S. Korean legal experts express concerns over LG Chem, SK on, POSCO Group’s JV with Chinese firms

South Korean legal experts have expressed concerns regarding LG Chem, SK on, and POSCO Group’s joint ventures with Chinese firms, which could be designated as foreign entities of concern under the US Inflation Reduction Act (IRA).

According to lawyers, the joint ventures’ products may not be able to enjoy benefits from the country's subsidy rules, thereby losing ground in the U.S. market.

The law firm Kim & Chang warned that foreign entities of concern are defined by the US Infrastructure Investment and Jobs Act the term as any foreign entities owned by, controlled by, or subject to the jurisdiction of North Korea, China, Russia, and Iran.

If a Chinese partner holds over 25 percent of a stake in a joint venture, the joint venture is regarded as a foreign entity of concern under the CHIPS Act, regardless of its location," according to Lee & Ko another major law firm in Korea

The US. Department of the Treasury said that beginning in 2024, an eligible clean vehicle may not contain any battery components that are manufactured by a foreign entity of concern and beginning in 2025 an eligible clean vehicle may not contain any critical minerals that were extracted, processed, or recycled by a foreign entity of concern.

The department, however, has yet to define a foreign entity of concern under the IRA.

LG Chem will reportedly sign a memorandum of understanding on Wednesday with the Chinese firm, Huayou Cobalt, to invest 1.2 trillion won in building a cathode materials factory in Gumi, North Gyeongsang Province.

Last month, SK on and EcoPro Materials also joined hands with China's GEM to invest 1.2 trillion won in their joint production of precursor materials in the same industrial complex.

POSCO Group recently started operating the factory of POSCO HY Clean Metal, its joint venture with Huayou Cobalt.