10.11.18 Jpmorgan Update South Korea

Country Profile South Korea
TREASURY SERVICES
Table of Contents
Executive Summary ......................................................................4 Economic / Political Environment Overview.....................................................................................4 Key indicators ...............................................................................5 Regulatory Environment and General Market Practice Key summary ................................................................................6 Resident and non-resident status ........................................................6 Central bank reporting ....................................................................6 Exchange controls ..........................................................................6 Liquidity Account types ...............................................................................7 Cash concentration / ZBA sweeping .....................................................7 Cross-border sweeping .....................................................................8 Notional pooling ............................................................................8 Lifting fees ..................................................................................8 Taxation Withholding tax .............................................................................9 Value-added tax .......................................................................... 10 Corporate taxation ....................................................................... 10 Transfer pricing ........................................................................... 10 Thin capitalisation ........................................................................ 10 Capital gains tax .......................................................................... 10 Payroll taxes .............................................................................. 11 Securities transaction tax ............................................................... 11 Acquisition tax ............................................................................ 12 Registration tax ........................................................................... 12 Advance tax ruling availability ......................................................... 12 Payment Instruments General overview and trends ........................................................... 12 Indicators of use of various cashless payment instruments ........................ 13 Electronic payment instruments ....................................................... 13 Cheque and paper instruments......................................................... 15 How Companies Pay & Receive Key summary .............................................................................. 15 How companies make payments ....................................................... 16
2010 JPMorgan Chase & Co. All Rights Reserved. JPMorgan Chase Bank, N.A. Member FDIC. All services are subject to applicable laws and regulations and service terms. Not all products and services are available in all geographic areas. Eligibility for particular products and services is subject to final determination by J.P. Morgan and or its affiliates/subsidiaries. Produced by TS Global Marketing.
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How companies receive payments ..................................................... 16 Summary of payment methods ......................................................... 17 Clearing Systems (including interface with cross-border systems) Overall structure(s)....................................................................... 17 Electronic clearing systems ............................................................. 18 Paper-based systems ..................................................................... 20 Electronic Banking Existing and future trends............................................................... 21 Usage by companies ...................................................................... 21 Market practice ........................................................................... 21 Internet banking .......................................................................... 21 Trade Finance Overview of trade agreements with other countries ............................... 22 General trade overview including any government policy ........................ 22 Imports and exports ..................................................................... 22 Main trading partners for imports and exports ..................................... 22 Main traded products / sectors share of total imports and exports ........... 22 Documentation requirements for imports and exports ............................. 23 Licence requirements for imports and exports ..................................... 23 Taxes, tariffs and other fees on imports and exports ............................. 23 Country export credit agency ......................................................... 23 Export credit programmes ............................................................. 24 List of prohibited imports / exports .................................................. 24 Glossary .................................................................................. 25
Updated 18 November 2010

The material contained in this report is not intended to be advice on any particular matter. No subscriber or other reader should act on the basis of any matter contained in this report without considering appropriate professional advice. J.P. Morgan and its contracted information supplier expressly disclaim all and any liability to any person, whether a purchaser of this report or not, in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance upon the contents of this report.
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Executive Summary
South Korea is the fourth largest economy in Asia and has shifted from a primarily poor, agricultural economy at its founding in 1948 to the 15th largest economy globally, relying on services and technologically advanced industries for economic growth. As one of the Asian Tiger economies, South Korea had achieved impressive levels of growth through government-directed, five-year economic plans. This changed with the East Asian Crisis of 1997, which pushed South Korea towards more decentralised, marketoriented reforms. However, a high degree of government direction is still exercised. Liberalisation of foreign exchange controls combined with gradual fiscal privatisation and reform helped South Korea to maintain its role as one of the worlds fastest growing mature economies, though this growth has been affected by the recent global economic slowdown and its effect on exports, which account for over half of South Koreas GDP. From a cash management perspective, regulatory restrictions still prevent certain liquidity management schemes from implementation, though this is changing with the continued liberalisation of exchange controls and foreign exchange transactions. There are some restrictions on non-resident accounts in domestic currency as well as reserve requirements for resident and nonresident foreign currency accounts. Due to strict regulations, notional pooling is not permitted. Cash concentration is permitted within a legal entity and zero balancing is a common practice. However, zero balancing or sweeping intercompany loans may be subject to tax. Payments are mainly effected by credit transfers, payment cards, and, to a lesser extent, direct debits. Paper instruments, such as cheques and giros, have declined in favour of payments that can be made through one of South Koreas nine electronic retail payment systems operated by the KFTC. In addition, the Bank of Korea operates a high-value RTGS system, BOK-Wire+, which was upgraded in April 2009. BOK-Wire+ also provides final settlement of net positions arising from the various retail payment systems. South Korean companies can rely on well-developed electronic banking services, such as the Cash Management System and their banks own proprietary e-banking platforms. Many local banks have invested heavily in browser-based cash and liquidity management services. South Korea also has one of the most advanced mobile banking networks in the world.
Economic / Political Environment

Overview
South Korea is one of the richest Asian countries per capita with a population of just over 48.6 million. South Korea transformed itself through a series of five-year economic plans, which combined state direction and free enterprise, and is the fourth largest economy in Asia after China, Japan and India. It is also the fourth largest exporter in Asia and one of the worlds trillion dollar economies. It is a key member of the regions economic organisations, such as the Association of South-East Asian Nations (ASEAN). After the East Asian Crisis of 1997-1998, which saw the bankruptcy of one of South Koreas largest conglomerates (chaebols) Daewoo, former president, Kim Dae Jung, adopted reforms recommended by the International Monetary Fund (IMF) aimed at greater transparency in accounting practices and corporate governance, putting pressure on chaebol structures, and financial market reform. The 1998 Foreign Exchange Transaction Act (FETA) liberalised exchange controls and foreign investment. The government is working towards complete exchange control liberalisation by 2011 with the Foreign Exchange Act replacing the FETA. Though South Koreas economy has been heavily affected by the global economic slowdown, it rebounded strongly in the second half of 2009 as the slowdown in demand from its largest export markets (China, the United States and Japan) began to wane. GDP increased by 0.2% for 2009 as a whole and the economy registered strong annualised growth of 7.8%, 7.2% and 4.5% during the first three quarters of 2010. In order to boost domestic demand, South Koreas government launched a series of economic rescue packages, including a USD 11 billion stimulus package in November 2008 and a record supplementary budget in March 2009. Although the stimulus packages have helped economic recovery in South Korea, the spending levels involved have left the country with large sums of debt.
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President Lee Myung-bak of the conservative Grand National Party won the December 2007 presidential election with 49% of the vote, ending 10 years of a centre-left executive. In March 2008, the president, a long-time opponent of the Sunshine Policy of engagement with North Korea, announced that further economic co-operation with North Korea would be subject to the latter resolving its international standoff over its nuclear programme. The North Korean government has countered this change by expelling South Korean officials from an inter-Korean industrial complex and through military provocations. North Korea conducted an underground nuclear test on 25 May 2009, followed by the testing of short range missiles. North Korea has also stated that it is no longer bound by the terms of the 1953 armistice that ended the Korean War. In May 2010 tensions between the North and South were again heightened when an international report placed responsibility for the sinking of the Cheonan South Korean warship on a North Korean submarine. The North has called the allegations fabrications, but the incident, which resulted in 46 South Korean deaths, caused outrage in South Korea. Both sides have swiftly broken off all trade and communications ties. South Korea has referred the North to the UN Security Council and the North has responded by threatening military action.
Key indicators
2009 2004 2005 2006 2007 2008 Q3 GDP @ year end exchange rate GDP volume change (year on year) GDP per capita Consumer prices change (year on year) Exchange rate KRW per USD (end period market rate) USD billion Q4 YEAR Q1 Q2 2010
799
855
977
1,042
815
913
+ 4.7
+ 4.0
+ 5.2
+ 5.0
+ 2.4
+ 1.0
+ 6.0
+ 0.2
+ 8.1
+ 7.2
USD
16,864
17,980
20,460
21,717
16,926
18,889
+ 3.5
+ 2.8
+ 2.2
+ 2.5
+ 4.7
+ 2.0
+ 2.4
+ 2.8
+ 2.7
+ 2.6
1,035.10
1,011.60
929.80
936.10
1,259.50
1,178.1
1,164.5
1,164.5
1,131.3
1,210.3
Source: IMF International Financial Statistics, October 2010.
Population (July 2010 est.) 48.64 million
Sectoral analysis % (2008 est.) Agriculture Industry Services
3.0%
39.4%
57.6%
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Regulatory Environment and General Market Practice

