What Counts as Korean Made:Relaxing Territoriality Principle Under Rules of Origin

Jong Bum KimDirector, FTA Goods Negotiation Division

How are goods produced in Gaesong Industrial Complex (GIC) treated under a Free Trade Agreement?

How are goods produced in Gaesong Industrial Complex (GIC) treated under a Free Trade Agreement?

1. Introduction

What role does rules of origin play in FTAs? What role does rules of origin play in FTAs?

Expanding the coverage of preferential rules of origin: relaxing the territoriality assumption

Expanding the coverage of preferential rules of origin: relaxing the territoriality assumption

What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin

Reduced output of home industry in favor of import from FTA partnersReduced output of home industry in favor of import from FTA partners

2. Economic Effects of Rules of Origin under FTA

Trade creation under FTA rules of origin Trade creation under FTA rules of origin

- Trade diversion in sourcing intermediate goods

• Sourcing from low Cost world to higher cost partner because of FTA tariff• Sourcing from low Cost world to higher Cost partner because of accumulation

- Trade diversion in sourcing intermediate goods

• Sourcing from low Cost world to higher cost partner because of FTA tariff• Sourcing from low Cost world to higher Cost partner because of accumulation

Trade diversion under FTA rules of origin Trade diversion under FTA rules of origin

Proliferation of preferential rules of originProliferation of preferential rules of origin

FTA Rules of Origin as Non Tariff Barrier FTA Rules of Origin as Non Tariff Barrier

What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin

3. Methods of Determining Rules of Origin under FTAs

Substantial transformation Substantial transformation

- Change in Tariff Classification

- Value Added

- Specific Processing Operation

- Change in Tariff Classification

- Value Added

- Specific Processing Operation

Measuring substantial transformation Measuring substantial transformation

What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin

Historical Meaning of GIC Project Historical Meaning of GIC Project

4. Gaesong Industrial Complex (GIC)

Overview Overview

Labor Conditions in GIC Labor Conditions in GIC

What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin

Customs Procedures in GIC Customs Procedures in GIC

Korea-EFTA FTA Korea-EFTA FTA

5. Korea’s FTA Provisions in GIC Processing

Korea-Singapore FTA Korea-Singapore FTA

What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin

- Outward Processing

- Accumulation

- Outward Processing

- Accumulation

6. Relaxing Territoriality Assumption

Reflecting Globalized Manufacturing Process

Reflecting Globalized Manufacturing Process

WTO GATT Article XXIV Consistency? WTO GATT Article XXIV Consistency?

What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin

7. Conclusion

Implication on GIC on Negotiating of FTA Implication on GIC on Negotiating of FTA

- Rules of origin should facilitate Trade not pose barrier to trade

- Rules of origin need to reflect changing global manufacturing process

- Rules of origin need to made simpler

- Rules of origin should facilitate Trade not pose barrier to trade

- Rules of origin need to reflect changing global manufacturing process

- Rules of origin need to made simpler

Implication Regarding Preferential Rules of Origin

Implication Regarding Preferential Rules of Origin

What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin