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NEWS

By Andrea Shalal and David Shepardson

WASHINGTON (Reuters) -The United States and European Union are working toward agreement in principle on a deal to make European minerals eligible for tax credits, a senior EU official said Friday.

The $430 billion U.S. Inflation Reduction Act passed in August requires rising percentages of battery minerals to come from the United States or a Free Trade Agreement (FTA) partner.

The EU official said an agreement could come as early as next week, in time for a visit by European Commission President Ursula von der Leyen to Washington, on a deal that would give the EU “free trade agreement-like status.

White House press secretary Karine Jean-Pierre declined to say if a high-level deal that would provide free trade-like status to the EU could be reached before von der Leyen’s visit, removing an irritant in U.S.-EU ties, but underscored Washington’s desire to maintain a strong working relationship with the EU.

“Of course, we want to make sure there’s a good working relationship,” she said.

Up to $3,750 per vehicle of the available tax credits relate to critical minerals for batteries, taking effect when the U.S. Treasury issues guidance, which is expected later this month.

The EU official said it was critical to reach an agreement soon, given moves by some European companies to shift production to the United States.

We need to react now, and we need to at least avoid as much as possible these disturbances, by granting an FTA-like status, and having better access when it comes to raw materials, battery production, for example.

He said the U.S. side was pressing for the agreement to be “legally binding,” but it would be difficult have that in place ahead of von de Leyen’s visit. I think that commitment to do this, and to do it quickly, could well be an outcome of next week’s discussions.

The agreement would be limited, the official said.

We’re not talking about market access here … This would be very reduced and certainly not a free trade agreement in the classical way,” the official said.

The EU, South Korea, Japan and other U.S. allies have harshly criticized the IRA’s provision requiring EVs to be produced in North America to qualify for consumer EV tax credits.

But the EU in December praised a U.S. Treasury Department decision to allow EVs leased by consumers to qualify for up to $7,500 in commercial clean vehicle tax credits.

(Reporting by Andrea Shalal; additional reporting by Trevor Hunnicutt; writing by David Shepardson; Editing by Kirsten Donovan)

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