[MUSIC] Hello, everyone, and welcome back. Last session, we talked about the World Trade Organization and the global public procurement principle. The non-discrimination and transparency and procedural fairness were the three key principles of World Trade Organization, the procurement policy principle. And also we talked about the GPA, which is the Government Procurement Agreement where Korea is a member country, along with the US and many other countries. So those country they belong to legal framework of GPA can enter into bilateral, the free trade agreement and also participate their public procurement practice. So today we are going to talk about a specific issue for free trade agreement between US government and Korean government. So we call it in shortened form, KORUS, Korea-US Free Trade Agreement. So let's have a look at it, what's in there. So I'm not going to talk about all other chapters in the Free Trade Agreement because this lecture is focused on global public procurement. I'm going to limit only talk about the article relevant to our lecture. So I'm going to talk about the government procurement versus all other element in articles. So, when you look at free trade agreement between Korea and US, there is a special chapter, chapter 17, fully dedicated for government procurement. So chapter 17 is all about the public procurement, so I want to have a look at it, what it's all about. So, obviously, you don't need to understand each one of them, but at least maybe it is a good benefit for us to understand what's in there and what is not covered under this free trade agreement for Korean company point of view. So your company item or the certain market when you conduct your company analysis and customer analysis, if your product or your services happen to be the limited access or the controlled item, and maybe US Federal market is not for your company. So let's have a look at overall the items stipulated in Article 17. So the article 17, one is general provision in various overall scope of the FTA, Free Trade Agreement. And we have the scope and coverage, section two. So we start to see the general principle of government public procurement agreement in Article 17, section 4. So that basically, general principles of the article 17.4 is the very similar to what we discussed for the GPA agreement principle of non-discrimination and transparency and procedural fairness. So 17.5, we talk about the condition for participation. So this condition for participation, who can participate? And how, and what method, what sort of mechanism we have available for Korean company or US company can participate in public procurement issue and funded by Korean government? And also we have a mechanism and public notice, what sort of notice mechanism we have available, and that is Article 17.6. And we have a technical specification for 17.7. And if you go down various item here, we can see, like at Article 17.9 is modification, how you actually rectify some of the issue. In each government, they have a government working group established, so they will have an issue addressed at regular basis. So let's have a look at the 17 chapter overall spirit. So the 17 section is a key important element for Korean company to consider. So all of the industry mentioned in 17, you are eligible to participate in any public procurement practice funded and issued by US federal government. So there's another provision in Chapter 17. We have a supplementary document which I want to go through a bit more detail. Because Chapter 17, overall general industry, I don't think we need to go into detail. But exception of the general industry, the showing in supplementary document, we call it 17-1, is a very important element where these are the section, actually, where we have set the limit and have special provisions and also have some special access and waiver condition in there. So supplementary document 17 -1 talked about specific detail and operating instruction. And also, the giving us guideline for which agency. For example, US government, as you are well aware of, have federal government on top. You have each state government has different jurisdiction and also different roles and function, and you have local government. Same with the Korean government. We have central government, we have provinces, and we have local government. So GPA, Government Procurement Agreement, is basically country to country. That mean, central government to central government. That does not mean necessarily for the state government will follow same rules and regulation stipulated in free trade agreement. Okay, so we're going to talk about that later on. So overall section of 17-1, we talk about the who would be entitled to issue, or the goods and services and some of the construction industry, and the other provision in there. So there is a number of different agency, for example, US Department of Defense, which is the most significant and the agency for US federal government in terms of their budget allocation and budget expenditure. If you look at 2018 fiscal year, US Department of Defense consume basically more than 66% of entire federal procurement budget. So therefore, US Department of Defense has many different room to maneuver, basically, some of the item is not open for any public procurement of any non-native actor at all. For example, if you are not a US citizen, there are a number of the businesses issued and funded by US Department of Defense, you're basically not eligible to participate. So under Section 17-A, we have a number of different agency, including the Department of Defence, and there are some other agency like the Department of Agriculture, Department of Commerce. They also have a special agency provision where they have different rules apply. So let's have a look at, because US Department of Defense has the most of budget allocated, and then they consume, if you like, the agency in the US federal government. There are many different item under the Federal Supply Code, we call it FSC. So Federal Supply Code is basically, the industry classification to classify the different types of the item or the industry. So, for example, Federal Supply Code 19, which is ships or small craft or floating deck, anything like this nature of the business is not applicable for Korean company to participate. So this is quite significant. If you go through, I'm not going to go through each one of them, but let's have a look at some of the main item. So FSC 20, Federal Supply Code 20 is ship, marine equipment. FSC 2310, is the passenger, it's like a motor vehicle, yeah. And also the FSC 86, textile, fur, apparel, shoe, tent, flag, all this type of item is not actually open for public procurement. So this is quite a important element. And also FSC 84 is clothing, individual equipment, and all this type of thing, also not open for Korean company to enter. As I said earlier, if your company happened to make total item mentioned here, and then you tried to enter or participate in the US federal government procurement, you probably, you may be wasting your time. Because basically market is not open for Korean company, unless you set up your own entity in the United States or any state of the state. And you open your own branch operation, hire people locally, have EIN number, Employer Identification Number, or the TIN number, and classify the local company, you're not basically eligible to participate in this industry. So these are the pretty important thing. And also under Department of Defense, there are special provision for specialty metal, we call it. Some product like even steel with a certain percentage of special item like aluminum and titanium. This sort of the alloy is not basically open for non-US company. So list actually go on, it's very, you can imagine most of the main weapon system, we call it that way, and Federal Supply Code 10, the weapon and FSC 13, Ammunition. All this type of thing is basically not open for non-actor. The Department of Energy also have various the restriction. So anything to do with the nuclear or atomic energy, based on authority of the Atomic Energy Act and foreign entity or foreign government, even we have free trade agreement, not open for Korean company to participate. The Homeland Security also have some provision like that. The interesting the element here that I want to share with you and a lot of people, when you go to the state, you have TSA, okay, Transportation Security Administration. So people know, TSA is a part of the Department of Homeland Security, right? So the TSA procurement is not cover actually under the public procurement, and also for the Coast Guard. US Coast Guard, a lot of people think US Coast Guard is belong to the Department of Defense, but they are not actually part of the Department of Defense. They belong to Department of Homeland Security. So there are some special provision made available for US Coast Guard. And also we have the GSA ,General Service Administration, issue special classification. For example, Federal Supply Code 51, hand tool, or FSC 52, measuring tool, this type of the product is not open for public procurement for the Korean company. So in summary, even we have a free trade agreement with US government, the federal government and also central Korean government, there are many items and not available, basically, under this legal framework. So, the Free Trade Agreement, the chapter 17 is the most important chapter that we need to understand, but there is a special supplementary provision, the 17-1, where we are not eligible for participating any business. So as I said earlier, if you're company product, for example, you are in business of the manufacturing fabric for the uniform clothing, anything like that, or hand tool. So if you are making this type of tool and you're interested in entering US government market, especially federal government market, as a Korean company, even you go through the number and case number and then the register understand SOM, System Order Management, as a vendor. At the end of the day, because your item you talk about is not open and restricts the item, you cannot participate any public procurement business with the US federal government. So next session, we'll talk about a specific regulation, how the US government encourage local industry and sometimes discourage a non-native company coming in to do business with US federal government.
