WORLD TRADE ORGANIZATION  
ORGANISATION MONDIALE DU COMMERCE  
ORGANIZACIÓN MUNDIAL DEL COMERCIO WT/TPR/M/137/Add.1 
20 December 2004 
 (04-5574) 
Trade Policy Review Body 
15 and 17 September 2004 Original:  English/ 
                 anglais/                  inglés 
  
TRADE POLICY REVIEW 
REPUBLIC OF KOREA 
Minutes of Meeting
 
Addendum  
Chairperson:  H.E. Mrs. Puangrat Asavapisit (Thailand) 
 This document contains the advance written qu estions, and replies provided by the Republic 
of Korea.1 
__________________________________________________________________________________  
Organe d'examen des politiques commerciales 
15 et 17 septembre 2004 
 
EXAMEN DES POLITIQUES COMMERCIALES 
RÉPUBLIQUE DE CORÉE 
Compte rendu de la réunion
 
Addendum  
Présidente:  S.E. Mme Puangrat Asavapisit (Thaïlande) 
 
 Le présent document contient les questions écrites communiquées à l'avance et les réponses 
fournies par la République de Corée.1 
__________________________________________________________________________________ 
 
Órgano de Examen de las Políticas Comerciales 
15 y 17 de septiembre de 2004  
EXAMEN DE LAS POLÍTICAS COMERCIALES 
REPÚBLICA DE COREA 
Acta de la reunión
 
Addendum  
Presidente:  Excma. Sra. Puangrat Asavapisit (Tailandia) 
 
 En el presente documento figuran las pre guntas presentadas anticipadamente por escrito, 
junto con las respuestas facilitadas por la República de Corea.1 
                                                      
1 In English only./En anglais seulement./En inglés solamente. WT/TPR/M/137/Add.1 
Page 2  
 
ADVANCE WRITTEN QUESTIONS BY MEMBERS AND 
REPLIES PROVIDED BY THE REPUBLIC OF KOREA 
ARGENTINA
 
 II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
(3) DEVELOPMENT AND ADMINISTRATION OF TRADE POLICY 
(i) Main trade laws  Question 1: paragraph 14
 
 The Report by the Secretariat (Chapter II, paragra ph 14) shows that the Foreign Trade Act of 1996 
(the main legislation covering international tr ade) was amended in 2003.  Could Korea list the 
modifications?    
Answer
 
 
Promulgation of Foreign Trade Act revisions (September 29, 2003)  - Services have been included within the broader definition of trade. - Designation of companies that specialize in hi-tech business, such as IT and BT, as general 
 trade companies. 
- New criteria for determining the origin of domestic manufacturing and distribution products 
 using imported raw materials.   - Reporting procedures and on-site inspections have been adopted to tighten control over 
 strategic item exports.  - Requirements for invoking adjustme nt orders have been clarified. 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
Question 2: page 45, paragraph 2
 
 
The Report by the Secretariat (page 45, paragraph 2) mentions that Korea applies tariffs on inputs 
according to end-use that selectively reduce applied tariffs.  Could Korea specify and provide more 
details on that mechanism and if it applies to non end-use goods?  
Answer
 
 Usage tariffs exempt imports for specified uses from certain tariffs. The subjects to which usage 
tariffs are imposed are autonomous tariff quotas, con cession tariffs, basic tariffs and other provisional 
tariffs, which have relatively low rates. 
 
(ii) Customs valuation 
 
Question 3: paragraphs 18-19
 
 
The Report by the Secretariat (paragraphs 18 and 19)  shows that, according to the Korean authorities, 
Korea's customs valuation legislation complies w ith the WTO Agreement on Customs Valuation. 
That legislation says that the KFC may set special customs valuation and documentary requirements 
for used imports.  Could Korea give details about those requirements?   
  WT/TPR/M/137/Add.1 
 Page 3 
 
 
Answer  
 
A letter of technical inspection which shows the t ype, year of production, unique number of the 
automobile, etc. is required when importing used automobiles.  (iii) Tariffs  Question 4: paragraph 28
 
 
The Report by the Secretariat (paragraph 28) shows that 99% of applied tariffs by Korea are ad 
valorem, whereas the rest are "alternate specific ra te" which vary for the same product depending on 
the quality.  Could Korea give more information on how that mechanism works?     
Answer
 
 Our mechanism of alternate specific rates is that  the higher tariff between ad-valorem and specific 
rates should be imposed. In addition, there are no alternate duties applied for the same product 
depending on the quality.  
(iv) Tariff quotas 
 
Question 5: paragraph 54
 
 
The Report by the Secretariat (paragraph 54) refe rs to autonomous tariff quotas (which provide the 
right to specific imported inputs amongst the most re duced quotas) and mentions that many items with 
no quota limits remain on the list. Moreover, domestic  legislation says that autonomous tariff quotas 
are applied to basic raw materials imported due to  "insufficient" domestic supply.  What determine 
this type of quota when the item has no limit?  Wh at are the items? What "insufficient" means?   
 
Answer  
 
Korea does not set the quota on all the items subject to the autonomous tariff quota system. Items not 
subject to quota, mainly comprising of raw mate rial with insufficient domestic production and items 
heavily depending on imports, are applied to lower th e in-quota rate. The meani ng of "insufficient," as 
questioned, is when the domestic supply falls greatly below the domestic demand. 
 
(ix) Standards and other technical requirements 
 
Question 6: paragraph 4  
 
The Report by the Secretariat (paragraph 4) show s that Korea has harmonized many compulsory 
technical standards with international norms to improve transparency and reduce unnecessary 
obstacles to trade. But, referring to pharmaceutical  products, cosmetics, a nd some other foodstuffs, 
there still are big differences regarding conformity test, inspection and acceptation of tests done 
abroad. What kind of foodstuffs are they? What kind of regulations are they?   
 
Answer  
 Please refer to the answer to New Zealand’s question 5. 
 WT/TPR/M/137/Add.1 
Page 4  
 
Question 7: paragraph 84
 
 
The Report by the Secretariat (paragraph 84) shows that, on food additives, Korea prohibits some 
ingredients and food colours that are considered saf e by international (e.g. CODEX) standards. Could 
Korea explain why? 
 
Answer  
 
The number of food additives, including flavorin g agents, approved by the KFDA is 603. However, 
considering that a group of flavoring agents can  be classified into one item, the number of food 
additives is, in practice, much higher than 603 and it  is not lower than that of other countries. The 
food additives items approved and food items vary  from country to country. The KFDA approves new 
food additives generally twice a year, and continu es to relax usage level provisions, in order to 
harmonize KFDA's standards and usage levels with  international standard s such as those by the 
Codex Alimentarius Commission. Please note that just like other member countries, including the 
U.S., and Japan, the KFDA has a food additives pre- approval system in place and reviews technical 
justification and the safety of food additives to approve food additives items.  
IV. TRADE POLICIES BY SECTOR 
(2) Agriculture 
 
Question 8: paragraph 13
 
 
The Report by the Secretariat (paragraph 13) shows that the average fill ratio of tariff quotas is about 
70%. Could Korea indicate what policy it will impl ement to complete the use of tariff quotas for 
agricultural products?  Answer
 
 
According to OECD data, Korea's agricultural produc t quota fill rate for TRQ items is relatively high 
compared to that of other member countries. State trading estates’ import administration for agricultural products is basically guaranteed in Ar ticle 17 of GATT.  More than 95 percent of the 
tariff quotas have been filled for many of the items  which are relatively high in terms of importing 
value and relatively large in terms of importing quan tity, such as soybean, corn, sesame seed, starch, 
malting barley and malt, orange, natural hone y, red bean, green bean, onion, etc.  
 Items that have shown lower quota fill rates incl ude; pepper, garlic, and gi nger due to the oversupply 
caused by increases in domestic production and a tem porary surge in imports; whey and several dairy 
products due to import bans imposed against anim al diseases such as BSE, Foot-and-Mouth disease, 
etc.; and egg, breeding cow and seeds due to decr eases in domestic demand. Korea will make further 
efforts to reflect market mechanisms in its import management system. (public auction of import rights, bidding sales of imported products, new real demand based allocation, etc.).  AUSTRALIA
 
 
FTAs 
 
Question: page 27, paragraph 42  
 
The Secretariat observes Korea’s increasing willingn ess to negotiate FTAs. What criteria is Korea 
using to select its FTA partners?  WT/TPR/M/137/Add.1 
 Page 5 
 
 
Answer  
 
To maximize economic and political benefits, Korea may have to pursue FTAs with big and advanced 
economies from the long-term perspective. However,  in the short run, Korea is using 3 criteria; 
economic feasibility, political and diplomatic impli cations, the country’s willingness to conclude an 
agreement with Korea. 
 
State Trading 
 
Question: page 54, paragraph 63  
 
The Secretariat Report notes that Korea has not  submitted an updated WTO notification on state 
trading since December 1998. Could Korea indicate when it expects to submit its next notification on state trading?   Answer
 
 
Korea will do its best to notify the WTO of the resu lts of the detailed operation of state trading as 
soon as possible.   
Tariffs  
 
Question: page 38, paragraph 2
 
 
The Secretariat Report notes that Korea’s tariff regi me is a relatively complex system and as such 
constitutes a potential distortion to competition and an obstacle to the efficient allocation of resources. 
What steps is Korea taking to streamline its tariff system?  
 
Answer  
 
Please refer to the answer to China’s question (Tariff).  Question: page 51, paragraph 51 and page 86, paragraph 13
 
 
Could Korea please indicate what steps it will take  to overcome tariff quota administration issues?  
 
Answer  
 
Please refer to the answer to Argentina’s question 8.  
Question: page 82, paragraph 2
 
 
How does Korea justify high tariff rates, particular ly on products like sheep meat which has a tariff 
rate of 22.5 per cent, despite the fact that Kor ea does not have a domestic sheep meat industry to 
protect?   
Answer
 
 Korea imposes tariffs on agricultural products b ased on the results of the UR negotiations on 
agriculture. It is true that for some items, it has become less necessary to impose high tariffs. Korea 
will adjust the tariffs on agricultural products accord ing to the outcome of the DDA negotiations on 
agriculture after the conclusion of the negotiations. Ye t, Korea needs to maintain high tariffs on sheep WT/TPR/M/137/Add.1 
Page 6  
 
meat because it is indirectly related to the c onsumption of Korean goat meat and influences the 
domestic livestock industry.   
Question: page 48, paragraph 33
 
 Does Korea intend to reduce the use of adjustment tariffs further? 
 
Answer
 
 
Please refer to the answers to China’s question (Tariff) and Canada’s question 6.  Quarantine  
 
Question: page 62, paragraph 101
 
 Can Korea explain why animals that test negative to  the mandatory quarantine arrangements; retained 
in PEQ; and not permitted contact with other consignm ents are not able to obtain an extension to the 
validity of their veterinary certificates?  Will Ko rea re-consider the proposed changes, made by 
Australia, to overcome these difficulties?   
Answer
 
 
The Korean Quarantine authority, while recognizing Au stralia’s interest in solutions for the issues of 
concern, is reviewing the issues raised by Austra lia. In the quarantine process, the Bluetongue disease 
was detected from live U.S. cattle. Consequently, quarantine for live Australian cattle, which is the 
next item subject to quarantine, in Korean quaran tine facilities has been postponed.  In the meantime, 
the quarantine inspection on live Australian cattle conducted in Australia prior to shipment has 
expired. As a result, the validity of the quarantin e certificate was questioned and live Australian cattle 
were shipped back voluntarily.  
 
Agriculture 
 
Question: page 89, paragraph 24-25  
 
Can Korea provide information on the volume of surplus milk bought by the Dairy Promotion Institution from dairy farmers, and provide more details on the final use of this surplus milk?  
 
Answer
 
 
In order to consolidate the milk collecting process and stabilize the supply, demand and price of raw milk, the Dairy promotion Institution, a private or ganization, has been selling milk since 2002 after 
purchasing surplus milk by using the Graded Price System through negotiations  with dairy farmers. 
The Dairy Promotion Institution sells surplus m ilk to companies manufacturing cheese, fermented 
milk and condensed milk through open tenders or negotiated contracts.  
 The volume of surplus milk purchased by the Dairy Promotion Institution, indicated year by year, is 
as follows: 
 - 1999 : 8,725 tons,  2000 : 179,937 tons,  2001 : 196,139 tons,  2002 : 314,440 tons, 2003 : 
 204,393 tons    WT/TPR/M/137/Add.1 
 Page 7 
 
 
Question  
 
With reference to Annex 5 of the WTO Agreemen t on Agriculture, what steps is Korea taking to 
prepare for the results of the negotiations on the possible tariffication of its rice sector?   Answer
 
 
Korea is conducting negotiations on rice with 9 countri es that have expressed interest. At the present, 
it is extremely difficult for us to predict the outcome of the negotiations.  
 
Question  
 
The Doha Round Mandate calls for a substantial im provement in market access and reduction in 
subsidy levels in the agriculture sector. What policie s is Korea pursuing to restructure its agriculture 
sector in advance of the conclusion of the Round?   Answer
 
 
The policy goal of "the ten-year agricultural reform  program" is to seek balanced social development 
through which both rural villages and urban cities will prosper. This policy originally started off as a 
paradigm to expand the plan to include not only the existing agricultural sector but also the new rural 
village sectors.   The major policy paradigm is as follows.   
- Target: expand from agriculture to includ e agriculture, food, and rural villages 
- Support Method: changed from e qual support to tailored support  
- Policy Means: transformed from a government-driven and price support method to private 
 sector-driven, market-oriented and income support method  - Attributes of Rural Villages: developed c oncept from agricultural production areas to 
 production, settlement, and amenities areas  
 
Policy Framework  - Agricultural Policy: carry out market-oriented structural reform and foster environment-
 friendly and high quality agriculture  
- Income Policy: expand direct payment system, strengthen management stabilization 
 mechanism, and increase non-farm income  - Rural Village Policy: develop rural village areas, expand so cial safety nets, and enlarge 
 welfare infrastructure  Policy Goal and Vision: achieve a balanced and developed society where rural villages and urban 
cities can both prosper 
 - Agriculture: graft agriculture onto sustainable bio-industries 
- Farmers: achieve income goal commensurate to urban workers  
- Rural Villages: build rural amenities 
 
The Korean government set out an investment and loan plan worth 119 trillion won in March 2004 to implement the ten-year agricultural reform program. 
 WT/TPR/M/137/Add.1 
Page 8  
 
Forestry 
 Question
 
 
Investment assistance offered by the Korean gove rnment to Korean companies for investment in 
offshore plantations is on the basis that plantation timber is returned to Korea for processing.  The 
Korean government’s policy differentiates against ve rtical integration of Korean owned plantations 
and processing facilities overseas and favours Ko rean based processing of wood products. 
 - Given the increasing need by Korea to import both logs and processed wood products can 
 Korea set out its intended tariff regime on pr ocessed wood products over the next 5, 10 and 
 20 years?  - Could Korea also explain how its investment policies for overseas plantation investment, 
 coupled with tariff regimes on processed w ood products, will not impact on vertical 
 integration of Korean forest businesses in  overseas countries nor affect the viability of 
 exporting processed wood products to Korea? 
 
Answer
 
 
Korea imports a considerable volume of logs as well as processed timber. However, some items 
directly and indirectly influence our domestic industr ies. In addition, it is also possible that forestry 
companies and timber businesses that have engaged in  afforestation projects in foreign countries may 
have different interests. Therefore, it is difficu lt for us to present a long-term tariff regime on 
processed wood.  We will review this issue after the conclusion of the DDA negotiations.  
 
Each item among diverse types of logs and process ed timber has a different influence on the local 
forestry industry as well as timber businesses. In par ticular, it is also possible that forestry companies 
and timber businesses that have engaged in afforesta tion projects in foreign countries have different 
interests. We will carefully review our tariff regime and come up with measures to satisfy as many interested parties as possible, in considera tion of all the above-mentioned points as well as the 
outcome of the DDA negotiations.   Energy  Question: page 91
 
 As the Secretariat report notes, remaining state monopolies are being privatized and competition 
being introduced in the energy sector (WT/TPR/S /137, page 91). However, progress has been slow. 
What is the status of Korea’s plan to restru cture the electricity and natural gas sectors?  
 
Answer
 
 1) Electricity 
 The Korean government established the Basic Plan for Restructuring the Electricity Industry in 1999 
and has been faithfully implementing restructuring.  
In Phase I, KEPCO's generation unit was split into  six generation companies (five thermal power 
companies and one nuclear company) and the Kor ea Power Exchange was established in April 2001. 
In Phase II, KEPCO's distribution was to be divided.  However, after further research on the plan, the 
adoption of the independent business operation system, in place of the division of the distribution, was decided in June 2004.  WT/TPR/M/137/Add.1 
 Page 9 
 
 
 * The joint research team which was set up at the recommendation of the Tripartite 
Commission of Labor, Management and Govern ment, conducted a study on the division of 
the distribution unit from September 2003 to April 2004. It recommended the adoption of the independent business operation system to stre ngthen internal competition, as there were 
concerns of skyrocketing prices and unstable suppl y if the distribution unit were to be divided 
and introduced into the wholesale market. 
 The Korean government will continuously work on th e restructuring of the electricity industry to 
adopt competition. The privatization of the Kor ea South-East Power Company (KOSEPCO) will be 
carried out as initially planned. However, given the stock market situation, the privatization efforts 
will focus on the sales of the company with improved management efficiency. 
 
2) Natural gas  
 
Korea promoted the restructuring and privatization of the gas industry in order to eliminate the 
inefficiency resulting from KOGAS' monopoly. Bills re lated to restructuring were submitted to the 
National Assembly in November 2001. In May 2005, th e bills were automatically  repealed due to the 
end of the term of the 16th National Assembly. The current government adjusted and amended the 
basic plan for gas industry restructuring.  
<Amendment of the basic plan for gas industry restructuring> 
Sector  Before Amendment 
Wholesale sector spin off the wholesale sector by three and 
sell off two of them to private companies  decide method of division and method of 
market entry after sufficient discussions 
Facility sector  maintain Open Access System  
sell government-owned shares by the end of 
2002 maintain the existing public enterprise 
system. 
 
< the result of overseas benchmark labor , management and the government > 
 Joint use of facilities 
 
- adopt a system for joint facility use by dividing facilities and sales: divide the gas company 
 into a facilities company and a sales company in  order to fairly calculate facilities fees  
 Structural reform  
- instead of an artificial division, carry out structural reform through a method of market entry 
 by easing regulations   Future measures   
- deciding the methods of competition in the wholesale sector after sufficient discussions 
 between labor, management and the government.  - converging opinions through pub lic hearings from various sources including related scholars, 
 businessmen, and consumers, etc.  WT/TPR/M/137/Add.1 
Page 10  
 
Services 
 
Question
 
 
Korea’s education, health and legal sectors remain  effectively closed to foreign service providers. 
Korea’s initial offer in the WTO services negotiations  on these sectors is very limited. Does Korea 
intend to allow greater foreign competition in these sectors?  
Answer
 
 Korea has submitted its initial offer in March 2003, in which Korea made new commitments in the 
legal and education services sector. However, Korea has not been able to make any commitments in 
sectors such as health-related social services. Thes e sectors are closely associated with influential 
domestic interest groups and carry great domestic sensitivity. The Korean government has not yet 
decided but consulted with vari ous domestic interest groups a nd related authorities on how to 
effectively cope with the various concerns of domestic services suppliers and the call for greater 
liberalization in these sectors.   
Question
 
 
Could Korea advise whether they would consider re moving restrictions in the sector, including: 
 
- the requirement that foreign bank branches need  to be separately licensed and capitalised to 
 operate in Korea? - requirements for foreign deposit taking institutio ns to allocate between 25 to 50 per cent of 
 loans (depending on the type of DTI) to SMEs? 
- not permitting foreign life or general insurers from forming joint ventures with Korean life or 
 general insurers?  
Answer
 
 
Foreign bank branches are subject to the branch capital system and considered as one independent 
bank.  If a foreign bank wishes to open more than one  branch in Korea, it has the option of setting up 
a subsidiary which does not require branch licensing.  Therefore, the authorities do not see the need to 
remove the requirement.  Please refer to the answer to Canada’s question 18. 
 
Under Korean insurance laws and regulations, ther e are no separate stipulations subjecting foreign 
investors especially in the areas of licensing, join t ventures and equity ownership. Also, in owning 
insurance companies, there are no restrictions on foreign ownership except for qualifications. 
Foreigners applying for overseas ownership must own an insurance business in their country with 
sound assets and financial structure. The rationale behind the required qualifications is to prevent 
speculators from entering the market and to pr otect the professional management of insurance 
companies and the best interest of policyholders. Similar types of entry requirements can be found in most other countries.   
 
    WT/TPR/M/137/Add.1 
 Page 11 
 
 
BRAZIL  
 Question 1
 
 
In document WT/TPR/S/137, Chapter I ("Economic Envi ronment), paragraph 25, it is stated that "The 
pattern of export destinations has shifted further to  East Asia since 2000. Reflecting the disparity in 
economic conditions between regions, the share of total exports destin ed for China increased notably, 
while the share destined for the Un ited States and Japan slightly decreas ed". In light of the shift of 
Korean exports from the West to the East, how does the South Korean Government consider its 
policies regarding the establishment of preferential tr ade agreements? In South Korea’s view, what is 
the role of RTAs in its trade relations with Western countries?  
 
Answer  
 
Please refer to the answers to US question 5 and Venezuela’s question 2. 
 Question 2: paragraph 22
 
 
According to document WT/TPR/S/137, Chapter III (Trade Policies and Practices Measures"), 
paragraph 22, "Korea has reduced tariff rates si nce its previous Review by implementing WTO 
commitments. It eliminated tariffs on 98 tari ff lines from 1 January 2003 and abolished remaining 
duties under the ITA. There have been few unilateral reductions or increases in MFN tariffs. Tariffs of 
10% were imposed on cigarettes in July 2001 and ra ised annually, to 40% by 2004". Has the process 
of tariff reduction due to WTO commitments been co mpleted? What products, other than cigarettes, 
have had their tariffs changed? Is it anticipated th at the higher tariffs could be later reduced in an 
specific timeframe?  
 
Answer  
 
The Korean government has already implemented mo st of the UR schedule. Only some petroleum 
products, of which the final commitment period acc ording to the UR schedule is 2009, are still under 
implementation.  There has been no tariff increases in any items since the last TPR. For cigarettes, 
Korea and the U.S. agreed to reserve the impos ition of tariffs, on the condition that Korea has 
monopoly over manufacturing under the Memorandum of Understanding on Ci garette between U.S. 
and Korea of 1988. And in July 2001, with the abolishment of Korea's monopoly over manufacturing, foreigners were allowed to invest and 10% tariffs were imposed on cigarettes in July 2001, which has 
gradually risen every year, up to 40% in 2004.  
 
Question 3: paragraph 34
 
 
Emergency tariffs are mentioned in paragraph 34  of Chapter III (Trade Policies and Practices 
Measures), of WT/TPR/S/137. It is stated that "Korea's customs legislation allows for special 
emergency tariffs on agricultural, forestry and livest ock products in the event of sharp increases in 
imports or falls in import prices (Article 68, Customs Act). Korea reserved the right to take 
emergency safeguard action (SSG) on crop and related produc ts (e.g. grains, potatoes, ginseng, and 
soybean) under the WTO Agreement on Agriculture. It has never applied special emergency tariffs to 
forest products, which are not covered by WTO pr ovisions." Can you indicate the official body in 
charge of the analysis and application of SSGs and the usual procedures for its use?  
 
 
  WT/TPR/M/137/Add.1 
Page 12  
 
Answer
 
 
The Korean government can trigger SSG on 121 ag ricultural items (based on HS 10-digit) according 
to Article 5 of the WTO Agreement on agriculture  as well as our C/S. However, SSG has been 
actually triggered for only a few items. The specifi c standards and procedures for triggering SSG are 
as follows:  
 The triggering of SSG is related to tariff increases.  Therefore, according to Article 68 of the Customs 
Law, the Ministry of Finance and Economy, consults  with the Ministry of Agriculture and Forestry 
regarding the list of items which would be subject to SSG the following year and the standard (price, 
volume and the basis for triggering SSG) at the end of each year.  
 The Ministry of Agriculture and Forestry informs the Ministry of Finance and Economy of the list of items and standards for the following year at the end of each year. As for items to be subject to SSG 
due to import surges, they are selected based on the average import volume for the last 3 years of the 
concerned item, and the changes in consumption vol ume for the last 2 years. The volume basis for 
triggering SSG is based on the same standard. As for the items to be subject to SSG due to decreases 
in import price, they are selected if the increas es in their import volume are higher as their average 
import prices dropped more than 10% compared to 1988~1990.  
 The Korea Customs Office is in charge of the actual triggering of SSG on the items selected to be 
subject to SSG. The Ministry of Finance and Economy issues a decree about the list of items subject 
to SSG and the trigger standard for the followi ng year after consulting with the Ministry of 
Agriculture and Forestry. Then, SSG is triggered automatically during the process of importation and 
customs clearance.   Question 4: paragraph 37
 
 
In document WT/TPR/S/137, Chapter III (Trade Poli cies and Practices by Measure), paragraph 37, it 
is stated that "Korea bound 91% of all tariff lines in the Uruguay Round. Some 99% of agricultural tariff lines (excluding mainly rice) and 90% of in dustrial tariff lines (WTO definitions) are bound. On 
a tariff classification basis, 86% of agricultural ta riff lines (HS Chapters 01-24) and 93% of industrial 
lines (HS Chapters 25-97) are bound. The lowest inci dence of tariff bindings on this basis (63% of 
items) is in live animals and products (HS secti on 1), which includes a substantial number of unbound 
tariff items on fish and fish products; wood and ar ticles (HS section 9) (72%); hides and skins (HS 
section 8) (78%); transport equipment (HS section 17) (81%); and articles of stone (HS section 13) 
(82%)". According to that paragraph, 9% of tari ff lines remain unbound. What are the applied rates 
for the unbound products? What are the special reasons for not binding the tariffs on those products?  
 
Answer
 
 
Most of our unbound items are domestically sensitive or related to future strategic industry. The 
general rates on those unbound products range between  08%. However, tariffs on fishery products 
and some industrial goods are relatively higher.  The individual tariff on unbound items could be 
identified though the IDB database.  
Question 5: paragraph 38
 
 According to document WT/TPR/S/137, Chapter III ("Trade Policies and Practices by Measure"), 
paragraph 38, it is stated that "Korea's aver age bound rates on agricultura l and industrial products 
were 61.1% and 9.7%, respectively, in 2004 (WTO  definitions). Since bound rates on average have 
fallen more than applied MFN rates (12.8% in  2004), the gap between the two has narrowed.  WT/TPR/M/137/Add.1 
 Page 13 
 
 
However, since the average bound rate was still abou t one third higher in 2004, considerable leeway 
exists to raise applied rates, thereby reducing ta riff predictability. Korea uses this scope mainly to 
raise MFN tariffs annually by applying higher ad justment duties on a number of products to 
temporarily protect domestic producers". What is th e procedure for reviewing applied MFN tariffs? Is 
there any report published annually to indicate the grounds for changing applied tariffs?  
 
Answer  
 
Please refer to the answers to Canada’s questions 5 and 6. In addition, any changes in adjustment duties should be published in the official gazette in advance. 
 
Question 6
 
 
Regarding document WT/TPR/S/137, paragraph 3 of Chapter IV ("Trade Policies by Sector"), it is 
affirmed that "Agricultural protection also underm ines Korea's economic effici ency and tends   to 
penalize efficient exporters, including manufacturer s. Although self-sufficiency goals and other "non-
trade" concerns underpin agricultural protec tion, the resulting higher food prices are borne 
disproportionately by poor consumers. The measures used are an economically inefficient and costly 
means of achieving food security, and have contri buted to surplus production of key commodities, 
like rice and dairy products." Is the surplus production  of rice and dairy products only a side effect, or 
is it also a deliberate objective within Korea food security goals? 
 
Answer  
 
The Korean government intends to maintain food security through a policy which combines domestic 
production, stable imports and maintaining the prope r volume of stock. We do not intend to achieve 
food security through the sole measure of domestic pr oduction. Such a point is proven by the fact that 
approximately 73% of the total crops consumed by the Korean public are imported from foreign 
countries. Accordingly, temporary problems concer ning excessive stocks of rice and dairy products 
do not arise because of food security, but due to a structural problem caused by the imbalance between production and consumption, which is  a common issue for agricultural products. 
Nevertheless, the Korean government  will make its utmost efforts to settle such issues in a market-
oriented way.  
 
Question 7
 
 
Chaebols are mentioned in Paragraph 57 of Chapte r TV (Measures Directly Affecting Exports) of 
WT/TPR/S/137 as follows: "The automobile indus try, dominated by chaebols, has undergone 
substantial rationalization. After declining in 2001, production growth rebounded to 5% in 2003 (8% 
in 2002). The Daewoo Motor Company, after bankrup tcy in 1999, was taken over by General Motors 
in October 2002 to form GM Daewoo". Could you please inform to what extent was the chaebols 
share in the Korean automobile ma rket (not just production) reduced? Is there any legal requirement 
to sell vehicles in the Korean mark et, like local presence requirements? 
 
Answer  
 
In 2003, Hyundai Motors accounted for 47% and Kia Motors 23.5% of the total car sales in Korea. 
Together, they amounted to 70.5% of the domestic  market. There is no legal requirement to sell 
vehicles in the Korean market. 
 
 
 WT/TPR/M/137/Add.1 
Page 14  
 
Question 8
 
 
In document WT/TPR/G/137, page 11, paragraph 31 it is stated that "In 2003, the government 
identified 10 key areas for regulatory reform, includi ng foreign direct investment, financial service, 
logistics and distribution, and land use. Greater e fforts are being made to improve, ease or rationalize 
the regulations on these areas to construct a more bus iness-friendly environment. In addition, there is 
now a greater emphasis on enhancing regulatory tran sparency as an essential component of economic 
reform programs." What are the main changes in th e distribution sector within the regulatory reform? 
 
Answer  
 
Since the liberalization of the distribution market  in 1996, the Korean government has removed most 
of the regulations and continues to explore ways to  improve the regulations annually in joint efforts 
with the distributors’ associations and organizations . In 2003, the regulatory reform was implemented 
when tobacco wholesalers and retailers were prohibited to hire adolescents. 
 
Question 9: page 96, paragraph 62  
 
In document WT/TPR/S/137, page 96, paragraph 62, it is stated that "The potential gains from enhanced competition through market opening and re gulatory reforms appear greatest in the services 
sector, given its lower level of productivity. For exam ple, labor productivity in services is around 60% 
of that in manufacturing, and the difference is wi dening". What are the factors that are contributing 
for this difference?   
Answer
 
 
The disparity in labor productivity between service s and manufacturing is mainly caused by the fact 
that Korean manufacturing is centered around capital  intensive industries, such as semiconductors, 
shipbuilding, steel, and automobiles, while services have been rather small in scale with less capital 
intensity. Therefore, Korea has set the goal of  transforming its economy into a knowledge based 
economy and aims to raise competitiveness in the servi ces sector through further deregulation, market 
opening, and enhanced competition and liberalization. 
 
Question 10: page 96, paragraph 58  
 
In WT/TPR/S/137, page 96, paragraph 58, it is indi cated that "a special ex cise tax applies to motor 
vehicles to minimize environmental pollution". What  are the criteria utilised for applying this tax 
across the range of types of motor vehicles?  
 
Answer  
 
Our special excise tax criteria applied to motor vehicles is based on displacement, as follows. 
- above 2,000 CC : 10% 
- below 2,000 CC : 5% 
 
CANADA  
 
Report by the Secretariat (WT/TPR/S/137)  
 
II. Trade Policy Regime: Fr amework and Objectives 
(6) Foreign Investment Regime (ii) Legislative Framework and Procedures  WT/TPR/M/137/Add.1 
 Page 15 
 
 
 
Question 1: paragraph 55  
 
Canada is pleased to see that the Republic of Kor ea has taken steps to est ablish an open Foreign 
Direct Investment (FDI) regime. Canada would appreciate receiving a general update regarding 
foreign equity limits in telecommunications services.  
 
Answer  
 
A foreign government, a foreigner or a juridical pe rson deemed to be a foreigner can hold up to 49% 
of the stakes of a facilities-based telecom service. A juridical person of which a foreign government or 
a foreigner is the largest shareholder and owns 15% or more stakes is deemed as a foreigner. A 
foreign government or a foreigner shall not beco me the largest shareholder of Korea Telecom. 
However, this provision shall not apply to the case of a foreign government or when a foreigner holds 
less than 5% of the total issued stocks of Korea Te lecom. There is no foreign equity limit in resale and 
value-added telecom services 
 
Question 2: paragraph 56 
 
Could the Republic of Korea please elaborate on the additional restrictions (i .e. on foreigners’ capital 
transactions, on foreigners’ entry and re sidence in Korea) published in the Consolidated Public Notice  
and the relationship between these restrictions and those already listed under the Foreign Investment 
Promotion Act?  Are all restrictions consistent with the Republic of Kor ea’s commitments under the 
GATT and the GATS?   
Answer
 
 
The FIPA stipulates general principles on FDI restri ctions (restrictions may be imposed for national 
security reasons, public order, public health or envir onment, and if laws of the Republic of Korea are 
violated). The Consolidated Public Notice lists FDI restrictions imposed specifically in all governing 
rules and regulations, except those of FIPA. Th ey are all consistent with GATT and GATS. 
 
The entry and stay of intra-corporate transferees who are employees of the 'foreign-investment 
company' is not prescribed in the "Foreign Invest ment Promotion Law & Regulations," but in the 
"Immigration Law & Regulations." All restrictions  of the "Korean Immigration Law & Regulations 
are consistent with the Republic of Korea's commitments under the GATT and GATS. According to 
the current Immigration Law and Regulations, inter-corporate transferees who are dispatched to 
foreigner-invested companies of the "Foreign Invest ment Promotion Law" can be granted the "Treaty 
Investor (D-8)" status. Other inter-corporate transferees can be granted the "Inter-company Transferees (D-7)" status.  
(iv) Incentives 
 
Question 3: paragraph 64
 
 
The Report mentions that a cash grant for ‘green field’ FDI was introduced for investment of over 
10 million  USD in high technology, parts, and materials,  and of over 5 million USD in R&D facilities. 
In the interest of transparency , does the Republic of Korea publish or otherwise make public the 
criteria by which such grants are negotiated and the percentage rebate awarded on an individual basis? 
   WT/TPR/M/137/Add.1 
Page 16  
 
Answer
 
 
The criteria are published in FDI-related laws, which can be found in the MOCIE website 
(http://mocie.go.kr) and the publication entitled "Korea's  Competitive Edge." The information is also 
listed in the Invest KOREA website (www.investkorea.org).  
 
Question 4: paragraph 65  
 
The Report indicates that the Republic of Korea curren tly has five types of zones to assist investors. 
 
a. Is a comprehensive summary of all investment  promotion zones and their respective incentive 
 schemes publicly available?   b. Could the Republic of Korea please provide fu rther detail on steps being taken by the 
 Government to rationalize the use of these zones?   c. Is the Republic of Korea considering consolida ting these zones into one category in order to 
 simplify the country’s FDI regime?   
 
