Free Trade Agreements
Summary of the U.S. - Korea Free Trade Agreement
Status: The Agreement was signed on June 30, 2007, ratified by the U.S. Congress on October 12, 2011, and signed by the President on October 21, 2011. The Agreement entered into force on March 15, 2012.
**The information presented on this website is meant to serve as a guide.
Only the agreement text and the customs regulations issued to implement the agreement
are definitive. For complex issues or where interpretation is required, U.S. exporters should seek legal assistance or an advanced ruling from the customs administration in the country to which they are exporting.**
If you have any questions about this Agreement, please contact Maria D'Andrea
at the U.S. Department of Commerce Office of Textiles and Apparel at 202-482-1550 or by email.
How U.S. Textile and Apparel Companies Benefit
On April 1, 2007, the United States and the Republic of Korea announced the successful completion of United States-Korea Free Trade Agreement (KORUS FTA). The Agreement entered into force on March 15, 2012, paving the way for the elimination of tariff and non-tariff barriers to trade in goods and services, to promoting economic growth, and to enhancing trade between the United States and Korea. The Agreement provides standards for protection and enforcement of a broad range of intellectual property rights, including trademarks, copyrights and patents. The Agreement establishes a stable legal framework for U.S. investors operating in Korea. All forms of investment are protected under the agreement. U.S. investors will enjoy in almost all circumstances the right to establish, acquire, and operate investments in Korea on an equal footing with local investors.
Opportunities for the U.S. Textiles and Apparel Sector
Korea is the 10th largest market for U.S. textile and apparel exports. Ninety-eight percent of Korea’s tariff lines, accounting for approximately 73 percent of U.S. textile and apparel exports to Korea by value, will receive duty-free treatment immediately upon implementation of the Agreement; Korean textile and apparel tariffs currently average 10.2 percent, ranging up to 13 percent
The Agreement includes a special textile safeguard mechanism which will provide for temporary re-application of MFN tariffs or the suspension of tariff elimination/reduction, if imports under the Agreement increase either absolutely or relative to the domestic market, and are shown to be causing or threatening to cause serious damage to domestic industry. It adopts a “yarn forward” origin rule, meaning that, generally, apparel and other textile products using yarn and fabric from the United States and Korea will qualify for preferential tariff treatment and, consistent with other U.S. free trade agreements, elastomeric yarns must be sourced from the United States or Korea for textile and apparel products to qualify for preferential treatment.
The Agreement includes a unique transitional streamlined commercial availability determination process that will allow fibers, yarns, or fabrics that are deemed not commercially available in the United States to be used in the production of articles that still qualify for preferential treatment, subject to a quantitative limit in each of the first five calendar years in which the Agreement is in force.
The Agreement includes specific cooperation language for enforcing their respective measures affecting trade in textile and apparel goods, for ensuring the accuracy of claims of origin, and for preventing circumvention of the Agreement’s rules of origin. These provisions provide for significant information sharing between Korean and U.S. Customs authorities, and allow U.S. authorities to conduct verification activities in Korea to ensure that textile products being imported into the United States meet applicable rules of origin and allow U.S. Customs and Border Protection (CBP) to take action whenever textile exporters are breaking the rules – including the denial of entry to suspect goods. These provisions are in addition to the regular CBP processes to ensure vigilance against illegal transshipment from third countries. CBP gathers information on suspected illegal shipments and submits the products to further inspection, and maintains an office in Seoul to act as its “eyes on the ground.” To make sure CBP has the most recent data and information, it also conducts post-importation verifications and summary reviews of goods to ensure their origin. These verifications entail reviewing documentation to support the country of origin claim.
See “The U.S.-Korea Free Trade Agreement: Opportunities for the U.S. Textiles and Apparel Sector”
Opportunities for the U.S. Footwear and Travel Goods Sector
Korea is the fifth largest market for U.S. footwear and travel goods exports. Estimated duties paid on exports of U.S. footwear and travel goods to Korea were over $7 million from 2008 to 2010.
All U.S. footwear and travel goods exports to Korea by value receive duty-free treatment immediately upon implementation of the Agreement; Korean footwear and travel goods tariffs currently average 9.8 percent, ranging up to 13 percent. U.S. tariffs on sensitive rubber/fabric and plastic/protective footwear items imported from Korea will remain at MFN levels for eight years. Beginning on January 1 2020, tariffs on these sensitive footwear products would be reduced in four equal annual stages, and would be eliminated on January 1, 2023.
