(o) Provision and transfer of financial information, and financial data processing and related software by suppliers of other financial services; and
(p) Advisory, intermediation, and other auxiliary financial services on all the activities listed in subparagraphs (e) through (o), including credit reference and analysis, investment and portfolio research and advice, advice on acquisitions and on corporate restructuring and strategy;
financial service supplier of a Party means a person of a Party that is engaged in the business of supplying a financial service within the territory of that Party;
FSS means the Financial Supervisory Service (9) established under Korea's Act on the Establishment, etc. of Financial Supervisory Organizations;
investment means "investment" as defined in Article 11.28 (Definitions), except that, with respect to "loans" and "debt instruments" referred to in that Article:
(a) a loan to or debt instrument issued by a financial institution is an investment only where it is treated as regulatory capital by the Party in whose territory the financial institution is located; and
(b) a loan granted by or debt instrument owned by a financial institution, other than a loan to or debt instrument issued by a financial institution referred to in subparagraph (a), is not an investment;
for greater certainty, a loan granted by or debt instrument owned by a cross-border financial service supplier, other than a loan to or debt instrument issued by a financial institution, is an investment for purposes of Chapter Eleven (Investment), if such loan or debt instrument meets the criteria for investments set out in Article 11.28 (Definitions);
investor of a Party means a Party or state enterprise thereof, or a person of a Party, that attempts to make, is making, or has made an investment in the territory of the other Party; provided, however, that a natural person who is a dual national shall be deemed to be exclusively a national of the State of his or her dominant and effective nationality;
new financial service means a financial service not supplied in the Party's territory that is supplied within the territory of the other Party, and includes any new form of delivery of a financial service or the sale of a financial product that is not sold in the Party's territory;
person of a Party means "person of a Party" as defined in Article 1.4 (Definitions) and, for greater certainty, does not include a branch of an enterprise of a non-Party;
public entity means a central bank or monetary authority of a Party, or any financial institution owned or controlled by a Party; for purposes of Chapter Sixteen (Competition- Related Matters), a central bank or monetary authority ofa Party, or any financial institution that performs a financial regulatory function and is owned or controlled by a Party, (10) shall not be considered a designated monopoly or a state enterprise; and
self-regulatory organization means any non-governmental body, including any securities or futures exchange or market, clearing agency, or other organization or association, that exercises regulatory or supervisory authority over financial service suppliers or financial institutions, by statute or delegation from central, regional, or local governments or authorities; for purposes of Chapter Sixteen (Competition-Related Matters), a self-regulatory organization shall not be considered a designated monopoly.
Annex 13-A. CROSS-BORDER TRADE
UNITED STATES
Insurance and insurance-related services
1. Article 13.5.1 applies to the cross-border supply of or trade in financial services as defined in subparagraph (a) of the definition of cross-border supply of financial services in Article 13.20 with respect to:
(a) insurance of risks relating to:
(i) maritime shipping and commercial aviation and space launching and freight (including satellites), with such insurance to cover any or all of the following: the goods being transported, the vehicle transporting the goods, and any liability arising therefrom; and
(ii) goods in international transit; and
(b) reinsurance and retrocession, services auxiliary to insurance as referred to in subparagraph (d) of the definition of financial service in Article 13.20, and insurance intermediation such as brokerage and agency as referred to in subparagraph (c) of the definition of financial service in Article 13.20.
2. Article 13.5.1 applies to the cross-border supply of or trade in financial services as defined in subparagraph (c) of the definition of cross-border supply of financial services in Article 13.20 with respect to insurance services.
Banking and other financial services (excluding insurance)
3. Article 13.5.1 applies only with respect to:
(a) the provision and transfer of financial information and financial data processing and related software as referred to in subparagraph (0) of the definition of financial service in Article 13.20; and
(b) advisory and other auxiliary services, excluding intermediation, relating to banking and other financial services as referred to in subparagraph (p) of the definition of financial service in Article 13.20.
KOREA
Insurance and insurance-related services
4. Article 13.5.1 applies to the cross-border supply of or trade in financial services as defined in subparagraph (a) of the definition of cross-border supply of financial services in Article 13.20 with respect to:
(a) insurance of risks relating to:
(i) maritime shipping and commercial aviation and space launching and freight (including satellites), with such insurance to cover any or all of the following: the goods being transported, the vehicle transporting the goods, and any liability arising therefrom; and
(ii) goods in international transit;
(b) reinsurance and retrocession;
(c) services auxiliary to insurance, such as consultancy, (11) risk assessment, (12) actuarial and claim settlement services; and
(d) insurance intermediation, such as brokerage and agency as referred to in subparagraph (c) of the definition of financial service in Article 13.20, of insurance of risks related to services listed in subparagraphs (a) and (b) of this paragraph.
