Japan

Introduction

Critical minerals have received a surge of attention recently, much of it tied to China’s dominance of extraction and processing and recent application of export controls on minerals with defense applications.  Policy discussions tend to focus on “critical minerals” collectively, but it is important to distinguish those needed for agriculture and transportation from those needed for national security.  Every mineral deemed essential for U.S. national security, economic security, and supply chain resilience and included on the official list of critical minerals maintained by U.S. Geological Survey list is important for its own reasons, but there are a few elements whose looming shortage now borders on an emergency, requiring extra focus from policymakers.  Certain “heavy” rare earth elements are among them.Continue Reading Heavy Rare Earth Elements: Rising Supply Chain Risks and Emerging Policy Responses

October 12, 2024, marks the 10-year anniversary of entry into force of the Nagoya Protocol on Access to Genetic Resources and Fair Benefit-Sharing from their Utilization (“ABS”). This additional treaty to the Convention on Biological Diversity (“CBD”) has now been ratified by 142 countries. Over the past decade, Nagoya Protocol has resulted in the mushrooming of more than one-hundred thirty (130+) national ABS laws around the globe. All this time the Covington life sciences team has stood by its pharmaceutical, food and biotech clients to navigate this ever-more challenging Harlequin’s costume that is the global ABS legal regime. 

In this Client Alert we share lessons learned from our 10+ years of experience on ABS in the life sciences sector.[1] As an anniversary edition, this document is a long read. For ease of navigation, we have structured it as a Q&A. 

We first recall the basics of ABS. Then we cover key questions from clients such as e.g. compliance best practices and enforcement trends. Finally, we look to challenges in the near-future, focusing on emerging ABS regimes such as the global mechanism on benefit-sharing from Digital Sequence Information (“DSI”), the genetic resource disclosure requirement when filing patents under a new World Intellectual Property Organization (“WIPO”) treaty, the new “pathogen” ABS provisions of the World Health Organization (“WHO”) Pandemic Treaty, the High Seas Treaty on marine genetic resources, and last but not least, the new corporate due diligence obligations under the EU’s Corporate Sustainability Due Diligence Directive (“CS3D”).

If you have any questions or would like a meeting concerning the material discussed in this Client Alert, please contact our partner Bart Van Vooren at bvanvooren@cov.com.

The ABC of ABS

1. What is the purpose of the Nagoya Protocol?

The Convention on Biological Diversity of 1992 recognizes the sovereignty of countries over biological resources within their jurisdiction. The CBD has three main objectives: (1) the conservation of biodiversity, (2) its sustainable use, and (3) “the fair and equitable sharing of benefits from the arising from the utilization of genetic resources.” Although there are 196 Parties to the CBD, by 2014 very few countries had implemented rules on ABS. The Nagoya Protocol was therefore negotiated as a supplemental treaty to achieve the third objective of the CBD. It does so by empowering countries to impose prior authorization (Access) and payment requirements (Benefit-Sharing) on companies that commercialize products or processes that utilize biological materials. This supposedly creates a financial resources and incentive for countries to protect biodiversity.Continue Reading The Nagoya Protocol at Its 10th Anniversary: Lessons Learned and New Challenges from ‘Access and Benefit-Sharing’

On March 28, 2023, the United States and Japan entered into a bilateral agreement, titled the Agreement Between the Government of the United States of America and the Government of Japan on Strengthening Critical Minerals Supply Chains (“U.S.-Japan Critical Minerals Agreement” or “Agreement”). 

Context and Significance of the U.S.-Japan…

Continue Reading Threading the Needle with the Narrow U.S.-Japan Critical Minerals Agreement to Expand the Availability for EV Credits of the Inflation Reduction Act

Funding incentives under the U.S. Inflation Reduction Act of 2022 (IRA) to transition to a clean energy economy are unleashing opportunities for key U.S. allies and partners around the world. In particular, tax credits exceeding 10% of the price of average electric vehicle (EV) sold in the United States are leading to new investments in Mexico and Canada, and have triggered high-level political negotiations from U.S. partners such as the European Union and Japan.

IRA Tax Credits for EV Critical Minerals and Battery Components

Under the IRA, EVs and batteries produced in North America (including Mexico and Canada) may qualify for significant tax breaks. Partial tax breaks are also available for EVs with batteries utilizing critical minerals extracted or processed in countries with which the U.S. has a free trade agreement (FTA).

As we previously discussed in greater technical detail, the IRA amended the Clean Vehicle Credit under section 30D of the U.S. tax code to provide a $7,500 consumer tax credit for the purchase of a qualified vehicle such as an EV. This consists of $3,750 for vehicles meeting the “critical minerals” requirements and $3,750 for those meeting the “battery components” requirements.

  • Under the critical minerals requirements, a share of critical minerals contained in the battery of a qualified vehicle must have beenextracted or processed in the U.S. or in a country with which the U.S. has an FTA, or recycled in North America. The applicable share is at least 40 percent for vehicles placed in service in 2023, and increasing by 10% per year until reaching 80% for vehicles placed in services after 2026.
  • Under the battery components requirements, final assembly must have occurred in North America and the percentage of the value of the components contained in such battery that were manufactured or assembled in North America must be equal to or greater than the “applicable percentage,” i.e., “60% for 2024 and 2025 vehicles, and going up 10% per year till past 2028 at 100%.”

Continue Reading Global Spotlight: the IRA’s Implications for Key U.S. Allies