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

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determines the tariff classification of the good is made of originating yarns and fabrics, without regard to the origin of any collar or cuffs incorporated into the garment, and the garment is cut and sewn in the FTA region. As in past FTAs, the U.S.-Korea FTA requires that certain visible linings in suits, skirts, jackets, coats, and similar articles originate in the FTA region. 5 In addition, the FTA contains a de minimis foreign content rule that permits up to 7 percent of the total weight of the component that determines the tariff classification of the good to consist of nonoriginating fibers or yarns, except for elastomeric yarns, which must be made in the FTA region. Annex 4-A applies a more restrictive “fiber-forward” rule of origin to a number of mostly cotton and man-made fiber textile articles, whereby imports of such goods from the FTA party must be made from inputs produced in the FTA region from the fiber stage forward to qualify for tariff preferences. A fiber-forward rule applies to yarns and knit fabrics of cotton and most man-made fibers. 6 A fiber-forward rule of origin also applies to all goods of manmade fibers (filaments or staple fibers) classified in HS chapter 56 (nonwovens and cordage), HS chapter 58 (specialty fabrics), HS heading 5902 (tire cord fabrics), and HS heading 5910 (belts and belting), and to all goods of man-made filaments classified in HS chapter 57 (carpets and rugs) and HS heading 5909 (tubing). The main exceptions to the yarn-forward rule of origin in FTA chapter 4 that would grant duty preferences to imports of goods made in the FTA region from nonoriginating inputs are the “fabric-forward” and “single transformation” rules of origin. The fabric-forward rule applies to apparel, home textiles, and other made-up textiles of viscose rayon filament yarns, whereby imports of such goods from the FTA party must be made from inputs produced in the FTA region from the fabric stage forward to qualify for FTA preferences. Under the single-transformation rule, certain finished goods can be made of nonoriginating fabrics and still qualify for FTA preferences, provided that the goods are cut and sewn in the FTA region. This “cut and sew” rule applies to textile luggage; apparel of silk, linen, nonwoven, and coated fabrics; and women’s and girls’ knit-suit-type jackets and blazers of man-made and certain other fibers. 7 It also applies to knit cotton pajamas and women’s and girls’ knit cotton briefs and panties of certain nonoriginating circular-knit cotton fabrics, provided that these garments, exclusive of collars, cuffs, waistbands, or elastic, are wholly of such fabrics and the garments are cut and assembled in the FTA region. 8 The cut and sew rule also applies to apparel made from woven fabrics designated in the FTA as being in short supply in the FTA region. As in past U.S. FTAs, the U.S.-Korea FTA would grant duty preferences to apparel classified in HS chapter 62 (apparel and apparel 5 The only commercially significant visible linings permitted by the U.S.-Korea FTA to be nonoriginating when used in the specified originating garments are those of silk and cuprammonium rayon. 6 FTA chap. 4 permits the use of nonoriginating acrylic and modacrylic staple fibers (HS subheading 5503.30) and artificial staple fibers (such as rayon and acetate [HS heading 5504]), as well as nonoriginating silk, wool, flax, and similar vegetable fibers, in FTA-qualifying yarns. It applies a yarn-forward rule of origin to knit fabrics made from yarns of such fibers, except those of silk and flax, which can be nonoriginating. FTA chap. 4 also permits the use of nonorginating rayon filament yarns in FTA-qualifying knit fabrics. 7 The single transformation rule applies to women’s or girls’ knit-suit-type jackets and blazers of synthetic fibers (HTS subheading 6104.33), and certain other textile materials (6104.39), including artificial fibers (annex 4-A to FTA chap. 4). 8 The knit cotton pajamas are classified in HTS subheadings 6107.21 (men’s or boys’) and 6108.31 (women’s or girls’); the women’s and girls’ knit cotton briefs and panties are classified in HTS subheading 6108.21. The circular knit fabrics are wholly of cotton yarns exceeding 100 metric number per single yarn and can be bleached or unbleached (HTS subheading 6006.21.10), dyed (6006.22.10), of yarns of different colors (6006.23.10), or printed (6006.24.10). D-6
accessories, not knitted or crocheted) and made from certain nonoriginating cotton velveteen and corduroy fabrics, handwoven wool Harris Tweed, combed wool or fine-animal-hair fabrics, and polyester batiste fabrics, provided that the outer shells of the garments, exclusive of collars or cuffs, are wholly of such fabrics and that the garments are cut and assembled in the FTA region. The FTA would also grant duty preferences to men’s and boys’ woven shirts made from nonoriginating fine-count woven fabrics of cotton or man-made fibers. FTA chapter 4 also contains a temporary provision that would grant duty preferences to specified quantities of imports of fabrics and apparel that are made in the FTA region from fibers, yarns, or fabrics not commercially available in the United States or Korea (Article 4.2 and Annex 4-B). It would require an importing party to grant duty preferences to such nonoriginating fabrics and apparel on the same basis as originating goods, but not to exceed an aggregate of 100 million square meters equivalent for fabrics and an identical amount for apparel in each of the first 5 calendar years of the FTA, unless the parties agree to extend the period for application of the annex. Annex 4-B contains each party’s list of fibers, yarns, and fabrics not available in commercial quantities in a timely manner in its territory (Appendix 4-B to Annex 4-B) and sets out procedures that allow each party to add or delete a fiber, yarn, or fabric from its list (neither party’s list currently contains any fibers, yarns, or fabrics not available in commercial quantities). 9 FTA Chapter 5—Pharmaceuticals and Medical Devices The pharmaceutical products and medical devices chapter of the U.S.-Korea FTA (FTA chapter 5) would require each party to promote access to both innovative (patented) and generic pharmaceuticals and medical devices through transparent and accountable pricing and reimbursement procedures, 10 regulatory cooperation, and ethical business practices. With respect to transparency, the chapter provisions would require both parties to ensure that their laws, regulations, and general procedures related to pricing, reimbursement, and regulation are promptly published or otherwise made available so that interested persons and the other party may become familiar with them. 11 Further, each party would be required to publish in advance any such measures it proposes to adopt and provide interested persons and the other party a reasonable opportunity to comment on them and to have their comments taken into account in the final regulations. 