19–010 

Calendar No. 190 

112TH CONGRESS REPORT " ! SENATE 2d Session 112–223 

UNITED STATES-KOREA FREE TRADE AGREEMENT 

IMPLEMENTATION ACT 

SEPTEMBER 20, 2012.—Ordered to be printed 

Mr. BAUCUS, from the Committee on Finance, 

submitted the following 

R E P O R T 

together with 

ADDITIONAL VIEWS 

[To accompany S. 1642] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Finance, to which was referred the bill (S. 

1642) to implement the United States-Korea Free Trade Agreement, having considered the same, reports favorably thereon without amendment and recommends that the bill do pass. 

CONTENTS 

Page 

I. Report and Other Materials of the Committee ........................................... 2 

A. Report of the Committee on Finance ............................................... 2 

B. Summary of Congressional Consideration of the Agreement ........ 2 

1. Background ................................................................................. 2 

2. Trade Promotion Authority Procedures in General ................. 3 

3. Notification Prior to Negotiations ............................................. 3 

4. Notification of Intent To Enter Into an Agreement ................. 4 

5. Development of the Implementing Legislation ........................ 4 

6. Formal Submission of the Agreement and Implementing 

Legislation ................................................................................ 7 

7. Committee and Floor Consideration ......................................... 8 

C. Trade Relations With Korea ............................................................ 9 

1. United States-Korea Trade ........................................................ 9 

2. Tariffs and Trade Agreements .................................................. 10 

3. U.S. International Trade Commission Study ........................... 10 

D. Overview of the Agreement ............................................................. 11 

1. Background ................................................................................. 11 


erowe on DSK2VPTVN1PROD with 
2 

2. Office of the U.S. Trade Representative Summary of the 

Agreement ................................................................................ 11 

E. General Description of the Bill To Implement the Agreement ..... 38 

Title I—Approval of, and General Provisions Relating to, the 

Agreement ................................................................................ 39 

Title II—Customs Provisions ......................................................... 40 

Title III—Relief From Imports ...................................................... 43 

Title IV—Procurement ................................................................... 49 

Title V—Offsets .............................................................................. 49 

F. Vote of the Committee in Reporting the Bill .................................. 50 

II. Budgetary Impact of the Bill ........................................................................ 50 

III. Regulatory Impact of the Bill and Other Matters ...................................... 56 

IV. Additional Views ............................................................................................ 57 

V. Changes in Existing Law Made by the Bill, as Reported ........................... 62 

I. REPORT AND OTHER MATERIALS OF THE COMMITTEE 

A. REPORT OF THE COMMITTEE ON FINANCE

The Committee on Finance, to which was referred the bill (S. 

1642) to implement the United States-Korea Free Trade Agreement 

(‘‘Agreement’’), having considered the same, reports favorably 

thereon without amendment and recommends that the bill do pass. 

B. SUMMARY OF CONGRESSIONAL CONSIDERATION OF THE

AGREEMENT

1. Background 

On February 2, 2006, U.S. Trade Representative Rob Portman 

notified Congress of the Administration’s intent to negotiate a free 

trade agreement with the Republic of Korea (‘‘Korea’’). Ambassador 

Portman consulted with the relevant congressional committees, including the Senate Committee on Finance, with respect to the initiation of negotiations. 

Negotiations with Korea were initiated in June 2006. U.S. Trade 

Representative Susan C. Schwab announced that the United States 

and Korea had successfully concluded those negotiations on April 

1, 2007. 

The President notified Congress of his intent to enter into the 

Agreement on April 1, 2007 and published notice of his intent in 

the Federal Register on April 3, 2007. On May 1, 2007, Ambassador Schwab submitted to Congress the reports from 27 trade advisory groups commenting on the final text of the Agreement. The 

Office of the U.S. Trade Representative also made the reports publicly available on its website. Ambassador Schwab and Korean Minister for Trade Hyun Chong Kim signed the Agreement on June 30, 

2007. 

On May 10, 2007, the Bush Administration and the bipartisan 

leadership of the U.S. Senate Committee on Finance and the U.S. 

House of Representatives Committee on Ways and Means reached 

an agreement on trade policy. As discussed further below in Section I.D., the May 10 bipartisan trade deal required 

groundbreaking changes to the labor, environmental, intellectual 

property, government procurement, services, and investment provisions of the Agreement. U.S. Trade Representative Schwab and Korean Minister for Trade Kim signed amendments to the Agreement 

to reflect those changes on June 30, 2007. 

On December 3, 2010, U.S. and Korean negotiators agreed to further commitments on automotive trade, pork, and pharmaceuticals, 


erowe on DSK2VPTVN1PROD with 
3 

which were confirmed through an exchange of letters between U.S. 

Trade Representative Ron Kirk and Korean Minister for Trade 

Jong-Hoon Kim on February 10, 2011. 

2. Trade promotion authority procedures in general 

Article I, section 8 of the Constitution of the United States vests 

Congress with the authority to regulate international trade. Congress has periodically delegated a portion of this authority to the 

President in order to advance the economic interests of the United 

States. This delegation represents a compact between Congress and 

the Administration, by which Congress guarantees it will vote on 

a trade agreement entered into by the Administration without 

amendment and the Administration guarantees close consultation 

with Congress during the negotiation of the trade agreement in 

order to achieve the objectives that Congress identifies. Thorough 

and timely consultation by the Administration with Congress is the 

essential bedrock upon which Congress’s delegation of constitutional authority rests. This longstanding compact, spanning decades, has resulted in the successful negotiation and implementation of numerous trade agreements that have contributed significantly to increased economic growth and prosperity in the United 

States. 

The most recent incarnation of this compact is found in the Bipartisan Trade Promotion Authority Act of 2002 (‘‘the Act’’), which 

was included in the Trade Act of 2002 (Pub. L. 107–210). The Act 

includes prerequisites for congressional consideration of a trade 

agreement under expedited procedures (known as Trade Promotion 

Authority (‘‘TPA’’) procedures), which are found in sections 2103 

through 2106 of the Act (19 U.S.C. §§ 3803–3806) and section 151 

of the Trade Act of 1974 (19 U.S.C. § 2191). Section 2103 of the Act 

authorizes the President to enter into reciprocal trade agreements 

with foreign countries to reduce or eliminate tariff or nontariff barriers and other trade-distorting measures. Section 2102 of the Act 

outlines the negotiating objectives that the President must achieve 

if the President intends to use TPA procedures to implement a 

trade agreement. And section 151 of the Trade Act of 1974 sets 

forth expedited procedures for congressional consideration of a 

trade agreement without amendment. The President’s authority 

under section 2103 extends to trade agreements entered into on or 

before June 30, 2007. 

3. Notification prior to negotiations 

Under section 2104(a)(1) of the Act, the President must provide 

written notice to Congress at least 90 calendar days before initiating negotiations. On February 2, 2006, the U.S. Trade Representative notified Congress of the President’s intent to initiate negotiations with Korea. The negotiations were initiated in June 2006. 

Section 2104(a)(2) requires the President, before and after submission of the notice, to consult regarding the negotiations with Congress. The Administration consulted with the Senate Committee on 

Finance and the House Committee on Ways and Means with respect to this Agreement. 


erowe on DSK2VPTVN1PROD with 
4 

4. Notification of intent to enter into an agreement 

Under section 2105(a)(1)(A) of the Act, the President must notify 

Congress at least 90 calendar days before entering into an agreement of his intent to enter into the agreement. On April 1, 2007, 

the President notified Congress of his intent to enter into the 

United States-Korea Free Trade Agreement. The Agreement and 

amendments to reflect the changes required by the May 10 bipartisan trade deal were signed on June 30, 2007, and further commitments were agreed to through an exchange of letters on February 

10, 2011. 

5. Development of the implementing legislation 

Under TPA procedures, Congress and the Administration work 

together to produce legislation that implements a free trade agreement. Draft legislation is developed in close consultation between 

the Administration and the committees with jurisdiction over the 

laws that must be enacted or amended to implement the agreement. The committees may hold informal meetings to consider the 

draft legislation and to make non-binding recommendations to the 

Administration. The Administration then finalizes the implementing legislation for formal submission to Congress and referral 

to the committees of jurisdiction. These procedures are meant to 

ensure close cooperation between the executive and legislative 

branches of government to develop legislation that faithfully implements the agreement. Under TPA and predecessor legislation, 

trade agreement implementing bills may include only those provisions that are ‘‘necessary or appropriate’’ to implement the agreement. 

The Senate Committee on Finance met in open executive session 

on July 7, 2011, to consider informally the draft implementing legislation for the Agreement and the draft Statement of Administrative Action (‘‘SAA’’). The draft implementing legislation included 

provisions to renew aspects of the Trade Adjustment Assistance 

(‘‘TAA’’) program that expired on February 13, 2011 and extend 

provisions that were due to expire on February 12, 2012. None of 

these provisions expanded TAA eligibility or benefits beyond those 

that had previously been provided; in fact, many of the provisions 

narrowed eligibility or benefits. 

The TAA provisions were ‘‘necessary or appropriate’’ to implement the Agreement, as required by TPA and predecessor legislation. The ‘‘necessary or appropriate’’ standard has applied to virtually every trade agreement that Congress has considered since 

1974, creating an extensive history of legislative practice. That 

practice clearly supported the inclusion of the TAA provisions in 

the draft legislation implementing this Agreement. For example, 

the North American Free Trade Agreement (‘‘NAFTA’’) implementing bill included provisions to expand TAA benefits. The TAA 

provisions included in the draft legislation implementing this 

Agreement were likewise ‘‘necessary or appropriate.’’ They would 

provide the full range of TAA benefits to help U.S. workers, firms, 

and farmers adjust to any trade-related dislocations they may experience, including as a result of the Agreement, which is the most 

economically significant FTA the United States has entered into 

since NAFTA. And the TAA provisions in the draft legislation implementing this Agreement were narrower than the TAA provisions 


erowe on DSK2VPTVN1PROD with 
5 

in the NAFTA implementing bill in that they simply extended, and 

in some cases narrowed, TAA eligibility or benefits. The NAFTA 

implementing bill, by contrast, significantly expanded TAA eligibility. 

As the Additional Views section of this report correctly points 

out, the Committee stated in its report accompanying the 2002 

TPA legislation that the ‘‘necessary or appropriate’’ standard 

should be strictly interpreted. But the Committee has never taken 

the position that a strict interpretation limits implementing legislation to provisions that only relate to the FTA partner country at 

issue. To the contrary, the U.S.-Australia FTA implementing legislation included provisions relating to government procurement 

under the Chile and Singapore FTAs. The Bahrain FTA implementing legislation included provisions relating to government procurement under the Morocco FTA. And at the informal markup for 

the CAFTA–DR implementing legislation, the Senate Finance Committee adopted, by bipartisan voice vote, an amendment that extended TAA to service sector workers and increased the annual authorizations of the TAA for Workers and TAA for Firms programs. 

Like the TAA provisions in the draft legislation implementing this 

Agreement, the TAA provisions in the draft CAFTA–DR implementing legislation applied to workers dislocated by trade with any 

country, not just the FTA countries at issue. 

The Additional Views section of this report incorrectly states that 

the decision to include the TAA provisions in the draft legislation 

implementing this Agreement was made with little or no consultation with the Minority. In fact, countless meetings between Majority and Minority staff, and between Chairman Baucus and Ranking 

Member Hatch, were held on this issue in the weeks leading up to 

the July 7 executive session. For example, Chairman Baucus indicated at the March 2011 hearing on the Administration’s trade 

agenda that the Agreement and other pending FTAs could only be 

approved if TAA were extended, as did the Administration in May 

2011. Numerous consultations were subsequently held with Committee members and their staff prior to the July 7 executive session. And a bipartisan meeting of all Finance Committee Members 

was held on June 30 to consider and discuss the issue. Regrettably, 

notwithstanding the clear statements of the Chairman and the Administration on the necessity of the renewing TAA, and the fact 

that no FTA implementing legislation had ever been enacted while 

TAA provisions had expired, minority Committee members indicated that they were unwilling to accept TAA provisions in connection with the FTAs (see Attached Letter dated June 30, 2011). TAA 

provisions negotiated between Chairman Baucus, House Ways and 

Means Chairman Camp, and the Administration were included in 

the implementing legislation against this background. TAA language was ultimately not included in the final version of the legislation because by that point the minority leadership had agreed to 

enact TAA separately and prior to Congressional consideration of 

the FTAs. 

During the Committee’s consideration of the draft implementing 

legislation at the July 7 executive session, thirteen amendments 

were offered. The first amendment, by Senator Hatch, sought to 

add language to the implementing legislation requiring the Comptroller General of the United States to submit a report to the U.S. 


erowe on DSK2VPTVN1PROD with 
6 

Senate Committee on Finance on the nature and effectiveness of 

the Obama Administration’s Congressional and private sector consultations on various trade negotiations, including those relating to 

the Agreement. The amendment failed by voice vote. The second 

amendment, by Senators Wyden, Snowe, Schumer, and Cardin, 

was withdrawn. It would have added language to the draft implementing legislation to address concerns about the evasion of antidumping and countervailing duty orders. The third amendment, by 

Senator Roberts, would have delayed the TAA provisions from 

going into effect until the President certified that the U.S. FTAs 

with Colombia, Panama, and South Korea had entered into force. 

That amendment failed by a roll call vote of 10 ayes, 14 nays. Ayes: 

Hatch, Grassley (proxy), Kyl (proxy), Crapo, Roberts, Enzi, Cornyn 

(proxy), Coburn (proxy), Thune, and Burr (proxy). Nays: Baucus, 

Rockefeller, Conrad (proxy), Bingaman, Kerry (proxy), Wyden, 

Schumer (proxy), Stabenow, Cantwell (proxy), Nelson (proxy), 

Menendez, Carper, Cardin, and Snowe. 

The fourth amendment, by Senator Hatch, would have required 

the Obama Administration to develop a public outreach plan on the 

benefits of international trade for the U.S. economy and U.S. workers. That amendment failed by a roll call vote of 11 ayes, 13 nays. 

Ayes: Hatch, Grassley (proxy), Snowe, Kyl (proxy), Crapo, Roberts, 

Enzi, Cornyn (proxy), Coburn (proxy), Thune, and Burr (proxy). 

Nays: Baucus, Rockefeller, Conrad (proxy), Bingaman, Kerry, 

Wyden, Schumer (proxy), Stabenow, Cantwell, Nelson, Menendez, 

Carper, and Cardin (proxy). The fifth amendment, by Senator Roberts, would have directed the Obama Administration to meet with 

government officials from China and Japan to discuss beef market 

access within 120 days. That amendment failed by a roll call vote 

of 11 ayes, 12 nays, and one pass. Ayes: Hatch, Grassley (proxy), 

Snowe, Kyl (proxy), Crapo, Roberts, Enzi, Cornyn (proxy), Coburn 

(proxy), Thune, and Burr (proxy). Nays: Baucus, Rockefeller, Conrad (proxy), Bingaman, Kerry, Wyden, Schumer (proxy), Cantwell, 

Nelson, Menendez (proxy), Carper, and Cardin (proxy). Pass: Stabenow. 

The sixth amendment, by Senator Thune, would have extended 

TPA through December 31, 2015. That amendment failed by a roll 

call vote of 11 ayes, 13 nays. Ayes: Cantwell, Hatch, Grassley, Kyl 

(proxy), Crapo, Roberts, Enzi, Cornyn, Coburn, Thune, and Burr 

(proxy). Nays: Baucus, Rockefeller, Conrad (proxy), Bingaman, 

Kerry, Wyden, Schumer (proxy), Stabenow, Nelson, Menendez, Carper (proxy), Cardin, and Snowe. The seventh amendment, by Senator Bingaman, sought to add language providing $5 million per 

year for three years to the budget of the Office of the U.S. Trade 

Representative for enforcement activities. The Chairman ruled the 

amendment non-germane, and it was withdrawn. The eighth 

amendment, by Senator Hatch, to extend TPA through December 

31, 2013, was withdrawn. 

The ninth amendment, by Senator Rockefeller, to require the 

GAO to compare the TAA health care coverage tax credit with 

other options, was withdrawn. The tenth amendment, by Senator 

Cornyn, would have delayed the effect of the TAA provisions in the 

draft implementing legislation until the President issued a proposal to address Medicare funding. The Chairman ruled the 

amendment non-germane. Senator Cornyn moved to appeal the rulVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
7 

ing of the Chair. The appeal failed by a roll call vote of 5 ayes, 9 

nays. Ayes: Hatch, Snowe, Roberts, Enzi, and Cornyn. Nays: Baucus, Rockefeller, Bingaman, Wyden, Stabenow, Cantwell, Nelson, 

Menendez, and Cardin. 

The eleventh amendment, by Senator Hatch, would have deleted 

the TAA provisions from the draft implementing legislation. That 

amendment failed by a roll call vote of 11 ayes, 13 nays. Ayes: 

Hatch, Grassley (proxy), Snowe, Kyl (proxy), Crapo (proxy), Roberts, Enzi, Cornyn (proxy), Coburn (proxy), Thune (proxy), and 

Burr (proxy). Nays: Baucus, Rockefeller, Conrad (proxy), Bingaman, Kerry, Wyden, Schumer (proxy), Stabenow, Cantwell, Nelson, 

Menendez, Carper (proxy), and Cardin. The twelfth amendment, by 

Senator Enzi, sought to add language to eliminate Medicaid and 

subsidy eligibility for early retirees. The Chairman ruled the 

amendment non-germane. Senator Enzi moved to appeal the ruling 

of the Chair. The appeal failed by a roll call vote of 5 ayes, 10 nays. 

Ayes: Bingaman, Hatch, Snowe, Roberts, and Enzi. Nays: Baucus, 

Rockefeller, Kerry, Wyden, Stabenow, Cantwell, Nelson, Menendez, 

Carper, and Cardin. 

The thirteenth amendment, by Senator Roberts, would have required that implementation of the Patient Protection Affordable 

Care Act and the Health Care and Education Reconciliation Act of 

2010 take place through a notice of proposed rulemaking and 

would have imposed several further procedural requirements for 

receiving and considering comments in that connection. The Chairman ruled the amendment non-germane. Senator Roberts moved to 

appeal the ruling of the Chair. The appeal failed by a roll call vote 

of 4 ayes, 12 nays. Ayes: Hatch, Snowe, Roberts, and Enzi. Nays: 

Baucus, Rockefeller, Bingaman, Kerry, Wyden, Schumer, Stabenow, Cantwell, Nelson, Menendez, Carper, and Cardin. 

The Committee then approved the draft implementing legislation 

and draft SAA, without amendment, by a roll call vote of 13 ayes, 

11 nays. Ayes: Baucus, Rockefeller, Conrad, Bingaman, Kerry, 

Wyden, Schumer, Stabenow, Cantwell, Nelson, Menendez, Carper, 

and Cardin. Nays: Hatch, Grassley, Snowe, Kyl (proxy), Crapo 

(proxy), Roberts, Enzi, Cornyn (proxy), Coburn (proxy), Thune 

(proxy), and Burr (proxy). Separately, the Committee on Ways and 

Means in the House of Representatives approved the draft implementing legislation and draft SAA, as amended, on July 7, 2011, 

by a roll call vote of 25 ayes, 11 nays. Unlike the draft implementing legislation approved by this Committee, the draft implementing legislation approved by the Ways and Means Committee 

did not include TAA provisions. 

6. Formal submission of the agreement and implementing legislation 

When the President formally submits a trade agreement to Congress under section 2105 of the Act, the President must include in 

the submission the final legal text of the agreement, together with 

implementing legislation, an SAA describing regulatory and other 

changes to implement the agreement, a statement setting forth the 

reasons of the President regarding how and to what extent the 

agreement makes progress in achieving the applicable purposes, 

policies, priorities, and objectives set forth in the Act, and a statement setting forth the reasons of the President regarding how the 


erowe on DSK2VPTVN1PROD with 
8 

agreement serves the interests of U.S. commerce. The implementing legislation is introduced in both Houses of Congress on the 

day it is submitted by the President and is referred to committees 

with jurisdiction over its provisions. 

On October 3, 2011, the President transmitted to Congress the 

final text of this Agreement, the implementing legislation, the SAA, 

and the other supporting information required under section 2105 

of the Act. That same day, Mr. Baucus, for himself, Mr. Hatch, and 

Mr. McConnell introduced the bill as S. 1642. The legislation was 

also introduced that same day in the House of Representatives 

(H.R. 3080). 

S. 1642 is substantially similar to the draft legislation considered 

by the Committee during the open executive session on July 7, 

2011. S. 1642, however, does not contain the provisions of the draft 

legislation relating to the TAA program. Those provisions were included in separate legislation, H.R. 2832, which the House and 

Senate approved and the President signed into law on October 21, 

2011. 

To qualify for TPA procedures, the implementing legislation itself 

must contain provisions formally approving the agreement and the 

SAA. And, as noted above, the implementing legislation must contain only those provisions necessary or appropriate to implement 

the Agreement. The implementing bill reported here—which approves the Agreement and the accompanying SAA and contains 

provisions necessary or appropriate to implement the Agreement 

into U.S. law—was referred to the Senate Committee on Finance. 

7. Committee and floor consideration 

When the requirements of the Act are satisfied, implementing 

revenue bills, such as the United States-Korea Free Trade Agreement Implementation Act, are subject to the legislative procedures 

of section 151 of the Trade Act of 1974. The following schedule for 

congressional consideration applies under these procedures: 

(i) House committees have up to 45 calendar days in session 

in which to report the bill; any committee which does not do 

so in that period will be automatically discharged from further 

consideration. 

