Georgia Reaching Out Worldwide

KOREAMaria Galindo, Commercial Officer

Commercial Service (USDOC), SeoulMay 14-18, 2012

Benefits for Georgia from the U.S.-Benefits for Georgia from the U.S.-Korea Free Trade AgreementKorea Free Trade AgreementGeorgia & Global TradeGeorgia is the 12th largest exporter among all U.S. States

with global exports of $34.7 billion (2011) Exports of manufactured goods account for over 4.2% of

Georgia’s total private-sector jobs88% of all Georgia exporters are SMEs

Georgia & Korea TradeGeorgia exports to Korea were $907 million in 2011Korea is Georgia’s 10th largest international market

Overall Benefits of the Korea FTA for GeorgiaThe U.S.-Korea FTA, which began on March 15, 2012, will

eliminate 95% of all Korean consumer and industrial products duties within 3 years, including such leading Georgia exports to Korea as computers and electronics, machinery, and transportation equipment.

The U.S. International Trade Commission estimated that U.S. exports to Korea could expand by as much as 40% over the next few years under the U.S.-Korea FTA.

Sector Benefits of the Korea FTA Sector Benefits of the Korea FTA for Georgiafor GeorgiaTransportation Equipment Manufacturing – USD 338

million (2011) – Georgia’s largest leading exports include aircraft, fishing vessels, locomotives and other transportation manufactures. Duties on most transportation equipment products will be eliminated immediately, including duties on 87 percent of aircraft and related parts.

Machinery Manufactures – USD 94 million (2011) - Georgia’s second manufactured exports, such as water filtering, purifying equipment, refrigeration compressors, etc., faces an 8 percent tariff rate; however, these tariffs will be phased out immediately.

Chemical Manufactures – USD 84 million (2011) – Georgia’s third leading manufactured exports to Korea that includes pharmaceuticals, cosmetics, fertilizers, agro-chemicals, etc., have tariffs that range from 6 to 50 percent. Most of these chemical exports will receive duty-free treatment immediately, with the remaining tariffs phased out within 10 years, under the U.S.-Korea FTA.

Computers and Electronic Products – USD 43 million (2011) – Georgia’s sixth largest exports to Korea faces 8 percent tariffs, based on their specific HS code. Under the KORUS FTA all of these tariff rates will be phased out immediately.

Best Market Prospects for Georgia Best Market Prospects for Georgia under the Free Trade Agreementunder the Free Trade AgreementAmong Georgia’s top global exports, the following products will have significant benefits under the U.S.-Korea FTA.

Georgia exported over $1 billion in gas turbines worldwide in 2011. The 3-8% tariff will be eliminated immediately upon implementation of the U.S.-Korea FTA.

Georgia exported $1.8 billion in motor-cars & vehicles for transporting persons worldwide in 2011. The 8% tariff will be eliminated immediately upon implementation of the U.S.-Korea FTA.

Georgia exported $1.1 billion in agricultural products worldwide in 2011. Tariffs on U.S. agricultural products like those produced in Georgia such as poultry, cotton, and peanuts, will be phased out upon implementation of the U.S.-Korea FTA.

Korea’s Golden Age …Korea’s Golden Age …1988: Summer Olympics2002: World Cup2010: G20 Seoul Summit2012: Nuclear Security Summit, 2012: Yeosu World Expo2014: Asian Games2018: Pyeongchang Winter Olympics

Mr. BAN Ki-moon: Secretary-General of the United NationsMr. Jim KIM: President-elect of the World BankMr. Sung KIM: U.S. Ambassador to Korea

…(oh …and by the way)…COSTCO stores in Korea have some of the highest revenues of

any COSTCO stores -- worldwide.

How big is Korea?How big is Korea?

Korea, where 70 percent of the topography consists

of mountains, is about the size of Indiana …but with

50 million people.

Korea then and nowKorea then and now

Korea has maintained a remarkable average annual

economic growth rate of 7% (<>) over <>35 years.

Today it is the world’s 10th largest economy, despite

being totally resource dependent ,being totally dependent on trade (80%), andrecovering from a major civil war over 50 years

ago.

Korea is a Global PlayerKorea is a Global Player8th in the world in trade (World Factbook)1st in Internet usage (ITU) 1st in shipbuilding (Economy Watch)3rd in Semiconductors3rd in mobile phone penetration3rd in Production of LCD monitors5th largest Auto producer (Economy Watch)10th in power generation (US EIA)15th global GDP (IMF)…oh…and by the way… is world-renown for TV & movie

dramas, music and the K-Pop or Korean Wave…

Korea as a Trading PartnerKorea as a Trading PartnerFast-growing market with 49 million consumer with a

per capita GDP of $31,754 (2011)World’s 12th largest economy: $1.6 trillion GDP (2011)U.S. 7th largest trading partner and 7th largest export

marketU.S. goods exports to Korea were $43.5 billion in 2011U.S. services exports to Korea were $17.0 billion in 2011Korean exports (goods and services) as % of GDP: 52%U.S. exports (goods and services) as % of GDP: 13.8%Korea ranks 8th out of 183 economies in 2012: “Ease of

