[Senate Report 112-223]
[From the U.S. Government Publishing Office]


                                                       Calendar No. 190
112th Congress                                                   Report
                                 SENATE
 2d Session                                                     112-223

======================================================================



 
      UNITED STATES-KOREA FREE TRADE AGREEMENT IMPLEMENTATION ACT

                                _______
                                

               September 20, 2012.--Ordered to be printed

                                _______
                                

              Mr. Baucus, from the Committee on Finance, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 1642]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Finance, to which was referred the bill 
(S. 1642) to implement the United States-Korea Free Trade 
Agreement, having considered the same, reports favorably 
thereon without amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
  I. Report and Other Materials of the Committee......................2
          A. Report of the Committee on Finance..................     2
          B. Summary of Congressional Consideration of the 
              Agreement..........................................     2
              1. Background......................................     2
              2. Trade Promotion Authority Procedures in General.     3
              3. Notification Prior to Negotiations..............     3
              4. Notification of Intent to Enter Into an 
                  Agreement......................................     4
              5. Development of the Implementing Legislation.....     4
              6. Formal Submission of the Agreement and 
                  Implementing Legislation.......................     7
              7. Committee and Floor Consideration...............     8
          C. Trade Relations with Korea..........................     9
              1. United States-Korea Trade.......................     9
              2. Tariffs and Trade Agreements....................    10
              3. U.S. International Trade Commission Study.......    10
          D. Overview of the Agreement...........................    11
              1. Background......................................    11
              2. Office of the U.S. Trade Representative Summary 
                  of the Agreement...............................    11
          E. General Description of the Bill to Implement the 
              Agreement..........................................    38
              Title I--Approval of, and General Provisions 
                  Relating to, the Agreement.....................    39
              Title II--Customs Provisions.......................    40
              Title III--Relief From Imports.....................    43
              Title IV--Procurement..............................    49
              Title V--Offsets...................................    49
          F. Vote of the Committee in Reporting the Bill.........    50
 II. Budgetary Impact of the Bill....................................50
III. Regulatory Impact of the Bill and Other Matters.................56
 IV. Additional Views................................................57
  V. Changes in Existing Law Made by the Bill, as Reported...........62

             I. REPORT AND OTHER MATERIALS OF THE COMMITTEE


                 A. Report of the Committee on Finance

    The Committee on Finance, to which was referred the bill 
(S. 1642) to implement the United States-Korea Free Trade 
Agreement (``Agreement''), having considered the same, reports 
favorably thereon without amendment and recommends that the 
bill do pass.

       B. Summary of Congressional Consideration of the Agreement


1. Background

    On February 2, 2006, U.S. Trade Representative Rob Portman 
notified Congress of the Administration's intent to negotiate a 
free trade agreement with the Republic of Korea (``Korea''). 
Ambassador Portman consulted with the relevant congressional 
committees, including the Senate Committee on Finance, with 
respect to the initiation of negotiations.
    Negotiations with Korea were initiated in June 2006. U.S. 
Trade Representative Susan C. Schwab announced that the United 
States and Korea had successfully concluded those negotiations 
on April 1, 2007.
    The President notified Congress of his intent to enter into 
the Agreement on April 1, 2007 and published notice of his 
intent in the Federal Register on April 3, 2007. On May 1, 
2007, Ambassador Schwab submitted to Congress the reports from 
27 trade advisory groups commenting on the final text of the 
Agreement. The Office of the U.S. Trade Representative also 
made the reports publicly available on its website. Ambassador 
Schwab and Korean Minister for Trade Hyun Chong Kim signed the 
Agreement on June 30, 2007.
    On May 10, 2007, the Bush Administration and the bipartisan 
leadership of the U.S. Senate Committee on Finance and the U.S. 
House of Representatives Committee on Ways and Means reached an 
agreement on trade policy. As discussed further below in 
Section I.D., the May 10 bipartisan trade deal required 
groundbreaking changes to the labor, environmental, 
intellectual property, government procurement, services, and 
investment provisions of the Agreement. U.S. Trade 
Representative Schwab and Korean Minister for Trade Kim signed 
amendments to the Agreement to reflect those changes on June 
30, 2007.
    On December 3, 2010, U.S. and Korean negotiators agreed to 
further commitments on automotive trade, pork, and 
pharmaceuticals, which were confirmed through an exchange of 
letters between U.S. Trade Representative Ron Kirk and Korean 
Minister for Trade Jong-Hoon Kim on February 10, 2011.

2. Trade promotion authority procedures in general

    Article I, section 8 of the Constitution of the United 
States vests Congress with the authority to regulate 
international trade. Congress has periodically delegated a 
portion of this authority to the President in order to advance 
the economic interests of the United States. This delegation 
represents a compact between Congress and the Administration, 
by which Congress guarantees it will vote on a trade agreement 
entered into by the Administration without amendment and the 
Administration guarantees close consultation with Congress 
during the negotiation of the trade agreement in order to 
achieve the objectives that Congress identifies. Thorough and 
timely consultation by the Administration with Congress is the 
essential bedrock upon which Congress's delegation of 
constitutional authority rests. This longstanding compact, 
spanning decades, has resulted in the successful negotiation 
and implementation of numerous trade agreements that have 
contributed significantly to increased economic growth and 
prosperity in the United States.
    The most recent incarnation of this compact is found in the 
Bipartisan Trade Promotion Authority Act of 2002 (``the Act''), 
which was included in the Trade Act of 2002 (Pub. L. 107-210). 
The Act includes prerequisites for congressional consideration 
of a trade agreement under expedited procedures (known as Trade 
Promotion Authority (``TPA'') procedures), which are found in 
sections 2103 through 2106 of the Act (19 U.S.C. 
Sec. Sec. 3803-3806) and section 151 of the Trade Act of 1974 
(19 U.S.C. Sec. 2191). Section 2103 of the Act authorizes the 
President to enter into reciprocal trade agreements with 
foreign countries to reduce or eliminate tariff or nontariff 
barriers and other trade-distorting measures. Section 2102 of 
the Act outlines the negotiating objectives that the President 
must achieve if the President intends to use TPA procedures to 
implement a trade agreement. And section 151 of the Trade Act 
of 1974 sets forth expedited procedures for congressional 
consideration of a trade agreement without amendment. The 
President's authority under section 2103 extends to trade 
agreements entered into on or before June 30, 2007.

3. Notification prior to negotiations

    Under section 2104(a)(1) of the Act, the President must 
provide written notice to Congress at least 90 calendar days 
before initiating negotiations. On February 2, 2006, the U.S. 
Trade Representative notified Congress of the President's 
intent to initiate negotiations with Korea. The negotiations 
were initiated in June 2006. Section 2104(a)(2) requires the 
President, before and after submission of the notice, to 
consult regarding the negotiations with Congress. The 
Administration consulted with the Senate Committee on Finance 
and the House Committee on Ways and Means with respect to this 
Agreement.

4. Notification of intent to enter into an agreement

    Under section 2105(a)(1)(A) of the Act, the President must 
notify Congress at least 90 calendar days before entering into 
an agreement of his intent to enter into the agreement. On 
April 1, 2007, the President notified Congress of his intent to 
enter into the United States-Korea Free Trade Agreement. The 
Agreement and amendments to reflect the changes required by the 
May 10 bipartisan trade deal were signed on June 30, 2007, and 
further commitments were agreed to through an exchange of 
letters on February 10, 2011.

5. Development of the implementing legislation

    Under TPA procedures, Congress and the Administration work 
together to produce legislation that implements a free trade 
agreement. Draft legislation is developed in close consultation 
between the Administration and the committees with jurisdiction 
over the laws that must be enacted or amended to implement the 
agreement. The committees may hold informal meetings to 
consider the draft legislation and to make non-binding 
recommendations to the Administration. The Administration then 
finalizes the implementing legislation for formal submission to 
Congress and referral to the committees of jurisdiction. These 
procedures are meant to ensure close cooperation between the 
executive and legislative branches of government to develop 
legislation that faithfully implements the agreement. Under TPA 
and predecessor legislation, trade agreement implementing bills 
may include only those provisions that are ``necessary or 
appropriate'' to implement the agreement.
    The Senate Committee on Finance met in open executive 
session on July 7, 2011, to consider informally the draft 
implementing legislation for the Agreement and the draft 
Statement of Administrative Action (``SAA''). The draft 
implementing legislation included provisions to renew aspects 
of the Trade Adjustment Assistance (``TAA'') program that 
expired on February 13, 2011 and extend provisions that were 
due to expire on February 12, 2012. None of these provisions 
expanded TAA eligibility or benefits beyond those that had 
previously been provided; in fact, many of the provisions 
narrowed eligibility or benefits.
    The TAA provisions were ``necessary or appropriate'' to 
implement the Agreement, as required by TPA and predecessor 
legislation. The ``necessary or appropriate'' standard has 
applied to virtually every trade agreement that Congress has 
considered since 1974, creating an extensive history of 
legislative practice. That practice clearly supported the 
inclusion of the TAA provisions in the draft legislation 
implementing this Agreement. For example, the North American 
Free Trade Agreement (``NAFTA'') implementing bill included 
provisions to expand TAA benefits. The TAA provisions included 
in the draft legislation implementing this Agreement were 
likewise ``necessary or appropriate.'' They would provide the 
full range of TAA benefits to help U.S. workers, firms, and 
farmers adjust to any trade-related dislocations they may 
experience, including as a result of the Agreement, which is 
the most economically significant FTA the United States has 
entered into since NAFTA. And the TAA provisions in the draft 
legislation implementing this Agreement were narrower than the 
TAA provisions in the NAFTA implementing bill in that they 
simply extended, and in some cases narrowed, TAA eligibility or 
benefits. The NAFTA implementing bill, by contrast, 
significantly expanded TAA eligibility.
    As the Additional Views section of this report correctly 
points out, the Committee stated in its report accompanying the 
2002 TPA legislation that the ``necessary or appropriate'' 
standard should be strictly interpreted. But the Committee has 
never taken the position that a strict interpretation limits 
implementing legislation to provisions that only relate to the 
FTA partner country at issue. To the contrary, the U.S.-
Australia FTA implementing legislation included provisions 
relating to government procurement under the Chile and 
Singapore FTAs. The Bahrain FTA implementing legislation 
included provisions relating to government procurement under 
the Morocco FTA. And at the informal markup for the CAFTA-DR 
implementing legislation, the Senate Finance Committee adopted, 
by bipartisan voice vote, an amendment that extended TAA to 
service sector workers and increased the annual authorizations 
of the TAA for Workers and TAA for Firms programs. Like the TAA 
provisions in the draft legislation implementing this 
Agreement, the TAA provisions in the draft CAFTA-DR 
implementing legislation applied to workers dislocated by trade 
with any country, not just the FTA countries at issue.
    The Additional Views section of this report incorrectly 
states that the decision to include the TAA provisions in the 
draft legislation implementing this Agreement was made with 
little or no consultation with the Minority. In fact, countless 
meetings between Majority and Minority staff, and between 
Chairman Baucus and Ranking Member Hatch, were held on this 
issue in the weeks leading up to the July 7 executive session. 
For example, Chairman Baucus indicated at the March 2011 
hearing on the Administration's trade agenda that the Agreement 
and other pending FTAs could only be approved if TAA were 
extended, as did the Administration in May 2011. Numerous 
consultations were subsequently held with Committee members and 
their staff prior to the July 7 executive session. And a 
bipartisan meeting of all Finance Committee Members was held on 
June 30 to consider and discuss the issue. Regrettably, 
notwithstanding the clear statements of the Chairman and the 
Administration on the necessity of the renewing TAA, and the 
fact that no FTA implementing legislation had ever been enacted 
while TAA provisions had expired, minority Committee members 
indicated that they were unwilling to accept TAA provisions in 
connection with the FTAs (see Attached Letter dated June 30, 
2011). TAA provisions negotiated between Chairman Baucus, House 
Ways and Means Chairman Camp, and the Administration were 
included in the implementing legislation against this 
background. TAA language was ultimately not included in the 
final version of the legislation because by that point the 
minority leadership had agreed to enact TAA separately and 
prior to Congressional consideration of the FTAs.
    During the Committee's consideration of the draft 
implementing legislation at the July 7 executive session, 
thirteen amendments were offered. The first amendment, by 
Senator Hatch, sought to add language to the implementing 
legislation requiring the Comptroller General of the United 
States to submit a report to the U.S. Senate Committee on 
Finance on the nature and effectiveness of the Obama 
Administration's Congressional and private sector consultations 
on various trade negotiations, including those relating to the 
Agreement. The amendment failed by voice vote. The second 
amendment, by Senators Wyden, Snowe, Schumer, and Cardin, was 
withdrawn. It would have added language to the draft 
implementing legislation to address concerns about the evasion 
of antidumping and countervailing duty orders. The third 
amendment, by Senator Roberts, would have delayed the TAA 
provisions from going into effect until the President certified 
that the U.S. FTAs with Colombia, Panama, and South Korea had 
entered into force. That amendment failed by a roll call vote 
of 10 ayes, 14 nays. Ayes: Hatch, Grassley (proxy), Kyl 
(proxy), Crapo, Roberts, Enzi, Cornyn (proxy), Coburn (proxy), 
Thune, and Burr (proxy). Nays: Baucus, Rockefeller, Conrad 
(proxy), Bingaman, Kerry (proxy), Wyden, Schumer (proxy), 
Stabenow, Cantwell (proxy), Nelson (proxy), Menendez, Carper, 
Cardin, and Snowe.
    The fourth amendment, by Senator Hatch, would have required 
the Obama Administration to develop a public outreach plan on 
the benefits of international trade for the U.S. economy and 
U.S. workers. That amendment failed by a roll call vote of 11 
ayes, 13 nays. Ayes: Hatch, Grassley (proxy), Snowe, Kyl 
(proxy), Crapo, Roberts, Enzi, Cornyn (proxy), Coburn (proxy), 
Thune, and Burr (proxy). Nays: Baucus, Rockefeller, Conrad 
(proxy), Bingaman, Kerry, Wyden, Schumer (proxy), Stabenow, 
Cantwell, Nelson, Menendez, Carper, and Cardin (proxy). The 
fifth amendment, by Senator Roberts, would have directed the 
Obama Administration to meet with government officials from 
China and Japan to discuss beef market access within 120 days. 
That amendment failed by a roll call vote of 11 ayes, 12 nays, 
and one pass. Ayes: Hatch, Grassley (proxy), Snowe, Kyl 
(proxy), Crapo, Roberts, Enzi, Cornyn (proxy), Coburn (proxy), 
Thune, and Burr (proxy). Nays: Baucus, Rockefeller, Conrad 
(proxy), Bingaman, Kerry, Wyden, Schumer (proxy), Cantwell, 
Nelson, Menendez (proxy), Carper, and Cardin (proxy). Pass: 
Stabenow.
    The sixth amendment, by Senator Thune, would have extended 
TPA through December 31, 2015. That amendment failed by a roll 
call vote of 11 ayes, 13 nays. Ayes: Cantwell, Hatch, Grassley, 
Kyl (proxy), Crapo, Roberts, Enzi, Cornyn, Coburn, Thune, and 
Burr (proxy). Nays: Baucus, Rockefeller, Conrad (proxy), 
Bingaman, Kerry, Wyden, Schumer (proxy), Stabenow, Nelson, 
Menendez, Carper (proxy), Cardin, and Snowe. The seventh 
amendment, by Senator Bingaman, sought to add language 
providing $5 million per year for three years to the budget of 
the Office of the U.S. Trade Representative for enforcement 
activities. The Chairman ruled the amendment non-germane, and 
it was withdrawn. The eighth amendment, by Senator Hatch, to 
extend TPA through December 31, 2013, was withdrawn.
    The ninth amendment, by Senator Rockefeller, to require the 
GAO to compare the TAA health care coverage tax credit with 
other options, was withdrawn. The tenth amendment, by Senator 
Cornyn, would have delayed the effect of the TAA provisions in 
the draft implementing legislation until the President issued a 
proposal to address Medicare funding. The Chairman ruled the 
amendment non-germane. Senator Cornyn moved to appeal the 
ruling of the Chair. The appeal failed by a roll call vote of 5 
ayes, 9 nays. Ayes: Hatch, Snowe, Roberts, Enzi, and Cornyn. 
Nays: Baucus, Rockefeller, Bingaman, Wyden, Stabenow, Cantwell, 
Nelson, Menendez, and Cardin.
    The eleventh amendment, by Senator Hatch, would have 
deleted the TAA provisions from the draft implementing 
legislation. That amendment failed by a roll call vote of 11 
ayes, 13 nays. Ayes: Hatch, Grassley (proxy), Snowe, Kyl 
(proxy), Crapo (proxy), Roberts, Enzi, Cornyn (proxy), Coburn 
(proxy), Thune (proxy), and Burr (proxy). Nays: Baucus, 
Rockefeller, Conrad (proxy), Bingaman, Kerry, Wyden, Schumer 
(proxy), Stabenow, Cantwell, Nelson, Menendez, Carper (proxy), 
and Cardin. The twelfth amendment, by Senator Enzi, sought to 
add language to eliminate Medicaid and subsidy eligibility for 
early retirees. The Chairman ruled the amendment non-germane. 
Senator Enzi moved to appeal the ruling of the Chair. The 
appeal failed by a roll call vote of 5 ayes, 10 nays. Ayes: 
Bingaman, Hatch, Snowe, Roberts, and Enzi. Nays: Baucus, 
Rockefeller, Kerry, Wyden, Stabenow, Cantwell, Nelson, 
Menendez, Carper, and Cardin.
    The thirteenth amendment, by Senator Roberts, would have 
required that implementation of the Patient Protection 
Affordable Care Act and the Health Care and Education 
Reconciliation Act of 2010 take place through a notice of 
proposed rulemaking and would have imposed several further 
procedural requirements for receiving and considering comments 
in that connection. The Chairman ruled the amendment non-
germane. Senator Roberts moved to appeal the ruling of the 
Chair. The appeal failed by a roll call vote of 4 ayes, 12 
nays. Ayes: Hatch, Snowe, Roberts, and Enzi. Nays: Baucus, 
Rockefeller, Bingaman, Kerry, Wyden, Schumer, Stabenow, 
Cantwell, Nelson, Menendez, Carper, and Cardin.
    The Committee then approved the draft implementing 
legislation and draft SAA, without amendment, by a roll call 
vote of 13 ayes, 11 nays. Ayes: Baucus, Rockefeller, Conrad, 
Bingaman, Kerry, Wyden, Schumer, Stabenow, Cantwell, Nelson, 
Menendez, Carper, and Cardin. Nays: Hatch, Grassley, Snowe, Kyl 
(proxy), Crapo (proxy), Roberts, Enzi, Cornyn (proxy), Coburn 
(proxy), Thune (proxy), and Burr (proxy). Separately, the 
Committee on Ways and Means in the House of Representatives 
approved the draft implementing legislation and draft SAA, as 
amended, on July 7, 2011, by a roll call vote of 25 ayes, 11 
nays. Unlike the draft implementing legislation approved by 
this Committee, the draft implementing legislation approved by 
the Ways and Means Committee did not include TAA provisions.

6. Formal submission of the agreement and implementing legislation

    When the President formally submits a trade agreement to 
Congress under section 2105 of the Act, the President must 
include in the submission the final legal text of the 
agreement, together with implementing legislation, an SAA 
describing regulatory and other changes to implement the 
agreement, a statement setting forth the reasons of the 
President regarding how and to what extent the agreement makes 
progress in achieving the applicable purposes, policies, 
priorities, and objectives set forth in the Act, and a 
statement setting forth the reasons of the President regarding 
how the agreement serves the interests of U.S. commerce. The 
implementing legislation is introduced in both Houses of 
Congress on the day it is submitted by the President and is 
referred to committees with jurisdiction over its provisions.
    On October 3, 2011, the President transmitted to Congress 
the final text of this Agreement, the implementing legislation, 
the SAA, and the other supporting information required under 
section 2105 of the Act. That same day, Mr. Baucus, for 
himself, Mr. Hatch, and Mr. McConnell introduced the bill as S. 
1642. The legislation was also introduced that same day in the 
House of Representatives (H.R. 3080).
    S. 1642 is substantially similar to the draft legislation 
considered by the Committee during the open executive session 
on July 7, 2011. S. 1642, however, does not contain the 
provisions of the draft legislation relating to the TAA 
program. Those provisions were included in separate 
legislation, H.R. 2832, which the House and Senate approved and 
the President signed into law on October 21, 2011.
    To qualify for TPA procedures, the implementing legislation 
itself must contain provisions formally approving the agreement 
and the SAA. And, as noted above, the implementing legislation 
must contain only those provisions necessary or appropriate to 
implement the Agreement. The implementing bill reported here--
which approves the Agreement and the accompanying SAA and 
contains provisions necessary or appropriate to implement the 
Agreement into U.S. law--was referred to the Senate Committee 
on Finance.

