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On Jan. 22, South Korea's AI Basic Act came into force, establishing one of the world's most comprehensive frameworks for artificial intelligence. For U.S. companies operating in or targeting the Korean market, this law brings both new compliance challenges and strategic opportunities.
Key Takeaways:
- Dual Focus: Innovation and Trust
The act aims to boost Korea's AI industry through national planning and support, while also ensuring public trust by regulating “high-impact” AI – systems used in sensitive areas such as healthcare, employment and essential services. - Transparency and User Notification
Companies must notify users when providing products or services powered by generative or high-impact AI. Outputs by gen AI must be labeled as such. If your AI generates photorealistic content, clear labeling to prevent user confusion is required. - Safety Obligations for Large-Scale Systems
Where the cumulative computing used to train an AI system exceeds a certain threshold – currently 1026 floating-point operations – AI operators must (1) identify, assess and mitigate risks across the system life cycle, and (2) maintain a risk management framework for monitoring and incident response. - High-Impact AI Governance
Before offering AI products or services, operators must assess whether the AI system used qualifies as high-impact AI and may request a formal confirmation from the government. If the offering is high-impact AI, operators must implement measures such as risk management plans and operation; prepare explanation mechanisms for final results, key criteria used in obtaining the results and an outline of the training data used; and implement user protection measures, provide human oversight and create/preserve documentation evidencing compliance. Further, for high-impact AI products and services, operators are expected to conduct an ex-ante fundamental rights impact assessment and government agencies must prefer solutions that have undergone such assessments. - Obligations of Foreign Companies
Foreign companies without a Korean office may need to appoint a local representative if they exceed certain revenue or user thresholds – currently KRW 1 trillion in total revenue, KRW 10 billion in AI service revenue or 1 million average daily domestic users. This representative will serve as the point of contact for Korean regulators. - Enforcement and Penalties
Noncompliance can result in fines of up to KRW 30 million and, more importantly, reputational and operational risks that could impact market access. - Support for AI Development
The act isn't just about regulation – it also provides for government-led investment, infrastructure and collaborative opportunities for companies engaged in AI research and development.
What Should US Companies Do?
- Review Compliance Frameworks for Gen and High-Impact AI: Review and update internal policies to meet new transparency, notification and risk management requirements for gen AI products or services. Assess whether your products or services fall under the high-impact AI category and ensure the policies meet the stricter requirements.
- Large-Scale AI System Assessment: Monitor the threshold requirement for large-scale systems and ensure that your company meets the risk assessment and safety monitoring system requirements.
- Appoint a Domestic Representative: If your company provides AI products or services to Korean users but does not have an office in Korea, stay alert for the official thresholds that trigger the domestic representative requirement and proactively appoint a representative if needed.
Bottom Line
South Korea's AI Basic Act sets a new standard for AI governance in Asia. U.S. companies should act now to ensure compliance, protect their reputation and seize new opportunities in one of the world's most dynamic AI markets.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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