12 9 A side letter to FTA chap. 4 of June 30, 2007, from the U.S. Special Textile Negotiator to the Korean Deputy Minister for Major Manufacturing Industries states that Korea expressed interest in adding certain cotton sheeting fabrics, man-made fiber knit fabrics, polyester and other synthetic filament fabrics, and wool fabrics to the U.S. list in app. 4-B. The letter further states that the United States will, upon receipt of a request from the Government of Korea or another interested entity after the date of entry into force of the FTA, consider the request in accordance with the procedures set out in annex 4-B of the FTA, under which the United States will make its decision on the request within 30 business days of receiving the request unless it has insufficient information, in which case it will make its decision within an additional 30 business days. 10 This FTA would be the second, after the U.S.-Australia FTA, to include a section on the pricing and reimbursement of pharmaceutical products. Chap. 5 of the U.S.-Korea FTA expands and clarifies many of the provisions of Annex 2-C of the U.S.-Australia FTA and includes medical devices in addition to pharmaceutical products. 11 USTR, “Final - United States - Korea FTA Text,” 2007, Article 5.3.1–5.3.4. 12 With respect to regulations of its central level of government, respecting pricing, reimbursement, or regulation, each party would publish the proposed regulations, including their purpose, in a single national journal, not less than 60 days before the comment due date in most cases; address in writing significant, D-7
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U.S. International Trade Commission
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This report was prepared principall
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CONTENTS-Continued Chapter 3. Secto
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CONTENTS—Continued Chapter 5. Imp
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CONTENTS-Continued Chapter 7. Liter
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CONTENTS-Continued Tables—Continu
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Abbreviations and Acronyms 3G third
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Abbreviations and Acronyms—Contin
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Abbreviations and Acronyms—Contin
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vehicles) would likely be diverted
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Sector-specific Assessments The U.S
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total increased fish imports from K
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Korea would likely limit the impact
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Intellectual property rights (IPR):
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sector barriers. 5 These merchandis
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Table 1.1 U.S.-Korea FTA: Location
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Table 1.2 Korean tariff rates on im
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Table 1.4 U.S.-Korea FTA: Summary o
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observed GDP for model regions). Th
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Box 2.1 Interpreting the model resu
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Table 2.1 U.S.-Korea FTA: Simulated
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2-8 This page has been updated to r
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Figure 2.2 U.S-Korea FTA: Simulated
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As shown in figure 2.2, the largest
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2-14 This page has been updated to
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Economy-wide Impact of Implementing
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Grain (Wheat, Corn, and Other Feed
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Korea imported 3.8 million mt of wh
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U.S. oilseed product exports to Kor
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Table 3.2 U.S. oilseed product expo
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Table 3.3 Animal feed exports to Ko
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consumed domestically by the U.S. l
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ates. For corn starch, the United S
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quota rates have been effectively e
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Noncitrus Fruit 87 Views of Interes
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3-20 Table 3.9 U.S.-Korea trade and
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Korean grapes are much more costly
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Potato Products 122 Assessment The
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ate is 304 percent ad valorem. 141
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Other Vegetables 162 Assessment The
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U.S. exports of other fresh and pro
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tariff concessions that could accru
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Dairy Products 215 Similarly, the p
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TRQ for food whey, 223 based on cur
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potential changes in trade based so
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Figure Figure 3.1 Korea: Beef and v
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Views of Interested Parties The inc
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are subject to the same food safety
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enefit under the provisions of this
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Box 3.2 Potential price and quantit
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50 percent, while the vegetable jui
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and major supplier, and U.S. tariff
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textiles and apparel through 2005.
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U.S. Exports The impact of the FTA
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passage. NCTO indicated that, even
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In its report, the ITAC on Distribu
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of the U.S. footwear market, with C
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of these producers. 362 RPFMA noted
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prohibit improper inducements by ph
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Machinery, Electronics, and Transpo
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U.S. exports of auto parts would be
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imports from and exports to Korea.