7. Committee and floor consideration

    When the requirements of the Act are satisfied, 
implementing revenue bills, such as the United States-Korea 
Free Trade Agreement Implementation Act, are subject to the 
legislative procedures of section 151 of the Trade Act of 1974. 
The following schedule for congressional consideration applies 
under these procedures:
          (i) House committees have up to 45 calendar days in 
        session in which to report the bill; any committee 
        which does not do so in that period will be 
        automatically discharged from further consideration.
          (ii) A vote on final passage by the House must occur 
        on or before the 15th calendar day in session after the 
        committees report the bill or are discharged from 
        further consideration.
          (iii) Senate committees must act within 15 calendar 
        days in session of receiving the implementing revenue 
        bill from the House or within 45 calendar days in 
        session of Senate introduction of the implementing 
        bill, whichever is later, or they will be discharged 
        automatically.
          (iv) The full Senate then must vote within 15 
        calendar days in session on the implementing bill.
    Once the implementing bill has been formally submitted by 
the President and introduced, no amendments to the bill are in 
order in either House of Congress. Floor debate in each House 
is limited to no more than 20 hours, to be equally divided 
between those favoring the bill and those opposing the bill.
    The Committee on Finance met in open executive session on 
October 11, 2011, to consider favorably reporting S. 1642. At 
the meeting, the Committee favorably reported S. 1642 without 
amendment by voice vote, a majority of members being present. 
The Committee on Ways and Means in the House of Representatives 
favorably reported the House version of the legislation, H.R. 
3080, on October 5, 2011, by a roll call vote of 31 ayes, 5 
nays.
    The House passed H.R. 3080 on October 12, 2011, by a roll 
call vote of 278 ayes, 151 nays. On the same day, the Senate 
passed H.R. 3080 by a roll call vote of 83 ayes, 15 nays. 
President Barack H. Obama signed H.R. 3080 into law on October 
21, 2011 (Pub. L. 112-41).

                     C. Trade Relations with Korea


1. United States-Korea trade

    In 2010, total goods trade between the United States and 
Korea was $87.7 billion, and Korea was the United States' 
seventh largest export market. Between 2003 and 2010, U.S. 
merchandise exports to Korea grew from $24.1 billion to $38.8 
billion. Corresponding U.S. imports from Korea grew from $37.2 
billion to $48.8 billion. Computer and electronic products and 
transportation equipment constitute over half of U.S. imports 
from Korea. Other significant imports include electrical 
equipment, appliances, machinery, and petroleum and coal 
products. Principal U.S. exports to Korea include machinery, 
chemicals, computer and electronic products, transportation 
equipment, agricultural products, and manufactured food 
products.
    The following tables summarize the top U.S. merchandise 
exports to Korea and the top U.S. merchandise imports from 
Korea in 2010.

                       2010 U.S. EXPORTS TO KOREA
------------------------------------------------------------------------
                  HTS Code--Product                       Value in USD
------------------------------------------------------------------------
84--NUCLEAR REACTORS, BOILERS, MACHINERY ETC.; PARTS.      6,947,657,962
85--ELECTRIC MACHINERY ETC; SOUND EQUIP; TV EQUIP;         5,074,051,704
 PTS.................................................
90--OPTIC, PHOTO ETC, MEDIC OR SURGICAL INSTRMENTS         2,660,191,601
 ETC.................................................
88--AIRCRAFT, SPACECRAFT, AND PARTS THEREOF..........      2,430,810,796
29--ORGANIC CHEMICALS................................      2,148,147,452
10--CEREALS..........................................      1,846,700,000
27--MINERAL FUEL, OIL ETC.; BITUMIN SUBST; MINERAL         1,549,372,516
 WAX.................................................
39--PLASTICS AND ARTICLES THEREOF....................      1,235,694,860
72--IRON AND STEEL...................................      1,131,471,428
98--SPECIAL CLASSIFICATION PROVISIONS, NESOI.........      1,025,023,070
OTHER................................................     12,796,536,174
                                                      ------------------
    TOTAL............................................    38,845,657,563
------------------------------------------------------------------------
(Source: U.S. Department of Commerce, International Trade
  Administration)


                      2010 U.S. IMPORTS FROM KOREA
------------------------------------------------------------------------
                  HTS Code--Product                       Value in USD
------------------------------------------------------------------------
85--ELECTRIC MACHINERY ETC; SOUND EQUIP; TV EQUIP;        15,266,804,758
 PTS.................................................
84--NUCLEAR REACTORS, BOILERS, MACHINERY ETC.; PARTS.      9,340,574,766
87--VEHICLES, EXCEPT RAILWAY OR TRAMWAY, AND PARTS         9,258,880,119
 ETC.................................................
27--MINERAL FUEL, OIL ETC.; BITUMIN SUBST; MINERAL         2,415,563,765
 WAX.................................................
40--RUBBER AND ARTICLES THEREOF......................      1,572,507,719
73--ARTICLES OF IRON OR STEEL........................      1,544,020,378
39--PLASTICS AND ARTICLES THEREOF....................      1,065,287,210
29--ORGANIC CHEMICALS................................        946,240,140
72--IRON AND STEEL...................................        893,487,339
90--OPTIC, PHOTO ETC, MEDIC OR SURGICAL INSTRMENTS           845,644,888
 ETC.................................................
OTHER................................................      5,725,546,579
                                                      ------------------
    TOTAL............................................    48,874,557,661
------------------------------------------------------------------------
(Source: U.S. Department of Commerce, International Trade
  Administration)

2. Tariffs and trade agreements

    Korea acceded to the World Trade Organization (``WTO'') on 
January 1, 1995, with an average bound tariff rate of 16.6 
percent for all goods (56.1 percent for agricultural goods and 
10.2 percent for nonagricultural goods). In 2010, Korea 
maintained an average applied tariff rate of 12.1 percent for 
all goods (48.5 percent for agricultural goods and 6.6 percent 
for nonagricultural goods). The United States, in contrast, 
maintained an average applied tariff rate of 3.5 percent for 
all goods (4.7 percent for agricultural goods and 3.3 percent 
for nonagricultural goods) in 2009. Given that the Agreement 
will greatly reduce this existing tariff asymmetry, the U.S. 
International Trade Commission (``Commission'') found that the 
Agreement likely will result in a larger increase in U.S. 
exports to Korea than in U.S. imports from Korea.
    Korea has FTAs in place with several countries, including 
Chile, the European Union, India, Peru, Singapore, the 10-
country Association of Southeast Asian Nations, and the 
European Free Trade Association countries (Norway, 
Liechtenstein, Iceland, and Switzerland). It has also signed 
numerous bilateral investment treaties. And Korea is a member 
of the Asia-Pacific Economic Cooperation forum.

3. U.S. International Trade Commission study

    In September 2007, the Commission released the results of 
its investigation (Investigation No. TA-2104-24) into the 
probable economic effect of the Agreement (USITC Pub. 3949). 
The Commission found that the Agreement would have a 
substantial impact on U.S. trade and investment relationship 
with Korea. The expected growth in U.S. trade with Korea under 
the Agreement would have a positive impact on the U.S. economy, 
increasing U.S. gross domestic product by up to $12 billion.
    As noted above, the Commission also concluded that the 
Agreement likely will result in a larger increase in U.S. 
exports to Korea than in U.S. imports from Korea. More 
specifically, it estimated that annual U.S. exports to Korea 
will increase by up to $10.9 billion while annual U.S. imports 
from Korea will increase by up to $6.9 billion. It further 
estimated that the largest increases in U.S. exports, by 
percent, will be in dairy products, other meat products 
(primarily pork and poultry), wearing apparel, and bovine meat 
products (beef). And it found the largest increases in U.S. 
exports, by value, will be in machinery and equipment; 
chemical, rubber, and plastic products; bovine meat products; 
other meat products; and certain other food products. The 
Commission expected certain U.S. sectors, such as textiles, 
wheat, wearing apparel, and electronic equipment, to experience 
modest declines in output or employment, generally less than 1 
percent.
    With respect to services, the Commission concluded that 
U.S. service firms will benefit from improved market access, 
national treatment, and regulatory transparency under the 
Agreement. The Commission noted that Korea's services market is 
large and that the Agreement will likely increase total U.S. 
services exports to Korea, although the impact will vary by 
industry.

                      D. Overview of the Agreement


1. Background

    The Agreement establishes a bilateral free trade area that 
eliminates tariffs on trade between the United States and Korea 
for all qualifying goods except rice. The Agreement also 
liberalizes trade in services and contains provisions that 
address telecommunications, electronic commerce, intellectual 
property rights, labor, environment, government procurement, 
customs and trade facilitation, and investment issues. In 
addition, the Agreement contains provisions that promote 
bilateral consultation and cooperation, procedural and 
substantive due process, administrative and judicial review, 
transparency, and the rule of law. And it contains a mechanism 
for settling disputes that arise under the Agreement.
    As noted above, the Bush Administration and the bipartisan 
leadership of the U.S. Senate Committee on Finance and the U.S. 
House of Representatives Committee on Ways and Means reached an 
agreement on trade policy on May 10, 2007. The United States 
and Korea signed amendments to the Agreement to reflect those 
changes on June 30, 2007. As a result of the amendments, this 
Agreement includes (1) fully enforceable commitments by the 
Parties to adopt, maintain, and enforce the five core 
international labor standards incorporated in the 1988 
International Labor Organization Declaration on Fundamental 
Principles and Rights at Work; (2) fully enforceable 
commitments by the Parties to adopt, maintain, and enforce 
their obligations under certain common multilateral 
environmental agreements; (3) modifications to the intellectual 
property chapter to clarify rules concerning the protection of 
public health; (4) modifications to the government procurement 
chapter that allow the Parties to condition government 
contracts on adherence to core labor standards; (5) 
confirmation that the United States can prevent foreign 
companies from supplying services at U.S. ports if the United 
States deems such action necessary to protect our national 
security; and (6) confirmation that the Agreement accords 
foreign investors in the United States no greater substantive 
rights with regard to investor protections than U.S. investors 
in the United States.

2. Office of the U.S. Trade Representative summary of the agreement

    The Office of the U.S. Trade Representative prepared a 
summary of the Agreement that was included among the documents 
that the President transmitted to Congress on October 3, 2011. 
This summary was distributed to Members of the Committee to aid 
in their consideration of the implementing legislation, and it 
is reprinted below:

              THE UNITED STATES-KOREA FREE TRADE AGREEMENT


                        Summary of the Agreement

    This summary briefly describes key provisions of the United 
States-Korea Free Trade Agreement (``Agreement'') that the 
United States has concluded with the Republic of Korea 
(``Korea'') and represents an authoritative expression of 
Administration views regarding the interpretation of the 
Agreement both for purposes of U.S. international obligations 
and domestic law.
    The Agreement was signed on June 30, 2007. On December 3, 
2010, Korea and the United States resolved outstanding issues 
related to the Agreement. As part of this resolution, the 
United States negotiated important new commitments on tariffs, 
nontariff barriers such as Korea's automotive safety standards, 
transparency, and a special automotive safeguard to protect 
U.S. workers from potential import surges. Where relevant, 
these new commitments, which are principally embodied in an 
exchange of letters between Korea and the United States dated 
February 10, 2011 (``February 10, 2011 Exchange of Letters''), 
are discussed further below.

                                PREAMBLE

    The Preamble to the Agreement provides the Parties' 
underlying objectives in entering into the Agreement and 
provides context for the provisions that follow. It includes 
the following statement:
    ``Agreeing that foreign investors are not hereby accorded 
greater substantive rights with respect to investment 
protections than domestic investors under domestic law where, 
as in the United States, protections of investor rights under 
domestic law equal or exceed those set forth in this 
Agreement.''
    This statement clarifies that, as provided in the 
Bipartisan Trade Promotion Authority Act of 2002, under the 
Agreement foreign investors in the United States are not to be 
accorded greater substantive rights with respect to investment 
protections than U.S. investors in the United States.

            CHAPTER ONE: INITIAL PROVISIONS AND DEFINITIONS

    Section A of Chapter One sets out provisions establishing a 
free trade area and affirming the Parties' existing rights and 
obligations with respect to each other under the Marrakesh 
Agreement Establishing the World Trade Organization (WTO) and 
other agreements to which they are party.
    Section B defines certain terms that recur in various 
chapters of the Agreement.

      CHAPTER TWO: NATIONAL TREATMENT AND MARKET ACCESS FOR GOODS

    Chapter Two and its relevant annexes and appendices set out 
the Agreement's principal rules governing trade in goods. Each 
Party must treat products from the other Party in a non-
discriminatory manner, provide for the phase-out and 
elimination of tariffs on ``originating'' goods (as defined in 
Chapter Six) traded between the Parties, and eliminate a wide 
variety of non-tariff trade barriers that restrict or distort 
trade flows.
    Tariff Elimination. Chapter Two provides for the 
elimination of customs duties on originating goods traded 
between the Parties. Duties on most trade in industrial and 
consumer goods will be eliminated within five years after the 
Agreement enters into force. Duties on almost all other goods 
will be phased out within 10 years. Some footwear, fishery, and 
agricultural goods will have longer periods for elimination of 
duties or be subject to other provisions, including, in some 
cases, the application of preferential tariff-rate quotas 
(TRQs). Annex 2-B and the General Notes to the U.S. and Korean 
Schedules to Annex 2-B include detailed provisions on staging 
of tariff reductions and application of TRQs for certain 
fishery products and agricultural goods. The Chapter provides 
that the Parties may agree to speed up tariff phase-outs on a 
product-by-product basis after the Agreement takes effect.
    Pursuant to the February 10, 2011 Exchange of Letters, the 
United States will maintain its tariff on Korean cars until the 
fifth year after the Agreement enters into force, while Korea 
will reduce its tariff on U.S. cars by one half on the date 
that the Agreement enters into force and eliminate it at the 
same time the U.S. auto tariff is eliminated. Korea and the 
United States will accelerate the elimination of tariffs on 
electric cars, phasing them out in equal annual increments 
until they are eliminated in the fifth year (with Korea 
reducing its tariff by one half on the date that the Agreement 
enters into force). The United States will maintain its 25 
percent U.S. truck tariff until the eighth year and then phase 
it out in three equal increments until it is eliminated in year 
ten. (Korea will eliminate its tariff on trucks immediately as 
agreed in 2007.) In addition, Korea will delay for two years, 
until January 1, 2016, the elimination of its tariffs on U.S. 
pork classified in one tariff line.
    Waiver of Customs Duties. The Parties may not adopt new 
duty waivers or expand existing duty waivers conditioned on the 
fulfillment of a performance requirement. Chapter Two defines 
the term ``performance requirements'' so as not to restrict a 
Party's ability to provide duty drawback on goods imported from 
the other Party.
    Temporary Admission. The Parties will provide duty-free 
temporary admission for certain products. Such items include 
professional equipment, goods for display or demonstration, and 
commercial samples. Chapter Two also includes specific 
provisions on transit of containers used in international 
traffic.
    Import/Export Restrictions, Fees, and Formalities. The 
Chapter clarifies that restrictions prohibited under the 
Agreement and the General Agreement on Tariffs and Trade (GATT) 
1994 include export and import price requirements (except under 
antidumping and countervailing duty orders and undertakings) 
and import licensing conditioned on the fulfillment of a 
performance requirement. In addition, a Party must limit all 
fees and charges imposed on or in connection with importation 
or exportation to the approximate cost of services rendered. 
Neither Party may apply a merchandise processing fee on imports 
of ``originating'' goods. In addition, Korea will amend its 
Special Consumption Tax and Annual Vehicle Tax on motor 
vehicles to reduce overall tax rates and decrease the tax 
disparity between different categories of motor vehicles. In 
the February 10, 2011 Exchange of Letters, Korea agreed to 
adhere to additional transparency obligations in the event that 
it adopts new automotive taxes based on greenhouse gas 
emissions or fuel economy.
    Distinctive Products. Korea will recognize Bourbon Whiskey 
and Tennessee Whiskey as ``distinctive products'' of the United 
States, meaning that Korea will not permit the sale of any 
product as Bourbon Whiskey or Tennessee Whiskey unless it was 
manufactured in the United States in accordance with applicable 
laws and regulations. Similarly, the United States will 
recognize Andong Soju and Gyeongju Beopju as ``distinctive 
products'' of Korea.
    Committee on Trade in Goods. The Parties will establish a 
Committee on Trade in Goods to consider matters arising under 
Chapters Two, Six (Rules of Origin and Origin Procedures), and 
Seven (Customs Administration and Trade Facilitation). The 
committee's functions include promoting trade in goods and 
addressing barriers to trade in goods between the Parties.

                       CHAPTER THREE: AGRICULTURE

    Chapter Three contains special provisions covering trade in 
agricultural goods.
    TRQs. Under Chapter Three each government must administer 
its tariff-rate quotas in a manner that is transparent, non-
discriminatory, responsive to market conditions, and minimally 
burdensome on trade. The Chapter requires the Parties to make 
every effort to administer TRQs in a manner that allows 
importers to fully utilize import quotas. In addition, the 
Chapter provides that the Parties may not condition application 
for, or utilization of, quota allocations on the re-export of a 
good.
    Safeguards. Chapter Three also sets out a safeguard 
mechanism that will permit Korea to impose an additional duty 
on specified agricultural products if imports of those products 
from the United States exceed an established volume 
``trigger.'' The list of products as well as trigger volumes 
and duty rates are set out in Annex 3-A of the Agreement. A 
safeguard measure will remain in force until the end of the 
year in which the measure applies. Korea may not apply an 
agricultural safeguard on a good after the period specified for 
that product in Annex 3-A.
    Korea may not apply a safeguard measure on a good that is 
already the subject of a safeguard measure under either Chapter 
Ten (Trade Remedies) of the Agreement or the WTO Agreement on 
Safeguards. All agricultural safeguard measures must be 
implemented in a transparent manner and, on request, Korea must 
consult with the United States regarding any measure it 
applies.
    Chapter Three prohibits both Parties from imposing 
safeguard duties pursuant to the WTO Agreement on Agriculture 
on ``originating'' goods.
    Additional Provisions. Chapter Three provides for the 
creation of a Committee on Agricultural Trade. The committee 
will be established within 90 days after the Agreement enters 
into force and will provide a forum for promoting cooperation 
in the implementation and administration of the Chapter as well 
as for consultations on agricultural trade.

                   CHAPTER FOUR: TEXTILES AND APPAREL

    Chapter Four contains special provisions covering trade in 
``originating'' textile and apparel goods.
    Safeguards. The Chapter establishes a transitional 
safeguard procedure for textile and apparel goods, under which 
the importing Party may temporarily impose additional duties up 
to the level of the normal trade relations most-favored-nation 
(NTR/MFN) duty rates on imports of textile or apparel goods 
that cause, or threaten to cause, serious damage to a domestic 
industry as a result of the elimination or reduction of duties 
under the Agreement. An importing Party may impose a textile 
safeguard measure only once on the same textile or apparel 
good. The measure may not be in place for more than two years, 
or four years if the measure is extended. A Party may not take 
or maintain a textile safeguard against a good beyond ten years 
after the date the Party must eliminate its customs duties on 
the good pursuant to the Agreement. A Party may not apply a 
textile safeguard measure to a good while the good is subject 
to a safeguard measure under (i) Chapter Ten (Trade Remedies) 
or (ii) Article XIX of the GATT 1994 and the WTO Agreement on 
Safeguards.
    A Party imposing a safeguard measure under Chapter Four 
must provide the exporting Party with mutually agreed 
compensation in the form of trade concessions for textile or 
apparel goods that have substantially equivalent trade effects 
or that are equivalent to the increased duties resulting from 
application of the safeguard measure. If the Parties cannot 
agree on compensation, the exporting Party may raise duties on 
any goods from the importing Party in an amount that has a 
value substantially equivalent to the increased duties 
resulting from application of the safeguard measure.
    Rules of Origin and Related Matters. A textile or apparel 
good will generally qualify as an ``originating'' good eligible 
to receive preferential treatment under the Agreement only if 
all processing from the yarn stage to the final product (e.g., 
yarn-spinning, fabric production, cutting, and assembly) takes 
place in the United States, Korea, or both, or if there is an 
applicable change in tariff classification under the specific 
rules of origin contained in Annex 4-A of the Agreement.
    Chapter Four sets out special rules for determining whether 
a textile or apparel good is an ``originating'' good, including 
a de minimis exception for non-originating yarns or fibers, a 
process for designating inputs not available in commercial 
quantities, a rule for treatment of sets, and consultation 
provisions.
    The de minimis rule applies to goods that ordinarily would 
not be considered ``originating'' goods because certain of 
their fibers or yarns do not undergo an applicable change in 
tariff classification. Under the rule, the Parties will 
consider a good to be ``originating'' if those fibers or yarns 
constitute seven percent or less of the total weight of the 
component of the good that determines the classification. This 
special rule does not apply to goods containing elastomeric 
yarns in the component of the good that determines the 
classification.
    Annex 4-B of the Agreement sets out a process for creating 
a list of fabrics, yarns, and fibers that a Party determines 
are not available in commercial quantities in a timely manner 
from producers in its territory. A textile or apparel good that 
includes the fabrics, yarns, or fibers included in this list 
will be treated as if it is ``originating'' for purposes of the 
specific rules of origin in Annex 4-A of the Agreement. A Party 
may remove a fabric, yarn, or fiber from the list if it 
determines that the fabric, yarn, or fiber has become available 
in commercial quantities.
    Customs Cooperation. Chapter Four commits the Parties to 
cooperate in enforcing their laws affecting trade in textile 
and apparel goods, to ensure the accuracy of claims of origin, 
and to prevent circumvention of international agreements 
affecting trade in textile and apparel goods. The Chapter also 
requires Korea to provide the United States specified 
information concerning entities engaged in the production of 
textile or apparel goods in its territory, including any 
potential circumvention.
    Chapter Four provides that, at the request of the importing 
Party, the exporting Party must conduct a verification to 
determine that a claim of origin for a textile or apparel 
product is accurate. In addition, the Chapter provides that 
under certain circumstances the exporting Party must conduct a 
verification of an enterprise in its territory to determine 
whether it is complying with the Parties' customs laws 
applicable to textile trade. A verification may include visits 
to the premises of the exporter or producer of the goods in 
question. If there is insufficient information to make the 
relevant determination, or if an enterprise provides incorrect 
information, the importing Party may take appropriate action, 
which may include denying application of preferential tariff 
treatment to the goods in question or to similar textile or 
apparel goods exported or produced by the person subject to the 
verification.
    Chapter Four also establishes a Committee on Textile and 
Apparel Trade Matters to consider issues arising under the 
Chapter.

