A Case Study on Shuttle Trade between Korea and China

Informal trade exists in almost all countries and thrives in some regions. As many countries suffer from fiscal deficits, their governments seek hidden revenue sources. Informal cross-border trade that is non-compliant with regulatory revenue requirements such as the payment of customs duties is one source that is currently being targeted. This study, which employs case study methodology, examines shuttle trade between Korea and China from the perspective of the Korea Customs Service (KCS). While examining the connotation of informal trade, drawing on legality and tolerance, this study characterizes casual shuttle trade in Korea as illegal-but-tolerable. The study, drawing on Killias's theory of breaches, demonstrates that the shuttle trade in Korea emerged due to a combination of factors, namely trade quotas rates and the emergence of ferry lines between Korea and China, and has grown as a result of both the economic downturn and an increase in the demand for express delivery service between Korea and China. This study illustrates how the KCS has criminalized shuttle trade as a result of tax evasion, health concerns, and protection of Korean industries.