COMMISSION STAFF WORKING DOCUMENT Implementation of Regulation (EU) No 511/2011 Accompanying the document Report from the Commission to the European Parliament and the Council Annual Report on the Implementation of the EU-Korea Free Trade Agreement
Date: 2016-06-30
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: South Korea, customs drawback, electronics industry, export (EU), free-trade agreement, import (EU), motor vehicle, textile industry, trade volume, vehicle parts

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   EN 

   EUROPEAN COMMISSION  Brussels, 30.6.2016  SWD(2016) 162 final   COMMISSION STAFF WORKING DOCUMENT Implementation of Regulation (EU) No 511/2011 Accompanying the document Report from the Commission to the European Parliament and the Council Annual Report on the Implementation of the EU-Korea Free Trade Agreement {COM(2016) 268 final}  
 
 
1. 

IMPLEMENTATION OF REGULATION (EU) NO 511/2011  

Regulation (EU) No 511/2011 (‘the Safeguard Regulation’) is the EU's internal legislation to 
implement the bilateral safeguard clause of the EU-Korea FTA.  

As provided for in Articles 3 and 11 of the Safeguard Regulation, the Commission has been 
monitoring  the  evolution  of  imports  and  exports  of  Korean  products  in  sensitive  sectors 
potentially  affected  by  duty  drawback  such  as  cars,  car  parts,  textiles  and  consumer 
electronics.  Since  the  provisional  application  of  the  FTA  started  in  July  2011,  the 
Commission has been sharing the results of the monitoring with the EU Member States, the 
European Parliament and the relevant stakeholders every two months. 

The  Safeguard  Regulation  also  provides  for  the  possibility  to  initiate  a  safeguard 
investigation or to introduce prior surveillance measures, under certain conditions defined in 
the  Regulation.  During  the  fourth  year  of  FTA  implementation,  the  Commission  did  not 
receive any such requests. 

1.1. 

Evolution  of  imports  into  the  EU  from  Korea  in  the  sectors  covered  by  the 
monitoring 

The results of the monitoring during the fourth year of FTA implementation are summarised 
below.  

For  the  purpose  of  the  monitoring  exercise,  data  has  been  compared  on  the  basis  of  FTA 
implementation years (July-June). The comparison under the monitoring exercise is based on 
quantities imported from Korea to  the EU, i.e. units in  the case of cars  and 1000 kg in  the 
case of car parts, textiles and electronics.  

It  is  also  worth  noting,  that  for  the  purpose  of  monitoring,  statistical  regime  1  of  Eurostat 
(normal trade) has been used, in contrast to the overall assessment in chapter 2 which is based 
on statistical regime 4 (total trade, i.e. including trade under inward and outward processing 
procedures). This explains why the figures are in some cases different. 

(i) Car sector 

EU imports of cars from Korea increased by 2% in the fourth  year of FTA implementation 
(July 2014 - June 2015) compared to the third FTA implementation  year (July 2013  – June 
2014). Imports of cars with medium/large engines increased by 3%, while imports of electric 
cars  increased  significantly.  Imports  of  electric  cars,  however,  are  still  negligible  in 
comparison  to  the  total  car  imports.  While  imports  of  Korean  cars  increased  by  11% 
compared to the 12-month period before the FTA took effect, their current level is still at or 
below  the  previous  years  and  in  particular  the  year  July  2007  –  June  2008  when  imports 
reached around 530,000 units.  

As regards EU imports of car parts, an increase of 25% occurred in the  fourth year of FTA 
implementation compared to the previous  year. This increase is significant compared to the 
rather stable level of imports over the first three years of the FTA, and also compared to the 
reference period. 

2 

 
 
 
 
 
 
 
 
 
 
 
Source: Eurostat – Comext (‘regime 1 – normal trade’) 

3 

(units)Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Var prior yearElectric engines2617571391,361879%Small engines118,969208,574171,256143,967144,4980%Medium/Large engines151,604172,417159,658150,099154,7803%Total cars (8703)270,599381,008330,971294,205300,6392%Index100141122109111(1000 kg)Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Var prior yearCar parts (8708)193,662284,750289,182305,994383,54825%Index100147149158198EU imports from Korea in the monitored car sector (including car parts)050,000100,000150,000200,000250,000300,000350,000400,000450,000Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Total cars (8703)Car parts (8708) 
 
 
 
 
 
(ii) Textile sector 

The  decreasing  trend  in  textile  imports  continued  in  the  fourth  year  of  the  FTA 
implementation. EU imports of textiles from Korea decreased by 16% in  the fourth  year of 
FTA  implementation  compared  to  the  previous  year.  This  compares  to  a  12%  decrease 
between the third and the second year. Imports are also lower than in the reference period. 