       CHAPTER FIVE: PHARMACEUTICAL PRODUCTS AND MEDICAL DEVICES

    Chapter Five sets out provisions related to the pricing and 
reimbursement of pharmaceutical products and medical devices. 
The Chapter recognizes the Parties' shared commitment to 
promoting and facilitating access to high-quality patented and 
generic pharmaceutical products and medical devices, and 
affirms the importance of several key principles in pursuing 
these objectives.
    Access to Innovation: Chapter Five calls for the Parties to 
apply fair, reasonable, and non-discriminatory procedures when 
they operate national-level listing and reimbursement regimes 
for pharmaceutical products and medical devices. In operating 
such a system, a Party must base reimbursement determinations 
on market prices or appropriately recognize the value of 
patented products and devices. A Party must also permit 
manufacturers to apply for increased reimbursement amounts, 
including for additional medical indications, based on evidence 
of a product's or device's safety or efficacy.
    Transparency: The Chapter also commits each Party to ensure 
that its measures governing pricing and reimbursement for 
pharmaceutical products and medical devices are transparent and 
predictable. An exchange of letters appended to the Agreement 
calls for Korea to establish and maintain an independent body 
to review pricing and reimbursement decisions on pharmaceutical 
products and medical devices.
    Dissemination of Information: Each Party must allow 
pharmaceutical manufacturers to publish certain information 
regarding their approved products on the Internet.
    Ethical Business Practices: Chapter Five also calls for the 
Parties to maintain and enforce measures to prohibit 
manufacturers and suppliers from providing improper inducements 
to health care professionals or institutions for listing, 
purchasing, or prescribing their devices or products.
    Cooperation: Chapter Five establishes a Medicines and 
Medical Devices Committee, co-chaired by health and trade 
officials from each Party, to monitor and support 
implementation of the Chapter and to provide for continued 
dialogue between the Parties on emerging health care policy 
issues. The Chapter also calls for each Party to facilitate 
consideration of requests from manufacturers to recognize the 
results of conformity assessment procedures that bodies in the 
other Party's territory have conducted.

           CHAPTER SIX: RULES OF ORIGIN AND ORIGIN PROCEDURES

    To benefit from various trade preferences provided under 
the Agreement, including reduced duties, a good must qualify as 
an ``originating'' good under the rules of origin set out in 
Chapter Six and Annex 6-A. These rules ensure that the 
preferential tariff treatment and other benefits of the 
Agreement accrue primarily to firms or individuals that produce 
or manufacture goods in the Parties' territories.
    Key Concepts. Chapter Six provides general criteria under 
which a good may qualify as ``originating:''
           When the good is wholly obtained or produced 
        in Korea, the United States, or both (e.g., crops grown 
        or minerals extracted in the United States); or
           When the good is produced entirely in the 
        territory of Korea, the United States, or both and: (1) 
        non-originating materials used in the production of the 
        good undergo a specified change in tariff 
        classification in Korea, the United States, or both; or 
        (2) meets any applicable ``regional value content'' 
        requirement (see below); and (3) satisfies all other 
        requirements of Chapter Six, including Annex 6-A; or
           When the good is produced in Korea, the 
        United States, or both, exclusively from 
        ``originating'' materials.
    De Minimis. Even if a good does not undergo a specified 
change in tariff classification, it will be treated as an 
originating good if the value of non-originating materials that 
have been used in the production of the good and do not undergo 
the required change in tariff classification does not exceed 
ten percent of the adjusted value of the good, and the good 
otherwise meets the Chapter's criteria. This de minimis 
exception does not apply to certain agricultural and fisheries 
goods, and the Agreement includes a separate de minimis 
exception for textile and apparel goods.
    Regional Value Content. Some origin rules under the 
Agreement require that certain goods meet a ``regional value 
content'' test in order to qualify as ``originating,'' meaning 
that a specified percentage of the value of the good must be 
attributable to originating materials. In general, the 
Agreement provides two methods for calculating that percentage: 
(1) the ``build-down method'' (based on the value of non-
originating materials used); and (2) the ``build-up method'' 
(based on the value of originating materials used). The 
regional value content of certain automotive goods may also be 
calculated on the basis of their net cost. Finally, standard 
accessories, spare parts, and tools delivered with a good are 
considered part of the material making up the good so long as 
these items are not separately classified or invoiced and their 
quantities and values are customary. The de minimis rule does 
not apply in calculating regional value content.
    Claims for Preferential Treatment. Under Chapter Six, 
importers who wish to claim preferential tariff treatment for a 
particular good must be prepared to submit, on the request of 
the importing Party's customs authority, a statement explaining 
why the good qualifies as an originating good. A Party may only 
deny a claim for preferential treatment through a written 
determination that the claim is invalid as a matter of fact or 
law. The Chapter establishes a procedure for filing claims for 
preferential treatment for up to one year after a good is 
imported and for seeking a refund of any excess duties paid. 
The Chapter also prohibits a Party from penalizing an importer 
if the importer promptly and voluntarily corrects an incorrect 
claim and pays any duties owed.
    Verification. Each Party must ensure that its customs 
authority is empowered to conduct verifications for purposes of 
determining whether a good is an originating good. Where an 
importing Party determines through a verification that an 
importer, exporter, or producer has engaged in a pattern of 
conduct in providing false or unsupported statements, 
declarations, or certifications that a good is an originating 
good, the Party may suspend preferential tariff treatment to 
identical goods from that importer, exporter, or producer until 
the importing Party determines that the importer, exporter, or 
producer is in compliance with the rules set out in the 
Chapter.
    Additional Rules. Chapter Six provides specific rules with 
respect to the treatment of (1) packing materials and 
containers; (2) indirect materials; (3) fungible goods; and (4) 
sets of goods for purposes of determining origin. The Chapter 
provides that a Party may not treat a good as originating if 
the good undergoes any operation in a third country other than 
being unloaded, reloaded, or preserved in good condition, or if 
it is shipped through a third country and does not remain under 
the control of customs authorities there. The Chapter also 
provides that the Parties will meet to discuss whether to 
develop common guidelines for interpreting, applying, and 
administering Chapters Six and Seven.

      CHAPTER SEVEN: CUSTOMS ADMINISTRATION AND TRADE FACILITATION

    Chapter Seven establishes rules designed to encourage 
transparency, predictability, and efficiency in the operation 
of each Party's customs procedures and to provide for 
cooperation between the Parties on customs matters.
    General Principles. In Chapter Seven, each Party commits to 
observe certain transparency obligations. Each Party must 
publish its customs measures, including on the Internet, and, 
where possible, provide opportunity for comments from the 
public before amending its customs regulations. Each Party must 
also provide written advance rulings, on request, to its 
importers and to exporters and producers of the other Party, 
regarding whether a product qualifies as an ``originating'' 
good under the Agreement, as well as on other customs matters. 
In addition, each Party must ensure that importers have access 
to both administrative and judicial review of customs 
determinations. The Parties must adopt or maintain procedures 
to release goods from customs promptly and expeditiously clear 
express shipments.
    Cooperation. Chapter Seven also is designed to enhance 
customs cooperation. The Parties are encouraged to give each 
other advance notice of customs developments likely to 
substantially affect the operation of the Agreement. The 
Chapter calls for the Parties to cooperate in securing 
compliance with their respective customs measures related to 
the implementation and operation of the provisions of the 
Agreement governing importations and exportations. It includes 
specific provisions for sharing customs information where a 
Party has a reasonable suspicion of unlawful activity relating 
to its laws and regulations governing importations.

           CHAPTER EIGHT: SANITARY AND PHYTOSANITARY MEASURES

    Chapter Eight defines the Parties' obligations to each 
other under the Agreement regarding sanitary and phytosanitary 
(SPS) measures. It reflects the Parties' understanding that 
implementation of existing obligations under the WTO Agreement 
on the Application of Sanitary and Phytosanitary Measures (SPS 
Agreement) is a shared objective. Nothing in the Agreement 
imposes new limitations on the United States in terms of 
maintaining high safety and inspection standards.
    Key Concepts. SPS measures are laws or regulations that 
protect human, animal, or plant life or health from certain 
risks, including plant- and animal-borne pests and diseases, 
additives, contaminants, toxins, or disease-causing organisms 
in food and beverages.
    Cooperation. The Parties will establish a Committee on SPS 
Matters to (i) enhance each Party's implementation of the WTO 
SPS Agreement; (ii) help protect human, animal, or plant life 
or health; (iii) enhance consultation and cooperation between 
the Parties on SPS matters; and (iv) facilitate bilateral 
trade.
    Dispute Settlement. Neither Party may invoke the 
Agreement's dispute settlement procedures for a matter arising 
under Chapter Eight.

               CHAPTER NINE: TECHNICAL BARRIERS TO TRADE

    Chapter Nine builds on WTO rules related to technical 
barriers to trade in order to promote transparency, 
accountability, and cooperation between the Parties on 
regulatory issues.
    Key Concepts. The term ``technical barriers to trade'' 
(TBT) refers to barriers that may arise in preparing, adopting, 
or applying voluntary product standards, technical regulations, 
and procedures used to determine whether a particular good 
meets a standard or technical regulation (``conformity 
assessment procedures'').
    International Standards. Chapter Nine requires the Parties 
to apply the principles articulated in the WTO TBT Committee's 
Decision on Principles for the Development of International 
Standards, Guides and Recommendations in determining what 
constitutes an ``international standard'' within the meaning of 
the WTO TBT Agreement. Those principles emphasize the need for 
openness and consensus in the development of international 
standards.
    Conformity Assessment. Chapter Nine also provides for a 
dialogue between the Parties on ways to facilitate the 
acceptance of conformity assessment results. Each Party will 
recognize conformity assessment bodies in the territory of the 
other Party on terms no less favorable than it accords 
conformity assessment bodies in its own territory. The Chapter 
also calls for the Parties to notify each other of the criteria 
they use to recognize conformity assessment bodies that perform 
conformity assessment procedures for cosmetics, household 
electrical appliances, and motor vehicles, and with respect to 
noise and emissions.
    Transparency. Chapter Nine contains various transparency 
obligations, such as requiring each Party to: (i) allow persons 
of the other Party to participate in the development of 
technical regulations, standards, and conformity assessment 
procedures on terms no less favorable than those it accords to 
its own persons; (ii) transmit regulatory proposals notified 
under the WTO TBT Agreement directly to the other Party; (iii) 
describe in writing the objectives of and reasons for a 
proposed technical regulation or conformity assessment 
procedure; and (iv) consider comments on such proposals and 
respond in writing to significant comments it receives.
    Cooperation. Chapter Nine establishes a Committee on 
Technical Barriers to Trade through which the Parties will 
cooperate to address technical barriers and improve market 
access. Annex 9-B establishes an Automotive Working Group to 
monitor and facilitate increased cooperation regarding the 
development, implementation, and enforcement of relevant 
standards, technical regulations, and conformity assessment 
procedures with respect to the regulation of motor vehicles.
    Automotive Standards and Technical Regulations. Under 
Chapter Nine, each Party must ensure that technical regulations 
related to motor vehicles are not prepared, adopted, or applied 
with a view to or with the effect of creating unnecessary 
obstacles to international trade, to the extent provided in 
Article 2.2 of the WTO TBT Agreement. In an exchange of letters 
appended to the Agreement, Korea has also taken on specific 
commitments with respect to auto emission standards and 
regulations relating to self-certification of automotive safety 
standards. Furthermore, in the February 10, 2011 Exchange of 
Letters, Korea committed to allow U.S. manufacturers that sell 
25,000 or fewer ``originating'' vehicles in Korea to be 
considered as meeting all Korean safety regulations provided 
the vehicles are certified to U.S. safety standards. For all 
regulatory measures that would require a substantial change in 
motor vehicle design or technology, Korea also agreed to 
provide a period between the date a regulation is issued and 
the date manufacturers must comply with it that is usually not 
less than one year, and to conduct post-implementation reviews 
of existing significant regulations affecting motor vehicles to 
assess whether the regulations remain appropriate.

                      CHAPTER TEN: TRADE REMEDIES

    Safeguards. Section A of Chapter Ten establishes a 
safeguard procedure that will be available to aid domestic 
industries that sustain or are threatened with serious injury 
due to increased imports resulting from tariff reduction or 
elimination under the Agreement. As part of this process, each 
Party shall notify the other Party on initiation of an 
investigation and consult with the other Party as far in 
advance of a safeguard measure as practicable.
    Chapter Ten authorizes a Party to impose temporary duties 
on an imported originating good if, as a result of the 
reduction or elimination of a duty under the Agreement, the 
good is being imported in such increased quantities and under 
such conditions as to constitute a substantial cause of serious 
injury, or threat of serious injury, to a domestic industry 
producing a ``like'' or ``directly competitive'' good.
    Unless the exporting Party agrees otherwise, a safeguard 
measure may be applied on a good only during the Agreement's 
``transition period'' (as defined in Article 10.6) for phasing 
out duties on the good. A safeguard measure may take one of two 
forms--a temporary increase in duties to NTR (MFN) levels or a 
temporary suspension of duty reductions called for under the 
Agreement. In ``critical circumstances,'' the importing Party 
may, after 45 days have passed since initiation of the 
investigation, impose provisional relief for up to 200 days, 
based on a preliminary determination, while its investigation 
of the matter is underway. The Agreement provides an 
alternative form of safeguard measure for duties applied to a 
good on a seasonal basis.
    A Party may not impose a safeguard measure under Chapter 
Ten more than once on any good. A safeguard measure may be in 
place for an initial period of up to two years. A Party may 
extend a measure for an additional year, if it determines that 
the industry is adjusting and the measure remains necessary to 
facilitate adjustment and prevent or remedy serious injury. If 
a measure lasts more than one year, the Party must scale it 
back at regular intervals.
    If a Party imposes a safeguard measure, that Party must 
provide offsetting trade compensation to the other Party. No 
later than 30 days after it applies a safeguard measure, the 
respective Party shall afford an opportunity for consultations 
with the other Party regarding compensation. If the Parties 
cannot agree on the amount or nature of the compensation, the 
exporting Party may unilaterally suspend ``substantially 
equivalent'' trade concessions that it has made to the 
importing Party.
    The February 10, 2011 Exchange of Letters includes a 
special safeguard for goods of tariff heading 8703 or 8704 
(i.e., cars and trucks). Under the special safeguard, a Party 
may apply a safeguard using the procedures set forth in Chapter 
Ten, with the following modifications: a safeguard may be 
applied on a good for an additional ten years after the 
``transition period'' for phasing out duties on the good; a 
Party may impose a safeguard measure more than once on any 
good; the safeguard measure may be extended for an additional 
two years; there is no obligation to scale back a safeguard at 
regular intervals; there are fewer procedural requirements for 
critical circumstances; and the Party applying the safeguard is 
not subject to the suspension of trade concessions for up to 
two years after the safeguard is applied if it does not agree 
with the exporting Party on tariff reductions or other 
compensation.
    Global Safeguards. Chapter Ten provides that each Party 
maintains its right to take action against imports from all 
sources under the WTO Agreement on Safeguards. A Party may 
exclude imports of an originating good from the other Party 
from a global safeguard measure if those imports are not a 
substantial cause of serious injury or do not create a threat 
of serious injury. A Party may not apply a safeguard measure 
under Chapter Ten at the same time that it applies a safeguard 
measure on the same good under the WTO Safeguards Agreement.
    Antidumping and Countervailing Duties. Section B of Chapter 
Ten confirms that each Party retains its rights and obligations 
under the WTO Agreement with regard to the application of 
antidumping and countervailing duties. A Party must notify the 
other when it receives an antidumping or countervailing duty 
petition concerning imports from the other Party and afford the 
other Party a meeting or other similar opportunities regarding 
the application, consistent with the Party's law. With respect 
to anti-dumping cases, following a preliminary affirmative 
determination, the Party's competent authorities must provide 
exporters of the other Party due consideration and adequate 
opportunity for consultations regarding proposed price or 
quantity undertakings that could suspend the investigation. 
With respect to countervailing duty investigations, following a 
preliminary affirmative determination, the Party's competent 
authorities must provide the other Party and exporters of the 
other Party due consideration and adequate opportunity for 
consultations regarding proposed price or quantity undertakings 
that could suspend the investigation. Antidumping and 
countervailing duty measures may not be challenged under the 
Agreement's dispute settlement procedures.
    Committee on Trade Remedies. Section C of the Chapter 
creates a Committee on Trade Remedies whose functions include 
(i) enhancing each Party's understanding of the other's trade 
remedy laws, policies, and practices; (ii) improving 
cooperation on trade remedies matters; and (iii) discussing 
topics of mutual interest.

                       CHAPTER ELEVEN: INVESTMENT

    Chapter Eleven establishes rules to protect investors from 
one Party against wrongful or discriminatory government actions 
when they invest or attempt to invest in the other Party's 
territory. The Chapter's provisions reflect traditional 
standards incorporated in earlier U.S. bilateral investment 
treaties, previous free trade agreements, and customary 
international law.
    Key Concepts. Under Chapter Eleven, the term ``investment'' 
covers all forms of investment, including enterprises, 
securities, debt, intellectual property rights, licenses, and 
contracts. Chapter Eleven covers both investments existing when 
the Agreement enters into force and future investments. The 
term ``investor of a Party'' encompasses U.S. and Korean 
nationals as well as firms (including branches) established in 
one of the Parties.
    General Principles. Under the Agreement, investors enjoy 
six basic protections: (1) the right to non-discriminatory 
treatment relative both to domestic investors and investors of 
non-Parties; (2) limits on imposition by the host Party of 
``performance requirements;'' (3) the right to free transfer of 
funds related to an investment; (4) the guarantee that 
expropriation will be done in accordance with customary 
international law standards; (5) the right to the minimum 
standard of treatment of aliens required by customary 
international law; and (6) the right to hire key managerial 
personnel without regard to nationality. (As to this last 
protection, a Party may require that a majority of the board of 
directors be of a particular nationality, as long as this does 
not prevent the investor from controlling its investment.)
    Sectoral Coverage and Non-Conforming Measures. With the 
exception of investments in or by regulated financial 
institutions (which are treated in Chapter Thirteen), Chapter 
Eleven generally applies to all sectors, including service 
sectors. However, each Party has listed in Annexes I and II 
particular measures or sectors for which it negotiated an 
exemption from the Chapter's obligations relating to national 
treatment, NTR (MFN), performance requirements, or senior 
management and boards of directors (``non-conforming 
measures''). Annex I contains each Party's list of existing 
non-conforming measures at the central and regional levels of 
government. The United States has scheduled an exemption from 
all aforementioned obligations for all existing state measures. 
All existing local measures are exempted for both Parties 
without the need to be listed. If a Party liberalizes any of 
these non-conforming Annex I measures, it must thereafter 
maintain the measure at least at that level of openness. In 
Annex II, each Party has listed sectors or activities in which 
it reserves the right to maintain existing or adopt future non-
conforming measures. (As described below, Annexes I and II also 
include exemptions from Chapter Twelve (Cross-Border Trade in 
Services).)
    Investor-State Disputes. Chapter Eleven provides a 
mechanism for an investor of a Party to submit to binding 
international arbitration a claim for damages against the other 
Party. The investor may assert that the Party has breached a 
substantive obligation under the Chapter or that the Party has 
breached an ``investment agreement'' with, or an ``investment 
authorization'' granted to, the investor or a covered 
investment that the investor owns or controls. ``Investment 
agreements'' and ``investment authorizations'' are arrangements 
between an investor and a host government based on contracts 
and authorizations, respectively. These terms are defined in 
the Chapter.
    Chapter Eleven affords public access to information on 
investor-State arbitrations conducted pursuant to the 
Agreement. For example arbitration hearings will generally be 
open to the public and key documents will be publicly 
available, with exceptions for confidential business 
information. The Parties also authorize arbitral tribunals to 
accept amicus submissions from the public. In addition, the 
Chapter includes provisions similar to those used in U.S. 
courts to dispose quickly of claims a tribunal finds to be 
frivolous. Finally, within three years after the Agreement 
enters into force the Parties will consider whether to 
establish an appellate body, or similar mechanism, to review 
arbitral awards that tribunals render under the Chapter.
    Chapter Eleven confirms the Parties' understanding that, 
``except in rare circumstances,'' nondiscriminatory regulatory 
actions designed and applied to meet legitimate public welfare 
objectives, such as public health, safety, and the environment, 
are not indirect expropriations. The Chapter also provides a 
list of factors to be considered in determining whether a 
taxation measure constitutes an expropriation.
    The Agreement does not require the United States to give 
Korean investors greater substantive rights than U.S. companies 
already enjoy in the United States.

