Government to Use Emergency Tariff Allocation Card... Neon and Krypton Tariffs Likely Reduced to 1-2%

[Asia Economy Sejong=Reporter Kim Hyewon] The government has pulled out the emergency tariff quota card to ease inflationary pressures caused by the Russia-Ukraine conflict. After selecting items with unstable supply and prices, such as rare gases essential for semiconductor processes?Korea's key industry?and international grains used as raw materials for other goods and services, it plans to impose either duty-free or lower tariffs than the standard rates.

According to related ministries on the 7th, the Ministry of Economy and Finance, Ministry of Trade, Industry and Energy, and Ministry of Agriculture, Food and Rural Affairs have decided to expand the application of tariff quotas, which have been used as a policy tool during past inflation surges, to a wider range of items and are conducting a comprehensive survey. They expect that the inflation shock triggered by geopolitical crises, such as international oil prices surpassing $130 per barrel, will directly affect the domestic market from later this month, and plan to select and announce the tariff quota items soon. ▶Related article page 5

The main items under review are neon and krypton, with a likely plan to reduce the current basic tariff rate from 5.5% to around 1-2%. A senior official from the Ministry of Economy and Finance said, "For key items dependent on Russia and Ukraine, like neon and krypton, which are crucial to maintaining competitiveness in core industries, tariff quotas will be temporarily applied if supply conditions do not improve. Although the reduction rate is being determined, tariffs are taxes, so it is difficult to reduce them to 0% as a general principle." A senior official from the Ministry of Trade, Industry and Energy explained, "Since neon gas is also produced domestically, we are reviewing not only the reduction rate but also the quota limits, considering the price gap with imported products."

The government also adjusted tariff quotas seven times in one year during the peak of inflation caused by high oil prices and foot-and-mouth disease in 2011, increasing the number of target items to 116. This year, tariff quotas are applied to 90 regular items under the Customs Act, but with additional regulatory revisions, the number of applicable items is expected to exceed 100 significantly.

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