S. Korea, Mongolia clinch CEPA at summit, scrapping tariffs on cosmetics and ramyun

South Korea and Mongolia reached an agreement in principle Thursday on a Comprehensive Economic Partnership Agreement, or CEPA, on the sidelines of a bilateral summit. The deal is expected to significantly improve conditions for expanding exports of key Korean products — including cosmetics, ramyun and seasoned dried seaweed — by eliminating tariffs on those goods.

President Lee Jae Myung, who is on a state visit to Mongolia, met with Mongolian President Ukhnaagiin Khurelsukh and jointly declared the agreement in principle on the CEPA.

The Ministry of Trade, Industry and Energy said the two countries had completed negotiations on the agreement's core provisions — including goods market access and rules of origin — effectively concluding the talks, though some technical details will be finalized through working-level consultations.

The ministry cited three key outcomes of the CEPA: accelerating cooperation on critical minerals supply chains, strengthening retail cooperation and expanding the reach of Korean consumer goods, and diversifying industrial and investment cooperation.

Mongolia is a resource-rich country holding reserves of copper, molybdenum and rare earth elements. South Korea will immediately eliminate the 2 to 5 percent import tariffs it had levied on those minerals, allowing Korean companies to secure critical raw materials more cost-effectively, the ministry said.

The two countries also codified cooperation in the energy and minerals sectors as part of their economic partnership framework. The agreement is expected to provide an institutional foundation for ongoing critical minerals supply chain cooperation, including through the Rare Metals Cooperation Center in Mongolia, which opened in December last year.

Korean convenience store chains and retail companies have already established a broad presence in Mongolia, and tariffs on Korean consumer goods will also be eliminated under the deal.

The move is expected to boost price competitiveness and improve Mongolian consumers' access to Korean products.

Tariffs on cosmetics will be scrapped immediately, while those on ramyun and seasoned dried seaweed will be phased out within five years.

On goods market access, both countries opened more than 90 percent of their markets by both number of product categories and import value. South Korea's liberalization rate stands at 96.3 percent by number of items and 94.5 percent by import value, while Mongolia's is 94.4 percent and 90.9 percent, respectively.

Beyond goods trade, the two countries also codified industrial cooperation across a range of sectors, including infrastructure construction, finance and healthcare.

Tariffs on infrastructure-related items such as trucks and heavy construction equipment will be eliminated, and duties on auto parts, used vehicles and pharmaceuticals will be scrapped immediately or in the short term.

The CEPA marks Mongolia's second bilateral free trade agreement, following the economic partnership agreement with Japan that took effect in 2016.

The Ministry of Trade, Industry and Energy and Mongolia's Ministry of Economy and Development had been negotiating since December 2023. Talks stalled for about a year and seven months due to Mongolian concerns over the level of market opening, but the two sides resumed negotiations last month.

With the two sides still at odds over market access on the eve of the summit, Yeo Han-koo, South Korea's chief trade negotiator at the ministry, and Mongolian Economy and Development Minister Enkh-Bayar Jadamba held three rounds of direct talks on goods concessions, ultimately reaching an agreement.

The ministry said it would swiftly complete the remaining working-level consultations and pursue follow-up procedures to bring the agreement to formal signing and entry into force as soon as possible.

Also Thursday, the ministry signed a memorandum of understanding on retail and logistics cooperation with Mongolia's Ministry of Food, Agriculture and Light Industry, in the presence of both heads of state.

A director-general-level standing consultative body — the Retail and Logistics Policy Council — will be established to identify cooperation projects covering joint product development, retail and logistics infrastructure, and personnel exchanges, as well as to discuss support measures for Korean companies operating in Mongolia.

Separately, the Ministry of Trade, Industry and Energy, the Korea Chamber of Commerce and Industry, and the Korea Trade-Investment Promotion Agency held the Korea-Mongolia Business Forum at a hotel in Ulaanbaatar, with about 300 business representatives from both countries in attendance.

On the sidelines of the forum, 21 MOUs were signed across the critical minerals and energy, consumer goods and retail, and digital and AI sectors. Among them, the Korea Institute of Geoscience and Mineral Resources agreed to form a joint research team with the Mongolian National Geological Survey and expand exchanges in the minerals and energy fields.

Namyang Dairy Products signed an MOU with Mongolian distributor Maximus to expand the distribution of Korean food products, pledging to cooperate on exports to Mongolia worth about 10 billion won ($6.62 million) over the next three years.

An export consultation fair held as a side event drew more than 20 South Korean companies and about 60 Mongolian firms, resulting in contracts and MOUs valued at approximately $7 million.

Kim Jung-kwan, minister of trade, industry and energy, said the ministry would "actively support Korean and Mongolian companies in identifying new business opportunities and generating tangible results, with a focus on the retail and consumer goods sector and critical minerals supply chains."