South Korea’s energy ministry will seek to lower import tariffs on crude oil to help protect the country’s energy-intensive manufacturers suffering from global trade tensions and a possible no-deal Brexit, officials said Monday.
The country’s Ministry of Trade, Industry and Energy will also speed up efforts towards free trade deals with the Middle East and South America under which South Korean refiners can import crude oil from the regions without tariffs.
South Korea currently levies a 3% tariff on imported crude oil. It has lowered the rate to 0.5% on crude oil for making naphtha and 2% on crude for LPG production.
The MOTIE and other government agencies, such as the finance ministry and the customs service, held a meeting Monday with a group of local manufacturers to discuss ways to boost the country’s slowing exports amid lingering uncertainties over global trade disputes and a possible no-deal Brexit.
“We have received requests from local manufactures to lower tariffs on crude oil so as to help address fallouts from global trade tensions,” a MOTIE official said at the end of the meeting.
The local manufacturers also called for the government to conclude FTAs with the Middle East and South America which can help lower their costs for importing crude oil and other raw materials as well as expanding their exports, the official said.
BREXIT MAY HAMPER FORTIES CRUDE IMPORTS
Meanwhile, a separate MOTIE official said the government is discussing ways to protect local buyers of North Sea crude beyond Britain’s upcoming exit from the EU.
“No tariff was one of the key reasons for local refiners to import North Sea crude under the 2012 FTA with the EU,” the official said, noting Britain’s planned departure from the EU could hamper South Korea’s imports of North Sea Forties grade.
“The government is thoroughly preparing for the anticipated departure of Britain from the EU to minimize potential negative impacts,” the official said.
South Korea imported 31.36 million barrels of crude from the UK in 2018, down 8.1% from 2017, according to Korea National Oil Corp.
The country began imports of crude from the UK in 2011, when it received 3.06 million barrels of Forties.
Driven by tax-free conditions for FTA with the EU, crude imports from the UK jumped to 24.77 million barrels in 2012 and further to record 34.11 million barrels in 2017, which accounted for 3.1% of South Korea’s total imports.
The MOTIE official also said the government has not decided yet on whether to extend freight rebates, an arrangement of freight incentives to help increase crude imports from the UK and other non-Middle East suppliers.
South Korea has provided freight incentives for crude imports from regions other than the Middle East since 1982 as part of efforts to reduce the country’s heavy reliance on Middle East crude.
Under the measure, shipments from the Americas, Africa or Europe have been given a freight rebate of the difference to a lifting from the Middle East — up to Won 16 ($0.014) per liter.
The government has considered suspending the freight incentives because South Korea’s dependence on Middle East crude has eased in recent years.
South Korea imported a total of 820.99 million barrels of crude from the Middle East last year, down 10.1% from 913.45 million barrels in 2017.
The share of Middle Eastern crude in South Korea’s total import basket also declined to 73.5% last year, from 81.7% in 2017, 85.9% in 2016 and 82.3% in 2015.
“The government agencies are still discussing the freight incentives issue, and will try to reach a conclusion as early as possible,” the MOTIE official said.
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