Electric vehicle materials from Japan may be exempt from tariffs under the trade agreement

A trade agreement could make electric vehicles using battery materials sourced from Japan eligible for federal tax credits. Japan Times third report.

The Inflation Reduction Act (IRA) requires key battery components and key minerals to be sourced from countries with which the United States has free trade agreements, a rule that sharp cut number of EVs and plug-in hybrids eligible for the full $7,500 credit.

The United States has no such qualifying agreement with Japan, South Korea or the EU, all leading manufacturers of electric vehicles, with associated supply chains.

2023 Toyota bZ4X Limited AWD

But a recently negotiated trade agreement between the US and Japan would bar the two countries from enacting bilateral export restrictions on battery minerals, including lithium, nickel, cobalt, graphite and manganese, according to the report. fox. The report said the agreement, expected to be signed on Tuesday, is aimed at reducing US-Japan dependence on China for those minerals.

This likely means more vehicle types will qualify for the full $7,500 tax credit, but does so by moving away from the Biden administration’s initial emphasis on vehicles and batteries. made in the United States—and what has been passed by Congress.

Nissan Leaf 2023

The Ministry of Finance prepares to release complete EV tax credit guide within the next day or two, clarify exactly how much non-US content can be included in Tram to qualify for full credit. in one White paper released on December 29, the Treasury Department hinted that it was planning to bring the network outside of the United States by discussing plans to classify cathode and anode materials as critical minerals that have been processing rather than the battery component, effectively expanding the number of countries that can get them from. , Bloomberg note.

This angered Senator Joe Manchin, the conservative-leaning Democratic senator who had demanded multiple IRA domestic sourcing rules to win his vote, and had find a way EV tax credit deferral under an IRA because of concerns that the Treasury Department was not complying with those rules.