[US Election D-50 Trade Check] US Raises Issue of Indirect Exports... "Korea Also Within Indirect Impact Zone"

US Next Administration to Actively Crack Down on Re-Export Evasion
Likely to Continue Biden Administration's Policy
Investigations into Re-Export of Aluminum and Others
Burden from Cases Naming Korea as Transit Point via China

The next U.S. administration plans to actively crack down on so-called 'circumvention exports.' The goal is to completely block the inflow of Chinese goods into the U.S. via third countries, and it is widely expected that this approach will continue the Biden administration’s policy. In the business community, there are concerns that South Korea is frequently identified as a transit country for China, so caution is advised.

Container unloading work at Busan Port Sinsundae Pier. [Image source=Yonhap News]

According to foreign media and the business sector on the 13th, the U.S. government is investigating companies in strategic sectors such as aluminum to determine whether circumvention exports exist as part of its high-tariff policy. In the case of aluminum, there have been instances where South Korean companies were identified as transit points for China’s circumvention exports, making vigilance necessary. A representative case occurred in April last year when the U.S. Department of Commerce preliminarily determined that certain aluminum foil imported from six South Korean companies and three Thai companies used aluminum foil and sheets manufactured in China, violating U.S. import regulations. At that time, the U.S. Department of Commerce judged that South Korean companies circumvented tariffs by simply processing Chinese products and exporting them to the U.S.

If another case arises where South Korea is found to be a transit point for China’s circumvention exports, there is concern that the next government could face considerable disadvantages. Both former President Donald Trump and Vice President Kamala Harris, who are competing for the presidency, are expected to continue a ‘protectionist’ stance that pressures China to protect their own industries if elected.

Vice President Harris is likely to continue the current administration’s tariff policies. Recently, the Biden administration announced measures to raise tariffs up to 100% on electric vehicles, batteries, solar panels, and critical minerals under Sections 232 and 301 of the Trade Act, and to reimpose tariffs on non-steel products in the North American region to prevent Chinese steel and aluminum products from entering duty-free via Mexico. Former President Trump pledged during his campaign to impose tariffs of at least 60% on China and 10-20% on other countries worldwide. During his presidency from 2017 to 2021, he took a tough stance by imposing ‘trade retaliation’ tariffs, so if elected again, he is also expected to take similar actions against China and others.

The Korea International Trade Association’s International Trade and Commerce Institute recently emphasized in a report titled ‘Strengthening U.S. Protectionist Measures and Their Impact Ahead of the Presidential Election’ that South Korean companies should be cautious about this recent trend. Senior Researcher Han Areum stated, "Although most of the U.S. protectionist measures target China, Korean companies should be aware of unexpected impacts," adding, "With the strengthening of U.S. import regulations and expanded investigations into Chinese circumvention exports, there is a possibility that high tariffs could be imposed on South Korean exports." She further emphasized, "It is necessary to continuously monitor import regulation trends and prepare response strategies."