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South Korean duty-free retailers caught in catch-22 over selling stockpiles to locals

South Korean duty-free retailers have begun to clear stock through local channels in response to a temporary change in regulations designed to relieve the industry of low sales volumes caused by the coronavirus pandemic.

However, as major operators in the sector begin to sell top-ticket items at discounts of as much as 50 per cent cheaper than tax-free prices, several top international players in the luxury industry are refusing to allow their products to be discounted – a stance that could be against Korean law. 

Luxury behemoths Hermes, Chanel and Louis Vuitton have refused to permit their duty-free items to be sold on the local market. Korea’s Fair Trade Act does however give retailers the right to resell purchased products and forbids suppliers from setting a retailer’s price for their goods.

“This can be subjected to several violations of the Fair Trade Act,” commented a KFTC official in the Korea Times. “If local duty free firms want to sell their stocks but the three luxury brands have applied pressure to not allow it, then it becomes a problem. However, we have to look at the contracts first that have been signed by the two players. Also, we will start an investigation if a duty free company requests us to do so.”

Some luxury brands have been accepting partial refunds of unsold products during the pandemic.

According to reporting in Yonhap News, the customs office ruled late last month to allow domestic sales of duty-free goods, provided the goods have been in stock for more than six months.

Duty-free outlets have seen a drop in combined sales below the US$822 million mark during the April calendar month for the first time in four years.

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