19–006 

112TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 112–239 

UNITED STATES-KOREA FREE TRADE AGREEMENT 

IMPLEMENTATION ACT 

OCTOBER 6, 2011.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. CAMP, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

ADDITIONAL VIEWS 

[To accompany H.R. 3080] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 3080) to implement the United States-Korea Free Trade 

Agreement, having considered the same, report favorably thereon 

without amendment and recommend that the bill do pass. 

CONTENTS 

Page 

I. Summary and Background ........................................................................... 2 

A. Purpose and Summary ..................................................................... 2 

B. Background ........................................................................................ 2 

C. Legislative History ............................................................................ 6 

II. Section-by-Section Summary ........................................................................ 7 

A. Title I: Approval and General Provisions ....................................... 7 

B. Title II: Customs Provisions ............................................................. 10 

C. Title III: Relief from Imports ........................................................... 15 

D. Title IV: Procurement ....................................................................... 20 

E. Title V: Offsets .................................................................................. 20 

III. Votes of the Committee ................................................................................. 23 

IV. Budget Effects of the Bill .............................................................................. 23 

A. Committee Estimate of Budgetary Effects ...................................... 23 

B. Statement Regarding New Budget Authority and Tax Expenditures Budget Authority .................................................................. 23 

C. Cost Estimate Prepared by the Congressional Budget Office ....... 24 

D. Macroeconomic Impact Analysis ...................................................... 30 


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V. Other Matters to be Discussed Under the Rules of the House of Representatives ................................................................................................. 30 

A. Committee Oversight Findings and Recommendations ................. 30 

B. Statement of General Performance Goals and Objectives ............. 30 

C. Information Relating to Unfunded Mandates ................................ 31 

D. Applicability of House Rule XXI 5(b) .............................................. 31 

E. Tax Complexity Analysis .................................................................. 31 

F. Congressional Earmarks, Limited Tax Benefits, and Limited 

Tariff Benefits ................................................................................. 31 

VI. Changes in Existing Law Made by the Bill, as Reported ........................... 31 

VII. Additional Views ............................................................................................ 39 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

H.R. 3080 would implement the agreement establishing a free 

trade area between the United States and Korea. 

B. BACKGROUND

The United States-Korea Free Trade Agreement 

The United States-Korea Free Trade Agreement (hereinafter the 

‘‘Agreement’’) was signed on June 30, 2007. The Agreement covers 

all agricultural and industrial sectors, provides for greatly expanded market access for U.S. services, contains robust protections 

for U.S. intellectual property rights holders, and includes strong 

labor and environment provisions. The Committee believes that the 

Agreement meets the objectives and priorities set forth in the Bipartisan Trade Promotion Authority Act of 2002 (‘‘TPA’’). Moreover, 

the agreement reflects the benefits of an exchange of letters between the United States and Korea on February 10, 2011 and the 

May 10, 2007 agreement between Congressional leaders and the 

last Administration regarding labor, environment, intellectual 

property, investment, government procurement, and port security 

(‘‘May 10 agreement’’). 

U.S. industrial goods currently face an average tariff of 6.2 percent in Korea, paying over $1.3 billion a year. Conversely, Korean 

exports enter the United States at an average tariff of only 2.8 percent—less than half the Korean rate. The Agreement will significantly open up the Korean market, helping U.S. exporters gain 

greater access. The International Trade Commission (‘‘ITC’’) estimates that U.S. exports to Korea would increase by $9.7–10.9 billion as a result of tariff reductions alone. 

The following are key sectoral benefits and aspects of the Agreement: 

Agriculture: U.S. agriculture exports to Korea currently face an 

average tariff of 54 percent, whereas Korean agricultural exports 

to the United States face average tariffs of just 9 percent. The 

Agreement would remedy this by making more than half of current 

U.S. farm exports to Korea by value duty-free immediately upon 

implementation, including U.S. exports of wheat, corn for feed, soybeans for crushing, whey for feed use, hides and skins, cotton, cherries, pistachios, almonds, grape juice, and wine. The Agreement 

would also address key non-tariff barriers. For example, Korea 

would recognize the equivalence of the U.S. food safety system for 

meat, poultry, and processed foods. 


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Manufacturing: The Agreement would significantly lower both 

tariff and non-tariff barriers to U.S. exports of manufactured goods. 

Upon implementation, over 80 percent of U.S. exports of consumer 

and industrial products to Korea would immediately become dutyfree, with virtually all tariffs phased out over ten years. Key U.S. 

export sectors that would receive immediate duty-free treatment 

include aircraft, electrical equipment, and medical and scientific 

equipment. As a result, ITC estimates significant gains in U.S. exports in key sectors and products. For example, the ITC estimates 

that exports of passenger vehicles would increase by 54 percent as 

a result of tariff cuts alone. Exports of motor vehicles and parts 

would increase an additional 41–56 percent as a result of the removal of non-tariff barriers. Similarly, exports of machinery and 

equipment would increase by more than 30 percent. Per the Agreement, Korea has also reaffirmed its commitment to fulfill its obligations under the WTO Information Technology Agreement and made 

commitments to further open Korea’s market to U.S. high-tech exports by immediately eliminating tariffs on information and communications technologies not covered by the ITA. The Agreement 

would provide U.S. firms with lower tariff barriers than major competitors from countries that do not have trade agreements with 

Korea in effect. 

Services: Korea is the eighth largest importer of services, with a domestic market worth $580 billion, making improved market access for U.S. services critical. The Agreement would provide U.S. 

service firms with market access, national treatment, and regulatory transparency exceeding that afforded by the WTO General 

Agreement on Services. Through the removal of existing barriers, 

the Agreement would facilitate entry for U.S. firms into Korea’s financial, insurance, telecom, audiovisual, express delivery, and professional services markets, among others. For example, the agreement would end many current Korean restrictions that allow only 

Korean nationals to provide professional services. Similarly, the 

ITC estimates, based on tariff equivalents, that the Agreement 

would reduce barriers in the banking sector by 62%. U.S. service 

providers that establish a local presence in Korea would benefit 

from strong investor protections included in the Agreement. In addition, the Agreement would provide improved access for international delivery services and establish a set course for future reform of Korea’s postal system with respect to delivery services. 

Government Procurement: The protections found in the Agreement go above and beyond Korea’s commitments as a member of 

the WTO Government Procurement Agreement and would expand 

market access for U.S. companies. The procurement provisions 

would grant U.S. entities greater access and protection than they 

currently have to Korea’s $100 billion government procurement 

market. The Agreement would expand coverage to include nine additional key central government agencies. It would also reduce the 

threshold of coverage from $200,000 to $100,000 for procurement of 

goods and services. 

Intellectual Property Rights: Under the Agreement, Korea would 

adopt higher and extended standards for the protection of intellectual property rights, such as copyrights, patents, trademarks, and 

trade secrets. The Agreement also provides enhanced means for enforcing those rights. Under the Agreement, each partner country 


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would be required to grant national treatment to nationals of the 

other, and all laws, regulations, procedures and final judicial decisions would need to be in writing and published or made publicly 

available. The Agreement would lengthen terms for copyright protection, cover electronic and digital media, and increase enforcement to go beyond the WTO Agreement on Trade-Related Aspects 

of Intellectual Property Rights. Both parties would be obliged to 

provide appropriate civil and criminal remedies for willful violators 

of intellectual property rights. 

Motor Vehicles and Parts: Under the Agreement, Korea will reduce its tariffs on U.S. motor vehicles and parts and eliminate nontariff barriers. Korea will immediately cut its tariff on U.S. autos 

in half and fully eliminate those tariffs after five years. Korea will 

also immediately cut its tariffs on U.S. electric cars in half and 

phase out those tariffs over five years. The exchange of letters on 

February 10, 2011 specifically addresses safety and environmental 

standards and other non-tariff barriers to U.S. exports. Korea has 

committed to strengthen transparency commitments, which will 

help to prevent the emergence of new non-tariff barriers and discriminatory taxes. The exchange of letters also strengthens other 

enforcement mechanisms and creates a special motor vehicle safeguard. The ITC estimates that removal of non-tariff barriers will 

add an additional $48–66 million in new exports. This opportunity 

is in addition to the $194 million in expected new exports from 

lower Korean tariffs on U.S. autos. 