(ii) A vote on final passage by the House must occur on or 

before the 15th calendar day in session after the committees 

report the bill or are discharged from further consideration. 

(iii) Senate committees must act within 15 calendar days in 

session of receiving the implementing revenue bill from the 

House or within 45 calendar days in session of Senate introduction of the implementing bill, whichever is later, or they 

will be discharged automatically. 

(iv) The full Senate then must vote within 15 calendar days 

in session on the implementing bill. 

Once the implementing bill has been formally submitted by the 

President and introduced, no amendments to the bill are in order 

in either House of Congress. Floor debate in each House is limited 

to no more than 20 hours, to be equally divided between those favoring the bill and those opposing the bill. 

The Committee on Finance met in open executive session on October 11, 2011, to consider favorably reporting S. 1642. At the 

meeting, the Committee favorably reported S. 1642 without amendVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
9 

ment by voice vote, a majority of members being present. The Committee on Ways and Means in the House of Representatives favorably reported the House version of the legislation, H.R. 3080, on 

October 5, 2011, by a roll call vote of 31 ayes, 5 nays. 

The House passed H.R. 3080 on October 12, 2011, by a roll call 

vote of 278 ayes, 151 nays. On the same day, the Senate passed 

H.R. 3080 by a roll call vote of 83 ayes, 15 nays. President Barack 

H. Obama signed H.R. 3080 into law on October 21, 2011 (Pub. L. 

112–41). 

C. TRADE RELATIONS WITH KOREA

1. United States-Korea trade 

In 2010, total goods trade between the United States and Korea 

was $87.7 billion, and Korea was the United States’ seventh largest 

export market. Between 2003 and 2010, U.S. merchandise exports 

to Korea grew from $24.1 billion to $38.8 billion. Corresponding 

U.S. imports from Korea grew from $37.2 billion to $48.8 billion. 

Computer and electronic products and transportation equipment 

constitute over half of U.S. imports from Korea. Other significant 

imports include electrical equipment, appliances, machinery, and 

petroleum and coal products. Principal U.S. exports to Korea include machinery, chemicals, computer and electronic products, 

transportation equipment, agricultural products, and manufactured 

food products. 

The following tables summarize the top U.S. merchandise exports to Korea and the top U.S. merchandise imports from Korea 

in 2010. 

2010 U.S. EXPORTS TO KOREA 

HTS Code—Product Value in USD 

84—NUCLEAR REACTORS, BOILERS, MACHINERY ETC.; PARTS .................................................................... 6,947,657,962 

85—ELECTRIC MACHINERY ETC; SOUND EQUIP; TV EQUIP; PTS .................................................................. 5,074,051,704 

90—OPTIC, PHOTO ETC, MEDIC OR SURGICAL INSTRMENTS ETC ................................................................ 2,660,191,601 

88—AIRCRAFT, SPACECRAFT, AND PARTS THEREOF ..................................................................................... 2,430,810,796 

29—ORGANIC CHEMICALS ............................................................................................................................. 2,148,147,452 

10—CEREALS ................................................................................................................................................. 1,846,700,000 

27—MINERAL FUEL, OIL ETC.; BITUMIN SUBST; MINERAL WAX ................................................................... 1,549,372,516 

39—PLASTICS AND ARTICLES THEREOF ........................................................................................................ 1,235,694,860 

72—IRON AND STEEL .................................................................................................................................... 1,131,471,428 

98—SPECIAL CLASSIFICATION PROVISIONS, NESOI ....................................................................................... 1,025,023,070 

OTHER ............................................................................................................................................................. 12,796,536,174 

TOTAL ..................................................................................................................................................... 38,845,657,563 

(Source: U.S. Department of Commerce, International Trade Administration) 

2010 U.S. IMPORTS FROM KOREA 

HTS Code—Product Value in USD 

85—ELECTRIC MACHINERY ETC; SOUND EQUIP; TV EQUIP; PTS .................................................................. 15,266,804,758 

84—NUCLEAR REACTORS, BOILERS, MACHINERY ETC.; PARTS .................................................................... 9,340,574,766 

87—VEHICLES, EXCEPT RAILWAY OR TRAMWAY, AND PARTS ETC ............................................................... 9,258,880,119 

27—MINERAL FUEL, OIL ETC.; BITUMIN SUBST; MINERAL WAX ................................................................... 2,415,563,765 

40—RUBBER AND ARTICLES THEREOF ......................................................................................................... 1,572,507,719 

73—ARTICLES OF IRON OR STEEL ................................................................................................................ 1,544,020,378 

39—PLASTICS AND ARTICLES THEREOF ........................................................................................................ 1,065,287,210 

29—ORGANIC CHEMICALS ............................................................................................................................. 946,240,140 

72—IRON AND STEEL .................................................................................................................................... 893,487,339 

90—OPTIC, PHOTO ETC, MEDIC OR SURGICAL INSTRMENTS ETC ................................................................ 845,644,888 


erowe on DSK2VPTVN1PROD with 
10 

2010 U.S. IMPORTS FROM KOREA—Continued 

HTS Code—Product Value in USD 

OTHER ............................................................................................................................................................. 5,725,546,579 

TOTAL ..................................................................................................................................................... 48,874,557,661 

(Source: U.S. Department of Commerce, International Trade Administration) 

2. Tariffs and trade agreements 

Korea acceded to the World Trade Organization (‘‘WTO’’) on January 1, 1995, with an average bound tariff rate of 16.6 percent for 

all goods (56.1 percent for agricultural goods and 10.2 percent for 

nonagricultural goods). In 2010, Korea maintained an average applied tariff rate of 12.1 percent for all goods (48.5 percent for agricultural goods and 6.6 percent for nonagricultural goods). The 

United States, in contrast, maintained an average applied tariff 

rate of 3.5 percent for all goods (4.7 percent for agricultural goods 

and 3.3 percent for nonagricultural goods) in 2009. Given that the 

Agreement will greatly reduce this existing tariff asymmetry, the 

U.S. International Trade Commission (‘‘Commission’’) found that 

the Agreement likely will result in a larger increase in U.S. exports 

to Korea than in U.S. imports from Korea. 

Korea has FTAs in place with several countries, including Chile, 

the European Union, India, Peru, Singapore, the 10-country Association of Southeast Asian Nations, and the European Free Trade 

Association countries (Norway, Liechtenstein, Iceland, and Switzerland). It has also signed numerous bilateral investment treaties. 

And Korea is a member of the Asia-Pacific Economic Cooperation 

forum. 

3. U.S. International Trade Commission study 

In September 2007, the Commission released the results of its investigation (Investigation No. TA–2104–24) into the probable economic effect of the Agreement (USITC Pub. 3949). The Commission 

found that the Agreement would have a substantial impact on U.S. 

trade and investment relationship with Korea. The expected 

growth in U.S. trade with Korea under the Agreement would have 

a positive impact on the U.S. economy, increasing U.S. gross domestic product by up to $12 billion. 

As noted above, the Commission also concluded that the Agreement likely will result in a larger increase in U.S. exports to Korea 

than in U.S. imports from Korea. More specifically, it estimated 

that annual U.S. exports to Korea will increase by up to $10.9 billion while annual U.S. imports from Korea will increase by up to 

$6.9 billion. It further estimated that the largest increases in U.S. 

exports, by percent, will be in dairy products, other meat products 

(primarily pork and poultry), wearing apparel, and bovine meat 

products (beef). And it found the largest increases in U.S. exports, 

by value, will be in machinery and equipment; chemical, rubber, 

and plastic products; bovine meat products; other meat products; 

and certain other food products. The Commission expected certain 

U.S. sectors, such as textiles, wheat, wearing apparel, and electronic equipment, to experience modest declines in output or employment, generally less than 1 percent. 


erowe on DSK2VPTVN1PROD with 
11 

With respect to services, the Commission concluded that U.S. 

service firms will benefit from improved market access, national 

treatment, and regulatory transparency under the Agreement. The 

Commission noted that Korea’s services market is large and that 

the Agreement will likely increase total U.S. services exports to 

Korea, although the impact will vary by industry. 

D. OVERVIEW OF THE AGREEMENT

1. Background 

The Agreement establishes a bilateral free trade area that eliminates tariffs on trade between the United States and Korea for all 

qualifying goods except rice. The Agreement also liberalizes trade 

in services and contains provisions that address telecommunications, electronic commerce, intellectual property rights, labor, environment, government procurement, customs and trade facilitation, and investment issues. In addition, the Agreement contains 

provisions that promote bilateral consultation and cooperation, procedural and substantive due process, administrative and judicial 

review, transparency, and the rule of law. And it contains a mechanism for settling disputes that arise under the Agreement. 

As noted above, the Bush Administration and the bipartisan 

leadership of the U.S. Senate Committee on Finance and the U.S. 

House of Representatives Committee on Ways and Means reached 

an agreement on trade policy on May 10, 2007. The United States 

and Korea signed amendments to the Agreement to reflect those 

changes on June 30, 2007. As a result of the amendments, this 

Agreement includes (1) fully enforceable commitments by the Parties to adopt, maintain, and enforce the five core international 

labor standards incorporated in the 1988 International Labor Organization Declaration on Fundamental Principles and Rights at 

Work; (2) fully enforceable commitments by the Parties to adopt, 

maintain, and enforce their obligations under certain common multilateral environmental agreements; (3) modifications to the intellectual property chapter to clarify rules concerning the protection 

of public health; (4) modifications to the government procurement 

chapter that allow the Parties to condition government contracts on 

adherence to core labor standards; (5) confirmation that the United 

States can prevent foreign companies from supplying services at 

U.S. ports if the United States deems such action necessary to protect our national security; and (6) confirmation that the Agreement 

accords foreign investors in the United States no greater substantive rights with regard to investor protections than U.S. investors in the United States. 

2. Office of the U.S. Trade Representative summary of the agreement 

The Office of the U.S. Trade Representative prepared a summary 

of the Agreement that was included among the documents that the 

President transmitted to Congress on October 3, 2011. This summary was distributed to Members of the Committee to aid in their 

consideration of the implementing legislation, and it is reprinted 

below: 


erowe on DSK2VPTVN1PROD with 
12 

THE UNITED STATES-KOREA FREE TRADE AGREEMENT 

Summary of the Agreement 

This summary briefly describes key provisions of the United 

States-Korea Free Trade Agreement (‘‘Agreement’’) that the United 

States has concluded with the Republic of Korea (‘‘Korea’’) and represents an authoritative expression of Administration views regarding the interpretation of the Agreement both for purposes of U.S. 

international obligations and domestic law. 

The Agreement was signed on June 30, 2007. On December 3, 

2010, Korea and the United States resolved outstanding issues related to the Agreement. As part of this resolution, the United 

States negotiated important new commitments on tariffs, nontariff 

barriers such as Korea’s automotive safety standards, transparency, and a special automotive safeguard to protect U.S. workers from potential import surges. Where relevant, these new commitments, which are principally embodied in an exchange of letters 

between Korea and the United States dated February 10, 2011 

(‘‘February 10, 2011 Exchange of Letters’’), are discussed further 

below. 

PREAMBLE

The Preamble to the Agreement provides the Parties’ underlying 

objectives in entering into the Agreement and provides context for 

the provisions that follow. It includes the following statement: 

‘‘Agreeing that foreign investors are not hereby accorded greater 

substantive rights with respect to investment protections than domestic investors under domestic law where, as in the United 

States, protections of investor rights under domestic law equal or 

exceed those set forth in this Agreement.’’ 

This statement clarifies that, as provided in the Bipartisan Trade 

Promotion Authority Act of 2002, under the Agreement foreign investors in the United States are not to be accorded greater substantive rights with respect to investment protections than U.S. investors in the United States. 

CHAPTER ONE: INITIAL PROVISIONS AND DEFINITIONS

Section A of Chapter One sets out provisions establishing a free 

trade area and affirming the Parties’ existing rights and obligations with respect to each other under the Marrakesh Agreement 

Establishing the World Trade Organization (WTO) and other agreements to which they are party. 

Section B defines certain terms that recur in various chapters of 

the Agreement. 

CHAPTER TWO: NATIONAL TREATMENT AND MARKET ACCESS FOR

GOODS

Chapter Two and its relevant annexes and appendices set out the 

Agreement’s principal rules governing trade in goods. Each Party 

must treat products from the other Party in a non-discriminatory 

manner, provide for the phase-out and elimination of tariffs on 

‘‘originating’’ goods (as defined in Chapter Six) traded between the 

Parties, and eliminate a wide variety of non-tariff trade barriers 

that restrict or distort trade flows. 


erowe on DSK2VPTVN1PROD with 
13 

Tariff Elimination. Chapter Two provides for the elimination of 

customs duties on originating goods traded between the Parties. 

Duties on most trade in industrial and consumer goods will be 

eliminated within five years after the Agreement enters into force. 

Duties on almost all other goods will be phased out within 10 

years. Some footwear, fishery, and agricultural goods will have 

longer periods for elimination of duties or be subject to other provisions, including, in some cases, the application of preferential tariff-rate quotas (TRQs). Annex 2–B and the General Notes to the 

U.S. and Korean Schedules to Annex 2–B include detailed provisions on staging of tariff reductions and application of TRQs for 

certain fishery products and agricultural goods. The Chapter provides that the Parties may agree to speed up tariff phase-outs on 

a product-by-product basis after the Agreement takes effect. 

Pursuant to the February 10, 2011 Exchange of Letters, the 

United States will maintain its tariff on Korean cars until the fifth 

year after the Agreement enters into force, while Korea will reduce 

its tariff on U.S. cars by one half on the date that the Agreement 

enters into force and eliminate it at the same time the U.S. auto 

tariff is eliminated. Korea and the United States will accelerate the 

elimination of tariffs on electric cars, phasing them out in equal annual increments until they are eliminated in the fifth year (with 

Korea reducing its tariff by one half on the date that the Agreement enters into force). The United States will maintain its 25 percent U.S. truck tariff until the eighth year and then phase it out 

in three equal increments until it is eliminated in year ten. (Korea 

will eliminate its tariff on trucks immediately as agreed in 2007.) 

In addition, Korea will delay for two years, until January 1, 2016, 

the elimination of its tariffs on U.S. pork classified in one tariff 

line. 

Waiver of Customs Duties. The Parties may not adopt new duty 

waivers or expand existing duty waivers conditioned on the fulfillment of a performance requirement. Chapter Two defines the term 

‘‘performance requirements’’ so as not to restrict a Party’s ability 

to provide duty drawback on goods imported from the other Party. 

Temporary Admission. The Parties will provide duty-free temporary admission for certain products. Such items include professional equipment, goods for display or demonstration, and commercial samples. Chapter Two also includes specific provisions on transit of containers used in international traffic. 

Import/Export Restrictions, Fees, and Formalities. The Chapter 

clarifies that restrictions prohibited under the Agreement and the 

General Agreement on Tariffs and Trade (GATT) 1994 include export and import price requirements (except under antidumping and 

countervailing duty orders and undertakings) and import licensing 

conditioned on the fulfillment of a performance requirement. In addition, a Party must limit all fees and charges imposed on or in 

connection with importation or exportation to the approximate cost 

of services rendered. Neither Party may apply a merchandise processing fee on imports of ‘‘originating’’ goods. In addition, Korea will 

amend its Special Consumption Tax and Annual Vehicle Tax on 

motor vehicles to reduce overall tax rates and decrease the tax disparity between different categories of motor vehicles. In the February 10, 2011 Exchange of Letters, Korea agreed to adhere to additional transparency obligations in the event that it adopts new 


erowe on DSK2VPTVN1PROD with 
14 

automotive taxes based on greenhouse gas emissions or fuel economy. 

Distinctive Products. Korea will recognize Bourbon Whiskey and 

Tennessee Whiskey as ‘‘distinctive products’’ of the United States, 

meaning that Korea will not permit the sale of any product as 

Bourbon Whiskey or Tennessee Whiskey unless it was manufactured in the United States in accordance with applicable laws and 

regulations. Similarly, the United States will recognize Andong 

Soju and Gyeongju Beopju as ‘‘distinctive products’’ of Korea. 

Committee on Trade in Goods. The Parties will establish a Committee on Trade in Goods to consider matters arising under Chapters Two, Six (Rules of Origin and Origin Procedures), and Seven 

(Customs Administration and Trade Facilitation). The committee’s 

functions include promoting trade in goods and addressing barriers 

to trade in goods between the Parties. 

CHAPTER THREE: AGRICULTURE

Chapter Three contains special provisions covering trade in agricultural goods. 

TRQs. Under Chapter Three each government must administer 

its tariff-rate quotas in a manner that is transparent, non-discriminatory, responsive to market conditions, and minimally burdensome on trade. The Chapter requires the Parties to make every effort to administer TRQs in a manner that allows importers to fully 

utilize import quotas. In addition, the Chapter provides that the 

Parties may not condition application for, or utilization of, quota allocations on the re-export of a good. 

Safeguards. Chapter Three also sets out a safeguard mechanism 

that will permit Korea to impose an additional duty on specified 

agricultural products if imports of those products from the United 

States exceed an established volume ‘‘trigger.’’ The list of products 

as well as trigger volumes and duty rates are set out in Annex 3– 

A of the Agreement. A safeguard measure will remain in force until 

the end of the year in which the measure applies. Korea may not 

apply an agricultural safeguard on a good after the period specified 

for that product in Annex 3–A. 

Korea may not apply a safeguard measure on a good that is already the subject of a safeguard measure under either Chapter Ten 

(Trade Remedies) of the Agreement or the WTO Agreement on 

Safeguards. All agricultural safeguard measures must be implemented in a transparent manner and, on request, Korea must consult with the United States regarding any measure it applies. 

Chapter Three prohibits both Parties from imposing safeguard 

duties pursuant to the WTO Agreement on Agriculture on ‘‘originating’’ goods. 

Additional Provisions. Chapter Three provides for the creation of 

a Committee on Agricultural Trade. The committee will be established within 90 days after the Agreement enters into force and 

will provide a forum for promoting cooperation in the implementation and administration of the Chapter as well as for consultations 

on agricultural trade. 

CHAPTER FOUR: TEXTILES AND APPAREL

Chapter Four contains special provisions covering trade in ‘‘originating’’ textile and apparel goods. 


erowe on DSK2VPTVN1PROD with 
15 

Safeguards. The Chapter establishes a transitional safeguard 

procedure for textile and apparel goods, under which the importing 

Party may temporarily impose additional duties up to the level of 

the normal trade relations most-favored-nation (NTR/MFN) duty 

rates on imports of textile or apparel goods that cause, or threaten 

to cause, serious damage to a domestic industry as a result of the 

elimination or reduction of duties under the Agreement. An importing Party may impose a textile safeguard measure only once on the 

same textile or apparel good. The measure may not be in place for 

more than two years, or four years if the measure is extended. A 

Party may not take or maintain a textile safeguard against a good 

beyond ten years after the date the Party must eliminate its customs duties on the good pursuant to the Agreement. A Party may 

not apply a textile safeguard measure to a good while the good is 

subject to a safeguard measure under (i) Chapter Ten (Trade Remedies) or (ii) Article XIX of the GATT 1994 and the WTO Agreement on Safeguards. 

A Party imposing a safeguard measure under Chapter Four must 

provide the exporting Party with mutually agreed compensation in 

the form of trade concessions for textile or apparel goods that have 

substantially equivalent trade effects or that are equivalent to the 

increased duties resulting from application of the safeguard measure. If the Parties cannot agree on compensation, the exporting 

Party may raise duties on any goods from the importing Party in 

an amount that has a value substantially equivalent to the increased duties resulting from application of the safeguard measure. 

Rules of Origin and Related Matters. A textile or apparel good 

will generally qualify as an ‘‘originating’’ good eligible to receive 

preferential treatment under the Agreement only if all processing 

from the yarn stage to the final product (e.g., yarn-spinning, fabric 

production, cutting, and assembly) takes place in the United 

States, Korea, or both, or if there is an applicable change in tariff 

classification under the specific rules of origin contained in Annex 

4–A of the Agreement. 

Chapter Four sets out special rules for determining whether a 

textile or apparel good is an ‘‘originating’’ good, including a de 

minimis exception for non-originating yarns or fibers, a process for 

designating inputs not available in commercial quantities, a rule 

for treatment of sets, and consultation provisions. 

The de minimis rule applies to goods that ordinarily would not 

be considered ‘‘originating’’ goods because certain of their fibers or 

yarns do not undergo an applicable change in tariff classification. 

Under the rule, the Parties will consider a good to be ‘‘originating’’ 

if those fibers or yarns constitute seven percent or less of the total 

weight of the component of the good that determines the classification. This special rule does not apply to goods containing elastomeric yarns in the component of the good that determines the 

classification. 

Annex 4–B of the Agreement sets out a process for creating a list 

of fabrics, yarns, and fibers that a Party determines are not available in commercial quantities in a timely manner from producers 

in its territory. A textile or apparel good that includes the fabrics, 

yarns, or fibers included in this list will be treated as if it is ‘‘originating’’ for purposes of the specific rules of origin in Annex 4–A of 

the Agreement. A Party may remove a fabric, yarn, or fiber from 


erowe on DSK2VPTVN1PROD with 
16 

the list if it determines that the fabric, yarn, or fiber has become 

available in commercial quantities. 

Customs Cooperation. Chapter Four commits the Parties to cooperate in enforcing their laws affecting trade in textile and apparel goods, to ensure the accuracy of claims of origin, and to prevent circumvention of international agreements affecting trade in 

textile and apparel goods. The Chapter also requires Korea to provide the United States specified information concerning entities engaged in the production of textile or apparel goods in its territory, 

including any potential circumvention. 

