"Work Volume Halved, Factory Maintenance Costs in Tens of Millions"... Hwagwan Act Shaking the Foundations of Korean Manufacturing Industry

Small Chemical Companies Hit Hard by Regulations Ahead of Next Year's Law Enforcement
"Application of K-Hwakywanbeop and K-Hwapyeongbeop Means Being Told to Close Down," They Complain

Workers at a plating (surface treatment) company factory are processing chrome-plated products. According to a recent urgent survey conducted by the Korea Surface Treatment Industry Cooperative targeting 116 companies, 94 companies, accounting for 81%, responded that they do not comply with the current chemical control law facility standards.

[Asia Economy Reporter Kim Heeyoon] Small plating company A in Ansan, Gyeonggi-do handles non-explosive chemicals such as sulfuric acid and hydrochloric acid, but ahead of the enforcement of the Chemical Substances Control Act (Chemicals Control Act), it must carry out renovation work to replace the interior of the factory with non-combustible materials. CEO An Mingyu of this company said, "Fires and explosions are already sufficiently regulated under the Industrial Safety and Health Act, and acid mist cannot be avoided in the plating process, but according to the Chemicals Control Act, the factory's fire-resistant structure must be changed to non-combustible materials," adding, "Due to COVID-19, our workload has been cut in half, but we are facing costs of tens of millions of won just for factory repairs." He also said, "We have to stop the factory during construction, and for companies like ours that survive on deliveries, it's frustrating to think about how we can bear those costs all at once."

A small dye company located in Incheon handles about 120 types of dyes and pigments. Due to the nature of the domestic industry mainly producing synthetic dyes, the number of chemicals handled from the manufacturing stage reaches about 500. When the Act on Registration and Evaluation of Chemicals (Chemicals Registration Act) is enforced next year, these 500 substances must be registered according to the application of hazardous substance registration for those used over 1,000 tons. CEO Jo Junghoon (alias) of this company said, "Registering one substance costs tens of millions of won, and including testing costs, expenses increase to hundreds of millions of won," adding, "There are many restrictions on dye manufacturing domestically, so most are imported in semi-processed form from China or overseas, but if domestic companies have to bear the full testing and registration costs, I regret whether we should have moved the factory abroad instead."

Ahead of the enforcement of the Chemical Control Act, a survey conducted by the Korea Federation of SMEs last September revealed that 80.3% of chemical SMEs responded that the grace period for regular inspections of handling facilities should be extended again. Table = Korea Federation of SMEs

Surviving on subsidies... Small and medium enterprises not yet prepared

Small and medium enterprises in plating (surface treatment), dyeing, dyes, and pigments, which use chemicals as their main raw materials, face the risk of closure ahead of the enforcement of the Chemicals Control Act and Chemicals Registration Act. According to a recent survey by the Korea Federation of SMEs targeting 300 chemical companies on the Chemicals Control Act, 80.3% of the surveyed companies responded that "regular inspections should be postponed." This means the field is not yet prepared. Moreover, due to the prolonged COVID-19 pandemic, these companies' sales decreased by an average of 35.8% compared to the previous year, and factory operating rates dropped by 26.8%.

In the surface treatment industry, only toxic substances are used, but under the Chemicals Control Act, they must undergo 413 items of regular inspections, including explosive substance checks and seismic design. According to the Korea Surface Treatment Industry Cooperative, most companies in this industry have fewer than 50 employees, and the average debt ratio exceeds 400%. Due to the nature of the industry, over 60% use leased factories, and many have been surviving on employment retention subsidies since the spread of COVID-19.

Workers at a plating (surface treatment) company factory are packaging tin-plated steel sheets.

"Budget support and realistic postponement are urgent"

According to an urgent survey conducted recently by the Surface Treatment Industry Cooperative targeting 116 companies, 94 companies, or 81%, responded that "they cannot meet the current Chemicals Control Act facility standards." Executive Director Lee Sang-oh said, "Small companies with depleted funds due to COVID-19 must renovate facilities under the Chemicals Control Act, but applying the law itself is tantamount to telling them to close," emphasizing, "Government budget support for environmental regulation facility improvements or realistic postponements are necessary."

It is estimated that about 14,000 chemical companies are subject to the Chemicals Control Act. The products of surface treatment, dye, and pigment companies, which are directly hit, are representative foundational industries supporting domestic manufacturing such as semiconductors, automobiles, home appliances, and textiles. Executive Director Lee expressed concern, saying, "If plating companies are forced into mass closures, the damage to domestic manufacturing will be considerable."

Professor Kwak Noseong, Special Appointment Professor at Hanyang University, said, "The Chemicals Registration Act and Chemicals Control Act impose stricter regulations than those in the U.S. or Japan, putting small chemical companies in a crisis where they are considering closure," adding, "Following last year's Japan whitelist incident, the government's policy to leap forward as a materials, parts, and equipment powerhouse is undermined by environmental regulations shaking the chemical industry, the foundation of the materials industry. To minimize damage, registration and management procedures must be greatly simplified, and a corporate environment recognizing companies' autonomous efforts should be created."

This content was produced with the assistance of AI translation services.