U.S. DOE Releases Final Interpretive Guidance on the Definition of Foreign Entity of Concern
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Final Guidance Provides Clarity on Terms that Restrict FEOCs from Clean Vehicle Tax Credits and Support Growth of Domestic Battery Materials Processing and Manufacturing
WASHINGTON, D.C. — Today, the U.S. Department of Energy (DOE) finalized its guidance interpreting the statutory definition of “foreign entity of concern” (FEOC) in Section 40207 of the Bipartisan Infrastructure Law (BIL). The FEOC interpretive guidance is designed to limit the participation of FEOCs in domestic battery supply chains and bolster the growth of domestic and friend-shored battery materials processing and manufacturing. It is finalized largely as originally proposed in December, with refinement and clarifications that take into account public comments and will aid automakers and other stakeholders in identifying FEOCs in their battery supply chains.
Additionally, today the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) released their final rule implementing the Section 30D Clean Vehicle Tax Credit in the Inflation Reduction Act. This rule cross-references DOE’s FEOC interpretive guidance. DOE worked closely with Treasury and the IRS to ensure that the FEOC interpretive guidance is administrable in the context of the BIL Section 40207 grant program and the IRA Section 30D Clean Vehicle Tax Credit.
Plug-in electric vehicle (EV) sales have quadrupled since President Biden took office, hitting record numbers last year and with U.S. sales projected to reach 1.9 million in 2024, according to Bloomberg New Energy Finance (BNEF). So far in 2024, each month has seen a higher EV market share than the previous year.
Even as EV sales grow, the U.S. still depends on foreign sources for many of the processed critical minerals needed to produce EV batteries. Through the President’s Investing in America agenda, the Biden-Harris Administration has taken swift action to secure a reliable and sustainable battery supply chain sourced predominantly in America and allied trading partners. A key element of this action is the implementation of the FEOC provision in the BIL.
The BIL defines a FEOC in part, as an entity that is “owned by, controlled by, or subject to the jurisdiction or direction of a government of a foreign country that is a covered nation.” Covered nations are defined in BIL as China, Russia, Iran, and North Korea. Pursuant to DOE’s guidance today interpreting this phrase, an entity is considered a FEOC if it is headquartered, incorporated or performing relevant activities in a covered nation, if 25% or more of its voting rights, board seats, or equity interest are held by the government of a covered nation, or if the entity is effectively controlled by a FEOC through a license or contract with that FEOC.
Pursuant to the Treasury and IRS final rule on the section 30D Clean Vehicle Tax Credit, an EV containing battery components manufactured or assembled by a FEOC will be ineligible to receive the tax credit starting in 2024. Similarly, an EV with a battery containing critical minerals extracted, processed or recycled by a FEOC will be ineligible to receive this tax credit starting in 2025.
In DOE’s Battery Materials Processing and Manufacturing grant program, the Office of Manufacturing and Energy Supply Chains (MESC) will prioritize applications that will not use battery material supplied by a FEOC.
For questions on DOE’s final interpretive guidance, stakeholders may reach out to: FEOCguidance@hq.doe.gov
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