[HCI Opinion] "Policy Report on Addressing Export Discrimination Against Korean SME Lithium-ion Battery Module-Pack Manufacturers"
- HOSOON CHOI
- Jun 15
- 11 min read
A Strategic Framework to Resolve Export Barriers Facing Korea’s SME Battery Manufacturers
Published on : June 14, 2025
Author Hosoon Choi (Logistics Strategy Consultant | Certified Customs Broker, Certified Logistics Manager, PMP, MBA)
"Data-Driven Logistics — Strategic Insight from Korea's Frontline Supply Chains" "
Executive Summary Small and medium-sized enterprises (SMEs) in South Korea that manufacture lithium-ion battery modules and packs for electric vehicles are facing export disadvantages during maritime transport. Despite passing internationally recognized safety certifications such as UN 38.3, shipping lines frequently deny or restrict shipments of SME products, citing safety concerns. In contrast, batteries produced by Korea’s top three conglomerates are routinely accepted, while SME products are often rejected due to perceived inadequacies in risk management systems. This constitutes a structural form of export discrimination, arising from a regulatory blind spot where the government has limited authority to influence private shipping companies’ decisions. As a result, certified and safe products from smaller manufacturers remain stranded at home, unable to reach global markets. This report analyzes the root causes of this imbalance using data-driven insights, and proposes integrated strategies—ranging from enhanced government policy support and regulatory reform to infrastructure upgrades and technology development—to strengthen the export competitiveness of Korea’s SME battery manufacturers.
1. Export Disparities Facing SME Lithium-Ion Battery Module-Pack Manufacturers
Despite rising global demand for electric vehicle (EV) batteries, South Korean small and medium-sized enterprises (SMEs) that produce lithium-ion battery modules and packs continue to face discriminatory barriers in the logistics phase—especially during ocean transport. Major shipping lines, citing safety concerns, have established internal policies that prioritize cargo from well-known conglomerates, while SME products are often accepted only on a case-by-case basis.
For example, in 2024, a major shipping company banned the transport of batteries produced by Korean SME Aricell following a fire at its manufacturing site. Since then, carriers have imposed strict controls—such as permitting only certain brand-name batteries on deck or in temperature-controlled containers, while outright prohibiting the shipment of used or recycled batteries. These self-imposed carrier regulations go far beyond official safety requirements, resulting in de facto export discrimination even against SME products that meet international standards.
The root of this inequity lies in persistent fears about lithium-ion battery fires and explosions, fueled by a series of high-profile incidents in recent years. Since the late 2010s, lithium-ion batteries have frequently been implicated as a leading cause of container ship fires. Following maritime disasters like the Felicity Ace fire in 2022, carriers have adopted a more conservative posture toward hazardous goods, and insurers have significantly tightened risk assessments.
Thermal runaway events—where batteries ignite, reignite (再發火), or even explode—pose a particularly difficult challenge, as fires can persist for days and spread rapidly onboard vessels. In this context, shipping companies now tend to accept cargo only from manufacturers whose track records inspire a high degree of confidence—typically large, well-known corporations—while avoiding SME products altogether.
As a result, SMEs face serious disadvantages in global competition. Large conglomerates leverage their trusted status and dedicated shipping channels to export at scale with lower logistics costs. In contrast, SMEs are often forced to turn to expensive air freight or abandon export efforts altogether. This growing divide undermines the balanced growth of Korea’s battery industry and threatens the country’s broader export diversification goals. Meanwhile, global competitors—such as China’s CATL—benefit from state-supported logistics infrastructures, placing Korean SMEs at an even greater disadvantage in international markets.
2. International Regulations and Korean Policies on Lithium-Ion Battery Transportation
Lithium-ion batteries are internationally classified as Class 9 hazardous materials (“miscellaneous dangerous goods”) for transportation purposes. According to the International Maritime Organization’s (IMO) IMDG Code and the UN Manual of Tests and Criteria, all lithium battery exports must pass a series of stringent safety tests, most notably the UN 38.3 certification. This certification evaluates the battery’s safety across eight critical stress factors—altitude, temperature, impact, short circuit, overcharge, and others—under simulated transport conditions. Regulatory bodies worldwide require UN 38.3 certification as a baseline for approving battery shipments, and South Korea has also adopted this standard through its Hazardous Materials Safety Control Act.
In air transport, the rules are even stricter. Lithium-ion batteries above a certain watt-hour rating are banned from passenger aircraft cargo holds, and cargo flights impose limitations such as requiring a State of Charge (SOC) of 30% or lower. In maritime shipping, the IMDG Code also mandates classification labeling, packing group specifications, and manifest declarations, and requires that only certified hazardous materials handlers manage such cargo. South Korea supplements these international requirements with domestic measures, including detailed guidelines for packaging, explosion protection, water resistance, and thermal insulation—especially for used EV batteries. However, these regulations establish only the minimum safety baseline. Shipping companies retain broad discretion in setting their own internal standards and may impose stricter rules than national law requires. Since carriers are private entities, the government lacks the authority to compel them to accept certified SME products, leaving a policy vacuum. This regulatory limitation underscores a key issue: the absence of mechanisms that translate technical compliance into commercial trust. Even when SMEs meet global safety standards, the lack of government-backed incentives or risk guarantees prevents them from overcoming the reputational barriers set by cautious logistics operators.
