[Federal Register Volume 88, Number 30 (Tuesday, February 14, 2023)]
[Notices]
[Pages 9430-9475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-03078]



[[Page 9430]]

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DEPARTMENT OF COMMERCE

Bureau of Industry and Security

RIN 0694-XC081


Publication of a Report on the Effect of Imports of Neodymium-
Iron-Boron (NdFeB) Permanent Magnets on the National Security: An 
Investigation Conducted Under Section 232 of the Trade Expansion Act of 
1962, as Amended

AGENCY: Bureau of Industry and Security, Commerce.

ACTION: Publication of a report.

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SUMMARY: The Bureau of Industry and Security (BIS) in this notice is 
publishing a report that summarizes the findings of an investigation 
conducted by the U.S. Department of Commerce (the ``Department'') 
pursuant to section 232 of the Trade Expansion Act of 1962, as amended 
(``section 232''), into the effect of imports of neodymium-iron-boron 
(NdFeB) permanent magnets on the national security of the United 
States. This report was completed in June 2022 and posted on the BIS 
website in September 2022. BIS has not published the appendices to the 
report in this notification of report findings, but they are available 
online at the BIS website, along with the rest of the report (see the 
ADDRESSES section).

DATES: The report was completed in June 2022. The report was posted on 
the BIS website in September 2022.

ADDRESSES: The full report, including the appendices to the report, are 
available online at https://bis.doc.gov/232.

FOR FURTHER INFORMATION CONTACT: For further information about this 
report contact Erika Maynard, Special Projects Manager, (202) 482-5572; 
and Leah Vidovich, Management and Program Analyst, (202) 482-1819. For 
more information about the Office of Technology Evaluation and the 
section 232 Investigations, please visit: http://www.bis.doc.gov/232.

SUPPLEMENTARY INFORMATION: 

The Effect of Imports of Neodymium-Iron-Boron (NdFeb) Permanent Magnets 
on the National Security

An Investigation Conducted Under Section 232 of the Trade Expansion Act 
of 1962, as Amended

U.S. Department of Commerce Bureau of Industry and Security Office of 
Technology Evaluation

Table of Contents

1. Executive Summary
    1.1 Findings
    1.2 Determination
    1.3 Recommendations
2. Legal Framework
    2.1 Section 232 Requirements
    2.2 Discussion
3. Investigative Process
    3.1 Initiation of Investigation
    3.2 Public Comments
    3.3 Information Gathering and Data Collection Activities
    3.4 Interagency Consultation
4. Product Scope of the Investigation
5. NdFeb Magnet Production
    5.1 Production Process and Value Chain Steps
    5.2 Rare Earth Element Losses in Magnet Production
6. U.S. NdFeB Magnet Industry
    6.1 Historical Overview
    6.2 U.S. Demand
    6.3 NdFeB Magnets in Defense and Critical Infrastructure 
Applications
    6.3.1 Defense Applications
    6.3.2 U.S. Government Actions To Reduce Defense Dependencies
    6.3.3 NdFeB Magnets, Climate Change, and the National security
    6.3.4 Electric Vehicles
    6.3.5 Wind Energy
    6.4 U.S. Trade in NdFeB Magnets
    6.5 Duties on NdFeB Magnet Imports
7. Global NdFeB Magnet Industry
    7.1 Global Demand
    7.2 Global NdFeB Magnet Value Chain
    7.3 Russia and the NdFeB Magnet Industry
8. Status and Forecast of the U.S. NdFeB Magnet Industry
    8.1 U.S. Production of NdFeB Magnets and Components, 2017 to 
2026
    8.1.1 Firm Participation in the U.S. NdFeB Magnet Value Chain
    8.1.2 Production of NdFeB Magnets and Magnet Components, 2017 to 
2026
    8.1.3 Company Profiles
    8.1.4 Estimated NdFeB Magnet Import Penetration, 2017 to 2026
    8.2 Requirements to Establish the U.S. NdFeB Magnet Industry
    8.2.1 Facility Costs and Capital Expenditures
    8.2.2 Critical Equipment
    8.2.3 Employment
    8.3 Additional Challenges to Domestic Production
    8.3.1 Import Competition, Production Costs, and General 
Challenges
    8.3.2 Environmental Factors
    8.3.3 Intellectual Property
    8.3.4 Prices and Price Volatility
    8.4 Recycling and Substitution
    8.4.1 NdFeB Magnet Recycling
    8.4.2 NdFeb Magnet Substitutes
9. Conclusion
    9.1 Findings
    9.1.1 NdFeB Magnets Are Essential to U.S. National Security
    9.1.2 Domestic Demand for NdFeB Magnets Is Expected To Grow
    9.1.3 The United States and Its Allies Are Dependent on Imports 
From China
    9.1.4 The United Sates Will Continue To Depend on Imports
    9.1.5 The U.S. NdFeB Magnet Industry Faces Significant 
Challenges
    9.2 Determination
    9.3 The United States Should Not Restrict NdFeB Magnet Imports
    9.4 Recommendations
    9.4.1 Engagement With Allies and Partners
    9.4.2 Bolster Domestic Supply
    9.4.3 Bolster Domestic Demand
    9.4.4 Support Medium- to Long-Term Industry Development and 
Resiliency
    9.4.5 Continue To Monitor the NdFeB Magnet Value Chain
Appendices
    Appendix A: Section 232 Investigation Notification Letter to 
Secretary of Defense Lloyd J. Austin III, September 21, 2021
    Appendix B: Federal Register Notice--Notice of Request for 
Public Comments on Section 232 National Security Investigation of 
Imports of Neodymium-Iron-Boron (NdFeB) Permanent Magnets, September 
27, 2021
    Appendix C: Public Comment Summaries
    Appendix D: U.S. NdFeB Permanent Magnet Industry Survey
    Appendix E: Global NdFeB Magnet Production: A Firm-Level 
Perspective
    Appendix F: U.S. NdFeB Magnet Industry: Company Profiles
    Appendix G: NdFeB Magnet Substitutes: Niron Magnetics

1. Executive Summary

    This report summarizes the findings of an investigation conducted 
by the U.S. Department of Commerce (the ``Department'') pursuant to 
section 232 of the Trade Expansion Act of 1962, as amended, into the 
effect of imports of neodymium-iron-boron (NdFeB) permanent magnets on 
the national security of the United States.\1\ Secretary of Commerce 
Gina Raimondo initiated the investigation on September 21, 2021, in 
response to a recommendation in the June 2021 White House Report 
``Building Resilient Supply Chains, Revitalizing American 
Manufacturing, and Fostering Broad-Based Growth: 100 Day Reviews under 
Executive Order 14017.'' 2 3
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    \1\ NdFeB magnets are also called NdFeB permanent magnets, 
neodymium-iron-boron (permanent) magnets, or neodymium (permanent) 
magnets. This report uses the term NdFeB magnets.
    \2\ Section 4 of this Report, ``Product Scope of the 
Investigation,'' discusses the products under investigation. Section 
4 also details ancillary products the Department examined to provide 
traction on the investigation.
    \3\ See ``Building Resilient Supply Chains, Revitalizing 
American Manufacturing, and Fostering Broad-Based Growth: 100 Day 
Reviews Under Executive Order 14017,'' The White House, June 2021, 
https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf.
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    As required by the statute, the Secretary considered all factors 
set forth in section 232(d). In particular, the Secretary examined the 
effect of imports on national security requirements, specifically:

[[Page 9431]]

    i. domestic production needed for projected national defense 
requirements;
    ii. the capacity of domestic industries to meet such requirements, 
including the commercial demand needed for economic viability;
    iii. existing and anticipated availabilities of the human 
resources, products, raw materials, and other supplies and services 
essential to the national defense;
    iv. the requirements of growth of such industries and such supplies 
and services including the investment, exploration, and development 
necessary to assure such growth; and
    v. the importation of goods in terms of their quantities, 
availabilities, character, and use as those affect such industries; and 
the capacity of the United States to meet national security 
requirements.
    In preparing this report, the Secretary also recognized the close 
relationship between the economic welfare of the United States and its 
national security. Factors that can compromise the nation's economic 
welfare include, but are not limited to, the impact of ``foreign 
competition on the economic welfare of individual domestic industries; 
and any substantial unemployment, decrease in revenues of government, 
loss of skills, or any other serious effects resulting from the 
displacement of any domestic products by excessive imports.'' See 19 
U.S.C. 1862(d). In particular, this report assesses whether NdFeB 
magnets are being imported ``in such quantities'' and ``under such 
circumstances'' as to ``threaten to impair the national security.'' \4\
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    \4\ 19 U.S.C. 1862(b)(3)(A).
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    The investigation was initiated to evaluate the effects of imports 
of NdFeB magnets on the national security. There are two types of NdFeB 
magnets--sintered and bonded. However, the investigation and this 
report largely focus on sintered NdFeB magnets because: (1) Sintered 
NdFeB magnets comprise over 93 percent of the global NdFeB magnet 
market and are forecast to grow to over 97 percent of the global market 
by 2030; (2) Sintered NdFeB magnets have a greater maximum energy 
product than bonded NdFeB magnets, making them essential in high-
temperature applications required by the defense and critical 
infrastructure sectors; and (3) Sintered NdFeB magnets are less easily 
substituted for than their bonded counterparts.5 6
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    \5\ Energy product refers to the magnetic energy stored in 
material, dependent on coercivity and magnetization. ``Rare Earth 
Permanent Magnets: Supply Chain Deep Dive Report,'' Department of 
Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \6\ References to NdFeB magnets indicate sintered NdFeB magnets, 
except where otherwise specified.
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    NdFeB magnets are the strongest permanent magnets commercially 
available and improve the efficiency of electrical machines. NdFeB 
magnets are used in hundreds of products ranging from the ubiquitous, 
such as headphones and air conditioners, to the highly specialized, 
like industrial robots. Of particular importance for evaluating the 
effects of imports of NdFeB magnets on the national security are NdFeB 
magnets' use in defense systems, including ship propulsion systems and 
guided missile actuators, as well as numerous critical infrastructure 
applications such as electric vehicle motors and offshore wind turbine 
generators.\7\ Although NdFeB magnets' value tends to be small relative 
to the cost of the end-product, they are nonetheless key to product 
performance.
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    \7\ The Presidential Policy Directive on Critical Infrastructure 
Security and Resilience (PPD-21) advances a national policy to 
strengthen and maintain secure, functioning, and resilient critical 
infrastructure. The Cybersecurity and Infrastructure Security Agency 
maintains a list of 16 critical infrastructure sectors ``whose 
assets, systems, and networks, whether physical or virtual, are 
considered so vital to the United States that their incapacitation 
or destruction would have a debilitating effect on security, 
national economic security, national public health or safety, or any 
combination thereof.'' Most relevant to NdFeB magnet applications 
are the Critical Manufacturing, Defense Industrial Base, and Energy 
sectors, although NdFeB magnets are used widely in other critical 
infrastructure sectors, including the Healthcare and Public Health 
and the Information Technology sectors. See ``Critical 
Infrastructure Sectors,'' Cybersecurity and Infrastructure Security 
Agency, October 21, 2020, https://www.cisa.gov/critical-infrastructure-sectors.
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    NdFeB magnets are composed of about 69 percent iron, 30 percent 
rare earths, and one percent boron by weight.\8\ NdFeB magnets contain 
a mix of rare earth elements, primarily neodymium, praseodymium, 
dysprosium, and terbium, depending on the end use.\9\ NdFeB magnets' 
iron-boron component is made up of American Iron and Steel Institute 
1001 steel and ferroboron.10 11 Small amounts of material, 
such as nickel and copper, dry-sprayed epoxy, or e-coat (epoxy), are 
also used to coat NdFeB magnets to prevent corrosion.\12\ The rare 
earth element component constitutes the largest portion of NdFeB magnet 
cost.
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    \8\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf.
    \9\ Toyota announced in 2018 that it had developed a NdFeB 
magnet that substituted cerium and lanthanum for neodymium, lowering 
total neodymium use by 50 percent. Although cerium substitution 
typically leads to reduced performance in the form of lower heat 
resistance and coercivity, Toyota claimed to have discovered a ratio 
at which deterioration is suppressed. At the time of the 
announcement, Toyota expected the magnets would be used in the first 
half of the 2020s, but more recent updates are not available. See 
``Toyota Develops New Magnet for Electric Motors Aiming to Reduce 
Use of Critical Rare-Earth Element by up to 50%,'' Toyota, February 
20, 2018, https://global.toyota/en/newsroom/corporate/21139684.html.
    \10\ The American Iron and Steel Institute and the Society of 
Automotive Engineers assign designations to types of steel. 1001 
steel refers to a type of carbon steel. See ``Introduction to the 
SAE/AISI Steel Numbering System,'' The Process Piping, n.d., https://www.theprocesspiping.com/introduction-sae-aisi-steel-numbering-system/.
    \11\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf.
    \12\ Ibid.
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    There are five main value chain steps prior to the production of 
NdFeB magnets: mixed rare earth element mining, processing of rare 
earth elements into rare earth carbonates, separation of rare earth 
carbonates into individual rare earth oxides, reduction of rare earth 
oxides into metals, and alloying of rare earth metals.13 14 
Magnet manufacturers then process rare earth alloys into either 
sintered or bonded NdFeB magnets. Sintered magnets are produced by 
compacting powdered alloy into a solid mass by vacuum pressure without 
melting it to the point of liquefaction. Bonded magnets are made of 
rapidly quenched NdFeB magnetic powder mixed into binder and shaped 
through compression, injection molding, or calendaring.
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    \13\ Rare earth carbonates are also referred to as mixed 
intermediates, although the term mixed intermediates can cover rare 
earth chlorides.
    \14\ Some publications condense processing and separation or 
metallization and alloying into single value chain steps, for a 
total of three or four value chain steps prior to magnet production. 
The Department elected to divide the value chain into five steps 
prior to magnet production based on industry consultation.
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    Except for rare earths mining, the United States is not presently a 
major participant in the NdFeB magnet value chain. The United States 
has extremely limited capacity to manufacture NdFeB magnets and is 
nearly one hundred percent dependent on imports to meet commercial and 
defense requirements. In 2021, the United States imported 75 percent of 
its sintered NdFeB magnet supply from China, with nine percent, five 
percent, and four percent coming from Japan, the Philippines, and 
Germany, respectively.15 16 17 There is

[[Page 9432]]

currently only one firm in the United States, Noveon (formerly Urban 
Mining Company), that produces sintered NdFeB magnets, albeit in small 
quantities.18 19 20 The United States has no domestic 
production of rare earth oxides or metal. The United States is 
dependent on foreign sources, especially China, for NdFeB magnets.
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    \15\ The import figures cited here corresponds to the value of 
magnet imports. Using data on unit imports of magnets increases 
China's import share to almost 85 percent.
    \16\ The Department's calculations using USITC data. ``USITC 
Dataweb,'' U.S. International Trade Commission, last modified 
October 25, 2021, https://dataweb.usitc.gov/trade/search/Import/HTS.
    \17\ Imports from the Philippines reflect activity by Japanese 
firms. See Appendix E, ``Global NdFeB Magnet Production: A Firm-
Level Perspective,'' for more information.
    \18\ Noveon indicated it can produce NdFeB magnets from recycled 
or new or ``virgin'' material. Meeting between Noveon and the 
Department of Commerce, (Virtual Meeting, November 12, 2021).
    \19\ There are three firms, Bunting Magnetics, the Electrodyne 
Company, and Tengam Engineering, that produce bonded NdFeB magnets 
in the United States. Meeting between the Defense Logistics Agency 
and the Department of Commerce, (Virtual Meeting, November 23, 
2021).
    \20\ Noveon was called Urban Mining Company until May 2022. See 
``Urban Mining Company is now Noveon Magnetics: The Nation's Only 
Manufacturer of Sustainable Rare Earth Magnets Powering our 
Electrified Future,'' NewsDirect, May 16, 2022, https://newsdirect.com/news/urban-mining-company-is-now-noveon-magnetics-the-nations-only-manufacturer-of-sustainable-rare-earth-magnets-powering-our-electrified-future-214013391.
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    China dominates all steps of the global NdFeB magnet value 
chain.\21\ In 2020, China controlled about 92 percent of the global 
NdFeB magnet and magnet alloy market.\22\ China also dominated the 2020 
upstream value chain steps, controlling about 58 percent of the rare 
earth mining market, 89 percent of the oxide separation market, and 90 
percent of the metallization market.23 24 25 China controls 
an even higher percentage of the heavy rare earth mining market, 
including dysprosium and terbium, which are critical for high 
performance NdFeB magnets.26 27 China's dominant position in 
the global NdFeB magnet value chain enables it to set prices at levels 
that can make production unsustainable for firms operating in market 
economies.\28\
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    \21\ See Section 7, ``Global NdFeB Magnet Industry,'' and 
especially Appendix E, ``Global NdFeB Magnet Production: A Firm-
level Perspective,'' for more information on global NdFeB magnet 
value chains.
    \22\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf.
    \23\ China produced about 60 percent of global rare earths in 
2021. Daniel Cordier, ``Mineral Commodity Summaries 2022: Rare 
Earths,'' U.S. Geological Survey, January 31, 2022, https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf.
    \24\ China's share of global rare earths mining increased from 
58 percent in 2020 to 60 percent in 2021. See Section 7.1, ``Global 
Demand.''
    \25\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.usitc.gov/publications/332/working_papers/rare_earths_and_the_electronics_sector_final_070921_2-compliant.pdf.
    \26\ ``Hyperion Testwork Confirms High Value Heavy Rare 
Earths,'' Mining Stock Education, August 9, 2021, https://www.miningstockeducation.com/2021/08/hyperion-testwork-confirms-high-value-heavy-rare-earths/.
    \27\ USA Rare Earth indicated that China produces one hundred 
percent of the global supply of dysprosium. Meeting between USA Rare 
Earth and the Department of Commerce, (Virtual Meeting, December 10, 
2021).
    \28\ For example, Molycorp, a U.S. mining firm that operated the 
Mountain Pass Mine in California, declared bankruptcy after China 
increased its export quotas and rare earth prices fell. Tom Hals, 
``Creditors of bankrupt rare earths miner Molycorp reach deal,'' 
Reuters, February 23, 2016, https://www.reuters.com/article/molycorp-bankruptcy-idUSL2N1621G0.
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    China is the only country with operations in all steps of the NdFeB 
magnet value chain, including upstream (mining, carbonates production, 
and separation to oxides) and downstream (metal refining, alloy 
production, and final magnet production) markets. All other countries 
maintain operations in only some steps of the upstream or downstream 
magnet value chain. Firms in the European Union, and especially Japan, 
specialize in the production of NdFeB magnets and alloys, but have no 
mining capacity. Japan is the second largest producer of NdFeB magnets 
after China, comprising about seven percent of the global market. 
Japanese firms also maintain magnet, alloy, and metal capacity in other 
countries. Firms in Germany, Finland, the Netherlands, and Slovenia 
produce minimal amounts of NdFeB magnets (less than one percent of 
global production).29 30 Japanese and European firms are 
almost completely reliant on imported feedstocks to produce metals, 
alloys, and ultimately NdFeB magnets.\31\
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    \29\ ``About Magnet e Motion,'' Magnet e Motion, n.d., https://magnetemotion.com/about-magnet-e-motion.html.
    \30\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \31\ Neo Performance Materials produces rare earth oxides in 
Estonia from non-European Union feedstock. Meeting between Neo 
Performance Materials and the Department of Commerce, the Department 
of Defense, and the U.S. Geological Survey, (Virtual Meeting, 
November 30, 2021).
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    The top upstream producers of rare earth minerals in 2021 were 
China (60 percent), the United States (15 percent), Burma, (nine 
percent), and Australia (eight percent).\32\ Malaysia comprises seven 
percent of the 2020 market for rare earth oxide separation, due 
entirely to the Australian firm Lynas Rare Earths.\33\ Outside of 
China, production of metals is fragmented between Estonia, Laos, 
Thailand, the United Kingdom, Vietnam, and other countries, with no 
country having more than three percent of the market.\34\
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    \32\ Daniel Cordier, ``Rare Earths: Mineral Commodity Summaries 
2022,'' U.S. Geological Survey, 2022, https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf.
    \33\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \34\ Ibid.
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    The NdFeB magnet value chain's fragmentation means that even 
countries which produce NdFeB magnets remain dependent in part on 
Chinese inputs. Japan began diversifying its sources of rare earth 
elements, carbonates, and oxides away from China in the early 2010s, 
and the European Union has ongoing initiatives to develop a resilient 
non-Chinese NdFeB magnet supply chain. Despite these efforts, both 
economies and the United States remain reliant, to differing degrees, 
on Chinese inputs. China has previously appeared to leverage its market 
dominance to achieve foreign policy outcomes. For example, in 2010 
China restricted exports of rare earth elements to Japan for two months 
after a collision between a Chinese fishing boat and the Japanese coast 
guard in disputed waters.35 36 Dependence on China leaves 
U.S. firms and U.S. allies vulnerable to similar Chinese coercion that 
could have a negative impact on national defense and the preservation 
of domestic critical infrastructure, such as transportation and energy.
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    \35\ ``China resumes rare earth exports to Japan,'' BBC, 
November 24, 2010, https://www.bbc.com/news/business-11826870.
    \36\ More broadly, China has encouraged localized production and 
technology transfer in return for a steady supply of rare earths. 
See Wayne M. Morrison and Rachel Tang, ``China's Rare Earth Industry 
and Export Regime: Economic and Trade Implications for the United 
States,'' Congressional Research Service, April 30, 2012, https://sgp.fas.org/crs/row/R42510.pdf.
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    Ongoing efforts by the U.S. Government and the private sector are 
intended to mitigate this reliance on Chinese inputs and to establish 
U.S. production capacity at all steps of the NdFeB magnet value chain. 
The Department of Defense and the Department of Energy have made 
limited investments in organizations with the goal of reestablishing 
domestic production capacity throughout the supply chain. Noveon plans 
to expand production over the next four years. In addition, three U.S.-
headquartered firms--MP Materials, Quadrant Magnetics, and USA Rare 
Earth--and the German company Vacuumschmelze

[[Page 9433]]

plan to establish U.S. NdFeB magnet manufacturing facilities by 
2026.\37\ Noveon and MP Materials have received Department of Defense 
funding. MP Materials and USA Rare Earth are also looking to develop 
U.S. capacity in pre-magnet value chain steps, including rare earths 
mining, rare earth carbonates processing, rare earth oxides separation, 
metallization, and alloying. Other non-magnet makers are considering 
building U.S. facilities to produce rare earth oxides and metals. These 
efforts, if successful, have the potential to create a complete supply 
chain to produce NdFeB magnets in the United States. Based on 
forecasted NdFeB magnet production, domestic sources could potentially 
satisfy up to 51 percent of total U.S. demand by 2026.\38\
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    \37\ On MP Materials, see ``MP Materials to Build U.S. Magnet 
Factory, Enters Long-Term Supply Agreemenwt with General Motors,'' 
MP Materials, December 9, 2021, https://mpmaterials.com/articles/mp-materials-to-build-us-magnet-factory-enters-long-term-supply-agreement-with-general-motors/; On Quadrant Magnetics, see 
``Quadrant's NeoGrass to Become New Magnet Plant in US,'' Magnetics 
Business and Technology, April 5, 2022, https://magneticsmag.com/quadrants-neograss-to-become-new-magnet-plant-in-us/; On USA Rare 
Earth, see Trish Saywell, ``USA Rare Earth outlines mine-to-magnet 
strategy,'' Mining.com, January 8, 2021, https://www.mining.com/usa-rare-earth-outlines-mine-to-magnet-strategy/; On Vacuumschmelze, see 
``General Motors and Vacuumschmelze (VAC) Announce Plans to Build a 
New Magnet Factory in the U.S. to Support EV Growth,'' General 
Motors, December 9, 2021, https://investor.gm.com/news-releases/news-release-details/general-motors-and-vacuumschmelze-vac-announce-plans-build-new.
    \38\ This is a very optimistic figure with several strong 
assumptions and should be taken as the maximum potential 
contribution of the U.S. NdFeB magnet industry. The Department used 
data from its survey of the U.S. NdFeB magnet industry to forecast 
U.S. NdFeB magnet production through 2026. This does not consider 
domestic production of NdFeB magnet inputs such as alloy or metal, 
which may constrain the ability of U.S.-based firms to use domestic 
feedstock to produce NdFeB magnets. [TEXT REDACTED], the demand 
estimate includes NdFeB magnets that are and may continue to be 
incorporated into intermediate and final products overseas. The 2030 
total demand estimate is a high-growth scenario. See Section 8.1.4, 
``Estimated NdFeB Magnet Import Penetration, 2017 to 2026,'' for 
more details.
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    If successful, these efforts to produce NdFeB magnets in the United 
States will be more than sufficient to satisfy U.S. defense-related 
demand. However, given the fact that defense demand accounts for only a 
small percentage of total demand, domestic firms in the NdFeB magnet 
value chain cannot rely solely on defense-related contracts to be 
viable. The nascent U.S. NdFeB magnet value chain will require 
substantial and consistent commercial demand and need a broad customer 
base to be economically sustainable. While domestic production is 
expected to be substantially less than total U.S. demand, direct U.S. 
demand for NdFeB magnets will be less than total demand because many 
NdFeB magnets are integrated into intermediate and final products 
overseas. These products--and the embedded magnets--are then imported 
into the United States. In addition, firms that integrate NdFeB magnets 
in the U.S. may be unwilling to pay a premium for domestic magnets, 
which are expected to cost more than their Chinese counterparts.
    On a potentially positive note, global and domestic demand for 
NdFeB magnets is forecast to increase dramatically by 2030 and even 
more so by 2050. The increase in demand is largely driven by global 
efforts to reduce greenhouse gas emissions which boost the electric 
vehicle and wind turbine industries. Substantial demand growth may 
result in a supply crunch for NdFeB magnets but also represents a 
critical opportunity to establish and maintain a resilient and 
economically viable domestic NdFeB magnet supply chain.

1.1 Findings

    In conducting the investigation, the Secretary came to the 
following key findings:
    1. NdFeB magnets are essential to U.S. national security:
    a. NdFeB magnets are required for national defense systems. NdFeB 
magnets are currently irreplaceable in key defense applications such as 
fighter aircraft and missile guidance systems.
    b. NdFeB magnets are required for critical infrastructure. NdFeB 
magnets are used in critical infrastructure sectors including but not 
limited to the energy sector (e.g., offshore wind turbines), the 
healthcare and public health sector (e.g., some open MRI machines and 
other medical equipment), and the critical manufacturing sector (e.g., 
electric vehicle motors).
    c. NdFeB magnets are required for infrastructure that is critical 
for climate change mitigation, identified by the President as an 
essential element of U.S. national security, and the transition to a 
green economy.\39\ In particular, NdFeB magnets are the technology of 
choice for electric vehicles and offshore wind turbines.
---------------------------------------------------------------------------

    \39\ See ``Executive Order on Tackling the Climate Crisis at 
Home and Abroad,'' The White House, January 27, 2021, https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-abroad/.
---------------------------------------------------------------------------

    2. Total domestic demand for NdFeB magnets is expected to grow:
    a. Total U.S. consumption of NdFeB magnets is forecast to more than 
double from 2020 to 2030, driven by increased demand from the electric 
vehicle and wind energy industries.
    b. Total domestic demand growth provides an opportunity to develop 
the U.S. NdFeB magnet industry if enough end-user applications are 
manufactured in the United States and the price differential between 
U.S. and Chinese magnets is narrowed.
    3. The United States and its allies are dependent on imports from 
China:
    a. The United States is essentially one hundred percent dependent 
on imports of sintered NdFeB magnets and is highly dependent on imports 
of bonded NdFeB magnets, primarily from China. The United States also 
lacks domestic capacity at various earlier steps in the NdFeB magnet 
value chain.
    b. U.S. allies are also dependent on Chinese production, which 
provides China political leverage.
    4. The United States will continue to depend on imports:
    a. There are multiple firms that intend to establish domestic 
capacity at different steps of the NdFeB magnet value chain. Although 
these plans have the potential to create a U.S. NdFeB magnet value 
chain from mine to magnet, they will not produce enough magnets to 
eliminate U.S. dependence on Chinese imports.
    b. Domestic NdFeB magnet manufacturing will be constrained by 
capacity limitations at earlier steps in the value chain, in particular 
rare earth metal refining and NdFeB alloy production. Some U.S. NdFeB 
magnet manufacturers will have to rely on imported metal and alloy 
feedstocks to produce NdFeB magnets.
    c. The U.S. NdFeB magnet industry will struggle to fulfill total 
critical infrastructure demand.
    5. The U.S. NdFeB magnet industry faces significant challenges:
    a. The nascent U.S. NdFeB magnet industry faces significant 
barriers to reaching its production targets. These include but are not 
limited to Chinese competition, financial and human capital 
constraints, and consistent demand for more expensive domestic magnets.

1.2 Determination

    Based on the findings in this report, the Secretary concludes that 
the present quantities and circumstances of NdFeB magnet imports 
threaten to impair the national security as defined in section 232 of 
Trade Expansion Act of 1962, as amended.

1.3 Recommendations

    The Department has identified several non-exhaustive actions that 
would facilitate the development of a domestic

[[Page 9434]]

NdFeB magnet industry, support a reliable supply of NdFeB magnets, and 
lessen the risk that NdFeB magnet imports threaten the national 
security. The Secretary recommends pursuing all proposed actions.
    1. The U.S. Government should engage with allies through existing 
fora to efficiently develop production from diverse sources, promote 
research on NdFeB magnet-related technologies, encourage intellectual 
property licensing, and cooperate on foreign investment review 
mechanisms.
    2. To bolster the U.S. NdFeB magnet industry by targeting domestic 
supply the U.S. Government should:
    a. Establish a tax credit for domestic manufacturing of rare earth 
elements, NdFeB magnets, and NdFeB magnet substitutes.
    b. Continue to direct Defense Production Act (DPA) Title III 
funding to firms in the U.S. NdFeB magnet industry, in particular to 
establish metal refining and alloy production facilities.
    c. Encourage eligible NdFeB magnet industry participants to use 
Export-Import Bank financing through the Make More in America 
Initiative and the China and Transformational Exports Program.
    d. Allocate additional funding to NdFeB magnet industry 
participants through other applicable instruments, such as the 
Bipartisan Infrastructure Law.
    e. Use the Defense Priorities and Allocations System to facilitate 
NdFeB magnet industry participants' acquisition of critical equipment 
and feedstock.
    f. Evaluate the use of export controls for domestic producers who 
face difficulties acquiring feedstocks from domestic sources due to 
competition with foreign consumers.
    g. Increase the National Defense Stockpile inventories of rare 
earth elements and other strategic and critical materials related to 
NdFeB magnets.
    3. To promote the development of a domestic industry by enhancing 
domestic demand the U.S. Government should:
    a. Establish a forum under a lead U.S. Government agency to 
facilitate cooperation and share information about industry-wide issues 
between producers and consumers of NdFeB magnets, alloys, rare earth 
metals, and rare earth oxides. In particular, the U.S. Government 
should use DPA Title VII to promote offtake agreements using voluntary 
agreements.
    b. Promote the recycling and reprocessing of NdFeB magnets by 
developing labeling requirements for end-of-life products using NdFeB 
magnets, leveraging the Defense Logistics Agency's Strategic Material 
Recovery and Reuse Program, U.S. Government-owned data centers, and 
other U.S. Government-owned products like electric vehicles to 
establish a source of recyclable feedstock, and exploring reuse of 
other potential feedstocks such as heavy mineral sands and coal 
tailings.
    c. Mandate minimum domestic and ally content requirements for NdFeB 
magnets used in U.S. Government-owned electric vehicles and offshore 
wind turbines that power U.S. Government-owned buildings. NdFeB magnets 
used in these products should be produced domestically or by allies and 
contain feedstock sourced domestically or from allies. To minimize 
disruption, content requirements can be phased-in and waived if there 
are insufficient eligible sources.
    d. Establish a consumer rebate for products, such as electric 
vehicles, that use U.S. or ally produced NdFeB magnets.
    4. To support the medium- to long-term development of the U.S. 
NdFeB magnet industry and enhance the resiliency of the U.S. NdFeB 
magnet supply chain, the U.S. Government should:
    a. Continue to fund research to reduce the use of rare earth 
elements in NdFeB magnets, develop magnets that can substitute for 
NdFeB magnets, and develop technologies that avoid the use of magnets--
including NdFeB magnets--in electric vehicle motors and wind turbine 
generators.
    b. Support the development of the human capital required by the 
nascent NdFeB magnet industry, including materials scientists and 
production line workers, through applicable funding sources.
    5. The U.S. Government should continue to monitor the NdFeB magnet 
value chain to ensure that U.S. and ally firms are not adversely 
impacted by non-market factors or unfair trade actions, such as 
intellectual property violations or dumping.

2. Legal Framework

2.1 Section 232 Requirements

    Section 232 of the Trade Expansion Act of 1962, as amended, 
provides the Secretary with the authority to conduct investigations to 
determine the effect on the national security of the United States of 
imports of any article. It authorizes the Secretary to conduct an 
investigation if requested by the head of any department or agency, 
upon application of an interested party, or upon their own motion. See 
19 U.S.C. 1862(b)(1)(A).
    Section 232 directs the Secretary to submit to the President a 
report with recommendations for ``action or inaction under this 
section'' and requires the Secretary to advise the President if any 
article ``is being imported into the United States in such quantities 
or under such circumstances as to threaten to impair the national 
security.'' See 19 U.S.C. 1862(b)(3)(A).
    Section 232(d) directs the Secretary and the President to, in light 
of the requirements of national security and without excluding other 
relevant factors, give consideration to the domestic production needed 
for projected national defense requirements and the capacity of the 
United States to meet national security requirements. See 19 U.S.C. 
1862(d).
    Section 232(d) also directs the Secretary and the President to 
``recognize the close relation of the economic welfare of the Nation to 
our national security, and . . . take into consideration the impact of 
foreign competition on the economic welfare of individual domestic 
industries'' by examining whether any substantial unemployment, 
decrease in revenues of government, loss of skills or investment, or 
other serious effects resulting from the displacement of any domestic 
products by excessive imports, or other factors, results in a 
``weakening of our internal economy'' that may impair the national 
security.\40\ See 19 U.S.C. 1862(d).
---------------------------------------------------------------------------

    \40\ An investigation under Section 232 looks at excessive 
imports for their threat to the national security, rather than 
looking at unfair trade practices as in an antidumping 
investigation.
---------------------------------------------------------------------------

    Once an investigation has been initiated, section 232 mandates that 
the Secretary provide notice to the Secretary of Defense that such an 
investigation has been initiated. section 232 also requires the 
Secretary to do the following:
    1. ``Consult with the Secretary of Defense regarding the 
methodological and policy questions raised in [the] investigation;''
    2. ``Seek information and advice from, and consult with, 
appropriate officers of the United States;'' and
    3. ``If it is appropriate and after reasonable notice, hold public 
hearings or otherwise afford interested parties an opportunity to 
present information and advice relevant to such investigation.'' \41\ 
See 19 U.S.C. 1862(b)(2)(A)(i)-(iii).
---------------------------------------------------------------------------

    \41\ Department regulations (i) set forth additional authority 
and specific procedures for such input from interested parties, see 
15 CFR 705.7 and 705.8, and (ii) provide that the Secretary may vary 
or dispense with those procedures ``in emergency situations, or when 
in the judgment of the Department, national security interests 
require it.'' Id., Sec.  705.9.

