When importing a US-produced vehicle due to overseas relocation, the country of manufacture can be confirmed by the VIN CODE on the vehicle registration. Will the KORUS FTA preferential tariff apply based solely on this? Released

When importing a vehicle produced in the United States as personal effects during international relocation, the VIN CODE (Vehicle Identification Number) stated on the vehicle registration certificate alone is not sufficient to apply for the preferential tariff under the KORUS FTA (Free Trade Agreement). While the VIN CODE is very useful for verifying the vehicle's history as it contains 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 represent the vehicle type and detailed information, the ninth digit is a verification number, 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 produced in the United States through its VIN CODE. However, 'country of production' is not always synonymous with 'FTA origin.' The origin under an FTA goes beyond simple production location information; it determines 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 United States, its origin may be determined differently depending on the origin of key components or the proportion of value added, and thus, the VIN CODE alone cannot prove FTA origin.

Essential Requirements for Applying KORUS FTA Preferential Tariffs

For the KORUS FTA preferential tariff to be applied, all four of the following requirements must be met; if any one of them is missing, the preferential tariff cannot be applied.

• 1. Fulfillment of KORUS FTA Rules of Origin: Beyond simply being 'produced in the United States,' the specific rules of origin set forth in the KORUS FTA must be met. For vehicles, origin is generally determined through the 'tariff shift rule' or the 'value-added rule (RVC: Regional Value Content) limiting the proportion of non-originating materials.' For example, even if a vehicle is finally assembled in the United States, if major components are imported from non-party countries and do not meet certain criteria, 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 important requirements; a document proving that the goods are originating goods as stipulated by the KORUS FTA must be provided. This should, in principle, be a certificate of origin issued by an exporter or producer located in the United States. However, under the KORUS FTA, importers can also self-certify the origin according to the agreement's provisions. In such cases, the importer must keep relevant documents (e.g., BOM, manufacturing process flow, 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 be prepared to submit them upon request by customs authorities. The VIN CODE cannot serve the role of such a certificate of origin.
• 3. Fulfillment of the Direct Consignment Rule: The goods must be transported directly from the country of origin (United States) to Korea. However, even if transshipment is unavoidable, if it can be proven that no further processing other than simple operations such as unloading and reloading occurred in the transshipment country, the direct consignment rule is considered to be met.
• 4. Application for Preferential Tariff: An application for the preferential tariff must be submitted to the Korea Customs Service when filing the import declaration.

Relocation Vehicles and FTA Tariffs

In the case of relocation vehicles imported during international relocation, customs duties and individual consumption taxes can generally be exempted if separate conditions (e.g., period of overseas residency, period of vehicle ownership and use, etc.) stipulated by the Customs Act are met. If the vehicle meets the exemption requirements as a relocation vehicle, there is no need to apply for the KORUS FTA preferential tariff. This is because FTA preferential tariffs are a system that lowers the tariff rate for general imported goods, while the relocation vehicle exemption system is a system that exempts the tax itself for personal effects of individuals who meet specific requirements.

However, if the requirements for being recognized as a relocation vehicle are not met and customs duties are imposed, then the burden of customs duties can be reduced by applying the KORUS FTA preferential tariff. Even in such cases, all the FTA preferential tariff application requirements explained above (fulfillment of rules of origin, possession of a certificate of origin, direct consignment rule, and application) must be fully met. For example, if one purchases a new car in the United States and then relocates, it might be difficult to meet the relocation vehicle exemption requirements (mainly use overseas for 3 months or more), in which case the possibility of applying for the FTA preferential tariff can be considered.

Conclusion and Recommendation

In conclusion, while the VIN CODE on a vehicle registration certificate is useful for verifying the country of manufacture, it cannot be used as a certificate of origin for applying KORUS FTA preferential tariffs. To receive preferential tariff benefits, it is essential to confirm whether the rules of origin 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 tailored to your vehicle import situation. Professional advice is crucial to avoid unnecessary tax burdens and ensure smooth customs clearance amidst complex customs regulations.