Busan customs officials keep smugglers at bay

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By Kim Jae-won

Investigators from the Busan Customs Office raided three plumbing fittings factories in May. Over the past three years the companies had imported 540,889 pipe fittings, valued at 45.7 billion won from China and exported them to other nations, including the United States and the European Union, with false “Made in Korea” labels.

The Busan unit of the Korea Customs Service (KCS) imposed a combined 190 million won in fines on the firms, and reported their illegal activities to the prosecutor’s office. One company owner was fined 30 million won and his corporation was sentenced to a 50 million won punitive payment at a district court, while two other businesses are tied up in legal disputes with the agency.

Investigators say that firms in the region are more easily tempted to fake the country of origin, as they think they can generate greater profits by using cheaper Chinese labor and the international reputation of Korean products.

“As Korean labor costs are increasing, some companies import pipe fittings from China cheaply and export them replacing the label one saying the product is made in Korea,” said Hong Kwang-man, a senior investigator from the customs office.

Hong said that the agency spares no efforts to crack down on criminals to maintain Korea’s international reputation.

Ahn Ho-joon, a junior investigator at the office, said that violating the country of origin is a serious offense that can lead to heavy fines which can shut down companies.

“One small clothing company was forced to close its business after being penalized 230 million won a few years ago.”

Tough stance against country origin violations

The KCS mobilizes all assets to crack down on these crimes to convince Korea’s trade counterparts anxious that a third country, especially China, may disguise its products as Korean to benefit from lowered tariffs from free trade agreements (FTAs).

Korea, Asia’s fourth-largest economy has recently achieved landmark FTAs to broaden its economic territories. The National Assembly ratified the long-stalled Korea-U.S. (KORUS) FTA on Tuesday, which could come into as early as January, while the Korea-EU FTA has been in force since July 1.

Fake labeling of the country of origin has caused headaches in international trade, and to counter it has become more important as major FTAs are in effect or will soon be. Making sure the origins of products are authentic is one of the biggest concerns of trade counterparts.

Republican U.S. Congressman Kevin Brady, who represents a district of Texas, expressed his concerns in this area to Trade Minister Kim Jong-hoon during a September meeting in Washington, while ambassadors from the European Union asked then-KCS Commissioner Yoon Young-sun to thoroughly check Chinese products in a meeting earlier this year in Seoul.

If customs authorities of trade partners examine of Korean products, local companies may suffer from delayed customs procedures for such items as textiles, clothes and steel products, which have enjoyed favorable treatment so far.

Through the KORUS FTA, a customs agency can examine the origin of products directly at the counterpart country. If the U.S. customs authorities investigate domestic companies regarding the matter, it may provoke social outcry. The United States investigates 5,000 such cases annually, while Germany looks into 8,000.

The government is also worried that the dispute over Korean products’ originality may hurt the country’s brand image and credibility. According to the KCS, there are two ways to cheat ― issuing a fake origin certificate or putting false “Made in Korea” labels on products.

Marking 1,757 during the January-to-September period, cases of faking goods’ origin is on the rise, up 50.2 percent from 2010. Most items come out of China, accounting for 92 percent during the first nine months. Last year, the portion from the neighboring country reached 99.9 percent.

Geographic Information System

The KCS is applying high-end information-technology techniques to combat this illegal transferring. The KCS set up the Geographic Information System, which trails suspected containers in real time. The agency attaches an “e-Seal” on suspicious containers and checks routes and whether the door of a container has been opened through its computer system at the agency. The e-Seal is an electronic seal, which sends the location information of containers and products to the place it was attached.

The KCS is also looking to enforce its network with foreign customs authorities by exchanging information and documents on criminal activity. It plans to launch an annual working group conference to share investigation information and strengthen international cooperation.