---------------------------------------------------------------------------

[[Page 9435]]

    As detailed in the report, all of the requirements set forth above 
have been satisfied.
    In conducting the investigation, section 232 permits the Secretary 
to request that the Secretary of Defense provide an assessment of the 
defense requirements of the article that is the subject of the 
investigation. See 19 U.S.C. 1862(b)(2)(B).
    Upon completion of a section 232 investigation, the Secretary is 
required to submit a report to the President no later than 270 days 
after the date on which the investigation was initiated. See 19 U.S.C. 
1862(b)(3)(A). The report must:
    1. Set forth ``the findings of such investigation with respect to 
the effect of the importation of such article in such quantities or 
under such circumstances upon the national security;''
    2. Set forth, ``based on such findings, the recommendations of the 
Secretary for action or inaction under this section;'' and
    3. ``If the Secretary finds that such article is being imported 
into the United States in such quantities or under such circumstances 
as to threaten to impair the national security . . . so advise the 
President.'' See 19 U.S.C. 1862(b)(3)(A).
    All unclassified and non-proprietary portions of the report 
submitted by the Secretary to the President must be published.
    Within 90 days after receiving a report in which the Secretary 
finds that an article is being imported into the United States in such 
quantities or under such circumstances as to threaten to impair the 
national security, the President shall:
    1. ``Determine whether the President concurs with the finding of 
the Secretary'' and
    2. ``If the President concurs, determine the nature and duration of 
the action that, in the judgment of the President, must be taken to 
adjust the imports of the article and its derivatives so that such 
imports will not threaten to impair the national security.'' See 19 
U.S.C. 1862(c)(1)(A).

2.2 Discussion

    Although section 232 does not specifically define ``national 
security,'' both section 232, and the implementing regulations at 15 
CFR part 705, contain non-exclusive lists of factors that the Secretary 
must consider in evaluating the effect of imports on the national 
security. Congress in section 232 explicitly determined that ``national 
security'' includes, but is not limited to, ``national defense'' 
requirements. See 19 U.S.C. 1862(d).
    In a 2001 report, the Department determined that ``national 
defense'' includes both the defense of the United States directly, and 
the ``ability to project military capabilities globally.'' \42\ The 
Department also concluded in 2001 that, ``in addition to the 
satisfaction of national defense requirements, the term ``national 
security'' can be interpreted more broadly to include the general 
security and welfare of certain industries, beyond those necessary to 
satisfy national defense requirements, which are critical to the 
minimum operations of the economy and government.'' The Department 
called these ``critical industries.'' \43\ Although this report applies 
these reasonable interpretations of ``national defense'' and ``national 
security,'' it relies on the more recent 16 critical infrastructure 
sectors identified in Presidential Policy Directive 21 instead of the 
28 industry sectors identified in the 2001 Report.44 45
---------------------------------------------------------------------------

    \42\ ``The Effects of Imports of Iron Ore and Semi-Finished 
Steel on the National Security,'' Department of Commerce, Bureau of 
Export Administration, October 2001 (``2001 Iron and Steel 
Report''), at 5, https://www.bis.doc.gov/index.php/documents/steel/2224-the-effect-of-imports-of-steel-on-the-national-security-with-redactions-20180111/file.
    \43\ Ibid.
    \44\ Presidential Policy Directive 21, ``Critical Infrastructure 
Security and Resilience,'' February 12, 2013 (``PPD-21'').
    \45\ ``The Effects of Imports of Iron Ore and Semi-Finished 
Steel on the National Security,'' Department of Commerce, Bureau of 
Export Administration, October 2001 (``2001 Iron and Steel 
Report''), https://www.bis.doc.gov/index.php/documents/steel/2224-the-effect-of-imports-of-steel-on-the-national-security-with-redactions-20180111/file.
---------------------------------------------------------------------------

    Section 232 directs the Secretary to determine whether imports of 
any article are being made ``in such quantities'' or ``under such 
circumstances'' that those imports ``threaten to impair the national 
security.'' See 19 U.S.C. 1862(b)(3)(A). The statutory construction 
makes clear that either the quantities or the circumstances, standing 
alone, may be sufficient to support an affirmative finding. The two may 
also be considered together, particularly when the circumstances act to 
prolong or magnify the impact of the quantities being imported.
    The statute does not define a threshold for when ``such 
quantities'' of imports are sufficient to threaten to impair the 
national security, nor does it define the ``circumstances'' that might 
qualify.
    Similarly, the statute does not require a finding that the 
quantities or circumstances are impairing the national security. 
Instead, the threshold question under section 232 is whether the 
quantities or circumstances ``threaten to impair the national 
security.'' See 19 U.S.C. 1862(b)(3)(A). This makes evident that 
Congress expects an affirmative finding under section 232 before an 
actual impairment of the national security.\46\
---------------------------------------------------------------------------

    \46\ The 2001 Iron and Steel Report used the phrase 
``fundamentally threaten to impair'' when discussing how imports may 
threaten to impair national security. See 2001 Iron and Steel Report 
at 7 and 37. Because the term ``fundamentally'' is not included in 
the statutory text and could be perceived as establishing a higher 
threshold, the Secretary expressly does not use the qualifier in 
this report. The statutory threshold in Section 232(b)(3)(A) is 
unambiguously ``threaten to impair'' and the Secretary adopts that 
threshold without qualification. 19 U.S.C. 1862(b)(3)(A).
---------------------------------------------------------------------------

    Section 232(d) contains a list of factors for the Secretary to 
consider in determining if imports ``threaten to impair the national 
security'' \47\ of the United States, and this list is mirrored in the 
implementing regulations. See 19 U.S.C. 1862(d) and 15 CFR 705.4. 
Congress was careful to note twice in section 232(d) that the list 
provided, though mandatory, is not exclusive.\48\ Congress' 
illustrative list is focused on the ability of the United States to 
maintain the domestic capacity to provide the articles in question as 
needed to maintain the national security of the United States.\49\ 
Congress broke

[[Page 9436]]

the list of factors into two equal parts using two separate sentences. 
The first sentence focuses directly on ``national defense'' 
requirements, thus making clear that ``national defense'' is a subset 
of the broader term ``national security.'' The second sentence focuses 
on the broader economy and expressly directs that the Secretary and the 
President ``shall recognize the close relation of the economic welfare 
of the Nation to our national security.'' \50\ See 19 U.S.C. 1862(d).
---------------------------------------------------------------------------

    \47\ 19 U.S.C. 1862(b)(3)(A).
    \48\ See 19 U.S.C. 1862(d) (``the Secretary and the President 
shall, in light of the requirements of national security and without 
excluding other relevant factors . . . '' and ``serious effects 
resulting from the displacement of any domestic products by 
excessive imports shall be considered, without excluding other 
factors . . . '').
    \49\ This reading is supported by Congressional findings in 
other statutes. See, e.g., 15 U.S.C. 271(a)(1) (``The future well-
being of the United States economy depends on a strong manufacturing 
base . . .'') and 50 U.S.C. 4502(a) (``Congress finds that--(1) the 
security of the United States is dependent on the ability of the 
domestic industrial base to supply materials and services . . . 
(2)(C) to provide for the protection and restoration of domestic 
critical infrastructure operations under emergency conditions . . . 
(3) . . . the national defense preparedness effort of the United 
States government requires--(C) the development of domestic 
productive capacity to meet--(ii) unique technological requirements 
. . . (7) much of the industrial capacity that is relied upon by the 
United States Government for military production and other national 
defense purposes is deeply and directly influenced by--(A) the 
overall competitiveness of the industrial economy of the United 
States; and (B) the ability of industries in the United States, in 
general, to produce internationally competitive products and operate 
profitably while maintaining adequate research and development to 
preserve competitiveness with respect to military and civilian 
production; and (8) the inability of industries in the United 
States, especially smaller subcontractors and suppliers, to provide 
vital parts and components and other materials would impair the 
ability to sustain the Armed Forces of the United States in combat 
for longer than a short period.'').
    \50\ Accord 50 U.S.C. 4502(a).
---------------------------------------------------------------------------

    In addition to ``national defense'' requirements, two of the 
factors listed in the second sentence of section 232(d) are 
particularly relevant in this investigation. Both are directed at how 
``such quantities'' of imports threaten to impair national security See 
19 U.S.C. 1862(b)(3)(A). In administering section 232, the Secretary 
and the President are required to ``take into consideration the impact 
of foreign competition on the economic welfare of individual domestic 
industries'' and any ``serious effects resulting from the displacement 
of any domestic products by excessive imports'' in ``determining 
whether such weakening of our internal economy may impair the national 
security.'' See 19 U.S.C. 1862(d).
    After careful examination of the facts in this investigation, the 
Secretary has determined that the present quantities and circumstance 
of NdFeB magnets imports threaten to impair the national security, as 
defined in section 232.

3. Investigative Process

3.1 Initiation of Investigation

    On September 21, 2021, Secretary of Commerce Gina Raimondo 
initiated the investigation to determine the effects of imports of 
NdFeB magnets on the national security based on a recommendation in the 
June 2021 White House Report ``Building Resilient Supply Chains, 
Revitalizing American Manufacturing, and Fostering Broad-Based Growth: 
100 Day Reviews under Executive Order 14017'' (``White House 
Report'').\51\ The White House Report noted that the United States is 
heavily dependent on imports of NdFeB magnets, which are important 
components of defense and civil industrial systems, and therefore 
recommended that the Department evaluate whether to initiate an 
investigation under section 232 of the Trade Expansion Act of 1962, as 
amended. Pursuant to section 232(b)(1)(b), the Department notified the 
U.S. Department of Defense of its intent to conduct an investigation in 
a letter of September 21, 2021, from Secretary Raimondo to Secretary of 
Defense, Lloyd Austin III (see Appendix A).
---------------------------------------------------------------------------

    \51\ ``Building Resilient Supply Chains, Revitalizing American 
Manufacturing, and Fostering Broad-Based Growth: 100 Day Reviews 
Under Executive Order 14017,'' The White House, June 2021, https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf.
---------------------------------------------------------------------------

3.2 Public Comments

    On September 27, 2021, the Department published a Federal Register 
Notice announcing the initiation of an investigation to determine the 
effect of imports of NdFeB magnets on the national security (see 
Appendix B).\52\ The notice also announced the opening of the public 
comment period. In the notice, the Department invited interested 
parties to submit written comments, opinions, data, information, or 
advice relevant to the criteria listed in section 705.4 of the National 
Security Industrial Base Regulations (15 CFR 705.4) as they affect the 
requirements of national security, including the following:
---------------------------------------------------------------------------

    \52\ See also ``Notice of Request for Public Comments on Section 
232 National Security Investigation of Imports of Neodymium-Iron-
Boron (NdFeB) Permanent Magnets,'' Federal Register, September 27, 
2021, https://www.federalregister.gov/documents/2021/09/27/2021-20903/notice-of-request-for-public-comments-on-section-232-national-security-investigation-of-imports-of.
---------------------------------------------------------------------------

    (a) Quantity of the articles subject to the investigation and other 
circumstances related to the importation of such articles;
    (b) Domestic production capacity needed for these articles to meet 
projected national defense requirements;
    (c) The capacity of domestic industries to meet projected national 
defense requirements;
    (d) Existing and anticipated availability of human resources, 
products, raw materials, production equipment, facilities, and other 
supplies and services essential to the national defense;
    (e) Growth requirements of domestic industries needed to meet 
national defense requirements and the supplies and services including 
the investment, exploration and development necessary to assure such 
growth;
    (f) The impact of foreign competition on the economic welfare of 
any domestic industry essential to our national security;
    (g) The displacement of any domestic products causing substantial 
unemployment, decrease in the revenues of government, loss of 
investment or specialized skills and productive capacity, or other 
serious effects;
    (h) Relevant factors that are causing or will cause a weakening of 
our national economy; and
    (i) Any other relevant factors.
    The public comment period closed on November 12, 2021. The 
Department received 41 submissions. Parties who submitted comments 
included representatives of the domestic NdFeB magnet industry, 
including firms at different stages of the NdFeB magnet value chain, 
representatives of the foreign NdFeB magnet industry, representatives 
of consumers of NdFeB magnets such as the automobiles and electronics 
industries, representatives of the governments of Australia, Canada, 
the European Union, and Japan, and other concerned parties.
    The Department carefully reviewed the public comments and factored 
all arguments and data into the investigative process. Public comments 
from representatives of consumers of NdFeB magnets tended to oppose the 
implementation of tariffs, citing the negative impact of tariffs for 
domestic industries that incorporate NdFeB magnets into end products. 
Representatives of foreign governments echoed concern for the 
imposition of tariffs and urged the investigation to recognize the 
strong ties between the United States and its allies. Representatives 
of the domestic NdFeB magnet industry discussed their future production 
plans, enumerated the difficulties firms faced in establishing a 
domestic value chain for the production of NdFeB magnets, and proposed 
recommendations to alleviate challenges. Two of the most cited 
challenges were Chinese competition, aided by favorable tax policies, 
lower environmental and labor costs, and domestic subsidies, and the 
difficulty of acquiring key intellectual property for sintered NdFeB 
magnets owned by Hitachi. A number of NdFeB magnet industry 
stakeholders indicated support for tax credit legislation for 
domestically produced NdFeB magnets. The public comments of key 
stakeholders are summarized in Appendix C, ``Public Comment 
Summaries,'' which also includes a link to the docket number

[[Page 9437]]

(BIS-2021-0035) under which all public comments can be viewed in full 
on Regulations.gov.\53\
---------------------------------------------------------------------------

    \53\ See also ``86 FR 53277 NdFeB Permanent Magnets 232 
investigation_published 9-27-21_comments due 11-12-21,'' 
Regulations.gov, September 27, 2021, https://www.regulations.gov/document/BIS-2021-0035-0001.
---------------------------------------------------------------------------

3.3 Information Gathering and Data Collection Activities

    Due to the limited number of firms engaged in the U.S. NdFeB magnet 
industry, it was determined that a public hearing was not necessary to 
conduct a comprehensive investigation. In lieu of holding a public 
hearing on this investigation, the Department fielded a mandatory U.S. 
NdFeB Permanent Magnet Industry Survey (the ``survey'') (see Appendix 
D, ``U.S. NdFeB Permanent Magnet Industry Survey'') to participants in 
the U.S. NdFeB magnet industry using statutory authority pursuant to 
section 705 of the Defense Production Act of 1950, as amended (50 
U.S.C. 4555) (DPA). The Department deployed the survey on January 31, 
2022, to 60 firms that it identified as current or prospective 
manufacturers and/or distributors of NdFeB magnets, producers of 
components used in the production of NdFeB magnets, and significant 
consumers of NdFeB magnets in critical end-use sectors, with one or 
more facilities in the United States. Although participants represented 
all steps of the NdFeB value chain, the Department made a particular 
effort to identify and deploy the survey to all current or near-
commercialization producers of NdFeB magnets and/or components used in 
the production of NdFeB magnets, and only sampled a small number of 
distributors and end-users. Seven NdFeB magnet value chain producers 
headquartered outside of the United States were invited to submit 
responses reflecting their foreign operations on a voluntary basis. The 
Department received 51 complete responses.
    The survey provided a mechanism for respondents to disclose 
confidential and non-public information. The survey collected detailed 
information concerning factors such as current and planned facilities, 
production, capacity utilization, purchases/sales, employment, capital 
expenditure, critical machinery, research and development, and 
challenges and competition. The resulting data provided the Department 
with detailed industry information that was otherwise not publicly 
available and was needed to effectively conduct analysis for this 
investigation.
    The Department deems the information furnished in the survey 
responses business confidential and will not publish or disclose it 
except in accordance with section 705 of the DPA, which prohibits the 
publication or disclosure of this information unless the President 
determines that the withholding of such information is contrary to the 
interest of the national defense. Therefore, the information submitted 
to the Department in response to the survey will not be shared with any 
non-government entity other than in aggregate form.
    The Department also held 17 meetings with 19 unique U.S. NdFeB 
magnet industry stakeholders to gather information on firms' 
perspectives on the industry. Table 1 displays the firms the Department 
held meetings with, along with their place in the value chain and the 
domicile of their parent firm.

                               Table 1--Industry Stakeholder Meeting Participants
----------------------------------------------------------------------------------------------------------------
                                                                                      Description of current and
             Firm name                   Parent location     Current market segment     planned market segment
                                                                  participation             participation
----------------------------------------------------------------------------------------------------------------
American Resources.................  United States.........  N/A...................  Planned producer of rare
                                                                                      earth oxides from rare
                                                                                      earth element waste from a
                                                                                      variety of feedstocks,
                                                                                      including battery metals
                                                                                      and end of life products.
Arnold Magnetics...................  United States.........  N/A...................  Current producer of
                                                                                      samarium-cobalt magnets
                                                                                      that indicates it could
                                                                                      produce NdFeB magnets if
                                                                                      it had access to relevant
                                                                                      intellectual property.
Energy Fuels.......................  United States.........  Rare Earth Carbonates   Current producer of mixed
                                                              Processing.             rare earth carbonates from
                                                                                      monazite. Prospective
                                                                                      producer of rare earth
                                                                                      oxides and rare earth
                                                                                      metals.
General Motors.....................  United States.........  NdFeB Magnet Consumer.  Current consumer of NdFeB
                                                                                      magnets. Has a binding
                                                                                      agreement with MP
                                                                                      Materials and a non-
                                                                                      binding agreement with
                                                                                      Vacuumschmelze to purchase
                                                                                      NdFeB magnets.
IperionX...........................  Australia.............  N/A...................  Planned domestic producer
                                                                                      of heavy mineral sands and
                                                                                      monazite, which can be
                                                                                      processed into rare earth
                                                                                      carbonates.
Lynas Rare Earths..................  Australia.............  Rare Earth Element      Current rare earth element
                                                              Mining; Rare Earth      miner and producer of
                                                              Oxide Separation.       mixed and separated rare
                                                                                      earth oxides. Current
                                                                                      production is outside of
                                                                                      the United States but
                                                                                      planned rare earth oxide
                                                                                      production in the United
                                                                                      States.
MP Materials.......................  United States.........  Rare Earth Element      Current producer of rare
                                                              Mining.                 earth elements. Planned
                                                                                      producer of rare earth
                                                                                      oxides, rare earth metals,
                                                                                      rare earth alloys, and
                                                                                      NdFeB magnets.
National Electrical Manufacturers    United States.........  NdFeB Magnet Consumer.  An industry association
 Association.                                                                         that includes current
                                                                                      consumers of NdFeB
                                                                                      magnets. Representatives
                                                                                      of Danfoss (products
                                                                                      include heat pumps and
                                                                                      motors), NIDEC (products
                                                                                      include motors), and ABB
                                                                                      (products include
                                                                                      robotics) participated.
Neo Performance Materials..........  Canada................  Rare Earth Oxide        Current producer of rare
                                                              Separation; Metal       earth oxides, rare earth
                                                              Refining; Rare Earth    metals, rare earth alloys,
                                                              Alloy Production;       and NdFeB magnets.
                                                              NdFeB Magnet            Production is entirely
                                                              Production.             outside of the United
                                                                                      States.
Niron Magnetics....................  United States.........  N/A...................  Planned producer of iron-
                                                                                      nitride magnets, a NdFeB
                                                                                      magnet substitute.
Quadrant Magnetics.................  United States.........  N/A...................  Planned producer of NdFeB
                                                                                      magnets.

[[Page 9438]]

 
Shin-Etsu..........................  Japan.................  Metal Refining; Rare    Current producer of rare
                                                              Earth Alloy             earth metals, rare earth
                                                              Production; NdFeB       alloys, and NdFeB magnets.
                                                              Magnet Production.      Production is entirely
                                                                                      outside of the United
                                                                                      States.
Turntide Technologies..............  United States.........  NdFeB Magnet            Current producer of a NdFeB
                                                              Substitute Production.  magnet-free motor.
Noveon.............................  United States.........  NdFeB Magnet            Current recycler and
                                                              Production; NdFeB       remanufacturer of NdFeB
                                                              Magnet Recycling.       magnets. [TEXT REDACTED].
USA Rare Earth.....................  United States.........  N/A...................  Planned rare earth element
                                                                                      miner and planned producer
                                                                                      of rare earth carbonates,
                                                                                      rare earth oxides, and
                                                                                      NdFeB magnets.
Vacuumschmelze.....................  Germany...............  NdFeB Magnet            Current producer of NdFeB
                                                              Production.             magnets. Planned NdFeB
                                                                                      magnet production in the
                                                                                      United States.
----------------------------------------------------------------------------------------------------------------

3.4 Interagency Consultation

    The Department consulted with the Department of Defense's Office of 
Industrial Base Policy and the Defense Logistics Agency regarding 
estimates of defense-related demand, as well as methodological and 
policy questions that arose during the investigation. The Department 
also consulted with other U.S. Government agencies with expertise and 
information regarding the NdFeB magnet industry including the 
Department of Energy, the Department of State, and the Environmental 
Protection Agency.

4. Product Scope of the Investigation

    The directive of the investigation is to assess the effects of 
imports of NdFeB magnets on the national security of the United States. 
NdFeB magnets can be produced through bonding or sintering processes. 
Sintered magnets currently comprise approximately 93 percent of the 
global NdFeB magnet market, can be used in more demanding applications, 
and are not easily substitutable with alternative 
materials.54 55 Harmonized Tariff Schedule (HTS) 
8505.11.0070 covers the imports of ``Permanent magnets and articles 
intended to become magnets after magnetization: Of metal: Sintered 
neodymium-iron-boron.'' Bonded NdFeB magnets do not have their own HTS 
code but fall under HTS 8505.11.0090 (``Permanent magnets and articles 
intended to become magnets after magnetization: Of metal: Other'').
---------------------------------------------------------------------------

    \54\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \55\ Meeting between the Critical Materials Institute and the 
Department of Commerce, (Virtual Meeting October 6, 2021).
---------------------------------------------------------------------------

    In order to ensure that the full NdFeB magnet value chain was 
covered, the Department also examined the supply chains of feedstocks 
and primary and intermediate products essential to the production of 
NdFeB magnets. These include rare earths, rare earth carbonates, rare 
earth oxides, rare earth metals, and rare earth alloys. NdFeB magnets 
generally use four rare earth elements with supply chain 
vulnerabilities: neodymium, praseodymium, dysprosium, and terbium.\56\ 
Although iron in the form of 1001 steel, boron, and coating materials 
such as copper are also components of NdFeB magnets, their supply 
chains are not expected to pose major issues for magnet production and 
were not a focus of this investigation.\57\
---------------------------------------------------------------------------

    \56\ Cerium is sometimes used in NdFeB magnets but is an 
overproduced rare earth element and as such does not pose a supply 
chain vulnerability.
    \57\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
---------------------------------------------------------------------------

    As of 2020, consumer electronics constituted the largest source of 
total U.S. demand for NdFeB magnets (45 percent), followed by 
industrial motors (30 percent).\58\ However, this investigation and 
report focuses on NdFeB magnets' use in electric vehicles and wind 
turbines, in addition to defense systems, for several reasons. The U.S. 
Government has recognized the electric vehicle and wind turbine 
industries as critical infrastructure.\59\ These industries are 
forecast to be the main drivers of total demand growth for NdFeB 
magnets, reaching 55 percent of total U.S. demand by 2030 and 61 
percent of total U.S. demand by 2050 (see section 6.2, ``U.S 
Demand'').\60\ In addition, U.S. leadership in and adoption of these 
technologies are key to the U.S. Government's efforts to address the 
existential threat caused by climate change. The investigation 
therefore also considered industries that depend on NdFeB magnets, 
focusing on the electric vehicle and wind turbine industries. 
Understanding and considering the effects of any determinations and 
recommendations on these and other NdFeB magnet-consuming sectors is 
necessary to ensure a complete analysis of the effect of NdFeB magnet 
imports on the national security.
---------------------------------------------------------------------------

    \58\ Ibid.
    \59\ See ``Critical Infrastructure Sectors,'' Cybersecurity and 
Infrastructure Security Agency, October 21, 2020, https://www.cisa.gov/critical-infrastructure-sectors.
    \60\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
---------------------------------------------------------------------------

5. NdFeB Magnet Production

5.1 Production Process and Value Chain Steps

    NdFeB magnets are an intermediate product composed of rare earths 
and other elements and are necessary for incorporation into a variety 
of consumer, infrastructure, and defense end-uses.\61\ By weight, NdFeB 
magnets are typically composed of about 30 percent rare earth elements, 
69 percent

[[Page 9439]]

iron, and one percent boron. NdFeB magnets primarily use neodymium and 
praseodymium, with various amounts of dysprosium or terbium added to 
increase coercivity at elevated temperatures (i.e., heat resistance). 
As mentioned earlier, this investigation focuses on the rare earths 
value chain and current and prospective U.S. production and does not 
consider iron and boron. There are six main steps in the NdFeB magnet 
value chain inclusive of magnet production: mining, mixed rare earths 
processing to carbonates, separation of carbonates into oxides, 
refinement of oxides into metal, alloy production, and magnet 
production.
---------------------------------------------------------------------------

    \61\ Except where otherwise noted, this section summarizes 
information on the NdFeB magnet value chain found in the DoE's 
``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report.'' See 
``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,'' 
Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
---------------------------------------------------------------------------

    Rare earth elements can be extracted from mining, unconventional 
sources, and recycled materials. There are two groups of rare earths--
light rare earths and heavy rare earths--defined by their atomic 
weights. In the United States, rare earths are mined from bastnaesite, 
a light rare earth-rich ore, or monazite, generally as a byproduct of 
heavy mineral sands.\62\ Outside of the United States, ion adsorption 
clays, sometimes called ionic clays, are also a source of rare earths, 
especially heavy rare earths.63 64 Mining projects are often 
referred to by their grade, which indicates the percentage of rare 
earths contained in the mined ore. For reference, the Mountain Pass 
Mine in California, owned and operated by MP Materials, is considered 
one of the world's highest-grade deposits of bastnaesite, containing on 
average about seven percent rare earths content.\65\ Lynas Rare Earths' 
Mt. Weld deposit in Western Australia, the other major non-Chinese 
deposit currently in operation, has a designated grade of about eight 
percent.\66\ Once mined, rare earths are beneficiated using one of 
several techniques to increase the concentration of rare earths. 
Research has also been done on extracting rare earths from 
unconventional sources, such as coal ash and mine tailings, although 
these techniques have not been commercialized.
---------------------------------------------------------------------------

    \62\ Heavy mineral sands are mainly mined for titanium and 
zircon. See ``Heavy Mineral Sand,'' Science Direct, n.d., https://www.sciencedirect.com/topics/engineering/heavy-mineral-sand.
    \63\ Although there may be deposits of ionic clays in the United 
States, they are not currently a source of rare earth elements. See 
``Rare Earth Element Accumulation Processes Resulting in High-Value 
Metal Enrichments in Regolith,'' U.S. Geological Survey, August 3, 
2018, https://www.usgs.gov/centers/geology%2C-energy-%26amp%3Bamp%3B-minerals-science-center/science/rare-earth-element-accumulation#overview.
    \64\ Ionic clays are an important source of heavy rare earths in 
China. See Daniel J. Packey and Dudley Kingsnorth, ``The impact of 
unregulated ionic clay rare earth mining in China,'' Resources 
Policy 48: 112-116, https://doi.org/10.1016/j.resourpol.2016.03.003.
    \65\ Comments of MP Materials to Request for Public Comments, 
``Section 232 National Security Investigation of Imports of 
Neodymium-Iron-Boron (NdFeB) Permanent Magnets,'' 86 FR 53277, 
November 12, 2021.
    \66\ ``2021 Annual Report,'' Lynas Rare Earths, Ltd., 2021, 
https://wcsecure.weblink.com.au/pdf/LYC/02434182.pdf.
---------------------------------------------------------------------------

    Once mined and concentrated, rare earths are separated into 
individual rare earth oxides. The primary method used to separate rare 
earth oxides is solvent extraction. The first step in the process is 
usually to remove cerium, since it is a low-value rare earth element. 
The cerium-free rare earth oxide mixture is then placed in mixer 
settlers composed of acidic reagents to separate rare earth elements 
based on their atomic weight. As a result, solvent extraction consumes 
significant quantities of acid and water and generates environmentally 
unfriendly waste. Solvent extraction processes are also tailored to 
feedstocks. Although facilities can be reorganized to accommodate new 
sources of rare earth concentrate, it takes time and resources to do 
so.\67\ [TEXT REDACTED].\68\ Rare earths can also be extracted from 
end-of-life products.
---------------------------------------------------------------------------

    \67\ Meeting between Lynas Rare Earths and the Department of 
Commerce, (Virtual Meeting, March 30, 2022); Meeting between USA 
Rare Earth and the Department of Commerce, (Virtual Meeting, 
December 10, 2021).
    \68\ Meeting between USA Rare Earth and the Department of 
Commerce, (Virtual Meeting, December 10, 2021).
---------------------------------------------------------------------------

    Rare earth oxides are then refined into metals, most often through 
electrowinning and calcium reduction.\69\ Electrowinning uses a cell 
made of anodes and cathodes and an electrolyte, while calcium reduction 
relies on sodium metal to reduce anhydrous rare earth salts. Industry 
participants indicate that metallization is an energy intensive and 
potentially hazardous process.\70\
---------------------------------------------------------------------------

    \69\ Thomas Lograsso, Critical Materials Institute, written 
communication, May 8, 2022.
    \70\ Meeting between Energy Fuels and the Department of 
Commerce, (Virtual Meeting, March 1, 2022).
---------------------------------------------------------------------------

    Finally, alloys are made by combining selected rare earth metals 
with iron and boron. There are two types of alloying approaches 
depending on whether they are meant to produce bonded or sintered NdFeB 
magnets. Although both sintered and bonded NdFeB magnets use neodymium 
and praseodymium, sintered NdFeB magnet alloy includes between 0.5 and 
11 percent dysprosium or terbium by weight to improve high-temperature 
resistance to demagnetization, while the absence of these elements in 
bonded magnets precludes their use in elevated temperature 
applications.
    Sintered NdFeB magnets are manufactured using powder metallurgy. 
For sintered magnets, specific alloys are first produced and melted. 
The molten alloy is then poured on the outer surface of a rotating 
metal cylinder in a process known as strip casting. After strip 
casting, the as-cast strips are jet milled into a powder with small 
grains that can be used for magnet production. Jet milling shapes the 
grains that define the magnet microstructure and affects the magnet's 
performance parameters. The powder is next aligned and pressed in a 
magnetic field before being sintered in a high temperature furnace to 
form the anisotropic magnets. The magnets are then machined to 
specified shapes depending on their end-use and coated with a metal 
film to protect the magnet from corrosion. The most common coating is a 
nickel-copper-nickel layer, although other coatings use gold, chrome, 
copper, and dry-sprayed epoxy or e-coat epoxy. Finally, magnets are 
magnetized using a high magnetic field to align the magnetization of 
the grains.
    Bonded NdFeB magnets follow a similar process to sintered NdFeB 
magnets through the production of magnetic powder. Bonded NdFeB magnets 
are often made from rapidly solidified material turned into ribbons 
through melt-spinning or jet casting, which is subsequently milled, or 
from spherical powders through gas or centrifugal atomization.\71\ 
Bonded NdFeB magnets can also be made from strip cast material after 
hydrogen decrepitation.\72\ The rapidly solidified powder feedstock is 
then mixed with a binder to form a final shape using compression 
bonding, injection molding, or calendaring.\73\ In compression bonding 
a liquid coating of thermoset epoxy is applied to the powder, which is 
then added to a press cavity and compacted under heat to

[[Page 9440]]

produce a rigid magnet.\74\ Injection molding entails blending powder 
with a thermoplastic compound and injecting it into a mold cavity to 
form a rigid or flexible magnet.\75\ Calendaring uses a roll press to 
form flexible magnet sheets.\76\ Rigid magnets require binders such as 
nylon, Teflon, vinyl, and thermoset epoxy, while flexible magnets rely 
on binders like nitrile rubber and vinyl.\77\
---------------------------------------------------------------------------

    \71\ John J. Croat, ``4--Production of rapidly solidified NdFeB 
magnetic powder,'' Rapidly Solidified Neodymium-Iron-Boron Permanent 
Magnets, 2018, https://doi.org/10.1016/B978-0-08-102225-2.00004-1; 
B.M Ma et al., ``Recent development in bonded NdFeB magnets,'' 
Journal of Magnetism and Magnetic Materials 239 (1-3): 418-423, 
February 2002, https://doi.org/10.1016/S0304-8853(01)00609-6.
    \72\ John J. Croat, ``Chapter 6--Compression bonded NdFeB 
permanent magnets,'' Modern Permanent Magnets, 2022, https://doi.org/10.1016/B978-0-323-88658-1.00007-8.
    \73\ Steve Constantinides and John de Leon, ``Permanent Magnet 
Materials and Current Challenges, Arnold Magnetic Technologies, 
n.d., http://www.arnoldmagnetics.com/wp-content/uploads/2017/10/Permanent-Magnet-Materials-and-Current-Challenges-Constantinides-and-DeLeon-PowderMet-2011-ppr.pdf; Jun Cui et al., ``Manufacturing 
Processes for Permanent Magnets: Part II--Bonding and Emerging 
Methods,'' JOM 74: 2492-2506, June 2022, https://doi.org/10.1007/s11837-022-05188-1.
    \74\ Ibid.
    \75\ Ibid.
    \76\ Ibid.
    \77\ John Ormerod, ``Bonded Magnets: A Versatile Class of 
Permanent Magnets,'' Magnetics Business and Technology, 2015, 
https://bunting-dubois.com/wp-content/uploads/2021/04/Magnetics-Business-Technology-Summer-2015-8-9.pdf.
---------------------------------------------------------------------------

5.2 Rare Earth Element Losses in Magnet Production

    It is difficult to estimate rare earth element losses from the 
mining to metallization value chain steps. Rare earth recovery from ore 
is complex since there are a variety of different rare earth minerals 
including bastnaesite, monazite, and ionic clays.\78\ Additionally, the 
process of concentrating rare earth bearing ore is tailored to specific 
ore deposits.\79\ Once the rare earth elements are concentrated, they 
are generally chemically leached into solution. Depending on the 
specific leaching technology utilized and the technological 
optimization of the process stream, recovery of rare earth elements in 
bastnaesite ranges from 85 to 90 percent, in monazite from 89 to 98 
percent, and in ionic clays from 80 to 90 percent.\80\ As discussed in 
the previous section, various approaches, including solvent extraction, 
are employed to separate individual rare earth elements from mixed 
carbonates or mixed oxides. Total recovery of rare earth elements 
during solvent extraction is typically 90 to 95 percent depending on 
the specific process and strategy utilized.\81\ Individual rare earth 
oxides are turned into metal using electrowinning and calcium 
reduction.82 83 Although specific data on the efficiency of 
electrowinning of individual rare earth elements could not be 
identified, the electrowinning process generally exhibits a 90 to 95 
percent metal recovery rate.\84\
---------------------------------------------------------------------------

