The government is preparing a regulation to bypass export restrictions by slightly reprocessing products from a third country to avoid tariffs. Following the announcement in March to regulate methods of changing import item codes (HS codes) to evade tariffs through 'color camouflage in other countries,' the intention is to control even the 'origin laundering' method of assembling and processing products anew. There are observations that this could prevent damage to the domestic industry caused by steel from China and plywood from Thailand and Indonesia entering through bypass export methods.
According to the Ministry of Trade, Industry and Energy on the 22nd, government-related departments are reviewing measures to establish a legal basis for investigating 'bypass dumping through assembly and processing in a third country.' This is to prepare for the evasion of anti-dumping tariffs by foreign corporations.
Anti-dumping tariffs are a system that imposes an additional tariff equal to the difference between the normal price and the dumping price when the price of imported goods is lower than the normal price, causing harm to the domestic industry.
The government has been implementing the bypass dumping prevention system since January of this year by revising the 'Detailed Operating Regulations on Applications, Investigations, and Determinations for the Imposition of Anti-dumping Tariffs.' This includes provisions for ex officio investigations into bypass dumping and specifies procedures for shortening the timeframe to allow for swift and strong measures.
However, at the time of revising the regulations, it only targeted 'evasion through minor changes within the supplying country' and failed to establish effective measures against 'bypass dumping through third countries.'
'Minor changes' refer to the method of disguising products as having HS codes that are not subject to tariffs by slightly processing them while taking advantage of loopholes in the HS codes that serve as the basis for imposing tariffs.
It has been reported that the domestic steel industry has suffered significant losses due to such methods. The government is currently imposing provisional anti-dumping tariffs of up to 38% and 21.62% on hot-rolled plates and steel plates, respectively, suspected of dumping from China.
Chinese steel companies attempted bypass exports after reprocessing hot plates by painting them or covering H-beams with steel plates. They aimed to exploit the blind spots where color hot plates and other steel structures have different HS codes from those subject to anti-dumping tariffs, thus being exempt from tariffs.
The government has restricted the evasion of anti-dumping tariffs through 'minor changes within the supplying country' starting this year but still has not established effective measures against bypass dumping through third countries.
The government held an economic ministers' meeting, combined with a meeting of ministers for strengthening industrial competitiveness, in March and indicated its intention to respond to 'minor changes in a third country.' Kim Jung-kwan, the new Minister of Trade, Industry and Energy, confirmed in a written submission during the National Assembly's confirmation hearing that he plans to push for regulatory improvements to include types of assembly and processing via third countries in the scope of investigation. This is interpreted as a signal of determination to block bypass exports through third countries.
The government plans to study measures to respond to bypass exports from third countries and may pursue amendments to tariff laws and announcements from the Trade Commission. A government official said, 'The United States and the European Union (EU) have regulations for investigating bypass dumping related to minor changes, assembly, and processing in a third country,' and added, 'We will identify such cases and collect related opinions.'
Once the measures against bypass exports are established, it is expected that Chinese steel and plywood from Thailand and Indonesia will also become subjects of regulation. A government official stated, 'Since steel, including hot plates, is usually not subject to assembly and processing, it will enable us to respond to issues like bypass exports of plywood from countries other than China.'