             CHAPTER TWELVE: CROSS-BORDER TRADE IN SERVICES

    Chapter Twelve governs measures affecting cross-border 
trade in services between the Parties. Certain provisions also 
apply to measures affecting investments to supply services.
    Key Concepts. Under the Agreement, cross-border trade in 
services covers supply of a service:
           from the territory of one Party into the 
        territory of the other Party (e.g., electronic delivery 
        of services from the United States to Korea);
           in the territory of a Party by a person of 
        that Party to a person of the other Party (e.g., a 
        Korean company provides services to U.S. visitors in 
        Korea); and
           by a national of a Party in the territory of 
        the other Party (e.g., a U.S. lawyer provides legal 
        services in Korea).
    Chapter Twelve should be read together with Chapter Eleven 
(Investment), which establishes rules pertaining to the 
treatment of service firms that choose to provide their 
services through a local presence, rather than cross-border. 
Chapter Twelve applies where, for example, a service supplier 
is temporarily present in a territory of a Party and does not 
operate through a local investment.
    General Principles. Among Chapter Twelve's core obligations 
are requirements to provide national treatment and NTR (MFN) 
treatment to service suppliers of the other Party. Thus, each 
Party must treat service suppliers of the other Party no less 
favorably than its own suppliers or those of any other country. 
This commitment applies to state and local governments as well 
as the national government. The Chapter's provisions apply to 
existing service suppliers as well as to those who seek to 
supply services. The Parties are prohibited from requiring 
firms to establish a local presence as a condition for 
supplying a service on a cross-border basis. In addition, 
certain types of market access restrictions on the supply of 
services (e.g., that limit the number of firms that may offer a 
particular service or that restrict or require specific types 
of legal structures or joint ventures with local companies in 
order to supply a service) are also barred. The Chapter's 
market access rules apply both to services supplied on a cross-
border basis and through a local investment.
    Sectoral Coverage and Non-Conforming Measures. Chapter 
Twelve applies across virtually all services sectors. The 
Chapter excludes financial services (which are addressed in 
Chapter Thirteen), except that certain provisions of Chapter 
Twelve apply to investments in financial services that are not 
regulated as financial institutions and are covered by Chapter 
Eleven (Investment). In addition, Chapter Twelve does not cover 
air transportation, although it does apply to specialty air 
services and aircraft repair and maintenance.
    Each Party has listed in Annexes I and II measures or 
sectors for which it negotiated exemptions from Chapter 
Twelve's core obligations (national treatment, NTR (MFN), local 
presence, and market access). Annex I contains the list of 
existing non-conforming measures at the central and regional 
level of government. Our coverage under the market access 
discipline is the same as our commitments under the WTO General 
Agreement on Trade in Services, with the right to take measures 
not inconsistent with those commitments. The United States has 
scheduled an exemption from national treatment, NTR (MFN), and 
local presence for all existing state measures. All existing 
local measures are exempted for both Parties without the need 
to be listed. However, once a Party liberalizes any of these 
non-conforming Annex I measures, it must thereafter maintain 
the measure at least at that level of openness. Each Party has 
listed in Annex II sectors or activities in which it reserves 
the right to adopt or maintain future non-conforming measures.
    Specific Commitments. Chapter Twelve includes a 
comprehensive definition of express delivery services under 
which each Party must provide national treatment, NTR (MFN) 
treatment, and additional benefits to express delivery services 
of the other Party. The Chapter provides that the Parties will 
try to maintain the level of market openness for express 
delivery services they provided on the date the Agreement was 
signed, and a Party may request consultations with the other if 
it believes the other Party is not maintaining that level of 
access. The Chapter also addresses the issue of postal 
monopolies directing revenues derived from monopoly postal 
services to confer an advantage on express delivery services. 
In an exchange of letters appended to the Agreement, Korea has 
committed to expand the current exceptions to the Korean Postal 
Authority's monopoly to include all international document 
delivery services. In a further letter signed along with the 
Agreement, Korea has expressed its intention to gradually 
increase the scope of permitted private delivery services in 
other areas as well.
    Transparency and Domestic Regulation. Provisions on 
transparency and domestic regulation complement the core rules 
of Chapter Twelve. The transparency rules apply to the 
development and application of regulations governing services. 
The Chapter's rules on domestic regulation govern the operation 
of approval and licensing systems for service suppliers. Like 
the Chapter's market access rules, its provisions on 
transparency and domestic regulation cover services supplied 
both on a cross-border basis and through a local investment.
    Exclusions. Chapter Twelve does not apply to any service 
supplied ``in the exercise of governmental authority''--that 
is, a service that is provided on a non-commercial and non-
competitive basis. Chapter Twelve also does not apply to 
government subsidies. In addition, the Chapter makes clear that 
the Agreement does not impose any obligation on a Party with 
respect to its immigration measures, including admission or 
conditions of admission for temporary entry.

                  CHAPTER THIRTEEN: FINANCIAL SERVICES

    Chapter Thirteen provides rules governing each Party's 
treatment of: (1) financial institutions of the other Party; 
(2) investors of the other Party, and their investments, in 
financial institutions; and (3) cross-border trade in financial 
services.
    Key Concepts. The Chapter defines a ``financial 
institution'' as any financial intermediary or other 
institution authorized to do business and regulated or 
supervised as a financial institution under the law of the 
Party where it is located. A ``financial service'' is any 
service of a financial nature, including, insurance, banking, 
securities, asset management, financial information and data 
processing services, and financial advisory services.
    General Principles. Chapter Thirteen's core obligations 
parallel those in Chapters Eleven (Investment) and Twelve 
(Cross-Border Trade in Services). Specifically, Chapter 
Thirteen imposes rules requiring national treatment and NTR 
(MFN) treatment, prohibits certain quantitative restrictions on 
market access of financial institutions, and bars restrictions 
on the nationality of senior management. As appropriate, these 
rules apply to measures affecting financial institutions, 
investors and investments in financial institutions of another 
Party, and services companies that are currently supplying and 
that seek to supply financial services on a cross-border basis. 
The rules do not apply to measures adopted or maintained by a 
Party relating to certain specified services and activities 
unless a Party allows its financial institutions to compete 
with a public entity or a financial institution to supply such 
services and activities. Chapter Thirteen includes broad 
flexibility and safeguards, including the prudential and 
monetary and exchange rate exceptions, to ensure that 
governments may continue to regulate the financial sector and 
take action to ensure the stability and integrity of the 
financial system in a financial crisis.
    Non-Conforming Measures. Similar to Chapters Eleven and 
Twelve, each Party has listed in an annex (Annex III) 
particular measures for which it negotiated exemptions from the 
Chapter's core obligations. Existing non-conforming U.S. state 
and local laws and regulations are exempted from these 
obligations. Once a Party, including a state or local 
government, liberalizes one of these non-conforming measures, 
however, it must, in most cases, maintain the measure at least 
at that new level of openness.
    Other Provisions. Chapter Thirteen also includes provisions 
on regulatory transparency, ``new'' financial services, self-
regulatory organizations, and the expedited availability of 
insurance products.
    Relationship to Other Chapters. Measures that a Party 
applies to financial services suppliers of the other Party, 
other than regulated financial institutions, that make or 
operate investments in the Party's territory are covered 
principally by Chapter Eleven (Investment) and certain 
provisions of Chapter Twelve (Cross-Border Trade in Services). 
In particular, the core obligations of Chapter Eleven apply to 
such measures, as do the market access, transparency, and 
domestic regulation provisions of Chapter Twelve. Chapter 
Thirteen incorporates by reference certain provisions of 
Chapter Eleven, such as those relating to transfers and 
expropriation.
    Additional Commitments. Pursuant to the Chapter's annexes 
and an exchange of letters appended to the Agreement, Korea has 
taken on specific commitments to establish a more transparent 
financial regulatory regime, ensure that a government-owned 
insurance supplier will not be provided competitive advantages, 
and allow U.S. financial institutions in Korea to transfer 
information out of Korea for data processing to take advantage 
of global economies of scale.

                  CHAPTER FOURTEEN: TELECOMMUNICATIONS

    Chapter Fourteen includes disciplines beyond those imposed 
under Chapters Eleven (Investment) and Twelve (Cross-Border 
Trade in Services) on regulatory measures affecting 
telecommunications trade and investment between the Parties. It 
is designed to ensure that service suppliers of each Party have 
non-discriminatory access to and use of public 
telecommunications networks and services in the territory of 
the other Party. In addition, each Party must regulate its 
major telecommunications suppliers in ways that will help 
ensure a level playing field for new entrants. Each Party also 
commits to ensure that its telecommunications regulations are 
set by independent regulators applying transparent procedures.
    Key Concepts. Under Chapter Fourteen, a ``public 
telecommunications service'' is any telecommunications service 
that a Party requires to be offered to the public generally. 
The term includes voice and data transmission services, but 
does not include ``value-added services'' (e.g., services that 
enable users to create, store, or process information over a 
network). A ``major supplier'' is a company that, by virtue of 
its market position or control over certain facilities, can 
materially affect the terms of participation in the market.
    Competition. Chapter Fourteen establishes rules promoting 
effective competition in telecommunications services. The 
Chapter includes commitments by each Party to:
           ensure that all service suppliers of the 
        other Party that seek to access or use a public 
        telecommunications network in the Party's territory can 
        do so on reasonable and non-discriminatory terms (e.g., 
        Korea must ensure that its public phone companies do 
        not provide preferential access to Korean banks or 
        Internet service providers, to the detriment of U.S. 
        competitors);
           ensure that the other Party's 
        telecommunications suppliers have the right to 
        interconnect their networks with public 
        telecommunications networks in the Party's territory;
           ensure that telecommunications suppliers of 
        the other Party are permitted to connect leased lines 
        with public telecommunications networks in the Party's 
        territory; and
           impose disciplines on the behavior of 
        ``major suppliers,'' such as ensuring that major 
        suppliers provide interconnection at cost-oriented 
        rates and do not impose unreasonable or discriminatory 
        conditions or limitations on the resale of their 
        services.
    Regulation. The Chapter addresses key regulatory concerns 
that may create barriers to trade and investment in 
telecommunications services. In particular, each Party:
           will maintain or adopt procedures that will 
        help ensure a transparent telecommunications regulatory 
        regime, including requirements to publish 
        interconnection agreements and service tariffs and 
        provide meaningful opportunities for interested parties 
        to participate in telecommunications rulemaking;
           will require its telecommunications 
        regulator to resolve disputes between suppliers and 
        provide foreign suppliers the right to seek judicial 
        review of those decisions; and
           may elect to deregulate telecommunications 
        services when competition emerges and certain standards 
        are met.
    Technological Choice. The Chapter contains innovative 
provisions designed to ensure that the Parties avoid limiting 
the technologies telecommunications suppliers may choose to use 
to provide their services.

                  CHAPTER FIFTEEN: ELECTRONIC COMMERCE

    Chapter Fifteen establishes rules designed to prohibit 
discriminatory regulation of electronic trade in digitally 
encoded products such as computer programs, video, images, and 
sound recordings. The provisions in this and other recent U.S. 
free trade agreements represent a major advance over previous 
international understandings on this subject.
    Customs Duties. Chapter Fifteen provides that a Party may 
not impose customs duties on digital products of the other 
Party that are either transmitted electronically or fixed on a 
carrier medium.
    Non-Discrimination. The Parties will apply the principles 
of national treatment and NTR (MFN) treatment to trade in 
electronically-transmitted digital products. Thus, a Party may 
not discriminate against digital products that have a nexus to 
the other Party's territory (e.g., creation, production, or 
first sale there) or to otherwise afford protection to products 
with a connection to its own territory. Nor may a Party provide 
less favorable treatment to digital products that have a nexus 
to the other Party than it gives to like products that have a 
link to a third country. These non-discrimination rules do not 
apply to non-conforming measures adopted under Chapter Eleven 
(Investment), Twelve (Cross-Border Trade in Services), or 
Thirteen (Financial Services).
    Additional Provisions. Chapter Fifteen contains additional 
provisions relating to electronic authentication and electronic 
signatures, online consumer protection, and paperless trade 
administration. The Chapter also establishes mutually agreed 
principles regarding the access to and use of the Internet for 
electronic commerce.

              CHAPTER SIXTEEN: COMPETITION-RELATED MATTERS

    Chapter Sixteen addresses competition laws, government-
designated monopolies, state enterprises, and consumer 
protection.
    Competition Laws. Each Party must maintain laws prohibiting 
anticompetitive business conduct and take appropriate action 
with respect to such conduct. Each Party must also maintain an 
authority responsible for enforcing its national competition 
laws. The Chapter affirms that the enforcement policy of each 
Party's national competition authority is to treat persons of 
the other Party no less favorably than their own nationals.
    Chapter Sixteen obligates each Party to provide certain 
procedural protections in enforcement proceedings convened 
under its competition law. Specifically, each Party must ensure 
that any person that is subject to an administrative 
enforcement proceeding is provided a right to be heard, to 
present and rebut evidence, and to cross-examine witnesses. In 
addition, each Party must ensure that a person subjected to a 
sanction or remedy under the Party's competition law can ask a 
court to review it. The Chapter also requires each Party to 
empower its national competition authorities to settle their 
administrative or civil enforcement actions by mutual agreement 
with the subject of the enforcement action.
    Designated Monopolies. Chapter Sixteen sets specific rules 
that apply with respect to any monopoly owned or controlled by 
a Party's national government and any private business to which 
a Party provides monopoly rights after the Agreement takes 
effect. The Party must ensure that any such entity: (1) abides 
by the Party's obligations under the Agreement whenever it 
exercises governmental authority delegated to it by the Party 
in connection with the monopoly product; (2) purchases or sells 
the monopoly product in accordance with commercial 
considerations; (3) provides nondiscriminatory treatment to the 
other Party's investments, goods, and service suppliers in its 
purchase or sale of the monopoly product; and (4) does not use 
its monopoly position to engage in anticompetitive practices in 
markets outside its monopoly mandate that harm the other 
Party's investments.
    State Enterprises. The Chapter also establishes rules 
governing each Party's responsibility for non-monopoly 
enterprises it owns or controls. Each Party must ensure that 
its state enterprises accord non-discriminatory treatment in 
the sale of their products to the other Party's investments and 
abide by the Party's obligations under the Agreement in 
exercising any governmental authority that the Party has 
delegated to it.
    Cross-Border Consumer Protection. Chapter Sixteen commits 
the Parties to cooperate, in appropriate cases of mutual 
concern, in the enforcement of their consumer protection laws. 
The Chapter provides that the Parties will also work to 
strengthen cooperation between their consumer protection 
agencies.
    Dispute Settlement. Some of the Chapter's provisions are 
not subject to the Agreement's dispute settlement procedures, 
including provisions covering competition laws and consumer 
protection. The Chapter's rules addressing designated 
monopolies and state enterprises, however, are subject to those 
procedures.

               CHAPTER SEVENTEEN: GOVERNMENT PROCUREMENT

    Chapter Seventeen provides suppliers in each Party with 
additional access to the other Party's national government 
procurement market.
    The Chapter reaffirms each Party's rights and obligations 
under the WTO Agreement on Government Procurement (GPA), and 
confirms the Parties' intention to apply the APEC Non-Binding 
Principles on Government Procurement, as appropriate, to all 
government procurement not covered under the GPA and the 
Agreement.
    Coverage and Thresholds. Chapter Seventeen applies to 
procurements by those government departments, agencies, and 
enterprises listed in each Party's schedule of goods and 
services valued above certain dollar thresholds. Specifically, 
the Chapter applies to procurements by listed agencies of the 
``central government,'' which for the United States means the 
federal government, of goods and services valued at $100,000 or 
more and construction services valued at $7,407,000 or more. 
The threshold for goods and services is substantially lower 
than the threshold applied under the GPA--hence expanding 
market opportunities in both countries.
    General Principles and Procurement Procedures. Chapter 
Seventeen incorporates a number of provisions from the GPA, 
including commitments to national treatment of persons of the 
other Party and requirements governing the conduct of 
procurements. The Chapter expands on the GPA by incorporating 
important improvements that reflect emerging practices in 
procurement, such as reducing the tendering period in cases 
where procurement notices and other procurement information are 
made available electronically; reducing the tendering period 
for off-the-shelf goods and services; and encouraging use of 
electronic procurement. In addition, in procurements subject to 
the Agreement, a government agency may adopt or apply technical 
specifications that require suppliers to comply with generally 
applicable laws regarding fundamental principles and rights at 
work and acceptable conditions of work in the territory where 
the supplier makes the product or performs the service that the 
agency will purchase.

             CHAPTER EIGHTEEN: INTELLECTUAL PROPERTY RIGHTS

    Chapter Eighteen complements and enhances existing 
international standards for the protection of intellectual 
property and the enforcement of intellectual property rights, 
consistent with U.S. law.
    General Provisions. Chapter Eighteen commits each Party to 
ratify or accede to several agreements on intellectual property 
rights by the date the Agreement enters into force, including 
the WIPO Copyright Treaty, the Convention Relating to the 
Distribution of Programme-Carrying Signals Transmitted by 
Satellite, the WIPO Performances and Phonograms Treaty, the 
International Convention for the Protection of New Varieties of 
Plants, the Trademark Law Treaty, and the Patent Cooperation 
Treaty. The United States is already a party to these 
agreements. With very limited exceptions, each Party commits to 
provide national treatment to the other Party's nationals with 
respect to the enjoyment and protection of the intellectual 
property rights covered by the Chapter.
    Trademarks and Geographical Indications. Each Party must 
protect trademarks and geographical indications, including by 
refusing protection or recognition of a geographical indication 
that is likely to cause confusion with a preexisting trademark. 
The Chapter calls for trademarks to include certification 
marks, and for geographical indications to be eligible for 
protection as trademarks. Each Party must establish an 
electronic system for applying for, registering and maintaining 
trademarks, as well as an online database, with efficient and 
transparent procedures governing applications. Furthermore, 
each Party's Internet domain name management system must 
include a dispute resolution procedure to address trademark 
cyber-piracy.
    Copyright and Related Rights. Under Chapter Eighteen, the 
Parties must provide broad protection for copyright and related 
rights, affirming and building on rights set out in several 
international agreements. For instance, each Party must provide 
copyright protection for the life of the author plus at least 
70 years (for works measured by a person's life), or at least 
70 years (for corporate works). The Chapter clarifies that the 
right to reproduce literary and artistic works, phonograms, and 
performances encompasses temporary copies, an important 
principle in the digital realm. Each Party must also provide a 
right of communication to the public, which will further ensure 
that the right holder has the exclusive right to authorize 
making protected works available online. Each Party must also 
protect the rights of performers and producers of phonograms.
    To curb copyright piracy, each Party must ensure that its 
government agencies use only legitimate computer software, 
setting an example for the private sector. The Chapter also 
includes provisions on anti-circumvention, under which the 
Parties commit to prohibit tampering with technology used to 
protect copyrighted works. In addition, Chapter Eighteen sets 
out obligations with respect to the liability of Internet 
service providers in connection with copyright infringements 
that take place over their networks. Recognizing the importance 
of satellite broadcasts, Chapter Eighteen provides that each 
Party will protect encrypted program-carrying satellite 
signals. The Chapter obligates the Parties to extend protection 
to the signals themselves, as well as to the content contained 
in the signals.
    Patents. Chapter Eighteen also includes a variety of 
provisions for the protection of patents. Each Party is 
obligated to make patents available for any invention, subject 
to limited exclusions, and each Party confirms that patents 
will be available for any new uses or methods of using a known 
product. To guard against arbitrary revocation of patents, each 
Party must limit the grounds for revoking a patent to the 
grounds that would have justified a refusal to grant the 
patent. Under Chapter Eighteen, each Party shall adjust the 
term of a patent to compensate for unreasonable delays in 
granting the patent and, for certain pharmaceutical products, 
to compensate for unreasonable curtailment of the effective 
patent term as a result of the marketing approval process for 
such products.
    Certain Regulated Products. Chapter Eighteen includes 
additional specific provisions relating to pharmaceuticals and 
agricultural chemicals. Among other things, the Chapter 
provides for the protection of information concerning product 
safety or efficacy, including test data that a company submits 
in seeking marketing approval for such products, by precluding 
other firms from relying on the information. It provides 
specific periods for such protection--at least five years for 
pharmaceuticals and ten years for agricultural chemicals. This 
means, for example, that during the period of protection, 
safety and efficacy information that a company submits for 
approval of a new agricultural chemical product cannot be used 
without that company's consent in granting approval to another 
company to market a combination product. The Chapter's rules 
protecting information concerning pharmaceutical product safety 
and efficacy are subject to a public health exception. Chapter 
Eighteen also requires the Parties to adopt measures to prevent 
the marketing of a competing pharmaceutical product during the 
term of a patent covering the original innovative product. The 
February 10, 2011 Exchange of Letters allows Korea three years 
from the date the Agreement enters into force to implement 
measures in its marketing approval process to prevent persons 
from marketing a patented product without the consent of the 
patent holder.
    Public Health. Chapter Eighteen expresses the Parties' 
understanding that a Party's obligations under the Chapter do 
not and should not prevent it from taking measures to protect 
public health by promoting access to medicines for all.
    Enforcement Provisions. The Chapter also imposes 
obligations with respect to the enforcement of intellectual 
property rights in civil proceedings, criminal proceedings, and 
at the border. For example, each Party must provide that, when 
determining damages in civil proceedings involving copyright 
infringement or trademark counterfeiting, its judicial 
authorities must be able to take into account the value of the 
legitimate goods as well as the infringer's profits. Each Party 
must also provide for damages based on a fixed range (i.e., 
``statutory damages'') as an option that the right holder can 
elect instead of actual damages.
    Chapter Eighteen further provides that each Party's law 
enforcement agencies must have the authority to seize suspected 
pirated and counterfeit goods and the equipment used to make or 
transmit them. Each Party must also give its courts authority 
to order the forfeiture and/or destruction of these items. 
Chapter Eighteen also provides that each Party must establish 
criminal procedures and penalties for certain cases of 
trademark counterfeiting and copyright and related rights 
piracy.
    Each Party must also empower its law enforcement agencies 
to take enforcement action at the border against pirated or 
counterfeit goods without waiting for a right holder to file a 
formal complaint.