The Agreement allows only products that are produced in the United States and Korea to receive preferences under the Agreement. The trade agreement rules of origin provide clear requirements for a good to be considered originating, including that a good must be wholly obtained or produced entirely in the territory of the United States or Korea as well as requirements on materials that are used in the production of the good. Importers may claim preferences under the trade agreement based on a certification by the importer, exporter, or producer or based on the importer’s knowledge that the good is originating, but certifications need not be in a prescribed format.
The Agreement requires transparency through the publication of customs measures to ensure that the U.S. and Korean private sectors have access to customs laws and regulations. To the extent possible, those interested will be given an opportunity to comment on generally applicable customs regulations proposed by the United States or Korea. The trade agreement requires simplified customs procedures for the timely and efficient release of goods in order to facilitate “just-in-time” supply chain logistics systems, as well as procedures intended to reduce delays in customs clearance.
See “The U.S.-Korea Free Trade Agreement: Opportunities for the U.S. Travel Goods and Footwear Sectors”.
Textiles and Apparel
Duties on the majority of qualifying textile and apparel products will be eliminated upon entry into force of the agreement. The remainder will be eliminated in three, five, or 10-year stages. The duty-free status and/or staged tariff rates are listed by Harmonized Tariff Schedule (HTS) number in the Tariff Elimination Schedule for the United States and the Tariff Elimination Schedule for Korea. Each line item of the FTA tariff schedules is assigned a letter code that indicates the staging by which the duty for each product is eliminated or reduced and ultimately eliminated. The staging categories listed below generally apply to textile and apparel products in HTS chapters 50-63.
Travel Goods and Footwear
- Category A: duties on originating goods shall be eliminated entirely March 15, 2012;
- Category C: duties shall be removed in three equal annual stages beginning on the date this Agreement enters into
force and will go to zero on January 1, 2014;
- Category D: duties shall be removed in five equal annual stages beginning on the date this Agreement enters into
force and will go to zero on January 1, 2016;
- Category G: duties shall be removed in 10 equal annual stages beginning on the date this agreement enters into
force and will go to zero on January 1, 2021;
- Category K: goods shall continue to receive duty-free treatment.
For qualifying footwear and travel goods, duties will be eliminated immediately for both the United States and Korea. However, for the United States, the following 17 rubber/fabric and plastic/protective 8-digit HTS lines have a twelve year, non-linear tariff phase-out: 6401.10.00, 6401.91.00, 6401.92.90, 6401.99.30, 6401.99.60, 6401.99.90, 6402.30.50, 6402.30.70, 6402.30.80, 6402.91.50, 6402.91.80, 6402.91.90, 6402.99.20, 6402.99.80, 6402.99.90, 6404.11.90, 6404.19.20. These tariff lines are in Category "J": tariffs remain at the current MFN rates of duties for years one through eight of the Agreement, i.e., from March 15, 2012 through January 1, 2019. Beginning on January 1, 2019, tariffs will be reduced in four equal annual stages until tariffs are eliminated on January 1, 2023.
See Annex II to the USITC Publication 4308, “Modifications to the Harmonized Tariff Schedule of the United States to Implement the United States-Korea Free Trade Agreement” for the U.S. tariff phase-out schedule for all commodities, including textiles, apparel, travel goods, and footwear.
Also see ITA's FTA Tariff Tool to determine current and future tariffs for qualifying products, as well as the date on which products are duty-free.
Qualifying Products/Rules of Origin
In order to take advantage of the duty reduction/elimination, products must qualify as "originating" goods under the terms of the Agreement. In general, the product must have sufficient U.S. or Korean content or processing.
Textiles and Apparel
The rule of origin for textiles and apparel is generally referred to as "yarn forward," which requires that the yarn production and all operation forward occur in either Korea or the United States, but the fiber may be from anywhere. However, there are some exceptions in the rules requiring "fiber forward," and some requiring "fabric forward".
If a good does not meet the rule of origin requirements as indicated above, a textile or apparel product might be considered originating if all non-originating fibers and yarns make up less than a "de minimis" seven percent of the total weight of the product. Special provisions also apply to textile and apparel goods put up in sets for retail sale. For further information, see Article 4.3 of the Textiles and Apparel Chapter of the Agreement.
The rule of origin for travel goods is either 1) tariff shift at the chapter level; or 2) cut and sew.
4202.12: A change to goods of subheading 4202.12 with an outer surface of textile materials from any other chapter, provided that the good is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of one or both of the Parties.
4202.19 – 4202.21: A change to subheading 4202.19 through 4202.21 from any other chapter.
4202.22: A change to goods of subheading 4202.22 with an outer surface of textile materials from any other chapter, provided that the good is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of one or both of the Parties.
4202.29 - 4202.31: A change to subheading 4202.29 through 4202.31 from any other chapter.