Answer
 
 
There are four zone systems related to FDI. - FIZ: Foreign Investment Zone 
- FIC: Foreign Industrial Complex  
- FEZ: Free Economic Zone  - Free Trade Zone  
Classification FIC FIZ FTZ FEZ 
Requirements Hi-tech business with a 
30% FDI ratio 
Ordinary manufacturing 
business with a 10% FDI 
ratio Manufacturing: at least 
$30m 
Tourism: at least $ 20m 
Logistics: at least $10m R&D facilities: at least 
$5m Foreign-invested 
companies (10%) 
Targets: manufacturing, 
logistics, trade, industry 
support service business Foreign-invested 
companies Targets: 
manufacturing, logistics, tourism 
 
Tax Reduction Only high tech 
businesses are awarded 
the same tax reduction as 
FIZ. Corporation tax,  
income tax:  100% for 7 years,  50% for the  following 3 years  Local tax:  100% for 5 years, 50% for 3 years The same tax reduction 
rate as the companies 
located in FIZ 
- Manufacturing: at least 
$10m  
- Logistics: at least $5m Exemption of 
corporation tax, 
income tax, tariffs and 
local tax  
- Manufacturing & 
tourism with over 
$10m, logistics with over $5m: 100% for 
3 years and 50% for 
2 years 
Rent  
reduction High tech business with 
over $1m FDI:  100% 
Ordinary manufacturing 
business with $5m FDI: 
75% 100% exemption High tech business with 
over $1m: 100% 
Ordinary manufacturing 
business with over $10m: 
100% Up to 100% rent 
reduction 
 
In June 2004, Free Trade Zones and the Customs Du ty Free Zones were consolidated into Free Trade 
Zones. From 2005, Foreign Indus trial Complexes and Foreign Investment Zones will also be 
consolidated. Accordingly, existing zones will be  classified into the Free Trade Zone, Foreign 
Investment Zone and Free Economic Zone.   WT/TPR/M/137/Add.1 
 Page 17 
 
 
III. Trade Policies and Practices by Measure 
(2) Measures Directly Affecting Imports (iii) Tariffs  Question 5: paragraph 32-33
 
 
Canada is seeking clarification on the process l eading to the selection of the products on which 
adjustment duties will be levied. Canada is also seeking clarification on the process leading to the 
determination of the level of adjustment duties to be levied on a particular good.  
 Answer
 
 
If it is deemed necessary in a situation where there is  not only a surge in imports of a specific product 
that can inflict serious injuries to the domestic i ndustry, but also an urgent need to protect the 
domestic industry, the relevant ministries and inte rested parties may submit a request for the selection 
of products on which adjustment duties should be imposed to the Ministry of Finance and Economy. 
The Minister of Finance and Economy decides whether and how to apply adjustment duties after examining trade relations and other circumstance s as a whole. Through the examination of the 
Customs and Tariff Deliberation Committee and the approval of the State Council, the adjustment 
duties are put into force by a presidential decree.  
* The Customs and Tariff Deliberation Committee is composed of professors, journalists, non-
governmental organizations including consum er and business representatives, customs 
experts and representatives from relevant ministries. 
 Adjustment duties are applied on an annual basis for all the products. The adjustment duties are 
imposed within the limit of the WTO concession tari ff rate, considering the difference between the 
domestic and foreign price.  
Question 6: paragraph 32-33
 
 
As pointed out in the Report, adjustment duties were  removed from some particular products since the 
last Review. Could the Republic of Korea please elaborate on what review mechanism is in place – if 
any – to determine whether adjustment duti es are still necessary for a particular product? 
 
Answer  
 
Items subject to Adjustment Duties by year  
(unit: number) 
 1998 1999 2000 2001 2002 2003 2004 
Items 38 30 27 26 23 23 20 
Removed Items - 8 3 1 3 - 3 
Reduced Items - 10 20 10 5 4 7 
 
Korea has reduced the number of products subject to  adjustment duties and tariff to promote public 
welfare and overseas trade cooperation.  Upon the request for the application of adjustment duties by the relevant ministries and interested parties, the Minister of Finance and Economy dete rmines whether and how to apply the adjustment 
duties on an annual basis. For more information on th e procedures for the determination of adjustment 
duties, refer to the answer to the previous question.  WT/TPR/M/137/Add.1 
Page 18  
 
 
(4) Measures Affecting Production and Trade 
(iv) Competition and Consumer Policy: Framework  Question 7: paragraph 149
 
 
The Report mentions that several changes to prohibi t collusive fee-setting arrangement were delayed, 
and other exemptions from competition law introduced to allow cartel activity. Could the Republic of 
Korea please elaborate on the reason for these delays a nd the nature of the cartel activity allowed for?  
 Answer
 
 
As part of its "Anti-competitive Regulation Impr ovement Task," the KFTC is in the process of 
consulting with related agencies to improve current  practices concerning service fees for architects 
and judicial scriveners. 
 
Question 8: paragraph 152 & 155  
 
As pointed out in the Report, a major function of  the Korea Fair Trade Commission (KFTC) is to 
regulate chaebols.  
a. Does the KFTC have all the necessary tools to control chaebols or, does the KFTC needs 
 additional power/authority to be more effective in this task? b. Will exempting chaebol affiliates (that meet cert ain requirements) from various controls have 
a negative impact on the regulation of chaebols? 
 Answer to a.
 
 
KFTC's chaebol policy tools include the prohib ition against purchasing shares of other domestic 
companies, cross-investment, cross-debt guarantees, and restriction of voting rights by financial subsidiaries. In 2003, the Civilian-Government Task Force has drafted the "Three Year Market 
Reform Roadmap", which is the blueprint for a rational reorganization of chaebol policy. In 
accordance with the ro admap, a revised bill is being reviewed  at the National Assembly which will 
transfer direct regulation by the government to  a more market-oriented monitoring mechanism, 
including a rational improvement for the ceiling on purchasing shares of other domestic companies. Also, a comprehensive review of chaebol policy will take place in three years. 
 
Answer to b.
 
 
According to the amended draft of the MRFTA, which is now under deliberation at the National 
Assembly, even companies subject to the regulati on for ceilings on the total amount of shareholdings 
in other domestic companies will be exempted from the regulation, if they meet several conditions. 
Such regulations will encourage chaebols to addr ess problems by themselves, having positive effects 
on chaebol regulations. This will lead chaebols to ma ke efforts to reduce the gap between cash flow 
rights and voting rights, to have an effective inte rnal control system and to establish simple and 
transparent shareholding structures. Through this pr ocess, the government's direct regulations will be 
transformed into more market-oriented self-regulations.  
 
 
 
  WT/TPR/M/137/Add.1 
 Page 19 
 
 
Question 9: paragraph 157  
 
The Report mentions that the Korean Fair Trad e Commission (KFTC) deals with a large number of 
repeat offenders, and that this may suggest that current legal deterrents are insufficient. Does the 
Republic of Korea plan to strengthen the enforc ement of competition policy by increasing legal or 
financial deterrents?  
 
Answer  
 
In Korea, the KFTC can order correction along with a surcharge, and criminal sanction can also be 
sought in most cases. In general, the sanction for cartels in Korea is quite high in comparison with 
many other jurisdictions. In order to reinfor ce its enforcement powers and prevent repetition of 
competition law violations, the KFTC has prepared a revision of its law which is under review at the 
National Assembly. The ceiling for surcharge against car tels will be raised from 5% of related sales to 
10%. The new law will facilitate litigations for co mpensation by the victims of competition law 
violation and improve the current system of priv ate legal suits to enhance legal deterrence by the 
general public. It will also expand  the scope and coverage of whis tle-blowers and informants who 
cooperated during investigation fo r leniency programs to facilitate the detection of cartels. 
 
(v) Intellectual Property Rights 
 
Question 10:  paragraph 160  
 
With respect to the comment that the Republic of Korea "generally bans a ll parallel imports," could 
the Government please provide details as to what products it allows paralle l importation and provide 
an explanation?   Answer
 
 
Korea allows parallel imports in cases where no viola tions of intellectual property rights are expected 
by importation of a trader without trademark rights.  It means, on the one hand, it is a system to protect foreign as well as domestic trademark owne rs.  On the other hand, it tries to avoid the 
monopoly of one trader (or producer, importer, etc.) over selling certain goods.  Article 1-3, 
paragraph 5, subparagraphs (1 ) and (2) of the Public Notice on Import and Export Clearance 
Protecting Intellectual Property Rights (6 N ovember 1995) provides the permission criteria. 
 In case of importation in Korea, if a trader (hereinafter, "domestic trademark owner") wants to protect 
her/his trademark, she/he should register her/his trademark with customs offices.  Parallel import 
occurs when an importer without the right for a certain trademark impor ts goods of which the 
trademark is already registered with the customs offices.  One example in which parallel import is 
allowed is as follows:  An importer may import cer tain goods with a trademark even if the importer 
has no right for the trademark; (1) When a foreign tr ader, who has a legal right to use the trademark in 
her/his foreign country, attaches (or uses) the trad emark on the imported good, and (2) the relationship 
between the domestic and foreign owner of the tradem ark is "identical," as the same person (or legal 
person) or 'related' as affiliates or agents.  
 
Question 11:  paragraph 168
 
 
Could the Republic of Korea please elaborate on its  "notice and takedown system" for online service 
providers?  In particular, Canada  is seeking more information on the types of legal incentives offered 
to online service providers.  WT/TPR/M/137/Add.1 
Page 20  
 
Answer
 
 
Article 77 bis of the Copyright Act of 2003 provides for the  "notice and takedown system", which stipulates that an online service provider may close dow n infringing material when he/she is informed 
of the infringement through the request of a right-holder.   
 
For example, a claimant, who claims that copyright or related rights were infri nged by reproduction or 
transmission of the works, etc., by using servi ces provided by an Online Service Provider, may 
demand that the reproduction or transmission of such  works be discontinued to an Online Service 
Provider by explaining the fact (paragraph 1 of Art.  77 bis). When the demand has been made for the 
discontinuation of reproduction or transmission, th e Online Service Provider shall stop without delay 
the reproduction or transmission of such works and notify the fact to a person who reproduces or transmits relevant works (paragraph 2 of Art. 77 bis). If the notified Reproducer-Transmitter demands 
to resume the reproduction or transmission of such works by explaining the fact that the reproduction 
or transmission is based on justifiable authority,  the Online Service Provider shall notify without 
delay the fact of the demand of resumption and the scheduled date for resumption to the claimant and 
resume the reproduction or transmission at the scheduled date (paragraph 3 of Art. 77 bis).   When an Online Service Provider stops or resum es the reproduction or transmission of such works 
pursuant to the provision of Paragraphs (2) and (3 ), the Online Service Provider's liability for the 
infringement on the copyright and related rights by another person as well as the damages incurred to 
the Reproducer-Transmitter may be reduced or exempted.  
 After all, the "notice and takedown system" pr ovides incentives to online service providers by 
enhancing legal stability and on the other hand, it al so strengthens copyrights and related rights for the 
same reason. 
The Republic of Korea implements "the notice and takedown system" under the Computer Program 
Protection Act (CPPA). Article 34-2 and 34-3 Clause 1 of the CPPA provide for OSPs’ exemption or 
mitigation from liability for copyright infringement when OSP removes the copied or transmitted infringing materials or disables access to them. Acco rding to Article 34-3 Clause 2, OSPs also have 
legal incentives of exemption from liability for co pyright infringement, wh en their measures of 
Clause 1 are not feasible due to technical impossibilities. 
 
Question 12: paragraph 170
 
 
In the Report, it is noted that a computer program in  the Republic of Korea is protected for a term of 
50 years from the year following its publication. Under Article 10(1) of the TRIPS Agreement, 
computer programs must be protected as literary works. Pursuant to Article 7(1) of the Berne 
Convention, the standard term for literary works is the life of the author plus 50 years. The term for 
pseudonymous works under this same Convention is 50 years from the time it is made available to the 
public (Article 7(3)). Hence, the protection provided for computer programs under the Korean 
legislation does not appear to comply with standa rd terms for literary works under Article 7 of the 
Berne Convention. Could the Republic of  Korea please clarify this issue?  
 
Answer  
 
Korean legislation willingly assents to the protecti on of copyrights for computer programs as literary 
works under the Berne Convention and TRIPS agreement.  However, it needs to take into account that 
computer programs mainly consist of functional elements such as technical ideas, procedures, and 
methods of operation unlike general literary works and has a short product cycle. Therefore, the 
protection for 50 years following the year of the computer program's publication is sufficient to cover the copyright owner’s rights for the computer program.  WT/TPR/M/137/Add.1 
 Page 21 
 
 
IV. Trade Policies by Sectors 
(2) Agriculture (ii) Policy Development  Question 13: paragraph 10
 
 What specific adjustment policies is the Republic of  Korea implementing to allow its rice sector to 
adapt to a more liberalized trade regime?   
Answer
 
 
The Korean government has been purchasing ri ce from farmers at harvest for the purpose of 
stabilizing prices, thereby appropriately balancing the supply and demand in the domestic rice market. 
With a view to strengthening market mechanisms  in the domestic rice market, it has introduced 
several measures: gradual reduction of the purchasing scale, the freezing of purchasing price since 
2001, and further cuts in purchasing price under cons ideration for year 2004. The Korean government 
is now conducting a research to reduce the amount of the so-called Amber box-typed rice subsidy, 
while introducing a Green box-typed public stockhol ding system. It is also reviewing its policy 
measures to adequately control rice produc tion areas, rather than expanding it.  
 
(iii) Selected Activities 
 
Question 14:  paragraph 21  
 
The Republic of Korea has entered into negotiati ons for the possible continuation of the special 
treatment exempting rice and certain rice products  from tariffication beyond ten years. Could the 
Republic of Korea be more specific on the time pe riod it envisages extending the special treatment?  
 
Answer  
 
Taking into account the fact that negotiations are cu rrently underway with 9 interested countries, it is 
hard to announce our position on this issue at this mo ment. We will discuss this issue, including other 
related issues, with those interested count ries through various bilateral negotiations.  
 
Question 15: paragraph 27  
 
a. How does the Republic of Korea intend to  increase the number of export estates?  
b. Are these estates owned by the Government or by private companies?  
c. What will the investment money will be used for? 
 Answer
 
 
This is not an issue of whether or not to increase the number of export estates. The estates are introduced to categorize existing farms producing fru it, vegetable, and flowers mainly for export 
purposes, into certain groups so that these expor ters can have a more effective production and 
distribution system to provide safe and low cost products.  
 
The government considers the production and distribu tion conditions of exported items and designates 
the agricultural product export estates through consulta tions with relevant local authorities. Currently, 
there are 108 export estates nationwide. Of  the 144 major producers of agricultural products across 
the nation, 108 were designated as export estates. The government provides consultations to these 
estates regarding the quality control, compliance to chemical safety standards, prevention of pests and WT/TPR/M/137/Add.1 
Page 22  
 
diseases, and selective packaging. They are desi gnated only for administ rative and geographic 
convenience. Private farms and farm groups own the land and production facilities of these estates.  
 
The investment fund indicated in the Secretariat repor t refers to our plan to invest 700 billion won in 
agricultural life science by 2010, as part of our ove rall policy plan. The other 100 billion won which 
was also mentioned refers to our plan to create an  agricultural venture investment fund for developing 
bio-food. The funds, thus, have nothing to do with the agricultural export estates.  
 
(6) Services 
(i) Financial Services 
 
Question 16: paragraph 70
 
 
1. It is our understanding that 100% foreign ownership of banks is possible, subject to various 
 approval requirements of the Financial Supervisory Commission. 
a. Could the Republic of Korea please indicate wh ether 100% foreign ownership of a bank by a 
 single foreign entity is possible? 
b. Given the Republic of Korea’s stated policy to welcome foreign investment in the financial 
 services sector, could the Government pl ease explain why the Financial Supervisory 
 Commission’s (FSC) approval is needed to surpass the levels of 10%, 25% and 33% bank 
 ownership by foreign firms?  Does Nationa l Treatment apply to these FSC approvals for 
 increasing ownership in a bank, or is this re quirement only applicable to foreign firms? 
 
Answer  
Yes, a foreign or local entity can own 100% of a bank's shares.  CitiBank, for instance, has recently 
taken over 99.33% of Koram Bank. 
This requirement applies to both foreign and local firms, and it is to prevent an industrial fund from 
dominating a bank's ownership and to perform fit & proper tests on subject firms by the level of 
ownership requested. This requirement app lies to both Korean and foreign firms. 
Question 17: paragraph 77  
The Report indicates that licensing requirements for foreign subsidiaries are the same as for domestic 
banks, but that a separate license must be obtai ned for each new foreign bank branch. Could the 
Republic of Korea please explain why a license is required for each new branch location after the 
foreign bank has already undergone an approval process to enter the market?  
Answer  
According to Korean bank law, each branch of a foreign bank is being defi ned as an independent bank 
because foreign bank branches are subject to branch cap ital requirement (A tier, B tier capitals).  But, 
if a foreign bank or a financial institution estab lishes a subsidiary in Korea, opening additional 
branches does not require FSC approval. 
Question 18: paragraph 77  
The Report mentions that foreign bank branches are a dvised to allocate at least 25% of any increase in 
their won-denominated loans to SMEs. Could the Re public of Korea please explain the nature of this  WT/TPR/M/137/Add.1 
 Page 23 
 
 
arrangement and the extent to which it is mandato ry? Are foreign bank subsidiaries subject to the 
same requirements? 
Answer  
 
The loan allocation by banks to SMEs is not a requi rement but a part of an incentive system designed 
by the Bank of Korea in order to improve funding to  SMEs.  Under this system commercial banks that 
do not comply are subject to lower funding limits  from the central bank. Thus, if foreign bank 
branches do not need central bank funding, they do not have to comply with this recommendation, 
which applies to both foreign and Korean banks.  Besides, the ratio of recommended loan allocation 
by Korean banks to SMEs is 45%, while the 25 % ceiling is being applied only to foreign bank 
branches. 
Question 19: paragraph 80  
Canada notes that Investment Trust Companies (ITC) must comply with numerous requirements, 
including one pertaining to personnel (i.e. five or mo re fund professionals), in order to obtain a license 
from the Financial Supervisory Commission (FSC). The "personnel requirement" could be seen as a 
barrier to entry for foreign companies, as their initial business activities may not warrant such a large 
number of professional staff.  Could the Republic of Korea please indicate why this requirement is maintained, and if there are any plans to review it?  
Answer
 
 
The personnel requirement is to protect investors by making sure that clients' assets are managed by a 
sufficient number of professional staff, and it has been  viewed that for a firm to smoothly run an asset 
management business, there has to be at least five (for example, 2 securities professionals, 2 bond 
professionals, and 1 CIO) professionals .    
 Taking into consideration the average number of as set managers in Korean firms and qualifications 
required in general, as well as in other countries, the current personnel requirement does not appear to 
be excessive.  Even brokerage firms that do not require licensing but mere registering are subject to personnel requirement of 4 professionals.    To date, all asset management and ITC companies,  45 of them in total, are running a brokerage 
business on the side, and the average number of prof essional staff in each comp any is 19.  In Japan, 
for instance, the law does not require a minimum number of professionals, but at the licensing review, 
the relevant qualifications and experiences of staff are being strictly examined.  
 Furthermore, it is not deemed difficult to recruit professional asset managers as their professionalism is officially recognized simply by passing an exam in Korea. For your reference, since 1999, a total of 
3,801 people have passed the exam, producing 543 pr ofessional asset managers each year. Besides, 
the personnel requirement has already been relaxed from the earlier requirement of 7 to 5 minimum 
professionals since the beginning of 2004.  Therefor e, revision of this requirement should be subject 
to a review in the long run. WT/TPR/M/137/Add.1 
Page 24  
 
Question 20: paragraph 83
 
Although the Republic of Korea has made great stri des to liberalize its insurance market through 
improved market access for foreign life and non-life in surance companies, the establishment of joint 
ventures with Korean insurance firms are still not al lowed. Grateful for explaining the reason for this 
policy stance.  
Answer  
 
Korean insurance laws and regulations do not stipul ate separate requirements for foreigners' insurance 
share ownership. Nor do discriminatory business re gulations exist against the operation of foreign 
insurance businesses in Korea.  Th e only difference is in the entr y requirement in which foreign 
investors who wish to set up insurance companies or branches in Korea have to own an insurance 
business in their home country or more than 15 % of a foreign firm that owns an insurance business. 
(ii) Communication: Regulatory Regime 
 Question 21: paragraph 91
 
 
The Report mentions that, despite efforts to liber alize telecommunications, there are a number of 
regulatory weaknesses preventing effective competiti on in facilities-based ser vices. These weaknesses 
are in relation to the creation of an independent  regulatory authority with adequate powers, the 
development of an appropriate cost-based in terconnection framework on access pricing, and the 
introduction of a price cap regime. Could the Republic  of Korea please explain what is being done to 
address these issues?  
 
Answer  
 
Article 5 (Independent Regulators) of the Refere nce paper requires that the regulatory body be 
separate from any supplier of basic telecommunications services.  By the privatization of KT in 
May 2002, the regulatory body was separated from any supplier of basic telecommunications services.  Korea fully implements the require ment of the reference paper re garding independent regulators. 
 Korea has introduced a cost-based interconnection fra mework to establish competition in the telecom 
market. 
 
- Before 2003: FDC (Fully Distributed Cost) - Since 2004: LRIC (Long Run Incremental Cost)  * LRIC: An access and interconnection pricing method that only recognizes costs incurred from 
the most efficient est ablishment and operation of communica tions networks as interconnection 
costs.  
 The MIC originally planned to introduce a ne w price regulation system (price cap & reserved 
notification system) in January 2003 in relation to the competition of the telecom market. The status 
of competition in telecom markets, however, ha s been worsening as the market power of the 
incumbents is being fortified while the entrants  experience financial difficulties. It was deemed 
therefore inappropriate to ease price regulation unde r such circumstances. The government plans to 
review the price regulation issue (including whet her to introduce the price cap), after carefully 
evaluating the degree of market competition.   WT/TPR/M/137/Add.1 
 Page 25 
 
 
Question 22: paragraph 92  
 
Even though the Korea Communication Commission (K CC) is the responsible for guaranteeing fair 
competition in telecommunications, Canada not es that the Ministry of Information and 
Communications (MIC) appears to have maintain ed possession of most regulatory responsibility. 
Canada also notes that the KCC, which is located wi thin the MIC, seems to be largely advisory, with 
minimum regulatory power. Canada would like to know if the Republic of Korea intends, in the 
future, to adopt the OECD’s reco mmendation, which suggests the tran sformation of the KCC into an 
independent regulator?   Answer
 
 
The Ministry of Information and Communication (M IC) is a policy-making organization, responsible 
for the development of the telecom industry and th e enhancement of consum er benefit. The Korea 
Communications Commission (KCC) is a regulatory bo dy established to promote fair competition and 
protect consumer rights by regulating anti-comp etitive behaviors of telecom operators.  All 
Commissioners of KCC are appointed by the President and their terms are guaranteed by the law. Commissioners’ are independent of the MI C as they are lawyers, judges, professors and 
consumer advocates. KCC started as a deliberati on body. However, the Telecommunications Basic 
Act and Telecommunications Business Act were  amended in December 2002 to make it an 
independent body, in real terms, with decision-ma king rights. Since then, the KCC has independently 
carried out investigations, issued corrective orders  and imposed fines on telecom operators for unfair 
practices.  For more thorough analyses of the fair competition issues, the KCC has a group of advisors 
on legal matters, as well as three advisory comm ittees; on service contracts/legal issues, accounting 
rules, and pricing issues. In addition, the KCC has be en enlarged to actively re spond to the changes in 
the competition environment of telecom markets.  The personnel and division of KCC, which was 
established in 1997, doubled as of September 2004.  K CC is taking a role as an independent regulator 
as described above since the OECD recommendation was published in 2000. 
 
Question 23: paragraph 101
 
 
Could the Republic of Korea please explain what concerns keep it from removing price controls on 
mobile calls? When does the Republic of Korea expect to implement the reserved notification 
system? 
 
Answer  
 
The retail price regulation is necessary to prevent anti-competitive and unfair pricing of incumbent 
operators with significant market power and to  reduce consumer burdens when an effective 
competition is not in place. In foreign countries,  there is no first mover’s advantage between 
incumbents and new entrants. Also, there is mo re than one operator using the cellular spectrum 
(800MHz).  But, Korea is totally different from other countries. There apparently exists a first-
mover’s advantage between incumbents and new en trants since SKT entered in 1984 and KTF, LGT 
in 1997. Also, the cellular spectrum is allocated on ly to the incumbent carrier, SKT. Thus without 
price regulations, the dominant operator will set a monopolistic price or a predatory price to 
maximize profit. This will damage consumer welf are. And there is a possibility of tipping to the 
incumbent and worsening competition. 
 
Considering the tipping to the incumbent and the disparity in the ability to compete among operators, 
the Korean government decided to supplement comp etition policies and maintain the current price 
regulation for the time being (Oct. 2003). The government will introduce the reserved notification 
rule or others after effective competition has been well established in the mobile market.  WT/TPR/M/137/Add.1 
Page 26  
 
 
(iii) Transport  Question 24: paragraph 113
 
 
Could the Republic of Korea please define "trade" ports, including how they differ from "non-trade" 
ports.  
Answer
 
 Trade ports refer to large ports that are mainly visited by ocean-going vessels such as international 
cargo ships and liners, whereas other ports can be defined as non-trade ports which are patronized by vessels on the coastal routes, including fishing ports.  
Question 25: paragraph 115
 
 
The Report indicates that the Korean Container Terminal Authority rents port facilities to private terminal operators. Could the Repub lic of Korea please indicate whether foreign operators are allowed 
to rent these facilities? In the affirmative, do domestic  terminal operators have priority over foreign 
terminal operators with respect to the rental of these ports?   Answer
 
 
Foreign terminal operators are a llowed to rent port facilities in the Republic of Korea. There is no 
discrimination with respect to the rental of these ports between domestic terminal operators and foreign operators. 
 
Report by the Government (WT/TPR/G/137)
 
 IV. Trade Policy Developments: 2000-2004 (1) Korea and the WTO  
 
Question 26: paragraph 47
 
 
Canada congratulates the Republic of Korea on its effo rts to strengthen its intellectual property regime 
and its establishment of a Consultative Committee on Intellectual Property Rights (IPR) Protection to facilitate policy coordination. Canada notes that  this Committee has devised an IPR Protection 
Comprehensive Plan and identified fifteen specific ta sks.  Could the Republic of Korea please explain 
in more detail what these tasks consist of and their expected dates of completion?  
Answer
 
 
The 15 specific tasks under the comprehensive Plan  to improve Intellectual Property Rights (IPR) 
protection has five categories, and those categories consist of the following 15 specific tasks :  
 
1. strong enforcement against IPR infringements  - government-wide crackdown of IPR infringeme nts operated under the Supreme Public 
 Prosecutor's Office 
- regularization of the crackdown staff enforci ng Sound Records, Video Products, and Game 
 Software Act and empowering them  with law enforcement authorities 
- reinforcing the education of the full-time crac kdown staff, to enhance their expertise     WT/TPR/M/137/Add.1 
 Page 27 
 
 
 2. an advanced legal system for IPR protection  - improvement of the legal system, including the computer program protection law for the 
 prevention of illegal counterfeiting on-line  
- creating the foundation for the facilitation of the use of  copyrights, e.g. the introduction of 
 standard IPR contract forms   
- revision of the personal accusation provision in Copyright Law and the Computer Program 
 Protection Law in order to reflect the public interest nature of IPR protection 
- strengthening the protection of copyrights and re lated rights in a digital environment: e.g. the 
 recognition of exclusive transmission rights for phonogram producers  
- reform of parallel importation systems to address problems such as the import of counterfeit 
 goods  
- introducing the legal ground for confiscation a nd removal of counterfeit goods in the customs 
 clearance process  
- improvement of the civil damage indemnity system, including the possible introduction of 
 punitive damage 
 3. a campaign for enhanced public awareness regarding IPR protection  - incorporation of IPR protection education in regular school curriculum 
- strengthening public education and programs raising public awareness on IPR protection   
 4. improved readiness for internati onal cooperation on IPR protection 
 - strengthening international c ooperation on IPR protection both in multilateral bodies such as 
 WTO, WIPO, and in bilateral consultativ e mechanisms with the U.S., EU, etc.  
- reinforced protection of Korean IPR overseas,  e.g. the reinforced operation of overseas IPR 
 protection centers 
 5. establishment of a government-wide IPR protection system  
- operation of the IPR protection consultative co mmittee composed of officers from relevant 
government agencies   
 Some of the above-mentioned tasks, for exam ple, the crackdown on IPR infringements, public 
education of IPR, are on-going activities, while others  require legal provisions by revising or enacting 
relevant law or enforcement regulations. 
 
CHINA
 
 Tariff  
 
Question
 
 
Would Korea clarify the reasons why the Korean government chooses to maintain the adjustment 
tariff and non ad valorem duty?  Will Korea cons ider making changes to the current regime?  
In addition to that, China notices th at Korea's current tariff binding coverage is 91%.  Is there any 
consideration or plan for Korea to bind all the tariffs?  
 
 
 WT/TPR/M/137/Add.1 
Page 28  
 
Answer
 
 
The adjustment tariff system was adopted to mini mize the side effects of import liberalization by 
imposing tariffs when it is necessary to correct or  prevent the potential disintegration of the domestic 
market or the collapse of production bases due to the surge in imports of products that are vulnerable 
when exposed to international competition. Recently, we are using this system only within a limited 
scope by reducing the items that are subject to ad justment tariffs and lowering the tariff rate.  
 The non ad valorem duty is a domestic agricultura l protection mechanism that was agreed by WTO 
members, as a result of the UR negotiation. The issue of tr ansferring the non-ad valorem to ad 
valorem duty is being discussed at the DDA agri cultural negotiations and we are waiting for the 
result.   Korea substantially increased the binding ratio af ter the Urguay Round, with the exception of some 
sensitive products. It intends to bind these non-binding tariff lines in accordance with the result of the 
WTO DDA negotiations. 
 
SPS and TBT 
 Question
 
 
China's exports to Korea, especially important produc ts such as fruits and vege tables, are substantially 
affected by the SPS and TBT measures taken by Korea.   Against the background that the trade deficit 
of China with Korea is still getting larger, China sincerely hopes that in the implementation of SPS 
and TBT measures Korea will demonstrate faithfully  the spirit of both the SPS Agreement and the 
TBT Agreement so that these measures do not const itute unnecessary barriers to trade.  Specifically, 
China is deeply concerned with th e risk assessment of export of fruit and vegetable, scientific grounds 
of certain standards for tolerance of contaminants  or residue, discretionary factors in standards 
application and certification and lengthy inspection pr ocedures for customs clearance, etc. In view of 
the technical nature of these specific issues, Chin a hereby would like to express its general concern 
over them, and hopes that further attention will be  given by the Korean government. China will keep 
closer contacts with Korea through channels, w ith a view to making further progress on specific 
issues to expand the bilateral trade.   
Answer
 
 In case of agricultural products such as fruits and vegetables, we follow the standard of the IPPC 
based on Pest Risk Analysis. Animal quarantine fo llows the OIE standard. Livestock Health Measures 
follow the Codex Alimentarius Commission and OI E’s standards, guidelines and recommendation.  
 Korea agrees on the need to maintain close coope ration with China. As for establishing a bilateral 
exchange channel for further increasing understandi ng and cooperation on SPS and TBT systems, we 
give equal opportunities to all members according to the MFN principle.  
 
Bidding Mechanisms for import of Tariff Quota Products 
 
Question
 
 
China would like to obtain Korean laws and regula tions on its bidding mechanism for import of tariff 
quota products, and to inquire whether there is any consideration or plan of Korea to adjust its 
mechanism.    WT/TPR/M/137/Add.1 
 Page 29 
 
 
Answer  
 
Korea’s State Trading Enterprise administers the TRQ imports according to Article 17 of GATT and Korea’s country schedule for agricultural produc ts. The details of import administration are 
announced regularly in a transparent and fair way to inform all the interested officials of the member 
countries. The issue of allowing Chinese exporters to take part in the bidding process is to be 
discussed in detail through bilateral negotiati ons according to the WTO service agreement and 
government procurement agreement. Korea regularly or frequently notifies the state trade enterprise 
import administration status according to the not ification procedure of Article 17 of GATT. 
 CHILE
 
 II. Trade Policy Regime 
 
Question 1: paragraph 3
 
 
"WTO Agreements rank alongside domes tic laws and can be invoked in na tional courts."  What is the 
legal status of bilateral trade agreements? Can they  be invoked in the same way as WTO Agreements?  
 
Answer  
 Bilateral Trade Agreements duly concluded and promulgated under the Constitution of the Republic 
of Korea shall have the same eff ect as its domestic laws and can be  invoked in its national courts in 
the same way as the WTO Agreement.   
Question 2: paragraph 14
 
 
The Foreign Trade Act of 1996 allows "retaliation fo r a trading partner discriminating against Korean 
trade or denying Korea its international rights". Is this valid with respect to a WTO member in case 
there is no DSU decision that states a breach on the part of that trading partner?   
Answer
 
 
As is stated in Article 3 of the Foreign Trade Act,  Article 5 on special measur es will be applied to go 
in line with the WTO provisions.  
III. Trade Policies and Practices by Measure 
 
Contingency Measures  Question 3: paragraph 68
 
 
It appears (from paragraph 68 and footnote 28) that dumping decisions can be appealed to the Judicial 
System only after a prior decision by the National Tax Tribunal.  Is this correct?  
 
Answer  
 
Since the Anti-Dumping Duty is a kind of a tax, dumping can be appealed to the Judicial System only 
after a prior decision has been made by the National Tax Tribunal. 
   WT/TPR/M/137/Add.1 
Page 30  
 
Question 4: paragraph 69
 
 
"Safeguard measures include tariff adjustments, impor t quotas or other measures to remedy injury to a 
domestic industry". Which are these ‘other measures’?  
 
Answer  
 
According to Article 17 of the Act on the Investig ation of Unfair International Trade Practices and 
Remedy Against Injury to Industry, safeguard me asures include the adjustment of customs tariffs, 
quantitative restrictions on imports of the goods a nd other measures purposed to remedy the serious 
injury or facilitate structural ad justments of the domestic industry. However, the Act is silent on 
structural adjustments, and only includes the effo rt of companies and institutions concerned for 
improving the competitiveness of domestic industry. 
 
Government Procurement 
 
Question 5: paragraph 109  
 
Paragraph 109 indicates that "Separate pre-qualifica tion lists are maintained for each construction 
project, based on objective criteria" and footnote 54 adds that "Bidding is onl y open to suppliers that 
receive a certain pass score in a comprehensive ev aluation based on experience, technical capacity, 
financial status, and credibility."  Are this pre- qualification lists open the whole year?  Is this 
registration free? If not, what is the co st for a foreign supplier to apply?  
 
Answer  
 In the normal case of every procuring entity, separate pre-qualification lists are maintained for each 
construction project. Thus, the list is effective onl y for a specific public works project. However, the 
Public Procurement Service (PPS), which is the central procurement offi ce, maintains Qualified 
Suppliers Registration Lists based on construction ability and this list is effective throughout the 
whole year. This registration to the Qualified Supp liers Registration Lists of PPS is free to domestic 
suppliers as well as foreign suppliers. 
 
Question 6: paragraph 111
 
 
Paragraph 111 says that "The Government plans to  develop a National Contract Disputes Decision 
Committee."  Can Korea provide more details about  this new Committee? For instance, Chile would 
like to know how its members would be appointed, and more generally how its independence would 
be ensured.  
Answer
 
 
The Korean government plans to establish a Na tional Contract Disputes Decision Committee 
(hereinafter referred to as "NCDDC") which cove rs the complaints concerning domestic tendering as 
well as international tendering. However, the details  of the structure of the NCDDC have not been 
decided yet and the establishment process is curr ently not under way. Even though the NCDDC 
covers the complaints concerning domestic tendering as well as intern ational tendering, the structure 
and organization of NCDDC would not be much diffe rent from the International Contract Disputes 
Mediation Committee. 
 
