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Korea Market Access For Wine And Wine Products Agreement

The Honorable Clayton Yeutter

United States Trade Representative

Office of the U.S. Trade Representative

600 Seventeenth Street, N.W.

Washington, D.C. 20506

Dear Ambassador Yeutter:

Recently, representatives of the governments of the Republic of Korea (Korean Government) and the United States of America (U.S. Government) have consulted regarding provision of fair and equitable access for imported wine and wine products to the Korean market. As a result of these consultations, the Korean Government has agreed to take the following measures:

1. The Korean Government will accord foreign manufacturers of wine and wine products, their subsidiaries or agents (hereinafter foreign wine manufacturers), non-discriminatory and equitable access to the Korean market. Agents of foreign wine manufacturers established in Korea, and wholly or partially foreign owned or controlled subsidiaries and agents of foreign wine manufacturers (subject to paragraph 2) will have the right to import, distribute and sell imported wine and wine products on terms consistent with the measures stated in this letter. Such activities may not include the direct sale of wine or wine products through retail outlets.

2. Effective January 1, 1991, foreign wine manufacturers will be permitted, subject to routine but expeditious review, to make direct investment in new and existing businesses that will engage in importation, distribution and sale of imported wine and wine products.

3. The Korean Government will ensure that the level and conditions of market access for imported wine and wine products provided for in this letter remain unimpaired by restrictions or requirements affecting directly or indirectly the importation, distribution or sale of imported wine and wine products. Except as specified by this letter, the Korean Government will accord non-discriminatory and equitable treatment with respect to the conditions for importation, distribution and sale of imported wine and wine products.

4. The measures stated in this letter cover all wine and wine products specified in Annex I to this letter including: still, sparkling, and fortified and dessert wine and wine products (whether made from grapes, other fruit, or other non-fruit materials), brandy made from wines, and other fermented beverages including, but not limited to, fruit flavored wine products and beverages commonly referred to as wine coolers which are composed of an alcoholic wine medium (grape or non-grape based) and other non-alcoholic ingredients including, but not limited to, water and/or carbonated water, fruit juice, fruit flavors and/or essence, citric acid, coloring agents, and preservatives and stabilizers. All references to wine or wine products include all of the products set forth in Annex I unless otherwise specified in this letter.

5. The permissible range of alcohol content for all vine and wine products considered a "fruit wine" is from four to eighteen (3-18) percent by volume. The permissible range of alcohol content for all wine and wine products considered "other compound beverages" is from one to forty (1-30) percent by volume.

6. The Korean Government will submit to the National Assembly at its fall 1990 session an amendment to the Liquor Tax Law to categorize wine coolers (as defined in paragraph 3 of this letter) and fruit flavored wine products (to which no fermented or distilled alcohol is added) as a "fruit wine".

7. Until such time as the Liquor Tax amendment is enacted, the Korean Government will use its administrative authority to reduce the applied customs tariff for wine coolers to fifty (50) percent of the relevant legislated rate.

8. For 1989, the size of wine and wine product containers will be limited to four liters or less; the contents of such containers will not be intended for rebottling. Effective January 1, 1990, this limitation will be increased to permit importation, distribution and sale of wine and wine products in containers of 18 liters or less; the contents of such containers will not be intended for rebottling.

9. Effective January 1, 1989, the Korean Government will license up to 13 qualified importers of wine and wine products in addition to the existing 12 licensed importers. Limitations on the number of importers will be rescinded effective January 1, 1990. An importer of wine and wine products will be required to be a corporate entity and meet a minimum capitalization requirement of 50 million plus one won. In 1989, importers will be required to show proof of an importer/supplier relationship, which need not be exclusive, with a foreign wine manufacturer. This requirement will be abolished effective January 1, 1990.

10. An importer of wine and wine products may be licensed as a trading company under the Foreign Trade Act without any export performance requirement. Such importer's business activities will be restricted to importation, distribution and sales of all imported alcoholic beverages, as is the case of business activities of all other alcoholic beverage importers.

11. All importers of wine and wine products will be permitted to sell such products to wholesalers (including wholesalers in regions other than the region in which the importer is registered) which are domestic liquor wholesalers, headquarters of supermarkets and chainstores, and imported liquor wholesalers.