                        CHAPTER NINETEEN: LABOR

    Chapter Nineteen sets out the Parties' commitments and 
undertakings regarding trade-related labor rights.
    Fundamental Labor Rights. Each Party commits to adopt and 
maintain in its statutes, regulations, and practice certain 
enumerated labor rights, as stated in the 1998 ILO Declaration 
on Fundamental Principles and Rights at Work and its Follow Up. 
Specifically, these are (1) freedom of association; (2) the 
effective recognition of the right to collective bargaining; 
(3) the elimination of all forms of forced or compulsory labor; 
(4) the effective abolition of child labor and, for purposes of 
the Agreement, a prohibition on the worst forms of child labor; 
and (5) the elimination of discrimination in respect of 
employment and occupation. In order to establish a violation of 
this obligation, a Party must demonstrate that the other Party 
has failed to comply in a manner affecting trade or investment 
between the Parties. Neither Party may waive or otherwise 
derogate from its statutes or regulations implementing this 
obligation in a manner affecting bilateral trade or investment 
where the waiver or derogation would be inconsistent with one 
of the enumerated rights. For the United States, the Chapter's 
provisions regarding fundamental labor rights apply to federal 
law only.
    Effective Enforcement. Each Party commits not to fail to 
effectively enforce its labor laws on a sustained or recurring 
basis in a manner affecting trade or investment between the 
Parties. The Chapter defines ``labor laws'' to include laws 
directly related to the ILO fundamental labor rights as well as 
laws providing for acceptable conditions of work with respect 
to minimum wages, hours of work, and occupational safety and 
health, and laws providing labor protections for children and 
minors, including a prohibition on the worst forms of child 
labor. For the United States, ``labor laws'' includes federal 
statutes and regulations addressing these areas, but does not 
cover state or local labor laws.
    Procedural Guarantees. Each Party commits to afford 
procedural guarantees that ensure workers and employers have 
access to tribunals for the enforcement of its labor laws. To 
this end, each Party must ensure that proceedings before these 
tribunals are fair, equitable, and transparent and comply with 
due process of law. Decisions of such tribunals must be in 
writing, made available to the parties to the proceedings and 
the public, and based on information or evidence in respect of 
which the parties were offered the opportunity to be heard. In 
addition, hearings in such proceedings must be open to the 
public, except where the administration of justice otherwise 
requires. Each Party also commits to make remedies available to 
ensure the enforcement of its labor laws. Such remedies might 
include orders, fines, penalties, or temporary workplace 
closures.
    Dispute Settlement. Chapter Nineteen provides for 
cooperative consultations as a first step if a Party considers 
that the other Party is not complying with its obligations 
under the Chapter. The complaining Party may, after an initial 
60-day consultation period under Chapter Nineteen, invoke the 
Agreement's general dispute settlement mechanism by requesting 
additional consultations or a meeting of the Agreement's 
cabinet-level Joint Committee under Chapter Twenty-Two 
(Institutional Provisions and Dispute Settlement). If the 
Committee is unable to resolve the dispute, the matter may be 
referred to a dispute settlement panel.
    Institutional Arrangements and Cooperation. Chapter 
Nineteen establishes a senior-level Labor Affairs Council to 
oversee the Chapter's implementation and to provide a forum for 
consultations and cooperation on labor matters. Each Party must 
designate an office to serve as contact point for 
communications with the other Party and the public regarding 
the Chapter. Each Party's contact point must provide 
transparent procedures for the submission, receipt, and 
consideration of communications from the public relating to the 
Chapter.
    The chapter also creates a cooperation mechanism through 
which the Parties will collaborate to address labor matters of 
common interest. In particular, the mechanism will assist the 
Parties to establish priorities for, and carry out, cooperative 
activities relating to such topics as: fundamental rights and 
their effective application; social safety net programs; and 
labor-management relations.

                      CHAPTER TWENTY: ENVIRONMENT

    Chapter Twenty sets out the Parties' commitments and 
undertakings regarding environmental protection.
    General Principles. Each Party must strive to ensure that 
its environmental laws provide for and encourage high levels of 
environmental protection and continue to improve its respective 
levels of environmental protection. Each Party also commits not 
to waive or otherwise derogate from its environmental laws to 
weaken or reduce the levels of environmental protection in a 
manner affecting trade or investment between the Parties other 
than pursuant to any provision in its environmental law 
providing for waivers or derogations. Chapter Twenty further 
includes commitments to enhance cooperation between the Parties 
in environmental matters and encourages the Parties to develop 
voluntary, market-based mechanisms as one means for achieving 
and sustaining high levels of environmental protection.
    Multilateral Environmental Agreements. The Chapter 
recognizes that certain multilateral environment agreements 
(MEAs) play an important role globally and domestically in 
protecting the environment. The Chapter includes a provision 
requiring each Party to adopt, maintain, and implement laws, 
regulations, and all other measures to fulfill its obligations 
under certain MEAs to which both governments are parties 
(``covered agreements''). To establish a violation of this 
obligation a Party must demonstrate that the other Party has 
failed to comply in a manner affecting trade or investment 
between the Parties.
    Chapter Twenty provides that in the event of any 
inconsistency between a Party's obligations under the Agreement 
and a covered agreement, the Party must seek to balance its 
obligation under both agreements, but this will not preclude a 
Party from taking measures to comply with the covered agreement 
as long as the measure's primary purpose is not to impose a 
disguised restriction on trade.
    Effective Enforcement. The Chapter commits each Party not 
to fail to effectively enforce its environmental laws, and its 
laws, regulations, and other measures to fulfill its 
obligations under the covered agreements, on a sustained or 
recurring basis in a manner affecting trade or investment 
between the Parties. For the United States, ``environmental 
laws'' comprise federal environmental statutes and regulations 
promulgated under those statutes that are enforceable by action 
of the federal government.
    Procedural Matters. The Chapter requires each Party to make 
judicial, quasi-judicial, or administrative proceedings 
available to sanction or remedy violations of its environmental 
laws. Each Party must ensure that these proceedings are fair, 
equitable, and transparent, and, to this end, comply with due 
process of law and are open to the public, except where the 
administration of justice otherwise requires. Each Party must 
also ensure that interested persons may request the Party's 
competent authorities to investigate alleged violations of its 
environmental laws and that those authorities duly consider 
such requests. Each Party must also make appropriate and 
effective remedies available for violations of its 
environmental laws. These remedies may include, for example, 
fines, injunctions, or requirements to take remedial action or 
pay for the cost of containing or cleaning up pollution.
    Environmental Performance. Each Party will encourage the 
development and use of flexible, voluntary, and incentive-based 
mechanisms for environmental protection and will also encourage 
the development and improvement of goals and indicators for 
measuring environmental performance as well as flexible means 
for achieving performance goals.
    Institutional Arrangements and Cooperation. Chapter Twenty 
establishes a senior-level Environment Affairs Council to 
oversee implementation of the Chapter. The Council will provide 
for the public to participate in its work, including by 
affording an opportunity at each Council meeting, unless the 
Parties otherwise agree, for the public to express views on how 
the Chapter is being implemented. The Council must also provide 
appropriate opportunities for the public to participate in the 
development and implementation of joint environmental 
activities, including those developed under a separate 
bilateral environmental cooperation agreement that the Parties 
have signed.
    Public Participation and Submissions. Each Party must 
provide for the receipt and consideration of submissions from 
persons of a Party on matters related to implementation of the 
Chapter. Each Party will also convene a national advisory 
committee to solicit views on those matters and to submit to 
the Joint Committee a written report on the implementation of 
the Chapter's public participation provisions within 180 days 
after the Agreement enters into force.
    Dispute Settlement. Chapter Twenty provides for cooperative 
consultations as a first step if a Party considers that the 
other Party is not complying with its obligations under the 
Chapter. The complaining Party may, after an initial 60-day 
consultation period, invoke the Agreement's general dispute 
settlement mechanism by requesting additional consultations or 
a meeting of the Joint Committee under Chapter Twenty-Two 
(Institutional Provisions and Dispute Settlement). If the Joint 
Committee is unable to resolve the dispute, the matter may be 
referred to a dispute settlement panel.

                    CHAPTER TWENTY-ONE: TRANSPARENCY

    Chapter Twenty-One sets out requirements designed to foster 
openness, transparency, and fairness in the adoption and 
application of measures respecting matters covered by the 
Agreement. Each Party must promptly publish all laws, 
regulations, procedures, and administrative rulings of general 
application concerning matters covered by the Agreement, or 
otherwise make them publicly available. To the extent possible, 
the Parties must publish proposed regulations in advance and 
give interested persons a reasonable opportunity to comment. 
The Chapter further provides that proposed regulations 
published by the central level of government must be published 
in a single official journal of national circulation and 
include an explanation of their purpose and rationale.
    Wherever possible, each Party must provide reasonable 
notice to the other Party's nationals and enterprises that are 
directly affected by an administrative proceeding, such as an 
adjudication, rulemaking, licensing, determination, or approval 
process. A Party must afford such persons a reasonable 
opportunity to present facts and arguments before taking any 
final action, when time, the nature of the process, and the 
public interest permit.
    Chapter Twenty-One also provides for independent review and 
appeal of final administrative actions. Appeal rights must 
include a reasonable opportunity to present arguments and to 
obtain a decision based on evidence in the administrative 
record.
    Chapter Twenty-One reaffirms the Parties' resolve to 
eliminate bribery and corruption in international trade and 
investment. To this end, each Party is obligated to make it a 
criminal offense for their public officials to solicit or 
accept a bribe, and for any person to bribe a public official 
in exchange for favorable government action in matters 
affecting international trade or investment. Each Party must 
also adopt measures to protect persons who, in good faith, 
report acts of bribery or corruption. The Parties will also 
endeavor to work together to encourage and support initiatives 
in relevant international fora to prevent bribery and 
corruption.

  CHAPTER TWENTY-TWO: INSTITUTIONAL PROVISIONS AND DISPUTE SETTLEMENT

    Section A of Chapter Twenty-Two creates a Joint Committee, 
to be co-chaired by the Parties' trade ministers. The committee 
will be charged with supervising the implementation and overall 
operation of the Agreement. The committee may, among other 
things, issue interpretations of the Agreement's provisions and 
consider accelerating the elimination of duties on particular 
products or adjusting the Agreement's product-specific rules of 
origin. The Joint Committee will also assist in the resolution 
of any disputes that may arise under the Agreement and 
supervise the work of the various expert committees and other 
bodies established under the Agreement.
    Chapter Twenty-Two also establishes two committees. One 
committee, established in Annex 22-B, will review and make 
recommendations to the Parties on whether conditions on the 
Korean Peninsula are appropriate for the development of outward 
processing zones. A second committee, to be convened under 
Annex 22-C, will promote bilateral cooperation on fisheries 
matters.
    Section B of Chapter Twenty-Two sets out detailed 
procedures for the resolution of disputes between the Parties 
regarding the interpretation or application of the Agreement. 
These procedures emphasize amicable settlements, relying 
wherever possible on bilateral cooperation and consultations. 
When disputes arise under provisions common to the Agreement 
and other agreements (e.g., the WTO agreements), the 
complaining government may choose a forum for resolving the 
matter that is set forth in any valid agreement between the 
Parties. The selected forum will be the exclusive venue for 
resolving that dispute.
    Consultations. A Party may request consultations with the 
other Party on any matter that it believes might affect the 
operation of the Agreement. If the Parties cannot resolve the 
matter through consultations within a specified period 
(normally 60 days), either Party may refer the matter to the 
Joint Committee, which will attempt to resolve the dispute.
    Panel Procedures. If the Joint Committee cannot resolve the 
dispute within a specified period (normally 60 days), the 
complaining Party may refer the matter to a panel comprising 
independent experts that the Parties select. The Parties will 
set rules to protect confidential information, provide for open 
hearings and public release of submissions, and allow an 
opportunity for the panel to accept submissions from non-
governmental entities in the Parties' territories.
    Unless the Parties agree otherwise, a panel is to present 
its initial report within 180 days after the panel chair is 
appointed. Once the panel presents its initial report 
containing findings of fact and a determination on whether a 
Party has met its obligations, the Parties will have the 
opportunity to provide written comments to the panel. When the 
panel receives these comments, it may modify its report and 
make any further examination that it considers appropriate. 
Within 45 days after it presents its initial report, the panel 
will submit its final report. The Parties will then seek to 
agree on how to resolve the dispute, normally in a way that 
conforms to the panel's determinations and recommendations. 
Subject to protection of confidential information, the panel's 
final report will be made available to the public 15 days after 
the Parties receive it.
    Suspension of Benefits. If the Parties cannot resolve the 
dispute after they receive the panel's final report, the 
Parties will seek to agree on acceptable trade compensation. If 
they cannot agree on compensation, or if the complaining Party 
believes the defending Party has failed to implement an agreed 
resolution, the complaining Party may provide notice that it 
intends to suspend trade benefits equivalent in effect to those 
it considers were impaired, or may be impaired, as a result of 
the disputed measure.
    If the defending Party considers that the proposed level of 
benefits to be suspended is ``manifestly excessive,'' or 
believes that it has modified the disputed measure to make it 
conform to the Agreement, it may request the panel to reconvene 
and decide the matter. The panel must issue its determination 
no later than 90 days after the request is made (or 120 days if 
the panel is reviewing both the level of the proposed 
suspension and a modification of the measure).
    The complaining Party may suspend trade benefits up to the 
level that the panel sets or, if the panel has not been asked 
to determine the level, up to the amount that the complaining 
Party has proposed. The complaining Party cannot suspend 
benefits, however, if the defending Party provides notice that 
it will pay an annual monetary assessment to the other Party. 
The amount of the assessment will be established by agreement 
of the Parties or, failing that, will be set at 50 percent of 
the level of trade concessions the complaining Party was 
authorized to suspend.
    Compliance Review Mechanism. If, at any time, the defending 
Party believes it has made changes in its laws or regulations 
sufficient to comply with its obligations under the Agreement, 
it may refer the matter to the panel. If the panel agrees, the 
dispute ends and the complaining Party must withdraw any 
offsetting measures it has put in place. Concurrently, the 
defending government will be relieved of any obligation to pay 
a monetary assessment.
    Special Provisions for Disputes Relating to Motor Vehicles. 
Annex 22-A establishes an expedited dispute settlement 
mechanism for disputes concerning motor vehicles. The annex 
provides a shortened schedule for selecting panelists and for 
panel proceedings. If a panel determines that a Party has not 
met its obligations under the Agreement in a matter that 
relates to motor vehicles and, as a result, has materially 
affected their sale or distribution, the other Party may 
increase its tariff with respect to passenger vehicles (i.e., 
vehicles classified under heading 87.03 of the Harmonized 
Commodity Description and Coding System) up to its prevailing 
NTR (MFN) applied tariff rate until the violation is remedied.
    Settlement of Private Disputes. Section C of Chapter 
Twenty-Two calls for the Parties to encourage the use of 
arbitration and other alternative dispute resolution mechanisms 
to settle international commercial disputes between private 
parties. Each Party must provide appropriate procedures for the 
recognition and enforcement of arbitral awards, for example by 
complying with the 1958 United Nations Convention on the 
Recognition and Enforcement of Foreign Arbitral Awards.

                    CHAPTER TWENTY-THREE: EXCEPTIONS

    Chapter Twenty-Three sets out provisions that generally 
apply to the entire Agreement. The Chapter makes Article XX of 
the GATT 1994 and its interpretive notes part of the Agreement, 
mutatis mutandis, for purposes of those Chapters related to 
treatment of goods. Likewise, Article XIV of the WTO General 
Agreement on Trade in Services is made part of the Agreement 
for purposes of Chapters Twelve (Cross-Border Trade in 
Services), Fourteen (Telecommunications), and Fifteen 
(Electronic Commerce). For both goods and services, the Parties 
understand that these exceptions include environmental measures 
necessary to protect human, animal, or plant life or health and 
measures relating to the conservation of living and non-living 
exhaustible natural resources.
    Essential Security. Chapter Twenty-Three makes clear that 
nothing in the Agreement prevents a Party from taking actions 
it considers necessary to protect its essential security 
interests, and specifically provides that an arbitration panel 
must apply the essential security exception if a Party invokes 
it. United States Annex II clarifies that non-conforming 
measures relating to the landside aspects of port activities 
are subject to the Agreement's essential security exception.
    Taxation. A general exception set out in the Chapter 
provides that only certain provisions of the Agreement apply to 
taxation measures. For example, the exception generally 
provides that the Agreement does not affect a Party's rights or 
obligations under any tax convention. The exception specifies 
that certain rules established under the Agreement do apply to 
certain tax measures, namely: (1) national treatment for goods; 
(2) national treatment and NTR (MFN) for services; (3) 
prohibitions on performance requirements; and (4) expropriation 
rules.
    Disclosure of Information. The Chapter provides that a 
Party may withhold information from the other Party if 
disclosing the information would be contrary to the public 
interest or prejudice the legitimate commercial interests of 
particular enterprises.

                 CHAPTER TWENTY-FOUR: FINAL PROVISIONS

    Chapter Twenty-Four provides that (i) the annexes, 
appendices, and footnotes to the Agreement are an integral part 
of the Agreement; (ii) the Parties may amend the Agreement, 
subject to the each Party's legal requirements; and (iii) the 
English and Korean language texts of the Agreement are both 
authentic. The Chapter also provides for the Parties to consult 
if any provision of the WTO Agreement that the Parties have 
incorporated into the Agreement is amended.
    Finally, Chapter Twenty-Four establishes procedures for the 
Agreement to enter into force and terminate.

     E. General Description of the Bill To Implement the Agreement


Sec. 1. Short title; table of contents

    This section provides that the short title of the act 
implementing the Agreement is the ``United States-Korea Free 
Trade Agreement Implementation Act'' (``Implementation Act''). 
Section 1 also provides the table of contents for the 
Implementation Act.

Sec. 2. Purposes

    This section provides that the purposes of the 
Implementation Act are to approve and implement the Agreement, 
to secure the benefits of the Agreement pursuant to the 
exchange of letters on February 10, 2011, to strengthen and 
develop economic relations between the United States and Korea, 
to establish free trade between the United States and Korea 
through the reduction and elimination of barriers to trade in 
goods and services and to investment, and to lay the foundation 
for further cooperation to expand and enhance the benefits the 
Agreement.

Sec. 3. Definitions

    This section defines the terms ``Agreement,'' 
``Commission,'' ``HTS,'' and ``Textile or apparel good'' for 
purposes of the Implementation Act.

TITLE I--APPROVAL OF, AND GENERAL PROVISIONS RELATING TO, THE AGREEMENT


Sec. 101. Approval and entry into force of the Agreement

    This section provides congressional approval for the 
Agreement and its accompanying SAA. Section 101 also provides 
that, if the President determines that Korea has taken measures 
necessary to comply with obligations that take effect at the 
time the Agreement enters into force, the President may 
exchange notes with Korea providing for the entry into force of 
the Agreement with respect to the United States on or after 
January 1, 2012.

Sec. 102. Relationship of the Agreement to United States and state law

    This section establishes the relationship between the 
Agreement and U.S. law. Section 102 clearly states that no 
provision of the Agreement will be given effect if it is 
inconsistent with any federal law.
    Section 102 also provides that only the United States may 
bring a court action to resolve a conflict between a state law 
and the Agreement. And it precludes any private right of action 
against the federal government, state or local governments, or 
a private party based on the provisions of the Agreement.

Sec. 103. Implementing actions in anticipation of entry into force and 
        initial regulations

    This section provides that, following the enactment of the 
Implementation Act, the President may proclaim such actions, 
and other appropriate officers of the federal government may 
issue such regulations, as may be necessary to ensure that 
provisions of the legislation that take effect on the date the 
Agreement enters into force are appropriately implemented on 
that date. Section 103 further provides that, with respect to 
any action proclaimed by the President that is not subject to 
the consultation and layover provisions contained in section 
104, such action may not take effect before the 15th day after 
the date on which the text of the proclamation is published in 
the Federal Register. The 15-day restriction is waived, 
however, to the extent that it would prevent an action from 
taking effect on the date the Agreement enters into force. 
Section 103 also provides that, to the maximum extent feasible, 
initial regulations necessary or appropriate to carry out the 
actions required by the Implementation Act or proposed in the 
SAA shall be issued within 1 year after the date on which the 
Agreement enters into force. In accordance with the SAA, any 
agency unable to issue a regulation within 1 year must report 
to the relevant Congressional committees, at least 30 days 
prior to the end of the 1-year period, the reasons for the 
delay and the expected date for issuance of the regulation.