   WT/TPR/M/137/Add.1 
 Page 31 
 
 
IV. Trade Policies by Sector 
Services 
 
Question 7: paragraph 93  
 Paragraph 93 indicates that both the MIC a nd KFTC have responsibility for controlling 
anticompetitive behavior in telecommunications, and that both agencies share jurisdiction over 
mergers and acquisitions in this sector.  However, it is also noted that "The precise anti-competitive 
and regulatory roles of the MIC and the KFTC are unclear."  Could Korea explain the role of each institution in this context?  
 
Answer
 
 
According to the OECD Secretariat Paper of 1999, competition law is exclusively enforced by the 
competition authorities in many jurisdictions, and regulatory authorities concentrate on more 
professional, technical and economic issues. Compet ition and regulatory authorities maintain close 
consultation to prevent regulatory overlap.  It is of KFTC's position that the competition author ity should be responsible for the comprehensive 
enforcement of competition law and that regulatory authorities be responsible for more technical and 
professional issues concerning related industries. 
 
Under the Telecommunications Business Act, the MIC has the responsibility for controlling anti-
competitive behaviors and M&As in the telecommunications sector, as the sector has unique characteristics. The FTC is respons ible for M&As in general sect ors, but the Telecommunications 
Business Act stipulates that M&As between telecom operators must be approved by the MIC after 
consultation with the KFTC. 
 
Question 8: paragraph 104
 
 
Paragraph 104.  Does Korea envisage further libe ralization of terrestrial radio and television 
broadcasting in terms of foreign investor participation?  
 
Answer  
 
Due to the public nature of terrestrial broadcasti ng, at present, Korea does not have specific plans to 
liberalize the terrestrial radio and television broa dcasting sectors for the participation of foreign 
investors. 
 
Question 9: paragraph 119  
 
Paragraph 119.  Does Korea envisage further liberaliza tion of air transport services in terms of foreign 
ownership (currently limited to less than 50%)?  
 
Answer  
 
At the moment, Korea does not envisage further lib eralizing the air transport sector for foreign 
ownership.     WT/TPR/M/137/Add.1 
Page 32  
 
Agriculture 
 Question 10: paragraph 11 & 12
 
 
According to paragraphs 11 and 12, direct payments currently represent only about 7-8% of Korea’s 
agricultural budget, while over 90% of assistance to this  sector is through market price support.  This 
figure is extremely high, even by OECD standa rds.  Does Korea envisage increasing the share of 
direct payments in the agricultural budget beyond the official 20% target for 2013?   
Answer
 
 
Korea’s food self-sufficiency rate is currently at a very low level of 27 percent.  The remaining 
73 percent depends on foreign imports. Major im ported crops are wheat, maize, grain sorghum, 
barley, soybean, manioc, and etc. Rice is the most important item that helps Korea maintain its food 
self-sufficiency rate at 27 percent. Korea’s mark et price support for agricultural products is thus 
mostly focused on rice, and price support for rice acc ounts for over 90 percent of the AMS. Therefore, 
relating to the ongoing DDA agricultural negotiatio ns, Korea will gradually reduce the Amber box-
type subsidy that was mainly used for supporting ri ce price, and instead use the Green box stipulated 
in Articles 3 (Public Stockholding for Food Securi ty Purposes), 5 and 13 of Annex 2 of the WTO 
Agreement on Agriculture.  
 
III. Trade Policies and Practices by Measure 
Tariffs  Question 11: paragraph 2
 
 
Paragraph 2 indicates that Korea has bound 91% of its tariff lines. What expalins the non-binding of 
the remaining 9%? Does Korea intend to bind these tariff lines? When?   
Answer
 
 
Korea substantially increased the binding ratio af ter the Urguay Round, with the exception of some 
sensitive products. It intends to bind these non-binding tariff lines in accordance with the result of the 
WTO DDA negotiations.  
Question 12: paragraph 26-42
 
 Paragraphs 26 to 42:  According to these paragraphs , Korea employs a variety of instruments such as 
seasonal and other "flexible" tariffs, usage tariff rates and non ad-valorem tariffs, that render its tariff 
tariff structure quite complex.  Does Korea intend to simplify its tariff structure, for example by 
reducing or eliminating the incidence of these inst ruments and/or reducing the number of tariff bands? 
 
Answer
 
 
In reality, Korea has implemented only adjust ment duties and autonomous tariff quota under the 
flexible tariff rate system and implemented less non ad-valorem tariffs compared with other foreign 
countries. Although the legal basis of seasonal duties is stipulated in the Korean Customs Act, only 
one seasonal duty on grapes has been implemented under the FTA with Chile. Usage tariffs exempt 
imports for specified uses from certain tariffs and th ey are reviewed to ensure their conformity with 
the provisions on usage tariffs through a post-audit system. So it is  not one of the flexible tariffs. In Korea, non ad-valorem tariffs have been applied at the level of 1%, which is less compared to other 
countries'.  WT/TPR/M/137/Add.1 
 Page 33 
 
 
 In reality, multiple tariff bands have appeared  in other countries as well, resulting from the 
implementation of the UR agreement except for the countries which have flat tariff rate systems. 
Korea expects the tariff bands to be simplified with reduced tariff rates resulting from the DDA 
negotiations, and will explore the areas for the si mplification of tariff structures by reducing or 
eliminating flexible tariffs after the DDA negotiations. 
 
COLOMBIA
 
 
II. Trade Policies by Practice and Measure 
 
Tariff regime and trade facilitation  
 
Question 1  
 The Secretariat's report and Korea's active participa tion in the area of trade facilitation are testimony 
to the improvements in the rationalization of custom  procedures to expedite  merchandises.  Korea's 
tariff regime is notably complex and lacks transpar ency.  Does not Korea think that the achievements 
in trade facilitation could be offset by the costs in curred in the administration of the current tariff 
regime?  Has a rationalization program been considered in this case?  Answer
 
 
Please refer to the answer to China’s question (Tariff).   
Free Zones 
 
Question 2
 
 
The Secretariat's report points out that the activities that take place within free zones are exempted 
form import procedures and custom duties, enjoy fiscal advantages and a reduction on the corporate tax as well. 
 
a. How does the reduction on the corporate tax operate?  b. Are the corporate tax reduction measures comp atible with the commitments under the WTO's 
Agreement on Subsidies and Countervailing Measures?  
 Answer
 
 
Corporate tax benefits will be provided to forei gn-invested companies which are established in the 
FEZs and on operators who are engaged in th e development project of FEZs. Corporate tax 
exemptions apply for the first 3 years, and a 50 percent reduction for the following 2 years (for 
investments of more than 50 million USD, a 100 percent exemption for the first 7 years and a 
50 percent reduction for the following 3 years). Our au thority views that this incentive is not specific 
within the meaning of Article 2 of the Subsidy Agre ement, and thus, it is compatible to the Subsidy 
Agreement.   
 
   WT/TPR/M/137/Add.1 
Page 34  
 
Technical and Sanitary Norms  
 
Question 3
 
 
The Secretariat's report highlights that Korea made significant improvements in adopting international 
norms and implementing then into domestic legisl ation. The regulations concerning quarantine, 
particularly for fruits, along with other sanitary  and phytosanitary measures requirements, are 
relatively strict, possibly conforming a barrier to tr ade. In this respect, Colombia asks for further 
information concerning applied requirements and procedures and the authorities in charge of 
enforcing them.  
 
The Secretariat's report does not provide data on the controls applied to the importation of 
pharmaceutical products. Colombia's pharmaceutical sector has achieved considerable development in 
the last years and has the potential to export. Colo mbia would appreciate further detailed information 
concerning applied controls to the importation of these products. 
 
Answer  
 
Korea notifies the WTO/SPS Committee when there are new or modified regulations and import 
conditions for animal and plant quarantine. Such notification includes an inquiry point where you can 
ask detailed questions. If there are any questions on the notification submitted to the WTO, you may 
ask via the inquiry point in the notification. Howe ver, questions related to plant quarantine may be 
inquired at the National Plant Quarantine Servi ce (homepage: http://www.npqs.go.kr), and those 
related to animal quarantine and livestock health at the National Veterinary and Research Quarantine 
Service (homepage: http://www.nvrqs.go.kr).   
In order to import foreign pharmaceutical products to Korea, import approval from the Korean 
government is required. The Korean government re quires an importer to conduct quality testing on 
pharmaceuticals to protect public health. For further details, please refer to the Korean pharmaceutical 
affairs regulations.  
EU
 
 
Trade in goods  
 
Question  
 
As far as the EU is aware, Korea continues to appl y costly pesticide residue tests in a routine fashion 
to all imports. While these tests have been notifie d to the WTO (SPS/N/KOR/123) Korea has not been 
able to provide neither risk assessment for this tr eatment accorded to all imports, nor any national 
testing plans demonstrating that domestic products are subject to comparable requirements. How does 
Korea foresee to ensure that the testing becomes streamlined and efficient, for example by exempting 
imports with a clean record from unnecessary testing? 
  WT/TPR/M/137/Add.1 
 Page 35 
 
 
Answer  
 
Korea substantially reduced the residue testing fees in April 2004, relaxing the financial burden of 
importers. Concerning testing exemption, the provisi on of testing exemption of food imports based on 
compliance history will be enforced af ter relevant regulations are revised. 
 
For further information, please refer to  the answer to the US question 7. 
 
Question  
 Noting that Korea is now reported as moving to a sy stem of self-regulation, the EU’s own experiences 
seem to witness that in-market contro l is perfectly sufficient to ensu re the safety of cosmetic products. 
What are the changes envisaged by Korea, and by when will they be introduced? Would Korea 
confirm that there is no need for additional quality testing in Korea, if quality testing results are 
submitted by overseas manufacturers with internati onally accepted standards, including for functional 
cosmetics?  
 
Answer
 
 
The KFDA's guidelines for cosmetics standards and testing methods are to ensure the safety of 
cosmetics and protect consumers in the Korean Ma rket. Even if a foreign cosmetics manufacturer 
conducts voluntary self-quality control, the mandato ry testing should be conducted based on KFDA 
regulations. If the Mutual Recognition Agreement on quality standards for cosmetics is signed by 
Korea and the exporting country, or quality standa rds for cosmetics of the exporting country are 
recognized to be the same as or higher than the KFDA's, the foreign cosmetics may be exempt from 
quality testing. 
 
Question  
 
a. The EU understands that Korea is about  to accede to the UN organisations for the 
harmonization of vehicle regulations. When will Korea accede to the UN organisation in 
order to also introduce harmonization of standards in this important sector?  
b. Furthermore the EU understands that the Ministry of Commerce, Industry and Energy 
(MOCIE) plans a new regulation for Average Fuel Economy (AFE) which will raise trade restrictions for foreign producers. Passenger cars will require the US OBD (onboard diagnosis 
for emissions) with effect of 2005. The comp arable EU OBD is not to be allowed and 
technological innovations (e.g. head up display)  are not accepted in Korea. Does Korea have 
any plans to amend the a bove-mentioned shortcomings? 
 
Answer to a.
 
 
Korea has acceded to the "Agreement Concerning the Establishing of Global Technical Regulations" 
in the year 2000.  In addition, Korea is curren tly taking the necessary steps to accede to the 
"Agreement concerning the adoption of Unifor m Technical Prescription for Wheeled Vehicle, 
Equipment and Parts which can be fitted and/or be  used on Wheeled Vehicles and the Conditions for 
Reciprocal Recognition of Approvals Granted on the Basis of These Prescriptions" (also known as the 
"1958 Agreement") by the end of 2004.  WT/TPR/M/137/Add.1 
Page 36  
 
Answer to b.
 
 
The Korean government will adopt and apply the Average Fuel Efficiency (AFE) to domestic 
automakers and foreign car importe rs which bring in more than 1,000 cars per year. The AFE will be 
applied to the domestic automakers  starting from January 1, 2006. However, foreign car importers 
will be given a grace period until 2009 without cond itions. The Korean government has already held 
sufficient consultations on this issue with the EU , the United States and Japan as well as KAIDA, the 
EUCCK and AMCHAM. Also, it will notify the TBT committee of the AFE at an early stage. 
 On OBD, Korea expressed its rationale behind intr oducing an advanced OBD system based on the US 
standard (OBD-II) for gasoline passenger cars;  
 - Korea currently has emission test procedures a nd standards for gasoline passenger cars that 
are similar to that of the US, and it is logical  to adopt an advanced OBD system based on the 
US system. 
- Because the EU OBD system (EOBD) has less stringent standards than that of the US 
OBD-II, if both standards are accepted, automake rs will tend to adopt EOBD rather than US 
OBD-II.  The Korean government has announced  its plan to introduce an advanced OBD 
system last year to all automakers in Korea and many of the automakers have already reflected the OBD system in their planned 2005 models.   
- In order to provide support for small-scale fo reign automakers, we ha ve allowed small-scale 
automakers to adopt OBD two years later (2007).   
- For diesel vehicles, since Korea has test procedures and standards similar to the EU system, 
Korea plans to adopt a system similar to EOBD. 
 
Question
 
 
The Korean government stipulates that importers of  alcoholic beverages must operate from a single 
warehouse in the same district as the one which issu ed the licenses, which implies additional costs and 
logistical problems for the importers. The EU  understands that currently, a domestic liquor 
producer/manufacturer can have as many warehouses as they like to store and distribute their goods. Further, that a liquor importer, who like the domestic manufacturer can only sell to a wholesaler, is 
only allowed one warehouse in the area where the im port license was issued and an additional one at 
the entry port.  This strikes the EU as being some what discriminatory. It seems that like domestic producers, liquor 
importers sell product to wholesalers. Liquor Importe rs should therefore be classified in the same 
category as domestic liquor producers/manufacturers and allowed as many warehouses as they wish. 
The EU should therefore like to ask why the Mi nistry of Finance and Economy and National Tax 
Service are currently classifying liquor Importers in the same category as domestic wholesalers. When does Korea foresee carrying out the necessary changes of this practice?  
 
Answer
 
 A liquor importer is the same type of liquor seller as a wholesaler, and allowing a greater number of 
warehouses for liquor importers will create an issue of unfairness against wholesalers. Such deregulation only for liqu or importers will essentially result in expansion of their business areas, 
which will create conflicts of interests among different  interested parties. Coordination is required in 
advance among the interested parties. In addition, it is illogical that liquor importers are classified in 
the same category as liquor producers, so that liquor importers are in the same category as liquor 
wholesalers.  
  WT/TPR/M/137/Add.1 
 Page 37 
 
 
Question  
 
The EU should like to ask Korea why Korean la beling requirements exceed those prescribed by the 
Codex Alimentarius Genera l Standard that covers the labeling of  alcohol products. Furthermore, the 
EU should like to ask how Korea reconciles the co mpatibility of the requirement with the WTO rules 
under the Agreement on Technical Barriers to Trad e (TBT) which provide that countries should use 
internationally agreed-upon standards where they exist.   
Answer
 
 Under the Korean labeling standards, it is require d that a maximum of 16 pieces of information be 
indicated on the label of imported liquor with a ll indications demanded by MOHW (Ministry of 
Health and Welfare), MOCT (Ministry of Culture and Tourism), ME (Ministry of Environment), and 
NTS (National Tax Service) besides the KFDA.  Fo r Food labeling, the Korean standards are neither 
stricter nor different in terms of the elements a nd contents of labeling, compared with the "Codex 
General Standard for the Labeling of Prepackaged  Foods." The Korean government is committed to 
continuously following up on the pending issues in the Codex Committee on Food Labeling, and 
reflecting relevant developments in to current food labeling standards. 
 
Question
 
 The EU understands that Korean customs refuse to accep t the EC certificate of origin. This means that 
in order to justify EU country of origin status, Community countries are required to furnish additional 
documentation and follow further procedures, which can  be a source of difficulties for EU suppliers. 
Considering the close relationships the EC should kind ly like to ask Korea when this apparent error in 
Korean legislation will be changes so that Kor ea clearly recognises the EC as a customs territory?  
 
Answer
 
 
It is not appropriate to raise this question because the EU has no cases of submitting certificates of origin for preferential treatment from Korea.   Question
 
 
Current Korean regulation could give the impressi on that foreign pharmaceutical products are not 
welcome in Korea. One example of this is that  guidelines for prescriptions for new products are 
mainly made for reasons of cost-cutting and ther efore discriminate products of foreign producers. 
Guidelines for prescriptions should be confined to scientific considerations. Another example is tri-
annual re-pricing. Currently, prices can only be re duced not increased. As there is no economical 
justification for this proceeding, the possibility of  price increases should be provided. Foreign quality 
certificates for imports in particular of biological and biotechnological products are not accepted. The 
"Drug Master File (DMF)" which was introduced  in 2002 contains only new products. To avoid 
discrimination it should instead embrace all important  products. The EU should like to know how and 
when Korea foresees changing the cu rrent practice and thereby to also eliminate the above-mentioned 
shortcomings.  
Answer
 
 Guidelines for pharmaceutical reimbursement are designed to promote the cost-effective use of 
pharmaceutical products and have nothing to do with discriminatory measures. Guidelines for 
pharmaceutical reimbursement are decided through th e technical review performed by an expert 
committee, which consists of specialists in medical science and pharmacy, including registered WT/TPR/M/137/Add.1 
Page 38  
 
doctors and pharmacists, established within the Health Insurance Review Agency (HIRA), an 
independent public corporation for the review and evaluation of hea lth insurance claims. In this 
technical review, experts look closely into th e clinical data in question, submitted by the 
pharmaceutical companies. If those pharmaceutical companies or related organizations consider 
HIRA's decision to be unacceptable, they will be duly given an opportunity to explain their view. 
 
The price of new products tends to decrease ove r time, as substitutable pharmaceuticals having the 
same efficacy become available in the market. This  is the way the market works. Under the current 
Korean system, however, this market principl e does not work well for the price of those 
pharmaceuticals covered by the insura nce. That is the reason why we  have introduced tri-annual re-
pricing. Nevertheless, if deemed necessary, pha rmaceutical companies can ask the authorities to 
increase the price of certain products.  Since biological and biotechnological products are ma de of organisms or or ganism-derived products, 
the possibility of deterioration or decomposition ca nnot be ruled out in the course of importation or 
distribution. Furthermore, the testing results of  every exporting company cannot be accepted equally 
because the level of compliance with the GMP varies by country and by company. Therefore, an importer needs to be capable of conducting quality t esting to ensure the safety of the pharmaceuticals. 
Regarding DMF, 77 additional pharmaceutical ingredie nts (e.g. gliclazide) are included in the list of 
ingredients regulated by the DMF system in March 2004 in addition to new pharmaceutical 
ingredients. The ingredient list of the DMF system will be continuously extended. 
 
Question
 
 
The EU welcomes the effort deployed by the Kor ean government to enforce IPR, and organisational 
steps such as the creation of inter-ministerial  consultative bodies, awareness raising campaigns, 
international cooperation, or enforcement campaigns . Some EU companies, however, still have major 
concerns, in particular about counterfeiting. Would Korea consider taking steps to translate welcome 
temporary enforcement campaigns on counterfeiting into a more permanent enforcement presence?  
 
Answer  
 On a permanent basis, KIPO continually reinfor ces its anti-counterfeiting measures to prevent unfair 
competition and to promote sound business practices. In 1987, we established a permanent division 
exclusively devoted to protecting IPRs. Since then , we have been continually investigating and 
cracking down on counterfeit goods. For reference, la st year, we uncovered 549 acts of counterfeiting. 
We issued warnings for 238 of these cases and file d criminal charges against the other 331 cases.  
 
Question
 
 
In its government report Korea states that "Unfai r commercial use of confidential data submitted to 
authorities for marketing approval of pharmaceuticals a nd agricultural chemicals, is also prohibited".  
 
a. The EC should like to ask Korea to explain more in detail which kind of practices are 
considered unfair commercial use. Would this include the reliance, by marketing authority 
officers, on the original data to assess th e safety and efficacy of a generic copy?  
b. In its government report Korea explains that  right holders may request Customs to suspend 
the release of suspected counterfeit goods, on pa yment of collateral of 120% of the dutiable 
value of the goods. Such a high bond would seem to unreasonably deter recourse to these 
procedures (Article 53 TRIPs. The EU should like to ask Korea’s views on this matter.  
c. In the government report Korea indicat es that the Agro-Fis heries Product Quality 
Management Act of 1999 specifies GIs for agricultural and fish products. The EU finds the  WT/TPR/M/137/Add.1 
 Page 39 
 
 
existence of such "sui-generis", specific GI  protection systems the most appropriate and 
efficient way to ensure adequate GI protecti on. Does Korea have plans to extend the system 
in the Agro-Fisheries Product Quality Manageme nt Act of 1999 to other products, or to 
establish a similar system for other products?  
 Answer
 
 
Under the Pharmaceutical Affairs Act, a new pharmaceutical product is given a six-year period of reexamination. During that period, the applicant manufacturing a generic drug should submit data of a 
level similar to or higher than the original data . Therefore, during that period of reexamination, 
original data cannot be used by generic copy appl icants. When that period expires, the applicant 
manufacturing a generic drug should submit data, incl uding bio-equivalence data, for approval as in 
the EU and the US. In that case, it does not constitute a case of unfair commercial use.    KCS sets that right holders pay a collateral of 120% of the dutiable value of the goods when they 
request Customs to suspend the re lease of suspected counterfeit goods. The payment of collateral was 
introduced to prevent the abuse of the suspension system and co mpensate for losses borne by the 
importers. The amount of the collateral was determin ed to account for the dutiable value of the goods 
plus relevant taxes imposed at the time of importation.  The Korean government is seeking to amend the Trademark Act in order to incorporate the 
registration of geographical indications as a collectiv e mark. Under the draft amendment of the Act, a 
geographical indication of goods, including agro-fish eries product, may be registered as a collective 
mark if it meets the conditions of the Act.  
Government Procurement 
 
Question
 
 
a. The EU understands that results of bids, in cluding scoring criteria, tenders, pre-qualification 
evaluation and contracts awards are released on the Internet (at www.g2b.go.kr). As this web 
site is in Korean it might be somewhat difficu lt for foreigners to benefit from it. Are Korean 
authorities planning to have an English vers ion or another language-version of the site? 
b. The EU should like Korea to inform about th e statistics regarding disputes handled by the 
Contract Dispute Mediation Committee (ICDMC) , in particular data concerning foreign 
companies' cases? The EU should also like to  receive further information regarding the 
creation of a National Contract Disputes Deci sion Committee, including explanation of what 
will be the relationship between this new committee and the ICDMC. 
 
Answer  
 
To help foreign suppliers participate in the proc urement process, the Korean government plans to 
make the Korean government Electronic Procuremen t System (hereinafter referred to as "GePS") 
more English-friendly. As part of such effort , in September 2004, the Korean government improved 
the GePS website, allowing foreign suppliers to have access to tender notices, award notices and 
relevant law in English by clicking on "Bid Infor. (ENG.)" at www.g2b.go.kr.  So far, we had a single mediation to the ICDMC and no cases were related to foreign suppliers. The 
Korean government plans to widen the coverage of ICDMC to the mediation of complaints regarding 
domestic tendering which are not covered by the GP A, as well as from the mediation of complaints 
regarding international tendering wh ich is covered by the GPA. Thus  we transform the ICDMC to the WT/TPR/M/137/Add.1 
Page 40  
 
NCDDC which covers complaints related to domes tic tendering as well as in ternational tendering. 
However, the details of the establishment and structure are not decided yet.  
Trade in Services 
Professional Services  
 
Question
 
 
According to the report of the WTO Secretariat (paragraph 64), Korea has in its FTA with Chile made substantial concessions in legal services, which are not in GATS undertakings. At the same time 
Korea has tabled a GATS initial offer which includes for the first time commitments in respect of 
foreign legal consultants. To what extent the substantial concessions in th e FTA go beyond the commitments offered in the 
commitments offered in the GATS negotiations?  Answer
 
 
With respect to the legal services sector, Korea reta ined comprehensive future reservations in the 
KCFTA.  
Question
 
 
As regards the Korean legal services market and re gulatory regime, what is the status of reform 
behind the proposed commitment? Is it already possibl e for foreign lawyers to provide legal services 
in international law and foreign laws in which th ey are qualified without having to be fully admitted 
into the Korean Bar? Is it already possible for a fo reign lawyer to take the Korean Bar exam with a 
view to provide the entire range of legal services in respect of Korean law? Is it possible for a foreign 
law firm to establish a commercial presence in Ko rea that would include among its members lawyers 
fully admitted to the Korean Bar? In case of negative answers, whic h are the reasons for not allowing 
those possibilities?  
Answer
 
 Regarding the Korean legal services market and regulatory regime, though Korea is making progress 
in its preparations for liberalization including th e enactment of the FLC Act (tentative), specific 
contents and methods are yet to be determin ed. However, Korea has already abolished the 
requirement of having to be a national to be qua lified as a Korean lawyer by amending the Lawyers 
Act upon entry to the OECD in 1996. Thus, foreigners  are equally eligible as Korean nationals to 
become lawyers in Korea. The Korean government  has been participating in the DDA services 
negotiations under the basic principle of progressive liberalization of its legal services market in 
accordance with the results of th e multilateral trade negotiations. 
 
Question
 
 
What are Korea’s plans for opening its legal serv ices market, and with regard to the other OECD 
recommendations to strengthen competition?  
Answer
 
 
Korea submitted its Initial Offer in March 2003. The Initial Offer was drawn based on the requests 
submitted by other Members in June 2002. We also took into account the progresses and current 
status of liberalization of other Members and the opinions of domestic service consumers and  WT/TPR/M/137/Add.1 
 Page 41 
 
 
suppliers. In our Initial Offer, the foreign law fi rms are permitted to estab lish their representative 
offices in Korea and their lawyers can provide adviso ry services on the jurisdiction law, of which they 
are qualified as lawyers, and the public international law. These lawyers are given the status of a Foreign Legal Consultant (FLC) and do not need to obtain a domestic license. The Korean government will take necessary measures to im plement its commitments including domestic 
legislations on FLC in accordance with th e schedule of the DDA services negotiations. 
 
Telecommunications  
 
Question
 
 
a. The EU has noted table IV.7 in the report of  the WTO Secretariat. The EU should like Korea 
to confirm if the figures in the table relate to direct foreign ownership and that there is no 
limit to indirect foreign ownership. In conti nuation the EU should like to be further informed 
of the reasons for maintaining a limita tion on direct foreign ownership?  
b. The WTO Secretariats report (Paragraph 95) re fers to operators contribution to R&D. The EU 
should like to ask Korea what form of R&D development is required from the different 
categories of telecom operators?  
c. The WTO Secretariats report (Paragraph 102) re fers to certain universal service obligations. 
The EU should like to ask how KT has been d esignated as the universal service provider.  
d. The EU understands that foreign equity  in Korea Telecom (KT) and other basic 
telecommunications providers is currently ca pped at 49%. Does Korea have any plans to 
remove this cap?  
e. The OECD recommended that the Korea Communications Commission (KCC) should be 
transformed into an independent regulator to  clearly differentiate MIC´s policy from its 
regulatory responsibilities. Does Korea intend to follow this recommendation?  
 
Answer to a. d.  
 
Please refer to the answer to Canada’s the first question.  
Currently, we have no plans to change the limits for foreign participation. 
 Answer to b.
 
 
The contribution of the operators is used to increa se the informatization level of Korea. It is not 
allocated according to the demands from operators  who made the contribution. The MIC surveys 
technology demand from the industry including operators , academia and research institutes. Through 
a series of technology planning activities, project  RFPs (request for proposals) are produced and 
announced. Operators are not given the priority of becoming beneficiaries of the fund because every 
applicant should go through open competition.   
Answer to c.
 
 KT is the unique operator that can provide universal services (local telephone service, payphone 
service, etc.) nationwide. The other operator (Han aro Telecom) can provide local telephone services 
only in 21 zones out of the 144 local zones. Thus, KT has been designated as the universal service provider since 2000 by the Ministry of Information and Communication.  Answer to e.
 
 
Please refer to the answer to Canada’s question (IV. Para 92) WT/TPR/M/137/Add.1 
Page 42  
 
 
Transport services 
 
Question
 
 
The report of the WTO Secretariat (Paragraph 111) describes how Korea has recently liberalised the 
maritime bulk cargo market. After this liberalization,  does any restriction or measure give preference 
to Koreas vessels in relation to access to different  types of international cargoes still exist?  
 
Answer  
 
Korea does not have any restrictions or measures to  give preferences to Korean vessels in every type 
of international cargoes.  Question
 
 
The report of the WTO Secretariat (Paragraph 111) re fers to the management and operation of Korean 
airports. Is it possible for independent third pa rty ground handling operators to get access to the 
ground handling business in Korean airports?  
 
Answer  
 
In accordance with the Aviation Act of Korea, access to the ground handlin g business is granted to 
domestic and foreign operators under the name of "A ircraft Handling Business," irrespective of their 
affiliation to an air carrier. 
 
Korea’s trade policy   
 
Question  
 
How does Korea perceive its use of the instrument of preferential trade and how does this correspond 
to its support for the ongoing development-round as well as the multilateral trading-system? Does 
Korea foresee entering into agreements with LDC’ s or other kinds of developing countries?   
 
Answer  
 
We keep in mind that FTAs should be based on, a nd consistent with, the WTO rules. In addition, 
FTAs should play a complementary role in prom oting the multilateral trading system and thus 
contribute to the wider process of trade liberali zation. We are also noting that FTAs have the 
advantage of further liberalizing and thus expanding the markets. Furthermore, through the FTAs, we 
wish to innovate our economic system by op ening the market, increasing domestic competition, 
facilitating industrial restructuring and upgrading its standards. The innovation will attract more 
foreign investment in the Korean market.   We are pursuing FTAs with partners, being ready to negotiate first on a multi-track basis in order to 
maximize the benefits of FTAs. In selecting candi date countries, Korea takes into account certain 
factors, including economic benefits, political a nd diplomatic considerations and the country's 
commitment to concluding the agreement with Kor ea, etc. Regardless of their status of economic 
development, the Korean government is ready to pursue FTAs with any count ry as long as they meet 
the afore-mentioned criteria.  Korea is currently co nducting a joint study on the feasibility of an FTA 
with the ASEAN, some members of which are LDCs.   WT/TPR/M/137/Add.1 
 Page 43 
 
 
 
Question  
 
The EC has introduced the Everything-But-Arms in itiative, granting duty-free access for all products 
from least-developed countries, basical ly with the exception of arms. The EC has been advocating for 
introduction of similar arrangement s by other developed countries.  
Considering Korea’s level of development, is the country of the opinion that it should introduce a similar system? Furthermore could Korea explain if and in case how it intends to use its bilateral trade policy for supporting the further integration of the least-developed countries in global trade? 
Answer
 
 
The Korean government is considering on expa nding duty-free and quota-free access for products 
from the least-developed countries. 
 
Question: page 69-73  
 
Document WT/TPR/S/137 pages 69 to 73 mention a variety of subsidies available for foreign investors and SMEs in form of tax incentives, tax holidays, government equity participations, 
guarantees and credits provided by state owned financ ial institutions etc. None of these subsidies are 
mentioned in Korea’s last New and Full Subsidy Notification (G/SCM/N/95/KOR). 
Can Korea please explain why these programs are not mentioned in the notification? Can Korea please provide appropriate information on these programs according to the notification 
format for New and Full Subsidy Notifications?   Answer
 
 
Article 25.2 of the Agreement on Subsidies and Countervailing Measures (ASCM) stipulates that 
"members shall notify any subsidy as defined in  paragraph 1 of Article 1 which is specific  within the 
meaning of Article 2…"  And, Article 2.1(b) stipulates that "where the granting authority … 
establishes objective criteria or conditions governing the eligibility for, and the amount of, a subsidy, 
specificity shall not exist …" 
 Korea, like many other countries, has various  types of support programs for SMEs and FDI 
inducement. The authority in charge of subsidy no tification viewed that Korea’s programs were not 
specific within the meaning of Article 2, and thus, it was not necessary to include those programs in 
Korea’s latest New and Full Subsidy Notification covering the year 2001 and 2002.  Nevertheless, 
Korea included a special tax treatment program for foreign invested enterprises in page 18 of the 
notification, without prejudice to its legal status  under the WTO agreement.  If any specific subsidy 
measure has been overlooked, Korea will include it  when updating notifications or in the next New 
and Full notification.  Question: page 97
 
 
Pages 97 to 101 of the same document give an overv iew on state intervention in mainly the financial 
sector in order to buy up bad loans and thus assisti ng in restructuring various branches of industries 
suffering from the Asian financial crisis. None of  these interventions, which in many cases were 
connected with important targeted transfers of stat e funds to specific industries, have been mentioned 
in Korea’s New and Full Subsidy Notification.  Can Korea please explain why these interventions are not mentioned in the notification?  
Can Korea please provide appropriate informati on on these actions according to the notification 
format for New and Full Subsidy Notifications?  WT/TPR/M/137/Add.1 
Page 44  
 
Answer
 
 
Regarding the assistance for restructuring industri es suffering from the Asian financial crisis, we are 
also of the view that such assistance was not a s ubsidy as defined in Article 1, and/or not specific 
within the meaning of Article 2.  Most of the rest ructuring programs were carried out by public or 
private banks based on their commercial judgment.  Also, there was no specificity in those programs, 
because the eligibility for the progr ams was automatic according to th e clearly spelled out laws and 
regulations, including the "Corporate Restructuring Promotion Act."  
HONG KONG, CHINA  
Agriculture 
 
Question 1: page 15, paragraph 53  
 
We would like to know if furthe r details of the ten-year agricu ltural reform program could be 
provided and how the measures contained therein w ill be translated into Korea's position in the 
agricultural negotiations under the DDA.  
 
Answer  
 
Please refer to the answer to Australia’s question on Agriculture for details for ten-year agricultural 
reform program. 
 
The Korean government set out an investment and loan plan worth 119 trillion won in March 2004, in 
order to implement the ten-year agricultural refo rm program. We are to transform the traditional 
government-led price support system to income-s upport and market-oriented policies through the ten-
year agricultural reform program.  Yet, given the cu rrent conditions of Korean agriculture, it will take 
a considerable amount of time. Therefore, in or der to achieve successful agricultural reform, the 
negotiation on trade liberalization should be carried out  gradually and with flexibility. In this context, 
Korea emphasized the necessity of gradual agricultural reform at the DDA negotiations on agriculture.   
Export Promotion 
 
Question 2: page 68, paragraph 122
 
 
We note that Korea helps companies develop "w orld class products" under a scheme introduced in 
2001, mainly by assisting with R&D and overseas marketing activities. The aim is to have 
1,000 world class products by 2010 that rank within th e top five according to global market share. We 
would like to know more details about the scheme.   
Answer
 
 
When we choose a product to be world class, we consid er whether or not it is in the top five in terms 
of global market share. Currently, we classify products as being World Class when they are in the top 
five in the global market share. Also, we clas sify products as next-generation world-class products 
when goods are projected to be a top five product within three years from the date of classification.   
 