Textile and Apparel: Many U.S. textiles and apparel products 

meeting the Agreement’s rules of origin would immediately become 

duty-free and quota-free when exported to Korea. The Agreement’s 

rules of origin are generally based on the ‘‘yarn forward’’ standard. 

A ‘‘de minimis’’ provision would allow limited amounts of specified 

third-country content to go into U.S. and Korean apparel, giving 

producers in both countries needed flexibility. The Agreement 

would allow the use of ‘‘short supply’’ fabrics (that is, fabrics not 

made in Korea or the United States that have been determined not 

to be commercially available in either country) as inputs. The Parties agreed to a list of short supply fabrics, and the Agreement includes a process for adding more. 

Customs cooperation commitments between the United States 

and Korea would allow for verification of claims of origin or preferential treatment, and denial of preferential treatment or entry if 

claims cannot be verified. A special textile safeguard would provide 

for temporary tariff relief if imports under the Agreement prove to 

cause or threaten serious damage to U.S. producers. 

Investment: The Agreement would ensure a stable legal framework for U.S. investors operating in Korea. All forms of investment 

would be protected under the Agreement, including enterprises, 

debt, concessions and similar contracts, and intellectual property. 

With very few exceptions, U.S. investors would be treated as well 

as Korean investors in the establishment, acquisition, and operation of investments in Korea. 

The Agreement draws from U.S. legal principles and practices to 

provide U.S. investors in Korea with a basic set of substantive and 

procedural protections that Korean investors currently enjoy under 

the U.S. legal system. These include due process protections and 

the right to receive fair market value for property in the event of 


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an expropriation. The Agreement includes recourse to an investorstate dispute settlement mechanism for certain types of claims. 

In the preamble, the Parties agree 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 provision reflects one of the negotiating objectives of TPA to 

ensure ‘‘that foreign investors in the United States are not accorded greater substantive rights with respect to investment protections than United States investors in the United States.’’ 

Labor: The labor chapter of the Agreement includes the obligation that the Parties adopt and effectively enforce the five core 

international labor rights as stated in the 1998 International Labor 

Organization Declaration on Fundamental Principles and Rights at 

Work. The Agreement would also require each country to enforce 

its own existing laws concerning acceptable conditions of work with 

respect to minimum wages, hours of work, and occupational safety 

and health. The obligations under the labor chapter are subject to 

the same dispute settlement mechanisms and enforcement mechanisms as obligations in other chapters of the Agreement. Neither 

Party would be permitted to waive or otherwise derogate from its 

laws that implement this obligation in a manner affecting trade or 

investment between the Parties. Procedural guarantees in the 

Agreement would ensure that workers and employers have fair, equitable, and transparent access to labor tribunals or courts. The 

Committee notes that Korea has shown a strong commitment to 

the protection of labor rights for Korean workers. 

Environment: The Agreement would commit the Parties to effectively enforce their own domestic environmental laws and adopt, 

maintain, and implement laws and all other measures to fulfill obligations under covered multilateral environmental agreements. 

The Agreement also includes a fully enforceable, binding commitment that would prohibit the Parties from lowering environmental 

standards in the future in a manner affecting trade or investment. 

The Agreement would promote a comprehensive approach to environmental protection by encouraging voluntary, market-based 

mechanisms to protect the environment and by providing procedural guarantees that ensure fair, equitable, and transparent proceedings for the administration and enforcement of environmental 

laws. The Agreement would call for a public submissions process 

with an independent secretariat for environmental matters to ensure that views of civil society are appropriately considered. All obligations in the environment chapter would be subject to the same 

dispute settlement procedures and enforcement mechanisms as obligations in other chapters of the Agreement. 

Procedures of the Trade Act of 2002 

H.R. 3080 is being considered by Congress under the procedures 

of the Bipartisan Trade Promotion Authority Act of 2002, included 

in the Trade Act of 2002. Pursuant to these requirements, the 

President is required to provide written notice to Congress of the 

President’s intention to enter into the negotiations. Throughout the 

negotiating process, and prior to entering into an agreement, the 


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President is required to consult with Congress regarding the ongoing negotiations. 

The President must notify Congress of his intent to enter into a 

trade agreement at least 90 calendar days before the agreement is 

signed. Within 60 days after entering in the Agreement, the President must submit to Congress a description of those changes to existing laws that the President considers would be required to bring 

the United States into compliance with the Agreement. After entering into the Agreement, the President must also submit to Congress the formal legal text of the agreement, draft implementing 

legislation, a statement of administrative action proposed to implement the Agreement, and other related supporting information as 

required under section 2105(a) of the Trade Act of 2002. 

Following submission of these documents, the implementing bill 

is introduced, by request, by the Majority Leader and the Minority 

Leader in each chamber. The House then has up to 60 legislative 

days to consider implementing legislation for the Agreement, and 

the Senate has up to an additional 30 legislative days. No amendments to the legislation are allowed under TPA requirements. 

C. LEGISLATIVE HISTORY

On February 2, 2006, the United States Trade Representative 

(‘‘USTR’’) formally notified the Congress of its intention to initiate 

negotiation of a trade agreement with Korea. Negotiations on a 

trade agreement between the United States and Korea began in 

June 2006. On April 1, 2007, the President notified the Congress 

of his intention to enter into a trade agreement with Korea. The 

Agreement was signed on June 30, 2007. 

On August 27, 2007, the USTR transmitted to Congress a description of the changes to existing U.S. laws required to comply 

with the Agreement. 

On February 10, 2011, the United States and Korea exchanged 

letters regarding additional commitments, particularly related to 

motor vehicles and parts. The benefits of that exchange of letters 

are secured through the implementing bill. 

Legislative hearings 

On January 25, 2011, the Committee on Ways and Means held 

a hearing on the Korea trade agreement, as well as the U.S.-Colombia Trade Promotion Agreement and the U.S.-Panama Trade 

Promotion Agreement. The Trade Subcommittee of the Committee 

on Ways and Means then held a hearing on the Korea trade agreement on April 7, 2011. 

Committee action 

On July 7, 2011, the Committee on Ways and Means considered 

in an informal mark-up session draft legislation to implement the 

Agreement and a statement of administrative action. The Committee approved the draft legislation by a vote of 22–15, after 

agreeing to an amendment in the nature of a substitute offered by 

Chairman Camp. 

On October 3, 2011, President Obama transmitted the United 

States-Korea Free Trade Agreement, a legislative proposal to implement the agreement, a Statement of Administrative Action and 

supporting documents to Congress. On the same day, H.R. 3080, a 


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bill to implement the United States-Korea Free Trade Agreement, 

was introduced by Majority Leader Eric Cantor (R–VA), by request, 

for himself and Rep. Sandy Levin (D–MI). H.R. 3080 was then referred to the Committee on Ways and Means. 

On October 5, 2011, Committee on Ways and Means formally 

met to consider H.R. 3080. The Committee ordered H.R. 3080 favorably reported to the House of Representatives by a vote of 31– 

5, without amendment. Under the procedures of TPA, no amendments are permitted after introduction. 

II. SECTION-BY-SECTION SUMMARY 

TITLE I: APPROVAL AND GENERAL PROVISIONS 

SECTIONS 1–3: SHORT TITLE, TABLE OF CONTENTS, PURPOSES, AND

DEFINITIONS

Present law 

No provision. 

Explanation of provision 

Section 2 sets forth the purposes of the implementing act (‘‘Act’’), 

which include approving and implementing the Agreement and securing the benefits of the agreement entered into pursuant to an 

exchange of letters between the United States and the Government 

of Korea on February 10, 2011. 

Reason for change 

The provision makes clear that the bill implements and approves 

the Agreement, as well as secures the benefits of the agreement entered into pursuant to an exchange of letters on February 10, 2011, 

relating to trade in motor vehicles. 

SECTION 101: APPROVAL AND ENTRY INTO FORCE

Present law 

No provision. 

Explanation of provision 

Section 101 states that Congress approves the United StatesKorea Free Trade Agreement (‘‘Agreement’’) and the Statement of 

Administrative Action. The Agreement enters into force when the 

President determines that Korea is in compliance with all provisions that take effect on the date of entry into force of the Agreement and exchanges notes with the Government of Korea providing 

for entry into force on or after January 1, 2012. 

Reason for change 

Approval of the Agreement and the Statement of Administrative 

Action is required under the procedures of section 2103(b)(3) of 

Trade Act of 2002. 

SECTION 102: RELATIONSHIP OF THE AGREEMENT TO UNITED STATES

AND STATE LAW

Present law 

No provision. 


