Ways and Means Committee Rejects IRA Regs on Chinese Battery Components

The House Ways and Means Committee passed a resolution to undo Treasury Department guidelines on foreign entity of concern involvement in electric vehicle supply chains. The committee passed the bill July 9 on a 25-14 vote.

While those guidelines barred companies from claiming a $3,500 advanced battery credit for electric vehicles assembled in North America if there are Chinese components or critical minerals in their batteries, they also critical minerals in electrolyte salts, electrode binders, and electrolyte additives are not traceable. The agency wrote: "Where battery materials make up only a very small percentage of the value of the battery as a whole, many industry participants, prior to the passage of the [Inflation Reduction Act], had little reason to trace the source of these materials. As a result, unlike with higher value battery materials, tracing the source of these low value materials is not immediately feasible, which makes it in turn not feasible for qualified manufacturers to provide the necessary assurance to the IRS that their materials are [foreign entity of control] compliant."

The foreign entity of concern designation, or FEOC, doesn't just apply to components made in China, it also applies to those made by companies headquartered in China, or with 25% or more Chinese government ownership (see 2312010005).

Rep. Carol Miller, R-W.Va., called the rules lenient, and said they "allow American tax dollars to flow to China." She called the final rule, which was finalized May 6, regulatory overreach, and said it conflicts with the law's text, which says "any input sourced from an FEOC would make a vehicle ineligible for the subsidy."

The Senate only needs 50 votes to reject the rule, but the Biden administration is likely to veto the resolution if it reaches the president's desk.