Chapter Four provides that, at the request of the importing 

Party, the exporting Party must conduct a verification to determine 

that a claim of origin for a textile or apparel product is accurate. 

In addition, the Chapter provides that under certain circumstances 

the exporting Party must conduct a verification of an enterprise in 

its territory to determine whether it is complying with the Parties’ 

customs laws applicable to textile trade. A verification may include 

visits to the premises of the exporter or producer of the goods in 

question. If there is insufficient information to make the relevant 

determination, or if an enterprise provides incorrect information, 

the importing Party may take appropriate action, which may include denying application of preferential tariff treatment to the 

goods in question or to similar textile or apparel goods exported or 

produced by the person subject to the verification. 

Chapter Four also establishes a Committee on Textile and Apparel Trade Matters to consider issues arising under the Chapter. 

CHAPTER FIVE: PHARMACEUTICAL PRODUCTS AND MEDICAL DEVICES

Chapter Five sets out provisions related to the pricing and reimbursement of pharmaceutical products and medical devices. The 

Chapter recognizes the Parties’ shared commitment to promoting 

and facilitating access to high-quality patented and generic pharmaceutical products and medical devices, and affirms the importance of several key principles in pursuing these objectives. 

Access to Innovation: Chapter Five calls for the Parties to apply 

fair, reasonable, and non-discriminatory procedures when they operate national-level listing and reimbursement regimes for pharmaceutical products and medical devices. In operating such a system, 

a Party must base reimbursement determinations on market prices 

or appropriately recognize the value of patented products and devices. A Party must also permit manufacturers to apply for increased reimbursement amounts, including for additional medical 

indications, based on evidence of a product’s or device’s safety or 

efficacy. 

Transparency: The Chapter also commits each Party to ensure 

that its measures governing pricing and reimbursement for pharmaceutical products and medical devices are transparent and predictable. An exchange of letters appended to the Agreement calls 

for Korea to establish and maintain an independent body to review 

pricing and reimbursement decisions on pharmaceutical products 

and medical devices. 

Dissemination of Information: Each Party must allow pharmaceutical manufacturers to publish certain information regarding 

their approved products on the Internet. 


erowe on DSK2VPTVN1PROD with 
17 

Ethical Business Practices: Chapter Five also calls for the Parties 

to maintain and enforce measures to prohibit manufacturers and 

suppliers from providing improper inducements to health care professionals or institutions for listing, purchasing, or prescribing 

their devices or products. 

Cooperation: Chapter Five establishes a Medicines and Medical 

Devices Committee, co-chaired by health and trade officials from 

each Party, to monitor and support implementation of the Chapter 

and to provide for continued dialogue between the Parties on 

emerging health care policy issues. The Chapter also calls for each 

Party to facilitate consideration of requests from manufacturers to 

recognize the results of conformity assessment procedures that bodies in the other Party’s territory have conducted. 

CHAPTER SIX: RULES OF ORIGIN AND ORIGIN PROCEDURES

To benefit from various trade preferences provided under the 

Agreement, including reduced duties, a good must qualify as an 

‘‘originating’’ good under the rules of origin set out in Chapter Six 

and Annex 6–A. These rules ensure that the preferential tariff 

treatment and other benefits of the Agreement accrue primarily to 

firms or individuals that produce or manufacture goods in the Parties’ territories. 

Key Concepts. Chapter Six provides general criteria under which 

a good may qualify as ‘‘originating:’’ • When the good is wholly obtained or produced in Korea, 

the United States, or both (e.g., crops grown or minerals extracted in the United States); or • When the good is produced entirely in the territory of 

Korea, the United States, or both and: (1) non-originating materials used in the production of the good undergo a specified 

change in tariff classification in Korea, the United States, or 

both; or (2) meets any applicable ‘‘regional value content’’ requirement (see below); and (3) satisfies all other requirements 

of Chapter Six, including Annex 6–A; or 

• When the good is produced in Korea, the United States, or 

both, exclusively from ‘‘originating’’ materials. 

De Minimis. Even if a good does not undergo a specified change 

in tariff classification, it will be treated as an originating good if 

the value of non-originating materials that have been used in the 

production of the good and do not undergo the required change in 

tariff classification does not exceed ten percent of the adjusted 

value of the good, and the good otherwise meets the Chapter’s criteria. This de minimis exception does not apply to certain agricultural and fisheries goods, and the Agreement includes a separate 

de minimis exception for textile and apparel goods. 

Regional Value Content. Some origin rules under the Agreement 

require that certain goods meet a ‘‘regional value content’’ test in 

order to qualify as ‘‘originating,’’ meaning that a specified percentage of the value of the good must be attributable to originating materials. In general, the Agreement provides two methods for calculating that percentage: (1) the ‘‘build-down method’’ (based on the 

value of non-originating materials used); and (2) the ‘‘build-up 

method’’ (based on the value of originating materials used). The regional value content of certain automotive goods may also be calculated on the basis of their net cost. Finally, standard accessories, 


erowe on DSK2VPTVN1PROD with 
18 

spare parts, and tools delivered with a good are considered part of 

the material making up the good so long as these items are not 

separately classified or invoiced and their quantities and values are 

customary. The de minimis rule does not apply in calculating regional value content. 

Claims for Preferential Treatment. Under Chapter Six, importers 

who wish to claim preferential tariff treatment for a particular 

good must be prepared to submit, on the request of the importing 

Party’s customs authority, a statement explaining why the good 

qualifies as an originating good. A Party may only deny a claim for 

preferential treatment through a written determination that the 

claim is invalid as a matter of fact or law. The Chapter establishes 

a procedure for filing claims for preferential treatment for up to 

one year after a good is imported and for seeking a refund of any 

excess duties paid. The Chapter also prohibits a Party from penalizing an importer if the importer promptly and voluntarily corrects 

an incorrect claim and pays any duties owed. 

Verification. Each Party must ensure that its customs authority 

is empowered to conduct verifications for purposes of determining 

whether a good is an originating good. Where an importing Party 

determines through a verification that an importer, exporter, or 

producer has engaged in a pattern of conduct in providing false or 

unsupported statements, declarations, or certifications that a good 

is an originating good, the Party may suspend preferential tariff 

treatment to identical goods from that importer, exporter, or producer until the importing Party determines that the importer, exporter, or producer is in compliance with the rules set out in the 

Chapter. 

Additional Rules. Chapter Six provides specific rules with respect 

to the treatment of (1) packing materials and containers; (2) indirect materials; (3) fungible goods; and (4) sets of goods for purposes 

of determining origin. The Chapter provides that a Party may not 

treat a good as originating if the good undergoes any operation in 

a third country other than being unloaded, reloaded, or preserved 

in good condition, or if it is shipped through a third country and 

does not remain under the control of customs authorities there. The 

Chapter also provides that the Parties will meet to discuss whether 

to develop common guidelines for interpreting, applying, and administering Chapters Six and Seven. 

CHAPTER SEVEN: CUSTOMS ADMINISTRATION AND TRADE FACILITATION

Chapter Seven establishes rules designed to encourage transparency, predictability, and efficiency in the operation of each Party’s customs procedures and to provide for cooperation between the 

Parties on customs matters. 

General Principles. In Chapter Seven, each Party commits to observe certain transparency obligations. Each Party must publish its 

customs measures, including on the Internet, and, where possible, 

provide opportunity for comments from the public before amending 

its customs regulations. Each Party must also provide written advance rulings, on request, to its importers and to exporters and 

producers of the other Party, regarding whether a product qualifies 

as an ‘‘originating’’ good under the Agreement, as well as on other 

customs matters. In addition, each Party must ensure that importers have access to both administrative and judicial review of cusVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00018 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
19 

toms determinations. The Parties must adopt or maintain procedures to release goods from customs promptly and expeditiously 

clear express shipments. 

Cooperation. Chapter Seven also is designed to enhance customs 

cooperation. The Parties are encouraged to give each other advance 

notice of customs developments likely to substantially affect the operation of the Agreement. The Chapter calls for the Parties to cooperate in securing compliance with their respective customs measures related to the implementation and operation of the provisions 

of the Agreement governing importations and exportations. It includes specific provisions for sharing customs information where a 

Party has a reasonable suspicion of unlawful activity relating to its 

laws and regulations governing importations. 

CHAPTER EIGHT: SANITARY AND PHYTOSANITARY MEASURES

Chapter Eight defines the Parties’ obligations to each other 

under the Agreement regarding sanitary and phytosanitary (SPS) 

measures. It reflects the Parties’ understanding that implementation of existing obligations under the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) 

is a shared objective. Nothing in the Agreement imposes new limitations on the United States in terms of maintaining high safety 

and inspection standards. 

Key Concepts. SPS measures are laws or regulations that protect 

human, animal, or plant life or health from certain risks, including 

plant- and animal-borne pests and diseases, additives, contaminants, toxins, or disease-causing organisms in food and beverages. 

Cooperation. The Parties will establish a Committee on SPS Matters to (i) enhance each Party’s implementation of the WTO SPS 

Agreement; (ii) help protect human, animal, or plant life or health; 

(iii) enhance consultation and cooperation between the Parties on 

SPS matters; and (iv) facilitate bilateral trade. 

Dispute Settlement. Neither Party may invoke the Agreement’s 

dispute settlement procedures for a matter arising under Chapter 

Eight. 

CHAPTER NINE: TECHNICAL BARRIERS TO TRADE

Chapter Nine builds on WTO rules related to technical barriers 

to trade in order to promote transparency, accountability, and cooperation between the Parties on regulatory issues. 

Key Concepts. The term ‘‘technical barriers to trade’’ (TBT) refers 

to barriers that may arise in preparing, adopting, or applying voluntary product standards, technical regulations, and procedures 

used to determine whether a particular good meets a standard or 

technical regulation (‘‘conformity assessment procedures’’). 

International Standards. Chapter Nine requires the Parties to 

apply the principles articulated in the WTO TBT Committee’s Decision on Principles for the Development of International Standards, 

Guides and Recommendations in determining what constitutes an 

‘‘international standard’’ within the meaning of the WTO TBT 

Agreement. Those principles emphasize the need for openness and 

consensus in the development of international standards. 

Conformity Assessment. Chapter Nine also provides for a dialogue between the Parties on ways to facilitate the acceptance of 

conformity assessment results. Each Party will recognize conVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00019 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
20 

formity assessment bodies in the territory of the other Party on 

terms no less favorable than it accords conformity assessment bodies in its own territory. The Chapter also calls for the Parties to 

notify each other of the criteria they use to recognize conformity assessment bodies that perform conformity assessment procedures for 

cosmetics, household electrical appliances, and motor vehicles, and 

with respect to noise and emissions. 

Transparency. Chapter Nine contains various transparency obligations, such as requiring each Party to: (i) allow persons of the 

other Party to participate in the development of technical regulations, standards, and conformity assessment procedures on terms 

no less favorable than those it accords to its own persons; (ii) transmit regulatory proposals notified under the WTO TBT Agreement 

directly to the other Party; (iii) describe in writing the objectives 

of and reasons for a proposed technical regulation or conformity assessment procedure; and (iv) consider comments on such proposals 

and respond in writing to significant comments it receives. 

Cooperation. Chapter Nine establishes a Committee on Technical 

Barriers to Trade through which the Parties will cooperate to address technical barriers and improve market access. Annex 9–B establishes an Automotive Working Group to monitor and facilitate 

increased cooperation regarding the development, implementation, 

and enforcement of relevant standards, technical regulations, and 

conformity assessment procedures with respect to the regulation of 

motor vehicles. 

Automotive Standards and Technical Regulations. Under Chapter Nine, each Party must ensure that technical regulations related 

to motor vehicles are not prepared, adopted, or applied with a view 

to or with the effect of creating unnecessary obstacles to international trade, to the extent provided in Article 2.2 of the WTO 

TBT Agreement. In an exchange of letters appended to the Agreement, Korea has also taken on specific commitments with respect 

to auto emission standards and regulations relating to self-certification of automotive safety standards. Furthermore, in the February 10, 2011 Exchange of Letters, Korea committed to allow U.S. 

manufacturers that sell 25,000 or fewer ‘‘originating’’ vehicles in 

Korea to be considered as meeting all Korean safety regulations 

provided the vehicles are certified to U.S. safety standards. For all 

regulatory measures that would require a substantial change in 

motor vehicle design or technology, Korea also agreed to provide a 

period between the date a regulation is issued and the date manufacturers must comply with it that is usually not less than one 

year, and to conduct post-implementation reviews of existing significant regulations affecting motor vehicles to assess whether the 

regulations remain appropriate. 

CHAPTER TEN: TRADE REMEDIES

Safeguards. Section A of Chapter Ten establishes a safeguard 

procedure that will be available to aid domestic industries that sustain or are threatened with serious injury due to increased imports 

resulting from tariff reduction or elimination under the Agreement. 

As part of this process, each Party shall notify the other Party on 

initiation of an investigation and consult with the other Party as 

far in advance of a safeguard measure as practicable. 


erowe on DSK2VPTVN1PROD with 
21 

Chapter Ten authorizes a Party to impose temporary duties on 

an imported originating good if, as a result of the reduction or 

elimination of a duty under the Agreement, the good is being imported in such increased quantities and under such conditions as 

to constitute a substantial cause of serious injury, or threat of serious injury, to a domestic industry producing a ‘‘like’’ or ‘‘directly 

competitive’’ good. 

Unless the exporting Party agrees otherwise, a safeguard measure may be applied on a good only during the Agreement’s ‘‘transition period’’ (as defined in Article 10.6) for phasing out duties on 

the good. A safeguard measure may take one of two forms—a temporary increase in duties to NTR (MFN) levels or a temporary suspension of duty reductions called for under the Agreement. In ‘‘critical circumstances,’’ the importing Party may, after 45 days have 

passed since initiation of the investigation, impose provisional relief for up to 200 days, based on a preliminary determination, while 

its investigation of the matter is underway. The Agreement provides an alternative form of safeguard measure for duties applied 

to a good on a seasonal basis. 

A Party may not impose a safeguard measure under Chapter Ten 

more than once on any good. A safeguard measure may be in place 

for an initial period of up to two years. A Party may extend a 

measure for an additional year, if it determines that the industry 

is adjusting and the measure remains necessary to facilitate adjustment and prevent or remedy serious injury. If a measure lasts 

more than one year, the Party must scale it back at regular intervals. 

If a Party imposes a safeguard measure, that Party must provide 

offsetting trade compensation to the other Party. No later than 30 

days after it applies a safeguard measure, the respective Party 

shall afford an opportunity for consultations with the other Party 

regarding compensation. If the Parties cannot agree on the amount 

or nature of the compensation, the exporting Party may unilaterally suspend ‘‘substantially equivalent’’ trade concessions that it 

has made to the importing Party. 

The February 10, 2011 Exchange of Letters includes a special 

safeguard for goods of tariff heading 8703 or 8704 (i.e., cars and 

trucks). Under the special safeguard, a Party may apply a safeguard using the procedures set forth in Chapter Ten, with the following modifications: a safeguard may be applied on a good for an 

additional ten years after the ‘‘transition period’’ for phasing out 

duties on the good; a Party may impose a safeguard measure more 

than once on any good; the safeguard measure may be extended for 

an additional two years; there is no obligation to scale back a safeguard at regular intervals; there are fewer procedural requirements for critical circumstances; and the Party applying the safeguard is not subject to the suspension of trade concessions for up 

to two years after the safeguard is applied if it does not agree with 

the exporting Party on tariff reductions or other compensation. 

Global Safeguards. Chapter Ten provides that each Party maintains its right to take action against imports from all sources under 

the WTO Agreement on Safeguards. A Party may exclude imports 

of an originating good from the other Party from a global safeguard 

measure if those imports are not a substantial cause of serious injury or do not create a threat of serious injury. A Party may not 


erowe on DSK2VPTVN1PROD with 
22 

apply a safeguard measure under Chapter Ten at the same time 

that it applies a safeguard measure on the same good under the 

WTO Safeguards Agreement. 

Antidumping and Countervailing Duties. Section B of Chapter 

Ten confirms that each Party retains its rights and obligations 

under the WTO Agreement with regard to the application of antidumping and countervailing duties. A Party must notify the other 

when it receives an antidumping or countervailing duty petition 

concerning imports from the other Party and afford the other Party 

a meeting or other similar opportunities regarding the application, 

consistent with the Party’s law. With respect to anti-dumping 

cases, following a preliminary affirmative determination, the Party’s competent authorities must provide exporters of the other 

Party due consideration and adequate opportunity for consultations 

regarding proposed price or quantity undertakings that could suspend the investigation. With respect to countervailing duty investigations, following a preliminary affirmative determination, the 

Party’s competent authorities must provide the other Party and exporters of the other Party due consideration and adequate opportunity for consultations regarding proposed price or quantity undertakings that could suspend the investigation. Antidumping and 

countervailing duty measures may not be challenged under the 

Agreement’s dispute settlement procedures. 

Committee on Trade Remedies. Section C of the Chapter creates 

a Committee on Trade Remedies whose functions include (i) enhancing each Party’s understanding of the other’s trade remedy 

laws, policies, and practices; (ii) improving cooperation on trade 

remedies matters; and (iii) discussing topics of mutual interest. 

CHAPTER ELEVEN: INVESTMENT

Chapter Eleven establishes rules to protect investors from one 

Party against wrongful or discriminatory government actions when 

they invest or attempt to invest in the other Party’s territory. The 

Chapter’s provisions reflect traditional standards incorporated in 

earlier U.S. bilateral investment treaties, previous free trade agreements, and customary international law. 

Key Concepts. Under Chapter Eleven, the term ‘‘investment’’ covers all forms of investment, including enterprises, securities, debt, 

intellectual property rights, licenses, and contracts. Chapter Eleven 

covers both investments existing when the Agreement enters into 

force and future investments. The term ‘‘investor of a Party’’ encompasses U.S. and Korean nationals as well as firms (including 

branches) established in one of the Parties. 

General Principles. Under the Agreement, investors enjoy six 

basic protections: (1) the right to non-discriminatory treatment relative both to domestic investors and investors of non-Parties; (2) 

limits on imposition by the host Party of ‘‘performance requirements;’’ (3) the right to free transfer of funds related to an investment; (4) the guarantee that expropriation will be done in accordance with customary international law standards; (5) the right to 

the minimum standard of treatment of aliens required by customary international law; and (6) the right to hire key managerial 

personnel without regard to nationality. (As to this last protection, 

a Party may require that a majority of the board of directors be of 


erowe on DSK2VPTVN1PROD with 
23 

a particular nationality, as long as this does not prevent the investor from controlling its investment.) 

Sectoral Coverage and Non-Conforming Measures. With the exception of investments in or by regulated financial institutions 

(which are treated in Chapter Thirteen), Chapter Eleven generally 

applies to all sectors, including service sectors. However, each 

Party has listed in Annexes I and II particular measures or sectors 

for which it negotiated an exemption from the Chapter’s obligations 

relating to national treatment, NTR (MFN), performance requirements, or senior management and boards of directors (‘‘non-conforming measures’’). Annex I contains each Party’s list of existing 

non-conforming measures at the central and regional levels of government. The United States has scheduled an exemption from all 

aforementioned obligations for all existing state measures. All existing local measures are exempted for both Parties without the 

need to be listed. If a Party liberalizes any of these non-conforming 

Annex I measures, it must thereafter maintain the measure at 

least at that level of openness. In Annex II, each Party has listed 

sectors or activities in which it reserves the right to maintain existing or adopt future non-conforming measures. (As described below, 

Annexes I and II also include exemptions from Chapter Twelve 

(Cross-Border Trade in Services).) 

Investor-State Disputes. Chapter Eleven provides a mechanism 

for an investor of a Party to submit to binding international arbitration a claim for damages against the other Party. The investor 

may assert that the Party has breached a substantive obligation 

under the Chapter or that the Party has breached an ‘‘investment 

agreement’’ with, or an ‘‘investment authorization’’ granted to, the 

investor or a covered investment that the investor owns or controls. 

‘‘Investment agreements’’ and ‘‘investment authorizations’’ are arrangements between an investor and a host government based on 

contracts and authorizations, respectively. These terms are defined 

in the Chapter. 

Chapter Eleven affords public access to information on investorState arbitrations conducted pursuant to the Agreement. For example arbitration hearings will generally be open to the public and 

key documents will be publicly available, with exceptions for confidential business information. The Parties also authorize arbitral 

tribunals to accept amicus submissions from the public. In addition, the Chapter includes provisions similar to those used in U.S. 

courts to dispose quickly of claims a tribunal finds to be frivolous. 

Finally, within three years after the Agreement enters into force 

the Parties will consider whether to establish an appellate body, or 

similar mechanism, to review arbitral awards that tribunals render 

under the Chapter. 

Chapter Eleven confirms the Parties’ understanding that, ‘‘except 

in rare circumstances,’’ nondiscriminatory regulatory actions designed and applied to meet legitimate public welfare objectives, 

such as public health, safety, and the environment, are not indirect 

expropriations. The Chapter also provides a list of factors to be considered in determining whether a taxation measure constitutes an 

expropriation. 

The Agreement does not require the United States to give Korean investors greater substantive rights than U.S. companies already enjoy in the United States. 


erowe on DSK2VPTVN1PROD with 
24 

CHAPTER TWELVE: CROSS-BORDER TRADE IN SERVICES

Chapter Twelve governs measures affecting cross-border trade in 

services between the Parties. Certain provisions also apply to 

measures affecting investments to supply services. 

