Economic 6 Organizations Urge Amendment of IRA Discriminating Against Foreign Cars in Letter to the US

Kim Ki-moon, President of the Korea Federation of Small and Medium Business.

[Asia Economy Reporter Donghyun Choi] The Korea Federation of Small and Medium Business (KSMB), together with six major economic organizations including the Korea Chamber of Commerce and Industry, the Korea International Trade Association, the Federation of Korean Industries, the Korea Employers Federation, and the Korea Federation of Mid-sized Enterprises, announced on the 17th that they have sent a joint letter to key members of the U.S. Congress and cabinet ministers expressing concerns about the U.S. Inflation Reduction Act (IRA) containing discriminatory provisions against Korean-made electric vehicles and requesting resolution of these issues.

In the letter, the six economic organizations stated, "The Korean business community has actively supported the expansion of economic cooperation between the two countries, from the Korea-U.S. Free Trade Agreement (FTA) to participation in the Indo-Pacific Economic Framework (IPEF)." They added, "Korean companies such as Samsung Electronics, Hyundai Motor Company, SK, and LG have contributed to creating quality jobs and regional development in the U.S. through continuous investment, and have played a pivotal role in bilateral economic cooperation, announcing large-scale investment plans this year as well."

They continued, "The IRA, which came into effect in the U.S. last August, applies tax credits only to electric vehicles produced in the North American region and requires the use of a certain percentage of North American battery components," pointing out that "this is highly likely to violate international trade norms and the Korea-U.S. FTA regulations."

The six economic organizations also stated, "The current IRA regulations, which discriminate even against electric vehicles produced by allied countries, do not align with the spirit of strengthening cooperation between the two countries," and argued, "The U.S. Congress and administration should remove discriminatory elements so that tax credit benefits limited to North American electric vehicles and battery components can equally apply to companies from U.S. allied countries."

As a specific alternative, the six organizations requested "the application of a three-year grace period for electric vehicle tax credit requirements, as proposed in the bill introduced by Senator Raphael Warnock and Representative Terri Sewell," emphasizing that "to continue greater cooperation between Korea and the U.S., the discriminatory electric vehicle tax credit issue must be resolved as soon as possible."

The IRA was enacted immediately upon signing by U.S. President Joe Biden on August 16. Accordingly, the tax credit benefits previously granted to all electric vehicles purchased in the U.S. now apply only to electric vehicles finally assembled in the North American region. Furthermore, starting next year, according to Treasury Department guidance, a certain percentage of North American battery components must be used, which poses a significant burden on domestic companies.

Meanwhile, the letter was sent jointly by the six economic organizations to 10 key members of the U.S. Congress and four cabinet ministers.