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Explanation of provision 

Section 102(a) provides that U.S. law prevails in the case of a 

conflict with the Agreement. Section 102(b) provides that only the 

United States is entitled to bring a court action challenging a state 

law as being invalid on grounds of inconsistency with the Agreement. Section 102(c) states that there is no private cause of action 

or defense under the Agreement and no person other than the 

United States may challenge a federal or state law in court as 

being inconsistent with the Agreement. 

Reason for change 

The provision addresses the operation of the Agreement relative 

to federal and state law, as well as private remedies. Section 102 

is necessary to make clear that no provision of the Agreement will 

be given effect if it is inconsistent with federal law and that entry 

into force of the Agreement creates no new private remedy. 

SECTION 103: IMPLEMENTING ACTIONS IN ANTICIPATION OF ENTRY

INTO FORCE AND INITIAL REGULATIONS

Present law 

No provision. 

Explanation of provision 

Section 103(a) provides that, after the date of enactment, the 

President may proclaim such actions, and other U.S. government 

officers may issue such regulations, as are necessary to ensure the 

appropriate implementation of any provision of the Act that is to 

take effect on the date of entry into force of the Agreement. The 

effective date of such actions and regulations may not be earlier 

than the date of entry into force of the Agreement. Where proclaimed actions are not subject to consultation and layover requirements under the Act, proclamations generally may not take effect 

earlier than 15 days after their publication. 

Section 103(b) establishes that regulations necessary or appropriate to carry out actions under the Act and Statement of Administrative Action must, to the maximum extent feasible, be issued 

within one year of entry into force of the Agreement or, where a 

provision takes effect on a later date, within one year of the effective date of the provision. 

Reason for change 

Section 103 provides for the issuance of regulations. The Committee strongly believes that regulations should be issued in a 

timely manner to provide maximum clarity to parties claiming benefits under the Agreement. The Committee notes, further, that the 

Statement of Administrative Action commits each agency that will 

be issuing regulations to provide a report to Congress if it cannot 

issue regulations within one year of the Agreement’s entry into 

force and that such report must be submitted at least 30 days prior 

to the end of the one-year period. 


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SECTION 104: CONSULTATION AND LAYOVER FOR PROCLAIMED ACTIONS

Present law 

No provision. 

Explanation of provision 

Section 104 establishes requirements for proclamation of actions 

that are subject to consultation and layover provisions under the 

Act. The President may proclaim such action only after: (1) obtaining advice from the International Trade Commission and the appropriate private sector advisory committees; (2) submitting a report to the Ways and Means and Finance Committees concerning 

the reasons for the action; and (3) providing for a 60-day layover 

period (starting after the President has both obtained the required 

advice and provided the required report). The proposed action cannot take effect until after the expiration of the 60-day period and 

after the President has consulted with the Ways and Means and 

Finance Committees regarding the proposed action. 

Reason for change 

The bill gives the President certain proclamation authority but 

requires extensive consultation with Congress before such authority may be exercised. The Committee believes that such consultation is an essential component of the delegation of authority to the 

President and expects that such consultations will be conducted in 

a thorough and timely manner. 

SECTION 105: ADMINISTRATION OF DISPUTE SETTLEMENT

PROCEEDINGS

Present law 

No provision. 

Explanation of provision 

Section 105 authorizes the President to establish an office within 

the Department of Commerce responsible for providing administrative assistance to dispute settlement panels that are established 

under the Agreement. The section also authorizes appropriations of 

up to $750,000 for the establishment and operation of the office 

and to pay the U.S. share of expenses of the panels. 

Reason for change 

Dispute settlement procedures and panels are necessary to ensure that disputes over compliance with Agreement provisions can 

be resolved effectively. The authorization is necessary for the Commerce Department to provide administrative assistance to panels. 

SECTION 106: ARBITRATION OF CLAIMS

Present law 

No provision. 

Explanation of provision 

Section 106 authorizes the United States to resolve certain 

claims covered by the Investor-State Dispute Settlement Procedures set forth in the Agreement. 


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Reason for change 

This provision is necessary to meet U.S. obligations under Section B of Chapter 10 of the Agreement. 

SECTION 107: EFFECTIVE DATES; EFFECT OF TERMINATION

Present law 

No provision. 

Explanation of provision 

Section 107 provides that, with the exception of Sections 1 

through 3, Section 207(g), and Titles I and V of the Act, which take 

effect on the date of enactment of the Act, the effective date of the 

Act is the date the Agreement enters into force with respect to the 

United States. Amendments made to U.S. law by Sections 203, 204, 

206, and 401 of the Act take effect on the date of enactment of the 

Act but apply with respect to Korea on the date on which the 

Agreement enters into force. Other than Title V, the provisions of 

the Act terminate on the date on which the Agreement terminates. 

Reason for change 

Section 107 implements provisions of the Agreement relating to 

the effective date and date of termination of the Act. 

TITLE II: CUSTOMS PROVISIONS 

SECTION 201: TARIFF MODIFICATIONS

Present law 

No provision. 

Explanation of provision 

Section 201(a) provides the President with the authority to proclaim tariff modifications necessary or appropriate to carry out the 

Agreement. 

Section 201(b) gives the President the authority, subject to consultation and layover, to proclaim further tariff modifications necessary or appropriate to maintain the general level of reciprocal 

and mutually advantageous concessions with respect to Korea provided for by the Agreement. 

Section 201(c) allows the President, for any goods for which the 

base rate under the Agreement is a specific or compound rate of 

duty, to substitute for the base rate an equivalent ad valorem rate 

to carry out the tariff modifications in subsections (a) and (b) of 

Section 201. 

Section 201(d) provides the President with the authority 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. 

Reason for change 

The provision is necessary to ensure United States compliance 

with the market access provisions of the Agreement and the exchange of letters. The Committee expects the President to comply 


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with the letter and spirit of the consultation and layover provisions 

of this Act in carrying out section 201(b). 

SECTION 202: RULES OF ORIGIN

Present law 

No provision. 

Explanation of provision 

Section 202 codifies the rules of origin set out in Article 4.2 and 

Chapter 6 of the Agreement. Section 202(b) establishes three basic 

ways for a Korean good to qualify as an ‘‘originating good’’ and 

therefore to be eligible for preferential tariff treatment when it is 

imported into the United States. A good is an originating good if: 

(1) it is ‘‘wholly obtained or produced entirely in the territory of 

Korea, the United States, or both’’; (2) it is produced entirely in the 

United States, Korea, or both and any 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 or the 

good otherwise meets regional content and other requirements, as 

specified in Annex 4–A or Annex 6–A of the Agreement; or (3) it 

is produced entirely in the territory of Korea, the United States, or 

both exclusively from originating materials. 

Under the rules in Chapter 4 and Annex 4–A of the Agreement, 

an apparel product must generally meet a tariff shift rule that effectively imposes a ‘‘yarn forward’’ requirement. Thus, to qualify as 

an originating good imported into the United States from Korea, an 

apparel product must have been cut (or knit to shape) and sewn 

or otherwise assembled in Korea, the United States, or both from 

yarn, or fabric made from yarn that originates in Korea, the United 

States, or both. 

Section 202(o)(3) provides authority for the President to add fibers, yarns, or fabrics to a list of products that are unavailable in 

commercial quantities in a timely manner, and such products are 

treated as if they originate in Korea, regardless of their actual origin, when used as inputs in the production of textile or apparel 

goods. The President may modify the list of fibers, yarns, or fabrics 

that are unavailable in commercial quantities at the request of interested entities, defined as Korea and potential and actual suppliers and purchasers of textile or apparel goods. 

The remainder of Section 202 sets forth more detailed rules for 

determining whether a good meets the Agreement’s requirements 

under the second method of qualifying as an originating good. 

These include rules pertaining to de minimis quantities of non-originating materials that do not undergo a tariff transformation, 

transformation by regional content, and alternative methods for 

calculating regional value-content. Other provisions in section 202 

address valuation of materials, determination of the originating or 

non-originating status of fungible goods and materials, and treatment of accessories, spare parts and tools, packaging materials, indirect materials, and goods put up in sets. Section 202(l) specifies 

that goods that undergo further production or other operations outside Korea or the United States (with certain exceptions) or do not 

remain under the control of the customs authorities of such other 

countries do not qualify as originating goods. 


