South Korea's US$200 Billion U.S. Program: What Sponsors Must Know

South Korea has now put in place the Special Act for Korea-U.S. Strategic Investment Management (the Special Act), its enforcement decree (the Enforcement Decree) and the Korea-U.S. Strategic Investment Corporation (KUIC), the investment corporation needed to administer its US$350 billion U.S. investment framework.^[1] The framework has two components. The US$150 billion shipbuilding package is expected to be implemented through project-specific foreign direct investment, loans, guarantees and ship finance. The separate US$200 billion investment program, which is the focus of this OnPoint, contemplates South Korean capital being invested through a U.S.-managed umbrella special purpose vehicle (the Investment SPV) and special purpose vehicles wholly owned by the United States (the Project SPVs). On September 9, 2026, the Ministry of Trade, Industry and Resources (MOTIR) stated that the investment targets, announcement date and amount and timing of the first remittance had not been finalized.

The US$200 billion program separates project selection from the final South Korean investment decision. Before the U.S.president selects a project, South Korean bodies review its commercial reasonableness and other strategic and legal considerations, and National Assembly reporting requirements apply, with standing-committee consent additionally required for projects proceeding under the statutory exception. After selection, the Korea-U.S. Strategic Investment Operating Committee (the Operating Committee) separately decides whether South Korea will invest, in what amount and on what timetable. The Memorandum of Understanding on Strategic Investment between South Korea and the U.S. dated November 14, 2025 (the MOU) contemplates milestone-based tranches and preserves South Korea's right, after consultation, to decline to fund the amount to be funded by South Korea for an investment (the Investment Amount).

The MOU is nonbinding, creates no third-party rights and permits either government to discontinue it by written notice. Participants should therefore establish their funding, payment and continuity rights in separate binding instruments, including the consequences of governmental discontinuation for undrawn commitments and existing project obligations.

For sponsors, lenders and industrial participants, that sequence changes the allocation of development and completion risk. A sponsor may have acquired a site, paid for engineering and permits, and agreed to construction or offtake milestones before the South Korean funding decision is complete. A South Korean contractor or technology provider may also have helped the project advance through the South Korean review process without yet having a binding commercial role. The principal structuring questions are therefore when a South Korean tranche may be relied upon, whether later tranches will be available to complete the project, whether the distribution model satisfies South Korea’s statutory test, and where each participant’s capital, payment rights and remedies will sit.

How a Project Reaches Funding

On the South Korean side, the committee under MOTIR that conducts the initial commercial, strategic and legal review (the Project Management Committee) reviews each candidate project. The Operating Committee then determines whether the candidate should advance and, after U.S. selection, separately decides whether South Korea will invest and, if so, the amount and timing. The two bodies therefore affect different questions. The Project Management Committee tests the project for entry into the bilateral process; the Operating Committee determines whether the South Korean investment program will ultimately support it.

The Special Act requires the government to report the relevant Operating Committee decision to the responsible National Assembly standing committees before formal bilateral consultation begins. A project that does not satisfy the commercial-reasonableness test may still proceed for overriding national-security or supply-chain reasons, but only with affirmative standing-committee consent. The exceptional route is an additional statutory approval path, not a routine cure for a project that cannot meet the ordinary financial test.

After South Korean review and bilateral consultation, the U.S. Investment Committee recommends projects and the U.S. president makes the selection. The MOU assigns the U.S. Investment Accelerator responsibility for executing, documenting, managing and administering investments. The MOU provides for at least 45 business days between South Korea's receipt of notice of selection and the requested funding date, contemplates milestone-based tranches, and allows South Korea, after consultation and in its sole discretion, to decline to fund an Investment Amount. The Special Act also permits renewed consultation if U.S. trade policy or the project's commercial reasonableness changes materially.

Selection is a significant commercial milestone, but the extent of reliance should depend on the funding commitments and conditions then in place. A sponsor may need to incur development costs before those conditions can be satisfied. The practical task is to agree how much may be spent at each stage, who bears that exposure and what funding or other milestone must be reached before further expenditure is authorized.

