WT/REG359/2  
 
23 May 2016  
(16-2791)  Page: 1/9  
Committee on Regional Trade Agreements  Original: English/Spanish  
 
 FREE TRADE AGREEMENT BETWEEN THE REPUBLIC OF KOREA AND AUSTRALIA 
(GOODS AND SERVICES) 
QUESTIONS AND REPLIES 
 The following communication, dated 19 May 2016, is being circulated at the request of the 
delegations of the Republic of Korea and Australia.  
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   This document reproduces the questions addressed to the Parties and the responses 
submitted. 
 Questions from the delegation of Canada 
 1.1.  Row 7A & B, Tables 4.3 and 4.4: The Fa ctual Presentation indicates that each party 
has made partial commitments on future me asures in financial services. Could the 
parties please provide an elaboration on this  observation? Are there specific limitations 
or restrictions applicable to future  measures in financial services?  
 In accordance with Article 8.9.2, some measures in Financial Services sector that a Party 
adopts or maintains are excluded from some of the obligations under the Agreement and the 
measures are listed in Section B of Annex III. 
  In Section B of Annex III, Australia reserved  the right to adopt or maintain any measure 
with respect to the guarantee by government of government-owned entities, including guarantees 
related to the privatization of such entities, which may conduct financial operations. In addition, Australia may maintain or amend measures listed in Section A, so long as amendments do not 
reduce the conformity of the measure as it ex isted. Australia's commitments are subject to 
headnotes, for example allowing non-discriminatory limitations on juridical form, and to the financial services chapter. Amongst other provisions, provisions in the Financial Services Chapter confirm a Party's right to adopt prudential measures and confirm certain rights when regulating 
new financial services in the future.  
  Korea listed in Section B of Annex III measures relating to compulsory third party insurance, 
the guarantee of the obligations and liabilities of government owned or controlled financial entities 
in the context of privatizing, and foreign inve stors' ownership of the Korea Exchange and the 
Korea Securities Depository. 
 
1.2.  Paragraph 4.47: The Factual Presentation  indicates that the Parties make specific 
commitments for supervisory cooperation. Are the Parties' financial regulators currently 
negotiating a memorandum of understanding (M OU) to strengthen their cooperation? If 
not, do the Parties intend to negotiate su ch an MOU, and would it be made public? 
 A MOU was signed on 11 February 2015 betwee n the Australian Securities and Investment 
Commission (ASIC), and the Financial Services Commission (FSC) and the Financial Supervisory 
Service (FSS) of the Republic of Korea, in relation to cooperation in fulfilling regulatory mandates, 
particularly in the areas of investor protection; fostering market and financial integrity, and maintaining confidence and systemic stability. The MOU is publicly available. 
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  Questions from the delegation of Colombia 
Chapter 13 - Intellectual Property Rights  
1.3.   Paragraph 5.33: In Article 13.9, with  respect to Australia, what is the procedure 
for revoking or cancelling a patent? Can this take place ex officio  or at the request of the 
interested party?  
 There are a number of procedures for revoking a patent. Revocation or cancelling a patent 
can take place ex officio  or at the request of a third party. The procedures vary according to which 
section of the Patents Act 1990 are used.  
 
 The specific sections are as follows:  
 Under sections 137 and 138, a patent can be revoked where the patentee offers to 
surrender the patent, or where a Minister or any other person applies to a court for an order revoking the patent, as outlined in s138. 
 Under section 101(1) the Commissioner may, by notice in writing, revoke a patent, 
either wholly or so far as it relates to a particular claim, if the Commissioner:  
(a) makes an adverse report on a re-examination of the relevant specification under 
subsection 97(2); and  
(b) is satisfied, on the balance of probabilities, that there is a lawful ground of objection 
to the relevant specification.  
 Under section 134 where a compulsory licence ordered under section 133  relating to a 
patent  is granted, an interested person may a pply to the Federal Court, after the end of 
the prescribed period, for an order revoking the patent . 
1.4.  Article 13.9 of the Agreement makes a reference to the publication of statistical 
information. Could we receive further details about what these indicators would cover?  
 Korean Intellectual Property Office (KIPO) publishes the Intellectual Property White Paper 
(Korean) and an Annual Report (English) every year. Via these documents, we publicize statistical 
information about (1) application, examination, and registration of IP, (2) trials and appeals, 
(3) law enforcement results (the number of criminal arrests of individuals and seized goods) etc.   Specific IP Australia statistical data can be harvested from the information on the IPGOLD  
system. Patents, trademarks, designs and plan t breeder’s rights can be searched on the 
IP Australia website . In relation to IP Australia Hearings and Oppositions, copies of all IP Australia 
decisions  since 1983 are available on the Australasian Legal Information Institute website.  
 
