Despite Surprise Carveout, ITC’s EV Battery Ban Stirs Controversy
The ITC has issued a Final Determination in Lithium-Ion Batteries (Inv. 1159) finding a violation of Section 337 in a foreign trade secret dispute between rival Korean conglomerates LG and SK. As I’ve noted before, it’s questionable whether the United States has any interest at all in preventing the foreign theft of foreign trade secrets. The ITC has nevertheless taken on this duty, allowing complainants to adjudicate these claims and issuing exclusion orders blocking access to imports for American consumers and businesses.
The Korean battery case dispute, which involves multiple legal actions in multiple jurisdictions, began after SK poached numerous employees—along with their proprietary know-how—from LG’s battery operation in order to develop its own competing battery business five miles down the road in Seoul, South Korea. There’s little doubt that this actually happened, and the ITC investigation ended fairly quickly after SK was found in default for destroying evidence.
The case has attracted significant attention from third parties because both SK and LG operate factories in the United States employing hundreds of American workers to manufacture batteries from imported components. In particular, SK has a factory in Georgia that supplies batteries for Ford and Volkswagen’s U.S.-made electric vehicles. LG, meanwhile, supplies batteries for General Motors from its plant in Michigan.
As a result, the ITC received numerous submissions from these automakers, their suppliers, and politicians from the affected states on the public interest implications of excluding imported components for SK’s batteries.
Section 337 enables the ITC to deny any exclusion order it considers contrary to the public interest. Specifically, the ITC considers the effect of an import ban on four enumerated public interest factors: the public health and welfare, competitive conditions in the U.S. economy, production of like products in the United States, and U.S. consumers.
Although these factors are—according to the legislative history of Section337—supposed to be “overriding considerations” of “paramount importance in the administration of the statute,” the agency almost never utilizes them. Only three exclusion orders have been denied in the ITC’s history, and the last one was over 35 years ago. In recent decades, however, the ITC has very occasionally chosen to tailor a remedy to reduce its negative impact on the public interest.
And that’s what they’ve done here. After finding a violation of Section 337, the ITC issued an exclusion order against SK’s imported battery component for ten years (a curiously round number that’s supposed to represent the amount of time it would’ve taken SK to develop its batteries without LG’s trade secrets). But the agency included a carveout allowing SK to import components needed to fulfill its existing commitments to Ford and Volkswagen for four years and two years, respectively.
This is welcome news for those automakers, as it will significantly mitigate (though not eliminate) the harm caused by the exclusion order. Because of this carveout, Ford and Volkswagen can continue production of current EV projects and have time to find new suppliers for future models.
The carveout has not, however, ended the public interest controversy. The exclusion order will still prevent SK from executing its planned expansion of the Georgia plant and will eventually force it to shut down entirely. That’s why public officials in Georgia—including U.S. Senator Raphael Warnock and Governor Brian Kemp—have been vocal in asking President Biden to veto the exclusion order. These requests have focused on how an import ban will threaten not only job creation in Georgia but also America’s ability to compete with China in the production and adoption of electric vehicles.
The president has authority under Section 337 to disapprove of the ITC’s exclusion order for “policy reasons” within 60 days. That sets a deadline for any veto in this case of April 11th.
