The European Commission has published a free guide on the impact of the Free Trade Agreement between the EU and South-Korea for European companies. Topics that are covered in the guide are amongst others the tariff elimination for EU’s exports of industrial and agricultural goods, the tackling of non-tariff barriers, the enhanced access to government procurement and the protection of intellectual property rights.

To read through all the relevant information on this FTA, click here.

The Free Trade Agreement (FTA) between the EU and South Korea is an FTA of the new generation. The origin rules in all other EU’s preferential trade arragements contain besides the use of an EUR.1 document also simplified procedures for regular exporters for the issue of proofs of preferential origin. Under those simplified procedures a preferential origin declaration (= statement of origin inserted by the exporter on the invoice or other commercial document) can be used for consignments with a value from € 6.000 or less and exporters known as ‘approved exporters’ who have an authorization from customs can issue invoice declarations for consignments of any value.

What are the benefits from these simplified procedures for the ‘approved exporter’? He doesn’t have to issue the EUR.1 documents and doesn’t need to get an original stamp from customs. The new reciprocal agreement with South Korea provides only the invoice declarations as proof of preferential origin. Exporters in the EU and South Korea are not allowed to issue EUR.1′s. This means that exporters who want to export preferential goods to South Korea with a value > €6.000 have to apply for a customs authorization in order to become an approved exporter. Exporters who are already approved for preferential origin purposes can apply to have the existing authorization extended for South Korea. But a lot of exporters are not familiar with this authorization and the related administration as they are using the EUR.1 certificates. If the criteria are met, perhaps this is an opportunity for these exporters to consider an application for simplified procedures for all their other FTA destinations as well. Of course this will take some effort but for future shipments to FTA destinations the savings on time and money for the not-issuance of EUR.1 documents is the return on investment.
If you want to read more about this FTA with Korea, click here.

The EU Council decided on 16th September to go ahead for a Free Trade Agreement with South Korea.  The agreement is aimed  to be signed in Brussels on 6th October with provisional application from 1st July 2011.  It will eliminate 98.7% of duties in trade value within five years (industry and agriculture). The remaining tariffs will be abolished almost fully over a longer period. Provisions on electronics, motor vehicles and vehicle parts, pharmaceuticals, medical devices and chemicals are specified in order to avoid non-tariff obstacles. 

The Free Trade Agreement contains protocols regarding rules of origin and administrative assistance on customs matters. Further information can be found here. 

EU Trade Commissioner Catherine Ashton and Korean Trade Minister Kim Jong-hoon have initialled a free trade agreement (FTA) that is the most important ever negotiated between the European Union and a third country. The deal, estimated to be worth up to EUR 19 billion in new trade for EU exporters, will remove virtually all tariffs between the two economies, as well as many non-tariff barriers. The agreement will create new market access in services and investment. The deal also makes major advances in areas such as intellectual property, procurement, competition policy and trade and sustainable development. The FTA signals an important upgrade of the EU-South Korea relationship, together with a new Framework Agreement.

One of the key benefits of the deal for the European Union is the quick elimination of EUR 1.6 billion of duties for exporters to Korea. The agreement also tackles key non-tariff barriers including regulations and standards in industries of European interest, like automotive, pharmaceutical and consumer electronics. Services sectors such as telecommunications, environmental, legal, financial and shipping are expected to see some of the greatest benefits, with substantial commitments from Korea to liberalise these sectors.

The initialling of the FTA signifies the closing of negotiations with a stable legal text, which the European Commission will formally present to EU Member States in early 2010. Following signature of the agreement by the EU Presidency and the Commission, the FTA will be presented to be approved by the European Parliament. Entry into force of the agreement would then be expected in the second half of 2010.

EU-Korea goods trade was worth around EUR 65 billion in 2008. The EU currently runs a deficit with Korea in goods trade, although trends suggest that the Korean market offers significant growth potential. For instance, EU car sales to Korea went up by a total of 78% in unit sales (39% in value) between 2005 and 2008. For products like chemicals, pharmaceuticals, auto parts, industrial machinery, shoes, medical equipment, non-ferrous metals, iron and steel, leather and fur, wood, ceramics, and glass, the EU enjoys a solid trade surplus. Similarly, for agricultural products Korea is one of the more valuable export markets globally for EU farmers, with annual sales of over EUR 1 billion. On services, the EU has a surplus with Korea of EUR 3.3 billion, with exports of EUR 7.2 billion in 2007 and imports of EUR 3.9 billion.

Source: EU Commission press release DG Trade 15th October 2009

The EU and Korea have concluded the 7th round of negotiations for an EU-Korea FTA.  The first negotiations were launched on 6 May 2007.  During the last round of negotiations in January 2008, the EU and Korea agreed on important issues such as sustainable development, antitrust and merger aspects of competition policy, transparency of domestic regulation and bilateral dispute settlement mechanisms. 

The current negotiations covered a wide range of negotiating issues, including non-tariff barriers, industrial goods tariffs and rules of origin. 

The two sides made further progress on ‘behind the border’ issues such as standards and certification requirements in a number of sectors.  Korea has also signaled its readiness to examine enhanced protection for geographical indications (GI’s).

Korea used this round to raise the question of the EU’s rules of origin -the rules governing the import of products into the EU produced in more than one country.  Both sides have achieved a better understanding of each other’s positions, and the EU intends to present a compromise proposal to Korea.

The difficult question of tariffs for industrial goods, including those on passenger cars, and the automotive non-tariff barriers have been discussed among the two negociators.  The gap in the respective positions remains.  However, both sides recognise the need to come to a common understanding.   

Eu and Korea will continue contacts at various levels.  The next round of negotiations is expected to be the final one, for which the date has not yet been fixed. 

The EU is committed to securing a comprehensive, highly ambitious and balanced agreement, in line with what the Commission set out in its Global Europe trade strategy.  The EU is Korea’s second largest export destination after China, and Korea is the EU’s fourth largest non-European trade partner.  The EU remains the largest foreign investor in Korea ahead of the US, Japan and China.  EU-Korea trade exceeded €64 billion in 2007.

Source: EU Trade News weekly digest 15 May 2008