[Bojo, Battery] Battery Industry Requests "US Supply Chain Audit... Please Protect Corporate Trade Secrets"

IRA to Disclose Supply Plans from 2027
"Risk of Confidential Leaks During Due Diligence... Policy Support Needed"

The domestic battery industry has requested the government to establish measures to protect trade secrets in relation to the U.S. battery supply chain due diligence. Recently, the U.S. administration announced a temporary plan to provide subsidies under the Inflation Reduction Act (IRA) for electric vehicles equipped with batteries containing Chinese graphite, but it also signaled a large-scale inspection of the battery supply chain, which is being seen as a new challenge for Korean companies.

Kim Dong-myung, CEO of LG Energy Solution, revealed that he expressed concerns about the supply chain due diligence at a public-private joint meeting on the U.S. IRA chaired by Minister Ahn Deok-geun of the Ministry of Trade, Industry and Energy on the 8th. Speaking to reporters immediately after the meeting, Kim said, "During the process of undergoing supply chain due diligence to determine compliance with the Foreign Entity Ownership, Control, or Influence (FEOC) standards, we requested the government for policy support to protect companies' trade secrets from being leaked."

Minister Anduk Geun of the Ministry of Trade, Industry and Energy attended the 'Public-Private Joint Meeting on the US IRA' held at JW Marriott Hotel in Seocho-gu, Seoul on the 8th and greeted Kim Dong-myeong, CEO of LG Energy Solution. Photo by Kang Jin-hyung aymsdream@

In the final regulations recently announced by the U.S. Treasury Department regarding the electric vehicle tax credit under the IRA, graphite?a key material?was designated as a material that is practically impossible to trace, and electric vehicles using graphite sourced from FEOC for two years are also eligible for subsidies. However, it ordered companies to disclose their procurement plans after the grace period. Starting in 2027, each battery company must submit a report to the U.S. government through automakers detailing how they plan to source battery material minerals outside of FEOC.

In this process, the domestic battery industry is concerned that disclosing specific supply chains could lead to leakage of corporate trade information. If information about where raw materials are sourced becomes known, competitiveness will inevitably be fully exposed.

In particular, the battery industry is worried about information leakage to automakers. Concerns have grown as global automakers such as Hyundai Motor Group have entered the electric vehicle battery production business themselves. For this reason, it is reported that during the meeting, a company representative proposed the idea of directly informing the U.S. government of battery mineral procurement plans instead of automakers.

An official from the Ministry of Trade, Industry and Energy explained, "Since receiving IRA subsidies is a company’s choice, no specific discussions have been held to protect this."

Supply chain due diligence obligations are expanding globally, not just in the U.S. Recently, the European Union (EU) passed the ‘Corporate Sustainability Due Diligence Directive (CSDDD),’ which mandates companies to conduct due diligence on environmental and human rights issues. The ‘Critical Raw Materials Act (CRMA),’ often called the European version of the IRA, was also officially adopted. It includes regulations to strengthen domestic manufacturing capabilities and diversify supply sources to reduce dependence on third-country strategic raw materials to less than 65% of total regional consumption by 2030.

Battery material companies are busy preparing countermeasures. POSCO Future M is disclosing its achievements in building a sustainable supply chain through its Responsible Minerals Report. It avoids sourcing raw materials from areas with high risks of human rights or environmental issues and applies its own evaluation process to minerals such as lithium, nickel, manganese, and graphite. Gu Ja-hyun, Head of Purchasing Contracts at POSCO Future M, said, "As stable and sustainable raw material supply chains become increasingly important in the battery materials business, which uses various minerals, we will proactively respond to the demands of global battery and automaker customers."