Korea to fix logistics industry’s cargo truck license leasing system

Korea to fix logistics industry’s cargo truck license leasing system [Photo by Yonhap]

The Korean government is looking into the local logistics industry’s practice of leasing commercial cargo truck license plates as part of its efforts to reform the logistics sector.

The Ministry of Land, Infrastructure and Transport estimates the number of commercial vehicle license plate leasing firms ranges from 5,000 to 7,000, according to government sources on Sunday. The ministry plans to look deeper into the industry for a more accurate picture as the current estimate is mixed with those shipping firms operating under normal terms, said a transport ministry official.

The cargo shipping firms under the government’s special monitoring are those that own trucks for commercial services and lease out license plates to cargo truck drivers. Such firms sell cargo vehicles to drivers and lease attached license plates for commercial service for a lump sum payment of around 40 million won ($32,400) per truck plus a monthly lease payment of around 300,000 won.

According to Korea Transport Institute, 68.2 percent of the cargo truck drivers in Korea currently operate with such leased license plates. The share goes up to 92.1 percent when the sector is narrowed down to cargo trucks of 5 tons or bigger.

There are 234,951 cargo transportation service firms in the country as of 2020, ranging from those firms operating more than 20 trucks to individuals driving small delivery trucks.

The controversy is that such market practices are driving up the cost of logistics on top of eating into the income of cargo truck drivers. The transportation ministry estimates that fixing the unfair pricing system would cut the country’s logistics cost by 5.2 percent, based on container shipping volume for exports and imports.

The government has been struggling to reform the market practice of leasing commercial vehicle license plates. In 2011, it introduced regulations designed to prevent large shipping firms from hiring smaller truck drivers with unfair payment terms. But the regulations have not worked out well due to light punishments.