Key Concepts. Under the Agreement, cross-border trade in services covers supply of a service: 

• from the territory of one Party into the territory of the 

other Party (e.g., electronic delivery of services from the United 

States to Korea); 

• in the territory of a Party by a person of that Party to a 

person of the other Party (e.g., a Korean company provides 

services to U.S. visitors in Korea); and 

• by a national of a Party in the territory of the other Party 

(e.g., a U.S. lawyer provides legal services in Korea). 

Chapter Twelve should be read together with Chapter Eleven 

(Investment), which establishes rules pertaining to the treatment 

of service firms that choose to provide their services through a local 

presence, rather than cross-border. Chapter Twelve applies where, 

for example, a service supplier is temporarily present in a territory 

of a Party and does not operate through a local investment. 

General Principles. Among Chapter Twelve’s core obligations are 

requirements to provide national treatment and NTR (MFN) treatment to service suppliers of the other Party. Thus, each Party must 

treat service suppliers of the other Party no less favorably than its 

own suppliers or those of any other country. This commitment applies to state and local governments as well as the national government. The Chapter’s provisions apply to existing service suppliers 

as well as to those who seek to supply services. The Parties are 

prohibited from requiring firms to establish a local presence as a 

condition for supplying a service on a cross-border basis. In addition, certain types of market access restrictions on the supply of 

services (e.g., that limit the number of firms that may offer a particular service or that restrict or require specific types of legal 

structures or joint ventures with local companies in order to supply 

a service) are also barred. The Chapter’s market access rules apply 

both to services supplied on a cross-border basis and through a 

local investment. 

Sectoral Coverage and Non-Conforming Measures. Chapter 

Twelve applies across virtually all services sectors. The Chapter excludes financial services (which are addressed in Chapter Thirteen), except that certain provisions of Chapter Twelve apply to investments in financial services that are not regulated as financial 

institutions and are covered by Chapter Eleven (Investment). In 

addition, Chapter Twelve does not cover air transportation, although it does apply to specialty air services and aircraft repair 

and maintenance. 

Each Party has listed in Annexes I and II measures or sectors 

for which it negotiated exemptions from Chapter Twelve’s core obligations (national treatment, NTR (MFN), local presence, and market access). Annex I contains the list of existing non-conforming 

measures at the central and regional level of government. Our coverage under the market access discipline is the same as our commitments under the WTO General Agreement on Trade in Services, 

with the right to take measures not inconsistent with those comVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00024 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
25 

mitments. The United States has scheduled an exemption from national treatment, NTR (MFN), and local presence for all existing 

state measures. All existing local measures are exempted for both 

Parties without the need to be listed. However, once a Party liberalizes any of these non-conforming Annex I measures, it must 

thereafter maintain the measure at least at that level of openness. 

Each Party has listed in Annex II sectors or activities in which it 

reserves the right to adopt or maintain future non-conforming 

measures. 

Specific Commitments. Chapter Twelve includes a comprehensive 

definition of express delivery services under which each Party must 

provide national treatment, NTR (MFN) treatment, and additional 

benefits to express delivery services of the other Party. The Chapter provides that the Parties will try to maintain the level of market openness for express delivery services they provided on the 

date the Agreement was signed, and a Party may request consultations with the other if it believes the other Party is not maintaining that level of access. The Chapter also addresses the issue of 

postal monopolies directing revenues derived from monopoly postal 

services to confer an advantage on express delivery services. In an 

exchange of letters appended to the Agreement, Korea has committed to expand the current exceptions to the Korean Postal 

Authority’s monopoly to include all international document delivery 

services. In a further letter signed along with the Agreement, 

Korea has expressed its intention to gradually increase the scope 

of permitted private delivery services in other areas as well. 

Transparency and Domestic Regulation. Provisions on transparency and domestic regulation complement the core rules of 

Chapter Twelve. The transparency rules apply to the development 

and application of regulations governing services. The Chapter’s 

rules on domestic regulation govern the operation of approval and 

licensing systems for service suppliers. Like the Chapter’s market 

access rules, its provisions on transparency and domestic regulation cover services supplied both on a cross-border basis and 

through a local investment. 

Exclusions. Chapter Twelve does not apply to any service supplied ‘‘in the exercise of governmental authority’’—that is, a service 

that is provided on a non-commercial and non-competitive basis. 

Chapter Twelve also does not apply to government subsidies. In addition, the Chapter makes clear that the Agreement does not impose any obligation on a Party with respect to its immigration 

measures, including admission or conditions of admission for temporary entry. 

CHAPTER THIRTEEN: FINANCIAL SERVICES

Chapter Thirteen provides rules governing each Party’s treatment of: (1) financial institutions of the other Party; (2) investors 

of the other Party, and their investments, in financial institutions; 

and (3) cross-border trade in financial services. 

Key Concepts. The Chapter defines a ‘‘financial institution’’ as 

any financial intermediary or other institution authorized to do 

business and regulated or supervised as a financial institution 

under the law of the Party where it is located. A ‘‘financial service’’ 

is any service of a financial nature, including, insurance, banking, 


erowe on DSK2VPTVN1PROD with 
26 

securities, asset management, financial information and data processing services, and financial advisory services. 

General Principles. Chapter Thirteen’s core obligations parallel 

those in Chapters Eleven (Investment) and Twelve (Cross-Border 

Trade in Services). Specifically, Chapter Thirteen imposes rules requiring national treatment and NTR (MFN) treatment, prohibits 

certain quantitative restrictions on market access of financial institutions, and bars restrictions on the nationality of senior management. As appropriate, these rules apply to measures affecting financial institutions, investors and investments in financial institutions of another Party, and services companies that are currently 

supplying and that seek to supply financial services on a cross-border basis. The rules do not apply to measures adopted or maintained by a Party relating to certain specified services and activities unless a Party allows its financial institutions to compete with 

a public entity or a financial institution to supply such services and 

activities. Chapter Thirteen includes broad flexibility and safeguards, including the prudential and monetary and exchange rate 

exceptions, to ensure that governments may continue to regulate 

the financial sector and take action to ensure the stability and integrity of the financial system in a financial crisis. 

Non-Conforming Measures. Similar to Chapters Eleven and 

Twelve, each Party has listed in an annex (Annex III) particular 

measures for which it negotiated exemptions from the Chapter’s 

core obligations. Existing non-conforming U.S. state and local laws 

and regulations are exempted from these obligations. Once a Party, 

including a state or local government, liberalizes one of these nonconforming measures, however, it must, in most cases, maintain 

the measure at least at that new level of openness. 

Other Provisions. Chapter Thirteen also includes provisions on 

regulatory transparency, ‘‘new’’ financial services, self-regulatory 

organizations, and the expedited availability of insurance products. 

Relationship to Other Chapters. Measures that a Party applies to 

financial services suppliers of the other Party, other than regulated 

financial institutions, that make or operate investments in the Party’s territory are covered principally by Chapter Eleven (Investment) and certain provisions of Chapter Twelve (Cross-Border 

Trade in Services). In particular, the core obligations of Chapter 

Eleven apply to such measures, as do the market access, transparency, and domestic regulation provisions of Chapter Twelve. 

Chapter Thirteen incorporates by reference certain provisions of 

Chapter Eleven, such as those relating to transfers and expropriation. 

Additional Commitments. Pursuant to the Chapter’s annexes and 

an exchange of letters appended to the Agreement, Korea has 

taken on specific commitments to establish a more transparent financial regulatory regime, ensure that a government-owned insurance supplier will not be provided competitive advantages, and 

allow U.S. financial institutions in Korea to transfer information 

out of Korea for data processing to take advantage of global economies of scale. 

CHAPTER FOURTEEN: TELECOMMUNICATIONS

Chapter Fourteen includes disciplines beyond those imposed 

under Chapters Eleven (Investment) and Twelve (Cross-Border 


erowe on DSK2VPTVN1PROD with 
27 

Trade in Services) on regulatory measures affecting telecommunications trade and investment between the Parties. It is designed to 

ensure that service suppliers of each Party have non-discriminatory 

access to and use of public telecommunications networks and services in the territory of the other Party. In addition, each Party 

must regulate its major telecommunications suppliers in ways that 

will help ensure a level playing field for new entrants. Each Party 

also commits to ensure that its telecommunications regulations are 

set by independent regulators applying transparent procedures. 

Key Concepts. Under Chapter Fourteen, a ‘‘public telecommunications service’’ is any telecommunications service that a Party requires to be offered to the public generally. The term includes voice 

and data transmission services, but does not include ‘‘value-added 

services’’ (e.g., services that enable users to create, store, or process 

information over a network). A ‘‘major supplier’’ is a company that, 

by virtue of its market position or control over certain facilities, can 

materially affect the terms of participation in the market. 

Competition. Chapter Fourteen establishes rules promoting effective competition in telecommunications services. The Chapter includes commitments by each Party to: • ensure that all service suppliers of the other Party that 

seek to access or use a public telecommunications network in 

the Party’s territory can do so on reasonable and non-discriminatory terms (e.g., Korea must ensure that its public phone 

companies do not provide preferential access to Korean banks 

or Internet service providers, to the detriment of U.S. competitors); • ensure that the other Party’s telecommunications suppliers 

have the right to interconnect their networks with public telecommunications networks in the Party’s territory; • ensure that telecommunications suppliers of the other 

Party are permitted to connect leased lines with public telecommunications networks in the Party’s territory; and • impose disciplines on the behavior of ‘‘major suppliers,’’ 

such as ensuring that major suppliers provide interconnection 

at cost-oriented rates and do not impose unreasonable or discriminatory conditions or limitations on the resale of their 

services. 

Regulation. The Chapter addresses key regulatory concerns that 

may create barriers to trade and investment in telecommunications 

services. In particular, each Party: 

• will maintain or adopt procedures that will help ensure a 

transparent telecommunications regulatory regime, including 

requirements to publish interconnection agreements and service tariffs and provide meaningful opportunities for interested 

parties to participate in telecommunications rulemaking; 

• will require its telecommunications regulator to resolve 

disputes between suppliers and provide foreign suppliers the 

right to seek judicial review of those decisions; and 

• may elect to deregulate telecommunications services when 

competition emerges and certain standards are met. 

Technological Choice. The Chapter contains innovative provisions 

designed to ensure that the Parties avoid limiting the technologies 

telecommunications suppliers may choose to use to provide their 

services. 


erowe on DSK2VPTVN1PROD with 
28 

CHAPTER FIFTEEN: ELECTRONIC COMMERCE

Chapter Fifteen establishes rules designed to prohibit discriminatory regulation of electronic trade in digitally encoded products 

such as computer programs, video, images, and sound recordings. 

The provisions in this and other recent U.S. free trade agreements 

represent a major advance over previous international understandings on this subject. 

Customs Duties. Chapter Fifteen provides that a Party may not 

impose customs duties on digital products of the other Party that 

are either transmitted electronically or fixed on a carrier medium. 

Non-Discrimination. The Parties will apply the principles of national treatment and NTR (MFN) treatment to trade in electronically-transmitted digital products. Thus, a Party may not discriminate against digital products that have a nexus to the other Party’s 

territory (e.g., creation, production, or first sale there) or to otherwise afford protection to products with a connection to its own territory. Nor may a Party provide less favorable treatment to digital 

products that have a nexus to the other Party than it gives to like 

products that have a link to a third country. These non-discrimination rules do not apply to non-conforming measures adopted under 

Chapter Eleven (Investment), Twelve (Cross-Border Trade in Services), or Thirteen (Financial Services). 

Additional Provisions. Chapter Fifteen contains additional provisions relating to electronic authentication and electronic signatures, online consumer protection, and paperless trade administration. The Chapter also establishes mutually agreed principles regarding the access to and use of the Internet for electronic commerce. 

CHAPTER SIXTEEN: COMPETITION-RELATED MATTERS

Chapter Sixteen addresses competition laws, government-designated monopolies, state enterprises, and consumer protection. 

Competition Laws. Each Party must maintain laws prohibiting 

anticompetitive business conduct and take appropriate action with 

respect to such conduct. Each Party must also maintain an authority responsible for enforcing its national competition laws. The 

Chapter affirms that the enforcement policy of each Party’s national competition authority is to treat persons of the other Party 

no less favorably than their own nationals. 

Chapter Sixteen obligates each Party to provide certain procedural protections in enforcement proceedings convened under its 

competition law. Specifically, each Party must ensure that any person that is subject to an administrative enforcement proceeding is 

provided a right to be heard, to present and rebut evidence, and 

to cross-examine witnesses. In addition, each Party must ensure 

that a person subjected to a sanction or remedy under the Party’s 

competition law can ask a court to review it. The Chapter also requires each Party to empower its national competition authorities 

to settle their administrative or civil enforcement actions by mutual agreement with the subject of the enforcement action. 

Designated Monopolies. Chapter Sixteen sets specific rules that 

apply with respect to any monopoly owned or controlled by a Party’s national government and any private business to which a Party 

provides monopoly rights after the Agreement takes effect. The 


erowe on DSK2VPTVN1PROD with 
29 

Party must ensure that any such entity: (1) abides by the Party’s 

obligations under the Agreement whenever it exercises governmental authority delegated to it by the Party in connection with 

the monopoly product; (2) purchases or sells the monopoly product 

in accordance with commercial considerations; (3) provides nondiscriminatory treatment to the other Party’s investments, goods, 

and service suppliers in its purchase or sale of the monopoly product; and (4) does not use its monopoly position to engage in anticompetitive practices in markets outside its monopoly mandate 

that harm the other Party’s investments. 

State Enterprises. The Chapter also establishes rules governing 

each Party’s responsibility for non-monopoly enterprises it owns or 

controls. Each Party must ensure that its state enterprises accord 

non-discriminatory treatment in the sale of their products to the 

other Party’s investments and abide by the Party’s obligations 

under the Agreement in exercising any governmental authority 

that the Party has delegated to it. 

Cross-Border Consumer Protection. Chapter Sixteen commits the 

Parties to cooperate, in appropriate cases of mutual concern, in the 

enforcement of their consumer protection laws. The Chapter provides that the Parties will also work to strengthen cooperation between their consumer protection agencies. 

Dispute Settlement. Some of the Chapter’s provisions are not subject to the Agreement’s dispute settlement procedures, including 

provisions covering competition laws and consumer protection. The 

Chapter’s rules addressing designated monopolies and state enterprises, however, are subject to those procedures. 

CHAPTER SEVENTEEN: GOVERNMENT PROCUREMENT

Chapter Seventeen provides suppliers in each Party with additional access to the other Party’s national government procurement 

market. 

The Chapter reaffirms each Party’s rights and obligations under 

the WTO Agreement on Government Procurement (GPA), and confirms the Parties’ intention to apply the APEC Non-Binding Principles on Government Procurement, as appropriate, to all government procurement not covered under the GPA and the Agreement. 

Coverage and Thresholds. Chapter Seventeen applies to procurements by those government departments, agencies, and enterprises 

listed in each Party’s schedule of goods and services valued above 

certain dollar thresholds. Specifically, the Chapter applies to procurements by listed agencies of the ‘‘central government,’’ which for 

the United States means the federal government, of goods and 

services valued at $100,000 or more and construction services valued at $7,407,000 or more. The threshold for goods and services is 

substantially lower than the threshold applied under the GPA— 

hence expanding market opportunities in both countries. 

General Principles and Procurement Procedures. Chapter Seventeen incorporates a number of provisions from the GPA, including 

commitments to national treatment of persons of the other Party 

and requirements governing the conduct of procurements. The 

Chapter expands on the GPA by incorporating important improvements that reflect emerging practices in procurement, such as reducing the tendering period in cases where procurement notices 

and other procurement information are made available electroniVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00029 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
30 

cally; reducing the tendering period for off-the-shelf goods and services; and encouraging use of electronic procurement. In addition, in 

procurements subject to the Agreement, a government agency may 

adopt or apply technical specifications that require suppliers to 

comply with generally applicable laws regarding fundamental principles and rights at work and acceptable conditions of work in the 

territory where the supplier makes the product or performs the 

service that the agency will purchase. 

CHAPTER EIGHTEEN: INTELLECTUAL PROPERTY RIGHTS

Chapter Eighteen complements and enhances existing international standards for the protection of intellectual property and 

the enforcement of intellectual property rights, consistent with U.S. 

law. 

General Provisions. Chapter Eighteen commits each Party to ratify or accede to several agreements on intellectual property rights 

by the date the Agreement enters into force, including the WIPO 

Copyright Treaty, the Convention Relating to the Distribution of 

Programme-Carrying Signals Transmitted by Satellite, the WIPO 

Performances and Phonograms Treaty, the International Convention for the Protection of New Varieties of Plants, the Trademark 

Law Treaty, and the Patent Cooperation Treaty. The United States 

is already a party to these agreements. With very limited exceptions, each Party commits to provide national treatment to the 

other Party’s nationals with respect to the enjoyment and protection of the intellectual property rights covered by the Chapter. 

Trademarks and Geographical Indications. Each Party must protect trademarks and geographical indications, including by refusing 

protection or recognition of a geographical indication that is likely 

to cause confusion with a preexisting trademark. The Chapter calls 

for trademarks to include certification marks, and for geographical 

indications to be eligible for protection as trademarks. Each Party 

must establish an electronic system for applying for, registering 

and maintaining trademarks, as well as an online database, with 

efficient and transparent procedures governing applications. Furthermore, each Party’s Internet domain name management system 

must include a dispute resolution procedure to address trademark 

cyber-piracy. 

Copyright and Related Rights. Under Chapter Eighteen, the Parties must provide broad protection for copyright and related rights, 

affirming and building on rights set out in several international 

agreements. For instance, each Party must provide copyright protection for the life of the author plus at least 70 years (for works 

measured by a person’s life), or at least 70 years (for corporate 

works). The Chapter clarifies that the right to reproduce literary 

and artistic works, phonograms, and performances encompasses 

temporary copies, an important principle in the digital realm. Each 

Party must also provide a right of communication to the public, 

which will further ensure that the right holder has the exclusive 

right to authorize making protected works available online. Each 

Party must also protect the rights of performers and producers of 

phonograms. 

To curb copyright piracy, each Party must ensure that its government agencies use only legitimate computer software, setting an 

example for the private sector. The Chapter also includes proviVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00030 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
31 

sions on anti-circumvention, under which the Parties commit to 

prohibit tampering with technology used to protect copyrighted 

works. In addition, Chapter Eighteen sets out obligations with respect to the liability of Internet service providers in connection 

with copyright infringements that take place over their networks. 

Recognizing the importance of satellite broadcasts, Chapter Eighteen provides that each Party will protect encrypted program-carrying satellite signals. The Chapter obligates the Parties to extend 

protection to the signals themselves, as well as to the content contained in the signals. 

Patents. Chapter Eighteen also includes a variety of provisions 

for the protection of patents. Each Party is obligated to make patents available for any invention, subject to limited exclusions, and 

each Party confirms that patents will be available for any new uses 

or methods of using a known product. To guard against arbitrary 

revocation of patents, each Party must limit the grounds for revoking a patent to the grounds that would have justified a refusal to 

grant the patent. Under Chapter Eighteen, each Party shall adjust 

the term of a patent to compensate for unreasonable delays in 

granting the patent and, for certain pharmaceutical products, to 

compensate for unreasonable curtailment of the effective patent 

term as a result of the marketing approval process for such products. 

Certain Regulated Products. Chapter Eighteen includes additional specific provisions relating to pharmaceuticals and agricultural chemicals. Among other things, the Chapter provides for the 

protection of information concerning product safety or efficacy, including test data that a company submits in seeking marketing approval for such products, by precluding other firms from relying on 

the information. It provides specific periods for such protection—at 

least five years for pharmaceuticals and ten years for agricultural 

chemicals. This means, for example, that during the period of protection, safety and efficacy information that a company submits for 

approval of a new agricultural chemical product cannot be used 

without that company’s consent in granting approval to another 

company to market a combination product. The Chapter’s rules 

protecting information concerning pharmaceutical product safety 

and efficacy are subject to a public health exception. Chapter 

Eighteen also requires the Parties to adopt measures to prevent 

the marketing of a competing pharmaceutical product during the 

term of a patent covering the original innovative product. The February 10, 2011 Exchange of Letters allows Korea three years from 

the date the Agreement enters into force to implement measures in 

its marketing approval process to prevent persons from marketing 

a patented product without the consent of the patent holder. 

Public Health. Chapter Eighteen expresses the Parties’ understanding that a Party’s obligations under the Chapter do not and 

should not prevent it from taking measures to protect public health 

by promoting access to medicines for all. 

Enforcement Provisions. The Chapter also imposes obligations 

with respect to the enforcement of intellectual property rights in 

civil proceedings, criminal proceedings, and at the border. For example, each Party must provide that, when determining damages 

in civil proceedings involving copyright infringement or trademark 

counterfeiting, its judicial authorities must be able to take into acVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00031 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
32 

count the value of the legitimate goods as well as the infringer’s 

profits. Each Party must also provide for damages based on a fixed 

range (i.e., ‘‘statutory damages’’) as an option that the right holder 

can elect instead of actual damages. 

Chapter Eighteen further provides that each Party’s law enforcement agencies must have the authority to seize suspected pirated 

and counterfeit goods and the equipment used to make or transmit 

them. Each Party must also give its courts authority to order the 

forfeiture and/or destruction of these items. Chapter Eighteen also 

provides that each Party must establish criminal procedures and 

penalties for certain cases of trademark counterfeiting and copyright and related rights piracy. 

Each Party must also empower its law enforcement agencies to 

take enforcement action at the border against pirated or counterfeit 

goods without waiting for a right holder to file a formal complaint. 

CHAPTER NINETEEN: LABOR

Chapter Nineteen sets out the Parties’ commitments and undertakings regarding trade-related labor rights. 

