South Korea has grown concerned over the U.S. Inflation Reduction Act(IRA) signed into law in August amid Washington’s efforts to keep Beijing in check.

The law mainly seeks to tackle climate change, reduce health care insurance costs for Americans and impose a 15-percent corporate minimum tax rate for big U.S. corporations.

The clause that has South Korea worried is the stipulation limiting tax credits to purchases of electric vehicles(EV) for which final assembly occurs within North America. Seoul is concerned as EVs sold by South Korean companies, such as Hyundai Motor and Kia, are all assembled overseas, disqualifying them from the tax subsidies.

South Korea’s trade minister and lawmakers have visited the U.S. to convey Seoul's demands over the IRA, including easing requirements for the final assembly of EVs and specifications that minerals and parts for batteries should come from North America as well as expanding the application for commercial EVs.

The IRA excludes passenger electric vehicles assembled outside North America from the EV tax credit, but commercial EVs are not subject to the law’s manufacturing-based restrictions.

Seoul also proposed that the U.S. include a three-year grace period in the implementation of the EV provision for Korean companies that plan to invest in the U.S. as Hyundai is set to complete construction of an EV plant in the state of Georgia in the latter half of 2024.

While Washington has signaled the possibility of adjusting its interpretation of the section on the scope of tax credit eligibility for commercial EVs, it has repeatedly conveyed to Seoul that it would be difficult to ease the definition of "assembled in North America.”

Photo : KBS News, YONHAP News

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