53% of SMEs Report Damage Due to Excessive Duty-Free Direct Purchases from China

Korea Federation of SMEs Announces Results of Survey on Small Business Opinions Regarding Damages from Overseas Direct Purchases

More than half of small and medium-sized enterprises (SMEs) cited a decline in price competitiveness due to excessive duty-free benefits for Chinese direct purchase products as the main type of damage.

The Korea Federation of SMEs announced the results of the "Survey on SME Opinions Regarding Damage Caused by Overseas Direct Purchases" conducted on 320 SMEs affected by Chinese e-commerce overseas direct purchases such as AliExpress, Temu, and Shein on the 26th.

According to the survey on types of damage, 53.1% of the affected SMEs answered "decline in price competitiveness due to excessive duty-free benefits." Next were "damage from resale of direct purchase products" (40.0%), "intellectual property rights infringement" (34.1%), "discriminatory damage to domestic certification-compliant companies" (29.1%), and "sales decline" (15.0%) in that order.

Regarding whether sales have decreased, 80.7% of respondents perceived that Chinese direct purchases have affected or are expected to affect their company’s sales decline. This is interpreted as the influx of Chinese direct purchase products causing a significant sense of crisis for our SMEs.

By industry, the response that sales decline was affected was higher in wholesale and retail (34.7%) than in manufacturing (29.5%).

The direction of countermeasures for overseas direct purchase damage for SMEs showed that "strengthening crackdowns on illegal activities related to direct purchases" was the highest at 61.6%. This was followed by "strengthening sanctions on patent and trademark infringement" (42.5%), "strengthening domestic certification obligations" (42.5%), and "setting an annual duty-free limit on Chinese direct purchase products" (35.0%).

In particular, the response that "strengthening domestic certification obligations" is necessary was higher in manufacturing (45.5%) than in wholesale and retail (40.9%). Other suggestions to protect SMEs from damage caused by overseas direct purchases included "operating a response organization for company damage related to overseas direct purchases," "regulatory relaxation for domestic SMEs," and "support for strengthening the online sales competitiveness of domestic SMEs."

Choo Moon-gap, head of the Economic Policy Headquarters at the Korea Federation of SMEs, said, "Due to the activation of Chinese overseas direct purchase platforms such as Ali, Temu, and Shein, a considerable amount of uncertified and duty-free products are flowing into the domestic consumer goods market," adding, "It is urgent to prepare measures to strengthen the competitiveness of SMEs."

Choo also said, "Unlike China, which has an annual cumulative duty-free limit of about 4.8 million KRW for overseas direct purchases, Korea only has a duty-free limit of 150 dollars per purchase with no annual cumulative duty-free limit. There is a need to reestablish the direct purchase duty-free system based on reciprocity, and the reverse discrimination felt by SMEs that comply with domestic laws and certifications against the large influx of direct purchase products without domestic certification must also be resolved."

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