Doing Business” index by the World Bank

Korea’s EconomyKorea’s EconomyGDP: US$ 1,014 trillion (2010)

Services 67% Industry 31%Agriculture 3%

Trade: US$1,081 billion (> 100% of GDP)Exports in 2011: $557 billion Imports in 2011: $524 billionUS 8th largest export marketOver 80% of Korea’s economy is trade-related

Important, and trueImportant, and trueKorea is clean, safe (you are captured on a CCTV screen

ev. 12 secs in Seoul!), and well-organized

Intellectual Property protection is pretty good

Legal recourse is expensive, much more predictable than in many nations, and improving

Korea is 43rd in Transparency International’s Corruption Perceptions Index

Korean industry is skilled at tweaking improvements to technology

Industrial Concentration is HighIndustrial Concentration is High

Korea grew on the backs of a few favored firms. Today they dominate the economy.

Several Chaebol are highly innovative and willing to take very large risks

30 Chaebol are responsible for more than 50% of Korea’s GDP.

The economic power of the largest players, who dominate multiple industries, is astounding

Korea is strategically Korea is strategically locatedlocatedNortheast Asia accounts for 21% of global

GDP, 24% of global population and 15% of global trade.

Korea is strategically located between the giant economies of China and Japan, which are the world’s largest single markets and the world’s largest economies.

Korea is strategically Korea is strategically locatedlocated51 cities with populations exceeding 1 million

are located within a 3.5-hour flight of Seoul.700 million people live within a 1,200 km

radius of Seoul (more than the populations of the United States and Europe combined).

Trade volume with Japan, China and United States amounts to over $220 billion.

TransportationTransportationMarine transportation - Cargo imports, exports and transshipments:

11,840,000 TEU (No. 5 in the world)

Land transportation - 90% of domestic transportation is handled by roads

and railways. - 5th high speed rail network in the world.

On-line Shopping WebsitesOn-line Shopping Websites

30,064 on-line shopping websites in Korea.Over 4,500 B2C Korean cyber shopping malls.In 2011, on-line consumers spent nearly USD 28 billion.E-Commerce transactions in 2011 exceeded USD 700

billion.Korea is ‘connected.’ In 2009, 96% of Korean

households had internet access. (79% - Germany, 69% - USA, and 67% - Japan)

Power bloggers are…popular and powerful…

Top 10 US Exports to KoreaTop 10 US Exports to KoreaMachinery & Computers 16%

Electrical Machinery 15%

Optical, Medical & Laboratory 7%

Aircraft 7%

Cereals 6%

Organic Chemicals 6%

Fuel & Hydrocarbons 4%

Iron & Steel 3%

Plastics 3%

Vehicles 2%

68%

Source: US Customs

Aerospace Industry Cosmetics Defense Industry EquipmentEducation ServicesEnergy: New and Renewable (NRE)Entertainment and MediaFranchisingMedical Equipment and DevicesPollution Control EquipmentSemiconductorsSpecialty ChemicalsTravel and Tourism

Source: Commercial Service - Korea

Protecting Your Valuable Intellectual Protecting Your Valuable Intellectual Property (IP) in Korea:Property (IP) in Korea:

In Korea, registration of patents and trademarks is on a first-to-file basis.

IP must be registered and enforced in Korea through Korean laws.

KIPO website: http://www.kipo.go.kr/kpo/user.tdf?a=user.eng.main.BoardApp

KORUS FTAKORUS FTAA Well-Timed OpportunityA Well-Timed OpportunityKorea and the U.S. have worked together closely for

more than half a century.

The KORUS FTA is the most important trade agreement for U.S. companies since NAFTA. Is very ‘unlike’ NAFTA in many ways.

This FTA is described as the ‘gold standard’ -- and was six years in the making.

Average Korean Tariff under KORUS FTAAverage Korean Tariff under KORUS FTA

Source: Appendix 2-B, KORUS FTA, http://www.ustr.gov/trade-agreements/free-trade-agreements/korus-fta/final-text

Tariffs

Tariff Reduction – Tariff Reduction – Staging CategoriesStaging Categories

Category H.S. CodesA Day 1 at 0% 7,521B 2 years to reach 0% 6C 3 years 749D 5 years 503E 6 years 2F 7 years 38G 10 years 718H 15 years 88I 10 years, tariff reduction starts 24

slowly then acceleratesJ 12 years, no reduction first 9 years 1K already at 0% before KORUS 1,625

M N Q U Y Special Rules for Agricultural Products 128

FTA Tariff and Trade Snapshot FTA Tariff and Trade Snapshot

KORUS Overview and Key KORUS Overview and Key ProvisionsProvisionsOver 95% of trade in consumer and industrial products duty-

free within 5 yearsTariff and non-tariff barrier reductions for agricultural

products Increased access for U.S. autos, including unprecedented

provisions to address non-tariff barriers in KoreaFurther market access for U.S. service providersState-of-the-art protections for IPExpanded access to Korean government procurement

contractsNew protections for U.S. investors Investor-State Dispute Settlement mechanism to help

investors address violations of the KORUS investment chapter

How KORUS benefits U.S. How KORUS benefits U.S. businessesbusinesses KORUS Levels the Playing Field

Korea’s applied tariffs on U.S. goods average 6.2 percent, whileU.S. tariffs on Korean goods average 2.8 percent.

