Two beliefs about Incoterms survive contact with a Korean import declaration badly: that buying FOB lowers the duty because the invoice is smaller, and that accepting DDP hands the Korean border to the supplier. Both are claims about Korean law, not the ICC rules, and neither holds.
Under 관세법 the dutiable value is CIF-type whichever rule you buy on; Korea taxes the 화주 — the owner of the goods named on the declaration — whatever the invoice says; and an import requirement is proved to the 세관장, the customs office, by the person importing. What the Incoterm moves is evidence — who contracts the carrier, who holds the transport document, who holds the policy, and so who can prove a loss.
One boundary: the export side — where the seller clears goods under every rule except EXW, so the rule allocates no export-licence risk — is covered in Procurement Strategy Under Export Controls. Everything below is the import side.
The dutiable value is CIF-type whichever rule you buy on
관세법 제30조제1항제6호 adds to the transaction price, among the 가산요소, 「수입항(輸入港)까지의 운임ㆍ보험료와 그 밖에 운송과 관련되는 비용」, and 관세법 시행령 제20조제5항 runs that amount until the goods arrive at the port of import and are ready for unloading. Korea has elected a CIF-type base, and no Incoterm changes the election.
「관세평가 운영에 관한 고시」(관세청고시 제2025-37호) 제24조제5항 then tells the appraiser what to do with each rule. Where the contract puts the freight to the port of import on the seller — CIF, CIP, CFR, CPT, DAP, DDP — it counts as already inside the price paid, and customs does not look behind the actual freight paid. Where it falls on the buyer — FOB, FCA, EXW — the freight counts as not included and the amount actually paid is added.
The base is CIF-type either way; the difference is the rate, not the label. Under CIF the seller's freight mark-up sits inside the price and is dutiable; under FOB you add what you actually paid. A buyer who books a cheaper rate than the seller was charging does lower the dutiable value — by the rate difference, not by the label. Book the same rate through the same forwarder and nothing moves.
Insurance is treated differently. 제25조제2항 imputes a 통상운임 where freight is free, so customs adds a normal freight even when nobody paid one, while 제26조제1항 adds a premium 「실제로 보험에 가입된 경우에만」. Shipping FOB uninsured therefore does lower the dutiable value by the premium — one duty rate on one premium, against an exposure of up to the whole cargo value. We could not verify a premium rate for powders from China to Korea and will not invent one, but those two are not the same order of magnitude.
A DDP invoice that is one number costs you part of the deduction. 관세법 제30조제2항 deducts from the price paid, where 「그 금액을 명백히 구분할 수 있을 때」, four categories, among them post-arrival transport and 「우리나라에서 해당 수입물품에 부과된 관세 등의 세금과 그 밖의 공과금」. 관세청's 고객지원센터 FAQ 「DDP조건에서 수입국내 부과제세 공제여부」 allows the tax limb 「송품장에 구분되어 표기되어 있지 않더라도」. There is no equivalent answer for transport, which runs into 제24조제4항제5호: under a door-to-door container contract, post-arrival freight is excluded only where the freight is separable. Ask for the breakdown at quotation, not at clearance.
Korea taxes the 화주 — the owner on the declaration — and the Incoterm does not fill that box
관세법 제19조제1항제1호 makes the taxpayer 「그 물품을 수입신고하는 때의 화주」. Where the 화주 is unclear and the goods were not imported through an agent, 나목 (item (b) of the same clause) falls back to the 「상업서류에 적힌 물품수신인」, which 관세법 시행령 제5조 defines as the 송품장 or the 선하증권ㆍ항공화물운송장. The consignee box on the bill of lading can therefore decide who Korean customs treats as the taxpayer — often filled in by an unbriefed forwarder. 「수입통관 사무처리에 관한 고시」(시행 2025-12-17) 제45조제1항 states: 「수입신고한 물품의 수입화주는 그 물품에 대한 관세 등의 납세의무자가 된다.」 The 관세사 is the 신고인 (declarant), not the 화주, and 관세법 제276조제2항제4호 punishes a false declaration of the 납세의무자's identity with a fine of up to the greater of the value of the goods or KRW 20 million.