Fundamental Labor Rights. Each Party commits to adopt and 

maintain in its statutes, regulations, and practice certain enumerated labor rights, as stated in the 1998 ILO Declaration on Fundamental Principles and Rights at Work and its Follow Up. Specifically, these are (1) freedom of association; (2) the effective recognition of the right to collective bargaining; (3) the elimination of all 

forms of forced or compulsory labor; (4) the effective abolition of 

child labor and, for purposes of the Agreement, a prohibition on the 

worst forms of child labor; and (5) the elimination of discrimination 

in respect of employment and occupation. In order to establish a 

violation of this obligation, a Party must demonstrate that the 

other Party has failed to comply in a manner affecting trade or investment between the Parties. Neither Party may waive or otherwise derogate from its statutes or regulations implementing this 

obligation in a manner affecting bilateral trade or investment 

where the waiver or derogation would be inconsistent with one of 

the enumerated rights. For the United States, the Chapter’s provisions regarding fundamental labor rights apply to federal law only. 

Effective Enforcement. Each Party commits not to fail to effectively enforce its labor laws on a sustained or recurring basis in a 

manner affecting trade or investment between the Parties. The 

Chapter defines ‘‘labor laws’’ to include laws directly related to the 

ILO fundamental labor rights as well as laws providing for acceptable conditions of work with respect to minimum wages, hours of 

work, and occupational safety and health, and laws providing labor 

protections for children and minors, including a prohibition on the 

worst forms of child labor. For the United States, ‘‘labor laws’’ includes federal statutes and regulations addressing these areas, but 

does not cover state or local labor laws. 

Procedural Guarantees. Each Party commits to afford procedural 

guarantees that ensure workers and employers have access to tribunals for the enforcement of its labor laws. To this end, each 

Party must ensure that proceedings before these tribunals are fair, 

equitable, and transparent and comply with due process of law. Decisions of such tribunals must be in writing, made available to the 

parties to the proceedings and the public, and based on information 


erowe on DSK2VPTVN1PROD with 
33 

or evidence in respect of which the parties were offered the opportunity to be heard. In addition, hearings in such proceedings must 

be open to the public, except where the administration of justice 

otherwise requires. Each Party also commits to make remedies 

available to ensure the enforcement of its labor laws. Such remedies might include orders, fines, penalties, or temporary workplace 

closures. 

Dispute Settlement. Chapter Nineteen provides for cooperative 

consultations as a first step if a Party considers that the other 

Party is not complying with its obligations under the Chapter. The 

complaining Party may, after an initial 60-day consultation period 

under Chapter Nineteen, invoke the Agreement’s general dispute 

settlement mechanism by requesting additional consultations or a 

meeting of the Agreement’s cabinet-level Joint Committee under 

Chapter Twenty-Two (Institutional Provisions and Dispute Settlement). If the Committee is unable to resolve the dispute, the matter may be referred to a dispute settlement panel. 

Institutional Arrangements and Cooperation. Chapter Nineteen 

establishes a senior-level Labor Affairs Council to oversee the 

Chapter’s implementation and to provide a forum for consultations 

and cooperation on labor matters. Each Party must designate an 

office to serve as contact point for communications with the other 

Party and the public regarding the Chapter. Each Party’s contact 

point must provide transparent procedures for the submission, receipt, and consideration of communications from the public relating 

to the Chapter. 

The chapter also creates a cooperation mechanism through which 

the Parties will collaborate to address labor matters of common interest. In particular, the mechanism will assist the Parties to establish priorities for, and carry out, cooperative activities relating 

to such topics as: fundamental rights and their effective application; social safety net programs; and labor-management relations. 

CHAPTER TWENTY: ENVIRONMENT

Chapter Twenty sets out the Parties’ commitments and undertakings regarding environmental protection. 

General Principles. Each Party must strive to ensure that its environmental laws provide for and encourage high levels of environmental protection and continue to improve its respective levels of 

environmental protection. Each Party also commits not to waive or 

otherwise derogate from its environmental laws to weaken or reduce the levels of environmental protection in a manner affecting 

trade or investment between the Parties other than pursuant to 

any provision in its environmental law providing for waivers or 

derogations. Chapter Twenty further includes commitments to enhance cooperation between the Parties in environmental matters 

and encourages the Parties to develop voluntary, market-based 

mechanisms as one means for achieving and sustaining high levels 

of environmental protection. 

Multilateral Environmental Agreements. The Chapter recognizes 

that certain multilateral environment agreements (MEAs) play an 

important role globally and domestically in protecting the environment. The Chapter includes a provision requiring each Party to 

adopt, maintain, and implement laws, regulations, and all other 

measures to fulfill its obligations under certain MEAs to which 


erowe on DSK2VPTVN1PROD with 
34 

both governments are parties (‘‘covered agreements’’). To establish 

a violation of this obligation a Party must demonstrate that the 

other Party has failed to comply in a manner affecting trade or investment between the Parties. 

Chapter Twenty provides that in the event of any inconsistency 

between a Party’s obligations under the Agreement and a covered 

agreement, the Party must seek to balance its obligation under 

both agreements, but this will not preclude a Party from taking 

measures to comply with the covered agreement as long as the 

measure’s primary purpose is not to impose a disguised restriction 

on trade. 

Effective Enforcement. The Chapter commits each Party not to 

fail to effectively enforce its environmental laws, and its laws, regulations, and other measures to fulfill its obligations under the covered agreements, on a sustained or recurring basis in a manner affecting trade or investment between the Parties. For the United 

States, ‘‘environmental laws’’ comprise federal environmental statutes and regulations promulgated under those statutes that are enforceable by action of the federal government. 

Procedural Matters. The Chapter requires each Party to make judicial, quasi-judicial, or administrative proceedings available to 

sanction or remedy violations of its environmental laws. Each 

Party must ensure that these proceedings are fair, equitable, and 

transparent, and, to this end, comply with due process of law and 

are open to the public, except where the administration of justice 

otherwise requires. Each Party must also ensure that interested 

persons may request the Party’s competent authorities to investigate alleged violations of its environmental laws and that those 

authorities duly consider such requests. Each Party must also 

make appropriate and effective remedies available for violations of 

its environmental laws. These remedies may include, for example, 

fines, injunctions, or requirements to take remedial action or pay 

for the cost of containing or cleaning up pollution. 

Environmental Performance. Each Party will encourage the development and use of flexible, voluntary, and incentive-based mechanisms for environmental protection and will also encourage the 

development and improvement of goals and indicators for measuring environmental performance as well as flexible means for 

achieving performance goals. 

Institutional Arrangements and Cooperation. Chapter Twenty establishes a senior-level Environment Affairs Council to oversee implementation of the Chapter. The Council will provide for the public to participate in its work, including by affording an opportunity 

at each Council meeting, unless the Parties otherwise agree, for the 

public to express views on how the Chapter is being implemented. 

The Council must also provide appropriate opportunities for the 

public to participate in the development and implementation of 

joint environmental activities, including those developed under a 

separate bilateral environmental cooperation agreement that the 

Parties have signed. 

Public Participation and Submissions. Each Party must provide 

for the receipt and consideration of submissions from persons of a 

Party on matters related to implementation of the Chapter. Each 

Party will also convene a national advisory committee to solicit 

views on those matters and to submit to the Joint Committee a 


erowe on DSK2VPTVN1PROD with 
35 

written report on the implementation of the Chapter’s public participation provisions within 180 days after the Agreement enters 

into force. 

Dispute Settlement. Chapter Twenty provides for cooperative consultations as a first step if a Party considers that the other Party 

is not complying with its obligations under the Chapter. The complaining Party may, after an initial 60-day consultation period, invoke the Agreement’s general dispute settlement mechanism by requesting additional consultations or a meeting of the Joint Committee under Chapter Twenty-Two (Institutional Provisions and 

Dispute Settlement). If the Joint Committee is unable to resolve 

the dispute, the matter may be referred to a dispute settlement 

panel. 

CHAPTER TWENTY-ONE: TRANSPARENCY

Chapter Twenty-One sets out requirements designed to foster 

openness, transparency, and fairness in the adoption and application of measures respecting matters covered by the Agreement. 

Each Party must promptly publish all laws, regulations, procedures, and administrative rulings of general application concerning 

matters covered by the Agreement, or otherwise make them publicly available. To the extent possible, the Parties must publish proposed regulations in advance and give interested persons a reasonable opportunity to comment. The Chapter further provides that 

proposed regulations published by the central level of government 

must be published in a single official journal of national circulation 

and include an explanation of their purpose and rationale. 

Wherever possible, each Party must provide reasonable notice to 

the other Party’s nationals and enterprises that are directly affected by an administrative proceeding, such as an adjudication, 

rulemaking, licensing, determination, or approval process. A Party 

must afford such persons a reasonable opportunity to present facts 

and arguments before taking any final action, when time, the nature of the process, and the public interest permit. 

Chapter Twenty-One also provides for independent review and 

appeal of final administrative actions. Appeal rights must include 

a reasonable opportunity to present arguments and to obtain a decision based on evidence in the administrative record. 

Chapter Twenty-One reaffirms the Parties’ resolve to eliminate 

bribery and corruption in international trade and investment. To 

this end, each Party is obligated to make it a criminal offense for 

their public officials to solicit or accept a bribe, and for any person 

to bribe a public official in exchange for favorable government action in matters affecting international trade or investment. Each 

Party must also adopt measures to protect persons who, in good 

faith, report acts of bribery or corruption. The Parties will also endeavor to work together to encourage and support initiatives in relevant international fora to prevent bribery and corruption. 

CHAPTER TWENTY-TWO: INSTITUTIONAL PROVISIONS AND DISPUTE

SETTLEMENT

Section A of Chapter Twenty-Two creates a Joint Committee, to 

be co-chaired by the Parties’ trade ministers. The committee will be 

charged with supervising the implementation and overall operation 

of the Agreement. The committee may, among other things, issue 


erowe on DSK2VPTVN1PROD with 
36 

interpretations of the Agreement’s provisions and consider accelerating the elimination of duties on particular products or adjusting the Agreement’s product-specific rules of origin. The Joint Committee will also assist in the resolution of any disputes that may 

arise under the Agreement and supervise the work of the various 

expert committees and other bodies established under the Agreement. 

Chapter Twenty-Two also establishes two committees. One committee, established in Annex 22–B, will review and make recommendations to the Parties on whether conditions on the Korean 

Peninsula are appropriate for the development of outward processing zones. A second committee, to be convened under Annex 22– 

C, will promote bilateral cooperation on fisheries matters. 

Section B of Chapter Twenty-Two sets out detailed procedures 

for the resolution of disputes between the Parties regarding the interpretation or application of the Agreement. These procedures emphasize amicable settlements, relying wherever possible on bilateral cooperation and consultations. When disputes arise under provisions common to the Agreement and other agreements (e.g., the 

WTO agreements), the complaining government may choose a 

forum for resolving the matter that is set forth in any valid agreement between the Parties. The selected forum will be the exclusive 

venue for resolving that dispute. 

Consultations. A Party may request consultations with the other 

Party on any matter that it believes might affect the operation of 

the Agreement. If the Parties cannot resolve the matter through 

consultations within a specified period (normally 60 days), either 

Party may refer the matter to the Joint Committee, which will attempt to resolve the dispute. 

Panel Procedures. If the Joint Committee cannot resolve the dispute within a specified period (normally 60 days), the complaining 

Party may refer the matter to a panel comprising independent experts that the Parties select. The Parties will set rules to protect 

confidential information, provide for open hearings and public release of submissions, and allow an opportunity for the panel to accept submissions from non-governmental entities in the Parties’ 

territories. 

Unless the Parties agree otherwise, a panel is to present its initial report within 180 days after the panel chair is appointed. Once 

the panel presents its initial report containing findings of fact and 

a determination on whether a Party has met its obligations, the 

Parties will have the opportunity to provide written comments to 

the panel. When the panel receives these comments, it may modify 

its report and make any further examination that it considers appropriate. Within 45 days after it presents its initial report, the 

panel will submit its final report. The Parties will then seek to 

agree on how to resolve the dispute, normally in a way that conforms to the panel’s determinations and recommendations. Subject 

to protection of confidential information, the panel’s final report 

will be made available to the public 15 days after the Parties receive it. 

Suspension of Benefits. If the Parties cannot resolve the dispute 

after they receive the panel’s final report, the Parties will seek to 

agree on acceptable trade compensation. If they cannot agree on 

compensation, or if the complaining Party believes the defending 


erowe on DSK2VPTVN1PROD with 
37 

Party has failed to implement an agreed resolution, the complaining Party may provide notice that it intends to suspend trade 

benefits equivalent in effect to those it considers were impaired, or 

may be impaired, as a result of the disputed measure. 

If the defending Party considers that the proposed level of benefits to be suspended is ‘‘manifestly excessive,’’ or believes that it 

has modified the disputed measure to make it conform to the 

Agreement, it may request the panel to reconvene and decide the 

matter. The panel must issue its determination no later than 90 

days after the request is made (or 120 days if the panel is reviewing both the level of the proposed suspension and a modification of 

the measure). 

The complaining Party may suspend trade benefits up to the 

level that the panel sets or, if the panel has not been asked to determine the level, up to the amount that the complaining Party has 

proposed. The complaining Party cannot suspend benefits, however, 

if the defending Party provides notice that it will pay an annual 

monetary assessment to the other Party. The amount of the assessment will be established by agreement of the Parties or, failing 

that, will be set at 50 percent of the level of trade concessions the 

complaining Party was authorized to suspend. 

Compliance Review Mechanism. If, at any time, the defending 

Party believes it has made changes in its laws or regulations sufficient to comply with its obligations under the Agreement, it may 

refer the matter to the panel. If the panel agrees, the dispute ends 

and the complaining Party must withdraw any offsetting measures 

it has put in place. Concurrently, the defending government will be 

relieved of any obligation to pay a monetary assessment. 

Special Provisions for Disputes Relating to Motor Vehicles. Annex 

22–A establishes an expedited dispute settlement mechanism for 

disputes concerning motor vehicles. The annex provides a shortened schedule for selecting panelists and for panel proceedings. If 

a panel determines that a Party has not met its obligations under 

the Agreement in a matter that relates to motor vehicles and, as 

a result, has materially affected their sale or distribution, the other 

Party may increase its tariff with respect to passenger vehicles 

(i.e., vehicles classified under heading 87.03 of the Harmonized 

Commodity Description and Coding System) up to its prevailing 

NTR (MFN) applied tariff rate until the violation is remedied. 

Settlement of Private Disputes. Section C of Chapter Twenty-Two 

calls for the Parties to encourage the use of arbitration and other 

alternative dispute resolution mechanisms to settle international 

commercial disputes between private parties. Each Party must provide appropriate procedures for the recognition and enforcement of 

arbitral awards, for example by complying with the 1958 United 

Nations Convention on the Recognition and Enforcement of Foreign 

Arbitral Awards. 

CHAPTER TWENTY-THREE: EXCEPTIONS

Chapter Twenty-Three sets out provisions that generally apply to 

the entire Agreement. The Chapter makes Article XX of the GATT 

1994 and its interpretive notes part of the Agreement, mutatis mutandis, for purposes of those Chapters related to treatment of 

goods. Likewise, Article XIV of the WTO General Agreement on 

Trade in Services is made part of the Agreement for purposes of 


erowe on DSK2VPTVN1PROD with 
38 

Chapters Twelve (Cross-Border Trade in Services), Fourteen (Telecommunications), and Fifteen (Electronic Commerce). For both 

goods and services, the Parties understand that these exceptions 

include environmental measures necessary to protect human, animal, or plant life or health and measures relating to the conservation of living and non-living exhaustible natural resources. 

Essential Security. Chapter Twenty-Three makes clear that nothing in the Agreement prevents a Party from taking actions it considers necessary to protect its essential security interests, and specifically provides that an arbitration panel must apply the essential 

security exception if a Party invokes it. United States Annex II 

clarifies that non-conforming measures relating to the landside aspects of port activities are subject to the Agreement’s essential security exception. 

Taxation. A general exception set out in the Chapter provides 

that only certain provisions of the Agreement apply to taxation 

measures. For example, the exception generally provides that the 

Agreement does not affect a Party’s rights or obligations under any 

tax convention. The exception specifies that certain rules established under the Agreement do apply to certain tax measures, 

namely: (1) national treatment for goods; (2) national treatment 

and NTR (MFN) for services; (3) prohibitions on performance requirements; and (4) expropriation rules. 

Disclosure of Information. The Chapter provides that a Party 

may withhold information from the other Party if disclosing the information would be contrary to the public interest or prejudice the 

legitimate commercial interests of particular enterprises. 

CHAPTER TWENTY-FOUR: FINAL PROVISIONS

Chapter Twenty-Four provides that (i) the annexes, appendices, 

and footnotes to the Agreement are an integral part of the Agreement; (ii) the Parties may amend the Agreement, subject to the 

each Party’s legal requirements; and (iii) the English and Korean 

language texts of the Agreement are both authentic. The Chapter 

also provides for the Parties to consult if any provision of the WTO 

Agreement that the Parties have incorporated into the Agreement 

is amended. 

Finally, Chapter Twenty-Four establishes procedures for the 

Agreement to enter into force and terminate. 

E. GENERAL DESCRIPTION OF THE BILL TO IMPLEMENT THE

AGREEMENT

Sec. 1. Short title; table of contents 

This section provides that the short title of the act implementing 

the Agreement is the ‘‘United States-Korea Free Trade Agreement 

Implementation Act’’ (‘‘Implementation Act’’). Section 1 also provides the table of contents for the Implementation Act. 

Sec. 2. Purposes 

This section provides that the purposes of the Implementation 

Act are to approve and implement the Agreement, to secure the 

benefits of the Agreement pursuant to the exchange of letters on 

February 10, 2011, to strengthen and develop economic relations 

between the United States and Korea, to establish free trade beVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00038 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
39 

tween the United States and Korea through the reduction and 

elimination of barriers to trade in goods and services and to investment, and to lay the foundation for further cooperation to expand 

and enhance the benefits the Agreement. 

Sec. 3. Definitions 

This section defines the terms ‘‘Agreement,’’ ‘‘Commission,’’ 

‘‘HTS,’’ and ‘‘Textile or apparel good’’ for purposes of the Implementation Act. 

TITLE I—APPROVAL OF, AND GENERAL PROVISIONS 

RELATING TO, THE AGREEMENT 

Sec. 101. Approval and entry into force of the Agreement 

This section provides congressional approval for the Agreement 

and its accompanying SAA. Section 101 also provides that, if the 

President determines that Korea has taken measures necessary to 

comply with obligations that take effect at the time the Agreement 

enters into force, the President may exchange notes with Korea 

providing for the entry into force of the Agreement with respect to 

the United States on or after January 1, 2012. 

Sec. 102. Relationship of the Agreement to United States and state 

law 

This section establishes the relationship between the Agreement 

and U.S. law. Section 102 clearly states that no provision of the 

Agreement will be given effect if it is inconsistent with any federal 

law. 

Section 102 also provides that only the United States may bring 

a court action to resolve a conflict between a state law and the 

Agreement. And it precludes any private right of action against the 

federal government, state or local governments, or a private party 

based on the provisions of the Agreement. 

Sec. 103. Implementing actions in anticipation of entry into force 

and initial regulations 

This section provides that, following the enactment of the Implementation Act, the President may proclaim such actions, and other 

appropriate officers of the federal government may issue such regulations, as may be necessary to ensure that provisions of the legislation that take effect on the date the Agreement enters into force 

are appropriately implemented on that date. Section 103 further 

provides that, with respect to any action proclaimed by the President that is not subject to the consultation and layover provisions 

contained in section 104, such action may not take effect before the 

15th day after the date on which the text of the proclamation is 

published in the Federal Register. The 15-day restriction is waived, 

however, to the extent that it would prevent an action from taking 

effect on the date the Agreement enters into force. Section 103 also 

provides that, to the maximum extent feasible, initial regulations 

necessary or appropriate to carry out the actions required by the 

Implementation Act or proposed in the SAA shall be issued within 

1 year after the date on which the Agreement enters into force. In 

accordance with the SAA, any agency unable to issue a regulation 

within 1 year must report to the relevant Congressional commitVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00039 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
40 

tees, at least 30 days prior to the end of the 1-year period, the reasons for the delay and the expected date for issuance of the regulation. 

Sec. 104. Consultation and layover provisions for, and effective date 

of, proclaimed actions 

This section sets forth consultation and layover steps that must 

precede the President’s implementation of any action by proclamation that is subject to the requirements of this section. Under the 

consultation and layover provisions, the President must obtain advice regarding the proposed action from the Commission and from 

the appropriate advisory committees established under section 135 

of the Trade Act of 1974 (19 U.S.C. § 2155). The President must 

also submit to the Senate Committee on Finance and the House 

Committee on Ways and Means a report that sets forth the action 

proposed, the reasons for the proposed action, and the advice of the 

appropriate advisory committees and the Commission. Section 104 

sets aside a 60-day period following the date of transmittal of the 

report for the President to consult with the Senate Committee on 

Finance and the House Committee on Ways and Means on the proposed action. 

Sec. 105. Administration of dispute settlement proceedings 

This section authorizes the President to establish or designate 

within the Department of Commerce an office responsible for providing administrative assistance to dispute settlement panels established under Chapter 21 of the Agreement. Section 105 also authorizes the appropriation of funds to support this office. 

Sec. 106. Arbitration of claims 

This section authorizes the United States to use binding arbitration to resolve certain claims against the United States pursuant 

to the Investor-State Dispute Settlement procedures set forth in 

section B of Chapter 11 of the Agreement. 