 Other decisions are available on the Australasian Legal Information Institute  website. This 
covers Federal Court, Federal Circuit Court, High Court and Supreme Court decisions. Other Civil 
and Criminal matters may be published in the State and territory Court Annual reports.  
  Additionally, annual reports for other organisations such as Department of Immigration and Border Protection (Customs), the Australian Federal Police, and State Police can include 
information on matters including seizures. 
 Questions from the delegation of the European Union  
 Liberalization schedule 
1.5.  Extensive carve outs and long phase in  periods: Australia accepted the carving out 
of two sectors in AUSFTA (dairy and sugar), while the list of carve outs is much more 
extensive for Korea, reflecting the politic al sensitivities around agriculture.  WT/REG359/2 
 
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   As the Parties of the Agreement are developed economies, how could they justify 
such an extensive carve-outs from scope of the agreement?    KAFTA is a high quality, comprehensive agreement that substantially liberalizes trade and 
investment between Korea and Australia, with significantly improved market access in goods and 
services.  
 At the end of the implementation period, 98.1% Korea's tariff lines across all sectors will be 
duty-free for imports of Australian origin.   Rules of origin 
 1.6.  Paragraph 3.23: Pursuant to Arti cle 3.23, the importing country's customs 
administration shall proceed with the origin verification with the direct involvement of 
and approach to importers, exporters and producers. In comparison, the exporting 
country's customs administration may assist in verifying the origin of the good (only) if 
requested by the importing country's customs administration in the origin verification 
process, and the importing country's customs administration shall provide advice of the 
decision to the exporting Party where a verifi cation visit was undertaken. Basically, this 
implies a limited role and competence of th e exporting country's customs administration 
in the origin verification proc ess (which differs from the indi rect origin verification opted 
for in the EU-Korea FTA).  
a. How will the direct origin verification  be undertaken in practical terms?  
 As provided for in the Agreement, the customs administration of the importing Party, as the 
primary initiator of origin verification action, may request related information from the importer, 
the exporter or producer and makes the final decision on whether a good satisfies the rules of origin based on the information provided (Article 3.23). In order to supplement direct verification 
by the importing Party, the importing Customs admi nistration may also veri fy the validity of a 
Certificate of Origin (CO), directly with the issuing authority where the CO was issued by an authorized body of the exporting Party (Article  3.23.1b). The importing Party may also request 
assistance from the customs administration of the exporting Party in the verification process 
(Article 3.23.1d). Participation of Customs officials from the exporting Party in the verification visit 
as observers is also allowed (Article 3.24.5).  
b. Will there be any exchange of letters/MOU  or the detailed operational guidance 
to provide the clear interpretation of the relevant FTA provisions, on which both sides can mutually agree?  
 There are no plans to issue any further operational guidance at the moment. 
 Provisions on Trade in Services and Investment 
Investment screening 
 1.7.  The Agreement reserved policy space to screen Japanese proposals for foreign investment in agricultural land at $A15 m illion and in agribusiness at $A53 million, a 
policy which was subsequently introduced by  the Australian Government in December 
2015. While KAFTA, in line with most of Aust ralia's earlier FTA's, raised the screening 
threshold at which Korean investments in ot her non-sensitive sectors are considered by 
the Foreign Investment Review Board fr om $A248 million to $A1,078 million, the new 
thresholds for agricultural land and agribusi ness investments do not apply to earlier FTA 
partners (such as the US and New Zealand) and therefore create a tiered system of 
investment review procedures, complicatin g the process for potential investors.  
 Australia has reserved the right to implement lower screening thresholds for foreign 
investment in agricultural land and agribusiness in its recent FTAs, including KAFTA, as well as the 
Japan-Australia Economic Partnership Agreement (JAEPA), the China-Australia Free Trade 
Agreement (ChAFTA) and the Trans-Pacific Partnership (TPP). This is consistent with recent 
changes to Australia's foreign investment policy. In March 2015 the screening threshold for foreign investment in agricultural land was set at AUD15 million and in December 2015 a AUD55 million WT/REG359/2 
 
