Analyzing the Conditions on Transport Rule Under the Korea-US FTA

ASML currently does not apply for preferential duty treatment for the goods that are shipped from the US, via the central customs warehouse in The Netherlands to Korea. In this study the legal requirements and procedures for claiming preferential tariff treatment under the KR-US FTA when goods are transported through non-FTA countries has been examined, with a focus on how to prove the conditions of the KR-US FTA on such a transport, and based upon the findings, what steps are required to implement a duty-saving program to apply for preferential duty treatment under this FTA.

Hence, the main research question is as follows : “How to design a duty-saving program to be able to apply preferential duty treatment under the KR-US FTA when US-originating goods are transported to Korea via the Netherlands?”

In this study a multistep approach has been used to analyze the implementation of transport rule under KR-US FTA. The main finding show that, where the KR-US FTA does not define direct transport explicitly, goods originating in the United States can still be considered to be of US preferential origin under the KR-US FTA when transported from the United States via the Netherlands if certain conditions are met and appropriate documentation is provided. These conditions include customs supervision while the goods are in transit or transshipped and the prove of non-manipulation of goods, conditions that can be met in the case of ASML.

In designing a duty-saving program to apply the preferential duty treatment, the three main steps will need to be made. First, a process needs to be designed and implemented in the US to determine whether and secure that the US origin under the KR-US FTA is in place. Next to this analysis that may also require educating the US suppliers, the classification team must make sure the required supplier declarations are in place and maintain a blanket certificate of US-origin items under the KR-US FTA. Second, as ASML uses the customs warehouse in the Netherlands as an hub when transporting US originating goods to Korea, it will need to provide the documentations to prove that the transport and non-manipulation conditions are met. Based on the research made, this set of documentation will need to include the original shipping invoice, the air way bill, and the TAD (hard copy document to prove the use of the EU transit procedure). The Korean Customs services will have to approve the document set as the required proof of meeting the transport conditions. Finally, the Korea Customs team will need to update the system to validate KR-US FTA requirements and notify the customs brokers of the new working instructions and guidelines for claiming preferential tariff on import.