In effect from today, could its implementation prove more hindrance than help?
Concerns are mounting that South Korea’s thriving cosmetics industry could become more vulnerable due to the country’s implementation of the Nagoya Protocol, officially coming into effect today.
The country is the 98th nation to ratify the Protocol under which companies must seek prior approval for using genetic resources from supplier countries.
But Korean website Business Korea has pointed out that 70% of the ingredients used in Korean cosmetics are imported, 23% from China alone and another 35% from the EU.
Implementing the Protocol looks set to increase royalty payments and impact the supply and demand of raw materials.
The move will also impact the pharmacy sector. Last year, the South Korean Government estimated that the Protocol would place an annual burden of up to 500bn won ($447.63m) on the domestic biotech industry.
The Nagoya Protocol arose out of the 1992 Convention on Biological Diversity and is designed to promote the fair and equitable sharing of benefits (and profits) arising out of the use of genetic resources, thereby improving global conservation and protecting biodiversity.
China put the Protocol into effect in September 2016 and recently announced that foreign companies will now be required to work jointly with Chinese companies when they use Chinese genetic resources.
They will also have to pay China an additional 0.5%-10% of their annual profits, outside of shared profits, and violation of the law could be met with a fine of between 50,000 and 200,000 yuan ($7,491-$29,966).
Although the larger Korean cosmetics conglomerates such as Amore Pacific have prepared well for this day, says Business Korea, smaller domestic players have adopted a wait-and-see approach that could mean they do not take active measures for another six months to a year.