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  screening threshold was introduced for agribusiness. Further detail is available at: 
https://firb.gov.au/resources/policy-documents/  
  The higher thresholds for screening of private foreign investment in some sectors under 
Australia's FTAs, including KAFTA, are the result of negotiated outcomes in those agreements. 
 Investment dispute resolution 
 The Agreements includes a mechanism for the settlement of investment disputes between one of the Parties and an investor of  the other Party, whereas other recent free 
trade agreements concluded by Australia do  not contain such a mechanism (e.g. Japan-
Australia Economic Partnership Agreement) or include a mechanism applicable to a 
limited set of investment protection provisions (e.g. China-Australia FTA). 
 
 The investment chapter of this agreement introduces specific screening thresholds 
dependent on the sector and the nationality of the investor, and some investors are able 
to utilise investor-state dispute settlement pr ocedures while others cannot or can do so 
for a more limited number of investment prot ection provisions. Will Australia consider 
standardizing its investment policies in orde r to create a level playing field for all 
investors?   
 Australia includes Investor-State Dispute Settlement (ISDS) in its FTAs on a case-by-case 
basis. Australia agreed to ISDS provisions in KA FTA, the China-Australia FTA and the Trans-Pacific 
Partnership Agreement.  
 
 Under KAFTA, an ISDS claim can be brought if any provision contained in the investment 
chapter has been breached and the claimant has incurred loss or damage as a result of, or arising 
out of, that breach (see Article 11.16). Covered investments are defined in Chapter 11, Section C. 
  The higher thresholds for screening of private foreign investment in some sectors under Australia's FTAs are the result of negotiated outcomes in those agreements. 
 
Intellectual Property Rights  
Well-known trademarks  (Article 13.2.5) 
 
1.8.  Are there any commonly agreed principl es and/or criteria fo r determining whether 
a trademark is a well-known mark in a party's jurisdiction or do they differ considerably 
from one to the other?  
 Korea and Australia do not have bilaterally agreed principles and/or criteria for determining 
whether a trade mark is well known in a party's jurisdiction.  
1.9.  Do both parties have domestic legi slation which contain the provision on the 
well-known trademarks and also set out the spec ific conditions for such determination? 
For Australia 
 
 No. In Australia, well-known trademarks are protected under a framework of laws including the Trade Marks Act 1995 , Australian Consumer Law and the common law tort of passing off. 
Australian trade mark law does not specifically incorporate a definition for well-known marks but 
they can be determined on a case-by-case basis.    Subsection 120(4) of the Trade Marks Act 1995 , in relation to infringement, states that: 
"In deciding, … whether a trade mark is well known in Australia, one must take account of the 
extent to which the trade mark is known within the relevant sector of the public, whether as a result of the promotion of the trade mark or for any other reason." 
 
For Korea 
 
 Article 7.1.10 of Korea's Trademark Act provides 'Any trademarks which is feared to cause 
confusion with goods or services of other persons or to damage their recognizability or reputation because the trademark is remarkably recognized  among consumers to indicate the goods or WT/REG359/2 
 
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  services of other persons' are not to be register ed. Further, Korean Intellectual Property Office's 
Trademark Examination Guideline set out specific criteria for such determination, which is method of use, period, location of product, market sh are and benefit of product, brand recognition of 
consumers.  
 
1.10.  Pursuant to Article 13.2.5, each Part y shall provide for appropriate measures to 
refuse or cancel the registration and prohibit  the use of a trademark that is identical or 
similar to a well-known trademark, for relate d goods or services, if the use of that 
trademark is likely to cause confusion or is likely to deceive.  
 Will this require any amendments to the do mestic legislation in either of the 
parties for its proper implementation or not? 
 
