KORUS Changes Affect Verification of Origin for US Goods, Harmonize Regulations

South Korea agreed to change "how it conducts verification of origin for U.S. products," and establish a working group to resolve future origin verification issues, as part of a deal to renegotiate U.S.-South Korea Free Trade Agreement announced March 25. The changes come on top of an agreement by South Korea to open its auto market by lifting caps on imports that don't match South Korean safety standards (see 1803260005), according to additional details of the agreement in principle released by the U.S. Trade Representative the evening of March 27. The preliminary deal also makes other changes on auto industry trade, including that:

• South Korea will recognize U.S. standards for auto parts, and reduce labeling burdens for imported parts, so that it's easier to repair U.S. cars owned in South Korea.
• South Korea will change how it conducts verification of origin for U.S. products, and establish a working group to monitor and address future issues about verification.
• Future fuel economy targets will consider U.S. regulations, and South Korea will expand credits needed to meet fuel economy standards across the fleet. Those credits apply to factors other than the engine, such as tires, lights and air conditioning.
• U.S. imports will not have to undergo South Korean emissions testing, if the U.S. testing shows compliance with South Korean regulations.

The deal, as earlier reported, also exempts South Korea from steel tariffs, but places a 70 percent quota on those exports. The temporary exemption from steel tariffs lasts until April 30; the quotas will take effect May 1. At that time, South Korean aluminum exports will be subject to 10 percent tariffs.

Congress members who will be part of the 60-day consulting period once the deal is completed reacted March 28, most praising the changes. Senate Finance Committee Chairman Orrin Hatch, R-Utah, responded to the news with a statement that said, "Since KORUS went into force more than five years ago, it became clear that Korea needed to do more to fully implement the agreement in order to remove trade and investment barriers for American exporters. The agreement in principle announced today makes steps toward improved implementation and maintains the strong economic ties between our two nations." House Ways and Means Committee Chairman Kevin Brady, R-Texas, said the deal "will be beneficial to American consumers, workers, and manufacturers."

Ways and Means Ranking Member Bill Pascrell, D-N.J., expressed skepticism. "I voted against KORUS in 2011 out of fears that it would widen the trade gap with our South Korean partners, and this is precisely what happened. These new terms do not go far enough to reduce that deficit. Furthermore, the steel quota provisions agreed to appear insufficient, with South Korea representing a large share of steel imports into the United States while also being one of China’s largest customers." Senate Finance Committee Ranking Member Ron Wyden, D-Ore., said, "I commend Ambassador Lighthizer for his work to restore business certainty with an important ally and expect him to consult much more closely with Congress as the details of this agreement are finalized."