 
   WT/TPR/M/137/Add.1 
 Page 45 
 
 
Financial services  
 
Question 3: page 100, paragraph 70-71  
 
It is noted that in respect of overseas bank ow nership, while foreign ow nership up to 100% is 
possible, approval from the Financial Supervisor y Commission. (FSC) is required for foreign 
ownership shares to surpass the levels of 10%, 25%  and 33%.  Does it mean that if FSC’s approval 
has been sought for foreign ownership shares to su rpass the level of 33%, FSC’s further approval is 
not required for the shares to in crease beyond 33% up to 100%?   
 Answer
 
 
First of all, this approval requirement applies to both Korean and foreign investors.  Further approval 
beyond the 33% ceiling is required in two cases.  First,  when an existing investor wishes to own more 
than 33% of the bank share (anywhere up to 100 %), additional approval to exceed the limit is 
necessary, after which further increases of ownershi p are possible without an approval. The other case 
is when an investor at the initial application stage applies for more than the 33% ceiling.  If approved, 
the investor can purchase the shares up to the level approved within the duration allowed, for instance, 
40% within six months.  If the same investor want s to own more shares later on, then further approval 
has to be obtained.  Question 4: page 100, paragraph 70-71
 
 
Would Korea clarify whether foreign ownership of in surance companies is subject to the restriction 
on joint venture as set out in its GATS schedule?   If not, we would like to encourage Korea to 
consider reflecting its freer regime in its initial o ffer so as to bring its commitments in line with its 
actual regime and to increase the predictability of the regime.  
 
Answer  
 
Under Korean insurance laws and regulations, ther e are no separate stipulations subjecting foreign 
investors, especially in the areas of licensing, joint ventures and equity ownership.  Also, in owning insurance companies, there are no restrictions on foreign ownership except the qualifications. 
Foreigners applying for overseas ow nership have to own an insurance business in their country with 
sound assets and financial structure. The rationale behind the required qualifications is to prevent 
speculators from entering the market and to pr otect the professional management of insurance 
companies and the best interest of policyholders. Fu rthermore, similar types of entry requirements can 
be found in most other countries. 
 
INDONESIA
 
 III. TRADE POLICIES AND PRACTICES BY MEASURE (2) Measures Directly Affecting Imports (viii) Contingency measures 
 
Question 1: page 55, paragraph 66
 
 
Paragraph 66 of the Secretariat Report notes that Korea has used anti-dumping provisions to protect certain industries against competitive imports. Tabl e III.3 shows that half of definitive of dumping 
duty were taken in 2003. Indonesia would be interest ed to know why Korea intensified the use of anti-
dumping measures to protect domestic industries in 2003. 
 WT/TPR/M/137/Add.1 
Page 46  
 
Answer
 
 
Anti-dumping measures in table III.3 show the total anti-dumping duties that were imposed as of late 
2003 and therefore they include the cases that were investigated into in the previous year and 
completed in 2003. This is because we received re latively more anti-dumping applications in 2002, 
particularly in the second half of 2002. For this r eason, our investigations were completed in 2003 and 
therefore the duties were also imposed in 2003.  
Question 2: page 56, paragraph 67
 
 Paragraph 67 of the Secretariat Report notes that  KTC independently decides to initiate an anti-
dumping investigation among other things following a request from the ministry responsible for the 
affected industry. How does Korean Authority ensu re fairness that the anti-dumping measure only be 
applied for removal or preventing domestic industry from injury? Indonesia would appreciate if Korea 
could explain how this ex-officio initiation could not simply be brought by responsible ministry into 
protection purposes.  
 
Answer
 
 
So far, the Korean investigation authorities concerne d have initiated investiga tions only if they were 
requested by the affected domestic industry. Ther e have been no cases in which they decided to 
initiate an investigation following the request from th e ministry in charge, and also no cases in which 
the ministry in charge requested initiation of an investigation. If the ministry responsible requests 
initiation of an anti-dumping investigation in the fu ture, the Korean authorities concerned, as an 
independent organization, will cons ider whether or not there is enough evidence to do so and decide 
whether or not to initiate an investiga tion in a fair and transparent manner. 
 
V. FUTURE POLICY DIRECTION 
 Question 3
 
 
With regard to bilateral trade relations in the futu re policy directions, paragr aph 90 of the Government 
report states that Korea will continue to proactivel y address any trade issues raised by its trading 
partner through bilateral consultations, in accordance with intern ational rules. Indonesia wishes to 
have further explanation on how to get prompt r esponse from Korea to resolve any bilateral  trade 
issues.   Answer
 
 
The Indonesian government may raise any bilateral trade issue through diplomatic channels. The 
specific trade issues can be discussed at ad-hoc m eetings which would be arranged for resolving the 
issue. Regular bilateral consultation mechanisms, such as a joint economic and trade committee, may 
also be utilized for this purpose. The Korean gove rnment is ready to hold any form of bilateral 
meeting on trade and economic issues, in acco rdance with international trade rules.  
 
JAPAN  
 
Government Report  IV. Trade Policy Developments: 2000 - 2004 (1) Korea and the WTO  WT/TPR/M/137/Add.1 
 Page 47 
 
 
(a) Implementation of WTO Commitments 
 
Question page 14, paragraph 46  
 
The Government Report states that Korea is now prep aring amendments to its Copyright Act to fully 
implement the WIPO Performances and Phonograms Treaty (WPPT). 
 a. Please indicate the specific schedule of the amendments. 
b. If the amendments will include content other th an the implementation of the WPPT, such as 
to extend the terms of protection and to grant the rental right to authors of books or 
magazines, please indicate them.  
 
Answer
 
 
The National Assembly is now deliberating the am endment draft of Copyright Act, which provides 
interactive transmission rights – equivalent to "t he right of making available" in the WPPT - to 
performers and phonogram producers, and it is expect ed that the amendment act will be passed soon. 
 Other aspects to implement the WPPT, e.g., the moral right of performers, could be dealt with by the 
next amendment of the Copyright Act, which is sche duled for next year. It is also expected that 
accession to the WPPT could be considered in the n ear future. We are considering the feasibility of 
granting rental rights on books etc., for the next amendment reserving the outcome. 
 
Question: page 14, paragraph 47
 
 
According to the Government Report, to coordi nate and facilitate IPR protection policies among 
various Ministries, the Consultative Committee on IPR Protection was established and the Committee 
identified 15 specific tasks in its Comprehensive Plan for IPR.   a. Please indicate the specific content of the "Comprehensive Plan for IPR Protection".  
b. Please indicate how to obtain the documents of the "Comprehensive Plan for IPR Protection" 
 Answer
 
 
Please refer to the answer to Canada’s question 26.  Secretariat Report
 
 
II. rade Policy Regime: Framework and Objectives 
(5) rade Agreement and Arrangements (iii) ilateral agreements  
 
Question: page 28, paragraph 46
 
 
Concerning the FTA negotiation between Japan and Korea, the Secretariat Report states that non-
tariff measures (e.g. trade barriers, business practic es, technical barriers to trade and sanitary and 
phytosanitary requirements) is be ing negotiated. Japan believes that "business practices" should not be 
included in the non-tariff measures.  Regarding th is point, please indicate the view of the Korean 
government.  
 
 WT/TPR/M/137/Add.1 
Page 48  
 
Answer
 
 
With regard to the on-going Korea-Japan Free Tr ade Agreement (KJFTA) negotiations, the Korean 
government deems that a KJFTA should achieve im proved market accessibility in both Korea and 
Japan. Therefore, the Korean government deems th at the KJFTA should have a mechanism that can 
ensure clear-cut solutions to non-tariff measu res (NTMs) including business practices that hamper 
trade and investment between Kore a and Japan. Since a market-oriented government has an obligation 
to keep its domestic market fair and competitiv e, the Korean government sees no problem in further 
obligating contracting parties to the KJFTA on an e qual basis in order to get rid of NTMs including 
anti-competitive business practices such as dango.  (6) Foreign Investment Regime (ii) Legislative framework and procedures  
 
Question: page 31, paragraph 55
 
 
The Secretariat Report states that as of April 2003, 27 sectors were partially open, subject to foreign equity limits. Regarding these restrictive sectors, Japanese investors have high hopes that the Korean 
government will continue to take pos itive action in order to realize the attractive market that motivates 
investors to make new or additional investment. In the light of their hopes, does the Korea Government  have any plan to remove or raise the current 
foreign equity limit?  
 
Answer
 
 
The plan will apply to a total of 26 industries. Si nce the first 5-year plan for foreign investment 
liberalization commenced in June 1993, we have been increasing the number of industries open to 
foreign investment.  The current FDI liberalization rate stands at 99.8%. We are planning to increase 
the numbers of industries for partial liberalization in  the future, taking into consideration the effect 
that market opening will have on the economy, do mestic industrial conditions, and the natures of 
industries  III. Trade Policies and Practices by Measure (1) Measures Directly Affecting Imports (i) Customs procedures  
 
Question: page 39, paragraph 9
 
 
Japan welcomes that the Korean government has endeavored to modernize customs procedures, 
including the introduction of "e-customs" and a " one-stop" service. Please indicate when "e-customs" 
starts to operate for industrial products, including automobiles.   
Answer
 
 
As there are electronic networks built between  Customs Houses and agencies responsible for 
verifying the requirements for quarantine at the time of import/export, inspection, approval and 
certification of industrial agricultural and marine products, Korean Customs can now check the results 
electronically, without submissions of additional documents involved. 
 
In line with the e-customs initiative by the Korean government, the agencies verifying the 
requirements will build a system that receives on line verification applications for industrial,  WT/TPR/M/137/Add.1 
 Page 49 
 
 
agricultural and marine products. Already, a number of agencies in charge of flora quarantine and 
other verification take applications over the Net.  
(iii) Tariffs 
 
Question: page 48, paragraph 33
 
 
In 2004 the Republic of Korea applies adjustment duties to following items of fishery products: the 
sea bream, the sea bass, the eel, the croaker, the saury, the Alaska Pollack, the shrimps and prawns, 
the prawn, the squid, as well as the pulp squid. 
Please indicate the schedule of reductions in the a bove adjustment duties to the general duty rate. 
Please confirm that the Korean Government does not intend to expand the list of items on adjustment 
duties. In the meantime, what percentage of Korean tariff lines with regard to fish and fisheries products is 
bound to the WTO obligation? Please also provide the schedule to improve the bound tariff rate. 
 
Answer
 
 
Korea has reduced the number of items subject to ad justment duties and tariff rate. In regards to the 
fishery industry, which is relatively less competitive,  it would be difficult to abolish the adjustment 
duty for now. But Korea will try to apply the adju stment duties in a minimal manner considering the 
economic situation of the domestic industry. 
 The tariff binding ratio of Korea on fish and fish eries products is 43.1%. Korea will consider on 
whether to bind the tariffs on fish and fisheries products in accordance with the result of WTO DDA 
negotiations on non-agricultural products. 
 
(viii) Contingency measures  
 Question: pages 55 to 56, paragraph 66 and 67
 
 
Concerning the anti-dumping investigation on industrial robot from Japan, the investigation was terminated by the withdrawal of the application by  the applicant on 14 January 2004. However, we 
have been informed that the Korean government ac cepted another application for an investigation on 
19 August 2004 which is virtually the same in conten t as the previous one. Japan is looking with high 
interest at this renewed application which was re-submitted only a short time after the previous 
application had been withdrawn. Japan urges the Korean government to recognize the fact that the 
mere initiation of an anti-dumping investigation, even before the actual imposition of AD duties, 
affects exporters to a great extent.  Please indicate the view of the Korean government on this matter.   
Answer
 
 
The Korean government will thoroughly review th e accuracy and suitability  of the evidence put 
forward in the application to decide whether or  not this case has enough evidences to initiate an 
investigation in accordance with the WTO anti-dumping agreement.  Question: page 51, paragraph 49
 
 
The Secretariat Report states that Korea’s non-prefer ential rules of origin are based on the wholly 
obtained goods and substantial transformation criterion and the tariff shift rule (change in six-digit HS 
classification) is applied. Japan understands that de tails of implementation of Korea’s non-preferential WT/TPR/M/137/Add.1 
Page 50  
 
rules of origin are regulated by Country of Orig in Regulation (issued by the Commissioner of the 
Korean Customs). This regulation requests exporters to  submit a list of auto parts in order to verify 
the origin of complete automobiles.  
Please indicate the reason why it is required to provide a list of car parts in order to verify the origin 
of complete automobiles.   Answer
 
 
The regulations of the Ministry of Commerce, Industry and Energy (MOCIE) and Korea Customs Service stipulate that supporting documents such  as origin certificates, parts purchase list or 
manufacture process specification etc., must be presented to see if marks of origin are false, 
misleading or confusing, only when it is deemed ne cessary. In compliance with paragraph 2 of Article 
9 of the GATT to protect consumers against fraudulent or misleading indications, the goods, 
designated by the MOCIE, must bear marks of origin.  
 
Question
 
 Concerning the approval of origin of a motorcycle, this regulation imposes th e obligation to stick a 
label which shows the origin on the tank of the moto rcycle in addition to the certification of origin. 
Please indicate the reason why it is required to stick a label in addition to the certificate of origin, in 
order to verify the origin of a motorcycle.  
 
Answer
 
 
As to the marking of origin, it is stated that label of origin shall be marked where it is seen clearly, but 
there is no provision stipulating that motorcycles should bear the origin label only on gas tanks. 
 
(ix) Standards and technical requirements  
 
Question: page 58, paragraph 78 and 79  
 
Concerning the technical standards for automobile s, although the standards are based on several 
international standards, certain requirements wh ich are unique to Korea are added. Such unique 
requirements impose heavy burdens on the producer s in terms of time and costs of producing 
automobiles for the Korean ma rket. Japan believes that such unique requirements should be 
harmonized with international standards at an early  stage, in accordance with  the principle of the 
WTO TBT Agreement, which stipulates that techni cal regulations and standards should not create 
unnecessary obstacles to international trade.  Please indicate the view of the Korean government on this matter.  Answer
 
 
Each country maintains its own motor vehicle safety standards that are suitable for its unique operating conditions.  In order to reduce variations a nd to enhance the level of safety available to the 
general public, work is being undertaken in the UN/ECE's World Forum for Harmonization of 
Vehicle Regulations with participation from most of the major automobile manufacturing countries. 
 Harmonization on a global level is a relatively r ecent phenomenon, and the majority of the non-EU 
countries participating in the discussions joined the forum in the late 1990's to accept harmonized 
UN/ECE regulations.    WT/TPR/M/137/Add.1 
 Page 51 
 
 
Korea has actively participated  in these efforts, acceding to the "Agreement Concerning the 
Establishing of Global Technical Regulations" in 2 000.  In addition, Korea is currently taking the 
steps necessary to join the "Agreement concerning the adoption of Uniform Technical Prescription for Wheeled Vehicle, Equipment and Parts which can be  fitted and/or be used on Wheeled Vehicles and 
the Conditions for Reciprocal Recognition of Appr ovals Granted on the Basis of These Prescriptions" 
(also known as the "1958 Agreement") by the end of 2004 with a view to introducing the necessary 
UN/ECE regulations in due course.  
Question 12: page 58, para. 80
 
 The regulation for the introduction of a low-pollution car in the Metropolitan area around Seoul, 
which is a regulation for the purpose of preservation of the environment, applies equally to both domestically manufactured cars and imported cars. However, such a regulation is, in relative terms, more of a burden for foreign manufacturers whose pr oduction volume of cars for the Korean market is 
low. The Korea Automobile Importers and Distribu tors Association (KAIDA) has requested to the 
Government of Korea (the Ministry of Environment) that this regulation should be modified, so that 
the minimum number of low-pollution cars is raised from 3,000 vehicles per manufacturer per year to 5,000 vehicles per model per year and the implem entation of this regulation is postponed from 2005 
until 2009. However, we recognize that the KAIDA h as not yet received the replies from the Korean 
Government to this request. Japan hopes that th e Korean Government replies as soon as possible on 
this matter. 
Please provide information for the current situation of this matter. 
 
Answer
 
 Air pollution caused by vehicles accounts for more th an half of the entire air pollution in the 
metropolitan area around Seoul. To improve the air-quality of the area, there needs to be an obligation 
for car manufacturers, whose average annual sales of  cars sold exceed a certain limit, to sell low-
pollution cars. The limit was set at over 3,000 vehicl es in consideration of factors such as domestic 
sales volume and precedents of other countries. More over, to address the air pollution issue in the 
metropolitan area at the earliest convenience, the ab ove-mentioned measure needs to be carried out 
expeditiously. Therefore, it is difficult to pos tpone the implementation of the regulation. 
 
Question: page 58, paragraph 80
 
 
Concerning the new regulation for fuel efficiency wh ich Korea is considering to introduce, Japan is 
concerned that the new regulation may overburden the foreign automobile manufacturers, including 
Japanese automobile manufacturers. Japan request s that the Korean government should make the 
notification pursuant to the WTO TBT Agreement at an appropriate timing, which is early enough so 
that our opinion can be reflected a nd the compulsory standard can be  modified, in accordance with the 
article 2.9 of the WTO TBT Agreement, particularly  with the article 2.9.2 which states that such 
notifications shall take place at an appropriate ear ly stage, when amendments can still be introduced 
and comments taken into account. Japan also re quests that the Korean government provide a 
sufficiently long commenting period to such notification on this issue. 
Please indicate the specific view of the Korean government on this matter.  Answer
 
 
The Korean government will adopt and apply the Average Fuel Efficiency (AFE) to domestic 
automakers and foreign car importe rs who bring in more than 1,000 cars per year. The AFE will be 
applied to domestic automakers starting from January  1, 2006. However, foreign car importers will be 
given a grace period until 2009 without conditio ns. The Korean government has already held WT/TPR/M/137/Add.1 
Page 52  
 
sufficient consultations on this issue with the EU , the United States and Japan as well as KAIDA, the 
EUCCK and AMCHAM. Also, it will notify the TBT committee of the AFE at an early stage. 
 
Question: page 58, paragraph 82
 
 According to the Secretariat Re port, Korea is promoting uniform standards among ministries to 
overcome inconsistencies and to improve efficiency, and is currently trying to promote such uniform 
standards on 1,813 products. Japan highly appreciat es Korea’s efforts to promote uniform standards 
among ministries, because we are concerned that the authority to give approval or authorization on one subject is often spread over several ministries and several standards and conformity assessment 
procedures are inconsistent among ministries. 
Does the current work on these 1,813 products in clude the standard and conformity assessment 
procedures for automobiles? If yes, please indi cate which specific procedure is included.  
 
Answer
 
 
National standards and regulations  regarding automobiles are administered by the Ministry of 
Commerce, Industry & Energy (MOCIE), the Ministry of Construction & Transportation (MOCT), and the Ministry of Environment (ME), according to their field of specialty. 
 
The MOCT applies the standards regarding parts, pe rformance, and safety regulations that are used in 
the final testing of automobiles. The MOCT is also  applying the self-certification system on the safety 
standards of 79 items and articles including speedom eter, distance recorder, and windshield. The ME 
applies regulations on the exhaust gas of moto r vehicles under the Atmospheric Environmental 
Preservation Act. The MOCIE is administering the classification system for various fuel consumption 
levels of motor vehicles to take part in saving energy. 
The Korean Agency for Technology and Standard s (KATS), which is affiliated with MOCIE, 
performs safety tests on five different consum er products for automobiles including windshield 
washer fluid, anti-freezing fluid, brake fluid, car  safety glass, and recycled tires under the Quality 
Management System and Safety C ontrol of Industrial Products Act. 
 Currently, there are some standards and regulations  between the Ministries that overlap with one 
another, and some are completely different from others. For the purpose of eliminating the 
differences, preventing the confusion within the indus try, and heightening customer satisfaction, the 
KATS is on its way to promote the Government Sta ndard Unification Project to help resolve inter-
governmental confusion. 
 
(3) Measures Directly Affecting Exports 
(ii) Export prohibitions, restrictions and licensing  
Question: page 66, paragraph 116
 
 
According to the Secretariat Repor t, the restrictions on exports of  scrap iron and steel bars are 
temporary measures until the end of September this year. Please indicate the plan on these restrictions 
after the end of September this year. If the Korean  government is considering an extension of these 
restrictions, please indicate what the background of such extension is.  
  WT/TPR/M/137/Add.1 
 Page 53 
 
 
Answer  
 
MOCIE currently restricts the export of scrap iron. To  decide whether or not to extend this period, we 
are considering the supply of and demand for scrap iron and prices at home and abroad. We will make 
a final decision at the end of September.   (4) Measures Affecting Production And Trade (iv) Competition and consumer policy  Question: page 77, paragraph 158
 
 The Secretariat Report uses the expression of "extra -territorial application of competition policy". 
Japan thinks that this expression may be misunde rstood, because in international treaties, extra-
territorial application is generally admitted through the application of the country in the territory by 
the request of the country outside the territory. This  is in case of serious influence on the latter country 
by the anticompetitive action of the former country.  
Please provide the view of the Korean government fo r the expression of "extra-territorial application 
of competition policy", if any.  Please indicate the evaluation of implementation of the competition chapter of the Korea-Chile 
Economic Partnership Agreement.  Answer
 
 
There can be various interpretations of extra territori al application. Generally, it can be interpreted as 
a situation in which domestic competition law is applie d to foreign firms that violated competition law 
outside jurisdiction, but which has a negative effect on the domestic market. 
 
So far, there has not been any case that can be regarded as the implementation of the competition 
chapter of the Korea-Chile FTA.  
(v) Intellectual property rights 
 
Question: page 77, paragraph 159
 
 
The Secretariat Report states that Korea accepted the Amendment to Article 9 (3) of the WIPO 
Convention on 20 April 2000 and is a signatory to the Patent Law Treaty. Japan wonders whether the 
Republic of Korea is a signatory to the Patent Law Treaty, because the Republic of Korea is not 
shown in the website of the WIPO as members of the signatory to the Patent Law Treaty. 
In this regard, please provide the view of the Korean government, if any.  
 
Answer  
 
Korea is a signatory of the Final Act regarding the Patent Law Treaty, which was adopted by the 
Diplomatic Conference on June 1, 2000. Therefor e, the expression "Korea … is a signatory to the 
Patent Law Treaty" is inaccurate.  
Question
 
 The Secretariat Report states that Korea’s accession to the WIPO Copyright Treaty is expected to take 
effect on 24 June 2004. Please indicate whether the right of making available to the public of works in the article 8 of the WIPO Copyright Treaty, is estab lished as the exclusive right of authorizing in the 
copyright law or in the other laws in the Republic of Korea.  WT/TPR/M/137/Add.1 
Page 54  
 
 
Answer
 
 
Article 18 bis of the Copyright Act provides that "t he author shall have the (exclusive) right to 
transmit his work in an interactive manner", and "i nteractive transmission" is defined as "transmission 
of a work or making available to the public by wi re or wireless communication in such a way that 
members of the public may access the work from a pl ace and at a time individually chosen by them" 
(Article 2 bis). As such, those provisions implement the requirements of the WIPO Copyright Treaty.  
Question: page 79, paragraph 168
 
 
According to the Secretariat Report, a "notice a nd takedown system" was introduced to provide legal 
incentives for online service providers to promptly  close down infringing materials at the right-
holders’ request.  
a. Please indicate the specific number of the applied cases to the system.  
b. Are there any cases that online service providers were accused of not reacting to the notice to 
close down infringing materials at the right-holders’ request? If yes, please indicate the specific content of the cases.  
c. Please indicate the responsibility of the online ser vice providers in the case of closing down 
the materials which mistakenly do not infringe copyright.  
d. Please indicate how any rights other than copyrights, such as defamation of character, are 
treated on the "notice and takedown system". If the Republic of Korea has plans for any other 
legislation on this matter, please indicate them.  
 
Answer to a.
 
 
There is no applied case to the system.  
Answer to b.
 
 There is no related case. 
 
Answer to c.
 
 
In general, OSPs are not liable for copyright infringement in that case.  
Answer to d.
 
 
In regards to defamation of characters, article 44 of the "Act on Promotion of Information and 
Communication Network Utilization and Information Pr otection" stipulates that the victim should be 
entitled to request deletion of the posted content to  a service provider that had managed the content in 
question and the service provider should take necessar y measures.  The MIC is preparing amendments 
to the "Act on Promotion of Information and Communication Network Utilization and Information 
Protection" to establish "Cyber Defamation Dispute Settlement Committee." The Committee will settle many disputes in a expedite and fair manner pr ior to legal procedures, which require substantial 
time and monetary costs. 
  WT/TPR/M/137/Add.1 
 Page 55 
 
 
Question  
 
The Secretariat Report states that non-original data bases also became protected  sui generis. Please 
indicate which law provides the basis for the protectio n of non-original databases and also indicate the 
outline of it.  
 
Answer  
 
Regardless of whether the database is creative or not , a person who has produced database or invested 
considerably in the renewal, verification or supplemen t of the database shall be granted the right to the 
reproduction, distribution, broadcas ting and transmission of the whole database or a considerable part 
of it (Article 2 Subparagraph 12-5, Article 73-2 through Article 73-9 are newly inserted by the 2003 
amendment of Copyright Act).    That is to say, certain sui generis rights are awarded to the database producers who have made a 
considerable investment in terms of human or mate rial resources. The right of a Database Producer 
shall be protected for a period of five years from the date when the database is produced or renewed 
with considerable investment.  
Question
 
 The Secretariat Report states that legislative ame ndments are intended shortly to provide performers 
and phonogram producers with interactive transm ission rights in accordance with the WIPO 
Performances and Phonogram Producers Treaty.  a. Has the Copyright Act in Korea been amende d to be fully in accordance with the WIPO 
Performances and Phonogram Producers Treaty?  If no, please indicate which parts are not 
accordance with the WIPO Treaty and also indi cate whether Korea has future plans for the 
amendment of the Copyright Act to fully comply with the WIPO Treaty.  
b. Does Korea have any plans for the accession to the WIPO Performances and Phonogram 
Producers Treaty? If yes, please indicate the schedule for it. 
 Answer
 
 
Please refer to the answer to the question con cerning WT/TPR/G/137, pa ge 14, paragraph 46. 
 
Question: page 79, paragraph 169  
 
The Secretariat Report states that five compulsory licenses have been granted.  a. Please explain each detail of the license. 
b. Please also provide information on the rela tionship between these compulsory licenses and 
the Copyright Act.  
 
Answer
 
 
The compulsory license system en ables the user to use the works on the condition that he pay a 
reasonable license fee or deposit a sum of reasona ble compensation even though he does not get the 
permission to exploit the work for the purpose of  enhancing public interest. The Copyright Act 
permits "exploitation of works in which the owner of author's property rights is not known" (Art. 47), 
"broadcasting of works being made public" (Art . 48), and "production of commercial phonograms" 
(Art. 50). The compulsory license system operates under strict procedural conditions to protect WT/TPR/M/137/Add.1 
Page 56  
 
copyright and related rights. Since 1986, eight com pulsory licenses (three on the foreign works) have 
been granted on the grounds of Article 47 with depos ition of compensation. It is to be noted that in 
order to meet the requirements for the compulso ry license of Article 47, the applicant should 
demonstrate, inter alia, that the identity or wherea bouts of the right-holder could not be established in 
spite of considerable efforts. The meaning of the term "considerable efforts" is elaborated in the 
Enforcement Decree. Considerable efforts are deemed to be made when at least one month has passed 
since an inquiry of the name and/or address of th e right-holder was sent to the copyright management 
service or other related persons, and when ten days  have passed since an inquiry was posted in a 
nationwide newspaper or an information network.  Question
 
 
The Secretariat Report states that the Online Digita l Contents Industry Development Act, passed in 
2002, protects intellectual property rights of online digital materials.  
a. Please indicate the specific content of this Act in detail.  
b. Please indicate how to obtain the articles of this Act.  
 
Answer
 
 
Clause 1, Article 18 of the Online Digital Contents Industry Development Act stipulates that no 
person shall, without authority, infringe upon the busin ess interests of a competitor by reproducing or 
transmitting electronically all or substantial part s of online content which has been produced by 
substantial efforts of the producer and on which no tice has been placed, provided that five years have 
not passed since the online content and the notice were  offered. Clause 2, Article 18 states that no 
person shall, without authority, offer, import, manufacture, transfer by assignment or rental, or display 
publicly for transferring any technology, service, devi ce, or main part thereof, that is primarily 
designed for the purpose of circumventing, removing, or changing technological measures that the producer of online content or others with competent authority have applied to effectively prevent the 
activities provided in the preceding paragraph.  Detailed information on the Act can be obtained from the homepage of the MIC (www.mic.go.kr). 
 
Question: page 79, paragraph 170
 
 
According to the Secretariat Report, in the Co mputer Program Protection Act of 1986, minimum 
reproduction is allowed if it does not infringe seri ously the right holder’s economic interests.   
Please indicate which extent is specifically allowed as the "minimum reproduction".  
 
Answer  
 
According to Article 12 of the Computer Program  Protection Act (CPPA), the published computer 
programs may be reproduced or distributed within the limit necessary for minimum and restricted 
purposes which include i) a trial or criminal inv estigations, ii) a restricted educational purpose, 
iii) restricted private purposes, iv) entrance examinat ions, v) surveying, study ing or testing functions 
of computer programs in order to verify the id eas and principles that constitute the basis for the 
programs, etc. The detailed information of the Ac t may be obtained from the homepage of the MIC. 
  WT/TPR/M/137/Add.1 
 Page 57 
 
 
Question: page 79, paragraph 172  
 
The Secretariat Report refers to the amendments  to the Sound Records, Video Products and Game 
Software Act in January 2004.  
a. Please indicate the specific content of this Act in detail. 
b. Please indicate how to obtain the articles of this Act.  
 
Answer
 
 Please refer to the website of the Ministry of Culture and Tourism of Korea (www.mct.go.kr) 
 
Question: page 80, paragraph 176
 
 
Japan recognizes that 113 varieties of plants are pr otected by the Seed Industry Law in the Republic 
of Korea.  
Please indicate the schedules for the expansion of the plant variety to be protected.  
 
Answer  
 
It is hard to provide a detailed schedule for the e xpansion at the moment. Korea plans to complete the 
Seed Protection System for remaining crops by 2009 according to what has been  agreed at UPOV.  It 
would be more appropriate to di scuss detailed technical issues at  the bilateral technical level 
discussions.  
IV. Trade Policies by Sector 
(1) Agriculture 
(ii) Policy developments 
 
Question: page 84, paragraph 10
 
 
Please indicate the specific mechanism to maintain th e high rate of self-sufficiency for potatoes, as 
well as for rice. 
 
Answer  
 
We do not have a specific mechanism to maintain th e high rate of self-sufficiency for potatoes. We 
will basically follow the market mechanism, main tain high out-quota tariffs and administer the 
imports for TRQ with low tariffs.   In case of rice, the government has a system in  which it purchases rice from farmers within the 
permitted level of annual total AMS, for the purpo se of stabilizing price and balancing supply and 
demand. The government is currently negotiating with nine interested countries on the possible 
continuation of the special treatment exempting rice and certain rice products from tariffication 
according to Annex 5B of the WTO Agreement on Ag riculture. The import of rice subject to MMA is 
handled by the Ministry of Agriculture and Forest ry under Article 17 of GATT. We are also either 
implementing a direct payment system or reviewing the introduction of a new one related to the Set 
Aside Program, Direct Income Support for Paddy Fields and Rice Production and Direct Income 
Support for Rice Farmer Management Stabilization.  
 WT/TPR/M/137/Add.1 
Page 58  
 
Question: page 88, paragraph 17
 
 
According to the Secretariat Report, foreigners may own farmland, excluding rice and barley growing 
land.  Please specifically explain which regulation exists on the foreign direct investment on rice and barley 
growing land.  
 
Answer
 
 
Currently, foreigners may own farmland, excluding land for growing rice and barley, according to the 
Foreign Investment Promotion Law. But even in cas es where foreigners are allowed to own farmland, 
the foreign owner must manage the farm directly.   
(ii) Selected activities 
 
Question: page 89, paragraph 27
 
 
The Secretariat Report refers to the "agricultural export estates" and "agricultural investment fund". 
 a. What is the "agricultural export estates"?  
b. How does the Korean government promote the exportation through such export estates?  
c. Does the export promotion policy include export subsidies or export credits, export credit 
 guarantees or insurance programs?  d. What is the "agricultural investment f und"? Does the Korean government promote the 
 exportation through such fund?   Answer to a.  b.
 
 
Please refer to Korea’s response to Canada’s question 15.   Answer to c.
 
 
Korea does not have export credits, export credit gua rantees or insurance programs. It only has S&D 
export subsidies stipulated in Article 9-4 of th e Agreement on Agriculture which are implemented 
according to the conditions of (d), (e) of Article 9-1. 
 
Answer to d.  
 
The agricultural investment fund is a system that  promotes venture farmers and it has nothing to do 
with the export promotion policy. The private sector is basically in charge of the possession and operation of the agricultural investment fund. The go vernment has only a part of the share (around 30-
40 percent). This fund is invested directly in ve nture-type bio-engineering technology which is not 
currently sold in the market and also in esta blishing companies that develop animal drugs.  
 
(6) Services 
(ii) Communications  
Question: page 103, paragraph 87
 
 
Japan would like to ensure that the WTO refere nce paper obligation applies to the IP telephony 
service. 
  WT/TPR/M/137/Add.1 
 Page 59 
 
 
a. Please explain the background of the recent shift of the IP telephony service category in the 
Republic of Korea from Value-Added Telecommunications Services to Facilities-Based Telecommunications Services.  
b. Please indicate whether the WTO reference pa per obligation applies to the IP telephony 
service.  
 
Answer
 
 
Korea regarded "PC to PC" Internet telephony service  as a value-added service while "IP Phone to IP 
Phone" and "PC to IP Phone" services were regarded  as a facilities-based service.  This is still in 
effect.  Thus, the IP telephony service category ("IP Phone to IP Phone" and "PC to IP Phone" 
services) has not been shifted from a value-a dded service to a facilities-based service.  
 Currently, the government is taking legal steps to clarify the classification of the IP telephony service. The application of the WTO reference pape r obligation to the IP telephony service will be 
reviewed after the completion of the institutionaliz ation. However, "PC to PC" Internet telephony 
service, which is regarded as a value-added service, will not be applied. 
 
Question: page 104, paragraph 90
 
 
Please indicate the share by each individual carrier in local, long distance, international, and mobile 
markets.  
 
Answer  
 
Share by Individual Carriers in the Telecom Market 
(Unit: hundred million won, December 2003) 
Category sales of revenue share (%) 
Local Market K T 51,844 95.4 
Local Market Hanaro Telecom 2,480 4.6 
Local Market Total  54,324 100.0 
Long-distance Market K T 10,264 77.0 
Long-distance Market Dacom  2,581 19.4 
Long-distance Market Onse Telecom 476 3.6 
Long-distance Market Total 13,321 100.0 
International Market K T 4,438 39.7 
Table (cont'd) WT/TPR/M/137/Add.1 
Page 60  
 
 
Inter-national Market Dacom  2,035 18.2 
Inter-national Market Onse Telecom 1,333 11.9 
Inter-national Market SKTelink 424 3.8 
 
 
Inter-national Market Reseller 2,950 26.4 
Inter-national Market Total  11,180 100.0 
Mobile Market SKT 94,594 61.5 
Mobile Market KTF 41,840 27.2 
Mobile Market LGT 17,443 11.3 
Mobile Market Total 153,877 100.0 
Question: page 105, paragraph 94  
 
The Secretariat Report states that license requests are open twice per year, in March and September. 
We think they should be accepted as required, when  they are submitted. Why are license requests 
open only twice a year?  In this regard, please provide the view of the Korean government.  
 
