The US government is poised to pay about $1 billion to end a trade embargo on South Korea, according to an administration official familiar with the matter.
The official said the funds were being prepared in anticipation of a December 11 deadline that would see the suspension of the trade agreement.
A similar agreement was in effect between the US and South Korea that was due to expire on December 13.
The US has long sought to renegotiate the pact, which it says is preventing South Korea from developing its own nuclear and missile programmes.
It also wants Seoul to open up its markets to American companies.
South Korea has also repeatedly refused to reopen its markets, which have been shut down since January 2017.
The administration official said that the funds would be used to assist in the implementation of the bilateral agreement and to promote the competitiveness of South Korean firms and consumers.
The US administration’s decision on the Korean embargo comes amid escalating tensions between the two countries, following the North’s nuclear test and missile launch last month.US President Donald Trump has made it clear that he wants a better relationship with North Korea, particularly after North Korea conducted its sixth and most powerful nuclear test in February.
South Korean authorities have said the North may carry out another nuclear test before the end of the year.