Even Unable to Recall Defective Cars: Controversial Clauses of KORUS FTA Are Posing Serious Problems | BusinessKorea

Sunday, January 21, 2018

Seoul, Korea
10 November 2017 - 11:00am
Jung Suk-yee

The Ministry of Land, Infrastructure & Transport of South Korea made a request for the U.S. National Highway Traffic Safety Administration’s authoritative interpretation in August this year on whether the tires of the Chevrolet Impala GM Korea imports from the U.S. are in compliance with the safety standards of the U.S.

The U.S. NHTSA has yet to send a reply on the urgent issue directly related to the safety of drivers and the South Korean government is currently unable to conduct a recall in spite of its determination that the product in question can threaten the safety of drivers. 

This is because of the terms of the KORUS FTA. According to it, each U.S. automaker can export up to 25,000 cars a year to South Korea regardless of the safety standards of the country as long as it complies with those of the U.S. GM is claiming based on the stipulation that the car is not problematic as it complies with the safety standards of the U.S. 

The stipulation is a typical example of the controversial clauses the South Korean government needs to deal with during the negotiations for KORUS FTA revision scheduled to start next month. The other examples include agricultural safeguards. According to the KORUS FTA, the safeguards are automatically enforced in the event of a rapid increase in imports. However, the number of the items subject to the safeguards is only 77 based on the HS Codes. The number is equivalent to only 5.1% of the total tariff elimination items. 

The other examples include the snapback and investor-state dispute settlement (ISD) clauses. The former is to restore tariffs when an agreement related to the automobile sector is violated. When it comes to the ISD, U.S. investors suffering losses due to the law and system of South Korea may put in a claim for damages outside the scope of the law of South Korea. 

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