Foreign Entity of Concern Interpretive Guidance

Question: How is the finalized guidance different from the proposed guidance?

Answer: DOE’s final guidance confirms the three major elements of the proposed guidance:

• First, that an entity incorporated in, headquartered in, or performing the relevant activities in a covered nation is subject to the jurisdiction of a covered nation, and is therefore a FEOC. 
• Second, that a company with at least 25 percent voting rights, board seats, or equity interests held by the government of a covered nation (including a senior official of such a government or dominant political party), regardless of where those activities occur.   
• Third, DOE finalized its proposal to establish a set of rights that an entity may reserve within contractual agreements to eliminate effective control if the entity licenses or contracts with a FEOC.   

DOE’s final guidance also provides clarifications and amendments in response to public comments. The final guidance expounds on key definitions, such as those for “senior political officials,” clarifies the process for calculating control, and provides revisions to the licensing and contracting provisions. 

Question: Does DOE intend to keep a list of FEOCs or does DOE currently know how many companies in the battery market are FEOCs?

Answer: DOE does not maintain a list of Foreign Entities of Concern (FEOC). By statute, FEOCs include specific entities that have been identified on lists managed by the Secretary of State, Department of Treasury, and Department of Justice, as well as entities “owned by, controlled by, or subject to the jurisdiction of the government of a covered nation” (defined in 10 USC § 2533c(d)(2) as North Korea, China, Russia, and Iran).

The focus of DOE’s interpretive guidance is to provide further clarity on how to identify and categorize entities “owned by, controlled by, or subject to the jurisdiction or direction of a government” of a covered nation that may be present in battery supply chains.

DOE does not intend to maintain a list of FEOCs within the U.S. battery supply chain, nor is DOE currently commenting on whether any particular entity is a FEOC. Rather, it is the responsibility of companies with batteries in their supply chains to understand whether any upstream suppliers of battery components or applicable critical minerals would meet the definition of a FEOC as clarified in DOE's final interpretive guidance. 

Question: What countries are FEOCs?

Answer: The term FEOC does not refer to an entire country but rather to individuals, organizations, and businesses, particularly those with certain relationships to covered nations, that meet the definitions of a FEOC within section 40207(a)(5) of the Bipartisan Infrastructure Law. 

Question: What countries are covered nations?

Answer: Per 10 USC § 2533c(d)(2): "Covered nation. — The term “covered nation” means— (A) the Democratic People’s Republic of North Korea; (B) the People’s Republic of China; (C) the Russian Federation; and (D) the Islamic Republic of Iran."  

Question: Are battery components and critical minerals from companies headquartered in China or owned by Chinese nationals that produce in the US, or in Free Trade Agreement (FTA) or North American countries, FEOC-compliant?

Answer: Under DOE’s proposed guidance, any battery components or applicable critical minerals produced in a covered nation would not be considered FEOC-compliant.

However, any battery component or critical mineral produced outside of the borders of a covered nation is only considered to be from a FEOC if the company directly producing it is headquartered/incorporated in a covered nation or has at least 25 percent of the voting interest, board seats, or equity interests are cumulatively held by a government of a covered nation, including senior officials of such a government. This control can be direct or indirect. For instance, a wholly owned U.S. subsidiary of a PRC-headquartered company would not automatically be considered a FEOC if it was producing battery components in the United States, because it is incorporated in the U.S., but such a wholly owned U.S. subsidiary would be considered a FEOC if its parent company was controlled by the PRC government, thereby holding indirect control of the subsidiary.

DOE's guidance includes a methodology and provides examples for how to calculate indirect government control for subsidiaries in nested corporate structures that operate outside of covered nations. 
 

Question: Why was 25% the threshold for control?

Answer: The threshold was set at 25% because it is a widely used standard to identify control by a parent company in the private sector. Regulatory contexts in which a 25% ownership threshold is considered control by the parent entity include the Department of Commerce’s current CHIPS rules, the Department of State’s International Traffic in Arms Regulation (ITAR), the Treasury Department’s BSA private banking regulation, and more.

Question: Will DOE assume that a U.S. subsidiary of a company incorporated in China is non-FEOC, or does the subsidiary need to prove that the parent company has no other connections to the FEOC government other than its incorporation?

Answer: DOE does not assume that any U.S. company or subsidiary is a non-FEOC. In its Compliance Report to DOE and the IRS, the qualified manufacturer will provide evidence that each supplier conducting covered activities (extraction, processing, or recycling of applicable critical minerals and manufacturing or assembly of battery components) is not owned by, controlled by, or subject to the jurisdiction or direction of a government of a covered nation. That includes affirmative proof that the entity is not controlled, directly or indirectly, by the PRC government.

Question: Would a U.S. subsidiary of a foreign company be considered a non-FEOC?

Answer: DOE cannot speak to the FEOC status of any individual company without a full understanding of the specifics of ownership, control, and jurisdiction as determined in the upfront review process for the section 30D tax credit for clean vehicles. DOE will conduct independent reviews of the material submitted but does not plan to publish lists of FEOCs at this time. 
 

Question: What is the U.S. policy objective behind the guidance considering a U.S. entity to be a non-FEOC if its parent entity is incorporated or headquartered in a covered nation but is not controlled by the covered nation at a level of 25% or more?

Answer: Jurisdiction and control are written as separate indicators in statute and are defined independently in DOE’s interpretive guidance. The policy objective behind the guidance is to understand and mitigate the influence of a government of a covered nation in the clean vehicle supply chain by assessing each entity’s relationship to that government. In the scenario described above, the U.S. entity is outside of the jurisdiction of a government of a covered nation and that government does not have any direct or indirect ownership or control.
 

