ARKANSAS, Nov 14 (Future Headlines)- Democratic Senator Joe Manchin, chair of the Senate Energy Committee, has called on the U.S. Treasury to implement the “strictest possible standards” to prevent Chinese-produced minerals or Chinese battery companies from benefiting from electric vehicle (EV) tax credits. In a letter to Treasury Secretary Janet Yellen, Manchin expressed concerns about Chinese battery companies seeking business opportunities to exploit EV tax credits, emphasizing the need to prevent U.S. tax credits from being utilized by adversaries engaging in “mineral laundering.”

In 2022, Congress passed the Inflation Reduction Act, which prevents $7,500 in future consumer EV tax credits if any battery components are manufactured or assembled by a “foreign entity of concern.” The legislation aims to shift U.S. battery supply chains away from China, which currently dominates global cathode production (74%), anode production (92%), and lithium-ion battery cell production (76%).

• Chinese Dominance in Battery Supply Chains

China’s significant role in battery supply chains underscores the need for regulations to ensure the security and independence of the U.S. EV industry. China’s current dominance in the cathode, anode, and lithium-ion battery cell production highlights the global reliance on Chinese-made components.

The Treasury is expected to provide detailed guidance on what constitutes a “foreign entity of concern,” a crucial factor in determining eligibility for EV tax credits. A Treasury spokesperson emphasized the ongoing assessment of national security concerns associated with international and domestic supply chains in the evolving clean energy market.

The rules, effective in 2024 for completed batteries and 2025 for critical minerals, aim to safeguard U.S. interests by minimizing dependence on foreign entities deemed concerning.

Senator Manchin highlighted that the law does not permit a “value-added test” exception, emphasizing the importance of avoiding loopholes that could allow the use of minerals and materials from China or other nations of concern.

A key decision in the Treasury’s guidance pertains to Ford Motor’s deal to license technology from Chinese battery manufacturer CATL for use in U.S. battery plants. Concerns have been raised about whether batteries made using Chinese technology, such as Ford’s arrangement with CATL, will qualify for EV tax credits. Ford put its planned $3.5 billion Michigan battery plant on hold in September, awaiting clarity from the Treasury on the qualification of batteries produced with Chinese technology for tax credits.

Senator Manchin urged Treasury Secretary Yellen to use the strictest metrics possible to ensure that there are no loopholes leading to the “laundering” of minerals and materials from China or other nations of concern.

As the clean energy market evolves, the Treasury emphasized its commitment to assessing and responding to any national security concerns associated with both international and domestic supply chains.

Reporting by Alireza Sabet; Editing by Sarah White