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Reason for change 

This provision implements the commitments made in the Agreement with respect to rules of origin applying to imports from 

Korea. Rules of origin are needed to confine Agreement benefits, 

such as tariff cuts, to Korean goods and to prevent third-country 

goods from being transshipped through Korea and claiming benefits under the Agreement. 

SECTION 203: CUSTOMS USER FEES

Present law 

Section 13031(a) of the Consolidated Omnibus Budget Reconciliation Act of 1985 (‘‘COBRA’’), at 19 U.S.C. 58c(a), authorizes the 

Secretary of the Treasury to collect a merchandise processing fee 

for formal and informal entries of merchandise into the United 

States (‘‘Merchandise Processing Fee’’). Section 13031(b) of COBRA 

exempts from the Merchandise Processing Fee all originating goods 

under each of the trade agreements currently in force between the 

United States and other countries. 

Explanation of provision 

Section 203 implements the U.S. commitments under Article 

2.10.4 of the Agreement to eliminate the Merchandise Processing 

Fee on originating goods under the Agreement. In accordance with 

U.S. obligations under the General Agreement on Tariffs and Trade 

1994, the provision also prohibits use of funds in the Customs User 

Fee Account to provide services related to entry of originating 

goods. 

Reason for change 

As with other trade agreements, the Agreement eliminates the 

Merchandise Processing Fee on qualifying goods from Korea. Other 

customs user fees remain in place. Section 204 is necessary to ensure United States compliance with the user fee elimination provisions of the Agreement. The Committee expects that the President, 

in his yearly budget request, will take into account the need for 

funds to pay expenses for entries under the Agreement given that 

Merchandise Processing Fee funds will not be available. 

SECTION 204: DISCLOSURE OF INCORRECT INFORMATION; FALSE CERTIFICATIONS OF ORIGIN; DENIAL OF PREFERENTIAL TARIFF TREATMENT

Present law 

No provision. 

Explanation of provision 

Section 204 implements Articles 6.19.3 and 6.18.6 of the Agreement. Section 204(a) prohibits the imposition of a penalty upon importers who make an invalid claim for preferential tariff treatment 

under the Agreement if the importer acts promptly and voluntarily 

to correct the error and pays any duties owed on the good in question. The provision also makes it unlawful for a person to falsely 

certify, by fraud, gross negligence, or negligence, that a good exported from the United States is an originating good. However, the 


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provision prohibits the imposition of a penalty if the exporter or 

producer promptly and voluntarily provides notice of the incorrect 

information to every person to whom a certification was issued. 

Section 204(b) provides that if U.S. authorities find that an importer, exporter or producer has engaged in a pattern of conduct of 

providing false or unsupported representations, the authorities may 

suspend preferential treatment with respect to identical goods covered by subsequent representations made by that importer, exporter or producer, until U.S. authorities have determined that its 

representations are accurate. 

Reason for change 

This provision is necessary to implement commitments in the 

Agreement relating to application of penalties for submission of 

false information or certifications by importers, exporters, and producers. 

SECTION 205: RELIQUIDATION OF ENTRIES

Present law 

No provision. 

Explanation of provision 

Section 205 implements Article 6.19.5 of the Agreement and provides authority for U.S. Customs and Border Protection (‘‘CBP’’) to 

reliquidate an entry to refund any excess duties (including any 

Merchandise Processing Fees) paid on a good qualifying under the 

rules of origin for which no claim for preferential tariff treatment 

was made at the time of importation if the importer so requests, 

within one year after the date of importation. 

Reason for change 

Article 6.19.5 of the Agreement anticipates that private parties 

may err in claiming preferential benefits under the Agreement and 

provides a one-year period for parties to make such claims for preferential tariff treatment even if the entry of the goods at issue has 

already been liquidated, i.e., legally finalized by customs officials. 

Section 205 is necessary to ensure United States compliance with 

Article 6.19.5. 

SECTION 206: RECORDKEEPING REQUIREMENTS

Present law 

No provision. 

Explanation of provision 

Section 206 implements Article 6.17 of the Agreement. The provision requires any person who completes and issues a certificate of 

origin under Article 6.15 of the Agreement for a good exported from 

the United States to maintain, for a period of five years after the 

date of certification, specified documents demonstrating that the 

good qualifies as originating. 


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Reason for change 

Section 207 is necessary to ensure United States compliance with 

the recordkeeping requirement provisions in Article 6.17 of the 

Agreement. 

SECTION 207: ENFORCEMENT RELATING TO TRADE IN TEXTILE OR

APPAREL GOODS

Present law 

No provision. 

Explanation of provision 

Section 207 implements the customs cooperation and verification 

of origin provisions in Article 4.3 of the Agreement. Under Article 

4.3, the United States may request the Government of Korea to 

conduct a verification of whether a claim of origin for a textile or 

apparel good is accurate or a particular exporter or producer is 

complying with applicable customs laws, regulations, and procedures regarding trade in textile or apparel goods. Section 207(a) 

provides that the President may direct the Secretary to take ‘‘appropriate action’’ while such a verification is being conducted. ‘‘Appropriate action’’ may include (i) suspending preferential tariff 

treatment for textile or apparel goods that the person subject to the 

verification has produced or exported if the verification was based 

on a reasonable suspicion of unlawful activity related to such 

goods; and (ii) suspension of liquidation of the entry of a textile or 

apparel good that is the subject of a verification. 

Under Section 207(c), the President may also direct the Secretary 

to take ‘‘appropriate action’’ after a verification has been completed. 

Such action may include (i) denying preferential tariff treatment to 

textile or apparel goods that the person subject to the verification 

has exported or produced; and (ii) denying entry to such goods. 

Under Section 207(e), the Secretary may publish the name of a 

person that the Secretary has determined: (i) is engaged in circumvention of applicable laws, regulations, or procedures affecting 

trade in textile or apparel goods; or (ii) has failed to demonstrate 

that it produces, or is capable of producing, textile or apparel 

goods. 

Under Section 207(f), the Commissioner of Customs may 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. 

Under Section 207(g), the Secretary may 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. 

Reason for change 

To avoid textile transshipment, special textile enforcement provisions have been included in the Agreement. Section 207 is necessary to authorize these enforcement mechanisms for use by U.S. 

authorities. 


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SECTION 208: REGULATIONS

Present law 

No provision. 

Explanation of provision 

Section 208 directs the Secretary to prescribe regulations necessary to carry out the tariff-related provisions of the Act, including 

the rules of origin and customs user fee provisions. 

Reason for change 

Because the Act involves lengthy and complex implementation 

procedures by customs officials, this provision is necessary to authorize the Secretary of Treasury to carry out provisions of the Act 

through regulations. No such regulations may take effect before the 

Agreement enters into force. 

TITLE III: RELIEF FROM IMPORTS 

SECTION 301: DEFINITIONS

Present law 

No provision. 

Explanation of provision 

Section 301 defines ‘‘Korean article,’’ ‘‘Korean textile or apparel 

article,’’ and ‘‘Korean motor vehicle article,’’ which are key terms 

for Title III of the Act. 

Reason for change 

This provision clarifies the scope of the provisions in Title III. 

Subtitle A: Relief From Imports Benefiting From the Agreement 

SECTIONS 311–316

Present law 

No provision. 

Explanation of provisions 

Subtitle A to Title III of the Act (Sections 311 to 316) authorizes 

the President, after an investigation and affirmative determination 

by the ITC, to impose certain import relief measures when, as a result of the reduction or elimination of a duty under the Agreement, 

a Korean product 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 the domestic industry. 

Section 311 provides for the filing of petitions with the ITC and 

for the ITC to conduct safeguard investigations under Subtitle A. 

Section 311(a)(1) provides that a petition requesting a safeguard 

action may be filed by an entity that is ‘‘representative of an industry.’’ As under Section 202(a)(1) of the Trade Act of 1974, a trade 

association, firm, certified or recognized union, or a group of workers can be considered such an entity. Section 311(b) sets out the 

standard to be used by the ITC in undertaking an investigation 


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and making a determination in safeguard proceedings under Subtitle A of Title III of the Act. 

Section 311(c) provides that certain provisions of Section 202 of 

the Trade Act of 1974 also apply with respect to investigations initiated under Section 311(b), including provisions defining ‘‘substantial cause’’ and listing factors to be taken into account in making 

safeguard determinations. 

