By Cathy Rose A. Garcia
Staff reporter
When 30-year-old Park returned from a trip to Bangkok last month, she came back with a newly bought Gucci purse dangling on her arm.
She blithely breezed past customs at Incheon International Airport, without declaring that she bought her $900 purse at the duty-free shop at the start of her trip.
``I bought the bag on sale and duty-free in Seoul, but I used it when I was in Bangkok, so I didn’t report it (on the customs form),’’ said Park, who declined to give her first name.
Park admitted she is aware of Korean Customs Service regulations that require all travelers to report any duty-free goods purchased over $400 upon their arrival in Korea.
``But I don’t know anyone who reports their duty-free purchases. I always buy luxury bags at duty-free, but I don’t report it and I’ve never been stopped at the customs area yet,’’ she said.
If Park was stopped by the customs officials at Incheon airport and discovered to have more than $400 worth of duty-free items, she would have been subjected to a slew of customs duties, value-added taxes and special consumption taxes and a fine.
According to the Korea Customs Service, travelers are only allowed to bring up to $400 worth of goods tax free into Korea. This includes cameras, electronic equipment, leather goods, jewelry, watches, clothing and footwear; one liter of alcohol, 200 cigarettes, 50 cigars and 250 grams of tobacco products.
However, clothing, toiletries such as make-up and skincare products, personal jewelry and watches ``will be admitted free of duties and other taxes’’ as long as it is intended for one’s own use.
Any items in excess of the $400 duty-free allowance would be subjected to between 20-55 percent in customs duties and other taxes. On its website, the Korea Customs Service advises travelers to be aware of the duty and tax rates of items they buy in excess of the duty/tax free allowance.
The amount of duty-free goods allowed for each traveler seems small at $400, but this does not seem to have stopped Koreans’ appetite for duty-free shopping. Most Korean travelers think that if they buy luxury goods duty-free, they will be able to save between 10 to 20 percent on the regular prices at department stores.
Duty-free business has flourished in Korea, with downtown and airport outlets combining to total $2.8 billion in sales in 2009, 8 percent higher than 2008, according to the London-based trade publication The Moodie Report.
The market leader is Lotte Duty Free, with more than 50 percent of the market. It is followed by The Shilla Duty Free, an affiliate of the Samsung Group, which has 28 percent of the market.
Lotte Duty Free is known for being the first duty-free retailer to open Louis Vuitton, Hermes, Chanel and Balenciaga outlets. It operates eight branches around the country, which has attracted many Japanese tourists, with its targeted marketing campaign featuring hallyu stars like Rain, TVXQ, Big Bang and Song Seung-heon.
The Shilla Duty Free offers 500 world-famous brands including Louis Vuitton, Chanel, Hermes and Korean specialties such as ceramics, ginseng, amethyst jewelry, traditional artifacts and kimchi, at the duty-free outlet next to The Shilla Hotel and at Incheon and Jeju airports.
At the downtown Lotte department store, the 9th and 10th floors are devoted to duty-free shopping with top luxury brands such as Louis Vuitton, Chanel, Dior, Cartier and Bulgari. Interestingly enough, the Lotte Avenuel, located next to the department store, also has shops with the same brands.
The difference is in the prices. Duty-free means lower prices because of the removal of VAT and other taxes.
Cosmetics and perfumes are also priced between five to 10 percent lower than department stores. Luxury goods are where shoppers can ``save’’ as much as 20 percent off the regular prices.
However, a comparison of some prices at the duty-free stores and the luxury shops showed there were not a lot of savings.
For instance, a black leather Chanel 2.55 purse was quoted as 4.63 million won at the Chanel store at Avenuel, although the sales personnel said tourists can apply for a tax refund of around seven percent. At the Lotte duty-free store, the Chanel purse was priced at 4.23 million won, 8 percent or 400,000 won lower.
At the Louis Vuitton Lotte duty-free shop, a medium-sized Neverfull tote bag goes for 875,000 won, around 9 percent lower compared to 970,000 won at its store.
Duty-free shops also offer regular summer and winter sales and promotions. The Shilla duty-free gives out 10,000 won gift vouchers to customers who spend at least $200 (240,000 won).
A representative from The Shilla said its duty-free shops offer lower prices than Korean department stores. ``Normally The Shilla Duty Free shop offers prices that are 18-20 percent discounted from the usual price offered at department stores, and the sale or promotions offer an additional 5-20% discount,’’ the representative said.
At a recent summer sale at The Shilla, a Prada tote bag was priced at 560,000 won, while the regular price was 900,000 won.
Its discounts like these that make Koreans keener about duty-free shopping, despite the possibility that even more taxes could be imposed by customs officials when they return to Seoul.
While shopping at duty-free shops in Seoul may have its advantages, some Korean travelers are not aware that some countries have their own regulations on duty-free allowances.
Cho, a 33-year-old woman who declined to give her first name, bought a pricey designer handbag for her sister at the duty-free shop at Incheon airport before heading to Cebu, the Philippines for a vacation last June.
She was stopped by a Philippine customs official, who examined her belongings and found the brand-new handbag, with the receipt showing it was clearly more than the $400 duty free allowance given to travelers to the Philippines. The customs official assessed that Cho would have to pay an additional $400 in taxes and penalties.
``I was really mad. I didn’t bring enough cash and I didn’t want to pay the taxes. So I complained and some airline people even helped me but the customs officials there initially did not want to budge. Then, it turned out they only wanted a bribe. I gave them $50 and they let it go,’’ Cho said.
Cho found out from her Philippine guide that many Korean travelers have been ``victimized’’ by Philippine airport officials, who have noticed that Koreans love duty-free shopping. ``My guide advised me that in the future, I should hide the duty-free bags and dress simply, in jeans or shorts, so they won’t suspect me,’’ Cho said.
These incidents only seem to have taught Korean travelers to be more careful about hiding their duty-free shopping sprees from customs officials, instead of encouraging them to become more honest about paying the appropriate taxes.