On the 31 March 2023, the U.S. Treasury Department released proposed guidance material for the clean vehicle provisions of the Inflation Reduction Act (IRA). Overall, the guidance closely follows the direction of the initial white paper laid out in December last year. To qualify for a USD7,500 credit, clean vehicles must meet requirements under both the critical minerals and battery components sections of the proposal, with vehicles only meeting one of these sections being limited to a maximum of USD3,750 credit. In terms of meeting the critical mineral requirement under the IRA, a certain percentage of the value of the critical minerals in the battery must be extracted or processed in the US or any country which is connected to the US via a free trade agreement. This percentage begins at 40% in 2023, and rises by 10% each year until 2027 when it is 80%. The FTA element of the requirements can include newly negotiated critical minerals agreements such as that recently signed with Japan and one in negotiation with the EU. The identification of the critical mineral value percentage will be determined by a three-step assessment: 1) determine procurement chains, 2) identify qualifying critical materials, and 3) calculate the qualifying critical mineral content. Minerals will qualify as extracted in the US is 50% or more of the value adding extraction steps occur in the US and for processing if 50% or more of the value adding processing steps take place in the US, the same for the identified FTA countries.
As for the battery component requirement, the percentage of the value of battery components that must be manufactured or assembled in North America begins at 50% in 2023, rising 10% each year (except the period 2024-2025 for which time 60% will remain the requirement for these two years) until 2029 when it reaches 100%. The crossover point for critical minerals and battery components comes…
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