Key summary
There are some restrictions on non-resident accounts in domestic currency as well as reserve requirements for resident and nonresident foreign currency accounts. Due to strict regulations, notional pooling is not permitted and cash concentration solutions are only permitted within a legal entity. Cross-border sweeping and notional pooling are not allowed. The Korean won is only traded onshore. Central bank reporting is required.
Resident and non-resident status

A company is considered resident if its place of effective management is located in South Korea.
Central bank reporting

All payment records are required to be reported to the central bank on a monthly basis. Banks undertake reporting to the BOK on behalf of their customers. All transactions between residents and non-residents should be completed through a foreign exchange bank, which includes any operational domestic or foreign bank in South Korea. Central bank reporting applies to inflows and outflows from residents accounts held outside South Korea, but there is no requirement to report on non-residents dealings with residents accounts held out of the country. Settlement methods, such as netting, must be reported to the BOK.
Exchange controls
The currency of South Korea is the Korean won (KRW), the external value of which is subject to an free floating regime with no predetermined path. The administrative authorities can intervene in the foreign exchange market to smooth out any large intra-day volatility swings in the KRW rate. It is the responsibility of the Financial Services Commission (FSC) to generate foreign exchange policies and the responsibility of the BOK to apply them. South Korea has made significant progress towards liberalising its foreign exchange controls since 1997, and continues to do so, but various restrictions remain. Any imports/exports of cash, by both residents and non residents, exceeding USD 10,000 or equivalent no longer require BOK approval, but must be reported to the customs office. Transfers of domestic and foreign currency abroad exceeding USD 1 million or equivalent require BOK approval. Repatriation of proceeds from capital and invisible transactions above the equivalent of USD 500,000 must be made within one and a half years to South Korea. Otherwise, proceeds must be held overseas for foreign transactions. New rules limiting domestic and foreign banks foreign exchange derivative contracts were introduced in South Korea in July 2010. Domestic banks foreign exchange derivative contracts are now limited to a value of 50% of their equity capital the previous month, whereas foreign banks are limited to a ceiling of 250% of the value of their equity capital the previous month. Though foreign investment is allowed in the vast majority of industries, controls are in operation for agricultural products including rice, public sector utilities involved in privatisation, nuclear energy, and investment in financial institutions, transport and communication. Corporations can now freely invest overseas with no limits provided the investment is declared to and accepted by the designated foreign exchange bank. Overseas investment in financial institutions or in any overseas financial or insurance institution must be declared to and be accepted by the Ministry of Strategy and Finance (MOSF). An insurance company may have no more than 30% of the value of its total assets denominated in foreign currency. The MOSF must be notified of financial and commercial credits (other than trade credits) to residents from non-residents exceeding USD 30 million. Notification can be made through a companys foreign exchange bank for amounts up to USD 30 million.
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A foreign exchange bank does not need to give prior notification for domestic currency loans to non-residents of up to KRW 30 billion. From mid-July 2010 the MOSF has introduced new rules on foreign currency financing for resident companies. These rules restrict resident companies, with the exception of some small and medium-sized manufacturers, to obtaining foreign currency loans for overseas use only. Small and medium-sized manufacturers can also obtain foreign currency financing for the purchase of domestic facilities, but borrowing must not exceed levels set in 2010. The BOK should be notified of personal loans between residents and non-residents.
Liquidity
Account types
Residents can open and maintain foreign currency accounts domestically and abroad. Domestic currency is not convertible into foreign currency. Non-residents are also allowed to open and maintain bank accounts in South Korea, denominated in either domestic or foreign currency. Non-resident domestic currency accounts, known as free won accounts, allow the conversion of domestic currency into foreign currency and the transfer of the proceeds abroad.
General market practice

Domestic currency current accounts are not paid interest. Short-term and demand deposit accounts, denominated in both domestic and foreign currency, are available to both residents and non-residents. Interest can be paid on foreign currency term and savings accounts at market rates.
Cash concentration / ZBA sweeping

Cash concentration is a liquidity management technique whereby account balances are physically transferred to/from a single account (known as a master, header or concentration account) for liquidity management purposes. Cash concentration can take these forms: Zero balancing (ZBA), sometimes referred to as sweeping, is a cash concentration technique whereby the total of all account balances is physically transferred into a nominated account. Target balancing, also known as sweeping, is a cash concentration technique similar to ZBA, whereby all account balances are physically transferred into a nominated account leaving a predetermined amount in the sub-accounts. Threshold balancing is a cash concentration technique similar to ZBA, whereby the balances of the sub-accounts are physically transferred in their totality into a nominated account each time the sub-account balances reach a predetermined threshold.

For residents:
Strict regulations long prevented sophisticated liquidity management structures among South Korean companies. Though this is now changing, certain regulations still prevent cash concentration and pooling between different entities. Most companies use cash concentration techniques to manage their liquidity. Cash concentration usually takes the form of zero balancing or sweeping. Standard market practice entails companies holding multiple collection accounts at different local banks, allowing customers to make a payment through an internal transfer. The Cash Management System operated by
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the Korea Financial Telecommunications and Clearings Institute (KFTC) can facilitate the concentration of these balances into a nominated account. Zero balancing or sweeping intercompany loans are subject to tax.
For non-residents:
There are no restrictions on non-residents participating in cash concentration techniques within a single legal entity. The Korean won may only be traded onshore, preventing involvement in certain regional liquidity management schemes.
Cross-border sweeping
A cross-border sweep is a liquidity management technique used to concentrate funds held in accounts in different jurisdictions into one liquidity centre*. A system for accounting, reporting and payment in accordance with the respective national accounting standards of the countries involved in the sweeping arrangement has to be put in place. * Care: A cross-border sweep can create an intercompany loan, which for certain countries will trigger corporate withholding tax.

