If It Follows Last Year's Treasury White Paper, It Will Be Advantageous
US Industry Already Opposes, Creating Variables
The extent to which the positions of South Korean companies will be reflected in the detailed guidelines of the Inflation Reduction Act (IRA) electric vehicle tax credit, announced by the U.S. government this week, is drawing attention. Within the U.S., criticism has already arisen that the Treasury Department has altered the definitions of battery components and critical minerals to favor countries like Korea.
According to a compilation of domestic and international media reports on the 27th, the South Korean government views that the direction of the guideline formulation contained in the white paper released by the U.S. Treasury Department at the end of last year has significantly reflected the positions of the domestic battery industry, and it is expected that the white paper's content will be included in the detailed guideline regulations.
According to the Treasury Department white paper, a substantial portion of the content favors electric vehicle battery component producing countries such as South Korea.
The white paper outlined the direction of detailed guidelines related to electric vehicle battery components and critical minerals under the IRA. To receive the U.S. government's tax credit benefits, batteries must have at least 50% of their components manufactured or assembled in North America starting this year, and for critical minerals installed in the battery, at least 40% must be mined or processed in the U.S. or countries that have free trade agreements (FTA) with the U.S.
Our government and companies are focusing on whether the U.S. will classify key battery materials such as cathode and anode materials as components or minerals in the detailed regulations to be released this week. If classified as components, subsidies are granted only if they are manufactured or assembled in North America; however, if classified as minerals, subsidies can be received even if produced in countries like South Korea that have FTAs with the U.S. Additionally, minerals mined in countries without FTAs but processed in FTA countries can be considered as produced in FTA countries under certain conditions.
If classified as minerals, it means that minerals imported from countries like China and processed in South Korea can qualify for tax credits if value-added criteria are met. This is a favorable regulation for South Korea, which relies on mineral imports. If cathode and anode materials are also considered minerals, it implies that the materials do not need to be produced in North America.
However, the 'North American final assembly' requirement for electric vehicles, which is an important provision for the automotive industry, is stipulated by law and appears unlikely to change.
Since our government has been in continuous consultation with the U.S. government, the atmosphere is that the detailed regulations will be released in accordance with the white paper's content.
The variable is domestic opposition within the U.S. Bloomberg reported that political and industry criticism is pouring in over the U.S. government's changes to the definitions of battery components and critical minerals to favor countries like South Korea. If the white paper's content remains as is, the current situation of relying on foreign sources for key battery materials will continue, according to the U.S. industry. There are also expectations that domestic investment in the U.S. may decrease more than initially anticipated.
Vivas Kumar, CEO of Mitrachem, an anode material development company, criticized the U.S. Treasury Department white paper, saying it "still allows the most valuable parts of the battery supply chain to be located outside the U.S."
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