{
  "id": "R41868",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "R41868",
  "active": false,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 388844,
      "date": "2011-06-15",
      "retrieved": "2016-04-07T00:46:26.065188",
      "title": "The Proposed U.S.-South Korea Free Trade Agreement (KORUS FTA): Automobile Rules of Origin",
      "summary": "The U.S.-South Korea Free Trade Agreement (KORUS FTA) was signed on June 30, 2007. The provisions on the automotive sector were among the most difficult areas negotiated, and were among those in which the Obama Administration and South Korean officials reached further agreement on December 3, 2010. \nThe agreement\u2019s effect on the automotive sector has drawn particular scrutiny as Congress considers implementation of the KORUS FTA. In particular, the specific rules of origin (ROO) for automobiles and auto parts have become a matter of debate. These rules determine whether the products imported into an FTA participating country are eligible to receive the duty-free or reduced tariff benefits of the agreement. For autos and auto parts, a certain percentage of the parts, labor, and other associated costs must come from the region. This is known as a regional value content (RVC) test.\nFew vehicles built today are built of parts made in any one country. The roughly 15,000 parts needed to produce a single motor vehicle are typically supplied by a complex web of manufacturers located throughout the world. This makes it challenging to determine whether a particular vehicle or a complex component, such as an engine or a transmission, qualifies for duty-free access to the U.S. or South Korean markets under the KORUS FTA. \nBased on analysis of the regional value content required under the KORUS FTA rules of origin, a significant proportion of a vehicle\u2019s value would need to originate in South Korea or the United States for that vehicle to enter the United States duty-free. Simply assembling a product from inputs obtained from other countries would likely result in insufficient regional value content for a product to qualify for the tariff benefits of the KORUS FTA. It appears that the requirements under the KORUS FTA are roughly equivalent to those imposed upon South Korean and European Union vehicles under the South Korea-European Union Free Trade Agreement, which takes effect July 1, 2011. \nContent produced in North Korea is not presently allowed into the United States, a situation that the KORUS FTA would not change. If at some future time the United States were to ease trade restrictions on North Korea, U.S. and South Korean negotiators would then need to discuss the treatment of North Korean inputs to South Korean products under the agreement. The KORUS FTA contains provisions to promote cooperation between the two countries\u2019 customs officials. Nonetheless, ensuring that North Korean parts are not used in South Korean products exported to the United States will remain a challenge, whether or not the KORUS FTA takes effect.",
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      "typeId": "REPORTS",
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  "topics": [
    "Foreign Affairs"
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}