Machinery Sector

An Expert's View about Machinery and Robotics in South Korea

Posted on: 11 Jun 2012

Korea is the 5th largest market for U.S. machinery exports.

U.S. Department of Commerce International Trade Administration The U.S.-Korea Trade Agreement: Opportunities for the U.S. Machinery Sector The U.S.-Korea Trade Agreement would provide signicant commercial opportunities for U.S. exporters: • Korea is the 5th largest market for U.S. machinery exports; failure to pass the U.S.-Korea Trade Agreement could enable exporters from the EU and other countries to gain key advantages over U.S. exporters to Korea. • Estimated duties paid on exports of U.S. machinery products to Korea were over $638 million from 2008 to 2010. Tari elimination could allow U.S. rms to reinvest in technology and production improvements. • More than 86 percent of U.S. machinery exports to Korea would receive duty-free treatment within three years of implementation of the U.S.-Korea Trade Agreement; Korean machinery taris currently average 7.5 percent, ranging up to 13 percent. Machinery Sector Overview U.S. Machinery Exports to Korea • The machinery sector accounted for over $2.8 billion in U.S. Averaged $2.8 Billion exports to Korea over 2008-10 (average) or over 9 percent of total 1 U.S. industrial exports to Korea. $3.5 • Top U.S. machinery exports to Korea include pumps, compres- $3.0 sors, valves, energy equipment, machine tools, mining machin- $2.5 ery, piston engines and engine parts, and machinery for the $2.0 production of textiles, chemicals, rubber and plastics. $1.5 • In 2009, U.S. production of machinery products was over $293 $1.0 2 billion. $0.5 • The U.S. machinery sector employed over 500 thousand workers $0.0 3 2008 2009 2010 in 2009. • U.S. SMEs exported approximately $1.8 billion in machinery prod- ucts to Korea in 2008 and made up an estimated 83 percent of 4 all U.S. rms in the sector exporting to Korea in 2008. More than 86% of U.S. Machinery • Korea’s manufacturing industry is expected to see increased Exports to Korea Would be Duty-Free investments in plants and equipment in the near future, par- Within Three Years ticularly in the semiconductor and automotive industries. 3% Furthermore, the Korean market oers areas of opportunity for 10% U.S. exporters due to increased public and private spending on 5 infrastructure and public works projects. Immediate 3 Y e ars 48% Improved Market Access for U.S. Machinery 5 Y e ars 38% Exporters to Korea 10 Y e ars • Korean machinery taris average 7.5 percent, ranging from zero to 13 percent. 1 Global Trade Atlas. Calculations by the U.S. Department of Commerce based on import data as reported by Korea. The denition for machinery used in this report, un- less otherwise cited, is based on products within Harmonized System (HS) Chapters 73, 82-85, 87, and 89-91. 2 U.S. Department of Commerce, U.S. Census Bureau, within NAICS 331-335. Shipments used as a best available proxy for production. 3 U.S. Department of Labor, Bureau of Labor Statistics, within NAICS 331-335 (non-seasonally adjusted data). 4 U.S. Department of Commerce, U.S. Census Bureau, NAICS 333. 5 U.S. Department of Commerce, U.S. & Foreign Commercial Service, including from the 2010 Country Commercial Guide for Korea. 6 Data based on three-year average for 2008-2010. Totals do not equal 100 percent due to rounding. April 2011 Additional information available at: www.trade.gov/KORUS in Billions USD 6• Over 48 percent of U.S. machinery exports to Korea would receive duty-free treatment immediately upon implemen- tation of the trade agreement. • Taris on an additional 38 percent of machinery exports to Korea would be eliminated over three years and taris on nearly 3 percent of machinery exports would be eliminated over ve years. • Taris on the remaining 10 percent of U.S. machinery exports would be eliminated in equal cuts over ten years. Selected Sub-Sectors: • Energy Equipment: Korea would eliminate taris on 53 percent of U.S. energy equipment exports immediately upon implementation of the trade agreement, and duties on 45 percent of exports would be eliminated over three years. Taris on the remaining 2 percent would be eliminated within 10 years. • Tools: Korea would eliminate taris on 66 percent of U.S. tools exports immediately upon implementation of the trade