The People's Republic of China (PRC) has challenged the WTO consistency of five vehicle and renewable energy tax credits created by the 2022 Inflation Reduction Act (IRA), Pub. L. 117-169:
- the Clean Vehicle Tax Credit (Internal Revenue Code Sec. 30D);
- the Investment Tax Credit for Energy Property (Internal Revenue Code Sec. 48);
- the Clean Electricity Investment Tax Credit (Internal Revenue Code Sec. 48E);
- the Production Tax Credit for Electricity from Renewables (Internal Revenue Code Sec. 45); and
- the Clean Electricity Production Tax Credit (Internal Revenue Code Sec. 45Y).
Proceedings in DS623 began with the PRC's request for consultations, which were held in May 2024. The PRC subsequently requested the establishment of a dispute settlement panel in July 2024, which the United States blocked. Assuming the PRC acts upon its next opportunity to request establishment of a panel, a second request could not be blocked by the United States.
Today, the Office of the United States Trade Representative (USTR) announced that it will open a 30-day statutory comment window via regulations.gov, at docket number USTR-2024-0014.
In general, the PRC argues that these tax credits disadvantage PRC-origin goods, relative to U.S.-origin goods, and thereby violate certain WTO Agreements. For the clean vehicle tax credit, the PRC has targeted the North American assembly requirement, critical minerals sourcing requirement, and battery components requirement, and disqualification of foreign entities of concern (which include the PRC, as well as Russia, Iran, and North Korea). For the other renewable energy tax credits, the PRC has targeted the domestic content bonus credit requirements.
Were a panel composed, the WTO dispute settlement panel proceeding will typically move forward under a lengthy schedule that would likely have China and the United States making written submissions and oral argument in Geneva in calendar year 2025 with an ultimate decision being issued by early 2026, which could subsequently be appealed, notwithstanding the ongoing absence of a functioning WTO Appellate Body.
Any party with an interest in the operation of these tax credits may submit comments to USTR concerning their WTO consistency, or any other issue raised in DS623, which could be helpful to USTR in defending the IRA programs at issue.
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