SOUTH KOREA. Travel retailers are weighing up the impact of new Korea Customs Service (KCS) proposals announced in mid-July that will restrict the number of Korean products that can be bought by individual customers.
If implemented, the proposals would limit customers to 50 cosmetics and perfume products, and ten bags and watches from each brand. However, those limits are still subject to change. Currently retailers place no limit on quantities – though some brands do.
The new policy represents a crackdown on the technically illegal buying and reselling (often through third-party brokers) of duty free items, an unofficial market that has flourished in recent years.
The news, first reported by The Korea Herald last week, sent the stock prices of Korea’s leading cosmetics houses sharply downwards on Monday.
The newspaper, citing NH Investment & Securities, said that some 25% of Korean cosmetic companies’ sales come from duty free, with the channel accounting for around 40% of industry giant AmorePacific’s profits and about 30% of LG Household & Health Care’s.
A leading Korean travel retailer, who asked to remain anonymous, told The Moodie Davitt Report: “We agree with the purpose of the policy – i.e. to get rid of illegal cosmetics distribution. However, we think the method of putting limits on purchases is not an optimal one. Foreign tourists, especially Chinese, come to Korea with the main purpose of shopping. To put limits on their purchases might do more harm than good to not only the duty free business but to the overall travel industry of Korea if we lose attractiveness to visit.”
The source emphasised that the final allowance is not settled yet, noting: “KCS will review the details and the limit will become effective within August. Currently we do not have an official limit on quantity but some brands in our stores have their own policies to limit purchase quantities.”
