BATT Proposes Implementation Guidance on New Tax, Trade Measures
WASHINGTON, D.C. – The BATT Coalition is actively supporting the implementation of enhanced tax credits to spur domestic production of electric battery components and leveraging member companies’ expertise to inform new trade agreements that loosen China’s grip on markets and materials that are critical to U.S. national security and economic competitiveness.
In official public comments to the Department of the Treasury, BATT recently outlined several recommendations for the IRS in determining eligibility for the 45X Advanced Manufacturing Production Credit, which was designed to help domestic producers grow and transition away from Chinese-produced or controlled inputs in electric batteries.
BATT also proposed in separate public comments to the Office of the United States Trade Representative that the United States apply price floors to critical materials and components as part of new trade agreements with friendly nations to further undermine Chinese market manipulation.
Said BATT Executive Director Samm Gillard:
“The U.S. government and the private sector have made significant strides to build a more sustainable domestic industrial base for battery materials and components. We now have opportunities to supercharge those investments with more robust policies. But how we implement them will determine whether domestic producers double down on their commitments and we can truly break China’s lock on this strategic industrial sector.”
Said BATT Policy Director Drew Ronneberg:
“The BATT Coalition is committed to working with the Trump Administration and Congress to ensure that we get the policies right in this crucial next phase of expanding America’s supply of the raw materials and components that we need for our armed forces and to build a more resilient energy future. Our members have the knowledge to help get there that comes from hard-fought experience in bucking fierce market pressures to construct a supply chain that is free of China’s malign influence.”
In the comments to the Treasury on 45X, the BATT Coalition asserted that defining “effective control” by a foreign entity like China of a battery supplier will be “a decisive factor in determining who is eligible for the tax credit.”
“It is not credible that a downstream supplier would lack knowledge, or reason to know, that upstream inputs include materials produced by prohibited foreign entities that are necessary for the battery to function,” the letter states. “Treasury should therefore interpret ‘effective control’ to encompass functional and operational control, not merely formal governance rights.”
In other words, “a prohibited foreign entity has the practical ability to determine whether production of a qualified component can continue,” BATT wrote. “In modern supply chains, control over the supply of a critical input is, as a functional matter, control over production.”
Such an interpretation, BATT’s letter added, “will play a critical role in shaping whether the credit advances the development of upstream battery materials manufacturing in the United States or instead benefits cell producers that remain structurally reliant on foreign-controlled supply chains.”
BATT’s letter cited several examples to illustrate how “dependency in highly concentrated markets can confer effective control, even where the input represents a relatively small share of total product value.”
Electrolyte salt used in nearly all lithium-ion batteries is almost entirely produced in China. While it only represents 2% to 5% of a cell’s value, “Chinese specified foreign entities could effectively control U.S. production because the Chinese government could restrict exports.”
Graphite used in more than 95 percent of lithium-ion battery anodes is also primarily produced by Chinese entities. “Although graphite generally represents less than 15 percent of cell value, U.S. manufacturers remain dependent on Chinese-controlled supply. Absent pre-secured alternative sources, export restrictions would effectively halt the downstream production of battery cells.”
Cobalt is a key input for nickel-manganese-cobalt (NMC) cathodes, which account for roughly half of the global lithium-ion battery market. Approximately 80 percent of production and refining is controlled by Chinese entities. “This concentration enables China to exert effective control over downstream production through export restrictions, despite cobalt representing only a minority share of total cell value.”
In the separate letter to USTR on trade agreements, BATT urged negotiators to focus on supply chain “choke points” in the international market, or “areas where extraction, processing, or refining capacity is overwhelmingly concentrated in China or controlled by China-linked prohibited foreign entities.”
“These China-controlled choke points make lithium-ion battery supply chains vulnerable to disruption through price manipulation or the imposition of export controls,” BATT wrote.
The coalition recommended that in future plurilateral trade agreements, the supply chain areas where China controls 80% or more of worldwide production should be subject to “a price-floor mechanism based on the cost of production in market economies.”
“By focusing on supply-chain choke points and addressing them with well-designed price floors,” BATT added, “the United States and its partners can build a more secure, competitive, and sustainable foundation for battery supply chains that are critical to our economic and national security.”
These price floors, BATT recommended, “should be adjusted semiannually, with industry input and oversight from the Department of Energy.”
The coalition also recommended to USTR that tariffs not be levied on foreign nations that supply U.S. battery makers “when no Chinese-produced choke-point materials were used in manufacturing the battery material or component.”
The Battery Advocacy for Technology Transformation (BATT) Coalition is an industry coalition dedicated to increasing domestic production of raw materials and components for electric batteries. Follow us on LinkedIn.