    \78\ On sources of rare earth elements, see ``Rare Earth 
Permanent Magnets: Supply Chain Deep Dive Report,'' Department of 
Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \79\ Meeting between Lynas Rare Earths and the Department of 
Commerce, (Virtual Meeting, March 30, 2022); Meeting between USA 
Rare Earth and the Department of Commerce, (Virtual Meeting, 
December 10, 2021).
    \80\ Sebastiaan Peelman et al., ``Leaching of Rare Earth 
Elements: Past and Present,'' ERES2014: 1st European Rare Earth 
Resources Conference, September 4 to 7, 2014, http://www.eurare.org/docs/eres2014/seventhSession/SebastiaanPeelman.pdf; Sebastiaan 
Peelman et al., ``Chapter 21: Leaching of Rare Earth Elements: 
Review of Past and Present Technologies,'' Rare Earths Industry: 
Technological, Economic, and Environmental Implications: 319-334, 
2016, https://doi.org/10.1016/B978-0-12-802328-0.00021-8.
    \81\ Laura Talens Peiro and Gara Villalba Mendez, ``Material and 
Energy Requirement for Rare Earth Production,'' JOM 65: 1327-1340, 
2013, https://doi.org/10.1007/s11837-013-0719-8.
    \82\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \83\ Thomas Lograsso, Critical Materials Institute, written 
communication, May 8, 2022.
    \84\ Danielle Miousse, ``A New Spin on Electrowinning,'' PF 
Products Finishing, May 1, 2007, https://www.pfonline.com/articles/a-new-spin-on-electrowinning.
---------------------------------------------------------------------------

    There is more information on material losses from alloying to 
magnet production.\85\ Metal recovery from strip casting, used to 
produce NdFeB alloy, is estimated at 97 percent. Hydrogen decrepitation 
and jet milling, which are used to make NdFeB powder, have estimated 
recovery rates of 99 percent. Pressing in a magnetic field, which is 
used to produce the sintered magnet, has a 99 percent recovery rate, 
while the subsequent sintering and heat-treating steps have 98 percent 
recovery rates. The greatest material loss occurs when machining the 
sintered magnet block into a usable magnet according to end-use-
determined specifications. Depending on the size and complexity of the 
final magnet machining has a recovery rate of 60 to 90 percent. 
Although considerable material is lost during the magnet machining 
step, the resulting waste, also known as magnet swarf, is often 
recycled and returns to the process flow stream.\86\ Indeed, some 
industry participants question the viability of magnet manufacturing 
that does not recycle swarf.\87\ The final steps in NdFeB magnet 
manufacturing are plating for corrosion and final magnetization, both 
of which have a yield of 99 percent. As a result, total recovery from 
alloy to magnet production can range from about 54 to 81 percent.\88\
---------------------------------------------------------------------------

    \85\ Unless otherwise noted, this paragraph summarizes 
information in a Department of Energy report on the NdFeB magnet 
supply chain. See ``Rare Earth Permanent Magnets: Supply Chain Deep 
Dive Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \86\ Meeting between Lynas Rare Earths and the Department of 
Commerce, (Virtual Meeting, March 30, 2022).
    \87\ Ibid.
    \88\ The Department reached this calculation using the 
information on material loss from alloy to magnet production 
discussed in earlier in the paragraph.
---------------------------------------------------------------------------

6. U.S. NdFeB Magnet Industry

6.1 Historical Overview

    The United States is essentially one hundred percent dependent on 
imports of NdFeB magnets to satisfy demand. However, the United States 
did not always have negligible capacity in the NdFeB magnet value 
chain. Rare earths were first discovered at Mountain Pass in California 
in 1949 and extracted by the mining firm Molycorp beginning in 
1951.\89\ In the 1950s, research by the Ames Laboratory advanced rare 
earths processing technology.\90\ The combination of favorable factor 
endowments and research and development caused the U.S. rare earths 
industry to flourish. By the 1980s, Mountain Pass supplied over 70 
percent of the world's rare earth elements.\91\ Meanwhile, 
commercialized processing technologies facilitated rare earth oxide 
production and consumption by a growing array of end-users.\92\ NdFeB 
magnet manufacturers were one such consumer: in 1983, General Motors 
and Sumitomo of Japan independently announced the development of NdFeB 
magnets.\93\ In 1986 General Motors established a subsidiary called 
Magnequench to commercialize production.\94\ Magnequench began 
production of rapidly solidified powders for isotropic bonded magnets, 
full dense hot pressed isotropic magnets, and fully dense anisotropic 
magnets in 1987.95 96
---------------------------------------------------------------------------

    \89\ Joanne Abel Goldman, ``The U.S. Rare Earth Industry: Its 
Growth and Decline,'' Journal of Policy History 26 (2): 139-166, 
2014, https://doi.org/10.1017/S0898030614000013.
    \90\ Ibid.
    \91\ Ibid.
    \92\ Ibid.
    \93\ Ibid.
    \94\ Jeffrey St. Clair, ``The Saga of Magnequench,'' 
Counterpunch, April 7, 2006, https://www.counterpunch.org/2006/04/07/the-saga-of-magnequench/.
    \95\ Ibid.
    \96\ V. Panchanathan, ``Magnequench Magnets Status Overview,'' 
Journal of Materials Engineering and Performance, 4 (4) 423-429, 
1995, https://doi.org/10.1007/BF02649302.
---------------------------------------------------------------------------

    However, the 1980s were marked by growing foreign competition that 
presaged the end of the U.S. rare earths industry. By 1985 Japan had 
already exceeded the United States in NdFeB magnet production and by 
1987 produced over half the world's magnets.\97\ Starting in the second 
half of

[[Page 9441]]

the 1980s, several U.S. magnet companies licensed Sumitomo patents to 
produce and sell sintered NdFeB magnets.\98\ In the 1980s, China also 
began to develop its rare earth and NdFeB magnet industries. A 
combination of low labor costs, less stringent environmental 
regulations, and tax rebates and subsidies made it difficult for U.S. 
firms to compete.\99\ In response to imports of unlicensed Chinese 
magnets, in 1995 U.S. magnet manufacturer Crucible Materials filed a 
complaint with the U.S. International Trade Commission (U.S. ITC) 
requesting a section 337 investigation.\100\ Although the U.S. ITC 
found a violation and issued a cease-and-desist order to a domestic 
respondent as well as a general exclusion order, these actions did not 
prevent the offshoring of domestic industry.\101\ In 1998, Molycorp 
suspended operation at Mountain Pass Mine, ending U.S. involvement in 
the upstream steps of the NdFeB magnet value chain.\102\ The downstream 
steps of the value chain followed. For example, after being sold to 
Chinese owners Magnequench's U.S. factories were closed and offshored 
starting in 1998, and it eventually ceased U.S. production in 
2006.\103\ Similarly, in 2005, Hitachi closed its sintered NdFeB magnet 
manufacturing facility in Edmore, MI, which it had previously acquired 
from General Electric.\104\
---------------------------------------------------------------------------

    \97\ Joanne Abel Goldman, ``The U.S. Rare Earth Industry: Its 
Growth and Decline,'' Journal of Policy History 26 (2): 139-166, 
2014, https://doi.org/10.1017/S0898030614000013.
    \98\ John Ormerod, ``NdFeB Magnet Patents: Updated 2021,'' 
Bunting, n.d., https://bunting-dubois.com/tech-briefs/ndfeb-magnet-patents-update-2021/.
    \99\ Joanne Abel Goldman, ``The U.S. Rare Earth Industry: Its 
Growth and Decline,'' Journal of Policy History 26 (2): 139-166, 
2014, https://doi.org/10.1017/S0898030614000013.
    \100\ John Ormerod, ``NdFeB Magnet Patents: Updated 2021,'' 
Bunting, n.d., https://bunting-dubois.com/tech-briefs/ndfeb-magnet-patents-update-2021/; ``Certain Neodymium-Iron-Boron Magnets, Magnet 
Alloys, and Articles Containing Same: Investigation No. 337-TA-
372,'' U.S. International Trade Commission, May 1996, https://usitc.gov/publications/337/pub2964.pdf.
    \101\ Ibid.
    \102\ Joanne Abel Goldman, ``The U.S. Rare Earth Industry: Its 
Growth and Decline,'' Journal of Policy History 26 (2): 139-166, 
2014, https://doi.org/10.1017/S0898030614000013.
    \103\ Jeffrey St. Clair, ``The Saga of Magnequench,'' 
Counterpunch, April 7, 2006, https://www.counterpunch.org/2006/04/07/the-saga-of-magnequench/.
    \104\ Walter Benecki, ``Magnetics Industry Overview,'' 2005, 
http://www.waltbenecki.com/uploads/Another_Year_of_Significant_Change_in_the_Magnetics_Industry.pdf.
---------------------------------------------------------------------------

    The U.S. NdFeB magnet value chain experienced a brief revival in 
the late 2000s and early 2010s, in part due to rising rare earths 
prices.\105\ In 2008, Molycorp sought to restart production at Mountain 
Pass Mine.\106\ When China dramatically restricted exports of rare 
earths in 2010 and prices increased, Molycorp appeared poised to 
benefit.107 108 In 2012 it acquired Magnequench, which at 
the time had NdFeB magnet powder facilities in China and Thailand, in 
order to create a vertically integrated mine to magnet 
firm.109 110 By 2013 it had achieved domestic production of 
5,500 tons of rare earth oxides and had established a joint venture 
with Mitsubishi and Daido Steel to produce magnets in 
Japan.111 112 113 However, Molycorp struggled to remain 
solvent and suffered from the decline in rare earths prices that 
occurred in part due to China's reversal of its export restrictions, 
ultimately declaring bankruptcy in 2015.114 115 The United 
States has in recent years been highly reliant (well above 80 percent) 
on imports of bonded NdFeB magnets and essentially one hundred percent 
dependent on imports of sintered NdFeB magnets.
---------------------------------------------------------------------------

    \105\ See Section 8.3.4, ``Prices and Price Volatility,'' for 
more details on neodymium oxide and metal prices.
    \106\ Jeffrey A. Green, ``The collapse of American rare earth 
mining--and lessons learned,'' Defense News, November 12, 2019, 
https://www.defensenews.com/opinion/commentary/2019/11/12/the-collapse-of-american-rare-earth-mining-and-lessons-learned/.
    \107\ China implemented export quotas starting in 2005, but 
dramatically decreased the export quota by almost 40 percent in 
2010. China's export quotas are broadly seen as part of a strategy 
of economic resource nationalism, wherein economic advantage can be 
transferred from foreign to local firms, although some argue they 
reflect an effort to gain a geopolitical advantage. China itself 
contended quotas were meant to decrease environmental costs, but 
this argument was rejected by the WTO in 2014. See Kristen Vekasi, 
``Politics, markets, and rare commodities: Responses to Chinese rare 
earth policy,'' Japanese Journal of Political Science 20 (1): 2-20, 
2019, https://doi.org/10.1017/S1468109918000385.
    \108\ Neodymium oxide prices rose by over 1,200 percent from 
$27.95 per kg at the end of January 2010 to a peak of $369.75 at per 
kg at the end of July 2011. The Department's calculations from 
Bloomberg data. See Section 8.3.4, ``Prices and Price Volatility,'' 
for more details.
    \109\ Artem Golev et al., ``Rare earths supply chains: Current 
status, constraints, and opportunities,'' Resources Policy 41: 52-
59, 2014, http://dx.doi.org/10.1016/j.resourpol.2014.03.004.
    \110\ Magnequench was later acquired by Neo Performance 
Materials after Molycorp's bankruptcy.
    \111\ Eugene Gholz, ``Rare Earth Elements and National 
Security,'' Council on Foreign Relations, October 2014, https://cdn.cfr.org/sites/default/files/pdf/2014/10/Energy%20Report_Gholz.pdf.
    \112\ Joseph Gambogi, ``Mineral Commodity Summaries: Rare 
Earths,'' U.S. Geological Survey, January 2017, https://d9-wret.s3.us-west-2.amazonaws.com/assets/palladium/production/mineral-pubs/rare-earth/mcs-2017-raree.pdf.
    \113\ All quantities specified as tons in this report refer to 
metric tons, unless otherwise noted.
    \114\ Tiffany Hsu, ``Molycorp--sole U.S. rare earth producer--
files for bankruptcy,'' Los Angeles Times, June 25, 2015, https://www.latimes.com/business/la-fi-molycorp-rare-earth-bankruptcy-20150625-story.html.
    \115\ When Molycorp declared bankruptcy in June 2015, neodymium 
oxide prices were down by over 88 percent to $43.00 per kg from a 
peak of $369.75 per kg in July 2011. The Department's calculations 
from Bloomberg data. See Section 8.3.4, ``Prices and Price 
Volatility,'' for more details.
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6.2 U.S. Demand

    As one of the strongest types of permanent magnets, NdFeB magnets, 
in particular sintered NdFeB magnets, are used in an extensive range of 
products. Example applications include actuators for machine tools, 
robots, and water pumps, refrigerator and air conditioner compressors, 
speakers in phones and laptops (as well as more advanced applications 
in computing and telecommunications), and traction motors in electric 
vehicles.
    The Department of Energy's (DoE) ``Rare Earth Permanent Magnets: 
Supply Chain Deep Dive Report'' estimates total domestic demand for 
selected NdFeB magnet applications in aggregate and by broad 
application area, as detailed in Table 2.116 117 It 
estimated total consumption at about 16,100 tons in 2020. Based on DoE 
estimates, total U.S. demand for NdFeB magnets for these applications 
is projected to increase under a high growth scenario to 37,000 tons in 
2030, with the bulk of increasing demand accounted for by offshore wind 
turbines and electric vehicles.
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    \116\ The Department notes that the global NdFeB magnet supply 
chain is opaque and as a result valid and reliable estimates of 
total as well as direct and embedded demand are difficult to 
generate, both in aggregate and at the end-use-level. [TEXT 
REDACTED]. Estimates of total, direct, and embedded demand in 
aggregate and by end-use category should be approached with caution.
    \117\ The DoE report and the figures provided in this report 
reflect total demand, in other words the sum of direct and indirect 
or embedded demand, for selected NdFeB magnet applications.

[[Page 9442]]



             Table 2--Total U.S. Demand for Selected NdFeB Magnet Applications, Thousands of Tons *
----------------------------------------------------------------------------------------------------------------
                                                Total demand in 2020     Projected total       Projected total
                                               ---------------------- demand in 2030 (high  demand in 2050 (high
                                                                             growth)               growth)
                  Application                     Amount     Share   -------------------------------------------
                                                   (kt)    (percent)    Amount     Share      Amount     Share
                                                                         (kt)    (percent)     (kt)    (percent)
----------------------------------------------------------------------------------------------------------------
Offshore wind turbines........................          0        0.0       10.1       27.3         19       27.7
Electric vehicles.............................        1.8       11.2       10.2       27.6       23.1       33.7
Consumer electronics (hard disk drives, cell          7.2       44.7        7.4       20.0       11.8       17.2
 phones, loudspeakers, other).................
Industrial motors.............................        4.9       30.4        5.9       15.9        9.5       13.8
Non-drivetrain motors in vehicles.............        1.5        9.3        2.4        6.5        3.9        5.7
Other sintered magnets (Power tools, electric         0.1        0.6        0.1        0.3        0.2        0.3
 bikes).......................................
Bonded magnets................................        0.6        3.7        0.8        2.2        1.3        1.9
                                               -----------------------------------------------------------------
    Total.....................................       16.1      100.0         37      100.0       68.6      100.0
----------------------------------------------------------------------------------------------------------------
* The figures presented represent total--or the sum of direct and embedded--demand.
Source: ``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,'' Department of Energy, February 24,
  2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.

    Since U.S. production of NdFeB magnets is minimal almost all the 
United States' direct and indirect NdFeB magnet consumption is met 
through imports.\118\ The United States directly imported about 7,500 
tons of sintered NdFeB magnets in 2021.\119\ However, direct imports of 
NdFeB magnets represent only a portion of U.S. consumption and the 
majority of U.S. demand is in the form of imported products with the 
magnets embedded in them. As the list of imported goods containing 
NdFeB magnets is extensive, and their magnet content (weight and type) 
unknown, it is difficult to precisely estimate indirect consumption by 
application. The Defense Logistics Agency Strategic Materials estimates 
60 percent of essential civilian demand for NdFeB magnets was fulfilled 
through embedded imports, [TEXT REDACTED].120 121
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    \118\ U.S. imports and exports of NdFeB magnets are further 
discussed in Section 6.4, ``U.S. Trade in NdFeB Magnets.''
    \119\ ``USITC Dataweb,'' U.S. International Trade Commission, 
last modified October 25, 2021, https://dataweb.usitc.gov/trade/search/Import/HTS.
    \120\ ``Building Resilient Supply Chains, Revitalizing American 
Manufacturing, and Fostering Broad-Based Growth,'' The White House, 
June 2021, https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf.
    \121\ Meeting between the Defense Logistics Agency and the 
Department of Commerce (Virtual Meeting, November 23, 2021).
---------------------------------------------------------------------------

6.3 NdFeB Magnets in Defense and Critical Infrastructure Applications

    Presidential Policy Directive 21 (Critical Infrastructure Security 
and Resilience) designates 16 critical infrastructure sectors as vital 
to national security, national economic security, and/or national 
public health and safety.\122\ NdFeB magnets are used so extensively 
across industries that they support virtually all 16 sectors, including 
the critical manufacturing, defense industrial base, energy, healthcare 
and public health, transportation systems, and water and wastewater 
systems sectors. The following sections will discuss the use of NdFeB 
magnets in defense applications and two key critical infrastructure 
applications: electric vehicles and offshore wind turbines. Defense-
related uses and demand are central to the investigation's directive to 
assess the effects of NdFeB magnet imports on national security. 
Electric vehicles and offshore wind turbines are important to the Biden 
Administration's Clean Energy Plan and efforts to combat climate 
change. They will also drive demand for NdFeB magnets and are key sales 
targets for NdFeB magnet manufacturers.
---------------------------------------------------------------------------

    \122\ ``Critical Infrastructure Sectors,'' Department of 
Homeland Security, last modified October 21, 2020, https://www.cisa.gov/critical-infrastructure-sectors.
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6.3.1 Defense Applications
    Consistent with their broad commercial applications, NdFeB magnets 
are used in a variety of defense end-uses.\123\ Defense usage is not 
limited to specific magnet characteristics such as high coercivity. 
Instead, each defense application requires a specially designed magnet, 
of varying sizes, grades, and performance characteristics. [TEXT 
REDACTED]. Aircraft, missiles, and munitions use small high-powered 
rare earth magnet actuators that control the various surfaces during 
operation. NdFeB magnets can also be used as fasteners. Although 
substitutes can be used in some applications, they are usually not as 
effective.\124\
---------------------------------------------------------------------------

    \123\ [TEXT REDACTED].
    \124\ ``Defense Federal Acquisition Regulation Supplement: 
Restriction on the Acquisition of Certain Magnets and Tungsten,'' 
Federal Register, April 30, 2019. https://www.federalregister.gov/documents/2019/04/30/2019-08485/defense-federal-acquisition-regulation-supplement-restriction-on-the-acquisition-of-certain-magnets?msclkid=9f790985ac5011eca53be28a54128eac.

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                                              [TEXT REDACTED] \125\
----------------------------------------------------------------------------------------------------------------
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----------------------------------------------------------------------------------------------------------------
[TEXT REDACTED]        [TEXT REDACTED]        [TEXT REDACTED]        [TEXT REDACTED]        [TEXT REDACTED]
[TEXT REDACTED]        [TEXT REDACTED]        [TEXT REDACTED]        [TEXT REDACTED]        [TEXT REDACTED]
[TEXT REDACTED]        [TEXT REDACTED]        [TEXT REDACTED]        [TEXT REDACTED]        [TEXT REDACTED]
----------------------------------------------------------------------------------------------------------------
                                                 [TEXT REDACTED]
----------------------------------------------------------------------------------------------------------------

    As with total domestic consumption of NdFeB magnets, a precise 
total for defense-related demand is not possible. [TEXT REDACTED].\126\ 
Thus, despite their importance to national security, defense demand for 
NdFeB magnets is only a small portion of overall demand and 
insufficient to support an economically viable domestic industry.
---------------------------------------------------------------------------

    \125\ [TEXT REDACTED].
    \126\ [TEXT REDACTED], Noveon's Federal Register Notice 
submission estimated defense-related demand at two to ten percent. 
Comments of Noveon to Request for Public Comments, ``Section 232 
National Security Investigation of Imports of Neodymium-Iron-Boron 
(NdFeB) Permanent Magnets,'' 86 FR 53277, November 12, 2021.
---------------------------------------------------------------------------

6.3.2 U.S. Government Actions To Reduce Defense Dependencies
    Given NdFeB magnets' usage in and importance to the performance of 
myriad military systems, and the United States' near one hundred 
percent reliance on imports of NdFeB magnets, the U.S. Government has 
taken several steps in recent years to mitigate this reliance and 
address potential supply disruptions. One such measure is legislation 
implemented through a Defense Federal Acquisition Regulation Supplement 
(DFARS) that restricts the use of foreign NdFeB magnets in the military 
supply chain from 2019.\127\ Specifically, section 871 of the National 
Defense Authorization Act for 2019 (Pub. L. 115-232) prohibits the 
acquisition of samarium-cobalt and NdFeB magnets melted or produced in 
North Korea, China, Russia, or Iran because these materials play an 
essential role in national defense. This requirement was originally 
codified in 10 U.S.C. 2533c but is now 10 U.S.C. 4872. There are 
exceptions for ``some commercially available off-the-shelf magnets 
incorporated into end items and for electronic devices,'' as well as 
for recycled magnets where the first melt may have taken place in China 
but subsequent recycling and milling takes place in the United 
States.\128\
---------------------------------------------------------------------------

    \127\ For more information, please refer to the Federal Register 
Notice of the rule. ``Defense Federal Acquisition Regulation 
Supplement: Restriction on the Acquisition of Certain Magnets and 
Tungsten,'' Federal Register, April 30, 2019, https://www.federalregister.gov/documents/2019/04/30/2019-08485/defense-federal-acquisition-regulation-supplement-restriction-on-the-acquisition-of-certain-magnets.
    \128\ Ibid.
---------------------------------------------------------------------------

    The Department of Defense's (DoD) Office of Industrial Base Policy 
has fostered domestic production capacity across the NdFeB magnet value 
chain from mining to magnet manufacturing through the allocation of 
funding under DPA Title III and the Industrial Base Analysis and 
Sustainment (IBAS) programs. Other important DoD funding sources for 
rare earth supply chain research and scale-up include the National 
Defense Stockpile Program, the Rapid Innovation Fund, and the Small 
Business Innovation Research (SBIR) program.
    Upstream in the NdFeB magnet value chain, DoD has funded the 
development of oxide separation capacity. In February 2021, Lynas USA 
LLC, a subsidiary of Australian mining firm Lynas Rare Earths, received 
$30.4 million to establish a facility to produce light rare earth 
oxides, including neodymium.129 130 [TEXT REDACTED]. This 
facility is also expected to produce heavy rare earth oxides such as 
dysprosium.\131\ [TEXT REDACTED].\132\ In February 2022, DoD awarded MP 
Materials $35 million under the IBAS program for a heavy rare earth 
oxide separation facility, on top of a previous $9.6 million commitment 
in December 2020 to develop light rare earth oxide separation 
capabilities.\133\ MP Materials expects to commence production by the 
end of 2022.\134\ DoD has also provided

[[Page 9444]]

funding for NdFeB magnet production. In July 2020, under DPA Title III, 
Noveon was provided $28.8 million to develop NdFeB magnet 
manufacturing, which will begin in 2022 and ramp up thereafter.\135\ 
Noveon later received $0.86 million for an inventory 
demonstration.\136\ In November 2020, DoD also provided $2.3 million in 
DPA Title III funding to TDA Magnetics for a rare earth element supply 
chain study.\137\
---------------------------------------------------------------------------

    \129\ ``DoD Announces Rare Earth Element Award to Strengthen 
Domestic Industrial Base,'' Department of Defense, February 1, 2021, 
https://www.defense.gov/News/Releases/Release/Article/2488672/dod-announces-rare-earth-element-award-to-strengthen-domestic-industrial-base/.
    \130\ Unless otherwise stated, all values cited in this report 
are U.S. dollars.
    \131\ ``2021 Annual Report,'' Lynas Rare Earths, Ltd., 2021, 
https://wcsecure.weblink.com.au/pdf/LYC/02434182.pdf.
    \132\ Meeting between Lynas Rare Earths and the Department of 
Commerce, (Virtual Meeting, March 30, 2022).
    \133\ ``MP Materials Awarded Department of Defense Heavy Rare 
Earth Processing Contract,'' MP Materials, February 2, 2022, https://investors.mpmaterials.com/investor-news/news-details/2022/MP-Materials-Awarded-Department-of-Defense-Heavy-Rare-Earth-Processing-Contract/default.aspx.
    \134\ ``Form 10-K,'' MP Materials, February 28, 2022, https://d18rn0p25nwr6d.cloudfront.net/CIK-0001801368/77b2894e-b746-43c5-938a-a3f524823baa.pdf.
    \135\ ``DoD Announces $77.3 Million in Defense Production Act 
Title III COVID-19 Actions,'' Department of Defense, July 24, 2020, 
https://www.defense.gov/News/Releases/Release/Article/2287490/dod-announces-773-million-in-defense-production-act-title-iii-covid-19-actions/.
    \136\ ``DoD Announces Rare Earth Element Awards to Strengthen 
Domestic Industrial Base,'' Department of Defense, November 17, 
2020, https://www.defense.gov/News/Releases/Release/Article/2418542/dod-announces-rare-earth-element-awards-to-strengthen-domestic-industrial-base/.
    \137\ Ibid.
---------------------------------------------------------------------------

    The U.S. Government also funded projects related to the NdFeB 
magnet value chain through the SBIR program.\138\ SBIR provides funding 
on a competitive basis to encourage high technology innovation by small 
businesses with less than 500 employees. In general, funding of up to 
$275,000 over a six month to one year period is granted for Phase I 
projects (i.e., projects at the technical assessment and feasibility 
stage), and up to $1.8 million over a two-year period for Phase II 
projects (to allow for continued research and development after a 
successful Phase I). Like other federal awards, SBIR contracts allocate 
intellectual property rights between the U.S. Government and the 
awardee according to a detailed regulatory regime. A typical SBIR 
patent rights clause generally permits the SBIR awardee to retain 
ownership of inventions, but grants the U.S. Government a ``non-
exclusive, nontransferable, irrevocable paid-up license to practice the 
subject invention throughout the world.'' \139\
---------------------------------------------------------------------------

    \138\ Information in this paragraph is drawn from the SBIR 
website. See ``SBIR,'' Small Business Administration, n.d., https://www.sbir.gov/?msclkid=fddb897aac5011ec87c1465b3f85f68e.
    \139\ ``37 CFR 401.14--Standard patent rights clauses,'' Cornell 
Law School Legal Information Institute, n.d., https://www.law.cornell.edu/cfr/text/37/401.14.
---------------------------------------------------------------------------

    In 2020 and 2021, SBIR awards directly related to neodymium were 
made to ten organizations--DoD units funded three of these, and DoE 
units funded seven. Projects included novel separation and metal 
reduction technologies, as well as recycling/reclaiming rare earths and 
magnets from end-of-life products and waste feedstocks. Additional 
projects focused on the development of electric motors that are free of 
rare earth elements or have reduced rare earth element content. If 
expanded to include SBIR awards related more broadly to rare earth 
elements, the total number of projects funded increases to 52 in 2020 
and 2021 alone, and over 300 over the history of the SBIR program.
    In one example, the Defense Logistics Agency--Strategic Materials 
is leveraging SBIR funding and Rapid Innovation Funding to accelerate 
the development of new rare earth processing technologies through a 
grant to Rare Earth Salts.\140\ Rare Earth Salts will use this money to 
scale production of separate rare earth oxides to 20 tons of neodymium-
praseodymium at its facility in Beatrice, NE. Using a unique 
separations process, Rare Earth Salts claims it can separate and refine 
all seventeen rare earth elements, providing DoD with a viable 
alternative to foreign sources.\141\
---------------------------------------------------------------------------

    \140\ ``DOD Announces Rare Earth Element Awards to Strengthen 
Domestic Industrial Base,'' Department of Defense, November 17, 
2020, https://www.defense.gov/News/Releases/Release/Article/2418542/dod-announces-rare-earth-element-awards-to-strengthen-domestic-industrial-base/msclkid/dod-announces-rare-earth-element-awards-to-strengthen-domestic-industrial-base/.
    \141\ ``Defense Logistics Agency Research and Development: Small 
Business Innovation Programs,'' Defense Logistics Agency, n.d. 2022, 
https://www.dla.mil/Portals/104/Documents/SmallBusiness/Always%20Accountable%20Program%20Sheet_10%20NOV%202020.pdf?ver=2A6BDQejXejBr5xDhoLDyQ%3D%3D.
---------------------------------------------------------------------------

    DoE has also provided funding related to the NdFeB magnet value 
chain. For example, DoE has advanced research on recovering rare earths 
from unconventional sources, including coal, coal byproducts, and other 
waste materials.\142\ Through basic and applied research conducted in 
DoE labs, small businesses, and universities, DoE was able to establish 
pilot scale facilities capable of producing small quantities of high 
purity, mixed rare earth oxides. DoE expanded this program in 2020 in 
response to Executive Order 13817 to include upstream beneficiation 
yielding mixed rare earth oxides, midstream processing, separation, 
recovery of rare earth elements and critical minerals, and ultimately 
onshore downstream manufacturing that incorporates these materials into 
consumer and national defense products. In 2021, efforts were initiated 
that address the development of innovative, cost-reduced processing for 
the separation of mixed rare earth elements into individual, high 
purity oxides, and reduction of these materials to metals for use in 
alloy production, advanced technology development, and component 
manufacturing. The final goal is to produce one to three tons a day of 
mixed rare earth oxides and metals in prototype separation facilities 
by 2026.
---------------------------------------------------------------------------

    \142\ Information in this paragraph is drawn from a DoE document 
describing the program. See ``Rare Earth Elements and Critical 
Minerals,'' National Energy Technology Laboratory, February 2022, 
https://www.netl.doe.gov/sites/default/files/2022-02/Program-141.pdf.
---------------------------------------------------------------------------

    In April 2021, DoE, through the National Energy Technology 
Laboratory, announced $19 million in grants to support production of 
rare earth elements and critical minerals vital to manufacturing 
batteries, magnets, and other products important to the clean energy 
economy.\143\ The grants, of up to $1.5 million each, were allocated to 
13 projects across the country to assess resources and extract and 
process rare earth elements and critical minerals in traditionally 
fossil-fuel producing communities. Not only will these initiatives help 
alleviate shortages in domestic supply and place the United States at 
the forefront of the clean energy economy, but they support regional 
economic growth and job creation in economically distressed 
communities. Many of these projects relate to reclaiming and processing 
rare earth elements from coal mine-derived waste.
---------------------------------------------------------------------------

    \143\ The information in this paragraph is drawn from a DoE 
press announcement. See ``DOE Awards $19 Million for Initiatives to 
Produce Rare Earth Elements and Critical Minerals,'' Department of 
Energy, April 29, 2021, https://www.energy.gov/articles/doe-awards-19-million-initiatives-produce-rare-earth-elements-and-critical-minerals.
---------------------------------------------------------------------------

6.3.3 NdFeB Magnets, Climate Change, and the National Security
    The Department of Defense, the Department of Homeland Security, the 
National Security Council, and the Director of National Intelligence 
have identified climate change as a threat to national security. 
Climate-fueled events and scarce resources create instability, 
heightened military tensions, and financial hazards which can lead to 
worsening conflicts between countries.\144\ Climate change and extreme 
weather events may also significantly increase the dislocation and 
migration of people.\145\ Climate

[[Page 9445]]

change is an existential crisis that poses a grave threat to the United 
States and the international community. To address this crisis, 
President Biden established a national goal to achieve net-zero carbon 
emissions by 2050.\146\ Transitioning away from gas powered to electric 
vehicles is an important part of U.S. and global efforts to address 
climate change by slashing greenhouse gas emissions, and NdFeB magnets 
are key to electric vehicle performance. In addition, NdFeB magnets 
power offshore wind turbine generators, which are another key element 
in achieving clean energy goals.
---------------------------------------------------------------------------

    \144\ Christopher Flavelle et al., ``Climate Change Poses a 
Widening Threat to National Security,'' The New York Times, October 
21, 2021, https://www.nytimes.com/2021/10/21/climate/climate-change-national-security.html.
    \145\ Renee Cho, ``Climate Migration: An Impending Global 
Challenge,'' Columbia Climate School, May 13, 2021, https://news.climate.columbia.edu/2021/05/13/climate-migration-an-impending-global-challenge/; David J. Kazcan and Jennifer Orgill-Meyer, ``The 
impact of climate change on migration: a synthesis of recent 
empirical insights,'' Climatic Change 158: 281-300, 2020, https://doi.org/10.1007/s10584-019-02560-0; ``Groundswell Part 2: Acting on 
International Climate Migration,'' World Bank, September 13, 2021, 
https://openknowledge.worldbank.org/handle/10986/36248.
    \146\ See ``Fact Sheet: President Biden Signs Executive Order 
Catalyzing America's Clean Energy Economy Through Federal 
Sustainability,'' The White House, December 8, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/12/08/fact-sheet-president-biden-signs-executive-order-catalyzing-americas-clean-energy-economy-through-federal-sustainability/.
---------------------------------------------------------------------------

6.3.4 Electric Vehicles
    Although the United States currently lags many other countries in 
the percentage of vehicles sold that are electric, President Biden has 
set a goal that by 2030 half of all new vehicles sold will be 
electric.\147\ This will reduce greenhouse gas emissions by more than 
60 percent over 2020 levels and positions the country to be a leader in 
the automobile manufacturing of the future. Funds have already been 
dedicated to advancing the domestic electric vehicle industry and key 
components such as batteries.
---------------------------------------------------------------------------

    \147\ See ``Executive Order on Strengthening American Leadership 
in Clean Cars and Trucks,'' The White House, August 5, 2021, https://www.whitehouse.gov/briefing-room/presidential-actions/2021/08/05/executive-order-on-strengthening-american-leadership-in-clean-cars-and-trucks/; ``Fact Sheet: President Biden Announces Steps to Drive 
American Leadership Forward on Clean Cars and Trucks,'' The White 
House, August 5, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/08/05/fact-sheet-president-biden-announces-steps-to-drive-american-leadership-forward-on-clean-cars-and-trucks/
.
---------------------------------------------------------------------------