5. Article 13.5.1 applies to the cross-border supply of or trade in financial services as defined in subparagraph (c) of the definition of cross-border supply of financial services in Article 13.20 with respect to services auxiliary to insurance, such as consultancy, actuarial, risk assessment, and claim settlement services.
Banking and other financial services (excluding insurance)
6. Article 13.5.1 applies only with respect to:
(a) the provision and transfer of financial information; (13)
(b) the provision and transfer of financial data processing and related software relating to banking and other financial services as referred to in subparagraph (0) of the definition of financial service in Article 13.20, by no later than two years from the date this Agreement enters into force; and
(c) advisory and other auxiliary services, excluding intermediation, relating to banking and other financial services as referred to in subparagraph (p) of the definition of financial service in Article 13.20. This commitment applies to the supply of credit rating, credit reference and investigation, general fund administration, indirect investment vehicle appraisal, and bond appraisal with regard to securities issued in Korea (14) only to the extent that Korea allows the supply of these services with respect to such assets. This commitment does not apply to (i) credit rating of enterprises in Korea; or (ii) credit reference and investigation undertaken for purposes of lending and other financial transactions in Korea with respect to individuals or companies in Korea. Once Korea allows the supply of certain of these services, it may not subsequently prohibit or limit the supply of such services.
Annex 13-B. SPECIFIC COMMITMENTS
Section A. PORTFOLIO MANAGEMENT
United States
1. The United States shall allow a financial institution organized outside its territory to provide the following services to a collective investment scheme located in its territory:
(a) investment advice; and
(b) portfolio management services, excluding
(i) trustee services; and
(ii) custodial services (15) and execution services, that are not related to managing a collective investment scheme.
2. For greater certainty, paragraph 1 is subject to Articles 13.1 and 13.5.3.
3. For purposes of paragraph 1, collective investment scheme means an investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940.
Korea
4. Korea shall allow a financial institution organized outside its territory to provide investment advice and portfolio management services to the manager of a collective investment scheme located in its territory, provided that the scope of the services does not include:
(a) trustee services;
(b) custodial services; and
(c) execution services that are not related to managing a collective investment scheme.
This paragraph applies to the supply of investment advice or portfolio management services with regard to won-denominated assets only to the extent that Korea allows the supply of these services with respect to such assets. Once Korea allows the supply of certain of these services with regard to Korean won-denominated assets, it may not subsequently prohibit or limit the supply of such services. Korea will consult with the United States with respect to the liberalization of these services no later than two years after the date this Agreement enters into force.
5. For greater certainty, paragraph 4 is subject to Articles 13.1 and 13.5.3. 6. For purposes of paragraph 4, collective investment scheme means: (a) an investment trust reported to the Financial Supervisory Commission (FSC) pursuant to the Indirect Investment Asset Management Business Act (LAMB Act); and
(b) an investment company registered with the FSC pursuant to the TAMB Act.
Section B. TRANSFER OF INFORMATION
Each Party shall allow a financial institution of the other Party to transfer information in electronic or other form, into and out of its territory, for data processing where such processing is required in the institutionâs ordinary course of business. Korea shall give effect to this commitment no later than two years after the date this Agreement enters into force.
Section C. PERFORMANCE OF FUNCTIONS
1. The Parties recognize the benefits of allowing a financial institution in a Party's territory to perform certain functions at its head office or affiliates located inside or outside the Party's territory. To the extent practicable, each Party should allow such an office or affiliate to perform these functions.
These functions generally include, but are not limited to:
(a) trade and transaction processing functions, including confirmation and statement production;
(b) technology-related functions, such as data processing, (16) programming, and system development;
(c) administrative services, including procurement, travel arrangements, mailing services, physical security, office space management, and secretarial services;
(d) human resource activities, including training and education;
(e) accounting functions, including bank reconciliation, budgeting, payroll, tax, account reconciliation, and customer and proprietary accounting; and
(f) legal functions, including the provision of advice and litigation strategy.
2. Nothing in paragraph 1 prevents a Party from requiring a financial institution located in its territory to retain certain functions.
3. For greater certainty, a financial institution located in the territory of a Party retains ultimate responsibility for compliance with requirements applicable to those functions performed by its head office or affiliate.