Answer  
 Korea has eased regulations by changing the mark et entry system from nomination to approval by 
prior notification and then, to free application. In pa rticular, the free application system introduced in 
1997 increased the number of license requests from once a year to twice a year in 1998. Korea limits 
license requests to twice a year because acceptanc e of requests on demand can result in excessive 
examination costs and overwhelming workloads. In addition, the required period for administration is 
more meaningful than the number of license request s. Once requested, it usually takes three months 
for administrative procedures in Korea. Regardi ng the number of license requests, there was no 
complaint from the applicant. We need to seek bot h an objective and fair examination and a relaxed 
market entry regulation. In this regard, the twice- a-year request cannot be seen to seriously limit 
market entry and is deemed appropriate compared with the cases of other countries.  Question
 
 
The Secretariat Report refers to the FBT licenses.  As for FBT service, please indicate the specific 
licensing system and types of FBT licenses.   Answer
 
 
As of September 2004, telephony services (local, long- distance, international), telegraphic services, 
leasing services of telecommunication line facilities,  services provided by allocated frequencies, 
Internet access services and others are classifi ed as facilities-based telecommunication services  WT/TPR/M/137/Add.1 
 Page 61 
 
 
(FBT). Those who want to obtain an FBT license ha ve to make an application for each service type. 
The FBT license is granted to an appropriate carrier after examining the feasibility of its service plan.  
There is no specific type of FBT license.  For details on the licensing system of Korea, please refer to the table below.  
 
 
FBT Licensing System  
 
Application 
(March 13~31, Sep. 25~30) o An applicant makes a decision to apply for market entry.  
  (Free application) 
   
Examine Possibility  
for License 
 (Notify by April 30, by Oct. 31) o Decide whether the service applied is open for license.  
  - Compliance with public interest, Telecommunications  
Basic Act, Telecommunications Business Act, etc.   - Available frequency and satellite orbit according to the      Radio Waves Act 
   
Examine Lump-sum Contribution Fees 
(applied only to services provided over allocated 
frequencies) o Give additional points according to the submitted frequency  
  fees (contribution fees).  
   
Examine Qualifications o Examine qualifications by Article 6 of the  
Telecommunications Business Act  
  - Composition of shareholders  and foreign ownership ceiling  
   
Business Plan 
Quantitative and Qualitative  
Assessment o Assess financial statements of the applicant (12 points) 
o Qualitative assessment on financial and business capabilities of the applicant (88 
points) 
   
Collect Results o Collect results from examination of qualifications and a  
quantitative and qualitative assessment on business plan  
   
  
 Telecommunications Policy  
Deliberation Committee  
 Telecommunications Policy Deliberation 
Committee  
  
   
Select Licensee 
(Notify by June 30,  
by Dec. 31) o The applicant that scored over 60 points (out of 100) for  
  each examination and over 70 points in total is selected as a  
potential licensee.  
   
Issue License o Issue license after the potential licensee pays contribution  
fees, registers for incorporation, pays in capital and submits  relevant documents.   WT/TPR/M/137/Add.1 
Page 62  
 
 
Question: page 105, paragraph 95
 
 
Please provide information on the following questions  regarding the contribution by operators;  
 
(i) How much of the amount is contributed by operators? (ii) How are these funds used and who uses them?  
Answer
 
 
Facilities-based operators pay their contribution f ees every year. The contributed amount fluctuates 
according to the previous year’s revenue which is influenced by the business environment. This fund 
is provided mainly to universities and IT research institutes for their R&D activities. 
 
Question: page 106, paragraph 98  
 
The Secretariat Report states that currently only KT and SK Telecom are designated for mandatory 
interconnection. We wonder whether all facilities- based carriers should be designated for mandatory 
interconnection. In this regard, please provi de the view of the Korean government.  
 
Answer  
 
Article 34.3 of the Telecommunications Business Ac t stipulates that a facilities-based provider that 
owns essential facilities or has over a 50% ma rket share (KT, SKT) provide mandatory 
interconnection. The other facilities-based provide r substantially has to provide interconnection 
because the Act prohibits unfair discrimination and non-performance of interconnection without 
justifiable reason to secure fair competition.   Question: page 106, paragraph 98
 
 
The Secretariat Report refers to the "individual rate system". 
Please specifically explain the "individual rate system ", and also explain the reason why the price was 
lowered resulting from that system.  Answer
 
 
The individual rate system is a method that calcula tes an interconnection rate  for each carrier that 
owns a mobile network.  Interconnection fees given a nd taken between carriers are part of user tariffs. 
Thus, a low interconnection rate is c onsidered one of the factors that bring down user tariffs. Korea's 
telecom market continued to grow and the call volume has been increased, which lowered 
interconnection rates. The low interconnec tion rates helped reduce user tariffs. 
 
Question: page 106, paragraph 99  
 
The Secretariat Report states that all FBT providers must maintain separate accounting systems for 
each service. In this regard, please provide  information on the following questions;  
 (i) Please explain the details of the Government’s accounting separation methodology. (ii) Is it necessary for all facility-based service providers to maintain the accounting separation? 
Is the obligation of accounting separation imposed only on main service providers?    
(iii) Please individually explain th e details of "each service" .  WT/TPR/M/137/Add.1 
 Page 63 
 
 
Answer  
 
Separate accounting aims at providing correct information on the calculation of telecom services costs, interconnection fees, charges for providi ng facilities, and compensation for the loss from 
universal services and other matters related to fair competition in the telecom market.  Accounting is 
separated by type, function and service through the allotment and/or distribution of the expenses and 
assets.   Accounting separation is necessary to calculate tari ff bases, interconnection rates, facility sharing 
prices, universal service deficits, to prevent inte rnal subsidies detrimental to competition, and to 
monitor the market situation of each telecommunications service. 
 Facility-based providers have to separate accoun ting into 27 services including telephony services, 
leased circuits services, wireless telecommunications  services, broadband Internet services and others. 
 Question: page 107, paragraph 103
 
 
The Secretariat Report states that the Korean  Broadcasting Commission (KBC) regulates the 
transmission and programming of broadcasting programs and conducts research to support 
broadcasting functions.  Please provide more information on the responsibility  and function of the KBC and on the regulation 
of the programming of broadcasting programs by th e KBC, including the amendments since 2001, if 
any.   
Answer
 
 As a government authority, the Korean Broadcast ing Commission was established to realize public 
responsibility, fairness, and public interest while  pursuing improved quality in broadcasting content 
and fair competition among broadcasters. The KBC governs the overall establishment of broadcasting 
policy, licensing and approval of broadcasting bus iness, content regulations such as operation of 
programming quotas, management of the broadcasti ng development fund, protection of viewers, and 
establishment of a fair trade order for the distribution of broadcast programs.  
 
Regarding programming quotas on foreign broadcast s, the Korean Broadcasting Commission is 
operating quotas on respective media and broadcasti ng sectors. More detailed information can be 
found at www.kbc.go.kr/english/.  Question: page 107, paragraph 104
 
 
The Secretariat Report states that legislation does not recognize separate DSL operators and FBT carriers provide these services. In this regard, please explain more clearly and specifically.   
Answer
 
 The DSL service was classified as a value-added service until July 2004. But considering the current 
broadband penetration of 75% and its  effects on society, the government decided to classify the DSL 
service as a facilities-ba sed telecom service. 
 WT/TPR/M/137/Add.1 
Page 64  
 
Question
 
 
The Secretariat Report states that CATV operato rs may also provide value-added (no voice) 
communications, such as internet service. Is it po ssible for CATV operators to provide IP telephony 
service?  
 
Answer  
 
Currently, the government is taking legal steps to clarify the classification of the IP telephony service. When the legal steps are completed and a CATV operator satisfies qualifications for 
providing facilities-based services, IP telephony servi ces may be provided by the CATV operator.  
 
Question
 
 
The Secretariat Report states that Internet access services are to be included in FBT operations. Is it 
possible for non facility-based service providers to provide Internet connection services through the 
rental facilities?   
Answer
 
 
The Telecommunications Business Act states that a resale-based service provider may provide the 
same services as facilities-based service  providers with leased facilities. 
 
Question: page 108, paragraph 106  
 
a. Please indicate the prospect of the deregulation of foreign content quotas in Broadcasting Law 
 and Promotion of the Motion Pictures Industry Act. 
b. Please indicate the prospect of opening the re maining restrictions to Japanese culture.  
c. Please explain the specific content of the "foreign program provider".  
 
Answer  
 
Foreign broadcast programming quotas are necessary fo r diversity in programming, cultural identity, 
and protection of the broadcasting industry. For these purposes, many countries are adopting similar regulations. However, the KBC has partially liberalized this sector recently by revising the related 
laws. The Ministry of Culture and Tourism is cons idering the possibility of modification to its screen 
quota through consultation with the film Industry. 
 
The time of opening Korea to Japanese culture furt her has not been yet determined and will be 
discussed after analyzing the effect of the 4th openi ng of the Japanese culture which was enforced on 
January 1, 2004. 
 
Foreign program providers are broadcasters outsi de the Korean territory who have programs 
retransmitted via cable or satellite to Korea. Ex amples of foreign program providers are CNN, BBC 
World, and NHK Premium World.  
Question: page 108, paragraph 107
 
 Please provide an overview and examples of specific cases of "substantial public investment".  
  WT/TPR/M/137/Add.1 
 Page 65 
 
 
Answer  
 
The Korean government achieved an amazing accom plishment by constructing the world’s best 
information and communication infrastructure. This  was made possible by the Korean government’s 
policy to establish the Korea Information Infrastructure (KII). 
 
The Korean government has established a comprehens ive plan for KII as early as March 1995. It was 
aimed at deploying high-speed and high-capacity netw orks in Korea. The project consisted of three 
parts: KII-Private (market), K II-Government (non-profit organizati ons), and KII-Testbed (R&D). 
 
The initial plan was to provide broadband networks to all households in the form of FTTH (Fiber-to-
the-home) by 2015, but the plan was amended in 1999 and in 2001. The Korean government has recently revised the basic plan with a goal of  constructing the Broadband convergence Network 
(BcN).  This is aimed at providing seamless multi- media and broadband Internet service to 20 million 
subscribers with the average transmission ra te of 50~100 Mbps per subscriber by 2010. 
 
NEW ZEALAND
 
 
Trade policy strategy (WT/TPR/S/137, p.5 para 12) 
 
Question 1  
 
The Secretariat notes that Korea’s favourable exte rnal reserve position and current surplus would 
seem to provide an opportune time to substantially reduce tariffs and further liberalise trade, which 
would tend to reduce pressures for the won to appr eciate while also promoting a more efficient and 
competitive economy.  How does Korea assess this policy option?   
Answer
 
 We are not reviewing, at present, specific trad e policy options to reduce pressure on the won to 
appreciate because of a favorable external reserves position.  Tariff peaks (WT/TPR/S 137, p.46, para 29) 
 
Question 2
 
 According to the Secretariat, reducing low tariffs while leaving high rates relatively unchanged risks 
creating a more distorting tariff structure, even though average tariffs are reduced. Economic efficiency and resource allocation would be improved most if high tariffs were reduced first and fast. 
Does Korea agree with this? If so, why does it not appl y such principles to the agriculture sector, and 
if not, why does it advocate a similar approach in  the context of the non-agricultural market access 
negotiations?   
Answer
 
 From the point of view of economic efficiency and resource allocation, reducing high-tariffs first and 
fast may seem valid, but we must also note that agri culture is multi-functional and has a certain value 
that cannot be assessed solely by ec onomic efficiency.  We maintain high tariffs for such items that 
help maintain food security and multi-functionality in agriculture, and those which have a great 
impact on domestic agriculture. This is why Korea emphasizes a gradual approach in the agricultural WT/TPR/M/137/Add.1 
Page 66  
 
sector at the DDA negotiations, though it upholds a market-oriented system.  However, Korea will 
make continuous efforts to reform its agricultural sector, whenever possible.  
 SPS requests (WT/TPR/S 137 p. 62 para 98-99, p.38, para 4)  
 
Question 3
 
 
How many requests for new access for horticultural produc ts has Korea received in the last five years 
and how many have been approved?  What is the average time for these requests to be considered?  
 
Answer  
 
Requests received: 22  Requesting countries: 18  Requested items: 16  
 
Approved requests: 5 - questing countries: Australia, Thailand, the Philippines  - quested items: Mango, Papaya, Lemon, Orange   It is difficult to calculate the average time required fro m the date of request to the date of approval due 
to various factors which include:  
 - How quickly requesting countries provide rela ted materials and documents for Pest Risk 
Analysis. 
- How timely requesting countries provide a dditional related materials and documents 
regarding regulated pests and their management after the PRA process.   
 Registration, Documentation, and Clearance Requirements (WT/TPR/S/137, p.49, para 15)  
 
Question 4
 
 
We note that Korea aims to shorten clearance tim es from port of entry and reduce logistics costs for 
imported goods. What progress has Korea made in terms of moving towards an e-certification system for animal and plant quarantine products? 
 
Answer
 
 The Korean government is making efforts to intro duce E-certification for animal and plant quarantine 
products, but several problems have yet to be reso lved before the introduction of E-certification: 
interoperability of computer systems, prevention of certificate counterfeiting, financial burden on 
private applicants, etc.  However, quarantine lists provided by shipping and air companies are 
currently processed electronically.  
 
Testing procedures (WT/TPR/S 137, p.59, para 86 and p.61, para 94)  
 
Question 5
 
 
According to paragraph 94 of the Secretariat report, overseas test results submitted by foreign 
inspection agencies are accepted by KFDA for imported food. Is Korea prepared to accept test results 
from officially accredited overseas laboratories as an alternative to testing, or re-testing, pharmaceutical products upon import to Korea in line with Korea's SPS commitments?   WT/TPR/M/137/Add.1 
 Page 67 
 
 
 
Answer  
 
The KFDA recognizes foreign inspection agencies from 1996 in order to ensure safety of a growing 
number of imported foods and help cut the domestic  food industry's logistics cost by reducing time 
spent on customs clearances. An officially rec ognized food inspection agency recognized by the 
Commissioner of the KFDA is defined as an in spection agency run by the government or the 
provincial government of the exporting country or the one recognized by the government of the 
exporting country.   
A laboratory test should be performed using testi ng methods stipulated in the Food Codes and Food 
Additive Codes. Testing methods stipulated in  Codex, AOAC, PAM are also accepted. When a 
laboratory test is performed usi ng methods other than methods ab ove, the testing method should be 
presented to the KFDA. When an importer submits te st results issued by a KFDA-recognized foreign 
inspection agency, depending on the KFDA review of submitted test results, the food in question can 
be exempt from the KFDA laboratory test or the nu mber of test items of the KFDA's laboratory test 
can be reduced.   The KFDA recognizes 49 inspection agencies located in nine foreign countries including the U.S., 
Thailand and Australia as of August 2004. When an inspection agency run by the government or the 
provincial government of the exporting country or the one recognized by the government of the 
exporting country applies for recognition by the KF DA, the inspection agency will be recognized by 
the KFDA, once the KFDA deems that the inspectio n agency meets the requirement of the KFDA's 
relevant regulations.   Pharmaceutical importers are subject to qualit y testing at the time of importation. Under the 
Pharmaceutical Affairs Act, no foreign inspec tion agency has been recognized by the KFDA.  
 International standards (WT/TPR/S 137 p.59, para 84 and p.61 para 97) 
 
Question 6
 
 
Can Korea please provide further information about the process of bringing Korean import conditions 
for food and agricultural products into line with in ternational standards?  What proportion of import 
requirements are regarded as being fully compliant w ith international standards?  Is there a work 
program in place to deal with the remai nder, and if so what are the details?  
 Answer
 
 
Korea promotes keeping the regulations in line with  international food standards such as CODEX and 
continuously revising the relevant regulations. Ko rea also introduced the "system of prior-confirmed 
registration of imported food" to simplify inspectio n procedures as well as an internet-based reporting 
system of food imports to ensure promptness and transparency. 
 
The KFDA has also recognized forei gn inspection agencies since 1996 in order to ensure safety of a 
growing number of imported foods and help cut the domestic food industry's logistics cost by 
reducing the time spent on customs clearances. Forty- nine inspection agencies located in nine foreign 
countries have been recognized.  WT/TPR/M/137/Add.1 
Page 68  
 
Sanitary standards for fish products (WT/TPR/S 137, p.59, para 83) 
 
Question 7
 
 
We are aware that Korea accepts procedures in e xport countries for certifying that fish products, such 
as fish fillet, are fit for human consumption.  Do es Korea accept that the same procedures provide a 
basis for certifying edible fish h eads as fit for human consumption? Can Korea confirm that it has the 
same sanitary requirements for imported fish head and fish head caught by Korean distant water 
fishing vessels?   Answer
 
 
For ordinary fish products, Korea generally ackno wledges the procedures of exporting countries. For 
fish heads, however, Korea imposes stricter sanita ry requirements. The reason is that fish heads are 
normally processed and traded without any signi ficant differentiation between edible goods and 
wastes in the international trade. In addition, some  of the fish by-products including fish heads have 
occasionally caused sanitary and social problems in the domestic market.   This is why Korea exceptionally sets a separate sanitary  regulation for fish heads. This is intended to 
protect human health and safety, but not intended for a trade barrier to foreign products. Under the 
bilateral sanitary arrangement for these products, a cer tain country exports fish heads to the Korean 
market, and Korea is taking consultations with so me other countries to make sanitary arrangements 
for the importation of the products.  
 
FTAs (WT/TPR/S 137 p.19, para 17 and WT/TPR/S/137, pp.27-29, 42-49) 
 
Question 8
 
 
What methodology does Korea use to assess th e impact of FTAs on sensitive sectors?  
With respect to the Korea/Chile FTA there are 373 agricultural products where negotiations on the 
elimination of tariffs have been deferred until after the conclusion of the DDA.  What is the level of 
bilateral trade in these products?  What if any gui delines apply to the elimination of tariffs – for 
example could further exclusions be possible?  What  will happen in regard to liberalization of these 
products if the conclusion of the DDA is greatly delayed?  
Answer
 
 We basically use the CGE (Computable Genera l Equilibrium) Model. However, the partial 
equilibrium model which permits item-by-item analysis  is also used to complement the CGE Model.  
 Most agricultural products traded between Korea and Chile are incl uded in the tariff reduction and 
elimination scheme. The 373 items mentioned above are rarely traded between the two countries. The 
tariff disparities of these items between Korea and Chile are huge and these items are of great 
significance to Korean agriculture. 
 This will have to be discussed by taking into acc ount the future results of the DDA negotiations and 
reflecting the opinions from Korea’s domestic agricultural industry.  
 
The issue of whether or not to liberalize the 373 items will be discussed after we reach any kind of 
conclusion in the DDA negotiations that are presently under way.  
 
Tariff quota administration (WT/TPR/S 137, p.38, para 4, p 86, para 13)  WT/TPR/M/137/Add.1 
 Page 69 
 
 
 
Question 9  
 
The Secretariat report (p.38, paragraph 4) notes that state-trading enterprises and producer 
associations still administer tariff quotas affecting many agricultural imports and that this raises 
potential conflicts between their importing interest s and those of their farm constituents (p 86, 
paragraph 13).  With average fill rates of around 70 percent (p 86, paragraph 13), how does Korea 
ensure that such conflicts of interest do not arise?   
Answer
 
 
According to the OECD, the quota fill rate of Kore a is relatively higher than that of other OECD 
member countries. And the state trading enterp rises have been administering tariff quotas in 
accordance with the principles stipul ated in Article 17 of GATT.  
 
More than 95 percent of the tariff quotas have been  filled for many of the items which are relatively 
high in terms of importing value and relatively larg e in terms of importing quantity, such as soybean, 
corn, sesame, orange, natural honey, red bean, onion, etc.  Items which have shown lower quota fill rates incl ude red pepper, garlic, and ginger due to the 
oversupply caused by a domestic production increase a nd a temporary import surge; whey and several 
dairy products due to an import ban imposed because of animal diseases such as BSE, Foot-and-
Mouth disease, etc.; and egg, breeding cow and seeds due to decreases in domestic demand.   Korea will make further efforts to incorporate mark et mechanism in its import management system 
(public auction of import rights, bidding sales of imported products, new real demand based allocation 
etc.). 
 
SINGAPORE
 
 
III. Trade Policies and Practices by Measure 
(2) Measures Directly Affecting Imports 
(ix) Standards and other technical requirements  
Question: paragraph 90
 
 
KATS operates a comprehensive system of marks b ased on detailed testing by appointed "reliability 
assessment centres", or specialist research institu tes. Marks include the new technology certification 
(NT mark) and the quality certification for excellent  machine, mechanism a nd materials (EM mark). 
Mark holders receive various government privileges, such as: priority in procurement by government 
and public organizations; 
Please elaborate on this scheme and the government pr iority in procurement given to mark holders. 
 WT/TPR/M/137/Add.1 
Page 70  
 
Answer
 
 
<Detailed Accreditation Process (New Technology)> 
Application 
(company) → Acceptance 
(KATS)   
  ↓   
  Technical Assessment 
(Assessment Committee)  
  ↓  
  Product Assessment and 
Actual Inspection at Site  
  ↓  o Assessment Committee 
- function: drawing up assessment criteria, technical 
assessment and actual inspection at site 
- organization: within 15  specialists including 
professors 
  Overall Assessment 
(Accreditation Committee)  
  ↓  
  Issuing Accreditation Certificate   
o Accreditation Committee - function: deciding on accreditation 
- organization: within 20 specialists including director-
general in charge of item 
 
Negotiated contract is allowed in cases of causi ng a producer to manufacture the products based on 
new technology or products selected for developm ent as recognized or designated by the competent 
Minister  (including a person who has been entruste d by the competent Minister) in order to promote 
the localization of the products or purchasing them  from the producer thereof within two years after 
confirming that the development thereof has been co mpleted (Article 26 para 7(g) of the Enforcement 
Decree of the Act on Contracts to which the State is a Party).  Question: paragraph 105 footnote 45
 
 
In some cases, there is nominat ed (by nomination) competitive bidding and private contracts where a 
specific supplier is used.  
Please elaborate the basis on which nomination is used, and the nomination criteria.  
 
Answer  
 
Nominated competitive bidding is used when it is cons idered to be more efficient with the approved 
participant considering the objectives and characters of  the contracts. The following is a list of the 
cases where nominated competitive bidding is used. 
 1. In the case of a contract for construction work  the amount of which is determined by the 
Ordinance of the Ministry of Finance and Economy, the maximum amount to be contracted, 
the construction capabilities or the past record s of construction performances which belong to 
the same type as the construction work concerned; 
2. In the case of a contract for construction work  in which a special technology or a special 
method of construction is required, the status of possessing the technology necessary for the 
performance of the construction work concer ned, or the past records of construction 
performance which belong to the same type  as the construction work concerned; 
3. In the case of a contract for manufacture of go ods in which special facilities or a special 
technology is required, the status of possessi ng the facilities and technology necessary for the 
manufacture of the goods concerned, or the past records of manufacture of goods which 
belong to the same type as the goods concerned; 
4. In the case of a contract for purchase of goods which requires a special capacity or quality, 
the capability to deliver the goods concerned; 
5. In the case of a contract for a service which re quires a special technology, the status of 
possessing the technology necessary for the performan ce of the service concerned, or the past 
records of performance of a service which belongs  to the same type as the service concerned; 
6. In the case of a contract for which the estimated  price is less than the amount prescribed by  WT/TPR/M/137/Add.1 
 Page 71 
 
 
the Ordinance of the Ministry of Finance and Economy, the location of the principal place of business; 
7. In the case where the contract for construction work is concluded on the basis of limitations 
under Article 22, the criteria for such limitations; 
8. In the case where the goods designated and notifie d by the Director of the Small and Medium 
Business Administration under Article 4 of the Enforcement Decree of the Promotion of 
Small and Medium Enterprises and Encouragemen t of Purchase of Their Products Act are 
manufactured or purchased, a small and medi um entrepreneur under Article 2 of the 
Framework Act on Small and Medium Enterprises; and 
9. In the case where the head of each central governme nt agency or the public official in charge 
of contracts specially deems it necessary to avoid the event of a failure to perform the 
contract, the financial status of a participant in the competition. 
 Furthermore, the detailed nomination criteria are as follows; 
 
a. In the case of the contracts regarding the Public Works  
1. When the contract officers nominate the supplie r in accordance with the contract limit amount 
and construction performance ability, the cont racting officers can nominate the supplier 
within two times of "projected price" 
2. When the contract officers nominate the supplier in accordance with credibility, past 
performance and managerial status, the contracting officers can nominate the supplier in accordance with the above criteria, 
3. When special technology is needed, the cont racting officers can nominate the supplier who 
has the special technology. 
 
b. In the case of the contracts regarding the Goods, Supplies, Repairing and Industrial 
Processing 
 
1. When the contract should be made with the person who has special technology, machines, 
furniture and facilities taking the character and pur pose of the contracts into consideration, the 
contracting officers can nominate the supplie r who has the special technology, machines, 
furniture and facilities. 
 (x) Government procurement 
 
Question: paragraph 106
 
 
Procurement of sub-central authorities and SOEs, for example, falls mainly under the Local Financing 
Act and the Government-Enterprise Accounting Re gulations; some SOEs are, however, covered 
because they are "prescribed agencies".  
Please explain what is meant by "prescribed agencies".   Answer
 
 
The Local Financing Act shall apply to the pr ocurement of sub-central authorities and the 
Government-Enterprise Accounting Regulations sh all apply to the procurement of government-
invested enterprises (SOEs). "Pr escribed agencies" in paragraph 106 are agencies covered by the 
Agreement on Government Procurement of the WTO. 
 
 
 WT/TPR/M/137/Add.1 
Page 72  
 
Question: paragraph 107
 
 
Foreign supplies accounted for about 3% of PPS's total business receipts in 2002. 
Please explain why the percentage of foreign suppli es is so low. Are there plans to increase this 
percentage?  Answer
 
 In international tendering covered by the WTO Ag reement on Government Pr ocurement (GPA), the 
Korean government does not discriminate against th e GPA signatories. Moreover, the government of 
Korea, a member country of GPA, endeavors to create a sound and transparent environment in the 
field of government procurement. 
 To make Korean government procurement more in ternational, the Korean government is in the 
process of 1) making an English version of govern ment procurement materials and 2) the Korean 
government Electronic Procurement System (hereina fter referred to as "GePS") in a more English-
friendly environment. Furthermore, the Korean government liberalized its government procurement 
market by concluding a Free Trade Agreement with  Chile (effective since April 2004) who is not a 
member country of the GPA, and is currently un dergoing negotiations for an FTA with Japan and 
Singapore who are member countries of the GPA. 
 
Question: paragraph 108
 
 
PPS uses a "multiple basic price system" for compe titive bidding on the Internet that discloses basic 
prices. Based on announced basic prices, PPS prepar es 15 preliminary prices, which are disclosed on 
bidding according to set criteria. Bidders must sele ct two of these 15 prices. PPS then calculates an 
estimated price based on the average of the four most common prices selected by bidders. Please 
elaborate further on how this scheme works, in pa rticular how the 15 prices are selected by PPS, and 
how the 2 prices are selected by bidders, as well as the selection of the final awarded price.   Answer
 
 
The Korean government requires the presentation of the "projected price" as a criterion for making an 
award. However, the Act Regarding Contract whic h State is a Party does not prescribe the "multiple 
basic price system." However, the PPS and some pr ocuring entities use the "multiple basic price" for 
the confidentiality of the "projected price." 
 
Further details on the scheme and method of estimating "projected price" are as follows:  
- The contract officials prepare the "basic price" prior to the tender and disclose it to the public 
- The contract officials make 15 "preliminary pri ces" in the scope of 2% (up and down) of the 
basic price through a computerized system, and th en this process is clo sed to the public and 
even the contract officials do not know the prepared price until the tender is finished. 
- Every tenderer selects 2 "preliminary prices"  in the process of submitting the tender. 
- The contract officials calculate the result of sel ected "preliminary price" and the average of 
the four most common "preliminary price" selected  by bidders is set as the "projected price." 
- Upon completion of a tender, the process for making the "prepared prices" including 15 
"prepared prices" and the results of the "prepa red prices" selected by bidders are announced to 
the public through the Internet. 
  WT/TPR/M/137/Add.1 
 Page 73 
 
 
Question: paragraph 109  
 
"Abnormally low" tenders are rejected. Bids are eval uated based on estimated prices prepared by the 
ordering office. Those that exceed these estimates ar e precluded, as are bids that fall below a certain 
level, such as less than a certain percentage of the estimated price. For contracts exceeding 
W 50 billion, PPS uses the lowest bid award system after conducting a pre-qualification evaluation. 
To exclude low tenders, PPS divides each project in to about 30 work categories and calculates for 
each an average bid price. Low bids are considered to be less than 80% of each category's average bid 
price. Any bidder that has low bids for than one-t enth of the work categories is excluded from the 
tender. What are the criteria for preparing estimated pric es? What are the criteria for dividing the 30 work 
categories? How is the average bid price computed?  
 
Answer
 
 a. Criteria of making the "projected price" 
 
The "projected price" (or "estimated price" in this context), which is estimated prior to any 
tender/contract, is calculated based on the actual purchasing price, cost price and past construction 
expenses as the criteria for making the award, contractors and contract amount when signing the contract. For the actual tender and contract, the "proj ected price" is prepared in accordance with "The 
Principle of Preparing the Projected Pri ce in accordance with Cost Calculating." 
 
b. Criteria for dividing the 30 work categories 
 
To evaluate the soundness of the construction project , which applies to the lowest bid award system, 
the Korean government divides each project into sep arate work categories when the contract amount 
of each separate work category is no less than 5% of the total contract amount. On average, work 
categories are divided into 30 categories to separate them.  
c. Computing method of average bid price 
 The average amount of each work category (ave rage bid price) is calculated as follows: 
 
The arithmetic mean of each work cat egory, except for the following cases 
 
- In the case that the tender is nullified 
- In the case that the tender price is higher than the "projected price" 
- In the case that the tender price is 20/100 lower than the average bid price of every bidder 
- In the case that there are minus (-) tender prices in  the profit sector or specific work categories 
- In the case that the price of specific work cat egories is in the position of the upper 10% or 
below 10% in every work category price 
 If the discrepancies between the average bid price a nd the price of a specific work category are over 
30%, the price of the specific work category should  be excluded when calculating the arithmetic mean 
of the average of each work category price.  WT/TPR/M/137/Add.1 
Page 74  
 
SWITZERLAND
 
 
I. Economic Environment 
(1) Main Economic Developments 
 
Question:  paragraph 1, 2, page 1; paragraph 4, page 3  
 
Currently, external demand represents  by far the main growth engine of the Korean economy. This 
encouraging development is somewhat hampered  by a still sluggish domestic demand, mainly 
triggered by the consequences of the plastic money boom that started in 1999 and went on for a few 
years afterward. 
 a. What are the main measures to be taken in  order for the Korean consumers (and not 
 principally the export sector) to also prof it from the next wave of economic growth?  
b. What kind of strategy should be implemented to curb the widening mismatch between 
 domestic and external demand as a source of sustainable growth? 
 
Answer
 
 
Despite a two-digit increase in exports for over a year, the recovery of domestic consumption has 
been rather sluggish. Recently, however, it has begun to show signs of rebounding. Domestic 
consumption is expected to improve slowly but steadily. Due to problems such as household liabilities 
and credit defaulters, it will take some time  before consumption recovers completely. 
 The Korean government plans to support economic recovery domestically by promoting various 
policies aimed at revitalizing domestic consumption.  We will strengthen the role of fiscal policies as a 
means of economic adjustment by expanding fiscal expenditures and implementing them promptly. In 
addition, we will help increase consumer income le vels by creating more jobs and by implementing 
other policies in a timely manner.  We will impl ement comprehensive measur es for credit defaulters 
while simultaneously ensuring a soft landing for soon-to-mature household liabilities. Furthermore, 
we will support the domestic economic situati on with comprehensive measures for small- and 
medium-sized enterprises and by promoting the competitiveness of the services industry.  
 
Through the aforementioned measures, we exp ect consumers to profit from economic growth. 
 
(2) Macroeconomic Policies 
(iii) Structural Policies  
 
Question: paragraph 13, paragraph 14-17
 
 
In the area of Corporate Governance as well as in the non banking financial sector, the Secretariat 
report suggests that further reforms are needed. While the requirements in auditing and accounting 
have been tightened and class actions will be po ssible starting in 2005, implementation of the 
regulations does not seem yet to be ensured. In par ticular the negative consequences of the credit card 
boom of 2002 do not seem to have already been absorbed.  
a. Which are the Korean government's steps to  further improve corporate governance and 
 implement the reforms to strengt hen transparency and accountability?  
b. How does the Korean governme nt assess the situation of the credit card sector?  
 
 
  WT/TPR/M/137/Add.1 
 Page 75 
 
 
Answer to a.  
 
The Korean government made "The 3-year Market Reform Roadmap" on December 30, 2003, to establish a free and fair market environment. Through  this roadmap, the government is striving to 
strengthen transparent and accountable business mana gement, improve corporate ownership and the 
governance structure of business conglomerates, and enhance market competition.  
 As a result, the amendment draft of the MRFTA is now submitted to the National Assembly. It 
includes introducing the graduation standards of re gulations by setting the ceiling on the total amount 
of shareholdings of other domestic companies for t hose having an efficient internal and external 
control system, and facilitating the establishmen t and transformation into the holding company, 
thereby improving corporate ownership and the governance structure of business conglomerates. 
Various other measures to enhance transparency a nd fairness of companies we re introduced, such as 
gradual reduction of the scope to exercise the vo ting rights of business conglomerates over financial 
affiliates, reintroduction of rights to request fina ncial transaction information, and strengthening of 
notification obligation of non-listed and non-registered companies.  
 
Answer to b. 
 
 
Credit card companies are pursuing self-restructuring si nce the outbreak of the liquidity crunch last 
year.  Currently, six independent and 44 in-house credit card companies are conducting credit card 
business in the market. Their financial position has weakened as a result of increasing delinquency in 
the aftermath of earlier reckless marketing strategies.  Thanks to large amounts of capital injection and 
other self-turnaround efforts by the companies themselves, their business position has improved 
somewhat. Still, in order for them to enjoy a s ubstantial business turnaround, full economic recovery 
must be accompanied. As for the delinquency ratio, because of strengthened individual credit 
evaluation and credit risk management practices by i ssuers, the increase rate has been curbed. Credit 
card use has recently gone down, and companies have  better access to capital due to their improving 
business conditions. Meanwhile, they must pursue the completion of their restructuring plan along 
with making efforts to fully regain market confid ence. At the regulatory front, the authorities will 
guide the credit card industry to concentrate on its in trinsic business, which is  credit purchase instead 
of cash advances. 
 
Question: paragraph 20-22  
 
Another critical area remains the relationship betw een employers and trade unions and the functioning 
of the labor market in general. More flexibility in  regular employment together with an improvement 
of the situation of the non regular workers and a streng thening of the social safety net, in particular of 
the pension system, should be aimed at.  Sound labor-management-relations are crucial fo r investment both from Korean and foreign 
companies. What is the Korean gove rnment's assessment of the situa tion? What policies are envisaged 
to introduce more flexibility in the functioning of the labor market?   Answer
 
 
It is true that some people have raised con cerns that frequent labor disputes have served as a 
hindrance to economic recovery and foreign investment  in Korea. However, labor disputes have been 
sensationalized by the media, thus creating a disproportionately unfavorable impression in the 
international community. It is commonly understood  that labor-management relations in Korea are 
undergoing a process of harmonization. The current administration has repeatedly emphasized the importance of voluntary resolution of issues between labor and management on the basis of dialogue and compromise. The government has consistently pursued its policy of dealing with illegal labor WT/TPR/M/137/Add.1 
Page 76  
 
activities in strict adherence to relevant rules and regulations. Furthermore, we strive to create an 
environment that prevents labor-management di sputes before they happen, by facilitating and 
promoting dialogue among labor, management and the government. 
 
In the past, Korean labor market flexibility was not at  a satisfactory level. In particular, it was rather 
difficult for employment adjustment of non-tempor ary workers immediately after the 1997 foreign 
exchange crisis. The internal factor s that restricted labor market flexibility were labor regulations that 
made it difficult to dismiss the workers, and difficulti es for middle-aged workers to transfer and to re-
enter the job market. The external factors that r estricted labor market flexibility were a lack of 
education, training and information related to the job, and of a social safety net. 
 