    The global transition to electric vehicles is expected to lead to a 
rapid increase in demand for NdFeB magnets. Although automobile 
manufacturers can use non-NdFeB magnet motors, up to 95 percent of 
electric vehicles use rare earth magnets in their traction drive 
motors.\148\ NdFeB magnets are highly desirable in traction drive 
motors because they provide high energy efficiency which allows for 
increased driving range. Electric vehicle drive train motors typically 
require higher grade NdFeB magnets (using six percent or more of 
dysprosium) due to the high temperature environment.
---------------------------------------------------------------------------

    \148\ Roland Gaus et al., ``Rare Earth Magnets and Motors: A 
European Call for Action,'' European Raw Materials Alliance, 
September 2021, https://erma.eu/app/uploads/2021/09/01227816.pdf.
---------------------------------------------------------------------------

    In addition to traction drive motors, NdFeB magnets, often of 
lesser grades, are used in various other automotive systems in both 
electric and conventional vehicles, including motors for door locks, 
mirrors, seat positioning, power steering, alternators, suspension 
control, anti-lock brakes, water pumps, and loudspeakers. Most sources 
estimate that electric vehicle drive trains use between one and two 
kilograms (kgs) of NdFeB magnets, with other applications using smaller 
amounts of NdFeB magnets.149 150 NdFeB magnets are a small 
percentage of the cost of production. The European Raw Materials 
Alliance (ERMA) forecasts that rare earth magnets used in electric 
vehicles will account for $2.3 to $3.5 billion out of a global electric 
vehicle market of $725 to $1,160 billion, or less than 0.5 percent of 
the value of the market.\151\ NdFeB magnets are nonetheless key to 
enhancing vehicle performance over non-magnet alternatives.
---------------------------------------------------------------------------

    \149\ Roland Gaus et al., ``Rare Earth Magnets and Motors: A 
European Call for Action,'' European Raw Materials Alliance, 
September 2021, https://erma.eu/app/uploads/2021/09/01227816.pdf; 
``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,'' 
Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf; Steve 
Constantinides, ``The Big Picture: Putting the Magnet Market Trends 
Together,'' Presentation at Magnetics 2018 at Orlando, FL, February 
8, 2018.
    \150\ Conventional vehicles also use small amounts of NdFeB 
magnets. Estimates of total NdFeB magnet rare earths content ranges 
from 4 grams to 356 grams per vehicle. See Ruby T. Nguyen et al., 
``NdFeB content in ancillary motors of U.S. conventional passenger 
cars and light trucks: Results from the field,'' Waste Management 
83: 209-217, 2019, https://doi.org/10.1016/j.wasman.2018.11.017.
    \151\ The original figures were quoted in euros: two to three 
billion euros for the value of rare earth magnets used in electric 
vehicles and 625 to 1000 billion euros for the value of the global 
electric vehicle market. These figures were converted into dollars 
at an exchange rate of 1.16 euro to the dollar, at the lower end of 
the exchange rate in September 2021 when the ERMA forecast was 
published, which fluctuated between 1.16 and 1.19 euro to the 
dollar. Roland Gaus et al., ``Rare Earth Magnets and Motors: A 
European Call for Action,'' European Raw Materials Alliance, 
September 2021, https://erma.eu/app/uploads/2021/09/01227816.pdf.
---------------------------------------------------------------------------

    The developing electric vehicle industry in the United States, in 
addition to the global electric vehicle market, represents a valuable 
opportunity for current and potential NdFeB magnet manufacturers. In 
one extreme example, if all new vehicle sales in 2040 were electric 
vehicles--an estimated 125 million vehicles globally--the global 
electric vehicle industry alone would consume at least 156,000 tons of 
NdFeB magnets and 342,000 tons of total rare earth oxides.\152\ By 
comparison, in 2020 about three million electric vehicles were sold 
globally (4.6 percent of total) and electric vehicles consumed 7,300 
tons of NdFeB magnets.153 154 155 Consumer preferences, 
coupled with government actions to achieve the goal of having half of 
vehicles sold in the United States be electric by 2030, constitute a 
key opportunity for the nascent U.S. NdFeB magnet industry. If enough 
electric vehicle drive trains are manufactured in the United States, 
electric vehicles are a potential source of consistent demand that 
could sustain a domestic NdFeB magnet industry.\156\ General Motors' 
plan to manufacture electric vehicles in the United States and use U.S. 
NdFeB magnets is important step in this direction, and similar actions 
should be encouraged to ensure the viability of U.S. NdFeB magnet 
manufacturers.\157\
---------------------------------------------------------------------------

    \152\ This figure assumes each electric vehicle consumes 1.25 
kgs of NdFeB magnets. This calculation relies on electric vehicle 
drive trains only to calculate demand. Actual demand will be higher 
because of NdFeB magnet use in ancillary products, such as door 
locks and speakers. See Steve Constantinides, ``The Big Picture: 
Putting the Magnet Market Trends Together,'' Presentation at 
Magnetics 2018 at Orlando, FL, February 8, 2018.
    \153\ ``Global EV Outlook 2021,'' International Energy Agency, 
April 2021. https://www.iea.org/reports/global-ev-outlook-2021.
    \154\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \155\ The differences in magnet weight per vehicle is likely 
attributable to the opacity of NdFeB magnet usage across the sector. 
The Department of Energy estimates each electric vehicle drive train 
uses between one and two kgs of NdFeB magnets, while Constantinides 
(2018) estimates each electric vehicle drive train uses 1.25 kgs of 
NdFeB magnets. In addition, as mentioned earlier electric vehicles 
also use NdFeB magnets in non-drive train applications. See Steve 
Constantinides, ``The Big Picture: Putting the Magnet Market Trends 
Together,'' Presentation at Magnetics 2018 at Orlando, FL, February 
8, 2018; ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \156\ Indeed, electric vehicles appear to be the key market for 
prospective NdFeB magnet manufacturers. For example, potential 
market entrants cite the industry as a sales target in public 
documents. ``Form 10-k,'' MP Materials, February 28, 2022, https://d18rn0p25nwr6d.cloudfront.net/CIK-0001801368/77b2894e-b746-43c5-938a-a3f524823baa.pdf.
    \157\ ``Paul A. Eisenstein,'' General Motors to source rare 
earth metals domestically for its electric vehicles,'' NBC, December 
9, 2021, https://www.nbcnews.com/business/autos/general-motors-announces-deal-source-rare-earth-metals-electric-vehicl-rcna8265.

---------------------------------------------------------------------------

[[Page 9446]]

6.3.5 Wind Energy
    Wind turbines, particularly offshore wind turbines, also represent 
a large growth market for NdFeB magnets. NdFeB magnets are used in wind 
turbines' permanent magnet synchronous generators, also referred to as 
direct drive generators. Although not all wind turbine systems require 
rare earth magnets, they are the preferred choice for offshore wind 
turbines due to reduced maintenance costs, generator efficiency, and 
generator weight (which allows for the construction of larger, higher 
capacity wind turbines).\158\ Each wind turbine can use a ton or more 
of NdFeB magnets.\159\ As with electric vehicles, NdFeB magnets are a 
negligible percentage of total wind turbine costs but are critical to 
performance.\160\ Chinese and European firms dominate wind turbine 
manufacturing with 23 percent and 58 percent market share, 
respectively.\161\ GE Renewable, the only major U.S. manufacturer, had 
an estimated market share of just under 12 percent in 2020.\162\ 
However, offshore wind turbine generators that constitute the largest 
source of demand for NdFeB magnets are not currently produced in the 
United States.
---------------------------------------------------------------------------

    \158\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \159\ Roland Gaus et al., ``Rare Earth Magnets and Motors: A 
European Call for Action,'' European Raw Materials Alliance, 
September 2021, https://erma.eu/app/uploads/2021/09/01227816.pdf.
    \160\ [TEXT REDACTED].
    \161\ Roland Gaus et al., ``Rare Earth Magnets and Motors: A 
European Call for Action,'' European Raw Materials Alliance, 
September 2021, https://erma.eu/app/uploads/2021/09/01227816.pdf.
    \162\ Shashi Barla, ``Global wind turbine market: state of 
play,'' Wood Mackenzie, April 14, 2021, https://www.woodmac.com/news/opinion/global-wind-turbine-market-state-of-play/.
---------------------------------------------------------------------------

    At present, the United States has just seven offshore wind turbines 
in two operating projects.\163\ The Block Island Wind Farm off the 
coast of Rhode Island comprises five turbines, with a generating 
capacity of 30 megawatts, and the Coastal Virginia Offshore Wind pilot 
project operates an additional two turbines, with a capacity of 12 
megawatts. In contrast, Europe has 25,000 megawatts of offshore wind 
capacity installed. To support the President's clean energy objectives, 
DoE has established a goal of deploying 30 gigawatts (30,000 megawatts) 
of offshore wind power by 2030. To fulfill this goal, in February 2022 
the U.S. Government opened bidding for offshore wind leases to 
developers for the New York Bight off the Atlantic coast that could 
generate up to seven gigawatts of energy and require 600 to 700 wind 
turbines. Beyond the national-level goal, eight states--Connecticut, 
Maryland, Massachusetts, New Jersey, New York, North Carolina, Rhode 
Island, and Virginia--are aiming to procure at least 39,298 megawatts 
of offshore wind capacity by 2040.
---------------------------------------------------------------------------

    \163\ This paragraph uses data from the Department of Energy's 
Offshore Wind Market Report 2021. Walter Musial et al., ``Offshore 
Wind Market Report: 2021 Edition,'' Department of Energy, August 30, 
2021, https://www.energy.gov/sites/default/files/2021-08/Offshore%20Wind%20Market%20Report%202021%20Edition_Final.pdf.
---------------------------------------------------------------------------

    The goal to expand offshore wind capacity is tied to the Biden 
Administration's broader efforts to transition to a clean energy 
economy. To meet DoE's target of 30 gigawatts of offshore wind power by 
2030, the industry is projected to generate over 31,000 construction 
period and 13,400 operating period jobs.\164\ This represents a 
promising demand stream for emerging domestic NdFeB magnet production 
and may encourage further investment in domestic capacity, especially 
if wind turbine generators are manufactured in the United States. 
Already, one of the leading wind turbine manufacturers, Siemens Gamesa, 
announced plans to build a wind turbine blade facility in 
Virginia.\165\ Although NdFeB magnets are primarily used in generators, 
this indicates some willingness on the part of the wind turbine 
industry to establish domestic component manufacturing. Encouraging 
additional domestic manufacturing of wind turbine generators would 
promote U.S.-based demand for NdFeB magnets and aid in the development 
of the U.S. NdFeB magnet industry.
---------------------------------------------------------------------------

    \164\ Ibid.
    \165\ ``Global leadership grows: Siemens Gamesa solidifies 
offshore presence in U.S. with Virginia blade facility,'' Siemens 
Gamesa, October 25, 2021, https://www.siemensgamesa.com/newsroom/2021/10/offshore-blade-facility-virginia-usa.
---------------------------------------------------------------------------

6.4 U.S. Trade in NdFeB Magnets

    As noted earlier in this report, the U.S. is highly dependent on 
imports for nearly all its direct demand for NdFeB magnets.\166\ 
However, using direct imports underestimates U.S. import dependence 
because NdFeB magnets are often embedded in imported intermediate and 
final goods, such as computers and headphones.
---------------------------------------------------------------------------

    \166\ Unless otherwise noted, all data in this section are from 
the U.S. International Trade Commission. See ``USITC Dataweb,'' U.S. 
International Trade Commission, last modified October 25, 2021, 
https://dataweb.usitc.gov/trade/search/Import/HTS.
---------------------------------------------------------------------------

    To analyze U.S. reliance on imports of NdFeB magnets, the 
Department examined imports of sintered NdFeB magnets (HTS 
8505.11.0070) for the years 2016 to 2021 from the United States' top 
five import sources (as of 2021) by value, in raw numbers and by share 
of imports (see Figure 1).167 168 Figure 2 show the same 
series but using quantity (units). China is the predominant source of 
imports to the United States, having increased its share of magnet 
imports to the United States in quantity from about 70 percent in 2016 
to almost 85 percent in 2021 and in value from almost 60 percent in 
2016 to about 75 percent in 2021. Germany and Japan are the next 
largest source of imports. Japan is particularly important in terms of 
magnet value, representing almost nine percent of imports by value 
compared to under five percent of imports by quantity. This 
substantiates a commonly held view that Japanese magnets tend to be of 
higher quality or used in more specialized end products than their 
Chinese counterparts.\169\ These data may underestimate the 
contribution of Japanese firms, given that exports from the Philippines 
and Malaysia likely reflect Japanese production facilities in these 
locations.\170\ The share of German magnet imports to the United States 
has fallen substantially from about 14 percent in 2016 to under two 
percent in 2021 in terms of quantity and almost 11 percent in 2016 to 
under four percent in 2021 in terms of value.
---------------------------------------------------------------------------

    \167\ Bonded NdFeB magnets do not have their own HTS code and 
instead fall into HTS 8505.11.0090 (``Permanent magnets and articles 
intended to become permanent magnets after magnetization: Of metal: 
Other''). Bonded NdFeB magnets comprise about seven percent of the 
global market, are of lower grade, and are substitutable with other 
magnets. Meeting between the Critical Materials Institute and the 
Department of Commerce, (Virtual Meeting October 6, 2021); ``Rare 
Earth Permanent Magnets: Supply Chain Deep Dive Report,'' Department 
of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \168\ The Department also examined imports of neodymium metal 
(HTS 2805.30.0020). Neodymium and praseodymium metal are the only 
NdFeB magnet components that have their own HTS codes. Imports of 
neodymium metal are minimal (about $371,000 in 2021) and come almost 
entirely from China (about 94 percent in 2021) with the remainder 
imported from the United Kingdom. ``USITC Dataweb,'' U.S. 
International Trade Commission, last modified October 25, 2021, 
https://dataweb.usitc.gov/trade/search/Import/HTS.
    \169\ Damien Ma and Joshua Henderson, ``The Impermanence of 
Permanent Magnets: A Case Study on Industry, Chinese Production, and 
Supply Constraints,'' Paulson Institute, November 16, 2021. https://macropolo.org/analysis/permanent-magnets-case-study-industry-chinese-production-supply/.
    \170\ ``Annual Report 2021'', Shin-Etsu Chemical Co., Ltd., 
2021, https://www.shinetsu.co.jp/wp-content/uploads/2021/07/Annual-Report-2021-for-viewing.pdf.
---------------------------------------------------------------------------

BILLING CODE 3510-33-P

[[Page 9447]]

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[GRAPHIC] [TIFF OMITTED] TN14FE23.001

    The Department also examined U.S. exports of sintered NdFeB magnets 
in total and to the top five destinations (as of 2021) for the same 
2016 to 2021 period (see Figure 3).\171\ Domestic exports of sintered 
NdFeB magnets ranged from a little over $7 million in 2016 to about $12 
million in 2021. Mexico was the top destination for U.S. exports in 
2021, although it still only accounted for about 30 percent of domestic 
sintered NdFeB magnet exports. Germany, the second most popular 
destination, accounted for less than nine percent of domestic sintered 
NdFeB magnet exports. U.S. magnet export destinations have also seen 
considerable turnover. In 2016, Singapore and Malaysia were the top 
destinations for U.S. sintered NdFeB magnet exports, accounting for 
about 28 percent of domestic exports ($2 million) and 15 percent of 
domestic exports ($1.1 million), respectively. By 2021, they were 
seventh at four percent ($488,000) and sixteenth at less than two 
percent ($185,000), respectively. Using 2021 figures, the United States 
imported more than 20 times the value of its domestic NdFeB magnet 
exports. Although there is only one active domestic producer of 
sintered NdFeB magnets, the United States does have an active ecosystem 
of magnet finishers and fabricators. These firms' activities almost 
certainly drive the modest value of U.S. NdFeB magnet domestic exports.
---------------------------------------------------------------------------

    \171\ These data reflect domestic exports rather than total 
exports. Domestic exports measure goods that are grown, produced, or 
manufactured in the United States or which may have been changed, 
enhanced in value, or improved in condition in the United States. It 
therefore excludes unimproved reexports. See ``USITC Dataweb,'' U.S. 
International Trade Commission, last modified October 25, 2021, 
https://dataweb.usitc.gov/trade/search/Export/HTS.

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[[Page 9448]]

[GRAPHIC] [TIFF OMITTED] TN14FE23.002

BILLING CODE 3510-33-C

6.5 Duties on NdFeB Magnet Imports

    NdFeB magnets and constituent products, including rare earth 
elements, rare earth carbonates, rare earth oxides, metals, and alloys, 
are subject to general tariff rates and the special tariff rate (see 
Table 5). The core product in this investigation, sintered NdFeB 
magnets (HTS 8505.11.0070) are subject to a general rate of 2.1 percent 
or a preferential rate of zero percent.\172\ The overall effect of 
these duties on end-users is small, although not nonexistent. Some 
NdFeB magnet distributors/finishers/consumers note reducing tariffs on 
sintered NdFeB magnets would reduce their input costs, [TEXT 
REDACTED].\173\
---------------------------------------------------------------------------

    \172\ The general rate for all 10-digit HTS codes under HTS 
8505.11.00 (``Permanent magnets and articles intended to become 
permanent magnets after magnetization: Of metal'') is the same at 
2.1 percent. Bonded NdFeB magnets, which fall under 8505.11.0090 
(``Permanent magnets and articles intended to become permanent 
magnets after magnetization: Of metal: Other''), are therefore 
subject to the same rates as their sintered counterparts. The 
preferential tariff rate applies to qualifying imports under U.S. 
free trade agreements and other preference programs.
    \173\ U.S. Department of Commerce, Bureau of Industry and 
Security, NdFeB Survey.
    \174\ These figures reflect the stated third country duty. 
Autonomous tariff suspension rates may be lower--zero percent in the 
case of 8505.11.0070, sintered NdFeB magnets.

                                              Table 5--Tariff Rates for NdFeB Magnets and Magnet Components
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  General
        HTS code           Product description      rate         Preferential rate           Japan general rate             EU general rate \174\
                                                 (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
8505.11.0070...........  Sintered NdFeB magnets        2.1  Free.......................  Free......................  2.2 percent.
8505.11.0090...........  Other permanent               2.1  Free.......................  Free......................  2.2 percent.
                          magnets and articles
                          intended to become
                          permanent magnets
                          after magnetization
                          of metal.
2805.30.0020...........  Neodymium metal.......          5  Free.......................  Free......................  2.7 to 5.5 percent.\175\
2805.30.0015...........  Praseodymium metal....          5  Free.......................  Free......................  2.7 to 5.5 percent.
2805.30.0050...........  Other rare earth                5  Free.......................  Free......................  2.7 to 5.5 percent.
                          metals, not
                          intermixed or
                          interalloyed.
2805.30.0090...........  Other rare earth                5  Free.......................  Free......................  2.7 to 5.5 percent.
                          metals, intermixed or
                          interalloyed.
2846.90.20.............  Mixtures of rare earth       Free  Free.......................  Free......................  Free to 3.2 percent.\176\
                          oxides or rare earth
                          chlorides.
2846.90.80.............  Mixtures of rare earth        3.7  Free.......................  Free......................  Free to 3.2 percent.
                          carbonates other than
                          cerium carbonate.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: ``HTS Search,'' U.S. International Trade Commission, last accessed April 19, 2022, https://hts.usitc.gov/; ``Access2Markets,'' European
  Commission, last accessed April 19, 2022, https://trade.ec.europa.eu/access-to-markets/en/home; ``Japan's Tariff Schedule as of April 1 2022,'' Japan
  Customs, last accessed April 19, 2022, https://www.customs.go.jp/english/tariff/2022_04_01/index.htm.

    The hundreds of products containing embedded NdFeB magnets, such as 
electric motors, MRI machines, and consumer electronics like headphones 
and printers are also tracked by HTS code. Some end-use categories, 
including electric motors and MRI machines, are not subject to general 
tariff rates, while others, such as generators for wind turbines, are 
subject to tariffs--2.5 percent in the case of generators.\177\ As 
discussed earlier, the NdFeB magnet contained within final goods is 
generally a small percentage of the overall cost of the product.
---------------------------------------------------------------------------

    \175\ Exact concordance for HTS 2805 not available.
    \176\ Exact concordance for HTS 2846.90 not available. The 
relevant products for NdFeB magnets face third country duties of 3.2 
percent (neodymium and praseodymium compounds, as well as compounds 
of mixtures of metals) or zero percent (terbium and dysprosium 
compounds).
    \177\ ``HTS Search,'' U.S. International Trade Commission, last 
accessed April 19, 2022, https://hts.usitc.gov/.

---------------------------------------------------------------------------

[[Page 9449]]

7. Global NdFeB Magnet Industry

7.1 Global Demand

    Total global demand for NdFeB magnets was estimated at about 
119,000 tons in 2020, of which sintered magnets account for over 93 
percent of total demand and bonded magnets the remaining seven 
percent.178 179 As of 2020, consumer electronics and 
industrial motors are the primary consumers of NdFeB magnets, with 
about 30 percent of the market each. Offshore wind turbines account for 
another 14 percent of total NdFeB magnet demand, with smaller shares 
for electric vehicles, motors for other types of vehicles, and other 
applications (see Table 6). The magnet content in these products varies 
but in general accounts for a small portion of the material costs of 
production. Wind turbines and MRI machines use large amounts of magnets 
but are produced and consumed in relatively small numbers, while 
consumer electronic devices contain very small amounts of magnets but 
are produced in the millions of units. The automotive sector lies 
somewhere in between, with each electric vehicle drive train consuming 
between one and two kg of NdFeB magnets.\180\ Regardless of the weight 
of the magnet, the strong magnetic properties provided by NdFeB magnets 
are key to effective and efficient product performance.
---------------------------------------------------------------------------

    \178\ Except where otherwise noted this section draws on the 
DoE's ``Rare Earth Permanent Magnets'' report. See ``Rare Earth 
Permanent Magnets: Supply Chain Deep Dive Report,'' Department of 
Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \179\ As noted earlier, valid and reliable estimates of demand 
are difficult to generate because of the opacity of the global NdFeB 
magnet supply chain and these estimates of global demand, both in 
aggregate and by end-use application, should be approached with 
caution.
    \180\ ``Critical Materials Strategy,'' Department of Energy, 
December 2011, https://www.energy.gov/sites/default/files/DOE_CMS2011_FINAL_Full.pdf.

 Table 6--Expected Magnets Contained in Total Global Demand for Selected NdFeB Magnet Applications, Thousands of
                                                     Tons *
----------------------------------------------------------------------------------------------------------------
                                                Total demand in 2020     Total projected       Total projected
                                               ---------------------- demand in 2030 (high  demand in 2050 (high
                                                                             growth)               growth)
                  Application                     Amount             -------------------------------------------
                                                   (kt)    Share (%)    Amount                Amount
                                                                         (kt)    Share (%)     (kt)    Share (%)
----------------------------------------------------------------------------------------------------------------
Offshore wind turbines........................       16.9       14.2      139.2       36.0      273.7       36.3
Electric vehicles.............................        7.3        6.1      114.1       29.5        266       35.3
Consumer electronics (hard disk drives, cell         35.1       29.4         41       10.6       65.4        8.7
 phones, loudspeakers, other).................
Industrial motors.............................       36.0       30.2       53.7       13.9       85.7       11.4
Non-drivetrain motors in vehicles.............        9.4        7.9       18.3        4.7       29.3        3.9
Other sintered magnets (Power tools, electric         6.5        5.5        9.6        2.5       15.3        2.0
 bikes).......................................
Bonded magnets................................        8.0        6.7       11.1        2.9       17.7        2.3
                                               -----------------------------------------------------------------
    Total.....................................      119.2      100.0        387      100.0      753.2      100.0
----------------------------------------------------------------------------------------------------------------
* The figures presented represent total--or the sum of direct and embedded--demand.
Source: ``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,'' Department of Energy, February 24,
  2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.

    Total global demand for NdFeB magnets is expected to grow 
dramatically over the next decade, increasing from 119,000 tons in 2020 
to 387,000 tons by 2030 and over 750,000 tons by 2050 in a net zero 
carbon emission scenario. This equates to an average annual growth rate 
of 12.5 percent through 2030 and 6.3 percent through 2050. Electric 
vehicles and offshore wind turbines will drive this growth and are 
projected to account for almost 30 percent and about 36 percent of 
NdFeB magnet demand, respectively, by 2030 as a result of the world's 
evolving clean energy goals. The push for energy efficiency in other 
sectors, including traditional NdFeB magnet applications such as 
consumer electronics and industrial motors, will also contribute to 
increased demand for NdFeB magnets. However, growth in these areas is 
expected to be more modest, with their share of total demand shrinking 
from almost 60 percent of total demand in 2020 to less than 25 percent 
of total demand in 2030.
    The rapid growth in demand for NdFeB magnets is expected to strain 
the current global value chain. One market research firm forecasts that 
combined neodymium, praseodymium, and neodymium-praseodymium oxide 
shortages will rise to 21,000 tons by 2030 and 68,000 tons by 2035, 
while NdFeB alloy and powder shortages will reach 66,000 tons by 2030 
and 206,000 tons by 2035.\181\ For reference, the Department's survey 
of the U.S. NdFeB magnet industry indicates that by 2026 the U.S. may 
produce a little under [TEXT REDACTED] of rare earth oxides and about 
[TEXT REDACTED] of NdFeB alloys.
---------------------------------------------------------------------------

    \181\ ``Adamas Intelligence forecasts global demand for NdFeB 
magnets to increase at CAGR of 8.6% through 2035; shortages of 
alloys, powders, REE expected,'' Green Car Congress, April 20, 2022, 
https://www.greencarcongress.com/2022/04/20220420-adamas.html.
---------------------------------------------------------------------------

7.2 Global NdFeB Magnet Value Chain

    The Department synthesized primary and secondary data on the global 
NdFeB magnet value chain's market conditions (see Appendix E, ``Global 
NdFeB Magnet Production: A Firm-Level Perspective''). The Department 
focused on five important current and potential industry producers 
outside of the United States: Australia, Canada, China, the European 
Union, and Japan. For each country or region, participation in the main 
market segments (mining, processing of carbonates/separation of oxides, 
metallization/alloying, magnet production) plus recycling and 
substitution is described. The major firms involved in production, 
often multinationals with global operations, are also discussed.
    Table 7 provides a review of market share by country for the 
consolidated market segments of mining, separation, metallization, and 
alloying/magnet manufacture. As noted earlier, China has the largest 
share of global production, by a large margin, at every step of the 
NdFeB magnet value chain.

[[Page 9450]]

[TEXT REDACTED].\182\ Australia is the third largest miner after China 
and the United States, and the Australian firm Lynas Rare Earths is 
responsible for Malaysia's seven percent share of the refined oxide 
market. Japan is the second largest alloy and magnet producer (seven 
percent in 2020), and its firms produce metals, alloys, and magnets in 
Japan, Southeast Asia, and China. [TEXT REDACTED].\183\ The European 
Union has plans for significant growth in rare earth mining and magnet 
production, and seeks to grow its relatively small share of the oxide 
separation, alloying, and magnet production markets. [TEXT 
REDACTED].\184\ Finally, Canada also plans to establish rare earth 
mining and separation capacity, in addition to Canadian firms such as 
Neo Performance Materials who maintain global capacity in multiple 
steps of the magnet value chain.
---------------------------------------------------------------------------

    \182\ Adamas Intelligence, ``Rare Earth Magnet Market Outlook to 
2030,'' 2020.
    \183\ Ibid.
    \184\ Ibid.

                   Table 7--Market Share by Country, 2021 for Mining and 2020 for Other Steps
----------------------------------------------------------------------------------------------------------------
                                                                                  Metal          Magnet alloy
                   Country                       Mining    Separation \186\  refining \187\  manufacturing \188\
                                               \185\  (%)         (%)              (%)                (%)
----------------------------------------------------------------------------------------------------------------
China.......................................           60                89              90                   92
U.S.........................................           15  ................  ..............                   <1
Myanmar (Burma).............................            9  ................  ..............  ...................
Australia...................................            8  ................  ..............  ...................
Madagascar..................................            1  ................  ..............  ...................
India.......................................            1                 1  ..............  ...................
Russia......................................            1  ................  ..............  ...................
Thailand....................................            3  ................              ~3              (\189\)
Malaysia....................................  ...........                 7  ..............  ...................
Estonia.....................................  ...........                 1              ~2  ...................
Japan.......................................  ...........  ................  ..............                    7
Vietnam.....................................           >1  ................              ~3                    1
Laos........................................  ...........  ................              ~2  ...................
Germany.....................................  ...........  ................  ..............                   <1
Slovenia....................................  ...........  ................  ..............                   <1
Finland.....................................  ...........  ................  ..............                   <1
U.K.........................................  ...........  ................              <1  ...................
Other countries.............................            1                 2              <1                   <1
----------------------------------------------------------------------------------------------------------------
Source: ``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,'' Department of Energy, February 24,
  2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf; Daniel Cordier, ``Rare Earths: Mineral Commodity Summaries 2022,'' U.S. Geological Survey, 2022,
  https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf.

7.3 Russia and the NdFeB Magnet Industry
---------------------------------------------------------------------------

    \185\ For 2021 estimates of rare earth mine output by country, 
see Daniel Cordier, ``Rare Earths: Mineral Commodity Summaries 
2022,'' U.S. Geological Survey, 2022, https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf.
    \186\ Calculated based on current understanding of where 
concentrate from specific producers is separated (for example, 
output from Lynas' Mount Weld Mine in Australia is separated at its 
LAMP facility in Malaysia and HREs mined in Myanmar are transported 
to China for further processing). ``Rare Earth Permanent Magnets: 
Supply Chain Deep Dive Report,'' Department of Energy, February 24, 
2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \187\ Current hypothesis based on expert consultation. ``Rare 
Earth Permanent Magnets: Supply Chain Deep Dive Report,'' Department 
of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \188\ ``Rare earth magnet market outlook to 2030,'' Adamas 
Intelligence, August 2020.
    \189\ In 2019, Thailand accounted for about eight percent of 
bonded NdFeB powders. Neo Magnequench (a subsidiary of Neo 
Performance Materials) manufactures bonded magnetic powders at its 
facility in Korat, Thailand. ``Rare Earth Permanent Magnets: Supply 
Chain Deep Dive Report,'' Department of Energy, February 24, 2022, 
https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
---------------------------------------------------------------------------

    Russia is not a major direct participant in the NdFeB magnet value 
chain. In 2021 Russian production of rare earth elements was estimated 
at 2,700 tons, equal to about one percent of the global market.\190\ 
However, Russia has significant reserves of rare earths, estimated at 
21 million tons or about 17.5 percent of the global total.\191\ 
Canadian firm Neo Performance Materials states it uses Russian 
feedstocks in its Estonian separation facility, along with feedstocks 
from Australia, China, and the United States.\192\ Russia does not 
participate in any downstream segments of the value chain.\193\ In 
addition, the United States imports 1001 steel from Germany and 
sometimes Brazil, and ferroboron is produced in China, India, and 
Turkey.\194\ Finally, based on market research and industry meetings, 
Russia does not appear to be a source of critical equipment for NdFeB 
magnet production.
---------------------------------------------------------------------------

    \190\ Daniel Cordier, ``Rare Earths: Mineral Commodity Summaries 
2022,'' U.S. Geological Survey, 2022, https://pubs.usgs.gov/periodicals/mcs2022/mcs2022.pdf.
    \191\ Ibid.
    \192\ ``Neo Performance Materials MD&A,'' Neo Performance 
Materials, 2021, https://www.neomaterials.com/wp-content/uploads/2021/03/NPM_12-31-2020_MDA.pdf.
    \193\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \194\ Ibid.
---------------------------------------------------------------------------

[TEXT REDACTED]
    One method to evaluate the exposure of the NdFeB magnet industry to 
Russia is to examine the effects of Russia's invasion of Ukraine on 
investor expectations using an event study.\195\ If investors think 
that the NdFeB magnet industry will be negatively affected by Russia's 
invasion of Ukraine, an abnormal negative market return for

[[Page 9451]]

publicly traded firms in the NdFeB magnet industry should be observed 
around that event. The Department therefore estimated the abnormal 
market return around the time of Russia's invasion of Ukraine for four 
NdFeB magnet industry firms: MP Materials, a rare earths miner who 
plans to create a vertically integrated mine to magnet firm in the 
United States; Energy Fuels, a U.S. rare earths processor who is 
considering separating oxides; Neo Performance Materials, a Canadian 
firm that produces rare earth oxides in Estonia, metals and alloys in 
Thailand and China, and NdFeB magnets in China; and Lynas Rare Earths, 
an Australian rare earths miner that produces oxides in Malaysia. Other 
public companies involved in the NdFeB magnet value chain were excluded 
because they are conglomerates with significant non-NdFeB magnet 
operations (e.g., Shin-Etsu, TDK, Hitachi), tangentially involved in 
the NdFeB magnet industry (e.g., Chemours), or at a more nascent stage 
of production (e.g., IperionX, Peak Rare Earths). The Department 
downloaded stock price data for each of these firms and the S&P 500 
index from January 1, 2021, through February 24, 2022, from Yahoo 
Finance. The Department then calculated the daily return of each firm 
and the S&P 500 index. In line with a simple market model event study, 
the Department estimated each firm's abnormal return in two steps. For 
each firm, the Department first regressed the firm's daily return on 
the S&P 500 index's daily return in a trading window of 250 days to 30 
days prior to Russia's invasion of Ukraine (February 24, 2022). The 
Department then used the estimated coefficients from this regression 
and the S&P 500 index's daily return to predict the firm's return in a 
trading window one day prior to one day after the invasion. Finally, 
the Department subtracted the firm's predicted daily return from the 
firm's observed daily return to generate an estimate of the firm's 
abnormal return in a trading window one day prior to one day after the 
invasion.
---------------------------------------------------------------------------

    \195\ For an overview of event studies, see e.g., John Binder, 
``The Event Study Methodology Since 1969,'' Review of Quantitative 
Finance and Accounting 11: 111-137, 1998, https://link.springer.com/article/10.1023/A:1008295500105; S.P. Kothari and Jerold B. Warner, 
``Chapter 1--Econometrics of Event Studies,'' Handbook of Empirical 
Corporate Finance, Volume 1, 2007, https://doi.org/10.1016/B978-0-444-53265-7.50015-9; Abigail McWilliams and Donald Siegel, ``Event 
Studies in Management Research: Theoretical and Empirical Issues,'' 
Academy of Management Journal 40 (3): 626-657, 1997, https://doi.org/10.5465/257056.
---------------------------------------------------------------------------

    This event study analysis supports market research that suggests 
the NdFeB magnet industry is not highly exposed to Russia.\196\ Using a 
one sample t-test, the average abnormal return is positive at p<.05 
with a sample mean of 0.026 and a 95 percent confidence interval of 
0.001 to 0.051.\197\ A positive abnormal return indicates that firms' 
stock prices increased more than they would have in the absence of an 
invasion, suggesting that investors did not expect the invasion to 
negatively affect the NdFeB magnet industry. Not only is the sign of 
the abnormal return different than what would be expected if investors 
believed the invasion would negatively affect the NdFeB magnet 
industry, but it is statistically significant. This analysis provides 
additional evidence corroborating the NdFeB magnet industry's lack of 
exposure to Russia.
---------------------------------------------------------------------------

    \196\ The Department strongly cautions against overinterpreting 
the results of this analysis because Russia's invasion was not 
wholly unanticipated and investors should therefore have partially 
priced in the costs of conflict, and the sample size is very small. 
Nevertheless, this analysis provides suggestive evidence of the 
NdFeB magnet industry's minimal exposure to Russia.
    \197\ Using a two-day trading window--the day of the event and 
the day after--results in an average abnormal return of 0.018, not 
significant at p<.05.
---------------------------------------------------------------------------

    To assess whether one firm was driving this result, the Department 
iteratively dropped each observation, resulting in a sample mean of 
.018 without Energy Fuels (not significant at p<.05), 0.025 without 
Lynas Rare Earths (not significant at p<.05), 0.024 without MP 
Materials (not significant at p<.05), and 0.037 without Neo Performance 
Materials (significant at p<.05). Neo Performance Materials' stock 
price did not experience as positive an abnormal return as the other 
three firms', suggesting that investors were relatively less optimistic 
about the effects of the invasion on Neo Performance Materials. This is 
consonant with market research expectations, because Neo Performance 
Materials sources some rare earths from Russia (along with Australia, 
China, and the United States) and therefore has more direct exposure to 
Russia than the other three firms.\198\
---------------------------------------------------------------------------

    \198\ ``Neo Performance Materials MD&A,'' Neo Performance 
Materials, 2021, https://www.neomaterials.com/wp-content/uploads/2021/03/NPM_12-31-2020_MDA.pdf.
---------------------------------------------------------------------------

8. Status and Forecast of the U.S. NdFeB Magnet Industry

8.1 U.S. Production of NdFeB Magnets and Components, 2017 to 2026

    This section covers U.S. production of NdFeB magnets and magnet 
components, including mixed rare earth oxides, rare earth carbonates, 
individual rare earth oxides, rare earth metals, and rare earth alloys, 
from 2017 to 2026.\199\ It focuses on identifying current and planned 
producers, their participation in the NdFeB magnet value chain, and the 
current and anticipated quantity of U.S. production at each value chain 
step. Later sections will elucidate the challenges the industry faces 
in meeting its production forecasts.
---------------------------------------------------------------------------

    \199\ [TEXT REDACTED]
---------------------------------------------------------------------------

8.1.1 Firm Participation in the U.S. NdFeB Magnet Value Chain
    Except for rare earths mining, the United States was not a major 
participant in the NdFeB magnet value chain from 2017 to 2021 and only 
seven firms participated in any step of the NdFeB magnet value chain 
over this period (see Figure 4). [TEXT REDACTED].
    The Department forecasts U.S. industry growth starting in 2022, due 
to a combination of expected demand growth, U.S. Government and private 
sector interest in supply chain resiliency, and rising rare earths 
prices. Between 2022 and 2026, ten additional firms indicate they will 
enter the market while the seven original firms noted in the 2017 to 
2021 period plan to continue, and in some cases expand, their 
operations. A total of 17 firms are expected to participate in the 
NdFeB magnet value chain by 2026 (see Figure 5). [TEXT REDACTED]

                                                 [TEXT REDACTED]
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8.1.2 Production of NdFeB Magnets and Magnet Components, 2017 to 2026
Rare Earth Element Production (Mining and Recycling)
    Between 2018 and 2021, U.S. production of NdFeB magnet-related rare 
earths increased by [TEXT REDACTED] (see Figure 6).\200\ Between 2022 
and 2026, U.S. rare earths production is expected to increase [TEXT 
REDACTED]. For the full 2018 to 2026 period, U.S. rare earths 
production is expected to increase by [TEXT REDACTED]. Mining is 
expected to remain the predominant source of rare earths feedstock, 
occupying roughly [TEXT REDACTED] of production for the period. 
Recycling is expected to account for the remaining [TEXT REDACTED].
---------------------------------------------------------------------------

    \200\ No production was recorded for 2017.

