The Deputy Prime Minister for Economy and Minister of Strategy and Finance, Choi Sang-mok recently announced that the government would scrap the limit of two-bottles of liquor from duty free, benefitting those arriving into the country. The scrapping of the limit also gives duty-free retailers such as Kyung Bok Kung Duty Free at the Busan Gimhae International Airport to boost their sales.
The Deputy Prime Minister said, “We will remove the two-bottle restriction on duty-free liquor, allowing them to be brought in without limits if they are under 2 litres and $400.” The scrapping of the inbound two-bottle allowance (provided the volume does not exceed two litres and the value does not exceed US$400, the same volume and value restrictions as at present) will benefit the country’s modest arrivals duty-free business – and overseas retailers selling to South Korea-bound passengers.
Importantly, the government has halved the patent fees of duty-free shops. The Deputy Prime Minister said, “Considering the sluggish duty-free shop market, we will cut patent fees by 50%. As a result of this measure, patent fees in the duty-free sector will decrease from approximately 40 billion won annually to 20 billion won, beginning with payments due in April 2025.”
The patent fee is a system where a certain percentage of sales is collected as a means of social contribution by duty-free shops. It is currently applied variably according to the sales scale of duty-free shops: 0.1% for annual sales up to 200 billion won, 0.5% for sales from 200 billion to less than 1 trillion won, and 1% for sales over 1 trillion won. The rate for duty-free shops operated by small and medium-sized enterprises is around 0.01%.
These announcements will prop up sales as presently sales was largely concentrated on premium whiskies, but with the relaxed cap, other alcoholic beverages may find buyers. The travel retail segment in the Republic has welcomed these announcements.
Import of liquor
Meanwhile, imports of whisky are on the rise in South Korea driven by millennials and older Gen Z. South Korea imported over 30,000 tons of whisky, mostly from the United Kingdom and the United States, as per the data from the Korea Customs Service. Imports of whisky products came to 30,586 tons in 2023, up 13.1% from 27,038 tons a year earlier, according to data compiled by the Korea Customs Service. However, the combined value of imported whiskies decreased 2.7% on-year to $259.6 million on increased shipments of cheaper ones.
Post Covid-19, there has been a steady increase in the imports as young South Koreans have started preferring darker and heavier grain beverage which go well in cocktails. The volume of imported wine decreased drastically by 20.1% to 56,542 tons, accordingly the value of imported wines also decreased to $506 million last year from $581.3 million a year ago. The government indicated that the country imported 8,443 tonnes of whisky from largely the United Kingdom and the United States in the first three months of 2023, up by 78% from the previous year period.