What are the conditions and specific procedures for releasing large-scale overseas equipment, imported by split shipment, before customs clearance with customs approval? Released

You inquired about the system for pre-release of goods before import declaration clearance when importing large overseas facilities by means of partial shipment. This system can provide very useful customs clearance convenience to importers when importing such large facilities. As a customs broker, I will provide you with detailed information on the application conditions and specific procedures of this system.

1. Overview and Necessity of the Pre-Release System Before Import Declaration Clearance

The pre-release system before import declaration clearance allows goods to be released in advance with the approval of the customs commissioner before the import declaration is cleared through customs procedures. It is primarily operated with the purpose of minimizing incidental costs such as storage fees and demurrage, and supporting companies to proceed with their production activities or project schedules without disruption through prompt utilization of goods.

Especially for goods like large facilities that require a long time for installation or special equipment and space for transportation and storage, the costs and time losses incurred while waiting for customs clearance procedures can be enormous, making this system highly valuable.

2. Eligibility for Pre-Release Before Import Declaration Clearance for Partially Shipped Large Facilities

Pre-release before import declaration clearance is, in principle, possible for goods that do not have difficulties in import customs clearance, by providing collateral equivalent to customs duties, etc., and obtaining the approval of the customs commissioner. In your case, when importing large overseas facilities by means of partial shipment, this system can be utilized if the following conditions are met.

• When goods intended for import declaration clearance under the HS code of a finished product are imported in an unassembled state via partial shipment: This is a key condition that precisely matches your case. Due to their nature, large facilities may be difficult to load onto a single means of transport, or may be transported in multiple stages due to manufacturing and supply chain characteristics. In such cases, this applies when the goods are ultimately intended to be used as a single completed facility, but are transported in separate parts for convenience of shipping.

Let's examine the meaning of 'partial shipment import' in more detail here.

Partial shipment import encompasses the following two cases.

1. When goods already possessing the characteristics of a finished product at the time of shipment from the exporting country cannot be loaded onto a single means of transport due to reasons such as enormous weight, and are therefore imported via partial shipment (loading) using two or more means of transport or multiple times.

2. When goods manufactured in various countries are imported via partial shipment (loading) using two or more means of transport or multiple times, due to the diversification of global supply chains.

To satisfy the conditions for partial shipment, all of the following requirements must be met.

• Classification under the HS code of a finished product: The imported unassembled parts must ultimately be able to function as a single completed facility, and customs clearance must be based on the HS code of that completed facility.

• Import from the same exporter under a single contract: The entire facility must be imported under a single contract and from the same exporter (including cases where there is a head office-branch relationship of a multinational corporation).

• Transportation schedule specified in the contract: The import contract must clearly specify the details of partial transportation and a concrete transportation schedule.

In addition, the pre-release system before import declaration clearance may also apply to other situations that may arise during the import of large facilities.

• In cases where goods are subject to pre-assessment of duties (including goods subject to assessment notice) and it takes a long time to determine the amount of duty

• In cases where it takes a long time to determine product classification or tariff rates

• In cases where the certificate of origin could not be submitted to the customs commissioner at the time of import declaration, in accordance with Article 236, Paragraph 1, Subparagraph 1 of the Enforcement Decree of the Customs Act

• In cases where goods are subject to examination for the appropriateness of preferential tariffs before import declaration clearance, as per the proviso of Article 8, Paragraph 4 of the "Act on Special Cases Concerning the Customs Act for the Implementation of Free Trade Agreements," and it takes a long time to determine the origin, etc.

These cases can be utilized when customs clearance delays are expected due to complex valuation, classification, or origin regulations during the import of large facilities.

3. Specific Procedures for Pre-Release Before Import Declaration Clearance

The specific procedures for obtaining approval for pre-release before import declaration clearance are as follows.

1. Submission of Application for Approval: An 'Application for Approval of Pre-Release Before Import Declaration Clearance' must be submitted to customs before or after the goods arrive in Korea. This application must include detailed information such as the goods' information, reason for release, and estimated import declaration date.

2. Preparation of Required Documents: The following documents must be attached along with the application.

   • Copy of import contract (confirming whether partial shipment conditions and transportation schedule are specified)

   • Copy of B/L (Bill of Lading) or AWB (Air Waybill)

   • Commercial Invoice, Packing List

   • Goods description materials (catalogs, drawings, detailed specifications, etc.)

   • Installation plan or usage plan (for large facilities, this is important documentation to explain the urgency of release)

   • Collateral provision documents (proof of collateral equivalent to the taxes to be paid, such as customs duties and value-added tax)

   • Other documents requested by the customs commissioner

3. Provision of Collateral: Collateral equivalent to the customs duties, value-added tax, etc., payable under the Customs Act must be provided. Types of collateral include cash, bank guarantees, and guarantee insurance policies from insurance companies, and appropriate collateral is set based on the actual estimated tax amount. This is to secure national treasury claims even if goods are released before import declaration clearance.

4. Customs Review and Approval: Customs comprehensively reviews the necessity of release, suitability of goods, and appropriateness of collateral based on the submitted documents. If deemed suitable after review, an 'Approval for Pre-Release Before Import Declaration Clearance' is issued.

5. Goods Release and Post-Management: After receiving the approval, goods can be released from the bonded area. Released goods are stored or undergo installation work according to the approval conditions. Subsequently, a formal import declaration must be made and customs duties and other taxes paid to complete the import declaration clearance within the specified period (generally within 15 days, extendable). If the import declaration is not made within the deadline, the collateral may be forfeited or additional taxes may be imposed.

4. Advice from a Customs Broker

The import of large facilities via partial shipment is highly likely to involve complex issues during the customs clearance process, such as product classification, determination of dutiable value, and application of origin rules. To successfully utilize the pre-release system before import declaration clearance, it is advisable to consider the following points.

• Prior Preparation: It is crucial to consider the possibility of partial shipment and pre-release before import declaration clearance from the import contract stage and to clearly specify related content in the contract.

• Accurate Product Classification: Even if imported in an unassembled state, the HS Code of the final finished product must be accurately determined, and sufficient documentation must be prepared to explain it to customs. This directly affects tariff rates and applicable laws.

• Efficient Collateral Management: Providing collateral incurs costs, so the method of collateral must be carefully chosen and managed to achieve maximum effect with minimum cost.

• Collaboration with Experts: The complex import of large facilities and the pre-release procedures before import declaration clearance require specialized knowledge and experience in customs. It is paramount to consult and collaborate sufficiently with a customs broker in advance to prevent unforeseen problems and to proceed with customs clearance procedures quickly and accurately.

We hope that you can carry out your large facility import projects more efficiently and economically through this system. If you have any further questions, we are always ready to assist you.