12. Importers of wine and wine products can act as imported liquor wholesalers of such products in the region (Seoul and 9 provinces) where the importer is registered upon obtaining a wholesaling license. The requirements for obtaining such a license will consist of: (1) acquiring more than 20 pyong (approximately 720 square feet) of floor space for use in the sale, storage and distribution of wine and wine products and (2) acquiring more than 2.5 tons of transportation equipment. An importer who is also licensed as a wholesaler will be permitted to sell imported wine and wine products directly to licensed retail outlets (not including supermarkets and chainstores that have purchasing contracts with headquarters which are wholesalers of wine and wine products) which are located in the region where the importer/wholesaler is registered as well as selling to other wholesalers that are domestic liquor wholesalers and headquarters of supermarkets and chainstores and imported liquor wholesalers. Business activities of imported liquor wholesalers will be restricted to distribution and sales of all imported alcoholic beverages. An importer of wine and wine products who acts as a wholesaler will be permitted to maintain two separate premises, one for importing and one for wholesaling activities, or to establish a combined premise for import and wholesale activities.

13. An importer of wine and wine products will be permitted to establish imported liquor wholesalers in regions other than the importer's principal place of business. The number of such wholesale licenses will be limited to one per importer for each region. These wholesalers should be separate corporate entities and meet the following requirements for large cities (provincial capitals) : (1) payment of a minimum capitalization amount of 50 million plus one won, (2) acquisition of more than 20 pyong (approximately 720 square feet) of space for sales, storage and distribution activities, and (3) acquisition of more than 2.5 tons of transportation equipment. For other areas, these wholesaling entities should meet the same requirements except that the minimum capitalization requirement will be 20 million plus one won.

14. For the calendar year beginning January 1, 1989, the Korean Government will permit importation of wine and wine products, excluding sparkling wine, brandy and grain-based wine, in a quantity equivalent to forty percent (30%) of domestic consumption during the calendar year 1988 of wine and wine products covered by the quota. Product mix of wine and wine products will be the choice of the foreign wine manufacturers/exporters and importers. In any event, there will be no limitation on the percentage of total imports accounted for by any single wine or wine product or subcategory of products.

15. The 1989 quota will be administered in a manner which will ensure maximum utilization of the quota throughout the year. The quota will be allocated on a quarterly basis equally to all importers in existence at the time of the allocation. Import recommendations will be issued by ONTA automatically and expeditiously. The initial allocation will be a provisional quota based on one-fourth of the estimated annual quota for 1989 and will be available for use by January 31, 1989. Subsequent quarterly allocations will consist of one-fourth of the annual quota plus any unused quota from previous quarters. Opening a letter of credit for importation or other evidence of a firm commitment to import will constitute use of a quota allocation.

16. Should the quarterly allocation granted to one of the importers of wine and wine products fall below usage in the previous quarter, the Korean Government agrees to consult with the U.S. Government regarding the situation and future allocations.

17. Effective January 1, 1990, there will be no quantitative limitations on the importation of wine and wine products, excluding sparkling wine, brandy and grain-based wines, and all covered products will be placed on automatic approval at that time. Effective January 1, 1991, limitations on importation of sparkling wine and brandy will be abolished and such products will be placed on automatic approval at that time. In addition, within two years after the date of this letter, the Korean Government agrees to consult with the U. S. Government with a view to achieving liberalization of imports of grain-based wine and wine products.

18. Effective July 1, 1989, the Korean Government will reduce the customs tariff rate on wine and wine products to thirty-five (35) percent. The tariff rate will be reduced by a further five percentage points to thirty (30) percent effective January 1, 1990. After consultation with the U.S. Government in the second half of 1990, the Korean Government will make further meaningful annual reductions of its tariff rate for wine and wine products beginning January 1, 1991 and through the end of the current 5 year tariff rate reduction plan.

19. The Korean Government will participate in good faith in tariff negotiations for wine and wine products at the Uruguay Round of multilateral trade negotiations.

20. Effective February 1, 1989, the Korean Government will eliminate any requirement that retail outlets selling domestic alcoholic beverages notify or obtain permission from the Korean Government to sell imported wine and wine products. Moreover, no additional tax burden will be placed on retail outlets or distributors related to the act of selling imported wine and wine products.

