Bonded Factory Benefits Extended to Semiconductor and Biotech Research Institutes... Effective This Month

The government will allow research institutes and similar entities to be designated as bonded factories in order to secure export competitiveness in advanced and promising industries such as semiconductors and biotechnology. This is a long-standing wish of the industry for over two decades, made possible through regulatory innovation at bonded processing export sites.

On the 29th, the Korea Customs Service announced that it had completed amendments to three notifications covering 12 key tasks as follow-up measures for the 'Bonded Processing Export Regulation Innovation (Export PLUS+ Strategy)'.

Commissioner Myunggu Lee of the Korea Customs Service introduced regulatory innovation details through the 'Bonded Processing Export Regulation Innovation (Export PLUS+ Strategy)' at the government Daejeon office on the 29th. Photo by Jeong Ilwoong

The amendments to the notifications focused on regulatory innovation that the industry has long called for, aiming to maximize export momentum in advanced sectors such as semiconductors, biotechnology, and defense. The revised regulations take effect and are implemented starting today, April 29.

The most notable change, drawing the industry's keenest interest, is the allowance for research institutes to be designated as bonded factories. Bonded factories are zones that permit the manufacturing or processing of foreign goods in Korea before customs clearance procedures are finalized. Traditionally, the bonded factory system has limited benefits to facilities involved in the manufacturing or processing of mass-produced products. In other words, research institutes developing new products were previously excluded from these benefits.

However, under the revised notifications, research institutes will now be able to use bonded factories as locations for new product development and testing. This will enable the industry to immediately utilize foreign raw materials needed for R&D in a deferred-tax status, without delays due to import customs procedures, thereby accelerating the pace of new technology and product development. Additional benefits such as cost savings and increased exports are also expected.

Procedures to foster the new aviation MRO (Maintenance, Repair, and Overhaul) industry will also be streamlined. The core point is that foreign aircraft and large volumes of parts can now be swiftly imported for repair and modification through a single approval process. The Korea Customs Service plans to implement this process at Incheon Airport in early May.

A foundation has also been laid for the manufacturing and supply of eco-friendly fuels to support the development of Arctic shipping routes. Specifically, 56 new oil tanks have been designated in the Busan, Ulsan, and Gyeongnam regions to enable rapid production of eco-friendly fuels. The amendments also include measures to improve construction efficiency in large-scale semiconductor clusters and to help the Korean shipbuilding industry, which uses massive quantities of raw materials, secure adequate worksites.

The Korea Customs Service has also put in place measures to protect the domestic steel industry. Anti-dumping duties will now be a condition for bonded factory licensing, blocking the circumvention of anti-dumping rules by simply processing dumped steel products in bonded factories before importing them domestically. The licensing period is also limited to one year, requiring annual renewal reviews.

In addition, the Korea Customs Service plans to establish a "(tentatively named) Central Region Advanced Industry One-Stop Support Team" at the Pyeongtaek Customs Office, so that companies can experience the benefits of regulatory innovation firsthand. This support team will provide close consulting to companies in the central region—including Pyeongtaek, southern Gyeonggi Province, and the Chungcheong region—where advanced industries such as semiconductors are concentrated. It will also establish a 24-hour customs clearance support system, playing a key role in fostering the advanced industry ecosystem.

Commissioner Myunggu Lee of the Korea Customs Service stated, "This regulatory innovation will lay the foundation for Korea's advanced industries to overcome global supply chain crises and secure unrivaled competitiveness in the world market. The Korea Customs Service will continue to proactively identify challenges in the export sector and reflect them promptly in policies by focusing our customs capabilities."

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