Can a foreign seller be the 화주, as a literal DDP would require? No single provision says it cannot, and we will not pretend one does. It follows from three read together: 시행령 제246조제1항제5호 requires the declaration to carry the 화주's 사업자등록번호 and 통관고유부호, 시행규칙 제77조의5제1항제1호 requires a 사업자등록증 to obtain that 통관고유부호, and 부가가치세법 제8조제1항 ties 사업자등록 to a place of business — 「사업장마다」. A non-resident with no Korean establishment cannot enter that chain, so a DDP into Korea is almost always executed with the Korean buyer as 화주 and therefore as 납세의무자. Bob Ronai of the Incoterms 2020 Drafting Group says the same from the seller's side: DDP 「should be used with great care as the seller might need to be a registered entity both for import and VAT/GST」 in the buyer's country — 「which is a fairly unlikely scenario」 — and if the seller cannot recover that VAT, the parties should contract on DAP instead.
The VAT credit turns on substance, and DDP puts the burden of proof on you
부가가치세법 제29조제2항 sets the import VAT base at 「관세의 과세가격과 관세」 plus the other border taxes, at 10% under 제30조 — so a CIF freight mark-up is taxed twice. Normally that is cash flow, not cost, because 제38조제1항제2호 makes the VAT creditable for a 사업자 importing goods for its own business against the 수입세금계산서 the 세관장 issues under 제35조제1항 to 「수입하는 자」.
What the 국세청 has said about DDP is narrower than trade-press reports. Four interpretations are on point — 부가가치세과-1543 (2010), 서면3팀-2234 (2005), 서면3팀-417 (2005) and 서면인터넷방문상담3팀-3214 (2007). They date from 2005 to 2010, under the pre-2013 numbering of the VAT Act, and we found no later ruling either way, so we are not calling them the current position of the tax authority. Their test is the 실질적인 수입주체, the substantive importer: where the foreign exporter is substantively the importer and pays the Korean duty and VAT, the Korean company's credit fails; where the Korean company uses the goods in its own taxable business and bears the tax 「실질적인 수입의 주체로서」, it survives. The 2010 refusal came on facts where the materials were supplied free of charge on DDP terms.
So DDP does not by itself destroy the credit, and anything saying it does is over-claiming. What it does is create the exposure, put the burden of showing substance on you, and attach a penalty to error — 서면3팀-417 confirms that a wrongly claimed credit draws 가산세 (penalty tax) as well as disallowance. The obvious workaround does not help either: 부가가치세법 제50조의2 defers import VAT, but 시행령 제91조의2 conditions it on being an SME or mid-tier manufacturer with prior-year zero-rated supplies — in practice exports — of at least 30% of total supplies, or at least KRW 5 billion for an SME, so a trading company fails at the first condition, and deferral benefits only the importer anyway.
An import requirement is proved by the importer
관세법 제226조제1항 requires goods needing a 허가ㆍ승인ㆍ표시 under any other law to prove it to the 세관장, and 「세관장확인물품 및 확인방법 지정고시」(관세청고시 제2026-46호) 제2조제3호 defines the 요건신청 as a filing by 「수출입하려는 자」. 제7조제2항제1호 keeps 화학물질관리법 prohibited and restricted substances, plus ozone-layer, household-chemical, biocide and biodiversity items, confirmable at the border even where 대외무역법 시행령 제19조 would otherwise exempt them. We read the body of the 고시 but not 별표 1 or 별표 2, so we cannot say from it which particular powder or target is a 세관장확인 item.
This apparent exception proves the point. 화학물질의 등록 및 평가 등에 관한 법률 제38조 lets a 국외제조ㆍ생산자 appoint a representative to register, report and file 「수입하고 있거나 수입하려는 자를 갈음하여」 — in place of the importer. The duty discharged remains the importer's; a DDP seller with no Korean 사업자등록 cannot occupy that position. Under every rule including DDP, the Korean buyer is the one the border asks. The Incoterm shifts who pays for compliance, not who is answerable.
What the Incoterm really moves: documents, cover and the carrier's cap
The ICC published a guidance paper in 2024, drafted by the Co-chairs and Special Adviser of its Incoterms 2020 Drafting Group, 「INCOTERMS 2020 FCA and CPT: Best practice for shipping containers through ports」. It reports a 2023 worldwide survey of Incoterms use in major ports, finds the top two considerations in choosing a rule are controlling freight costs and clarifying risk transfer, and concludes the maritime rules serve neither for containers:
The traditional maritime Incoterms® rules FOB, CFR and CIF have an on-board point of delivery that is not suitable for containers since users have in practice no control over the start of freight cost and over transfer of risk up to or after this point. This mismatch has for years given rise to additional costs, Terminal Handling Charges (THC) overcharge/double charging in ports, uncertainty, and disputes.