Question: The final guidance includes the “National People’s Congress” in a list of PRC bodies whose membership (both current and former) qualifies as “senior foreign political figures” such that they are considered part of the government of the People’s Republic of China. Was this inclusion intentional?

Answer: Yes, DOE intentionally included specific reference to the National People’s Congress as an example of an entity whose current and former members qualify as “senior foreign political figures.”

To determine whether a particular individual is a “senior foreign political figure,” the final guidance establishes the following standard: “In order to be considered ‘senior,’ an official should be or have been in a position of substantial authority over policy, operations, or the use of government-owned resources.” In order to assist manufacturers in determining whether an individual meets this “substantial authority” standard, the guidance provides, in an explanatory section, certain examples of government and political institutions for which, in the context of the PRC, DOE has determined that all current and former members satisfy the standard and are therefore deemed “senior foreign political figures.”  This list is not intended to be exhaustive, however, and individuals who hold or have held positions in other PRC government or party institutions may still satisfy the substantial authority standard even if they are not members of one of the specifically mentioned bodies.

Current and former members of the National People’s Congress, which the PRC constitution refers to as the highest organ of state power, satisfy the substantial authority standard and therefore qualify as “senior foreign political figures.” The inclusion of a specific reference to the National People’s Congress was intended to improve the transparency and administrability of the final guidance since it is a standing body that meets annually, in full, with a transparent list of members who serve five-year terms. The final guidance omitted specific reference to the National Party Congress, which is not a standing body, but DOE anticipates that individual participants in the National Party Congress will still likely meet the substantial authority standard by virtue of their membership or role in that or other qualifying bodies.

Question: Can companies wait until 2027 to take action on graphite FEOC compliance?

Answer: No. In order for a vehicle placed in service in 2025 to be 30D eligible, the manufacturer of such vehicle relying on the impracticable-to-trace transition rule with respect to that vehicle’s eligibility must provide sourcing plans and draft agreements (e.g., MOU, offtake contract, press release, etc.) for FEOC-compliant graphite and any other impracticable-to-trace materials to DOE and IRS in 2024, with sufficient time for up-front review.

By the time manufacturers are submitting compliance reports for vehicles placed in service in 2027, they must demonstrate and certify that the vehicles they are certifying contain FEOC-compliant graphite in the vehicle battery, meaning that battery manufacturers will need to begin qualifying, purchasing, and incorporating FEOC-compliant graphite well in advance of 2027.

Graphite is not excluded from FEOC compliance under the final section 30D regulations; rather, it is subject to a transition rule, as are other impracticable-to-trace battery materials named in the transition rule. Battery materials named in the transition rule, including graphite, DO require companies to take action now to work toward 1) the due diligence that the 30D final regulations require and 2) compliant status.

Question: Is DOE’s FEOC guidance different from the CHIPS FEOC rule? If so, why?

Answer: DOE's guidance is very similar to the CHIPS rule, with some important and intentional distinctions driven by differences between the battery and semiconductor markets and differences between the Bipartisan Infrastructure Law (BIL) and the CHIPS and Science Act (CHIPS). DOE and the Department of Commerce coordinated throughout the guidance development process and largely adopted the same interpretation of jurisdiction, ownership, and control, with some small differences due to the context of these respective industries and statutes.

Specifically, DOE’s guidance considers an entity to be a FEOC under three scenarios: (1) via jurisdiction of the government of a covered nation; (2) via 25% ownership or control by the government of a covered nation; and (3) via certain licenses or contracts with a FEOC. Inclusion of the jurisdiction and 25% control provisions aligns with the Department of Commerce’s CHIPS rule and various international trade and financial regulations administered by the Departments of State and Treasury. DOE’s third provision, which addresses effective control that may be exercised over a non-FEOC company through certain license or contract agreements with a FEOC, is not found in the CHIPS rule and is meant to address means of control specific to the battery supply chain. Despite differences in statutory purpose, industry context, and impact, DOE and Commerce both have provided clarity on the definition of FEOC in supply chains, and have the statutory authority to name specific entities that engage in certain forms of unauthorized conduct as FEOCs in the future. 
 

Question: How does DOE’s rule address companies with ties to the People’s Republic of China?

Answer: DOE’s guidance presents a strong signal to the auto and battery industries that the U.S. does not see suppliers based in the People’s Republic of China (PRC) as part of a reliable or secure energy supply chain. Under DOE’s guidance, PRC-headquartered companies, PRC state-owned-enterprises, and companies controlled by the government of the PRC are among the entities treated as foreign entities of concern (FEOCs). This includes any company producing an applicable mineral or battery component in China, as well as companies that are subject to 25% Chinese government control through voting rights, board seats, or equity interests.

DOE’s guidance further establishes that individuals who hold or have held senior positions within the government or the dominant ruling party of a covered nation, may be extensions of the government and could exercise control. As such, individuals that hold or have held senior positions in the PRC government or within the Chinese Communist Party, and their family members, would be considered extensions of government control.

DOE’s guidance also addresses efforts by covered nation governments to exercise control over a company through licensing agreements. An entity not based in China or directly or indirectly controlled by the government of China may still be considered a FEOC based on effective control through a licensing agreement or contract with another FEOC.

In addition, DOE will continue to closely monitor the market to understand whether the PRC government is exerting influence in other ways. Subject to this ongoing monitoring, DOE may seek to incorporate consideration of control through non-ownership measures, such as direct or indirect investments by covered nation governments, to inform the Secretary’s potential exercise of her authority under BIL Section 40207(a)(5)(E), in consultation with the Secretary of Defense and the Director of National Intelligence, to designate an entity a FEOC if it is “engaged in unauthorized conduct that is detrimental to the national security or foreign policy of the United States.”