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
 
------------------------------------------------------------------------
[TEXT REDACTED] [TEXT REDACTED]
------------------------------------------------------------------------

    Of the rare earths used in NdFeB magnets, neodymium and 
praseodymium account for [TEXT REDACTED] of the 2017 to 2026 market, 
with neodymium making up around [TEXT REDACTED] and praseodymium around 
[TEXT REDACTED]. Dysprosium production is slated to increase starting 
in [TEXT REDACTED] and will bring neodymium and praseodymium's combined 
market share down to [TEXT REDACTED] by 2026.

[[Page 9453]]

An increase in dysprosium production to over [TEXT REDACTED] in 2026 is 
significant due to previously cited concerns about single source 
concentrations in China.\201\ Should dysprosium production develop, the 
United States may become a feasible alternative to China for some 
dysprosium sourcing.
---------------------------------------------------------------------------

    \201\ Comments of USA Rare Earth to Request for Public Comments, 
``Section 232 National Security Investigation of Imports of 
Neodymium-Iron-Boron (NdFeB) Permanent Magnets,'' 86 FR 53277, 
November 12, 2021.
---------------------------------------------------------------------------

[TEXT REDACTED]
Rare Earth Carbonates
    Between 2023 and 2026, U.S. rare earth carbonates production is 
expected to increase [TEXT REDACTED] (see Figure 7).\202\ Of these 
carbonates, those containing [TEXT REDACTED] are anticipated to be the 
main driver for this growth, accounting for [TEXT REDACTED] of total 
carbonates growth. Carbonates containing [TEXT REDACTED] make up most 
of the remaining production with small amounts of carbonates containing 
[TEXT REDACTED] expected to be produced starting in [TEXT REDACTED].
---------------------------------------------------------------------------

    \202\ [TEXT REDACTED]

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
 
------------------------------------------------------------------------
[TEXT REDACTED] [TEXT REDACTED]
------------------------------------------------------------------------

[TEXT REDACTED]
Separated Rare Earth Oxides
    Between 2023 and 2026, U.S. separated rare earth oxides production 
is expected to increase [TEXT REDACTED] (see Figure 8).\203\ Of these 
oxides, [TEXT REDACTED] are the main driver of growth, accounting for 
on average [TEXT REDACTED] of total growth. [TEXT REDACTED], most of 
the remaining growth is due to [TEXT REDACTED] production, with a small 
[TEXT REDACTED] due to [TEXT REDACTED] and a negligible amount to [TEXT 
REDACTED].
---------------------------------------------------------------------------

    \203\ No production was recorded for 2017 to 2021 [TEXT 
REDACTED].
---------------------------------------------------------------------------

[TEXT REDACTED]

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
 
------------------------------------------------------------------------
[TEXT REDACTED] [TEXT REDACTED]
------------------------------------------------------------------------

Rare Earth Metals
    Between 2023 and 2026, U.S. rare earth metals production is 
expected to increase by [TEXT REDACTED] (see Figure 9).\204\ At this 
production rate, the United States could produce between about [TEXT 
REDACTED] of NdFeB magnets.\205\ Of these metals, [TEXT REDACTED] rare 
earth metal is the main driver for growth, accounting for on average 
[TEXT REDACTED] of total rare earth metals growth. [TEXT REDACTED] will 
make up much of the remaining growth. The Department expects U.S. firms 
will refine negligible amounts of [TEXT REDACTED].
---------------------------------------------------------------------------

    \204\ No production was recorded for 2017 to 2021 [TEXT 
REDACTED].
    \205\ The Department reached this estimate by first calculating 
the amount of NdFeB alloy [TEXT REDACTED] of rare earth metal could 
produce based on 30 percent rare earths content in NdFeB magnets, 
then estimating the range of potential material loss from alloy 
production to magnet production (see Section 5.2, ``Rare Earth 
Element Losses in Magnet Production,'' for estimates of material 
loss from alloy production to magnet production).
---------------------------------------------------------------------------

[TEXT REDACTED]

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
 
------------------------------------------------------------------------
[TEXT REDACTED] [TEXT REDACTED]
------------------------------------------------------------------------

Rare Earth Alloys
    Between 2023 and 2026, U.S. rare earth alloys production is 
expected to increase by [TEXT REDACTED] (see Figure 10).\206\ At this 
production rate, the United States would produce enough alloy for 
between [TEXT REDACTED] of NdFeB magnets.\207\ Of these alloys, [TEXT 
REDACTED] is anticipated to be the main driver of growth, representing 
on average [TEXT REDACTED] of total alloy growth. Production of [TEXT 
REDACTED] are expected to represent [TEXT REDACTED] of growth, 
respectively. NdFeB alloys containing heavy rare earths including 
dysprosium and terbium are critical for high heat tolerant NdFeB 
magnets used in products like electric vehicle drive trains.
---------------------------------------------------------------------------

    \206\ No production was recorded for 2017 to 2021 [TEXT 
REDACTED].
    \207\ See Section 5.2, ``Rare Earth Element Losses in Magnet 
Production,'' for estimates of material loss from alloy production 
to magnet production.
---------------------------------------------------------------------------

[TEXT REDACTED]

[[Page 9454]]



------------------------------------------------------------------------
 
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                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
 
------------------------------------------------------------------------
[TEXT REDACTED] [TEXT REDACTED]
------------------------------------------------------------------------

NdFeB Magnet Production
    Between 2017 and 2022, no sintered NdFeB magnet production was 
recorded in the United States. [TEXT REDACTED], commercial-scale 
production is not expected until 2023. Between 2023 and 2026, U.S. 
sintered NdFeB magnet production is expected to increase [TEXT 
REDACTED] to over 14,000 tons (see Figure 11).
    [TEXT REDACTED].\208\
---------------------------------------------------------------------------

    \208\ ``General Motors and MP Materials Enter Long-Term Supply 
Agreement to Scale Rare Earth Magnet Sourcing and Production in the 
U.S.,'' General Motors, December 9, 2021, https://investors.gm.com/news-releases/news-release-details/general-motors-and-mp-materials-enter-long-term-supply-agreement.

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
 
------------------------------------------------------------------------
[TEXT REDACTED]
[TEXT REDACTED]
------------------------------------------------------------------------

    On average, sintered NdFeB magnet production is expected to account 
for roughly 97 percent of aggregate U.S. NdFeB magnet production. 
Although occupying a small portion of the market, it is important to 
note that domestic bonded NdFeB magnet production existed during the 
2017 to 2021 period. Between 2017 and 2021, bonded NdFeB magnet 
production increased [TEXT REDACTED] (see Figure 11). Between 2022 and 
2026 production is expected to increase by a further [TEXT REDACTED] 
from about [TEXT REDACTED], with total production increasing by [TEXT 
REDACTED] between 2017 and 2026.
[TEXT REDACTED]
8.1.3 Company Profiles
    To better illuminate the plans, requirements, and challenges U.S. 
firms face in establishing production, the Department developed 
profiles of those firms that are expected to be major participants in 
the U.S. NdFeB magnet industry (see Appendix F, ``U.S. NdFeB Magnet 
Industry: Company Profiles''). [TEXT REDACTED].\209\ These profiles 
emphasize information on current and planned facilities, including 
location, initial dates of production, and capacity, planned 
facilities' fixed costs, future production volumes, employment, and 
challenges.
---------------------------------------------------------------------------

    \209\ [TEXT REDACTED]
---------------------------------------------------------------------------

8.1.4 Estimated NdFeB Magnet Import Penetration, 2017 to 2026
    The Department used the data from its survey of the U.S. NdFeB 
magnet industry and estimates of U.S. NdFeB magnet demand to estimate 
import penetration for sintered and bonded NdFeB magnets from 2017 to 
2026 (see Figures 12 and 13).\210\ Based on these data and the 
assumptions detailed in footnote 210, the Department estimates sintered 
NdFeB magnet import penetration from 2017 to 2021 at one hundred 
percent. There was no domestic production of NdFeB magnets during this 
period. From 2022 to 2026 import penetration could fall to as low as 49 
percent as domestic production ramps up. The Department estimates 
bonded NdFeB magnet import penetration from 2017 to 2021 at between 85 
and 87 percent. This figure is expected to fall to about 79 percent due 
to expanded U.S. production. The Department emphasizes that, because of 
the optimistic production estimates and the modelling assumptions 
detailed in footnote 210, these import penetration estimates should be 
taken as a floor and actual import penetration is expected to be 
higher.
---------------------------------------------------------------------------

    \210\ The Department's figures rely on several demand and export 
assumptions and should be taken as lower bound for import 
penetration. U.S. production estimates are taken from the 
Department's survey and reflect firms' production forecasts as of 
February and March 2022. The quantity of domestic production in 
Figures 20 and 21 will require significant capital expenditure and 
faces additional constraints in the form of workforce issues and 
other challenges, discussed in more detail below. In addition, by 
relying on production of NdFeB magnets this analysis reflects direct 
imports only and does not take into account trade in value added. 
There are several domestic magnet integrators and finishers who 
purchase magnets or magnet blocks and shape and integrate them into 
intermediate and final products, some of which are exported. The 
Department's analysis does not account for these value-add 
activities. Further, the Department asked firms to only provide 
sales data if contracts or memorandums of understanding were in 
place. No prospective U.S. sintered NdFeB magnet producer indicated 
sales to foreign customers [TEXT REDACTED]. The Department therefore 
assumed no foreign sales of sintered NdFeB magnets [TEXT REDACTED]. 
Any foreign sales (i.e., domestic exports) will increase import 
penetration. The Department used estimates of total U.S. demand 
provided by the Department of Energy (DoE). DoE estimated total 2020 
and 2030 U.S. demand for NdFeB magnets, with the 2030 figure 
representing a high growth scenario. DoE's demand estimates reflect 
both direct and embedded demand. [TEXT REDACTED]

[[Page 9455]]



                                                     Figure 12--Estimated U.S. Sintered NdFeB Magnet Import Penetration, 2017 to 2026, Tons
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
           Figure/year                 2017            2018            2019            2020            2021            2022            2023            2024            2025            2026
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
U.S. Production.................          [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT
                                           REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]
U.S. Imports for Consumption *..          [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT
                                           REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]
U.S. Domestic Exports **........  ..............  ..............  ..............  ..............  ..............  ..............  ..............  ..............  ..............  ..............
U.S. Apparent Consumption ***...          [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT
                                           REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]
Import Penetration (No Exports)            100%            100%            100%            100%            100%           99.7%             91%             74%             56%             49%
 ****...........................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: U.S. Department of Commerce, Bureau of Industry and Security, NdFeB Survey, 3a, Section G.
Source: ``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
* Imports for consumption are calculated as U.S. Apparent Consumption (i.e., total demand) less U.S. production and therefore differs from direct imports.
** No exports recorded (measured in tons) over the period.
*** [TEXT REDACTED]
**** Import penetration estimates shown are minimums. Actual figures are expected to be higher due to modelling assumptions and optimistic production estimates.


                                                      Figure 13--Estimated U.S. Bonded NdFeB Magnet Import Penetration, 2017 to 2026, Tons
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
           Figure/year                 2017            2018            2019            2020            2021            2022            2023            2024            2025            2026
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
U.S. Production.................          [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT
                                           REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]
U.S. Imports for Consumption *..          [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT
                                           REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]
U.S. Domestic Exports **........          [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT
                                           REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]
U.S. Apparent Consumption ***...          [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT           [TEXT
                                           REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]       REDACTED]
Import Penetration (No Exports)             87%             87%             87%             85%             87%             86%             86%             85%             79%             79%
 ****...........................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: U.S. Department of Commerce, Bureau of Industry and Security, NdFeB Survey, 3a, Section G.
Source: ``Rare Earth Permanent Magnets: Supply Chain Deep Dive Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
* Imports for consumption are calculated as U.S. Apparent Consumption (i.e., total demand) less U.S. production and therefore differs from direct imports.
** [TEXT REDACTED]
*** [TEXT REDACTED]
**** Import penetration estimates shown are minimums. Actual figures are expected to be higher due to modelling assumptions and optimistic production estimates.


[[Page 9456]]

8.2 Requirements To Establish the U.S. NdFeB Magnet Industry

8.2.1 Facility Costs and Capital Expenditures
    As indicated in the earlier section on firm-level profiles, the 
facilities required to produce NdFeB magnets and components of NdFeB 
magnets are costly to establish. In meetings with industry 
stakeholders, company representatives emphasized the substantial 
investment requirements to establish U.S. capacity. MP Materials 
announced in 2019 that it was spending $200 million to establish a 
domestic processing and separation facility and announced in February 
2022 plans to spend $700 million to establish a vertically integrated 
NdFeB magnet supply chain in the United States.211 212 [TEXT 
REDACTED].\213\ On the lower end of the spectrum, Quadrant Magnetics 
announced that it plans to invest $95 million to construct a U.S. NdFeB 
magnet manufacturing facility, with anticipated capacity of [TEXT 
REDACTED].\214\ Other industry stakeholders, while not reporting 
specific costs, indicated that expenditures made it difficult to 
construct facilities without demand from anticipated customers. These 
figures emphasize the need for increased certainty of demand, ideally 
through definitive offtake agreements, and the limitations of current 
U.S. Government funding mechanisms, such as the Title III program, to 
provide sufficient capital.
---------------------------------------------------------------------------

    \211\ Ernest Scheyder, ``California rare earths miner races to 
refine amid U.S.-China trade row,'' Reuters, August 23, 2019, 
https://www.reuters.com/article/us-usa-rareearths-mpmaterials-idUSKCN1VD2D3.
    \212\ John Wagner and Amy B. Wang, ``Biden announces new 
spending on mineral production to address supply chain challenges,'' 
Washington Post, February 22, 2022, https://www.washingtonpost.com/politics/2022/02/22/biden-minerals-supply-chain-announcement/.
    \213\ Meeting between USA Rare Earth and the Department of 
Commerce, (Virtual Meeting, December 10, 2021).
    \214\ Eleanor Tolbert, ``Global Manufacturer Plans $95 million 
facility in Louisville,'' Louisville Business First, January 28, 
2022, https://www.bizjournals.com/louisville/news/2022/01/28/manufacturer-plans-95-million-facility.html.
---------------------------------------------------------------------------

    The Department's survey provides further evidence on the costs to 
establish U.S. production facilities. Respondents were asked to list 
all future facilities that would start production between 2022 and 
2026.\215\ For each facility, respondents were asked to estimate the 
total cost it would take to reach full production capacity. There is 
considerable variation in facility costs between value chain steps (see 
Figure 14). The upstream steps of the value chain are generally the 
most expensive to establish, with the median mining facility estimated 
to cost [TEXT REDACTED], and the median oxide facility estimated to 
cost about [TEXT REDACTED]. In comparison to mining facilities, plants 
that reclaim/recycle rare earth elements from waste feedstocks are 
relatively inexpensive at [TEXT REDACTED]. Facility costs are generally 
lower in the downstream steps of the value chain. Respondents estimate 
that the median metal facility costs [TEXT REDACTED], the median alloy 
facility [TEXT REDACTED], and the median sintered NdFeB magnet facility 
around [TEXT REDACTED].
---------------------------------------------------------------------------

    \215\ Although respondents were asked to provide information on 
any future facilities regardless of location, respondents only 
indicated future facilities in the United States or in undecided 
locations.

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
 
------------------------------------------------------------------------
[TEXT REDACTED]
------------------------------------------------------------------------

    Firms face considerable financial shortfalls when it comes to new 
facilities. Figure 15 shows the median and mean difference at the 
facility-level between the amount needed to reach full production and 
amount firms have allocated to reach full production, as well as the 
sum of differences over facilities, grouped by facility value chain 
step. The similarity between the median and mean differences between 
funds need and funds allocated suggest that there are few well-funded 
outliers. In addition, the differences between funds needed and funds 
allocated are similar to the facility costs in Figure 14, indicating 
that most firms have allocated little to no money for the construction 
of new facilities. The total funding needed to bring all planned 
facilities online is considerable but varies widely between value chain 
steps. The seven new sintered NdFeB magnet facilities, which are 
critical to achieving the ambitious production estimates discussed 
earlier, are expected to require over [TEXT REDACTED].\216\ This is not 
even the largest shortfall in the NdFeB magnet value chain: [TEXT 
REDACTED]. Metal and alloy plants have the smallest shortfall, 
requiring a further [TEXT REDACTED], respectively. As relatively low 
levels of domestic metal and alloy production are expected to constrain 
the use of domestic metals and alloys in NdFeB magnets, the 
comparatively small gap between allocated and required funds for metal 
and alloy plants is of particular interest. Without substantial new 
funding, U.S. producers will not meet the production estimates 
described earlier.
---------------------------------------------------------------------------

    \216\ [TEXT REDACTED]

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
 
------------------------------------------------------------------------
[TEXT REDACTED] [TEXT REDACTED]
------------------------------------------------------------------------

    Data on firms' capital expenditures from 2017 to 2026 corroborate 
the significant financing needed to achieve production forecasts. From 
2017 to 2020 annual capital expenditures were well under [TEXT 
REDACTED] annually, reflecting the fact that prior to 2021 the only 
active domestic value chain steps were mining and bonded NdFeB magnet

[[Page 9457]]

production (see Figure 16). In 2021, capital expenditures increased to 
just under [TEXT REDACTED] and are forecasted to jump in 2022 to over 
[TEXT REDACTED]. The massive increase in capital expenditure to around 
[TEXT REDACTED] annually for 2022 to 2024 is further evidence of the 
considerable funding needed to establish a U.S. NdFeB magnet value 
chain.

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
 
------------------------------------------------------------------------
[TEXT REDACTED] [TEXT REDACTED]
------------------------------------------------------------------------

    The sources of capital expenditure funding in 2021 indicate the 
potential need for additional sources of financing to cover anticipated 
outlays. Even in 2021, when aggregate industry capital expenditure is a 
comparatively low [TEXT REDACTED], over [TEXT REDACTED] of recorded 
spending was self-funded (see Figure 17). Department of Defense funds 
covered less than [TEXT REDACTED] of total expenditure. Given Title III 
funding constraints, it is unlikely that current Department of Defense 
funding mechanisms will be able to scale support for the U.S. NdFeB 
magnet industry when annual capital expenditures increase to over [TEXT 
REDACTED] in 2022. Additional private sector financing that can bolster 
internal sources of capital expenditure funding will be critical to 
achieving production estimates.

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
 
------------------------------------------------------------------------
[TEXT REDACTED] [TEXT REDACTED]
------------------------------------------------------------------------

8.2.2 Critical Equipment
    In addition to costly facilities, the production of NdFeB magnets 
and components of NdFeB magnets requires expensive critical equipment. 
22 firms indicated 130 pieces of equipment that are critical to 
production in the Department's survey. Firms identified the most pieces 
of equipment for NdFeB magnet production [TEXT REDACTED] followed by 
alloy production [TEXT REDACTED]. Firms identified the fewest pieces of 
equipment for recycling rare earths [TEXT REDACTED] and mining [TEXT 
REDACTED].\217\
---------------------------------------------------------------------------

    \217\ The distribution of equipment may reflect the composition 
of our sample.
---------------------------------------------------------------------------

    The most cited source of equipment was the United States, followed 
by Japan, China, and Germany. The high degree of machinery sourcing 
from the United States may reflect the location of assembly rather than 
where machine components were produced. Industry participants indicated 
that the most sophisticated machinery relevant to NdFeB magnets come 
from Japan and Germany, with additional equipment sourced from 
China.\218\ Japan was the top source for equipment needed to produce 
magnets. Respondents indicated equipment also came from [TEXT 
REDACTED].
---------------------------------------------------------------------------

    \218\ [TEXT REDACTED]
---------------------------------------------------------------------------

    Mining equipment was on average the most expensive critical 
machinery, with a mean of over [TEXT REDACTED] (see Figure 18). 
Machinery to produce magnets was the second most expensive at an 
average of [TEXT REDACTED], closely followed by oxide production 
equipment at over [TEXT REDACTED]. Metal production equipment was on 
average the least expensive at [TEXT REDACTED]. The relative cost of 
equipment across value chain steps partially reflects the costs of 
facilities: mining is the most expensive, oxides and magnets are less 
so, and metals and alloys the least costly.

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
------------------------------------------------------------------------
[TEXT REDACTED]
[TEXT REDACTED]
------------------------------------------------------------------------

    In addition to cost, some industry representatives have indicated 
the potential for supply chain issues in the acquisition of necessary 
capital equipment.\219\ The NdFeB magnet industry has, like other 
industries, seen long lead times, which industry participants tend to 
attribute to COVID-19-related supply chain issues. Across all pieces of 
equipment, the average lead time is 238 days, and the median lead time 
is 240 days. When disaggregating by value chain step, equipment needed 
to produce carbonates faces somewhat shorter lead times, while 
equipment needed to produce magnets and oxides faces somewhat longer 
lead times (see Figure 19). There do not appear to be strong patterns 
when disaggregating by equipment criticality. Equipment that is 
critical to production tends to face longer lead times across value 
chain steps, but this is not the case for equipment to produce magnets 
and the

[[Page 9458]]

differences are sometimes small. The Department also examined average 
lead times by source country and value chain step. At the country-level 
lead times for the United States were somewhat lower than for other 
countries, although not across all value chain steps. No other strong 
patterns emerged, in part reflecting the small sample size when cross 
tabulating the survey data in this way.
---------------------------------------------------------------------------

    \219\ [TEXT REDACTED].

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
[TEXT REDACTED].
------------------------------------------------------------------------
[TEXT REDACTED]
------------------------------------------------------------------------

    Even within pieces of equipment there is considerable 
heterogeneity. [TEXT REDACTED]
8.2.3 Employment
    The U.S. NdFeB magnet industry directly employs a relatively small 
number of individuals.\220\ Mine to magnet production has increased 
total full time equivalent (FTE) employment from 314 in 2017 to 1,214 
in 2021 and is expected to increase to 4,226 by 2026 as facilities at 
different steps of the value chain start production (see Figure 20). By 
comparison, employment in the North American Industry Classification 
System (NAICS) corresponding to NdFeB magnets (``All Other 
Miscellaneous Fabricated Metal Product Manufacturing''--332999) was 
76,918 in 2020 and employment in the NAICS corresponding to carbonates, 
oxides, and metals (``Other Basic Inorganic Chemical Manufacturing''--
325180) was 39,700 in 2020. Even assuming no growth in non-NdFeB magnet 
employment in these NAICS the U.S. NdFeB magnet industry would 
contribute less than four percent to direct employment in 2026.
---------------------------------------------------------------------------

    \220\ The Department notes that this does not consider 
employment in the many sectors that rely on NdFeB magnets, such as 
electric vehicles and wind turbines.
[GRAPHIC] [TIFF OMITTED] TN14FE23.004

    As mentioned earlier, the U.S. NdFeB magnet industry is emerging 
and many of the firms involved plan to expand production and enter 
other value chain steps. To better understand which occupations will 
likely be in demand, the Department compared employment by occupation 
between mature magnet firms and the current U.S. industry. Three mature 
magnet firms provided employment data in their responses to the 
Department's survey.\221\ These firms are established NdFeB magnet 
producers with significant output and provide insight into the 
employment makeup of a typical magnet firm. Figure 21 compares the mean 
proportion employed in each of five broad occupational categories 
between these two samples. Mature magnet firms employ relatively 
similar proportions across occupational categories: [TEXT REDACTED] are 
manufacturing engineers, scientists, and research and development 
(R&D); approximately [TEXT REDACTED] are in production line operations; 
around [TEXT REDACTED] in sales, administrative, and management; about 
[TEXT REDACTED] in testing and quality control; and [TEXT REDACTED] in 
information technology. By contrast, as indicated by the wide standard 
deviations, current U.S. producers are very heterogeneous in the 
proportion employed across occupational categories. They also employ a 
far smaller percentage of production line operations employees (about 
[TEXT REDACTED]). Based on occupational data from current mature magnet 
producers, U.S. firms are likely to employ a greater percentage of 
production line operations employees as they develop capacity.
---------------------------------------------------------------------------

    \221\ [TEXT REDACTED]

[[Page 9459]]



------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
 
------------------------------------------------------------------------
[TEXT REDACTED].
[TEXT REDACTED]
------------------------------------------------------------------------

    Industry stakeholders indicated to the Department a range of 
perspectives on employment challenges. For example, MP Materials stated 
that the United States ``has limited skilled labor and human resources 
needed for the production of this high-technology product.'' \222\ In 
contrast, the United States Magnetic Materials Association said that 
``the knowledge of how to produce the magnets does exist'' and cited 
the inability to obtain licenses for critical intellectual property and 
return on investment as more significant barriers to domestic 
production.\223\ This is consistent with Arnold Magnetics' public 
comments, in which it indicated it could shift production from 
Samarium-Cobalt magnets to NdFeB magnets.\224\ [TEXT REDACTED].
---------------------------------------------------------------------------

    \222\ Comments of MP Materials to Request for Public Comments, 
``Section 232 National Security Investigation of Imports of 
Neodymium-Iron-Boron (NdFeB) Permanent Magnets,'' 86 FR 53277, 
November 12, 2021.
    \223\ Comments of the United States Magnetic Materials 
Association to Request for Public Comments, ``Section 232 National 
Security Investigation of Imports of Neodymium-Iron-Boron (NdFeB) 
Permanent Magnets,'' 86 FR 53277, November 12, 2021.
    \224\ Comments of Arnold Magnetics to Request for Public 
Comments, ``Section 232 National Security Investigation of Imports 
of Neodymium-Iron-Boron (NdFeB) Permanent Magnets,'' 86 FR 53277, 
November 12, 2021.
---------------------------------------------------------------------------

    Survey respondents were requested to indicate what labor market 
issues they faced, including the timeframe and the primary affected 
occupation. For U.S. producers, the primary workforce issues faced were 
finding qualified and experienced workers, followed by attracting 
workers to their location and finding U.S. citizens (see Figure 22). 
U.S. producers were likely to select high wage occupations as the 
primary occupation affected and were much more likely to do so when 
compared to non-producers, although production line operations were 
also frequently cited. The U.S. NdFeB magnet industry may face human 
capital challenges, in particular finding engineers and scientists.

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
[TEXT REDACTED].
[TEXT REDACTED].
------------------------------------------------------------------------

    Qualitative survey responses provide further evidence of the NdFeB 
magnet industry's potential difficulties in attracting human capital. 
The lack of available and experienced high wage labor was a 
particularly common refrain. [TEXT REDACTED]
    Firms that can find workers face competition and difficulties 
attracting them. [TEXT REDACTED] Many NdFeB magnet firms are located 
outside major urban centers, which can cause issues attracting talent. 
[TEXT REDACTED]

8.3 Additional Challenges to Domestic Production

8.3.1 Import Competition, Production Costs, and General Challenges
    The Department's survey of the U.S. NdFeB magnet industry asked 
firms about whether they struggled to compete against imports. 29 
firms--57 percent of the sample and 67 percent of current or planned 
U.S. NdFeB magnet value chain producers--responded affirmatively. The 
Department then asked the percentage of operating costs attributable to 
eight input conditions. Figure 23 shows the median cost for each input 
condition for all respondents, non-producers, current or planned U.S. 
producers, and foreign producers.\225\ Producers indicated that 
feedstock purchases are the single largest contributor to operating 
costs. [TEXT REDACTED]. By contrast, non-producers indicated sourcing 
feedstock is a distant second to labor costs. This is consonant with 
the high cost of rare earths in NdFeB magnets. The cost of sourcing 
feedstock is one vector of Chinese competition. [TEXT REDACTED]. Labor 
is the second largest contributor to U.S. producer operating costs, 
representing about [TEXT REDACTED], followed by electricity at [TEXT 
REDACTED].
---------------------------------------------------------------------------

    \225\ Proportions do not sum to one for each category because 
firms were not compelled to complete this section. In addition, 
there is an ``Other'' category that is mainly described as 
miscellaneous or overhead costs.

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
                             [TEXT REDACTED]
[TEXT REDACTED].
[TEXT REDACTED].
------------------------------------------------------------------------

    The Department also asked survey respondents to indicate which of 
30 challenges affected their competitive position and to rank the top 
five challenges (see Figure 24). Foreign competition is the most 
important challenge for U.S. NdFeB magnet industry participants. [TEXT 
REDACTED] current and future U.S.

