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

compensation could be negotiated, payable in either party’s currency. If the parties fail to
agree on the terms of compensation, or the report or agreed resolution is not implemented,
an actual suspension of benefits of equivalent effect could be undertaken in accord with the
panel’s report, or the party complained against could pay a monetary assessment in U.S.
dollars for an amount equal to 50 percent of the total benefit the panel deems to have been
involved. The Joint Committee could decide that an assessment should be paid into a fund
established by the Joint Committee and expended for appropriate initiatives to facilitate trade
between the parties.
This chapter also contains provisions directing compliance reviews and a 5-year review for
disputes under the FTA. Actions relating to measures subject to exception under Article 23.1
could not be taken. The chapter contains administrative procedures for requesting a panel,
selecting panelists, and issuing reports. It would prohibit any private right of action related
to the consistency of a national law with the FTA. The chapter also states that parties should
facilitate the use of arbitration and alternate dispute resolution to settle international
commercial disputes between private parties in the free trade area.
Unlike in previous FTAs, there are provisions in Annex B to this chapter outlining
alternative, expedited dispute-settlement procedures for disputes concerning motor vehicles.
The proceedings are similar to those for other FTA obligations as described above, except
that the Joint Committee would submit the dispute to a panel if it could not resolve it within
30 days. The panel would have 120 days in which to draft a preliminary report and to
determine whether an FTA-inconsistent measure materially affected the sale, offering for
sale, purchase, transportation, distribution, or use of originating goods of a party. If the panel
finds that the violating party has not conformed with its obligations, or that its actions
materially injured the other party, the complaining party could increase the rate of customs
duty on passenger cars of heading 8703 of the Harmonized System (HS) to a level not to
exceed the prevailing MFN applied rate of duty on such goods, to be rescinded upon
corrective action taken by the other party. If the panel determines that there is a
nonconformity but that it did not materially injure the other party, the dispute-settlement
rules and outcomes otherwise provided in chapter 22 as described above would apply. Unless
a panel is convened and finds an NCM under these provisions, the procedures in the annex
would expire 10 years after the date of entry into force of this agreement.
Annex C to this chapter would establish a Committee on Outward Processing Zones on the
Korean Peninsula, comprising members from each party, to identify areas on the Korean
Peninsula that may be designated outward processing zones. In making such a determination,
the committee is to consider criteria such as progress toward denuclearization of the Korean
Peninsula, the effect of the outward processing zones on intra-Korean relations, and the
environmental and labor standards and wage and business practices prevailing in the outward
processing zone. The committee would also determine the maximum threshold for the value
of the total input of the originating final good that may be added within the outward
processing zone.
The provisions of Annex D to this chapter would establish a Joint Fisheries Committee. This
committee is to serve as a forum to discuss issues concerning fisheries matters, including but
not limited to, policies on commercial activities within the exclusive economic zones of the
parties and scientific research on fisheries matters.
6-39