Small and Medium Size Enterprises and KORUSThe transparency provisions help small and medium size

companiesthat may not have the resources to navigate customs and

regulatoryred tape

InvestorsEstablishes a secure and predictable legal framework for U.S.investors in Korea

Service ProvidersImproved access for U.S. service providers, including telecom,express delivery, legal, financial, and many others

Market Access ReportsMarket Access Reports

What’s My Tariff?What’s My Tariff?FTA Tariff tool:

http://export.gov/FTA/FTATariffTool/

Detailed Background Information: http://export.gov/FTA/korea/index.asp

USTR website: http://www.ustr.gov/uskoreaFTA

ITA website:http://export.gov/FTA/korea/

US Customs website: http://www.cbp.gov/xp/cgov/trade/trade_programs/

international_agreements/free_trade/

Do I need a Certificate of Do I need a Certificate of Origin?Origin?You must prove your product qualifies for a lower

tariff under KORUS.

But, you do not need to get an official document from a government office. (unlike NAFTA) The burden lies with the importer of record.

Written or electronic certification by the manufacturer, exporter or importer.

If requested by Customs, must provide proof.

Self-CertificationSelf-CertificationThese ‘data elements’ are part of your self-certification. Name of ‘Certifying Person’ Importer Exporter Producer Description of Good Tariff Classification Information Demonstrating that a Good is Originating Period Certification Covers (if a blanket certification) Certifying Statement Authorized Signature & Date

There is no prescribed format.

Rules of OriginRules of OriginTransformation rules: inputs are substantially

different from the final product.Specific rules by HS code under KORUS FTA.For example:

Leather and metal parts transformed into a handbag

Raw cinnamon transformed into packaged, ground cinnamon

Wood, plastic and metal parts transformed into furniture

Electronic parts transformed into a printed circuit board

Rules of OriginRules of OriginRegional Value Content rules: the proportion of U.S. and

Korean (“Regional”) content exceeds x%, or the proportion of non-Regional (KR) content is less than y%

Specific rules by HS code under KORUS FTA

For example: Imported furniture components (not from Korea)

transformed into finished furniture; at least 35% Regional, or no more than 45% from third countries

A printed circuit board (not from Korea) transformed into a new printed circuit board; at least 30% Regional, or no more than 35% from third countries

Rules of OriginRules of OriginA good must be more than a product of Korea, it must

meet a preference rule of originThe FTA rules of origin lay out the various methods

that a good can qualify for preference, or “originate”An imported good must “be originating” to receive

preferential tariff treatmentPreferential tariff treatment is not necessarily “duty-

free,” might be a reduced rate of duty while tariffs are being phased out

U.S.-Korea FTA qualifying goods eligible for “KR” rate of duty found in the “Special” column of the HTS Chapters 1 to 97

U.S. Customs andBorder Protection

Preference CriteriaWholly ObtainedTariff ShiftRegional Value Content (RVC) achieved in three

ways: Build Up Build Down Net Cost

Exclusively from Originating MaterialsU.S. Customs andBorder Protection

Doing Business in Korea:  2012 Country Doing Business in Korea:  2012 Country Commercial Guide for U.S. CompaniesCommercial Guide for U.S. CompaniesChapter 1 : Doing Business In KoreaChapter 2: Political and Economic EnvironmentChapter 3: Selling U.S. Products and ServicesChapter 4: Leading Sectors for U.S. Export and InvestmentChapter 5: Trade Regulations, Customs and StandardsChapter 6: Investment ClimateChapter 7: Trade and Project FinancingChapter 8: Business TravelChapter 9: Contacts, Market Research and Trade Events

Consult: http://www.buyusainfo.net/docs/x_6114956.pdf or www.export.gov/southkorea (see icon for CCG).

Source: USDOC/Commercial Service

We look forward to working with you in We look forward to working with you in this mature, …dynamic, …fast-moving, …this mature, …dynamic, …fast-moving, …ever-changing …(…ever-changing …(…but not for everyone!!!but not for everyone!!!) ) market …market …

Visit with International Trade Managers of the GA Dept. of Econ. Dev. , Office of Global Commerce: International Operations: International Trade and Mr. Peter Underwood and Ms. Shin Hee-jung, State of GA Reps in Korea, www.ircltd.com

Visit with International Specialists in the U.S. Export Assistance Centers in GA: www.export.gov/usoffices/index.asp who will assist you in contacting us.

Jim Sullivan jim.sullivan@trade.gov - Senior Commercial OfficerErik Hunt erik.hunt@trade.gov - Deputy Senior Commercial OfficerMark O’Grady mark.ogrady@trade.gov – Commercial Officer (sector specific)Maria Galindo maria.galindo@trade.gov – Commercial Officer (sector

specific)Catherine Spillman catherine.spillman@trade.gov– Commercial Officer (sector

specific)

Gamsamhapnida

and

Good luck!(Haeng-un ul biluyo)