On the 1st (local time), the U.S. government designated battery-related companies in which the governments of China, Russia, North Korea, and Iran own ‘25% or more shares’ as ‘Foreign Entities of Concern (FEOC)’, thereby reducing inflation. It was decided to exclude it from receiving subsidies (tax credits) under the IRA.
On this day, the U.S. Treasury and Department of Energy announced the final rule for FEOC, etc., which does not allow electric vehicle subsidies of up to $7,500 (approximately 10 million won) per vehicle under IRA.
When defining FEOC, the U.S. government invoked the Infrastructure Act to specify that it is a company “owned, controlled, or under the jurisdiction” of the governments of China, Russia, North Korea, and Iran.
First, companies located in or registered as corporations in so-called overseas countries of concern, such as China, are considered FEOCs.
Additionally, companies in which the Chinese government or Communist Party directly or indirectly controls more than 25% of the company’s voting rights, shares, or board seats are designated as FEOCs, regardless of the physical location in which the company operates.
In order to receive subsidies under the IRA, companies that operate outside of so-called foreign countries of concern, but have entered into contracts with or acquired technology licenses from those countries or FEOC companies, must have certain rights in the company’s operations, such as determining the production or production time of key minerals. .
Under IRA, which went into effect in August of last year, American consumers can receive a subsidy in the form of a tax credit of up to $7,500 when purchasing a new electric vehicle that was finally assembled in North America.
The subsidy is $3,750 when using battery parts manufactured and assembled in North America and $3,750 when using core minerals mined and processed in the United States or a country that has signed a free trade agreement (FTA) with the United States.
According to battery-related guidelines issued by the U.S. Treasury in March, more than 50% of battery-related parts are currently manufactured or assembled in North America (step-by-year increase to 100% by 2029) and 40% of core minerals used in batteries. (Gradual increase by year to over 80% by 2027) The above amount must be mined and processed in the United States or a country that has concluded an FTA with the United States to receive subsidies.
However, IRA stipulates that FEOC’s core minerals or battery parts are excluded from subsidy eligibility if used. When enacting the IRA, Congress included the rule to force electric vehicle manufacturers to reduce their dependence on market-dominant Chinese suppliers.
This provision is stipulated to be implemented from 2024 for battery parts and from 2025 for core minerals.
Meanwhile, in this rule, it has been decided to exempt materials less than 2% of the value of core battery minerals from FEOC application.
(Washington·Seoul=News1)
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.