The United States is implementing a major reform of its Section 232 tariffs on steel, aluminum, and copper derivative products. This policy change aims to simplify the tariff calculation process and reduce administrative burdens for exporters, particularly benefiting small and medium-sized enterprises. The reform is a response to ongoing trade negotiations and is designed to align with the US-Korea Free Trade Agreement (FTA), providing Korean exporters with certain competitive advantages over countries without an FTA with the US. The Korean Ministry of Trade, Industry and Energy (MOTIE) has analyzed the expected impacts and communicated that the overall administrative burden for companies will be eased, though the effects will differ by industry and product.
The new tariff system changes the basis for calculation from the value of steel or aluminum content in products to the full customs value at import. This adjustment is expected to particularly benefit small and medium-sized exporters by making compliance easier. The number of items subject to Section 232 tariffs will decrease by approximately 17%, equivalent to a reduction of about $2.3 billion in trade volume. Additionally, certain products such as cosmetics and food are now excluded from the tariff scope, further reducing the burden for those sectors. Korean products that meet FTA criteria will continue to enjoy a 0% base tariff, giving them an advantage over competitors from non-FTA countries.
The revised tariffs are scheduled to take effect on April 6, 2024, at 00:01 Eastern Standard Time. For most products, the new system introduces standardized rates of 50%, 25%, or 15% based on the full customs value, replacing the previous variable rates based on material content. Products with less than 15% steel, aluminum, or copper by weight are exempt from Section 232 tariffs. For key export items like high-voltage transformers and certain machine tools, the tariff rate will be reduced from 25% to 15% until December 31, 2027. However, some machinery and electronics may see increased tariff burdens, while automotive parts already subject to Section 232 tariffs will not be further affected.
Frequently asked questions include: Which sectors benefit most from the reform? Sectors such as small and medium-sized exporters, cosmetics, and food producers benefit from reduced administrative and tariff burdens. What are the main changes in tariff calculation? The basis shifts from material content to full customs value, with standardized rates and exemptions for products with low metal content. How does the US-Korea FTA affect these changes? Korean products meeting FTA rules continue to enjoy a 0% base tariff, providing a competitive edge over non-FTA countries. The government will continue to monitor sector-specific impacts and engage with US counterparts to further reduce burdens on Korean exporters.
The Section 232 tariff reform by the US is a notable development for Korean exporters, especially SMEs, as it streamlines administrative processes and reduces the scope of affected products. The shift to a customs value-based calculation and the exclusion of certain items like cosmetics and food are positive steps. However, the impact is not uniform across all sectors, with some machinery and electronics potentially facing higher tariffs. The continued advantage provided by the US-Korea FTA is significant, and the Korean government’s proactive approach to monitoring and negotiating further relief is essential for minimizing negative effects.