The specific sourcing requirements for critical minerals in batteries are outlined in the Inflation Reduction Act and detailed in proposed guidance by the U.S. Treasury. Here are the key requirements:
- Eligibility for Credit: To be eligible for a portion of the electric vehicle tax credit ($3,750 out of $7,500), vehicles must meet the critical mineral sourcing requirements.
- Sourcing Regulations:
- The critical minerals must be extracted or processed in the United States or in countries with which the U.S. has a free trade agreement.
- Alternatively, they can be recycled in North America.
- Percentage Requirements Over Time:
- 2023: 40% of the value of critical minerals in the battery must meet these criteria.
- 2024: The percentage increases to 50%.
- 2025: It rises to 60%.
- 2026: The requirement is 70%.
- 2027 and beyond: The percentage must be at least 80%.
- Tracking and Transparency: Due to the complexity of mineral supply chains, there is a proposal for a temporary transition rule that would allow the allocation of critical minerals to specific batteries using tracing methods like serial numbers. However, achieving full transparency and accurate tracking remains challenging due to commingling in supply chains.
- Data and Compliance: Battery OEMs and downstream entities must work closely with upstream suppliers to validate the sourcing of critical minerals, ensuring compliance with these regulations.
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