The Korean government makes efforts to improve the labor regulations and to support more cooperative labor-management to e nhance internal labor market fl exibility. We will increase labor 
market flexibility by easing the criterion to dismiss workers, and by permitting substitute labor. At the 
same time, we will also prepare for the regulation to protect the rights of temporary workers within 
the scope consistent with labor market flexibility. 
 On the other hand, to strengthen the stability of the external labor market, we will support the job search of the unemployed, facilitate job creation and activate the worker's job training. We will also 
strive to strengthen the social safety net for temporary workers. 
 
(4) Trends and Pattern in Foreign Investment  
Question: paragraph 26, page 10
 
 
After reaching a historic peak in 1999, FDI inflows continuously declined afterward. The pattern of 
FDI inflow also changed markedly  with the share of manufacturing investment dropping against other 
forms of investments.  a. What kind of recent measures are being pursued in order to break that negative trend and 
 attract more FDI into Korea, e.g. with rega rd to facilitating of cross-boarder mergers?  
b. Does the current shift in the investment mix,  toward more services and less manufacturing-
 based projects, represents a cause of concern or  rather a source of satisfaction for Korea?  
 
Answer to a.
 
 
Establish an effective foreign investment regime: 
 
- Create an FDI-friendly environment through I nvest KOREA, and provide a One-Stop Service 
 through Project Managers.  - Invest Korea will designate home doctors to resolve problems encountered by newly 
established foreign-invested companies. The designated home doctors, along with active 
support from the Office of the Investment Ombuds man (OIO), will help their clients resolve 
any business issues they encounter. 
 Improve living and management conditions for foreigners:  
 - Promote a three-year plan for improving the corporate management environment (corporate 
deregulation, improving labor-management relati ons) and a five-year plan for improving the 
living environment for foreigners (improving education, medical care, immigration, and 
communication for foreigners). 
  WT/TPR/M/137/Add.1 
 Page 77 
 
 
Strengthen system for dealing with grievances:  - Establish support team for labor-management relations in foreign-invested companies, 
increase consultations related to labor-manag ement relations, and st rengthen support for 
difficulties in taxation and labor issues, in order to induce increases in investment by existing 
foreign-invested companies.  
 
Answer to b.
 
 
As the economy develops, demand for services increa ses quantitatively and, at the same time, demand 
for services grows more diverse and more sophisticated qualitatively. The services industry will grow 
in importance not only as a final product but also as intermediate input in the production of other 
industries such as the manufacturing industry. In addition, the services industry plays a critical role in enhancing the quality of people's lives and in strengthening the competitiveness of the nation's 
industry as a whole. 
 
Decreasing investments in manufacturing and increasing investments in services are a global trend.  In 2002, 75% of inward FDI to OECD member count ries were investments in the services sector. As 
for FDI in Korea in 2003, 26.2% of total invest ments was in manufacturing, while 63.9% was in 
services. Increasing FDI in the services sector is a positive trend, because it enhances economic 
efficiency through transfers of management know-how and other technologies.  II. Trade Policy Regime: Fr amework and Objectives 
(6) Foreign Investment Regime 
 
Question
 
 
National treatment is usually understood to be a relative standard. However, foreign investors and 
foreign investments shall in principle be accorded as regards expropriation by the State (host state) 
treatment which is based on a absolute standard as provided for in many bilateral investment treaties 
(BIT). Switzerland would appreciate if Korea could provide further clarifications on how it treats investors 
from countries with which it has concluded a BIT containing specific provisions on the issue of 
expropriation.  
Answer
 
 Please refer to the following Article 5 (Expropriation) of Korea’s model BIT. 
 1. Investments of investors of one Contracting Party shall not be nati onalized, expropriated or 
otherwise subjected to any other measures having eff ect equivalent to nationa lization or expropriation  
(hereinafter referred to as "expropriation") in the territory of the other Contracting Party except for 
public purpose and against prompt, adequate and ef fective compensation.  The expropriation shall be 
carried out on a non-discriminatory basi s in accordance with legal procedures. 
 2. Such compensation shall amount to the fair market value of the expropriated investments 
immediately before expropriation was taken or  before impending expropriation became public 
knowledge, whichever is the earlier, shall include inte rest at the applicable commercial rate from the 
date of expropriation until the date of payment, and shall be made without undue delay, be effectively 
realizable, and be freely transferable. In both expropriation and compensation, treatment no less favourable than that which the Contracting Party accor ds to its own investors or to investors of any 
third State shall be accorded.  WT/TPR/M/137/Add.1 
Page 78  
 
 
3. Investors of one Contracting Party affected by expropriation shall have a right to prompt 
review by a judicial or other inde pendent authority of the other Contr acting Party, of their case and of 
the valuation of their investments in accordance with the principles set out in this Article. 
 
4. Where a Contracting Party expropriates the assets of a company which is incorporated or 
constituted under its laws and regulations, and in wh ich investors of the other Contracting Party own 
shares, debentures or other forms of participation, the provision of this Article shall be applied. 
 
III. Trade Policies and Practices by Measure 
(2) Measures Directly Affecting Imports 
(ii) Customs valuation 
 
Question: page 41, paragraph 19-20
 
 According to the report of the S ecretariat, Korean "Customs may determine the valuation of second-
hand imports using "reasonable standards", whereby prices paid are adjusted based on appraised prices from certified appraisal institutes, domestic wholesale prices, or other recognised price lists"  a. Could Korea indicate which are these "reasonable standards" and "recognized price lists"?  
b. As article 7 of the Customs valuation agreem ent prohibits the use of selling price in the 
country of importation of goods produced in such  country to determine the customs value of 
imported goods, in which way can the use of domestic wholesale prices be considered 
consistent with the a bove mentioned article?  
 
Answer to a.
 
 
Reasonable standards include prices of imported goods that are adjusted based on  - appraised prices from government-certified appraisal institutes; - domestic wholesale prices, and; -  prices of new goods or used goods transacted within the country deducted by depreciation 
value. 
 Recognised price lists do not exist. In the past, the Kelly Blue Book was used as a recognized price list, but in September 1, 2004, Article 5-5 of The Notice on the Determination of the Price of 
Imported Goods was revised and therefore the recognized price lists do not exist anymore. 
 
Answer to b.
 
 
The method of determining customs value based on domestic wholesale prices is consistent with 
Article 7 of the WTO Agreement because the domestic wholesale prices are the prices of imported goods, not those of domestically produced goods. 
 
(iii) Tariff 
 
Question: page 48, paragraph 37
 
 
Presently Korea has not bound all its tariff lines. Will Korea bind 100% of its tariff lines under the 
DDA?  
 
  WT/TPR/M/137/Add.1 
 Page 79 
 
 
Answer  
 
Korea increased the binding ratio substantially  after the Uruguay Round except on some sensitive 
products. Korea intends to bind these non-binding ta riff lines in accordance with the result of the 
WTO DDA negotiations. 
 
(v) Other levies and charges  
 
Question: page 52-53, paragraph 56 – footnote 24  
 
Could Korea explain why the basis for the waste ch arge in case of plastic goods is different for 
imported and domestic goods and how it is consistent with article VIII GATT and is not 
discriminating against imported goods? 
 
Answer  
 
Regarding the difference in the basis of wast e charges for imported and domestic plastic goods 
 1) In the case of domestic plastic goods, the waste charge is rated at a certain sum of money per kilogram of plastic put into the goods as raw materi al, and the producer is subject to the requirement 
to submit supporting documents deta iling the type and quantity of plastic inputs contained in the 
plastic goods. 
 2) The same basis of waste charge could be applied to imported plastic goods. In practice, 
however, there would be considerable difficulti es for foreign producers to submit documents and 
materials which demonstrate the types and quan tities of plastics contained in their products. 
 3) Taking into account the possible difficulties of foreign producers and with the intention of preventing such a circumstance in which the docum entation requirements relating to waste charge 
might function as trade barriers, Korea is rating waste charges for imported goods in proportion to 
their prices. 
 
4) Therefore, the application of different ch arge rates for domestic and imported plastic goods 
should not be viewed as discrimination against im ports but as a result of consideration of the 
difference existing between domestic and foreign producers. 
 
5) For those state parties with objection to this difference, Korea could consider applying to the 
imports from such states the same basis of waste charge as domestic goods, with the same level of 
documentation requirements on their producers.  Regarding whether the above policy is inconsiste nt with Article VIII paragraph 1(a) of GATT 
 
1) Article VIII paragraph 1(a) of GATT states that  "all fees and charges of whatever character 
(other than import and export duties and other than  taxes within the purview of Article III) imposed 
by contracting parties on or in connection with im portation or exportation shall be limited in amount 
to the approximate cost of services rendered and sha ll not represent an indirect protection to domestic 
products or a taxation of imports  or exports for fiscal purposes." 
 
2) The waste charge in question has a nature  of being imposed on plastic goods, domestic and 
imported, which come into the domestic market and has environmental purposes. Therefore, it does 
not constitute "fees and charges imposed on or in connection with importati on or exportation" under 
Article VIII paragraph 1(a). WT/TPR/M/137/Add.1 
Page 80  
 
 3) The issue of whether or not it is consistent with Article VIII paragraph 1(a) of GATT does not 
seem to be a relevant issue for Korea's waste charges on plastic goods.  
(ix) Standards and other Technical Requirements: 
 
Question: paragraph 87
 
 
Is a further review of Korea's drug registration requirements planned? Are GMP certificates issued by foreign authorities according to relevant internati onal standards (e.g. WHO standards) recognized in 
the Republic of Korea?  
 
Answer
 
 
Neither import approval nor field (on-site) inspection is  needed for the IND to be imported, if the IND 
protocol is approved by KFDA. In order to conduct a clinical trial, the sponsor of the clinical trial 
must check the GMP certificate showing that th e IND was manufactured in  accordance with GMP. 
The KFDA applies the DMF to both domestic comp anies and foreign companies equally. The KFDA 
accepts a GMP certificate issued by the govern ment of the exporting country, meeting the 
international standards (e.g., WHO standards).   IV. Trade Policies by Sector (4) Policy Developments in the Energy Sector 
 
Question: paragraph 45
 
 Which of the cross-subsidies and subsidies of th e Korea Electric Power Corporation KEPCO named 
in § 45 and estimated at W 1 trillion will be remove d within the framework of the ten year KEPCO 
reform plan?   
Answer
 
 Since January 1, 2003, cross-subsidies have been in  gradual decline with the adjustment of the unit 
price for each electricity use category. Korea's electr icity pricing system is divided into six categories 
according to the use of electricity. Prices for reside ntial, general and educational uses are relatively 
higher while those for industrial, agricultural and st reet lighting uses are lower, hence resulting in a 
cross retaliation. With the adjustment of pricing adopted in January 2003, prices for residential, 
general and educational uses have been lowered while those for indus trial, agricultural and street 
lighting uses have been raised to reduce cross retaliation.  The one trillion won mentioned in the question is not a subsidy but originates from the electric power 
industry fund. The fund is used to finance the projects directly carried out by the government in accordance with the Electricity Bu siness Act, such as providing electricity to remote places and 
islands and ensuring electricity safety. This fund is not provided to electricity businesses. It is levied 
with the electricity bills for the convenience of pa yment collection and is not a part of electricity 
tariffs.   
Question: paragraph 50-51
 
 
Which of the measures directly or indirectly suppor ting domestic coal will be abolished in the Coal 
Business Rationalization Project by 2005? What is the impact of such measures on CO2 emissions?  
  WT/TPR/M/137/Add.1 
 Page 81 
 
 
Answer  
 
With the Coal Business Rationalization Project that first began in 1989, the reduction and closure of 
economically non-viable mines have been induced. According to the long-term plan for the coal 
industry, which will be implemented till the end of  2005, the current government policy is to be 
pursued continually to reduce coal production to th ree million tons per year. The hard coal production 
has sharply declined with the implementation of th e Coal Business Rationalization Project and thus 
resulting in the drastic reduction in CO 2 emission. 
 
CHINESE TAIPEI  
 
IV. TRADE POLICY DEVELOPMENTS 
1. KOREA and the WTO (b) DDA Negotiations  
Trade and Environment  
 Question: page 17, paragraph 61
 
 
Korea believes that successful negotiations on th e liberalization of envi ronmental goods could 
contribute to the achievement of sustainable deve lopment objectives. We would like to know Korea’s 
views on the classification of Environmental G oods. For instance, what does Korea see as the 
practical considerations involved in identifying an d defining environmental goods, such as the main 
issues relating to multiple end-uses and to processes and production methods?   Answer
 
 
In the classification of environmental goods, Kor ea is of the view that non-product related PPM 
criteria (npr PPM) should not be the basis for the de finition of environmental goods. We think that the 
npr PPM based criteria may contradict WTO principles such as "equal treatment of like products." 
With regard to the multiple end-u ses issue, Korea expects the concept of multiple end-uses to be more 
defined and elaborated in future CTE negotiations.  
 (4) Trade Policies by Sector  Question: page xii, paragraph 28
 
 
As mentioned in the report, recent exposures to hous ehold credit on real estate and credit cards have 
reduced the profitability of Korea’s financial institu tions, prompting the govern ment to take prudential 
measures to solve the problem, mainly in the non-banking sector. It is encouraging to note that the 
Korean authorities are taking measures to address this issue and it would be appreciated if Korea 
could share with other Members its valuable e xperiences with regard to prudential regulation. 
 
Answer  
 
After the drastic increase of household lending in Korea from 2000 to 2003, the rate of increase has 
been somewhat curbed. This is largely due to st rengthened prudential regulations and the improved 
risk management practice of financial institutions. 
 
There still remain some concerns over returning loan  maturities within close time gaps coupled with 
the potential deterioration of borrowers' loan serv icing ability due to further delays in economic 
recovery. Therefore, the authorities will continue to  reinforce the prudential regulations in household WT/TPR/M/137/Add.1 
Page 82  
 
lending without hurting the lenders’ financial soundness. At the same time, the authorities will guide 
lenders to actively apply indivi dual credit evaluation so as to improve their lending practice based on 
borrowers' loan servicing ability. Also, in order to av oid risks following consolidated loan maturities, 
long-term loans will be recommended to lenders as a way to spread out loan maturity dates. 
 
I. ECONOMIC ENVIRONMENT 
(1) Main Economic Developments 
 Question: page 1-4, paragraph 1-7
 
Following the Asian financial crisis in 1997, Korea started a series of economic reforms. In 2001 and 
2002, the economy grew in real terms by 3.8% and 7.0% respectively. GDP growth in 2003, as a 
consequence of the economic downturn in the early part of the year, was only about 3.1%, although, 
based on continued export expansion, it is set to recover to over 5% by the end of 2004. Korea’s 
future economic development will still be depe ndent on the recovery of the global economy and 
China’s continued expansion, but most important of all to its longer-term growth prospects will 
probably be Korea’s own efforts to implement stru ctural reforms, stimulate economic recovery and 
expand domestic consumption. 
We would appreciate the opportunity of discussing with Korea in more detail its related economic 
strategies and plans for the future.  
Answer  
 
The Korean economy is gaining in strength owing to increasing exports, but the recovery of domestic 
consumption has been rather sluggish. Recently, ho wever, it has begun to show signs of rebounding. 
Domestic consumption is expected to improve slowly but steadily.  The Korean government plans to support economic recovery domestically by promoting various 
policies aimed at revitalizing domestic consumption.  We will strengthen the role of fiscal policies as a 
means of economic adjustment by expanding fiscal expenditures and implementing them promptly. In 
addition, we will help increase consumer income le vels by creating more jobs and by implementing 
other policies in a timely manner. We will implem ent comprehensive measures for credit defaulters 
while simultaneously ensuring a soft landing for soon-to-mature household liabilities. Furthermore, 
we will support the domestic economic situati on with comprehensive measures for small- and 
medium-sized enterprises and by promoting the competitiveness of the services industry.  
Moreover, constant financial and corporate rest ructuring will be pursued within the framework 
established after the 1997 foreign exchange crisis.  
We will endeavor to attract FDI into the service se ctor through measures such as the designation of 
the Free Economic Zone (FEZ), maintain policy measu res for Korea’s growth engine and advanced 
economy, and build the growth level for sustainable development. 
(1) Development in Merchandise Trade 
 
Question: pages 8-10, paragraph 23-25
 
 
Korea was the world’s seventh la rgest exporter and eighth largest importer in 2002, underlining its 
importance as a major global trader. The ratio to  GDP of Korea’s exports of goods and services 
declined from 40.8% to 35.3% between 2000 and 2002; the ratio of its imports to GDP declined from 37.7% to 33.9% over the same period.   WT/TPR/M/137/Add.1 
 Page 83 
 
 
Korea’s main trading partners are the United States, Japan, China and the EU. In 2003, due to its rapid 
economic growth, China apparently b ecame Korea’s largest export market. 
We would appreciate it if Korea could provide us with more information on its trading policies and 
related plans towards China. 
Answer  
 
For the past decade, Ko rea has shown relatively large amount of trade surpluses to PRC annually, 
especially last year, recording 13.2 billion US dollars. Keeping in mind China's ever-growing 
concerns over this continued trend of bilateral trade imbalance, Korea has made efforts to reduce trade 
imbalance as much as it can. However,  it is also undeniable that the ro le of the Korean Government in 
attaining a trade balance with China is limited with in international market mechanism. To enhance 
bilateral economic and trade relati ons, Korea and China agreed, at the summit in Beijing in July 2003, 
to various measures such as forming a joint team  to conduct research on bilateral economic and trade 
cooperation. 
 
(4) Trends And Patterns In Foreign Investment  
Question: pages 10-13, paragraph 26-27
 
 
What strategies and plans does Korea have for a ttracting greater inflows of FDI in the future? 
 Answer
 
 
1. Why FDI is decreasing 
Since 2000, FDI showed an overall decrease due to the sluggish global economy, increasing 
uncertainties in the domestic economy, and an in crease in FDI in China.  In 2004, however, FDI 
inflow into Korea has been increasing due to the recovering global economy, improved corporate 
profits, and active trans-border M&As. (In the firs t half of 2004, FDI increased by 89.6% year-on-
year to 5.05 billion USD, based on FDI cases reporte d.) Decreasing investments in manufacturing and 
increasing investments in services are a global trend. In  2002, more than 75% of inward FDI to OECD 
countries were investments in the services sector. In  regards to FDI into Korea, investments in the 
services sector increased sharply in relation to the manufacturing sector. 
 
- (2000) Share of investments in manufacturing sector: 44%; share of investments in services  sector: 56%  
-  (2003) Share of investments in manufacturing sector: 26.2%; share of investments in services 
sector: 63.9% 
2. FDI-promotion strategies 
Establish an effective foreign investment regime : Create an FDI-friendly environment through Invest 
KOREA; provide the One-Stop Service through Project Managers.  
Improve living and management conditions for forei gners: Promote a three-year plan for improving 
the corporate management environment (corpor ate deregulation, improving labor-management 
relations) and a five-year plan for improving th e living environment for foreigners (improving 
education, medical care, immigration, and communication for foreigners). WT/TPR/M/137/Add.1 
Page 84  
 
Strengthen system for dealing with grievances: Es tablish support team for labor-management relations 
in foreign-invested companies, increase consulta tions related to labor-management relations, and 
strengthen support for difficulties in taxation and labor issues, in order to induce increases in 
investment by existing foreign-invested companies. 
 
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES  
(1) Overview 
 
Question: page 14, paragraph 2
 
 
The report mentions that raising exports is seen as a major engine for the growth needed to meet the 
political target of doubling average per capita annua l income to 20,000 USD. We note separately that 
in contrast to the current international trend of ra ising interest rates to counter inflation, Korea has 
recently lowered its interest ra te to 3.5% (in August 2004).  
We are interested in knowing what is Korea’s rationa le behind the lowering of the interest rate. Could 
it lead indirectly to a depreciation of the Korean Won, which might have the effect of boosting 
exports?  
Answer
 
 
The real economy has exhibited a slowdown in its p ace of recovery as there has been a delay in any 
marked improvement of private consumption and facilities investment. Also, the pace of economic 
growth may be even slower, largely due to th e likelihood of the more stubborn than expected 
persistence of high oil prices and of a worldwide cooling of the information and technology sector. 
Although upward pressure on prices from the cost si de has been increasing mainly due to the increase 
of oil prices, the core inflation rate remains w ithin its target range owing to subdued domestic 
demand. Housing prices are stable through a series of government measures. Meanwhile, the current 
account is forecast to maintain a surplus, mainly thanks to the surplus of the goods account. In the 
financial markets, the overall liquidity conditions have been favourable. Ho wever, the fund-raising 
conditions have not yet improved for small- and medium-sized enterprises with low credit ratings. 
Taking the above economic and fi nancial conditions into consid eration, the Monetary Policy 
Committee of the Bank of Korea decided today to lower its target for the benchmark call rate 
(uncollateralized overnight rate) from 3.75 percen t to 3.5 percent for the inter-meeting period.  
 
(6) Foreign Investment Regime 
(iv) Incentives   
 
Question: page 34, paragraph 62  
 
Korea continues to provide a range of mainly ta x incentives to attract FDI. Has it, at any time, 
conducted an assessment of the effe ctiveness of these incen tives? If so, what were the main findings 
and conclusions?  
Answer  
The government has assessed the e ffectiveness of the current tax in centive to the foreign-invested 
companies every three years. We found that the current tax incentive system was effective and should be maintained to attract FDI. 
  WT/TPR/M/137/Add.1 
 Page 85 
 
 
Question: page 34-36, paragraph 63-65)  
 
In addition to providing enhanced tax and other incentiv es in an effort to attrac t FDI and to offset its 
recent decline, in 2003, Korea designated the por ts of Incheon, Busan and Gwangyang as three new 
Free Economic Zones (FEZs). We would be interested in learning more about Korea’s experiences to 
date and its strategic plans for promoting its FEZs in the future. 
Answer  
 The Korean government introduced Free Economic Zones to respond to the industrial cluster trends in 
Northeast Asia and to our strategic logistics. Th rough FEZs, we are striving to transform our growth 
engine from a manufacturing industry to a high-tech  and knowledge-intensive service industry. We 
are also making efforts to attract foreign highly-s killed labor and transnational enterprises into our 
FEZs by introducing an improved sy stem consistent with the globa l standard. We designated three 
areas such as Incheon, Busan/Jinhae, and Gangyang-man as FEZs last year. 
Following tax breaks and other incentives will be provi ded to foreign-invested companies which are 
established in the FEZs and on operators who are engaged in the development project of FEZs. 
<Benefit for foreign-invested companies in FEZs> 
Sector Benefits 
Tax breaks - Income and corporate tax exemptions for the firs t three years and a 50 percent reduction for the following two 
years (for investments of more than 50 million USD, a 100 percent exemption for the first seven years and a 
50 percent reduction for the following three years) 
- A flat 17 percent income tax for CEOs and executives at foreign companies 
- Capital goods import tariff exemption for three years - Acquisition, registration, property, and aggregate la nd tax exemptions for the first three years and a 
50 percent reduction for the following two years. 
Financial Support - Companies that locate in FEZs will eith er be exempt from or subject to reduced land fees.  
- Financial assistance for the construction of such fa cilities as hospitals and schools to make life more 
convenient for foreigners. 
Deregulation - Minimal land-use regulations  governing factory construction and enla rgement (currently applicable to the 
Seoul metropolitan area) 
- Lift restrictions on entering businesses reserved for SMEs. - Direct foreign currency payments for current transactions of less than 10,000 USD allowed. 
Employment and 
labor management - Unpaid weekly holidays allowed (currently paid) 
- Exemption from obligatory employment of  veterans, the disabled, the elderly. 
Educational 
improvement - Schools can be established by foreign investors. 
- Domestic residents can attend foreign schools. 
Foreign hospitals and 
pharmacies - Foreign-financed hospitals and pharmacies for foreigners allowed 
 
Foreign Broadcasting - The ratio of cable network foreign broa dcasting re-transmission channels expanded from the current 10 to  20 
percent. 
Administrative support - English allowed for processing of public documents. 
- Foreign investment Ombudsman's office will be established. 
 WT/TPR/M/137/Add.1 
Page 86  
 
Moreover, we are preparing for specific plans by regions in order to develop the FEZs into 
internationalized regions and make efforts to est ablish the necessary infrastru cture for a business hub 
in East Asia and to attract advanced schools and hospitals. 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
(2) Measures Directly Affecting Imports (i) Customs procedures  
 
Question: page 39-40, paragraph 9-11  
 
The Korea Customs Service (KCS) enjoys a W2.5 trillion annual saving in handling costs as a result 
of automated customs formalities and the introducti on of its "e-customs" system. These results are 
extremely impressive and we would welcome th e opportunity of learning more about KCS’s 
experiences with the new systems, especially in the area of quantifying the benefits.  
 
Answer  
 
Korea Customs Service (KCS) welcomes your visit to share our experience of customs automation. 
KCS concluded a research contract with the National Computerization Agency, a research 
organization, in 2002 to quantify the benefit of  automatization. The NCA came up with such an 
amount (2.5 trillion won) by comparing the achieve ments before and after clearance automatization. 
 
Question: page 40-41, paragraph 12-16  
 
The Regulatory Review Commission (RRC) and the KC S are working closely together to introduce 
measures to further expedite customs clearance procedures, including the installation of a single 
window. Could Korea please provide more informa tion on the operational framework envisaged for 
such a single window? We would also like to know which entity will be responsible for its operation 
once it is in place.   Answer
 
 
KCS plans to build a Single Window to cove r all clearance processes including inspection and 
quarantine with just one Customs application. KCS is now in the course of standardizing application 
items with a number of agencies in charge of quarantine and approval. 
 
(ii) Customs valuation  
 
Question: page 41, paragraph 18-19  
 
The report mentions that Korea’s customs valuation legislation has been bro ught into compliance with 
the WTO Agreement on Customs Valuation. We would be particularly interested in knowing how the 
stipulation of Paragraph 10 of the Interpretative No te to Article 5 of the WTO Agreement on Customs 
Valuation has been incorporated into  Korea’s relevant legislation.  
 
Answer  
 
Paragraph 1. (b) of Article 5 of the Customs Va luation Agreement states "If neither the imported 
goods nor identical nor similar imported goods are so ld at or about the time of importation o the 
goods being valued, the customs value shall, subject otherwise to the provisions of paragraph 1(a), be 
based on the unit price at which the imported goods or identical or similar imported foods are sold in  WT/TPR/M/137/Add.1 
 Page 87 
 
 
the country of importation in the condition as imported at the earliest date after the importation of the 
goods being valued but before the expira tion of 90days after such importation." 
 
Korea does not have a definition on the "earliest  date." Customs Houses are responsible for a 
reasonable interpretation of the te rm according to the cases, and so far, the "earliest date" has not 
caused any problems. 
 
Question: page 41-42, paragraph 20-21  
 
Importers who voluntarily rectify declarations w ithin six months of importation must pay the duty 
difference plus an additional duty of 5% (10% after six months). Would Korea please clarify whether 
these additional duty requirements apply in cases  of insufficient duty collection as well as of 
excessive duty collection, and how they can be jus tified, especially in situations where importers 
declare the differences voluntarily?  
 
Answer  
 Korea imposes an additional duty on incompliant impor ters. As for insufficient duty, an insufficient 
duty is collected plus additional duty in proportion to the insufficient duty. However, as for excessive duty collection, the excessive duty collection, as well as additional dues, is drawn back to importers.  
 
If an importer makes a voluntary declaration, Korea Customs audits the appropriateness of the amount 
after the acceptance of the import declaration. Wh en the importer paid less than the amount he/she 
should have paid, Customs imposes an additional duty as well as the insufficient amount of duty. This procedure encourages importers to make correct declarations. 
 
(iii) Tariffs  
(a) Applied MFN rate 
 
Question: page 42-43, paragraph 26  
 
Korea’s tariff rate on vegetable products is 100%. We understand, however, that Korea has difficulty 
in producing a sufficient amount of fresh vegetables in  winter. In order to meet this seasonal shortfall 
in vegetable supplies, would Korea consider lowe ring its high tariff rate so as to boost imports?  
 
Answer  
 
Korea’s tariff on fresh vegetables is relatively lower (an average of 20~40 percent) than that on other 
agricultural products.  Korea’s horticulture gr eenhouse which allows the production of fresh 
vegetables all year round has developed significantly  so that farmers have become very sensitive 
about the issue of cutting tariffs to  increase the fresh ve getable supply in the winter. The overall tariff 
cut in agriculture will be reviewed in line with  the results of the Doha Development Agenda.  
 
Question: page 45, paragraph 27  
 
It is noted that so-called "nuisance" applied MFN rates (2% or less) accounted for only 2.7% of all Korea’s tariff lines in 2004.  Given the small am ount involved, we find it difficult to understand why 
Korea still keeps the "nuisance" rates in place. Does Korea have plans to eliminate these rates 
altogether at some time in the foreseeable future?  
 
 
 WT/TPR/M/137/Add.1 
Page 88  
 
Answer
 
 
It is our basic position that we will modify our ta riff schedule according to the final results of the 
ongoing DDA negotiations. Therefore we do not have any plans to eliminate the low tariff at this 
moment.   
 
Question: page 45-46, paragraph 28  
 
We note that the out-of-quota duty for manioc is as  high as 887.4%. Given that manioc is essentially a 
tropical product, it does not seem very likely that Korea can produce this pr oduct efficiently. Could 
Korea please explain its reasons for ma intaining such high tariff rates?  
 
Answer  
 
The current tariff structure of Ko rea’s agricultural products is a result of the UR negotiations on 
agriculture. So there are some products for which ther e is no longer a need to maintain high tariffs 
today. As such, we will readjust the tariff st ructure once the DDA negotiations on agriculture are 
concluded. However, in the case of manioc, although we do not produce manioc in Korea, we need to 
maintain a high tariff because it affects the domestic agriculture to a certain extent since it is an 
indirect substitute of domes tic potato and other crops. 
 
(vii) State trading 
 
Question: page 54, paragraph 63  
 
The report indicates that Korea has not updated its WTO notification on state trading since its last trade policy review. Could Korea please explain its state trading operations for rice, banana, garlic 
and onions. It would also be appreciated if Korea could provide us with its import figures for the 
above-mentioned products, by country, in quan tity and value, for the period 2001-2003?  
 
Answer
 
 We will do our best to notify the WTO of the resu lts of the detailed operation of state trading estates 
as soon as possible. Korea does not implement state tr ading for bananas. The Ministry of Agriculture 
and Forestry administers the import and domestic  sale of rice. The Agriculture and Fisheries 
Marketing Corporation is in charge of garlic and onion. We will soon subm it a detailed import volume 
of 2001-2003 and the amount by country.  
 
(ix) Standards and other technical requirements  
(b) Quarantine regulations 
 
Question: page 61-62, paragraph 97-101  
 
According to Article 7 of the WTO/SPS Agreement, Members shall notify chang es in their sanitary or 
phytosanitary (SPS) measures and shall provide  information on their SPS measures. The WTO 
official working languages are currently English, French and Spanish, but when we try to access 
Korea’s relevant SPS regulations, only Korean language versions appear to be available and versions 
in English are difficult to acquire. Bearing in mind its transparency obligations under the WTO SPS 
Agreement, it would be most helpful if Korea could provide interested Members with English 
versions of its relevant SPS regulations.  
 
  WT/TPR/M/137/Add.1 
 Page 89 
 
 
Answer  
 
We are trying our best to provide an English ve rsion of Korea’s regulations on various health and 
quarantine measures. However, due to the curr ent working conditions in relevant Korean 
organizations, it is difficult to alwa ys provide an English version.  
 
(3) MEASURES DIRECTLY AFFECTING EXPORTS  
(iv) Duty and tax concessions 
 
Question: page 66, paragraph 97-118  
 
Refunds of customs duties on imported raw materials u sed in exports totaled the equivalent of 25% of 
Korea’s tariff revenue. Could Korea please elaborat e on this aspect of its customs operations? We 
would especially like to know whether, after th e recent introduction of the electronic refunding 
system, a mechanism exists that could prevent th e occurrence of such an excessive amount of duty 
drawback on imported raw materials, thereby ensuri ng that the levels of duties refunded are more 
reasonable.  
 
Answer  
 
Korea refunds customs duties paid at the time of importation of the goods when the raw materials 
which are designated by the WTO Subsidy and C ountervailing Duty for drawback and the Kyoto 
Convention were imported, manufactured, and pr ocessed and then the goods from this process are 
exported. The proportion of customs duty refunds to customs revenue was 35% in the 1980s, but it 
went down in the 1990 to 2000 to 20~25%. The d ecrease resulted from the changes in tariff rates on 
raw materials used in exporting goods.  
 
With the introduction of the Electronic Drawback Sy stem, when an applicant applies for a drawback 
to the system, the system assesses the amount of imported raw materials used in manufacturing and 
processing exported goods, and calculates the drawback , within the amount of the duty paid upon 
importation. When an applicant applies for an  excessive amount of drawback, even if it is 
unintentional, the system itself rejects the appli cation. Only when the applicant corrects this 
miscalculation and then applies for a drawback with in the amount of the duty paid, the system re-
processes this application. This pro cedure prevents excessive drawbacks. 
 
(4) Measures Affecting Production And Trade 
(i) Taxation (c) Tax incentives 
 
Question: page 69-70, paragraph 133-135  
 
It has been noted that the Korean government has been offering a wide range of tax incentives to 
encourage foreign investment in the production of  certain goods. However, it is acknowledged that 
many incentives fail to achieve the desired eff ects and that costs often outweigh benefits. We 
understand that the Korean government has removed some of the ineffective incentives, while the 
application of others has been extended to the end of 2006. We are interested in learning more about 
what Korea has experienced from amending its tax incentive policies and we would like to know, in 
particular, its rationale for the policy shift.  
 
 WT/TPR/M/137/Add.1 
Page 90  
 
Answer
 
 
Please refer to the answers to US questions 14 and 15.  
(iv) Competition and consumer policy 
(a) Competition policy  
 
Question: page 74, paragraph 149  
It is stated in the report that, with the amendm ent in 2002 of the Korean Fair Trade Act 1980, the 
scope of exemptions from competition law is now limite d. However, it is also noted that several of 
these changes were delayed and other exemptions from competition law introduced to allowed cartel 
activity. The Korea Fair Trade Commission (KFTC) h as stated that (unlike in the 1980s) it "no longer 
encouraged tariff cuts to increase foreign compe tition because of the relativ e openness of the Korean 
market".   
 Could Korea please clarify: 
a) What are these "other exemptions" from competiti on law and on what basis are they justified? 
b) Whether the KFTCs above-mentioned statement is  consistent with a free trade system, with 
Korea’s own trade policy and is in the Korean public’s interest?  
Answer
 
 
When the KFTC enacted the Omnibu s Cartel Repeal Act in 1999, it tried to abolish or restrict the 
regulations which encourage the Korea Judicial Scri vener Association to form cartels by setting their 
service fee (Article 19 of the Judicial Scrivener Act). However, due to strong resistance from the 
relevant interest group (the Korea Judicial Scrivene r Association) and the Judicial Body, the KFTC's 
efforts have come to fail.  
 The regulation to set the service fee for architects (A rticle 26 of the Architect Act) was once abolished 
by the Omnibus Cartel Repeal Act for its possi bility of encouraging cartels among architects. 
However, through the legislative lobbyist activiti es from the relevant interest group (the Korea 
Institute of Registered Architects), the members of  the National Assembly reintroduced its legislation 
in 2001. As part of its "Anti-competitive Regulati on Improvement Task," the KFTC is in the process 
of consulting with the related agencies to improve the current practices concerning the service fee for architects and judicial scriveners.  
Question: page 74, paragraph 150
 
Included in the list of competition activities prohi bited under Korea’s legislation is "resale price 
maintenance, unless exempt by the KFTC". Please c ould Korea provide details of the circumstances 
in which the KFTC allows resale price main tenance and of the criteria applied?  
 