Section 311(d) exempts from investigation Korean articles, except 

for Korean motor vehicle articles (per Section 321), with respect to 

which relief has previously been provided under Subtitle A of Title 

III of the Act. 

Section 312 requires the ITC to make a determination not later 

than 120 days (180 days if critical circumstances have been alleged) after the date on which the Section 311 investigation is initiated. Under Sections 312(b) and (c), if the ITC makes an affirmative determination, it must find and recommend to the President 

the amount of import relief that is necessary to remedy or prevent 

serious injury and to facilitate the efforts of the domestic industry 

to make a positive adjustment to import competition. 

Section 312(d) directs the ITC to submit a report to the President 

regarding the determination no later than 30 days after the determination is made. Section 312(e) requires the ITC to make this report public and to publish a summary of it in the Federal Register. 

Section 313(a) provides that the President, within 30 days of receiving a report from the ITC under Section 312, must provide import relief to the extent that the President determines is necessary 

to remedy or prevent the injury found by the ITC and to facilitate 

the efforts of the domestic industry to make a positive adjustment 

to import competition. Under Section 313(b), the President is not 

required to provide import relief if the relief will not provide greater economic and social benefits than costs. 

Section 313(c) sets forth the nature of the relief that the President may provide. The President may take action in the form of a 

suspension of further reductions in the rate of duty to be applied 

to the articles in question, or in the form of an increase in the rate 

of duty on the articles in question to a level that does not exceed 

the lesser of the existing NTR (MFN) rate or the NTR (MFN) rate 

of duty that was imposed on the day before the Agreement entered 

into force. In the case of a duty applied on a seasonal basis, the 

President may increase the rate of duty on the articles in question 

to a level that does not exceed the lesser of the NTR (MFN) rate 

for the corresponding season immediately preceding the date the 

import relief is provided or the NTR (MFN) rate of duty that was 

imposed for the corresponding season immediately preceding the 

date on which the Agreement enters into force. Under Section 

313(c)(3), if the relief the President provides has duration greater 

than one year, the relief must be subject to progressive liberalization at regular intervals over the course of its application, except 

with respect to a Korean motor vehicle article (per Section 321). 

Section 313(d) provides that the President may initially provide 

import relief for up to two years. This period may be extended by 

up to one year for a Korean article and by up to two years for a 

Korean motor vehicle article (per Section 321) if, after an investigation by the ITC and receipt of an ITC report, the President determines that import relief continues to be necessary and there is eviVerDate Mar 15 2010 03:42 Oct 08, 2011 Jkt 019006 PO 00000 Frm 00016 Fmt 6659 Sfmt 6602 E:\HR\OC\HR239.XXX HR239

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dence that the industry is making a positive adjustment to import 

competition. The ITC must conduct an investigation on these issues 

if, within a specified period before the relief terminates, a concerned industry files a petition requesting an investigation. The 

ITC must issue a report on its investigation to the President no 

later than 60 days before the termination of the import relief. 

Section 313(e) specifies that upon the termination of import relief, the rate of duty shall be the rate that would have been in effect but for the provision of relief. 

Section 313(f) exempts from relief any article that is: (i) subject 

to import relief under the global safeguard provisions in U.S. law 

(Chapter 1 of Title II of the Trade Act of 1974); or (ii) subject to 

import relief under Subtitle C to Title III of the Act. 

Section 314 provides that no relief may be provided under Subtitle A of Title III of this Act after ten years from the date the 

Agreement enters into force, unless (i) the scheduled tariff phaseout period for the article under the Agreement is greater than ten 

years, in which case relief may not be provided for that article after 

the scheduled phase-out period ends; or (ii) the President determines that Korea has consented to such relief. In addition, per Section 321, relief for a Korean motor vehicle article may be provided 

during any period before the date that is ten years after the date 

on which duties on the article are eliminated. 

Section 315 authorizes the President to provide compensation to 

Korea consistent with Article 10.4 of the Agreement if relief is ordered. 

Section 316 provides for the treatment of confidential business 

information submitted to the ITC in the course of investigations 

conducted under Title III of the Act. 

Reason for change 

Sections 311 to 316 establish a mechanism for providing temporary import relief where a U.S. industry experiences serious injury or threat of serious injury by reason of increased import competition from Korea resulting from reduction or elimination of a 

duty under the Agreement. The Committee notes that the President is not required to provide relief if the relief will not provide 

greater economic and social benefits than costs. The Committee intends that administration of this safeguard be consistent with U.S. 

obligations under Section A of Chapter Eight (Trade Remedies) of 

the Agreement. 

Subtitle B: Motor Vehicle Safeguard Measures 

SECTION 321

Present law 

No provision. 

Explanation of provision 

Subtitle B of the Act (Section 321) 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 


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being provided. Section 321(2) provides that relief may be extended 

for up to two years. Section 321(3) provides that relief may be provided for a total of up to four 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 respect to a Korean motor vehicle article up to ten 

years after the date on which duties on the article are eliminated. 

Reason for change 

This provision implements U.S. rights and Korean commitments 

under the exchange of letters on February 10, 2011 relating to 

treatment of Korean motor vehicle imports in safeguard procedures. 

Subtitle C: Textile and Apparel Safeguard Measures 

(SECTIONS 331–338)

Present law 

No provision. 

Explanation of provisions 

Subtitle C of Title III of the Act (Sections 331 to 338) authorizes 

the President to impose certain import relief measures when he determines that, as a result of the elimination or reduction of a duty 

provided under the Agreement, a Korean textile or apparel article 

is being imported into the United States in such increased quantities, in absolute terms or relative to the domestic market for that 

article, and under such conditions as to cause serious damage, or 

actual threat thereof, to the domestic industry. 

Section 331 provides that an interested party may file a request 

with the President for safeguard relief under Subtitle C to Title III 

of the Act (Sections 331–338) . The President must review the request and determine whether to commence consideration of the request. Under Section 331(b), if the President determines that the 

request contains information necessary to warrant consideration 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. 

Section 332(a) provides that the President shall determine, pursuant to a request by an interested party, whether, as a result of 

the elimination or reduction of a duty provided under the Agreement, a Korean textile or apparel article is being imported into the 

United States in such increased quantities, in absolute terms or 

relative to the domestic market for that article, 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(b) sets forth the relief that the President may provide, which is a suspension of any further reduction provided for 

under Annex 2–B of the Agreement, or an increase in the rate of 

duty on the articles in question to a level that does not exceed the 

lesser of the existing NTR (MFN) rate or the NTR (MFN) rate of 

duty that was imposed on the day before the Agreement entered 

into force. 


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Section 333 provides that the period of relief shall be no longer 

than two years. The period may be extended for an additional period of not more than two years if the President determines that 

continuation is necessary to remedy or prevent serious damage and 

to facilitate adjustment by the domestic industry to import competition and there is evidence the industry is making a positive adjustment. The aggregate period of relief, including any extension, may 

not exceed four years. 

Section 334 provides that relief may not be granted to an article 

under this subtitle if relief has previously been granted under this 

subtitle for that article, or the article is subject to import relief 

under Subtitle A of Title III of the Act or under Chapter 1 of Title 

II of the Trade Act of 1974. 

Under Section 335, after a safeguard expires, the rate of duty on 

the article that had been subject to the safeguard shall be the rate 

that would have been in effect at that time, but for the safeguard 

action. 

Section 336 provides that the authority to provide safeguard relief under Subtitle C to Title III of the Act expires ten years after 

the date on which duties on the articles are eliminated pursuant 

to the Agreement. 

Section 337 authorizes the President to provide compensation to 

Korea if relief is ordered. 

Section 338 provides for the treatment of confidential business 

information received by the President in connection with an investigation or determination under Subtitle C to Title III of the Act. 

Reason for change 

Sections 321 to 328 implement the commitments under the 

Agreement relating to textile and apparel safeguard measures. The 

Committee intends that the provisions of Subtitle C of Title III of 

the Act be administered in a manner that is transparent and that 

will serve as an example to our trading partners. For example, in 

addition to publishing a summary of the request for safeguard relief, the Committee notes that the President plans to make available the full text of the request, subject to the protection of business confidential data, on the website of the Department of Commerce, International Trade Administration. In addition, the Committee encourages the President promptly to issue regulations on 

procedures for requesting such safeguard measures, for making determinations under Section 332(a), and for providing relief under 

Section 332(b). 

