US military installations in Yongsan, Seoul, Korea

The European Union Chamber of Commerce in Korea (www.eucck.org) has been receiving complaints from its members, about the rampant smuggling of consumer goods from the US military post exchanges (PX) across the country.

South Korea imposes customs taxes (in some cases, very high) on many of the imported consumer goods including Television sets, music systems, DVD players, Computer systems, beverages, spirits and food items.

However, because of an agreement with the Korean government, U.S. Forces Korea doesn't pay import taxes on goods used on bases. As a result, consumer goods in the post exchanges are often much cheaper than on the open Korean market.

As such, by smuggling the consumer goods off of U.S. post exchanges, and selling them to shop vendors, these levies are virtually sidelined. Moreover, while it has been a common small-time crime over the years, the scale of operations appears to be increasing.

On U.S. bases, access to the post exchanges and shops is controlled, and patrons are required to show ID and ration cards. At these facilities that sell consumer goods and liquor in South Korea, checkers write down how much is bought and customers sign their names on a sheet. The sheets are then turned into the Ration Control Office, which checks to make sure people aren't exceeding limits.

Despite these elaborate checks, smuggling continues unhindered. The smugglers have elaborate arrangements with "insiders" and manage to transfer large quantities of imported products out of the base. This consignment is then resold to local shopkeepers. The resale price would be lower than what vendors would have to pay on imported goods in the authorized dealers, making it a very profitable exercise for both the smugglers and the shopkeepers.

EUCCK member companies have been complaining that these illegally distributed imported products will not only harm the Brand (image) of the foreign companies, but also business development. It will also cause unfair competition between shops that utilize a fair channel from those that use illegal products.

As regards the consumers, they have reason to feel cheated too. They could be buying the imported products from shops, without realizing that these are "illegally smuggled items." The products that they buy can turn out to be of inferior quality and damaged. Moreover, the products may not be eligible for warranties and after sales service from authorized dealers.

The consumers end up paying the actual cost of the imported product, without realizing the shopkeeper is withholding the taxes from the government. The government in turn looses substantial revenue that it would have earned by way of taxes.

Although the authorities are aware of this rampant smuggling from the US bases, very little action has been taken. While there are sporadic checks and raids, it is not enough to repair the damage that is caused to the reputation of foreign companies in Korea.

EUCCK hopes the authorities will take up the issue on an "urgent basis" and crackdown on this illegal activity, not just for the sake of its member companies, but also for safeguarding consumer's interest.

The European Union Chamber of Commerce in Korea (EUCCK) is a non-profit organization, and is made up of around 800 members from the EU, local as well as overseas business community.

The purpose of the Chamber is to help in any possible way to develop trade, commercial and industrial relations between the EU and Korea. The Chamber paves the way for and fosters contacts between interested business circles of the 25 EU member states and the Korean Peninsula.

For further enquiries, please contact Ram Garikipati (Ph: 725-9916) or Sungyoon Park (Ph: 725-9915) or E-mail: euram@eucck.org/ euop@eucck.org