Who Bears Operating Costs and Liability When You Sell in Korea

Across all three of Kontactic's tiers — Spark, Flame, and Blaze — the client bears every operational cost and carries product and advertising liability. Kontactic operates the machinery; it never owns the inventory, the entity, or the risk. That single principle is written into every service agreement, and it explains almost every "wait, who pays for that?" question a foreign brand asks in its first month selling in Korea.

The confusion is understandable. When an operator handles your customs clearance, files your VAT, runs your Coupang account, and sometimes writes your ads, it looks like the operator is taking the business over. It isn't. Below is how the money and the liability actually flow — and why the answer is the same across tiers even though the mechanics differ.

The rule: you fund the costs, always

The short answer is that inventory procurement, international shipping, platform fees, advertising spend, and every other cost tied to selling your product are ultimately borne by you — regardless of tier.

What changes between tiers is how those costs get funded, not who they land on.

• Spark — costs are deducted from Settlement Funds. Kontactic collects your Coupang revenue, subtracts operational costs and service fees, and remits the net. If revenue is short, you cover the shortfall.
• Flame and Blaze — costs are funded from your Korean entity's revenue, or paid directly by you. Because the entity is yours, the money was always yours; Kontactic just administers the flow before any remittance.

This is deliberately unglamorous. An operator that quietly absorbed your ad spend or fronted your inventory would be a distributor or a co-investor, not an agent — and that changes the tax posture, the ownership, and the incentives. Kontactic is structured as an agent precisely so that you keep ownership and control of the economics.

If you want the line-item version of how these costs sequence before you see a cent of remittance, we walked through it in who pays for what in Korea.

Why the mechanics differ: consignment vs operating agency

The reason Spark deducts from settlement while Flame and Blaze fund from your entity comes down to a different legal relationship underneath each tier.

Spark is a consignment selling arrangement (위탁판매대행). Kontactic's own Korean entity is the Importer of Record and Seller of Record. You have no Korean entity. You are the consignor and owner of the products; Kontactic is the consignment selling agent. Because Kontactic collects the revenue under its own seller accounts, it deducts costs and fees from those Settlement Funds and remits the net to you. Product ownership never transfers to Kontactic — not before, during, or after the sale.

Flame and Blaze are operating agency arrangements (운영대행). A Korean limited company (유한회사) is set up under your ownership, and it is the Importer of Record and Seller of Record. Kontactic is the authorized operating agent. The revenue lands in your entity, so operational costs — Coupang selling commission, Rocket Growth storage and fulfillment, returns handling, net VAT, advertising — are satisfied from your entity's revenue before any remittance to your parent company.

One consequence worth budgeting for: because Flame and Blaze involve your own Korean entity, there is a tax filing fee of USD 1,200 per year covering VAT filing and corporate tax filing coordination, for up to 100,000,000 KRW in annual revenue. Under Spark there is no such fee — VAT is filed under Kontactic's entity at no additional cost to you, because it is Kontactic's entity doing the filing.

The liability that comes with ownership

Because you own the product and the brand, you also carry the product-level and advertising liability. This is the part brands most often expect to hand off, and it is the part that does not move.

Under every tier, you bear sole responsibility for any claims, disputes, regulatory actions, penalties, or liability arising from advertising content, product claims, and marketing materials — whether you created that content yourself, provided it to Kontactic, had Kontactic create it on your behalf, or developed it jointly.

That last clause surprises people. Under Flame and Blaze, Kontactic may actually produce the creative — but the agreement is explicit that creatives produced by Kontactic are subject to your approval, and you hold full responsibility for product claims, substantiation, and regulatory exposure. In practice this means the approval step is not a formality; it is where liability crystallizes. We look at that approval-and-liability split in more detail in who approves your Korea ad creative and who is liable.

Product liability follows the same logic. Product ownership and product-level liability rest with you at all times. Under Spark, that is reinforced by an indemnification clause: you hold Kontactic harmless against claims arising from the products themselves — defects, safety issues, regulatory non-compliance, labeling failures, IP infringement — as well as claims from advertising, platform-policy violations attributable to your products, and any customs penalties from non-compliant documentation or import valuation.

None of this makes the arrangement risky in a loose sense — it makes the ownership honest. You keep the upside because you keep the exposure. And it is why the word "risk-free" never appears in a Kontactic agreement: compliance responsibility is genuinely yours, and pretending otherwise would misrepresent the structure.

Common questions

If Kontactic collects the money under Spark, isn't it Kontactic's revenue? No. Kontactic collects it as your consignment selling agent, deducts costs and fees, and remits the net to you. Product ownership and the economics remain yours; Kontactic never takes title to the goods.

Does Kontactic ever front my inventory or ad spend? No. Operational costs are ultimately borne by you. Under Spark they are deducted from Settlement Funds; under Flame and Blaze they are funded from your entity's revenue or paid directly by you.

If Kontactic writes my ad and it violates a regulation, who is liable? You are. Under Flame and Blaze, Kontactic-produced creatives are subject to your approval, and you hold full responsibility for product claims and regulatory exposure regardless of who drafted the content.

How do I pay Kontactic's service fees under Flame or Blaze? By one of two methods agreed in writing: a local KRW transfer from your Korean bank account, or a monthly USD invoice paid by international wire within fourteen (14) calendar days of issuance.

Why does Flame and Blaze have a tax filing fee but Spark doesn't? Because Flame and Blaze use your own Korean entity, which has its own VAT and corporate tax filings — USD 1,200 per year, up to 100,000,000 KRW in revenue. Spark files VAT under Kontactic's entity, so there is no separate fee.