G/SCM/Q2/USA/89  
 
20 October 2022  
(22-7886) Page: 1/4 
Committee on Subsidies and Countervailing Measures  Original: English  
 
SUBSIDIES  
 
QUESTIONS FROM CHINA TO THE UNITED STATES  
PURSUANT TO ARTICLE 25.8 OF THE AGREEMENT  
The following communication, dated and received on 20 October 2022, is being circulated at the 
request of the delegation of China.  
 
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China would like to submit the following questions to the US regarding the compliance of certain 
provisions in  the Inflation Reduction Act of 2022  with the GATT and the ASCM under Article 25.8 
of the ASCM.  
Question: The specific requireme nts under Sec. 13401 (a), (b)(1), (c)(1), (e)(1) and (e)(2) of the 
Inflation Reduction Act of 2022 could be implemented in a manner that is inconsistent with U.S. 
obligations under the GATT and the ASCM. What would the United States do to ensure its measures ' 
consistency with its obligations?  
1. Provisions under concern  
Inflation Reduction Act of 2022 Sec. 13401 Clean Vehicle Credit, subparagraphs (a) Per Vehicle 
Dollar Limitation, (b) Final Assembly, (c) Definition of New Clean Vehicle and (e) Critic al Mineral and 
Battery Component Requirements:  
Item(1): Sec. 13401 (a) PER VEHICLE DOLLAR LIMITATION. —Section 30D(b) is amended by 
striking paragraphs (2) and (3) and inserting the following:  
"(2) CRITICAL MINERALS. —In the case of a vehicle with respect to which the requirement 
described in subsection (e)(1)(A ) is satisfied, the amount determined under this paragraph 
is $3,750 .  
(3) BATTERY COMPONENTS. —In the case of a vehicle with respect to which the requirement 
described in subsection (e)(2)(A) is satisfied, the amount determined under this paragraph 
is $3,750 .'' 
Item (2): Sec. 13401 (b)(1) FINAL ASSEMBLY. —Section 30D(d) is amended — 
(1) in paragraph (1) — 
[…] 
(C) by adding at the end the following:  
"(G) the final assembly of which occurs within North America ." G/SCM/Q2/USA/89  
 
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  Item  (3): Sec. 13401 (c) DEFINIT ION OF NEW CLEAN VEHICLE. — (1) IN GENERAL. —
Section  30D(d), as amended by the preceding provisions of this section, is amended — 
[…] 
(D) by adding at the end the following:  
"(6) NEW QUALIFIED FUEL CELL MOTOR VEHICLE. —For purposes of this section, the 
term 'new clean vehicle ' shall include any new qualified fuel cell motor vehicle  (as 
defined in section 30B(b)(3)) which meets the requirements under subparagraphs (G ) 
and (H) of paragraph (1) .'' 
Item (4): Sec. 13401 (e)(1) CRITICAL MINERAL AND BATTERY COMPONENT  REQUIREMENTS.  
(1) IN GENERAL. — Section 30D, as amended by the preceding provisions of this section, is 
amended by inserting after subsection (d) the following:  
"(e) CRITICAL MINERAL AND BATTERY COMPONENT REQUIREMENTS. —  
(1) CRITICAL MINERALS REQUIREMENT. —  
(A) IN GENERAL. —The requirement described in this subparagraph with respect to a vehicle 
is that, with respect to the battery from which the electric motor of such vehicle draws 
electricity, the percentage of the value of the applicable critical minerals (as defined in 
section 45X(c)(6)) contained in such battery that were —  
(i) extracted or processed —  
(I) in the United States, or  
(II) in any country with which the United States has a free trade agreement in 
effect, or  
(ii) recycled in North America, is equal to or greater than the applicable percentage (as 
certified by the qualified manufacturer, in such form or manner as prescribed by the 
Secretary).  
(B) APPLICABLE PERCENTAGE. —For purposes of subparagraph (A), the applicable 
percentage shall be —  
(i) in the case of a vehicle placed in service after the date on which the proposed 
guidance described in paragraph (3)(B) is issued by the Secretary and before January 
1, 2024, 40 percent ,  
(ii) in the case of a vehicle pl aced in service during calendar year 2024, 50 percent ,  
(iii) in the case of a vehicle placed in service during calendar year 2025, 60 percent ,  
(iv) in the case of a vehicle placed in service  during calendar year 2026, 70 percent,  
and  
(v) in the case of a vehicle placed in service after December 31, 2026,  80 percent . 
(2) BATTERY COMPONENTS. —  
(A) IN GENERAL. —The requirement described in this subparagraph with respect to a vehicle 
is that, with respect to the battery from which the electric motor of such v ehicle draws 
electricity, the percentage of the value of the components contained in such battery that 
were manufactured or assembled in North America is equal to or greater than the applicable G/SCM/Q2/USA/89  
 
