Battery Industry: "US 'Concerned Entity' Announcement Causes Temporary Costs in Supply Source Replacement"

US Government Announces FEOC Interim Guidance
Ministry of Industry Holds Public-Private Joint Emergency Response Meeting
Industry: "Using It as an Opportunity for Structural Improvement, Strengthening Presence in North America"

On the 1st (local time), the U.S. government announced provisional guidance on Foreign Entities of Concern (FEOC) under the Inflation Reduction Act (IRA). The domestic battery industry analyzed that temporary costs may arise during the process of supply source replacement. The domestic industry intends to use this opportunity to improve the supply chain structure and strengthen its position in the North American market.

On the 2nd, the Ministry of Trade, Industry and Energy held an emergency public-private joint response meeting chaired by First Vice Minister Jang Young-jin. Attendees included LG Energy Solution, Samsung SDI, SK On, POSCO Future M, LG Chem, EcoPro, the Korea Battery Industry Association, and the Korea Mining Industry Promotion Agency, following the U.S. FEOC announcement.

At the meeting, the impact of the FEOC regulations on the domestic battery industry and future response measures were intensively discussed.

The ministry reported that companies evaluated the FEOC regulations as having a structure similar to the U.S. Semiconductor Act announced last March, so the scope did not greatly deviate from initial expectations. Although the IRA regulations are described in more detail than the Semiconductor Act, requiring careful additional analysis, the ministry stated that with the uncertainty of the regulations now resolved, they will promptly establish and implement response strategies for each key mineral.

Jang Young-jin, First Vice Minister of the Ministry of Trade, Industry and Energy, is presiding over the "Public-Private Joint Response Meeting on the US IRA FEOC" on the 2nd at the Korea Chamber of Commerce and Industry's main conference room in Jung-gu, Seoul, with officials from Samsung SDI, LG Energy Solution, SK On, POSCO Future M, LG Chem, EcoPro, Korea Battery Industry Association, Korea Mining and Resources Corporation, and others in attendance. Photo by Ministry of Trade, Industry and Energy

The Korea Battery Industry Association stated, "Our companies have secured more than 50% of battery cell production in the U.S. through medium- to long-term contracts with U.S. automakers, and since our battery quality and technology are also advanced, it is expected that our position will not be significantly shaken by these regulations." They added, "Although temporary costs may occur during the supply source replacement process, if this is used as an opportunity to improve the supply chain structure, it could rather solidify our position in the North American market."

First Vice Minister Jang Young-jin said, "Ultimately, the FEOC regulations will be an important turning point to make our supply chain self-reliant and elevate the competitiveness of the battery industry to the next level." He added, "The government will urgently inspect the current supply chain by key minerals through the public-private joint Battery Alliance launched last year and actively support companies' efforts to diversify supply sources and secure minerals."

The announced regulations will be finalized after about a month-long public consultation period. The government explained that based on the domestic industry's position identified through the response meeting, it will submit a government opinion letter and continue to convey Korea's stance to the U.S. side through high-level meetings.

According to the FEOC regulations announced by the U.S. Treasury and Energy Departments, entities established or located in, or having major business operations in, foreign concern countries (China, Russia, Iran, North Korea), or those owned, controlled, or directed by the governments of these countries, are considered FEOCs.

If the foreign concern government directly or indirectly holds 25% or more of board seats, voting rights, or shares, it is interpreted as being owned, controlled, or directed by the foreign concern government, and the entity is considered an FEOC. If an FEOC exercises effective control over the extraction, processing, recycling, manufacturing, or assembly of critical minerals, battery parts, or components through license agreements, it is also regarded as being owned, controlled, or directed.

Electric vehicles equipped with batteries containing minerals extracted, processed, or recycled by FEOCs, or parts manufactured or assembled by FEOCs, will be excluded from the tax credit. For parts, this applies from January 2024, and for critical minerals, from January 2025.

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