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

effect on U.S. imports of potato products from Korea, as Korea currently has no frozenpotato
processing facilities. 133
Other Potato Products 134
Currently, Korean duties are 20 percent on potato chips, granules, and other prepared potato
products, 27 percent on cooked or uncooked frozen potatoes, and 304 percent on fresh
potatoes, seed potatoes, and dehydrated potato products. Under the FTA, the elimination of
the 304 percent duty on fresh potatoes, seed potatoes, and dehy potato products and the
27 percent duty on frozen potato products would decline in two annual installments and
would be eliminated effective January 1 of year 2. The elimination of the 20 percent duty on
potato chips, granules, and other potato preparations would occur in three annual
installments and be eliminated effective January 1 of year 3.
U.S. industry sources state that Korea has become an important export market for U.S. dehy
potato products, but further significant growth is limited principally by Korea’s TRQ on
dehy products. 135 Although the in-quota duty is 5.4 percent, the over-quota duty is
304 percent. According to the American Potato Trade Alliance, this over-quota duty
essentially restricts the dehy market for U.S. exporters. 136 Recently, the Korean government
announced an expansion of the existing TRQ on dehy potato products from 10 mt to
60 mt, 137 an amount, which, according to a company representative, is still well below
volumes the industry would like to ship. 138 Nevertheless, by reducing the restrictions on U.S.
exports of dehy potatoes, the U.S. industry stands to increase its market share in Korea.
Medium-term increases in exports of dehy potato products may, however, be hampered as
the FTA TRQ is easily filled by U.S. exporters, 139 and the duty-free in-quota quantity
increases by only 3 percent annually over the following 10 years after FTA
implementation. 140
There may be a small but growing Korean market for sales of U.S. fresh potatoes for
chipping (chipping potatoes). Under the FTA, chipping potatoes from the United States enter
duty-free and quota-free during December 1 through April 30, when Korean domestic
product availability is usually low. In addition, the FTA contains a TRQ on fresh table-stock
potatoes (excluding chipping potatoes and seed potatoes) that limits duty-free entry to 3,000
mt in year 1, which increases by 3 percent annually each year thereafter; the over-quota duty
133 APTA, written submission to the Trade Policy Staff Committee, Office of the USTR, March 20, 2006.
134 Included here are potato seed and fresh potatoes (0710), uncooked or cooked frozen potatoes
(0710.10), dehydrated potato products (1105), and other prepared or preserved potato products including
chips, granules, and other products (2005.20).
135 APTA, written submission to the Trade Policy Staff Committee, Office of the USTR, March 20, 2006.
136 APTA, written submission to the USITC, June 22, 2007.
137 USDA, FAS, “Republic of Korea Product Brief, Market Access Quota Increase 2007,” May 4, 2007, 3.
138 U.S. industry official, telephone interview by Commission staff, May 30, 2007.
139 According to an industry source, current U.S. production for export to Korea is approximately ten
times the 5,000 mt quota. U.S. industry representative, telephone interview by Commission staff,
May 30, 2007.
140 According to Annex 3-A, Agricultural Safeguard Measures, the quota is 5,000 mt. The quota increases
by 3 percent annually and remains in effect for 10 years; within-quota amounts enter free of duty. The
safeguard duty falls 3 percent annually between years 1, 2, and 3, 4 percent between years 3, 4, and 5,
16 percent between years 5 and 6, 7 percent between years 6, 7, and 8, 8 percent between years 8 and 9,
9 percent between years 9 and 10, and goes to zero in year 11.
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