Few customers are spotted at duty-free stores at Terminal 1 of Incheon International Airport, west of Seoul, on May 15, 2020. (Yonhap)
SEOUL, July 22 (Korea Bizwire) — With the ongoing spread of the coronavirus, the struggling duty-free industry is tapping into third-party foreign transfer for a sales breakthrough to address concerns that Chinese parallel traders may leave the South Korean market following recent measures by the Chinese government to bolster domestic duty-free businesses.
The Korea Customs Service decided in late April to temporarily permit the sale of duty-free products through domestic customs and third-party foreign transfer to stimulate the duty-free industry.
A third-party foreign transfer refers to a program which allows a South Korean duty-free shop to send customs-cleared duty-free products to foreign duty-free businesses to overcome the current situation in which the coronavirus pandemic has resulted in the shutdown of most routes overseas.
This program allows Chinese parallel traders, registered as wholesale businesses in China, to receive duty-free products without having to come to South Korea.
South Korea’s top duty-free stores – Lotte, Shilla, and Shinsegae – began third-party foreign transfers to China and Hong Kong last May, each shipping between two and seven large containers overseas every day.
With almost no demand from ordinary travelers due to the coronavirus, third-party foreign transfer has become a major source of income for duty-free shops, growing large enough to cover half of all income from foreigners in the pre-coronavirus era.
Both domestic customs sales and third-party foreign transfers, however, fall short of saving the duty-free industry unless foreign travels reopen, experts say.
It is inevitable that China’s recent efforts to increase the number of domestic businesses to tap into duty-free demand inside the country will impact the South Korean duty-free industry, which is considered to be the largest of its kind worldwide.
The Chinese government recently decided to allow each citizen visiting southern resort island of Hainan to purchase 100,000 yuan (US$14,340) worth of duty-free products every year, with 40 different kinds of duty-free products, including cell phones and liquor, now available to the public.
H. M. Kang (hmkang@koreabizwire.com)