The South Korean government’s MOU summary describes changes to South Korea’s distributions and possible tariff consequences if requested funding is not provided. Any tariff action would require valid U.S. statutory authority and compliance with applicable procedures. Deal teams should distinguish those governmental consequences from the rights and remedies available to private participants under their funding and project documents.^[2]

Funding Over Multiple Fiscal Years

The MOU contemplates investment commitments through January 19, 2029. The Special Act, however, limits actual investment execution to US$20 billion in any fiscal year and requires execution to reflect project progress. The limit applies to annual execution under the program, not to the total capital cost of an individual project. At the statutory ceiling, full deployment of the US$200 billion program would require at least ten fiscal years. January 2029 is therefore a commitment deadline, not a deadline for full disbursement.

The deployment period for the overall program does not determine the funding timetable of an individual project. A project’s South Korean contribution may be funded within a single fiscal year if its allocation, approvals and funding arrangements permit. Where a project depends on contributions across several fiscal years, however, the parties should assess whether the proposed draw schedule matches construction expenditure and identify how any intervening shortfall will be met. The annual ceiling does not assure any project an allocation.

For each South Korean tranche, the documents should identify the funding obligor and instrument, required approvals, amount covered, outstanding conditions, funding longstop and consequences of delay or shortfall. Coverage of an initial tranche should be distinguished from commitments sufficient to complete the project. Any remaining requirement should be matched to identified sources of capital or expressly recognized as an exposure borne by the relevant participants.

Bridge or substitute financing may address a timing gap, but its feasibility depends on the repayment source, available recourse and the lender’s willingness to bear the remaining funding risk. Where repayment depends on a South Korean tranche that remains discretionary, the parties should identify what repayment or credit support would be available if that tranche does not arrive. They should also establish who bears financing and delay costs, whether additional consents are required and how the financing affects the cash expected to be distributed to South Korea.

South Korea's Commercial-Reasonableness Test

The Special Act makes commercial reasonableness the ordinary condition for investment under the US$200 billion program. The Enforcement Decree gives the term a specific financial meaning: projected distributions to South Korea over the expected life of the individual project must be sufficient to recover the principal attributable to South Korea’s investment and a deemed return based on the applicable 20-year U.S. Treasury rate plus an agreed spread.

The MOU contemplates pooling receipts at the Investment SPV, but MOTIR stated on September 10, 2026, that the distribution structure remained under discussion. Deal teams should confirm how the implementing arrangements attribute receipts and losses and distinguish that analysis from the individual-project financial test under South Korean law. The financing documents should address when cash may leave a project; the debt-service, reserve and completion requirements that must first be satisfied; and any exposure to other projects or their creditors.

That test differs from the project-level return analysis that a sponsor would ordinarily present. A positive net present value or attractive sponsor IRR does not answer whether enough cash is expected to reach South Korea, in the required amount and over the relevant period. Project debt service, U.S. taxes, reserves, management and governmental expenses, construction contingencies, cash traps, lender lock-ups, refinancing terms and other priority claims may all reduce or delay the distributions relevant to the South Korean test. A project can therefore be profitable at the asset level and still fail the ordinary statutory route.

If projected distributions do not satisfy the test, deal teams should assess whether changes to revenue arrangements, investment amounts, financing terms, fees or credit support could improve South Korea’s expected recovery while preserving the project’s viability. The effect of each change must be modelled: reducing South Korea's investment may provide little benefit if its distribution entitlement falls proportionately, while additional debt may reduce the cash available to South Korea. Reducing reserves may also weaken completion protection or conflict with lender requirements.

Any proposed adjustment to distribution arrangements should distinguish terms negotiable by project participants from parameters established under the governmental framework. Changes affecting those parameters would require engagement with the relevant authorities. Reliance on the exceptional national-security or supply-chain route would likewise require governmental support and the statutory approvals described above; a sponsor cannot secure that outcome through project structuring alone.

