Tariff revenue on U.S. imports falls: ministry

A free trade agreement with the U.S. has pushed down Korea’s tariff revenue on U.S. imports for the first time in seven years, despite an increase in trade with the world’s largest economy.

The Ministry of Strategy and Finance said Tuesday that tariff revenue on U.S. imports sank to 9.8 trillion won ($8.9 billion) last year, down 10.7 percent from 10.9 trillion won a year ago.

This is the first time Korea saw its customs revenue decline since 2005, the ministry noted, adding that its revenue fell short by 15.5 percent of the country’s initial expectations.

Even though the won-dollar exchange rate for taxation was higher in 2012 than in 2011, the country had fewer gains in tariff revenue.

This is mostly due to the free trade pact with the U.S. ratified in March last year, which enforces an elimination of duties on a majority of goods shipped between the two major trading partners.

About 80 percent of U.S. products shipped to Korea are duty free, while 70 percent of Korean exports to the U.S. are freed from taxation.

The National Assembly Budget Office said in a report that tariff revenue growth is expected to be slower than the country’s overall growth, forecasting further decline in customs revenue in 2014 when the free trade pacts with the U.S. and the European Union will take full effect on the market.

By Park Hyong-ki (hkp@heraldcorp.com)