KITA urges exporters to review trade contracts as US tariff uncertainty drags on

Report on practical precautions and response strategies released

Firms advised to revisit existing contracts, add tariff clauses to new ones

As the United States maintains its high-tariff stance, South Korean exporters should stop relying solely on government-to-government trade negotiations and instead review their trade contracts and build dispute-response systems in advance, according to a new industry report.

The Korea International Trade Association's Institute for International Trade on Tuesday released a report titled "Surviving the US Tariff Wave — Practical Precautions and Response Strategies, Part 3: Contract and Dispute Management," outlining contract management measures to reduce tariff risks in exports to the United States.

The report noted that while a US federal court recently ruled reciprocal tariffs unlawful, the US government has continued its high-tariff policy by invoking Sections 122 and 301 of trade law, leaving exporters in prolonged uncertainty. Companies must therefore review their own contracts and strengthen their capacity to handle disputes, it said.

For existing contracts, the report recommended that companies first examine which party bears the tariff burden under the agreed trade terms, along with force majeure clauses, price adjustment and renegotiation provisions, criteria for allocating tariff refunds, and dispute resolution procedures. It particularly noted that fixed-price contracts make it difficult to be released from performance obligations simply because tariffs have raised costs. Companies should therefore verify whether government measures, tariff increases and regulatory changes are covered as force majeure events. Where necessary, the report also suggested concluding a supplementary agreement that clearly defines which party absorbs additional tariff costs and how refunds are handled.

For new contracts, the report recommended designing a "tariff clause" in advance that defines tariff changes, sets price adjustment benchmarks, specifies cost-sharing arrangements, establishes notification deadlines, and outlines renegotiation and termination procedures. It also advised companies to actively consider using Incoterms to place import-country tariff obligations on the buyer, and added that contracts should clearly assign responsibility for errors in origin determination or tariff classification.

Should a tariff-related trade dispute arise, the report recommended making active use of alternative dispute resolution, or ADR — including negotiation, mediation and arbitration — rather than litigation. Because many trade disputes involve sensitive matters such as supply chains and trade secrets, ADR allows parties to maintain confidentiality and expertise while preserving the business relationship. The report said it is particularly effective to build mediation, which enables swift and flexible dispute coordination, and arbitration, whose awards are enforceable in 172 countries under the New York Convention, into contracts from the outset.

"The legal basis and rates of US tariff policy change so frequently that there are limits to how reactively companies can respond," said Lee Jeong-a, a senior researcher at the Korea International Trade Association. "Managing tariff risks from the contract stage and building internal response capabilities is the most realistic strategy in an uncertain trade environment."

eyre@heraldcorp.com