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

quota rates have been effectively equalized at 50 percent. 74 Korean tariff rates are relatively
high, 50 percent for oranges and 30 percent for lemons and grapefruit. Under the provisions
of the FTA, the Korean 30 percent tariff on U.S. lemons would be phased out over 2 years,
while the 30 percent tariff on U.S. grapefruits would be phased out over 5 years. The
50 percent tariff rate on U.S. fresh oranges exported to Korea between March 1 and August
31 would be phased out over 7 years, with an immediate 20-percentage-point reduction of
the 50 percent tariff in the first year of implementation to 30 percent ad valorem, followed
by 5-percentage-point reductions each year thereafter to complete phaseout in year 7. Korea,
however, would continue to maintain the 50 percent tariff on U.S. oranges imported between
September 1 and March 1, but within that period, Korea would allow a duty-free permanent
TRQ starting at 2,500 mt and increasing by 3 percent per year. This quota is relatively small
compared to total U.S. fresh orange shipments to Korea, accounting for less than 5 percent
of U.S. shipments in 2006.
In addition to these reductions in tariffs, the FTA’s SPS chapter establishes a standing
committee which is intended to address SPS issues related to U.S.-Korea bilateral trade. 75
The SPS chapter of the agreement reconfirms the commitment of both parties to use sound
science in the application of SPS measures and generally refers to the WTO SPS Agreement
to establish the means by which such measures would be applied. 76 Currently, U.S. fresh
citrus exporters have entered into bilateral protocol agreements with Korea regarding
Septoria, canker, and fruit fly. These protocols, which are outside the FTA framework, are
in place between Korea and individual U.S. states such as California, Arizona, and Florida.
For example, Korea prohibits the importation of fresh grapefruit from Florida unless they are
certified under a bilateral protocol for Caribbean fruit flies, also known as the Caribfly
Protocol. 77 The protocol restricts the Florida fruit to a small growing area in Florida that is
certified to be free of fruit flies. Few grapefruits grown in Florida qualify because this area
has been shrinking over the past decade. 78
The provisions for fresh citrus fruit would likely have a significant effect on the U.S. citrus
industry by significantly reducing tariffs on U.S. exports to one of the largest export markets
for U.S. fresh citrus products. Fresh oranges accounted for the largest share of U.S. exports
of fresh fruits, vegetables, and nuts to Korea, and fresh citrus of all types accounted for over
half of the value in this category. In 2006, Korea imported approximately $60 million of
fresh oranges, $45 million of fresh grapefruit, and $5 million of fresh lemons from the
United States. 79 Korea was the third-leading destination for U.S. fresh orange exports in
2006, after Canada and Japan. Korea was the second-leading destination for U.S. fresh
grapefruit exports in 2006 after Japan and the fourth-leading destination for U.S. fresh lemon
exports. In spite of the high tariff rates, U.S. fresh citrus is able to compete successfully in
the Korean market against both domestically grown and imported products. In 2006, the
United States accounted for about 95 percent of overall Korean citrus imports, South Africa
74 Under the orange tariff-rate quota, tariffs of 50 percent are applied within the quota. The size of the
quota increased every year until 2004. The tariff on imports over the quota declined from 84.3 percent in
1997 to 50 percent in 2004. In practice, this eliminated the quota as the tariff was equalized for all oranges.
75 For additional information regarding the FTA’s chapter on SPS, see chap. 5 of this report.
76 For additional analysis regarding SPS and other NTMs, see chap. 5 of this report.
77 USDA, FAS, “Korea, Product Brief, Korean Grapefruit Market Brief 2005,” July 29, 2005, 2; and Doug
Bournique (General Manager, Indian River Citrus League), conversation with Commission staff, Vero
Beach, FL, June 12, 2007.
78 Barnes, Richardson, and Colburn (counsel), written submission to the Trade Policy Staff Committee,
Office of the USTR on behalf of the Florida Citrus Mutual, Florida Citrus Packers, Gulf Citrus Growers
Assoc., and Indian River Citrus League, March 24, 2006.
79 Official U.S. Department of Commerce trade statistics.
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