Sec. 107. Effective dates; effect of termination 

This section provides that the provisions of the Implementation 

Act and the amendments made by it take effect on the date on 

which the Agreement enters into force, except for sections 1 

through 3, section 207(g), title I and title V, which take effect on 

the date of enactment of the Implementation Act. In addition, section 107 provides that the amendments made by sections 203, 204, 

206, and 401 take effect on the date of the enactment of the Implementation Act and apply with respect to Korea on the date on 

which the Agreement enters into force. Section 107 also provides 

that the provisions of the Implementation Act and the amendments 

to other statutes made by it will cease to have effect on the date 

on which the Agreement terminates. 

TITLE II—CUSTOMS PROVISIONS 

Sec. 201. Tariff modifications 

Section 201(a) authorizes the President to implement by proclamation the modification or continuation of any duty, imposition of 

any additional duties, or the continuation of duty-free or excise 


erowe on DSK2VPTVN1PROD with 
41 

treatment that the President determines to be necessary or appropriate to carry out or apply Articles 2.3, 2.5, 2.6, and Annex 2–B, 

Annex 4–B, and Annex 22–A of the Agreement. 

Section 201(b) authorizes the President, subject to the consultation and layover provisions of section 104, to proclaim the modification or continuation of any duty, the modification of the staging of 

any duty elimination, the imposition of additional duties, or the 

continuation of duty-free or excise treatment that the President determines to be necessary or appropriate to maintain the general 

level of reciprocal and mutually advantageous concessions with respect to Korea provided by the Agreement. 

Section 201(c) authorizes the President, with respect to any good 

for which the base rate of duty in the Tariff Schedule of the United 

States to Annex 2–B of the Agreement is a specific or compound 

rate of duty, to substitute for the base rate an ad valorem rate that 

the President determines to be equivalent to the base rate. 

Section 201(d) authorizes the President to proclaim tariff modifications with respect to motor vehicles of Korea, consistent with 

the agreement entered into pursuant to an exchange of letters between the United States and the Government of Korea on February 

10, 2011. 

Sec. 202. Rules of origin 

Section 202 implements the rules of origin set forth in Article 4.2 

and Chapter 6 of the Agreement. These rules define the circumstances under which a good imported from Korea qualifies as 

an originating good and is thus eligible for preferential tariff treatment under the Agreement. 

Section 202(a) establishes the Harmonized Tariff Schedule of the 

United States (‘‘HTS’’) as the basis of any tariff classification. It 

also provides that any cost or value referred to in section 202 shall 

be recorded and maintained in accordance with the generally accepted accounting principles applicable in the territory of the country in which the good is produced. 

Section 202(b) provides that a good is an originating good if it 

falls within one of three specified categories. First, a good qualifies 

as an originating good if it is wholly obtained or produced entirely 

in the territory of Korea, the United States, or both. Second, a good 

qualifies as an originating good if the good is produced in the territory of Korea, the United States, or both, and the materials used 

to produce the good that are not themselves originating goods are 

transformed in such a way as to cause their tariff classification to 

change and to meet other requirements specified in Annex 4–A or 

Annex 6–A of the Agreement. Third, and finally, a good qualifies 

as an originating good if the good is produced entirely in the territory of Korea, the United States, or both, exclusively from materials that fall within the first two categories. 

The remainder of section 202 sets forth specific rules related to 

determining whether a good meets the Agreement’s specific requirements to qualify as an originating good. Section 202(c) implements provisions in Annex 6–A of the Agreement that require certain goods to have a specified percentage of ‘‘regional value content’’ to qualify as originating goods. It prescribes alternative methods for calculating regional value content, as well as a specific 

method that must be used in the case of certain automotive goods. 


erowe on DSK2VPTVN1PROD with 
42 

Section 202(d) addresses how materials are to be valued for purposes of calculating the regional value content of a good under subsection 202(c) and for purposes of applying the de minimis rules 

under subsection 202(f). Section 202(e) provides a rule of accumulation for originating materials from the territory of Korea or the 

United States that are used in the production of a good in the territory of the other country. Section 202(f) provides that a good is not 

disqualified as an originating good if it contains de minimis quantities of non-originating materials that do not undergo a change in 

tariff classification. Section 202(g) addresses how to determine 

whether fungible goods and materials qualify as originating or nonoriginating under the Agreement. Section 202(h) provides rules for 

the treatment of accessories, spare parts, or tools that are delivered 

with a good. Sections 202(i) and (j) address the treatment of packaging materials and containers for retail sale and for shipment in 

determining whether a good qualifies as an originating good. Section 202(k) provides that indirect materials shall be treated as originating materials without regard to where they are produced. Section 202(l) provides rules for the treatment of goods that undergo 

further production in a third country or that otherwise transit 

through a third country. And section 202(m) provides rules for the 

treatment of goods classifiable as sets. 

Section 202(n) defines various terms used in section 202. Section 

202(o) authorizes the President to proclaim the specific rules of origin set forth in Annex 4–A and Annex 6–A of the Agreement and 

to modify certain rules of origin in the Agreement by proclamation 

subject to the consultation and layover provisions of section 104. 

Sec. 203. Customs user fees 

This section provides for the immediate elimination of the merchandise processing fee for goods qualifying as originating goods 

under the Agreement. Processing of goods qualifying as originating 

goods will be financed from the General Fund of the Treasury. 

Sec. 204. Disclosure of incorrect information; false certifications of 

origin; denial of preferential tariff treatment 

Section 204(a) amends section 592 of the Tariff Act of 1930 (19 

U.S.C. § 1592) to impose penalties on an importer, exporter, or producer that makes an invalid claim for preferential tariff treatment 

under the Agreement through negligence, gross negligence, or 

fraud, unless the importer, exporter, or producer, after discovering 

that the claim is invalid, promptly and voluntarily corrects the 

claim and pays any customs duties owed. Section 204(b) amends 

section 514 of the Tariff Act of 1930 (19 U.S.C. § 1514) to provide 

that, if an importer, exporter, or producer has engaged in a pattern 

of conduct in providing false representations that a good qualifies 

as originating, the United States may suspend preferential tariff 

treatment under the Agreement to identical goods covered by any 

subsequent representations that the person may make. 

Sec. 205. Reliquidation of entries 

Section 205 amends section 520(d) of the Tariff Act of 1930 (19 

U.S.C. § 1520(d)) to allow an importer to claim preferential tariff 

treatment for an originating good within 1 year of importation, 

even if no such claim was made at the time of the importation. 


erowe on DSK2VPTVN1PROD with 
43 

Sec. 206. Recordkeeping requirements 

Section 206 amends section 508 of the Tariff Act of 1930 (19 

U.S.C. § 1508) to establish recordkeeping requirements for U.S. exporters and producers that issue certifications of origin for goods 

exported to Korea. 

Sec. 207. Enforcement relating to trade in textile or apparel goods 

This section authorizes the President to apply anti-circumvention 

provisions concerning trade in textile and apparel goods. Pursuant 

to article 4.3 of the Agreement, the Secretary of the Treasury (‘‘Secretary’’) may request that the Government of Korea conduct a 

verification to determine the compliance of exporters and producers 

with applicable customs laws, regulations, and procedures regarding trade in textile or apparel goods, and to determine the accuracy 

of a claim of origin for a textile or apparel good. Section 207(a) provides that the President may direct the Secretary to take ‘‘appropriate action’’ while the verification is being conducted. Under section 207(b), such appropriate action includes suspension of liquidation of the entry of any textile or apparel good exported or produced by the subject of the verification or for which a claim has 

been made that is the subject of verification. 

Section 207(c) permits the President to direct the Secretary to 

take ‘‘appropriate action’’ after a verification has been completed. 

Section 207(d) defines ‘‘appropriate action’’ to include the denial of 

preferential treatment or entry to textile or apparel goods that the 

person subject to the verification has exported or produced until 

such time as the Secretary receives information sufficient to prove 

compliance or until an earlier date as the President may direct. 

Section 207(e) permits the Secretary to publish the name of any 

person that the Secretary determines has engaged in circumvention 

of applicable laws, regulations, or procedures affecting trade in textile or apparel goods or has failed to demonstrate that it produces, 

or is capable of producing, textile or apparel goods. 

Section 207(f) permits the Commissioner of Customs to require 

an importer to submit a certificate of eligibility, which must be 

signed by an authorized official of the Government of Korea, to receive preferential tariff treatment under Article 4–B of the Agreement. 

Section 207(g) permits the Secretary to request a verification of 

the production of any textile or apparel good if requested by a 

party to a free trade agreement. This provision applies to all trade 

agreement partners. 

Sec. 208. Regulations 

Section 208 authorizes the Secretary to prescribe regulations necessary to carry out the rules of origin and customs user fee provisions in the Implementation Act and to carry out the President’s 

proclamation authority under section 202(o). 

TITLE III—RELIEF FROM IMPORTS 

Sec. 301. Definitions 

This section defines the terms ‘‘Korean article,’’ ‘‘Korean motor 

vehicle article,’’ and ‘‘Korean textile or apparel article’’ for purposes 

of this title. Section 301(1) defines ‘‘Korean article’’ as an article 


erowe on DSK2VPTVN1PROD with 
44 

that qualifies as an originating good under section 202(b) of the Implementation Act. Section 301(2) defines ‘‘Korean motor vehicle article’’ as a good provided for in heading 8703 or 8704 of the HTS 

that qualifies as an originating good under section 202(b) of the Implementation Act. And section 301(3) defines ‘‘Korean textile or apparel article’’ as a ‘‘textile or apparel good’’ as defined in section 

3(5) (a good listed in the Annex to the WTO Agreement on Textiles 

and Clothing) that is a Korean article. 

SUBTITLE A—RELIEF FROM IMPORTS BENEFITING FROM THE

AGREEMENT

Subtitle A of title III implements the bilateral safeguard provisions set out in Chapter Ten of the Agreement. It authorizes the 

President, after an investigation and affirmative determination by 

the Commission, to suspend duty reductions or impose duties temporarily up to NTR (MFN) rates on a ‘‘Korean article’’ when, as a 

result of the reduction or elimination of a duty under the Agreement, the article is being imported into the United States in such 

increased quantities and under such conditions as to be a substantial cause of serious injury or threat of serious injury to a domestic 

industry that produces a like or directly competitive good. The 

standards and procedures set out in this subtitle closely parallel 

the procedures for global safeguards set forth in sections 201 

through 204 of the Trade Act of 1974 (19 U.S.C. §§ 2251–2254). 

Sec. 311. Commencing of action for relief 

Section 311(a) requires an entity that is representative of an industry to file a petition with the Commission to commence a bilateral safeguard investigation. Section 311(a) defines an entity to include a trade association, firm, certified or recognized union, or a 

group of workers. 

Section 311(b) provides that, upon the filing of a petition, the 

Commission shall promptly initiate an investigation to determine 

whether, as a result of the reduction or elimination of a duty provided for under the Agreement, a Korean article is being imported 

into the United States in such increased quantities and under such 

conditions that imports of the Korean article constitute a substantial cause of serious injury, or threat of serious injury, to the domestic industry producing an article that is like, or directly competitive with, the imported article. 

Section 311(c) extends certain provisions (both substantive and 

procedural) contained in subsections (b), (c), (d), and (i) of section 

202 of the Trade Act of 1974 (19 U.S.C. § 2252(b), (c), (d), and (i)), 

which apply to global safeguard investigations, to any bilateral 

safeguard initiated under the Agreement. These provisions include, 

inter alia, the requirement that the Commission publish notice of 

the commencement of an investigation; the requirement that the 

Commission hold a public hearing at which interested parties and 

consumers have the right to be present and to present evidence; 

the factors to be taken into account by the Commission in making 

its determinations; provisional relief; and authorization for the 

Commission to promulgate regulations providing access to confidential business information under protective order to authorized 

representatives of interested parties in an investigation. 


erowe on DSK2VPTVN1PROD with 
45 

Section 311(d) precludes the initiation of a bilateral safeguard investigation with respect to any Korean article for which import relief has already been provided under subtitle A. 

Sec. 312. Commission action on petition 

Section 312(a) establishes deadlines for Commission action following the initiation of a bilateral safeguard investigation. Section 

312(b) applies certain statutory provisions regarding an equally divided vote by the Commission in a global safeguard investigation 

under section 202 of the Trade Act of 1974 (19 U.S.C. § 2252) to 

Commission determinations and findings under this section. If the 

Commission renders an affirmative injury determination or a determination that the President may treat as an affirmative determination in the event of an equally divided vote by the Commission, section 312(c) requires the Commission to find and recommend to the President the amount of import relief that is necessary to remedy or prevent the injury and to facilitate the efforts 

of the domestic industry to make a positive adjustment to import 

competition. Section 312(d) requires the Commission to submit a 

report to the President regarding its determination and specifies 

the information that the Commission must include in the report. 

Upon submitting the report to the President, section 312(e) requires the Commission to promptly release the report to the public, 

except for any confidential information contained therein, and to 

publish a summary of the report in the Federal Register. 

Sec. 313. Provision of relief 

Section 313(a) directs the President, not later than 30 days after 

receiving the report from the Commission, to provide relief from 

imports of the article subject to an affirmative determination by 

the Commission, or a determination that the President treats as affirmative, to the extent that the President determines is necessary 

to remedy or prevent the injury and to facilitate the efforts of the 

domestic industry to make a positive adjustment to import competition. Section 313(b), however, provides that the President need not 

provide import relief if the President determines that the import 

relief will not provide greater economic and social benefits than 

costs. 

Section 313(c) specifies the nature of the import relief that the 

President may impose, which includes the suspension of any further reduction in the rate of duty imposed on the article in question under Annex 2–B of the Agreement and an increase in the 

rate of duty imposed on such article to a level that does not exceed 

the lesser of (1) the NTR (MFN) duty rate at the time the import 

relief is provided; or (2) the NTR (MFN) duty rate on the day before the Agreement enters into force. Section 313(c) also requires 

the President to provide for the progressive liberalization of import 

relief at regular intervals during the period of its application if that 

period exceeds 1 year. 

Section 313(d) limits any import relief that the President imposes 

in a bilateral safeguard action to no more than 3 years in the aggregate. The initial period of import relief that the President imposes may not exceed 2 years. The President may extend the relief 

up to an additional year, however, if (1) the Commission makes an 

affirmative determination, or a determination that the President 


erowe on DSK2VPTVN1PROD with 
46 

treats as affirmative, that import relief continues to be necessary 

to remedy or prevent serious injury and that there is evidence that 

the domestic industry is making a positive adjustment to import 

competition; and (2) the President makes a determination to the 

same effect. 

Section 313(e) specifies the duty rate to be applied to Korean articles after termination of a safeguard action. On the termination 

of import relief, the rate of duty for the remainder of the calendar 

year shall be the rate that was scheduled to have been in effect but 

for the provision of such relief. 

Section 313(f) precludes the application of import relief pursuant 

to the bilateral safeguard provisions with respect to any Korean article that is (1) subject to import relief under subtitle B or C of title 

III of the Implementation Act; or (2) subject to import relief under 

the global safeguard provisions in chapter 1 of title II of the Trade 

Act of 1974 (19 U.S.C. §§ 2251 et seq). 

Sec. 314. Termination of relief authority 

This section provides that the President’s authority to impose import relief under the bilateral safeguard expires 10 years after the 

date on which the Agreement enters into force. If, however, the period for elimination of duties on a particular article exceeds 10 

years, relief may be provided for that article until the date on 

which the duty elimination period ends. Relief may also be provided beyond 10 years after the date on which the Agreement enters into force or the period for elimination of duties if the President determines that Korea has consented to such relief. 

Sec. 315. Compensation authority 

This section authorizes the President, under section 123 of the 

Trade Act of 1974 (19 U.S.C. § 2133), to grant new concessions to 

Korea as compensation for the imposition of import relief pursuant 

to the bilateral safeguard. 

Sec. 316. Confidential business information 

This section applies the same procedures for the treatment and 

release of confidential business information by the Commission in 

a global safeguard investigation under chapter 1 of title II of the 

Trade Act of 1974 (19 U.S.C. §§ 2251 et seq.) to investigations 

under title III of the Implementation Act. 

SUBTITLE B—MOTOR VEHICLE SAFEGUARD MEASURES

Sec. 321. Motor vehicle safeguard measures 

Subtitle B of title III implements the motor vehicle safeguard established by the exchange of letters between the United States and 

the Government of Korea on February 10, 2011, related to trade in 

motor vehicles. Section 321(1) provides that the same product can 

be the basis for according relief more than once and that progressive liberalization is not required while relief is being provided. 

Section 321(2) provides that relief may be extended for up to 2 

years. Section 321(3) provides that relief may be provided for a 

total of up to 4 years. Section 321(4) provides that subtitle B exceptions shall not apply to any relief action brought under subtitle A. 

Section 321(5) provides that import relief may be provided with reVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00046 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
47 

spect to a Korean motor vehicle article up to 10 years after the 

date on which duties on the article are eliminated. 

SUBTITLE C—TEXTILE AND APPAREL SAFEGUARD MEASURES

Subtitle C of title III implements the Agreement’s textile and apparel safeguard. 

Sec. 331. Commencement of action for relief 

Section 331(a) requires an interested party to file a request with 

the President in order to commence action for relief under the textile and apparel safeguard. Upon the filing of a request, the President must review the request to determine, from information presented in the request, whether to commence consideration of the 

request on its merits. Section 331(b) provides that, if the President 

determines that the request contains the information necessary for 

the request to be considered on the merits, the President must publish notice in the Federal Register stating that the request will be 

considered and seeking public comments on the request. The notice 

must contain a summary of the request and the dates by which 

comments and rebuttals must be received. 

The Committee notes our regulatory processes should be administered in an open and transparent manner that can serve as a 

model for our trading partners. The Committee notes that the SAA 

states that, in addition to publishing a summary of a request for 

safeguard relief, the President plans to make the full text of the 

request available on the U.S. Department of Commerce’s International Trade Administration website, subject to the protection of 

confidential business information, if any. The Committee encourages this and similar efforts to enhance government transparency. 

Sec. 332. Determination and provision of relief 

Section 332 sets out the procedures to be followed in considering 

a request filed under section 331. If a positive determination is 

made under section 331(b), section 332(a) requires the President to 

determine whether, as a result of the elimination of a duty under 

the Agreement, a Korean textile or apparel article is being imported into the United States in such increased quantities and 

under such conditions as to cause serious damage, or actual threat 

thereof, to a domestic industry producing an article that is like, or 

directly competitive with, the imported article. Section 332(a) also 

provides that, in making such a determination, the President shall 

examine the effect of increased imports on the domestic industry’s 

output, productivity, capacity utilization, inventories, market 

share, exports, wages, employment, domestic prices, profits and 

losses, and investment, no one of which is necessarily decisive. Finally, section 332(a) provides that the President shall not consider 

changes in consumer preference or technology as factors supporting 

a determination of serious damage or actual threat thereof. 

Section 332(b) authorizes the President, in the event of an affirmative determination of serious damage or actual threat thereof, 

to provide import relief to the extent that the President determines 

is necessary to remedy or prevent the serious damage and to facilitate adjustment by the domestic industry. Section 332(b) also specifies the nature of the import relief that the President may impose, 

which consists of suspension of any further duty reduction provided 


erowe on DSK2VPTVN1PROD with 
48 

for under Annex 2–B of the Agreement in the duty imposed on the 

article, or an increase in the rate of duty imposed on the article to 

a level that does not exceed the lesser of (1) the NTR (MFN) duty 

rate in place for the textile or apparel article at the time the import 

relief is provided; or (2) the NTR (MFN) duty rate for that article 

on the day before the Agreement enters into force. 

Sec. 333. Period of relief 

Section 333 limits any import relief that the President imposes 

under the textile and apparel safeguard to no more than 4 years 

in the aggregate. Section 333(a) provides that the initial period of 

import relief that the President imposes may not exceed 2 years. 

Under section 333(b), however, the President may extend the relief 

up to 2 additional years if the President determines that (1) the import relief continues to be necessary to remedy or prevent serious 

damage and to facilitate adjustment by the domestic industry to 

import competition; and (2) there is evidence that the domestic industry is, in fact, adjusting to import competition. 

Sec. 334. Articles exempt from relief 

This section precludes the President from providing import relief 

under the textile and apparel safeguard with respect to a Korean 

article if import relief previously has been provided under subtitle 

C of title III of the Implementation Act or if the article is subject 

to import relief under subtitle A of title III of the Implementation 

Act or under the global safeguard provisions in chapter 1 of title 

II of the Trade Act of 1974 (19 U.S.C. §§ 2251 et seq.). 

Sec. 335. Rate after termination of import relief 

This section provides that the duty rate applicable to a textile or 

apparel article after termination of the import relief shall be the 

duty rate that would have been in effect for that article, but for the 

provision of such relief, on the date on which the relief terminates. 

Sec. 336. Termination of relief authority 

This section provides that the President’s authority to impose import relief under the textile and apparel safeguard with respect to 

any article expires 10 years after the date on which duties on the 

article are eliminated under the Agreement. 

Sec. 337. Compensation authority 

This section authorizes the President, under section 123 of the 

Trade Act of 1974 (19 U.S.C. § 2133), to grant new concessions to 

Korea as compensation for the imposition of import relief pursuant 

to the textile and apparel safeguard. 