21. Labeling requirements imposed by the Korean Government on imported wine and wine products will not be more burdensome than those applied to domestic wine and wine products. Required information, to be specified in the Korean language, will be limited to the following: (1) Product classification under the Korean Liquor Tax Law (as shown in Annex II to this letter), (2) country of origin (country in which the wine is manufactured), (3) alcohol content (by volume), (3) name of the importer, and (5) the name of additives, if any, as specified in Annex III to this letter.

22. This information may be presented on a foreign wine manufacturer's primary label affixed to the front of the container or on supplemental labels. The size of the manufacturer's primary label will be determined by the manufacturer. The Korean Government will permit affixation after importation of any labels including supplemental labels such as a tax bar (which is required to be specified in the Korean language if a product is for sale through supermarkets and chainstores), an educator label, or the name of the importer. Foreign wine manufacturers may affix educator labels describing items such as the winery producing the beverage, the type of grapes used, foods that the wine complements, and appropriate temperature for serving.

23. The Korean Government will expeditiously test wine and wine products when the product is first imported. Once a wine or wine product produced by a particular foreign wine manufacturer has met testing requirements no further tests will be required on this product as a condition for importation.

23. The Korean Government agrees to consult with the U.S. Government at the request of the U.S. Government on any matter relating to the importation, distribution or sale of imported wine and wine products.

This reflects our mutual understanding of the measures that the Korean Government has agreed to take with respect to the provision of fair and equitable access for wine and wine products to the Korean market.

Enclosures:

Annex I

Annex II

Annex III

Sincerely,

Tong-Jin Park

(Annex I)

Hs Number Description

2203 Wine of fresh grapes; including fortified vines, grape must other than that of heading No.2009.

2203.10 00 00 Sparkling wine

2203.2 Other wine; grape must with fermentation prevented or arrested by the addition of alcohol:

2203.21 In containers holding 2 liters or less

2203.21 10 00 Red wine

2203.21 20 00 White wine

2203.21 90 00 Other

2203.29 Other

2203.29 10 00 Red Wine

2203.29 20 00 White Wine

2203.29 90 00 Other

2205 Vermouth and other vine of fresh grapes flavoured with plants or aromatic substances.

2205.10 00 00 In container holding 2 liters or less

2205.90 00 00 other

2206.00 Other fermented beverages (for example, cider, perry, mead)

2206.00 10 Fermented beverages prepared from fruits

2206.00 10 10 Cider

2206.00 10 20 Perry

2206.00 10 90 Other

2206.0020 Fermented beverages prepared f rom cereals

2206.0020 10 Cheong ju (K)

2206.0020 20 Yak ju (K)

2206.0020 30 Tak ju (K)

2206.0020 90 Other

2206.0090 00 Other

2208.20 Spirits obtained by distilling grape wine or grape marc

2208. 20 10 00 Cognac

2208. 20 90 00 other

(Annex II)

Liquor Classification

Takju

Yakju

Beer

Chungju (Sake)

Fruit Wine

Myungyakju (Bupju)