It recommends FCA at the named container terminal of departure and CPT — or CIP where cover is agreed — as 「the best matching point to delineate freight cost and transfer risk」. This is guidance, not a binding rule. The mechanism behind that sentence follows from FOB's own delivery point. Between the container reaching the terminal and its loading on board, risk under FOB has not yet passed — delivery is on board — so it is still the seller's, yet the seller has already handed the goods over; neither side can prove what happened there. It is a proof problem, not an allocation win for the buyer.
One reason sellers keep using FOB for containers is the bank. Credits call for a bill of lading showing the goods shipped on board — under UCP 600 Article 20, pre-printed wording or a dated on-board notation — and FCA does not naturally produce one. Incoterms 2020 answered that: ICC's release of 10 September 2019 lists a change 「in relation to bills of lading (BL) with an on-board notation and the Free Carrier (FCA)」, described by secondary commentary as optional by agreement. We did not read FCA A6/B6 itself.
Cover is the other document the rule assigns. The Institute Cargo Clauses (A), (B) and (C) are not ICC clauses — the Lloyd's Market Association and the International Underwriting Association of London publish them. Clauses (C) — all that CIF obliges a seller to buy — is named-perils cover: under the 1/1/09 texts, water entry into the container is a named peril only from (B) up, theft and pilferage only under (A), contamination in none. Under (A) the contamination fight is exclusion 4.3, unsuitability of packing, which expressly includes stowage in a container — so packing is an insurance term as well as a quality term. Our green SiC micro powder page states its packing on its face: 25 kg bags, with moisture-barrier aluminium laminate and desiccant for sub-micron cuts.
The carrier's cap, and the arithmetic that moves it
상법 제797조제1항 limits the carrier's liability to the greater of 666.67 SDR per package or shipping unit and 2 SDR per kilogram, unless the loss came from the carrier's own intent or recklessness with knowledge. 제797조제2항제1호 is the container rule: each package or shipping unit stated on the bill of lading counts as one package, and 「이 경우를 제외하고는」 the whole contents count as a single package. 제797조제3항 disapplies the limits where the shipper declared the nature and value of the goods and that was entered on the bill of lading.
Take this site's illustrative container from Inventory Buffering and Cash Conversion Cycle: a 20 ft FCL with 18 MT at USD 6/kg, USD 108,000 of cargo. At the IMF's USD 1.364440 per SDR on 18 September 2026 — the arithmetic below is ours:
The limbs cross at a package net weight of 666.67 ÷ 2 = 333.3 kg: below it, listing the count raises the cap; above it, listing buys nothing.
This is where the Incoterm does real work, invisibly. Whoever instructs the carrier controls whether the package count — and any declared value under 제797조제3항 — reaches the bill of lading. Under FCA or FOB that is the buyer's forwarder; under CIF or CIP the seller's; under DDP the buyer may never see the document. Add 상법 제814조제1항, which extinguishes claims against the carrier one year from delivery unless suit is brought, and the DDP position is stark: no transport document, no contract with the carrier, no policy. That is the machinery behind our SiC powder buying checkpoints instinct to run early orders on FOB, because controlling the forwarder makes lead time and damage visible.
What to write down
Three decisions, in that order: put containers on FCA or CPT, per the ICC's own guidance above; put an early or unproven order on FOB, so your forwarder — not the seller's — controls the visibility; and reserve DDP for a seller that can actually register for and reclaim Korean VAT, otherwise sign DAP.
- Name the rule, the point and the year — FCA at a named container terminal, not "FCA China" — and prefer FCA or CPT for containers on the ICC's own reasoning, pricing the THC line explicitly.
- Get the package count onto the bill of lading, and declare value under 상법 제797조제3항 where the package limb will not help: any packing heavier than about 333 kg.
- Buy the cover you need, not the cover the rule obliges. Under CIF the seller's duty stops at Clauses (C); water ingress, theft and contamination need (A), with the sum insured specified.
- Make landed weight a contract term if you want one. Under 상법 제853조 the bill of lading carries the weight the shipper notified, the carrier may omit it where it has no adequate means of checking, and the shipper warrants it — so a claused bill of lading is not evidence of quantity against the carrier. Buy an appointed weighing — the same principle as nominating the laboratory in our sample evaluation protocol. Under UCP 600 Article 30 the wording also decides the tolerance: ±5% where the quantity is not expressed in packing units and the credit amount is not exceeded, ±10% where the credit says "about", so "18,000 kg" and "720 × 25 kg drums" are different instruments.
- Write the rejection route, not just the rejection right. 관세법 제100조제1항 relieves duty only for damage arising before the declaration is accepted — under DDP the seller has already cleared, so that door shuts before the buyer opens a drum. After clearance, 관세법 제106조제1항제1호 refunds the duty if the goods differ from the contract, remain 「수입신고 당시의 성질이나 형태가 변경되지 아니한」 and return to a 보세구역 (bonded area) within one year for re-export; sampling and repacking a lot to document contamination can defeat that condition.
