WORLD TRADE G/SG/N/10/KOR/1
27January 1997
ORGANIZATION(97-0276)
Original: English Committee onSafeguards
NOTIFICATION PURSUANT TOARTICLE 12.1(C)
OFTHE AGREEMENT ONSAFEGUARDS
Thefollowing communication, dated 21January 1997, hasbeenreceived fromthePermanent
Mission ofKorea.
_______________
Onbehalf oftheGovernment oftheRepublic ofKorea, andpursuant toArticle 12.1(c) ofthe
Agreement onSafeguards, Ihereby forward anotification concerning Korea 'sdecision toapply a
safeguard measure oncertain dairy products. Given thetimeconstraints involved inthetranslation
ofother material andinformation related tothismatter, myGovernment reserves therighttoprovide
further relevant information asnecessary.
Pursuant toArticle 12.1(c) oftheWTO Agreement onSafeguards, andinlightoftheformat
fornotificationsadoptedbytheCommitteeonSafeguards(G/SG/W/1of23February1995),theRepublic
ofKorea hereby notifies thatitproposes toapply asafeguard measure onimports ofcertain dairy
products. Thisnotification refers todocument G/SG/N/8/KOR/1 of6December 1996 inwhich the
Republic ofKorea notified afinding ofserious injury toitsdomestic rawmilkandmilkpowder industry
caused byincreased imports ofcertain dairy products.
1. Evidence ofserious injury caused byincreased imports
Increase ofimports, share ofthedomestic industry inconsumption, andstock
Asimports oftheproducts subject toinvestigation havegrown, theshare ofdomestic rawmilk
andmilkpowder industry inapparent consumption hasbeenreduced from 91.1% in1993 to85.4%
during thefirsthalfof1996. Domestic stock hasincreased from 4,509 tonsto14,994 tonsbetween
theendof1993 and30June1996.
Imports increase, apparent consumption increase, andincrease ofdomestic goods consumption
Year Imports increase Apparent
consumption increaseIncrease ofdomestic
goods consumption
1994 +383.7% +9.6% +5.6%
1995 +80 +3.8 +0.0
1996
(first half)+16.9 -2.3 -2.0G/SG/N/10/KOR/1
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Saleprice ofimported goods anddomestic goods, andmanufacturing costsofdomestic goods
Because thesalepriceofimported goods hasbeencontinuously lower, thesalepriceofdomestic
goods hasdecreased fromKRW 5,304 perkg.in1993toKRW 4,994 perkg.inthefirstfourmonths
of1996. Inaddition, thesaleprice ofthedomestic goods hasbeenlower thanthemanufacturing cost
ofthedomestic goods since 1994.
ReductionofthenumberofdairyfarminghouseholdsandlossincurredbyLivestockCooperatives
Thenumber ofdairy farming households inKorea:
1993 28,219
1994 25,667
1995 23,519
asofJune1996 22,725
Korean dairy farming households organize Livestock Cooperatives inorder toprocess or
selltheirproducts. Thenetincome before taxesoftherelevant Livestock Cooperatives which suffered
injury fromimports oftherelevant products subject toinvestigation decreased fromKRW 6.7billion
in1993toKRW4.7billionin1994,andKRW0.2billionin1995.TheLivestockCooperativesrecorded
alossofKRW 17billion during thefirsthalfof1996. Seven livestock cooperatives hadadebtratio
ofmore than1,000%, while 14cooperatives registered losses andsixcooperatives haddepleted their
paid-in capital.
2. Information onwhether thereisanabsolute increase inimports oranincrease inimports relative
todomestic production
Imports oftheproducts subject totheinvestigation:
Year Imports (tons) Imports increase Domestic production
increase
1993 3,217 - -
1994 15,561 +384% +3.2%
1995 28,007 +80% +4.2%
1996 (first half) 16,320 +16.9% +4.4%G/SG/N/10/KOR/1
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3. Description oftheproducts involved
Theimported goods inquestion fallunder thesubheadings 0404.90.00001(products consisting
ofnatural milkconstituents, whether ornotcontaining added sugar orother sweetening matter, except
whey) and1901.90.2000 (food preparations ofgoods ofheadings 0401to0404, notcontaining cocoa
powder ofmore than10%) oftheHarmonized Tariff Schedule ofKorea. Among theproducts which
come under theabove subheadings, thefollowing articles willbeexempted fromthesafeguard measures:
milkmineral (calcium) concentrated product (limited totheuseasanadditive fortheproduction of
mineralfortifiedfood),wheyproteinconcentratedproductandmilkproteinconcentratedproduct(limited
totheuseasanadditive forproduction ofprotein fortified food), Chilean special products andraw
material forproduction ofCerelac ofNestlé which isnota"mixture mainly consisting ofmilkpowder".
Ithasbeenverified thattheimported goods concerned compete directly withdomestic raw
milkandmilkpowder inthattheyareusedassubstitutes forsuchproducts. Theexamination ofactual
commercial usage byindustry andtestanalysis demonstrated thattheimported goods concerned can
beusedassubstitutesinthemanufactureofprocessedmilk,yoghurt,ice-cream,andotherdairyproducts.
4. Proposed measure andexpected timetable forprogressive liberalization
Therelief provided tothedomestic industry experiencing serious injury, orthethreat thereof,
willbetheimposition ofquantitative restrictions ofimports foraperiod offouryears asof
1March 1997. Thequantitative restriction imposed onimports inthefirstyearwillbebased onthe
average ofthequantity imported from 1993 to1995. Thequantity ofimports insubsequent years
willbeincreased by888.9 tons. Thequantity tobeimported shallbedistributed toactual users on
aproratabasis.
Year 1 Year 2 Year 3 Year 4
15,595 tons 16,483.9 tons 17,372.8 tons 18,261.7 tons
5. Proposed dateoftheintroduction ofthemeasure
Thequantitative restrictions described inthisnotification willgointoeffect asof1March 1997.
6. Expected duration ofthemeasure
These measures willremain inforce until28February 2001.
1Heading number 0404.90.0000 hadbeenclassified intooneitembytheKorean HScodewhen thedecision
onwhether there wasaserious injury inthedomestic industry wastaken. Since 1January 1997, however, as
theitems containing modified whey liketheheading number 0404.90.0000 havebeengiven separate HScodes,
theheading number 0404.90.0000 wassubdivided intothefollowing codes:
(a) 0404.10.2109 Modifiedwhey/wheyfromwhichallorpartofthelactose,proteinsorminerals
have been removed/other thanlactose removed, demineralized andwhey
protein concentrates.
(b) 0404.10.2900 Modified whey/other thanwhey from which allorpartofthelactose, proteins
orminerals have been removed.
(c) 0404.90.0000 Other thanwhey andmodified whey.G/SG/N/10/KOR/1
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7. Proposed dateofreview
Amid-term review ofthesafeguard measure willbeconducted within 120daysprior to
29February 1999.
Pursuant toArticle 12.3oftheAgreement onSafeguards, theRepublic ofKorea willconsult
withMembers having substantial interest intheproducts covered bythesafeguard measure, forthe
purpose ofproviding further information. Adelegation from Korea willstayinGeneva during the
week beginning 3February 1997 tomeet withthose Members, before itmakes afinaldecision on
themeasure bytheweek beginning 24February 1997.