The government is set to reform the bonded processing system. The intention is to remove regulations that hinder advanced and core industries such as semiconductors, thereby strengthening companies' export competitiveness. The bonded processing system allows the manufacturing and processing of foreign raw materials under deferred taxation, such as customs duties, enabling export and import without immediate tax payment. The export share by industry utilizing this system in advanced and core sectors is 93% for semiconductors, 92% for shipbuilding, 96% for bio, and 85% for displays.
On the 19th, the Korea Customs Service and related ministries announced at the National Policy Issues Ministerial Meeting that they will promote the ‘STAR Strategy’ for regulatory innovation in the bonded processing system to support the export competitiveness of domestic advanced and core industries.
The STAR Strategy will be implemented by easing or abolishing unnecessary regulations in four key areas: ▲Supporting new value creation (Start-up) ▲Logistics innovation (Transportation) ▲Expansion of autonomous management (Autonomy) ▲Reduction of costs and burdens (Reduction).
First, the Korea Customs Service will simplify the research and development procedures for bonded factories. Previously, when prototypes or research products were moved from bonded factories to R&D departments, all items had to undergo import customs clearance and pay duties. Going forward, they can be moved in a tax-deferred state without import clearance. This is expected to accelerate new product research in semiconductors and the analysis of defective products, enabling more efficient product development.
The restriction on the storage period of foreign goods in free trade zones will also be reduced to allow long-term storage of large heavy equipment and raw materials for core industries such as shipbuilding, aviation, and plants. The current regulation limiting storage of foreign goods at certain piers in Busan Port, Incheon Port, and Incheon Airport to three months will be changed to unlimited storage.
As part of logistics innovation, the distance restriction for a single bonded factory license will be relaxed from the current 15 km to 30 km. A single bonded factory is a system that integrates two or more nearby bonded factories operated by the same legal entity for unified management, enabling rapid logistics movement without reporting between factories. Considering this, allowing a single bonded factory license within a 30 km straight-line distance is expected to shorten the manufacturing and processing period for export goods compared to before.
Additionally, the Korea Customs Service explained that it will permit export and import declarations to be made at the customs office with jurisdiction over the off-site workplace where products are produced, helping companies reduce unnecessary transportation costs.
The STAR Strategy also includes easing the requirements for designating autonomous management bonded factories to expand the autonomous management scope of excellent bonded processing companies. Autonomous management bonded factories are designated by the Korea Customs Service as excellent bonded factories and receive benefits such as exemption from bonded transportation, off-site work permits, export/import declaration exemptions, and automatic acceptance of usage reports.
However, until now, autonomous management bonded factories were required to provide customs with access to their business systems. In contrast, defense industry companies sensitive to security found it difficult to meet this requirement in practice. Therefore, the Korea Customs Service will replace the requirement to provide access to business systems with a pledge to guarantee access only upon customs' cooperation request.
Furthermore, the scope of repair work, which has simpler procedures than general manufacturing and processing, will be expanded, and customs approval procedures for repetitive repair work within autonomous management bonded factories will be omitted. This will allow simple tasks such as attaching supplies needed for machinery and equipment or performing performance tests and marking without customs approval.
The STAR Strategy will also significantly simplify the management of residues such as steel scrap, packaging boxes, and empty containers generated during the manufacturing process within bonded factories. In particular, for shipbuilding companies, foreign steel scrap generated during ship construction will be allowed to be managed in inventory based on the loss quantity calculated from design drawings (the amount of raw material loss occurring during normal production of export goods) without the need to measure the actual weight, alleviating the industry's management burden.
The Korea Customs Service stated, “The government will continue to listen to the voices from the industrial field and implement bold regulatory innovations reflecting them to strengthen the export competitiveness of domestic advanced and core export industries and expand their share in the international market.”
On the 19th, visitors are viewing semiconductor manufacturing equipment at 'Semicon Korea 2025' held at COEX in Gangnam-gu, Seoul. 2025.2.19. Photo by Kang Jin-hyung
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