Answer  
 Until 2002, all materials under protection of the copyri ght law were exempted from the prohibition of 
resale price maintenance. However, since 2003, only materials designated by the KFTC after 
consultation with the related ministries are exempt . Currently, only printed materials are protected 
under the "Publication and Print Promotion Act," but the scope of books protected by this law will be 
gradually reduced. From 2005, no n-fiction books and student's reference books will no longer be 
subject to price maintenance to induce pri ce competition and enhance consumer choice.  WT/TPR/M/137/Add.1 
 Page 91 
 
 
 
IV. TRADE POLICIES BY SECTOR 
(4) Policy Developments in the Energy Sector (i) Petroleum and petroleum products 
 
Question: page 91, paragraph 38  
The report mentions that all oil used in Korea is imported, mainly from the Middle East (79.5% in 
2003) and that diversifying oil imports is a policy goal. Please could Korea describe what measures it 
has adopted so far to meet this diversification objec tive and confirm that they are consistent with the 
rules of the GATT 1994 Agreement on S ubsidies and Countervailing Measures?  
 Answer
 
 The support for diversifying import lines of crude o il helps make up a part of the differences in 
transportation fees. The Korean government is of the view that a diversification system is a means of 
ensuring energy security in a possible petroleum cr isis for Korea, which is totally dependent on 
petroleum imports, and is not related to trade policies. 
 
Question: page 91, paragraph 40
 
 
The Ministry of Commerce, Industry and Energy (M OCIE) has established seven blocks for offshore 
oil and gas exploration and is issuing concessions, four  of which have so far gone to the state-owned 
Korea National Oil Company (KNOC). Are foreign investors allowed to participate in the oil and gas exploration of Korea’s coastal areas?  If so, are there any limitations on the foreign ownership of oil 
and gas exploration companies?  
 
Answer
 
 Korea imposes no limitations on foreign participati on in the exploration of its coastal areas, but 
currently no foreign company is pa rticipating in the exploration. 
 
(ii) Other energy 
(a) Natural gas 
 
Question: page 91-92, paragraph 41-43  
 
For a net liquefied natural gas (LNG) importing economy like Korea, there exists a seemingly almost irreconcilable conflict between gas industry deregulation and the stab ility of gas supply. Deregulation 
might add to market uncertainty, while long-term  contracts remain a fundamental requirement 
underpinning investment and supply secu rity for a potential LNG supplier.  
How does Korea intend to circumvent this c onflict and how will the government manage a 
satisfactory balance between deregul ation and a stable gas supply? 
 
Answer
 
 Even if competition is introduced into the gas i ndustry, the government will work to accomplish a 
balance between supply and demand, by predicting the mid-to-long term gas supply and demand and 
expanding storage facilities.  If necessary, the gove rnment will utilize the spot market or import gas 
for a short period to maintain the balance of supply and demand. WT/TPR/M/137/Add.1 
Page 92  
 
(b) Electricity  
 
Question: page 93, paragraph 46  
 
In its program of deregulation a nd privatization of the electricity sector, the government has set a 
maximum limit on foreign equity permitted in th e majority state-owned Korea Electric Power 
Corporation (KEPCO) at 40%, and the largest share holder must be domestic and own no more than 
3% of the equity. Because of the structural differences between the power generating and the transmission and distribution sectors, which have thei r existing networks, in other electricity markets 
that have been liberalized, competition has usually been introduced into the generating sector without 
any ownership restrictions.  
We wonder whether the dissipated and fragmented di vision of equity as currently envisaged in the 
Korean power generating sector might have the ef fect of reducing operating efficiency and making 
the sector less attractive to foreign investors? We would therefore like to have further clarification of the rationale behind the ownership limits in the pow er generating sector as currently stipulated by 
Korea? Moreover, are there any prospects for furt her relaxation of restrictions in the future? 
Answer
 
 
Basic direction of the privatization of the generation companies 
- The five thermal companies will be privatized  through the sales of the management rights as 
well as IPO. 
- One investor can purchase the management right s of only one generation company. The sales 
to foreigners cannot exceed 30% of Korea's to tal generation capacity (two out of the five 
companies can be sold to foreigners. 
- Other than the point mentioned above, there are no other restrictions on the acquisition of 
 shares of generation companies. 
KEPCO will not be privatized but will remain as a state-run enterprise, overseeing the transmission 
network. The Korea South-East Power Company (KOSEPC O), the first to be sold, is in the process of 
privatization. However, because of the domestic a nd global economic situation, sales are progressing 
rather slowly. 
Generation 
 Question: page 93, paragraph 47
 
 
The restructuring and privatization of the Korea Gas Corporation (KOGAS) as well as that of KEPCO 
have fallen behind schedule for the time being, fo r reasons mentioned in the report. Are there any 
special measures currently being taken or planned by the government to address the situation? If so, 
would Korea please elaborate and provide details.  
 
Answer  
 
Concerning the power industry, the introduction of competition has already been completed in the 
generation sector, but delayed in the distributio n sector. We will enhance the efficiency of the 
distribution sector by introducing an independent company, while carrying out as planned structural 
reforms of the other sectors excluding those of the distribution sector, such as the privatization of 
power generation companies. Considering that competition has been introduced in the power 
generation sector, we will also introduce competition at least in the import/wholesale sectors of the  WT/TPR/M/137/Add.1 
 Page 93 
 
 
gas industry. This way, we will make the gas indus try more efficient, boost synergy effects in the 
entire energy industry, and strengthen the consumer’s right to choose.  
Distribution 
 
Question: page 94, paragraph 49
 
 
It is noted that the government of Korea was due to announce a revised restructuring and privatization 
plan for KEPCO based on a Joint Study Group report on the splitting of distribution activities, which 
was expected by late-May 2004. Can Korea therefore please inform us now of the conclusions of the 
report? What are the government’s final recommendations for the restructuring of KEPCO? 
 
Answer  
The joint research team has conducted a study on th e division of the distribution unit from September 
2003 to April 2004. The team recommended to th e government the adoption of the independent 
business operation system to strengthen internal comp etition, as there were concerns of skyrocketing 
prices and unstable supply if the distribution unit were to be divided to introduce the wholesale 
market. The Korean government acc epted the joint research team's recommendation. In June 2004, it 
decided that KEPCO's distribution unit was not to be split but the independent business operation 
system would be adopted to enhance its inde pendence, and boost competition and management 
efficiency. 
* The establishment of detailed plans to adopt  the independent business operation system has 
currently been outsourced. 
The Korean government will faithfully and continuous ly carry out restructuring of the electricity 
industry to adopt competition. The privatization of units other than distribution, such as generation 
companies, will be pursued as was planned originally 
(6) SERVICES 
 
Question: page 96, paragraph 63  
 
Korea has submitted its initial services offers under the current WTO negotiations and we understand 
its position to be that it would like to see meani ngful liberalization in the maritime transport sector. 
However, Korea still maintains the limitation that "o nly Chusik Hoesa (stock companies) as stipulated 
under the Commercial Act are permitte d" under Mode 3 in the maritime transport sector. This would 
seem to conflict with its stated position and exp ectations in the current WTO negotiations. Please 
could Korea elaborate on its rationale for maintaining such a limitation.   
Answer  
The condition that only Stock Companies (containi ng the capital of 50,000 USD, seven promoters) 
under the "Commercial Act" are pe rmitted under Mode 3 in the mar itime transport market is the 
minimum requisite to access to Korea’s domestic mark et. This condition applies to everyone without 
any discrimination between nationality, and there ar e numerous foreign companies in Korea. So the 
term "Chusik Hoesa (stock companies)" is just a mi nimum requirement to guarantee stable business in 
Korea, not an intentional restriction to curb business. WT/TPR/M/137/Add.1 
Page 94  
 
(ii) Communications 
(a) Telecommunications   
Regulatory regime  
 
Question: page 105, paragraph 94  
 
The report states that requests for FBT (facility-based  service providers) licenses are open twice per 
year, in March and September, and the Ministry of Information and Communications (MIC) must 
decide whether to grant a license within 30 days of  the application. According to the information 
published on the MIC’s official website, however , while applications for FBT licenses should be 
received on 25-31 March and 25-30 September, the final decisions on licensing would not be made 
until 30 June and 31 December respectively. 
It would be appreciated, therefore, if Korea could please clarify and confirm what are the current 
procedures for FBT licensing? 
Answer  
Please refer to the answer to Japan’s question on FBT licenses. 
 
(iii) Transportation 
(a) Maritime transport  
 
Question: pages 108-109, paragraph 111  
Could the Korean government please provide details of the significant steps it has taken to further 
deregulate and liberalize the shipping industry. 
Answer  
Korea abolished the cargo sharing system in 1999, making free the business of foreign shipping 
companies in the bulk cargo market. 
 
THAILAND  
 Report by the Secretariat (WT/TPR/S/137
) 
 Trade Policies and Practices by Measure
 
Measures Directly Affecting Imports 
 
Question 1  
 
The Republic of Korea uses "adjus tment duties" and compounding of tax es to boost the applied rate in 
order to protect domestic producers. This practice affects a number of products, especially seafood products (frozen shrimps and prawns, frozen pulp s quids), gems and jewelr y, and plywood items. 
Does the Republic of Korea have any plan to re duce or eliminate adjustment duties imposing on the 
mentioned products? 
  WT/TPR/M/137/Add.1 
 Page 95 
 
 
Answer  
 
Korea has operated the adjustment tariff within the limit of the WTO concession tariff rate in 
accordance with WTO rules while considering the gap between the domestic and foreign price. 
However, gems and jewelry indicated in your ques tion are not subject to the adjustment duties. 
Admitting the necessity of adjustment duties, we have been trying to reduce the number of items 
subject to adjustment duties and reduce the tariff rate since 1997.  
Standards and other technical requirements 
 
Question 2
 
 
In early April 2004, the Republic of Korea announced its intention to revise its import regulations on 
processed chicken. Consequently, the Republic of Korea imposed a temporary restriction on poultry imports from Thailand. Korean authorities were sen t to Thailand to undergo a random inspection of 
9 out of 29 processed chicken-manufacturing factori es suspected of being at a sub-standard level. 
After the inspection, the Republic of Korea announ ced that 7 factories chosen at random for 
inspection were allowed to re-expor t its products to the Republic of Korea. However, the remaining 
20 factories that meet all sanitary and quarantin e requirements still remain banned from export. We 
would like to be informed as to when Korean authorities will inspect the remaining 20 factories. 
 Answer
 
 
There was another outbreak of highly pathogenic avian influenza in Thailand after July. It is thus not 
an adequate time to dispatch Ko rean quarantine expert team to conduct survey in Thailand at the 
moment. 
 
Measures Affecting Production and Trade 
 
Question 3  
 
The Report states that the education tax is levied  on banking and insurance services, and all goods 
subject to the special excise tax, the transportation tax and the liquor tax.  This education tax has been 
collected on several goods, including motor vehicles,  electrical machinery and equipment and parts 
thereof, gems and jewelry and furniture products, to gether with import tariff. We would like to seek 
clarification on the purposes of collecting the educa tion tax. How is the education tax relevant for 
imposing on those products? 
 
Answer  
 
The government maintains the education tax system to finance huge financial resources necessary to 
build and improve schools and relate d facilities. The education tax is  levied on goods subject to the 
special excise tax and goods not subject to the value-added tax. 
 WT/TPR/M/137/Add.1 
Page 96  
 
Trade Policies by Sector
  
 Agriculture  Question 4
 
 
The Korean government allows imported rice to be  used only for industrial or processing purposes. 
(Pages 54 & 88) The prohibition of imported table rice to be marketed directly to Korean consumers 
continues to render Thai rice uncompetitive in the Republic of Korea. Does the Republic of Korea 
have the intention of relaxing the full control over the end-use of imported rice?   
 
Answer  
 
Imported rice subject to MMA is stored in th e government warehouse for a certain period of time 
along with domestic rice which is secured thro ugh the government’s basic rice supply and demand 
plan. It is then sold taking into consideration th e government’s inventory management conditions and 
the market demand according to u sage. This issue will be one of  the major issues at the rice 
negotiations with interested countries and will have  to be discussed fully in future negotiations. 
However, we are not able to go into details at the moment.  
Services 
 
Question 5
 
 
Korea has made substantial efforts since its last Re view to encourage FDI by further liberalizing and 
making transparent its foreign investment regime. (Page 30) However, Thailand views that, according 
to the level of commitments under GATS, the Repub lic of Korea still have a limited sector bound in 
its schedule of specific commitments. In this rega rd, we would appreciate further information on 
foreign investment climate in the Republic of Korea.  
Answer
 
 FDI in the services sector is currently going through a liberalization phase as described in the 
implementation schedule. Additional liberalization measures will be reflected duly following DDA 
negotiations.   
Question 6
 
 Concerning the entry into and temporary stay within the Republic of Korea, we would like to inquire 
about the immigration and work permit policy c oncerning occupations that mainly use working 
experience/training such as cooks, chefs, hairdressers, etc.  
Answer
 
 
Korea introduced a new working system for low-sk illed/unskilled foreign workers, so-called the 
"Employment Permit System for Foreign Workers"  which took into effect on 17 August 2004.  
 Major features of the Employment Permit System: 
 
- Foreign workers are imported only for cons truction, manufacturing and agricultural and 
 livestock industries. - The number of foreign workers to be importe d is decided by the Foreign Workers Policy  WT/TPR/M/137/Add.1 
 Page 97 
 
 
 Committee. A total of 25,000 foreign workers are to be imported in 2004. - Foreign workers are allowed to work  in Korea for up to three years. 
The workers to be employed in Korea under the Employment Permit System are issued with 
 an E-9 visa (unprofessional employment).  Question 7
 
 
Referring to professional services, please provide more information regarding the progress of the implementation of MRA in the Republic of Korea including the details of the implementation of 
MRA between the Republic of Korea and other Me mber countries? What are the conditions of 
accreditation? 
 
Answer
 
 
Korea has not concluded any MRA in the professional services with other members of the WTO. 
Korea is now preparing to enter into negotiations  on MRA with Australia in engineering services and 
also actively participating in establishing the criteria of substantial equivalence at the APEC engineer 
coordinating committee.  
Question 8
 
 Does the Republic of Korea allow foreigners to  do business in the "trade fair and exhibition 
organization service"? If so, what are the conditions of doing business? 
 
Answer
 
 There are no restrictions for foreigners to do business of organizing trade fair or exhibition in Korea. 
 
Insurance  
 
Question 9
 
 Korea has liberalized the insurance market, both life and non-life insurance. In regard to public health 
insurance, we would like to seek more informati on bout the reimbursement policy. For example: 
Could the citizen reimburse their expense arisi ng from consuming the private hospital services 
abroad? How much can they reimburse?  Answer
 
 
Although they are policyholders of the national hea lth insurance program prescribed in the National 
Health Insurance Act, the Korean nationals cannot reimburse their expenses that arise from 
consuming private hospital services abroad.  Question 10
 
 
In connection with direct insuran ce, the Republic of Korea has indi cated in the specific commitments 
under GATS that the commercial presence is permitte d only to foreign companies. However, the 
recruitment and employment of insurance professionals are restricted. 
We would like to seek clarification on the above-menti oned restriction. In addition, we would like to 
know why the Republic of Korea does not allow foreigners to join ventures with domestic 
entrepreneurs? Does the Republic of Korea have any plan to remove/relax the mentioned restrictions 
in the future? WT/TPR/M/137/Add.1 
Page 98  
 
 
Answer
 
 
Korea has restrictions on the employment of insu rance professionals such as salespersons, considering 
that the insurance business requires highly skilled specialists, and with the purpose of protecting 
policyholders or consumers. In this context, people opting to become insurance professionals are 
required to pass certain examinations in Korea. Fo reigners are allowed to take the examinations.  
 There is no restriction for foreigners in establishi ng joint ventures with Kor ean insurance companies. 
However, Korea will maintain its current reserva tion in the schedule for it may be necessary to 
prohibit such establishment of joint ventures in the future. Korea could consider whether to lift the 
reservation or not after the DDA negotiations.   
Broadcasting and audio-visual  
 
Question 11: Page 107
 
 
The Republic of Korea as a major films exporter has succeeded in exporting movies in various 
regions, especially Southeast Asia. However, it see ms that the Republic of Korea has a number of 
limitations in the audio-visual sector. In this rega rd, could the Republic of Korea in form whether it 
has any plan to relax those rest rictions in the near future? 
 Answer
 
 
Korea is considering on a gradual liberalization of  broadcasting and audio-visual sector. However, 
Korea has difficulty making commitments in the br oadcasting services sector due to the lack of 
technical feasibility in modes of  supply and vagueness of the existing GATS classification on this 
sector.  
Report by the Government (WT/TPR/G/137
) 
 Bilateral Trade Relations with the United States 
 
Question 12: Page 17
 
 
In 1998 the Republic of Korea and the United Stat es concluded a Memorandum of Understanding 
(MOU) to improve market access for foreign motor vehicles. 
Thailand would like to request the Republic of Korea to bring up-to-date the actions to open the 
automotive sector under the 1998 MOU. Are those acti ons applied to all Member countries or only to 
the United States? Does the Republic of Korea have any plan to consider more measures to improve 
market access?  
Answer
 
 
The Korean government has been doing its utmost  to improve the market access opportunity for 
foreign vehicles. In November 1998, the Korean gove rnment notified WTO of its commitment to bind 
its tariff rate on passenger vehicles at the level of  8%. Prior to November 1998, the WTO bound tariff 
rate had been 80%. The Korean government also continues to reduce the tax burden on vehicles. 
- In January 1999, the engine-displacement-b ased progressive tax rate categories for motor 
 vehicle tax were reduced from seven to five , and the tax rate was reduced by 9-40%.  
- In January 2002, the special consumption ta x rate for passenger vehicles was tentatively 
 reduced until the end of August 2002 (for ve hicles with engine over 2,000 cc, 14% →10%).    WT/TPR/M/137/Add.1 
 Page 99 
 
 
- In July 2003, the engine-displacement-based  progressive tax rate categories for special 
 consumption rate were reduced from three to two and tax rate was also reduced.   
- In March 2004, the special consumption tax ra te was tentatively reduced by 20% until the end 
 of 2004.  
The Korean government continues to improve consumer perception of foreign vehicles. 
 - 100 foreign vehicles were purchased by the Kor ean government to be used for police patrol 
 for the year 2002 and 2003 (50 vehicles for each year). - In May 2000 and 2003, the government ministries (MOFAT, MOCIE, MOCT, and Ministry 
 of Environment (ME)) officially sponsored the Import Motor Show.  
 Regarding the standard and certification issues,  problems facing foreign importers have been 
addressed through technical working group consulta tions among the parties of interest including 
foreign importers. 
 
Tariff reductions and other tax reforms menti oned above are applied to all WTO members. 
 Market share of foreign vehicles in the Korean  domestic market has significantly increased. The 
Korean government will continuously endeavor to  ensure a fair business environment for foreign 
companies to operate in Korea.  
 
USA
 
I. Economic Environment 
(2) Macroeconomic Policies (iii) Structural Policies 
 
Question 1: paragraph 16-17
 
 
Given Korea’s stated desire to attract foreign investment and develop into a hub of Northeast Asia, what measures is the Korean government taking to  promote transparency, strengthen intellectual 
property protection, adopt technology-neutral polic ies that do not discriminate against foreign 
technologies, and remove regulatory or other non-tariff barriers?   
 
Answer
 
 
The promotion of transparency and reduction of non-tariff barriers and other regulations 
 
- The South Korean government has been reviewing its economic policies in part to foster fair 
 and balanced governmental affairs in the context of economic development.  
- Even if it is considered to take longer to  improve the current situation, the South Korean 
 government will continue to strive to achieve their goals. 
 
Protection of intellectual property rights  
 - The South Korean government has been playing a crucial role in attracting foreign direct 
investment and developing intellectual prope rty-related industries while taking into 
consideration the protection of intellectual property rights.  
- The intellectual property plan was first introduced and implemented by the request of the 
president. The plan calls for a regular investigation-punishment system to be established, the advancement of intellectual law and the widesp read education of intellectual property. In WT/TPR/M/137/Add.1 
Page 100  
 
particular, it functions against violators of the regulation and increases public relations and 
education.  In addition, the revision of re lated legislations is currently in process. 
 The technology-neutrality policy  
- The South Korean government acknowledges that  the technology standard should depend on 
 the market mechanism.  - However, we also believe that there are cases where a single standard is necessary to 
accomplish such government goals as guara nteeing inter-operability and precluding 
overlapped investment. This is also cons istent with the WTO/GATS regulations.  
- The South Korean government is taking measures to address this issue by holding 
consultations between technical experts in or der to reduce any possible negative impact by 
seeking technical solutions. We are pleased that th e WIPI issue, the most crucial trade agenda 
between the United States and South Korea, h as been resolved through consultation between 
technical experts held in April. 
 
Question 2: page 6, paragraph 14
 
 
The Report of the Secretariat (p. 6, paragraph 14) states that although incomplete, corporate 
restructuring, including that of many of the chaebol, has progressed since the 1997 financial crisis. The Report further states that 17 of the top 30 chae bol have either gone bankr upt or entered workout 
programs. 
 a. Please elaborate on the debt workout program that was implemented for financially-distressed 
companies after the 1997 financial crisis.  
b. Specifically, please provide data on the number of companies that entered workout programs; 
how many companies that entered workouts sub sequently failed and went bankrupt or were 
liquidated; how many companies that entered workouts have "graduated" from the workout program; how many companies are still in workouts; and whether the Government of Korea has any indication when the workout program w ill be "closed" or "terminated" for those 
companies that entered workout plans as a result of the aftermath of the 1997 financial crisis?   
c. Please provide the total amount of debt that w as forgiven and the total amount of debt that 
was restructured for companies that entered workouts as a result of the 1997 financial crisis.  
d. How has the Government of Korea ensured that  its workout programs remain in conformity 
with WTO subsidies disciplines?  
e. In the measures to improve corporate gove rnance (paragraph 23 of Korean government 
submission), what specific steps has the Kor ean government taken to improve management 
transparency and strengthen the rights of minority shareholders? 
 
Answer to a.
 
 
In the aftermath of the financial crisis, larg e conglomerates faced chain bankruptcies and ailing 
lenders began to force early loan collection, causing a serious credit crunch even for sound 
companies. Therefore, with the purpose of reviving companies with a promising business outlook but 
deemed to be suffering a short-term financia l weakness and maximizing a creditors' chance of 
collecting loan payments, the wor kout programs convened in June 1998. 
  WT/TPR/M/137/Add.1 
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Answer to b.  
 
As of August 2004, a total of 83 companies have been placed under the program, 57 of which have 
successfully completed the program, 19 have quit, and 7 are still in the process of completing the program. 
 
Answer to c.
 
 
Debt rescheduling etc. have been d ecided by the creditors themselves. 
 Answer to d.
 
 
Corporate restructuring programs such as workout programs have been and are being pursued voluntarily by creditor financial institutions. Since the government does not provide assistance in this 
case, there is no conflict between the workout programs and WTO subsidies disciplines. 
 
Answer to e.
 
 
The Korean government has pursued various refo rms to improve corporate governance since the 1997 
foreign exchange crisis. In this vein, the res ponsibilities of directors and the rights of minority 
shareholders were further strengthened. Creditor fina ncial institutions and instrumental investors were 
entitled to further rights for management monitoring.  Besides, the government has built the basis for 
improved corporate governance by improving the acc ounting and disclosure system. (The government 
revised and improved three acts related to corporat e governance such as the "securities act related to 
the advanced accounting system," the "External auditing act on limited companies," And the "Public 
accountant act" in December 2003.) Moreover, the secu rities action lawsuit system will be introduced, 
making it possible for minority shareholders to institute a lawsuit as a representative when the 
corporate managers engage in window-dressing or manipulate stock prices.  All these related systems are underway to take root  and when the improved systems are incorporated 
into the industry, and the improvement of corporate governance will be more visible.   
The government will make efforts for further system improvement and pursue various policies to 
make the improved system imbedde d into sound practice. Preparing for the introduction of minority 
shareholder's class action lawsuit system, which w ill be in effect from January 2005, the government 
will streamline the related regula tion, supplement the current weak point and support the corporate 
sector to prepare for the class action. (Prepare for compensation criterion for damage and insider 
trading, and shift supervisory focus from disclosur e of offenders to prevention of window-dressing.) 
In line with the regulation enforcement related w ith the advanced auditing system, the government 
will supplement sub-regulation accordingly. (The  sub-regulation will prescribe the representative 
director's authentication on documents related to di sclosure and exemption reason for regular shift of 
auditing corporation.)  
The Korean government made 'The 3-year Market Reform Roadmap' on December 30th last year to 
establish a free and fair market environment. Through  this roadmap, the government is striving to 
strengthen transparent and accountable business mana gement, improve corporate ownership and the 
governance structure of business conglomerates, and enhance market competition.  As a result, the amendment draft of the MRFTA is now submitted to the National Assembly. It 
includes introducing the graduation standards of re gulation by setting the ceiling on the total amount 
of shareholdings of other domestic companies for t hose having an efficient internal and external 
control system, and facilitating the establishmen t and transformation into the holding company, 
thereby improving corporate ownership and the governance structure of business conglomerates. WT/TPR/M/137/Add.1 
Page 102  
 
 - Various other measures to enhance transparen cy and fairness of companies were introduced, 
such as gradual reduction of the scope to exercise the voting rights of business conglomerates over financial affiliates, reintroduction of rights to request financial transaction information, 
and strengthening of notification obligation of  non-listed and non-registered companies.  
(4) Trends and Patterns in Foreign Investment 
 
Question 3: page 30
 
 
The Secretariat Report notes (page 30) that Foreign Direct Investment in Korea peaked in 2000 and 
has fallen in each year since.   
What factors contributed to declining FD I for four consecutive years through 2003? 
What steps is the Korean government taking to reve rse the trend of declining levels of FDI since 
2000?   Answer
 
 
Since 2000, investments decreased due to the sluggi sh global economy, growing uncertainties in the 
domestic economy, and an increase in FDI in China.  In 2004, however, FDI inflow into Korea has 
been increasing, due to the recovering global ec onomy, improved corporate profits, and active trans-
border M&As. 
 Inducement of strategic investment: Select certain industries to induce strategic investments - such as 
the parts and materials sector and the R&D sector - and through aggressive direct and focused promotions overseas.  
 
Establish an effective foreign investment regime:  Create an FDI-friendly environment through Invest 
KOREA, and provide a One-Stop Service through Project Managers.   Improve living and management conditions for forei gners: Promote a three-year plan for improving 
the corporate management environment (corpor ate deregulation, improving labor-management 
relations) and a five-year plan for improving th e living environment for foreigners (improving 
education, medical care, immigration, and communication for foreigners).  Strengthen system for dealing with grievances: Es tablish support team for labor-management relations 
in foreign-invested companies, increase consulta tions related to labor-management relations, and 
strengthen support for difficulties in taxation and labor issues, in order to induce increases in 
investment by existing foreign-invested companies. 
 
II. Trade Policy Regime  
(3) Development and Administration of Trade Policy 
 
Question 4: paragraph 30-32
 
 
Despite the Korean government’s attempts to enhance regulatory transparency, many foreign 
exporters and investors continue to complain about  a lack of regulatory transparency, inadequate 
notification and comment periods, and review a nd appeal procedures, as well as inconsistent 
application of the Administrative Procedures Act.   WT/TPR/M/137/Add.1 
 Page 103 
 
 
a What further steps does Korea plan to take to address these concerns?  
b. The Korean government’s submission (paragraphs 30-32) notes the establishment of a 
Regulatory Reform Committee to address regulatory reform issues.  What are the highest priority regulatory issues that  this group is focusing on? 
c. Has the RCC conducted outreach to the inte rnational business community so its members 
may discuss areas of concern?  
d. The Korean government submission refere nces (paragraph 32) the establishment of the 
Corporate Difficulties Resolution Center (CRD C) under the Regulatory Reform Committee.  
Of the 118 cases that have been resolved by the Center, how many of these have involved 
cases brought by foreign companies or importers?  
e. Has the CRDC engaged in any outreach activ ities to foreign companies and/or importers? 
 
Answer to a.
 
 
As a way of enforcing transparency in the admi nistration, the Korean government is now pushing 
forward with an amendment to the administrativ e procedural law, which includes administration 
notice and complements the related procedures with the notification of the people and collection of 
opinion when drafting a government policy and plan.   
Answer to b.
 
 Creating a business-friendly environment 
 - Korea has achieved amazing success after the fi nancial crisis, such as eliminating more than 
half of its administrative regulations. However, in  spite of the reformative measures so far, the 
financial sector has been inadequate in its improvement of key regulations, and companies 
assert that they encounter many difficulties in th e actual management field. As a result, the 
Government is making efforts to create a bus iness-friendly environment, such as uncovering 
and preparing field-centered regulatory reform measures by gathering suggestions from economic organizations in order to increase the companies’ direct experience of regulatory 
reform.  
 
Increasing the convenience of citizens’ lives 
 - The Regulatory Reform Committee (RRC) focu ses on regulatory reform to enhance the 
quality of citizens’ lives, such as clarifying ambiguous regulations and aiming for a one-stop 
service by integrating previous regulations that required submitting papers to numerous 
governmental bodies. Furthermore, the RRC has selected as strategic regulations those that 
are related to multiple governmental bodies and hi ghly influential to the lives of citizens, and 
is currently promoting those regulations. In 2003, the RRC selected and restructured ten 
government organizations, such as improving the construction permit procedure, and by doing 
so, made an effort to increase th e convenience of citizens’ lives. 
 Answer to c.
 
 
- The Regulatory Reform Committee gathers opinions from AmCham, EUCCK, and SJC to 
improve the quality of regulations so that they are in agreement with international regulations. 
Recently, the Regulatory Reform Committee took into consideration opinions from foreign 
chambers of commerce when establishing the "M easures to revitalize foreign investment," 
which was one of the RRC’s strategic tasks in 2003. 
 
 WT/TPR/M/137/Add.1 
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Answer to d.
 
 
Of the 118 cases settled by the Regulatory Refo rm Committee, eight were corporate difficulties 
related to foreign companies or importing companies,  among which five were resolved and three were 
not received. Examples of the five cases which were resolved are the deferment of foreign investment 
companies’ mandatory employment of persons of  national merit and the eradication of illegal 
importing and circulation of used copy machines.  
Answer to e.
 
 The Corporate Difficulty Resolution Center is an  organization that receives the difficulties of 
individual companies and investigates methods of resolution with the ministry. It has dispatched 
official notices when it was first established and e ngaged in general publicity through the Internet and 
bulletin boards, but it has never held an event with nor promoted itself directly to a foreign company 
or an importer. The center promotes itself to forei gn companies and collects matters of difficulty with 
them through the Foreign Investment Ombudsman, a subsidiary of the Ministry of Commerce, 
Industry and Energy.   In February, 2004, at the EU event for European Commercial and Industrial Workers’ Day, the prime 
minister explained the plans for establishing the corporate difficulty Resolution center and requested 
that foreign companies make frequent use of it. 
 
(5) Trade Agreements and Arrangements 
(iii) Bilateral agreements 
 
Question 5: paragraph 76-79
 
 
The Korean government submission references (paragraphs 76-79) ongoing Free Trade Agreement 
negotiations between Korea and Japan and between Korea and Singapore. 
 
a. What are Korea’s principal criteria for selection of potential FTA partners? 
b. Will any economic sectors potentially be ex cluded from the scope of the FTAs currently 
being negotiated?  
 
Answer to a.  
 
The Korea-Chile FTA, our first FTA, entered into fo rce on April 1, 2004, and Korea has engaged in 
FTA negotiations with Singapore and Japan every two months, with the aim of concluding the 
agreements by 2004 and by 2005, respectively. In  addition, Korea is conducting a joint study on 
possible FTAs with ASEAN and EFTA.   To maximize economic and political benefits , thus securing export markets and enhancing 
productivity, Korea may have to pursue FTAs with  big and advanced economies from a long-term 
perspective. However, in the short run, Korea uses three criteria; ① Economic feasibility, ② Political 
and diplomatic implications, ③ Countries' willingness to conclude an agreement with Korea, etc. 
  WT/TPR/M/137/Add.1 
 Page 105 
 
 
Answer to b.  
In the negotiations, Korea seeks FTAs that are as comprehensive as possible, without excluding any 
sector, so that they will be WTO-consiste nt and guarantee maximum economic benefits. 
Besides tariff elimination, the FTAs that Korea is pursuing includes comprehensive sectors such as 
investment, services and other non-tariff barriers,  which may help those FTAs achieve further 
liberalization and expansion in the markets.  
 The Korea-Chile FTA, which entered into force last  April, stipulates its consistency with GATT and 
GATS in its Article 1.  Its Article 3.4 also states that neither party may increase any existing customs 
duty or adopt any customs duty on goods, and that  each Party shall progressively eliminate its 
customs duties on originating goods in accordance wi th its Tariff Elimination Schedule. The Schedule 
from the Korean side requires 96.2% of all the ta riff lines, which is substantially all trade, be 
eliminated within ten years.  In the FTAs currently under negotiation, Korea will continue to seek comprehensive ones which cover 
substantially all trade including the most domest ically sensitive sectors such as agriculture.   
 
(6) Foreign Investment Regime 
(iv) Incentives 
 
Question 6: page 34, paragraph 63
 
 
Referring to page 34, paragraph 63  of the Secretariat’s report, please list the industries currently 
receiving benefits through Korea’s foreign investment zone (FIZ) program.   
Answer
 
 
High-tech industry: 485 industries including electronics and information, electricity, parts and materials, precision machinery, new materials, pr ecision chemistry, bio-indu stry, optical industry, 
medical devices, shipbuilding, marine industry, the environment, energy, resources, and construction.  
 Auxiliary support industry: 149 in dustries including electronics and information, electricity, new 
materials, precision chemistry, bio-industry, optical  industry, medical devices, transportation, the 
environment, energy, resources, construction, digita l contents industry, motion pictures, and media. 
 
III. Trade Policies And Practices By Measure 
(2) Measures Directly Affecting Imports 
(i) Customs Procedures 
 
Question 7
 
 
The Secretariat Report notes (paragraph 4) that  while Korea has "harmonized many voluntary 
standards and mandatory technical regulations with international norms to improve transparency and 
reduce unnecessary obstacles to trade, and continues revising food codes and re lated regulations in 
line with international requirements . . . significan t differences, including in conformity testing, 
inspection, and acceptance of overseas results, seemingly remain." In cases where discrepancies in the treatment of do mestic and foreign goods exist because of these 
"significant differences," how does Korea address th is treatment in light of WTO rules on national 
treatment?  WT/TPR/M/137/Add.1 
Page 106  
 
Would Korea provide examples of where its policies on testing, inspection, and acceptance of overseas results, particularly in food importatio n, differ greatly from international norms?  
Furthermore, would Korea provide its justification fo r the difference in treatment in each example?   
 
