The percentage of critical minerals extracted or processed within the United States or a country with which the United States has a free trade agreement is calculated based on the value added by these activities. Here is a breakdown of the process:
- Determine Procurement Chains: Identify the common sequence of extraction, processing, or recycling activities for each applicable critical mineral.
- Calculate Value Added: Determine the total value added by extraction and processing for the critical mineral. For example, if extraction adds $20 in value and processing adds $80, the total value added would be $100.
- Determine Qualifying Value: Calculate the portion of value added that occurs within the United States or a free trade country. For instance, if 75% of the extraction value ($15 out of $20) and 100% of the processing value ($80 out of $80) are from qualifying locations, the total qualifying value would be $95.
- Apply the 50% Test: An applicable critical mineral is considered “qualifying” if 50% or more of the value added by extraction or processing is from the United States or a free trade country.
- Calculate Percentage: The percentage of critical minerals that meet this requirement is then determined by dividing the total traced qualifying value by the total value of critical minerals in the vehicle’s battery. This calculation helps determine compliance with the critical mineral requirement for electric vehicle tax credits.
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