Frequently Asked Questions
Does buying FOB lower our Korean import duty?
Not by itself. 관세법 제30조제1항제6호 makes the dutiable value CIF-type, and 관세평가 고시 제24조제5항제2호 adds the buyer's actual freight back on FOB, FCA and EXW terms. What can differ is the seller's freight mark-up inside a CIF price against the rate you actually book, since 제24조제5항제1호 tells customs not to look behind the seller's freight line. The saving, where there is one, comes from the freight rate, not the three letters.
Under DDP, can we still claim the import VAT credit?
Usually, but you carry the burden of showing it. The 국세청 interpretations on point test the 실질적인 수입주체 — the substantive importer — not the invoice term. A Korean buyer that really imported the goods, uses them in its own taxable business and bears the tax keeps the credit; where the foreign seller is genuinely the importer, the credit fails and a wrongly claimed one draws 가산세. Those interpretations run from 2005 to 2010 under the pre-2013 VAT Act numbering, and we found no later ruling either way.
Is Incoterms 2020 still current, and does writing the year matter?
Incoterms 2020 entered into force on 1 January 2020; as of September 2026 we found no ICC announcement of a successor or interim amendment. Write the year anyway. The widely repeated rule that an undated reference picks up the latest edition is commentary — we could find no ICC statement, statute or court decision supporting it.
Our letter of credit requires all-risks cover. Are we covered?
Not necessarily. Under UCP 600 a bank presented with a document bearing an all-risks notation accepts it without regard to any risks stated to be excluded, and the document may carry an exclusion clause and a franchise or excess. The bank checks the document, not the cover, so a CIF seller can satisfy an all-risks credit with a policy that excludes what you needed. Specify the clause set in the sale contract, not only in the credit.
References (Public Sources)
- Korean law, from 국가법령정보센터 via its open API in September 2026, with the articles cited above read in full: 관세법 (시행 2026-08-11) and its 시행령ㆍ시행규칙; 부가가치세법 (시행 2026-01-02) and its 시행령; 상법 (시행 2026-09-10); 화학물질의 등록 및 평가 등에 관한 법률 (시행 2026-05-12). Also 「관세평가 운영에 관한 고시」 (제2025-37호) 제24조–제26조 in full, 「수입통관 사무처리에 관한 고시」 (시행 2025-12-17), and the 세관장확인물품 고시 (제2026-46호) — body only, 별표 1ㆍ2 not retrieved. 관세청's undated 고객지원센터 FAQ on the DDP deduction was read in full; the four 국세청 interpretations were read through casenote.kr, which cites 국세법령정보시스템, a system we could not reach.
- We did not read the Incoterms 2020 rules themselves — they are ICC-copyrighted and the circulating free copies are unauthorised. The FCA A6/B6 description here is therefore second-hand, and we give no minimum-insured percentage for CIF or CIP because our sources disagree over whether the basis is the contract price or the invoice value.
- ICC guidance paper 「INCOTERMS 2020 FCA and CPT」 (© 2024 ICC), drafted by the Incoterms 2020 Drafting Group's Co-chairs and Special Adviser with the Executive Chair of the ICC China Commission on Commercial Law and Practice. Its English text layer would not extract, so we rendered the page and read it visually; the ICC Austria German edition corroborates it, but a transcription error remains possible. Also ICC's release of 10 September 2019 and its Incoterms landing page. Read in part: ICC Academy on DAP and DDP (25 February 2025), Trade Finance Global's CIF and DDP pages by Bob Ronai (6 April 2026), TT Club (9 December 2019).
- Institute Cargo Clauses (A), (B) and (C), edition 1/1/09, from the Lloyd's Market Association and the International Underwriting Association of London — all three read in full and compared. UCP 600 Articles 20, 28 and 30 from a bank training deck on letterofcredit.biz, a summary and not the UCP text; we did not verify that UCP 600 remains current. IMF, USD 1.364440 per SDR at 18 September 2026 — the cap arithmetic is ours.
We verified no premium, duty, demurrage or THC figure, so none appears above.
Nami Tech Solutions works project by project on ceramic and rare-earth powders, not from standing inventory, and on the import side the work sits in these documents: fixing the delivery point and named place before pricing, asking for a DDP quotation broken down so the border can see the parts, putting package count and packing description into the booking, and setting the weight basis, cover level and rejection route in the contract.