[[Page 9460]]

producers ranked foreign competition in their top five challenges, and 
[TEXT REDACTED] current and future U.S. producers ranked it as their 
number one challenge. [TEXT REDACTED] of current and future U.S. 
producers ranked input availability as their number one challenge, 
making it the second most frequently cited number one challenge. [TEXT 
REDACTED] current and future U.S. producers included labor availability 
in their top five challenges, making it the second most frequently 
cited challenge overall. Current and future U.S. producers also 
indicated financing/credit availability is an issue, with [TEXT 
REDACTED] of respondents ranking it in their top five challenges. [TEXT 
REDACTED] U.S. producers also indicated financing/credit availability 
is a minor issue, with only [TEXT REDACTED] including it in their top 
five challenges.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
                             [TEXT REDACTED]
------------------------------------------------------------------------
 
          [TEXT REDACTED]                      [TEXT REDACTED]
 
------------------------------------------------------------------------
[TEXT REDACTED].
                                      [TEXT REDACTED]
------------------------------------------------------------------------

    Qualitative explanations underscore foreign competition, in 
particular with China, as a major challenge for domestic production. 
Many respondents who cited foreign competition directly compete with 
Chinese firms, which they claim are unfairly advantaged through 
government policies, subsidies, and market manipulation. Several 
respondents noted that the lack of environmental regulations and 
enforcement in China allows Chinese magnet producers to undercut prices 
for NdFeB magnets. Others noted the near total domination that Chinese 
firms had throughout the NdFeB magnet supply chain, which enables China 
to set market prices. China is also mentioned in terms of input 
availability. Some firms indicate that there are few sources of 
feedstocks outside of China [TEXT REDACTED]. Chinese firms also compete 
with U.S. producers for inputs. [TEXT REDACTED]
    Respondents were also likely to cite Chinese competition as the 
primary challenge to increasing their market share. One U.S. magnet 
integrator noted that China is a low-cost producer of NdFeB magnets and 
end-users often purchase from the cheapest source regardless of country 
of origin. Other respondents reiterated that Chinese suppliers are 
unfairly subsidized and because of their dominant position can set 
prices. A related factor cited by one U.S. producer is the higher cost 
of labor in the United States compared to foreign competitors. Another 
often-mentioned challenge to expanding operations and market share is 
accessing the necessary financing for capital investments. Finally, 
several respondents experienced challenges in developing a resilient 
supply chain for their operations, such as securing diverse sources for 
necessary feedstocks. Domestic sources are a particular challenge given 
the lack of U.S. production capacity in all stages of the NdFeB magnet 
value chain. Reflecting the more general challenges discussed earlier, 
Chinese competition, feedstocks, and capital are major barriers to 
expanding production.
8.3.2 Environmental Factors
    Rare earths mining and processing can cause damage to the 
environment because it produces large amounts of hazardous and 
radioactive waste.\226\ Mining waste, also known as tailings, is 
typically stored in impoundments engineered to minimize waste 
seepage.227 228 Further downstream the value chain, the 
disposal and recycling of electronic waste can release heavy metals 
into the environment, with negative consequences for natural 
ecosystems.\229\ In countries with less-stringent environmental 
regulations such as China, heavy metals can reach and contaminate 
groundwater during the mining process.\230\ By contrast, environmental 
regulation in more highly-regulated economies pose additional costs and 
risks to market participants.231 232 For example, a 
Government Accountability Office report found that between 2010 and 
2014 it took the Department of the Interior's Bureau of Land Management 
and the Department of Agriculture's Forest Service between one month 
and 11 years to approve mine plans, with an average approval time of 
two years.\233\ Of the 68 mine plans reviewed, 13 had not begun 
operations in November 2015, partially attributed to the need to obtain 
other required federal and state permits.\234\ Environmental studies 
are a time-intensive part of the permitting process.\235\ Meanwhile, 
regulation requirements for depolluting infrastructure increase U.S. 
production costs.\236\ Table 8 displays a non-

[[Page 9461]]

exhaustive list of relevant statutes and treaties.\237\
---------------------------------------------------------------------------

    \226\ Gwenolyn Bailey, Nabeel Mancheri, and Karel Van Acker, 
``Sustainability of Permanent Rare Earth Magnet Motors in (H)EV 
Industry,'' Journal of Sustainable Metallurgy 3: 611-626, 2017, 
https://link.springer.com/article/10.1007/s40831-017-0118-4.
    \227\ ``What are Tailings,'' Society for Mining, Metallurgy, and 
Exploration, n.d., https://www.smenet.org/What-We-Do/Technical-Briefings/What-are-Tailings.
    \228\ Mining waste, such as coal tailings and heavy mineral 
sands, can be processed and recycled to extract contained rare earth 
elements. [TEXT REDACTED] Austyn Gaffney and Dane Rhys, ``In coal 
country, a new chance to clean up a toxic legacy,'' Washington Post, 
May 19, 2022, https://www.washingtonpost.com/climate-solutions/2022/05/19/coal-mining-waste-recycling/.
    \229\ Duc Huy Dang et al., ``Toward the Circular Economy of Rare 
Earth Elements: A Review of Abundance, Extraction, Applications, and 
Environmental Impacts,'' Archives of Environmental Contamination and 
Toxicology 81: 521-530, 2021, https://link.springer.com/article/10.1007/s00244-021-00867-7.
    \230\ Gwenolyn Bailey, Nabeel Mancheri, and Karel Van Acker, 
``Sustainability of Permanent Rare Earth Magnet Motors in (H)EV 
Industry,'' Journal of Sustainable Metallurgy 3: 611-626, 2017, 
https://link.springer.com/article/10.1007/s40831-017-0118-4.
    \231\ Environmental regulations are critical for public health 
and safety. Noting that highly regulated jurisdictions are 
associated with higher production costs is a strictly factual 
observation and is not an endorsement of deregulation.
    \232\ Another example of risk is Lynas Rare Earths' Malaysian 
separation facility, which has brought the company into conflict 
with the Malaysian government over waste disposal. Currently, Lynas 
plans to establish a disposal facility as a condition of their 
license. Interview with Kristin Vekasi, ``China's Control of Rare 
Earth Metals,'' The National Bureau of Asian Research, August 13, 
2019, https://www.nbr.org/publication/chinas-control-of-rare-earth-metals/; ``2021 Annual Report,'' Lynas Rare Earths, Ltd., 2021, 
https://wcsecure.weblink.com.au/pdf/LYC/02434182.pdf.
    \233\ ``Hardrock Mining: BLM and Forest Service Have Taken Some 
Actions to Expedite the Mine Plan Review Process but Could Do 
More,'' United States Government Accountability Office, January 
2016, https://www.gao.gov/assets/gao-16-165.pdf.
    \234\ Ibid.
    \235\ Duc Huy Dang et al., ``Toward the Circular Economy of Rare 
Earth Elements: A Review of Abundance, Extraction, Applications, and 
Environmental Impacts,'' Archives of Environmental Contamination and 
Toxicology 81: 521-530, 2021, https://link.springer.com/article/10.1007/s00244-021-00867-7.
    \236\ Gwenolyn Bailey, Nabeel Mancheri, and Karel Van Acker, 
``Sustainability of Permanent Rare Earth Magnet Motors in (H)EV 
Industry,'' Journal of Sustainable Metallurgy 3: 611-626, 2017, 
https://link.springer.com/article/10.1007/s40831-017-0118-4.
    \237\ In addition to the listed statutes and treaties, firms 
face state and local as well as further federal regulations. For 
example. MP Materials notes their activities are subject to federal, 
state, and local laws and regulations covering a wide range of 
issues, such as air emissions, water usage, and waste management. 
The Mountain Pass Mine, for instance, has 16 environmental permits 
from 11 entities with various expiration dates. See ``Form 10-K,'' 
MP Materials, February 28, 2022, https://d18rn0p25nwr6d.cloudfront.net/CIK-0001801368/77b2894e-b746-43c5-938a-a3f524823baa.pdf.

              Table 8--Partial List of Relevant Federal and International Environmental Regulations
----------------------------------------------------------------------------------------------------------------
             Name                     Scope          Relevant body                   Brief summary
----------------------------------------------------------------------------------------------------------------
Atomic Energy Act of 1954.....  Waste............  Federal..........  The Nuclear Regulatory Commission
                                                                       (``NRC'') oversees the regulatory
                                                                       framework governing the control of
                                                                       radioactive materials, including
                                                                       beneficiation and processing of rare
                                                                       earths that contain radioactive source
                                                                       materials.
Basel Convention..............  Waste............  International....  The Basel Convention on the Control of
                                                                       Transboundary Movements of Hazardous
                                                                       Wastes is an international treaty signed
                                                                       in 1989 and entered into force in 1992.
                                                                       It currently has 188 signatories and
                                                                       establishes a ``notice and consent''
                                                                       regime for the export of hazardous waste
                                                                       to other countries. The United States is
                                                                       not currently a party to the Basel
                                                                       Convention.
Clean Air Act.................  Air..............  Federal and State  Authorizes the Environmental Protection
                                                                       Agency (EPA) to establish national
                                                                       ambient air quality standards and maximum
                                                                       achievable control technology emission
                                                                       standards for hazardous and toxic
                                                                       pollutants. Establishes an air quality
                                                                       control permitting program implemented by
                                                                       EPA and authorized states.
Clean Water Act...............  Water............  Federal and State  Authorizes EPA to establish national water
                                                                       quality criteria and establishes two
                                                                       permitting programs. The National
                                                                       Pollutant Discharge Elimination System
                                                                       (NPDES) Program prohibits the discharge
                                                                       of pollutants through a point source into
                                                                       a water of the United States without a
                                                                       NPDES permit. NPDES permits are issued by
                                                                       EPA or authorized states. The NPDES
                                                                       permit program also includes ``Effluent
                                                                       Guidelines,'' including the Mineral
                                                                       Mining and Processing Effluent Guidelines
                                                                       and Standards, the Ferroalloy
                                                                       Manufacturing Effluent Guidelines and
                                                                       Standards, and the Metal Finishing
                                                                       Effluent Guidelines. Clean Water Act
                                                                       section 404 permits, issued by the U.S.
                                                                       Army Corps of Engineers or authorized
                                                                       states, are required for the discharge of
                                                                       dredge and fill material in waters of the
                                                                       United States.
Comprehensive Environmental,    Waste............  Federal..........  Provides Federal authority for responding
 Response, Compensation and                                            to releases or threatened releases of
 Liability Act.                                                        hazardous substances that may endanger
                                                                       public health or the environment.
The Endangered Species Act....  General..........  Federal..........  Regulates activities that could have an
                                                                       adverse effect on threatened and
                                                                       endangered species, including the habitat
                                                                       and ecosystems upon which they depend.
Federal Mine Safety and Health  Mining...........  Federal..........  Imposes health and safety standards on
 Act of 1977, as amended by                                            mining operations, including training of
 the Mine Improvement and New                                          mine personnel, mining procedures,
 Emergency Response Act of                                             blasting, the equipment used in mining
 2006.                                                                 operations and other matters. In 2006,
                                                                       the Mine Safety and Health Administration
                                                                       promulgated new emergency mine safety
                                                                       rules addressing mine safety equipment,
                                                                       training, and emergency reporting
                                                                       requirements.
Mobile Phone Partnership        Waste............  International....  Launched in 2002 to promote awareness
 Initiative (MPPI).                                                    raising--design considerations,
                                                                       collection of used and end-of-life mobile
                                                                       phones, transboundary movement of
                                                                       collected mobile phones, refurbishment of
                                                                       used mobile phones, and material recovery/
                                                                       recycling of end-of-life mobile phones.
                                                                       Has not met since 2011.
The National Environmental      General..........  Federal..........  Requires Federal agencies to integrate
 Policy Act.                                                           environmental considerations into certain
                                                                       decision-making processes by evaluating
                                                                       the environmental impacts of their
                                                                       proposed actions, including issuance of
                                                                       permits to mining facilities, and
                                                                       assessing alternatives to those actions.
Partnership for Action on       Waste............  International....  Developed as a multi-stakeholder public-
 Computing Equipment (PACE).                                           private partnership that provides a forum
                                                                       for representatives of personal computer
                                                                       manufacturers, recyclers, international
                                                                       organizations, associations, academia,
                                                                       environmental groups, and governments to
                                                                       tackle environmentally sound
                                                                       refurbishment, repair, material recovery,
                                                                       recycling, and disposal of used and end-
                                                                       of-life computing equipment.
Resource Conservation and       Waste............  Federal and State  Gives the EPA and authorized states the
 Recovery Act (RCRA).                                                  authority to regulate hazardous from
                                                                       cradle to grave under Subtitle C. RCRA
                                                                       establishes the framework for a national
                                                                       system of solid waste control where EPA
                                                                       sets minimum national technical standards
                                                                       for how disposal facilities should be
                                                                       designed and operate. States play the
                                                                       lead role under Subtitle D. Most
                                                                       extraction and beneficiation wastes from
                                                                       hardrock mining are excluded from federal
                                                                       hazardous waste regulations under
                                                                       Subtitle C.
The Safe Drinking Water Act...  Water............  Federal and State  Authorizes EPA to establish standards to
                                                                       protect underground sources of drinking
                                                                       water and establishes the underground
                                                                       injection control program that regulates
                                                                       the drilling and operation of subsurface
                                                                       injection wells. Permits are issued by
                                                                       EPA or authorized states.
----------------------------------------------------------------------------------------------------------------


[[Page 9462]]

    The Department used data from its survey of the U.S. NdFeB magnet 
industry, a previous industrial base assessment on rare earth elements, 
meetings with NdFeB magnet industry participants, and market research 
to assess the relationship between the NdFeB magnet value chain and 
environmental regulations. Based on these data, a preliminary picture 
emerged that although historically NdFeB magnet industry participants 
saw environmental factors as a constraint, the current NdFeB magnet 
industry is using new methods and technologies to reduce its 
environmental impact and sees these processes as enabling competition 
with China, even though weaker Chinese environmental regulations 
increase the price gap between Chinese and non-Chinese magnets.
    In 2014 the Department conducted a survey under section 705 of the 
DPA of U.S. rare earth suppliers and product manufacturers to support a 
2016 supply chain assessment on dysprosium, erbium, neodymium, terbium, 
and ytterbium called ``U.S. Strategic Material Supply Chain Assessment: 
Select Rare Earth Elements'' (``2016 Rare Earths Assessment''). Of the 
160 respondents, 126 indicated they used one of the rare earths that 
make up NdFeB magnets--neodymium, praseodymium, terbium, or 
dysprosium--and 115 indicated they used neodymium.
    These survey data suggest that in the early 2010s environmental 
factors constrained multiple steps in the U.S. rare earths value chain. 
36 respondents (22.5 percent) indicated that environmental regulations/
remediation had a current and/or future impact on their rare earth 
element-related business lines.\238\ Upstream in the value chain, 
mining firms stated environmental regulations were a source of concern. 
[TEXT REDACTED] The impact of environmental regulations propagated 
downstream to customers. [TEXT REDACTED]
---------------------------------------------------------------------------

    \238\ This analysis uses the larger sample of companies involved 
in any NdFeB magnet-related rare earths production, except when 
stated otherwise.
---------------------------------------------------------------------------

    In contrast, the current U.S. NdFeB magnet industry sees 
environmental factors as a relatively minor concern and cites 
environmentally friendly technologies as a source of opportunity. The 
Department's survey of the U.S. NdFeB magnet industry asked firms to 
identify the primary challenges affecting their competitive positions 
and rank the top five from a list of 30 potential responses. Among the 
16 current or future U.S. producers that provided responses, [TEXT 
REDACTED]. Restricting the sample to the top five challenges, 
environmental regulations are tied with four other issues for the 
seventh most cited challenge. [TEXT REDACTED] These data suggest that 
environmental regulations matter but are relatively less important in 
comparison to the other challenges faced by the U.S. NdFeB magnet 
industry.
    Input cost data from the Department's survey of the U.S. NdFeB 
magnet industry lend support for the view that environmental 
regulations are minor in comparison to other factors. The Department's 
survey asked respondents to estimate the percentage of operating costs 
due to a series of inputs, including environmental regulations. The 
median response from current or planned U.S. producers regarding 
environmental regulations was [TEXT REDACTED], lower than sourcing 
feedstock material ([TEXT REDACTED]), labor ([TEXT REDACTED]), other 
([TEXT REDACTED], most often described as operating or overhead costs), 
electricity ([TEXT REDACTED]), transportation costs ([TEXT REDACTED]), 
and taxes ([TEXT REDACTED]). Only VAT taxes/tariffs/trade duties ([TEXT 
REDACTED]) and export regulations ([TEXT REDACTED]) ranked lower.
    Environmental regulations increase the price gap between Chinese 
and non-Chinese NdFeB magnets, but consonant with their minor 
contribution to U.S. firms' production costs their impact appears to be 
small relative to other factors.\239\ [TEXT REDACTED].\240\ [TEXT 
REDACTED].\241\ [TEXT REDACTED]. However, other industry participants 
tend to attribute differences in NdFeB magnet production costs more to 
Chinese tax policies or energy costs than environmental 
regulations[TEXT REDACTED].\242\ Despite the minor role of 
environmental regulations, any price gaps can affect customer behavior. 
[TEXT REDACTED].\243\
---------------------------------------------------------------------------

    \239\ However, in response to the Department's survey of the 
U.S. NdFeB magnet industry only [TEXT REDACTED] current or future 
U.S. producers (of 11 who provided responses) indicated that 
changing government regulations or incentives around environmental 
regulations would improve price competitiveness.
    \240\ Kazuaki Kobayashi, ``Trusted Supply-Chain for Rare Earths 
in the Age of Carbon Neutrality,'' Ministry of Economy, Trade, and 
Industry, n.d.
    \241\ Meeting between the Ministry of Economy, Trade, and 
Industry and the Department of Commerce, (Virtual Meeting, December 
21, 2021)
    \242\ Meeting between Neo Performance Materials and the 
Department of Commerce, the Department of Defense, and the U.S. 
Geological Survey, (Virtual Meeting, November 30, 2021).
    \243\ Meeting between Lynas Rare Earths and the Department of 
Commerce, (Virtual Meeting, March 30, 2022).
---------------------------------------------------------------------------

    Both upstream and downstream in the NdFeB magnet value chain, some 
firms see environmental factors as a competitive advantage and tout 
their small environmental footprints and new technologies that help 
minimize environmental waste.\244\ [TEXT REDACTED].[TEXT 
REDACTED].\245\ [TEXT REDACTED].246 247 [TEXT 
REDACTED].\248\ [TEXT REDACTED].
---------------------------------------------------------------------------

    \244\ This anecdotal evidence is consistent with a view that 
environmental regulation may spur technological innovation and 
reduce marginal costs. Some research suggests that this process has 
meant environmental regulations have had no to a positive effect on 
rare earths exports from China. An Pan et al., ``How environmental 
regulation affects China's rare earth export?,'' PLoS One 16 (4), 
2021, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8062019/.
    \245\ Meeting between MP Materials and the Department of 
Commerce, (Virtual Meeting, November 17, 2021).
    \246\ Energy Fuels briefing to the NSTC Critical Minerals 
Subcommittee, (Virtual Meeting, November 29, 2021).
    \247\ [TEXT REDACTED]. Meeting between Energy Fuels and the 
Department of Commerce, (Virtual Meeting, March 1, 2022).
    \248\ Meeting between USA Rare Earth and the Department of 
Commerce, (Virtual Meeting, December 10, 2021).
---------------------------------------------------------------------------

    Downstream in the value chain, Noveon highlighted its low 
environmental impact, [TEXT REDACTED].\249\ Joint research with Purdue 
University suggests a 50 percent net reduction across a range of 
environmental indicators, including smog formation, acidification, and 
respiratory effects.250 251 [TEXT REDACTED].\252\ NdFeB 
magnet industry participants throughout the value chain emphasize their 
low environmental impact and suggest that their more environmentally 
friendly technologies could act as a competitive advantage in the 
global marketplace.
---------------------------------------------------------------------------

    \249\ Meeting between Noveon and the Department of Commerce, 
(Virtual Meeting, November 12, 2021).
    \250\ ``With Urban Mining, Recycled Bird Magnets are 
Transforming our Electric Future,'' Bird Cities Blog, June 6, 2021, 
https://www.bird.co/blog/urban-mining-recycled-bird-magnets-transforming-electric-future/.
    \251\ Hongyue Jin et al., ``Comparative Life Cycle Assessment of 
NdFeB Magnets: Virgin Production versus Magnet-to-Magnet 
Recycling,'' Procedia CRIP 48: 45-50, 2016, https://www.sciencedirect.com/science/article/pii/S2212827116006508.
    \252\ Meeting between Noveon and the Department of Commerce, 
(Virtual Meeting, November 12, 2021).
---------------------------------------------------------------------------

8.3.3 Intellectual Property
    NdFeB magnets were concurrently invented in 1983 by General Motors 
in the United States and by Sumitomo in Japan.\253\ General Motors

[[Page 9463]]

commercialized its intellectual property by founding Magnequench, which 
was eventually acquired by the Canadian firm Neo Performance Materials. 
The Sumitomo intellectual property passed to Hitachi, which has an 
extensive NdFeB magnet-related patent portfolio of over 600 patents, 
including about one hundred U.S. patents.\254\ Of these, there are four 
key U.S. patents for sintered NdFeB magnets that expired in 2021 or 
will expire in 2022.\255\ Other relevant patents with longer expiration 
dates may exist.\256\ In the public comments received for this 
investigation, many U.S. companies noted that Hitachi has repeatedly 
declined to offer licenses to U.S. companies. Hitachi granted licenses 
to eight Chinese firms as early as 2013, which facilitated Chinese 
firms' entrance in to the sintered NdFeB magnet 
market.257 258 [TEXT REDACTED] \259\ Additional Chinese 
firms may gain de jure access to Hitachi licenses as a result of a 2021 
ruling by the Ningbo Intermediate People's Court in China in which 
NdFeB magnet licenses were held to be essential facilities.\260\ Under 
the essential facilities doctrine, a firm that controls an essential 
facility is obliged to make that facility available to competitors on 
non-discriminatory terms.\261\ Hitachi has appealed the case, but may 
be required to license sintered NdFeB magnet patents to additional 
Chinese firms.
---------------------------------------------------------------------------

    \253\ The method developed by General Motors to produce NdFeB 
magnets is the predecessor to bonded magnets. The method developed 
by Sumitomo is the predecessor of sintered NdFeB magnets. Hitachi is 
an organizational descendent of Sumitomo and therefore holds the 
intellectual property for sintered magnets.
    \254\ ``Chinese Court Enforces Mandatory Licensing for 
``Essential Facility'' Patents in Antitrust Case,'' Jones Day, June 
2021, https://www.jonesday.com/en/insights/2021/06/chinese-court-enforces-mandatory-licensing-for-essential-facility-patents-in-antitrust-case.
    \255\ Some industry participants expressed concern that Hitachi 
may attempt to renew these patents, but the Department could not 
locate information on whether Hitachi had done so. Industry 
participants also mentioned that Bain Capital's potential 
acquisition of Hitachi Metals may shape Hitachi's behavior. For 
information on Bain Capital's potential acquisition of Hitachi 
Metals, see Appendix E, ``Global NdFeB Magnet Production: A Firm 
Level Perspective'' at footnote 144. [TEXT REDACTED].
    \256\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \257\ Nathan Bush and Ray Xu, ``Framing patents as essential 
facilities in Chinese antitrust: Ningbo Ketian Magnet Co., Ltd. v. 
Hitachi Metals,'' DLA Piper, September 7, 2021, https://www.dlapiper.com/en/us/insights/publications/2021/09/antitrust-matters-september-2021/framing-patents-as-essential-facilities-in-chinese-antitrust/.
    \258\ ``Chinese Court Enforces Mandatory Licensing for 
``Essential Facility'' Patents in Antitrust Case,'' Jones Day, June 
2021, https://www.jonesday.com/en/insights/2021/06/chinese-court-enforces-mandatory-licensing-for-essential-facility-patents-in-antitrust-case.
    \259\ U.S. Department of Commerce, Bureau of Industry and 
Security, NdFeB Survey, 10, Part D.
    \260\ ``Chinese Court Enforces Mandatory Licensing for 
``Essential Facility'' Patents in Antitrust Case,'' Jones Day, June 
2021, https://www.jonesday.com/en/insights/2021/06/chinese-court-enforces-mandatory-licensing-for-essential-facility-patents-in-antitrust-case.
    \261\ There is no accepted definition of essential facility. See 
Christopher Seelen, ``The Essential Facilities Doctrine: What Does 
It Mean To Be Essential?,'' Marquette Law Review (80), Summer 1997, 
https://scholarship.law.marquette.edu/cgi/viewcontent.cgi?article=1517&context=mulr.
---------------------------------------------------------------------------

    Hitachi has also defended its intellectual property rights in U.S. 
courts. In 2012, Hitachi filed a complaint with the United States 
International Trade Commission (U.S. ITC) against 29 manufacturers and 
importers of sintered rare earth magnets and products containing 
sintered rare earth magnets.\262\ It sought an exclusion order 
prohibiting imports of these unlicensed NdFeB magnets and cease and 
desist orders to produce NdFeB magnets.\263\ Some defendants settled 
with Hitachi, with five Chinese firms agreeing to new licenses. In 2013 
Hitachi announced additional settlements and withdrew the U.S. ITC 
case. Later, some defendants filed for inter partes review with the 
United States Patent and Trademark Office, which granted the request 
and found the challenged claims obvious.\264\ In an appellate opinion 
in 2017, the United States Court of Appeals for the Federal Circuit 
largely affirmed this ruling.\265\ U.S. industry participants noted 
these actions instigated considerable discussion in the NdFeB magnet 
industry and deterred potential market entrants.\266\
---------------------------------------------------------------------------

    \262\ Walter T. Benecki, ``Hitachi Metals, Ltd. The Magner 
Industry Newsmaker,'' Magnetics: Business and Technology, November 
26, 2013, https://magneticsmag.com/hitachi-metals-ltd-the-magnet-industry-newsmaker/.
    \263\ Ibid.
    \264\ Anthony McCain, ``Patentlyo Bits and Bytes,'' Patentlyo, 
July 31, 2017, https://patentlyo.com/2017/07.
    \265\ ``Hitachi Metals, Ltd., v. Alliance of Rare-Earth Magnet 
Industry,'' United States Court of Appeals for the Federal Court, 
July 6, 2017, https://cafc.uscourts.gov/sites/default/files/opinions-orders/16-1824.Opinion.7-5-2017.1.PDF.
    \266\ [TEXT REDACTED].
---------------------------------------------------------------------------

    In conversations with industry participants Hitachi's ownership of 
sintered NdFeB magnet patents was characterized on a spectrum from a 
critical barrier to entry to a nonexistent risk.\267\ Arnold Magnetics 
considered Hitachi's patents to be a key barrier to market entry and 
indicated it could produce sintered NdFeB magnets if it had a 
license.\268\ [TEXT REDACTED].\269\ [TEXT REDACTED].\270\ Some industry 
representatives also expressed hope that the acquisition of Hitachi's 
magnets business by Bain Capital may change Hitachi's willingness to 
license the patents to potential market entrants.\271\ In contrast, 
Noveon relies on new proprietary technology to process recycled magnets 
and produce new material and is therefore unaffected by Hitachi's 
reluctance to license its patents. A related concern is whether magnets 
would need to be produced under licensed patents to be incorporated 
into some end-user's assemblies and, if so, how expensive qualification 
of alternative production methods may be. For example, some end-users 
may qualify magnets for use in their products based on the technology 
used to produce the magnets.
---------------------------------------------------------------------------

    \267\ Meeting between Arnold Magnetics and the Department of 
Commerce, (Virtual Meeting, December 6, 2021); Meeting between USA 
Rare Earth and the Department of Commerce, (Virtual Meeting, 
December 10, 2021); Meeting between Noveon and the Department of 
Commerce, (Virtual Meeting, November 12, 2021).
    \268\ Comments of Arnold Magnetics to Request for Public 
Comments, ``Section 232 National Security Investigation of Imports 
of Neodymium-Iron-Boron (NdFeB) Permanent Magnets,'' 86 FR 53277, 
November 12, 2021.
    \269\ Meeting between USA Rare Earth and the Department of 
Commerce, (Virtual Meeting, December 10, 2021).
    \270\ Ibid.
    \271\ For information on Bain Capital's potential acquisition of 
Hitachi Metals, see Appendix E, ``Global NdFeB Magnet Production: A 
Firm Level Perspective'' at footnote 144.
---------------------------------------------------------------------------

    The Department's survey of the U.S. NdFeB magnet industry supports 
the view that intellectual property does not pose a major barrier to 
NdFeB magnet production, although access to Hitachi's technology would 
facilitate domestic production. In response to the question, ``Has your 
organization encountered difficulties in obtaining NdFeB Magnet related 
IP?'' [TEXT REDACTED]. Intellectual property is unlikely to derail 
current production estimates but may pose constraints on growth and 
use.
8.3.4 Prices and Price Volatility
NdFeB Magnet Feedstock Prices and Price Volatility
    In comparison to NdFeB magnets, neodymium oxide and metal are 
relatively standard products for which comparable price data are 
available. Neodymium oxide and metal prices have seen considerable 
shifts over the previous 20 years (see Figure 25). Oxide and metal 
price changes are closely related because neodymium oxide is processed 
into neodymium metal.\272\

[[Page 9464]]

Price data indicate two periods of relative stability (2002 to mid-2010 
and 2013 to mid-2020) punctuated with two sharp price increases 
corresponding to China's cuts to its export quotas in the early 2010s 
and the early 2020s' rise in prices, which may reflect increased 
demand.\273\ The overall trendline from 2002 to 2021 is of increasing 
prices--neodymium oxide prices increased by 3,209 percent from $4.3 per 
kg in 2002 to $142.3 per kg in 2021, while neodymium metal prices 
increased by 2,443 percent from $7 per kg in 2002 to $178 per kg in 
2021.274 275
---------------------------------------------------------------------------

    \272\ The daily price of neodymium oxide and the daily price of 
neodymium metal are almost perfectly positively correlated at 0.99.
    \273\ In contrast to the early 2010s spike, there is not a clear 
cause for the price increases that have occurred since mid-2020. 
Increased demand from end-users is the most common explanation, 
based on meetings with industry.
    \274\ Dysprosium oxide and terbium oxide prices have also 
increased. Dysprosium oxide prices are up almost 120 percent and 
terbium oxide prices increased over 375 percent from January 2017 to 
mid-April 2022, compared to over 265 percent and 188 percent for 
neodymium oxide and praseodymium oxide, respectively. See ``Rare 
Earth 2022 April 18,'' The Rare Earth Observer, April 18, 2022, 
https://treo.substack.com/p/shanghai-infinite-lockdown-price?s=r.
    \275\ For comparison, China's consumer price index increased by 
an average of 2.2 percent, with a range of -0.7 to 5.9 percent. See 
``Inflation, consumer prices (annual %)--China,'' World Bank World 
Development Indicators, last accessed May 17, 2022, https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?locations=CN.
[GRAPHIC] [TIFF OMITTED] TN14FE23.005

    Although the neodymium oxide and metal price series appear to 
indicate high volatility, prices of neodymium and other rare earth 
elements used in NdFeB magnets are less volatile than other metals and 
materials. DoE estimated price volatility for the four key rare earth 
oxides used in NdFeB magnets (neodymium, praseodymium, dysprosium, and 
terbium), by analyzing changes in monthly average prices between 
January 2010 and June 2020, a period that includes the early 2010s 
price spike but not the more recent rise in prices. DoE found that 
price volatility was 0.1 for neodymium oxide, 0.09 for praseodymium 
oxide, 0.13 for dysprosium oxide, and 0.14 for terbium oxide, lower 
than the average of a set of 30 by-product metals and materials.\276\ 
However, DoE still emphasizes the potential for large price swings, 
citing the high price volatility resulting from Chinese government 
policies in the early 2010s.\277\
---------------------------------------------------------------------------

    \276\ Michael Redlinger and Roderick Eggert, ``Volatility of by-
product metal and mineral prices,'' Resources Policy, 47: 69-77, 
2016, https://doi.org/10.1016/j.resourpol.2015.12.002.
    \277\ ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
---------------------------------------------------------------------------

    Industry representatives emphasize the distortionary effects of 
price volatility. [TEXT REDACTED]. The Chinese government has recently 
expressed concern about rising prices, calling on major Chinese rare 
earths producers to maintain a steady supply chain and reduce price 
increases.\278\ Anecdotally, price increases do not appear to have 
strongly negatively affected Chinese firms in the value chain. For 
example, ``Advanced Technology & Materials, a Chinese producer of NdFeB 
magnets, [said] the rare earth price increase has had ``little impact'' 
on the company because it has a guaranteed supply of raw materials at 
``favorable prices'' from the state-owned giant China Northern Rare 
Earth Group.'' \279\
---------------------------------------------------------------------------

    \278\ ``China Calls on Rare Earths Companies to Bring Prices 
Back to ``Reasonable'' Level,'' Reuters, March 4, 2022, https://www.reuters.com/business/china-calls-rare-earths-companies-bring-prices-back-reasonable-level-2022-03-04/.
    \279\ Mary Hui, ``Are High Rare Earth Prices Good for China?,'' 
Quartz, March 7, 2022, https://finance.yahoo.com/news/high-rare-earth-prices-good-220022712.html.
---------------------------------------------------------------------------

    Price increases also have the potential to change consumer behavior 
and lead to greater interest in substitutes and alternatives. [TEXT 
REDACTED].\280\ Neo Performance Materials also said heightened prices 
could incentivize substitution research.\281\ [TEXT REDACTED].\282\
---------------------------------------------------------------------------

    \280\ Meeting between General Motors and the Department of 
Commerce, (Virtual Meeting, February 2, 2022).
    \281\ Mary Hui, ``Are High Rare Earth Prices Good for China?,'' 
Quartz, March 7, 2022, https://finance.yahoo.com/news/high-rare-earth-prices-good-220022712.html.
    \282\ Meeting between Turntide Technologies and the Department 
of Commerce, (Virtual Meeting, February 17, 2022).
---------------------------------------------------------------------------

8.4 Recycling and Substitution

8.4.1 NdFeB Magnet Recycling
    Recycling NdFeB magnets or NdFeB magnet swarf, the waste produced 
by shaping magnets, represents a potentially significant and largely 
untapped source of rare earth material.\283\ In an extreme example, if 
all U.S. computer hard disk drives

[[Page 9465]]

(HDDs) were recycled, the contained NdFeB magnets could satisfy up to 
80 percent of electric vehicle magnet demand.\284\ One market research 
firm estimates that in 2030 upwards of 90,000 tons of NdFeB magnets 
will be entering waste streams globally, equal to 23 percent of 
projected 2030 demand.\285\ In the past 15 years, significant academic 
research has been conducted on NdFeB magnet recycling and reuse 
technologies.\286\ The research directly led to attempts at 
commercialization either through firms that manufacture end-use 
products (e.g., Nissan) or via specialized companies focused on the 
remanufacturing of sintered NdFeB magnets (e.g., Noveon). Increased 
demand for NdFeB magnets is likely to further pressure end-users to 
commercialize recycling technologies.
---------------------------------------------------------------------------

    \283\ Magnet material known as swarf is generated when magnet 
blocks are shaped to customer specifications.
    \284\ Meeting between the Critical Materials Institute and the 
Department of Commerce, (Virtual Meeting, October 6, 2021).
    \285\ ``Adamas: cerium, lanthanum, terbium, and recycling can 
help fill the magnet rare earth gap,'' Green Car Congress, September 
3, 2020, https://www.greencarcongress.com/2020/09/20200903-adamas.html; ``Rare Earth Permanent Magnets: Supply Chain Deep Dive 
Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \286\ Recycling refers to deconstructing NdFeB magnets and 
reprocessing the contained rare earth elements. In contrast, reuse 
refers to integrating NdFeB magnets contained in end-of-life 
products into new products. As discussed later in this section, 
research and attempts at commercialization generally focus on 
recycling.
---------------------------------------------------------------------------

    Separating NdFeB magnets from the products which house them is a 
major challenge of the recycling process. Firms that recycle magnets 
have limited visibility into the construction and design of products 
that use magnets, which makes disassembly difficult.\287\ Continuing 
with the example of HDDs as a feedstock for NdFeB magnet recycling, the 
first difficulty in recycling HDDs is that most drives are shredded due 
to data sensitivities. Shredding reduces the ability to recover and 
recycle the NdFeB magnets and results in significant material 
loss.\288\ Another option is manual removal, which recovers more 
material and has a lower environmental cost but is very time 
consuming.\289\ In 2010, Hitachi announced that it had developed a 
machine to dismantle neodymium magnets from hard discs and compressors. 
The machine has a capacity of one hundred magnets per hour, about eight 
times faster than manual labor. The machine was supposed to be employed 
in commercial operations in 2013 but no follow up details are 
available.\290\ One solution to the issue of separating magnets from 
end-of-life products is a labeling system to describe the 
specifications of contained NdFeB magnets, which would facilitate 
magnet recovery and the recycling process.\291\
---------------------------------------------------------------------------

    \287\ Meeting between the Critical Materials Institute and the 
Department of Commerce, (Virtual Meeting, October 6, 2021).
    \288\ ``Analysis of material efficiency aspects of personal 
computers product group,'' European Commission Joint Research 
Center, January 2018, http://dx.doi.org/10.2788/89220.
    \289\ Raymond Moss et al., ``Critical Metals in the Path towards 
the Decarbonisation of the EU Energy Sector: Assessing Rare Metals 
as Supply-Chain Bottlenecks in Low-Carbon Energy Technologies,'' 
European Commission Joint Research Center, 2013, https://publications.jrc.ec.europa.eu/repository/handle/JRC82322.
    \290\ Ibid.
    \291\ Meeting between the Critical Materials Institute and the 
Department of Commerce, (Virtual Meeting, October 6, 2021).
---------------------------------------------------------------------------

    The complexities involved in NdFeB magnet separation increase 
recycling costs. In 2014 a company approached by Japanese magnet 
manufacturers found they could not dismantle rare earth elements from 
HDDs at a profit.\292\ That said, end-user firms in the United States 
and abroad have expressed interest in recycling 
magnets.293 294 This interest has helped to facilitate the 
commercialization of Noveon's magnet recycling and reengineering 
technology, [TEXT REDACTED].\295\ More generally, increased demand for 
NdFeB magnets is likely to incentivize the commercialization of magnet 
recycling technologies.
---------------------------------------------------------------------------

    \292\ Meeting between Hongyue Jin, Critical Materials Institute, 
and the Department of Commerce, (Virtual Meeting, October 22, 2021).
    \293\ Ibid.
    \294\ ``Bentley sets out path to sustainable, recyclable 
electric motors,'' Automotive World, February 18, 2021, https://www.automotiveworld.com/news-releases/bentley-sets-out-path-to-sustainable-recyclable-electric-motors/.
    \295\ Meeting between Noveon and the Department of Commerce, 
(Virtual Meeting, November 12, 2021).
---------------------------------------------------------------------------

    In theory, NdFeB magnet reuse is possible without dismantling 
assemblies and remanufacturing contained magnets because magnets do not 
lose much strength over their lifetime. However, NdFeB magnets are 
often produced and shaped for a specific end-use product, and it is 
difficult to change the properties of the manufactured magnets, such 
that reuse is generally uncommon.\296\
---------------------------------------------------------------------------

    \296\ Raymond Moss et al., ``Critical Metals in the Path towards 
the Decarbonisation of the EU Energy Sector: Assessing Rare Metals 
as Supply-Chain Bottlenecks in Low-Carbon Energy Technologies,'' 
European Commission Joint Research Center, 2013, https://publications.jrc.ec.europa.eu/repository/handle/JRC82322.
---------------------------------------------------------------------------

    Returning to the 2016 Rare Earths Assessment, 30 respondents 
indicated they recycled rare earth elements or rare earth element-
related products, and 25 indicated they used recycled rare earth 
elements or rare earth element-related products. However, a number of 
these respondents do not operate in the NdFeB magnet value chain and 
their operations are unrelated to magnets. Other respondents explained 
that they sold material to be recycled or outsourced recycling 
operations, including to known magnet producers. [TEXT REDACTED] Some 
of the pessimistic responses reflect the contemporaneous state of 
technology. For example, [TEXT REDACTED]
    The Department's survey of the U.S. NdFeB magnet industry presents 
a more encouraging picture of the potential contributions of recycled 
rare earths to the U.S. NdFeB magnet value chain. Survey participants 
included five current and potential recyclers: [TEXT REDACTED].\297\
---------------------------------------------------------------------------

    \297\ [TEXT REDACTED].
---------------------------------------------------------------------------

    [TEXT REDACTED]
    [TEXT REDACTED]
    In addition to these firms, in February 2022 the Critical Materials 
Institute (CMI) announced it had partnered with TdVib of Boone, IA, to 
commercialize rare earth element recycling.\298\ In 2017, CMI first 
developed a novel NdFeB magnet recycling process to recover rare earth 
elements that dissolved magnets in an acid-free solution.\299\ CMI's 
method can handle shredded electronic waste like HDDs and obviates the 
need to pre-process--for example, sort--the NdFeB magnets.\300\ Being 
acid-free, CMI's technology is also more environmentally friendly than 
acid-based recycling processes.\301\ TdVib has licensed this technology 
and intends to produce three to five tons of rare earth oxides in the 
next one to two years as part of the method's eventual 
commercialization.\302\ The Small Business Innovation Research Program 
awarded TdVib Small Business Technology Transfer funding for this 
partnership, $200,000 in Phase I and $1.1 million in Phase II.\303\
---------------------------------------------------------------------------

    \298\ ``Green rare-earth recycling goes commercial in the US,'' 
Ames Laboratory, February 25, 2022, https://www.ameslab.gov/index.php/news/green-rare-earth-recycling-goes-commercial-in-the-us.
    \299\ ``Critical Materials Institute develops new acid-free 
magnet recycling process,'' Ames Laboratory, September 5, 2017, 
https://www.ameslab.gov/news/critical-materials-institute-develops-new-acid-free-magnet-recycling-process.
    \300\ Ibid.
    \301\ ``Green rare-earth recycling goes commercial in the US,'' 
Ames Laboratory, February 25, 2022, https://www.ameslab.gov/index.php/news/green-rare-earth-recycling-goes-commercial-in-the-us.
    \302\ Ibid.
    \303\ ``TdVib LLC,'' SBIR, n.d., https://www.sbir.gov/node/1653561.

