S. Korean Trade Barriers to Auto Imports - Ford Motor Company

S. Korean Trade Barriers to Auto Imports
The Republic of Korea is a text-book example of a closed automotive market. The Korean
government has a long history of intervening in its market to block imports of autos into
Korea.
In today's globally competitive auto market with world-class manufacturers building
competitive vehicles in every segment, it is impossible for imports to Korea to be comprised of
a meager 5 percent market share without the Korean government actively working to block
imports.
o Over many years, the Korean government has used measures like restricting the hours
of advertising by importers, auditing the taxes of import car owners and manipulating its
currency to protect its domestic automakers.
The current version of the U.S.-Korea FTA does not have a sufficient enforcement mechanism
to prevent the Korean government from continuing to block automotive imports with nontariff
barriers.
Below is a chronology of Korean government intervention to block imports.
Year Applied
Tariff
Non-Tariff Barriers to Imports Agreements
Import
Share
1985-1986 50% Ban on all vehicle imports 0%
1987-1988 40-25% Ban on most vehicle imports 0%
1989-1993 20-10% • Ban on Japanese car imports
< 1%
• Higher tax rates on import vs. domestic cars
• Government tax audits of imported car owners
• Ban on import auto co. financing for new vehicles
• Severe limits on advertising for import autos
• Severe limits on retail distribution size and no.
• Excessively burdensome auto standard cert. process
1994 8% car • Ban on Japanese car imports
< 1%
10% trk • Higher tax rates on import vs. domestic cars
• Government tax audits of imported car owners
• Ban on import auto co. financing of new vehicles
• Severe limits on advertising for import autos
• Severe limits on retail distribution size and no.

• Excessively burdensome auto standard cert. process
1995 8% car • Ban on Japanese car imports
The “US-Korea Automotive < 1%
10% trk • Threat of gov’t tax audits of imported car owners MOU to Increase Market
•
•
Excessively burdensome auto standard cert. process
Private sector “anti-import” auto initiative
Discriminatory treatment of import automakers at
national auto shows
Access for Foreign
Passenger Vehicles in the
Republic of Korea” (’95
Auto MOU)
• Private sector “anti-import” auto initiatives
1995 Auto MOU Signed (Sept 2005)
1996 8% car • Ban on Japanese car imports
‘95 Auto MOU < 1%
10% trk • Threat of gov’t tax audits of imported car owners
• SUVs, passenger cars and minivans reclassified as
cars at a higher tax level
• Discriminatory treatment of import automakers at
national auto shows
• Private sector “anti-import” auto initiatives
• Six new auto standards , with most having a
disproportionately adverse impact on auto imports
1997 8% car • Ban on Japanese car imports
’95 Auto MOU
< 1%
10% trk • Threat of gov’t tax audits of imported car owners
• SUVs, passenger cars and minivans reclassified as
cars at a higher tax level
• Discriminatory treatment of import automakers at
National auto shows
• Government and private sector “anti-import” auto
initiatives, including local gov’t parking restrictions
and higher taxes for imports, and police harassment
1998 8% car • Ban on Japanese car imports
• The USA-Republic of < 1%
10% trk • Threat of gov’t tax audits of imported car owners Korea MOU Regarding
• Discriminatory treatment of import automakers at Foreign Motor Vehicles
national auto shows
in the Republic of
• Private sector “anti-import” auto initiatives
Korea” (’98 Auto MOU)
• ’95 Auto MOU
1998 Auto MOU Signed (Nov. 2008) •
1999 8% car • Threat of gov’t tax audits of imported car owners • ’95 Auto MOU
< 1%
10% trk • Discriminatory treatment of import automakers at • ’98 Auto MOU
Bound in
WTO •
national auto shows
Private sector “anti-import” auto initiatives
• Three new and unique auto safety standards
introduced: Front tow hook, headlamp, and remote
keyless entry
2000-2002 8% car • Threat of gov’t tax audits of imported car owners • ’95 Auto MOU
’00-0.4%
10% trk • Discriminatory treatment of import automakers at • ’98 Auto MOU
’01-0.5%
Bound in national auto shows
’02-1.0%
WTO • Private sector “anti-import” auto initiatives
• Seven new auto safety and emissions regulations,
including: Pass-by noise, fuel efficiency, bumper,
tinted rear-window, side impact, power-window antipinch,
and various emissions standard changes
2003-2006 8% car • Discriminatory treatment of import automakers at • ’95 Auto MOU
’03-1.5%
10% trk national auto shows
• ’98 Auto MOU
’04-2.1%
Bound in • Private sector “anti-import” auto initiatives
’05-2.7%
WTO • Seven new auto safety and emissions regulations,
including: various emission standard changes, license
’06-3.5%

2007 8% car
10% trk
Bound in
WTO
2008 8% car
10% trk
Bound in
WTO
2009 8% car
10% trk
Bound in
WTO
plate size, average fuel economy, OBDII, K-ULEV,
auto recycling and self-certification defect
investigation changes
US-Korea FTA-Signed (June, 2007) and Pending
Congressional Approval
• Korean Fair Trade Commission raids the offices of
the assoc. that represents the auto importers -
KAIDA.
• Private sector/press “anti-import” auto initiatives
• Korean gov’t intervened in the currency market to
maintain a weaker won-raising the price of imports
and subsidizing exports
• Private sector/press “anti-import” auto initiatives
• Auto insurance reform- raising insurance prices on
imports more than on domestic makes
• Certification change- Importers no longer allowed to
certify by witness tests at the import test facilities-
reversed after USG objected
• Korean gov’t intervened in the currency market to
maintain a weaker won-raising the price of imports
and subsidizing exports
• Private sector/press “anti-import” auto initiatives
• New fuel economy regulation to include imports for
the first time to start Jan 1, 2010
• New Korea unique CO2 regulation proposed for ‘12
• The US-Korea FTA
signed & pending
approval (KORUS FTA)
• ’95 Auto MOU
• ’98 Auto MOU
• KORUS FTA-pending
approval
• ’95 Auto MOU
• ’98 Auto MOU
• KORUS FTA-pending
approval
• ’95 Auto MOU
• ’98 Auto MOU
4.4%
5.3%
4.4%