Subtitle D: Cases Under Title II of the Trade Act of 1974 

SECTION 341: FINDINGS AND ACTION ON GOODS FROM KOREA

Present law 

No provision. 

Explanation of provision 

Section 341(a) provides that if the ITC makes an affirmative determination, or a determination that the President may consider to 

be an affirmative determination, in a global safeguard investigation 

under Section 202(b) of the Trade Act of 1974, the ITC must find 

and report to the President whether Korean imports of the article 


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that qualify as originating goods under the Agreement are a substantial cause of serious injury or threat thereof. Under Section 

341(b), if the ITC makes a negative finding under Section 341(a), 

the President may exclude any imports that are covered by the 

ITC’s finding from the global safeguard action. 

Reason for change 

This provision implements commitments under the Agreement 

relating to treatment of Korean imports in global safeguard investigations under Section 202(b) of the Trade Act of 1974. 

TITLE IV: PROCUREMENT 

SECTION 401: ELIGIBLE PRODUCTS

Present law 

U.S. procurement law (such as the Buy American Act of 1933 

and the Buy American Act of 1988) limits procurement from certain foreign suppliers of goods and services in favor of U.S. providers of goods and services. Most discriminatory purchasing provisions are waived if the United States is a party to a bilateral or 

multilateral procurement agreement, such as the WTO Agreement 

on Government Procurement, or a bilateral or multilateral trade 

agreement that includes provisions on procurement. 

Explanation of provision 

Section 401 implements Chapter 17 of the Agreement and 

amends the definition of ‘‘eligible product’’ in Section 308(4)(A) of 

the Trade Agreements Act of 1979. As amended, Section 308(4)(A) 

provides that an ‘‘eligible product’’ means a product or service of 

Korea that is covered under the Agreement for procurement by the 

United States. 

Reason for change 

This provision implements U.S. commitments under Chapter 17 

of the Agreement (Government Procurement). 

TITLE V: OFFSETS 

SECTION 501: INCREASE IN PENALTY ON PAID PREPARERS WHO FAIL TO

COMPLY WITH EARNED INCOME TAX CREDIT DUE DILIGENCE REQUIREMENTS

Present law 

Under Section 6695(g) of the Internal Revenue Code of 1986, 

paid preparers who fail to comply with earned income tax credit 

due diligence requirements are fined $100 per return. 

Explanation of provision 

Section 501 increases the penalty for paid preparers who fail to 

comply with earned income tax credit due diligence requirements 

from $100 to $500 per return. The increased penalty applies to returns required to be filed after December 31, 2011. 


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Reason for change 

The Committee believes it is appropriate to increase the penalty 

for paid preparers who fail to comply with earned income tax credit 

due diligence requirements to deter non-compliance and for budgetary offset purposes. 

SECTION 502: REQUIREMENT FOR PRISONS LOCATED IN THE UNITED

STATES TO PROVIDE INFORMATION FOR TAX ADMINISTRATION

Present law 

No provision. 

Explanation of provision 

Section 502 requires the head of the Federal Bureau of Prisons 

and the head of any State agency that administers prisons to provide certain information regarding inmates incarcerated, in electronic format, to the Secretary of the Treasury. The information 

must be filed no later than September 15, 2012, and annually 

thereafter. 

Reason for change 

The information provided will assist in detecting and deterring 

fraudulent tax return filings from inmates. The Committee believes 

it is appropriate to identify inmates who are filing fraudulent tax 

returns and for budgetary offset purposes. 

SECTION 503: MERCHANDISE PROCESSING FEE

Present law 

Section 8101 of the Omnibus Budget Reconciliation Act of 1986 

(‘‘OBRA’’) authorizes the Secretary of the Treasury to collect a merchandise processing fee for formal and informal entries in order to 

offset the salaries and expenses that will likely be incurred by the 

Customs Service in the processing of entries and releases. This authority has been consistently extended. Provided for under 19 

U.S.C. 58c(a)(9)–(10), the merchandise processing fee is assessed on 

all goods entered or released from non-trade agreement partner 

countries. Presently, an ad valorem fee of 0.21 percent is mandated 

for merchandise that is entered formally. The fee is assessed on the 

value of the merchandise being imported, not including duty, 

freight, and insurance charges. The current minimum fee is $21, 

and the maximum fee is $485. Goods that are entered informally 

are charged a fee pursuant to a three-tiered flat rate fee table, depending on whether the fee is filed manually or electronically. The 

fee for informal entries ranges from $2.00 to $9.00 per shipment. 

The present fee level has been in place since 1995. 

Explanation of provision 

Section 503 increases the ad valorem fee collected by Customs 

and Border Protection that offsets the costs incurred in processing 

and inspecting imports from 0.21 percent to 0.3464 percent. This 

is the first increase in this fee since 1995. 


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Reason for change 

The Committee believes it is appropriate to increase the merchandise processing fees to address increased costs Customs and 

Border Protection has incurred as a result of the increased volume 

of trade and additional operational initiatives since the last legislative change to the merchandise processing fee in 1995. 

SECTION 504: CUSTOMS USER FEES

Present law 

Section 13031 of the Consolidated Omnibus Budget Reconciliation Act of 1985 (‘‘COBRA’’) authorizes the Secretary of the Treasury to collect passenger and conveyance processing fees and the 

merchandise processing fees. Section 412 of the Homeland Security 

Act of 2002 authorized the Secretary of the Treasury to delegate 

such authority to the Secretary of Homeland Security. COBRA has 

been amended on several occasions. The current authorization for 

the collection of the passenger and conveyance processing fees is 

through January 14, 2020. The current authorization for the collection of the Merchandise Processing Fee is through January 7, 2020. 

Explanation of provision 

Section 504 extends the passenger and conveyance processing 

fees and the merchandise processing fees authorized under Section 

13031 of the Consolidated Omnibus Budget Reconciliation Act of 

1985 (‘‘COBRA’’) through December 8, 2020 and August 2, 2021, respectively. 

Reason for change 

The Committee believes it is appropriate to extend the passenger 

and conveyance processing fees authorized under COBRA for budgetary offset purposes. 

SECTION 505: TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES

Present law 

In general, corporations are required to make quarterly estimated tax payments of their income tax liability. For a corporation 

whose taxable year is a calendar year, these estimated tax payments must be made by April 15, June 15, September 15, and December 15. 

Explanation of provision 

For corporations with assets of at least $1 billion, Section 505(a) 

increases the amount of the required installment of estimated tax 

otherwise due in July, August, or September of 2012 by 0.25 percent of such amount and Section 505(b) increases the amount of the 

required installment of estimated tax otherwise due in July, August, or September of 2016 by 2.75 percent of such amount (determined without regard to any increase in such amount not contained in the Internal Revenue Code). The next required installment is reduced to reflect the prior increase. 


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Reason for change 

The Committee believes it is appropriate to adjust the corporate 

estimated tax payments for budgetary offset purposes. 

III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statements are made concerning the vote of the Committee on Ways and Means in its consideration of the bill, H.R. 3080. 

MOTION TO REPORT THE BILL

The bill, H.R. 3080, was ordered favorably reported by a rollcall 

vote of 30 yeas to 5 nays (with a quorum being present). The vote 

was as follows: 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Camp .............................. X ........... ............. Mr. Levin .............................. X ........... .............

Mr. Herger ............................. X ........... ............. Mr. Rangel ........................... X ........... .............

Mr. Johnson ........................... X ........... ............. Mr. Stark .............................. ........... X .............

Mr. Brady .............................. X ........... ............. Mr. McDermott ..................... X ........... .............

Mr. Ryan ............................... X ........... ............. Mr. Lewis .............................. ........... X .............

Mr. Nunes ............................. X ........... ............. Mr. Neal ............................... X ........... .............

Mr. Tiberi .............................. X ........... ............. Mr. Becerra .......................... X ........... .............

Mr. Davis .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Reichert .......................... X ........... ............. Mr. Thompson ...................... X ........... .............

Mr. Boustany ......................... X ........... ............. Mr. Larson ............................ ........... ........... .............

Mr. Roskam ........................... X ........... ............. Mr. Blumenauer ................... X ........... .............

Mr. Gerlach ........................... X ........... ............. Mr. Kind ............................... X ........... .............

Mr. Price ............................... X ........... ............. Mr. Pascrell .......................... ........... X .............

Mr. Buchanan ....................... X ........... ............. Ms. Berkley ........................... ........... X .............