Sec. 104. Consultation and layover provisions for, and effective date 
        of, proclaimed actions

    This section sets forth consultation and layover steps that 
must precede the President's implementation of any action by 
proclamation that is subject to the requirements of this 
section. Under the consultation and layover provisions, the 
President must obtain advice regarding the proposed action from 
the Commission and from the appropriate advisory committees 
established under section 135 of the Trade Act of 1974 (19 
U.S.C. Sec. 2155). The President must also submit to the Senate 
Committee on Finance and the House Committee on Ways and Means 
a report that sets forth the action proposed, the reasons for 
the proposed action, and the advice of the appropriate advisory 
committees and the Commission. Section 104 sets aside a 60-day 
period following the date of transmittal of the report for the 
President to consult with the Senate Committee on Finance and 
the House Committee on Ways and Means on the proposed action.

Sec. 105. Administration of dispute settlement proceedings

    This section authorizes the President to establish or 
designate within the Department of Commerce an office 
responsible for providing administrative assistance to dispute 
settlement panels established under Chapter 21 of the 
Agreement. Section 105 also authorizes the appropriation of 
funds to support this office.

Sec. 106. Arbitration of claims

    This section authorizes the United States to use binding 
arbitration to resolve certain claims against the United States 
pursuant to the Investor-State Dispute Settlement procedures 
set forth in section B of Chapter 11 of the Agreement.

Sec. 107. Effective dates; effect of termination

    This section provides that the provisions of the 
Implementation Act and the amendments made by it take effect on 
the date on which the Agreement enters into force, except for 
sections 1 through 3, section 207(g), title I and title V, 
which take effect on the date of enactment of the 
Implementation Act. In addition, section 107 provides that the 
amendments made by sections 203, 204, 206, and 401 take effect 
on the date of the enactment of the Implementation Act and 
apply with respect to Korea on the date on which the Agreement 
enters into force. Section 107 also provides that the 
provisions of the Implementation Act and the amendments to 
other statutes made by it will cease to have effect on the date 
on which the Agreement terminates.

                      TITLE II--CUSTOMS PROVISIONS


Sec. 201. Tariff modifications

    Section 201(a) authorizes the President to implement by 
proclamation the modification or continuation of any duty, 
imposition of any additional duties, or the continuation of 
duty-free or excise treatment that the President determines to 
be necessary or appropriate to carry out or apply Articles 2.3, 
2.5, 2.6, and Annex 2-B, Annex 4-B, and Annex 22-A of the 
Agreement.
    Section 201(b) authorizes the President, subject to the 
consultation and layover provisions of section 104, to proclaim 
the modification or continuation of any duty, the modification 
of the staging of any duty elimination, the imposition of 
additional duties, or the continuation of duty-free or excise 
treatment that the President determines to be necessary or 
appropriate to maintain the general level of reciprocal and 
mutually advantageous concessions with respect to Korea 
provided by the Agreement.
    Section 201(c) authorizes the President, with respect to 
any good for which the base rate of duty in the Tariff Schedule 
of the United States to Annex 2-B of the Agreement is a 
specific or compound rate of duty, to substitute for the base 
rate an ad valorem rate that the President determines to be 
equivalent to the base rate.
    Section 201(d) authorizes the President to proclaim tariff 
modifications with respect to motor vehicles of Korea, 
consistent with the agreement entered into pursuant to an 
exchange of letters between the United States and the 
Government of Korea on February 10, 2011.

Sec. 202. Rules of origin

    Section 202 implements the rules of origin set forth in 
Article 4.2 and Chapter 6 of the Agreement. These rules define 
the circumstances under which a good imported from Korea 
qualifies as an originating good and is thus eligible for 
preferential tariff treatment under the Agreement.
    Section 202(a) establishes the Harmonized Tariff Schedule 
of the United States (``HTS'') as the basis of any tariff 
classification. It also provides that any cost or value 
referred to in section 202 shall be recorded and maintained in 
accordance with the generally accepted accounting principles 
applicable in the territory of the country in which the good is 
produced.
    Section 202(b) provides that a good is an originating good 
if it falls within one of three specified categories. First, a 
good qualifies as an originating good if it is wholly obtained 
or produced entirely in the territory of Korea, the United 
States, or both. Second, a good qualifies as an originating 
good if the good is produced in the territory of Korea, the 
United States, or both, and the materials used to produce the 
good that are not themselves originating goods are transformed 
in such a way as to cause their tariff classification to change 
and to meet other requirements specified in Annex 4-A or Annex 
6-A of the Agreement. Third, and finally, a good qualifies as 
an originating good if the good is produced entirely in the 
territory of Korea, the United States, or both, exclusively 
from materials that fall within the first two categories.
    The remainder of section 202 sets forth specific rules 
related to determining whether a good meets the Agreement's 
specific requirements to qualify as an originating good. 
Section 202(c) implements provisions in Annex 6-A of the 
Agreement that require certain goods to have a specified 
percentage of ``regional value content'' to qualify as 
originating goods. It prescribes alternative methods for 
calculating regional value content, as well as a specific 
method that must be used in the case of certain automotive 
goods. Section 202(d) addresses how materials are to be valued 
for purposes of calculating the regional value content of a 
good under subsection 202(c) and for purposes of applying the 
de minimis rules under subsection 202(f). Section 202(e) 
provides a rule of accumulation for originating materials from 
the territory of Korea or the United States that are used in 
the production of a good in the territory of the other country. 
Section 202(f) provides that a good is not disqualified as an 
originating good if it contains de minimis quantities of non-
originating materials that do not undergo a change in tariff 
classification. Section 202(g) addresses how to determine 
whether fungible goods and materials qualify as originating or 
non-originating under the Agreement. Section 202(h) provides 
rules for the treatment of accessories, spare parts, or tools 
that are delivered with a good. Sections 202(i) and (j) address 
the treatment of packaging materials and containers for retail 
sale and for shipment in determining whether a good qualifies 
as an originating good. Section 202(k) provides that indirect 
materials shall be treated as originating materials without 
regard to where they are produced. Section 202(l) provides 
rules for the treatment of goods that undergo further 
production in a third country or that otherwise transit through 
a third country. And section 202(m) provides rules for the 
treatment of goods classifiable as sets.
    Section 202(n) defines various terms used in section 202. 
Section 202(o) authorizes the President to proclaim the 
specific rules of origin set forth in Annex 4-A and Annex 6-A 
of the Agreement and to modify certain rules of origin in the 
Agreement by proclamation subject to the consultation and 
layover provisions of section 104.

Sec. 203. Customs user fees

    This section provides for the immediate elimination of the 
merchandise processing fee for goods qualifying as originating 
goods under the Agreement. Processing of goods qualifying as 
originating goods will be financed from the General Fund of the 
Treasury.

Sec. 204. Disclosure of incorrect information; false certifications of 
        origin; denial of preferential tariff treatment

    Section 204(a) amends section 592 of the Tariff Act of 1930 
(19 U.S.C. Sec. 1592) to impose penalties on an importer, 
exporter, or producer that makes an invalid claim for 
preferential tariff treatment under the Agreement through 
negligence, gross negligence, or fraud, unless the importer, 
exporter, or producer, after discovering that the claim is 
invalid, promptly and voluntarily corrects the claim and pays 
any customs duties owed. Section 204(b) amends section 514 of 
the Tariff Act of 1930 (19 U.S.C. Sec. 1514) to provide that, 
if an importer, exporter, or producer has engaged in a pattern 
of conduct in providing false representations that a good 
qualifies as originating, the United States may suspend 
preferential tariff treatment under the Agreement to identical 
goods covered by any subsequent representations that the person 
may make.

Sec. 205. Reliquidation of entries

    Section 205 amends section 520(d) of the Tariff Act of 1930 
(19 U.S.C. Sec. 1520(d)) to allow an importer to claim 
preferential tariff treatment for an originating good within 1 
year of importation, even if no such claim was made at the time 
of the importation.

Sec. 206. Recordkeeping requirements

    Section 206 amends section 508 of the Tariff Act of 1930 
(19 U.S.C. Sec. 1508) to establish recordkeeping requirements 
for U.S. exporters and producers that issue certifications of 
origin for goods exported to Korea.

Sec. 207. Enforcement relating to trade in textile or apparel goods

    This section authorizes the President to apply anti-
circumvention provisions concerning trade in textile and 
apparel goods. Pursuant to article 4.3 of the Agreement, the 
Secretary of the Treasury (``Secretary'') may request that the 
Government of Korea conduct a verification to determine the 
compliance of exporters and producers with applicable customs 
laws, regulations, and procedures regarding trade in textile or 
apparel goods, and to determine the accuracy of a claim of 
origin for a textile or apparel good. Section 207(a) provides 
that the President may direct the Secretary to take 
``appropriate action'' while the verification is being 
conducted. Under section 207(b), such appropriate action 
includes suspension of liquidation of the entry of any textile 
or apparel good exported or produced by the subject of the 
verification or for which a claim has been made that is the 
subject of verification.
    Section 207(c) permits the President to direct the 
Secretary to take ``appropriate action'' after a verification 
has been completed. Section 207(d) defines ``appropriate 
action'' to include the denial of preferential treatment or 
entry to textile or apparel goods that the person subject to 
the verification has exported or produced until such time as 
the Secretary receives information sufficient to prove 
compliance or until an earlier date as the President may 
direct.
    Section 207(e) permits the Secretary to publish the name of 
any person that the Secretary determines has engaged in 
circumvention of applicable laws, regulations, or procedures 
affecting trade in textile or apparel goods or has failed to 
demonstrate that it produces, or is capable of producing, 
textile or apparel goods.
    Section 207(f) permits the Commissioner of Customs to 
require an importer to submit a certificate of eligibility, 
which must be signed by an authorized official of the 
Government of Korea, to receive preferential tariff treatment 
under Article 4-B of the Agreement.
    Section 207(g) permits the Secretary to request a 
verification of the production of any textile or apparel good 
if requested by a party to a free trade agreement. This 
provision applies to all trade agreement partners.

Sec. 208. Regulations

    Section 208 authorizes the Secretary to prescribe 
regulations necessary to carry out the rules of origin and 
customs user fee provisions in the Implementation Act and to 
carry out the President's proclamation authority under section 
202(o).

                     TITLE III--RELIEF FROM IMPORTS


Sec. 301. Definitions

    This section defines the terms ``Korean article,'' ``Korean 
motor vehicle article,'' and ``Korean textile or apparel 
article'' for purposes of this title. Section 301(1) defines 
``Korean article'' as an article that qualifies as an 
originating good under section 202(b) of the Implementation 
Act. Section 301(2) defines ``Korean motor vehicle article'' as 
a good provided for in heading 8703 or 8704 of the HTS that 
qualifies as an originating good under section 202(b) of the 
Implementation Act. And section 301(3) defines ``Korean textile 
or apparel article'' as a ``textile or apparel good'' as 
defined in section 3(5) (a good listed in the Annex to the WTO 
Agreement on Textiles and Clothing) that is a Korean article.

     SUBTITLE A--RELIEF FROM IMPORTS BENEFITING FROM THE AGREEMENT

    Subtitle A of title III implements the bilateral safeguard 
provisions set out in Chapter Ten of the Agreement. It 
authorizes the President, after an investigation and 
affirmative determination by the Commission, to suspend duty 
reductions or impose duties temporarily up to NTR (MFN) rates 
on a ``Korean article'' when, as a result of the reduction or 
elimination of a duty under the Agreement, the article is being 
imported into the United States in such increased quantities 
and under such conditions as to be a substantial cause of 
serious injury or threat of serious injury to a domestic 
industry that produces a like or directly competitive good. The 
standards and procedures set out in this subtitle closely 
parallel the procedures for global safeguards set forth in 
sections 201 through 204 of the Trade Act of 1974 (19 U.S.C. 
Sec. Sec. 2251-2254).

Sec. 311. Commencing of action for relief

    Section 311(a) requires an entity that is representative of 
an industry to file a petition with the Commission to commence 
a bilateral safeguard investigation. Section 311(a) defines an 
entity to include a trade association, firm, certified or 
recognized union, or a group of workers.
    Section 311(b) provides that, upon the filing of a 
petition, the Commission shall promptly initiate an 
investigation to determine whether, as a result of the 
reduction or elimination of a duty provided for under the 
Agreement, a Korean article is being imported into the United 
States in such increased quantities and under such conditions 
that imports of the Korean article constitute a substantial 
cause of serious injury, or threat of serious injury, to the 
domestic industry producing an article that is like, or 
directly competitive with, the imported article.
    Section 311(c) extends certain provisions (both substantive 
and procedural) contained in subsections (b), (c), (d), and (i) 
of section 202 of the Trade Act of 1974 (19 U.S.C. 
Sec. 2252(b), (c), (d), and (i)), which apply to global 
safeguard investigations, to any bilateral safeguard initiated 
under the Agreement. These provisions include, inter alia, the 
requirement that the Commission publish notice of the 
commencement of an investigation; the requirement that the 
Commission hold a public hearing at which interested parties 
and consumers have the right to be present and to present 
evidence; the factors to be taken into account by the 
Commission in making its determinations; provisional relief; 
and authorization for the Commission to promulgate regulations 
providing access to confidential business information under 
protective order to authorized representatives of interested 
parties in an investigation.
    Section 311(d) precludes the initiation of a bilateral 
safeguard investigation with respect to any Korean article for 
which import relief has already been provided under subtitle A.

Sec. 312. Commission action on petition

    Section 312(a) establishes deadlines for Commission action 
following the initiation of a bilateral safeguard 
investigation. Section 312(b) applies certain statutory 
provisions regarding an equally divided vote by the Commission 
in a global safeguard investigation under section 202 of the 
Trade Act of 1974 (19 U.S.C. Sec. 2252) to Commission 
determinations and findings under this section. If the 
Commission renders an affirmative injury determination or a 
determination that the President may treat as an affirmative 
determination in the event of an equally divided vote by the 
Commission, section 312(c) requires the Commission to find and 
recommend to the President the amount of import relief that is 
necessary to remedy or prevent the injury and to facilitate the 
efforts of the domestic industry to make a positive adjustment 
to import competition. Section 312(d) requires the Commission 
to submit a report to the President regarding its determination 
and specifies the information that the Commission must include 
in the report. Upon submitting the report to the President, 
section 312(e) requires the Commission to promptly release the 
report to the public, except for any confidential information 
contained therein, and to publish a summary of the report in 
the Federal Register.

Sec. 313. Provision of relief

    Section 313(a) directs the President, not later than 30 
days after receiving the report from the Commission, to provide 
relief from imports of the article subject to an affirmative 
determination by the Commission, or a determination that the 
President treats as affirmative, to the extent that the 
President determines is necessary to remedy or prevent the 
injury and to facilitate the efforts of the domestic industry 
to make a positive adjustment to import competition. Section 
313(b), however, provides that the President need not provide 
import relief if the President determines that the import 
relief will not provide greater economic and social benefits 
than costs.
    Section 313(c) specifies the nature of the import relief 
that the President may impose, which includes the suspension of 
any further reduction in the rate of duty imposed on the 
article in question under Annex 2-B of the Agreement and an 
increase in the rate of duty imposed on such article to a level 
that does not exceed the lesser of (1) the NTR (MFN) duty rate 
at the time the import relief is provided; or (2) the NTR (MFN) 
duty rate on the day before the Agreement enters into force. 
Section 313(c) also requires the President to provide for the 
progressive liberalization of import relief at regular 
intervals during the period of its application if that period 
exceeds 1 year.
    Section 313(d) limits any import relief that the President 
imposes in a bilateral safeguard action to no more than 3 years 
in the aggregate. The initial period of import relief that the 
President imposes may not exceed 2 years. The President may 
extend the relief up to an additional year, however, if (1) the 
Commission makes an affirmative determination, or a 
determination that the President treats as affirmative, that 
import relief continues to be necessary to remedy or prevent 
serious injury and that there is evidence that the domestic 
industry is making a positive adjustment to import competition; 
and (2) the President makes a determination to the same effect.
    Section 313(e) specifies the duty rate to be applied to 
Korean articles after termination of a safeguard action. On the 
termination of import relief, the rate of duty for the 
remainder of the calendar year shall be the rate that was 
scheduled to have been in effect but for the provision of such 
relief.
    Section 313(f) precludes the application of import relief 
pursuant to the bilateral safeguard provisions with respect to 
any Korean article that is (1) subject to import relief under 
subtitle B or C of title III of the Implementation Act; or (2) 
subject to import relief under the global safeguard provisions 
in chapter 1 of title II of the Trade Act of 1974 (19 U.S.C. 
Sec. Sec. 2251 et seq).

Sec. 314. Termination of relief authority

    This section provides that the President's authority to 
impose import relief under the bilateral safeguard expires 10 
years after the date on which the Agreement enters into force. 
If, however, the period for elimination of duties on a 
particular article exceeds 10 years, relief may be provided for 
that article until the date on which the duty elimination 
period ends. Relief may also be provided beyond 10 years after 
the date on which the Agreement enters into force or the period 
for elimination of duties if the President determines that 
Korea has consented to such relief.

Sec. 315. Compensation authority

    This section authorizes the President, under section 123 of 
the Trade Act of 1974 (19 U.S.C. Sec. 2133), to grant new 
concessions to Korea as compensation for the imposition of 
import relief pursuant to the bilateral safeguard.

Sec. 316. Confidential business information

    This section applies the same procedures for the treatment 
and release of confidential business information by the 
Commission in a global safeguard investigation under chapter 1 
of title II of the Trade Act of 1974 (19 U.S.C. Sec. Sec. 2251 
et seq.) to investigations under title III of the 
Implementation Act.

              SUBTITLE B--MOTOR VEHICLE SAFEGUARD MEASURES

Sec. 321. Motor vehicle safeguard measures

    Subtitle B of title III implements the motor vehicle 
safeguard established by the exchange of letters between the 
United States and the Government of Korea on February 10, 2011, 
related to trade in motor vehicles. Section 321(1) provides 
that the same product can be the basis for according relief 
more than once and that progressive liberalization is not 
required while relief is being provided. Section 321(2) 
provides that relief may be extended for up to 2 years. Section 
321(3) provides that relief may be provided for a total of up 
to 4 years. Section 321(4) provides that subtitle B exceptions 
shall not apply to any relief action brought under subtitle A. 
Section 321(5) provides that import relief may be provided with 
respect to a Korean motor vehicle article up to 10 years after 
the date on which duties on the article are eliminated.

           SUBTITLE C--TEXTILE AND APPAREL SAFEGUARD MEASURES

    Subtitle C of title III implements the Agreement's textile 
and apparel safeguard.

Sec. 331. Commencement of action for relief

    Section 331(a) requires an interested party to file a 
request with the President in order to commence action for 
relief under the textile and apparel safeguard. Upon the filing 
of a request, the President must review the request to 
determine, from information presented in the request, whether 
to commence consideration of the request on its merits. Section 
331(b) provides that, if the President determines that the 
request contains the information necessary for the request to 
be considered on the merits, the President must publish notice 
in the Federal Register stating that the request will be 
considered and seeking public comments on the request. The 
notice must contain a summary of the request and the dates by 
which comments and rebuttals must be received.
    The Committee notes our regulatory processes should be 
administered in an open and transparent manner that can serve 
as a model for our trading partners. The Committee notes that 
the SAA states that, in addition to publishing a summary of a 
request for safeguard relief, the President plans to make the 
full text of the request available on the U.S. Department of 
Commerce's International Trade Administration website, subject 
to the protection of confidential business information, if any. 
The Committee encourages this and similar efforts to enhance 
government transparency.

Sec. 332. Determination and provision of relief

    Section 332 sets out the procedures to be followed in 
considering a request filed under section 331. If a positive 
determination is made under section 331(b), section 332(a) 
requires the President to determine whether, as a result of the 
elimination of a duty under the Agreement, a Korean textile or 
apparel article is being imported into the United States in 
such increased quantities and under such conditions as to cause 
serious damage, or actual threat thereof, to a domestic 
industry producing an article that is like, or directly 
competitive with, the imported article. Section 332(a) also 
provides that, in making such a determination, the President 
shall examine the effect of increased imports on the domestic 
industry's output, productivity, capacity utilization, 
inventories, market share, exports, wages, employment, domestic 
prices, profits and losses, and investment, no one of which is 
necessarily decisive. Finally, section 332(a) provides that the 
President shall not consider changes in consumer preference or 
technology as factors supporting a determination of serious 
damage or actual threat thereof.
    Section 332(b) authorizes the President, in the event of an 
affirmative determination of serious damage or actual threat 
thereof, to provide import relief to the extent that the 
President determines is necessary to remedy or prevent the 
serious damage and to facilitate adjustment by the domestic 
industry. Section 332(b) also specifies the nature of the 
import relief that the President may impose, which consists of 
suspension of any further duty reduction provided for under 
Annex 2-B of the Agreement in the duty imposed on the article, 
or an increase in the rate of duty imposed on the article to a 
level that does not exceed the lesser of (1) the NTR (MFN) duty 
rate in place for the textile or apparel article at the time 
the import relief is provided; or (2) the NTR (MFN) duty rate 
for that article on the day before the Agreement enters into 
force.

