Authors: Angela Morris, Jay Leary and Alistair Murray

The US Department of Energy recently released its proposed guidelines on the interpretation of a “foreign entity of concern” (FEOC). In this article, we provide a high-level summary of these guidelines, and the consequences of conducting business with a FEOC in the context of the electric vehicle tax credits and battery grants available in the US, as part of the Infrastructure Investment and Jobs Act(also known as the Bipartisan Infrastructure Law).

Executive summary

  • On 1 December 2023, the US Department of Energy (DOE) released proposed guidelines on the interpretation of a FEOC.
  • The term FEOC applies to the rules regarding tax credits for electric vehicles (EV) with battery components and critical minerals from (or otherwise sufficiently linked to) covered nations, as well as the Bipartisan Infrastructure Law’s significant battery manufacturing and recycling grants program.
  • The FEOC interpretive guidelines are intended to push participants away from being involved with a FEOC in the EV battery supply chain process.
  • The Biden Administration’s press release on the guidance concludes that it will provide certainty, and encourage diversity and strength in supply chains for battery components and critical minerals, making the US a leader in the EV market.


FEOC is defined in the Bipartisan Infrastructure Law and cross-referenced in the Internal Revenue Code2.

The proposed guidelines are currently open to a 30-day public consultation process closing on 3 January 2024.

Meaning of FEOC

The FEOC definition includes five grounds upon which a foreign entity is considered a FEOC. The proposed guidance from the DOE concerns one of these five grounds, being the interpretation of foreign entities that are “owned by, controlled by, or subject to the jurisdiction or direction of a government of a foreign country that is a covered nation3.

Covered nations include the People’s Republic of China, the Russian Federation, the Democratic People’s Republic of North Korea, and the Islamic Republic of Iran.4

The DOE’s clarification of a FEOC, plus existing federal guidance to define FEOC, allows for a two-step analysis to determine who these entities will be. This FEOC analysis is made at the time of the activity occurring, for example, upon the extraction of battery components.

First, is there a foreign entity?

DOE guidance defines a foreign entity as one that meets any of the following four criteria:

  1. a government of a foreign country;
  2. a natural person who is not a lawful permanent resident or citizen of the US;
  3. a partnership, association, corporation, or other combination of persons organised under the laws of or having its principal place of business in a foreign country; or
  4. an entity organised under the laws of the US that is owned, controlled by or subject to the direction of a foreign entity under categories 1 to 3.

Entities will often qualify as a foreign entity, but may not then be considered a FEOC.

Second, is the foreign entity a FEOC?

To determine if a foreign entity is a FEOC, one of the two following criteria must be met.

The first criteria is satisfied if the foreign entity is “subject to the jurisdiction” of a government of a covered nation. This occurs if:

  • the foreign entity is incorporated or domiciled in, or has its principal place of business in a covered nation; or
  • the foreign entity engages in the extraction, processing or recycling of specific battery components, critical minerals or battery materials in a covered nation.

Alternatively, a foreign entity will be a FEOC if it is “owned by, controlled by or subject [to the] direction” of a government of a foreign country that is a covered nation. The guidance states that a foreign entity will be considered to be “owned by, controlled by or subject [to the] direction” of another entity if:

  • at least 25% of the foreign entity’s board seats, voting rights or equity interest, are cumulatively held by the other entity (whether directly or indirectly); or
  • the foreign entity has entered a licensing or contractual arrangement with the other entity (a contractor), entitling that contractor to exercise effective control over the extraction, processing, recycling, manufacturing or assembly of certain battery components, critical minerals or battery materials.

A “government of a foreign country” is to be broadly interpreted to include the national or subnational government, agencies or instrumentalities of the government, the dominant or ruling political party, and current or former senior foreign political figures.

The proposed guidelines offer some specific examples of scenarios demonstrating when a foreign entity meets the various tests.

Impact of conducting business with a FEOC

US taxpayers can receive a US$7,500 tax credit per new clean EV purchased, as introduced under section 30D of the Internal Revenue Code in April 2023. This amount consists of US$3,750 if certain critical mineral requirements are met, and US$3,750 if certain battery component requirements are met in the manufacturing process of the EVs.

The new FEOC rules will impact whether consumers can receive this tax credit. EVs will not be eligible to receive the tax credit in the following circumstances:

  • for EVs placed in service after 31 December 2023, if the vehicle’s battery contains battery components manufactured or assembled by a FEOC; and
  • for EVs placed in service after 31 December 2024, if the vehicle’s battery contains any applicable critical minerals extracted, processed, or recycled by a FEOC.

Additionally, when applying for grants under the DOE’s US$6 billion funding program, candidates that do not use battery materials supplied by a FEOC will be prioritised.

These consequences incentivise US companies to source products and materials from entities located in the US or from US free-trade companies so their consumers can receive a tax credit when purchasing a company’s EV. If tax credits for an EV are not available due to FEOC involvement in the supply chain process of manufacturing the EV battery, consumers may instead move towards choosing tax credit eligible products. It is unknown exactly what impact this will have on company sales and what flow-on effect will be felt by the relevant company stakeholders.


  1. Infrastructure Investment and Jobs Act, 42 U.S.C. § 18741(a)(5).
  2. Internal Revenue Code, 26 U.S.C. § 30D(d)(7).
  3. Infrastructure Investment and Jobs Act, 42 U.S.C. § 18741(a)(5).
  4. Acquisition of sensitive materials from non-allied foreign nations: prohibitions, 10 U.S.C. § 4872(d)(2).


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To learn more, or to discuss how you might be affected by the above, please contact:

Jay Leary
Jay Leary
Partner and Global Head of Mining, Perth
+61 8 9211 7877
Angela Morris
Angela Morris
Executive Counsel, Brisbane
+61 7 3258 6520