Kim Young-hwan, director general of the FTA Information & Business Center 

How can Korean companies, particularly SMEs, make the most of the preferential tariff treatment of free trade agreements, including the Korea-U.S. FTA?

“Company CEOs will have to pay more attention to post verification of the certificate of origin (C/O) so as to maximize the benefits of FTAs,” said Kim Young-hwan, director general of the FTA Information & Business Center (FTA-IBC). He made the remarks recently in regard to U.S. customs authorities’ requests for post verification of the certificates of origin issued to 60 Korean companies. 

“As FTA signatories with Korea are on the rise, cases of confirming information through post verification have increased, and EU and the Association of Southeast Asian Countries (ASEAN) have made calls for post verification of C/Os,” Dir. Gen. Kim said. Under the KORUS FTA, he said, verification of C/Os is up to U.S. customs authorities, however.

About 60 companies are known to have undergone post verification, but the actual number is likely to rise, Dir. Gen. Kim said. The reality is that the cases of requests for the certifying of C/Os from the U.S. and EU have surged significantly, indicating a tendency to curb a surge in automobile, textiles, and machinery imports from Korea, sensitive to the protection of their own industries, he said.  

The FTA Information & Business Center, located on the 17th floor of COEX, is charged with offering consultative services on the utilization of the KORUS FTA and other FTAs, including the requirements of issuing C/Os. It is manned by officials from the Ministry of Trade, Industry and Energy; the Ministry of Strategy and Finance; the Ministry of Agriculture, Food and Rural Affairs (MAFRA); the Small and Medium Business Administration; the Korea Customs Service; KOTRA; the Korea Industrial Complex Corp.; Small & Medium Business Corp.; and the Korea International Trade Association, as well as experts like customs specialists. Any queries can be made at the FTA Call Center by calling 1380. Consultations from experts are referred to the FTA Information & Business Center.

“Exporters and makers of finished products as well as cooperative firms supplying materials and parts are responsible for certifying C/Os, and SMEs with a lack of experts find it difficult to have a C/O management system since they have few officials in charge of C/Os,” Kim said.

In an effort to extend a helping hand to SMEs, each company now receives 10.8 million won in a government subsidy for hiring an official in charge of managing C/Os, and distributes “FTA Korea,” a free C/O management program for assisting SMEs. FTA-IBC in Seoul and 16 regional FTA support centers across the nation have customs specialists and C/O management officers to step up assistance to SMEs. 

The government now offers tax credits to cooperative companies that issue C/Os – 10,000 won per C/O issuance for up to 300,000 won. The tax credit policy may not work since cooperative companies perceive the issuance of C/Os as their shouldering of C/O management costs instead of the preferential tariff benefits given to exporters, Kim said. But he warned that any cooperative company’s failure in C/O management could lead to the cancellation of the preferential tariff treatment. Exporters are expected to do business with cooperative companies that accomplish C/O management well, and for instance, the automotive parts industry extends preferential treatment such as higher quotas in purchases to cooperative firms versed in post verification, he said. 

Kim tries to drive home the point that SME CEOs’ mindset toward FTAs must reflect the need for training and nurturing officials in charge of C/O management, he said, and to have a C/O management system in place. 

He also emphasized shared growth between large- and small-sized cooperative companies.