The US Department of the Treasury and the Internal Revenue Service (IRS) ruled on Friday that US manufacturers can continue buying graphite from China for another two years.
Under the Inflation Reduction Act (IRA)'s Section 30D Clean Vehicle Tax Credit, graphite contained in anode materials is now considered impracticable to trace.
This means automakers can keep sourcing graphite outside of the US without preventing end-buyers from accessing the $7,500 tax credit on eligible EVs.
OEMs can purchase graphite mined, manufactured, and processed in China, until 1 January 2027, as long as they can demonstrate a meaningful procurement plan to secure compliant supply chains.
The Treasury and the IRS attribute this decision to "the difficulty of tracing synthetic graphite fully upstream" and "the commingling of natural and synthetic graphite." Graphite accounts for 3-4% of EV battery value and battery cell manufacturers frequently mix synthetic and natural graphite together, which industry players say makes it difficult to trace, the government states.
Reacting to the news, trade body North American Graphite Alliance (NAGA) urges the Biden Administration to stringently impose its new two-year certification requirements for OEMs. It argues this will ensure that OEMs reach offtake agreements with North American graphite producers and grow domestic graphite supply by 2027, when the exemption expires.
"The robustness and pace of these new requirements are critical so producers can obtain financing and begin scaling production to fulfil demand by 2027. This effort begins today," comments NAGA spokesperson Erik Olson. "OEMs must commit to sourcing IRA-compliant graphite from North American suppliers. Only then will the industry be able to sustain itself, compete with China, and bring thousands of jobs to the US and Canada," he adds.
"We do appreciate Treasury's work in the final rule to ensure that the two-year window is not extended. If we want a North American graphite industry the window must close in 2027," warns Olson.
China is the world's largest graphite producer and is behind 98% of announced anode-manufacturing projects for the rest of the decade. Although North American demand for anode material is expected to rise exponentially, domestic producers say they cannot compete with cheaper Chinese supply.
