Auto Companies Brace For EV Battery Compliance Hurdles

Auto Companies Brace For EV Battery Compliance Hurdles

May 8, 2024, Law360

Jamin Koo’s commentary was included in a Law360 article analyzing new federal regulations aimed at domestic electric vehicle manufacturing, including the U.S. Department of Energy’s final guidance interpreting the statutory definition of "foreign entity of concern," or FEOC, in accordance with trade restrictions in 2021's Bipartisan Infrastructure Law. To ensure a homegrown EV industry backed by U.S. jobs and manufacturing, EVs with battery components and critical minerals from an FEOC are not eligible for the clean vehicle tax credits.

Jamin believed that determining whether an automotive original equipment manufacturer or any of its suppliers fits the definition of an FEOC "with certainty is difficult, at best, requiring an examination of all direct and indirect stakeholders and suppliers.” He added that “the rules provide few, if any, safe harbors and create significant obstacles where an entity is publicly traded or there is other non-identifiable ownership. While automotive original EMs [original equipment manufacturers] may reasonably rely on supplier certifications for their due diligence, inaccuracies in the supplier certifications could render their EVs ineligible for the credit.”

Jamin also noted that because the Department of Energy considers this FEOC rule an interpretive rule — exempt from the notice and comment rulemaking process — automakers face a non-negligible risk that the rule may change in a meaningful way when there is a different administration. “Then, they may have to alter their supply chain again,” he said.