The Famous Millionaire


Chapter 83

Report Chapter

(adsbygoogle = window.adsbygoogle || []).push({});

Chapter 83

Though the Story Mecca critics were expensive, that would not be a big problem because they were not hired for monthly payment, just paid for their reviews.

Hyunwoo came out the restaurant and called Kyungsu on this, wondering if he knew about Story Mecca.

“Didn’t you know that?” asked Kyungsu.

“Oh, you knew about it already. Did you ever think of using the critics there for your company?”

“I did, but their field is different from ours. We’re in the animation business, while their major field is novels. In the animation world, there are not many established critics, and the cost is too much. Actually, I once thought about using them but gave up because I felt I might waste money on a wild goose chase.”

“In my opinion, I think you can give it a try. Just once. At least, you can take cue from them.”

“Got it. Let me think about it. Thanks for your kind consideration anyway.”

In the meantime, Hyunwoo’s friends began gathering at the restaurant. The alumni gladly greeted each other. Soon, Hyungsun Kim, who was hosting the meeting, arrived. He arrived 30 minutes late.

“Sorry, guys. I was so busy even on a Saturday like this. Long time no see! Oh, you did come!”

Hyungsoo showed up, patronizing his friends there. He shook hands with them one by one, going around the table as if he was running for the National Assembly elections. He took out name cards from the gold-plated card purse and gave one to each of them.

“I’m the president of Sangwon Foods. Just stop by when you can.”

His friends asked questions out of courtesy, “How is your business doing these days?”

“I feel good about it. Looks like I’m going to hit the jackpot this time. I may be able to grow my company bigger than my father’s if everything goes alright.”

He boasted of his business confidently, but Hyunwoo didn’t trust him that much. He was such a big talker during his school days. Nonetheless, he praised Hyungsun out of courtesy.

In the meantime, it looked like almost everybody gathered, totalling over 20. Obviously, Hyungsun enthusiastically called everybody for this meeting.

The alumni meeting was noisy with everybody talking about Hyungsun’s business partly because he led the topic in that direction.

“It’s my goal, but I think I’m going to overtake my father’s business in three years.”

“What kind of business are you dealing with?”

“It’s food company. The location is terrific! It’s located inside a free-trade zone.”

“Free-trade zone? What’s the benefit of having a company there?”

“Well, if you’re doing business in a free trade zone, you’re exempt from taxes. You can make lots of money by making good use of that.”

“Really? How?”

Everyone got closer to Hyungsu, with their eyes popped. Hyunwoo also got interested.

But Hyungsun was hesitant for a moment, scratching his head and said, “Oh, I shouldn’t share this kind of information with anybody else…”

“What is it?”

“How dare you treat your alumni like this? Let’s share information.”

His friends pressed him, asking for his tip, but he kept on hesitating as if it’s a top secret.

At last, he nodded as if he decided to tell them.

“Okay. I can’t keep it secret to you, friends. Please shut the door. If this is leaked, it could make them change the law.”

His friends shut the door quickly. Only then did he lower his voice and told them about his business.

“Did you ever hear about a bonded factory?”

Some of them knew about it, but others didn’t. Hyunwoo heard about it when he was doing some research on customs processing at Aurum.

If someone imported products from abroad, he has to pay taxes such as value-added tax, but such taxes are put on hold under certain conditions such as bonded warehouses, bonded factories or bonded construction sites.

(adsbygoogle = window.adsbygoogle || []).push({});

Bonded warehouses were where the raw materials are piled up without import clearance. And when they need the materials, they take out only the amount of what they need and pay the taxes.

Bonded factories offer companies an extended window of tax payment. As for the payment of the taxes, they don’t pay taxes upfront when the parts are put into the production line, but when the parts are actually used to make products for final sale.

In this process, there occured an important change. The product actually imported from abroad and the products actually made at bonded factories that went through import clearance were completely different products. The tariff rate varied, depending on the characteristics of the products.

This is how it goes. Let’s take the example of Aurum. Assuming Aurum imported wheels and handles of chairs from Taiwan, the HS code for them is 2.20-0000 and 9401.90-9000 respectively, with the basic tariff rate of 8%. If Aurm imported 100 million won worth of materials, it has to pay eight million won in tariff. However, if Aurum was a bonded factory, the imports are the wheels and handles, but the final products that go through import clearance are the assembled chairs. Namely, the customs clearance and tariff are put on hold until the chairs are assembled with the parts and transported out of the bonded factory. In that case, the HS code for chairs are 9401.30-9000 with a basic tariff rate of 0% under the relevant clause of WTO. In other words, no matter how high the tariff was when they import materials, they wouldn’t have to pay any tariff if the tariff rate of the finished products was zero.

Of course, there was one specific restriction that applied to bonded factories.

Hyunwoo pointed it out, “As far as I know, you can’t have a bonded factory for agricultural products.”

Snapping his fingers, Hyungsun nodded his head and said, “Yes, that’s correct. They don’t approve bonded factories for agricultural or livestock products. To the best knowledge, there is not a single bonded factory for agricultural or livestock products, but it’s different in a free trade zone.”

Hyunwoo’s eyes became a bit wider as he never did any research on free-trade zones. Maybe he could find an opportunity to save on the production cost. Pricking up his ears, he listened to Hyungsun’s explanation.

“Bonded factories are controlled by customs laws, but the law on free trade zones is different. As a result, there is no prohibition of agricultural or livestock companies’ entry into the free trade zone. My company Sangwon Foods could get in thanks to that.”

Hyunwoo never heard about it before, but Hyungsun would not lie about something that could be verified anytime.

“As a matter of fact, it’s little different from bonded factories. Thanks to that, I’m getting enormous tax benefits compared to other companies. When they pay 270% in tariff for their imports, we only pay 54%.”

Hyunwoo’s jaws dropped at his explanation. 270% vs 54%? The difference of the tariff ratio was enormous.

Another friend asked, “What are you importing?”

“The main product of Sangwon Foods is mixed seasoning. To put it easily, it’s seasoned-red-pepper sauce. We import chili, onion and garlic from China and make mixed seasoning at a bonded factory.”

“Then, don’t you pay taxes at all?”

“No, we do pay taxes, but much less. The tax rate for import chili is 270%, but 54% for mixed seasoning. That’s why we can easily beat other rival companies outside the free trade zone.”

*** You are reading on ***

Hyungsun’s explanation was appealing enough. How can a company paying 270% in tariff win against competitors paying only 54%?


*** You are reading on ***