U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

and major supplier, and U.S. tariffs are high, such as man-made fibers, yarns, fabrics, and
hosiery, and will likely displace domestic production of such goods and especially imports
of such goods from other sources.
The average U.S. tariff on imports from Korea is 11.0 percent for textiles and 16.5 percent
for apparel, while the average Korean tariff on imports from the United States is 8.3 percent
for textiles and 12.4 percent for apparel. 290 The FTA would eliminate tariffs on textiles and
apparel that meet the FTA rules of origin (“originating goods”) either immediately upon its
implementation or within 10 years. 291 The FTA would eliminate U.S. tariffs immediately on
52 percent of the Korean goods (based on the level of U.S. imports of textiles and apparel
from Korea in 2006) and phase out U.S. tariffs on the remainder over 5 years (21 percent of
the total) or 10 years (27 percent). The FTA would remove Korean tariffs immediately on
77 percent of U.S. textile and apparel exports and phase out Korean tariffs on the remainder
over 3 years (13 percent) or 5 years (10 percent). 292
The FTA would apply a yarn-forward rule of origin found in other recent U.S. FTAs to most
textiles and apparel; 293 for a garment to qualify for FTA preferences, production of the yarn
and fabric used in the garment, as well as cutting and sewing, must occur in the FTA
region. 294 The FTA contains provisions similar to those found in CAFTA-DR. 295 Unlike
CAFTA-DR, the U.S.-Korea FTA would permit the use of nonoriginating sewing thread,
narrow fabrics, and pocketing fabrics in qualifying apparel, 296 and the U.S.-Korea FTA does
not contain tariff preference levels (TPLs) that would grant tariff preferences to specified
quantities of textiles and apparel made from nonoriginating materials or a “cumulation”
290 The duties are based on trade in 2006.
291 Data in the paragraph on the portion of trade that would be subject to immediate tariff elimination
include goods subject to immediate tariff elimination (staging code “A”) and those already free of duty
(staging code “K”).
292 Data in the paragraph are in terms of goods covered by FTA chap. 4, which includes all textiles and
apparel listed in the annex of the Agreement on Textiles and Clothing, which is contained in Annex 1A to the
WTO Agreement. The products include, but are not limited to, textile and apparel articles in HS chapters
50–63 except raw cotton, wool, and certain other textile fibers; textile travel goods (e.g., luggage) in HS
heading 4202; glass fibers, yarns, and fabrics in HS heading 7019; and comforters in HS subheading
9404.90. In 2006, U.S. imports from Korea totaled $2.0 billion and Korean imports from the United States
were an estimated $220–250 million. Official statistics of the U.S. Department of Commerce; and Global
Trade Information Services, World Trade Atlas Database.
293 FTA chap. 4 sets out the rules of origin and other provisions specifically applicable to textiles and
apparel, a summary of which appears in app. D of this report.
294 The yarn-forward rule of origin applies only to the component that determines the tariff classification
of the garment (i.e., the component that gives the garment its “essential character”), rather than to all fabric
components of the garment.
295 The FTA would apply a more flexible single transformation, or “cut and sew,” rule of origin but to
fewer goods, and would require certain visible linings used in qualifying suits, coats, jackets, and skirts to
originate in the FTA region. The cut and sew rule would permit the use of nonoriginating fabrics in certain
goods as long as the goods are cut and sewn in the FTA region, including textile luggage, silk and linen
apparel, certain knit cotton pajamas and underwear, women’s knit man-made fiber blazers, and men’s woven
shirts of fine-count cotton and man-made fiber fabrics.
296 U.S. textile companies expressed concern that the FTA would permit the use of nonoriginating sewing
thread, narrow fabrics, and pocketing fabrics in FTA-qualifying goods, because these inputs are in “plentiful
supply” in the FTA region. ITAC (13) on Textiles and Clothing, Advisory Committee Report, April 27, 2007.
According to the United States Association of Importers of Textiles and Apparel (USA-ITA), the key and
most beneficial components of the textile and apparel provisions of the FTA include the use of these
nonoriginating inputs. Jones, written submission to the USITC, June 27, 2007, 2–3.
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