For residents:
Resident companies are not permitted to participate in cross-border sweep structures via an account based in South Korea. International pooling is beginning to be developed by South Korean conglomerates through the help of international banks.
For non-residents:
Non-resident companies are not permitted to participate in cross-border sweep structures via an account based in South Korea.
Notional pooling
Notional pooling is a liquidity management technique which does not involve the physical movement or any co-mingling of funds held in different bank accounts. All bank account balances within the structure are offset against one another. The bank applies interest on the structures net balance, rather than on the individual bank account balances. Some countries restrict notional pooling to bank accounts held in the name of the same legal entity. Others permit bank accounts held in the name of different group entities to participate in the same notional cash pool.
General market practice Single entity

For residents and non-residents:
Notional pooling is not permitted in South Korea.
General market practice Multiple entities

For residents and non-residents:
Notional pooling is not permitted in South Korea.
Lifting fees
A lifting fee is a charge associated with the resident/non-resident movement of funds calculated as a percentage of the transaction value.

Funds transfers between resident and non-resident accounts are subject to lifting charges either as flat fees for a range of transfer values, or as a percentage of the total transaction value.
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Taxation
A company which has its headquarters, main office, or a place of effective management in South Korea is considered to be a domestic company. A domestic company is taxable on its worldwide income. A foreign company with a permanent establishment in Korea is liable to file its corporate tax return disclosing the income attributable to the permanent establishment. A foreign company without a permanent establishment in Korea is taxable on the Korean source income for Korean corporate income tax purposes. A business year should be specified in the companys Articles of Incorporation or in the by-laws and should not exceed a year. Most companies use a calendar year. Corporate tax returns and tax payments are due by the end of the third month after the year end and extension is only available for a foreign company (including branch) upon the approval of the tax authority. Companies file interim tax returns for the first six month period or pay half of the prior years tax liability within two months from the end of the second quarter. The South Korean government has entered into tax treaties with 76 countries (as of 31 December 2009). When domestic tax law conflicts with a tax treaty, the tax treaty overrides domestic law.
Withholding tax
Payments to: Interest Dividends Royalties Business profits Can be exempt* 2.2% Personal services income Can be exempt 22% Other income
Resident companies Non-resident companies with treaty Non-resident companies without treaty
15.4-22%
None
None
Can be exempt 22%
015%
515%
015%
15.4-22%
22%
22%
*Business profits derived by a resident of a country with which Korea has a treaty can be exempt from Korean corporate income tax when the treaty provides for such exemption. Personal services income derived by an employee of a resident company of a country with which Korea has a treaty can be exempt from Korean corporate income tax when the treaty provides for such exemption. Other income derived by a resident of a country with which Korea has a treaty can be exempt from Korean corporate income tax when the treaty provides such exemption.
The sale of listed shares by a foreign shareholder is exempt from capital gains tax when the following requirements are satisfied:
listed shares are transferred through the Korea Stock Exchange or KOSDAQ; the foreign company has no permanent establishment in Korea; and the foreign company and any related parties own less than 25% of the share capital of the Korean company during the year in which the transfer occurs, and did so during the prior five-year period.
The taxation of a gain from trading in derivative products or sophisticated financial products is still in the development stage in South Korea and there are currently no definite rules. Certain gains are treated as interest and other gains are treated as other income. Withholding tax rates would differ depending upon the character of the income derived. Income from transactions in financial investment services and capital markets derived by a foreign company with no permanent establishment in South Korea are not treated as Korean-sourced income subject to Korean withholding tax.
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Value-added tax
VAT is levied on all taxable goods and services and on all taxable goods imported into South Korea. The standard rate is 10%, but a zero-rated VAT is available on certain supplies or services, including the export of goods, services provided outside Korea, international navigation services involving ships and aircraft, etc. Furthermore, public transportation services, certain food products, publications, medical services, and services provided by financial institutions such as bank, insurance, securities, etc. listed in the VAT law are exempt from VAT.
Corporate taxation
Resident companies are taxed on their worldwide income, after the deduction of allowable expenses, including capital gains. Non-resident companies are taxed on Korean-sourced income only. Corporate income tax rates were revised in December 2009 as follows:
Tax Base 2010 Tax Rate 2011 2012
KRW 200,000,000 or less
11%
11%
More than KRW 200,000,000
24.2%
22%
Transfer pricing
Companies are required to conduct their business on arms length principles. Where arms length pricing is not initially applied to transactions with related parties, appropriate adjustments to profits can be made by the tax office upon an audit. In determining what constitutes an arms length price, the International Tax Coordination Law is applied. Companies should maintain sufficient documentation to support the prices used and any adjustments made. Failure to do so can lead to penalties being charged. Advance pricing agreements can be made with the National Tax Service.
Thin capitalisation
If a foreign invested company borrows from a foreign controlling shareholder (FCS), or an FCS or head office guarantees borrowings from third parties, and such borrowing exceeds 300% of its net equity or paid-in capital, whichever is greater, then the interest expense on the debt exceeding 300% (600% for financial institutions) of the FCSs share of the borrowers net equity or paid-in capital is not a deductible expense for Korean corporate income tax purposes. Furthermore, any disallowed interest is treated as a dividend to the FCS and is subject to withholding tax. An FCS is a head office or a foreign entity owning, directly or indirectly, 50% or more of the shares of a Korean company or a foreign entity that substantially controls the Korean company. When a company borrows funds that are then used to lend to related parties, a portion of the interest expense incurred by the company, equivalent to the ratio of the loans made to the related party over the companys total borrowings, would not be deductible for income tax purposes. This is because the loan to a related party would be considered a non-business asset under the corporate income tax law when the lender is not engaged in a financing business.
Capital gains tax

