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1 1 (April 28, 2023)

handle is hein.crs/govellg0001 and id is 1 raw text is: S Congressional ____ aResearch Service U.S.-Japan Critical Minerals Agreement April 28, 2023 On March 28, the United States and Japan signed a critical minerals agreement (CMA), which entered into force immediately upon signature without requiring congressional approval. The Office of the U.S. Trade Representative (USTR) stated that the CMA builds on the 2020 U.S.-Japan Trade Agreement (USJTA), a limited trade deal. The U.S.-Japan CMA addresses Japan's concerns regarding certain critical mineral content requirements for the clean vehicle (commonly referred to as electric vehicle or EV) tax credit included in P.L. 117- 169, the Inflation Reduction Act of 2022 (IRA). According to a Notice of Proposed Rulemaking (NPRM) from the U.S. Treasury Department, released on March 31, and USTR's free trade agreement (FTA) list, the Biden Administration is categorizing the CMA as an FTA under a new but separate category for the purposes of the EV tax credit. This CMA raises issues for Congress regarding the broader U.S.-Japan trade relationship and implications for the debate over congressional and executive trade authorities, particularly related to ongoing negotiations like the Indo-Pacific Economic Framework for Prosperity (IPEF). U.S.-Japan Automotive Trade and Investment Snapshot The auto sector plays a major role in the U.S.-Japan economic relationship. In 2022, the United States imported $48.2 billion in vehicles/parts from Japan and exported $2.2 billion to Japan. Since 1982, Japanese automakers have invested a total of $57.1 billion in U.S. manufacturing facilities. Several Japanese automakers have announced plans to invest in EV and EV battery manufacturing capabilities at both new and existing U.S. facilities. These announcements are likely in anticipation of global regulatory and market shifts towards EVs, as well as regional content and assembly requirements in recent U.S. legislation like the IRA and FTAs like the 2020 United States-Mexico-Canada Agreement. The USJTA covers tariffs on some goods, but not the automotive sector. Agreement Background and Overview The IRA provides consumers a tax credit of up to $7,500 for new EVs (26 U.S.C. @30D). Vehicles must meet various requirements, including prohibitions on sourcing critical minerals and components used in the EV's batteries from foreign entities of concern (e.g., China, a leading processor of EV critical minerals). In particular, the $3,750 critical minerals-related portion of the credit requires a certain Congressional Research Service https://crsreports.congress.gov IN12152 CRS INSIGHT Prepared for Members and Committees of Congress