Top U.S. economic envoy expresses understanding of IRA fears

Washington is well aware of the concerns of Korean companies regarding the Inflation Reduction Act (IRA) and is communicating closely with stakeholders in Seoul, said U.S. Under Secretary of State for Economic Growth…

U.S. Under Secretary of State for Economic Growth, Energy, and the Environment Jose Fernandez speaks with reporters at the U.S. Embassy in Seoul on Thursday. [US EMBASSY IN SEOUL]

Washington is well aware of the concerns of Korean companies regarding the Inflation Reduction Act (IRA) and is communicating closely with stakeholders in Seoul, said U.S. Under Secretary of State for Economic Growth, Energy, and the Environment Jose Fernández on Thursday.

“We understand those concerns, and we will take them into account because the only way we succeed is together,” Fernández told a group of reporters at the U.S. Embassy in Seoul on the second day of his visit, alluding to specific concerns on the IRA recently raised by Korean EV makers.

Fernández led a delegation to visit Korea this week to attend the regular Senior Economic Dialogue in Seoul.

The dialogue, inaugurated in 2011, was held for the eighth time this week, coming on the heels of requests from Korean companies to the U.S. government on the IRA.

Under the tightened IRA, which began in 2024, an eligible clean vehicle may not contain any battery components “manufactured or assembled by” a foreign entity of concern (FEOC) to qualify for up to $7,500 in tax credits.

Starting in 2025, an eligible clean vehicle “may not contain any critical minerals that were extracted, processed or recycled by an FEOC."

According to the U.S. Department of the Treasury's guidance, an FEOC is owned, controlled, or subject to the jurisdictions of China, Russia, North Korea, and Iran. With the law coming into effect, the number of EV models eligible for the credits fell sharply to 19 from last year's 43.

No Hyundai and Kia EVs are currently eligible as they have no assembly plants in North America.

Last week, Hyundai Motor called on the U.S. government to provide a temporary IRA exemption.

Meeting with the press on Thursday, Fernández highlighted the U.S.-China rivalry on supply chains, including critical minerals.

“I would not call this a tech war,” he said in response to a question from a reporter on whether there will be more sanctions from the U.S. on Chinese parts as part of the so-called “tech war.”

"We’re looking to de-risk not to de-couple from China," he said, adding that the IRA and the Chips Act are part of Washington's efforts to diversify its supply chains.

Highlighting the recent Korean investment in the EV industry in the United States and the bilateral trade numbers, Fernández said the bilateral partnership “is at an all-time high” and that he believes “no country has benefited more from our Inflation Reduction Act than the Korean companies and Korean workers.”

The under secretary also recalled when he first proposed the U.S.-led Minerals Security Partnership to his Korean counterparts.

“It took me five minutes to describe before they agreed,” he said. “Why? Because they were thinking the same thing.” Korea is one of the 13 countries that are members of Washington's partnership designed to diversify the supply chains of critical minerals.

Fernández dismissed concerns that the upcoming presidential election in the U.S. may change the course of these policies.

“There is strong bipartisan support for the IRA in the United States,” he said.

According to the under secretary, the Senior Economic Dialogue on Wednesday did not address Korea’s proposed regulations to curb market domination by large online platform companies such as Korea's Naver and Kakao and Apple, Google and Netflix from the United States.

The U.S. Chamber of Commerce issued a statement earlier this week opposing the regulations.

BY CHUNG YEONG-GYO,ESTHER CHUNG [chung.juhee@joongang.co.kr]