Auto Issues in the KORUS FTA
The KORUS FTA has the unanimous backing of the "Big Three" U.S. Automakers and the UAW, an unprecedented level of support from both business and labor for an FTA.
Rule of Origin
The rule of origin section of the FTA specifies the minimum content of a product that must originate in either the U.S. or Korea for the products to be eligible for duty-free or reduced duty treatment.
- Specifically, the KORUS FTA provides that 35% of the components used to manufacture products (under the build-up method/net cost method) or 55% of the components of the final product (using the build-down method) must originate in one of the two countries to be eligible for the FTA's preferential treatment. Each methodology's benchmark percentage is supposed to be equivalent to each other to avoid any circumvention.
- Some opponents have claimed that the EU has received a better deal than the U.S. has, because the Korea-EU FTA stipulates that foreign contents should not exceed 45% of the price of the product. This is simply wrong. A 45% maximum foreign content rule under the Korea-EU FTA corresponds with the minimum 55% domestic contents rule under the KORUS FTA (in build-down method). In addition, it should be noted that the EU's standard foreign content rule was 40% instead of 45%.