For Australia 
 
 No.  
  The Trade Marks Act  1995 includes measures to: 
 
 Refuse or cancel registration or prohibit use of a trade mark where that trade mark is 
likely to deceive or cause confusion (s.44, s.60s, s88, 120). 
 Refuse or cancel registration  of a trade mark on the basis of bad faith (s.62A, s88). 
 The Trade Marks Act  1995 deals with registered trademarks, or trademarks for which 
registration is sought. The Australian Consumer Law (ACL, sections 18 and 29) covers false, misleading and deceptive conduct and representations. The common law tort of passing off is also 
available. 
 For Korea 
  Relevant necessary measures are already put in place according to the existing Korean Trademark Act; therefore no further amendments are required.  
Ex officio  border control (Article 13.9.21) 
 
1.11.  The Agreement (Art. 13.9.21) provides  that the Parties customs authorities may 
initiate border measures ex officio  with respect to imported merchandise that is 
suspected of being counterfeit or confusin gly similar trademark goods, or pirated 
copyright goods. The scope of the goods subject to the ex-officio border measures is 
clearly limited to the goods infringing the trademark and the copyright only, which does 
not encompass the other intellectual property ri ghts such as a patent, registered design, 
a plant variety right and geographical indica tions. Furthermore, Australia, in its last 
Trade Policy Review of April 2015 stated (i n reply to EU Question 53) "Australian 
Customs still require a Notice of Objection from  the IP owner or authorised user to seize 
goods that infringe IP rights (in contrast to  the EU situation, where authorities are able 
to initially act ex officio )." Against this background: 
a. Could Australia provide information how ex officio  at the border action provided 
for in the Korea-Australia Agreement is  compatible with its legislation? 
Ex officio  action can be initiated by the Department of Immigration and Border Protection 
through provisions within the Commerce (Trade Descriptions) Act 1905 . The action is based on the 
goods having a false trade description. Ex officio  action is progressed as a Customs matter and not 
under any intellectual property (IP) legislation. The rights holder is not involved in this process.  
 In addition, a rights holder can request the courts to order suspension of the release of 
other types of IP. (This would require a court order directing customs authorities to intervene.)  
 
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  b. What if one of the parties already has in  place the domestic law and the system 
to enforce the ex-officio border measur es on all these intellectual property 
rights, which shall apply unilaterally to all the imported goods irrespective of 
its product origin? How will this be  treated under this Agreement? 
 More extensive protection by either party is permitted under the IP Chapter of KAFTA by 
Article 13.5, which provides:  
"More Extensive Protection and Enforcement 
5. A Party may provide more extensive protection for, and enforcement of, intellectual property 
rights under its law than this Chapter requires, pr ovided that the more extensive protection does 
not contravene this Chapter." 
Questions from the delegation of Mexico 
 
Anti-dumping and countervailing measures  
 1.12.  Paragraph 3.50: The Parties confirm th eir current practice of counting toward the 
average all individual margins, whether p ositive or negative, when anti-dumping 
margins are established on the weighted-to-we ighted basis, transaction-to-transaction 
basis, or weighted-to-transaction basis, and share their expectation that such practice 
will continue. Moreover, the Party making a deci sion to impose an anti-dumping duty in 
accordance with Article 9.1 of the WTO Ag reement on Anti-Dumping, shall normally 
apply the "lesser duty" rule. 
 Regarding paragraph 3.50, could the Pa rties explain under what circumstances 
they would cease to apply the "lesser duty" rule? The reason for our question is that the 
term "normally" indicates that there may be an  exception to the application of this rule. 
  For Australia, application of the lesser duty  rule does not need to be considered when 
imposing an anti-dumping duty in certain circum stances. These are where the Australian industry 
comprises a number of small and medium enterp rises (SMEs) or where a particular market 
situation exists. Even when these circumstances exist, the lesser amount of duty may still be 
applied. 
 
 For Korea, the lesser duty rule applies in all cases unless it is impracticable to do so in such cases as stakeholders' failure to submit data. 
 
