US Department of Commerce Proposed Excluding Korea from $232 Trillion Tariff Investigation on Imported Cars

2018 Report Released Late... "Considering FTA Renegotiation and Security Relations"

[Asia Economy Reporter Kim Eun-byeol] It has been revealed belatedly that the U.S. Department of Commerce officially recommended to the White House that South Korea be exempted from tariffs during the 2018 investigation under Section 232 of the Trade Expansion Act on imported automobiles. At the time, the Department of Commerce expressed the opinion that the results of the renegotiation of the Free Trade Agreement (FTA) with South Korea and the strong national security relationship should be taken into account.

According to the Korea International Trade Association and foreign media on the 11th, the U.S. Department of Commerce recently disclosed a report investigating the impact of imported automobiles and automobile parts on U.S. national security, conducted under the direction of then-President Donald Trump in 2018. At that time, President Trump ordered the Department of Commerce to conduct this investigation before pushing for a high tariff rate of 25% on imported automobiles and parts based on Section 232 of the Trade Expansion Act. Section 232 allows for urgent import restrictions or high tariffs if foreign imports are judged to threaten U.S. national security.

The Department of Commerce's report was submitted to the White House in February 2019, and the decision on whether to impose tariffs was scheduled for May of that year but was postponed by six months. However, even after that, the White House did not disclose the report and announced a suspension of Section 232 measures.

In the report released after more than two years, the Department of Commerce diagnosed that excessive imports of automobiles and parts have a tangible impact on domestic industries, including unemployment rates, government revenue decline, and loss of technology, and could harm national security.

Specifically, it pointed out that over the past 30 years, the increase in imported automobiles has weakened the manufacturing base in the U.S., resulting in a rapid decline in the innovative technological leadership of the U.S. automobile industry. It expressed particular concern over the significant decrease in the proportion of research and development (R&D) investment in the U.S. automobile industry.

In conclusion, the Department of Commerce stated that if positive agreements favorable to the U.S. automobile industry are not reached in negotiations with other countries, Section 232 measures could be implemented. It recommended imposing tariffs of up to 25% on imports of automobiles and parts such as engines, transmissions, and powertrains, and up to 35% tariffs on imports of sport utility vehicles (SUVs) and crossover utility vehicles (CUVs).

Notably, the Department of Commerce mentioned South Korea as the only country to be considered when deciding whether to exempt specific countries from tariffs.

The Department of Commerce recommended that South Korea be considered for tariff exemption based on its strong national security relationship with the U.S. and the recently improved "agreement." The term "agreement" is interpreted to mean the results of the Korea-U.S. FTA renegotiation.

In the 2018 renegotiation of the FTA with the U.S., South Korea made concessions in the automobile sector, including agreeing to maintain U.S. tariffs on pickup trucks for 20 more years and expanding the application of U.S. safety standards to American cars imported into South Korea. Shortly after the amendment to the agreement, President Trump described it as "wonderful." At the time, there was a prevailing view among government insiders and trade experts that the enactment of the revised Korea-U.S. FTA would exclude South Korea from the application of Section 232, and this has now been confirmed as fact.

Park Tae-ho, Director of the International Trade Research Institute at the law firm Kwangjang (and former head of the Trade Negotiation Office), said, "Since South Korea showed considerable goodwill to the U.S. in the automobile sector during the Korea-U.S. FTA renegotiation, it seems the U.S. side also decided to exclude Section 232 application. Although this report was prepared under the previous administration, I believe the current Biden administration will evaluate it similarly."

This content was produced with the assistance of AI translation services.