South Korea’s tariff rate on US goods is close to zero, trade ministry officials said over March 5-6, reassuring the international physical oil market that WTI Midland cargo flows to Asia’s third-largest crude importer would continue to flourish after US President Donald Trump’s recent claim about high Seoul tariffs.
In a March 4 address to a joint session of Congress, Trump raised concerns about South Korea’s tariff rates, claiming they are four times higher than those of the US. However, officials and sources at the Ministry of Trade, Industry and Economy said that the South Korea-US free trade agreement, which took effect in 2012, has facilitated the elimination of tariffs on the majority of goods exchanged between the two nations.
While South Korea’s most-favored-nation (MFN) applied tariff rate is 13.4%, significantly higher than the US rate of 3.3%, it is important to note that this MFN rate differs from the preferential tariff rates established under the South Korea-US FTA for US goods and energy imports, MOTIE said in a statement.
The MFN tariff rates apply to imports from World Trade Organization (WTO) member countries that do not have a preferential trade agreement with South Korea.
“As of 2024, South Korea’s effective tariff rate for goods imported from the US stands at approximately 0.79%,” a MOTIE official said.
Over the past decade, major South Korean refiners and petrochemical makers, including SK Innovation, Hanwha Total, GS Caltex and Hyundai Oilbank, have taken full advantage of the low US crude import tariff rate.
For South Korea, lighter and sweeter US crude is sometimes considered cheaper than various Saudi and Abu Dhabi grades, largely due to the FTA with the US and the government’s freight rebate scheme.
The FTA enables cost reductions of up to $2/b for WTI Midland crude purchases, according to a trade source from a South Korean refiner’s feedstock trading team in Singapore.
South Korean refiners paid an average of $78.86/b for US crude shipments in January, 99 cents/b lower than the average of $79.85/b paid for Saudi oil barrels received that month, the latest data from state-run Korea National Oil Corp. showed.
KNOC’s import cost data includes freight, insurance, taxes and other administrative and port charges.
South Korea imported 168.43 million barrels of US crude in 2024, up 18.3% from 2023 and marking the largest annual US crude purchase in Asia, according to an analysis by Platts, part of S&P Global Commodity Insights, based on data from KNOC.
Platts assessed WTI Midland crude at a premium of $4.45/b to front-month Dubai on a DES Yeosu basis on March 5. The light sweet US crude premium has averaged $5.23/b so far in the first quarter of 2025, compared with the Q4 2024 average of $4.40/b.
Source: Platts
