Samil PwC: "Tariff Reduction Strategies Essential for Korean Defense Industry to Enter US Market"

Joint Webinar with KDIA
Discussing Response Strategies to US Tariffs and Strategic Goods Export Controls

As the second Trump administration in the United States pursues aggressive tariff policies, experts have advised that the defense industry, which has previously benefited from zero tariffs through various agreements and treaties, must now develop tariff reduction strategies to enter the U.S. defense procurement market, the largest in the world.

Samil PwC and the Korea Defense Industry Association (KDIA) announced on the 25th that they jointly held a webinar on the 22nd under the theme "Response Strategies to US Trump Tariffs and Strategic Goods Export Controls." This webinar was a follow-up to last month's event on "Strategies for Entering the US Defense Procurement Market" and was attended by over 150 participants, including export managers from more than 30 defense companies.

Customs and trade experts from the Samil PwC Global Trade Platform attended the webinar, where they explained the tariff policies of the second Trump administration, the system for export controls on strategic goods, and the Certified Exporter Program (CP), while also presenting response strategies.

Soh Juhyun, leader (partner) of the Samil PwC Global Trade Platform, stated, "Earlier this month, a 15% mutual tariff rate agreement was reached with Korea, and on the 18th, 407 types of steel and aluminum derivative products were added to the 50% tariff list, impacting the domestic defense industry." She emphasized, "Just like other sectors, the defense industry must also develop tariff reduction strategies in order to remain competitive."

Specific tariff reduction measures suggested included the strategic structuring of the Bill of Materials (BOM) and confirming the appropriateness of HS Codes to determine tariff applicability. Soh further advised, "It is necessary to maintain thorough documentation for the purpose of 'Reasonable Care' and to manage evidence meticulously to reduce future tax authority risks."

Director Kim Hyunjun, in relation to strategies for responding to strategic goods export controls, remarked, "Recently, Korea’s annual defense exports have reached $10 billion, placing it among the top 10 in the world." He noted, "With the Trump administration expanding the scope of export controls and strengthening management of the Entity List, the need for strategic goods export control management has never been greater." He particularly emphasized that, due to extraterritorial application regulations, it is necessary to manage not only domestic but also U.S. export control regulations, and therefore, active utilization of the Certified Exporter Program (CP, ECP) and strategies to establish export control management systems are essential.

Other topics discussed included the outlook for semiconductor tariffs and corporate response strategies, plans for promoting the Reciprocal Defense Procurement Agreement (RDP-A) following trade agreements in the defense sector, tariffs on civil aircraft components, expected U.S. Customs policies for defense item exports, which tariffs apply if there is a policy change after contract signing, and whether domestic shipbuilders can be properly granted U.S. security clearance for Aegis destroyer maintenance, repair, and overhaul (MRO).

Taesung Kim, leader (partner) of the Defense Industry Center at Samil PwC, said, "I hope this helps domestic defense companies develop practical and specific strategies to address the tariff and regulatory environment," adding, "Reflecting the interest of many defense companies, we plan to hold in-person meetings with interested companies in September."

Taesung Kim, leader of the Defense Industry Center at Samil PwC, is speaking at a webinar held on the 22nd on the topic of "US Trump Tariffs and Strategic Goods Export Control Response Strategies." Samil PwC

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