The changes to KORUS focus on the auto sector, customs procedures, and pharmaceutical reimbursement. With respect to autos, the largest change is a 20-year extended phase-out period for the current 25% U.S. tariff on imports of light trucks from Korea. That tariff will now expire in 2041, instead of 2021, which, according to the U.S. International Trade Commission, will delay the anticipated increase of 59,000 Korean truck imports. Korea has also agreed to increasing the quota of U.S.-origin autos that meet U.S. safety standards (but not Korean safety standard) from 25,000 to 50,000 per manufacturer, per year. Korea further agreed to recognizing U.S. standards for auto parts exports necessary to service U.S. vehicles in Korea and a harmonized testing system for emissions standards. With respect to improving customs procedures, Korea will address onerous and costly customs verification procedures for U.S. exports, which have been particularly taxing for U.S. agricultural exports. Finally, Korea has promised to address its pricing and reimbursement policy for pharmaceuticals to align with existing KORUS commitments and ensure fair treatment for U.S. exports.

For Korea, successful renegotiation has earned it a break from the United States’ Section 232 tariffs on steel imports. Instead of being subjected to a 25% tariff, steel imports from Korea are subject to an absolute quota based on 70% of the average annual import volume of such products during the 2015-2017 period. Korea had initially been exempt from the tariffs pending further KORUS discussions. The final quota-based exclusion was announced on April 30, 2018, and on August 29, 2018, President Trump announced a review process for individuals to request tariff exclusions for imports beyond the quota.

While the White House is touting the updated agreement as a major do-over, the changes are understood to be fairly moderate. Notably, the new pact does not include any provisions on currency manipulation and does not allow for increased U.S. rice exports, which was a U.S. priority during the original talks 12 years ago. The changes being made will, however, improve predictability without major disruption to existing trade flows between the two countries.

The first special session of the KORUS joint committee (the first meeting of its kind under the agreement) took place in August, at USTR Lighthizer’s request, and focused on the U.S. goods trade deficit with South Korea. Trade Minister Kim did not agree to amend KORUS as suggested by the United States, but did propose a joint study on the impact of KORUS and the cause of the U.S. bilateral trade deficit.

That first session was followed on September 1st by news that the Trump Administration was “seriously considering” withdrawing from the agreement. A bi-partisan letter from Congress and several industry groups have urged President Trump to avoid such a move. Since then, the White House has reported that KORUS is “going through a normal review process” that would not result in any imminent change in policy. During a joint public appearance by President Trump and South Korean President Moon Jae-in on September 21st, both leaders noted the continuing work on KORUS, with President Trump stating that the two sides were “going to try and straighten out the trade deal and make it fair for everybody.”

KORUS entered into force in March 2012. Korea is currently the United States’ 6th largest trading partner. In 2016, the United States’ goods trade deficit with Korea stood at $27.7 billion, down 2.3% from 2015. That same year, the United States had a services trade surplus with Korea of $10.7 billion, up 2.6% from 2015.