A barrier to trade?

The Office of the U.S. Trade Representative calls South Korea’s law requiring manufacturers and importers of chemical substances to register and comply with annual reporting requirements a technical barrier to trade.

In its recently published “National Trade Estimate on Foreign Trade Barriers,” it said the law, which took force on Jan. 1, raises concerns about the high cost of complying with the registration and reporting requirements, as well as the “potential release of sensitive business information.”

Domestic manufacturers have also been critical of the act, which demands all companies dealing with chemical substances and those involved in the manufacturing, import and sale of more than 1 ton per year to register, report and be evaluated by authorities. The act was part of efforts to toughen the control of toxic materials. But registration of each material will cost companies from thousands to millions of dollars. Some of their classified technology and materials could also be leaked in the process.

Citing a need for greater transparency and the government’s failure to set aside time for comment on the new law, the USTR requested Korea notify the World Trade Organization (WTO) of the new law and said it will engage with Korean authorities “as appropriate,” raising the possibility of a trade conflict. It could take action if it determines that the interests of any of the U.S. companies that run factories in South Korea, such as DuPont or Dow Chemical, could be hurt by the regulation. Washington has been sensitive about the act ever since Seoul began working on it in 2011. It also expressed concerns in previous reports in 2013 and 2014.

But it pushed the matter further this year, demanding Korea report the law to the WTO and provide additional time for commentary from interested parties before implementation.

The Ministry of Industry, Trade, and Energy maintains that there is little possibility of trade friction with the United States over the law.

But it should give further thought and pay more attention if local and overseas chemical and pharmaceutical companies are vocal in criticizing the law.

Excessive regulations can choke companies in terms of the costs and manpower needed to comply with them and possibly kill their competitiveness. Regardless of what Washington has said, the government should re-examine the regulation to weigh the downsides against the merits for the interests of local industry.