Can Korea-EU FTA Preferential Tariffs Apply to Partial Shipments from a Third-Country Bonded Warehouse? Released

In principle, if goods originating from Denmark are stored in a Japanese bonded warehouse and subsequently imported into Korea as partial shipments (split from the original bulk), it is difficult to apply the Korea-EU FTA preferential tariff. This is because such an arrangement typically violates the Direct Transport Rule and the Single Consignment principle, which are core origin requirements under the Korea-EU FTA.

The Direct Transport and Single Consignment Principles

Most Free Trade Agreements, including the Korea-EU FTA, stipulate that originating goods must be transported directly between the parties to the agreement to qualify for preferential treatment. This rule is essential to prevent unnecessary processing or "origin laundering" in third countries and to ensure the goods' originating status is preserved. While transit through a third country is permitted under specific exceptions, these are governed by extremely strict conditions.

Permissible Operations in Transit Countries

When goods pass through a third country (such as Japan in this case), the only permitted operations are those required for logistical purposes or preservation. These include:

• Unloading and reloading for transport-related reasons.
• Operations to preserve the goods in good condition (e.g., chilling, ventilation, or drying).
• Remaining under customs supervision in the transit country at all times.
• Providing evidence of transit (e.g., Through Bill of Lading, Certificate of Non-Manipulation).

Crucially, these activities must not alter the nature or characteristics of the goods, nor can they change their status as originating products.

The Problem with Partial Shipments (Splitting)

The primary issue in this scenario is that the Denmark-origin goods are stored and then split into partial shipments in a third country. The act of "splitting" or "dividing" cargo exceeds the scope of simple unloading or preservation. The concept of a Single Consignment implies that the shipment unit must remain intact from the point of initial export. Dividing the cargo in Japan disrupts the integrity of the original shipment and is generally viewed as processing or manipulation that exceeds the scope of simple transit allowed by the treaty.

Conclusion and Recommendations

In conclusion, importing Denmark-origin goods as partial shipments from a Japanese warehouse will likely be deemed a violation of the Direct Transport Rule. Therefore, the Korea-EU FTA preferential tariff will not apply, and the Most-Favored-Nation (MFN) base rate will be applied instead. To secure FTA benefits, importers must ensure that goods are either shipped directly from the EU to Korea or that any transit through a third country strictly adheres to the non-manipulation rules without splitting the consignment.