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Navigating the Agreement (KORUS FTA) |
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The United States - Korea Free Trade Agreement (KORUS FTA)
Provisions Relating to Agricultural Trade |
| The main provisions relating to agricultural trade in the KORUS FTA (referred to here as the Agreement) are in the areas of tariff reductions, tariff-rate quotas, special safeguards, rules of origin, sanitary and phytosanitary measures, technical barriers to trade, and dispute settlement.
Since the full Agreement contains a total of 24 Chapters and three Annexes, the following will help you locate the specific provisions in the agreement which relate to these topics.
| Tariff Reductions
| Under the KORUS, Korean tariffs on all U.S. agricultural products - with the exception of rice - will be eliminated. Chapter 2 of the Agreement deals with all of the general market access provisions, while Article 2.3 of Chapter 2 provides for the elimination of tariffs (customs duties or taxes charged on imported goods).
As an exporter, you will need to know how quickly Korean duties on their products will be eliminated. Some tariffs will be eliminated immediately, while others will be phased out more gradually. The Agreement spells out about 24 different tariff phase out timeframes and modalities. Eleven of the tariff elimination or staging categories are found in Annex 2-B of Chapter 2. In addition, the General Notes to the Korean Tariff Schedule contains an additional 13 staging categories.
To determine the staging category that applies to a specific product, you must refer to the Tariff Schedule of Korea . The a href="Annex Korea Tariff Schedule.pdf">Tariff Schedule of Korea shows the harmonized schedule tariff line number (HSK), a description of the product, the initial or base tariff rate and the staging category by which the base rate will be reduced. If the product is subject to a safeguard, it will be indicated in the safeguard column.
| | An example of how to read this schedule follows: |
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HSK
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Description
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Base
Rate
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Staging
Category
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Safeguard
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0101101000
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Horses
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8
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D
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| The tariff line number is 0101101000, which is live horses. The initial or base rate of duty of 8 percent will be eliminated according to staging category D. According to Annex 2-B, duties on originating goods in staging category D “shall be removed in five equal annual stages beginning on the date this Agreement enters into force, and such goods shall be duty-free, effective January 1 of year five.”
| It is important to remember that the first tariff reductions will take place upon implementation, or entry into force, of the Agreement. This will be considered Year 1. Subsequent reductions will take place on January 1 of each year. Ad valorem tariff rates are rounded to the nearest 0.1 percent.
| Tariff-rate Quotas and Special Safeguards
| Tariff-rate quotas and special safeguards, which are provisions specific to agricultural products, are described in Chapter 3, the ‘Agriculture’ chapter of the Agreement.
Tariff-rate quotas (TRQ) allow for reduced duties on limited quantities of products. Under the KORUS, Korea will have 19 TRQ’s on U.S. agricultural products. The products and details on the TRQ’s are listed in Korea’s Appendix 2-B-1.
For example, the TRQ on U.S. cheese under tariff lines 0406101000, 0406200000, 0406300000, and 0406900000 is 7,000 MT in Year 1. This means that no duties are paid on 7,000 MT of U.S. cheese. However, the duty on any imports in excess of 7,000 would be 31.2 percent in Year 1. Under the KORUS the volume of cheese eligible for zero duty under the TRQ would increase each year (per Appendix 2-B-1), while the duty assessed on imports in excess of the TRQ volume would decline (per Tariff Schedule of Korea.) By Year 15, all cheese would enter duty free.
Special safeguards allow for Korea to increase the duty applied in a given year if imports of that product reach a specified trigger level. Korea has 30 safeguards which could apply to U.S. agricultural products. These are listed in Chapter 3.
For example, the safeguard on beef in year 1 of the Agreement (per Chapter 3) is 270,000 MT. The applied duty in year 1 is 37.5 percent. However, if Korean imports of beef were to reach the ‘trigger level’ of 270,000 MT in year 1, the duty would be raised to the ‘safeguard duty’ level of 40 percent for the remainder of the year.
| Sanitary and Phytosanitary Measures and Technical Barriers to Trade
| Measures to protect human, animal or plant health, known as sanitary and phytosanitary (SPS) measures, as well as standards, technical regulations, and conformity assessments (technical barriers to trade or TBT), can affect trade in agricultural products. The provisions under Chapter 8 ‘Sanitary and Phytosanitary Measures’ will enhance U.S. and Korean implementation of the World Trade Organization’s SPS Agreement. Very importantly, the Agreement (Article 8.3) creates a Committee on Sanitary and Phytosanitary Matters to enhance cooperation and consultation on sanitary and phytosanitary matters and facilitate trade. The Committee must be created within 45 days of the implementation of the Agreement and meet no less than once a year.
The provisions under Chapter 9 ‘Technical Barriers to Trade’ will help strengthen cooperation in the TBT area with a view toward facilitating market access. The Agreement (Article 9.8) also creates a Committee on Technical Barriers to Trade which will help to address TBT-related issues.
| Rules of Origin
| Chapter 6 covers rules of origin. In order to be eligible for duty-free treatment, U.S. agricultural products must meet requirements for U.S. origin. For example, plants and plant products should be grown and harvested in the United States. Seafood and marine fish must be harvested on U.S. flag vessels. The importer in Korea can claim the KORUS preferential tariff levels on the basis of a written certification or on the basis of his own information and knowledge.
| Dispute Settlement
| Finally, the Agreement provides for mechanisms to resolve any trade disputes through consultations, referral to the Joint Committee which oversees overall implementation of the Agreement, or through formation of a Dispute Settlement panel. These provisions are laid out in Chapter 22.
The full text of the U.S.-Korea (KORUS) Free Trade Agreement is available on the Office of the U.S. Trade Representative’s website at Final Text | Office of the United States Trade Representative.
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