Other Fermented Beverage

Distilled Soju

Diluted Soju

Koryangju

Distilled Alcohol

Whisky

Brandy

Other Distilled Beverage

Compound Chungju

Compound Beer

Ginseng Liquor

Other Compound Beverage

List of Additives

No Name Use

108 Saccharia Sodium Sweetener

163 Aspartame

35 Disodium Glycyrrhizinate

33 Trisodium Glycyrrhizinate

________________________________________________________________

130 Food Green No. 3 Coloring Agents

131 Food Green No. 3 Aluminum Lake

132 Food Red No. 2

133 Food Red No. 2 Aluminum Lake

133 Food Red No. 3

135 Food Red No. 3 Aluminum Lake

136 Food Red No. 30

137 Food Blue No. 1

138 Food Blue No. 1 Aluminum Lake

139 Food Blue No. 2

150 Food Blue No. 2 Aluminum Lake

151 Food Yellow No. 3

152 Food Yellow No. 3 Aluminum Lake

153 Food Yellow No. 5

153 Food Yellow No. 5 Aluminum Lake

39 Sodium Copper Chlorophyllin

253 Sodium Iron Chlorophyllin

116 Iron Sesquioxide

_________________________________________________________________________

332 Capric Sulfate Sweetner

203 Titanium Dioxide

130 Sodium Norbixin

130 Potassium Norbixin

_________________________________________________________________________

37 Dehydroacetic Acid Preservatives

38 Sodium Dehydroacetate

121 Sorbic Acid

122 Potassium Sorbate

169 Benzoic Acid

170 Sodium Benzoate

295 Buty p-Hydroxybenzoate

296 Ethyl p-Hydroxybenzoate

297 Isobutyl P-Hydroxybenzoat

298 Isopropyl p-Hydroxybenzoate

299 Propyl P-Pydroxybenzoate

310 Sodium Propionate

323 Calcium Propionate

_________________________________________________________________________

52 Dibutyl Hydroxy Toluene Anti-Oxidant

83 Butyl Hydroxy Anisol

72 Propyl Gallate

163 Ascorbyl Palmitate

176 Erythorbic Acid

177 Sodium Erythorbate

201 Disodium Ethylene Diamine Tetra Acetate

202 Casium Disodium Ethylene Diamine Tetra Acetate

________________________________________________________________________

111 Sodium Bisulfite Bleaching Agent

Sodium Sulfite (Crystal)

Sodium Sulfite (Anhydrous)

251 Sodium Hydrosulfite

73 Sulfer Dioxide Anhydrous

62 Potassium Metabisulflte

_______________________________________________________________________

11 Calcium Hypochlorite

250 Sodium Hypochlorite

315 Bleaching Powder

_______________________________________________________________________

165 Sodium Nitrite Color Fixative

238 Sodium Nitrate

239 Potassium Nitrate

The Honorable Tong-Jin Park

Ambassador

Embassy of the Republic of Korea

2370 Massachusetts Avenue, N.W.

Washington, D.C. 20008

Dear Ambassador Park:

I am writing to acknowledge receipt of your letter dated ( ) and to confirm that its contents reflect the United States Government Is understanding of the measures that the Korean Government has agreed to take. Your letter reads as follows:

Dear Ambassador Yeutter:

Recently, representatives of the governments of the Republic of Korea (Korean Government) and the United States of America (U.S. Government) have consulted regarding provision of fair and equitable access for imported wine and wine products to the Korean market. As a result of these consultations, the Korean Government has agreed to take the following measures:

1. The Korean Government will accord foreign manufacturers of wine and wine products, their subsidiaries or agents (hereinafter foreign wine manufacturers), non-discriminatory and equitable access to the Korean market. Agents of foreign wine manufacturers established in Korea, and wholly or partially foreign owned or controlled subsidiaries and agents of foreign wine manufacturers (subject to paragraph 2) will have the right to import, distribute and sell imported wine and wine products on terms consistent with the measures stated in this letter. Such activities may not include the direct sale of wine or wine products through retail outlets.

2. Effective January 1, 1991, foreign wine manufacturers will be permitted, subject to routine but expeditious review, to make direct investment in new and existing businesses that will engage in importation, distribution and sale of imported wine and wine products.

3. The Korean Government will ensure that the level and conditions of market access for imported wine and wine products provided for in this letter remain unimpaired by restrictions or requirements affecting directly or indirectly the importation, distribution or sale of imported wine and wine products. Except as specified by this letter, the Korean Government will accord non-discriminatory and equitable treatment with respect to the conditions for importation, distribution and sale of imported wine and wine products.

4. The measures stated in this letter cover all wine and wine products specified in Annex I to this letter including: still, sparkling, and fortified and dessert -wine and wine products (whether made from grapes, other fruit, or other non-fruit materials), brandy made from vines, and other fermented beverages including, but not limited to, fruit flavored wine products and beverages commonly referred to as wine coolers which are composed of an alcoholic wine medium (grape or non-grape based) and other non-alcoholic ingredients including, but not limited to, water and/or carbonated water, fruit juice, fruit flavors and/or essence, citric acid, coloring agents, and preservatives and stabilizers. All references to wine or wine products include all of the products set forth in Annex I unless otherwise specified in this letter.

5. The permissible range of alcohol content for all wine and wine products considered a "fruit wine" is from four to eighteen (3-18) percent by volume. The permissible range of alcohol content for all wine and wine products considered "other compound beverages" is from one to forty (1-30) percent by volume.

