It was expected that an Agreement was about to be reached. However some sectors and member states made clear to the EU Commission they were not happy with the current outcome of the discussions, mainly on the Duty Draw Back System (DDB), and this is delaying the conclusion of the Agreement. On the other hand additional demands from the part of the EU on the DDB could mean a price to pay in other items sensitive to us like Rules of Origin.
According to EURATEX materials – the most important standing issue is the DDB System and all the other remaining issues are secondary and do not jeopardize the outcome. The target is to reach an agreement by next week on DDB and sign the FTA beginning of July.
Duty Draw Back is a sensitive question for both sides and the Safeguard Clause is what the Commission is asking for in order to limit the extensive use of this mechanism. However the following aspects are still open to debate:
- a) To what products the Safeguard Clause should apply: the Commission wants to include all the products
but Korea wants only “sensitive products” (there is no definition of what they are);
- b) Conditions to apply the Safeguard Clause: an increase in Imports and Exports confirmed by the official
statistics is defended by the Commission but no definition yet at what extend (threshold limit,
percentage?). The Proof of Injury from the part of the EU Industry would be also a prerequisite;
- c) Procedure to apply the Safeguard Clause: needs to be fast and with an efficient time frame binding for
both parts and with an Arbitrage mechanism;
- d) Adopted Measures/Remedies: need to be agreed by all and would imply a limitation in the DDB rate.
The DDB system was a demand from Korea in exchange for the application of the Standard Rules of Origin to the FTA.
Source: EURATEX