---------------------------------------------------------------------------

[[Page 9466]]

8.4.2 NdFeB Magnet Substitutes
    NdFeB magnet substitution can occur through several paths.\304\ One 
NdFeB magnet input, such as dysprosium, could be substituted with 
another input, such as terbium. Alternatively, NdFeB magnets can be 
redesigned to reduce the content of certain inputs. As discussed in 
more detail below, some end-users are developing methods to decrease 
the quantity of heavy rare earth elements due to their high cost and 
concentrated supply chains. Products that rely on NdFeB magnets can 
also be redesigned to require NdFeB magnets with different 
characteristics. Finally, NdFeB magnets themselves can be replaced with 
alternative technologies. This could either be in the form of another 
type of magnet or by eliminating the need for magnets.
---------------------------------------------------------------------------

    \304\ This paragraph draws on the DoE's ``Rare Earth Permanent 
Magnets'' report. ``Rare Earth Permanent Magnets: Supply Chain Deep 
Dive Report,'' Department of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
---------------------------------------------------------------------------

Background and Status of NdFeB Magnet Substitution
    The U.S. Government has provided valuable funding for research on 
NdFeB magnet substitutes. In 2011, the Advanced Research Projects 
Agency--Energy (ARPA-E) funded 14 projects aimed at developing 
replacements for rare earth elements in electric vehicles and wind 
turbines through its Rare Earth Alternatives in Critical Technologies 
(REACT) Program.\305\ These projects included research into cerium-
based magnets, iron-nitride alloy magnets, manganese-aluminum based 
magnets, iron-nickel-based magnets, and carbon-based magnets, as well 
as rare earths-free applications like superconducting wire.\306\ 
Although none of these alternatives have resulted in a mainstream 
alternative to NdFeB magnets, there have been some initial steps 
towards commercialization.\307\ For example, the Critical Materials 
Institute is partnering with bonded NdFeB magnet producer Bunting 
Magnetics to test and conduct a feasibility study for cerium-based 
magnets.\308\ This research has also been applied to end-products. For 
example, GE Renewables is planning to produce a prototype of a wind 
turbine generator using superconducting wire instead of NdFeB magnets 
in mid-2023.\309\ In other cases such as carbon-based magnets, academic 
research has continued with little commercial success.\310\
---------------------------------------------------------------------------

    \305\ ``Rare Earth Alternatives in Critical Magnets,'' Advanced 
Research Projects Agency--Energy, n.d., https://arpa-e.energy.gov/technologies/programs/react.
    \306\ ``REACT Program Overview,'' Advanced Research Projects 
Agency--Energy, n.d., https://arpa-e.energy.gov/sites/default/files/documents/files/REACT_ProgramOverview.pdf.
    \307\ Research on iron-nitride magnets was spun-out to a private 
enterprise called Niron Magnetics, which is discussed later in this 
report and in Appendix G, ``NdFeB Magnet Substitutes: Niron 
Magnetics.''
    \308\ ``Commercialization of Cerium-based gap magnets--TCF 
award,'' Ames Laboratory, October 4, 2021, https://www.ameslab.gov/cmi/research-highlights/commercialization-of-cerium-based-gap-magnets-tcf-award.
    \309\ Brett Nelson, ``How Cool is This: Superconducting 
Generators Aim to Unlock More Offshore Wind Power at Lower Cost,'' 
GE Renewables, February 24, 2021, https://www.ge.com/news/reports/how-cool-is-this-superconducting-generators-aim-to-unlock-more-offshore-wind-power-at-lower.
    \310\ ``Revolutionary Carbon-Based Magnetic Material Finally 
Synthesized After 70 Years,'' SciTech Daily, January 28, 2022, 
https://scitechdaily.com/revolutionary-carbon-based-magnetic-material-finally-synthesized-after-70-years/.
---------------------------------------------------------------------------

    In 2020, the Defense Advanced Research Projects Agency's Basic 
Energy Sciences division awarded a total of $20 million to five 
projects dealing with rare earth extraction.\311\ Another $30 million 
was awarded in August 2021 to 13 projects focused on the ``isolation of 
critical elements from natural and recycled resources'' and which may 
reduce or eliminate the use of critical elements without functionality 
losses.\312\ Although it is too early to tell whether these projects 
will lead to commercial products, the U.S. Government's continued 
support for research that may reduce dependence on rare earths and 
enhance supply chain resiliency is critical.
---------------------------------------------------------------------------

    \311\ ``DOE Awards $20 Million for Research on Rare Earth 
Elements,'' Department of Energy, August 25, 2020, https://www.energy.gov/articles/doe-awards-20-million-research-rare-earth-elements.
    \312\ ``Critical Minerals and Materials: Chemical and Materials 
Sciences Research on Rare Earth and Platinum Group Elements,'' 
Department of Energy, https://science.osti.gov/-/media/bes/pdf/Funding/2021/FY2021_CM_Awards.pdf?la=en&hash=D76330B7A090B12B63F0EB2AB83DD43FB367D61C.
---------------------------------------------------------------------------

    The private sector has also actively pursued substitution research. 
Turntide Technologies manufactures motors using switch reluctance 
motors that do not use NdFeB magnets.\313\ [TEXT REDACTED].\314\ Among 
automobile manufacturers, Toyota has been working to develop NdFeB 
magnet substitutes for over a decade. In 2011, Toyota announced that it 
was researching rare earth-free motors.\315\ In 2018, Toyota announced 
that it had produced a preliminary design for a magnet that partially 
replaced neodymium with lanthanum and cerium, reducing total neodymium 
content in the magnet by 20 to 50 percent.\316\ In 2022, Toyota's 
subsidiary Denso announced that it is developing rare earths-free iron-
nickel magnets, although it did not give a timeline for 
commercialization.\317\ In 2016, Honda also announced it would use a 
heavy rare earth element-free motor in some hybrid electric 
vehicles.\318\ Other automobile manufacturers, including BMW, Daimler, 
Nissan, and Volkswagen, are researching methods to reduce the amount of 
rare earth elements used in NdFeB magnets.\319\ For example, the German 
firm Mahle announced rare earths-free motors for vehicle applications, 
with mass production to commence around 2024.\320\
---------------------------------------------------------------------------

    \313\ Meeting between Turntide Technologies and the Department 
of Commerce, (Virtual Meeting, February 17, 2022).
    \314\ Ibid.
    \315\ Nikki Gordon-Bloomfield, ``Toyota Seeks to Ditch Rare 
Earth Metals from Electric Motors, Green Car Reports, January 17, 
2011, https://www.greencarreports.com/news/1053778_toyota-seeks-to-ditch-rare-earth-metals-from-electric-motors.
    \316\ Megan Geuss, ``Toyota's new magnet won't depend on some 
key rare-earth minerals,'' ArsTechnica, February 28, 2018, https://arstechnica.com/cars/2018/02/neodymium-more-like-neo-dont-mium-new-magnet-uses-fewer-key-rare-earths/.
    \317\ ``High-performance magnet that does not use rare earths,'' 
Chunichi Shimbun, January 8, 2022, https://www.chunichi.co.jp/article/394835.
    \318\ Lindsay Brooke, ``Honda's new e-motor magnet aims to 
mitigate China rare-earth monopoly,'' SAE International, July 17, 
2016, https://www.sae.org/news/2016/07/hondas-new-e-motor-magnet-aims-to-mitigate-china-rare-earth-monopoly.
    \319\ ``Factbox: Automakers Cutting Back on Rare Earth 
Magnets,'' Reuters, July 19, 2021, https://www.reuters.com/business/autos-transportation/automakers-cutting-back-rare-earth-magnets-2021-07-19/; Claudiu C. Pavel et al., ``Role of substitution in 
mitigating the supply pressure of rare earths in electric road 
transport applications,'' Sustainable Materials and Technologies 
(12): 62-72, July 2017, https://doi.org/10.1016/j.susmat.2017.01.003.
    \320\ Philip E. Ross, ``In Mahle's Contact-Free Electric Motor, 
Power Reaches the Rotor Wirelessly,'' IEEE Spectrum, May 12, 2021, 
https://spectrum.ieee.org/mahles-electric-motor-says-look-ma-no-contacts.
---------------------------------------------------------------------------

Example: NdFeB Magnet Substitution Using Iron-Nitride Magnets
    Iron-nitride magnets are a potential NdFeB magnet substitute with 
several attractive qualities.\321\ Iron-nitride magnets are made of 
iron and nitrogen powder. [TEXT REDACTED].\322\ [TEXT

[[Page 9467]]

REDACTED].\323\ [TEXT REDACTED].\324\ [TEXT REDACTED].\325\
---------------------------------------------------------------------------

    \321\ [TEXT REDACTED].
    \322\ Meeting between Niron Magnetics and the Department of 
Commerce, (Virtual Meeting, January 7, 2022).
    \323\ Ibid.
    \324\ ``Niron Magnetics: Summary of Environmental Life Cycle 
Analysis,'' Niron Magnetics, November 25, 2021.
    \325\ Meeting between Niron Magnetics and the Department of 
Commerce, (Virtual Meeting, January 7, 2022).
---------------------------------------------------------------------------

    Although iron-nitride has been known for many years, it has yet to 
be commercialized because of the difficulties involved in 
manufacturing.\326\ Researchers at the University of Minnesota, funded 
by ARPA-E's REACT program, were the first to produce an iron-nitride 
magnet prototype. This research was spun out into a commercial venture 
called Niron Magnetics. Niron Magnetics continues to develop this 
technology [TEXT REDACTED].\327\ [TEXT REDACTED].\328\ [TEXT 
REDACTED].\329\
---------------------------------------------------------------------------

    \326\ Ibid.
    \327\ Ibid.
    \328\ Ibid.
    \329\ Ibid.
---------------------------------------------------------------------------

Example: NdFeB Magnet Substitution Using Nanotechnology
    Sintered NdFeB magnets used in critical infrastructure and high 
growth applications, such as electric vehicles and offshore wind 
turbines, require elevated temperature properties that necessitate the 
addition of heavy rare earths like dysprosium and terbium. Heavy rare 
earth deposits are even more concentrated in China than neodymium and, 
after recent Chinese industry consolidation, a single state-owned 
enterprise--China Rare Earth Group--will control most 
capacity.330 331 Although USA Rare Earth's Round Top Mine in 
Texas is expected to produce dysprosium, China will continue to 
dominate global production.\332\
---------------------------------------------------------------------------

    \330\ Meeting between USA Rare Earth and the Department of 
Commerce, (Virtual Meeting, December 10, 2021).
    \331\ Sun Yu and Tom Mitchell, ``China Merges 3 Rare Earth 
Miners to Strengthen Dominance of Sector,'' Financial Times, 
December 23, 2021, https://www.ft.com/content/4dc538e8-c53e-41df-82e3-b70a1c5bae0c.
    \332\ Meeting between USA Rare Earth and the Department of 
Commerce, (Virtual Meeting, December 10, 2021).
---------------------------------------------------------------------------

    MQ3 magnets, first developed by General Motors in 1985 and later 
commercialized by Magnequench in 1987, are a type of NdFeB magnet that 
may offer a reduced heavy rare earth element or heavy rare earth 
element-free alternative to sintered NdFeB magnets.333 334 
With the exception of a reduced need for heavy rare earth elements, MQ3 
magnets rely on similar feedstocks as sintered and bonded NdFeB 
magnets. However, MQ3 magnets are manufactured using different methods 
that affect their heavy rare earth element requirements. MQ3 magnets 
rely on thermomechanical processes to produce dense anisotropic 
microstructures that enable the development of high energy products 
required for elevated temperature applications like electric 
vehicles.\335\ The production of MQ3 magnets involves the following 
steps: (1) rapid solidification of feedstock into ribbon and then 
milling into powder (also used for bonded NdFeB magnets), (2) hot 
deformation of powder into fully dense isotropic magnets through hot 
pressing, hot extrusion, or spark plasma sintering (called MQ2), and 
(3) die-upsetting or back extrusion to form fully dense anisotropic 
magnets (called MQ3).\336\ MQ3 magnets can be made with very high 
energy density. In the 1990s, researchers reported energy products in 
MQ3 magnets comparable to high energy sintered NdFeB 
magnets.337 338 MQ3 magnets can possess similar 
characteristics as sintered NdFeB magnets, despite their different 
manufacturing processes.
---------------------------------------------------------------------------

    \333\ R.W. Lee, ``Hot-pressed neodymium-iron-boron magnets,'' 
Applied Physics Letters 46: 790, 1985, https://doi.org/10.1063/1.95884.
    \334\ V. Panchanathan, ``Magnequench Magnets Status Overview,'' 
Journal of Materials Engineering and Performance, 4 (4) 423-429, 
1995, https://doi.org/10.1007/BF02649302.
    \335\ Ibid.
    \336\ Ibid.
    \337\ C.D. Fuerst and E.G. Brewer, ``High-remanence rapidly 
solidified Nd-Fe-B: Die-upset magnets,'' Journal of Applied Physics 
73: 5751, 1993, https://doi.org/10.1063/1.353563.
    \338\ V. Panchanathan, ``Magnequench Magnets Status Overview,'' 
Journal of Materials Engineering and Performance, 4 (4) 423-429, 
1995, https://doi.org/10.1007/BF02649302.
---------------------------------------------------------------------------

    While comparable in performance metrics to sintered NdFeB magnets, 
MQ3 magnets use a smaller amount of heavy rare earth elements due to 
microstructural differences. As the grain size of NdFeB magnets' 
microstructure is reduced, the magnets' resulting coercivity increases 
due to higher domain wall pinning.\339\ MQ3 magnets' thermomechanical 
manufacturing process means that their grain sizes are in the range of 
20 to one hundred nanometers, orders of magnitude smaller than the five 
to ten micrometers in a typical sintered NdFeB magnet.\340\ MQ3 magnets 
thus display higher coercivity, including at elevated temperatures. As 
a result of these properties, MQ3 magnets require less heavy rare earth 
elements than sintered NdFeB magnets.341 342
---------------------------------------------------------------------------

    \339\ J.F. Herbst, ``R2Fe14B materials: 
Intrinsic properties and technological aspects,'' Reviews of Modern 
Physics, 63 (4): 819-898, 1991, https://doi.org/10.1103/RevModPhys.63.819.
    \340\ Ibid.
    \341\ ``Automotive,'' Neo Magnequench, n.d., https://mqitechnology.com/applications/automotive/.
    \342\ ``Radially oriented, anisotropic Nd-Fe-B ring magnets 
(NEOQUENCH-DR),'' Daido Electronics, n.d., http://daido-electronics.co.jp/english/product/neoquench_dr/index.html?msclkid=a3ef65e0cbb811ecb84db59d0093c2de.
---------------------------------------------------------------------------

    Extant research indicates that substituting MQ3 magnets for 
sintered NdFeB magnets could substantially reduce or even eliminate the 
use of heavy rare earth elements. In one study comparing equivalent MQ3 
and sintered NdFeB magnets, dysprosium-free MQ3 magnets were equivalent 
to sintered NdFeB magnets with 3.43 percent dysprosium by weight.\343\ 
Although MQ3 magnets needed to be four percent dysprosium by weight to 
be equivalent to a sintered NdFeB magnet composed of 6.45 percent 
dysprosium by weight, this still represents a considerable reduction in 
heavy rare earth element content.\344\ In another study comparing MQ3 
and sintered NdFeB magnets with similar temperature coercivities at 180 
degrees, the MQ3 magnets required four percent less dysprosium by 
weight than their sintered NdFeB magnet counterparts.\345\ Future 
research could further optimize the microstructure, reduce grain sizes 
to exhibit single domain behavior, and maximize pinning dominated 
demagnetization, which may enhance coercivity and result in even 
greater reductions in heavy rare earth element content.
---------------------------------------------------------------------------

    \343\ Steve Constantinides, ``Manufacture of Modern Permanent 
Magnet Materials,'' Arnold Magnetic Technologies, n.d., https://www.arnoldmagnetics.com/wp-content/uploads/2017/10/Manufacture-of-Modern-Permanent-Magnet-Materials-Constantinides-PowderMet-2014-ppr.pdf.
    \344\ Ibid.
    \345\ John Ormerod, ``MQ3 Fully Dense NdFeB Magnets,'' Bunting, 
n.d., https://bunting-dubois.com/tech-briefs/types-of-rare-earth-magnets-part-3/.
---------------------------------------------------------------------------

    Although the method to produce MQ3 magnets was first discovered in 
1985, the current NdFeB magnet industry primarily produces bonded and 
especially sintered NdFeB magnets. One major reason for this 
equilibrium is that the processing costs for MQ3 magnets are higher 
than for sintered NdFeB magnets.\346\ However, the rise in heavy rare 
earth prices has increased the proportion of magnet costs attributable 
to feedstock prices and may make MQ3 magnets more economically 
competitive. That said, MQ3 magnets

[[Page 9468]]

were never fully decommercialized. There are currently at least two 
firms that produce MQ3 magnets: Neo Performance Materials of Canada and 
Magnet e Motion of the Netherlands.347 348 In addition to 
these magnet manufacturers, Honda appears to have commercialized the 
use of MQ3 magnets.\349\ In July 2016, Honda and Daido Steel announced 
the use of MQ3 magnets in one of its hybrid electric traction drive 
motors, with production to commence in August 2016.\350\ Daido Steel 
planned to use feedstock from Neo Performance Materials' predecessor 
Magnequench International to produce the magnets at a facility in 
Japan.\351\ [TEXT REDACTED]
---------------------------------------------------------------------------

    \346\ David Brown, Bao-Min Ma, and Zhongmin Chen, ``Developments 
in the processing and properties of NdFeb-type permanent magnets,'' 
Journal of Magnetism and Magnetic Materials, 248 (3): 432-440, 2002, 
https://doi.org/10.1016/S0304-8853(02)00334-7.
    \347\ ``Products,'' Neo Magnequench, n.d., https://mqitechnology.com/products/.
    \348\ ``Hot Formed NdFeB Magnets (MQ3),'' Magnet e Motion, n.d., 
https://magnetemotion.com/technology-mq3-ndfeb-extrusion.html.
    \349\ ``Daido Steel and Honda develop neodymium magnet free of 
heavy rare earth elements; Honda Freed hybrid first to adopt 
resulting new motor,'' Green Car Congress, July 12, 2016, https://www.greencarcongress.com/2016/07/20160712-honda.html.
    \350\ Ibid.
    \351\ Ibid.
---------------------------------------------------------------------------

    In summary, there are two different approaches which can be used to 
improve coercivity and resulting resistance to demagnetization at 
elevated temperature, one of which--MQ3 magnets--is less reliant on 
heavy rare earth elements. In sintered NdFeB magnets, heavy rare earths 
such as terbium and dysprosium are added which results in higher 
feedstock costs and an even greater reliance on Chinese supply chains. 
MQ3 magnets' smaller grain size enables manufacturers to reduce or 
eliminate heavy rare earth elements while maintaining comparable 
performance. Although MQ3 magnets' processing methods are more 
expensive than sintered NdFeB magnets', heavy rare earth element 
feedstock prices may make MQ3 magnets economically competitive. In 
addition, using less heavy rare earth elements would decrease 
dependence on China, which dominates global heavy rare earth element 
production even more than global light rare earth element production. 
MQ3 magnets are a potential substitute for sintered NdFeB magnets and 
would be particularly useful in reducing U.S. dependence on heavy rare 
earth elements.
Commercial Viability of NdFeB Magnet Substitutes
    Despite advances, most substitution technologies are still at least 
several years away from commercialization, which means they will be 
unable to satisfy growing demand for NdFeB magnets from green 
technology (e.g., electric vehicles and wind turbines) over the same 
timeframe.\352\ In addition, most substitutes currently being 
researched would require other rare earth elements (such as lanthanum) 
and would only replace lower-grade NdFeB magnets, meaning that NdFeB 
magnets would still be required in high heat application, including 
electric vehicle drive trains, or when efficiency is highly desired. 
Although other rare earth elements are cheaper, China dominates rare 
earth production. Any viable substitute would also have to quickly 
scale up production. The manufacture of different types of magnets is 
similar, so shifting a production facility from NdFeB magnets or 
samarium cobalt magnets to a substitute may be possible but would still 
require available facilities. Finally, because NdFeB magnets are highly 
tailored to end-user specifications, customers would have to make 
product adjustments to account for substitutes.\353\ Substitution 
research has the potential to impact production in the long-term but 
requires present action to enable success.
---------------------------------------------------------------------------

    \352\ [TEXT REDACTED].
    \353\ [TEXT REDACTED].
---------------------------------------------------------------------------

    The Department's survey of the U.S. NdFeB magnet industry provides 
support for the view that current substitutes are of limited commercial 
viability. The survey asked producers of assemblies or systems 
containing NdFeB magnets to indicate whether magnet substitutes were 
available for their primary products, and if so, to identify the 
potential substitute and discuss the advantages and disadvantages of 
the substitute. 21 firms indicated 57 products in response. [TEXT 
REDACTED].\354\ [TEXT REDACTED] 14 firms indicated 38 products (67 
percent) where no substitutes were available for NdFeB magnets.\355\ 
[TEXT REDACTED], these were a mix of rotors and motors, in addition to 
speakers, wind turbines, and other products, to be used in 15 different 
industries.\356\ For the vast majority of firms in our sample [TEXT 
REDACTED] substitutes were either unknown or unavailable for most 
products [TEXT REDACTED], and the only substitute listed was another 
rare earth magnet, speaking to the dearth of currently commercially 
viable NdFeB magnet substitutes.
---------------------------------------------------------------------------

    \354\ The NdFeB magnets in question were all sintered NdFeB 
magnets.
    \355\ [TEXT REDACTED].
    \356\ The industries cited included all [TEXT REDACTED] 
industries where the NdFeB magnets that could be substituted for 
[TEXT REDACTED] were destined to be used.
---------------------------------------------------------------------------

    The relationship between NdFeB magnet component prices and NdFeB 
magnet imports further underscores the lack of commercially viable 
NdFeB magnet substitutes. If NdFeB magnet substitutes are commercially 
available, then end-users should be able to switch production to use 
NdFeB magnet substitutes. As a result, as NdFeB magnet prices rise 
demand should fall, and vice versa. To examine whether this is the 
case, the Department analyzed the relationship between neodymium oxide 
prices and NdFeB magnet imports. Neodymium oxide prices are a good 
proxy for NdFeB magnet prices because neodymium is the largest 
contributor to NdFeB magnet cost. NdFeB magnet imports are a relatively 
reliable indicator of direct demand because the United States is nearly 
one hundred percent dependent on imports.\357\ The correlation between 
the daily price of neodymium oxide and the daily value of NdFeB magnet 
imports from 2016 to 2021 is 0.23, while the equivalent correlation for 
the daily quantity (units) of NdFeB magnet imports is 0.06. Neodymium 
oxides prices are thus somewhat positively associated with the value of 
NdFeB magnet imports, given that increases in the value of NdFeB magnet 
components should raise the value of NdFeB magnets. However, the 
correlation with the quantity of NdFeB magnet imports is very weak, 
suggesting that end-users do not change their importing behavior in 
response to increases in NdFeB magnet costs. The relatively weak 
correlation between the price of neodymium oxide and the quantity of 
NdFeB magnet imports lends further credence to the view that although 
other magnets or non-magnet components can substitute for NdFeB magnets 
in certain situations, wholesale substitution is currently not 
possible.
---------------------------------------------------------------------------

    \357\ The Department acknowledges that there is significant 
indirect demand for NdFeB magnets.
---------------------------------------------------------------------------

9. Conclusion

9.1 Findings

    In this section the Department discusses the key findings from its 
investigation into the effects of imports of NdFeB magnets on U.S. 
national security. These findings are based on data collected from an 
industry survey, industry meetings, extant U.S. Government research, 
and other sources, as discussed in earlier sections.
9.1.1 NdFeB Magnets Are Essential to U.S. National Security
NdFeB Magnets Are Key Components of National Defense Systems
    NdFeB magnets are critical to the functioning of numerous defense 
systems, including fighter aircraft and

[[Page 9469]]

missile guidance systems. Although NdFeB magnets can sometimes be 
substituted for with alternative products, these products are usually 
not as effective and may reduce system performance. NdFeB magnets are 
therefore essential to U.S. national security.
NdFeB Magnets Are Key Components of Critical Infrastructure
    NdFeB magnets are used in a broad range of products across 
virtually all 16 critical infrastructure sectors. NdFeB magnets are 
necessary and largely non-substitutable components of goods in multiple 
critical infrastructure sectors. NdFeB magnets are particularly 
important for the critical manufacturing and critical energy sectors, 
as they are key to the functioning of electric vehicle drive trains and 
offshore wind turbine generators. They also have an important role in 
the critical healthcare and public health sector, where they are used 
in MRI machines and other medical instruments, and the critical defense 
industrial base sector.
    The Department previously determined that ``national security'' can 
be interpreted to include the general security and welfare of certain 
``critical industries.'' \358\ The Department currently uses the 16 
critical infrastructure sectors identified in Presidential Policy 
Directive 21 to define critical industries.\359\ NdFeB magnets are 
therefore also essential to U.S. national security by virtue of their 
indispensable use in critical infrastructure sectors. NdFeB magnets' 
criticality is heightened by the fact they are key components of 
electric vehicles and offshore wind turbines. These products are 
central to achieving the United States' clean energy goals and 
combating climate change, which have important national security 
implications.\360\
---------------------------------------------------------------------------

    \358\ ``The Effects of Imports of Iron Ore and Semi-Finished 
Steel on the National Security,'' Department of Commerce, Bureau of 
Export Administration, October 2001 (``2001 Iron and Steel 
Report''), at 5, https://www.bis.doc.gov/index.php/documents/steel/2224-the-effect-of-imports-of-steel-on-the-national-security-with-redactions-20180111/file.
    \359\ Presidential Policy Directive 21, ``Critical 
Infrastructure Security and Resilience,'' February 12, 2013.
    \360\ David Vergun, ``Climate Change Has National Security 
Implications, DOD Official Says,'' Department of Defense, https://www.defense.gov/News/News-Stories/Article/Article/2707739/climate-change-has-national-security-implications-dod-official-says/.
---------------------------------------------------------------------------

9.1.2 Domestic Demand for NdFeB Magnets Is Expected To Grow
    Total U.S.--and global--demand for NdFeB magnets is expected to 
grow significantly in the coming decades, driven by increased 
production of electric vehicles and offshore wind turbines. Under high 
growth scenarios, total domestic demand is expected to more than double 
from 2020 to 2030, growing from just over 16,000 tons to 37,000 tons, 
and more than quadruple from 2020 to 2050, increasing to almost 69,000 
tons.\361\ Total global demand is forecasted to grow even more quickly, 
tripling from 2020 to 2030 from 119,000 tons to 387,000 tons and 
increasing sixfold from 2020 to 2050 to over 750,000 tons. 
Domestically, electric vehicles will consume more than 10,000 tons by 
2030 and 23,000 tons by 2050, up from just under 2,000 tons in 2020. 
Domestic offshore wind turbine-driven demand will increase from zero in 
2020 to over 10,000 tons in 2030 and 19,000 tons in 2050. Together, 
these critical infrastructure products will make up almost 55 percent 
of total U.S. demand in 2030 and over 61 percent of total U.S. demand 
by 2050, up from 11 percent in 2020. Total domestic demand from 
traditional end-users is also expected to grow, albeit at a slower 
rate.
---------------------------------------------------------------------------

    \361\ This section uses demand data from the DoE's ``Rare Earth 
Permanent Magnets: Supply Chain Deep Dive Report.'' See ``Rare Earth 
Permanent Magnets: Supply Chain Deep Dive Report,'' Department of 
Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
---------------------------------------------------------------------------

    A key outstanding question is the extent to which firms will locate 
the production of assemblies that integrate NdFeB magnets, such as 
electric vehicle motors and wind turbine generators, in the United 
States. If firms elect to produce products containing NdFeB magnets 
overseas this will increase embedded U.S. demand for NdFeB magnets but 
not affect direct U.S. demand or contribute to a domestic market for 
NdFeB magnets. U.S. NdFeB magnet value chain participants are more 
likely to successfully establish and maintain production if they are 
proximate to their customers, due to transportation costs and turn 
times.\362\ In addition, even end-users that manufacture domestically 
may be unwilling to pay a premium for domestic or ally magnets over 
Chinese magnets. Onshoring or nearshoring of end-user industries and 
incentivizing the use of domestic NdFeB magnets will be critical to the 
success of the U.S. NdFeB magnet industry.
---------------------------------------------------------------------------

    \362\ Meeting between Lynas Rare Earths and the Department of 
Commerce, (Virtual Meeting, March 30, 2022); Meeting between 
Quadrant Magnetics and the Department of Commerce, (Virtual Meeting, 
February 15, 2022).
---------------------------------------------------------------------------

    The substantial growth in total U.S. demand will increase U.S. 
dependence on imports of NdFeB magnets without the rapid development of 
a competitive U.S. NdFeB magnet industry. However, it also presents an 
opportunity to facilitate the formation of just such an industry. If a 
large enough proportion of the products that directly incorporate NdFeB 
magnets--such as electric vehicle drive trains--are manufactured in the 
United States and the price differential between U.S. and Chinese 
magnets can be sufficiently narrowed, domestic NdFeB magnet producers 
may benefit from a sizeable and stable source of demand.
9.1.3 The United States and Its Allies Are Dependent on Imports From 
China
    The United States is currently one hundred percent dependent on 
imports of sintered NdFeB magnets and is highly dependent on imports of 
bonded NdFeB magnets. The United States does not currently possess the 
capacity to manufacture sintered NdFeB magnets and only makes a small 
amount of bonded NdFeB magnets. In addition, the United States does not 
produce rare earth oxides, NdFeB-related metals, or NdFeB alloys, such 
that current bonded NdFeB magnet manufacturers are dependent on 
imported feedstocks. The majority of direct U.S. NdFeB magnet demand is 
satisfied by imports from China. In 2021, China accounted for 75 
percent of U.S. sintered NdFeB magnet imports by value, up from under 
60 percent in 2016. Given substantial indirect demand, this may even 
underestimate the United States' overall dependence on China for NdFeB 
magnets. For example, up to 60 percent of essential civilian demand is 
satisfied through embedded imports.\363\
---------------------------------------------------------------------------

    \363\ ``Building Resilient Supply Chains, Revitalizing American 
Manufacturing, and Fostering Broad-Based Growth,'' The White House, 
June 2021, https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf.
---------------------------------------------------------------------------

    U.S. allies are also dependent to varying degrees on China. 
Although the European Union and Japan operate in the downstream steps 
of the NdFeB magnet value chain, they are dependent on China for 
feedstock to produce metals, alloys, and magnets. Other U.S. allies, 
such as Australia, only operate in the upstream portions of the NdFeB 
magnet value chain. More broadly, China can shape global prices due to 
its dominance in all value chain steps and the increasing concentration 
of its domestic industry.
9.1.4 The United States Will Continue To Depend on Imports
    Multiple firms intend to establish domestic capacity at different 
steps of

[[Page 9470]]

the NdFeB magnet value chain. If successful, these plans have the 
potential to create a U.S. NdFeB magnet value chain from mine to magnet 
and would reduce--but far from eliminate--import dependence on China. 
Based on its survey of the U.S. NdFeB magnet industry, the Department 
estimates that the United States could produce more than 14,000 tons of 
sintered NdFeB magnets by 2026. Should all these magnets be consumed 
domestically, import penetration may decline from one hundred percent 
in 2021 to as low as 49 percent in 2026.\364\ Despite this potentially 
significant decline in import penetration, U.S. production would likely 
struggle to fulfill critical infrastructure demand. Assuming linear 
growth from 2020 to 2030, combined domestic NdFeB magnet demand from 
the automobile and wind energy sectors will be almost 15,000 tons in 
2026, exceeding domestic production.\365\ In addition, domestic NdFeB 
magnet manufacturing will be constrained by domestic production of rare 
earth metals and NdFeB alloys. The Department estimates the U.S. NdFeB 
magnet industry will produce [TEXT REDACTED] of NdFeB alloy by 2026, 
enough for between [TEXT REDACTED] of NdFeB magnets, far less than 
overall and critical infrastructure demand.\366\ Despite diverse 
efforts to establish a U.S. NdFeB magnet industry, the United States 
will continue to depend on imports of NdFeB magnets and related 
feedstock to fulfill demand, including from critical infrastructure 
sectors.
---------------------------------------------------------------------------

    \364\ For further information on the assumptions and data used 
to reach these figures, see Section 8.1.4, ``Estimated NdFeB Magnet 
Import Penetration, 2017 to 2026.''
    \365\ This figure combines estimates of total U.S. demand for 
electric vehicles, offshore wind turbines, and non-electric vehicle 
drive trains, [TEXT REDACTED]. For the demand estimates see ``Rare 
Earth Permanent Magnets: Supply Chain Deep Dive Report,'' Department 
of Energy, February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \366\ See Section 5.2, ``Rare Earth Element Losses in Magnet 
Production,'' for estimates of material loss from alloy production 
to magnet production.
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9.1.5 The U.S. NdFeB Magnet Industry Faces Significant Challenges
    The nascent U.S. NdFeB magnet industry faces significant barriers 
to achieve its production targets. In particular, the U.S. NdFeB magnet 
industry participants will need to compete with Chinese manufacturers, 
who benefit from favorable tax and tariff policies, low labor and 
energy costs, and comparatively relaxed environmental regulations, 
among other factors. Indeed, U.S. producers consistently cite foreign 
competition as a top challenge to their competitive position. Chinese 
competition is also often mediated by other major challenges such as 
labor costs and input availability.
    In addition to Chinese competition, U.S. firms face financial and 
human capital constraints. NdFeB magnet facilities--and facilities at 
earlier value chain steps--are expensive, and U.S. firms have currently 
allocated almost no funds to establish planned facilities. For example, 
sintered NdFeB magnet facilities cost on average [TEXT REDACTED], but 
firms have on average allocated less than [TEXT REDACTED] for each 
facility. Further, the collapse of the U.S. NdFeB magnet industry in 
the 1990s means that planned U.S. NdFeB magnet producers struggle to 
find qualified and experienced workers, especially high wage employees 
such as materials scientists.
    Finally, there is high uncertainty over demand for U.S. NdFeB 
magnets. Not only do a significant portion of end-users manufacture 
products overseas, but even domestic manufacturers may prefer to 
continue using less expensive Chinese NdFeB magnets. Ensuring that 
enough end-users integrate magnets into intermediate and final products 
in the United States will be crucial for the success of the U.S. NdFeB 
magnet industry. Planned U.S. NdFeB magnet industry participants may 
struggle to achieve production estimates, given these and other 
obstacles.

