President Signs FTAs, GSP/TAA Legislation

October 21, 2011

Today, President Obama signed into law implementing legislation for the Korea, Panama and Colombia Free Trade Agreements (FTAs), as well as renewal legislation for the Generalized System of Preferences (GSP) and Trade Adjustment Assistance (TAA). The Colombia implementing legislation also includes a retroactive renewal of the Andean Trade Preferences Act (ATPA), through July 31, 2013. The GSP extension applies to articles entered on or after 15 days from today’s signing, and applies retroactively to entries made since December 31, 2010. The ATPA renewal similarly applies to articles entered on or after the 15^th day after enactment of the Colombia implementing legislation, and applies retroactively to entries since February 12, 2011. All three FTAs face further hurdles, however, before they take effect.

The Korea FTA will go into force when the President determines that Korea has taken the measures necessary to comply with the provisions in the agreement that take effect on the date the agreement enters into force, and exchanges notes with the Government of Korea providing for the entry into force. The earliest date the text of the bill allows for entry into force is January 1, 2012. According to Assistant U.S. Trade Representative Wendy Cutler, South Korea has already passed many of the laws needed to implement the FTA with the U.S. as a part of the implementation process for the E.U.-Korea FTA. The E.U.-Korea FTA took effect last July.

The Korean National Assembly, however, has yet to pass the necessary FTA implementing legislation for its FTA with the United States. Korea’s Foreign Affairs, Trade and Unification Committee began consideration of the FTA implementing bill last week, but progress was hampered by opposition lawmakers who physically blocked discussion of the bill. Opposition members’ tactics to derail the debate went as far as sitting in the Committee Chairman’s seat. Despite the opposition’s delay tactics, Korea’s Grand National Party (GNP) holds an absolute majority in the unicameral National Assembly, and can pass the bill without the support of the minority opposition parties. A vote may be held as early as next week. According to U.S. Senator Max Baucus (D-MT), the U.S.-Korea FTA will likely go into force in April, 2012.

The FTAs with Colombia and Panama have already garnered the necessary approvals in their respective countries. The Colombia FTA will enter into force in the United States when the President determines that Colombia has taken the necessary measures to comply with the provisions of the agreement which take effect on the date the FTA enters into force, and exchanges notes with the Government of Colombia providing for entry into force. Likewise, the Panama FTA will enter into force in the U.S. when the President determines that Panama has taken the necessary measures to comply with the provisions of the agreement which take effect on the date the FTA enters into force, and exchanges notes with the Government of Panama providing for entry into force. Neither FTA may enter into force before January 1, 2012. All three FTA implementing bills also include consultation and layover provisions for certain actions that are to be implemented by Presidential proclamation.

Both the Korea FTA implementing bill and the GSP/TAA bill provide for increases in the merchandise processing fee (MPF) rate. As the President signed the Korea FTA implementing bill after the GSP/TAA bill, the Korea FTA’s rates for the overlapping period apply. The current MPF rate is 0.21%. The GSP/TAA bill (H.R. 2832) proposes raises the MPF rate to 0.3464% for the period of October 1, 2011 to November 30, 2015, to 0.21% from December 1, 2015 to September 30, 2016, and to 0.1740% for October 1, 2016 to September 30, 2019.  The Korea FTA implementing bill, increases the MPF to 0.3464% from December 1, 2015 through June 30, 2021. As the KORUS bill was enacted after the GSP bill, the KORUS bill’s MPF provisions override the GSP bill’s MPF provisions for the overlapping time period, resulting in a 0.3464% MPF rate for the entire October 1, 2011 – June 30, 2021 period. Neither bill raises the $485 MPF cap or $25 minimum for formal entries. Additionally, the Korea FTA implementing legislation extends the MPF for formal entries from January 8, 2020 through August 2, 2021, and the Colombia implementing bill further extends the MPF for formal entries from August 3, 2021 through September 30, 2021. The GSP bill also contains certain prepayment and reconciliation requirements for the MPF for formal and informal entries for a 42-day period in 2012. 

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