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| Deputy Prime Minister and Minister of Finance and Economy Hong Nam-ki speaks during a meeting on the external economy and security at the government complex in Seoul, Sunday. Courtesy of Ministry of Economy and Finance |
By Baek Byung-yeul
The government will make all-out efforts to solve the ongoing shortage of diesel exhaust fluid (DEF) ― sometimes called "urea water" ― an essential additive for diesel-powered vehicles, by seeking to import it from major producers including China and Australia.
It will also temporarily simplify customs clearance and offer tax incentives for its importation.
The mandatory testing period for DEF exclusively manufactured for diesel engines will be shortened from the current 20 days to three to five days, while urea used for industrial purpose will be allowed in the production of DEF for diesel-powered vehicles.
These were measures discussed during an emergency meeting on the external economy and security, Sunday, presided over by Deputy Prime Minister and Minister of Finance and Economy Hong Nam-ki.
The meeting was attended by the foreign and security ministers and members of the presidential National Security Council.
"The government will take all-out action by establishing a response system that combines the country's economic and diplomatic capabilities," the finance and economy ministry said in a press release.
The government will mobilize all available diplomatic channels and talk with major producers of urea and DEF for their prompt importation.
Specifically, it will push diplomatic consultations with the Chinese government to allow tens of thousands of tons of DEF, which had already been contracted for, to be sent to Korea via fast-tracking through customs.
The government said 20,000 liters will come from Australia this week and that it plans to deploy military vessels for its rapid transportation here.
In addition, it will explore ways to import thousands of tons of DEF from multiple countries before the end of the year.
The administration will push to stabilize the situation by keeping product and logistics costs low through its diversification of import sources and using military transportation aircraft. Furthermore, it will crack down on anyone attempting to corner the market and gouge customers.
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| A truck driver puts diesel exhaust fluid (DEF) into his vehicle at a station near a port in Changwon, South Gyeongsang Province, Nov. 5. Yonhap |
Fears are mounting that the country will see major supply chain disruptions from the shortage of DEF which is used in selective catalytic reduction (SCR) systems that prevent diesel-powered vehicles from producing harmful emissions.
Given that the SCR systems are fitted to most modern cargo trucks, any shortage could hit domestic logistics networks with ripple effects disrupting entire industries and the domestic economy.
The government's decision to allow the chemical modification of industrial urea for use in diesel vehicles is not a fundamental solution, according to industry analysts.
Urea is the main component of DEF, an essential product needed in SCR systems to cut emissions. DEF decomposes nitrogen oxide, a main gas pollutant, and consequently reduces its emission from diesel-powered vehicles. All vehicles meeting Euro 6 emission standards must be equipped with an SCR system.
Without the DEF additive, SCR systems do not allow diesel engines to operate. Of around 9.81 million diesel vehicles in Korea, SCR systems are installed in about 2.15 million. This means the shortage issue could lead to a worst case scenario in which all of these vehicles fail to operate. They include emergency vehicles such as fire engines, ambulances and police cars, and logistics vehicles.
Korea has been struggling with a lack of DEF since last month, after China tightened its exports of fertilizers, including urea, after fertilizers prices soared. According to government data, 97.7 percent of the country's imports of urea came from China from January to September this year. Korea stopped production of "urea water" products in 2011 as companies here lost their price competitiveness to Chinese makers.
The external economy and security meeting also dealt with U.S. government's request for Korean semiconductor firms to share confidential information such as lists of their clients ahead of a Nov. 8 deadline. The information demand came in response to the prolonged global chip shortage that has caused severe production disruptions for major U.S. carmakers. TSMC of Taiwan, Micron of the U.S. have already submitted the information demanded.
The government has focused on supporting domestic chip companies Samsung Electronics and SK hynix in talks with the U.S. government. The local semiconductor companies are expected to voluntarily supply "second-tier" information, according to sources in the administration.
