weekly import (customs) exchange rate, which you can look up by import declaration date. The rate is set each week from the previous week’s rates.

Sources

• Customs Act Art. 30 (principles of customs valuation), KCS CLIP law portal (Korean)
• Customs Act Art. 18 (customs exchange rate), Art. 17 (applicable law) and Art. 37 (advance ruling on valuation), KCS CLIP (Korean)
• Enforcement Rules of the Customs Act Art. 1-2 (customs exchange rate), Tax Tribunal tax law service (Korean)
• Value-Added Tax Act Art. 29 (tax base), Korean Law Information Center (Korean)
• Easy Law, Determination of customs value (Korean)
• Korea Customs Service help centre, What is the customs exchange rate? (Korean)