South Korean domestic tax law imposes a capital gains tax equal to the lesser of 22% of the capital gain or 11% of the sales proceeds when a non-resident derives capital gains from the sale of shares in a South Korean company provided that such a
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company is not a real-estate heavy company and unless a reduced rate of withholding tax is applicable under a double taxation treaty. Domestic companies report capital gains, together with other profits earned by the company, on their corporate tax return and there is no preferential rate for capital gains. Foreign companies that derive capital gains from the sale of real estate or realestate heavy companies are required to file a tax return and are subject to tax at the regular corporate tax rate.
Payroll taxes
Employers are required to withhold the following taxes, pension contributions and insurance contributions from their employees payroll on a monthly basis and submit them to appropriate government offices by the tenth day of the month following the month in which salaries are paid. Industrial injury compensation insurance and unemployment insurance are paid annually and due by 31 March.
Combined tax rate (including resident surtax)
Annual taxable income Less than KRW 12,000,000 KRW 12,000,00036,000,000 KRW 46,000,00088,000,000
2010
2011
2012
6.6%
6.6%
16.5%
16.5%
26.4%
26.4%
More than KRW 88,000,000
38.5%
36.3%
Employer
Employee
Total
Remark Monthly cap: KRW 162,000 each (increased to KRW 165,600 each as of 1 July 2010) Monthly cap: KRW 1,753,300 each Calculated as 6.55% of the national health insurance premium Varies depending on the types of industries No cap
National Pension
4.5%
4.5%
9.0%
National Health Insurance Long-term Care Insurance Industrial Injury Compensation Insurance Unemployment Insurance Disability
2.665%
2.665%
5.33%
0.175%
0.175%
0.35%
0.7436.04%
0.7436.04%
0.71.3%
0.45%
1.151.75%
Businesses with more than 50 employees are required to hire people with disabilities, who should make up 2% of the total workforce. Failure to comply results in a penalty of KRW 510,000 per person.
Securities transaction tax

Securities transaction tax is imposed on the seller at a rate of 0.5% and 0.150.3% for listed shares of the transfer price upon the sale of securities.
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Acquisition tax
When a taxpayer acquires certain assets, such as property, a vehicle or luxury assets (including golf club membership) set out in the Local Tax Law, a 2.2% acquisition tax is imposed on the purchasing price of the assets acquired. When a shareholder acquires over 50% of the shares in a domestic company, the shareholder is deemed to have acquired the underlying assets (mentioned above) of that company; therefore the acquiring shareholder is subject to a 2.2% (including local surtax) deemed acquisition tax on the book value of such assets.
Registration tax
A company is subject to a 0.48% capital registration tax on the amount of capital contributed. The tax rate triples when the company is located in the Seoul metropolitan area. An asset registration tax applies to certain assets that need to be registered with the court. The registration of real estate is subject to a tax of 2.4% of the transaction price and the registration of vehicles is subject to a tax of 25%. The real estate registration tax rate triples when the registration is executed in the Seoul metropolitan area.
Advance tax ruling availability

A tax payer can submit a written ruling request to the National Tax Service (NTS) or the Ministry of Strategy and Finance (MOSF) to resolve or clarify certain tax issues before entering into transactions. Obtaining a ruling can take a few weeks to a few months. Such rulings are public information. Third parties can refer to rulings but such rulings are only binding upon the party who requested it. Supplied by Deloitte Touche Tohmatsu, 7 May 2010. For more information please visit www.deloitte.com.
Payment Instruments
General overview and trends
The use of paper-based payment and collection instruments (such as cheques and paper-based giros) in South Korea has steadily declined in recent years in favour of electronic credit transfers, direct debits and payment cards. In particular credit cards have increased in popularity as a result of government deregulation and tax deductions providing incentives for their use. As a result, electronic payment cards and credit transfers are now the most common cashless payment method in terms of volume. However, cheques are still an important payment medium in terms of value. The rise in electronic payments corresponds to the rise in electronic banking in South Korea, which has one of the most advanced mobile and internet banking networks in the world.
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Indicators of use of various cashless payment instruments

Transactions (million) 2008 Cheques and bills* Debit cards Credit cards Credit transfers (paper-based and electronic) Direct debits Card-based e-money Total 2009 % change 2009 / 2008 Traffic (KRW billion) 2008 2009 % change 2009 / 2008
747.5
648.2
-13.3
5,153,210.3
5,420,612.7
5.2
1.3
1.0
- 23.1
57.4
44.8
-21.9
4,147.4 2,321.6 715.3
4,880.1 2,430.8 682.9
17.7 4.7 -4.5
456,420.6 51,332,536.2 63,026.9
466,358.1 55,382,648.3 63,681.0
2.2 7.9 1.0
109.1
105.3
-3.5
93.2
90.9
-2.5
8,042.2
8,748.3
8.8
57,005,344.6
61,333,535.8
7.6
* Only those cheques and bills cleared through the cheque clearing system and not presented at issuance window. Source: Bank of Korea ECOS Economic Statistics System, May 2010 and KFTC statistics.
Electronic payment instruments

Domestic
Credit transfers (electronic payments)
The electronic credit transfer is one of the most popular mediums of non-cash payments in South Korea. Though credit transfers as a whole accounted for only 27.8% of the total volume of non-cash payments processed in 2009, they represented 90.3% of the total value. Of this, four out of every five credit transfers are made electronically, accounting for over 99% of the value of all credit transfers.
High-value / urgent Clearing details

High-value transfers requiring immediate execution are processed via the RTGS system, BOK-Wire+, and executed individually in real time on a same-day basis.
Low-value / non-urgent Clearing details

Retail credit transfers/giros are cleared through the various retail payment systems operated by the Korea Financial Telecommunications and Clearings Institute (KFTC). Regularly scheduled electronic credit transfers can be made via the Giro System, using a customers bank account. Irregular credit transfers are executed and cleared via one of the Financial Information Network Systems (FINS) or the Internet Giro Service.
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Delivery of electronic credit transfers is made across banks interconnected computers with the KFTC and sent to the BOKWire+ for multilateral net settlement at 11:30 on the following business day. Payments can be initiated via firm banking, CD/ATM system, the internet, mobiles, PCs and telebanking, the Cash Management Service (CMS) system and BANKLINE, a service for local banks.
Direct debits
Direct debits are widely used in South Korea for regular payments. There are two types of direct debit in South Korea. The Bank Giro System direct debit This is widely used to effect regular low-value payments such as utility bills and insurance. The debtor transfers specified funds to a creditor through periodic transactions according to a pre-authorised agreement between the debtor, creditor and financial institution. The Giro-using institutions send the billing information to the KFTC. The CMS debit transfer This is mainly used to collect high-value payments for companies, such as credit card charges and tuition, which are transferred from multiple payor accounts to a collection account.
Clearing details
Direct debits are cleared through the Electronic Bank Giro System, operated by the KFTC, which are then settled on a netbasis through BOK-Wire+. Clearing for public utility charges takes approximately three days, while general giro direct debits take around four days. Debit transfers are cleared through the CMS.
Payment cards
Debit cards are not often used in South Korea as they can only be used between 08:00 and 23:30 and are not accepted by many merchants. Credit cards, however, are a popular form of payment instrument, especially for retail payments and their usage continues to rise. In 2009 the average daily spend by individuals using credit cards increased by 17.7% in terms of volume and 2.2% in terms of value, on the previous year.
Clearing details
There is no dedicated interbank settlement system for credit cards in South Korea and each domestic credit card company, along with Visa and MasterCard, can choose their own method of settlement for transactions. EDTPOS clears all debit card transactions.
Electronic money
Electronic money remains a little used payment instrument, accounting for 105.3 million transactions in 2009 at a value of KRW 90.9 billion. Electronic money, in the form of K-Cash, VisaCash, and Mybi, is mainly used on public transportation or at universities. Its use remains low, due to competition from pre-paid transportation cards and post-payment cards, which double as credit cards. Approximately 11.2 million e-money cards were in circulation at the end of 2009.
Clearing details
K-Cash is available 24 hours a day and transactions are cleared via the K-Cash service operated by the KFTC. Net settlement then takes place through BOK-Wire+.
Cross-border
Clearing details
Cross-border payments are effected through BOK-Wire+, which is connected to the CLS System via SWIFT. Most large banks have direct access to SWIFT. Payments can also be cleared via the banks own correspondent banking network. Several banks can use their correspondent banks networks to access TARGET2, EURO1, and for retail payments, STEP1 and STEP2 in Europe.
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Cheque and paper instruments

