President Barack Obama has signed into law a renewal of the United States Generalized System of Preferences (GSP), which was part of a trade pact originally agreed to between the U.S. and the Republic of Korea in 2007. And the Tire Industry Association couldn't be happier about the result.
Known specifically as the KORUS FTA (Korean-United States Free Trade Agreement), the law will reduce the tariff on the importing of Korean manufactured car and truck radial tires from 4% (3.4% for non-radials) through a series of graduated step-downs every year. By the fifth year of the agreement, the tariffs will be zero.
The duty-free importing of tires from Korea will extend for a total of 15 years when the free trade agreement will need to be renewed.
“The renewal of the program removes 95% of the existing tariffs within five years for goods and services covered by the pact, and gives particular preference to the automotive sector for both the importing and exporting of goods, including tires," says Roy Littlefield, executive vice president of TIA.
"The agreement also provides greater access to the Korean government procurement market for American companies."
The agreement’s initial year will be retroactive to Jan. 1, 2011. For American tire manufacturers, the Korean import duty of U.S.-made tires will go from the current 8% percent to 0%.
Congress passed the new free trade agreement earlier this month. The previous agreement expired on Dec. 31, 2010. According to the Obama administration, American companies paid nearly $2 million a day in additional duties since the GSP expired last year.
The Korean Republic’s legislature is expected to approve the agreement by the end of the month, says TIA.
