Key Tips To Start Exporting From Australia To South Korea
Exporting goods to an international market can be a profitable boost for your business. As you consider exports to South Korea, this guide provides key information that will help you prepare your business for a successful international expansion.
South Korea is Australia’s 3rd largest market for exports, as statistics from the Department of Foreign Affairs show. Major exports to the Republic of Korea include coal, iron ores, aluminium and beef.
Before you begin with this guide, you may wish to learn more about the prerequisites of exporting goods for your business. Our guide provides a good starting point that will help you understand what it takes to export internationally, as well as the costs involved.
In this guide we’ll cover:
- Finding the right products to export to South Korea.
- Understanding the types of products you can (and can’t) export.
- The best ways to export products to South Korea.
- Costs to export containers from Australia to South Korea.
- Understanding licenses for exporting to South Korea.
- Export and import duty, tariffs, and taxes.
- Getting paid in foreign currency
Finding the right products to export to South Korea
The key to a successful export to South Korea is a result of selling your products at a profit. Find out if your export products are in demand before you begin exporting. Keep in mind that South Korea manufactures low cost goods, so if you are trying to sell items that are already available, you could be facing tough competition.
- Avoid food and perishables — Food and produce are very expensive to export, since you need specialised shipping. Additionally, food exports are subject to strict criteria, so you’re best off avoiding them altogether.
- Avoid mass-produced, cheap goods — South Korea makes so many of these types of goods domestically, you’re never going to compete when you factor in the costs of manufacturing and logistics.
- Do your market research — Gmarket and Alibaba, both enormous online marketplaces, have a huge presence in South Korea — You can certainly sell through these marketplaces, and they’re a good place to start when it comes to market research. Additionally, look into specialised market reports on what sells in South Korea.
- Aim at aged care, and biotechnology products — Ideally, you’ll want to provide items that aren’t produced domestically in South Korea. These are current trends and opportunities in the market.
- Understand your margins and pricing — Exporting can eat into your margins. So make sure you’ve got a rock-solid understanding of all your costs and the price you want to sell at, and account for exchange rates to make sure you can still turn a profit.
Understanding the types of products you can and can’t export to South Korea
Both Australia and South Korea have limitations on what you can export and import.
Australia export restrictions
The Australian authorities prevent or restrict goods like some chemicals, biological materials, pharmaceuticals, animal and plant species, weapons, and more from export. You can find a complete list here. You should also learn what Australian Customs needs from you if you want to export.
South Korea import restrictions
The South Korean authorities prohibit certain types of goods being imported including firearms, ammunition, explosives, germs (bio-terrorism), illicit drugs, counterfeit currency, and media / materials that are obscene or immoral, articles that infringe intellectual property.
The best ways to export products to South Korea
If you are exporting to South Korea for the first time, it may be wise to hire someone who has experience in this area as it can get confusing.
The process generally involves the following:
- You manufacture or purchase the items domestically, in Australia OR you manufacture them elsewhere and arrange for shipping from there to South Korea.
- You understand the various regulations, tariffs, and licenses you need to export.
- You arrange for international shipping from the point of origin to South Korea — For larger items and big quantities, you will typically use container cargo, for smaller quantities, you might use an international shipper like FedEx.
- On arrival of your goods in South Korea you pay the necessary duty, tariffs, and any other fees.
- You arrange for your goods to be held on your behalf in South Korea.
- You market your goods for sale in South Korea, often through a retail store, third-party marketplace, ecommerce website, or some other outlet.
- You sell your goods and arrange for them to be sent to your customers.
- You get paid and transfer your money back to Australia.
- You pay any necessary local taxes in South Korea and Australia.
Typical container costs — Shipping from Australia to South Korea
International shipping might not be as expensive as you think. According to the Sea Freight Calculator, the cost of renting a full container to ship goods from Australia to South Korea is approximately:
20 ft container — $1,600 USD
40 ft container — $2,000 USD
And according to Australia Trade, renting part of a container will cost you between $150 and $250 AUD per cubic meter or 1,000 kilos, whichever is greater.
Remember that these are only shipping costs — The cost of actually having your goods freighted from one port to another. They don’t include costs involved in getting your goods to a warehouse, insurance, duties, and other fees. Make sure you understand your total logistics costs so you can factor them into your pricing.
We’d advise you to compare a number of quotes from shipping companies and suppliers based on the type and quantity of goods you want to export.
Understanding licenses for exporting to South Korea
The type of documents you need to clear South Korean customs are the commercial invoice and certificate of origin. According to the Korea – Australia Free Trade Agreement (KAFTA), tariff is eliminated on nearly all Australia’s current exports by value if the products satisfy the relevant rules.
Note that the rules and regulations around importing and exporting to and from South Korea do change from time to time. Make sure you check with official sources to ensure you’ve always got the latest information.
Export and import tariffs, duties, and taxes for South Korea
Here are some estimates for the typical fees you’ll need to pay to import goods into South Korea.
You typically won’t have to pay goods and services tax to Australian authorities for exporting from the country, although you may need to pay some processing fees.
You’ll likely have to pay the following if your import value is more than KRW 150,000:
- Duty Rates — This varies between 0% to 40% depending on the product.
- Sales Tax — For goods sold in South Korea, you typically pay 10% on the sum of the import value. This is calculated based on Cost, Insurance and Freight (CIF).
- Special Consumption Tax, Special Tax for Rural Development, Transportation Tax — Charged on certain products.
- Liquor Tax — Between 5% and 72% of the sum of the CIF value and duty or charged per kilogram.
- Education Tax — Between 10% and 30%, depending on type of applicable tax.
As you can see, there is some work involved in exporting to South Korea, but if you’ve already made good inroads into the Australian domestic market, it can be a great next step. Make sure you do your research, understand what you’re getting into, and plan carefully. Then you’ll be ready to launch, and sell your products.
What about receiving money in foreign currency?
South Korean businesses will typically pay you in either US dollars or South Korean Won.. If you are exporting goods to South Korea, consider using the TransferWise Borderless Account.
Until recently, Australian businesses had 3 options to receive money from overseas customers:
- Get paid into a local Australian based, Australian dollar account.
- Open a Foreign Currency Account, usually with a bank
- Use a payment gateway like PayPal, Braintree or Stripe
Unfortunately, these options are usually filled with fees, balance requirements or massive exchange rate mark-ups.
In October 2017, TransferWise released the Borderless account in Australia and it’s really impressive. It allows you to receive, hold and transfer 27 different currencies.
A unique feature that is particularly useful for businesses, is the ability to have local bank account details in USD, EUR, GBP or AUD. This makes receiving money from overseas customers exceptionally easy.