Commercial Reasonableness

Formation and codification

At the October 29, 2025 announcement of the Korea-US tariff agreement details, Presidential Policy Chief Kim Yong-beom said the two sides agreed to pursue only projects with commercial reasonableness guaranteeing recovery of principal and interest and to write this into the MOU. The term first entered Korea-US negotiations at that point. The MOU concluded on November 14, 2025 covered $200 billion in direct US investment plus $150 billion in shipbuilding cooperation investment, a total of $350 billion.

The Korea-US Strategic Investment Special Act passed the National Assembly on March 12, 2026 with 226 votes in favor of 242 voting, was promulgated on March 17, and took effect on June 18, 2026. It establishes governance, a dedicated corporation and fund, and National Assembly controls. On June 9, 2026, the Cabinet (25th meeting) deliberated and resolved the enforcement decree, which concretizes the definition of commercial reasonableness and the procedures for deciding its details; the decree took effect with the special act on June 18, 2026.

Decision procedure and exception pathway

Review operates at two tiers. The Korea-US Strategic Investment Project Management Committee, chaired by the MOTIR minister, conducts the first review including commercial reasonableness, and the Steering Committee, chaired by the Deputy Prime Minister and Minister of Economy and Finance, makes the final resolution on whether to proceed. When a candidate project for which commercial reasonableness is not secured is put to the Steering Committee, the Project Management Committee must review and report the project's impact on national security or supply chain stability. Under the special act, where investment proceeds despite commercial reasonableness not being secured, on national-security or supply-chain grounds, prior consent of the competent National Assembly standing committee is required, and the Assembly must be briefed before consultations with the US begin.

The Korea-US Strategic Investment Corporation is the institutional apparatus for the standard. It operates for 20 years from registration with 2 trillion won in statutory capital paid in cash by the government in installments, and reporting to the National Assembly and consultations with the US government occur before projects are finalized. The corporation was officially launched in June 2026, and its first head of strategic investment, Kim Kyung-han, resigned about two months after appointment.

Applications and distinction from the generic sense

As of late September 2026 the government was negotiating with the US to announce the first US-investment project, with Korea proposing energy on commercial-reasonableness grounds while the US showed interest in semiconductors and domestic production and employment; the launch slipped from late August-early September to September. The core of the $350 billion investment turns on narrowing the gap between the US demand for an expanded US industrial base and Korea's emphasis on commercial reasonableness.

The generic sense to be distinguished is a standard used in commercial and financial disputes whose meaning derives from commonly accepted business customs and practices in the relevant industry. It is rarely decided as a matter of law and often requires fact-intensive proof and expert testimony. Official Comments to the UCC state that reasonableness should be defined by commercial rather than legal standards, and contract language and the common law are further sources. The standard is central to, or in the shadow of, most commercial and financial disputes, may render a transaction unenforceable if absent, and courts increasingly merge the good-faith finding with evidence of commercial reasonableness based on established industry practices.

The Korean statutory standard is an administrative gateway for state-backed overseas strategic investment, deciding whether a project proceeds and whether guarantees or policy finance are provided, whereas the common-law standard governs the conduct of commercial parties and the enforceability of transactions.