Final Rules on the clean vehicle provisions of the Inflation Reduction Act

The Final Rules on clean vehicle provisions of the Inflation Reduction Act 2024 establish supply chain verification requirements for electric vehicle batteries, focusing on critical minerals and foreign entity compliance. The rules form part of the Inflation Reduction Act, which aims to strengthen domestic manufacturing and reduce dependence on foreign entities of concern in the clean vehicle supply chain. These regulations specifically address the verification and traceability requirements for battery components and critical minerals used in new clean vehicles.

The rules mandate a robust tracking system for battery components through serial numbers or equivalent identification methods to ensure compliance throughout the supply chain. Manufacturers must implement a compliant-battery ledger system that documents and verifies the locations of all facilities involved in extraction, manufacturing, processing, and recycling. Under the Traced Qualifying Value Test, manufacturers are required to conduct detailed supply chain analyses to calculate the actual value-added percentage for critical mineral components, including their extraction, processing, and recycling phases.

These rules establish a standardised framework for supply chain verification in the clean vehicle industry. The tracking requirements create a documented chain of custody for battery components and critical minerals, enabling verification of compliance with non-Foreign Entity of Concern requirements. The implementation of these rules affects vehicle manufacturers, battery suppliers, and mineral processors, requiring them to maintain detailed records and verification systems throughout their supply chains. 

The Final Rules also include a transition provision on impracticable-to-trace battery materials, which are low-value materials from multiple sources that get mixed during production, making it difficult for manufacturers to trace their origin. These materials are less valuable compared to the total value of the clean vehicle battery. Identified impracticable-to-trace battery materials include:

• Graphite in anode materials
• Critical minerals in electrolyte salts, binders, or additives

Until January 1, 2027, manufacturers can exclude these materials from due diligence requirements if they provide periodic reports. These reports must show efforts to secure compliant supplies once the transition rule ends.

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