Joseon and Seokhwasa Also "Closely Monitoring Possibility of Secondary FDPR Damage"

Exemptions for Phones, Cars, and Washing Machines, but
South Korea Still Subject to FDPR

Without Core Technology or Patents,
Always in Sight... "Frequent Inspections"

U.S. President Joe Biden. (Photo by AP Yonhap News)

[Asia Economy Reporter Moon Chaeseok] Although the U.S. government has excluded consumer goods such as mobile phones, automobiles, and washing machines from the application of the Foreign Direct Product Rule (FDPR) against Russia, it has not completely exempted South Korea, causing companies to remain vigilant. Not only electronics (semiconductor) companies under Export Control List (CCL) categories 3 to 9 but also shipbuilding and petrochemical companies are closely monitoring the situation.

According to the government on the 3rd, Yeohangoo, the head of the Trade Negotiations Office, is scheduled to hold a high-level meeting with officials from the U.S. Department of Commerce regarding South Korea's FDPR application issue. As of the morning of that day, South Korea is still subject to FDPR, with only the news that consumer goods such as mobile phones, automobiles, and washing machines will be excluded. This means that South Korean export companies have not escaped the scope of FDPR. It appears that transactions with the Russian Ministry of Defense, affiliated institutions, and state-owned enterprises related to military users are subject to sanctions, but if not, companies may avoid sanctions; however, it is not a situation to be complacent about.

FDPR is a sanction provision that prohibits exports if foreign companies outside the U.S. use software or designs controlled by the U.S. in their products. It applies to all detailed technologies in seven fields: electronics (semiconductors), computers, communications and information security, sensors and lasers, marine, navigation and avionics, and aerospace. While 32 countries including the 27 European Union (EU) member states, Australia, Canada, Japan, New Zealand, and the United Kingdom, which have joined the U.S. in sanctions against Russia, have been granted exceptions from FDPR application, South Korea has not yet received such an exemption.

Accordingly, some shipbuilding and petrochemical companies have shown a cautious response, continuing to closely watch the situation. FDPR regulations are trade controls that can be applied at any time depending on geopolitical circumstances, requiring constant monitoring. The inclusion of marine and communication information security in the FDPR fields is a burden. A shipbuilding industry official said, "There are no products in shipbuilding that directly apply U.S. software," but added, "However, we are continuously identifying whether foreign-made equipment installed on ships involves technology or software subject to U.S. FDPR." A petrochemical industry official said, "We are checking related matters, keeping open the possibility of indirect impacts and secondary damage caused by shocks to upstream industries such as semiconductors and automobiles."

However, the consensus is that if South Korea holds manufacturing technology patents, it can escape U.S. influence in software and design, so whether FDPR exemptions are granted does not significantly affect business operations. A chemical industry official explained, "The core of FDPR is to prevent U.S. technology from flowing to Russia, but if the production process we use is based on patents we have obtained rather than U.S. licenses, the relevance is low." Based on this logic, companies in refining, battery, and steel sectors said that the application of U.S. FDPR does not greatly hinder their business.

In this regard, legal experts emphasized that trade regulations based on geopolitical factors can be applied at any time, so constant caution is necessary. Park Hyomin, a lawyer at Sejong Law Firm who participated as a speaker in the online seminar titled "Key Contents and Impact of U.S. and EU Sanctions against Russia due to the Ukraine Crisis," held at the Korea Chamber of Commerce and Industry EC Room in Jung-gu, Seoul at 10 a.m. that day, said, "Items belonging to U.S. Export Control List (CCL) categories 3 to 9, such as integrated circuits and semiconductors, personal computers and laptops, and Internet of Things (IoT), can fall under FDPR at any time, so caution is required."

Lawyer Jo Yongjun of Sejong Law Firm also advised, "Regarding transactions that may be subject to sanctions from the U.S. as well as the European Union (EU), it is necessary to specifically review the applicability and effects of sanctions, exceptions, and special license conditions," adding, "Since Russia's countermeasures are also underway, the rapidly changing situation must be continuously monitored."

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