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Korea braces for impact of Japan’s moves

Localization first and then substitution are called for by minister
July 31,2019
Korean Minister of Trade, Industry and Energy Sung Yun-mo on Tuesday said the government and the private sector will focus all of their energies to minimize the impact of a removal from Japan’s so-called white list of countries given preferential treatment in export procedures.

“The related government departments have been thoroughly reviewing products that could be affected when Japan decides to exclude Korea from its white list and are drawing up measures that would address the situation according to different scenarios,” Minister Sung said while visiting a semiconductor and display equipment manufacturer located in Pyeongtaek, Gyeonggi. “If the government and the private sector work together, [I] believe we could overcome the current situation.”

He said the current crisis Korea faces could be an opportunity for it to advance.

“The government is informing local governments and companies on the precise impact that the Japanese actions could have and the government’s supportive measures,” Sung said. Long-term, “we plan to fundamentally change Korea’s industrial structure so it will be less dependent on core components by strengthening the competitiveness of materials, components and equipment developed in Korea while diversifying the import markets.”

Reports suggest that Japanese Prime Minster Shinzo Abe will take Korea off the white list of 27 countries as early as Friday.

The move is expected to be a blow to major Korean industries, including makers of EV batteries and hydrogen fuel-cell vehicles, just after the semiconductor sector was targeted in earlier restrictions.

Korea has been on Japan’s white list since 2004. Korea is the only Asian country on the list. If Japan decides to cross Korea off the lists, it would be a first.

White-list status simplifies export procedures and cuts through much of the red tape, such as export evaluations.

The Korean government estimates roughly 1,100 products - including advanced materials, electronics, telecommunications equipment and sensors - are strategic commodities that could be used for military purposes and thus could be restricted.

If Korea is removed from the white list, export permission will be needed for each shipment, and Korean companies importing these goods will have to inform the Japanese government of reasons for import and where the materials or products will be used. They will also have to agree not to use the imports in the manufacture of weapons of mass destruction.

The process takes an estimated 90 days, but it could take longer.

EV batteries manufactured by LG Chem and SK Innovation are pouch cells that need pouch films. DNP and Showa Denko, Japanese companies, hold 70 percent of the market.

Japanese companies make 66 percent of the world’s carbon fiber, which is used in hydrogen fuel cell vehicles.

“Korean companies could face problems if the component supplies are delayed,” said Kim Yang-paeng, a Korea Institute for Industrial Economics and Trade researcher. “For us to replace Japanese products, it would take about two to three years, and to catch up to the appropriate level of quality, it would take between four to five years.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]