The U.S. and South Korean governments will hold talks on a recently approved U.S. tax credit for electric vehicles.
This tax credit is included in the U.S. Inflation Reduction Act (IRA) and, according to the South Korean government, discriminates against U.S. imports of cars from South Korea.
In this regard, Yonhap News Agency reported that South Korean Trade Minister Ahn Duk-geun expressed his concern to U.S. Trade Representative Katherine Tai during a meeting in Washington, DC, on Wednesday.
The talks will be “at the ministerial level” on ways to minimize the damage from the Inflation Reduction Act to South Korean automakers, according to statements by Ahn after meeting with Tai.
In addition, Ahn indicated that they will discuss specific dates and other details as soon as possible and that he plans to meet with Tai on a weekly basis, including the next two weeks.
In contrast, the Inflation Reduction Act allows the use of automotive tax credits for the purchase of cars produced in Mexico and Canada.
The Act states that final assembly must take place in North America, while the retail price must be less than $55,000 for cars and $80,000 for trucks and SUVs.
Another requirement is that the battery material must be sourced from the United States or free trade partners, with a phase-in beginning in 2024.
Notably, the law provides for the extension of the $7,500 federal tax credit for electric vehicles and removes the limit for automakers to qualify for the credit, which currently stands at 200,000 vehicles.
The South Korean government believes that the IRA violates the U.S.-South Korea free trade agreement (FTA), which ensures that products from other countries receive the same treatment as local goods or those from a country with most-favored-nation status.