The U.S. government will exclude all companies operating in China from its electric vehicle (EV) subsidies, including Chinese entities and foreign entities.
The U.S. Treasury Department and Department of Energy announced Friday their rules defining "foreign entities of concern" (FEOC) that are ineligible to receive EV tax credits under the Inflation Reduction Act (IRA).
The U.S. currently offers up to seven-thousand-500 dollars in tax credits for purchases of EVs assembled in North America that satisfy certain conditions regarding the source of battery parts and mined materials.
However, manufacturers must refrain from sourcing battery components from FEOCs from 2024 or critical battery minerals from FEOCs from 2025 to remain eligible for the tax credits.
On Friday, the U.S. Department of Energy defined FEOCs as companies that fall under the ownership, control or jurisdiction of the Chinese, Russian, North Korean or Iranian governments or take orders from said governments.
Accordingly, companies may not source critical minerals from entities located in China or registered in China in order to remain eligible for the tax credits.
Even mining or processing critical minerals in China puts one on the FEOC list, regardless of where the entity is from.
Joint ventures outside China were also excluded from the tax credits if Chinese entities owned 25 percent or more of the company.
Battery manufacturers worldwide, including Korea, will likely find the rules burdensome as they rely heavily on China for supply chains.
The Korean embassy in the U.S. said it would closely consider the impact the rules will have on Korean firms and deliver Seoul's position to Washington after gathering the views of Korean entities.