Steel Industry's Favorable US Export Outlook... Victory in Tariff Dispute After 3 Years

WTO Rules "Unfair Clause"... US Likely to Appeal 2nd Trial
Steel Industry: "1st Trial Decision Warns Against Punitive Tariff Practices"
Tariffs Not Immediately Lifted Despite 1st Trial Win

[Image source=Yonhap News]

[Asia Economy reporters Hwang Yoon-joo and Joo Sang-don] The steel industry has collectively welcomed the World Trade Organization (WTO) ruling that deemed the ‘Adverse Facts Available (AFA)’ clause, which allows the U.S. to arbitrarily impose high tariffs, unfair. Over the past three years, the industry faced difficult export conditions to the U.S. due to baseless punitive tariffs. With the first-instance victory, the domestic steel industry expects a positive impact on the export environment to the U.S.

A representative from the Steel Association said on the 22nd regarding the WTO ruling, "This means that the U.S. is being cautioned against imposing excessive punitive tariffs to protect its domestic steel industry," adding, "Although export prices cannot be lowered immediately, it could help improve the overall export atmosphere."

Previously, the U.S. government applied AFA to impose anti-dumping and countervailing duties of up to 60.81% on Korean steel and transformers starting from May 2016. AFA is an investigative technique that ignores data submitted by the investigated company and uses adverse facts available to the company to determine the level of measures. In August 2015, the U.S. amended its tariff law to significantly strengthen the discretion of investigative authorities in rejecting actual data submitted by exporters and selecting substitute data when applying AFA.

According to the steel industry, from May 2016 to March 2018, about three years during which the U.S. applied the AFA regulation, high tariffs of approximately 58.68% to 59.00% were imposed on Korean products such as galvanized steel sheets, cold-rolled steel sheets, and hot-rolled steel sheets. POSCO (hot-rolled and cold-rolled steel sheets), Hyundai Steel (galvanized, hot-rolled, and cold-rolled steel sheets), and Dongkuk Steel (galvanized and color steel sheets) faced difficulties as they export highly competitive automotive steel sheets and high value-added products to the U.S. market.

However, this victory does not mean that anti-dumping duties will be immediately withdrawn. The U.S. is highly likely to file an appeal against the ruling. The U.S. can appeal within 60 days after the circulation of the panel report. If the U.S. appeals, the dispute will move to the WTO Appellate Body, which serves as the final adjudicator. The problem is that there are currently no members of the Appellate Body, which could indefinitely prolong the litigation.

Since mid-2017, the U.S. has refused to appoint appellate members, and from December 2019, two of the three required appellate members have been vacant, leaving only member Hong Zhao, effectively paralyzing the Appellate Body. However, member Hong retired in November last year. If the U.S. continues to refuse appointments, predicting the timing of the final ruling will become difficult.

Kang In-soo, professor of economics at Sookmyung Women’s University and former president of the Korean International Trade Association, said, "Although U.S. President Joe Biden emphasizes the restoration of multilateralism, it is a reorganization of a U.S.-centered trade system, and there has been no statement about normalizing WTO functions," adding, "Since there are disagreements about WTO reform, there is no urgent reason to appoint appellate members, so the current state without a final ruling could continue for a long time."

The steel industry expects that even if the period until the final ruling is prolonged, the U.S.’s practice of imposing punitive tariffs will somewhat subside. A steel industry official evaluated, "Going forward, the U.S. can be restrained from actively applying the AFA regulation," adding, "This will make it easier for Korean steel companies to respond."