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.
Duty Drawback is a system commonly used in many countries, including the U.S., to promote exports. Under a duty drawback system, the government repays certain duties it collects on imported products that are used as components in products that are then exported.
- Duty drawback has a long history in U.S. trade law, dating back to the first tariff act of the U.S. in 1789. The purpose is to provide a level playing field to U.S. exporters, permitting American businesses to compete in foreign markets without the handicap of including the duty paid on imported merchandise in its costs.
- Duty drawback is a legitimate and widely-used program in international trade. The World Trade Organization specifically exempts duty drawback from subsidy-related challenges. The KORUS FTA and many other FTAs do not have any specific provisions on duty drawback, since there is nothing special or unique about it.
- Conversely, the Korea-EU FTA does have some duty drawback provisions, which specifically allow the current regime in both economies to continue. The Korea-EU FTA has also provided for the possibility of a cap on duty drawback amounts beginning in the fifth year of implementation. However, the cap would be triggered only in the exceptional case of a huge import surge and sourcing pattern change. To deal with the possibility of an import surge in the automotive trade, the KORUS FTA's accompanying agreement announced in December 2010 has introduced special motor vehicle safeguard procedures.