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Untitled Document

THE LAW OF THE DEMOCRATIC PEOPLE’S REPUBLIC OF KOREA ON THE RASON ECONOMIC AND TRADE ZONE


Adopted by Resolution No. 28 of the Standing Committee of the Supreme People’s Assembly on January 31, 1993,
amended by Decree No. 484 of the Presidium of the Supreme People’s Assembly on February 26, 1999, and
amended by Decree No. 3400 of the Presidium of the Supreme People’s Assembly on November 7, 2002

Chapter 1. Fundamentals

Article 1. The purpose of this law is to provide provisions for efficient administration and operation of the Rason economic and trade zone in the Democratic People’s Republic of Korea, and for the further expansion and promotion of economic cooperation and exchange with foreign countries.
Article 2. The Rason economic and trade zone is a certain part of the DPRK designated as a preferential area for transit transport and trade, processing of export goods, financing and services.
Economic and trade activities in the Rason economic and trade zone shall be conducted in accordance with the system and order specially established by the State.
Article 3. The Cabinet shall direct in a unified way trade, foreign investment and development and administration activities in the Rason economic and trade zone.
Article 4. The State shall protect by law the capital invested and the incomes earned, as well as the vested rights of foreign investors in the Rason economic and trade zone.
Article 5. A foreign investor shall have free choice of forms of business management and operation in the Rason economic and trade zone.
Article 6. Economic and trade activities in the Rason economic and trade zone shall be governed by this Law and the other laws and regulations of the DPRK applying to the Zone.
Article 7. A foreign investor may conduct economic and trade activities in the form of contractual or equity joint venture or wholly foreign-owned enterprise in the Rason economic and trade zone.

Chapter 2. Duties and Powers of Management Organs

Article 8. The administrative and management organs for the Rason economic and trade zone shall include the central trade guidance organ, relevant central organs and the Rason City People’s Committee.
The central trade guidance organ and relevant central organs are organs guiding trade, foreign investment and development, administration and management of the Zone in accordance with their duties and powers, and the Rason City People’s Committee is the local executive organ for implementing all matters related to the development of the Zone.
Article 9. The duties and powers of the central trade guidance organ in connection with the Rason economic and trade zone shall be:
1. To adopt State measures in connection with trade and foreign investment,
2. To direct on a regular basis economic and trade affairs in contact with relevant central organs, and
3. To receive, screen and settle the applications for foreign investment.
Article 10. The relevant central organs may carry out, in accordance with their own duties and powers, such activities as planning for development of the Rason economic and trade zone, preparation and execution of budget, financial and banking services, land lease, and urban development, issuing of licences of building lots and so forth.
Article 11. The Rason City People’s Committee may have an external economic department that shall be responsible for promoting trade, foreign investment and the development of the Zone, and for organizing and implementing their administration and management in a rational manner.
Article 12. The duties and powers of the Rason City People’s Committee related to trade, foreign investment and Zone development shall be:
1. To prepare, advertise and implement the plans for trade and Zone development,
2. To receive on the spot an application for foreign investment and present it to the central trade guidance organ, for screening,
3. To register enterprises and issue business licences,
4. To assist foreign-invested businesses in employing workers,
5. To examine transfer of the right to use land or buildings and present it to the relevant central organ for screening,
6. To render direct or indirect services for the construction or reconstruction of buildings, structures and work places, and
7. To conduct other activities for the improvement of management and operation of the Zone.
Article 13. The central trade guidance organ shall reach a decision on the approval or refusal of the establishment of an enterprise, within 50 days of receiving an application for investment in contractual or equity joint ventures, and within 80 days of receiving an application for investment in wholly foreign-owned enterprises, and inform the relevant organization of the results.
Investments may be prohibited or restricted for projects that may endanger the national security or do a harm to the health of inhabitants or the growth of animals and plants, projects that go beyond the environmental standards set by the State, projects that are obsolete in economic and technical terms or projects lacking in economic feasibility.
Article 14. The central trade guidance organ and the Rason City People’s Committee may cancel their approval for the establishment or the business licence, or suspend the operations, of a foreign-invested business in the following cases:
1. When there is a failure to comply with the conditions for investment, or
2. When there is a serious breach of a law of the DPRK.
Article 15. The Rason City People’s Committee may establish a technical training fund and operate a training centre for the purpose of improving technical skills of the workers to be employed in foreign-invested businesses.
Article 16. The Rason City People’s Committee may form and operate a consultative committee, which shall be composed of the representatives of the People’s Committee, the relevant organs and enterprises and of the foreign investors, and which shall consult about and assist in the trade and the development, administration and operation of the Zone.

