Sourcing Alternatives in Asia KOREA

Transcription

1 Sourcing Alternatives in Asia KOREA Presentation to U.S. Fashion Industry Association Laura Siegel Rabinowitz, Esq. June 10, 2014

2 Agenda US-Korea trade data KORUS FTA trade data Taking Advantage of the FTA Duty free and staged reductions Rules of origin Steps to a successful FTA implementation Certification of Origin 2

3 Korean Textile and Apparel Industry Textile and apparel exports 3% of Korea s total exports Textile and apparel industry 10.3% of Korea s manufacturing sector Textile industry is 4 th in worldwide production Apparel exports: China, Vietnam, US, Indonesia 3

4 U.S. Textile and Apparel Imports Non-Apparel Apparel Non-Apparel (includes yarn and fabrics) Apparel (In millions of dollars) Source: otexa.ita.doc.gov 4

5 U.S. Textile and Apparel Imports (In millions of dollars) Source: otexa.ita.doc.gov Jan-Mar 2013 Jan-Mar 2014 Non-Apparel Apparel Apparel Non-Apparel (includes yarn and fabrics) Percent change YTD 3/13-3/14 non-apparel -1.9 apparel 14% 5

6 KORUS Overview Signed on June 30, 2007 by Bush Administration (after 8 formal rounds over 10 months) Largest agreement since NAFTA (1994) Effective March 15,

7 U.S. Textile and Apparel Imports Under KORUS Jan-Mar 2013 Jan-Mar 2014 Source: otexa.ita.doc.gov (in millions of dollars) 7

8 Issues Under KORUS Yarn forward Duty free and staged reductions Proximity of Chinese inputs Enforcement provisions 8

9 1. Is the product eligible? (check tariff schedule) Claiming KORUS FTA Two questions that must be asked prior to making a KORUS FTA claim: 2. If so, is the product originating? (rules of origin) 9

10 Is the Product Eligible? Immediate and Staged Reductions United States International Trade Commission (USITC) Publication 4308, February 2012: Annex I, Revised, General Note 33, Harmonized Tariff Schedules of the U.S. Annex II, Immediate Phase Out Annex II, Staged Phase Out 10

11 Immediate Duty Phase Out Current duty rates: USITC Publication 4308, Annex II Modifications to the Rates of Duty 1-Special Sub column Of the Harmonized Tariff Schedule of the United States (HTS) Section A. Effective with respect to goods of Korea, under the terms of general note 33 to the tariff schedule, entered, or withdrawn from warehouse for consumption, on or after March 15, 2012, the HTS is modified as follows: (1). For the following provisions, in the Rates of Duty 1-Special subcolumn, insert in the parentheses following the Free rate in such subcolumn the symbol KR, in alphabetical order:

12 Staged Duty Phase Out Current and future duty rates: USITC Publication 4308, Annex II Section B(1): Effective with respect to goods of Korea, under the terms of general note 33 to the tariff schedule, entered, or withdrawn from warehouse for consumption, on or after March 15,2012, and on January 1 of each of the successive years, for each of the enumerated subheadings in the following table, the Rates of Duty 1 Special subcolumn in the HTS is modified (i) by inserting in such subcolumn for each subheading the rate of duty specified for such subheading in the 3/15/ /31/2012 column followed by the symbol KR in parentheses, and (ii) for each of the subsequent dated columns the rates of duty that are followed by the symbol KR in parentheses are deleted and the rates of duty for such dated column are inserted in such subheadings in lieu thereof for the years 2013 through 2021 HTS Subheading /31/ % 4% 2.70% 1.30% Free Free Free Free Free Free /kg 2.8 /kg 1.7 /kg 0.9 /kg Free Free Free Free Free Free % 22.8% 21.1% 19.3% 17.0% 15.8% 14% 12.3% 10.5% 8.9% % 0% 4% 2% Free Free Free Free Free Free % 2.4% 1.6% 0.8% Free Free Free Free Free Free % 6% 4% 2% Free Free Free Free Free Free /kg 2.6 /kg 1.7 /kg 0.9 /kg Free Free Free Free Free Free % 22.8% 21.1% 19.9% 17.6% 15.8% 14% 12.3% 10.5% 8.9% 12

13 Is the Product Originating? To Qualify as Originating: 1. Product is wholly obtained or produced entirely in the territory of the US and/or Korea or 2. Product is produced entirely in the territory of the US and/or Korea, and Non-originating materials undergo tariff shift Regional Value Content, if applicable, is satisfied All other applicable requirements are satisfied or 3. Product is produced entirely in the territory of the US and/or Korea exclusively from originating materials 13

14 Tariff Shift Rule Based on classification of goods being imported Must know classification of materials used in the production A good originates if each of the nonoriginating materials used in the production of a good undergoes an applicable change in tariff classification as specified in rule for the imported good. 14

15 Tariff Shift De Minimis For apparel - Up to 7% of adjusted value of good may include non-originating materials Non-originating materials still must be included for purposes of calculating RVC 15

