High Tariffs on South Korean Steel Imports into U.S. likely to be lowered

According to the latest updates, U.S. Court of International Trade (USCIT) has prohibited the 'Particular Market Situation' (PMS) which is a method the U.S. Department of Commerce (DoC) has used in imposing high tariffs on South Korean steel. Subsequently South Korean steel companies are anticipating that the court's recent decision will help them avoid massive tariffs.

What happened in the past?

Earlier, in October 2016, the department made a preliminary annual review determination on the OCTG and imposed anti-dumping duties of 8.04 percent, 3.80 percent and 5.92 percent on Nexteel, SeAH Steel and the others, respectively.

In the final determination in April 2017, the U.S. DoC had increased these anti-dumping duties applying new legal tools that allowed for more comprehensive calculations of foreign cost distortions. The department lifted duties on oil country tubular goods to a range of 2.76% to 24.9% from a previous range of about 4% to 6.5%.

The decision was the first to be made under a provision of the Trade Preferences Extension Act of 2015 that allows the Commerce Department to consider a "Particular Market Situation" such as foreign subsidies for raw materials.

In the case of the South Korean oil country tubular goods, the U.S. DoC's decision was based on the rationale that included not only cost calculations for the production of the pipes, but price distortions for the hot-rolled steel used in the pipes that are caused by subsidized electricity.

USCIT's judgement in favour of South Korean steel companies

The USCIT recently made public its judgment regarding oil country tubular goods (OCTG) manufactured by Nexteel, Hyundai Steel, Husteel, AJU Besteel, SeAH Steel and Iljin. These companies had previously filed a suit against the U.S. government, claiming that the department's annual review determination is wrong.

The USCIT told the department to cancel its PMS determination and recalculate its anti-dumping duty rates. The tariff rates applied to the companies are likely to be lowered once the department does so.

According to South Korean steelmakers, the court's decision is expected to block the department from abusing the PMS, although what the USCIT called into question this time is not the PMS itself but how to apply it.