TIA: Tire sales with Korea poised for upswing via free trade pact

According to the Tire Industry Association (TIA), positive results are expected as President Barack Obama has signed into law a renewal of the Generalized System of Preferences (GSP). The measure was part of a trade pact originally agreed to between the U.S. and South Korea in 2007, known specifically as the KORUS FTA (Korean-United States Free Trade Agreement).

“The renewal of the program removes 95 percent 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,” reports Roy Littlefield, TIA’s executive vice president.

“The agreement also provides greater access to the Korean government procurement market for American companies,” he adds.

KORUS FTA will reduce the tariff on the importing of Korean manufactured car and truck radial tires from 4 percent (3.4 percent for non-radial) through a series of graduated step-downs every year to zero starting in the fifth year of the agreement, Littlefield says.

The duty free importing of tires from Korea will extend for a total of 15 years when the free trade agreement will be up for renewal.

For American tire manufacturers, the Korean import duty of U.S.-made tires will go from the current 8 percent to zero beginning in the first year of the agreement. Congress passed the long-anticipated free trade agreement earlier this month. The Obama administration estimates that American companies paid nearly $2 million a day in additional duties since the GSP expired at the end of last year.

“This agreement is of particular benefit to the American consumers who experienced a price hike on tires in late 2009 when tariffs were imposed on Chinese passenger and light truck tires imported to the U.S.,” says Littlefield. “Korean tire exports increased 63 percent due to the U.S. import duty on Chinese-manufactured tires and an aggressive manufacturing and marketing program by manufacturers in the peninsula nation.”

The Korean Republic’s legislature is expected to approve the agreement by the end of the month, despite some opposition concerning the trade pact’s impact on certain Korean industries, especially agriculture.

For more information, visit www.tireindustry.org.