Environment 
 
1.13.  Paragraph 5.42: Who makes up the ad -hoc Committee? Which Party is responsible 
for appointing its members?   
According to the KAFTA Environment Chapter (Article 18.7), the ad hoc  Committee shall 
comprise appropriate senior officials from the environmental ministry and/or other appropriate 
agencies and ministries of each Party. The ad hoc  Committee has not yet been convened.  
Technical Barriers to Trade  
1.14.  Paragraph 3.3: Unde r what circumstances will the Committee meet? Who makes 
up the Committee and does it meet at the re quest of the Parties or on a regular basis? 
 The text, as drafted, allows for the possibility of an ad-hoc  Working Group on Technical 
Barriers to Trade to be formed (Article 5.9.4) and describes the process by which such meetings 
are convened. Participants from relevant agenci es and organizations from both Parties could 
participate in these meetings.  WT/REG359/2 
 
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  Regulatory Cooperation  
1.15.  Sections 3.5.1 and 3.5.2: Do sector al cooperation activities not provide for 
regulatory cooperation? Does technical coop eration include the possibility of developing 
regulatory cooperation mechanisms? 
 Sectoral cooperation activities can include regulatory cooperation. Technical cooperation 
between the Parties could include the possibility of  developing regulatory cooperation mechanisms. 
 
Questions from the delegation of the Separate Customs Territory of Taiwan, Penghu, 
Kinmen and Matsu 
 
Sector-specific provisio ns on trade in goods 
Cooperation in energy and mineral resources 
 
1.16.  According to paragraph 3.56 of the WT O Secretariat's Factual Presentation, both 
Parties agreed to endeavour to promote mu tually beneficial trade and investment 
activities in the energy and mineral resources sector.  
We would like to ask whether there have been significant changes in the 
two countries' export structure for energy resources since the FTA entered into force on 
12 December 2014, and what effects the recent crude oil price decline have had on the two countries' performance in energy trade. 
 
 Given recent broader movements in global commodity markets, particularly for energy 
resources, it is difficult to identify changes in export structure for energy resources resulting from 
the Korea-Australia FTA. Furthermore, the FTA has on ly been in force for a relatively short period 
of time and tariffs on some energy products are still being reduced. This further adds to the 
difficulty in making any assessment on export structure and trade performance at this stage. 
 
1.17.  According to paragraph 3.56 of the WTO Secretariat's Factual Presentation, the 
Parties agree to endeavour to promote mu tually beneficial trade and investment 
activities in the energy and mineral resou rces sector, via the effective ways which 
Article 16.15, point 2, has listed. Article 16.15,  point 2(a) then indicates: "encouraging 
investment relating to the exploration, extr action, processing, tran sportation and use of 
energy and mineral resources,  including emerging technologies and renewable energy". 
 Have there been any significant improvements in investment schemes in the 
renewable energy sector between the Parties or more plans formulated to facilitate 
investments in this sector since the FTA entere d into force? If so, please elaborate which 
energy resources have been targeted, and/or which plans have been formulated to 
facilitate relevant investments.  
  Parties are continuing to promote mutually beneficial trade and investment activities in the energy and mineral resources sector, including emerging technologies and renewable energy.  
 
1.18.  According to Section B of Chapter 16 (Cooperation) of this FTA, Article 16.13 
affirms both parties agree to enhance the st able and mutually beneficial cooperative 
relationship between the Parties in th e energy and mineral resources sector. 
Article 16.14 identifies the cooperative activiti es by the public and private sectors in the 
field of energy and mineral resources. Ar ticle 16.15 illustrates both parties agree to 
endeavor to promote mutually  beneficial trade and investment activities in these 
sectors. Regarding the energy and mineral resources sector, both parties may discuss 
effective ways to encourage investment re lating to the exploration, extraction, 
processing, transportation and use of ener gy and mineral resources, including in 
emerging technologies and renewable energy. 
In 2004, the South Korean government passed the Act on the Promotion of the 
Development, Use and Diffusion of New And Renewable Energy (the Act). According to 
the Act, do recipients of operation subsidies (such as the feed-in tariff scheme and the 
introduction of Renewable Portfolio Standard  in 2012) and the R&D tax credit program 
have to achieve a certain level or percentage of domestic content?  WT/REG359/2 
 
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   The programmes according to the Act do not set out such requirements. 
 Provisions on Trade in Services and Investment 
Recognition 
 1.19.  Paragraph 4.60: For so me professional services, th e Parties commit to ensure 
more transparency concerning standards and criteria for the licensing and certification 
of professional service suppliers, includin g information concerning the appropriate 
regulatory or other body to consult regarding these standards and criteria. Moreover, each Party shall encourage the relevant bodi es in its territory to develop mutually 
acceptable standards and criteria for licensi ng and certification. A Working Group on 
Professional Services is establishe d to facilitate these activities. 
 We would like to know is there any im provement or collaboration on mutual 
recognition under the Working Group on Pr ofessional Services to facilitate the 
development of mutually a cceptable standards and criteria for licensing and 
certification. If so, please shar e the latest development with us. 
 
