US Company "Treasury Department's IRA Interpretation Favorable to Korean Battery Industry" Backlash

There are claims that the U.S. Treasury Department's interpretation of the Inflation Reduction Act (IRA) could favor countries like South Korea that produce electric vehicle battery components, potentially hindering additional investment within the United States.

According to Bloomberg News on the 22nd (local time), such claims have emerged from within the U.S. battery industry and some political circles.

The issue originated from a white paper released by the Treasury Department at the end of last year. In the white paper, the Treasury outlined detailed guidelines related to electric vehicle battery components and critical minerals under the IRA. To qualify for the U.S. government's tax credit benefits, batteries must contain at least 50% of components manufactured or assembled in North America starting this year, and at least 40% of the critical minerals used in the batteries must be mined or processed in the U.S. or countries that have free trade agreements (FTA) with the U.S.

The controversial point is whether cathode and anode materials, which are key battery raw materials, should be considered components or classified as minerals. If considered components, they must be manufactured or assembled in North America to receive subsidies; if classified as minerals, they can be produced in countries that have FTAs with the U.S., such as South Korea, and still qualify for subsidies. Even if minerals are mined in countries without FTAs but processed in FTA countries under certain conditions, they are regarded as produced in FTA countries. Specific details, including how cathode and anode materials will be classified, are expected to be included in the IRA electric vehicle-related detailed guidelines to be announced by the Treasury Department next week.

Bloomberg reported that the U.S. government is facing industry criticism for allegedly redefining battery components and critical minerals in a way that favors countries like South Korea. The U.S. industry argues that if the white paper's content remains unchanged, the current reliance on foreign sources for key battery materials will continue. There are also concerns that domestic investment in the U.S. could be lower than initially expected.

Vivas Kumar, CEO of Mitrachem, a company developing anode materials, criticized the U.S. Treasury white paper, saying it "still allows the most valuable parts of the battery supply chain to be located outside the United States."