Holding stock in Korea without a Korean company: consignment and bonded options

A Korean operator asks whether you can hold spares locally. You want to say yes, because the answer affects whether your equipment gets specified at all. But you have no Korean entity, and holding stock in a country where you are not established raises questions that are easier to answer before the stock ships than after.

Why the question is asked at all

On continuously operating plant, replacement time is treated as a risk cost. A component with a four-week lead time carries an exposure that a component available in two days does not, and maintenance quantifies that when they assess equipment.

There is a second, more mundane reason. A small overseas purchase is disproportionately expensive for a purchasing department to process — import, duty, currency, freight, all for a part worth a few hundred. Availability locally removes that friction entirely.

Both reasons mean the same thing for you: local availability is often worth more as a sales condition than as a parts business. The economics follow from the equipment, not from the parts.

The options, ranked by how much they demand of you

Between "ship from the factory" and "establish a subsidiary" there are several arrangements, and most of them require no entity.

The first row solves most of the problem and is almost always overlooked. An initial spares set sold with the equipment sits in the customer's store from day one, appears in their maintenance system under your part numbers, and costs you nothing to hold.

A bonded warehouse sits between the two. Goods are stored without duty being paid until they are withdrawn, which defers the cash outflow and can avoid it entirely on anything re-exported. The trade-off is the warehouse charge and the administration, so it favours higher-value items with slow movement — which happens to describe the critical spares category exactly.

Why selling the initial set does more than it looks

When parts enter the customer's system, they get an item number, a reorder point, and a nominated supplier. When consumption triggers a reorder, the system generates an order — to whoever is recorded.

That is the mechanism that keeps aftermarket business with the original manufacturer, and it is set at handover. Miss it, and the item number is created later from an emergency purchase, with whoever could supply at the time.

It also means the content of the initial set matters more than its value. Include what fails first and what stops the plant; leave out what is easy to buy locally. A set padded with items the customer can get anywhere devalues the whole list.

Consignment without an entity

Consignment — your stock, at the customer's site, invoiced on use — is attractive to the operator and is where the questions start.

The stock is imported before any sale occurs, so someone must be importer of record and someone must bear import duty and tax. When the customer draws an item, a domestic sale occurs, which can create a registration obligation.

There are structures that work without establishing: the customer imports and holds the stock under an agreement to purchase within a period; a local partner owns the stock and you supply them. Both shift the ownership question to a party already established. Which is workable depends on tax treatment, and that check belongs before the first shipment — it can make the whole model unviable.

What a consignment agreement must contain

Where consignment does apply, four points are commonly left out and each causes a specific failure.

Reporting of draws — how and how often you learn that stock was used, and the invoicing cycle. Stock counts — who counts, at what interval, and what happens on a discrepancy. Loss and damage — who bears it while the stock sits in someone else's building. Termination — what happens to the remaining stock when the arrangement ends.

The last one determines your real exposure. Without a return mechanism, ending the arrangement leaves goods you own in a place you cannot access, still carried as an asset.

Location is worth thinking about as well. Stock at one customer is fastest for that customer and useless to the others. Where you supply several plants, a single holding within half a day of most of them serves more installations for less total inventory — and Korean industrial activity clusters geographically, which makes that calculation easier than it would be elsewhere.

Which parts justify it

Local stock is not an all-or-nothing decision. Two criteria narrow it to a handful of items.

The first is consequence of failure: parts that stop the plant belong locally; parts that reduce output can wait. The second is consumption rate: regularly replaced items are predictable and can be ordered against the maintenance schedule.

What remains — high consequence, low consumption — is the set worth holding. It barely moves, which is exactly why it needs to be there and why its carrying cost is modest.

Part numbering deserves attention at the same time. If your numbers exist only in a manual and not on the components, every reorder starts with an identification exchange, and after two or three of those a locally sourced equivalent quietly takes over. Numbers that are marked on the part and match what appears in the customer's system are what make the reorder mechanism work at all.

Sizing it, then correcting it

Quantity follows from consumption, replenishment time and accepted risk. On new equipment there is no consumption history, so the first set is an estimate from comparable installations and design intervals.

The estimate should be corrected after a year or two against what was actually drawn and what never moved. This correction is almost never made, because nobody owns it.

An annual review of draws and dwell time is the whole exercise. It is also where shelf life gets caught: elastomers, seals and some electronic components degrade in storage, and a part that has sat for years is not necessarily serviceable.

Shortening delivery without holding stock

If stock is not viable, the response time can still be reduced, because much of it is not transport.

Order-to-dispatch is yours: standing packing and documentation templates shorten it. Transport is a choice of mode. Clearance is preparation — with the classification of your part numbers settled in advance and any import requirement confirmed, it is predictable; without that, it is not.

Those steps cost nothing and take days out of the cycle. They also make any claim you make about response time defensible, which matters more than the days themselves.

When more stock makes availability worse

The instinctive response to a stockout is to broaden the holding — more line items, larger quantities. That can reduce availability rather than improve it.

A wide holding without disciplined stock control produces items whose actual quantity nobody knows. In an emergency, someone searches for a part the list says is there, fails to find it, and the procurement starts later than it would have without a store at all. Add shelf life, and a proportion of what is nominally available is not usable.

What works is not breadth but maintenance: a small number of correctly chosen items, with a reliable count and a recorded storage date. Ten items that are certainly there beat a hundred that might be — and the small holding is also the one somebody will actually review each year. If you can name your critical items and the plants you supply, we can look at which arrangement fits them — talk to us about sourcing. Why the question decides specification at all is covered under spare part availability.