In a recent press release, the U.S. Trade Representative confirmed that the provisions of
the U.S.-Korea Free Trade Agreement will take effect on Thursday March 15, 2012.
A Presidential Proclamation just published in the Federal Register indicates that, except
for certain provisions with other specified effective dates, the Korean Free Trade
Agreement will take effect with respect to goods entered (or withdrawn from warehouse
for consumption) on or after March 15th. Thus, assuming they would otherwise qualify,
goods already exported from Korea but which are to be entered on or after March 15th
may conceivably benefit under the Korea FTA.
The Korea FTA (variously also referred to as KORUS and, most recently,
as UKFTA) extends duty-free or reduced duty treatment to articles satisfying various
eligibility rules. Conceptually, the Agreement, like the NAFTA, is tariff shift based.
What that means is that, depending upon the commodity, the use of certain foreign inputs
may be permitted but they must undergo a specified change in tariff classification as
a result of production in Korea. The applicable tariff shift eligibility rule varies from
commodity to commodity depending upon its tariff classification.
A very important point of which to be aware is that the Agreement provides for a phase-
out of duties on
qualifying articles. Depending upon the staging category applicable to a particular
commodity, a qualifying article may become duty-free immediately on March 15, 2012
or have its duty rate phased-out over a period from two to fifteen years. It is critical that
any sourcing strategies be informed not only by a commoditys eligibility rule but its
staging category as well.
The Agreement is rife with additional eligibility rules addressing such things as the
impact of any non-
Korean/non-U.S. processing, the presence of de minimis amounts of non-originating
materials, and the
importation of retail sets incorporating foreign components that do not satisfy the
Agreement rules, just to name a few. As with other Free Trade Agreements, requirements