Seoul, South Korea - The Seoul government expressed satisfaction on Saturday with the release of the U.S. proposed guidance on tax credits for electric vehicles (EVs), seeing it as a step towards reducing uncertainties related to the 2022 Inflation Reduction Act (IRA).
According to Yonhap News Agency, starting in 2025, EVs qualifying for tax credits should not include critical minerals extracted, processed, or recycled by an FEOC. Additionally, from next year, eligible EVs must not contain battery components manufactured or assembled by an FEOC.
The U.S. guidance, released on Friday (U.S. time), defines a "foreign entity of concern" (FEOC) and outlines how battery components and critical minerals from these entities could affect eligibility for U.S. EV incentives. The Ministry of Trade, Industry and Energy highlighted the significance of this guidance in a press release, noting that it addresses many uncertainties faced by South Korean battery makers in their investment and business operations.
The South Korean government emphasized its commitment to assisting local manufacturers in diversifying the supply chains of critical minerals used in EV batteries. This effort aims to prevent South Korean companies from being disadvantaged under the IRA.
First Vice Minister of Trade, Industry and Energy Jang Young-jin discussed these developments in a meeting with representatives from leading battery makers, including LG Energy Solution, SK On, and Samsung SDS, along with officials from relevant organizations and government agencies.
The ministry confirmed that South Korea will maintain close consultations with the U.S. to minimize any adverse effects the IRA may have on South Korean businesses. For example, under the new guidance, a company is ineligible for tax credits if an FEOC controls a significant portion of its board seats, voting rights, or equity interest.
Seoul is seeking further clarification on specific scenarios, such as the eligibility for tax credits if a private firm from an FEOC, with no links to the government of the FEOC, owns a substantial stake in a company. The South Korean government plans to continue dialogues with the U.S., incorporating feedback from related businesses to ensure a clear and fair application of these guidelines.