The Inflation Reduction Act angered America’s allies as it included production and sourcing requirements that benefited electric vehicles made in North America with North American components.
Officials from Japan, South Korea and the European Union have been pressuring the Biden Administration for changes and it appears their campaign has worked as the U.S. Department of Treasury released a white paper on the anticipated direction on “critical minerals and battery components requirements, and the process for determining whether vehicles qualify under these requirements.”
Also: US Delays EV Tax Credit Sourcing Requirements Until March
While the government cautioned this “preliminary information is not proposed guidance,” the paper effectively calls for expanding tax credit eligibility. In particular, it says the “critical mineral requirement will be met if the percentage of the value of the critical minerals in the vehicle’s battery that were extracted or processed in the United States, or in any country with which the United States has a free trade agreement in effect.” The latter is a notable change and it could mean a number of EVs with batteries made overseas would be eligible for a $3,750 credit.
The paper went on to say the Treasury and the Internal Revenue Service (IRS) expect Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, South Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, and Singapore to qualify. Japan and European countries are notably absent, but the paper noted “Treasury and the IRS expect to propose that the Secretary may identify additional free trade agreements for purposes of the critical minerals requirement going forward and will evaluate any newly negotiated agreements for proposed inclusion during the pendency of the rulemaking process or inclusion after finalization of the rulemaking.”
The paper’s release comes days ahead of EV-specific changes that go into effect on January 1st. However, things aren’t going smoothly as the sourcing requirements were recently postponed and the IRS released a flurry of last minute updates today.
H/T to Politico
