In order for an importer/exporter to benefit from the lowered tariff rates under the Korean-European Union FTA, the product must be recognized as a product either from Korea or an EU member nation.
Article 2 of the Protocol to the Korea-EU (the “Protocol”) provides that in order for a product to be recognized as a product under the Protocol , the product must either:
- “Wholly Obtained” within the territory of the Party; OR
- Has undergone “substantial transformation” within the territory of the Party.
Protocol Article 4 notes that “wholly obtained” means, in summary,:
- Minerals extracted and vegetables grown and harvested in the territory of the Party;
- Seafood taken from the territorial waters of the Party;
- Products made from (2) seafood on “factory ships;”
- Scrape and Waste derived from the manufacturing or processing in the territory of the Party.
A “factory ship” “vessel” must be registered in the territory of the Party, sail under their flag and 50% of the shares must be owned by a national within the territory of the Party.
Protocol Article 6 notes that “insufficient” to classify as a “substantial transformation” includes, in summary, mere:
- Preservation techniques for transport;
- Painting and polishing;
- Husking of cereals and rice, peeling of fruits, removal of seeds;
- Sifting, screening, sorting, classifying, grading or matching of products;
- Slaughter of animals;
- Assemble and disassemble of products.
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