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Passenger Vehicles 433 Assessment U
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Table 3.16 Korean passenger vehicle
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import activities have continued
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Box 3.4 Automotive-related FTA Prov
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access. The FTA affirms the parties
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gaining U.S. market share regardles
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keep the products out.” 492 Mr. B
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these vehicles to Korea. The commit
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Brown expressed concern about the r
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goods; and high-technology medical,
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device pricing, reimbursement, and
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CHAPTER 4 Impact of Market Access P
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elative to GDP than do China, Japan
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services as a substantial improveme
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Box 4.2 Financial services: Competi
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Summary of Provisions Chapter 13 of
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national treatment, full establishm
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Box 4.4 Competitive conditions in t
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and cross-connect links 70 are more
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Box 4.5 U.S. legal services trade w
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establish offices in Korea to provi
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Box 4.6 Competitive conditions in t
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equirements and foreign ownership r
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CHAPTER 5 Impact of Trade Facilitat
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publication and administration of t
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Views of Interested Parties In its
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Summary of Provisions This chapter
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use of TBTs to protect Korea’s au
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conformity assessment procedures el
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FTA Chapter 15-Electronic Commerce
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Views of Interested Parties The U.S
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quantities as to be a substantial c
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that such transshipment could imped
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Box 6.1 Foreign investment in Korea
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in the FTA. The awards made by any
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Table 6.1 U.S.-Korea FTA: Industry
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(ITAC 5) report cited as particular
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Section C of Chapter 11 and the lac
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practices, and violations of consum
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FTA Chapter 17—Government Procure
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Both the United States and Korea ar
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8) 87 also expressed support for th
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Box 6.2 Recent conditions of IPR pr
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protection to life of the author pl
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Views of Interested Parties A numbe
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GPHA stated in testimony before the
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Box 6.3 Labor market conditions in
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FTA Chapter 20—Environment 131 As
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trade measures are the least disrup
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FTA Chapter 22-Institutional Provis
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Views of Interested Parties The Ind
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CHAPTER 7 Literature Review and Sum
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7-3 Table 7.1 Model, liberalization
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terms. Much of the increase in U.S.
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Liberalization generated small incr
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Sander Levin, Member of the U.S. Ho
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Regarding footwear and travel goods
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Korea’s establishment as a region
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The California Table Grape Commissi
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order activity, and facilitate expa
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At the Commission’s hearing, Mr.
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Information Technology Industry Cou
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With respect to tariff and nontarif
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deterring illegal transshipments. I
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PhRMA identified what it views as t
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the TIA stated that it supports the
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access to the market. The Council a
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United States, Spain, Chile, Brazil
Page 267 and 268: Bibliography Advanced Medical Techn
Page 269 and 270: AT&T. “AT&T Reaction to Free Trad
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Page 273 and 274: ______. “Country Finance: South K
Page 275 and 276: Global Trade Information Services I
Page 277 and 278: International Labor Organization (I
Page 279 and 280: Jones, Laura E. Executive Director.
Page 281 and 282: Lee, Hyunok, and Daniel A. Sumner.
Page 283 and 284: Nam, In-Soo. “Helio's Losses To W
Page 285 and 286: Powers, Mark. Northwest Horticultur
Page 287 and 288: Smith, Brad. American Council of Li
Page 289 and 290: U.S.-Korea Business Council (USKBC)
Page 291 and 292: ______. “Korea, Republic of Oilse
Page 293 and 294: U.S. International Trade Commission
Page 295 and 296: Ward, David. American Council on Ed
Page 297: APPENDIX A Request Letter from USTR
Page 301: APPENDIX B Federal Register Notices
Page 304 and 305: pwalker on PROD1PC71 with NOTICES 2
Page 307: APPENDIX C Hearing Participants
Page 310 and 311: ORGANIZATION AND WITNESS: PANEL 1 (
Page 313: APPENDIX D U.S.-Korea FTA: Chapter-
Page 316 and 317: fees and charges on trade in goods
Page 320 and 321: The transparency provisions would a
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Page 324 and 325: technical regulation or conformity
Page 326 and 327: procedures), and practices of a par
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Page 330 and 331: of standards and criteria and on te
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Page 336 and 337: parties’ rights and obligations u
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Page 347 and 348: Economic indicators 2002 2006 Popul
Page 349 and 350: Table E.1 Leading U.S. exports to K
Page 351: APPENDIX F GTAP Model
Page 354 and 355: Updating the GTAP Database The curr
Page 356 and 357: Key Assumptions Agency. 4 The price
Page 358 and 359: Table F.2 U.S.-Korea FTA benchmark
Page 360 and 361: Measuring the Impacts of the FTA an
Page 363 and 364: General Effects of Trade Agreements
Page 365: APPENDIX H Tariff Equivalents in Ko
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Previous Literature The method for
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For the purposes of this report, a
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Table H.1 Tariff equivalents in Kor
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APPENDIX I Services Nonconforming M
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Table I.1 U.S.-Korea FTA: Korean se
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APPENDIX J Description of Possible
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are in effect import prices, and th
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APPENDIX K Overview of Agricultural
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Additionally, although current regu
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About This Report The United States
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