2.1 Legislation on Trade and Investment

The framework of ROK's laws governing the regimes of foreign trade and investment includes Foreign Trade Act, Foreign Investment Promotion Act, Foreign Exchange Transaction Act, Customs Act, and other sector-specific laws and regulations, among which Foreign Trade Act and Foreign Investment Promotion Act serve as the basic regulations in the fields of trade and investment. In addition, ROK's decrees related to regulation of foreign investment in ROK include Regulations on Foreign Investment and Technology Inducement, Regulations on Ta x Reductions or Exemptions for Foreign Investors, Special Tax Treatment Control Act, etc. ROK's laws related to intellectual rights protection include Patent Act, Trademark Act, Computer Programs Protection Act, Unfair Competition Prevention and Business Secret Protection Act. Other sector-specific laws include Banking Act, Telecommunications Business Act, Electricity Business Act, Ship Act, Broadcasting Act, etc.

Food Safety Basic Law formulated in March 2005 will take effect on March 31, 2006. In addition to the above-mentioned laws and regulations, the Ministry of Commerce, Industry and Energy announces from time to time specific policies and measures regarding foreign trade in its Import & Export Notice, Comprehensive Notice of Import & Export, and Special Notice of Import & Export published either regularly or irregularly.

In addition, the multilateral trade agreements signed by the ROK government such as the extended GATS negotiations on financial services and basic telecommunications, Agreement on Government Procurement and Agreement on Trade in Civil Aircraft have the same legal effects as the domestic laws.

2.2 Trade Administration

2.2.1 Tariff system

ROK's import tariff rates are classified into basic tariff rates, temporary tariff rates and elastic tariff rates, etc. Temporary tariff and elastic tariff are regulated and imposed by the ROK government under different circumstances. ROK's import tariffs rates also include the concession rates subject to the negotiations by the ROK government and other countries, such as World Trade Organization (WTO) Conventional Tariff, conventional tariff for developing member countries of Economic and Social Council of Asia and Pacific (ESCAP), concession tariff negotiated among developing countries under the GATT framework, etc. ROK's tariff imposition are based on Ad Valorem Duty measured by commodity prices and Specific Duty measured by commodity quantity. In practice, more than 99 percent duties are accessed on an ad valorem basis.

ROK's elastic tariff rates, comprised of anti-dumping duties, retaliatory tariffs, emergency tariffs, adjustment tariffs, countervailing duties, price equilibrium tariffs, and quota tariffs, are vital in regulating imports and exports as well as protecting its domestic related industries.

2.2.2 Import administration

In principle, all commodities except rice can be freely imported, subject to special registrations and import approvals. However, the Import & Export Notice published by the Ministry of Commerce, Industry and Resources (MOCIE) from time to time imposes restrictions on the import of specific commodities temporarily.

The import of special items specified in the Import & Export Notice requires import license application which shall be submitted to the related government bodies or the trade associations and approval by related authorities. In addition, special items defined by the MOCIE in its Annual Trade Plan require approval by the Minister. In most cases, the supplier's qualified local agent completes the import registration process.

2.3 Investment administration

In the wake of Asian financial crisis, full liberalization and incentive policies are applied to foreign investment.

In accordance with the scope of liberalization, 1121 sectors in ROK are classified into four categories (based on the standard industry). The first category is the sectors not suitable for foreign investment including 63 sectors such as public administration, foreign affairs, and war industry. The second category is sectors suitable for foreign investment but not officially liberalized including television broadcasting and radio broadcasting. The third category includes 27 sectors under investment restriction. The ROK government sets the ceiling limitation for shareholding ratio of foreign investors below 50 percent in such sectors as fishery, cattle farming, energy transmission and air freight, below 49 percent in telecommunications and generally below 33 percent in cable and satellite broadcasting. The other 1029 sectors are fully open to foreign investment.

Related administration agencts implement the market access approval system over foreign direct investment for the purpose of capital flow and market access administration. All relevant restrictions to foreign direct investment will be collected by the MOCIE and announced in the Comprehensive Notice of Foreign Investment each year.

2.4 Competent authorities

2.4.1 Government authorities

The Ministry of Commerce, Industry and Resources works as the core competent authority for trade and investment administration, responsible for the formulation and implementation of ROK trade and investment policies, while its subordinate Korea Trade Commission is responsible for implementing trade remedies including anti-dumping, countervailing and protective measures, investigating unfair trade practices disrupting import and export and putting forward proposals for punishment.

Meanwhile, MOCIE exercises its guidance and surveillance over governmental investment institutions, non-governmental organizations and trade associations such as the Korean Trade-Investment Promotion Agency, the Korean International Trade Association and the Korean Chamber of Commerce and Industry.

The Ministry of Foreign Affairs and Commerce is the policy maker for multilateral and bilateral trade as well as the coordinator and organizer of negotiations in foreign trade. The Ministry of Finance and Economy takes charge of formulating and implementing policies related to banking, foreign exchanges and taxation. The Korea Customs Service is in charge of implementing ROK's tariff polices and cracking down illegal trade. The other administrative authorities such as the Ministry of Agriculture and Forestry, the Ministry of Maritime Affairs and Fisheries, the Ministry of Culture and Tourism, the Ministry of Construction and Transportation, the Ministry of Information and Communications, formulate and implement policies governing trade in the goods and services that are under their administration.

2.4.2 Other relevant organizations

Korea Trade-Investment Promotion Agency (KOTRA) is a non-profit organization established by the Korean Government with the aim to promote trade and investment. KOTRA has over 100 overseas branches. Its subordinate Invest Korea provides foreign investors with one-stop services, assisting them in going through the prerequisite administrative formalities, formulating investment proposals and offering consultation and assistance related to law and taxation.

Founded in 1946, Korean International Trade Association is a non-profit non-governmental organization. With 86,000 member enterprises, its services include registration for foreign trading enterprises, trade intermediacy, conducting overseas market surveys, introduction of related international and domestic laws and regulations, and providing various consultations of special topics.

Other relevant organizations include the Korean Small Business Corporation which provides various services for the development of Korean small-and-medium sized enterprises, the Korean Export Insurance Corporation which provides export risk insurance to exporters, as well as the Korean Chamber of Commerce and Industry which enhances international non-governmental economic cooperation.