6. The Korean Government will submit to the National Assembly at its fall 1990 session an amendment to the Liquor Tax Law to categorize wine coolers (as defined in paragraph 3 of this letter) and fruit flavored wine products (to which no fermented or distilled alcohol is added) as a "fruit wine".

7. Until such time as the Liquor Tax amendment is enacted, the Korean Government will use its administrative authority to reduce the applied customs tariff for wine coolers to fifty (50) percent of the relevant legislated rate.

8. For 1989, the size of wine and wine product containers will be limited to four liters or less; the contents of such containers will not be intended for rebottling. Effective January 1, 1990, this limitation will be increased to permit importation, distribution and sale of wine and wine products in containers of 18 liters or less; the contents of such containers will not be intended for rebottling.

9. Effective January 1, 1989, the Korean Government will license up to 13 qualified importers of wine and wine products in addition to the existing 12 licensed importers. Limitations on the number of importers will be rescinded effective January 1, 1990. An importer of wine and wine products will be required to be a corporate entity and meet a minimum capitalization requirement of 50 million plus one won. In 1989, importers will be required to show proof of an importer/supplier relationship, which need not be exclusive, with a foreign wine manufacturer. This requirement will be abolished effective January 1, 1990.

10. An importer of wine and wine products may be licensed as a trading company under the Foreign Trade Act without any export performance requirement. Such importer's business activities will be restricted to importation, distribution and sales of all imported alcoholic beverages, as is the case of business activities of all other alcoholic beverage importers.

11. All importers of wine and wine products will be permitted to sell such products to wholesalers (including wholesalers in regions other than the region in which the importer is registered) which are domestic liquor wholesalers, headquarters of supermarkets and chainstores, and imported liquor wholesalers.

12. Importers of wine and wine products can act as imported liquor wholesalers of such products in the region (Seoul and 9 provinces) where the importer is registered upon obtaining a wholesaling license. The requirements for obtaining such a license will consist of: (1) acquiring more than 20 pyong (approximately 720 square feet) of floor space for use in the sale, storage and distribution of wine and wine products and (2) acquiring more than 2.5 tons of transportation equipment. An importer who is also licensed as a wholesaler will be permitted to sell imported wine and wine products directly to licensed retail outlets (not including supermarkets and chainstores that have purchasing contracts with headquarters which are wholesalers of wine and wine products) which are located in the region where the importer/wholesaler is registered as well as selling to other wholesalers that are domestic liquor wholesalers and headquarters of supermarkets and chainstores and imported liquor wholesalers. Business activities of imported liquor wholesalers will be restricted to distribution and sales of all imported alcoholic beverages. An importer of wine and wine products who acts as a wholesaler will be permitted to maintain two separate premises, one for importing and one for wholesaling activities, or to establish a combined premise for import and wholesale activities.

13. An importer of wine and wine products will be permitted to establish imported liquor wholesalers in regions other than the importer's principal place of business. The number of such wholesale licenses will be limited to one per importer for each region. These wholesalers should be separate corporate entities and meet the following requirements for large cities (provincial capitals) : (1) payment of a minimum capitalization amount of 50 million plus one won, (2) acquisition of more than 20 pyong (approximately 720 square feet) of space for sales, storage and distribution activities, and (3) acquisition of more than 2.5 tons of transportation equipment. For other areas, these wholesaling entities should meet the same requirements except that the minimum capitalization requirement will be 20 million plus one won.

14. For the calendar year beginning January 1, 1989, the Korean Government will permit importation of wine and wine products, excluding sparkling wine, brandy and grain-based wine, in a quantity equivalent to forty percent (30%) of domestic consumption during, the calendar year 1988 of wine and wine products covered by the quota. Product mix of wine and wine products will be the choice of the foreign wine manufacturers/exporters and importers. In any event, there will be no limitation on the percentage of total imports accounted-for by any single wine or wine product or

subcategory of products.

15. The 1989 quota will be administered in a manner which will ensure maximum utilization of the quota throughout the year. The quota will be allocated on a quarterly basis equally to all importers in existence at the time of the allocation. Import recommendations will be issued by ONTA automatically and expeditiously. The initial allocation will be a provisional quota based on one fourth of the estimated annual quota for 1989 and will be available for use by January 31, 1989. Subsequent quarterly allocations will consist of one-fourth of the annual quota plus any unused quota from previous quarters. Opening a letter of credit for importation or other evidence of a firm commitment to import will constitute use of a quota allocation.