Section D. TRANSPARENCY
The United States welcomes Korea's ongoing initiative to expand and enhance transparency, noting in particular the adoption by the FSS of the Operational Rule on Administrative Guidance and the introduction of the no-action letter mechanism. Korea shall, to the extent practicable, continue its existing practice of issuing in writing any administrative guidance to a financial institution or cross-border financial services supplier. At the request of an affected party, Korea shall put any oral administrative guidance provided into writing and post it on a public Internet site. During any review of previously issued administrative guidance, Korea shall provide interested parties an opportunity to comment on that guidance.
Section E. INSURANCE COMPLAINT METHODS AND PROCEDURES
Each Party should ensure that its system for public disclosure of data on complaints filed with regard to insurance suppliers fairly takes into account the relative size of such suppliers. Each Party shall ensure that aggregate complaint information is provided in a transparent manner, such as in a complaint index ratio format, grade format, or other reasonable format and include well documented definitions and explanations of calculation methodology. Any public disclosure of the number of complaints filed with respect to an insurance supplier should also disclose the number of such complaints that the authorities found to be valid.
Section F. SECTORAL COOPERATIVES SELLING INSURANCE
1. The regulation of insurance services supplied by a sectoral cooperative should not provide the cooperative a competitive advantage over private suppliers of like insurance services. To the extent practicable, a Party should apply the same rules to services supplied by such cooperatives that it applies to like services supplied by private insurers.
2. To this end, the FSC should exercise regulatory oversight over services supplied by sectoral cooperatives. At a minimum, Korea shall provide that no later than three years after the date this Agreement enters into force, solvency matters related to the sale of insurance by the National Agricultural Cooperative Federation, the National Federation of Fisheries Cooperatives, the Korea Federation of Community Credit Cooperatives, and the National Credit Union Federation of Korea shall be subject to regulation by the FSC.
3. The Insurance Working Group established in Annex 13-C shall address the need for additional steps to achieve the objectives set out in paragraphs 1 and 2.
Section G. SUPERVISORY COOPERATION
The Parties support the efforts of their respective financial regulators to provide assistance to the regulators of the other Party to enhance consumer protection and those regulators' ability to prevent, detect, and prosecute unfair and deceptive practices. Each Party confirms that its financial regulators have the legal authority to exchange information in support of those efforts. The Parties encourage financial regulators to continue their ongoing efforts to strengthen this cooperation through bilateral consultations or bilateral or multilateral international cooperative mechanisms, such as memoranda of understanding or ad hoc undertakings.
Section H. GOVERNMENT PROCUREMENT
1. Notwithstanding Article 13.1.4, each Party shall apply Articles 13.2. and 13.3 with respect to the acquisition or procurement of the following services to the extent this Chapter applies to measures adopted or maintained by the Party relating to activities or services set out in subparagraphs (a) and (b) of Article 13.1.3:
(a) services relating to the sale, redemption, and distribution of central government debt;
(b) services relating to the holding of central government fiscal and depository accounts; and
(c) services relating to the management of the following assets:
(i) in the case of the United States, assets of federal government employees held by the Federal Retirement Thrift Investment Board as a fiduciary; and
(ii) in the case of Korea, assets of the Korea Investment Corporation.
2. Korea shall apply Article 13.5.1 with respect to the services described in subparagraph 1(c) (ii) to the extent that the Korea Investment Corporation chooses to acquire or procure those services on a cross-border basis.
Section I. EXPEDITED AVAILABILITY OF INSURANCE
The Parties recognize the importance of maintaining and developing regulatory procedures to expedite the offering of insurance services by licensed suppliers.
Korea
1. The United States welcomes Korea's plan to adopt policies and procedures based on a negative list approach (17) to the product filing process no later than one year after the date this Agreement enters into force. Korea requires prior product filing before the introduction of a new insurance product except in cases where the product satisfies criteria (18) set forth by the FSC in the Regulation on Supervision of Insurance Business.
Section 8 of this regulation establishes the review period for products filed with the FSS. Korea requires product filing for all Bancassurance products.
United States
2. Recognizing the principles of federalism under the U.S. Constitution, the history of state regulation of insurance in the United States, and the McCarran-Ferguson Act, the United States welcomes the efforts of the National Association of Insurance Commissioners (NAIC) relating to the availability of insurance services as expressed in the NAIC's "Statement of Intent: The Future of Insurance Regulation," including the initiatives on speed-to-market intentions and regulatory re-engineering provided under Part II of the Statement of Intent.
Annex 13-C. FINANCIAL SERVICES COMMITTEE
Authorities Responsible for Financial Services
1. The authorities responsible for financial services are:
(a) for Korea, the Ministry of Finance and Economy; and
(b) for the United States, the Department of the Treasury for banking and other financial services and the Office of the United States Trade Representative, in coordination with the Department of Commerce and other agencies, for insurance.
