Key Highlights :
Legal experts in Korea have begun to sound the alarm regarding LG Chem, SK on and POSCO Group, warning them that their joint ventures, established here in Korea with Chinese firms, could be designated as foreign entities of concern under the U.S. Inflation Reduction Act (IRA).
The legal experts are concerned that the joint ventures could be designated as foreign entities of concern under the IRA because the Chinese firms that established the joint ventures are not considered to be domestic entities under Korean law. This would make the joint ventures subject to a range of U.S. economic sanctions, including prohibitions on transactions with U.S. companies and sanctions against individuals.
The legal experts are urging the joint ventures' Chinese partners to take steps to make the joint ventures Korean entities in order to avoid the risk of being designated as foreign entities of concern. If the joint ventures are not designated as foreign entities of concern, the legal experts say that the joint ventures could still be subject to a range of U.S. economic sanctions.
The legal experts' warning comes as tensions between the United States and China continue to increase. The United States has been increasing its scrutiny of Chinese investments in the United States, and the joint ventures that LG Chem, SK on and POSCO Group have established with Chinese firms are likely to be among the targets of this scrutiny.
The legal experts' warning is likely to increase the pressure on the joint ventures' Chinese partners to make the joint ventures Korean entities in order to avoid the risk of being designated as foreign entities of concern. If the joint ventures are not designated as foreign entities of concern, the legal experts say that the joint ventures could still be subject to a range of U.S. economic sanctions.