Cheques
Cheques are widely used in South Korea for both consumer and business transactions. However, their usage has been affected by the rise in popularity of electronic funds transfers and payment cards. In 2009 the daily usage of cheques and bills fell by 17.3% in terms of volume, on the previous year. However, the average daily spend using cheques and bills increased by 1.7%. This rise reflects the fact that in South Korea cheques are increasingly used for high-value payments. The types of cheques and bills available include cashiers cheques, current account cheques and promissory notes. Businesses can make high-value payments with current account cheques or promissory notes, which are post-dated. However, the banking industry has tried to discourage this practice due to the unfair advantage it gives to larger companies in negotiating deferred payment terms with smaller suppliers. It has developed alternative payment methods such as corporate purchase cards.
Clearing details
All cheques are cleared via the Cheque Clearing System, comprising 50 clearing houses all operated by the KFTC. The KFTC applies manual clearing to household cheques, promissory notes and current account cheques.
Cashiers cheques
Also known as bearer-form bank drafts, cashiers cheques can be used in place of regular cash for payments such as bank deposits and loan instalments. They can be printed without a preset value or with a preset value, the most common of which is the KRW 100,000 denomination. Cashiers cheques can be dispensed at any ATM.
Clearing details
Cleared via the Cheque Clearing System. The KFTC applies cheque truncation clearing to cashiers cheques, whereby banks send the payment information electronically to the clearing house, without the physical movement of the cheque.
Paper-based credit transfers

The usage of paper-based credit transfers, or giros, has steadily declined in favour of electronic credit transfers and internet giros. The volume of paper-based credit transfers fell 5.5% but rose 0.8% by value from 2008 to 2009. Paper-based giros accounted for 30.3% of the volume of transactions processed through the Bank Giro System in 2009 and 41.6% of the value.
Clearing details
These are cleared via the Bank Giro System.
How Companies Pay & Receive

Key summary
Credit transfers and to a lesser extent direct debits are the most popular forms of payment used by South Korean companies. Cheques, particularly post-dated cheques, are still widely used to pay suppliers, though the practice is discouraged by the banking industry. The issuance of corporate credit cards continues to increase, reaching 4.98 million at the end of the first quarter of 2010.
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How companies make payments

Vendors / suppliers
Credit transfers are most commonly used to issue a large number of payments or invoices to multiple vendors and suppliers. Pre-authorised direct debits are the most commonly used instrument for regular payments such as insurance premiums and utility payments. Promissory notes are also used to pay suppliers. Current account (corporate) cheques can be used for public utility payments.
Tax / social security

Current account cheques are commonly used for the payment of taxes by businesses. Credit transfers/giros can also be used to pay tax and social security. Payment can also be effected through the Internet Giro System.
Payroll
Salary, pensions and dividends payments are made via direct credit transfer (direct deposit).
Treasury settlements
Treasury settlements are usually paid for via credit transfers or internet giros.
How companies receive payments

From consumers / small companies
For retail services, cash is still widely used among consumers and credit cards are a popular choice for small and mediumvalue transactions. Cashiers cheques are widely used by the general public in place of cash and can be used to make utility and loan payments. Direct debits and credit transfers can also be used to collect payment from customers and small companies.
From other companies

The use of credit transfers and direct debits is common. Post-dated promissory notes are commonly used as provisions of credit between businesses and corporate payment cards are on the increase. The growing use of electronic payment methods has made it unnecessary to develop a lockbox network, though lockbox services are available from some banks.
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Summary of payment methods

Usage Physical presence Remote payment Regular payment One-off payment Consumer Cheque and bill Debit/Credit card Credit transfer Companies Transactions in 2009 (million) % of total number of transactions
648.2
7.4
4,881.1
55.8
2,430.8
27.8
Direct debit Card-based e-money Total
682.9
7.8
105.3
1.2
8,748.3
I: important usage M: moderate usage S: seldom used N: at the moment essentially used through non-secure communication of the card number PInstrument available.
Source: Bank of Korea ECOS Economic Statistics System, May 2010.
Clearing Systems
Overall structure(s)
(including interface with cross-border systems)
The South Korean settlement system consists of a central bank-operated bilateral, multilateral and real-time gross settlement system, BOK-Wire+, and nine retail net settlement systems used for the clearing of non-urgent/low-value payments. The retail payment systems are owned and operated by the Korea Financial Telecommunications and Clearings Institute (KFTC), an organisation owned by participating member banks. The KFTC divides its operations into the Cheque Clearing System, the Bank Giro System, the Financial Information Networks Systems (FINS) and Electronic Money. In addition, the KFTC also manages a B2B and a B2C e-commerce payment service, which support e-commerce transactions and fund transfers. FINS interconnects the computers of all banks in South Korea through its relay computers to process various electronic payments. It is divided into the following systems:
CDNET (Interbank Cash Dispenser/Automated Teller Machine) System IFTNET (Interbank Funds Transfer Network) System EFTPOS (Electronic Funds Transfer at the Point of Sale) System CMS (Cash Management Service) System BANKLINE (Local Banks Shared) System HOFINET (Interbank/Firm Banking) System, or the Electronic Banking System.
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High-value payments may be effected through BOK-Wire+, though in theory any payment can be effected through BOK-Wire+. Low-value payments are generally processed through one of the nine retail net settlement systems, with final settlement of net obligations occurring through BOK-Wire+.
Electronic clearing systems

