Overseas Relocation: When importing US-manufactured vehicles, the VIN CODE on the car registration confirms the country of origin. Is this alone sufficient for Korea-US FTA preferential tariff application? Released

When importing a vehicle manufactured in the United States as part of household goods during international relocation, the VIN CODE (Vehicle Identification Number) stated on the vehicle registration alone is not sufficient to qualify for preferential tariffs under the Korea-U.S. FTA (Free Trade Agreement). While the VIN CODE is highly useful for verifying a vehicle's history, containing unique identification information such as the country of manufacture, manufacturer, and model year, it does not function as a document proving 'origin,' which is a key requirement for applying FTA preferential tariffs.

Role and Limitations of VIN CODE

VIN CODE stands for Vehicle Identification Number, a unique identification number assigned to every vehicle. The first digit of this number indicates the country of manufacture, the second digit indicates the manufacturer, the third through eighth digits indicate the vehicle type and detailed information, the ninth digit is a check digit, the tenth digit indicates the model year, the eleventh digit indicates the production plant, and the last six digits represent the production serial number. Therefore, it is possible to confirm that a vehicle was manufactured in the U.S. through its VIN CODE. However, 'country of manufacture' does not always mean the same as 'FTA origin.' The origin under an FTA goes beyond simple production location information, evaluating whether strict origin determination criteria set forth in the agreement have been met. In other words, even if a vehicle was finally assembled in the U.S., its origin can be determined differently depending on the origin of key components or the proportion of value added, making it impossible to prove FTA origin solely with a VIN CODE.

Essential Requirements for Applying Korea-U.S. FTA Preferential Tariffs

To apply Korea-U.S. FTA preferential tariffs, all four of the following requirements must be met; if even one of them is lacking, application of preferential tariffs is not possible.

• 1. Fulfillment of Korea-U.S. FTA Origin Determination Criteria: Beyond simply being 'produced in the U.S.', specific origin determination criteria set forth in the Korea-U.S. FTA must be met. For vehicles, origin is generally determined through 'tariff shift criteria' or 'value-added criteria limiting the proportion of non-originating materials (RVC: Regional Value Content).' For instance, even if a vehicle was finally assembled in the U.S., if major components were imported from non-originating countries and do not meet a certain threshold, it may not be recognized as an 'originating good' under the agreement.
• 2. Possession of a Valid Certificate of Origin: This is one of the most crucial requirements; a document proving that the goods are originating goods as prescribed by the Korea-U.S. FTA must be possessed. In principle, this should be a certificate of origin issued by an exporter or producer located in the U.S. However, under the Korea-U.S. FTA, the importer can also voluntarily complete a certificate of origin as stipulated by the agreement. In such cases, the importer must keep relevant documents (e.g., BOM, manufacturing process flow chart, raw material purchase records, producer's declaration, etc.) that can prove the goods are originating products, as well as documents proving that the transportation requirements have been met, and must be prepared to submit them upon request by customs authorities. The VIN CODE cannot serve as this certificate of origin.
• 3. Fulfillment of the Direct Consignment Principle: The goods must be transported directly from the country of origin (U.S.) to Korea. However, even if transshipment is unavoidable, if it can be proven that no further processing beyond simple operations such as unloading and reloading occurred in the transit country, the direct consignment principle is considered to have been met.
• 4. Application for Preferential Tariff Treatment: An application for preferential tariff treatment must be submitted to the Korea Customs Service during import declaration.

Relocation Vehicles and FTA Tariffs

For relocation vehicles imported during international relocation, customs duties and individual consumption taxes can generally be exempted if specific conditions under the Customs Act (e.g., period of overseas residence, period of vehicle ownership and use, etc.) are met. If the vehicle meets the exemption requirements as a relocation vehicle, there is no need to apply for Korea-U.S. FTA preferential tariffs. This is because FTA preferential tariffs are a system for reducing tax rates on general imported goods, whereas the relocation vehicle exemption system exempts the tax itself for personal household goods that meet specific conditions.

However, if the vehicle does not meet the requirements to be recognized as a relocation vehicle and customs duties are imposed, then the burden of duties can be reduced through the application of Korea-U.S. FTA preferential tariffs. In such cases, all the FTA preferential tariff application requirements explained above (fulfillment of origin determination criteria, possession of a certificate of origin, direct consignment principle, and application) must be fully met. For instance, if one purchases a new car in the U.S. and relocates, it might be difficult to meet the relocation vehicle exemption requirement (typically, used for more than 3 months overseas); in this situation, the possibility of applying FTA preferential tariffs can be considered.

Conclusion and Recommendation

In conclusion, while the VIN CODE on the vehicle registration is useful for confirming the country of manufacture, it cannot be used as a certificate of origin for applying Korea-U.S. FTA preferential tariffs. To receive preferential tariff benefits, it is essential to verify whether the origin determination criteria required by the agreement are met and to thoroughly prepare supporting documents such as the relevant certificate of origin. Since exemption benefits for relocation vehicles and FTA preferential tariffs are separate systems, we recommend consulting with a customs expert in advance to determine the optimal procedures and document preparation for your specific vehicle import situation. Professional advice is crucial to avoid unnecessary tax burdens and ensure smooth customs clearance amidst complex customs regulations.