Part Of The Provisions Of The US Korea Free Trade Agreement On Textiles

The agreement stipulates that most textiles and garments can enjoy zero tariff preferences after the agreement comes into effect, while some sensitive products will be gradually reduced to a zero tariff rate of 20% or 10% per year in 5 or 10 years.

For example, the United States Customs Tariff No. 61091000 cotton knitted T-shirt has a normal tariff rate of 16.5%, which applies to 10 years' tariff reduction. The agreement takes effect first years, reduces the tax rate by 1.65%, and reduces the 1.65% to zero tariff each year from second to tenth years.

Other products that are applicable to 10 years of tariff reduction include cotton knitted trousers and cotton knitted shirts.

The United States Customs Tariff No. 62052020 for men's cotton woven shirts, with a normal duty rate of 19.7%, is applicable to 5 years' reduction tariff, that is, the reduction of 3.94% to zero tariff each year in 1-5 years after the agreement comes into effect.

Sensitive textiles and garments also include polyester staple, polyester long fiber and polyester long / short fiber fabrics.

2. rules of origin

The rules of origin of textiles and garments are stipulated in the "yarn forward" (self yarn start).

It is stipulated that only tariff and preferential treatment can be enjoyed only by garments made from yarns or fabrics of the United States and / or Korea.

Unlike the Central American Free Trade Agreement, the terms of origin of the US Korea Free Trade Agreement do not require the use of the United States or Korea system for sewing thread, narrow elastic cloth and pocket cloth.

As the Korean textile industry chain is very complete, the rules of origin will not cause Korean clothing exporters to enjoy preferential treatment.

However, the following two provisions are missing in the agreement, which may affect the application of preferential tariffs:

1. cumulative provisions of origin: if we use other raw materials produced by countries with free trade agreements with the United States (such as Mexico), we will not enjoy tariff preferences.

2. tariff preferences limit (TPL): the agreement does not stipulate the "quota ratio" which does not conform to the strict rules of origin of the free trade agreement, but conforms to the general rules of origin.

3. other provisions

(1) customs cooperation and inspection executive group requirements.

The US and South Korean customs may inspect the manufacturers in South Korea without prior notice.

The US Customs has also been authorized to implement relevant measures, such as detaining suspected goods, to control the pshipment of textiles from mainland China.

(2) textile guarantee clause.

When the US duty-free products proliferate and cause damage to us domestic industry, the US can initiate safeguards investigation; if the survey results show substantial damage or threat, the US side has the right to restore the original tax or raise tariffs.

(3) shortage of raw materials.

Importers may apply for a shortage of raw materials for the raw materials that neither the US and South Korea can fully supply. The products which are approved to use the raw materials are subject to duty exemption but are subject to quotas.

In addition, the agreement does not stipulate the "outward processing arrangement". Therefore, the United States does not apply to duty-free preferential treatment when exporting garments made of cheap labor and fabrics from North Korea.

Assessment of the impact of the agreement

Won W. Koo, a professor of North Dakota State University, and research assistant professor Renan Zhuang jointly published the report on the meaning of the free trade agreement between the United States and South Korea, which assessed the impact of the US Korea Free Trade Agreement on the two industrial economies in a general equilibrium model.

The main contents of the report on textile industry are as follows:

1. the output of textile products in the United States will drop by 1.52%, and the reduction will be completely replaced by the textile and clothing imported from Korea, which will result in two effects of trade creation and trade pfer.

Specifically, US imports from Korea will increase by US $5 billion 240 million (trade creation effect), while imports from other countries (regions) will be reduced by US $2 billion 30 million (trade diversion effect).

Since trade creation is more advantageous than trade diversion, the total import of textiles and clothing will increase by US $3 billion 210 million.

2. other developing countries have lower labor costs, and their products have more advantages than Korea's.

After the signing of the free trade agreement between the United States and South Korea, the textiles and clothing imported from the United States from the more advantageous non free trade agreement countries will be pferred to South Korea. While the US textile exports to Korea will increase by 240 million US dollars, while exports to other countries (regions) will be reduced by US $750 million and exports will be reduced by US $510 million.

3. South Korea's textile and clothing exports to countries other than the United States will be slightly reduced by 570 million US dollars, but the total export growth will reach US $4 billion 670 million. The import of textiles and clothing from all its trade partners will increase slightly and the net imports will increase by US $780 million.