Source: Eurostat – Comext (‘regime 1 – normal trade’) 

4 

(1000 kg)Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Var prior yearCotton sewing thread (CN 5204)7.526.75.21.70.2-88%Certain cotton yarn (CN 5205)1,155.3715.5896.7281.1282.30%Certain cotton yarn (CN 5206)21.00.00.00.80.1-88%Certain cotton yarn (CN 5207)0.20.20.00.60.1-83%Wovern fabrics of artificial filament yarn (CN 5408)2,385.92,226.11,953.22,086.61,758.3-16%Yarn of synthetic staple fibres (CN 5509)247.9309.1159.589.646.1-49%Yarn of artificial staple fibres (CN 5510)166.975.2150.7322.7264.0-18%Yarn of man-made staple fibres (CN 5511)12.10.30.00.10.0-100%Total textile sector3,9973,3533,1652,7832,351-16%Index10084797059EU imports from Korea in the monitored textile sector05001,0001,5002,0002,5003,0003,5004,0004,500Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Total textile sector 
 
 
 
(iii) Electronics sector 

The  increasing  trend  of  imports  in  the  electronic  sector  continued  in  the  fourth  year  of  the 
FTA implementation. Imports were 25% higher in the fourth year compared to the previous 
year, and significantly higher than in the reference period. 

Source: Eurostat – Comext (‘regime 1 – normal trade’) 

1.2. 

Duty drawback  

Duty  drawback  is  the  refunding,  remission  or  non-payment,  either  partial  or  complete,  of 
customs duties or equivalent charges on foreign inputs (raw, semi-manufactured materials or 
components) that  are used in  the production of  a  final product which is  exported to  a third 
country. 

The Commission carries out specific monitoring on duty drawback in relation to the rules of 
origin  as  provided  for  in  Article  11(1)  of  the  Safeguard  Regulation,  to  assess  the  foreign 
content in the Korean manufacturing process and thus in the exports of final products from 
Korea to the EU. Article 11(1) provides for a procedure for the application of Article 14 of 
the Rules of Origin Protocol on drawback or exemption from customs duties.  

The analysis focused on the import value of products  subject  to  monitoring during the first 
ten  months  (January-October)  of  2015,  compared  to  the  same  period  in  2014,  as  for  these 
periods full data are available. 

5 

(1000 kg)Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Var prior yearSound recording or sound reproducing apparatus (CN 8519)224137527646%Video recording of reproducing apparatus (CN 8521)886669475421329-22%Transmission apparatus for radio-broadcasting or television; cameras (CN 8525)1,4271,2291,013925815-12%Radar apparatus (CN 8526)1051112244941,051113%Reception apparatus for radio-broadcasting (CN 8527)5071,1652,1262,9451,962-33%Certain monitors and projectors (CN 8528)6,0086,4934,5816,2119,62155%Total electronic sector8,9569,7078,45611,04813,85425%Index10010894123155EU imports from Korea in the monitored electronic sector02,0004,0006,0008,00010,00012,00014,00016,000Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Total electronic sector 
 
 
 
 
 
 
In  the  electronics  sector,  EU  imports  from  Korea  increased  in  the  following  HS  headings: 
8519 (+29%), 8526 (+36%), 8527 (+15%) and 8528 (+30%) and decreased in the following 
headings: 8521 (-22%) and 8525 (-4%).  

At  the  same  time,  Korea's  imports  from  China  of  parts  of  these  products  (HS  8522,  8527, 
8529) decreased by 16%, 18% and 4% respectively. Korea's imports from Japan decreased by 
32% for HS 8522 and by 3% for HS 8529, whereas imports of HS 8527 increased by 671%. 
This increase may be partially explained by an increase of the import price of this commodity 
by 215%. 

As regards textiles (yarns and fabrics), a decrease of EU imports from Korea between 8% and 
100% could be observed for all the product lines subject to the monitoring: under HS 5204 
(cotton  sewing  thread),  HS  5205  (certain  cotton  yarn),  HS  5206  (cotton  yarn  not  for  retail 
sale)  HS  5207  (cotton  yarn  for  retail  sale),  HS  5408  (woven  fabrics  of  artificial  filament 
yarn), HS 5509 (yarn of synthetic staple fibres), HS 5510 (yarn of artificial staple fibres) and 
HS  5511  (yarn  of  man-made  staple  fibres).  In  the  FTA,  yarns  benefit  from  the  rule 
“Manufacture from man-made staple fibres, not carded or combed or otherwise prepared for 
spinning” safeguarded by annual quotas. 

Regarding cars, there was an overall increase in EU imports from Korea by 30% in value and 
by 25% in the number of cars falling within the HS code 8703. The increase does not apply to 
all types of cars but depends on the type and the size of the engine.  

In  the  meantime,  Korea's  imports  from  China  of  car  engines  for  the  industrial  assembly  of 
motor  vehicles  of  HS  heading  8703  increased  by  143%.  The  imports  of  diesel  engines 
increased  by  94%.  Imports  of  Chinese  car  bodies  (HS  8707)  increased  by  519%  and 
decreased by 6% for other parts (HS 8708). Korea's imports from Japan of car engines for the 
industrial assembly of motor vehicles of HS heading 8703 decreased by 30%. The imports of 
diesel  engines  increased  by  50%.  Imports  of  Japanese  car  bodies  (HS  8707)  increased  by 
363% and increased by 16% for other car components (HS 8708).  

In  conclusion,  while  there  was  a  significant  increase  in  imports  of  car  components  from 
China to Korea in the first ten months of 2015 compared to the same period in 2014, it is not 
possible to assess based on trade statistics to what extent this explains the 30% increase in EU 
imports from Korea of cars, and whether the allowance of duty-drawback played a role in this 
increase.  

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