Sec. 333. Period of relief

    Section 333 limits any import relief that the President 
imposes under the textile and apparel safeguard to no more than 
4 years in the aggregate. Section 333(a) provides that the 
initial period of import relief that the President imposes may 
not exceed 2 years. Under section 333(b), however, the 
President may extend the relief up to 2 additional years if the 
President determines that (1) the import relief continues to be 
necessary to remedy or prevent serious damage and to facilitate 
adjustment by the domestic industry to import competition; and 
(2) there is evidence that the domestic industry is, in fact, 
adjusting to import competition.

Sec. 334. Articles exempt from relief

    This section precludes the President from providing import 
relief under the textile and apparel safeguard with respect to 
a Korean article if import relief previously has been provided 
under subtitle C of title III of the Implementation Act or if 
the article is subject to import relief under subtitle A of 
title III of the Implementation Act or under the global 
safeguard provisions in chapter 1 of title II of the Trade Act 
of 1974 (19 U.S.C. Sec. Sec. 2251 et seq.).

Sec. 335. Rate after termination of import relief

    This section provides that the duty rate applicable to a 
textile or apparel article after termination of the import 
relief shall be the duty rate that would have been in effect 
for that article, but for the provision of such relief, on the 
date on which the relief terminates.

Sec. 336. Termination of relief authority

    This section provides that the President's authority to 
impose import relief under the textile and apparel safeguard 
with respect to any article expires 10 years after the date on 
which duties on the article are eliminated under the Agreement.

Sec. 337. Compensation authority

    This section authorizes the President, under section 123 of 
the Trade Act of 1974 (19 U.S.C. Sec. 2133), to grant new 
concessions to Korea as compensation for the imposition of 
import relief pursuant to the textile and apparel safeguard.

Sec. 338. Confidential business information

    This section precludes the President from releasing 
information received in a textile and apparel safeguard 
proceeding that the President considers to be confidential 
business information unless the party submitting the 
confidential business information had notice, at the time of 
submission, that the information would be released by the 
President, or the party subsequently consents to the release of 
the information. This section also provides that, to the extent 
a party submits confidential business information to the 
President, the party shall also submit a nonconfidential 
version of the information in which the confidential business 
information is summarized or, if necessary, deleted.

       SUBTITLE D--CASES UNDER TITLE II OF THE TRADE ACT OF 1974

    Subtitle D of title III implements the global safeguard 
provisions of the Agreement. It authorizes the President, in 
granting global import relief under the global safeguard 
provisions in sections 201 through 204 of the Trade Act of 1974 
(19 U.S.C. Sec. Sec. 2251-2254), to exclude imports of 
originating articles from the relief when certain conditions 
are present.

Sec. 341. Findings and action on Korean articles

    Section 341(a) provides that, if the Commission makes an 
affirmative determination, or a determination that the 
President may treat as an affirmative determination, in a 
global safeguard investigation initiated under chapter 1 of 
title II of the Trade Act of 1974 (19 U.S.C. Sec. Sec. 2251 et 
seq.), the Commission must find and report to the President 
whether imports of the Korean article are a substantial cause 
of serious injury or threat thereof. Section 341(b) provides 
that, if the Commission makes a negative finding under section 
341(a), the President may exclude the Korean articles from the 
global safeguard action.

                         TITLE IV--PROCUREMENT


Sec. 401. Eligible products

    This section amends section 308(4)(A) of the Trade 
Agreements Act of 1979 (19 U.S.C. Sec. 2518(4)(A)) to implement 
the government procurement provisions of the Agreement.

                            TITLE V--OFFSETS


Sec. 501. Increase in penalty on paid preparers who fail to comply with 
        earned income tax credit due diligence requirements

    Section 501 amends section 6695(g) of the Internal Revenue 
Code of 1986 to increase from $100 to $500 the penalty on tax 
return preparers who fail to comply with the due diligence 
requirements for determining eligibility for the earned income 
tax credit. The increased penalty applies to returns required 
to be filed after December 31, 2011.

Sec. 502. Requirement for prisons located in the United States to 
        provide information for tax administration

    Section 502 amends subchapter B of chapter 61 of the 
Internal Revenue Code of 1986 to require all prisons located in 
the United States to submit annually to the IRS a list of names 
and valid Social Security numbers of all inmates serving 
sentences of 1 year or more to assist in identifying fraudulent 
returns filed by prisoners. The information must be filed no 
later than September 15, 2012, and annually thereafter.

Sec. 503. Merchandise processing fee

    Section 503 amends section 13031 of the Consolidated 
Omnibus Budget Reconciliation Act of 1985 (``COBRA'') to 
provide for an increase in the current merchandise processing 
fee rate charged by Customs and Border Protection for formal 
entries to 0.3464 percent ad valorem and increases the cap on 
the range of such rate from 0.21 percent to 0.3464 percent ad 
valorem. The change in rate addresses the increased costs 
Customs and Border Protection is incurring. The last 
legislative change to the merchandise processing fee occurred 
in 1995. The provision will be effective from December 1, 2015, 
through June 30, 2021.

Sec. 504. Customs user fees

    Section 504 amends section 13031 of COBRA to extend until 
August 2, 2021, the merchandise processing fees and until 
December 8, 2020, the passenger and conveyance processing fees 
authorized under that act.

Sec. 505. Time for payment of corporate estimated taxes

    Section 505 increases the amount of the required 
installment of estimated tax otherwise due from a corporation 
with at least $1 billion in assets in (1) July, August, or 
September 2012 by 0.25 percent; and (2) July, August, or 
September 2016 by 2.75 percent. The bill reduces the next 
required installment to reflect the prior increase.

             F. Vote of the Committee in Reporting the Bill

    In compliance with section 133 of the Legislative 
Reorganization Act of 1946, the Committee states that on 
October 11, 2011, S. 1642 was ordered favorably reported, 
without amendment, by voice vote.

                    II. BUDGETARY IMPACT OF THE BILL

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 12, 2011.
Hon. Max Baucus,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1642, the United 
States-Korea Free Trade Agreement Implementation Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kalyani 
Parthasarathy.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                          Director.
    Enclosure.

S. 1642--United States-Korea Free Trade Agreement Implementation Act

    Summary: S. 1642 would approve the free trade agreement 
between the government of the United States and the government 
of the Republic of Korea (Korea) that was signed on June 30, 
2007, and modified by a later agreement on December 3, 2010. It 
would provide for tariff reductions and other changes in law 
related to implementation of the agreement. The bill would 
extend user fees collected by Customs and Border Protection 
(CBP) that expire under current law and would increase those 
fees. In addition, it would establish a reporting requirement 
for federal and state prisons for tax administration purposes 
and increase the penalties on tax preparers who did not comply 
with due-diligence requirements for the earned income tax 
credit. It also would shift some corporate income tax payments 
between fiscal years.
    The Congressional Budget Office (CBO) and the staff of the 
Joint Committee on Taxation (JCT) estimate that enacting S. 
1642 would reduce revenues by $31 million in 2012 and by about 
$7.0 billion over the 2012-2021 period. CBO estimates that 
enacting S. 1642 would increase direct spending by $53 million 
in 2012 but would decrease direct spending by about $7.0 
billion over the 2012-2021 period. The net impact of those 
effects is an estimated reduction in deficits of $16 million 
over the 2012-2021 period. Pay-as-you-go procedures apply 
because enacting the legislation would affect direct spending 
and revenues.
    Further, CBO estimates that implementing the legislation 
would cost $7 million over the 2012-2016 period, assuming the 
availability of appropriated funds.
    CBO has determined that the nontax provisions of S. 1642 
contain no intergovernmental mandates as defined in the 
Unfunded Mandates Reform Act (UMRA), and would impose no costs 
on state, local, or tribal governments.
    CBO has determined that the nontax provisions of the bill 
contain private-sector mandates with costs that would exceed 
the annual threshold established in UMRA for private-sector 
mandates ($142 million in 2011, adjusted annually for 
inflation).
    JCT has determined that the tax provisions of S. 1642 
contain no intergovernmental or private-sector mandates as 
defined in UMRA.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 1642 is shown in the following table. 
The costs of this legislation fall within budget functions 150 
(international affairs), 370 (commerce and housing credit), 750 
(administration of justice), and 800 (general government).

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           By fiscal year, in millions of dollars--
                                                             -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                              2012-      2012-
                                                                 2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2016       2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       CHANGES IN REVENUES

Free Trade Agreement........................................       -158       -312       -381       -462       -726       -873       -954     -1,043     -1,146     -1,254     -2,040     -7,310
Prison Reporting Requirement................................          0          6         13         13         14         14         15         15         16         16         46        122
EITC Preparer Penalty.......................................          9         19         19         20         20         21         21         22         23         23         87        197
Corporate Payment Shift.....................................        118       -118          0          0      1,894     -1,894          0          0          0          0      1,894          0
                                                             -----------------------------------------------------------------------------------------------------------------------------------
    Estimated Revenues......................................        -31       -405       -349       -429      1,202     -2,732       -918     -1,006     -1,107     -1,215        -13     -6,991

                                                                                   CHANGES IN DIRECT SPENDINGa

Extend Customs User Fees:
    Estimated Budget Authority..............................          0          0          0          0          0          0          0          0     -1,957     -2,186          0     -4,143
    Estimated Outlays.......................................          0          0          0          0          0          0          0          0     -1,957     -2,186          0     -4,143
Exemption from Merchandise Processing Fee:
    Estimated Budget Authority..............................         53         95         99        104        161        180        189        198        208        184        511      1,470
    Estimated Outlays.......................................         53         95         99        104        161        180        189        198        208        184        511      1,470
Increase the Merchandise Processing Fee Rates:
    Estimated Budget Authority..............................          0          0          0          0       -572       -720       -756       -794       -835       -657       -572     -4,334
    Estimated Outlays.......................................          0          0          0          0       -572       -720       -756       -794       -835       -657       -572     -4,334
    Total Direct Spendinga
        Estimated Budget Authority..........................         53         95         99        104       -411       -540       -567       -596     -2,584     -2,659        -61     -7,007
        Estimated Outlays...................................         53         95         99        104       -411       -540       -567       -596     -2,584     -2,659        -61     -7,007

                                                    NET INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES

Impact on the Deficit.......................................         84        500        448        533     -1,613      2,192        351        410     -1,477     -1,444        -48       -16
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office and the staff of the Joint Committee on Taxation.
Note: Components may not sum to totals because of rounding; EITC = Earned Income Tax Credit.
aIn addition, CBO estimates that implementing the provisions of S. 1642 would have a discretionary cost of $7 million over the 2012-2016 period, assuming appropriation of the necessary
  amounts.

    Basis of estimate: For the purposes of this estimate, CBO 
assumes that S. 1642 will be enacted early in fiscal year 2012.

Revenues

    Under the United States-Korea free trade agreement, tariffs 
on U.S. imports from Korea would be phased out over time. The 
tariffs would be phased out for individual products at varying 
rates, ranging from immediate elimination on the date the 
agreement enters into force to gradual elimination over 10 or 
more years. According to the U.S. International Trade 
Commission, the United States collected about $660 million in 
customs duties in 2010 on $48 billion of imports from Korea. 
Based on expected imports from Korea, CBO estimates that 
implementing the tariff schedule outlined in the U.S.-Korea 
free trade agreement would reduce revenues by $158 million in 
2012, and by about $7 billion over the 2012-2021 period, net of 
income and payroll tax offsets.
    This estimate includes the effects of increased imports 
from Korea that would result from the reduced prices of 
imported products in the United States, reflecting the lower 
tariff rates. It is likely that some of the increase in U.S. 
imports from Korea would displace imports from other countries. 
In the absence of specific data on the extent of this 
substitution effect, CBO assumes that an amount equal to one-
half of the increase in U.S. imports from Korea would displace 
imports from other countries.
    S. 1642 would increase the penalties imposed on paid tax 
return preparers who do not comply with due-diligence 
requirements for determining their clients' allowable earned 
income tax credits (EITC), from $100 under current law to $500 
for each failure. JCT estimates that this change would increase 
revenues by $197 million over the 2012-2021 period.
    S. 1642 also would require prisons located in the United 
States to provide the names and Social Security Numbers of all 
inmates serving sentences longer than one year to the Internal 
Revenue Service for tax administration purposes. JCT estimates 
that this change would increase revenues by $122 million over 
the 2012-2021 period.
    S. 1642 also would shift payments of corporate estimated 
taxes between fiscal years 2012 and 2013 and between fiscal 
years 2016 and 2017. For corporations with at least $1 billion 
in assets, the bill would increase the portion of corporate 
estimated payments due from July through September in both 2012 
and 2016. JCT estimates that those changes would increase 
revenues by $118 million in 2012 and decrease them by $118 
million in 2013, and would increase revenues by about $1.9 
billion in 2016 and decrease them by about $1.9 billion in 
2017.

Direct spending

    Under current law, certain fees collected by CBP will 
expire in January of 2020. The bill would extend COBRA fees 
(which were established in the Consolidated Omnibus Budget 
Reconciliation Act of 1985) from January 14, 2020, through 
December 8, 2020, and would extend merchandise processing fees 
from January 7, 2020, through August 2, 2021. CBO estimates 
that those changes would increase offsetting receipts (a credit 
against direct spending) by about $4.1 billion over the 2020-
2021 period. For merchandise entered from December 1, 2015, 
through June 30, 2021, the bill would raise the merchandise 
processing fee from 0.21 percent to 0.3464 percent of the value 
of goods entered. CBO estimates that this would increase 
offsetting receipts by about $4.3 billion over the 2012-2021 
period.
    In addition, the bill would exempt imports from Korea from 
merchandise processing fees. CBO estimates that this would 
reduce offsetting receipts by about $1.5 billion over the 2012-
2021 period.

Spending subject to appropriation

    Implementing provisions of S. 1642 would increase the costs 
of several agencies affected by the bill including:
           The Department of Commerce to provide 
        administrative support for dispute-settlement panels 
        established in the agreement;
           The International Trade Commission to 
        conduct investigations, if petitioned, into whether 
        Korean imports might threaten or cause serious injury 
        to domestic competitors; and
           The Department of the Treasury and the 
        United States Trade Representative to establish 
        regulations to carry out provisions of the agreement.
    Based on information from the agencies, CBO estimates that 
those activities would cost $7 million over the 2012-2016 
period, assuming appropriation of the necessary amounts.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in the 
following table.

                                  CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR S. 1642 AS ORDERED REPORTED BY THE SENATE COMMITTEE ON FINANCE ON OCTOBER 11, 2011
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           By fiscal year, in millions of dollars--
                                                             -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                              2012-      2012-
                                                                 2012       2013       2014       2015       2016       2017       2018       2019       2020       2021       2016       2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           NET INCREASE OR DECREASE (-) IN THE DEFICIT

Statutory Pay-As-You-Go Impact..............................         84        500        448        533     -1,613      2,192        351        410     -1,477     -1,444        -48        -16
Memorandum:
    Changes in Revenues.....................................        -31       -405       -349       -429      1,202     -2,732       -918     -1,006     -1,107     -1,215        -13     -6,991
    Changes in Outlays......................................         53         95         99        104       -411       -540       -567       -596     -2,584     -2,659        -61     -7,007
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Estimated impact on state, local, and tribal governments: 
CBO has determined that the nontax provisions of S. 1642 
contain no intergovernmental mandates as defined in UMRA and 
would impose no costs on state, local, or tribal governments. 
JCT has determined that the tax provisions of S. 1642 contain 
no intergovernmental mandates as defined in UMRA.
    Estimated impact on the private sector: CBO has determined 
that the nontax provisions of S. 1642 would impose private-
sector mandates, as defined in UMRA, by extending the customs 
user fees, by increasing merchandise processing fees and by 
enforcing new recordkeeping requirements. CBO estimates that 
the aggregate costs of those mandates would exceed the annual 
threshold established in UMRA for private-sector mandates ($142 
million in 2011, adjusted annually for inflation). JCT has 
determined that the tax provisions of S. 1642 contain no 
private-sector mandates as defined in UMRA.
    Previous CBO estimate: On October 5, 2011, CBO transmitted 
a cost estimate for H.R. 3080, the United States-Korea Free 
Trade Agreement Implementation Act, as ordered reported by the 
House Committee on Ways and Means on October 5, 2011. S. 1642 
and H.R. 3080 are identical, and the CBO cost estimates are the 
same.
    Estimate prepared by: Federal revenues: Kalyani 
Parthasarathy; Federal spending: Sunita D'Monte, Mark 
Grabowicz, Matthew Pickford, and Susan Willie; Impact on state, 
local, and tribal governments: J'nell L. Blanco; Impact on the 
private sector: Marin Randall.
    Estimate approved by: Peter H. Fontaine, Assistant Director 
for Budget Analysis; Frank Sammartino, Assistant Director for 
Tax Analysis.

          III. REGULATORY IMPACT OF THE BILL AND OTHER MATTERS

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee states 
that the bill will not significantly regulate any individuals 
or businesses, will not affect the personal privacy of 
individuals, and will result in no significant additional 
paperwork.
    The following information is provided in accordance with 
section 423 of the Unfunded Mandates Reform Act of 1995 
(``UMRA'') (Pub. L. No. 104-04). The Committee has reviewed the 
provisions of S. 1642 as approved by the Committee on October 
11, 2011. In accordance with the requirements of UMRA, the 
Committee has determined that the nontax provisions of S. 1642 
contain no intergovernmental mandates as defined in UMRA and 
impose no costs on state, local, or tribal governments. The 
Committee has determined that the tax provisions of S. 1642 
contain no intergovernmental mandates as defined in UMRA. The 
Committee has determined that the nontax provisions of S. 1642 
do impose private-sector mandates, as defined in UMRA, by 
extending customs user fees, increasing merchandise processing 
fees, and enforcing new recordkeeping requirements. The 
aggregate costs of those mandates will exceed the annual 
threshold established in UMRA for private-sector mandates ($142 
million in 2011, adjusted annually for inflation). The 
Committee has determined that the tax provisions of S. 1642 
contain no private-sector mandates as defined in UMRA.

