Kaesong-made products excluded from KORUS FTA by US

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Kaesong workers

The Hankyoreh | 29 Aug 2011

Kaesong-made products excluded from KORUS FTA by US

A bill in the U.S. Congress indicates sanctions against N.Korea prevents the inclusion of the products

By Jung Eun-joo

The United States government has made it official that products made at the Kaesong Industrial Complex in North Korea will not be classified as “made in Korea” according to the terms of the South Korea-U.S. Free Trade Agreement (KORUS FTA). The formation of a committee to discuss whether products from the complex should be regarded as made in Korea, the formation being previously agreed upon by the United States and South Korea has now been thrown into doubt. This goes directly against previous statements by the South Korean government, which emphasized that the FTA would re-open a path for exporting Kaesong Industrial Complex products to the United States.

A bill on the implementation of the KORUS FTA and a statement of administrative action, both currently being deliberated by the U.S. Senate and House of Representatives, clearly states that administrative orders of the US administration and regulations of the Department of Treasury’s Office of Foreign Assets Control (OFAC) forbid bringing into the U.S., directly or indirectly, North Korean products, services and technology, and that the KORUS FTA does not change these sanctions.

The documents also state that products from a third country that use North Korean products or technology, too, may not be brought into the United States, and that those contravening the measures will be subject to civil and criminal prosecution. In other words, as long as the United States maintains its sanctions against North Korea, it will be impossible for products made at the Kaesong Industrial Complex to be exported to the United States with the benefits of reduced tariffs, even if the KORUS FTA comes into effect.

The U.S. government has also blocked the discussion of whether Kaesong products should be recognized as made in Korea. In addition to no mention of the formation of a committee to discuss the issue in the text of the U.S. bill, the bill clearly states that the KORUS FTA, even after it has come into effect, will not change the ban on bringing products made in North Korea into the United States. The United States has also failed to provide a legal or systemic basis for granting Kaesong Industrial Complex products the same tariff benefits as those made in South Korea.

Unlike the KORUS FTA, the FTAs South Korea has recently signed with ASEAN, the E.U. and Peru all recognize products made in the Kaesong Industrial Complex as being made in South Korea, by classifying them as special cases of products refined outside South Korean territory.

Until now, the South Korean government has claimed that it has provided a systematic framework in which Kaesong Industrial Complex products will be subject to the reduced tariffs of the KORUS FTA, for reasons such as the fact that the two countries had agreed to form a regional committee for products refined outside Korean territory.

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source: Hankyoreh