Answer
 
 
In order to control imported foods more efficiently and facilitate the trade of foods, Korea revised the 
Inspection Guidelines for Imported Foods in May 2004, having analyzed and evaluated non-
compliance testing results for import foods and domest ic foods for the last five years. As a result, 
pesticides residue items under the ma ndatory laboratory test have been  substantially reduced from 197 
to 47.  
 Regarding domestic agricultural produce, the cen tral and local governments perform inspection at 
every stage of the development of the produce, from the seed, to the cultivation, the harvest and the 
distribution in the market to ensure the safety of foods. However, regarding imported foods, there is 
no way to ensure food safety but to inspect the food in the importing process. The Korea government 
conducts a laboratory inspection or an organolept ic inspection or documentation inspection, etc. 
depending on the condition of the product.  However, in order to inspect impor ted foods more efficiently and facilitate the trade of foods, Korea 
introduced the system of prior-confirmed registration of imported foods to simplify inspection 
procedures as well as an internet-based reporting sy stem of food imports. Korea has also recognized 
foreign inspection agencies since 1996. Forty-nine  inspection agencies located in nine foreign 
countries have been recognized so far.   
(iii) Tariffs 
 
Question 8
 
 
The Secretariat Report notes that Korea maintains it s highest tariff rates in agriculture, even on 
products such as rye seed, beef jerky, popcorn, fr uit juice and dried fruit for which there is little 
domestic production. 
Would the Korean government explain why it maintains high tariffs on such products? 
 
Answer  
 
Korea’s current tariff structure for agricultural products was established as a result of the UR 
negotiation. There are some items for which we no l onger need to maintain such high tariffs. Once the 
DDA agricultural negotiations are concluded, we will take into consideration its result and subsequent 
changes and readjust the agricultura l tariff structure. The Korean farmers, however, view popcorn as a 
very important income source for certain villages in  Gangwon Province; beef jerky as an item that has 
a huge impact on the beef industry and livestock processors; and fruit juice and dried fruit as having a 
direct or indirect effect on the domestic fruit industry.  
  WT/TPR/M/137/Add.1 
 Page 107 
 
 
Question 9  
 
The Secretariat Report notes (paragraph 32) that Kor ea has used an adjustment tariff on imports of 
croaker in order to protect the domestic industr ies, including the competitively weak, from import 
surges.  Table of AIII.4 shows that adjustment tari ff on croaker is currently 70 percent and to our 
knowledge this has not been changed since 1999. 
Since adjustment tariffs are set annually by MOFE and apparently meant to be temporary measures, 
how does Korean justify such longstanding adjustment  duties on croaker or any other product?  Does 
Korea have plans to rescind this and any other such adjustment tariffs?  Answer
 
 
Korea has implemented the adjustment duties within  the limit of WTO's concession tariff rate based 
on the MFN principles. Korea has reduced the number of items subject to adjustment duties and tariff 
rate. Considering the relatively less competitive agri cultural and fishery industry, it would be difficult 
for us to abolish this adjustment duty for now. But Korea will try to apply the adjustment duties in a 
minimal manner considering the economic situation of the domestic industry. 
* There has been a decrease in the number of items subject to adjustment duties from 62 in 1997 to 20 
in 2004.  Adjustment duties on croaker have been applied in  order to protect the domestic industry from the 
injury resulting from the surge of low-priced cr oaker imports originating from foreign countries. 
Adjustment duty rates on croaker have been reduced on a gradual basis since 1999.  
 July 1997~1998 1999 2000 2001~2004 
Adjustment Duties (%) 100 90 80 70 
 
(ix) Measures Directly Affecting Imports 
 
Question 10: paragraph 102  
 The Secretariat Report notes (paragraph 102) Korea’s e fforts to better conform to international norms 
in labeling. Are labeling stickers (in Korean) for goods such as functional foods currently permitted?  If not, what 
is Korea’s rationale for forcing exporters to creat e separate Korean language labels for the Korean 
market since this could be seen as unnecessarily inhibiting trade? 
 
Answer
 
 
In order to protect consumers, the KFDA prohibits importers of health functional foods from affixing 
a Korean labeling sticker to the original label in  the language of the exporting country. However, the 
Korean language labeling sticker may be attached or printed on health-functional food containers 
bearing no labels from the food manufacturer in th e exporting country. Or labeling information may 
appear in parallel in two languages (Korean and the language of the exporting country) on a single 
labeling sticker.   WT/TPR/M/137/Add.1 
Page 108  
 
Question 11: paragraph 102
 
 
The Secretariat Report notes (paragraph 102) that in August 2004, the Korean government announced plans to restructure food safety management res ponsibilities in order to better respond to food safety 
crises. 
Has Korea implemented the plans and would Kor ea explain how the changes will facilitate the 
management of food safety issues?   
Answer
 
 This question is not related to the Secretariat Report notes (paragraph 102). The Korean government 
is reviewing ways to better coordinate food safety control.  
(3) Measures Directly Affecting Exports 
(iv) Duty and Tax Concessions 
 
Question 12: paragraph 118
 
 
The Secretariat Report provides an overview (par agraph 118) of Korea’s duty drawback scheme. 
 
a. Please provide further information regarding Korea’s drawback scheme as provided under the 
Act on Special Cases with Respect to Drawback  of Customs Duties and Other Taxes Levied 
on Raw Materials for Export, particularly w ith regard to the government’s system of 
enforcement.   
b. Please also confirm that this program is  consistent with Korea’s commitments under 
 Annex III of the WTO Agreement on Subsidies and Countervailing Measures.   
Answer to a.
 
 
When raw materials that were imported within two years from the last date of the exported month are 
used for export goods, and customs duties and ta xes excluding VAT (Value Added Tax) on the 
materials shall be refunded. To get a refund, it is required for an applicant to apply for drawback of 
customs duties and taxes to customs within two years from the date of export.  
The procedures for the application for drawback of customs duties and taxes to Customs are as 
follows:  1. Applicant of Drawback shall apply for drawback through an electronic document. 2. Customs examines whether or not the applica tion satisfies the requirements and standards for 
drawback and determines whether or not to gi ve a refund and arranges the drawback amount. 
(Accuracy of the drawback amount shall be reexamined through the post-audit system) 
3. Customs shall notify the applicants of draw back of the determination and ask the Bank of 
Korea to provide the drawback amount determined. 
4. The Bank of Korea shall provide the drawback amount to the applicants and notify customs of 
the result. 
 
Answer to b.
 
 
Customs duties and taxes paid on imported raw mate rials are refunded within the amount of customs 
duties and taxes paid on importation. Since the Certificate of import declaration which certifies the 
amount of customs duties and taxes paid at the time of importation should be submitted as a related  WT/TPR/M/137/Add.1 
 Page 109 
 
 
document at the time of the application of drawback , it is impossible to be refunded over the amount 
imposed on raw material used for exportation.  
(vi) Export Promoting and Marketing 
 
Question 13: paragraph 122
 
 
The Secretariat Report notes (paragraph 122) the Korean government’s scheme to help selected 
companies develop "world-class products" by assist ing in research and development and overseas 
marketing activities. 
Please provide further information regarding the Ko rean government’s program to develop so-called 
"world class products."  For example, please explain what types of products are defined as "world 
class products" and what criteria must be met for co mpanies and/or industries to receive incentives 
under this program?   Please provide more specific information regard ing the types of incentiv es provided under this 
program.  
 
Answer
 
 
Please refer to the answer to Hong Kong’s questio n (Secretariat Report pa ge 68, paragraph 122). 
 
(4) Measures Affecting Production & Trade 
(i) Taxation 
 
Question 14: paragraph 133  
 
Please explain further the statement in paragraph 1 33 of the Secretariat Report, which states, "the 
government is improving the effectiveness of tax incentives by removing ineffective incentives".   
 Answer
 
 
The Korean government applies the sunset system to most tax exemptions and tax reductions to 
secure a fair tax burden. Among 79 tax exemption and tax reduction systems that were subject to the 
sunset review in 2003, nine were removed and 18 were reduced by their scope or period. Through 
this, we continue to reduce unnecessary and in effective tax exemption and tax reduction. 
 
Question 15  
 
Specifically, please provide information regarding the types of incentives that will be eliminated and 
whether those incentives will be replaced.  
 
Answer  
 
Whether or not specific tax incentives are eliminated is decided during their review process.  Among 79 tax exemption and tax reduction sy stems which were subject to the sunset review in 2003, nine 
were removed and 18 were redu ced by their scope and period. 
 WT/TPR/M/137/Add.1 
Page 110  
 
(ii) Financial Assistance 
 
Question 16: paragraph 141
 
 The Secretariat Report (paragraph 141) notes that there are 19 subsidy schemes, and that through 
August 2001, "15 [of the 19] provided grants, tax concessions, or concessional loans to assist a range 
of agricultural, forest, fishing and manufacturing activities."  a. Please provide an update on the 19 subsidy sch emes (and any others that have been 
 introduced since 2001), including specifically: 
b. What grants, tax concessions or concessional lo ans they have extended in the past three 
 years? c. What companies have benefited from these 19 subsidy schemes, since 2000? 
d. Whether any of the subsidies in the 19 schem es have been used since 2000 to benefit 
 companies that operate in the pulp and paper industry?   Answer to a.b.c.
 
 
In accordance with the WTO Agreement on Subsid ies and Countervailing Measures and the decision 
of the Committee on Subsidies and Countervailing Measures, members are required to notify any 
subsidy granted or maintained within their territo ries every other year. Korea presented the list of 
subsides in May 2004, which was a snapshot of  figures at the end of 2002. The document (No. 
G/SCM/N/95/KOR) is available at the Secretariat or  document archives. According to the document, 
Korea maintained 22 subsidies from 2001 to 2002. Th e title of the subsidy programs, policy objective, 
background, and form of subsidies for all 22 subsidies are described in the document. The information 
on qualified recipients is also included in th e document. However, detailed information on the 
recipients who benefited from any of th e subsidies is currently unavailable.  
 
Answer to d.  
 
The Forest Product Utilization Assistance Program is  provided as a loan for companies in need of 
funds for purchasing raw materials and the repl acement/expansion of outworn wood utilization and 
processing facilities. Companies that produce chemical and wood pulp or paper are not included and were never aided by this assistance program. 
 
(v) Intellectual Property Rights  
Question 17: paragraph 46
 
 
In paragraph 46 of the Korean government submission , Korea states that it is in full compliance with 
the TRIPs Agreement.  
Please indicate which provision of Korean law provid es the judicial authorities the authority to adopt 
provisional measures inaudita altera parte, as required by Article 50.2 of TRIPs.  
 
Answer  
 
The ex-Civil Procedure Act provided for the injunc tions in Part 7. Those provisions were fully 
amended and separated as an independent act ca lled the Civil Execution Act, which took effect on 
July 1, 2002. The provisional measures of the judi ciary's, inaudita altera parte demanded under TRIPs 
50.2, were prescribed in the ex-Civil Procedure Ac t from the Article 696 to 723 before July 1st 2002, 
but afterwards, in the Civil Execution Act from the Article 276 to 310. 
  WT/TPR/M/137/Add.1 
 Page 111 
 
 
The Civil Execution Act provides that a court may issue an order for two types of provisional measures to prevent substantial or permanent dama ge, and to avoid an immi nent violation of civil 
rights. First, provisional seizure may be effected in  order to preserve a compulsory execution against 
the movables or immovables in respect of a monetary  claim or a claim convertible into money in the 
case where, unless such seizure is ef fected, an execution of the judgment  is impossible, or there exists 
a concern about the remarkable difficulty in execu ting the judgment. Second, provisional injunctions 
may be effected in the case where, if the existing s ituations with regard to the objects of dispute are 
altered, the party is unable to exercise his or her rights, or there exists a concern about a substantial 
difficulty in exercising it. Provisional injunctions may also be effected in order to sustain a temporary 
position regarding the cases in dispute.  But in this case, such provisional dispositions shall be limited 
especially to the situations where it is necessary to avoid a significant damage  on a pending relation of 
right or to prevent an imminent danger, or where there exist other necessary reasons.  
Question 18: paragraph 47
 
 The Korean government submission references th e establishment of the Consultative Committee on 
Intellectual Property Rights Protection (paragraph 47),  consisting of Korean government officials and 
non-governmental experts and designed to revise legislation on IPR especially in light of technological advances.  a. Of the 15 specific tasks outlined in the Comprehe nsive Plan for IPR Protection, what are the 
highest priorities, and what is the timeframe for their implementation?  
b. Since one of the stated goals of the Plan is to  facilitate international cooperation, are foreign 
rights holders or IPR experts participating as members of the Committee?   
 
Answer
 
 
Even if the highest priorities are not set, th e Korean government is focused on the regular 
investigation-punishment system, the enforcement of the intellectual property legal mechanism and 
the widespread education of intellectual property.  In particular, we are planning to promote the 
revision of related legislations in the near future.  
The Consultative Committee on Intellectual Propert y Rights Protection consists of 12 Korean 
government officials and ten non-governmental expe rts. Although foreign right-holders are not 
directly participating in the committee, the vice president of the Korean Multi-National Pharmacy 
Industry Committee represents the interests of mu lti-national pharmaceutical companies in which 
foreign right-holders have interests. 
 
Question 19:  paragraph 180
 
 
The Secretariat Report (paragraph 180) notes the extent of piracy of video movies, records, music and business application software.  
a. What is Korea's schedule for joining the WIPO Performances and Phonograms Treaty?  
b. In the past few years, the Korea Media Rati ng Board has provided ratings that authorize 
motion pictures to be distributed in Korea to numerous entities that did not have the authority of the copyright owner to distribute those work s.  Please describe what steps are being taken 
by the Korean government to halt further piracy by these entities?  
c. Please describe the provisions of Korean law th at enable foreign performers and producers of 
phonograms to prevent the unauthorized making available or communication to the public of their performances or phonograms?  
 WT/TPR/M/137/Add.1 
Page 112  
 
Answer to a.
 
 
The National Assembly is now deliberating the amendment draft of the Copyright Act, which 
provides interactive transmission rights - equivalent to "the right of making available" in the WPPT - 
to performers and phonogram producers, and it is e xpected that the amendment act will be passed 
soon. Other aspects to implement the WPPT, e.g., th e moral right of performers, could be dealt with 
by the next amendments of the copyright act, which is scheduled for next year. It is also expected that 
accession to the WPPT could be cons idered in the near future.  
 
Answer to b.  
 
The Korean government (The Ministry of Culture  and Tourism) revised the "Sound Records, Video 
Products and Game Software Act" in the first half of 2004. The contents of the revised law are as 
follows:  
- Empowerment of the Korea Media Rating Boar d (KMRB) to reject fraudulent video titles  
Empowerment of the KMRB to de-register audio-vi sual titles that are later discovered to have 
been rated based on false licensing documentation.  
- Punishment for submitting false licensing documentation to the KMRB with an intent to 
receive the rating.  
 
The Korean government has reinforced measures to  regulate on-line piracy as well as off-line piracy 
since 2003, and will continue to take every effort to eradicate video piracy. 
 
Answer to c.
 
 As explained in the answer to a above, the National Assembly is now deliberating the amendment 
draft of the Copyright Act, which provides interactiv e transmission rights – equivalent to "the right of 
making available" in the WPPT - to performers and phonogram producers. As for the communication 
to the public of performances and phonograms, Arti cle 65(1) and Article 68(1) grant remuneration 
right by broadcasting organizations, but those provisions limit national treatment to foreign 
performers or phonogram producers. These exceptions  comply with Article 16(1) of the Rome 
Convention and Article 3(1) and 14(6) of the TRIPS Agreement. 
 
Question 20: paragraph 165
 
 
The Secretariat Report (paragraph 165) states that  well-known marks are protected in Korea by the 
Unfair Competition Protection and Trade Secret Prot ection Law which prohibits "unfairly tarnishing a 
well-known mark or causing confusio n with another person’s goods by using a similar or identical 
mark, including distributing, importing or exporting such goods."  a. As Article 6 bis of the Paris Convention and TRIPs Article 16 calls for the protection of 
unregistered well-known marks, does Korea’s Unfair Competition Protection and Trade 
Secret Protection Law allow for unregiste red well-known marks to be protected?   
b. Is registration of a well-known mark require d in order for it to receive protection?  
c. To better understand how well-known marks are protected through unfair competition laws, 
we request a copy of Unfair Competition Protection and Trade Secret Protection Law.  
  WT/TPR/M/137/Add.1 
 Page 113 
 
 
Answer  
 
According to Article 6bis of the Paris Convention and Article 16(2), (3) of the TRIPS Agreement, 
trademarks that are identical or similar to a nother person's trademark that is well-known among 
customs may not obtain registration under the curre nt Trademark Act and the Unfair Competition 
Prevention and Trade Secret Protection Act. 
 Regardless of registration, a well-known trademark is protected by the Unfair Competition Prevention and Trade Secret Protection Act and the Trademark Act.  
Please refer to the following site: http://eportal.kipo.go.kr:8581/ekipo.jsp 
 
Question 21: paragraph 177
 
 
The Secretariat Report also states (paragraph 177), "Korea protects geographical indications."  Please 
elaborate how GIs are protected under Korean Law.  If geographical indications are protected through 
unfair competition laws, please provide copies of these laws.    
Answer
 
 
In the case of agriculture, one must register  at the National Agricultural Products Quality 
Management Service according to the Agricultural Product Quality Management Law, and in the case 
of fisheries, one must register at the Nationa l Fisheries Products Quality Management Service 
according to the Fisheries Product Quality Management  Law. In the case of agricultural products that 
are subject to the Agricultural Product Quality Management Law, foreign GIs that go through the 
same registration procedure and evaluation standard as Korean GIs are also protected. If foreigners or 
Korean citizens want to receive GI protection, they must fill out a registration form on a GI stipulated 
under the same Law, attach rele vant documents, and submit them  to the National Agricultural 
Products Quality Management Service. This Service body will evaluate whether or not the documents 
qualify for the registration conditions  and decide upon the items and sc ope that are to be protected. 
 Question 22: paragraph 177
 
 
The Secretariat Report further states (paragraph 177),  "trademark legislation (reference to Article 6 
(1) (iv) of the Trademark Law – Law No. 71) prev ents registration of trademarks consisting of a 
conspicuous geographical name."  
What does this provision mean?  Are interested pa rties or owners of third country geographical 
indications (i.e., geographical indications protected as U.S. certification or collective marks) able to 
receive protection under Korean trademark law?  
 
Answer  
 
Article 9 of the Trademark Examination Guidelines states: 
 Article 9 (Conspicuous Geographical Name)  1. The conspicuous geographical name and abbr eviation thereof as provided under Article (1)(4) 
of the Act (hereinafter "Subject Provision") include  country names; names of Seoul metropolitan city, 
other metropolitan cities, or do names of cities, gu in  Seoul, gu in metropolitan cities, or gun in Korea; 
well-known names of capitals, large cities, provinces or administrative units equivalent thereto in 
foreign countries; names of historic places, tour ist attractions, and downtow n areas; and abbreviation 
thereof. WT/TPR/M/137/Add.1 
Page 114  
 
 2. The map as provided under the Subject Provision means the map of the world (including a part thereof) or the map of a country, both foreig n and domestic, which may be an accurate map or 
one recognizable as a map as generally accepted by society.  
3. Subject Provision shall not apply to a trad emark containing the "conspicuous geographical 
name, the abbreviation thereof (hereinafter ‘ge ographical names’)"if the part other than the 
"geographical name" does not constitute the principa l part of the trademark and the trademark is 
distinctive because of another part.  However, the Subject Provision shall apply in case, in a 
trademark containing a "geographical name," the part other than the "geographical name" is 
supplementary to the "geographical  name" or constitutes an inseparable unity through absorption into 
the "geographical name."  4. Article 7(1)(11) of the Act shall also appl y in case it is acknowledged that the "geographical 
name" under the Subject Provision (including when the "geographical name" is supplementary) is 
likely to cause confusion as to the source in connection with the pertinent designated goods. 
 5. Subject Provision shall not apply to the names of non-profit organizations, such as that an association, union and laboratory, and compani es under the Commercial Code, and abbreviation 
thereof, which are a combination of the geographi cal name under the Subject Provision and the name 
of business category.  However, the application of Paragraph 3 shall not be excluded even in such a 
case. 
 Protection of third countries' geographical indications:  - Trademarks may not be registered if they co nsist of geographical indications or include 
geographical indications of the origin of wines or spirits in a WTO member state. 
- Trademark registration may not be obtained if a mark consists solely of a sign that indicates a 
conspicuous geographical name or an abbrev iation of a conspicuous geographical name. 
- The Korean government is seeking to amend th e Trademark Act in order to incorporate the 
registration of geographical indications as a collective mark. Under the draft amendment of the Act, a geographical indication of third countries may be registered as a collective mark if 
it meets the conditions of the Act. 
 
IV. Trade Policy by Sector 
(2) Agriculture 
 
Question 23
 
 
The Korean government submission references (paragraph 53) a ten-year reform program designed to make the domestic agriculture sector more market-o riented and responsive to trade liberalization. 
What are the principal elements of the ten-year program?  
 
Answer
 
 
Please refer to the answer to Hong Kong’s question. 
  WT/TPR/M/137/Add.1 
 Page 115 
 
 
(3) Fishing 
 
Question 24: paragraph 53  
 The Secretariat Reports notes (paragraph 33) that that Korea provides subs idies to the fishing 
industry.  a. Please explain to what extent support throug h the subsidies described contributes to the 
creation or maintenance of capacity in the fisheries sector. 
b. More specifically, how are factors such as oversupply and overcapacity taken into account 
when determining the amount of support given to the fishing industry under these programs. 
 
Answer
 
 
Some programs such as those supporting deep-sea fishery and fishing activities among the described 
subsidies are related to the creation or maintenance of capacity in the fisheries sector while others are 
not.  The status of fish stocks or fleet size is not taken into special consideration when the government 
decides the amount of subsidy for the two related.  Even though no special scheme is provided to 
regulate the fishing capacity of distant water fisher y, the fishing effort is automatically regulated 
either through bilateral fishery access arrangeme nts with coastal countries or regional fishery 
management bodies.   Furthermore, the demand for funding has recently b een declining as the gap between the fund rate and 
the market interest rate has narrowed. There also has been a decrease in the number of distant water 
1fishing vessels, following the freeze in the number of vessels by the government which affected the 
demand as well. Thus, the loan itself does not have a direct impact on the fishing capacity and if any, 
should be minimal.   With regard to the support for fishing activities, the gap between the market interest rate and the fund 
rate has narrowed, reducing the actua l benefits of the loans. As the actual benefits get smaller, the 
impact of the catch effort intensity or oversupply is likewise reduced.  The loan is withdrawn once the beneficiary is found to be engaged in illegal fishing practices, thereby 
encouraging sustainable fisheries. 
 
(5) Manufacturing Sector 
(ii) Motor Vehicles 
 
Question 25: paragraph 14
 
 
The Korean government submission notes (parag raph 14) that automobiles have, since 2000, 
accounted for a growing share of Korea’s exports.  
a. What has been the trend in auto imports in to Korea since the last Trade Policy Review in 
2000?  
b. What percentage of the Korean auto ma rket is accounted for by imported vehicles? 
 Given that imported vehicles into Korea tend to have  larger engines, the Korean government’s system 
of engine displacement-based vehicle taxation falls, as the Secretariat Report rightly notes, WT/TPR/M/137/Add.1 
Page 116  
 
disproportionately on imported vehicles.  Has the Korean government contemplated moving to a value-based system of vehicle taxation?  Automobile imports into Korea currently face an 8 percent tariff.  When was that tariff level last 
adjusted?  Given the overwhelming trade imbalance Ko rea currently runs in its auto trade, has the 
Korean government contemplated lowering or elim inating the tariff on imported cars?  What would 
be the main criteria in such a decision?  What specific measures have been taken to harm onize Korean automobile standards with other 
international standards?  What are the governing prin ciples behind such harmonization?  What future 
work is envisioned in this area? 
 e. Does the Korean government currently have an y plans to repeal the Special Consumption Tax 
on automobiles?  On what othe r items has the Special Consum ption Tax been repealed (or 
will be repealed)?  What crite ria has the Korean government considered in deciding whether 
and when to repeal the Special Consumption Tax on automobiles? 
f. Are importers of foreign cars and foreign-a ffiliated automakers provided an opportunity to 
consult and comment on any changes to Ko rea’s tax and tariff regimes regarding 
automobiles? 
 
Answer
 
 
The imported car sales in 2003 steadily rose to 19,461  despite a decrease in overall domestic spending 
on cars, which had risen 20.7% from the same period of the previous year. The domestic market share of imported vehicles also rose to 1.9%, up 0.6% fro m the year earlier. By exporting country, Germany 
took the first place (58.8%) in 2003, followed by Jap an (19.4%) and the U.S. (18.2%). There is a big 
gap in the market share of imported cars depending on engine displacement, and the market share of 
over 3,000cc vehicles is 25.8%. The annual sale of im ported cars is expected to rise to about 36,000 in 
2006, due to changes in consumer perceptions a nd an increasing demand for big vehicles fueled by 
higher incomes.  The Korean government has relaxed the system of engine displacement-based vehicle taxation, which 
made it possible for imported vehicles to have easy  access to the Korean market.  Given the same 
engine displacement-based vehicle, the domestic an d foreign vehicles are subject to the same tax 
burden. A number of Asian and European countri es as well as Korea have a system of engine 
displacement-based vehicle taxation.  
Korea has acceded to the "Agreement Concerning the Establishing of Global Technical Regulations" 
in 2000.  In addition, Korea is currently taking  the necessary steps to acc ede to the "Agreement 
concerning the adoption of Uniform Technical Pr escription for Wheeled Vehicle, Equipment and 
Parts which can be fitted and/or be used on Wh eeled Vehicles and the Conditions for Reciprocal 
Recognition of Approvals Granted on the Basis of These Prescriptions" (also known as the "1958 Agreement") by the end of 2004. Furthermore, Kore a is active in related discussions in APEC. At 
present, Korea is the chair economy of the Road Transport Harmonization Project (RTHP) - a forum 
attended by 17 APEC economies including the United St ates. Korea plans to continue the work within 
the aforementioned multi-lateral fora, with a view to ensuring the safety of its citizens with due 
consideration of the transportation conditions in Korea. After acceding to the "1958 Agreement" by 
the end of 2004, Korea will work towards intr oducing the necessary UN/ECE regulations in due 
course. 
  WT/TPR/M/137/Add.1 
 Page 117 
 
 
The Government has a plan to repeal the special c onsumption tax on goods. The draft is in the process 
of being reviewed by the National Assembly. Ho wever the special consumption tax on automobile 
and oil which are related with external dis-economy would be maintained as it is. 
 
(6) Services 
(i) Financial services  
Question 26: paragraph 69
 
 
The Secretariat Report (paragraph 69) shows th at the state-owned Korea Deposit Insurance 
Corporation (KDIC) still has the majority of the shares in both Woori Bank (through the Woori Financial Group) and Korea First Bank.  In August of this year, the Korean government cancelled the 
sale of between 15 and 20 percen t of Woori Financial Group. 
Please provide an update on the government’s plan  and schedule to sell the shares of the KDIC in 
both the Woori Finance Group and Korea First Bank.  
 
Answer
 
 
The plan for ADR issuance of the Woori Financ ial Group was postponed, reflecting the managing 
underwriter's opinion to postpone it. The underwrite r suggested deferring the ADR issuance, because 
of unfavorable conditions of the Woori Financial Gr oup’s stock prices. Instead, on September 9, the 
KDIC sold 5.74% of Woori Financial Group shares through a block sale. The KDIC will sell the remaining shares of the Woori Financial Group through an appropriate method, considering the need to maximize the retrieval of public funds, and th e stock market conditions at home and abroad.  
 
In the case of Korea First Bank, it is not easy to fi nd an appropriate buyer because the sales condition, 
which was agreed upon with New Bridge, the majo r shareholder of Korea First Bank, makes it 
difficult for the KDIC to sell its shares independently . The sales condition is that the KDIC should sell 
its shares with the identical condition and identical  ratio to those of New Bridge when New Bridge 
sells its shares. The sale of KDIC's share in Korea First Bank will also be pu rsued, considering the 
condition of its stock prices. 
 
(ii) Communications 
 
Question 27: paragraph 14
 
 
The Korean telecom industry has made tremendous strides in recent years – exports of communications equipment have soared (parag raph 14 of Korean government submission), and 
Korean firms have become leading global players in  wireless communications.  This also means that 
Korean government telecommunications policies have a much greater impact than when Korea was a 
smaller player in the communications industry. 
Given Korea’s new role and responsibilities as a gl obal telecommunications leader, what measures 
has it taken to amend its technology policies and pr ocedures, in order to ensure that the Korean 
telecommunications market is fully integrated w ith the global telecommunications market, and to 
ensure that foreign telecommunications technologies have fair access to this important market?  
 WT/TPR/M/137/Add.1 
Page 118  
 
Answer
 
 
Korea's policy in telecommunications technology h as been directed toward further opening and a 
more active cooperation with the world.  We believe  that these policies contributed to fair access of 
foreign technologies to the Korean market. In recen t years, the Korean government tried to increase 
international cooperation in IT R&D. In 2004, IB M, Fraunhoffer and Intel decided to locate their 
R&D centers in Korea. This is th e combined result of Korea's attrac tiveness as an IT test-bed and the 
government's efforts to globalize IT R&D.  There al so is no policy obstacle for Korean companies to 
out-source R&D from foreign countries.  Question 28: paragraph 40
 
 
On standards (paragraph 40 of Korean government  submission), the Korean government notes that 
technical barriers to trade have been significantly reduced.  But in telecommunications, an area where 
Korea has come to play a significant global lead ership role, American technology providers are 
finding that technical standards are being introduced , or even mandated, in a way that serves as a 
barrier to technical standards developed outside Ko rea, harming not just foreign technology providers 
but also preventing Korean consumers and ope rators from making their own decisions about 
competing technologies.  a. Is the Korean government committed to technology neutrality in its standards regimes?  Does 
the Korean government agree that wh ere multiple, reliable, inter-operable 
telecommunications standards exist, the governme nt should allow operato rs and consumers to 
make the choice of appropriate standard, rather than Government officials?  
b. In those instances where a singl e standard has been mandated,  what process or mechanism 
does the Korean government have in place to en sure that should evol ving technology render 
the selected standard less competitive, the origin al decision can be revisited or adjusted?  
 
Answer
 
 In principal, the Korean governme nt maintains a neutral position in its standards regimes and allows 
operators and consumers to make their own choice of  an appropriate standard out of multiple existing 
standards. However, for ensuring inter-operabilit y, encouraging economies of scale, and preventing 
overlapping investment especially in the absence of  international standards, the Korean government 
(MIC) may adopt a single national standard such  as the WiBro service standard as a legitimate 
domestic regulation.  In cases where new technologies evolve, when it com es to recommended standards, discussions take 
place at the Telecommunications Technology Asso ciation (TTA) over how to reflect evolving 
technologies on the existing standard at the request of  the private sector.  And based on the result, the 
participants either make some changes in the existing standard or establish a new standard in 
reflection of new technologies.  Meanwhile, for ma ndatory standards, the government reflects the 
views of various interested parties concerned at their request.  
Question 29: paragraph 55
 
 
The Secretariat Report notes (paragraph 55) that forei gn equity investment is "generally limited to no 
more than 49 percent in telecommunications." What are the specific restrictions on foreign investment 
in telecommunications services?  Is there any add itional restriction on how great an ownership stake 
any individual foreign company or person can own?  Are there any plans to relax these restrictions?   
   WT/TPR/M/137/Add.1 
 Page 119 
 
 
Answer  
 
Please refer to the answer to Canada’s question.  
Question 30: paragraph 55
 
 
The Secretariat Report notes (paragraph 55) that forei gn equity investment is "generally limited to no 
more than 33 percent in cable and satellite broadcas ting." What are the specific restrictions on foreign 
investment in cable and satellite broadcasting? Ar e there any plans to relax these restrictions?  
 Answer
 
 
Foreign equity investment in cable and satellite broadcasting in Korea is  permitted up to 49% and 
33% respectively. The KBC has relaxed the 33% in  cable broadcasting to 49% which is a sign of 
gradual liberalization. At present, however, we do not have any plans for further liberalization. 
 
VENEZUELA  
 
Question 1  
 
In the context of Korea's unilateral trade policy, has Korea established priority sectors in which it 
expects to deepen or offer preferential treat ment to Latin America?  If so, please specify? 
 
Answer  
 
Please refer to the answer to EU’s question (Korea’s trade policy). 
 Question 2
 
 
In the context of Korea's recent trade policy, char acterized by its increasing readiness to negotiate 
regional free trade agreements, has Korea identifi ed priority markets in Latin America for its 
negotiations, in addition to its negotiating agenda with Asian countries?  If so, please specify.  
Korea's longer term goals include a trilateral agreement with China a nd Japan, and the formation of an 
East Asian Free Trade Area (EAFTA) among "ASEA N+3" members (Secretariat Report p. 14). 
 
Answer  
 
The Latin American countries have long been repr esenting important opportunities to many Korean 
businesses.  This is demonstrated in the steadfas tly growing trade pattern between Korea and Latin 
America. In full awareness of the value of Latin Am erica as its trade partner, the Korean Government 
has been pursuing various initiatives in order to bolste r solid links with this region. In fact, Korea’s 
first ever FTA was concluded with one of Latin American countries - Chile.  The Korean government 
is now considering further pursuing FTAs with c ountries in this region. Korea and Mexico have 
agreed to conduct a joint study on the strengthening of bilateral economic relations. Being the biggest 
regional economy leading the integration process in  Latin America, MERCOSUR naturally seems to 
be a meaningful choice for this initiative of Korea. However, Korea’s horizon is much wider. Korea is 
ready to discuss at any time the matter of pursuing FTA with any countries in the region, in as far as 
the FTAs it will conclude are WTO-consistent.   WT/TPR/M/137/Add.1 
Page 120  
 
Question 3
 
 
In the light of the Government of Korea's objectiv e to attain a fair and transparent market-driven 
economy, what actions does Korea envisage within th e framework of the regulatory reform initiative 
promoted by the Regulatory Reform Committee?   
 
Answer  
 
Since its previous Trade Policy Review in 2000, Korea has continued to liberalize its trade and 
investment policies to promote structural reform  and thereby improve the economy's efficiency.  
While there have been no significant changes in th e general legal or institutional framework, nor in 
the way in which trade policy is formulated or implemented, trade and business laws have been 
strengthened and transparency improved as part of  the Government's goal of achieving a "fair and 
transparent market-driven economy". Regulatory reform, driven by the Regulatory Reform Committee, remains a high priority, and improved cust oms procedures were selected as a trade-related 
strategic goal in 2003.  (Summary Observations by the Secretariat, p. viii).  
 In order to implement a fair and balanced ma rket mechanism, the Regulatory Reform Committee 
considers the existence of competition-limited fact ors as a significant standard of regulatory impact 
analysis. The committee also introduced  a collection of crucial agendas for the year and arranged it by 
category. For example, it introduced ten agendas in 2003 that includes plans to attract foreign direct 
investment, improving clearance systems and regulatory reform strategies in the distribution industry.  
 In particular, a regulatory reform task force team was established unde r the Regulatory Reform 
Committee (RRC) to renovate existing regulations. The team aims to build a corporate-friendly regulatory environment by restructuring regulations that hamper economic activities in the private 
sector.  
 The team, which was launched in August, consists of 50 staff members. Twenty-five of the staff are from the government and 25 are from private sector, such  as corporate & research  institutes. The team 
will remain operational for two years (August 2004 ~ August 2006).  
 
The task force team will launch a series of invest igations against existing regulations to identify 
registered regulations, unregistere d regulations and regulations wit hout legal foundation. In addition, 
all identified regulations will be categorized by  function. Bulk regulations with duplicated 
licensing/approval will also be identified to devel op a regulatory map that displays the content, 
procedure, and processing time of the bulk regulation. Furthermore, duplicated procedures and 
unnecessary processing time will be improved based on the regulatory map. The team will also 
identify core regulations that involve multiple government agencies and develop the improvement 
plan. 
__________