20% of Korean SMEs Report Higher Tariffs After U.S. Section 232 Revision

56% "Unaware of Applicable Annex"
Average Tariff Rate Increased by 16.2 Percentage Points

Due to the revision of Section 232 tariffs under the U.S. Trade Expansion Act, South Korean small and medium-sized enterprises (SMEs) are experiencing increased export burdens. In particular, nearly 40% of SMEs producing steel, aluminum, and copper-containing products that are subject to high tariff rates expressed concerns about a potential deterioration in their exports.

The Korea Federation of Small and Medium Business announced the results of a survey on the "Section 232 tariff revision" conducted with 600 SMEs related to steel, aluminum, and copper on June 22. The survey was carried out from April 29 to May 29.

This revision stems from the U.S. changing its tariff calculation method for steel, aluminum, and copper products from April 6. Previously, tariffs were imposed based on the value of metal content, but after the revision, tariffs of up to 50% are applied to the total product price according to Annex classification.

The results show that 56.3% of responding companies said they have not yet identified which Annex their export items fall under. "Annex II" was the most common response at 16.5%, followed by "Annex III" (11.0%), "Annex I-A" (8.3%), and "Annex I-B" (7.8%).

After the tariff revision, 20.8% of companies reported that their tariff rates had increased. For these companies, the average increase in tariff rates was 16.2 percentage points compared to before the revision. In contrast, only 2.8% said that their tariff rates had decreased.

Export prospects also varied by Annex. Among companies under "Annex I-A," where a 50% tariff is imposed on the total product price, 40.0% expected export conditions to the U.S. to worsen. For companies under "Annex I-B," subject to a 25% tariff, 38.3% expected deteriorating conditions. Meanwhile, for Annex II and III, where tariff burdens are relatively lower, 67.7% and 42.4% respectively responded that "there will be no change."

Korea Federation of Small and Medium Business Report. Korea Federation of Small and Medium Business

Among companies anticipating worsening exports, the top difficulty cited was "deterioration of profitability due to increased tariff burdens" (76.1%). This was followed by "requests from buyers to modify contract terms such as price and delivery conditions" (37.3%) and "delays and cancellations of transactions" (25.4%).

When asked about countermeasures, the most common response was "negotiating price and transaction terms with buyers" (52.2%), followed by "efforts to reduce costs" (43.3%), "seeking alternative markets" (18.7%), and "securing new local buyers" (15.7%).

Regarding government support priorities, companies most frequently cited "establishing cost reduction measures" and "strengthening negotiations with the U.S. for reclassification of items by Annex" (40.3% each). This was followed by "support for pioneering third-country markets" (22.4%) and "expanding tariff consulting for HS code changes" (20.1%).

A fastener manufacturing company commented, "Previously, we paid a tariff of about 25% calculated based on steel content value, but after being classified under Annex I-A, 50% of the total product price is now subject to tariffs," adding, "Manufacturing costs and labor costs are now included in the tariff calculation base, causing a sharp increase in our burden."

Heejung Kim, Head of the Economic Policy Division at the Korea Federation of Small and Medium Business, stated, "SME products with a high proportion of processing costs such as manufacturing and labor are now structurally faced with much greater tariff burdens," and added, "Government negotiations with the U.S. are needed to ensure a rational reclassification of annexes that reflects the real price structure of products."

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