Sec. 338. Confidential business information 

This section precludes the President from releasing information 

received in a textile and apparel safeguard proceeding that the 

President considers to be confidential business information unless 

the party submitting the confidential business information had notice, at the time of submission, that the information would be released by the President, or the party subsequently consents to the 

release of the information. This section also provides that, to the 

extent a party submits confidential business information to the 


erowe on DSK2VPTVN1PROD with 
49 

President, the party shall also submit a nonconfidential version of 

the information in which the confidential business information is 

summarized or, if necessary, deleted. 

SUBTITLE D—CASES UNDER TITLE II OF THE TRADE ACT OF 1974

Subtitle D of title III implements the global safeguard provisions 

of the Agreement. It authorizes the President, in granting global 

import relief under the global safeguard provisions in sections 201 

through 204 of the Trade Act of 1974 (19 U.S.C. §§ 2251–2254), to 

exclude imports of originating articles from the relief when certain 

conditions are present. 

Sec. 341. Findings and action on Korean articles 

Section 341(a) provides that, if the Commission makes an affirmative determination, or a determination that the President may 

treat as an affirmative determination, in a global safeguard investigation initiated under chapter 1 of title II of the Trade Act of 

1974 (19 U.S.C. §§ 2251 et seq.), the Commission must find and report to the President whether imports of the Korean article are a 

substantial cause of serious injury or threat thereof. Section 341(b) 

provides that, if the Commission makes a negative finding under 

section 341(a), the President may exclude the Korean articles from 

the global safeguard action. 

TITLE IV—PROCUREMENT 

Sec. 401. Eligible products 

This section amends section 308(4)(A) of the Trade Agreements 

Act of 1979 (19 U.S.C. § 2518(4)(A)) to implement the government 

procurement provisions of the Agreement. 

TITLE V—OFFSETS 

Sec. 501. Increase in penalty on paid preparers who fail to comply 

with earned income tax credit due diligence requirements 

Section 501 amends section 6695(g) of the Internal Revenue Code of 1986 to increase from $100 to $500 the penalty on tax return 

preparers who fail to comply with the due diligence requirements 

for determining eligibility for the earned income tax credit. The increased penalty applies to returns required to be filed after December 31, 2011. 

Sec. 502. Requirement for prisons located in the United States to 

provide information for tax administration 

Section 502 amends subchapter B of chapter 61 of the Internal 

Revenue Code of 1986 to require all prisons located in the United 

States to submit annually to the IRS a list of names and valid Social Security numbers of all inmates serving sentences of 1 year or 

more to assist in identifying fraudulent returns filed by prisoners. 

The information must be filed no later than September 15, 2012, 

and annually thereafter. 

Sec. 503. Merchandise processing fee 

Section 503 amends section 13031 of the Consolidated Omnibus 

Budget Reconciliation Act of 1985 (‘‘COBRA’’) to provide for an inVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00049 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
50 

crease in the current merchandise processing fee rate charged by 

Customs and Border Protection for formal entries to 0.3464 percent 

ad valorem and increases the cap on the range of such rate from 

0.21 percent to 0.3464 percent ad valorem. The change in rate addresses the increased costs Customs and Border Protection is incurring. The last legislative change to the merchandise processing fee 

occurred in 1995. The provision will be effective from December 1, 

2015, through June 30, 2021. 

Sec. 504. Customs user fees 

Section 504 amends section 13031 of COBRA to extend until August 2, 2021, the merchandise processing fees and until December 

8, 2020, the passenger and conveyance processing fees authorized 

under that act. 

Sec. 505. Time for payment of corporate estimated taxes 

Section 505 increases the amount of the required installment of 

estimated tax otherwise due from a corporation with at least $1 billion in assets in (1) July, August, or September 2012 by 0.25 percent; and (2) July, August, or September 2016 by 2.75 percent. The 

bill reduces the next required installment to reflect the prior increase. 

F. VOTE OF THE COMMITTEE IN REPORTING THE BILL

In compliance with section 133 of the Legislative Reorganization 

Act of 1946, the Committee states that on October 11, 2011, S. 

1642 was ordered favorably reported, without amendment, by voice 

vote. 

II. BUDGETARY IMPACT OF THE BILL 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, October 12, 2011. 

Hon. MAX BAUCUS, 

Chairman, Committee on Finance, 

U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 1642, the United StatesKorea Free Trade Agreement Implementation Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Kalyani Parthasarathy. 

Sincerely, 

DOUGLAS W. ELMENDORF, Director. 

Enclosure. 

S. 1642—United States-Korea Free Trade Agreement Implementation Act 

Summary: S. 1642 would approve the free trade agreement between the government of the United States and the government of 

the Republic of Korea (Korea) that was signed on June 30, 2007, 

and modified by a later agreement on December 3, 2010. It would 

provide for tariff reductions and other changes in law related to imVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00050 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
51 

plementation of the agreement. The bill would extend user fees collected by Customs and Border Protection (CBP) that expire under 

current law and would increase those fees. In addition, it would establish a reporting requirement for federal and state prisons for tax 

administration purposes and increase the penalties on tax preparers who did not comply with due-diligence requirements for the 

earned income tax credit. It also would shift some corporate income 

tax payments between fiscal years. 

The Congressional Budget Office (CBO) and the staff of the Joint 

Committee on Taxation (JCT) estimate that enacting S. 1642 would 

reduce revenues by $31 million in 2012 and by about $7.0 billion 

over the 2012–2021 period. CBO estimates that enacting S. 1642 

would increase direct spending by $53 million in 2012 but would 

decrease direct spending by about $7.0 billion over the 2012–2021 

period. The net impact of those effects is an estimated reduction in 

deficits of $16 million over the 2012–2021 period. Pay-as-you-go 

procedures apply because enacting the legislation would affect direct spending and revenues. 

Further, CBO estimates that implementing the legislation would cost $7 million over the 2012–2016 period, assuming the availability of appropriated funds. 

CBO has determined that the nontax provisions of S. 1642 contain no intergovernmental mandates as defined in the Unfunded 

Mandates Reform Act (UMRA), and would impose no costs on state, 

local, or tribal governments. 

CBO has determined that the nontax provisions of the bill contain private-sector mandates with costs that would exceed the annual threshold established in UMRA for private-sector mandates 

($142 million in 2011, adjusted annually for inflation). 

JCT has determined that the tax provisions of S. 1642 contain 

no intergovernmental or private-sector mandates as defined in 

UMRA. 

Estimated cost to the Federal Government: The estimated budgetary impact of S. 1642 is shown in the following table. The costs 

of this legislation fall within budget functions 150 (international affairs), 370 (commerce and housing credit), 750 (administration of 

justice), and 800 (general government). 


erowe on DSK2VPTVN1PROD with 
52 

By fiscal year, in millions of dollars— 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012– 2016 2012– 2021 

CHANGES IN REVENUES 

Free Trade Agreement ............................................................ ¥158 ¥312 ¥381 ¥462 ¥726 ¥873 ¥954 ¥1,043 ¥1,146 ¥1,254 ¥2,040 ¥7,310 

Prison Reporting Requirement ............................................... 0 6 13 13 14 14 15 15 16 16 46 122 EITC Preparer Penalty ............................................................. 9 19 19 20 20 21 21 22 23 23 87 197 Corporate Payment Shift ........................................................ 118 ¥118 0 0 1,894 ¥1,894 0 0 0 0 1,894 0 

Estimated Revenues ...................................................... ¥31 ¥405 ¥349 ¥429 1,202 ¥2,732 ¥918 ¥1,006 ¥1,107 ¥1,215 ¥13 ¥6,991 

CHANGES IN DIRECT SPENDING a

Extend Customs User Fees: 

Estimated Budget Authority .......................................... 0 0 0 0 0 0 0 0 ¥1,957 ¥2,186 0 ¥4,143 

Estimated Outlays ......................................................... 0 0 0 0 0 0 0 0 ¥1,957 ¥2,186 0 ¥4,143 

Exemption from Merchandise Processing Fee: 

Estimated Budget Authority .......................................... 53 95 99 104 161 180 189 198 208 184 511 1,470 Estimated Outlays ......................................................... 53 95 99 104 161 180 189 198 208 184 511 1,470 

Increase the Merchandise Processing Fee Rates: 

Estimated Budget Authority .......................................... 0 0 0 0 ¥572 ¥720 ¥756 ¥794 ¥835 ¥657 ¥572 ¥4,334 

Estimated Outlays ......................................................... 0 0 0 0 ¥572 ¥720 ¥756 ¥794 ¥835 ¥657 ¥572 ¥4,334 

Total Direct Spending a

Estimated Budget Authority ................................. 53 95 99 104 ¥411 ¥540 ¥567 ¥596 ¥2,584 ¥2,659 ¥61 ¥7,007 

Estimated Outlays ................................................ 53 95 99 104 ¥411 ¥540 ¥567 ¥596 ¥2,584 ¥2,659 ¥61 ¥7,007 

NET INCREASE OR DECREASE (¥) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES 

Impact on the Deficit ............................................................. 84 500 448 533 ¥1,613 2,192 351 410 ¥1,477 ¥1,444 ¥48 ¥16 

Sources: Congressional Budget Office and the staff of the Joint Committee on Taxation. Note: Components may not sum to totals because of rounding; EITC = Earned Income Tax Credit. a In addition, CBO estimates that implementing the provisions of S. 1642 would have a discretionary cost of $7 million over the 2012–2016 period, assuming appropriation of the necessary amounts. 


erowe on DSK2VPTVN1PROD with 
53 

Basis of estimate: For the purposes of this estimate, CBO assumes that S. 1642 will be enacted early in fiscal year 2012. 

Revenues 

Under the United States-Korea free trade agreement, tariffs on 

U.S. imports from Korea would be phased out over time. The tariffs 

would be phased out for individual products at varying rates, ranging from immediate elimination on the date the agreement enters 

into force to gradual elimination over 10 or more years. According 

to the U.S. International Trade Commission, the United States collected about $660 million in customs duties in 2010 on $48 billion 

of imports from Korea. Based on expected imports from Korea, 

CBO estimates that implementing the tariff schedule outlined in 

the U.S.-Korea free trade agreement would reduce revenues by 

$158 million in 2012, and by about $7 billion over the 2012–2021 

period, net of income and payroll tax offsets. 

This estimate includes the effects of increased imports from 

Korea that would result from the reduced prices of imported products in the United States, reflecting the lower tariff rates. It is likely that some of the increase in U.S. imports from Korea would displace imports from other countries. In the absence of specific data 

on the extent of this substitution effect, CBO assumes that an 

amount equal to one-half of the increase in U.S. imports from 

Korea would displace imports from other countries. 

S. 1642 would increase the penalties imposed on paid tax return 

preparers who do not comply with due-diligence requirements for 

determining their clients’ allowable earned income tax credits 

(EITC), from $100 under current law to $500 for each failure. JCT 

estimates that this change would increase revenues by $197 million 

over the 2012–2021 period. 

S. 1642 also would require prisons located in the United States 

to provide the names and Social Security Numbers of all inmates 

serving sentences longer than one year to the Internal Revenue 

Service for tax administration purposes. JCT estimates that this 

change would increase revenues by $122 million over the 2012– 

2021 period. 

S. 1642 also would shift payments of corporate estimated taxes 

between fiscal years 2012 and 2013 and between fiscal years 2016 

and 2017. For corporations with at least $1 billion in assets, the 

bill would increase the portion of corporate estimated payments 

due from July through September in both 2012 and 2016. JCT estimates that those changes would increase revenues by $118 million 

in 2012 and decrease them by $118 million in 2013, and would increase revenues by about $1.9 billion in 2016 and decrease them 

by about $1.9 billion in 2017. 

Direct spending 

Under current law, certain fees collected by CBP will expire in 

January of 2020. The bill would extend COBRA fees (which were 

established in the Consolidated Omnibus Budget Reconciliation Act 

of 1985) from January 14, 2020, through December 8, 2020, and 

would extend merchandise processing fees from January 7, 2020, 

through August 2, 2021. CBO estimates that those changes would 

increase offsetting receipts (a credit against direct spending) by 

about $4.1 billion over the 2020–2021 period. For merchandise enVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00053 Fmt 6659 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
54 

tered from December 1, 2015, through June 30, 2021, the bill would 

raise the merchandise processing fee from 0.21 percent to 0.3464 

percent of the value of goods entered. CBO estimates that this 

would increase offsetting receipts by about $4.3 billion over the 

2012–2021 period. 

In addition, the bill would exempt imports from Korea from merchandise processing fees. CBO estimates that this would reduce offsetting receipts by about $1.5 billion over the 2012–2021 period. 

Spending subject to appropriation 

Implementing provisions of S. 1642 would increase the costs of 

several agencies affected by the bill including: • The Department of Commerce to provide administrative 

support for dispute-settlement panels established in the agreement; • The International Trade Commission to conduct investigations, if petitioned, into whether Korean imports might threaten or cause serious injury to domestic competitors; and • The Department of the Treasury and the United States 

Trade Representative to establish regulations to carry out provisions of the agreement. 

Based on information from the agencies, CBO estimates that those activities would cost $7 million over the 2012–2016 period, 

assuming appropriation of the necessary amounts. 

Pay-As-You-Go considerations: The Statutory Pay-As-You-Go Act 

of 2010 establishes budget-reporting and enforcement procedures 

for legislation affecting direct spending or revenues. The net 

changes in outlays and revenues that are subject to those pay-asyou-go procedures are shown in the following table. 


erowe on DSK2VPTVN1PROD with 
55 

CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR S. 1642 AS ORDERED REPORTED BY THE SENATE COMMITTEE ON FINANCE ON OCTOBER 11, 2011 

By fiscal year, in millions of dollars— 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012– 2016 2012– 2021 

NET INCREASE OR DECREASE (¥) IN THE DEFICIT 

Statutory Pay-As-You-Go Impact ........................................... 84 500 448 533 ¥1,613 2,192 351 410 ¥1,477 ¥1,444 ¥48 ¥16 

Memorandum: 

Changes in Revenues .................................................... ¥31 ¥405 ¥349 ¥429 1,202 ¥2,732 ¥918 ¥1,006 ¥1,107 ¥1,215 ¥13 ¥6,991 

Changes in Outlays ....................................................... 53 95 99 104 ¥411 ¥540 ¥567 ¥596 ¥2,584 ¥2,659 ¥61 ¥7,007 


erowe on DSK2VPTVN1PROD with 
56 

Estimated impact on state, local, and tribal governments: CBO 

has determined that the nontax provisions of S. 1642 contain no 

intergovernmental mandates as defined in UMRA and would impose no costs on state, local, or tribal governments. JCT has determined that the tax provisions of S. 1642 contain no intergovernmental mandates as defined in UMRA. 

Estimated impact on the private sector: CBO has determined 

that the nontax provisions of S. 1642 would impose private-sector 

mandates, as defined in UMRA, by extending the customs user 

fees, by increasing merchandise processing fees and by enforcing 

new recordkeeping requirements. CBO estimates that the aggregate costs of those mandates would exceed the annual threshold established in UMRA for private-sector mandates ($142 million in 

2011, adjusted annually for inflation). JCT has determined that the 

tax provisions of S. 1642 contain no private-sector mandates as defined in UMRA. 

Previous CBO estimate: On October 5, 2011, CBO transmitted a 

cost estimate for H.R. 3080, the United States-Korea Free Trade 

Agreement Implementation Act, as ordered reported by the House 

Committee on Ways and Means on October 5, 2011. S. 1642 and 

H.R. 3080 are identical, and the CBO cost estimates are the same. 

Estimate prepared by: Federal revenues: Kalyani Parthasarathy; 

Federal spending: Sunita D’Monte, Mark Grabowicz, Matthew 

Pickford, and Susan Willie; Impact on state, local, and tribal governments: J’nell L. Blanco; Impact on the private sector: Marin 

Randall. 

Estimate approved by: Peter H. Fontaine, Assistant Director for 

Budget Analysis; Frank Sammartino, Assistant Director for Tax 

Analysis. 

III. REGULATORY IMPACT OF THE BILL AND OTHER 

MATTERS 

Pursuant to the requirements of paragraph 11(b) of rule XXVI of 

the Standing Rules of the Senate, the Committee states that the 

bill will not significantly regulate any individuals or businesses, 

will not affect the personal privacy of individuals, and will result 

in no significant additional paperwork. 

The following information is provided in accordance with section 

423 of the Unfunded Mandates Reform Act of 1995 (‘‘UMRA’’) (Pub. 

L. No. 104–04). The Committee has reviewed the provisions of S. 

1642 as approved by the Committee on October 11, 2011. In accordance with the requirements of UMRA, the Committee has determined that the nontax provisions of S. 1642 contain no intergovernmental mandates as defined in UMRA and impose no costs on 

state, local, or tribal governments. The Committee has determined 

that the tax provisions of S. 1642 contain no intergovernmental 

mandates as defined in UMRA. The Committee has determined 

that the nontax provisions of S. 1642 do impose private-sector mandates, as defined in UMRA, by extending customs user fees, increasing merchandise processing fees, and enforcing new recordkeeping requirements. The aggregate costs of those mandates will 

exceed the annual threshold established in UMRA for private-sector mandates ($142 million in 2011, adjusted annually for inflation). The Committee has determined that the tax provisions of S. 

1642 contain no private-sector mandates as defined in UMRA. 


erowe on DSK2VPTVN1PROD with 
(57) 

IV. ADDITIONAL VIEWS 

ADDITIONAL VIEWS OF RANKING MEMBER ORRIN G. 

HATCH AND SENATOR JON KYL 

Several elements of this report deserve significant elaboration. 

The May 10, 2007 agreement (May 10th Agreement) negotiated by 

some in Congress and the Bush Administration was intended to secure votes for the four free trade agreements (FTAs) with Colombia, Panama, Peru and South Korea, but it did not reflect an agreement on a new trade policy as the Majority contends. We were not 

part of the negotiations of these new provisions. We continue to 

harbor misgivings over several aspects of these changes, including 

in the areas of labor, the environment and intellectual property. 

The May 10th Agreement, however—failed as only a vote on Peru 

was allowed by Democrat congressional leaders during the 110th 

Congress—and the other three FTAs had to wait for more than 

four years before a vote was secured. The Bush administration and 

the governments of Colombia, Panama, Peru and South Korea 

upheld their end of the bargain by incorporating the May 10th 

Agreement changes into each FTA, but the democrat leadership of 

Congress refused to honor its part of the May 10th Agreement and 

allow a vote on any of the three remaining FTAs. The Obama Administration continued this pattern of delay for nearly three years. 

As acknowledged, years after the pending trade agreements were 

modified in accordance with the substantive provisions of the May 

10th Agreement, the Majority in March 2011 and the administration in May 2011 added a new demand that Congress approve additional spending on a domestic job training program before they 

would allow any pending trade agreement to be considered. This 

new demand was not part of May 10th Agreement and it was made 

during a period of extreme fiscal austerity. Regardless, Senator 

Hatch indicated during a May 26, 2011 hearing on the U.S.-Korea 

FTA that he was not opposed to having Trade Adjustment Assistance (TAA) considered separately. Moreover, all Republican Finance Committee Members agreed that TAA should be ‘‘debated 

and considered on its own merits.’’ Although some Republican Senators signaled a willingness to consider TAA and support a separate vote, the Majority rejected these overtures prior to the markup 

and refused to allow an open debate on the merits of TAA—or even 

to hold a hearing on the TAA program. In its report, the Majority 

states that no FTA implementing legislation has been passed while 

TAA provisions had expired. Even if this is true, it does not justify 

including TAA in the Korea FTA implementing bill, as the TAA 

program was not set to expire until February 2012. 

The report also states that including the expired and expanded 

provisions of TAA in the draft implementing bill during the Senate 


erowe on DSK2VPTVN1PROD with 
58 

Finance Committee’s ‘‘mock mark-up’’ process was ‘‘necessary or 

appropriate’’ to implement the Korea FTA. Again, that is not correct. 

Inclusion of TAA in the draft implementing bill during the ‘‘mock 

mark-up’’ process abused long-standing rules and procedures governing the delegation of trade negotiating authority from Congress 

to the President. Moreover, contrary to the Senate Finance Committee’s tradition of managing trade legislation through bipartisan 

collaboration, this decision was made with little to no consultation 

with Senate Finance Committee Members in the Minority. 

Under the Bipartisan Trade Act of 2002, trade agreement implementing bills are considered under Trade Promotion Authority 

(TPA) procedures. Under TPA, trade agreement implementing bills 

are developed jointly by Congress and the administration. Close 

consultation with Congress during this process is key. Once submitted to Congress, these bills are not amendable. As added protection, the law says these bills can only consist of provisions that are 

necessary or appropriate to implement the trade agreement. 

The Majority report states that it was necessary or appropriate 

to include the TAA provisions in the Korea FTA draft implementing bill because the North American Free Trade Agreement 

(NAFTA) included NAFTA Transitional Adjustment Assistance 

(NAFTA TAA). The Majority also claims that the Korea FTA implementing bill’s TAA provisions were ‘‘narrower’’ than the NAFTA 

TAA provisions, and that the NAFTA TAA provisions expanded eligibility. Both contentions are incorrect. NAFTA TAA was far different from the TAA proposal included in the Korea FTA draft implementing bill. NAFTA TAA was a temporary and transitional 

program, narrowly tailored just for workers who might be directly 

dislocated by trade with NAFTA countries (Mexico and Canada). 

The TAA provisions considered as part of the Senate Finance Committee’s informal consideration of the Korea FTA draft implementing bill went far beyond that, providing much richer benefits 

to workers dislocated for a myriad of reasons totally unrelated to 

the Korea FTA. In fact, benefits under the expanded TAA proposal 

go to workers dislocated by trade with any country. In addition, the 

proposal provided benefits to workers retroactively. Including statutory language to provide benefits to workers who were not, are 

not, and never will be affected by the approval of the Korea FTA 

itself was neither necessary nor appropriate to implement the 

Korea FTA. It is difficult to understand how these provisions could 

be narrower than the NAFTA TAA provisions that impacted two 

countries and provided temporary transitional benefits to workers 

affected by the NAFTA agreement after its approval. 

