(Adds South Korea auto industry group's letter to U.S. House of
Representatives in paragraphs 10 and 11)
BRUSSELS, Aug 12 (Reuters) - The European Union and South
Korea have raised concerns about proposed U.S. tax credits for
purchases of electric vehicles, saying they may discriminate
against foreign-made vehicles and breach World Trade
Organization (WTO) rules.
Under the $430 billion climate and energy bill passed by the
U.S. Senate on Sunday, Congress would lift the cap on the
existing $7,500 tax credit for electric vehicle purchasers but
impose restrictions, including barring vehicles not assembled in
North America from receiving the credit.
The ban on tax credits for vehicles assembled outside of
North America would take effect as soon as President Joe Biden
signs the legislation.
The proposed legislation also includes provisions aimed at
preventing use of battery components or critical minerals
derived from China.
"We think it's discriminatory, that it is discriminating
against foreign producers in relation to U.S. producers," said
European Commission spokesperson Miriam Garcia Ferrer. "Of
course this would mean that it would be incompatible with the
Garcia Ferrer told a news briefing the EU agreed with
Washington that tax credits are an important incentive to drive
demand for EVs and promote the transition to sustainable
transport and a reduction in greenhouse gas emissions.
"But we need to ensure that the measures introduced are fair
and ... non-discriminatory," she said. "So we continue to urge
the United States to remove these discriminatory elements from
the bill and ensure that it is fully compliant with the WTO."
South Korea also said on Thursday that it has expressed
concerns to the United States that the bill could potentially
violate WTO rules and a bilateral free trade deal. South Korea's
trade ministry said in a statement that it has asked U.S. trade
authorities to ease battery component and final vehicle assembly
South Korea's trade ministry held a meeting with automaker
Hyundai Motor Co and battery makers LG Energy
Solution, Samsung SDI and SK. The companies asked Seoul to
support them so that the bill would not put them at a
competitive disadvantage in the U.S. market, according to the
South Korea's auto industry group on Friday said it had sent
a letter to the U.S. House of Representatives, requesting that
the United States includes EVs and battery components
manufactured or assembled in South Korea as eligible for U.S.
tax benefits, citing the U.S.-Korea Free Trade Agreement.
"Korea is deeply concerned that the recent U.S. Senate's EV
tax incentive bill includes provisions for providing tax
incentives discriminating between North American-made and
imported EVs and batteries," the Korea Automobile Manufacturers
Association (KAMA) said in a statement. It said South Korea has
been offering subsidies for EVs made in the United States.
Hyundai said it is "disappointed that the current
legislation severely limits EV access and options for Americans
and may dramatically slow the transition to sustainable mobility
in this market."
Hyundai, which imports its flagship electric vehicles from
Korea, has recently announced U.S. investments of $10 billion
including EV manufacturing in Alabama and Georgia.
A group of major automakers said last week that most EV
models would be ineligible for tax credits because of
requirements for battery parts and critical minerals to be
sourced from North America.
The EV tax break is part of the Inflation Reduction Act,
which is likely to be passed by the House of Representatives on
Friday and then sent to Biden for his signature.
(Reporting by John Chalmers in Brussels and Hyunjoo Jin in San
Francisco; Additional reporting by Joe White in Detroit, David
Shepardson in Washington and Heekyong Yang in Seoul; Editing by
Mark Potter, Matthew Lewis and Kenneth Maxwell)