Imported beers to be exempt from tariffs
By Park Jae-hyuk
The New Year will be tough for large domestic breweries because of the removal of restrictions on beer importers and craft beer brewers, according to industry officials, Thursday.
Beers imported from the United States and the European Union will be exempt from tariffs, starting from this month and July, respectively, under the terms of free trade agreements that Korea signed with each of them.
The market share of Korean beers will likely go down further because the elimination of the tariffs is expected to reduce the prices of imported beers from the U.S. and Europe.
Korean companies have already complained about the different tax rates imposed on local and foreign beers.
Under the relevant law, taxes on domestic beers are levied in accordance to their factory prices including costs for marketing. Taxes on imported beers are based on the sum of their production costs and tariffs, which do not include marketing expenses.
Officials of domestic breweries have regarded the regulation as a discriminatory measure against Korean beer, saying the importers are practically receiving special treatment.
Against this backdrop, foreign beers have attracted more and more Korean consumers, offering four cans for 10,000 won ($9.4).
Plus, as a growing number of beer drinkers prefer the taste of foreign beers to local ones, the market share of imported beers has grown rapidly over the past few years.
The Korea Customs Service noted that the import of beers was a record-high $241.5 million between January and November last year, up 45 percent from a year earlier. Beer has also maintained its position as the top selling imported alcoholic beverage since July.
Sales of imported beers topped those of Korean ones last year at discount chains. The situation is similar at convenience stores nationwide.
In addition to imported beers, deregulation of craft beers will weigh on the nation’s top-tier beer makers ― Oriental Brewery, Hite-Jinro and Lotte Liquor.
Craft beers have recently gained popularity among Korean beer drinkers as well, because of their distinct flavors. Seven Brau’s Gangseo Beer was even served during President Moon Jae-in’s meeting with business leaders last year.
According to the Fair Trade Commission, craft beer brewers will be able to double their production from August this year because they will be able to sell their products through retailers selling specific liquors. The brewers have only been able to distribute their beverages through retailers dealing with all kinds of alcohol.
As of the end of 2015, the number of retailers of specific liquors was 1,685, while that for retailers of general alcoholic beverages was 1,149.
The government will also allow each small brewer to produce up to 120 kiloliters a year beginning in February. Currently, they have a maximum production capacity of 75 kiloliters.