By amending (i) the Customs Act and its Enforcement Decree on February 29, 2024, and (ii) the Enforcement Rules of the Customs Act on March 22, 2024,the Korean Government introduced grounds for the anti-dumping investigation authorities to investigate circumvention dumping. The amendments related to circumvention dumping will take effect from January 1, 2025.
Circumvention dumping refers to the avoidance of anti-dumping duties through minor alterations to the categories of goods subject to such duties, or through assembly in a third country. As this type of behavior can neutralize the effectiveness of anti-dumping duties, the World Trade Organization (the “WTO”) discussed the concept of circumvention in its anti-dumping agreements during the Uruguay Round negotiations and the Doha Development Agenda (the “DDA”) negotiations beginning in 2001. However, ultimately, the anti-dumping duty policy was not introduced into the WTO rules.
As a result of this absence in regulation by the WTO, the US, EU and Australia, among others, have developed their own anti-circumvention systems to sanction circumvention dumping. There had also been calls for Korea to take action against circumvention dumping, and the Korean Government has introduced anti-circumvention policies in response.
- Definition and Types of Circumvention Dumping
The term circumvention dumping refers to the act of “evading the imposition of anti-dumping duties by means of acts prescribed by the Presidential Decree, such as slightly changing the physical characteristics or form of the goods subject to anti-dumping duties” (Article 56 (2) of the Customs Act).
In addition, “minor alteration,” a type of circumvention dumping, is defined as the act of changing the physical characteristics or form, packaging methods, or use of goods in the supplying country to the extent that it does not change the essential characteristics of the goods, and includes cases where the HS Code is changed. In determining what constitutes a minor alteration, consideration needs to be given to differences in the physical properties and chemical composition of the goods under investigation, differences in HS Code, usage of the goods under investigation, differences in production facilities, costs of the alterations, and other matters deemed necessary by the Korea Trade Commission (the “KTC”).
- Procedure for Dumping Investigation
A circumvention dumping investigation can be initiated in the same manner as any other anti-dumping investigation, that is, either through an application or through an ex officio investigation. In the former case, an applicant must file a complaint with the KTC, as well as data and explanatory statements supporting the existence of dumping. The KTC must then review the accuracy and adequacy of the data submitted by the applicant, decide whether to initiate the investigation, and notify the Minister of Economy and Finance of the goods, duration and suppliers subject to the dumping investigation within 30 days starting from the date of the application. The period may be extended by 15 days if necessary.
A circumvention dumping investigation may also be initiated ex officio. In this case, the KTC may request the Commissioner of the Korea Customs Service (the “KCS Commissioner”) to review whether circumvention dumping has taken place. The KCS Commissioner may also voluntarily review whether or not there has been an occurrence of circumvention dumping in the absence of such request and notify the KTC of the results. If the KTC decides to initiate an ex officio investigation, it must notify the Government of the supplier country, the supplier and other stakeholders within ten days from the date of the decision and publish the decision in the Official Gazette.
The investigation of whether or not circumvention dumping has occurred is conducted by the KTC, which may, if necessary, involve officials or experts from relevant administrative agencies.
The KCS Commissioner may seek cooperation from the relevant administrative agencies, domestic producers, importers and domestic stakeholders, including the submission of relevant data, if necessary, in order to determine whether circumvention dumping has occurred. The law stipulates that this procedure is governed by the same provisions for requesting cooperation from interested parties in general dumping investigation proceedings.
The time period provided to respond to the questionnaire is not less than 40 days, and if the interested party fails to submit the data or refuses/obstructs the KTC’s investigation by making it difficult to conduct the investigation or verify the data, the KTC may use available facts and evidence to determine whether circumvention occurred.
The circumvention dumping investigation must be conducted within six months of the date of publication in the Official Gazette, and can be extended by one month if necessary. Based on the results of the investigation, the Minister of Economy and Finance must (i) decide whether to impose anti-dumping duties and which duties should be imposed, and (ii) impose them within eight months of the date of publication in the Official Gazette, or, if there are special reasons, within nine months from the date of publication.
- Imposition of Anti-Dumping Duties
The imposition of anti-dumping duties for circumvention dumping will be based on the anti-dumping duty rate or the base import value of the supplier or supplying country of the dumped goods. However, as described above, a separate anti-dumping duty may be set for suppliers who have caused difficulties in the investigation or verification of data, within the scope of the existing anti-dumping duty or the base import value of the dumped goods. The Minister of Economy and Finance will publish the decision on whether or not to impose an anti-dumping duty in the Official Gazette and notify relevant stakeholders.
Korea’s introduction of circumvention dumping investigations is expected to increase the effectiveness of the KTC’s anti-dumping measures.
The circumvention dumping investigation takes up to nine months from the receipt of an application for investigation to the imposition of duties, which is approximately five months shorter than the original anti-dumping investigation. It also does not investigate the rate of dumping, which eases the burden on domestic industries to apply for the investigation. Not only will this enable effective measures to be taken in response to cases of circumvention dumping, but it will also deter the occurrence of circumvention dumping.
While Korea only stipulates minor alterations as a type of circumvention dumping, the US has defined four types of circumvention dumping, including (i) goods assembled or finished in the US, (ii) goods assembled or finished in a third country, (iii) goods with minor alterations, and (iv) goods developed after anti-dumping measures. The EU has also broadly defined the types of circumvention dumping to include (i) minor alterations, (ii) transshipment through a third country, (iii) reorganization of the sales route and sales type by the exporter or producer, and (iv) component assembly processes in the EU or a third country. It remains a possibility that Korea may also expand its circumvention dumping categories in accordance with other countries.
As the anti-circumvention investigation system will be implemented from January 1, 2025 and applications for investigations will also be accepted from that date, it remains to be seen how the anti-circumvention system will operate in practice.
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