South Korea stands out in the shipbuilding sector, with the dominance of HHI and SHI, where it ranks second in the world after China.

According to the World Trade Organization (WTO), the shipbuilding sector has been undergoing a restructuring process, in line with the trend to focus on more specialized and higher value-added vessels, such as tankers, container ships and those for the transport of liquefied natural gas (LNG).

Increasingly, the sector is concentrated. In 2019, Hyundai Heavy Industries (HHI) and the Korea Development Bank signed a contract to acquire Daewoo Shipbuilding & Marine Engineering (DSME).

Since then, the three largest shipbuilders (HHI, DSME, and Samsung Heavy Industries (SHI)) have reorganized into two (HHI and SHI), and, according to officials, accounted for 66.9% of Korea’s market share in 2019.

A report by Invest Korea indicates that most of the equipment and parts used in shipbuilding are manufactured domestically.

According to the WTO, SMEs can play a greater role as suppliers in the value chain of large shipbuilding companies.

Foreign Direct Investment (FDI) in the shipbuilding sector is permitted, although it has been low, as the commercial ship market suffers a slowdown since 2014.

Shipbuilding

In 2021, tariff protection for ships ranges from zero to 8%, with an arithmetic average of 3.6% (as in 2016). The WTO specifies the applied tariff rates are:

A zero tariff rate for headings 8901 (ocean liners, excursion (cruise) ships, ferries, cargo ships, barges (barges) and similar vessels for the transport of persons or goods); 8902 (fishing vessels; factory ships and other vessels for the preparation or preservation of fishery products); 8906 (other vessels, including warships and lifeboats, except rowing vessels); and 8908 (ships and other floating structures for breaking up) of HS.

Another tariff rate of 5% for HS headings 8904 (tugs and pusher craft); 8905 (lightships, pumpboats, dredges, pontoon cranes and other vessels in which navigation is incidental to the main function; floating docks; floating or submersible drilling or production platforms); and 8907 (other floating structures (e.g., rafts, tanks, whether or not moored)).

A tariff rate of 8% for HS heading 8903 (yachts and other vessels for pleasure or sports; rowing boats and canoes).