It is also a specious argument to cite the inclusion of a TAA provision in an implementing bill as evidence that the practice comports with TPA statutory requirements. The fact that some unrelated provisions have been included in prior trade agreement implementing bills is not evidence that their inclusion was within the 

confines of TPA, simply that their inclusion was never formally 

challenged. The Majority’s contention that the CAFTA–DR informal markup adopted a TAA expansion does not demonstrate that 

such an amendment was ‘‘necessary or appropriate’’ to include in 

the CAFTA–DR implementing bill. Unlike the Korea FTA impleVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00058 Fmt 6604 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
59 

menting legislation that included TAA expansions in the chairman’s informal markup text, the CAFTA–DR TAA provisions were 

included as an amendment as part of the informal markup process 

by voice vote. Then-Chairman Grassley expressed serious reservations regarding the adoption of the TAA amendment precisely because he viewed it as neither ‘‘necessary or appropriate’’ to implement the CAFTA–DR agreement. The general counsel of the Office 

of the United States Trade Representative concurred with this assessment, both during the informal mark-up and in subsequent correspondence where he stated that inclusion of such a TAA provision is not ‘‘necessary or appropriate.’’ As a result, the Bush administration declined to submit implementing legislation that included 

the TAA provisions in the CAFTA–DR package that Congress approved. We have attached that letter as part of our additional 

views. 

As the parliamentarian has never ruled on whether a disputed 

provision complies with the rules of TPA, there is no legal precedent for including such provisions in a trade agreement implementing bill. Nevertheless, in 2002, both houses of Congress expressed significant discomfort with the past practice of including 

overly broad provisions in trade agreement implementing bills. 

Statutory history which accompanies the 2002 TPA procedures 

makes it clear that, under these authorities, the parameters of 

what is necessary or appropriate should be strictly and narrowly 

construed. 

Without demonstrating whether any jobs would be lost, the Majority attempted to use the Korea FTA draft implementing bill to 

shield wholesale changes to U.S. labor, tax, pension and health 

care law from debate and amendment, disregarding the clear written views of the Senate Finance Committee Republicans. (See Attached Letter dated June 30, 2011). In so doing, the draft implementing bill went far beyond what was necessary or appropriate to 

implement this agreement. House and Senate Finance Committee 

reports to the Trade Act of 2002 made it clear that the standard 

for what can be included in an implementing bill must be narrowly 

and strictly defined. Past administrations and Senate Finance 

Committees have carefully and faithfully followed these 2002 

guidelines in implementing trade agreements by narrowly limiting 

any extraneous provisions in trade agreement implementing bills. 

Instead of serious consultations, the expanded TAA provisions were 

jammed into the Korea FTA draft implementing bill, providing the 

Senate Finance Committee Minority with little notice and no consultation. This highly partisan maneuver resulted in the first 

strictly partisan vote on a trade agreement in decades. Such a 

break from past practice and precedent was unnecessary and inappropriate. Including unrelated and highly-controversial provisions, 

like the TAA spending program, into the Korea FTA draft implementing bill with little to no consultation violated the letter and 

spirit of TPA. It is a practice which should not be replicated in future bills. 

Finally, the Majority asserts that ‘‘countless’’ meetings took place 

between the Majority and the Minority prior to the introduction of 

the chairman’s informal mark-up implementing legislation, which 

included the inappropriate TAA provisions. Yet, the ranking memVerDate Mar 15 2010 13:23 Sep 25, 2012 Jkt 019010 PO 00000 Frm 00059 Fmt 6604 Sfmt 6602 E:\HR\OC\SR223.XXX SR223

erowe on DSK2VPTVN1PROD with 
60 

ber’s staff was not part of the substantive negotiations of the TAA 

provisions with the House Committee on Ways and Means Majority. It is correct that many meetings took place to prepare the implementing legislation language—including with the Office of the 

U.S. Trade Representative and the Majority and Minority staffs 

from the Committee on Finance and Ways and Means Committee— 

and to ensure that the terms of the Korea FTA were met in the 

implementing bill provisions. These meetings did not, however, include meaningful discussions regarding TAA or the process for 

moving this legislation, including its possible inclusion in the 

Korea FTA implementing bills. Although there were rumors that 

the chairman might include TAA in the chairman’s mark for the 

informal markup, we and others cautioned against such an approach—privately and publicly. Our concerns were ignored, and the 

Republican Committee Members and staff saw the TAA provisions 

for the first time when the Majority posted the implementing legislation 48 hours prior to the scheduled informal markup. All Republican Committee Members rejected moving forward with TAA included in the Korea FTA implementing bill as evidenced by the second letter we have included in our additional views. Thankfully, 

the TAA language was stripped out of the final implementing legislation sent to Congress by the Obama administration. 

Fortunately, the May 10th Agreement provisions diluting intellectual property rights protection for pharmaceutical products were 

not included in the Korea FTA. As a result, this pact contains some 

of the highest standards for intellectual property rights protection 

of any bilateral trade agreement. We hope these high standards, 

and their reflection of U.S. law, will continue to serve as the model 

for future trade agreements. 


erowe on DSK2VPTVN1PROD with 
(61) 

ADDITIONAL VIEWS OF SENATOR CHUCK GRASSLEY 

The Majority has stated that, ‘‘On May 10, 2007, the Bush Administration and the bipartisan leadership of the U.S. Senate Committee on Finance and the U.S. House of Representatives Committee on Ways and Means reached an agreement on trade policy.’’ 

However, as Ranking Member of the Finance Committee during 

that time period, I strongly disagree with the Majority’s statement 

that the agreement was an agreement ‘‘on trade policy.’’ The Majority’s terminology implies the terms of the agreement reached on 

May 10, 2007 with President Bush are somehow now the blueprint 

for future trade agreements. This is not the case. The May 10th 

agreement was made out of necessity by President Bush as he attempted to gain support from the democratically-controlled Congress for approving the South Korea, Panama, Peru, and Colombia 

trade agreements. As I expressed at the time, I have reservations 

about many of the provisions included in the May 10th agreement, 

including the terms regarding labor, environment, and intellectual 

property. I continue to have reservations about the May 10th provisions. Most, if not all, of the members on our side do not see the 

May 10th provisions as part of a blueprint for future trade agreements. Those provisions were part of a bargain between President 

Bush and Democrat leaders in Congress, for those specific free 

trade agreements at the time, not an ‘‘agreement on trade policy’’ 

as the Majority suggests. 


erowe on DSK2VPTVN1PROD with 
62 

V. CHANGES IN EXISTING LAW MADE BY THE BILL, AS 

REPORTED 

In compliance with paragraph 12 of rule XXVI of the Standing 

Rules of the Senate, changes in existing law made by the bill, as 

reported, are shown as follows (existing law proposed to be omitted 

is enclosed in black brackets, new matter is printed in italics, and 

existing law in which no change is proposed is shown in roman): 

SECTION 13031 OF THE CONSOLIDATED OMNIBUS 

BUDGET RECONCILIATION ACT OF 1985 

SEC. 13031. FEES FOR CERTAIN CUSTOMS SERVICES. 

(a) * * * 

(b) LIMITATIONS ON FEES.—(1) * * * 

* * * * * * * 

(19) No fee may be charged under subsection (a) (9) or (10) with 

respect to goods that qualify as originating goods under section 202 

of the United States-Korea Free Trade Agreement Implementation 

Act. Any service for which an exemption from such fee is provided 

by reason of this paragraph may not be funded with money contained in the Customs User Fee Account. 

* * * * * * * 

(j) EFFECTIVE DATES.—(1) * * * 

* * * * * * * 

(3)(A) Fees may not be charged under paragraphs (9) and (10) of 

subsection (a) after øJanuary 7, 2020¿ August 2, 2021. 

(B)(i) Subject to clause (ii), Fees may not be charged under paragraphs (1) through (8) of subsection (a) after øJanuary 14, 2020¿ 

December 8, 2020. 

* * * * * * * 

TARIFF ACT OF 1930 

* * * * * * * 

TITLE IV—ADMINISTRATIVE PROVISIONS 

* * * * * * * 

Part III—Ascertainment, Collection, and Recovery of Duties 

* * * * * * * 

SEC. 508. RECORDKEEPING. 

(a) * * * 

* * * * * * * 

(i) CERTIFICATIONS OF ORIGIN FOR GOODS EXPORTED UNDER THE

UNITED STATES-KOREA FREE TRADE AGREEMENT.— 

(1) DEFINITIONS.—In this subsection: 

(A) RECORDS AND SUPPORTING DOCUMENTS.—The term 

‘‘records and supporting documents’’ means, with respect to 

an exported good under paragraph (2), records and documents related to the origin of the good, including— 


erowe on DSK2VPTVN1PROD with 
63 

(i) the purchase, cost, and value of, and payment for, 

the good; 

(ii) the purchase, cost, and value of, and payment 

for, all materials, including indirect materials, used in 

the production of the good; and 

(iii) the production of the good in the form in which 

it was exported. 

(B) KFTA CERTIFICATION OF ORIGIN.—The term ‘‘KFTA 

certification of origin’’ means the certification established 

under article 6.15 of the United States-Korea Free Trade 

Agreement that a good qualifies as an originating good 

under such Agreement. 

(2) EXPORTS TO KOREA.—Any person who completes and 

issues a KFTA certification of origin for a good exported from 

the United States shall make, keep, and, pursuant to rules and 

regulations promulgated by the Secretary of the Treasury, 

render for examination and inspection all records and supporting documents related to the origin of the good (including 

the certification or copies thereof). 

(3) RETENTION PERIOD.—The person who issues a KFTA certification of origin shall keep the records and supporting documents relating to that certification of origin for a period of at 

least 5 years after the date on which the certification is issued. 

ø(i)¿ (j) PENALTIES.—Any person who fails to retain records and 

supporting documents required by subsection (f), ø(g), or (h)¿ (g), 

(h), or (i) or the regulations issued to implement any such subsection shall be liable for the greater of— 

(1) * * * 

* * * * * * * 

SEC. 514. PROTEST AGAINST DECISIONS OF THE CUSTOMS SERVICE. 

(a) * * * 

* * * * * * * 

(j) DENIAL OF PREFERENTIAL TARIFF TREATMENT UNDER THE

UNITED STATES-KOREA FREE TRADE AGREEMENT.—If U.S. Customs 

and Border Protection or U.S. Immigration and Customs Enforcement of the Department of Homeland Security finds indications of 

a pattern of conduct by an importer, exporter, or producer of false 

or unsupported representations that goods qualify under the rules 

of origin provided for in section 202 of the United States-Korea Free 

Trade Agreement Implementation Act, U.S. Customs and Border 

Protection, in accordance with regulations issued by the Secretary 

of the Treasury, may suspend preferential tariff treatment under the 

United States-Korea Free Trade Agreement Implementation Act to 

entries of identical goods covered by subsequent representations by 

that importer, exporter, or producer until U.S. Customs and Border 

Protection determines that representations of that person are in conformity with such section 202. 

* * * * * * * 

SEC. 520. REFUNDS AND ERRORS. 

(a) * * * 

* * * * * * * 


erowe on DSK2VPTVN1PROD with 
64 

(d) GOODS QUALIFYING UNDER FREE TRADE AGREEMENT RULES

OF ORIGIN.—Notwithstanding the fact that a valid protest was not 

filed, the Customs Service may, in accordance with regulations prescribed by the Secretary, re liquidate an entry to refund any excess 

duties (including any merchandise processing fees) paid on a good 

qualifying under the rules of origin set out in section 202 of the 

North American Free Trade Agreement Implementation Act, section 202 of the United States-Chile Free Trade Agreement Implementation Act, section 203 of the Dominican Republic-Central 

America-United States Free Trade Agreement Implementation Act, 

section 202 of the United States-Oman Free Trade Agreement Implementation Act, øor¿ section 203 of the United States-Peru Trade 

Promotion Agreement Implementation Act øfor which¿, or section 

202 of the United States-Korea Free Trade Agreement Implementation Act for which no claim for preferential tariff treatment was 

made at the time of importation if the importer, within 1 year after 

the date of importation, files, in accordance with those regulations, 

a claim that includes— 

(1) * * * 

* * * * * * * 

PART V—ENFORCEMENT PROVISIONS 

* * * * * * * 

SEC. 592. PENALTIES FOR FRAUD, GROSS NEGLIGENCE, AND NEGLIGENCE. 

(a) * * * 

* * * * * * * 

(c) MAXIMUM PENALTIES.— (1) * * * 

* * * * * * * 

(11) PRIOR DISCLOSURE REGARDING CLAIMS UNDER THE

UNITED STATES-KOREA FREE TRADE AGREEMENT.—An importer 

shall not be subject to penalties under subsection (a) for making 

an incorrect claim that a good qualifies as an originating good 

under section 202 of the United States-Korea Free Trade Agreement Implementation Act if the importer, in accordance with 

regulations issued by the Secretary of the Treasury, promptly 

and voluntarily makes a corrected declaration and pays any 

duties owing with respect to that good. 

ø(11)¿ (12) SEIZURE.—If the Secretary has reasonable cause 

to believe that a person has violated the provisions of subsection (a) and that such person is insolvent or beyond the jurisdiction of the United States or that seizure is otherwise essential to protect the revenue of the United States or to prevent the introduction of prohibited or restricted merchandise 

into the customs territory of the United States, then such merchandise may be seized and, upon assessment of a monetary 

penalty, forfeited unless the monetary penalty is paid within 

the time specified by law. Within a reasonable time after any 

such seizure is made, the Secretary shall issue to the person 

concerned a written statement containing the reasons for the 

seizure. After seizure of merchandise under this subsection, 


erowe on DSK2VPTVN1PROD with 
65 

the Secretary may, in the case of restricted merchandise, and 

shall, in the case of any other merchandise (other than prohibited merchandise), return such merchandise upon the deposit 

of security not to exceed the maximum monetary penalty which 

may be assessed under subsection (c). 

* * * * * * * 

(j) FALSE CERTIFICATIONS OF ORIGIN UNDER THE UNITED STATESKOREA FREE TRADE AGREEMENT.— 

(1) IN GENERAL.—Subject to paragraph (2), it is unlawful for 

any person to certify falsely, by fraud, gross negligence, or negligence, in a KFTA certification of origin (as defined in section 

508 of this Act) that a good exported from the United States 

qualifies as an originating good under the rules of origin provided for in section 202 of the United States-Korea Free Trade 

Agreement Implementation Act. The procedures and penalties of 

this section that apply to a violation of subsection (a) also apply 

to a violation of this subsection. 

(2) PROMPT AND VOLUNTARY DISCLOSURE OF INCORRECT INFORMATION.—No penalty shall be imposed under this subsection 

if, promptly after an exporter or producer that issued a KFTA 

certification of origin has reason to believe that such certification contains or is based on incorrect information, the exporter or producer voluntarily provides written notice of such 

incorrect information to every person to whom the certification 

was issued. 

(3) EXCEPTION.—A person shall not be considered to have violated paragraph (1) if— 

(A) the information was correct at the time it was provided in a KFTA certification of origin but was later rendered incorrect due to a change in circumstances; and 

(B) the person promptly and voluntarily provides written 

notice of the change in circumstances to all persons to 

whom the person provided the certification. 

* * * * * * * 

TRADE ACT OF 1974 

* * * * * * * 

TITLE II—RELIEF FROM INJURY CAUSED BY IMPORT 

COMPETITION 

CHAPTER 1—POSITIVE ADJUSTMENT BY INDUSTRIES 

INJURED BY IMPORTS 

* * * * * * * 

SEC. 202. INVESTIGATIONS, DETERMINATIONS, AND RECOMMENDATIONS BY COMMISSION. 

(a) PETITIONS AND ADJUSTMENT PLANS.— 

(1) * * * 

* * * * * * * 

(8) The procedures concerning the release of confidential 

business information set forth in section 332(g) of the Tariff 


erowe on DSK2VPTVN1PROD with 
66 

Act of 1930 shall apply with respect to information received by 

the Commission in the course of investigations conducted 

under this chapter, part 1 of title III of the North American 

Free Trade Agreement Implementation Act, title II of the 

United States-Jordan Free Trade Area Implementation Act, 

title III of the United States-Chile Free Trade Agreement Implementation Act, title III of the United States-Singapore Free 

Trade Agreement Implementation Act, title III of the United 

States-Australia Free Trade Agreement Implementation Act, 

title III of the United States-Morocco Free Trade Agreement 

Implementation Act, title III of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act, title III of the United States-Bahrain Free Trade 

Agreement Implementation Act, title III of the United StatesOman Free Trade Agreement Implementation Act, øand¿ title 

III of the United States-Peru Trade Promotion Agreement Implementation Act, and title III of the United States-Korea Free 

Trade Agreement Implementation Act. The Commission may request that parties providing confidential business information 

furnish non confidential summaries thereof or, if such parties 

indicate that the information in the submission cannot be summarized, the reasons why a summary cannot be provided. If 

the Commission finds that a request for confidentiality is not 

warranted and if the party concerned is either unwilling to 

make the information public or to authorize its disclosure in 

generalized or summarized form, the Commission may disregard the submission. 

* * * * * * * 

TRADE AGREEMENTS ACT OF 1979 

* * * * * * * 

TITLE III—GOVERNMENT PROCUREMENT 

* * * * * * * 

SEC. 308. DEFINITIONS. 

As used in this title— 

(1) * * * 

* * * * * * * 

(4) ELIGIBLE PRODUCTS.— 

(A) IN GENERAL.—The term ‘‘eligible product’’ means, 

with respect to any foreign country or instrumentality that 

is— 

(i) * * * 

* * * * * * * 

(vi) a party to the United States-Oman Free Trade 

Agreement, a product or service of that country or instrumentality which is covered under that Agreement 

for procurement by the United States; øor¿ 

(vii) a party to the United States-Peru Trade Promotion Agreement, a product or service of that country 


erowe on DSK2VPTVN1PROD with 
67 

or instrumentality which is covered under that agreement for procurement by the United Statesø.¿; or 

(viii) a party to the United States-Korea Free Trade 

Agreement, a product or service of that country or instrumentality which is covered under that agreement 

for procurement by the United States. 

* * * * * * * 

INTERNAL REVENUE CODE OF 1986 

* * * * * * * 

Subtitle F—Procedure and Administration 

* * * * * * * 

CHAPTER 61—INFORMATION AND RETURNS 

* * * * * * * 

Subchapter B—Miscellaneous Provisions 

* * * * * * * 

øSEC. 6116. Cross reference.¿ 

SEC. 6116. Requirement for prisons located in United States to provide information 

for tax administration. 

SEC. 6117. Cross reference. 

* * * * * * * 

SEC. 6116. REQUIREMENT FOR PRISONS LOCATED IN UNITED STATES 

TO PROVIDE INFORMATION FOR TAX ADMINISTRATION. 

(a) IN GENERAL.—Not later than September 15, 2012, and annually thereafter, the head of the Federal Bureau of Prisons and the 

head of any State agency charged with the responsibility for administration of prisons shall provide to the Secretary in electronic format a list with the information described in subsection (b) of all the 

inmates incarcerated within the prison system for any part of the 

prior 2 calendar years or the current calendar year through August 

31. 

(b) INFORMATION.—The information with respect to each inmate 

is— 

(1) first, middle, and last name, 

(2) date of birth, 

(3) institution of current incarceration or, for released inmates, most recent incarceration, 

(4) prison assigned inmate number, 

(5) the date of incarceration, 

(6) the date of release or anticipated date of release, 

(7) the date of work release, 

(8) taxpayer identification number and whether the prison 

has verified such number, 

(9) last known address, and 

(10) any additional information as the Secretary may request. 

(c) FORMAT.—The Secretary shall determine the electronic format 

of the information described in subsection (b). 


erowe on DSK2VPTVN1PROD with 
68 

SEC. ƒ6116.¿ 6117. CROSS REFERENCE. 

For inspection of records, returns, etc., concerning gasoline or lubricating oils, see section 4102. 

* * * * * * * 

CHAPTER 68—ADDITIONS TO THE TAX, ADDITIONAL 

AMOUNTS, AND ASSESSABLE PENALTIES 

* * * * * * * 

Subchapter B—Assessable Penalties 

* * * * * * * 

PART I—GENERAL PROVISIONS 

* * * * * * * 

SEC. 6695. OTHER ASSESSABLE PENALTIES WITH RESPECT TO THE 

PREPARATION OF TAX RETURNS FOR OTHER PERSONS. 

(a) * * * 

* * * * * * * 

(g) FAILURE TO BE DILIGENT IN DETERMINING ELIGIBILITY FOR

EARNED INCOME CREDIT.—Any person who is a tax return preparer 

with respect to any return or claim for refund who fails to comply 

with due diligence requirements imposed by the Secretary by regulations with respect to determining eligibility for, or the amount of, 

the credit allowable by section 32 shall pay a penalty of ø$100¿ 

$500 for each such failure. 


erowe on DSK2VPTVN1PROD with 
69 


erowe on DSK2VPTVN1PROD with Insert offset folio 70 here SR223.001
70 


erowe on DSK2VPTVN1PROD with Insert offset folio 71 here SR223.002
71 


erowe on DSK2VPTVN1PROD with Insert offset folio 72 here SR223.003
72 


erowe on DSK2VPTVN1PROD with Insert offset folio 73 here SR223.004