4202.32: A change to goods of subheading 4202.32 with an outer surface of textile materials from any other chapter, provided that the good is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of one or both of the Parties.
4202.39 – 4202.91: A change to subheading 4202.39 through 4202.91 from any other chapter.
4202.92: A change to goods of subheading 4202.92 with an outer surface of textile materials from any other chapter, provided that the good is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of one or both of the Parties.
4202.99: A change to subheading 4202.99 from any other chapter.
There are two rules of origin for footwear:
1) A change to headings 6401 through 6405 from any heading outside that group (i.e., there are no restrictions on the use of imported uppers). This rule applies to all footwear, except the following 17 8-digit HTS numbers: 6401.10.00, 6401.91.00, 6401.92.aa, 6401.99.aa, 6401.99.bb, 6401.99.cc, 6402.30.aa, 6402.30.bb, 6402.30.cc, 6402.91.aa, 6402.91.bb, 6402.91.cc, 6402.99.aa, 6402.99.bb, 6402.99.cc, 6404.11.aa, 6404.19.aa (See Correlation Table in Appendix 6-A-1.)
2) Footwear covered in the exception above (i.e., the 17 HTS lines) follow a regional value content rule of not less than 55 percent of the adjusted value of the product. Under this rule of origin, to qualify for the duty benefits, uppers can only be made in the United States and/or Korea. This is essentially the same rule of origin used in NAFTA and CAFTA-DR.
NOTE: The regional value content is determined by the “Build-up method”:
RVC = -------- x 100
Where RVC is the regional value content, expressed as a percentage; AV is the adjusted value (value without Cost, Insurance, Freight); and VOM is the value of originating materials used by the producer for the production of the good.
For more information, see the U.S. Customs and Border Protection presentation--How do I Read Tariff Shift Rules.
The Agreement provides for a list in Appendix 4-B-1 for fibers, yarns, and fabrics that the United States has determined are not available in commercial quantities in a timely manner from suppliers in the United States. A textile or apparel good imported into the United States containing fibers, yarns, or fabrics that are included on the list in Appendix 4-B-1 of the Agreement will be treated as if it is an originating good for purposes of the specific rules of origin in Annex 4-A of the Agreement, regardless of the actual origin of those inputs, in accordance with the specific rules of origin of Annex 4-A. In accordance with Annex 4-B-5 of the Agreement, the preferential tariff treatment accorded to a good provided in Harmonized Tariff Schedule of the United States (HTSUS) Chapters 51, 52, 54, 55, 58, or 60 that contains fibers, yarns, or fabric that are included in Appendix 4-B-1 of the Agreement and that satisfies the requirements of Rule 1 of Section XI of Annex 4-A, is limited to 100 million square meter equivalents in each of the first five years in which the Agreement is in force.
In accordance with Annex 4-B-6 of the Agreement, the preferential tariff treatment accorded to a good provided in HTSUS Chapters 61 or 62 that contains fibers, yarns, or fabric that are included in Appendix 4-B-1 of the Agreement and that satisfies the requirements of Rule 2 or 3 of Section XI of Annex 4-A, is limited to 100 million square meter equivalents in each of the first five years in which the Agreement is in force.
To determine the quantity of square meter equivalents that is charged against the annual quantities described above, CITA shall apply the conversion factors listed in, or utilize a methodology based on, the Correlation: U.S. Textile and Apparel Category System with the Harmonized Tariff Schedule of the United States of America, U.S. Department of Commerce, Office of Textiles and Apparel (2007), or a successor document.
Unless the United States and Korea otherwise agree, these procedures implementing Annex 4-B of the Agreement shall cease to apply beginning on January 1 of the sixth calendar year in which the Agreement is in force. On March 19, 2012, the Committee for the Implementation of Textile Agreements (CITA), to which authority for this provision was delegated by the President, published interim procedures for considering requests under the commercial availability provision of the United States-Korea Free Trade Agreement and estimate of burden for collection of information. For more information, see Annex 4-A and Appendix 4-B-1 of the Textiles and Apparel Chapter of the Agreement.
For qualifying goods for which U.S.-Korea FTA duty benefits are requested, the importer must make a claim of preference. The Agreement does not require that the importer provide a certificate of origin in support of the claim of preference. However, both the importer and the exporter have obligations to generate supporting documentation to back-up any claims of preferential treatment under the U.S.-Korea FTA.
