Tariffs drop under FTA with U.S. and first bargains are on the Web

When Lee Chang-woo, a 25-year-old college student, ordered a pair of $170 Nudie jeans from an online import mall last month, he spent a total of 230,000 won ($204) including shipping from the U.S., handling fees and a 13 percent duty.

Lee should have waited a few weeks. The Korea-U.S. free trade agreement came into effect March 15, and according to the deal, duties are waived for goods under $200, up from the previous $100. Lee would have saved 24,944 won.

Internet-savvy shoppers are some of the first Koreans to enjoy the savings being ushered in by the FTA with the U.S.

American brands in boutiques and department stores may not get cheaper. Most are manufactured in China or other Asian countries, not the U.S., and brick-and-mortar stores are slower to reduce prices even when import duties fall.

But ordering online through direct-sourcing import malls or U.S. Web sites of branded apparel that ship overseas will give a savings of 13 percent on goods under $200 and 8 percent on miscellaneous goods like shoes, accessories and hats.

“Only direct-sourcing online import malls designated by the Korea Customs Service as special customs clearance businesses can benefit from the change,” said Moon Tae-joon, an official at the Korea Customs Service.

The malls have to prove they comply with customs laws to get designated. There are 72 certified malls.

Goods such as apparel, shoes, handbags, dishes, furniture, toys, CDs and DVDs that don’t exceed $200 are now free from custom charges.

But cosmetics, vitamins, food and medical supplies still have duties.

The Korea Customs Service warned that parcels under $200 in value can be subjected to duties if it has 20 of the same product. The customs service then assumes the products will be resold and not used personally.

On March 16, the Korea Customs Service held a public hearing to explain the new system to online import malls operators.

Certified online import malls are already reducing prices of U.S. goods.

Plein Express, an online import mall owned by GS Shop, this week cut prices of U.S. goods by between 20,000 won and 40,000 won.

A Tory Burch patent leather wallet is now selling for 339,800 won, down from 359,800 won, and a Michael Kors jet set medium travel tote has been reduced to 279,000 won from 309,800 won.

Before the FTA took effect, GS Shop concentrated on products under $100, which were duty free. Now it’s offering goods up to $200.

“Prices of masstige handbags and branded clothes fall under the new price limit of customs exemption,” said Park Hyeong-min, an official at GS. (Masstige is retail industry jargon for luxury goods offered to the mass market. It combines the concepts of mass market and prestige.)

eBay’s online import mall for Korea, eBay Shopping (www.ebay.auction.co.kr), has also lowered prices of goods shipped from its U.S. logistics centers starting March 15.

A $189 watch was previously sold at 308,000 won with shipping, handling charges and tax before March 15. Now it’s sold 40,000 won cheaper.

Wiz Wid, Korea’s No. 1 online import mall, has also lowered prices.

The number of certified shopping malls fell to 72 from 601 in 2008 because many companies were caught violating the customs laws.

Some online import malls that don’t have designation are lying to customers and saying the FTA hasn’t affected duties.

The customs service said it is considering listing the designated malls on its Web site.

By Shim Seo-hyun, Kim Mi-ju [mijukim@joongang.co.kr]