The Washington paperwork might rescue the Democrats from their EV tax credit score downside

There is already a playbook for getting around geographic sourcing requirements: A decades-old program called “Buy America,” which aims to ensure that road and transit projects are built with American-made materials. The requirements, especially for things like steel, which are produced more cheaply overseas, have been difficult to meet since their inception — which is precisely why they are sometimes waived.

For example, while Congress enacted tough new Buy America rules in last year’s massive infrastructure law, they were immediately waived temporarily to give states and cities more time to adapt.

And the new sourcing requirements for electric vehicles that are currently obsolete could also go down the Buy America path. Indeed, automakers and electric vehicle interest groups are already calling for more time before implementation.

The Zero Emissions Transportation Association is not seeking a waiver, but Executive Director Joe Britton said the association and its members on Capitol Hill are asking Congress to extend the bill’s compliance deadlines by 12 to 18 months.

“We want to get as much time as we can,” Britton said. “In my opinion, every six months we can get as an extension has a material benefit.”

Where the rubber meets the road

In order to receive a tax credit to buy an electric vehicle, the budget deal that Democrats are working to enact requires that at least 40 percent of battery minerals be sourced from North America or a US trading partner. starting in 2024 and rising from there. And by 2029, battery components would have to be 100 percent made in North America.

Perhaps the most difficult bar, however, is thinking Chinese dominance when it comes to lithium-ion and mineral batteries and other components vehicle requirements, a condition of the agreement is that the credit will not apply to a vehicle with any battery components made from an “entity of concern,” such as China, by 2024, and that no critical minerals from those sources by 2025.

A single electric vehicle currently on the market would not qualify. It’s not surprising, considering that the United States is responsible for only 8 percent of global lithium-ion battery production, compared to China’s 76 percent.

In some cases, companies may not even be able to trace the source of minerals or sub-components of their own products.

“We’re an American company that makes American products and we believe in buying America,” said Desmond Wheatley, CEO and president of electric vehicle infrastructure company Beam Global. “However, it’s actually very difficult to know the origin of the components and raw materials you’re using.”

“It’s a minefield,” he said. “We’re afraid that we could say we’re going to comply and someone down the road could argue that we’re not, because three or four levels of foundation come against the flow that some things come from overseas and it wasn’t worth it. you know.”

How those requirements could be waived, relaxed or mitigated

The reconciliation bill does not expressly outline any waivers. But how the Treasury Department defines and applies the requirements and the IRS could provide some wiggle room.

ZETA’s Britton said that while “the law is the law,” the Treasury has authority to determine how U.S. businesses are allowed to interact with “entities of concern,” for example — and the IRS will determine how and when to calculate how much foreign-made battery.

One infrastructure trade executive suggested that exemptions may be needed even more for electric vehicle credits than for Buy America.

“It may not be apples to apples but it’s comparing results,” said AASHTO executive director Jim Tymon, whose organization represents state Departments of Transportation, including those pushing for Buy America waiver. “For a vehicle or a battery it’s a much more detailed analysis to find out where those materials come from.”

That’s because there are significant differences between Buy America’s requirements for infrastructure projects and materials like steel, where the requirements have been in place for years and the supply chain is well understood, and requirements for private car companies to source their battery components from an existing supply chain. does not exist.

Tymon said the temporary waiver DOT put in place allowed infrastructure projects that had been in the planning process for years to move forward this summer. Without it, several projects were delayed.

“We realize there’s kind of a chicken or egg here,” Tymon said. “If we can’t prove to America and Congress that we can get dollars out into the community, that doesn’t bode well for us when we have to go back to Congress and push out a similar level of investment.”

GM CEO Mary Barra acknowledged Thursday that while the domestic sourcing language in the reconciliation bill will help drive more investments in American manufacturing and sustainable, scalable and secure supply chains,” those goals “cannot be achieved overnight.”

Republicans who do not support the reconciliation bill want to make the requirements for mineral sourcing even stricter.

Sen. blond frame (R-Fla.) plans to file an amendment the bill would require electric vehicles to source 100 percent of their batteries and battery components from the US or a country with which the US has a free trade agreement immediately, rather than allowing a transition period. If Rubio’s amendment were to pass, electric vehicle tax credits would not be available for years.

But it is unlikely that any Republicans will vote for the bill, and the bill’s language is unlikely to change significantly, given the delicate balancing act of getting all 50 Democratic senators to sign on.

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