High-value / urgent
BOK-Wire+ is South Koreas RTGS system for high-value interbank payments for domestic and foreign funds transfers, as well as payments relating to the government and treasury. In April 2009, the system was upgraded, becoming a hybrid system, with bilateral and multilateral settlement processes. The new system enables straight through processing of payments with direct server-to-server connections between the BOK and its participants. BOK-Wire+ provides net settlement for all other clearing systems. BOK-Wire+ has been in operation since 1994 and is owned and operated by the central bank, the Bank of Korea (BOK). Any financial institution with an account at the BOK may participate in BOK-Wire+, subject to approval by the BOK. BOK-Wire+ has 129 participants, of which 53 are banks. High-value/urgent payments and third-party funds transfers are settled in real time with immediate finality. Third-parties can make payments of at least KRW 1 billion per transaction through a participating institution. There are no minimum or maximum thresholds for all other payments. The systems operating hours are between 09:00 and 17:30 local time, Monday to Friday. Interbank payments are made on a firstin-first-out basis, whilst net settlement arising from the electronic retail payment systems takes place at 11:30 each day. Final net settlement of paper-based cheque clearing occurs at 14:30. The system is connected to the DVP and PVP Systems and uses internationally established SWIFT standards of communication. During 2009 BOK-Wire+ processed 2,540.5 million transactions at a total value of KRW 45976039.8 billion, an increase of 8.3% in volume and 6.8% in value on 2008.
Low-value / non-urgent
Bank Giro System has been operating since 1977 and is used by companies and customers to make regularly scheduled nonurgent payments between bank deposit accounts. Eighteen Korean banks, one foreign bank and four specialist institutions participate in the Bank Giro System. The system is divided between processing paper-based giros and electronic giros. Electronic giros consist of credit transfers such as standing orders and direct deposits, or direct debits. These are set up by prior arrangement between the payor, payee and the relevant financial institution. The KFTC is provided with the billing information from the giro and clears the transaction accordingly. Net obligations are then settled through BOK-Wire+ on the following working day at 11:30. The KFTC also operates an Internet Giro Service, which allows customers to effect a giro payment without visiting a bank branch. The system accepts giro payments from 09:30 to 19:00 on weekdays, while the Internet Giro Service has extended hours until 22:00. Giro transfers normally clear in two to three days, while cross-border transfers can take up to three days. In 2009 electronic giros accounted for 69.7% of the volume and 58.4% of the value processed through the Giro System. The system processed 1,072.7 million electronic giros at a total value of KRW 157531.5 billion in 2009, a decrease of 3.3% in volume and an increase of 2.4% in value from 2008. CDNET All South Korean domestic banks, the Post Office and three specialist co-operative institutions participate in CDNET, which began operating in 1988. The system processes cash withdrawals, cash advances on credit cards, giro and funds transfers, and KRW 100,000 cashiers cheque withdrawals effected through CD/ATM terminals. Funds transfers are limited to KRW 10 million per transaction. The
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network is in operation daily from 07:00 to 23:30 (09:00-17:00 Monday-Friday at indoor CD/ATMs) and is managed by NICE e-Banking Services, which sends transactions information daily to the KFTC for clearing. Net positions arising from the system are then settled on the following working day through the BOK-Wire+ at 11:30. In 2009 CDNET handled 506.6 million transactions totalling KRW 242,531.2 billion, an increase of 1.7% in volume and a decrease of 0.4% in value on 2008. IFTNET Eighteen South Korean banks, seven foreign banks and four specialist institutions participate in IFTNET, which began operating in 1989. The system allows customers of participant institutions to immediately remit cash, cashiers cheques, and collected money from one bank branch to another regardless of location or bank by visiting any bank branch. Cash remittances are limited to KRW 100 million per transaction. The network is in operation during banking hours from 09:30 to 16:30 Monday to Friday. A customers account is automatically debited or credited upon payment order and net positions arising from the system are then settled on the following working day through the BOK-Wire+ at 11:30. The use of IFTNET had been in decline due to the rise in various payment methods that do not require visiting a bank branch, but volume and value levels have stabilised. In 2009 IFTNET processed 123.7 million transactions totalling KRW 803,909 billion, a decrease of 8.1% in volume and 1.1% in value on 2008. EFTPOS processes purchases made with bank-issued debit at the point of sale. There are 17 participating financial institutions in the system, which began operating in 1996. Transactions through FETPOS are subject to a minimum purchase of KRW 1,000. The network is in operation daily from 08:00 to 23:30 for debit card transactions and continuously for credit card transactions. Net positions arising from the system are then settled on the following working day through the BOK-Wire+ at 11:30. The KFTC also operates a VAN service for credit card purchases, which is available 24 hours a day. In 2009 it processed 1.0 million transactions at a value of KRW 44.8 billion, a decrease of 23% in volume and 22.1 value from 2008. CMS Eighteen South Korean domestic banks, one foreign bank and four specialist institutions participate in CMS, which began operating in 1996. The system is essentially a service which provides participating companies with the facility to manage bank-related funds when doing business with several different banks. Companies can conduct non-urgent/low-value funds transfers and send transaction information without having to go to the bank. The KFTCs intermediary system interconnects a companys computers with participating banks. The system has a debit transfer and credit transfer service network. Net settlement of interbank funds for deposit transfers takes place at 11:30 on the day of the transaction if made prior to that time, while net settlement of interbank funds for debit transfers takes place the following business day at 11:30. In 2009 the CMS processed 753.8 million transactions totalling KRW 102,108.2 billion, a decrease from 2008 of 4.7% in terms of volume and 7.1% in terms of value. BANKLINE South Koreas six local commercial banks participate in BANKLINE, which began operating in 1997. The participating banks are connected with the KFTC system, enabling local bank customers to conduct account business at any participating bank using a BANKLINE account. The system is essentially designed to provide local banks with a nationwide branch network. The network is in operation during banking hours from 09:30 to 16:30. Net positions arising from the system are then settled on the following working day through the BOK-Wire+ at 11:30. In 2009 BANKLINE processed 139,100 transactions totalling KRW 1,143.2 billion, a decrease of 17.1% in terms of both volume and value. HOFINET Eighteen South Korean banks, two foreign banks and four specialist institutions participate in HOFINET, which is the electronic banking system operated by the KFTC. The system processes banking transactions effected through communication devices such as personal computers, phones, mobile phones, PDA and TV, 24 hours a day, seven days a week. HOFINET began operating in April 2001, after adding intermediary electronic banking functions such as internet, phone, and mobile banking services to the existing ARS (Automated Response Service). Transfers are limited to KRW 1 billion per transaction.
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Between 00:00 and 7:00, participating banks may choose to cut off access to HOFINET. Net positions arising from the system are then settled on the following working day through the BOK-Wire+ at 11:30. In 2008 HOFINET processed 1.4 billion transactions totalling KRW 7.1 trillion.
Other local transfer systems

