South Korea has begun preparing for possible legal proceedings against the United States’ Inflation Reduction Act(IRA) for its discriminatory clause targeting non-North American carmakers.

According to industry sources, South Korea has recently hired a domestic law firm and has begun a selection process for another overseas as it prepares to file complaints against Washington based on the mechanism for either the World Trade Organization or the Korea-U.S. Free Trade Agreement(FTA).

South Korea will primarily make an effort to resolve the issue through bilateral talks with the U.S., but will take legal steps as a last resort if it garners enough consensus with European and other non-American carmakers.

Seoul has been in talks with Washington regarding its concerns and is set to provide the U.S. Treasury Department with official input on the IRA this week.

The IRA, signed into law by U.S. President Joe Biden in August, grants tax subsidies to buyers of electric vehicles assembled only in North America, putting South Korea's Hyundai Motor and Kia Corporation at a disadvantage in the U.S. market as their vehicles are manufactured primarily in South Korean facilities for export.