[Contribution] U.S. export product prices, deduction costs and procedures must be checked to respond strategically

The U.S. Court of Appeals for the Federal Circuit (CAFC) ruled on August 29, local time, that the imposition of reciprocal tariffs under the International Emergency Economic Powers Act (IEEPA) was illegal. Last May, the Court of International Trade (CIT) invalidated the entire administrative order based on IEEPA and banned its enforcement, and in this appeal, the Federal Circuit Court of Appeals equally recognized the illegality of drug tariffs and cross-tariffs.

President Trump immediately appealed the decision of the Federal Circuit Court of Appeals. And President Trump said, "This is the most important case among the U.S. Supreme Court cases," and "Our country has a chance to become incredibly rich again, but if we don't win this case, we could become incredibly poor again," and warned that trade agreements signed with other countries, including Korea, could be invalidated.

Even if the Supreme Court rules that the reciprocal tariff measures are illegal, President Trump can replace the reciprocal tariffs with other laws such as Article 122 of the Trade Act, Article 232 of the Trade Expansion Act, Article 338 of the Tariff Act, and Article 301 of the Trade Act, so experts believe that tariff imposition measures will continue during President Trump's term.

Therefore, rather than expecting President Trump's tariff policy to be withdrawn, domestic export companies need to receive government support to minimize damage and at the same time re-establish their export strategies in line with US tariff regulations.

First, you must accurately check the HS code of the export product. Depending on the HS code of the exported product, it must be confirmed as it is determined whether it falls under the item-specific tariffs imposed on aluminum, steel, automobiles, and automobile parts, or is subject to reciprocal tariffs.

Additionally, the country of origin of exported goods must be confirmed. Origin is divided into 'preferential origin' for receiving preferential treatment such as FTA and 'non-preferential origin' for non-preferential purposes such as reciprocal tariffs. Since the purpose of classifying the country of origin is different, it should be noted that even if a product is determined to be of Korean origin according to the FTA origin determination criteria, it may be judged as Chinese origin according to the US non-preferential origin determination criteria.

Tariffs are calculated by multiplying the dutiable value of imported goods by the tariff rate. In order to reduce tariffs, the tariff rate must be lowered or the taxable value must be lowered. Confirming the HS code and country of origin of exported goods is to confirm the accurate tariff rate, but if it is difficult to lower the tariff rate due to changes in the supply chain, etc., measures to lower the customs value must be reviewed.

Currently, domestic export companies are lowering export prices by reducing the margin included in the export price in order to respond to the US tariff policy. However, caution is required when arbitrarily adjusting the price because the U.S. Customs may view the adjustment as an abnormal discount and not recognize the import declaration price.

So, how can we legally reduce the taxable value? Unlike Korea, the United States calculates the taxable value based on FOB (Free on Board) price. In Korea, international transportation freight and insurance are taxed based on CIF (Cost, Insurance, Freight), but in the United States, which is based on FOB, international transportation freight and insurance are not included in the taxable price.

Under U.S. customs law, when selling on EXW (Ex Works) terms, if inland freight and other service costs incurred in the exporting country are not included in the price, they are considered international transportation freight and are not taxed. In the case of sales under Incoterms other than EXW, inland freight and other service costs in the exporting country are specified separately, and costs incurred after the product is placed with a carrier for export to the United States are not taxed as they are considered international freight.

If you utilize this regulation, inland freight charges, terminal costs, forwarder costs, and document issuance costs incurred in Korea can be deducted from the taxable value when reporting imports to the US, which will help reduce customs duties. In addition to the relevant regulations, the U.S. Customs Act stipulates costs that can be deducted from the taxable price, so domestic export companies need to review the costs included in the export price to see whether they can be deducted.
 

Small Business Team

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[Contribution] U.S. export product prices, deductible costs and procedures need to be checked and strategically responded (Shortcut)