What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin Jong Bum Kim Director, FTA Goods Negotiation Division

How are goods produced in Gaesong Industrial Complex (GIC) treated under a Free Trade Agreement? How are goods produced in Gaesong Industrial Complex (GIC) treated under a Free Trade Agreement? 1.Introduction What role does rules of origin play in FTAs? Expanding the coverage of preferential rules of origin: relaxing the territoriality assumption Expanding the coverage of preferential rules of origin: relaxing the territoriality assumption What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin

Reduced output of home industry in favor of import from FTA partners 2.Economic Effects of Rules of Origin under FTA Trade creation under FTA rules of origin - Trade diversion in sourcing intermediate goods Sourcing from low Cost world to higher cost partner because of FTA tariff Sourcing from low Cost world to higher Cost partner because of accumulation - Trade diversion in sourcing intermediate goods Sourcing from low Cost world to higher cost partner because of FTA tariff Sourcing from low Cost world to higher Cost partner because of accumulation Trade diversion under FTA rules of origin Proliferation of preferential rules of origin FTA Rules of Origin as Non Tariff Barrier What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin

3.Methods of Determining Rules of Origin under FTAs Substantial transformation - Change in Tariff Classification - Value Added - Specific Processing Operation - Change in Tariff Classification - Value Added - Specific Processing Operation Measuring substantial transformation What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin

Historical Meaning of GIC Project 4.Gaesong Industrial Complex (GIC) Overview Labor Conditions in GIC What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin Customs Procedures in GIC

Korea-EFTA FTA 5.Korea’s FTA Provisions in GIC Processing Korea-Singapore FTA What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin

- Outward Processing - Accumulation - Outward Processing - Accumulation 6.Relaxing Territoriality Assumption Reflecting Globalized Manufacturing Process Reflecting Globalized Manufacturing Process WTO GATT Article XXIV Consistency? What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin

7.Conclusion Implication on GIC on Negotiating of FTA - Rules of origin should facilitate Trade not pose barrier to trade - Rules of origin need to reflect changing global manufacturing process - Rules of origin need to made simpler - Rules of origin should facilitate Trade not pose barrier to trade - Rules of origin need to reflect changing global manufacturing process - Rules of origin need to made simpler Implication Regarding Preferential Rules of Origin Implication Regarding Preferential Rules of Origin What Counts as Korean Made: Relaxing Territoriality Principle Under Rules of Origin