The KFTC also operates K-Cash, an e-money system, which processes transactions arising from the K-Cash card, which was launched in 2000. However, it is mainly used on public transport. The B2C E-commerce Payment System processes e-commerce funds transfers in real time for consumers and retailers and began operating in 2000. The B2B E-commerce Payment System was launched in 2002 to assist businesses in the exchange of contract information and also to serve as a payment channel for the Online Registered Bill (ORB), which encompasses both cheque and credit functions.
Paper-based systems
Cheque Clearing System All cheques, bills and payment certificates are cleared via the Cheque Clearing System, a network of 50 clearing houses operated by the KFTC. Cheque clearing can be divided into the Cheque Truncation Service (CTS) and manual clearing. The KFTC applies manual clearing to household cheques, promissory notes and current account cheques, while cashiers cheques are truncated and sent electronically to the designated clearing house. The CTS was launched in 2000 and the KFTC is in the process of extending the CTS to household cheques, promissory notes and current account cheques. Since October 2009, current account cheques and promissory notes exchanged through the Seoul Clearing house have been subject to CTS, and from December 2009, this was extended to current account cheques and promissory notes exchanged through clearing houses in cities neighbouring Seoul. The BOK aims for all promissory notes and current account cheques to be subject to CTS by the end of 2010. Cheques are deposited at financial institutions during banking hours. They are then delivered, either manually or electronically to a regional clearing house for overnight clearing, until one hour before the start of the following business day (08:30). Net positions are then transmitted to the BOK via the internet. If a cheque has been cleared manually, final settlement take place through the BOK-Wire+ at 14:30. Final settlement of net positions arising from cheques sent via the CTS occurs at 11:30. All bills or cheques exchanged at a clearing house can be cashed the following day at 14:20 or later. If there is a regional difference between the cheque issuer and the designated clearing house, then settlement can take up to five days. Inter-regional clearing takes place in Seoul, Busan, Daegu, Gwangju, Gangneung Daejeon and Mopko. In 2009 the system processed 640.9 million transactions at a total value of KRW 5,399,706.3 billion, a decrease of 13.4% from 2008. The steady decrease in cheque usage is attributable to the rise of other forms of electronic cashless payments. However, the value of cheque payments increased by 5.9% during 2009 on the previous year as cheques were used for higher value purchases. Bank Giro System The Bank Giro System is divided between paper-based giro and electronic giro processing. For paper giros, giro-using institutions invoice their customers by issuing giro forms containing printed information on the payments to be made. Customers then make a payment by taking the giro form to a bank for processing. Each giro contains a unique seven-digit number which signifies the billing companys name, bank code, and the account number of the beneficiary. The KFTC is provided with the billing information from the giro and clears the transaction accordingly. Net obligations are then settled through BOK-Wire+ on the following working day at 11:30. Giros can be paid or collected at any bank branch or participating CD/ATM terminal. In 2009 paper-based giros accounted for 30.3% of the volume and 41.6% of the value processed through the Giro System. The system processed 325.3 million paper giros at a total value of KRW 65579.6 billion in 2009, a decrease of 15.5% in volume and increase of 0.8% in value from 2008.
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Electronic Banking
Existing and future trends
Electronic banking is common practice in South Korea with most banks offering electronic banking services. However, there is currently no national bank-independent standard. In addition, most banks offer some form of internet banking and mobile phone banking has grown rapidly.
Usage by companies
Usage of electronic banking has spread rapidly among South Korean businesses, along with significant growth in the internet. South Korea claims to be the most wired country on earth with one of the highest rates of broadband and mobile penetration. Most banks offer their own proprietary e-banking systems. Many local banks have also invested extensively in the development of online cash management services to meet the demands of customers. Internet banking transfers made by businesses in South Korea are limited to individual transfers of no more than KRW 1 billion. A limit of KRW 5 billion for online transfers can be made by a business in one day. At the end the third quarter of 2010, there were around 33.4 thousand million companies subscribing to internet banking services in South Korea. This is an increase of 11.7% on the number of corporate internet banking subscribers at the same point in 2009.
Market practice
Through their proprietary systems, most major banks in South Korea offer services that include transaction initiation, balance enquiry and loan services. Cash management services can also include e-procurement, e-invoicing and accounts receivable loans. To participate in electronic banking, customers must sign an agreement with their bank.
Internet banking
South Korea has one of the worlds highest internet penetration rates; 81.1% of the population currently accesses the internet. As a result, internet banking continues to rise in South Korea and around 19 banks in Korea offer internet services. At the end of the third quarter of 2010, there were around 6.1 million individuals (around 12.5% of the total adult population) using internet banking South Korea, according to the BOK, an increase of 11.5% on the same period of 2009 when around 5.6 million people used internet banking services. Due to this rise in popularity among businesses, some local banks have phased out telephone electronic banking operations. Online funds transfers are limited to KRW 100 million per transaction and KRW 500 million per day for individuals. With the implementation of the Digital Signature Act, all internet transactions made with digital certificates are legally valid in South Korea. An internet banking user must obtain a digital certificate from a certification authority. Furthering efforts to protect identity, new requirements under the Basic Act on Electronic Financial Transactions, passed in April 2006, oblige all financial institutions offering online banking in South Korea to use two-factor authentication. The new requirements became effective in January 2007.
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Trade Finance
Overview of trade agreements with other countries
All trade is now free between South Korea and the Association of South East Asian Nations (ASEAN) member states. South Korea signed a free trade agreement (FTA) with the United States in April 2007, though it has not yet been ratified by either countrys legislatures. In October 2009, South Korea signed an FTA with the European Union, removing the all but a few import duties on goods traded between the two partners. In August 2009, South Korea agreed the terms of a Comprehensive Economic Partnership Agreement (CEPA) with India. It also signed a CEPA in December 2009 with the United Arab Emirates. In addition, South Korea has established bilateral trade agreements of some form or another with Chile, Singapore, Peru, Kyrgyzstan and EFTA. It is currently involved in free trade talks with Australia, Turkey, Vietnam and Canada.
General trade overview including any government policy

Trade and customs in South Korea are governed by the External Trade Act and the Customs Act respectively. The government has pursued a policy of trade liberalisation; however, trade with North Korea still requires approval from the Ministry of Unification.
Imports and exports

Goods Figures for 2009 Imports Exports Balance USD billion 317.5 % of GDP 34.8 USD billion 75.7 Services % of GDP 8.3 USD billion 11.2 Income % of GDP 1.2
373.6
40.9
58.5
6.4
15.7
1.7
+ 56.1
+ 6.1
17.2
1.9
+ 4.6
+ 0.5
Source: IMF International Financial Statistics, October 2010.
Main trading partners for imports and exports
Imports China 16.8%, Japan 15%.3, (European Union 10.0%), United States 9.0%, Saudi Arabia 6.1%. Exports China 23.9%, (European Union 12.8%), United States 10.4%, Japan 6.0%, Hong Kong 5.4%.
Source: WTO, October 2010.
Main traded products / sectors share of total imports and exports

Exports Manufactures 76.6%, fuels and mining products 7.3%, transportation 6.9%, commercial services (excl. travel and transportation) 4.5%, travel 2.2%, agricultural products 1.7%.
Imports Manufactures 46.2%, fuels and mining products 28.8%, commercial services (excl. travel and transportation) 9.6%, transportation 5.9%, agricultural products 5.3%, travel 3.4%.
Source: WTO, Ocotber 2010.
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Documentation requirements for imports and exports

A commercial invoice, including a full description of the goods, a bill of lading, a packing list and a customs declaration are needed for importing and exporting items into and out of South Korea. A terminal handling receipt and a cargo release order are also needed for imports.
Licence requirements for imports and exports

The Korea Trade Commission may implement import quotas for products it judges harmful to Korean industry, but most goods do not require a licence for import, the main exception being rice, which does require a licence. Meanwhile, all items can be exported from South Korea, excluding those placed on the negative list. Licences with quotas are required for only four commodities.
Taxes, tariffs and other fees on imports and exports

