Toughened measures on trade, tariffs challenge Korean firms

The Korea Times

The Korea Times

Business

Sat, September 30, 2023 | 14:57

Companies

Toughened measures on trade, tariffs challenge Korean firms

Posted : 2021-10-11 16:27

Updated : 2021-10-11 18:49

The company logo of Samsung Electronics is seen at the entrance of its promotional center in Seoul in this file photo. The tech giant is among the Korean companies affected by a series of international measures on cross-border trade and tariffs. Korea Times file

By Yi Whan-woo

A series of toughened international measures on cross-border trade and tariffs are posing challenges for major Korean companies that rely heavily on exports.

The measures include a digital tax to be implemented by the Organization for Economic Cooperation and Development (OECD), the U.S. government's request for global chipmakers to disclose secret business information, the European Union's first-ever carbon border tax plan and Japan's trade curbs exclusively targeting Korea.

The affected companies include: Samsung Electronics, SK hynix, POSCO, Hyundai Steel, Hyundai Heavy Industries (HHI) and Daewoo Shipbuilding & Marine Engineering (DSME).

Concerning the digital tax, Samsung Electronics, along with SK hynix, will be subject to a 15-percent tariff to be imposed on multinational enterprises from 2023 according to the OECD tax scheme announced on Oct. 8, in order to return more profits made by these business groups to the countries where they operate.

Samsung Electronics is already facing pressure from the Joe Biden administration, as it is fated to hand over sensitive business information, such as the types of technology nodes it utilizes, the target revenue of its semiconductor business, inventory levels, management planning strategies and the types of materials used in its semiconductors.

Announced in September, Washington's request comes as U.S. President Joe Biden is moving to reclaim America's leadership in the global chip industry and enhance the global supply chain with allied nations amid a row against China.

The Korean tech giant's quandary comes after it managed to find alternative supply routes for key tech materials other than Japan, following Tokyo's export ban on such materials since 2019 in a diplomatic tit-for-tat with Seoul.

"Samsung Electronics is perhaps the most affected Korean enterprise amid the changing diplomatic and business circumstances," said Shin Yul, a political science professor at Myongji University.

Introduced in July, the EU's carbon tax plan intends to levy border taxes on relevant imports from Korea's steel, shipbuilding, cement, aluminum and electricity industries, collectively labelled as "carbon-intensive" sectors.

The tax plan is expected to start in 2023 with a transition period. If they fail to meet conditions proposed by the EU, Korea's steelmakers are estimated to pay billions of dollars in additional taxes a year from 2030.

"Such an amount will be more than the operating profits of the major steelmakers," an industry source said, adding that POSCO and Hyundai Steel will need to come up with an alternative manufacturing method to replace blast furnaces that emit high levels of carbon dioxide.

POSCO has been using blast furnaces for 40 to 50 years, while Hyundai Steel has been using them for about 10 years.

The domestic shipbuilding industry is known to have emitted some 208,000 tons of greenhouse gases per year, with 60 percent coming from the manufacturing process. With Europe being their major market, HHI and DSME have joined forces with other domestic shipbuilders to go carbon neutral.

yistory@koreatimes.co.kr