SOUTH KOREA. In a dual move designed to boost the moribund travel retail sector, the government yesterday announced it will halve airport patent fees from April 2025 and remove the two-bottle inbound duty-free liquor limit.
The decision was revealed by Deputy Prime Minister for the Economy and Minister of Strategy and Finance Choi Sang-mok at a press briefing.
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 Republic’s modest arrivals duty-free business – and overseas retailers selling to South Korea-bound passengers. But the slashing of the patent fees is more significant.
A Shinsegae spokesperson told The Moodie Davitt Report: “We sincerely appreciate the government’s continued policy support for the duty-free industry. The 50% reduction in patent fees is indeed a significant relief for our operations.
“Additionally, the removal of the bottle limit on alcoholic beverages is a welcome change. While the US$400 and two-litre limits remain unchanged, this policy adjustment will likely broaden our product mix.
“Previously, our sales were largely concentrated on premium whiskies, but we now anticipate a more diverse range of alcoholic beverages will appeal to customers moving forward.”
Another leading retailer told us: “The recent announcement by the government is expected to provide relief to Korea’s travel retail industry. Above all, we anticipate this change will greatly enhance convenience for our customers.
“Regarding the 50% reduction in patent fees, this measure aims to alleviate operational challenges for businesses in the travel retail industry.
“The removal of the bottle limit will improve convenience for customers looking to purchase multiple bottles (three or more) of affordable or smaller-sized liquor. However, since the US $400 duty-free allowance limit remains unchanged, the impact on overall sales remains to be seen.”
A Lotte Duty Free spokesperson told The Moodie Davitt Report: “Lotte Duty Free warmly welcomes the recent measures taken by the Korean government, which are expected to ease the management burden of the Korean duty-free industry, which has been struggling with a series of setbacks.
“In line with the government’s support, we plan to make every effort to strengthen our competitiveness.”
Patently positive
Describing the Korean patent fee system, leading business title Chosun Biz explained how a rising percentage of duty-free sales is collected as a means of social contribution.
Currently 0.1% is collected on annual sales up to KRW200 billion (US$137.7 million); 0.5% for sales from KRW200 billion to less than KRW1 trillion (US$688.6 million) and 1% for sales over KRW1 trillion.
The rate for small and medium-sized (SME) stores is around 0.01%.
The Moodie Davitt Report has sought reaction from the leading Korean duty-free retailers. ✈