The financial model should trace cash from the project through the relevant vehicles to the distributions attributable to South Korea. Base and downside cases should reflect taxes, debt service, reserves, fees and other priority claims, together with any bridge financing or completion support. The approval process should identify the proposed treatment of debt sizing, reserves, affiliate fees, refinancing and available free cash flow. The parties should also establish which subsequent changes require further South Korean approval, who must obtain it and how any approval requirement affects funding conditions and the construction timetable. Because the sovereign distribution formula applies after U.S. taxes, entity classification and withholding may affect both satisfaction of the statutory test and South Korea's ultimate return.^[3]

Private Participation and Credit Support

The framework does not fully specify where private participants will hold their capital and rights. The MOU provides for Project SPVs wholly owned by the United States but does not define what that ownership requires of these vehicles, and the question remains under discussion between the two governments. Ordinary sponsor equity at the Project SPV level cannot be assumed until the implementing arrangements settle it. Before negotiating detailed protections, participants should establish which forms of participation are permitted under the implementing arrangements and what approvals are required. Depending on those arrangements, participation could involve debt, an economic interest in an investment vehicle, equity in an asset-level subsidiary or separate joint venture, or rights under an EPC, supply, operating, license or services agreement.

For any proposed structure, the parties should identify the entity responsible for payment or performance, its authority to undertake the obligation, the supporting assets and revenue, and the participant’s priority relative to other capital providers. They should also assess governance, tax, CFIUS, accounting, security and exit implications, including any ability to transfer cash or assets between projects.

Participants should review the standards of care, conflicts procedures, information and audit rights, affiliate transactions and limitations of liability in the definitive vehicle and management documents. They should identify which decisions require their consent, which protections are available through reporting or contractual covenants, and what remedies apply if funds are misused or agreed restrictions are breached.

Continuity protections should address the specific event of concern. Replacement of a manager while the same obligor remains in place raises different issues from a transfer of assets or dissolution of that obligor. Depending on the structure, effective protection may require restrictions on transfers, assumption of obligations by a successor, security, guarantees or funded termination compensation. A contractual survival provision alone may leave the participant with a claim against an entity unable to pay.

Governmental involvement does not answer the credit question. The U.S. Investment Accelerator is a facilitation office operating subject to applicable law and appropriations. Its involvement does not establish that an Investment SPV or Project SPV obligation carries the full faith and credit of the United States.^[4] Participants should confirm the formation authority and legal status of each vehicle, who can bind it, the source of payment for its obligations, any governmental commitment or guarantee, available security, creditor priority, sovereign-immunity treatment and the consequences of reorganization, replacement or discontinuation. For a lender, project selection is not evidence that equity has been committed or that completion capital is available.

The Special Act also directs the South Korean government to seek South Korean vendors, suppliers and project managers in its consultations with the United States, together with specified forms of U.S. support. That direction strengthens the case for South Korean industrial participation, but does not appoint a company or create a procurement right.

Where the final commercial mandate cannot be agreed before development work begins, a South Korean participant should seek interim arrangements covering its development scope and fees, expenditure limits, permitted use of studies and IP, and treatment of its contribution if it is displaced. Those arrangements should identify the intended commercial role and any procurement, approval or funding conditions affecting appointment. Reimbursement or compensation provisions should identify the paying entity and available payment support. These protections can preserve value and bargaining position, but cannot assure appointment by a project owner that has not accepted them.

South Korean commercial participants should also avoid assuming that they will share in the distributions payable to South Korea under the MOU’s distribution formula. Their return will ordinarily arise from their own investment, financing, EPC, supply, operating, license or services agreement. Internal investment papers and transaction documents should make that distinction explicit.

Documentation and Timing

Before material development expenditure, the consortium or development agreement should establish an agreed scope and budget, expenditure approval thresholds and responsibility for costs. It should also address responsibility for governmental submissions, consultation and consent rights among participants, permitted use of studies and application materials, confidentiality, IP, withdrawal and displacement. These arrangements govern the signatories’ conduct and rights; they do not themselves bind governmental decision-makers or a future project owner.

