Canada faces South Korea export barriers

Since tariffs were lifted on certain Canadian seafood exports to South Korea earlier this year, the country remains a potential profitable market for suppliers. However, the challenges that persist – including transportation costs and demand – will limit exports from Canada, consultants say.

The Canada-Korea free trade agreement eliminated the 20 percent tariffs on frozen lobster and fresh/ smoked salmon as of 1 January. Tariffs on other Canadian seafood exports will be phased out within three to five years. In addition, Korean Air began flights from Halifax, Nova Scotia, in January, effectively increase exports of Canadian seafood to Korea, some of which are utilized in Korea while much is distributed to other countries in the region.

Despite these two moves to open the market, many problems persist, particularly with shipping Canada’s largest seafood export – lobster.

Canadian exporters can ship to the U.S., Europe and Japan and a much better rate than to South Korea, so the market has not been developed much, according to Michael Gardner, owner of Halifax-based Gardner Pinfold Consulting. In fact, South Korea accounts for less than one percent of Canada’s seafood exports. “Lobster can be shipped to the U.S. by truck for USD 25 cents a pound. It is going to cost you between five and ten times the amount per unit to ship to Korea,” Gardner said.

Another big challenge is that the live lobster industry in Canada is dominated by small companies with limited finances and marketing expertise. Because of cash flow pressure on lobster suppliers, they need to sell product as quickly as possible and utilize their “well-established relationships” in the U.S., Europe and Japan, according to Gardner.

“It is going to take a little bit of effort and some price advantages for them to look at Korea as offering strong potential. In Korea, importers are the gatekeepers, and it is very difficult for an exporter to bypass them and go directly to a regional chain,” Gardner said. “It is a huge market and has huge potential, but it’s really on the supply side in Canada that there are the constraints of doing business.”

“The market for lobster is gradually being increased year by year, but not considerably,” agreed Kevin Park, president of Korean seafood importer Golden Price Co. “Even though we have a free trade agreement with Canada, I don't think there will be big transactions except for certain items such as lobster, red shrimp, Atlantic farmed salmon and maybe some clam (Hoki Gai),” Park said.

Demand from Korean consumers is also a challenge, according to Park. “The overall consumptions for seafood in Korea is now dull, due to a not good consumers’ market.” In addition, younger consumers prefer lobster, salmon and shrimp, but cannot buy large quantities “due to relatively high prices”, Park said. “Also, younger generation consumers don’t have a strong interest in eating general fish such as mackerel, redfish and skate.”