Duty-Free Store Inventory Sales Allowed Domestically "Timing Possible After June"

On the 29th, the duty-free shop at Terminal 1 of Incheon International Airport is quiet. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Lim Hye-seon] Domestic duty-free shops, struggling due to the impact of the novel coronavirus infection (COVID-19), will be temporarily allowed to sell their inventory duty-free products. The industry expects that sales of duty-free inventory items will take place after June, as price setting and brand consultations remain.

On the 29th, the Korea Customs Service announced that to support the duty-free industry's crisis recovery, it will temporarily allow inventory duty-free products to be imported through customs clearance and sold to domestic consumers. Current regulations only permit disposal or return to suppliers of inventory items to strictly manage duty-free goods.

However, as the number of inbound and outbound travelers decreased by 93% compared to the same period last year (as of March), and the duty-free industry is facing management difficulties, the Customs Service has opened the door for domestic distribution of inventory items on a temporary basis. Only long-term inventory duty-free products stored for more than six months are allowed to be sold domestically.

For duty-free shops to distribute inventory duty-free products domestically, they must prepare the necessary documents for import and pay taxes, just like general imported goods. The Customs Service estimates that if 20% of the long-term inventory held by duty-free shops is consumed through this measure, the duty-free industry could secure about 160 billion KRW in liquidity.

However, challenges remain before inventory items can be distributed domestically.

The biggest concern for duty-free companies is price setting. Since these are inventory items, standards for discount rates must be established. The Customs Service stated that there are no separate standards for depreciation rates of inventory items, and prices will be set comprehensively considering inventory periods according to Article 30 of the Customs Act on the determination of taxable prices. A duty-free shop official explained, "If prices are set at the original purchase cost, there will be no competitiveness, so we will first discuss how to set the depreciation rate for inventory items," adding, "We also need to consult with the brands."

The sales locations for inventory items also need to be discussed. Currently, department stores, downtown duty-free shops, and outlets are being considered as sales venues. The industry expects that sales through department stores will be difficult. Even for the same brand, domestic and duty-free products often have different importers, and there is a high possibility of opposition to selling inventory items alongside new products.

A duty-free industry official said, "Opening sales channels for inventory items will provide relief," and added, "We will do our best to overcome difficulties as much as possible."

This content was produced with the assistance of AI translation services.