The Harmonised Customs System applies to all imports from outside South Korea. Imports into South Korea are subject to a variety of tariffs assessed on an ad valorem basis at an average of around 8%. Excise taxes are higher for alcohol and cigarettes. High tariffs may be waived for foreign investors. No taxes are levied on exports from South Korea.
Country export credit agency

Established in 1976, the Export-Import Bank of Korea (Korea Eximbank) is the an official, state-owned export credit agency that provides supplier credit, export buyer credit, credit for pre-export financing and guarantee programmes. It also provides overseas investment credit and is responsible for managing two government funds for development assistance, The Economic Development Co-operation Fund and the Inter-Korean Co-operation Fund. The Small and Medium Business Administration (SMBA) offers policy loans for small to medium-sized exporters. Domestic and foreign-owned commercial banks in South Korea can also provide export financing. The wholly state-owned Korea Export Insurance Corporation (KEIC) is the countrys official export credit insurance provider which insures short-term export risk (where the risk period involved is less than two years), long term (where the risk period involved exceeds two years) export supplier credit and long-term export buyer credit. It also provides insurance for losses arising from overseas construction works, overseas investment, foreign exchange risk, interest make-up and export bonds. In addition, it provides post shipment repayment guarantees for SMEs. KEIC is able to insure up to 95% of the risk amount when there is commercial or political risk involved. It insures up to 90% for buyers credit under medium and long-term export contracts. The Korea Eximbank operates in accordance with the international legal framework on export credits and credit guarantees developed by the OECD (Organisation for Economic Co-operation and Development) which includes the international Arrangement of Officially Supported Export Credits (OECD Consensus). The OECD Consensus only applies to long-term export credit. The KEIC operates in accordance with the 1968 Export Insurance Law and its subsequent amendments. KEIC is a member of the Berne Union or, officially, the International Union of Credit and Investment Insurers, a leading international organisation for export credit and foreign investment insurers. South Korea also participates in the Asian Development Bank, aimed at assisting developing member states in Asia. Neither imports nor exports are subject to financing requirements.
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Export credit programmes

The Korea Eximbank is responsible for managing South Koreas official state-supported export financing programme. The KEIC is responsible for operating South Koreas official state-supported export credit insurance programmes. The Ministry of Commerce, Industry and Energy oversees the work of the KEIC and provides policy guidance. KEIC has established a reinsurance agreement with EKN of Sweden and has signed co-operation agreements with approximately eight foreign export credit agencies.
List of prohibited imports / exports

Certain items are prohibited from being imported into South Korea, to protect fauna and flora, national security and for moral reasons. There is also a negative list of products whose exports are prohibited.
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Glossary
The Bank of Koreas real time gross settlement system. In April 2009, the system was upgraded, becoming a hybrid system, with bilateral and multilateral settlement processes. Korean word for conglomerates, such as Hyundai, which have been a major force in the South Korean economy. Cheques are exchanged and paid based only on the relevant information provided through an interbank information network with no physical movement of cheques. Cashiers cheques are cleared in this manner. A pre-authorised direct debit, widely used to effect regular low-value payments. A debit transfer can be made through the Bank Giro System or the Cash Management System. A system that interconnects the computers of all banks in Korea through its relay computers to process financial transactions between banks in a prompt and secure way. The system is operated by the KFTC. The term used for a non-resident domestic settlement account, which can be used for current transactions, reinsurance contracts and inward investment in domestic securities. One of three pre-paid card systems in South Korea. It is the only pre-paid card processed through the e-money payment system operated by the KFTC. Organisation established in 1986 by member banks to provide efficient and reliable payment services in Korea. The KFTC operates South Koreas retail payment systems and divides its operations into the Cheque Clearing System, the Bank Giro System, the Financial Information Networks Systems (FINS) and Electronic Money. In addition, the KFTC also manages a B2B and a B2C e-commerce payment service, which support e-commerce transactions and fund transfers. Electronic bill used in the B2B E-commerce Payment System developed by the KFTC, which has the payment features of a cheque and also a credit function.
BOK-Wire+
Chaebol
CTS (Cheque Truncation Service)
Debit transfer
FINS (Financial Information Networks Systems)
Free won account
K-Cash
KFTC (Korea Financial and Telecommunications Clearing Institute)
ORB (Online registered bill)
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For more information, please contact your J.P. Morgan Treasury Services representative or visit jpmorgan.com/ts
The material contained in this report is not intended to be advice on any particular matter. No subscriber or other reader should act on the basis of any matter contained in this report without considering appropriate professional advice. J.P. Morgan and its contracted information supplier expressly disclaim all and any liability to any person, whether a purchaser of this report or not, in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance upon the contents of this report. 2010 JPMorgan Chase & Co. All Rights Reserved. JPMorgan Chase Bank, N.A. Member FDIC. All services are subject to applicable laws and regulations and service terms. Not all products and services are available in all geographic areas. Eligibility for particular products and services is subject to final determination by J.P. Morgan and or its affiliates/subsidiaries. Produced by TS Global Marketing.

10.11.18 Jpmorgan Update South Korea

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10.11.18 Jpmorgan Update South Korea

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Country Profile South Korea

Updated 18 November 2010

Economic / Political Environment

Source: IMF International Financial Statistics, October 2010.

Population (July 2010 est.) 48.64 million

Sectoral analysis % (2008 est.) Agriculture Industry Services

Regulatory Environment and General Market Practice

Resident and non-resident status

Central bank reporting

General market practice

Cash concentration / ZBA sweeping

General market practice

General market practice

General market practice Single entity

Notional pooling is not permitted in South Korea.

General market practice Multiple entities

Notional pooling is not permitted in South Korea.

General market practice

Can be exempt 22%

KRW 200,000,000 or less

More than KRW 200,000,000

Capital gains tax

More than KRW 88,000,000

Securities transaction tax

Advance tax ruling availability

Indicators of use of various cashless payment instruments

4,147.4 2,321.6 715.3

4,880.1 2,430.8 682.9

17.7 4.7 -4.5

456,420.6 51,332,536.2 63,026.9

466,358.1 55,382,648.3 63,681.0

2.2 7.9 1.0

Electronic payment instruments

High-value / urgent Clearing details

Low-value / non-urgent Clearing details

Cheque and paper instruments

Paper-based credit transfers

How Companies Pay & Receive

How companies make payments

Tax / social security

How companies receive payments

From other companies

Summary of payment methods

Direct debit Card-based e-money Total

Source: Bank of Korea ECOS Economic Statistics System, May 2010.

(including interface with cross-border systems)

Electronic clearing systems

Other local transfer systems

General trade overview including any government policy

Imports and exports

Source: IMF International Financial Statistics, October 2010.

Main trading partners for imports and exports

Main traded products / sectors share of total imports and exports

Source: WTO, Ocotber 2010.

Documentation requirements for imports and exports

Licence requirements for imports and exports

Taxes, tariffs and other fees on imports and exports

Country export credit agency

Export credit programmes

List of prohibited imports / exports

CTS (Cheque Truncation Service)

FINS (Financial Information Networks Systems)

Free won account