For guidance on importing into the United States under this Agreement, see U.S. Customs and Border Protection “Korea FTA Implementation Instructions” and “U .S. Customs and Border Protection (CBP) Interim Regulations to Amend CBP’s Rules to Implement the US-Korea FTA”.
|To make a claim for preferential tariff treatment for a good, the importer must submit to the customs authority of the importing Party, on request, a signed declaration setting forth all pertinent information concerning the growth, production, or manufacture of the good. A requested declaration may require the following details:
- a description of the good, quantity, numbers, and invoice numbers and bills of lading
- a description of the operations performed in the growth, production, or manufacture of the good in the territory of one or both of the Parties and, where applicable, identification of the direct costs of processing operations
- a description of any materials used in the growth, production, or manufacture of the good that are wholly the growth, product, or manufacture of one or both of the Parties, and a statement as to the value of such materials
- a description of the operations performed on, and a statement as to the origin and value of, any materials used in the good that are claimed to have been sufficiently processed in the territory of one or both of the Parties so as to be materials produced in the territory of one or both of the Parties, or are claimed to have undergone an applicable change in tariff classification specified in Annex 4-A
- a description of the origin and value of any foreign materials used in the good that are not claimed to have been substantially transformed in the territory of one or both of the Parties, or are not claimed to have undergone an applicable change in tariff classification specified in Annex 4-A
Korean customs officials may verify a claim of preferential treatment up to five years after the date of importation. Therefore, it is recommended that importers and exporters maintain documents relating to the importation of the good and all supporting documents for at least five years.
|Exporters should be aware that commercial invoices for all shipments from the United States must bear a notarized affidavit: I, (name, title, and name of company), hereby swear that the prices stated in this invoice are the current export market prices for the merchandise described, that the products being shipped are of US origin, and that they have been manufactured in the United States. I accept full responsibility for any inaccuracies therein. (Signature) |
If the products being shipped contain any foreign components, the country of origin and percentage of foreign content in the goods must be indicated on the invoice. No certificate of origin is required.
Exporters can use the free internet-based system on the AESDirectwebsite to file their Electronic Export Information (EEI) to the Automated Export System (AES).
For information on common export documents, such as transportation documents, export compliance documents, certificates of origin, certificates for shipments of specific goods, temporary shipment documents, and other export-related documents, see the Export.gov webpage on Common Export Documents.
Measures to Prevent Circumvention of the Agreement’s Rule of Origin
The Agreement contains additional measures to ensure that textile and apparel goods are not subject to fraud, such as illegal transshipment. The parties agree that the exporting Party, at the request of the importer Party, shall conduct verification procedures to determine that a claim for origin of a textile and apparel good is accurate, allows the exchange of information between parties when suspicion occurs, and permits the importing party to suspend preferential tariff treatment to the textile and apparel good under suspicion or any textile and apparel good produced or exported by a specific company. For further information, Article 4.3 of the Textiles and Apparel Chapter of the Agreement.
Measures to Prevent Serious Damage, or Actual Threat Thereof, to the Domestic Industry
Article 4.1 of the Agreement provides for bilateral emergency action, or a textile safeguard mechanism. This mechanism applies when, as a result of the reduction or elimination of a customs duty under the Agreement, a Korean textile or apparel article is being imported into the United States in such increased quantities, in absolute terms or relative to the domestic market for that article, and under such conditions as to cause serious damage or actual threat thereof to a U.S. industry producing a like or directly competitive article. In these circumstances, Article 4.1.1(b) permits the United States to (a) suspend any further reduction in the rate of duty provided for under Annex 2-B of the Agreement in the duty imposed on the article; or (b) increase duties on the imported article from Korea to a level that does not exceed the lesser of the prevailing U.S. normal trade relations (“NTR")/most-favored-nation ("MFN") duty rate for the article or the U.S. NTR/MFN duty rate in effect on the day before the Agreement enters into force. On March 19, 2012, the Committee for the Implementation of Textile Agreements (CITA), to which authority for this provision was delegated by the President, published interim procedures for considering requests from the public for textile and apparel safeguard actions on imports from Korea and estimate of burden for collection of information. For more information, please see Article 4.1 of the Textiles and Apparel Chapter of the Agreement.
Under the FTA, U.S. suppliers will have rights to bid on the procurements of more than 50 Korean central government entities, nine more than are covered under the WTO Agreement on Government Procurement (GPA). The agreement also expands procurements to which U.S. suppliers will have access by reducing by nearly one-half the threshold applied under the GPA, from $203,000 to $100,000. The government procurement rules under the agreement ensure that certain American business sectors – such as small businesses or textile companies bidding on Department of Defense procurement – do not face foreign competition for key government contracts here at home. The agreement’s procurement obligations also maintain American environmental and labor safeguards. For additional information, see Chapter 17 of the U.S.-Korea Free Trade Agreement.
Office of the U.S. Trade Representative U.S.-Korea FTA web page