U.S. senator urges Treasury Department to tighten EV tax credit standards to preclude China

An electric vehicle charging station in Seoul [NEWS1]

A U.S. senator called on the Treasury Department on Monday to impose the “strictest possible” standards to preclude Chinese battery firms from getting electric vehicle (EV) tax credits, while expressing concern over their pursuit of joint ventures in Korea and Morocco.

Sen. Joe Manchin, chair of the Senate Energy and Natural Resources Committee, made the call in a letter to Treasury Secretary Janet Yellen, urging her department to employ tough standards for any “foreign entity of concern (FEOC)” under the Inflation Reduction Act (IRA), according to his office.

The FEOC rule excludes battery manufacturers from China and other countries of concern from tax incentives under the IRA.

“I urge you to impose the strictest possible standards for FEOCs to ensure the minerals in electric vehicles are, to the greatest extent possible, sourced in the United States or from legitimate allies,” he wrote in the letter.

“I am incredibly concerned by recent reports that suggest Chinese battery companies are actively pursuing business opportunities and arrangements, including joint ventures and investments, in South Korea and Morocco to take advantage of the IRA,” he added.

The senator stressed that China has a “long” history of circumventing U.S. trade laws.

“The incentives Congress provided in the IRA for domestic manufacturers, and our friends and allies with which the United States has free trade agreements, cannot be allowed to be hijacked by adversaries engaging in 'mineral laundering,'” he said.

The IRA offers tax credits of up to $7,500 to each buyer of a new electric vehicle only assembled in North America. It also requires EV batteries to be made with a certain portion of minerals mined or processed in the United States or countries or regions that have free trade agreements with the United States.

BY KIM JU-YEON, YONHAP [kim.juyeon2@joongang.co.kr]