As the project advances, the documents should distinguish executed funding commitments from proposed contributions and identify the conditions remaining for each tranche. Before financial close or a material notice to proceed, the parties should establish how the relevant expenditure will be funded and address any uncovered completion requirement. The agreed package should identify the actual obligors and available recourse, together with applicable funding longstops, substitute-financing rights, suspension and termination rights, and responsibility for resulting costs.

The parties should also allocate applicable CFIUS process and risk, including filing responsibility, cooperation, mitigation, efforts standards and termination consequences. Those contractual arrangements do not determine whether the transaction falls within CFIUS jurisdiction.

Five Questions for the First Structuring Call

1. What approvals and executed instruments support each proposed South Korean tranche, and which funding conditions remain discretionary?
2. Does the committed funding meet the project’s development and construction timetable, and who bears any shortfall if a later tranche is delayed or declined?
3. Does the model demonstrate sufficient distributions to South Korea after debt service, taxes, reserves and other priority claims, including under downside scenarios?
4. Through which permitted structure will each participant hold its capital and contractual rights, which entity owes payment or performance, and what recourse supports those obligations?
5. What protections can be obtained before further expenditure, and what exposure will participants retain if funding, project ownership or the governmental arrangements change?

What Project Participants Should Establish Now

The scope for protection will depend on the implementing arrangements, project economics and each participant’s bargaining position. Sponsors should match expenditure to identifiable funding sources and make any reliance on uncommitted capital explicit. South Korean industrial participants should protect the value of early contributions while their final mandates remain subject to negotiation and approval. Lenders should assess the actual repayment sources and recourse. Where adequate commitments or protections cannot be obtained, participants should decide whether to limit expenditure, stage the project, price and accept the exposure, or defer participation.

How Dechert Can Assist

Dechert brings together experience advising South Korean companies on overseas acquisitions, joint ventures and strategic investments with longstanding work for sovereign investors, financial sponsors and lenders. That combination is particularly relevant to a framework in which governmental funding, private capital and industrial participation must be accommodated within the same transaction.

Our South Korea and U.S. teams can help clients negotiate how capital is committed, how control and returns are allocated, and how regulatory requirements affect the proposed structure. We advise from the formation of the initial consortium through the investment, financing and commercial agreements, helping clients carry their negotiated position through to closing and implementation.

Footnotes

^[1] Special Act for Korea-U.S. Strategic Investment Management, Act No. 21486, March 17, 2026, arts. 2(5), 3(1) and 3(3), 5, 7, 12, 13 and 51; Enforcement Decree, Presidential Decree No. 36405, June 16, 2026, arts. 2 and 14 (both effective June 18, 2026). See, in particular, Special Act art. 5(2) for the annual execution limit and Enforcement Decree art. 2 for the commercial-reasonableness test. Memorandum of Understanding on Strategic Investment between South Korea and the U.S., November 14, 2025, paras. 2, 6-9, 13-17, 21, 25 and 27, and Appendix A.

^[2] On February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump, No. 24-1287, that IEEPA does not authorize the President to impose tariffs. A subsequent Section 301 action effective July 24, 2026 established a different non-sectoral tariff regime for covered South Korean goods, arising from investigations into the enforcement of forced-labor import prohibitions rather than the investment framework, while products subject to Section 232 measures remained outside that action. See Notice of Actions in Section 301 Investigations, 91 Fed. Reg. 47318 (July 28, 2026).

^[3] The application of Internal Revenue Code §§ 892 and 1446 and FIRPTA will depend on entity classification, ownership, governance, asset mix and the character of the relevant income; see Treasury and IRS final regulations under § 892 (T.D. 10042, December 15, 2025), and the proposed regulations of May 29, 2026 revising the applicability dates of the December 2025 proposed rules on debt acquisition and effective control.

^[4] Executive Order 14255, Establishing the United States Investment Accelerator (March 31, 2025).