Changing US tariff policy considers ‘nationality’… “‘Preemptive design’ is important”

Daeryun Law Firm Diagnoses U.S. Policy at a Seminar at the Korea Medical Device Industry Association
“Tariff design from the R&D stage… ‘First sale regulations’, ‘FTZ’, etc. must be utilized”

There are suggestions that a sophisticated export strategy utilizing laws and systems is required as U.S. trade policies are threatening domestic medical device price competitiveness.

Solutions to the US tariff policy were discussed at Daeryun Law Firm's 'US Medical Device Market Entry Seminar' held at COEX in Seoul on the 17th and hosted by the Korea Medical Device Industry Association.

Myeong Jae-ho, a customs expert at Daeryun Law Firm who was a speaker at the seminar on this day, explained, “America’s new tariff policy is evolving beyond simply increasing tax rates to considering the ‘nationality’ of products.”

In particular, in the case of cutting-edge medical devices that combine components and technologies from multiple countries, high tariffs may be imposed based on the country of origin of the key components if it cannot be proven in which country the 'substantial transformation' occurred.

Commissioner Myeong pointed out the vulnerabilities of the medical device industry with its complex global supply chain, saying, “Apart from the performance of the finished product, the country of origin of the input components is becoming a new trade barrier that hinders exports.”

He added, “There may be cases where there is a conflict between the parts list submitted for FDA approval and the proof of origin for customs declaration, so if there is no integrated legal review, we may face greater risks.”

Commissioner Myeong proposed ‘preemptive tariff design’ in which legal experts participate from the R&D planning stage as a solution to overcome this double whammy. He emphasized, “The final tariff rate varies depending on which parts are used and which country it is assembled in, so a ‘tariff diet’ strategy that utilizes laws must be developed from the beginning of product development.”

Specifically, they introduced strategies such as ▲product design considering the product classification (HS Code) with low tax rates ▲utilization of the 'first sale regulation', which reports tariffs at the initial transaction price excluding intermediate distribution margins ▲tariff exemption and deferral plans using the 'Foreign Trade Zone (FTZ)', a bonded area in the United States.

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