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Seoul says FEOC guidance reduces uncertainty, will continue close consultation with US

By Yonhap

Published : Dec. 2, 2023 - 11:52

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The Seoul government on Saturday welcomed the release of proposed U.S. guidance on U.S. tax credits for electric vehicles (EVs), noting it will help remove uncertainties surrounding the 2022 Inflation Reduction Act (IRA).

The U.S. released the guidance on Friday (U.S. time), defining a "foreign entity of concern" (FEOC) whose battery components and critical minerals may disqualify EVs from U.S. incentives.

"Our battery makers have been asking for an early release of FEOC requirements, and many uncertainties in their investment and business operations are expected to be greatly removed by their release this time," the Ministry of Trade, Industry and Energy said in a press release.

Under the proposed rules, an EV eligible for tax credits may not contain any critical minerals that were extracted, processed or recycled by an FEOC, starting from 2025. Starting next year, an eligible EV may not contain any battery components that were manufactured or assembled by an FEOC.

The trade ministry said its first vice minister was set to host a meeting later in the day with government and business leaders to review any impact the proposed FEOC guidance will have on local businesses and discuss any necessary steps to offset such an impact.

To this end, the government will continue its close consultation with the U.S. to help minimize any negative impact the IRA may have on South Korean businesses, it added.

For instance, the new guidance stipulates that a company would not be eligible for tax credits if an FEOC holds 25 percent or more of its board seats, voting rights or equity interest.

Seoul is said to be seeking further clarification on whether a company would still not be eligible for tax credits if a private firm from an FEOC that has no link to the government of the FEOC owns a 25 percent stake in the company.

The government "plans to continue its consultation with the U.S. by submitting an additional statement of opinion after gathering the opinions of related businesses," the ministry said. (Yonhap)