Encouragingly, both the Korean central government and regional authorities have begun addressing the issue. The Ministry of Trade, Industry and Energy (MOTIE) and the Ministry of Oceans and Fisheries (MOF) have designated the secondary battery sector as a national strategic industry and are working with domestic shipping lines to develop lithium battery transport guidelines. Additionally, local governments like Busan City are funding R&D programs for advanced battery logistics safety technologies. These steps mark the beginning of a more coordinated policy effort to reduce logistical bottlenecks in battery exports.
3. Global Benchmarking: Policy and Logistics Approaches in China, the U.S., and the EU
Global leaders in the battery industry—namely China, the United States, and the European Union—have each developed distinct approaches to managing the logistics of lithium-ion battery exports, often reflecting their broader industrial strategies.
China has taken a highly centralized and state-led approach. As the world’s largest battery producer, the Chinese government plays an active role in coordinating logistics and ensuring safety compliance. State-owned shipping companies, under government direction, prioritize outbound shipments for domestic battery manufacturers. Before loading, many carriers require third-party safety validation from certified national testing institutes—even for cargo that already complies with international standards. For example, COSCO mandates special declarations and documentation for all lithium battery shipments, regardless of their risk classification. In addition, major Chinese ports have designated battery storage zones equipped with 24/7 emergency response teams. This national-level coordination enables even small Chinese manufacturers to secure stable export routes with relative ease.
The United States takes a more market-oriented approach but supports safety through strong federal oversight. Agencies like the Pipeline and Hazardous Materials Safety Administration (PHMSA) and the U.S. Coast Guard issue detailed transport guidelines and conduct safety drills for EV-related fires aboard ships. In 2024, PHMSA released a comprehensive lithium battery shipping guide that emphasized compliance with both domestic and IMDG regulations. U.S. shipping lines work closely with insurance providers and industry bodies to establish standard operating procedures (SOPs) and enforce strict penalties for undeclared or poorly packed battery cargo. This collaborative model encourages accountability while maintaining flexibility for logistics operators.
The European Union, meanwhile, has moved to legally institutionalize battery transport responsibility. The EU Battery Regulation (2023/1542) extends producer responsibility to include the logistics phase, requiring clear traceability and risk classification for all battery shipments. Many EU carriers follow guidance from the Cargo Incident Notification System (CINS), an international industry network that shares best practices for hazardous goods. Specific safety measures include using containers equipped with temperature sensors and adopting transport protocols that mandate low State of Charge (SOC) conditions to reduce thermal risk during transit.
Taken together, these case studies reveal two key insights for Korea and similar economies:
The importance of proactive government involvement—as seen in China’s success with risk-sharing logistics systems.
The role of industry-led safety innovation and compliance—as demonstrated in the U.S. and EU.
Korea's current model, which emphasizes regulatory compliance without systematic logistical support, risks leaving smaller manufacturers exposed to shipping constraints. To address this, Korea must consider a hybrid approach that combines public-sector facilitation with industry-driven safety improvements.
4. Strategic Recommendations to Eliminate Export Discrimination
Building upon the previous analysis, this section proposes actionable strategies to eliminate structural export discrimination against Korea’s SME manufacturers of EV lithium-ion battery modules and packs.
A. Government Policy and Regulatory Reforms
Launch Dedicated Support Programs: The Korean government should initiate targeted programs through emergency presidential directives or special legislation such as a "Special Act on Export Logistics Support for Secondary Battery SMEs." These programs could include temporary subsidies for logistics insurance and shipping costs to alleviate financial burdens on shipping lines. Additionally, a joint task force between the Ministry of Trade, Industry and Energy and the Ministry of Oceans and Fisheries should be established to gather industry feedback and respond with agile policy adjustments. Where necessary, presidential decrees could enable temporary shipping waivers for qualified battery products.
Public-Private Shipping Partnerships: A logistics cooperation platform should be formed between the public and private sectors. This would incentivize shipping lines with tax breaks, financial assistance for risk-mitigation measures, and performance-based recognition. In return, carriers would commit to transporting a set percentage of SME battery shipments. The Korea Ocean Business Corporation (KOBC), currently the second-largest shareholder of national carrier HMM, could be tasked with ensuring public interest objectives—such as prioritizing SME cargo—while sharing additional costs with the government.
Enhanced Certification System: A new national certification regime, tentatively titled H-KBAT (High-level Korea Battery Assessment Test), should be introduced. This system would go beyond UN 38.3 to assess packaging compliance, Battery Management System (BMS) reliability, and manufacturing quality. Certified products would receive an official government safety label. Agreements with shipping lines and insurers would then ensure that H-KBAT-certified products are prioritized for transport, regardless of the manufacturer’s size. This would provide shipping companies with trusted assurance in handling SME batteries.