agreement, and taris on 29 percent of exports would be elimi- nated over three years. Taris on the remaining 5 percent would be eliminated over 5 years. Foreign Competition in the Korean Market • Korea signed a trade agreement with the EU in 2009, which is scheduled to enter into force in July 2011. It also recently signed an FTA with Peru, which is also scheduled to enter into force this year. Korea presently has FTAs in force with ASEAN, Chile, India, Singapore, and EFTA. In addition, Korea is negotiating new agreements with Australia, Canada, Colombia, New Zealand, and Turkey; is considering launching FTA negotiations with China; and is exploring re-launching its stalled negotiations with Japan. • EU machinery exporters will immediately enjoy an average tari of 0.7 percent upon entry into force of the EU-Korea FTA, while U.S. exporters will face an average most favored nation (MFN) 7 tari of 7.5 percent until entry into force of the U.S.-Korea Trade Agreement. Key States Exporting to Korea • Top U.S. states exporting machinery to Korea include: California, New York, Texas, Pennsylvania, Ohio, Illinois, Connecti- cut, Michigan, Indiana, and North Carolina. Other Key U.S.-Korea Trade Agreement Commitments for the Machinery Sector • Rules of Origin: The U.S.-Korea Trade Agreement rules of origin allow only products that are produced in the United States and Korea to receive preferences under the Agreement. The trade agreement rules of origin provide clear requirements for a good to be considered originating, including that a good must be wholly obtained or produced entirely in the territory of the United States or Korea as well as requirements on materials that are used in the production of the good. Importers may claim preferences under the trade agreement based on a certication by the importer, exporter, or producer or based on the importer’s knowledge that the good is originating, but certications need not be in a prescribed format. • Investment: The U.S.-Korea Trade Agreement establishes a stable legal framework for U.S. investors and investments in Korea, backed by a transparent, binding international arbitration mechanism. All forms of investment are protected under the Agreement. With few exceptions, U.S. investors would be treated as well as Korean investors (or investors of any other country) in the establishment, acquisition, and operation of investments in Korea. • Government Procurement: Korea and the United States are members of the WTO Agreement on Government Procurement and already enjoy open and transparent access to each other’s government procurement markets. The U.S.-Korea Trade Agreement enhances this relationship by increasing the procurements to which U.S. suppliers will be ensured non-discriminatory access by reducing the goods and services threshold to $100,000 from $203,000 for central government entities. The Agreement also incorporates important improvements that reect the emerging practices in procurement, such as reducing the tendering period for “o-the-shelf” goods and services and encouraging the use of electronic tendering. 7 U.S. Department of Commerce calculations based on EU-Korea FTA and U.S.-Korea Trade Agreement tari commitments. April 2011 Additional information available at: www.trade.gov/KORUS U.S. Department of Commerce International Trade Administration The International Trade Administration - Your Global Business Partner The International Trade Administration (ITA) – a division of the U.S. Department of Commerce – strengthens the competitiveness of U.S. industry, promotes trade and investment, and ensures fair trade through the rigorous enforcement of our trade laws and agreements. ITA also utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. For more information on exporting to Korea, please contact: • The ITA office of the U.S. Embassy in Korea at office.seoul@trade.gov or 82-2-397-4535, or by visiting our website www.export.gov/southkorea. • The ITA trade specialist in the U.S. nearest you by visiting www.export.gov/eac. For more information on the U.S.- Korea Trade Agreement, please visit www.export.gov/fta/korea and www.trade.gov/fta/korea. For more information on industry-specific issues, please visit www.trade.gov/mas/index.asp.
Posted: 11 June 2012

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