[Federal Register Volume 63, Number 214 (Thursday, November 5, 1998)]
[Notices]
[Pages 59836-59837]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29681]
[[Page 59836]]
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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
[Docket No. 301-115]
Section 304 Determination: Korean Barriers to Auto Imports
AGENCY: Office of the United States Trade Representative.
ACTION: Notice of determination under section 304 of the Trade Act of
1974, as amended.
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SUMMARY: Having concluded the investigation undertaken pursuant to
section 302 of the Trade Act of 1974, as amended (``Trade Act''), the
United States Trade Representative (``USTR'') has determined pursuant
to section 304(a)(1)(A)(ii) of the Trade Act that certain acts,
policies, and practices of the Government of the Republic of Korea
related to exports of U.S. motor vehicles to the Korean market are
unreasonable and discriminatory and burden or restrict U.S. commerce.
The Korean government, however, has agreed to take several measures to
resolve the matters under investigation. Therefore, pursuant to section
304(a)(1)(B) of the Trade Act, the USTR has determined that the
appropriate action in this case is to terminate the investigation and
to monitor under section 306 the Korean government's implementation of
these measures to eliminate those acts, policies, and practices.
EFFECTIVE DATE: October 20, 1998.
FOR FURTHER INFORMATION CONTACT:
Mary Latimer, Director of Korean Affairs, Office of Asia and the
Pacific, (202) 395-3077.
SUPPLEMENTARY INFORMATION: On October 1, 1997, pursuant to Executive
Order No. 12901 of March 3, 1994, as extended by Executive Order No.
12973 of September 27, 1995, regarding the ``Super 301'' annual review,
the USTR identified as a ``priority foreign country practice'' the
Government of the Republic of Korea's barriers to auto imports. On
October 20, 1997, also pursuant to Executive Orders 12901 and 12973,
the USTR initiated an investigation under section 302(b)(1)(A) of the
Trade Act (19 U.S.C. 2412) with respect to certain acts, policies, and
practices of the Korean government that pose barriers to imports of
U.S. motor vehicles into the Korean market.
On October 28, 1997, (62 FR 55843), the USTR invited written
comments on the acts, policies and practices of the Korean government
that were the subject of this investigation, including the amount of
burden or restriction on U.S. commerce caused by these acts, policies
and practices, and the determinations required under section 304 of the
Trade Act regarding whether they are actionable under section 301, and
if affirmative, the appropriate action, if any, to take in response.
During the course of this investigation, the U.S. and Korean
governments held a series of consultations on the matters under
investigation. Specific Korean government practices raised during the
consultations included an array of cumulative tariff and tax
disincentives that have a discriminatory effect on imports, onerous and
costly standards and certification procedures, financing restrictions,
and a climate of bias against imported vehicles. While some of these
barriers were addressed in a 1995 bilateral agreement between the
United States and Korea, implementation of that agreement had been
disappointing, especially as new practices had been introduced that
undermined the 1995 agreement. Also discussed during the consultations
was the application of the market economic reform measures that Korea
is undertaking to the operation of the Korean motor vehicle sector.
On October 20, 1998, the United States and Korea concluded a
Memorandum of Understanding (MOU) to improve market access of U.S. and
other foreign motor vehicles to the Korean market. The new MOU
addresses certain acts, policies, and practices that are unreasonable
and discriminatory and burden or restrict U.S. commerce and were the
subject of the section 301 investigation. Specifically, the MOU
provides that the Government of the Republic of Korea will:
(a) Reduce specific motor vehicle-related taxes that have
significantly increased, in comparison to Korean vehicles, the purchase
price of and cost of retaining foreign motor vehicles, including: a 30
percent reduction in the Special Consumption tax until at least July
2005, and a 40 percent reduction in the rate applied to U.S.-type
vehicles under the Annual Motor Vehicle Registration tax; not increase
the tax differentials between engine-displacement based categories;
eliminate an Education tax and the Rural Development tax on motor
vehicles in Korea; equalize the Subway Bond purchase and revenue
requirements for Korean and domestic foreign motor vehicles within
engine-displacement categories; and, in the longer term, simplify
Korea's motor vehicle tax structure and reduce the tax burden on Korea
motor vehicle purchases;
(b) Lower Korea's WTO tariff bindings on motor vehicles from 80% to
its current applied rate of 8% and actively participate in future
multilateral negotiations aimed at reducing or eliminating tariffs in
this sector;
(c) Revise standards and certification procedures that have imposed
increased costs and time delays on imported motor vehicles through
redundant testing and excessive documentation requirements through a
number of actions, including: institution of a self-certification
system by 2002 that will allow U.S. manufacturers to certify compliance
of their own products with Korean safety standards; acceptance of U.S.
headlamp standards; and significant streamlining of the current safety
and environmental standards certification system;
(d) Institute an expeditious and efficient secured financing system
for the purchase of motor vehicles that will enable Korean consumers to
more easily finance purchases of U.S. vehicles; and
(e) Continue government efforts to improve public perception of
imports by: addressing instances of anti-import activity targeting
foreign motor vehicles, such as discriminatory use of tax audits;
encouraging equal treatment of foreign and Korean motor vehicles; and
actively promoting Korean understanding of the benefits of free and
open trade and competition; Sport utility vehicles and minivans are
specifically included in the scope of the MOU.
The MOU also sets forth goals and general policies, including the
goals of substantially increasing market access for foreign motor
vehicles in Korea and establishing conditions so that the Korean motor
vehicle sector operates according to market principles. In that regard,
the Korean government confirmed that it is implementing a wide range of
economic reform measures, including structural reforms of the financial
and corporate sectors, and that it expects these reforms will create a
dramatic change in the Korean business environment and contribute to a
more market-oriented and transparent Korean motor vehicle industry.
Section 304 Determination
(1) Korea's Acts, Policies, and Practices
Having concluded the investigation undertaken pursuant to section
302 of the Trade Act and on the basis of consultations with the
Government of the Republic of Korea, the affected U.S. industry, and
the relevant private sector advisory committees, the USTR has
determined pursuant to section 304(a)(1)(A)(ii) of the Trade Act that
certain acts, policies, and practices of
[[Page 59837]]
the Korean government related to exports of U.S. motor vehicles to the
Korean market are unreasonable and discriminatory and burden or
restrict U.S. commerce.
(2) U.S. Action
The Government of the Republic of Korea has agreed to take several
measures, described above, to resolve the matters under investigation.
Therefore, pursuant to section 304(a)(1)(B) of the Trade Act, the USTR
has determined that the appropriate action in this case is to terminate
the investigation and to monitor under section 306 the Korean
government's implementation of these measures to eliminate those acts,
policies, and practices.
Joanna K. McIntosh,
Chairman, Section 301 Committee.
[FR Doc. 98-29681 Filed 11-4-98; 8:45 am]
BILLING CODE 3190-01-M