Source: Business Korea
The US is imposing high tariffs on Korean steelmakers from all directions. The US Congress laid the foundation in 2015 for such high tariffs by passing the Trade Preferences Extension Act (TPEA) which the US Department of Commerce could use adverse facts available (AFA) and particular market situations (PMSs). The AFA provision is a measure to impose anti-dumping and countervailing duties on accused companies as many disadvantageously as possible to the accused companies unless they hand in materials and data demanded by the US government. The PMS provision is a protective trade means that regards market situations of a specific country abnormal, rejects product cost submitted by companies and impose high tariffs at US authorities’ discretion. With the AFA and PMS provisions, the US can levy more than 50% anti-dumping and countervailing duties which may end up less than 10%.
The US Department of Commerce victimized POSCO, the largest steelmaker in Korea with the TPEA in August 2016. The US department laid 60.93% countervailing and anti-dumping duties on the Korean steelmaker by applying the AFA provision on the grounds that POSCO was insincere in giving the US department materials and data demanded by the department. At that time, the US Department of Commerce obstinately imposed a 60.93% tariff, even citing KEPCO’s electric charges for POSCO as a special preference for POSCO which was not recognized even by the US court. Even though the US Department of Commerce had to receive additional mandatory evidence from POSCO until the investigation was finalized, the department ignored it.
This is because if the US designates areas where POSCO's hot-rolled products are distributed as PMSs, it will create an environment where the US department has to levy high tariffs on other steelmakers. The US government wanted to designate Korea as a distorted market so that it can create a specific market situation (PMS) where high tariffs can be imposed on POSCO. The first victim was Nexsteel. Last year, anti-dumping duty rates on OGTCs jumped from the initial 8% to 46% last year, virtually blocking Nexteel’s export to the US last year. In particular, as the PMS provision applied even to Hyundai Steel this time, all of Korean steelmakers which have used POSCO's hot-rolled steel plates became targets of the US Department of Commerce’s anti-dumping duties.
According to the steel industry and trade law experts on January 4, the US Department of Commerce made an annual preliminary judgment to raise an anti-dumping duty on Hyundai Steel’s WLPs to 19.42 percent from 6.23 percent imposed in 2015. The commerce department said that Hyundai Steel and SeAH Steel (2.53 percent) were exporting oil pipelines to the US at prices lower than in Korea in December 2015, and imposed 6.23 percent and 2.53 percent anti-dumping duties respectively. However, the commerce department did not stop there and made a harsh judgment one more time after the inauguration of the Donald Trump Administration which has emphasized protectionism.
Hyundai Steel which the PMS provision was applied to this time cannot rule out a possibility that an anti-dumping duty on its products will rise to 40%, just like Nexsteel. In particular, the US is also considering announcing a report on investigations based on Article 232 of the Trade Expansion Act which can take super-strong punishment measures such as limiting import volume sooner or later.
The Korean steel industry believes that the measure was an extension of the remark that US President Donald Trump made, “Using US steel for US oil pipelines" when he ordered to build an oil pipeline connecting Canada and the United States in January of 2017. President Trump pull out all the stops to pass a tax reform bill to cut the corporate tax rate from 35% to 21% in order to attract US businesses back to the US mainland and increase investment and create jobs in the US. It was the tax reform bill that made President Trump put on the back burner the US Steel Association’s request to limit Korean and Chinese steel imports or trigger Article 232 of the Trade Expansion Act to impose extremely high tariffs on them, claiming, “Korean and Chinese steel imports threaten US security.” The US Steel Association is a major supporter of President Trump.
After passing the tax reform bill, the Trump Administration is expected to put a spur to infrastructure investment amounting to nearly US$1 trillion in to promote the US economy this year. In order to protect US steel companies, it is necessary to force out Korean steel which is dominating construction sites and the energy infrastructure market in the US. "The Trump administration is aiming to reduce Korea's steel imports via anti-dumping duties on them in advance of expanding its $1 trillion infrastructure investment project to boost domestic demand,” said a professor of trade.
The US steel industry continues to express anger against the Trump administration, which does not invoke Article 232 of the Trade Expansion Act. This is because exports of Korean steel pipes for oil wells to the US increased 188% to 787,561 tons as of October according to the Korea Iron & Steel Association. Moreover, oil pipe exports to the US jumped 57% to 525,854 tons. For this reason, the Korean steel industry expects that the US Department of Commerce will raise tariffs on Korean steelmakers starting from Hyundai Steel and will also trigger Article 232 of the Trade Expansion Act this year.
The Korean steel industry and trade law experts emphasized that the Korean government and the Korean steel industry should wage a full-scale trade war with the US. "The Trump administration is focusing on direct and powerful policies to show its achievements. But such policies have weaknesses,” a trade law expert said. "If Korea feels that a WTO complaint is burdensome, Korea should take this case to the US court to find out who is right and who is wrong.”