Implementation of the Free Trade Agreement with Korea
Five years after the entry into force of the FTA EU-Korea Free Trade Agreement, both the European Parliament and the Commission decided to have a close look at the implementation of the deal. The EP is to adopt a report and the Commission has launched a public consultation.
The EU spirits sector now enjoys a full elimination of tariffs. Since the provisional implementation of the deal, we also gained immediate protection of 25 Geographical Indications, including Brandy de Jerez, Cognac, Grappa, Polska Wodka and Scotch Whisky. However, despite those improved trading conditions and growth of our exports from €169m in 2013 to €187m in 2015, imported products in Korea still represent less than 2% of the domestic market (mainly soju). Growth is still impeded by high taxation, warehousing restrictions, complex labelling requirements and the propensity of Korean Government to introduce regulatory changes at short notice. Although new requirements for labelling have to be in place by 1 March, the Korean authorities announced new changes just three weeks ago. We are urging the authorities to provide a reasonable transition period to exhaust existing stocks and implement changes.
While the tariffs have been eliminated or reduced according to the schedule to date, our operators still face a significant issue of concern in the practical application of the agreement. This relates to trade via distribution hubs located in other Asian countries (principally Singapore and Hong Kong). The language used in the Agreement does not permit any processing or manipulation of exports in third countries before arrival in the importing country, other than loading and offloading of a vessel.
As a result, in Korea, companies using distribution hubs elsewhere are currently not entitled to the tariff reductions negotiated in the FTA. This has had a serious impact on our members’ supply chains. Today, the use of trans-shipment through regional hubs for the export of spirits from the EU to markets across Asia represents the most efficient and cost-effective route to many Asian markets.
In the context of a revision of the Agreement, we look for an amendment to the rules of origin to ensure that the European products arriving in Korea - having transited through a regional hub en route - can still benefit from the preferential tariff.