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Customs Tariffs Benefit Decrease Causes Worry to the Industry 2008/12/24 By Kwon, Sang-hee, Seo, Han The government decided to abolish or reduce customs tariffs benefit on some display manufacturing equipments, which have been non tariff items for the past 8 months. With this decision, it appears to increase investment burden on display industry, further contracting already reduced investment due to economic downturn. The Ministry of Strategy and Finance announced on December 23 that it will reduce items that get discount in tariffs from 120 now to 74 in the first half of next year for price stabilization. According to the revised plan, the government revised tariff rates for spray and OLED CVD from zero to 8%. Tariffs for those products were eliminated in April to boost display industry investment. These two equipments had 8% basic customs tariffs before April. With non-tariff policy, the industry had total 47.8 billion worth benefit. Dry etcher (basic rate: 8%) has been non tariff item, but was increased to 3%. But evaporator (basic 8%) can remain non tariff item. These two equipments were applied 2.5% discounted tariffs before April, and the industry enjoyed total 26.4 billion worth tariff cut. Although it is temporary, as the tariff benefit, which has been catalyst to display industry investment, was minimized, related industry was disappointed. An insider of Korea Display Industry Association said, “We already sense lack of new investment in new year, and even such little investment can become huge burden. Capital Investment by Samsung and LG will contract further.” And the government will recover non tariff items like carbon electrode, aluminum foil and other component to basic tariff rate, which will increase manufacturing cost of component importers and electronics parts industry. The government cited decrease in international oil prices to reduce tariff benefit on oils. The rates for oil, gasoline, kerosene, heavy and light oil will be rise to2% in February and 3% in March in phase. LPG will be 1% from 0% while LNG will remain 1%. Discount tariffs will be applied to products that will be imported between January 1 and June 30. In addition, the government announced that it decided to extend application of higher tariffs than basic rate for 16 items in next year. But 7 items including electronic parts and other items that have increased competitiveness and lost import were slightly dropped in tariffs in consultation with related department and industry. Surface mount machines for electronic parts (basic tariff 8%) gets 14% tariff rate, but will drop by 3% to 11%. The adjusted tariffs are flexible tariffs that increased rates with ceiling of 100% to protect local industry. That will be applicable to products that will be imported between January 1 and December 31 in next year.