Large conglomerates have been publicly criticized for abnormal donations of profits through work funneling between specially related corporations by establishing logistics- broking subsidiaries, etc. To prevent this, the Inheritance Tax and Gift Tax Act was amended in 2013 to prescribe that the legal fiction of donation shall be applicable when a conglomerate’s percentage of transactions with specially related corporations exceeds 30 percent.
However, logistics broking subsidiaries affiliated with conglomerates have evaded the 30 percent restriction on transactions with specially related corporations by taking advantage of their superior position based on the volume of affiliates and engaging in dumping, absorbing most of the volume handled by third-party logistics.
As a result, the logistics broking subsidiaries of Korea’s 8 major conglomerates were estimated to account for 80% (718 million of 897 million TEU) of the domestic export volume in 2017. From 2000 to 2017, logistics broking subsidiaries of conglomerates saw a rapid 27-fold growth in sales from 2.3 trillion to 36.3 trillion won.
In contrast, the domestic marine transportation industry lost competitiveness due to the dumping by the logistics broking subsidiaries of conglomerates and only achieved a 1.8-fold growth in the same period. This ultimately led to the industry being pushed to an extreme situation, including the bankruptcy of Hanjin Shipping. Since the bankruptcy, the government has established the Korea Ocean Business Corporation and is otherwise injecting public funds to rebuild the marine transportation industry. However, the loading rate of flag carriers, which is determined by the logistics subsidiaries of conglomerates, is excessively low and the publicly funded rebuilding of the marine transportation industry is reaching its limit.
In this regard, it is necessary to impose and collect a marine transportation industry development charge from the logistics subsidiaries of conglomerates, which are both a cause and a beneficiary of the undermined competition of the marine transportation industry. This would encourage effective collaboration between shipowners and shippers, including higher loading rates of flag carriers, to establish a fair-trade order in marine transportation and ensure that the marine transportation industry is self-perpetuating. To encourage higher loading rates for flag carriers, the charge would be reduced or waived for logistics subsidiaries of conglomerates that have been certified as outstanding shipowner/shipper enterprises for collaborating with the marine transportation industry. Charges collected from logistics subsidiaries of conglomerates that fail to collaborate would be used to fund improvements to the provision of services by flag carrier companies to logistics subsidiaries of conglomerates.

Details

The Amendment prescribes that a marine transportation industry development charge, equivalent to up to 10 percent of annual sales as specified by Presidential Decree, may be imposed on and collected from international logistics brokerage business entities that have been designated as a business group subject to disclosure under Article 14 of the Monopoly Regulation and Fair Trade Act. The Amendment also allows the charge to be reduced or waived for businesses that have been certified as outstanding shipowner/shipper enterprises (Article 47-8 newly inserted).

Note

This Amendment rests on the premise that the “Partial Amendment to the Framework Act on the Management of Charges” (Bill no. 24261), represented and proposed by National Assembly member Kim Yeong-chun, is passed. If the bill is not passed or is passed with modification, this Amendment must be adjusted accordingly.

Allow a marine transportation industry development charge, equivalent to up to 10 percent of annual sales as specified by Presidential Decree, to be imposed on and collected from international logistics brokerage business entities that have been designated as a business group subject to disclosure under Article 14 of the Monopoly Regulation and Fair Trade Act. Allow the charge to be reduced or waived for businesses that have been certified as outstanding shipowner/shipper enterprises (Article 47-8 newly inserted).