'Smartphones, cars not subject to US export ban against Russia'

Hyundai cars are temporally stationed at Hyundai Motor's Ulsan export loading docks before shipment. / Yonhap

By Kim Hyun-bin

Korean companies are showing signs of relief, following the government announcement that consumer goods such as smartphones, automobiles and washing machines are exempted from the U.S. export ban against Russia, according to government and company officials Thursday.

The Ministry of Trade, Industry and Energy said it had been informed by its U.S. counterpart, during an earlier meeting with officials from the U.S. Department of Commerce's Bureau of Industry and Security (BIS).

"Even though the U.S. Department of Commerce, in principle, has applied the Foreign Direct Product Rule (FDPR) for smartphones, vehicles and washing machines, consumer goods for the general public are considered exceptions to this rule, unless they are exported for military-related purposes," the trade ministry said.

The FDPR regulation calls on companies to receive a license from the U.S. for tech-related items that are using U.S. technology before they can be shipped to Russia, which is feared to affect major Korean exporters, as many use U.S. technology and software in their products.

The technologies in seven fields including electronics (semiconductors), computers, communication/information security, sensors/lasers, marine, navigation/avionics and aerospace are subject to these restrictions.

Currently, a total of 32 countries including 27 EU countries, Australia, Canada, Japan, New Zealand and the UK, which have implemented independent sanctions on Russia in line with the U.S. high-level sanctions, have been exempted from the FDPR measures, but Korea has not yet received the green light and is still working to receive an exemption from the FDPR rules.

"The condition for being included in the U.S. FDPR exemption countries is to impose export controls against Russia at a level similar to that of the international community," the trade ministry said.

The exclusion comes as the Moon Jae-in administration was late to join U.S.-led sanctions efforts against Russia, which made Seoul the only U.S. ally not to be exempted from the FDPR measures.

To minimize the uncertainty for companies arising from the FDPR, the Korean government plans to promptly engage in dialogue with the U.S. about further export control cooperation against Russia, while simultaneously relaying additional critical information obtained from the U.S. government to local companies.

Despite the circumstances, electronics and automobile companies are showing signs of relief at the latest developments.

Samsung Electronics has the No. 1 market share in the Russian smartphone and TV market, and is fiercely competing with LG Electronics for the No. 1 market share in the home appliance sector as well.

Hyundai Motor and other carmakers also seem to be relieved due to the news that automobiles will also be excluded from the FDPR regulation.

"It is fortunate that risks surrounding the FDPR have been resolved to some extent," said an official at a local automaker, who declined to be named.

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