SEOUL, July 18 (Yonhap) -- French fashion company Chanel S.A. will soon cut prices of its key items such as garments and handbags by up to 10 percent after a free trade pact between South Korea and the European Union (EU) took effect early this month, industry sources said Monday.

But the French fashion firm has yet to decide the timing of the price cuts, according to the sources. Under the free trade deal, a 13 percent tariff on European-made bags and garments was immediately abolished.

Chanel's envisioned price cuts come after another European luxury brand, Hermes, cut prices of its key items by an average of 5.6 percent starting from last Friday.

Unlike Louis Vuitton and Gucci, Chanel and Hermes ship their products from France, with their products being treated under the free trade pact, the sources said.

Some European luxury brands have come under fire for raising product prices in South Korea before the free trade pact took effect.

The free trade accord, signed in October last year and ratified by lawmakers, is the most ambitious deal that South Korea has ever finalized, and is the first of its kind between an East Asian country and the EU.

The EU is the second-largest trading partner of South Korea, after China, and buys around 20 percent of Korean exports annually.

Last year, trade between the 27-member economic bloc and South Korea totaled $92.2 billion, up around 17 percent from 2009.

Under the deal, Seoul and Brussels will eliminate or phase out tariffs on 96 percent of EU goods and 99 percent of South Korean goods within three years after the accord takes effect.