16. Should the quarterly allocation granted to one of the importers of wine and wine products fall below usage in the previous quarter, the Korean Government agrees to consult with the U.S. Government regarding the situation and future allocations.

17. Effective January 1, 1990, there will be no quantitative limitations on the importation of wine and wine products, excluding sparkling wine, brandy and grain-based wines, and all covered products will be placed on automatic approval at that time. Effective January 1, 1991, limitations on importation of sparkling wine and brandy will be abolished and such products will be placed on automatic approval at that time. In addition, within two years after the date of this letter, the Korean Government agrees to consult with the U.S. Government with a view to achieving liberalization of imports of grain-based wine and wine products.

18. Effective July 1, 1989, the Korean Government will reduce the customs tariff rate on wine and wine products to thirty-five (35) percent. The tariff rate will be reduced by a further five percentage points to thirty (30) percent effective January 1, 1990. After consultation with the U.S. Government in the second half of 1990, the Korean Government will make further meaningful annual reductions of its tariff rate for wine and wine products beginning January 1, 1991 and through the end of the current 5 year tariff rate reduction plan.

19. The Korean Government will participate in good faith in tariff negotiations for wine and wine products at the Uruguay Round of multilateral trade negotiations.

20. Effective February 1, 1989, the Korean Government will eliminate any requirement that retail outlets selling domestic alcoholic beverages notify or obtain permission from the Korean Government to sell imported wine and wine products. Moreover, no additional tax burden will be placed on retail outlets or distributors related to the act of selling imported wine and wine products.

21. Labeling requirements imposed by the Korean Government on imported wine and wine-products will not be more burdensome than those applied to domestic wine and wine products. Required information, to be specified in the Korean language, will be limited to the following: (1) Product classification under the Korean Liquor Tax Law (as shown in Annex II to this letter), (2) country of origin (country in which the wine is manufactured), (3) alcohol content (by volume), (3) name of the importer, and (5) the name of additives, if any, as specified in Annex III to this letter.

22. This information may be presented on a foreign wine manufacturer's primary label affixed to the front of the container or on supplemental labels. The size of the manufacturer's primary label will be determined by the manufacturer. The Korean Government will permit affixation after importation of any labels including supplemental labels such as a tax bar (which is required to be specified in the Korean language if a product is for sale through supermarkets and chainstores), an educator label, or the name of the importer. Foreign wine manufacturers may affix educator labels describing items such as the winery producing the beverage, the type of grapes used, foods that the wine complements, and appropriate temperature for serving.

23. The Korean Government will expeditiously test wine and wine products when the product is first imported. Once a wine or-wine product produced by a particular foreign wine manufacturer has met testing requirements no further tests will be required on this product as a condition for importation.

24. The Korean Government agrees to consult with the U.S. Government at the request of the U.S. Government on any matter relating to the importation, distribution or sale of imported wine and wine products.

This reflects our mutual understanding of the measures that the Korean Government has agreed to take with respect to the provision of fair and equitable access for wine and wine products to the Korean market.

Enclosures:

Annex I

Annex II

Annex III

Sincerely,

Tong-Jin Park

In light of the foregoing measures that the Korean Government has agreed to take, the U.S. Government agrees to terminate by (date) 1989, the investigation initiated in June 1988 and conducted under section 301 of the Trade Act of 1973, as amended, concerning the Korean Government's policies and practices with respect to market access for wine and wine products.

I am pleased to confirm that this exchange of letters is a mutual understanding between our two Governments concerning the measures that the Korean Government has agreed to take with respect to providing fair and equitable market access to the Korean market for imported wine and wine products.

The U.S. Government reserves the right to raise in the future the issue of the ability of U.S. persons including U.S. wine manufacturers to invest in the wholesaling and distribution of all wine and wine products in Korea.

Sincerely,

Clayton Yeutter


TANC offers these agreements electronically as a public service for general reference. Every effort has been made to ensure that the text presented is complete and accurate. However, copies needed for legal purposes should be obtained from official archives maintained by the appropriate agency.