U.S. Set to Impose Quota on Steel Imports from South Korea

After the U.S. announcement of exemption of six of its trade allies including South Korea from import tariffs on steel and aluminum last week, U.S. has announced the imposition of a quota on steel imports coming from South Korea.

According to reports, South Korea has received a quota of 2.68 MnT of steel exports or 70% of annual average South Korea’s steel exports to U.S. during 2015-2017, which will be exempted from new tariffs. In other words, South Korea can export up to 2.68 MnT of steel to U.S. without any tariffs and anything beyond this limit will attract an import duty of 25% on steel.

South Korea’s steel exports to U.S. in 2015 stood at 4.4 MnT (13%), in 2016 at 3.5 MnT (12%) and in 2017 at 3.4 MnT (10%). The average of these exports over  past three years stands at 3.76 MnT and the quota is set at 70% of this average of 3.76 MnT which comes at 2.68 MnT approximately.

Although South Korea is the third largest steel exporter to U.S. and its percentage share in country’s total steel imports has been declining over the past three years, South Korea is China’s top steel importer leading to concerns that the Chinese material, a big threat to U.S. steel sector, can make its way to U.S. via South Korea.

In response to the U.S. imports quota, the South Korean government plans to make more investment and increase the competitiveness of the steel industry by developing more value-added steel in the domestic industry.

South Korea’s concession to U.S. automakers

Now in return for steel tariff exemptions South Korea also gave some concessions to the U.S. automakers.

Under KORUS, U.S. and South Korea’s FTA (Free Trade Agreement), U.S. automakers will now be able to bring in 50,000 vehicles per automaker to South Korea which was earlier 25,000 vehicles per automaker and these vehicles will be required to meet U.S. safety standard and not necessarily South Korean standards.

However, both the countries have agreed that the U.S. tariffs on the import of pick-up trucks from South Korea will be extended by 20 years further until 2041 which was scheduled to phase-out in 2021.