B. Infrastructure and Technology for Safe Transport
Smart Transport Container Development and Deployment: Accelerate the commercialization and distribution of smart fire-resistant containers currently being developed in Busan, Korea. These containers should include flame-retardant and insulated materials, IoT sensors, and blockchain-based monitoring to ensure real-time safety and traceability. The government should offer R&D subsidies and push for global certifications (e.g., ISO) to establish these as standard solutions. Shipping companies can be incentivized to use these containers through financial support, reducing the cost barrier to adoption. Other innovations—such as explosion-resistant containers and packaging boxes with embedded fire-suppression packets—should also be supported to enhance safety from the packaging stage onward.
Dedicated Battery Storage Yards at Ports: Designate special yards at major export ports (e.g., Busan, Gwangyang) for lithium-ion battery cargo. These zones should be equipped with temperature sensors, sprinkler systems, and firefighting robots to respond to incidents quickly. Isolating these areas from general cargo reduces the risk of fire spreading and ensures safe staging before and after loading. Port authorities should reduce usage fees for SMEs, or have the government subsidize them entirely. Additionally, dedicated Dangerous Goods Terminals (DG Terminals) should be constructed to allow freight forwarders to consolidate and manage SME battery cargo collectively—improving efficiency and reducing rejection risks due to small-scale shipments.
Enhanced Onboard Fire Response Capabilities: Korean shipbuilders and shipping lines should jointly improve vessel-based fire suppression capabilities. Conventional container ships often lack sufficient built-in fire systems. Upgrades should include high-pressure water mist nozzles and inert gas suppression technologies. While water is effective for cooling during early-stage battery fires, it becomes less effective during thermal runaway when organic electrolytes ignite and produce explosive gases. For this reason, deck-loaded battery containers should use fireproof packaging and thermal insulation. Additional solutions such as onboard drones or robotic extinguishers and infrared smoke detection systems should be deployed to ensure rapid response within the golden time. Given the high costs, government subsidies—similar to green equipment incentives—should be introduced to offset retrofitting expenses. Finally, Korea should take a proactive role in shaping future IMO ship design standards, advocating for the inclusion of battery-specific compartments and fire safety systems in all new vessel builds.
C. Industry Capacity Building and Risk Mitigation Frameworks
Form Consortiums Among SMEs: A collaborative export consortium should be created to help smaller battery manufacturers jointly tackle logistics challenges. This would include operating shared logistics centers and jointly leasing containers to improve cost and space efficiency. The consortium could also collectively manage government safety certifications, group insurance policies, and access to specialized shipping containers. A cooperative model with larger battery firms could allow SMEs to co-load cargo and adopt best practices from their partners, creating a mutually beneficial supply chain ecosystem.
Develop Tailored Insurance and Liability Systems: The government should promote the development of dedicated marine cargo insurance products for battery shipments. One option is to establish a public insurance fund—underwritten by the government—to cover damages in case of accidents involving SME battery cargo. This would reduce the perceived risk for shipping lines and increase willingness to accept such cargo. Additionally, clear protocols should be established to define responsibilities and liabilities between shippers, carriers, and insurers, thereby minimizing disputes in the event of an incident.
Enhance Education and Information Sharing: SME battery exporters should receive structured training on hazardous materials labeling and packaging to ensure compliance with international standards. Frequent issues such as misclassification and underreporting undermine trust and increase rejection rates. Government agencies should provide free educational resources and updated packaging guides. Moreover, an international safety case database should be created and shared with the industry in real time. This would enable shipping lines to evaluate unfamiliar battery brands using objective data from test results and global incident records.
5. Expected Outcomes and Conclusion
If the proposed strategies are implemented, Korea’s SME battery manufacturers will benefit from expanded shipping access, strengthening the overall foundation of the national battery industry. Improved logistics infrastructure and safety technologies will ease carrier concerns, enabling previously excluded SME cargo to be transported safely and cost-effectively. This will lead to higher export volumes, greater revenue potential, and more balanced growth between large corporations and SMEs within the EV battery sector.
Additionally, Korea’s early adoption of advanced safety solutions—such as smart containers, designated port zones, and onboard suppression technologies—could evolve into international standards. These innovations may unlock new export markets for Korean-made logistics equipment and services. When public policy and private-sector collaboration are aligned, the resulting best practices could serve as a global benchmark for addressing other emerging logistics challenges, including the safe transport of hydrogen fuel or waste batteries.
In conclusion, export discrimination in maritime shipping of SME lithium-ion battery modules and packs is a question of both safety and trust—and of equitable industrial growth. Through decisive policy support, institutional reforms, and technical innovation, Korea can create a logistics environment that is both safer and more inclusive. Ensuring that SMEs stand on equal footing in global markets will ultimately reinforce Korea’s long-term competitiveness in the EV battery economy.
HOSOON CHOI
Insight from Korea’s Strategic Logistics Frontline
※ The opinions expressed in this article are solely those of the author and do not represent the official views or policies of any affiliated organization or employer. This content is intended for general informational purposes only and should not be interpreted as legal or commercial advice.
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