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  percentage (as certified by the qualified manufacturer, in suc h form or manner as prescribed 
by the Secretary).   
(B) APPLICABLE PERCENTAGE. —For purposes of subparagraph (A), the applicable 
percentage shall be — 
(i) in the case of a vehicle placed in service after the date on which the proposed 
guidance described in pa ragraph (3)(B) is issued by the Secretary and before January  1, 
2024, 50 percent,   
(ii) in the case of a vehicle placed in service  during calendar year 2024 or 2025, 
60 percent,   
(iii) in the case of a vehicle placed in service during calendar year 2026, 70 percent ,  
(iv) in the case of a vehicle placed in service during calendar year 2027, 80 percent,   
(v) in the case of a vehicle placed in service  during calendar year 2028, 90 percent,   
(vi) in the case of a vehicle placed in service after December 31, 2028, 100 percent. " 
[…] 
Item (5): Sec. 13401 (e)(2) EXCLUDED ENTITIES. —Section 30D(d), as amended by the preceding 
provisions of this section, is amended by adding at the end the following:  
"(7) EXCLUDED ENTITIES. —For purposes of this section, the term 'new clean vehicle ' shall 
not include —  
(A) any vehicle placed in service after December 31, 2024,  with respect to which any 
of the applicable critical minerals contained in the battery of such vehicle (as described 
in subsection (e)(1)(A)) were extracted, processed, or recycled by a foreign entity of 
concern (as defined in section 40207(a)(5) of the I nfrastructure Investment and 
Jobs Act (42 U.S.C. 18741(a)(5))), or   
(B) any vehicle placed in service after December 31, 2023, with respect to which any 
of the components contained in the battery of such vehicle (as described in 
subsection  (e)(2)(A)) were manufactured or assembled by a foreign entity of concern 
(as so defined). " 
2. Likelihood of the MFN Violation  
Sec. 13401 limits the place of extraction or process of critical minerals used in batteries of electric 
vehicles, the place of battery component m anufacture or assembly, and the place of final assembly 
to the United States, countries that have signed free trade agreements with the U.S., or 
North  America, as a precondition for tax credit. It also explicitly excludes relevant products from 
"foreign entity of concern ". Constituting discrimination against like products imported from other 
WTO members, these would lead to a violation of the U.S. obligation under the GATT Art. I.  
3. Likelihood of the NT Violation  
Sec. 13401 accords to imported el ectronic vehicles treatment less favorable than that accorded to 
like regional -assembled electronic vehicles, which makes electronic vehicles manufactured and 
assembled in the U.S. or with high US value more likely to enjoy tax credits. Constituting 
discrimination against like electronic vehicles produced in and imported from other WTO members, 
this would lead to a violation of the U.S. obligation under the GATT Art. III.  G/SCM/Q2/USA/89  
 
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  4. Likelihood of Constituting Prohibited Subsidies  
Sec. 13401 makes access to a consum ption subsidy contingent on the purchaser choosing a 
domestically  manufactured and  assembled electronic vehicles , and  requires the percentage of the 
value of the components contained in the battery or battery component manufactured or assembled 
in North America is equal to or greater than the applicable percentage. According to Article 3.1(b) 
of the ASCM, "subsidies cont ingent, whether solely or as one of several other conditions, upon the 
use of domestic over imported goods " is a form of prohibited subsidy.  
 
 
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