 Yes. Australia and Korea are discussing arrangements for the first Working Group on 
Professional Services meeting to be held in 2016.  Questions from the delegation of Thailand 
 Rules of origin  
 
1.20.  Paragraph 3.25: The RVC is calculat ed according to the methods defined under 
Articles 3.3 (Regional value content) and 3.4 (value of materials). When the RVC is used 
as an alternative method to determine the or igin of a good, in most cases, this means 
that the good must have a RVC of not less than 40%. In some cases, the RVC is either 
not less than 30% using the build-up method or not less than 40% using the build-down 
method. Annex 3-A also specifies for which tari ff lines the good must be wholly obtained 
in the territory of one or both of the Partie s, and for which one specific manufacturing or 
processing operation confirms origin. 
 According to the methods defined under Regional value content, is there a 
difference in terms of result when the RV C is calculated using the build-up and the 
build-down method? 
  Providing a choice of build up or build down methods facilitates trade by giving traders the 
option to use the method which best suits the information they hold. Mathematically, the outcome 
of the formulae for calculating Regional value content using the alternative methods will be the same where the value and originating status of all the materials is known. However, this may not always be the case; the originating status or value of some materials may not have been 
determined. If a trader knows the value of non- originating and undetermined materials, it may 
choose to use the build-down method. If it knows the value of originating materials, it may choose to use the build-up method.  
 
General provisions on trade in services 
Movement of Natural Persons  
Table 4.1 Australia: Commitments on movement of natural persons 
 1.21.  Could Australia elaborate more on her commitments that Korean accompanying 
spouses and dependents of Business Visitors and Contractual Service Suppliers of Korea 
who has been granted a temporary stay for a period of no longer than 12 months are 
also able and eligible to stay and work for the same length of stay as that natural 
person. Additionally, In the case where a na tural persons of Korea who are fallen under 
categories Business Visitors and Contractua l Service Suppliers extend or renew their 
length of stay, do those Korean accompanyi ng spouses and dependents be also eligible 
to apply their length of stay and work as well? 
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  Under KAFTA, Australia extends stay and work rights to spouses or dependants of natural 
persons of Korea where the visa granted to the natural person is for a period of longer than 12 months. Business Visitors and Contractual Service Suppliers categories are precluded from this commitment. 
 
Table 4.2 Korea: Commitments on  movement of natural persons 
 
1.22.  Could Korea elaborate more on th e point that under Korea's commitments, 
Australian accompanying spouses and dependen ts of all categories of natural persons 
(Business Visitors Intra Corporate Transfer ees, Trade and Investors and Contractual 
Service Suppliers) are capable to stay in Korea for exactly the same length of stay of 
those natural persons, moreover, the accomp anying spouses and dependents are also 
eligible to work in Korea too? 
 Entry and temporary stay shall be granted for an equal period to a spouse or dependent of 
an intra-corporate transferee, trader, investor, or contractual service supplier of Australia; and if 
the accompanying spouse and dependents satisfies the requirements of relevant laws of Korea, 
they may be eligible to work in Korea.  
 
Other 
Competition 
 
1.23.  Under the Agreement, "the Parties also recognize the importance of ensuring that 
Governments at all levels in their territori es do not provide any competitive advantage 
to any state enterprise in its business acti vities as a result of it being a state 
enterprise." Could the Parties provide an ex planation and examples of "any competitive 
advantage to any state enterprise  in its business activities as a result of it being a state 
enterprise"?  
 KAFTA requires that governments (at any level) do not provide any competitive advantage 
to a state enterprise as a result of it being a state enterprise. This reflects the concept of 'competitive neutrality', which requires that government business activities should not enjoy net competitive advantages over their private sector competitors by virtue of their public sector 
ownership alone. It requires that governments should not use their legislative or fiscal powers to 
advantage their own businesses over the private sector.   
 For more information on the implementation of 'competitive neutrality' in Australia, see 
http://www.pc.gov.au/about/core-func tions/competitive-neutrality  
 
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