 IV. ADDITIONAL VIEWS OF RANKING MEMBER ORRIN G. HATCH AND SENATOR JON 
                                  KYL

    Several elements of this report deserve significant 
elaboration. The May 10, 2007 agreement (May 10th Agreement) 
negotiated by some in Congress and the Bush Administration was 
intended to secure votes for the four free trade agreements 
(FTAs) with Colombia, Panama, Peru and South Korea, but it did 
not reflect an agreement on a new trade policy as the Majority 
contends. We were not part of the negotiations of these new 
provisions. We continue to harbor misgivings over several 
aspects of these changes, including in the areas of labor, the 
environment and intellectual property. The May 10th Agreement, 
however--failed as only a vote on Peru was allowed by Democrat 
congressional leaders during the 110th Congress--and the other 
three FTAs had to wait for more than four years before a vote 
was secured. The Bush administration and the governments of 
Colombia, Panama, Peru and South Korea upheld their end of the 
bargain by incorporating the May 10th Agreement changes into 
each FTA, but the democrat leadership of Congress refused to 
honor its part of the May 10th Agreement and allow a vote on 
any of the three remaining FTAs. The Obama Administration 
continued this pattern of delay for nearly three years.
    As acknowledged, years after the pending trade agreements 
were modified in accordance with the substantive provisions of 
the May 10th Agreement, the Majority in March 2011 and the 
administration in May 2011 added a new demand that Congress 
approve additional spending on a domestic job training program 
before they would allow any pending trade agreement to be 
considered. This new demand was not part of May 10th Agreement 
and it was made during a period of extreme fiscal austerity. 
Regardless, Senator Hatch indicated during a May 26, 2011 
hearing on the U.S.-Korea FTA that he was not opposed to having 
Trade Adjustment Assistance (TAA) considered separately. 
Moreover, all Republican Finance Committee Members agreed that 
TAA should be ``debated and considered on its own merits.'' 
Although some Republican Senators signaled a willingness to 
consider TAA and support a separate vote, the Majority rejected 
these overtures prior to the markup and refused to allow an 
open debate on the merits of TAA--or even to hold a hearing on 
the TAA program. In its report, the Majority states that no FTA 
implementing legislation has been passed while TAA provisions 
had expired. Even if this is true, it does not justify 
including TAA in the Korea FTA implementing bill, as the TAA 
program was not set to expire until February 2012.
    The report also states that including the expired and 
expanded provisions of TAA in the draft implementing bill 
during the Senate Finance Committee's ``mock mark-up'' process 
was ``necessary or appropriate'' to implement the Korea FTA. 
Again, that is not correct.
    Inclusion of TAA in the draft implementing bill during the 
``mock mark-up'' process abused long-standing rules and 
procedures governing the delegation of trade negotiating 
authority from Congress to the President. Moreover, contrary to 
the Senate Finance Committee's tradition of managing trade 
legislation through bipartisan collaboration, this decision was 
made with little to no consultation with Senate Finance 
Committee Members in the Minority.
    Under the Bipartisan Trade Act of 2002, trade agreement 
implementing bills are considered under Trade Promotion 
Authority (TPA) procedures. Under TPA, trade agreement 
implementing bills are developed jointly by Congress and the 
administration. Close consultation with Congress during this 
process is key. Once submitted to Congress, these bills are not 
amendable. As added protection, the law says these bills can 
only consist of provisions that are necessary or appropriate to 
implement the trade agreement.
    The Majority report states that it was necessary or 
appropriate to include the TAA provisions in the Korea FTA 
draft implementing bill because the North American Free Trade 
Agreement (NAFTA) included NAFTA Transitional Adjustment 
Assistance (NAFTA TAA). The Majority also claims that the Korea 
FTA implementing bill's TAA provisions were ``narrower'' than 
the NAFTA TAA provisions, and that the NAFTA TAA provisions 
expanded eligibility. Both contentions are incorrect. NAFTA TAA 
was far different from the TAA proposal included in the Korea 
FTA draft implementing bill. NAFTA TAA was a temporary and 
transitional program, narrowly tailored just for workers who 
might be directly dislocated by trade with NAFTA countries 
(Mexico and Canada). The TAA provisions considered as part of 
the Senate Finance Committee's informal consideration of the 
Korea FTA draft implementing bill went far beyond that, 
providing much richer benefits to workers dislocated for a 
myriad of reasons totally unrelated to the Korea FTA. In fact, 
benefits under the expanded TAA proposal go to workers 
dislocated by trade with any country. In addition, the proposal 
provided benefits to workers retroactively. Including statutory 
language to provide benefits to workers who were not, are not, 
and never will be affected by the approval of the Korea FTA 
itself was neither necessary nor appropriate to implement the 
Korea FTA. It is difficult to understand how these provisions 
could be narrower than the NAFTA TAA provisions that impacted 
two countries and provided temporary transitional benefits to 
workers affected by the NAFTA agreement after its approval.
    It is also a specious argument to cite the inclusion of a 
TAA provision in an implementing bill as evidence that the 
practice comports with TPA statutory requirements. The fact 
that some unrelated provisions have been included in prior 
trade agreement implementing bills is not evidence that their 
inclusion was within the confines of TPA, simply that their 
inclusion was never formally challenged. The Majority's 
contention that the CAFTA-DR informal markup adopted a TAA 
expansion does not demonstrate that such an amendment was 
``necessary or appropriate'' to include in the CAFTA-DR 
implementing bill. Unlike the Korea FTA implementing 
legislation that included TAA expansions in the chairman's 
informal markup text, the CAFTA-DR TAA provisions were included 
as an amendment as part of the informal markup process by voice 
vote. Then-Chairman Grassley expressed serious reservations 
regarding the adoption of the TAA amendment precisely because 
he viewed it as neither ``necessary or appropriate'' to 
implement the CAFTA-DR agreement. The general counsel of the 
Office of the United States Trade Representative concurred with 
this assessment, both during the informal mark-up and in 
subsequent correspondence where he stated that inclusion of 
such a TAA provision is not ``necessary or appropriate.'' As a 
result, the Bush administration declined to submit implementing 
legislation that included the TAA provisions in the CAFTA-DR 
package that Congress approved. We have attached that letter as 
part of our additional views.
    As the parliamentarian has never ruled on whether a 
disputed provision complies with the rules of TPA, there is no 
legal precedent for including such provisions in a trade 
agreement implementing bill. Nevertheless, in 2002, both houses 
of Congress expressed significant discomfort with the past 
practice of including overly broad provisions in trade 
agreement implementing bills. Statutory history which 
accompanies the 2002 TPA procedures makes it clear that, under 
these authorities, the parameters of what is necessary or 
appropriate should be strictly and narrowly construed.
    Without demonstrating whether any jobs would be lost, the 
Majority attempted to use the Korea FTA draft implementing bill 
to shield wholesale changes to U.S. labor, tax, pension and 
health care law from debate and amendment, disregarding the 
clear written views of the Senate Finance Committee 
Republicans. (See Attached Letter dated June 30, 2011). In so 
doing, the draft implementing bill went far beyond what was 
necessary or appropriate to implement this agreement. House and 
Senate Finance Committee reports to the Trade Act of 2002 made 
it clear that the standard for what can be included in an 
implementing bill must be narrowly and strictly defined. Past 
administrations and Senate Finance Committees have carefully 
and faithfully followed these 2002 guidelines in implementing 
trade agreements by narrowly limiting any extraneous provisions 
in trade agreement implementing bills. Instead of serious 
consultations, the expanded TAA provisions were jammed into the 
Korea FTA draft implementing bill, providing the Senate Finance 
Committee Minority with little notice and no consultation. This 
highly partisan maneuver resulted in the first strictly 
partisan vote on a trade agreement in decades. Such a break 
from past practice and precedent was unnecessary and 
inappropriate. Including unrelated and highly-controversial 
provisions, like the TAA spending program, into the Korea FTA 
draft implementing bill with little to no consultation violated 
the letter and spirit of TPA. It is a practice which should not 
be replicated in future bills.
    Finally, the Majority asserts that ``countless'' meetings 
took place between the Majority and the Minority prior to the 
introduction of the chairman's informal mark-up implementing 
legislation, which included the inappropriate TAA provisions. 
Yet, the ranking member's staff was not part of the substantive 
negotiations of the TAA provisions with the House Committee on 
Ways and Means Majority. It is correct that many meetings took 
place to prepare the implementing legislation language--
including with the Office of the U.S. Trade Representative and 
the Majority and Minority staffs from the Committee on Finance 
and Ways and Means Committee--and to ensure that the terms of 
the Korea FTA were met in the implementing bill provisions. 
These meetings did not, however, include meaningful discussions 
regarding TAA or the process for moving this legislation, 
including its possible inclusion in the Korea FTA implementing 
bills. Although there were rumors that the chairman might 
include TAA in the chairman's mark for the informal markup, we 
and others cautioned against such an approach--privately and 
publicly. Our concerns were ignored, and the Republican 
Committee Members and staff saw the TAA provisions for the 
first time when the Majority posted the implementing 
legislation 48 hours prior to the scheduled informal markup. 
All Republican Committee Members rejected moving forward with 
TAA included in the Korea FTA implementing bill as evidenced by 
the second letter we have included in our additional views. 
Thankfully, the TAA language was stripped out of the final 
implementing legislation sent to Congress by the Obama 
administration.
    Fortunately, the May 10th Agreement provisions diluting 
intellectual property rights protection for pharmaceutical 
products were not included in the Korea FTA. As a result, this 
pact contains some of the highest standards for intellectual 
property rights protection of any bilateral trade agreement. We 
hope these high standards, and their reflection of U.S. law, 
will continue to serve as the model for future trade 
agreements.

               ADDITIONAL VIEWS OF SENATOR CHUCK GRASSLEY

    The Majority has stated that, ``On May 10, 2007, the Bush 
Administration and the bipartisan leadership of the U.S. Senate 
Committee on Finance and the U.S. House of Representatives 
Committee on Ways and Means reached an agreement on trade 
policy.'' However, as Ranking Member of the Finance Committee 
during that time period, I strongly disagree with the 
Majority's statement that the agreement was an agreement ``on 
trade policy.'' The Majority's terminology implies the terms of 
the agreement reached on May 10, 2007 with President Bush are 
somehow now the blueprint for future trade agreements. This is 
not the case. The May 10th agreement was made out of necessity 
by President Bush as he attempted to gain support from the 
democratically-controlled Congress for approving the South 
Korea, Panama, Peru, and Colombia trade agreements. As I 
expressed at the time, I have reservations about many of the 
provisions included in the May 10th agreement, including the 
terms regarding labor, environment, and intellectual property. 
I continue to have reservations about the May 10th provisions. 
Most, if not all, of the members on our side do not see the May 
10th provisions as part of a blueprint for future trade 
agreements. Those provisions were part of a bargain between 
President Bush and Democrat leaders in Congress, for those 
specific free trade agreements at the time, not an ``agreement 
on trade policy'' as the Majority suggests.
        V. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

SECTION 13031 OF THE CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT OF 
                                  1985


SEC. 13031. FEES FOR CERTAIN CUSTOMS SERVICES.

    (a) * * *
    (b) Limitations on Fees.--(1) * * *

           *       *       *       *       *       *       *

    (19) No fee may be charged under subsection (a) (9) or (10) 
with respect to goods that qualify as originating goods under 
section 202 of the United States-Korea Free Trade Agreement 
Implementation Act. Any service for which an exemption from 
such fee is provided by reason of this paragraph may not be 
funded with money contained in the Customs User Fee Account.

           *       *       *       *       *       *       *

    (j) Effective Dates.--(1) * * *

           *       *       *       *       *       *       *

    (3)(A) Fees may not be charged under paragraphs (9) and 
(10) of subsection (a) after [January 7, 2020] August 2, 2021.
    (B)(i) Subject to clause (ii), Fees may not be charged 
under paragraphs (1) through (8) of subsection (a) after 
[January 14, 2020] December 8, 2020.

           *       *       *       *       *       *       *


TARIFF ACT OF 1930

           *       *       *       *       *       *       *


TITLE IV--ADMINISTRATIVE PROVISIONS

           *       *       *       *       *       *       *



Part III--Ascertainment, Collection, and Recovery of Duties

           *       *       *       *       *       *       *



SEC. 508. RECORDKEEPING.

    (a) * * *

           *       *       *       *       *       *       *

    (i) Certifications of Origin for Goods Exported Under the 
United States-Korea Free Trade Agreement.-- 
          (1) Definitions.--In this subsection:
                  (A) Records and supporting documents.--The 
                term ``records and supporting documents'' 
                means, with respect to an exported good under 
                paragraph (2), records and documents related to 
                the origin of the good, including--
                          (i) the purchase, cost, and value of, 
                        and payment for, the good;
                          (ii) the purchase, cost, and value 
                        of, and payment for, all materials, 
                        including indirect materials, used in 
                        the production of the good; and
                          (iii) the production of the good in 
                        the form in which it was exported.
                  (B) KFTA certification of origin.--The term 
                ``KFTA certification of origin'' means the 
                certification established under article 6.15 of 
                the United States-Korea Free Trade Agreement 
                that a good qualifies as an originating good 
                under such Agreement.
          (2) Exports to korea.--Any person who completes and 
        issues a KFTA certification of origin for a good 
        exported from the United States shall make, keep, and, 
        pursuant to rules and regulations promulgated by the 
        Secretary of the Treasury, render for examination and 
        inspection all records and supporting documents related 
        to the origin of the good (including the certification 
        or copies thereof).
          (3) Retention period.--The person who issues a KFTA 
        certification of origin shall keep the records and 
        supporting documents relating to that certification of 
        origin for a period of at least 5 years after the date 
        on which the certification is issued.
    [(i)] (j) Penalties.--Any person who fails to retain 
records and supporting documents required by subsection (f), 
[(g), or (h)] (g), (h), or (i) or the regulations issued to 
implement any such subsection shall be liable for the greater 
of--
          (1) * * *

           *       *       *       *       *       *       *


SEC. 514. PROTEST AGAINST DECISIONS OF THE CUSTOMS SERVICE.

    (a) * * *

           *       *       *       *       *       *       *

    (j) Denial of Preferential Tariff Treatment Under the 
United States-Korea Free Trade Agreement.--If U.S. Customs and 
Border Protection or U.S. Immigration and Customs Enforcement 
of the Department of Homeland Security finds indications of a 
pattern of conduct by an importer, exporter, or producer of 
false or unsupported representations that goods qualify under 
the rules of origin provided for in section 202 of the United 
States-Korea Free Trade Agreement Implementation Act, U.S. 
Customs and Border Protection, in accordance with regulations 
issued by the Secretary of the Treasury, may suspend 
preferential tariff treatment under the United States-Korea 
Free Trade Agreement Implementation Act to entries of identical 
goods covered by subsequent representations by that importer, 
exporter, or producer until U.S. Customs and Border Protection 
determines that representations of that person are in 
conformity with such section 202.

           *       *       *       *       *       *       *


SEC. 520. REFUNDS AND ERRORS.

    (a) * * *

           *       *       *       *       *       *       *

    (d) Goods Qualifying Under Free Trade Agreement Rules of 
Origin.--Notwithstanding the fact that a valid protest was not 
filed, the Customs Service may, in accordance with regulations 
prescribed by the Secretary, re liquidate an entry to refund 
any excess duties (including any merchandise processing fees) 
paid on a good qualifying under the rules of origin set out in 
section 202 of the North American Free Trade Agreement 
Implementation Act, section 202 of the United States-Chile Free 
Trade Agreement Implementation Act, section 203 of the 
Dominican Republic-Central America-United States Free Trade 
Agreement Implementation Act, section 202 of the United States-
Oman Free Trade Agreement Implementation Act, [or] section 203 
of the United States-Peru Trade Promotion Agreement 
Implementation Act [for which], or section 202 of the United 
States-Korea Free Trade Agreement Implementation Act for which 
no claim for preferential tariff treatment was made at the time 
of importation if the importer, within 1 year after the date of 
importation, files, in accordance with those regulations, a 
claim that includes--
          (1) * * *

           *       *       *       *       *       *       *


PART V--ENFORCEMENT PROVISIONS

           *       *       *       *       *       *       *



SEC. 592. PENALTIES FOR FRAUD, GROSS NEGLIGENCE, AND NEGLIGENCE.

    (a) * * *

           *       *       *       *       *       *       *

    (c) Maximum Penalties.--
          (1) * * *

           *       *       *       *       *       *       *

          (11) Prior disclosure regarding claims under the 
        united states-korea free trade agreement.--An importer 
        shall not be subject to penalties under subsection (a) 
        for making an incorrect claim that a good qualifies as 
        an originating good under section 202 of the United 
        States-Korea Free Trade Agreement Implementation Act if 
        the importer, in accordance with regulations issued by 
        the Secretary of the Treasury, promptly and voluntarily 
        makes a corrected declaration and pays any duties owing 
        with respect to that good.
          [(11)] (12) Seizure.--If the Secretary has reasonable 
        cause to believe that a person has violated the 
        provisions of subsection (a) and that such person is 
        insolvent or beyond the jurisdiction of the United 
        States or that seizure is otherwise essential to 
        protect the revenue of the United States or to prevent 
        the introduction of prohibited or restricted 
        merchandise into the customs territory of the United 
        States, then such merchandise may be seized and, upon 
        assessment of a monetary penalty, forfeited unless the 
        monetary penalty is paid within the time specified by 
        law. Within a reasonable time after any such seizure is 
        made, the Secretary shall issue to the person concerned 
        a written statement containing the reasons for the 
        seizure. After seizure of merchandise under this 
        subsection, the Secretary may, in the case of 
        restricted merchandise, and shall, in the case of any 
        other merchandise (other than prohibited merchandise), 
        return such merchandise upon the deposit of security 
        not to exceed the maximum monetary penalty which may be 
        assessed under subsection (c).

           *       *       *       *       *       *       *

    (j) False Certifications of Origin Under the United States-
Korea Free Trade Agreement.--
          (1) In general.--Subject to paragraph (2), it is 
        unlawful for any person to certify falsely, by fraud, 
        gross negligence, or negligence, in a KFTA 
        certification of origin (as defined in section 508 of 
        this Act) that a good exported from the United States 
        qualifies as an originating good under the rules of 
        origin provided for in section 202 of the United 
        States-Korea Free Trade Agreement Implementation Act. 
        The procedures and penalties of this section that apply 
        to a violation of subsection (a) also apply to a 
        violation of this subsection.
          (2) Prompt and voluntary disclosure of incorrect 
        information.--No penalty shall be imposed under this 
        subsection if, promptly after an exporter or producer 
        that issued a KFTA certification of origin has reason 
        to believe that such certification contains or is based 
        on incorrect information, the exporter or producer 
        voluntarily provides written notice of such incorrect 
        information to every person to whom the certification 
        was issued.
          (3) Exception.--A person shall not be considered to 
        have violated paragraph (1) if--
                  (A) the information was correct at the time 
                it was provided in a KFTA certification of 
                origin but was later rendered incorrect due to 
                a change in circumstances; and
                  (B) the person promptly and voluntarily 
                provides written notice of the change in 
                circumstances to all persons to whom the person 
                provided the certification.

           *       *       *       *       *       *       *


TRADE ACT OF 1974

           *       *       *       *       *       *       *


       TITLE II--RELIEF FROM INJURY CAUSED BY IMPORT COMPETITION


CHAPTER 1--POSITIVE ADJUSTMENT BY INDUSTRIES INJURED BY IMPORTS

           *       *       *       *       *       *       *



SEC. 202. INVESTIGATIONS, DETERMINATIONS, AND RECOMMENDATIONS BY 
                    COMMISSION.

    (a) Petitions and Adjustment Plans.--
          (1) * * *

           *       *       *       *       *       *       *

          (8) The procedures concerning the release of 
        confidential business information set forth in section 
        332(g) of the Tariff Act of 1930 shall apply with 
        respect to information received by the Commission in 
        the course of investigations conducted under this 
        chapter, part 1 of title III of the North American Free 
        Trade Agreement Implementation Act, title II of the 
        United States-Jordan Free Trade Area Implementation 
        Act, title III of the United States-Chile Free Trade 
        Agreement Implementation Act, title III of the United 
        States-Singapore Free Trade Agreement Implementation 
        Act, title III of the United States-Australia Free 
        Trade Agreement Implementation Act, title III of the 
        United States-Morocco Free Trade Agreement 
        Implementation Act, title III of the Dominican 
        Republic-Central America-United States Free Trade 
        Agreement Implementation Act, title III of the United 
        States-Bahrain Free Trade Agreement Implementation Act, 
        title III of the United States-Oman Free Trade 
        Agreement Implementation Act, [and] title III of the 
        United States-Peru Trade Promotion Agreement 
        Implementation Act, and title III of the United States-
        Korea Free Trade Agreement Implementation Act. The 
        Commission may request that parties providing 
        confidential business information furnish non 
        confidential summaries thereof or, if such parties 
        indicate that the information in the submission cannot 
        be summarized, the reasons why a summary cannot be 
        provided. If the Commission finds that a request for 
        confidentiality is not warranted and if the party 
        concerned is either unwilling to make the information 
        public or to authorize its disclosure in generalized or 
        summarized form, the Commission may disregard the 
        submission.

           *       *       *       *       *       *       *


TRADE AGREEMENTS ACT OF 1979

           *       *       *       *       *       *       *


TITLE III--GOVERNMENT PROCUREMENT

           *       *       *       *       *       *       *



SEC. 308. DEFINITIONS.

    As used in this title--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Eligible products.--
                  (A) In general.--The term ``eligible 
                product'' means, with respect to any foreign 
                country or instrumentality that is--
                          (i) * * *

           *       *       *       *       *       *       *

                          (vi) a party to the United States-
                        Oman Free Trade Agreement, a product or 
                        service of that country or 
                        instrumentality which is covered under 
                        that Agreement for procurement by the 
                        United States; [or]
                          (vii) a party to the United States-
                        Peru Trade Promotion Agreement, a 
                        product or service of that country or 
                        instrumentality which is covered under 
                        that agreement for procurement by the 
                        United States[.]; or
                          (viii) a party to the United States-
                        Korea Free Trade Agreement, a product 
                        or service of that country or 
                        instrumentality which is covered under 
                        that agreement for procurement by the 
                        United States.

           *       *       *       *       *       *       *


INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *


Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *


CHAPTER 61--INFORMATION AND RETURNS

           *       *       *       *       *       *       *



Subchapter B--Miscellaneous Provisions

           *       *       *       *       *       *       *


[SEC. 6116. Cross reference.]
SEC. 6116. Requirement for prisons located in United States to provide 
          information for tax administration.
SEC. 6117. Cross reference.

           *       *       *       *       *       *       *


SEC. 6116. REQUIREMENT FOR PRISONS LOCATED IN UNITED STATES TO PROVIDE 
                    INFORMATION FOR TAX ADMINISTRATION.

    (a) In General.--Not later than September 15, 2012, and 
annually thereafter, the head of the Federal Bureau of Prisons 
and the head of any State agency charged with the 
responsibility for administration of prisons shall provide to 
the Secretary in electronic format a list with the information 
described in subsection (b) of all the inmates incarcerated 
within the prison system for any part of the prior 2 calendar 
years or the current calendar year through August 31.
    (b) Information.--The information with respect to each 
inmate is--
          (1) first, middle, and last name,
          (2) date of birth,
          (3) institution of current incarceration or, for 
        released inmates, most recent incarceration,
          (4) prison assigned inmate number,
          (5) the date of incarceration,
          (6) the date of release or anticipated date of 
        release,
          (7) the date of work release,
          (8) taxpayer identification number and whether the 
        prison has verified such number,
          (9) last known address, and
          (10) any additional information as the Secretary may 
        request.
    (c) Format.--The Secretary shall determine the electronic 
format of the information described in subsection (b).

SEC. 6116.] 6117. CROSS REFERENCE.

    For inspection of records, returns, etc., concerning 
gasoline or lubricating oils, see section 4102.

           *       *       *       *       *       *       *


 CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE 
PENALTIES

           *       *       *       *       *       *       *



Subchapter B--Assessable Penalties

           *       *       *       *       *       *       *



PART I--GENERAL PROVISIONS

           *       *       *       *       *       *       *



SEC. 6695. OTHER ASSESSABLE PENALTIES WITH RESPECT TO THE PREPARATION 
                    OF TAX RETURNS FOR OTHER PERSONS.

    (a) * * *

           *       *       *       *       *       *       *

    (g) Failure To Be Diligent in Determining Eligibility for 
Earned Income Credit.--Any person who is a tax return preparer 
with respect to any return or claim for refund who fails to 
comply with due diligence requirements imposed by the Secretary 
by regulations with respect to determining eligibility for, or 
the amount of, the credit allowable by section 32 shall pay a 
penalty of [$100] $500 for each such failure.