Chapter 3. Provision of Conditions for Economic Activities

Article 17. Goods may be brought into the Rason economic and trade zone and may be stored, processed, assembled, disassembled, sorted, packed, or repaired in the Zone or may be taken out of the Zone to a foreign country.
Any goods that endanger the security and social and moral life of the country, the health of people and the growth of animals and plants shall not be allowed to be brought into the Zone.
Article 18. A foreign investor may establish and operate an enterprise or undertake transit transport in the Rason economic and trade zone.
Organs, enterprises and entities of the DPRK may also invest, for the purpose of economic and trade activities, in the Zone either solely or in the form of equity or contractual joint venture enterprises with the approval of the Cabinet.
Article 19. An equity or contractual joint venture enterprise and a domestic organ, enterprise or entity of the DPRK may not open a branch, agency or representative office in the Rason economic and trade zone without the approval of the Cabinet.
Article 20. A foreign-invested business or a foreign individual may acquire on lease land it needs in the Rason economic and trade zone, and the period of the lease may be extended with the consent of the lessor.
Article 21. A foreign-invested business may employ domestic labour force or dismiss them in accordance with a contract concluded with the labour exchange in the Rason economic and trade zone.
Where necessary, some management personnel, technicians and skilled workers for special jobs may be employed from foreign countries by agreement with the Rason City People’s Committee.
Article 22. Prices for goods manufactured by a foreign-invested business in the Rason economic and trade zone shall be determined by agreement between buyer and seller.
Prices of important raw and other materials, and essential mass consumption goods may be determined by the Rason City People’s Committee.
Article 23. The trade ports in the Rason economic and trade zone are open to any cargo ships and crewmen for free movement in and out according to the entry/ exit order for the ports, regardless of their nationality.
Article 24. A foreign-invested business in the Rason economic and trade zone may consign the processing of raw and other materials or parts to an enterprise or entity of the DPRK outside the Zone.
When the value of processing performed outside the Zone is not greater than 40 per cent of the total value of production of the enterprise concerned, such processing on consignment shall be treated in the same manner as production activities conducted within the Zone.

Chapter 4. Customs Duties

Article 25. The State shall apply a system of preferential customs duties in the Rason economic and trade zone.
Article 26. No customs duties shall be levied on the following goods in the Rason economic and trade zone:
1. Goods brought into the Zone for the purpose of processing for export,
2. Materials needed for production and operation of enterprises, and export products,
3. Certain quantities of office supplies and personal articles for the needs of foreign investors,
4. Materials needed for the construction of the Zone, and
5. Trade cargoes of foreign countries passing through the Zone.
Article 27. Article 26 of this Law shall not be applicable in the following cases:
1. When goods are imported from foreign countries for sale in the Rason economic and trade zone, and
2. When goods produced in the Zone or imported into the Zone are sent to other parts of the country for sale.
Article 28. When a foreign-invested business sells its products in the Zone instead of exporting them, customs duties on the imported raw materials and parts used in the production of goods shall be paid.
Article 29. A foreign-invested business in the Rason economic and trade zone shall keep documents concerning the import and export of goods such as the records of customs inspection and invoices for goods for a period of 5 years.

Chapter 5. Currency and Finance

Article 30. The currency in circulation in the Rason economic and trade zone shall be Korean won, and payment for all transactions may be made either in Korean won or in a convertible foreign currency.
The rate of exchange of foreign currencies against the Korean won shall be the rate published by the foreign exchange control organ.
Article 31. A foreign-invested business may keep an account at a bank of the DPRK or a foreign bank, upon agreement with the foreign exchange control organ.
Article 32. A foreign-invested business or foreign individual may secure loans to meet financial needs for business operation from a DPRK or foreign financial institution.
Korean won secured either by loan or by purchasing shall be deposited in a bank of the DPRK.
Article 33. Banks in the Rason economic and trade zone may, with the consent of the foreign exchange control organ, engage in offshore banking transactions.
Article 34. A foreign-invested business or a foreign individual may transact securities denominated in foreign currency at a fixed place established in the Rason economic and trade zone.

Chapter 6. Guarantees and Privileges

Article 35. A foreign investor may remit abroad profits, interests, dividends, rentals, service charges, proceeds from the sale of assets and other incomes earned from business activities in the Rason economic and trade zone, and may take out of the Zone all the assets that have been brought into it when the duration of operation expires.
Article 36. The enterprise income tax rate in the Rason economic and trade zone shall be 14 per cent of net profit.
Article 37. A foreign-invested business in the production sector may be entitled to full exemption from enterprise income tax for 3 years from the first profit-making year and reduction of up to 50 per cent for the following 2 years, provided that it is to be operated for a duration of more than 10 years.
A foreign-invested business engaged in infrastructure development projects with a total investment of more than 4,500,000,000 won may be given full exemption from enterprise income tax for 4 years from the first profit-making year and reduction of up to 50 per cent for the following 3 years.
Article 38. Foreign investors investing in the priority sectors may be entitled to a lease of land in favorable locations at lower rates of rent.
Article 39. Foreign investors investing in the priority sectors may be given priority in granting of loans for business activities from the financial institutions of the DPRK.
Article 40. If a foreign investor reinvests his profits for the duration of 5 years or more, 50 per cent of the income tax paid on the reinvested amount may be refunded. In case of reinvesting in an infrastructure development project, all of the income tax paid on the reinvested amount may be refunded.
Article 41. A foreigner may enter the Rason economic and trade zone directly without visa and stay or reside in the Zone according to the relevant procedures.

Chapter 7. Settlement of Disputes

Article 42. Any dispute arising in connection with economic and trade activities in the Rason economic and trade zone shall be settled through consultation between the parties concerned.
In case of a failure in consultation, it shall be settled by arbitration or legal procedures provided by the DPRK, or may be taken to an arbitration agency in a third country for settlement.


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