Trade Liberalization and Tax Equity in Korean E-Cigarette Imports

Purpose – This study analyzes how tariff policies, excise taxes, and regulatory measures affect e-cigarette imports and tax compliance in South Korea, addressing challenges posed by modular product structures and Free Trade Agreement (FTA) tariff disparities. Design/Methodology - A fixed-effects panel regression analysis is applied to an 11-year dataset (2014–2024) on e-cigarette imports, focusing on tariff rates, excise taxes, nicotine import regulations, and the 2022 HS code revision. Findings – Tariff reductions under FTAs significantly and consistently increase e-cigarette imports in both weight- and value-based models. Excise tax hikes demonstrate limited effectiveness: the 2017 tobacco stick tax had minimal effects on import volumes but significantly increased import values, suggesting price pass-through and changes in product mix. The 2022 HS code reclassification had a significant adverse effect in both models, highlighting the importance of regulatory clarity, with stronger moderating effects in weight-based specifications. Originality/value – By integrating trade liberalization, regulatory measures, and tax equity into a single framework, this study highlights structural tensions between FTA-driven liberalization and domestic tax equity. Furthermore, by comparing weight- and value-based outcomes, it provides novel evidence that the measurement of imports can shape the interpretation of policy effectiveness, an aspect rarely addressed in prior tobacco tax research. Policy implications – The findings suggest that policymakers should adopt integrated regulatory frameworks that align tariff policies with excise taxation and strengthen classification clarity. Tax increases should be complemented by regulatory measures, such as HS reclassification and stronger enforcement of nicotine regulations, to ensure equitable taxation and compliance.