News / Korea must update Customs as air cargo profile changes and e-commerce grows

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DHL Express has urged the Korean government to boost the e-commerce sector and make it more cost-effective to do business in the country.

Noting a fall in air cargo volumes, Raymond Yee, the firm’s VP Customs and regulatory affairs for South Asia, said the industry had seen a profile change.

“We tend to see large volumes, small packages and high customer expectations over returns and track and trace. It needs to be cost-effective.

“But Korea has a high level of Customs inspections, compared with Hong Kong and Japan. It creates cost issues for logistics companies and customers. Korea needs to make its Customs flows as efficient as the data flows.”

Mr Yee told delegates at TIACA’s Air Cargo Forum in Seoul that forwarders were unable to submit data directly to Customs, and that plans to move express operators to separate screening areas would delay shipments.

“This is a regression. Onsite Customs should be part of the service offered.”

Noting that even low-risk import and transit shipments were subjected to 100% screening, he called on Korean Customs to focus instead on higher-risk cargo.

Korea also has a low rate of duty exemption, set at $100, compared with Australia’s rate of $1,000 and Singapore’s 400.

“This is very important for e-commerce. And the cost of collecting duty above $100 could be higher than the duty itself – why not put it in line with passenger requirements, which are $600-worth of duty-free?”

He added:”We’ve seen a slowdown in air cargo growth and the world economy, and a move of low-value manufacturing out of Korea. But there is growth in the express and ecommerce market. Korea needs to be competitive and tap into this growth. Incheon is good but the government should be looking at how it can do better.”

Hye-sun Lee, deputy director of the Ministry of Land, Infrastructure and Transport said the government was working hard to improve stagnant volumes at Incheon, the world’s fourth-largest air cargo airport.

“Volumes have shifted to the port,” she said. “We are trying to increase them by diversifying into perishables and express which have high demand. E-commerce is increasing by 8% a year and our Customs regime is changing to support it.

“We will improve the business environment and provide cost incentives…we are also revising the permit system so new routes can be operated.”

The government plans to expand the cargo infrastructure at Incheon and build an integrated logistics facility.

While the session on Korea was generally upbeat about the future, David Hoppin, a consultant and CEO of Diio, warned that there could be more structural problems and that e-commerce may not boost air cargo.

“A lot of growth in B2C will be less likely to go by air. Most will go by surface as air is too costly,” he said. “And better speeds and predictability of ocean is coming.”

He revealed that despite a Free Trade Agreement between the US and Korea in 2012, there had been no visible impact on trade flows.

“Tonnage has gone down while exchange rates have been stable. Seoul is well-positoned as a key export gateway for China, but it is losing share. And I’m sceptical about the need for air freight on inbound flows.”