FTA may trigger rush of fake Korean goods to Europe

By Kim Da-ye

Concerns over the possible “laundering” of the country of origin for bigger volume of products to be traded are mounting as the free trade pact (FTA) between Korea and the European Union (EU) takes effect next month, removing customs on Korean-made goods.

According to data from the Korea Customs Service (KCS), foreign-made exports disguised as goods made in Korea worth 116.9 billion won were confiscated in 2010, up from 70.4 billion won in 2009 and 63.5 billion won in 2008.

More than half of the uncovered goods were heading to the EU and the U.S. They were imported from abroad _ mainly China and Southeast Asian countries _ and repackaged here.

The upward trend raises concerns that the amount of the goods disguised as Korean-made to be exported to Europe could soar dramatically as certified Korean goods won’t be levied customs duty. In five years, customs will be removed for 99.6 percent of industrial products shipped from Korea to the EU.

Yonhap News Agency reported that faking the country of origin for clothing and textile goods would become the most severe as the customs rate for those items is relatively high at 9.1 percent.

Janet Labuda, director of the textile enforcement and operations division at U.S. Customs and Border Protection, warned last week at a conference hosted by the KCS that Korea will be classified as a high-risk country for laundering country of origin and for illegal transshipment once the Korea-U.S. Free Trade Agreement goes into effect. The U.S. agency will therefore strengthen inspections on confirming the country of origin was actually Korea, the KCS quoted her as saying.

Determining the country of origin has been a key issue in free trade between Korea and its trading partners as complex regulations won’t recognize products containing imported materials in excess of certain limits as Korean-made.

For instance, the controversy over translation errors in the Korean language version of the Korea-EU FTA involved one that the value of imported materials in toys should not exceed 40 percent of their factory price to qualify as Korean-made. Actually the limit was 50 percent.

The customs service said that Korean companies’ understanding of the standards in determining the country of origin is relatively low while the EU and the U.S. are very strict in this regard.

For instance, Germany carried out some 8,000 inspections on the country of origin for imports and exports while the U.S. did the same on about 5,000.

At the conference arranged by the KCS, Kim Suk-oh, director of the KCS’ origin verification division, said that faking the country of origin will become more prominent once the Korea-EU FTA takes effect.

“We will strengthen surveillance against it by setting up a database of companies that are highly likely to disguise the country of origin and employ a risk management system,” Kim said.

“We will also organize a separate team for agricultural products which are likely to be illegally imported by rerouting.”

The KCS is also encouraging businesses to get certificates that prove their capacity to verify the country of origin. Those with certificates would see the verification process for their exports simplified.