Rubio Urges Biden Admin to Stop US EV Tax Credits From Going to China

In response to reports that Chinese EV battery firms are using partnerships in South Korea to get U.S. tax credits, Sen. Marco Rubio (R-Fla.) asks the Biden administration to “act swiftly” to stop American taxpayer dollars from flowing to China.
Rubio Urges Biden Admin to Stop US EV Tax Credits From Going to China
Sen. Marco Rubio (R-Fla.), chairman of the Small Business and Entrepreneurship Committee, speaks at the senate hearing "Made in China 2025 and the Future of American Industry" in Washington on Feb. 27, 2019. (Jennifer Zeng/The Epoch Times)
Terri Wu

Sen. Marco Rubio (R-Fla.) has asked the Biden administration to stop U.S. electric vehicle (EV) tax credits from going to Chinese companies through their partnerships in South Korea.

In the past five months, four Chinese firms have announced investing more than 5.6 trillion won ($4 billion) in South Korea for new EV battery factories. These deals were established to take advantage of Korea’s free-trade agreement with the United States to qualify for EV tax credits under the U.S. Inflation Reduction Act (IRA).

“The products manufactured in our South Korean base meet the critical minerals requirements in the IRA bill for the benefit of tariff policies when exporting to European and US markets,” Ningbo Ronbay New Energy Technology Co. stated in an announcement last week regarding setting up a plant in South Korea to produce 80,000 tons of EV battery precursors a year. The value of the investment hasn’t been disclosed.
Another Chinese company, GEM Co., Ltd., stated in a March release, “To qualify for tax credits, IRA requires that consumer electric vehicles contain a certain percentage of battery materials and critical minerals from America or countries with a free-trade agreement with America, but China is not one such country.”

GEM also stated that its investment of more than $937 million for an EV battery precursor factory with an annual production capacity of 43,000 tons in South Korea was a response to the IRA. The project is implemented by a joint venture between South Korea’s SK On Co. Ltd. and Ecopro Materials Co. Ltd.

“Since the Democrat’s Inflation Reduction Act, I have been deeply concerned that China would benefit from American taxpayer dollars,” Mr. Rubio said in a statement emailed to The Epoch Times. “Now, reports that Chinese firms are setting up partnerships in South Korea in order to qualify for Joe Biden and the Democrats’ EV tax credits prove those concerns are warranted.

“This is a clear attempt by the Chinese Communist Party to circumvent U.S. law and use American taxpayers’ money to expand its influence in Asia.

“The Biden Administration must act swiftly.”

The Department of the Treasury is still in the process of providing guidance on applying “foreign entity of concern” to the IRA tax credit requirements.

According to Prateek Biswas, a research analyst at Wood Mackenzie, a UK-based global energy research and consulting company, American consumers can use the clean vehicle tax credit of up to $7,500 per new qualified vehicle purchase if the China–South Korea partnerships are in joint ventures. That’s because the current definition of “foreign entity of concern” covers companies “owned by, controlled by, or subject to the jurisdiction of the Chinese government,” he said.

“Since the US is proactively attempting to stem Chinese investments in critical mineral projects located in countries it is allied with, the upcoming rules will likely incorporate some sort of restrictions on partial Chinese company ownership,” Mr. Biswas told The Epoch Times.

The other South Korean joint venture deals announced by Chinese companies include one by CNGR Advanced Material Co. with Korean POSCO Holdings Inc. for a nickel refinery valued at $1.2 billion, and two by Zhejiang Huayou Cobalt Co., valued at a total of $2.25 billion. Both Huayou partnerships are EV battery precursor factories, one with LG Chem and another with POSCO Future M Co.
Huayou also has majority ownership of a $4.5 billion battery materials plant in Indonesia, of which Ford Motor Co. owns a minority stake.

State Department spokesperson Matthew Miller, in response to Chinese partnerships with South Korean companies, said at a press briefing on July 31: “We certainly understand that other countries like South Korea have relationships with China, including economic relationships. We have a significant economic relationship with China.

“I will say with respect to all of our enforcement actions we always look on ways to improve those actions, in ways to tighten those actions, in ways to enforce them, including people who are—people and entities that are trying to evade them. That’s a general comment without respect to any specific report, but that remains our policy and will be going forward.”

Mr. Rubio has been demanding a commitment from the Biden administration that no IRA tax credits will go to Chinese companies, directly or indirectly.

Last week, he introduced a joint resolution to overturn the Federal Highway Administration’s waiver of “Buy America” requirements on EV chargers for IRA tax credits. In February, he asked the Committee on Foreign Investment in the United States, a federal panel that reviews foreign transactions for national security implications, to review the licensing agreement between Ford and Chinese battery maker Contemporary Amperex Technology Co. Ltd. (CATL).

Ford’s partnership with CATL, announced in February, is to build a battery park in Marshall, Michigan. The plant will start operating in 2026 and will be a wholly owned subsidiary of the U.S. company; CATL will provide the battery technology, some equipment, and workers.

A month later, Mr. Rubio introduced a bill to disqualify the Ford-CATL plant from IRA tax credits by including licensing agreements with a foreign entity of concern in the prohibitions.
The foreign entity of concern restriction, however, doesn’t apply to the IRA advanced manufacturing production credit that the Ford-CATL factory also qualifies for. Currently, the chairs of the House Select Committee on China and the House Ways and Means Committee are seeking to review the license agreement.

The Epoch Times contacted the Department of Treasury and the Federal Highway Administration, an agency of the Department of Transportation, for comment but received none by press time.

Eva Fu contributed to this report.