Mr. Smith .............................. X ........... ............. Mr. Crowley .......................... X ........... .............

Mr. Schock ............................ X 

Ms. Jenkins ........................... X 

Mr. Paulsen ........................... X 

Mr. Berg ................................ X 

Ms. Black .............................. X 

Mr. Reed ............................... X 

IV. BUDGET EFFECTS OF THE BILL 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of this bill, H.R. X, as reported: 

The Committee agrees with the estimate prepared by the Congressional Budget Office (CBO) which is included below. 

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with subdivision 3(c)(2) of rule XIII of the Rules 

of the House of Representatives, the Committee states that the provisions of H.R. 3080 would reduce customs duty receipts due to 

lower tariffs imposed on goods from Korea. 


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C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, the following report prepared by CBO is provided: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, October 5, 2011. 

Hon. DAVE CAMP, 

Chairman, Committee on Ways and Means, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3080, 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. 

Enclosure. 

H.R. 3080—United States-Korea Free Trade Agreement Implementation Act 

Summary: H.R. 3080 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 implementation 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 H.R. 3080 

would reduce revenues by $31 million in 2012 and by about $7.0 

billion over the 2012–2021 period. CBO estimates that enacting 

H.R. 3080 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. Payas-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 H.R. 3080 

contain no intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA), and would impose no costs 

on state, local, or tribal governments. 


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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 H.R. 3080 contain 

no intergovernmental or private-sector mandates as defined in 

UMRA. 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 3080 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). 


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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 

a. In addition, CBO estimates that implementing the provisions of H.R. 3080 would have a discretionary cost of $7 million over the 2012–2016 period, assuming appropriation of the necessary amounts. 

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. 


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Basis of estimate: For the purposes of this estimate, CBO assumes that H.R. 3079 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. 

H.R. 3080 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. 

H.R. 3080 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. 

H.R. 3080 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 03:42 Oct 08, 2011 Jkt 019006 PO 00000 Frm 00027 Fmt 6659 Sfmt 6602 E:\HR\OC\HR239.XXX HR239

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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 H.R. 3080 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. 


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CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 3080 AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON OCTOBER 5, 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 


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Estimated impact on state, local, and tribal governments: CBO 

has determined that the nontax provisions of H.R. 3080 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 H.R. 3080 contain no intergovernmental mandates as defined in UMRA. 

Estimated impact on the private sector: CBO has determined 

that the nontax provisions of H.R. 3080 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 H.R. 3080 contain no private-sector mandates as 

defined in UMRA. 

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. 

D. MACROECONOMIC IMPACT ANALYSIS

In compliance with clause 3(h)(2) of rule XIII of the Rules of the 

House of Representatives, the following statement is made by the 

Joint Committee on Taxation with respect to the provisions of the 

bill amending the Internal Revenue Code of 1986: the effects of the 

tax provisions of the bill on economic activity are so small as to be 

incalculable within the context of a model of the aggregate economy. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE OF REPRESENTATIVES 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives (relating to oversight findings), the Committee concluded that it is appropriate and timely to consider H.R. 

3080, as reported. In addition, the legislation is governed by procedures of the Bipartisan Trade Promotion Authority Act of 2002. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the performance goals and objectives of 

the part of this legislation that authorizes funding are for (a) the 

payment of the U.S. share of the expenses incurred in dispute settlement proceedings established under Chapter 20 of the U.S.- 

Korea Free Trade Agreement and (b) the establishment and operation of an office within the Department of Commerce responsible 

for providing assistance to the panels in such proceedings. 


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C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (P.L. 104–4). The 

Committee has determined that the revenue provisions of the bill 

do not impose a Federal mandate on the private sector. The Committee has determined that the revenue provisions of the bill do 

not impose a Federal intergovernmental mandate on State, local, or 

tribal governments. 

D. APPLICABILITY OF HOUSE RULE XXI 5(B) 

Clause 5(b) of rule XXI of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, 

or conference report carrying a Federal income tax increase may 

not be considered as passed or agreed to unless so determined by 

a vote of not less than three-fifths of the Members voting, a 

quorum being present.’’ The Committee has carefully reviewed the 

sections of the bill and states that the bill does not involve any 

Federal income tax rate increases within the meaning of the rule. 

E. TAX COMPLEXITY ANALYSIS

The Joint Committee on Taxation, in consultation with the Internal Revenue Service and the Department of the Treasury, will provide a tax complexity analysis to Members of the Committee as 

soon as practicable after the report is filed. 

F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, 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 italic, 

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 


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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— 

(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). 


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(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) * * * 

* * * * * * * 

(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, reliquidate 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) * * * 

* * * * * * * 


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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, 

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

STATES–KOREA 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 exVerDate Mar 15 2010 03:42 Oct 08, 2011 Jkt 019006 PO 00000 Frm 00034 Fmt 6659 Sfmt 6603 E:\HR\OC\HR239.XXX HR239

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porter 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 

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 nonconfidential 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 


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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 

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 

* * * * * * * 


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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). 

SEC. ø6116.¿ 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 

* * * * * * * 


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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. 

* * * * * * * 


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1Pending FTAs with developing countries (i.e., Peru, Panama and Colombia) were also modified to ensure that poor patients in those countries have access to affordable medicines. Those 

changes were not included in the Korea FTA, reflecting our views that more flexible patent rules 

(e.g., related to test data protection) appropriate for a developing country are not appropriate 

for a country at Korea’s level of development. 

ADDITIONAL VIEWS 

We support the United States-Korea Free Trade Agreement 

(FTA). The Agreement is the product of our work over many years 

to better ensure that U.S. trade policy reflects American values and 

shapes globalization to spread its benefits more broadly. We write 

these additional views to describe how this Agreement achieves 

those objectives and to put this Agreement in its broader context. 

THE U.S.-KOREA FREE TRADE AGREEMENT

On May 10, 2007, we won a major breakthrough to change U.S. 

trade policy. We insisted that this FTA, and others like it, be renegotiated to: (1) require Korea to comply with international labor 

standards, fully enforceable through the agreement’s normal dispute settlement mechanism; (2) require Korea to comply with key, 

mutually accepted international environmental agreements, again 

fully enforceable through dispute settlement; (3) clarify that the 

chapter on intellectual property rights does not and should not prevent either country from taking steps to protect public health by 

promoting access to medicines for all; 1 (4) allow U.S. government 

agencies to base government procurement decisions on compliance 

with core labor standards; (5) make clear that nothing in the agreement should be interpreted to provide foreign investors greater 

rights than U.S. investors have under U.S. law; and (6) affirm that 

the United States has non-challengeable authority to prevent foreign companies from operating in U.S. ports, based on national security concerns. 

At that time, we also made clear to the previous Administration 

that another major issue had to be addressed—ensuring that the 

FTA meaningfully opened Korea’s historically closed auto market. 

For decades, Korea has employed a unique and ever changing regulatory regime to discriminate against auto imports, while the U.S. 

market has been open to their goods. As a result, U.S. automakers 

exported less than 14,000 cars to Korea in 2010. In contrast, Korean automakers have been able to use their historically closed 

market to finance an aggressive push into the U.S. market, 

through both exports (515,000 cars in 2010) and transplant production. In 2010, automotive trade accounted for more than 75 percent 

of the U.S. trade deficit with Korea. 

Unfortunately, the Bush Administration ignored these concerns 

and negotiated an agreement which would have locked in one-way 

trade in autos in Korea’s favor. As a result, the 2007 FTA failed 

to garner significant support in Congress. 


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On December 3, 2010, with the support of key Members, the 

Obama Administration negotiated an accompanying agreement to 

the FTA that will end one-way trade in autos and provide U.S. 

automakers with a real opportunity to compete and succeed in the 

Korean market. An exchange of letters between the United States 

and Korea on February 10, 2011 (‘‘February 10, 2011 Exchange of 

Letters’’) reflects the agreement that was reached. With the 

changes achieved through the accompanying agreement, all of the 

U.S. auto industry (Ford, Chrysler, GM and the UAW) are supporting the U.S.-Korea FTA. 

Key elements of the February 10, 2011 Exchange of Letters include: • Rescheduling of the Phase out of Car and Truck Tariffs. Critical changes made to the car and truck tariff phase out schedule 

will give U.S. automakers the opportunity to reverse decades of Korean protectionism, important time to establish a brand and distribution presence and leverage to evaluate Korea’s compliance 

with the FTA and the February 10, 2011 Exchange of Letters. 

