By Wangi Ahn,Yeojin Yi,Chris Sung,Michael Lee
The Korean National Assembly has ratified the Korea-U.S. FTA ("KORUS FTA") in a plenary session held on November 22, 2011, thereby removing the last hurdle to implementation of the FTA between the two parties. Since the U.S. Congress has already completed its procedures for ratification, the FTA is set to enter into force 60 days after the date both parties exchange written notifications certifying that they have completed their respective applicable legal requirements and procedures, or on such other date as both parties may agree. According to the Korean Ministry of Foreign Affairs and Trade, the Korean government is proceeding with implementation procedures in order to effectuate the KORUS FTA with a target date of entry into force of January 1, 2012.
The KORUS FTA is considered as the most ambitious bilateral free trade agreement entered into by both Korea and the U.S., and will significantly affect the way bilateral trade is conducted, and the changed market environment will also impact third-country businesses. The most immediate effect will be reduced tariffs resulting in price competitiveness for the FTA beneficiaries, and an opening for new players to enter the market. On a broader policy level, the FTA will promote transparency and enhance efficiency across public and private sectors.
However, while the overall effect of the FTA is expected to bring net plus gains for the parties, its implications and potential benefits which individual corporations may derive will hinge upon many factors, such as business structure, location of manufacturing facilities, cross-border logistics flow, etc. For example, while there is no requirement under the KORUS FTA for the exporter to receive any approval or certification in order to receive tariff benefits (the so-called "approved exporter" qualification in the Korea-EU FTA), certain other criteria under the KORUS FTA, including the rules of origin for specific products (among others), must be reviewed and carefully adhered to in order to qualify for preferential treatment.
In the remaining time until the date of the entry into force of the KORUS FTA, we expect both the Korean and the U.S. governments to step up efforts to bring domestic laws in compliance with their respective obligations under the FTA and to issue the requisite implementing laws and regulations to provide detailed guidance on the FTA's provisions.
The FTA Practice Group of Kim & Chang provides consulting services tailored to each company's different needs and circumstances in relation to the full spectrum of FTA issues, and also assists our clients in understanding the legal changes and advocating their positions vis-à-vis government agencies.
Should you have any questions or comments regarding free trade agreements, please do not hesitate to contact me or any of the FTA Practice Group contacts below at your convenience for additional information or consultation.