16 Textiles and Apparel Yarn fiber must originate in Korea or U.S. Fabric yarn must originate in Korea or U.S. Apparel yarn must originate in Korea or U.S. De Minimis 7% of total weight Elastomeric Yarns if determines tariff classification, then yarn must be from Korea or U.S. Visible Linings fabric must be wholly formed and finished in Korea or U.S Short Supply 1) textured and non-textured cuprammonium rayon filament yarns classified in HTS ) 100% cashmere 2-ply yarns classified in HTS and

17 Requirements Direct Shipment Rules of Origin Making a Claim (certification) Recordkeeping Verification 17

18 Goods must be shipped directly and cannot undergo any production outside Korea or the U.S. Exceptions: 1. Unloading, reloading Direct Shipment 2. Any operation necessary to preserve the good 3. Qualifying good remains under the control of the Customs authority in the territory of a non-party 18

19 Steps to a Successful FTA Implementation Korea US FTA is a Bi-Lateral Agreement which eliminates tariffs, import quotas and preferences on most goods and services traded between the two countries. But these benefits can be claimed only if the requirements are fulfilled. Prior to Export & Import Tariff Classification Supplier Origin Data Rules of Origin At Export & Import Certification Declarations After Import Records Verification 19

20 Steps to a Successful FTA Implementation STEP 1 - Prior to Export & Import Review/Modify Supplier Contracts & Obtain commitments to provide FTA required data Understand the Rules of Origin & Identify Necessary Documents and Data source Develop Process For Documentation Identify Resources Service Providers Train Staff - Importer/Suppliers/Service Providers Classify Goods & Materials and Request Origin Certifications Obtain Bills of Materials, Add Classification and Regional Value Content data Conduct Audit Certifications and Supplier Follow-up Complete Bill of Material Processing 20

21 Steps to a Successful FTA Implementation STEP 2 - At Export and Import Completion of Certification of Origin Communicate Certification Status to Necessary Parties Make Declarations 21

22 Steps to a Successful FTA Implementation STEP 3 - After Export and Import Maintain Electronic and Paper Records Respond to Information Request from Customs Respond to Custom Audits 22

23 Certification of Origin Good is an originating good No Certification of Origin form Can be in any format Must be submitted upon request May be submitted electronically Must contain certain data elements 23

24 Certification of Origin Required Data: 1. Name and contact information of the certifying person 2. Importer 3. Exporter 4. Producer 5. Description of good 6. Tariff classification 7. Information demonstrating that the good is originating 8. Authorized signature and date 24

25 Certification of Origin May apply to: 1. Single shipment of a good into the territory of a Party; or 2. Multiple shipments of identical goods within any period specified in the written or electronic certification, not exceeding 12 months from the date of the certification Can be in Korean, but must be translated at Customs request 25

26 Verification U.S. Customs may conduct verifications to support FTA claim The importer is responsible Importer must provide proof of originating status Documents from exporter/producer Importer may fail reasonable care standard if cannot provide proof of origination Producers, exporters and importers will need to ensure the customs values are correct Producers, exporters and importers will need to ensure the adjusted values are correct for both materials and goods 26

27 Verification Evidence of origin include trip reports, site visits, origin certificates, raw material purchases, proof of factory labor and support for manufacturing overhead Evidence of foreign manufacturing costs include product specifications, bills of material, product cost sheets, payment records, overhead allocation schedules, raw material invoices, proof of labor (time sheets) and support for overhead (direct costs of processing) Evidence of transportation costs include bills of lading, freight, shipping invoices, brokerage invoices 27

28 Documentation Supporting Origination For Tariff-Shift Rule Claims Certifications of origin completed by the importer/exporter Production flowchart Bill of materials with HTS numbers (Harmonized Tariff Schedule) Certifications of origin or affidavits from producers for all originating materials Classification of all non-originating materials Demonstration of tariff shift Bill of lading to confirm direct importation 28

29 Documentation Supporting Origination For Originating Materials Claims Documents that give evidence of the originating status of all materials affidavits from suppliers of inputs purchase orders, proof of payment, contracts, etc. 29

30 10 Facts to Remember 1. Level of Documentation at Importation Freeform Declaration, electronic or written, Waived on Shipments values less than $1,000 USD 2. Logistics Shipped Directly Cannot enter a 3 rd country 3. General Rules of Origin (Preference Criteria) Wholly Obtained, All Originating Materials, Substantial Transformation (Tariff Shift, RVC, Special Processing) 4. Regional Value Content Adjusted Value, Build Up/Build Down 5. De minimis 10%; 7% textiles & apparel 6. Post-Importations May file claim up to one year after importation 7. Corrections Importer may correct declarations without penalty if declare and pay duty 8. Verifications Yes Written questions, Questionnaires, On-site visits 9. Determination Notification Importer, Exporter if provided documentation to CBP 10. Recordkeeping 5 Years Date of Importation 30

31 Sample Contact Page Laura Siegel Rabinowitz, Esq. Kelley Drye & Warren LLP Tel. (212)