Proposed U.S.-South Korea Free Trade Agreement (KORUS FTA): Automobile Rules of Origin [June 15, 2011] [open pdf - 775KB]
From the Summary: "The U.S.-South Korea Free Trade Agreement (KORUS FTA) was signed on June 30, 2007. The provisions on the automotive sector were among the most difficult areas negotiated, and were among those in which the Obama Administration and South Korean officials reached further agreement on December 3, 2010. The agreement's effect on the automotive sector has drawn particular scrutiny as Congress considers implementation of the KORUS FTA. In particular, the specific rules of origin (ROO) for automobiles and auto parts have become a matter of debate. These rules determine whether the products imported into an FTA participating country are eligible to receive the duty-free or reduced tariff benefits of the agreement. For autos and auto parts, a certain percentage of the parts, labor, and other associated costs must come from the region. This is known as a regional value content (RVC) test. […] Content produced in North Korea is not presently allowed into the United States, a situation that the KORUS FTA would not change. If at some future time the United States were to ease trade restrictions on North Korea, U.S. and South Korean negotiators would then need to discuss the treatment of North Korean inputs to South Korean products under the agreement. The KORUS FTA contains provisions to promote cooperation between the two countries' customs officials. Nonetheless, ensuring that North Korean parts are not used in South Korean products exported to the United States will remain a challenge, whether or not the KORUS FTA takes effect."
CRS Report for Congress, R41868