Korea-EFTA FTA Preferential Tariffs: Eligibility for EFTA Products Stored and Repacked in a Non-Party Country with EFTA Exporter's Declaration of Origin. Released

If goods originating from EFTA are imported into Korea after being stored and repackaged via a logistics warehouse in a non-party country, it may be difficult to apply the Korea-EFTA FTA preferential tariff with only the declaration of origin issued by the EFTA exporter to the importer in that non-party transit country (even if it is the same entity as your company).

One of the core principles for applying FTA preferential tariffs is the 'Direct Consignment Principle'. According to this principle, goods exported from a contracting party must be directly transported to another contracting party. However, in cases where transit through a non-party country is unavoidable due to convenience of transport or geographical reasons, it may exceptionally be recognized as direct consignment. The most important condition at this time is to prove that no processing or work whatsoever has been carried out on the goods within the transit non-party country.

Specifically, operations permitted during transit through a non-party country are limited to unloading for transport, transshipment, or minimal operations for the preservation of goods (e.g., ventilation, drying, removal of damaged parts during storage, etc., acts that do not alter the essential characteristics of the goods). The act of 're-packaging' mentioned in the question is highly likely to be interpreted as an operation beyond mere transport convenience or preservation. In particular, the phrase 'repackaging according to the orders of each overseas branch' can be seen as an act of commercial preparation of the goods, which can make it very difficult or impossible to prove that the essential characteristics of the goods have not been altered. Therefore, if this 'repackaging' act is deemed to violate the Non-Manipulation Rule stipulated in the FTA agreement, the Direct Consignment Principle is compromised, making the application of preferential tariffs impossible.

Furthermore, the issuance target and purpose of the declaration of origin must also be significantly considered. A declaration of origin is a document that proves the originating status of goods to receive preferential tariffs between contracting parties. A declaration of origin issued by an EFTA-based exporter to a 'non-party country importer' (the entity owning or managing the relevant logistics warehouse) is difficult to be recognized as a valid declaration of origin under the Korea-EFTA FTA agreement. In principle, it is common for a declaration of origin to be issued directly by the exporter (or producer) to the importer in the importing party country (Republic of Korea) to receive preferential tariffs in trade between FTA parties. A document issued to an importer located in a non-party country can be interpreted as not having its primary purpose for the application of the Korea-EFTA FTA, which serves as the basis for the judgment that its validity is difficult to recognize, as mentioned in the original answer.

In conclusion, if goods originating from EFTA are imported into Korea after being repackaged via a non-party country, the act of 'repackaging' within the non-party country is highly likely to violate the Non-Manipulation Rule, which is part of the Direct Consignment Principle, and the fact that the declaration of origin was issued to an importer in a non-party country also makes it highly probable that the requirements for applying FTA preferential tariffs will not be met. To apply FTA preferential tariffs, you will need to either change the shipping route directly from EFTA to Korea, or, if transiting through a non-party country, ensure that only minimal operations for preservation purposes are carried out without any processing, and that the declaration of origin is also issued directly to the importer in Korea for the purpose of final export to Korea, thus fulfilling all requirements.