The House Ways & Means Committee, led by Chairman Jason Smith (R-MO), cited a study by CPA chief economist Jeff Ferry this week looking at the benefits Chinese companies are getting under the Inflation Reduction Act (IRA).
In a fact sheet dated April 25, Chairman Smith highlighted the CPA report stating Chinese manufacturers getting as much as $125 billion in tax credits under the IRA law. That’s more than half of what China plans to spend on its military this year.
Chairman Smith also said that the IRA allowed companies, namely large electric utility companies, to use its tax breaks to pay for solar products imported from SE Asia. Almost all of the Southeast Asian solar exporters are Chinese multinationals, including JA Solar and Longii, both of which are setting up shop in Arizona and Ohio, respectively, to take advantage of manufacturing tax credits for solar producers.
Last week, the House Ways & Means Committee voted 26 to 13 to remove the White House’s emergency declaration on solar from June 6, 2022. The Biden White House said that the war in Ukraine could hurt America’s energy supply chain, and decided to place a two-year pause on tariffs against Southeast Asian solar exporters currently under investigation by the Commerce Department. Commerce found at least four Chinese multinationals to be circumventing import duties by using Southeast Asian countries. A case was brought against them by Auxin Solar, a California-based solar manufacturer. The emergency declaration means that should Commerce find companies guilty of circumventing U.S. trade laws, they would get a pass on punitive tariffs for a period of two years, starting June 2022. Commerce only issued a preliminary decision with a full decision of its discovery expected before the summer.
The House will have a floor vote on rescinding this declaration on Friday. There is bipartisan support for killing the solar emergency.
The White House has said it will veto the bill, citing issues of cost and supply disruptions of ongoing utility-grade solar projects.
Meanwhile, the House Ways & Means fact sheet also took the IRA’s incentives for electric vehicles to task on Tuesday.
Rep. Smith said half of the clean vehicle tax credit ($3,750) in the IRA is dependent on critical minerals in the battery being extracted or processed in the U.S. or countries with which we have FTAs. But by circumventing this requirement, the Biden Administration has engaged in negotiations for limited critical minerals agreements that are not part of those free trade agreements.
He said the IRA law helps China’s growing dominance over America’s renewable energy supply chains, which includes the minerals used in making long-life batteries for EVs. The fact sheet warned that these critical minerals agreements in the IRA lack safeguards that will exclude Chinese content.
Ford recently announced that CATL, one of China’s top EV battery manufacturers, will partner to make batteries in the U.S.
CPA strongly supported the provisions in the IRA that reduce our reliance on China by providing tax credits for the domestic solar manufacturing supply chain, including modules, photovoltaic cells, and solar-grade polysilicon. However, allowing Chinese companies to be eligible for those tax credits funded by American taxpayers is at direct odds of reducing U.S. dependence on China. American voters agree. A poll conducted by Morning Consult on behalf of CPA found that 72% of likely voters support Congress passing additional legislation to ban Chinese companies from being eligible to receive IRA tax credits.
Chinese Manufacturers Could Earn Up To $125 Billion in U.S. Renewable Energy Tax Credits