Elaboration of the Agenda of the Financial Services Committee
2. The Parties anticipate discussing a range of issues in the Financial Services Committee, including measures adopted or maintained by central and regional levels of government that affect the supply of financial services by financial institutions or financial service suppliers of either Party. Before any meeting of the Committee, the authorities specified in paragraph 1 will provide their counterparts with a list of financial services issues for the Committee’s consideration, including any concerns of financial institutions or financial service suppliers that a Party chooses to raise.
Insurance Working Group
3. The Parties recognize the importance of discussions between their respective insurance regulatory authorities to further cooperation, coordination, and mutual understanding of issues relating to the supply of insurance in their territories. To this end, the Parties hereby establish an Insurance Working Group comprising relevant officials of each Party’s financial services regulatory structure. The Working Group shall address transparency; actions necessary to ensure competitive equality between Korea Post, sectoral cooperatives selling insurance, and private insurers; financial supervision, including regulations at the central and regional levels of government, the development, adoption, and review of changes in policy; the different regulatory structures of the Parties; and other issues of mutual interest. Unless the Parties otherwise agree, the Working Group shall meet once each year after the date this Agreement enters into force, and each Party shall select, the meeting location every other year. The Working Group shall inform the Joint Committee of the results of each meeting in accordance with Article 13.16, unless the Parties otherwise agree.
Chapter Fourteen. TELECOMMUNICATIONS
Article 14.1. SCOPE AND COVERAGE
1. This Chapter applies to measures affecting trade in telecommunications services, including:
(a) measures relating to access to and use of public telecommunications services;
(b) measures relating to obligations of suppliers of public telecommunications services;
(c) other measures relating to public telecommunications networks or services; and
(d) measures relating to the supply of value-added services.
2. Except to ensure that an enterprise operating a broadcast station or cable system has continued access to and use of public telecommunications services, this Chapter (except for Article 14.20) does not apply to any measure relating to broadcast or cable distribution of radio or television programming.
3. Nothing in this Chapter shall be construed to:
(a) require a Party, or require a Party to compel any enterprise, to establish, construct, acquire, lease, operate, or provide telecommunications networks or services not offered to the public generally; or
(b) require a Party to compel any enterprise exclusively engaged in the broadcast or cable distribution of radio or television programming to make available its broadcast or cable facilities as a public telecommunications network.
Section A. Access to and Use of Public Telecommunications Networks and Services
Article 14.2. ACCESS AND USE
1. Each Party shall ensure that service suppliers of the other Party have access to and use of any public telecommunications network or service, including leased circuits, offered in its territory or across its borders, on reasonable and non-discriminatory terms and conditions, including as set out in paragraphs 2 through 6.
2. Each Party shall ensure that service suppliers of the other Party are permitted to:
(a) purchase or lease and attach terminal or other equipment that interfaces with a public telecommunications network;
(b) provide services to individual or multiple end-users over leased circuits; (1)
(c) connect owned or leased circuits with public telecommunications networks and services or with circuits leased or owned by another enterprise;
(d) perform switching, signaling, processing, and conversion functions; and
(e) use operating protocols of their choice in the supply of any service.
3. Each Party shall ensure that service suppliers of the other Party may use public telecommunications services for the movement of information in its territory or across its borders, including for intra-corporate communications, and for access to information contained in databases or otherwise stored in machine-readable form in the territory of either Party.
4. Notwithstanding paragraph 3, a Party may take such measures as are necessary to ensure the security and confidentiality of messages, provided that such measures are not applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination or disguised restriction on trade in services.
5. Each Party shall ensure that no condition is imposed on access to and use of public telecommunications networks and services, other than as necessary to:
(a) safeguard the public service responsibilities of suppliers of public telecommunications networks and services, in particular their ability to make their networks or services available to the public generally; or
(b) protect the technical integrity of public telecommunications networks or services.
6. Provided that conditions for access to and use of public telecommunications networks and services satisfy the criteria set out in paragraph 5, such conditions may include:
(a) a requirement to use specified technical interfaces, including interface protocols, for interconnection with such networks or services;
(b) requirements, where necessary, for the inter-operability of such networks and services; and
(c) type approval of terminal or other equipment that interfaces with the network and technical requirements relating to the attachment of that equipment to such networks.
Section B. Suppliers of Public Telecommunications Services
Article 14.3. OBLIGATIONS RELATING TO SUPPLIERS OF PUBLIC TELECOMMUNICATIONS SERVICES (2)
Interconnection
(a) the availability, provisioning, rates, or quality of like public telecommunications services; and