SK Innovation Vows to Return to U.S. After Being Hit With a 10-Year International Trade Commission Ban on EV Battery Imports
South Korean battery maker SK Innovation is vowing to return to producing electric vehicle batteries in the U.S. after being hit with a 10-year import ban by the U.S. International Trade Commission (ITC) over the theft of trade secrets from rival LG Energy Solutions.
The announcement comes days after the U.S. ITC sided with LG Energy Solution in a dispute over battery trade secrets.
LG Energy Solution is a wholly owned subsidiary of LG Chem and supplies EV batteries to U.S. companies Tesla and General Motors. The company is GM's battery partner and the two companies are investing $2.3 billion to build an EV battery factory in Ohio to supply the batteries for GM's future electric vehicles.
LG Chem filed its trade complaints against SK Innovation in 2019 and sought to block SK from producing battery cells in the United States as well as importing the components necessary to make battery cells.
LG Energy had accused SK Innovation of stealing its proprietary battery manufacturing secrets. The ITC affirmed a judge's decision that the 10-year import ban was the appropriate punishment for SK Innovation destroying evidence LG Chem said it needed to prove its case.
In its ruling on Feb 10, the ITC determined that SKI had stolen technology from its compatriot and issued a limited exclusion order prohibiting SKI from importing EV batteries and components into the U.S. for 10 years.
SK's stock price fell to its lowest levels in a year after the ruling by the U.S. ITC.
"We will actively cope with the remaining litigation and all other processes to ensure we have no problems producing batteries in the U.S.," the South Korean company said in a regulatory filing.
An Exemption Allows SK to Supply Ford and Volkswagen with EV Batteries in the U.S.
SKI's existing agreement with U.S. automaker Ford Motor Co., will be allowed to remain in place. SKI had a deal in place with Ford to supply batteries for the upcoming electric F-150 pickup that's currently in development. The F-150 is Ford's best selling vehicle in the U.S. and the automaker is developing a battery-powered version for the first time.
SK is being allowed to import components for the domestic production of lithium ion batteries and other parts for Ford's electric F-150 program for four years. For Volkswagen, the exemption is for two years.
SKI will also be allowed to supply batteries to German automaker Volkswagen for its U.S. electric vehicle production. The automaker is converting its plant in Tennessee to be its North American hub for EV production.
The Volkswagen Group is one of the world's biggest automakers. The company announced it selected SK Innovation as one of its battery suppliers in Nov 2018. The automaker said the ruling will not affect its plans to build EVs in Tennessee.
SK Innovation, said in a statement last week that it regretted the ITC's decision, but added "it's a relief that we will continue to supply to Ford and Volkswagen."
On Feb 11, Ford Chief Executive Jim Farley encouraged LG Chem and SK Innovation to reach a settlement in the case. Both Ford and Volkswagen previously warned a U.S. legal dispute between South Korean battery makers could disrupt supplies of the key EV parts and cost U.S. jobs just as the U.S. economy begins to recover from the pandemic.
Ford said the "ITC decision supports our plans to bring the all-electric Ford F-150 to market in mid-2022."
In addition, The ITC is allowing SK to replace or repair batteries in Kia Motors' vehicles sold to U.S. consumers. Kia produces vehicles at its West Point, Georgia, which is its only U.S. factory. Kia is also the only automaker producing vehicles in the state of Georgia. Its factory produces around 330,000 vehicles a year.
SK Innovation said in a statement last week that the inability to make batteries in the U.S. "could have a serious adverse impact on President Biden's environmental policies to fight climate change and expand EV adoption in the U.S. The EV adoption rate in the U.S. is currently around 2% of all vehicles sold, but that number is expected to climb over 10% the next decade.
Unlike the previous administration, President Biden has made fighting climate change a priority. Initiatives being discussed include stimulus funds, fuel regulations, and expanding the federal EV tax credits to encourage the adoption of EVs in the U.S.
Before the ruling, SK was in the process of building an EV battery plant in Georgia. The $2.6 billion factory is currently under construction in Jackson County, one of the biggest economic development projects in the state's history, which will bring roughly 2,600 jobs to the region.
The state of Georgia provided $300 million in grants to SK, including the land to build the new factory and other incentives. Georgia Governor Brian Kemp has urged President Biden to reverse the decision that's jeopardizing the project.
"Unfortunately, the International Trade Commission's recent ruling puts SK's significant investment in 2,600 clean energy jobs and innovative manufacturing in peril during a pandemic," Kemp said in a statement.
President Biden has 60 days to review the ruling and can issue a reversal, although changes to the commission's rulings are rare. However they are not without precedent.
LG Chem says that Georgia where its $2.6 billion factory is under construction is a victim of SK's unlawful actions. But automakers are also the victims.
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