BAE, KIM & LEE LLC and the Korea Trade Remedies Association reviewed the possibility that bonded factories could be used to circumvent trade remedy measures such as anti-dumping duties and discussed ways to improve the system.
BAE, KIM & LEE LLC said on the 14th that it held a policy seminar with the Korea Trade Remedies Association on the 10th at its headquarters in Jongno District, Seoul, under the theme "Tasks arising from changes in the global trade environment: the current state of bonded factory operations and directions for improvement." Government officials, academics, experts from state-run research institutes, and representatives from the steel, chemical, textile, and tire industries attended.
A bonded factory is a system that allows manufacturing and processing while deferring the imposition of tariff on imported materials and supplies. Participants noted that while the system's purpose of supporting exports and processing trade should be maintained, its use in ways that undermine the effectiveness of anti-dumping measures must be prevented.
Ju Seong-jun, an attorney at BAE, KIM & LEE LLC, compared bonded area management systems in major countries such as the United States, the European Union (EU), and Japan in the first session. He explained that while major countries have mechanisms to prevent circumvention of trade remedies through raw material taxation, economic feasibility reviews, and bonded factory licensing reviews, Korea lacks separate screening to assess the possibility of evading trade remedies when licensing bonded factories that use items subject to anti-dumping.
Professor Jo Yeong-jin of Ewha Womans University and Vice President Jeong Jae-ho of the Korea Institute of Public Finance(KIPF) suggested that, because anti-dumping measures are intended to remedy damage suffered by domestic industries from unfair foreign trade, there is a need to reexamine their relationship with the bonded factory system so that they can lead to actual relief.
In the second session, Lee Go-eun, a researcher at the Korea Institute for Industrial Economics & Trade (KIET), analyzed changes in import structures after trade remedies, focusing on the steel industry. Lee explained that although trade remedies were implemented on some steel products such as heavy plate and hot-rolled steel, imports of items subject to the measures, including entries into bonded factories, increased in the first half of this year. In particular, Lee noted that imports of Japanese hot-rolled steel increased compared with before the imposition of anti-dumping duties.
During the discussion, participants also pointed out that differences in expense burdens could arise between corporations with significant capacity to use bonded factories and those without. If some corporations avoid the burden of anti-dumping duties through bonded factories, it could affect fairness among corporations within the same industry.
Participants agreed on the need to review measures such as establishing explicit grounds in the Customs Act or subordinate regulations to restrict the licensing of bonded factories intended to evade trade remedies, while maintaining bonded factories' export support function.