Application of Korea-EU FTA for Danish Goods Split-Shipped via a Japanese Bonded Warehouse Released

Overview of Direct Transport and Single Consignment Rules

Generally, applying the Korea-EU FTA preferential tariff is unlikely to be permitted if Danish goods are stored in a Japanese bonded warehouse and then split into partial shipments for import into Korea. This scenario typically constitutes a violation of the 'Direct Transport Clause' and the 'Single Consignment' rule, which are fundamental requirements under the Korea-EU FTA.

The Core Principle of Direct Transport

Most Free Trade Agreements (FTAs), including the Korea-EU FTA, require originating goods to be transported directly between the member parties to qualify for preferential treatment. This principle is designed to prevent unnecessary processing or 'origin laundering' in third countries and to ensure that the origin of the goods remains unchanged during transit. While exceptions exist for transit through non-party countries, they are subject to very strict conditions.

Permissible Operations in Third Countries

When goods transit through a third country, the only actions permitted—under the supervision of local customs authorities—are as follows:

• Unloading and reloading for logistical or transport-related reasons.
• Operations required to preserve the goods in good condition (e.g., refrigeration, ventilation, or drying).
• These operations must not alter the essence or character of the products, and the goods must remain under customs control at all times.
• Documentation, such as a Through B/L or a Certificate of Non-Manipulation, must be provided to prove the goods were not altered.

The Issue with Split Shipments (Consignment Splitting)

The primary legal hurdle in this case is that the goods were split during storage in a third country (Japan). The act of dividing a shipment exceeds the scope of simple unloading, reloading, or preservation. The concept of 'Single Consignment' implies that the integrity of the cargo unit established at the time of export must be maintained. Splitting the cargo in Japan is interpreted as a manipulation that falls outside the allowed transit exceptions, thereby invalidating the FTA claim.

Conclusion and Regulatory Consequences

In conclusion, because split shipping via a third-party warehouse violates the direct transport requirements, it is reasonable to expect that the Korea-EU FTA preferential rate will be denied. Consequently, the goods will likely be subject to the General (MFN) Tariff rates. To benefit from FTA rates, importers must ensure that goods are shipped directly from the EU exporter to Korea, or that the consignment remains intact if transshipment through a third country is unavoidable.