Car Tariffs: Under the FTA as negotiated by the Bush Administration (‘‘the 2007 agreement’’), U.S. tariffs on 90 percent 

of South Korean auto imports would have been eliminated immediately, with tariffs on the remaining 10 percent phased out 

by the third year of implementation. Under the February 10, 

2011 Exchange of Letters, the 2.5 percent U.S. tariff will remain in place until the fifth year. At the same time, South 

Korea will immediately cut its tariff on U.S. auto imports in 

half (from 8 percent to 4 percent), and fully eliminate the Korean tariff in year five. 

Truck Tariff Elimination: Under the 2007 agreement, phase 

out of the 25 percent U.S. tariff on South Korean trucks would 

have begun immediately, with the phase out completed in the 

agreement’s tenth year. Under the February 10, 2011 Exchange of Letters, the United States will maintain its 25 percent truck tariff until the eighth year and then phase it out in 

the tenth year. However, South Korea must eliminate its 10 

percent tariff on U.S. trucks immediately (its original commitment). 

Tariffs on Electric Cars: Under the 2007 agreement, the 

United States and South Korea would have eliminated tariffs 

on electric car and plug-in hybrid imports in year 10. Under 

the February 10, 2011 Exchange of Letters, South Korea will 

immediately reduce these tariffs from 8 percent to 4 percent, 

and both countries will then phase out their tariffs in year five. 

• Creation of a Special Autos Safeguard. The February 10, 2011 

Exchange of Letters includes a first-ever auto-specific safeguard designed to protect against potential surges of Korean cars and 

trucks. This special safeguard contains several unique provisions 

not available under the FTA’s general safeguard, such as being 

available for 10 years after the applicable U.S. tariff fully phases 

out, and it can be applied more than once. 

• Safety and Environmental Standards. The February 10, 2011 

Exchange of Letters levels the playing field and prevents Korea 

from relying on discriminatory, rotating safety and environmental 

regulations—as it has in the past—to shut out U.S. auto imports. 


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Automotive Safety Standards: The February 10, 2011 Exchange of Letters allows U.S. automakers to import up to 

25,000 cars and trucks into South Korea that meet U.S. federal 

safety standards, as opposed to complying with unique Korean 

standards. 

Automotive Environmental Standards: Korea’s trade policies 

have precluded U.S. automakers (and other foreign manufacturers) from selling a mixed fleet into that market, thereby 

making it impossible for U.S. producers to meet Korea’s proposed fuel economy and greenhouse gas emissions regulations. 

To address the ‘‘overhang’’ effect of past discriminatory trade 

policies, under the February 10, 2011 Exchange of Letters, 

U.S. autos will be considered compliant with the new South 

Korean environmental emissions rules if they achieve targets 

within 19 percent of those in the new regulations. • Taxes: Historically, Korea’s tax system has imposed higher fees 

on larger vehicles with larger engines (the tax structure does not 

have an environmental justification). As a result, U.S. producers, 

who primarily export larger cars with larger engines (because Korean non-tariff barriers make it uneconomical to import smaller 

cars), have borne the brunt of these taxes. In the 2007 agreement, 

South Korea committed to make changes to its engine size-based 

tax regime to limit its discriminatory nature. Under the February 

10, 2011 Exchange of Letters, South Korea has additionally committed that, in the event it proposes taxes based on fuel economy 

or greenhouse gas emissions, the taxes will be governed by the 

FTA’s transparency provisions, helping to ensure that they are not 

implemented in a way that discriminates against U.S. automakers. • Transparency: The February 10, 2011 Exchange of Letters 

builds on the provisions designed to promote regulatory transparency and the avoidance of non-tariff barriers included in the 

2007 FTA, e.g., the Automotive Working Group. First, under the 

February 10, 2011 Exchange of Letters, Korea must provide a 

twelve month period between the time a final regulation is issued 

concerning significant regulations (e.g., regulations requiring a substantial change in motor vehicle design or technology) and the time 

that automakers must comply with it. Second, within 24 months of 

entry into force, Korea must develop a new review system to evaluate whether its auto regulations achieve their aim in the least burdensome manner possible. 

We in the U.S. House have been working to change U.S. trade 

policy for over a decade. In the era of increasing globalization, 

trade policy must be a tool to shape the rules of competition and 

spread the benefits of globalization. The question raised by the 

U.S.—Korea FTA was: Would we stand up for U.S. businesses and 

workers and insist on two-way trade? With the changes achieved 

last fall eliminating non-tariff barriers and adjusting the tariff provisions, the answer is ‘‘yes’’ and thus, this is an FTA worth supporting. 

This process has taken too long. The Bush administration should 

not have ignored Congressional and stakeholder demands concerning the auto market access issue and taken action to address 

them. And this FTA should have been submitted for consideration 

as soon as the February 10, 2011 Exchange of Letters occurred, 


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along with the reauthorization of the historically bipartisan Trade 

Adjustment Assistance (TAA) program, which the Majority allowed 

to lapse. 

THE AGREEMENT IN ITS BROADER CONTEXT

The May 10 components that are included in the Korea FTA are, 

without question, some of the most forward-looking provisions in 

U.S. trade agreements. While more work can be done to ensure 

that our trade agreements reflect our values and interests, those 

components are a critical basis to the successful conclusion of any 

future bilateral or regional trade agreement. New agreements also 

should address new challenges, such as unfair competition from, 

and distortions caused by, state-owned and state-supported enterprises. 

Moreover, it is important to recognize that the May 10 Changes 

were just one part of our vision for a ‘‘new trade policy for America.’’ In March 2007, House Democrats coalesced around a number 

of initiatives to improve U.S. trade policy, including in areas that 

eventually were reflected in the May 10 Changes. Beyond those 

changes, initiatives included the need to: (1) strengthen the enforcement of trade agreements and U.S. trade laws (in particular, 

by addressing massive Chinese subsidies and violations of intellectual property rights; eliminating currency manipulation; and by addressing non-tariff barriers that limit U.S. exports); (2) strengthen 

American competitiveness, including through worker retraining, 

education and health care improvements, and community revitalization programs; and (3) foster development in the poorest countries of the world. 

Some progress has been made on these initiatives. For example, 

the 2009 reforms to Trade Adjustment Assistance (TAA) dramatically improved the program, including by covering service workers 

and many more manufacturing workers, increasing training funding and mandating counseling to ensure appropriate training, promoting on-the-job, part-time and longer-term training, and by increasing the TAA health coverage tax credit. We now have agreement to extend the program, which the Majority allowed to expire 

in February. And while modifications have been made, both the integrity of the program and the major 2009 improvements are preserved. And the Affordable Care Act of 2010 will make the United 

States more competitive by reining in health care costs. 

But much more needs to be done, particularly with respect to enforcement and global trade imbalances. For example, Fred 

Bergsten, the Director of the Peterson Institute for International 

Economics recently described China’s currency manipulation as ‘‘by 

far the largest protectionist measure adopted by any country since 

the Second World War—and probably in all of history.’’ Eliminating 

currency misalignments (caused in large part by China’s currency 

manipulation) is expected to improve the U.S. current account position by $200 billion to $250 billion annually and produce at least 

a million good jobs, mainly in manufacturing. Years of ‘‘quiet diplomacy’’ to address this issue have produced only meager results. 

And more tools and resources are needed to address the many 

trade-distorting policies of our trading partners, including China’s 

massive subsidies and other industrial policies in key sectors such 


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as clean energy. Those policies have been allowed to persist even 

as important incentives for our companies like the Section 48C Advanced Manufacturing Credit have lapsed due to Republican opposition. 

In addition to leveling the playing field, more must be done to 

invest in American competitiveness and to create American jobs. 

For example, last month, the President submitted the American 

Jobs Act to Congress. Among other things, the bill would help to 

rebuild and modernize American schools and put teachers laid off 

by State budget cuts back to work. It would make needed investments in our nation’s infrastructure to create jobs today and lay 

the foundation for future growth. Enactment of the President’s 

American Jobs Act will help to promote American competitiveness 

in the global economy. 

SANDER M. LEVIN. 

JIM MCDERMOTT. 

XAVIER BECERRA. 

JOHN B. LARSON. 

RICHARD E. NEAL. 

MIKE THOMPSON. 

EARL BLUMENAUER. 

CHARLES B. RANGEL. 

Æ 


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