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[Herald Interview] Korea Customs Service champions big data analysis

KCS steps up crackdown on narcotics, illegal currency exchange

Korea Customs Service Commissioner Lim Jae-hyeon (Korea Customs Service)
Korea Customs Service Commissioner Lim Jae-hyeon (Korea Customs Service)
At the Korea Customs Service, all administrative work is done through a massive computerized system.

An average of 118,000 export and import reports are handled every day, and the accumulation of vast data allows KCS to make good use of big data analysis and artificial intelligence.

“We plan to open a KCS big data portal for the public late this year, which will offer customized services for businesses through AI analysis of exporter and importer data as well as business support records of the Ministry of SMEs and Startups,” Lim Jae-hyeon, commissioner of the Korea Customs Service, said in an interview with The Korea Herald.

“Export and import trend reports for different items and nations will be provided via data visualization methods to help businesses analyze and predict international economic trends.”

In February last year, the KCS completed a big data platform where all of its staff can analyze export and import data through analysis models embedded on the platform.

When KCS staff have ideas for big data analysis based on their field experience, technical specialists analyze the data and provide the results.

This allowed the KCS to analyze and uncover the transaction network of an importer that illegally used other people’s names to avoid dispositions on default of duties, and an illegal foreign exchange transaction worth over 200 billion won ($167 million).

Armed with big data and top-notch analysts, the KCS has intensified investigations into trade crimes such as import of narcotics and illegal currency exchange using virtual currency.

“As rising home prices led to foreign buyers’ increasing purchase of apartments in South Korea and greater chance of illegal inflow of foreign funds, the KCS worked together with the Ministry of Land, Infrastructure and Transport and the Bank of Korea to look for illegal home financing,” Lee said.

An investigation conducted from December 2020 through April 2021 found 17 foreigners who bought 16 apartments worth 17.6 billion won by using illegal foreign exchange trading schemes or money made through smuggled goods.

The KCS also found nine crime rings involved in illegal foreign exchange trade worth 812.2 billion won. They were found to have used virtual assets such as Bitcoin for the illicit trading.

In another round of investigation from April through August last year, the KCS found 1.7 trillion won worth of wire transfers for which the purpose was falsely stated and actually used for illegal foreign exchange trade and purchase of virtual assets.

As for narcotics, most of the drugs traded in Korea are brought in from overseas.

About 77 percent of the drugs confiscated by the government over the past five years were seized by the KCS.

A related law was revised in January last year, expanding the scope of direct investigation by the KCS.

In an intensive crackdown targeting maritime freight, the KCS found 404 kilograms of methamphetamine, the largest ever volume for a single case in Korea.

“Whereas the police and the prosecution have about 1,100 and 280 personnel dedicated to narcotics investigation, respectively, the KCS has only around 60 people in its narcotics control team,” Lee said.

“As the number of drug offenders in Korea rose 12.5 percent from a year ago to 18,050 in 2020, the KCS plans to set up additional teams for narcotics investigations and take steps to secure budget for necessary equipment.”

As electronic commerce transactions by individuals continue to increase sharply, the KCS plans to gradually reform its customs rules and system to better address the growth of incoming e-commerce goods.

The number of e-commerce express cargo items arriving in Korea rose from about 32.3 million in 2018 to around 43 million in 2019. It reached 63.6 million in 2020.

The KCS is considering receiving transaction information from online platforms or sellers such as the web address, order number and order details for customs clearance. It is also considering improving the declaration form to include supply chain information and applying different standards based on the safety level of the supply chains.

As e-commerce exports are also rising sharply, the KCS launched an exclusive export category conversion report system last year to help small businesses easily engage in e-commerce exports.

E-commerce exports rose from 9.6 million cases in 2018 to 13.2 million in 2019. It hit 26.9 million in 2020.

The KCS is currently working on improving its system to add functions that allow exporters to directly report their exports to cut clearance costs and automatically issue customs duty refunds. As for now, export reports can be made only through licensed customs agents who are linked to express delivery companies. The renewed services will be available in the first half of this year.

“The KCS will continue to make efforts to automatize most of the e-commerce export clearance process from export reports to application for customs duty refunds,” Lee said.

Another major project the KCS is working on is a pilot project for combined transport with China that connects the seaport and airport in Incheon with the seaport and airport in China’s Weihai, Shandong province. Weihai is the closest Chinese city to South Korea.

Trucks loaded with freight will board ships, and then go directly to airports where they will go on aircraft with their cargo. This means there will be no unloading procedure, which allows the freight to be air transported to a third country on the same day it entered the seaport.

Compared to the standard seaport and airport cargo transfer process, which requires making entry and exit reports, bonded transportation and unloading procedure, this new system cuts about a day in transport time.

The pilot project will apply to China’s e-commerce exports that are shipped to Korea to be loaded on aircraft at Incheon International Airport, and freight that is transported from a third country to the Incheon Airport to be shipped to China via the Incheon seaport.

China’s annual e-commerce exports amount to $1.3 trillion, making it the world’s biggest e-commerce exporter.

As the cargo volumes exceed China’s air transport capacity, much of the freight is transferred at airports in neighboring countries such as Hong Kong and Singapore.

“As for the Chinese province of Shandong, shipping the cargo trucks to Incheon airport turned out to be faster and cheaper than overland transport to airports in Beijing or Shanghai,” Lee said.

The Incheon International Airport Corp. proposed the combined transport project in 2018. The Chinese Communist Party’s Secretary of Shandong agreed to carry out a pilot project during a meeting with Korea’s prime minister and land minister in December 2019.

Logistics and customs authorities of the two countries are currently discussing the details of a memorandum of agreement for the pilot project.

“If Korea attracts 10,000 tons of China’s e-commerce freight for transfer annually, it is expected to create over 160 billion won in added value, including air freight charges, for logistics activities carried out in Korea,” Lee said.

By Kim So-hyun (sophie@heraldcorp.com) and Lee Kwon-hyung (kwonhl@heraldcorp.com)
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