"Mandatory Stockpiling of Core Resources for Private Sector and Price Controls During Crises"... Resource Security Act Passed

Completion of the Three Supply Chain Laws

Recently, Chinese customs have suspended the clearance of urea exports to Korea. On the afternoon of December 5 last year, a notice was posted at a gas station in Seoul stating that urea solution is limited to one container per customer.
[Image source=Yonhap News]

In the future, to prepare for resource security crises, not only public entities but also private businesses will be required to compulsorily stockpile key resources. Additionally, in the event of a resource security crisis, rationing systems may be implemented or sales prices controlled to stabilize supply and demand.

According to the Ministry of Trade, Industry and Energy, the National Assembly held a plenary session on the 9th and passed the Special Act on National Resource Security (Resource Security Act) containing these provisions. This law was based on bills proposed by lawmakers Hwang Unha (Democratic Party), Yang Geumhee (People Power Party), and Kim Hanjeong (Democratic Party), and was adopted as an alternative by the National Assembly’s Industry, Trade, Resources, Small and Medium Enterprises Committee before passing through the Legislation and Judiciary Committee and the plenary session.

The Resource Security Act was enacted in recognition of the fact that South Korea depends on imports for over 90% of its energy, amid intensifying resource weaponization and trends by major countries, and the successive occurrence of geopolitical crises such as the Russia-Ukraine war and the Israel-Hamas conflict, making stable management of supply chains in the energy and resource sectors extremely important.

With the passage of the Resource Security Act in the National Assembly, along with the amendment of the Materials, Parts, and Equipment Industry Act (June 13, 2023) and the enactment of the Basic Supply Chain Act (December 26, 2023), the so-called ‘Supply Chain Three Acts’ have been completed.

The Resource Security Act designates not only oil, natural gas, coal, uranium, hydrogen, and critical minerals but also materials and parts for renewable energy facilities as key resources. The government must establish a Basic Resource Security Plan to present strategies and directions for national resource security, including basic directions, vulnerability analysis and response strategies, and supply and demand status and outlook. Additionally, a Resource Security Council chaired by the Minister of Trade, Industry and Energy will be formed to deliberate on important matters related to resource security, including the basic plan.

In normal times, to prepare for resource crises, support will be provided for overseas resource development, stockpile expansion, diversification of import sources, as well as recycling and development of substitute materials for key resources. The law also includes provisions to mandate stockpiling for public and private supply institutions by key resource. It establishes grounds to expand the production base of critical minerals and support emergency mobilization mines.

In the event of a resource security crisis, phased crisis alerts will be issued and a Resource Security Crisis Response Headquarters will be organized and operated. The law also provides grounds for emergency response measures and loss compensation support necessary to stabilize supply and demand of key resources during a crisis. During a crisis, emergency import of overseas developed resources, release of stockpiled resources, increased production at emergency mobilization mines, supply stabilization measures, and setting maximum sales prices will be possible. Supply stabilization measures include allocation and rationing of key resources, emergency imports, export restrictions, operation of supply infrastructure, and use of distribution facilities.

The Resource Security Act will be promulgated after procedures such as government transmission and Cabinet resolution. Following preparations including the establishment of enforcement ordinances and rules, it is scheduled to take effect one year after promulgation.

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