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

CHAPTER 5
Impact of Trade Facilitation Provisions
This chapter assesses the potential impact of provisions in the U.S.-Korea FTA related to
trade facilitation. These provisions are covered in FTA chapters addressing customs
administration and trade facilitation, sanitary and phytosanitary (SPS) measures, technical
barriers to trade (TBT), and electronic commerce. 1
FTA Chapter 7—Customs Administration and Trade
Facilitation
Assessment
U.S. industries that export to and invest in Korea would likely benefit from the customs
administration and trade facilitation provisions of the U.S.-Korea FTA. In contrast with
previous FTAs, these benefits would likely be realized more quickly because of the
immediate implementation of all commitments by both parties, reflecting the greater capacity
of the Korean Customs Service to implement its FTA obligations in the area of customs
administration and trade facilitation. 2
U.S. industry would likely gain from reduced transaction costs 3 with the implementation of
the customs administration and trade facilitation provisions of the FTA. 4 The chapter’s
provisions would also likely contribute to an enhanced investment climate in Korea, 5 which
could result in additional positive outcomes for U.S. industry. The commitments to
transparent and efficient procedures, greater accountability and predictability, improved
customs efficiency, reciprocity and fairness, and expedited goods clearance would likely
reduce paperwork and speed goods delivery. 6 Commitments for processing express
1 These provisions cover FTA chapters 7–9 and 15.
2 For example, the Korean Customs Service (KCS) employs the UNI-PASS system, which is a one-stop
electronic customs clearance service. Korea IT Times, “KCS, Global Leader in Customs Administration,”
November 1, 2006. In July 2003, the KCS announced a 3-year reform project to improve cargo management
and the duty payment system, to restructure the organization, and to create a business-friendly atmosphere.
APEC, Subcommittee on Customs Procedures, “Recent Reforms in Korea Customs Service.” KCS has also
implemented several measures to reduce goods clearance times, which is a key goal of the organization.
Korea IT Times, “KCS to Speed Up Customs Clearance Processes,” July 2004. Additionally, the KCS
employs the Electronic Data Interchange (EDI) system for paperless import clearance, which allows
importers to submit electronically an import declaration without visiting the customs house. USFCS, “Korea
Trade Regulations and Standards.”
3 For an in-depth discussion of the effect of trade facilitation on transaction costs, see OECD, “The
Economic Impact of Trade Facilitation,” October 12, 2005, 26.
4 According to the U.S.-Korea Business Council, Korea’s complicated and time-consuming Customs
procedures impose costs on U.S. exporters and service providers. Reis, testimony before the USITC,
June 20, 2007, 25.
5 OECD, “The Economic Impact of Trade Facilitation,” October 12, 2005, 26.
6 The agreement provides for advanced electronic submission of paperwork, requires timely goods
clearance, and increases transparency. Reis, testimony before the USITC, June 20, 2007, 29.
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