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: 2017-10-20
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 agreement (EU), vehicle parts

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   EN 

   EUROPEAN COMMISSION  Brussels, 20.10.2017  SWD(2017) 345 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(2017) 614 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 fifth year of FTA implementation, the Commission did not receive 
any such requests. 

2. 

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

The  results of  the  monitoring  during  the  fifth  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 the present monitoring, statistical regime 1 of 
Eurostat  (normal  trade)  has  been  used,  in  contrast  to  the  overall  assessment  in  the  annual 
report 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  32%  in  the  fifth  year  of  FTA  implementation 
(July 2015 - June 2016) compared to the fourth FTA implementation year (July 2014 - June 
2015). Imports of cars with medium/large engines increased by 8%, while imports of electric 
cars  increased  significantly.  Imports  of  electric  cars,  however,  are  still  negligible  in 
comparison  to  the  total car imports.  The  current  level  of  car  imports  is still  below  the  year 
July  2007  -  June  2008  (several  years  before  the  FTA  took  effect)  when  imports  reached 
around 530,000 units.  

As  regards  EU  imports  of  car  parts,  an  increase  of  17%  occurred  in  the  fifth  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  (July  2010  -  June  2011,  i.e.  the  last  12  months  before  the  provisional 
application of the FTA started). 

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(units)Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Jul15-Jun16Var prior yearElectric engines2617571391,3616,202356%Small engines118,969208,574171,256143,967144,498222,97454%Medium/Large engines151,604172,417159,658150,099154,780167,8428%Total cars (8703)270,599381,008330,971294,205300,639397,01832%Index100141122109111147(1000 kg)Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Jul15-Jun16Var prior yearCar parts (8708)193,662284,750289,182305,994383,548448,07117%Index100147149158198231EU imports from Korea in the monitored car sector (including car parts)150,000200,000250,000300,000350,000400,000450,000500,000Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Jul15-Jun16Total cars (8703)Car parts (8708) 
 
 
 
 
(ii) Textile sector 

The  decreasing  trend  in  textile  imports  continued.  EU  imports  of  textiles  from  Korea 
decreased  by  31%  in  the  fifth  year  of  FTA  implementation  compared  to  the  previous  year. 
Imports are also significantly lower than in the reference period. 

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(1000 kg)Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Jul15-Jun16Var prior yearCotton sewing thread (CN 5204)7.526.75.21.70.211.45600%Certain cotton yarn (CN 5205)1,155.3715.5896.7281.1282.3119.9-58%Certain cotton yarn (CN 5206)21.00.00.00.80.10.2100%Certain cotton yarn (CN 5207)0.20.20.00.60.11.0900%Wovern fabrics of artificial filament yarn (CN 5408)2,385.92,226.11,953.22,086.61,758.31,349.3-23%Yarn of synthetic staple fibres (CN 5509)247.9309.1159.589.646.144.9-3%Yarn of artificial staple fibres (CN 5510)166.975.2150.7322.7264.088.9-66%Yarn of man-made staple fibres (CN 5511)12.10.30.00.10.00.00%Total textile sector3,9973,3533,1652,7832,3511,616-31%Index1008479705940EU imports from Korea in the monitored textile sector05001,0001,5002,0002,5003,0003,5004,0004,500Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Jul15-Jun16Total textile sector 
 
 
(iii) Electronics sector 

The increasing trend of imports in the electronic sector that started in July 2012 stoppedin the 
fifth year of the FTA implementation. Imports were 23% lower in the fifth year compared to 
the previous year, and slightly higher than in the reference period. 

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

3. 

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  is  based  on  the  import  value  of  products  subject  to  monitoring  during  2016, 
compared to 2015. 

5 

(1000 kg)Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Jul15-Jun16Var prior yearSound recording or sound reproducing apparatus (CN 8519)22413752769930%Video recording of reproducing apparatus (CN 8521)886669475421329206-37%Transmission apparatus for radio-broadcasting or television; cameras (CN 8525)1,4271,2291,0139258158282%Radar apparatus (CN 8526)1051112244941,0511,37231%Reception apparatus for radio-broadcasting (CN 8527)5071,1652,1262,9451,9621,397-29%Certain monitors and projectors (CN 8528)6,0086,4934,5816,2119,6216,824-29%Total electronic sector8,9569,7078,45611,04813,85410,727-23%Index10010894123155120EU imports from Korea in the monitored electronic sector6,0007,0008,0009,00010,00011,00012,00013,00014,00015,000Jul 10-Jun 11Jul 11-Jun 12Jul12-Jun13Jul13-Jun14Jul14-Jun15Jul15-Jun16Total electronic sector 
 
 
 
 
 
 
 
In  the  electronics  sector,  EU  imports  from  Korea  increased  in  the  following  HS  headings: 
8519 (+19%), 8525 (+24%) and 8526 (+39%), and decreased in the following headings: 8521 
(-25%), 8525 (-4%), 8527 (-45%) and 8528 (-21%).  

At  the  same  time,  Korea's  imports  from  China  of  parts  of  these  products  (HS  8522,  8527, 
8529) increased by 53%, 43% and 69% respectively. Korea's imports from Japan increased 
by 177% for HS 8522 and by 141% for HS 8529, whereas imports of HS 8527 increased by 
57%. The import prices of the commodities under these chapter both from China and Japan 
follow the same trend as that of the import values.  

As  regards  textiles  (yarns  and  fabrics),  a  decrease  of  EU  imports  from  Korea  could  be 
observed for product lines HS 5207 (cotton yarn for retail sale), HS 5408 (woven fabrics of 
artificial filament yarn) and HS 5510 (yarn of artificial staple fibres) while imports increased 
under HS 5204 (cotton sewing thread), HS 5205 (certain cotton yarn), HS 5206 (cotton yarn 
not for retail sale), HS 5509 (yarn of synthetic 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 14% in value and 
by 9% 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  94%  (HS  8407).  The  imports  of  diesel 
engines (HS 8408) increased by 70%. Imports of Chinese car bodies (HS 8707) increased by 
892% and by 58% for other parts (HS 8708). Korea's imports from Japan of car engines for 
the  industrial  assembly  of  motor  vehicles  of  HS  heading  8703  increased  by  190%.  The 
imports  of  diesel  engines  increased  by  86%.  Imports  of  Japanese  car  bodies  (HS  8707) 
increased by 632% and increased by 106% for other car components (HS 8708).  

In  conclusion,  while  there  was  a  significant  increase  in  imports  of  car  components  from 
China and Japan to Korea in 2016 compared to  2015, it is not possible to assess based on 
trade  statistics  to  what  extent  this  explains  the  14%  increase  in  EU  imports  from  Korea  of 
cars, and whether the allowance of duty-drawback played a role in this increase. Furthermore, 
it must be noted that this increase rate is significantly lower than what was observed between 
2014 and 2015 (30%). 

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