US-China Conflict Sees Record High US Circumvention Investigations Last Year... "Caution on Chinese Materials and Components"

Record High of 26 New Circumvention Investigations Last Year
South Korea Involved in Chinese Investigation for the First Time
Aluminum Foil Anti-Dumping Evasion Allegations

As tensions between the US and China escalate, it has been revealed that the US has increased the number of circumvention investigations on imports to an all-time high. It is pointed out that caution is needed when using Chinese materials and components in exports to the US to avoid a 'tariff bomb.'

On the 18th, the Korea International Trade Association's International Trade and Commerce Research Institute released a report titled "The Surge in US Circumvention Investigations and Response Strategies for Our Companies," containing this information. Circumvention investigations determine whether 'circumvention exports' occur by changing the production or shipping methods of products subject to anti-dumping or countervailing duties to evade existing measures. If detected, US authorities can impose high tariffs.

Last year, there were 26 new US circumvention investigations, the highest since investigations began in 2005. By country, China had the most investigations with 17 cases. Taiwan, Korea, and India each had 3 cases, ranking second. Three cases involved Korean steel products exported to the US via Vietnam.

Notably, among the 17 investigations on China, one case identified Korea as a transit country. This is the first time the US has initiated an investigation on the grounds that China circumvented duties by routing exports through Korea. The Korea International Trade Association stated, "The Korea transit case is suspected of evading anti-dumping duties imposed on aluminum foil," adding, "This is the first case identifying Korea as a transit country." This means that high anti-dumping and countervailing duties imposed on Chinese products have also been applied to Korean aluminum foil exports to the US. In March, the US Department of Commerce issued a preliminary affirmative determination. To be exempted from circumvention measures, it must be proven that Chinese raw materials were not used.

By type, 'assembly/completion in a third country' accounted for the largest number with 22 cases.

The reason US authorities have increased circumvention investigations is that they believe China is circumventing its own anti-dumping and countervailing duties by routing through ASEAN countries such as Vietnam and Malaysia. In particular, many investigations have been conducted on cases where Chinese products are assembled or completed after passing through Vietnam and other countries.

Of the 89 circumvention investigations conducted by the US over 18 years from 2005 to 2022, 63 cases (71%) involved China, overwhelmingly the most. The US has been monitoring steel and aluminum product imports in real time. When importing steel, the 'steelmaking' (melt and pour) country must be reported, and when importing aluminum, the 'smelting and casting' country must be reported.

Yoo Jin Lee, senior researcher at the Korea International Trade Association, said, "The US Department of Commerce is reforming its steel and aluminum inspection system to strengthen supply chain tracking, so caution is needed when using Chinese materials and components in exports to the US," adding, "If products made with Chinese materials do not undergo significant transformation or generate sufficient added value domestically before export to the US, they may be considered circumvention exports."

Of the 89 circumvention investigations, 52 cases (58.4%) involved assembly or completion in a third country. Among these 52 cases, 36 (69.2%) are suspected of routing through ASEAN countries such as Vietnam and Malaysia. The key issue in these investigations is whether the processes performed in the third country (circumvention country) are 'minor or insignificant.' Senior researcher Yoo Jin Lee emphasized, "It is necessary to present sufficient evidence that the third-country processes are not minor and actively demonstrate that there were no special relationships between trading partners before and after the investigation," adding, "Failure to respond sincerely to the investigation may result in disqualification from submitting evidence of Chinese raw materials, so caution is required."

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