The Office of the United States Trade Representative (USTR) is activating a universal tariff framework based on "Super 301," and plans to impose tariffs of up to 12.5% on Korea on the grounds that it failed to block products made with forced labor. After a February Supreme Court ruling made it difficult to impose a 15% universal tariff, the US has been investigating trade imbalance issues such as forced labor and overproduction in order to levy tariffs based on Section 301 of the Trade Act.
USTR Representative Jamieson Greer appeared on CNBC on Tuesday (local time) and said, "We are investigating specific unfair trade practices in more than 70 countries," adding, "We will release the results report within a few weeks."
After the Supreme Court ruling nullified the universal tariff based on the International Emergency Economic Powers Act (IEEPA), the US has temporarily applied a 10% tariff using Section 122 of the Trade Act as a substitute. However, since tariffs based on Section 122 of the Trade Act can only be imposed for up to 150 days, a new tariff framework must be established by around July 24, when the deadline expires.
Section 301 of the Trade Act, known as "Super 301," is what fills that role. To impose measures such as tariffs based on Section 301 of the Trade Act, a separate investigation procedure is required, and the plan is to wrap this up within a few weeks and restore the universal tariff framework.
Among the issues USTR is using as the basis for its Section 301 investigation — "overproduction" and "insufficient blocking of imports of forced-labor goods" — the outline of the forced labor investigation results has emerged. As a result of investigating 60 countries, USTR determined that 46 countries did not effectively enforce import bans on forced-labor goods and decided to impose a 12.5% tariff. These include Korea, Japan, China, New Zealand, Singapore, India, and Vietnam.
USTR plans to impose a 10% tariff on the remaining 14 countries, including the European Union (EU), Canada, Mexico, Taiwan, and Indonesia, judging that they already have systems banning imports of forced-labor goods or have promised to create similar systems during trade negotiations with the US.
The US has long banned the import of raw materials, components, textiles made with forced labor, or products made based on them. The reasoning is that forced labor is not only unethical but also reduces labor costs to zero, constituting an unfair trade practice.
In this investigation, USTR argued that US trading partners such as Korea failing to sufficiently prevent goods made with forced labor from entering their domestic markets also constitutes an unfair trade practice. For example, if fabric made with forced labor is imported into Korea, processed into clothing products, and then exported to the US, US companies are essentially competing with forced-labor goods. To prevent this, USTR's logic is to impose tariffs even on countries that are not active in blocking imports of forced-labor goods.
The new tariff to be imposed under Super 301 will not apply to imports already subject to separate sectoral tariffs under Section 232 of the Trade Expansion Act. The steel and auto industries, which are already subject to separate sectoral tariffs, had been concerned about the possibility of additional tariffs being levied under Section 301, but can now breathe a sigh of relief. In addition, USTR will exclude items directly linked to US prices or closely related to economic security — such as agricultural and livestock products, critical minerals, oil and natural gas, and chemical and battery raw materials — from the tariff target.
Some are paying attention to the fact that the maximum tariff rate proposed by the US is 12.5%, not 15%. The universal tariff based on the IEEPA imposed a flat 15% tariff regardless of existing tariffs. This was a method that eliminated the tariff benefit of about 2.5% that Korea had enjoyed thanks to the Korea-US Free Trade Agreement (FTA). If the universal tariff based on Super 301 is designed to add the 12.5% Super 301 tariff on top of the US Most-Favored-Nation (MFN) tariff of 2.5%, the benefits of the Korea-US FTA could be revived. A government official said, "Since the executive order has not yet been issued, nothing can be confirmed," adding, "We will communicate with the US side to align as closely as possible with national interests."
USTR plans to receive opinions from each country and hold public hearings until July, centered on the policy proposed that day. The Presidential Office stated, "We will actively communicate with the US to protect the balance of interests under the Korea-US tariff agreement to the greatest extent possible." Yeo Han-koo, Trade Negotiator of the Ministry of Trade, Industry and Energy, also plans to contact Representative Greer in the near future to discuss matters related to this announcement.