9.2 Determination

    Based on the findings in this report, the Secretary concludes that 
the present quantities and circumstances of NdFeB magnet imports 
threaten to impair the national security as defined in section 232 of 
Trade Expansion Act of 1962, as amended.

9.3 The United States Should Not Restrict NdFeB Magnet Imports

    Despite the heavy dependence of the United States on direct and 
indirect imports of NdFeB magnets, the Department currently recommends 
that the Administration not impose tariffs, quotas, or other import 
restrictions on NdFeB magnets or component products. Given the current 
severe lack of domestic production capability throughout the magnet 
supply chain, tariffs and quotas would have an adverse impact on 
consuming sectors and might incentivize businesses to move operations 
incorporating NdFeB magnets offshore. In both industry meetings and 
public comments, most representatives of consuming sectors oppose the 
imposition of trade restrictions for these reasons. As Dana, a 
manufacturer of electric motors, stated, tariffs ``would potentially 
curtail any future plans to bring parts of its electric motor 
manufacturing to the U.S.'' \367\ Even planned magnet manufacturers, 
such as MP Materials, emphasize that tariffs could incentivize 
substitution or offshoring, although they do not discount the ability 
of tariffs or quotas to aid an established NdFeB magnet manufacturing 
sector. The U.S. Government may reconsider the merits of imposing 
tariffs or other import restrictions, based on section 232 of the Trade 
Expansion Act of 1962, as amended, or other policy levers, as the 
domestic supply chain develops production capacity.
---------------------------------------------------------------------------

    \367\ Comments of Dana to Request for Public Comments, ``Section 
232 National Security Investigation of Imports of Neodymium-Iron-
Boron (NdFeB) Permanent Magnets,'' 86 FR 53277, November 12, 2021.
---------------------------------------------------------------------------

9.4 Recommendations

    The Department has identified several actions that would help to 
ensure reliable domestic sources of NdFeB magnets and lessen the risk 
that imports threaten the national security. These actions are not 
intended to be exhaustive or exclusive, and the Secretary recommends 
that the Administration pursue all proposed actions.
9.4.1 Engagement With Allies and Partners
U.S. Ally Vulnerabilities
    The national security of U.S. allies and partners is essential to 
U.S. national security, and both are undermined by allies' and 
partners' reliance on China with respect to the NdFeB magnet value 
chain. Australia relies on China to buy rare earth materials, while 
both Japan and the European Union rely on China to purchase rare earth 
oxides and metals to make NdFeB magnets. There is also broad reliance 
by U.S. allies on China for NdFeB magnets--[TEXT REDACTED].\368\ Such 
reliance leaves allies open to supply chain disruptions or potential 
economic coercion by China. For example, China has previously 
restricted its imports of Australian coal and its exports of rare 
earths to Japan. China's export restrictions to Japan in 2010, while 
only lasting two months, caused supply chain problems for Japanese 
firms and

[[Page 9471]]

galvanized Japan into diversifying its supply of rare earths.\369\
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    \368\ [TEXT REDACTED]. See Adamas Intelligence, ``Rare Earth 
Magnet Market Outlook to 2030,'' 2020; ``Rare Earth Permanent 
Magnets: Supply Chain Deep Dive Report,'' Department of Energy, 
February 24, 2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \369\ Restrictions to Japan were first reported in September 
2010 and were lifted two months later in November 2010. Kristen 
Vekasi, ``Politics, markets, and rare commodities: Responses to 
Chinese rare earth policy,'' Japanese Journal of Political Science 
20 (1): 2-20, 2019, https://doi.org/10.1017/S1468109918000385; 
``China resumes rare earth exports to Japan,'' BBC, November 24, 
2010, https://www.bbc.com/news/business-11826870.
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Multilateral Engagement on Critical Minerals
    Shared vulnerabilities highlight the value of current 
multilateral--as well as bilateral--engagements on critical minerals, 
which can help transition the United States and allies from reliance on 
a potential adversary and national security threat. Continued 
multilateral engagement through existing fora, such as the Conference 
on Critical Materials and Minerals, in concert with current bilateral 
engagements, including with Australia, Canada, and the European Union, 
will facilitate efficient coordination on supply chain resiliency 
issues across the full NdFeB magnet value chain. The United States 
should work with allies through these existing engagements to develop 
production at different steps of the value chain, encourage 
intellectual property licensing, and cooperate on foreign investment 
reviews, in addition to other actions.
    The United States and allies should leverage burgeoning 
multilateral mechanisms to enhance focus on identifying the most cost-
effective deposits, prioritizing the most commercially viable ones, and 
then pooling funding for production. The United States has one of the 
highest-grade deposits of rare earth elements in the world at Mountain 
Pass Mine in California. Round Top Mine in Texas, scheduled to begin 
production in 2023, may become a viable source of dysprosium. 
Meanwhile, Australia has some of the richest deposits of uranium and 
gallium, along with significant rare earth elements. Leveraging assets 
and comparative advantage amongst allies and partners will help develop 
a critical minerals supply chain in economically viable locations in a 
manner consistent with the United States' labor, environmental, equity, 
and other values.
    In addition to funding market development, multilateral action 
should address technology sharing. While not cited as a critical 
barrier to entry, NdFeB magnet industry participants indicate 
intellectual property licensing would facilitate production. Industry 
participants are also researching NdFeB magnet substitutes and methods 
to reduce rare earths content that would increase supply chain 
resiliency, the commercialization of which should be promoted. 
Intellectual property licensing to firms from ally and partner 
countries should be encouraged and facilitated, especially when it 
reduces reliance on sourcing from non-allies. Allies and partners 
should reciprocate and respect all intellectual property. Emphasis 
should be placed on sharing technology that reduces the negative 
impacts of mining or separation, improves the extraction of rare earth 
elements from unconventional sources, fosters novel and effective 
recycling technologies, and develops effective magnet substitutes.
    Coordinating foreign investment review mechanisms, which affect how 
quickly international capital can flow to priority facilities, should 
also be part of multilateral engagements. U.S. foreign investment law 
has exceptions for investors from certain countries, including 
important NdFeB magnet value chain participants such as Australia and 
Canada.\370\ Those exceptions facilitate investments between the United 
States and its allies; other countries should be encouraged to 
reciprocate for U.S.-origin investments. Coordinating inbound 
investment review regimes may also help protect against the risk that 
an untrusted investor gains access to an important piece of the supply 
chain by investing in a trusted country. Outbound investment controls, 
similar to the ones currently before Congress, may reduce the risk that 
a firm based in an allied country will sell key assets located overseas 
to a foreign adversary.\371\ The Australian firm Peak Rare Earths is an 
example of how foreign investment controls could be used to monitor and 
reduce risk in the NdFeB magnet supply chain. Peak Rare Earths is a 
potentially important non-Chinese rare earths market participant. As 
discussed in Appendix E, ``Global NdFeB Magnet Production: A Firm-level 
Perspective,'' a Chinese firm recently took a significant stake in Peak 
Rare Earths in an inbound transaction to Australia. Outbound review 
could protect against the risk of Peak Rare Earths' Chinese investors 
compelling it to sell critical facilities to Chinese owners, whether 
those facilities are in allied countries (such as its planned rare 
earth oxide separation facility in the United Kingdom) or elsewhere 
(such as its Ngualla mining project in Tanzania).\372\
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    \370\ ``CFIUS Exempted Foreign States,'' U.S. Department of the 
Treasury, https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius/cfius-excepted-foreign-states.
    \371\ ``Text--H.R. 5421--United States Innovation and 
Competition Act,'' U.S. House of Representatives, February 4, 2022, 
https://www.congress.gov/bill/117th-congress/house-bill/4521/text/eh 
(Section 104001).
    \372\ Note that Shenghe Resources, the Chinese investor in Peak 
Rare Earths, also purchased eight percent of U.S. mining firm MP 
Materials. See Mary Hui, ``A Chinese rare earths giant is building 
international alliances worldwide,'' Quartz, February 19, 2021, 
https://qz.com/1971108/chinese-rare-earths-giant-shenghe-is-building-global-alliances/.
---------------------------------------------------------------------------

    There are several established and relevant fora which can serve as 
venues for structured engagement with allies on these and other issues 
related to NdFeB magnets. For example, the Conference on Critical 
Materials and Minerals, which brings together Australia, Canada, the 
European Union, Japan, and the United States, is an important venue to 
regularly exchange information on policies for critical materials, 
research and development, and other efforts, and could be the site of 
further multilateral engagement.\373\ In March 2022, the International 
Energy Agency announced a voluntary critical materials security program 
that could be another forum to coordinate on issues related to NdFeB 
magnets.\374\ In addition to these multilateral fora, the Japan-U.S. 
Industrial Cooperation Partnership, the U.S.-Australia Action Plan, 
U.S.-Brazil Critical Minerals Working Group, the U.S.-Canada Action 
Plan, and the U.S.-E.U. Trade and Technology Council are all important 
bilateral venues in which the United States could engage in structured 
dialogue and coordination with allies on NdFeB magnet-related supply 
chain resiliency issues.
---------------------------------------------------------------------------

    \373\ For additional information on the Conference on Critical 
Materials and Minerals, see ``12th Conference on Critical Materials 
and Minerals Held,'' Ministry of Economy, Trade, and Industry, 
December 9, 2021, https://www.meti.go.jp/english/press/2021/1209_002.html.
    \374\ See ``2022 IEA Ministerial Communiqu[eacute],'' 
International Energy Agency, March 24, 2022, https://www.iea.org/news/2022-iea-ministerial-communique.
---------------------------------------------------------------------------

9.4.2 Bolster Domestic Supply
Establish Rare Earths Tax Credits
    The Department recommends that the Administration support the 
passage of H.R. 5033, the Rare Earth Magnet Manufacturing Production 
Tax Credit Act, or similar legislation.\375\ This bipartisan 
legislation would establish a $20 per kilogram tax credit for rare 
earth magnets manufactured in the United States, and an enhanced $30 
per kilogram credit for magnets manufactured in the United States for

[[Page 9472]]

which all the component materials are produced domestically. This 
legislation covers both NdFeB magnets and samarium-cobalt magnets. In 
both the public comments and in industry meetings, NdFeB magnet 
producers and value chain participants expressed support for this 
legislation. Although they did not cite this legislation directly, end-
users indicated support for domestic manufacturing incentives as 
opposed to tariffs. H.R. 5033 or similar legislation would increase the 
cost competitiveness of U.S. NdFeB magnets and magnet feedstocks 
relative to their Chinese counterparts and galvanize the development of 
a U.S. NdFeB magnet value chain. A tax credit should include magnets 
produced by or using materials from U.S. allies.
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    \375\ See ``H.R. 5033--Rare Earth Magnet Manufacturing 
Production Tax Credit Act of 2021,'' Congress.gov, n.d., https://www.congress.gov/bill/117th-congress/house-bill/5033.
---------------------------------------------------------------------------

    In addition to a tax credit for NdFeB magnets, the Department 
recommends that the Administration support the development of tax 
credits for non-NdFeB magnets that can substitute for NdFeB magnets and 
upstream rare earth products including carbonates, oxides, metals, and 
alloys. NdFeB magnet substitute and upstream rare earth product tax 
credits would similarly improve cost competitiveness and facilitate the 
growth of U.S.-produced magnetic materials. As with a rare earth tax 
credit, any NdFeB magnet substitute and upstream rare earth product tax 
credits should include materials produced by U.S. allies.
Defense Production Act Title III Funding
    As discussed earlier, the Department of Defense (DoD) has made 
several notable awards through the Defense Production Act (DPA) Title 
III program to firms in the NdFeB magnet value chain. These awards have 
largely focused on the development of oxide separation and sintered 
NdFeB magnet production facilities. Further DoD awards for alloying and 
metallization production could facilitate the development of a holistic 
domestic NdFeB magnet value chain. Alloy and especially metal 
production are currently anticipated to be weak links in the future 
U.S. NdFeB value chain. Based on the Department's survey of the U.S. 
NdFeB magnet industry, alloy and metal production facilities are also, 
on average, less expensive than domestic mining or magnet facilities. 
DoD DPA funding for alloy and metal facilities would be an efficient 
use of resources to strengthen the nascent NdFeB magnet value chain.
Encourage the Use of Export-Import Bank Financing
    Eligible U.S. NdFeB magnet industry participants, including NdFeB 
magnet manufacturers and producers at upstream and downstream steps in 
the value chain, should be encouraged to apply for loans from the 
Export-Import Bank of the United States (EXIM). EXIM financing is 
another mechanism to help ease the financial constraints faced by the 
nascent U.S. NdFeB magnet industry. EXIM has two initiatives that are 
particularly relevant for the U.S. NdFeB magnet industry: the Make More 
in America Initiative and the China and Transformational Exports 
Program (CTEP).376 377 The Make More in America Initiative 
extends EXIM's existing medium- and long-term loans and loan guarantees 
to domestic manufacturers that export a sufficient percentage of 
production (15 percent or 25 percent depending on firm 
characteristics), scaled by jobs created. Importantly, export suppliers 
are also eligible. U.S. NdFeB magnet industry participants who meet 
export thresholds directly or because of their customer relationships, 
and are facing financing gaps, should be encouraged to apply for EXIM 
loans and loan guarantees under this initiative.
---------------------------------------------------------------------------

    \376\ On the Make More in America Initiative, see ``Make More in 
America Initiative,'' Export-Import Bank of the United States, n.d., 
https://www.exim.gov/about/special-initiatives/make-more-in-america-initiative.
    \377\ On the China and Transformational Exports Program, see 
``China and Transformational Exports Program,'' Export-Import Bank 
of the United States, n.d., https://www.exim.gov/about/special-initiatives/ctep.
---------------------------------------------------------------------------

    CTEP is meant to help U.S. exporters facing competition from China 
and ensure that the United States leads in ten transformational export 
areas, including renewable energy, energy storage, and energy 
efficiency. It is highly probable that U.S. NdFeB magnet industry 
participants that seek to enter export markets will face considerable 
competition from Chinese firms, given that China is the global leader 
in the NdFeB magnet value chain and Chinese magnets are less expensive 
than their non-Chinese counterparts because of favorable tax rebates 
and subsidies, among other factors. NdFeB magnet industry participants 
should also be encouraged to apply for EXIM financing under CTEP.
Provide Additional Support for Domestic Manufacturing
    As directed by the Bipartisan Infrastructure Law, the Department of 
Energy has allocated nearly $3 billion to boost domestic production of 
technologies critical to clean energy of the future, including electric 
vehicles. Although much of this funding is directed at electric vehicle 
battery-related technologies, a portion of it could be devoted to 
funding domestic NdFeB magnet production, as these are critical to 
clean energy and national security.\378\ For example, $140 million is 
earmarked for the design, construction, and build-out of a facility to 
demonstrate the commercial feasibility of a full-scale integrated rare 
earth element extraction and separation facility and refinery. The 
facility will use recycled feedstock derived from acid mine draining, 
mine waste, or other deleterious material to separate rare earths into 
oxides and refine oxides into metals. Building domestic capacity in 
this phase of the supply chain would support both electric vehicle 
battery and NdFeB magnet production.
---------------------------------------------------------------------------

    \378\ ``Biden Administration, DOE to Invest $3 Billion to 
Strengthen U.S. Supply Chain for Advanced Batteries for Vehicles and 
Energy Storage,'' Department of Energy, February 11, 2022, https://www.energy.gov/articles/biden-administration-doe-invest-3-billion-strengthen-us-supply-chain-advanced-batteries.
---------------------------------------------------------------------------

    In addition to these existing funding sources, the Department 
recommends that the Administration support legislative action to 
develop resilient supply chains through the allocation of additional 
funding, such as the Supply Chain Resilience Program. Additional 
funding from such programs should support investment in domestic 
manufacturing in all steps of the NdFeB magnet value chain.
Defense Priorities and Allocation System
    The investigation into NdFeB magnets focuses foremost on the 
national security. Under Title I of the Defense Production Act (DPA), 
the President is authorized to require preferential acceptance and 
performance of contracts or orders (other than contracts of employment) 
supporting certain approved national defense and energy programs.\379\ 
The Department is delegated authority, through Executive Order 13603, 
to implement these authorities for industrial resources, which it does 
through the Defense Priorities and Allocation System (DPAS) regulation. 
The Department has delegated specific priority rating authority with 
respect to industrial resources to DoD, DoE, DHS, and the

[[Page 9473]]

General Services Administration (GSA). The U.S. Government should 
prioritize contracts for DoD programs while considering the extensive 
use of NdFeB magnets in U.S. critical industry to minimize ``disruption 
to normal commercial activities'' and ``provide an operating system to 
support rapid industrial response in a national emergency.'' \380\
---------------------------------------------------------------------------

    \379\ The DPA's definition of ``national defense'' includes 
military, energy, homeland security, emergency preparedness, 
critical infrastructure and restoration, and military and critical 
infrastructure assistance to foreign nations. See e.g., ``Defense 
Production Act Program Definitions,'' FEMA, n.d., https://www.fema.gov/disaster/defense-production-act/dpa-definitions.
    \380\ ``Defense Priorities and Allocation System,'' Department 
of Defense, n.d., https://www.dcma.mil/DPAS/.
---------------------------------------------------------------------------

    Access to neodymium and NdFeB magnets is critical to the industrial 
base as a highly customizable component with a variety of uses. DoD, 
DoE, and DHS should use or continue to use their delegated authority 
under the DPAS to place priority ratings on contracts for programs 
related to or containing NdFeB magnets and magnet components. DPAS use 
ensures that approved national defense programs receive the appropriate 
priority in the marketplace. DPAS authorities could be particularly 
useful in ensuring that U.S. NdFeB magnet industry manufacturers are 
able to acquire critical equipment in a timely fashion. Across the 
industry, potential domestic producers face average lead times of 
around eight months for equipment, and for some market segments this 
increases to ten months for critical equipment. The Department's survey 
of the U.S. NdFeB magnet industry indicated the United States is the 
top source for equipment. DPAS could therefore be successfully deployed 
to shorten lead times and hasten the development of the U.S. NdFeB 
magnet industry. In addition, once sufficient domestic sources of 
feedstock are available, employing DPAS authorities could enhance the 
timeliness and stability of supply and increase the ability of U.S. 
NdFeB magnet firms to maintain production.
Export Controls
    The Department recommends the Administration consider restrictions 
on exports of materials relevant to the NdFeB magnet value chain under 
the International Emergency Economic Powers Act (IEEPA). Export 
controls could address market distortions in the NdFeB magnet value 
chain that create substantial difficulties acquiring or face inflated 
prices for feedstocks from domestic sources due to competition with 
foreign consumers. [TEXT REDACTED].\381\ [TEXT REDACTED]. The economic 
implications of export controls on the value chain should be analyzed 
to determine their efficacy while considering their impact on U.S. 
allies.
---------------------------------------------------------------------------

    \381\ [TEXT REDACTED].
---------------------------------------------------------------------------

National Defense Stockpile
    The Strategic and Critical Minerals Stockpiling Act (50 U.S.C.Sec.  
98 et seq.), as amended, provides for the acquisition and retention of 
strategic and critical minerals stocks to decrease and preclude U.S. 
dependence on foreign sources or single points of failure for supplies 
during national emergencies.\382\ The Defense Logistics Agency (DLA) 
Strategic Materials oversees the National Defense Stockpile. In Fiscal 
Year 2023, DLA announced potential acquisitions of one hundred metric 
tons of rare earth magnet block, 600 tons of neodymium, and 70 tons of 
praseodymium, potential conversions of 12 tons of rare earth elements, 
and potential recovery from government sources of ten tons of rare 
earths.383 384 385 These potential acquisitions are part of 
the Annual Materials Plan, which is an unconstrained budget estimate 
that assumes that Congressional authorization and funding are 
available. Actual acquisitions may be lower. In DLA's view, the 
availability of rare earth element ore is not a problem, between MP 
Materials, Chemours, and Lynas Rare Earths. Rather, the processing 
stages (oxide to separation to alloying) create production 
vulnerabilities. DLA has not announced the purchase of specific magnet 
grades. [TEXT REDACTED].\386\ Although this stockpile is a welcome 
corrective to current supply chain vulnerabilities, the proposed 
quantities are small in relation to essential civilian and overall U.S. 
demand.\387\ A disruption of the NdFeB magnet supply chain could cause 
an essential civilian shortfall of more than ten times DoD's annual 
peacetime consumption.\388\ Demand, including by critical 
infrastructure sectors, is only expected to grow. The Department 
recommends that the Administration support further national stockpile 
purchases of NdFeB magnet block and constituent materials including 
neodymium, praseodymium, and dysprosium. The Department also suggests 
that the Administration explore whether to include a commercial buffer 
for select essential civilian and critical infrastructure sectors, 
which could strengthen supply chain resiliency in the event of 
disruptions caused by non-market forces.
---------------------------------------------------------------------------

    \382\ ``The Strategic and Critical Materials Stockpiling Act (50 
U.S.C. 98 et seq.): As amended through Public Law 115-232, the 
National Defense Authorization Act for Fiscal Year 2019,'' Defense 
Logistics Agency, n.d., https://www.dla.mil/Portals/104/Documents/Strategic%20Materials/The%20Strategic%20and%20Critical%20Materials%20Stock%20Piling%20Act%20Amended%20Thru%20FY2019.pdf?ver=2019-01-09-151703-093.
    \383\ ``National Defense Stockpile Market Impact Committee 
Request for Public Comments on the Potential Market Impact of the 
Proposed Fiscal Year 2023 Annual Materials Plan,'' Federal Register, 
September 9, 2021, https://www.federalregister.gov/documents/2021/09/09/2021-19415/national-defense-stockpile-market-impact-committee-request-for-public-comments-on-the-potential.
    \384\ As previously mentioned, NdFeB magnets are shaped to meet 
product requirements. Stockpiling unshaped magnet block is prudent 
as it can be cut to meet specific end-use demands. However, each 
magnet block can only produce one grade of magnet, which requires 
the purchase of magnet blocks at multiple grades based on end-use 
demand. Stockpiling rare earth oxides may be preferable as they can 
be refined into metals, alloyed, and manufactured into magnets and 
obviate the need to consider magnet shape and grade requirements. 
That said, the United States currently does not possess the 
requisite downstream capacity to turn rare earth oxides into NdFeB 
magnets so any stockpile of rare earth oxides would need to be 
processed overseas until domestic capacity is established.
    \385\ NdFeB magnets typically contain about 30 percent rare 
earths, with combined neodymium and praseodymium content ranging 
from 19 to 29.5 percent depending on magnet grade and the remaining 
rare earths percentage composed of dysprosium or terbium. Based on 
the potential acquisition of neodymium and praseodymium the proposed 
National Defense Stockpile could produce up to about 1,980 tons of 
NdFeB magnet, not accounting for dysprosium or terbium requirements 
or material losses in the production process, in addition to the one 
hundred tons of rare earth magnet block.
    \386\ Meeting between the Defense Logistics Agency and the 
Department of Commerce, (Virtual Meeting, November 23, 2021).
    \387\ At a minimum, 2020 automobile sector demand was 3,300 tons 
of total U.S. demand of 16,100 tons. ``Rare Earth Permanent Magnets: 
Supply Chain Deep Dive Report,'' Department of Energy, February 24, 
2022, https://www.energy.gov/sites/default/files/2022-02/Neodymium%20Magnets%20Supply%20Chain%20Report%20-%20Final.pdf.
    \388\ ``Building Resilient Supply Chains, Revitalizing American 
Manufacturing, and Fostering Broad-Based Growth: 100 Day Reviews 
Under Executive Order 14017,'' The White House, June 2021, https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf.
---------------------------------------------------------------------------

    [TEXT REDACTED]. DoD has requested $253 million in new 
appropriations for the National Defense Stockpile Transaction Fund in 
the President's Budget Request for Fiscal Year 2023. These funds build 
towards the $1 billion funding goal established by the June 2021 White 
House Report ``Building Resilient Supply Chains, Revitalizing American 
Manufacturing, and Fostering Broad-Based Growth: 100 Day Reviews under 
Executive Order 14017.'' \389\
---------------------------------------------------------------------------

    \389\ Ibid.

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[[Page 9474]]

9.4.3 Bolster Domestic Demand
Cooperation and Information Sharing Between Producers and Consumers
    The Department recommends that the Administration establish a forum 
under a lead U.S. Government agency to encourage information exchange 
and cooperation between emerging NdFeB magnet producers throughout the 
supply chain and NdFeB magnet end-users. As previously discussed, 
ensuring consistent domestic commercial demand is critical to the 
development of a U.S. NdFeB magnet industry. Industry stakeholders have 
cited uncertainty over both potential sources of domestic supply and 
consistent demand for domestic magnets as risks to the emerging U.S. 
NdFeB magnet value chain. This forum would provide additional assurance 
of domestic supply and demand, for example by promoting private sector 
offtake agreements using DPA Title VII. Japan's use of JOGMEC to 
establish definitive offtake agreements between overseas producers and 
Japanese consumers is a successful model the U.S. Government could 
emulate.390 391 Ongoing private sector efforts such as the 
recent agreements between General Motors and MP Materials and 
Vacuumschmelze are encouraging, but the U.S. Government should 
facilitate further cooperation.
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    \390\ For an example, see ``Sojitz and JOGMEC enter into 
Definitive Agreements with Lynas Including Availability Agreement to 
secure supply of Rare Earths products to Japanese Market,'' Japan 
Oils, Gas, and Metals National Corporation, March 30, 2011, https://www.jogmec.go.jp/english/news/release/release0069.html.
    \391\ JOGMEC's offtake agreement with Lynas Rare Earths enabled 
Lynas Rare Earths to survive a slump in rare earth element prices in 
the mid-2010s. JOGMEC-style actions and definitive offtakes more 
generally could be mechanisms to counteract price volatility in the 
rare earths market. Sonali Paul, ``Japanese shore up cash-strapped 
rare earths miner Lynas,'' Reuters, March 13, 2015, https://finance.yahoo.com/news/japanese-shore-cash-strapped-rare-085926334.html.
---------------------------------------------------------------------------

    This forum could also provide a platform to resolve other issues 
relevant to the NdFeB magnet industry. For example, industry 
participants could discuss whether developing a market in futures and 
derivatives based on neodymium or other rare earths could increase 
price transparency and reduce price volatility or provide additional 
access to capital markets that could be used to finance capital-
intensive projects. The Chinese rare earths industry is already 
considering such a marketplace.\392\ [TEXT REDACTED].\393\
---------------------------------------------------------------------------

    \392\ ``China's SHFE speeds up RE futures research,'' Argus 
Media, October 21, 2019, https://www.argusmedia.com/en/news/1999255-chinas-shfe-speeds-up-re-futures-research.
    \393\ See Appendix F, ``U.S. NdFeB Magnet Industry: Company 
Profiles.''
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Recycling and Reprocessing
    The Department recommends that the Administration take legislative 
action to establish regulations and, working in collaborative with the 
private sector, voluntary consensus standards to promote the recovery, 
recycling, and reuse of NdFeB magnets. In particular, labelling 
requirements for end-of-life products would ensure recyclers know NdFeB 
magnet specifications. Uncertainty over magnet specifications is a 
significant barrier to recycling, so labelling would facilitate 
recycling.
    The Department also recommends that the Administration leverage 
existing programs and assets to increase the demand for recycling. DLA 
runs a Strategic Material Recovery and Reuse Program, which allows the 
recovery of strategic and critical materials from excess materials made 
available by other Federal agencies.\394\ Through this program, DLA 
mitigated germanium shortfalls and recovered alloys from turbine 
engines.\395\ DLA could potentially recover rare earth magnets from 
hard disk drives under this authority from the more than 4,000 U.S. 
Government-owned data centers and thereby generate a source of 
recyclable end of life material for recycling firms.\396\ Leveraging 
U.S. Government-owned data centers would also give federal authorities 
an opportunity to lead private industry in secure destruction of the 
devices containing NdFeB magnets without damaging the magnets. As noted 
above, private entities often shred their data devices; they may be 
more willing to follow secure destruction practices identified by the 
U.S. Government. In addition, Federal agencies could direct any 
Federally-owned end-of-life electric vehicles or wind turbines using 
NdFeB magnets to recycle contained magnets.
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    \394\ ``Strategic Material Recovery and Reuse Program,'' Defense 
Logistics Agency Strategic Materials, n.d., https://www.dla.mil/HQ/Acquisition/StrategicMaterials/RRSMRP/.
    \395\ Ibid.
    \396\ ``Building Resilient Supply Chains, Revitalizing American 
Manufacturing, and Fostering Broad-Based Growth: 100 Day Reviews 
Under Executive Order 14017,'' The White House, June 2021, https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf.
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    Finally, the Department recommends that the Administration evaluate 
whether removing and processing tailings sites, for example of heavy 
mineral sands and coal tailings, could ameliorate environmental 
concerns at site locations.397 398 If removing heavy mineral 
sands and coal tailings would improve environmental indicators at site 
locations, the Environmental Protection Agency should assess whether 
environmental cleanup funds such as its Superfund program could be used 
to repurpose these sites. Monazite, produced as a byproduct of heavy 
mineral sands operations and traditionally considered a waste material, 
and coal tailings are potential rare earth element feedstocks. As a 
result, removing and processing tailing sites could provide an 
additional source of rare earths and increase the resilience of the 
U.S. NdFeB magnet value chain.
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    \397\ Heavy mineral sands operations produce monazite as a 
byproduct. Monazite was historically considered a waste material due 
to its radioactive content. As a result, monazite was blended into 
sand and reburied. Removing and processing monazite could therefore 
be conceptualized as reusing existing waste material. Meeting 
between Energy Fuels and the Department of Commerce, (Virtual 
Meeting, March 1, 2022).
    \398\ Multiple private and public sector actors are actively 
seeking to clean up coal mine byproduct waste while extracting rare 
earth elements. See Austyn Gaffney and Dane Rhys, ``In coal country, 
a new chance to clean up a toxic legacy,'' Washington Post, May 19, 
2022, https://www.washingtonpost.com/climate-solutions/2022/05/19/coal-mining-waste-recycling/.
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Domestic Content Requirements
    In Executive Order 14057, ``Catalyzing Clean Energy Industries and 
Jobs through Federal Sustainability'', the Biden Administration 
mandated that all federal agencies buy electric vehicles (in total 
about 600,000 car and trucks) by 2035 and that all 300,000 federal 
buildings be powered by wind, solar, or nuclear energy by 2030.\399\ In 
addition, greatly expanded offshore wind energy is a major aspect of 
the Administration's efforts to accelerate the United States' clean 
energy economy and fight climate change. To support a vibrant and 
resilient green technology supply chain, federal procurement rules 
should specify that, to the extent possible, the electric vehicles 
purchased use domestically produced NdFeB magnets, and that the wind 
turbines supplying energy to federal facilities use domestically 
produced NdFeB magnets (for those using NdFeB magnets). The Department 
of Interior is sponsoring an offshore wind lease sale that includes 
lease provisions to promote the use of domestic materials.\400\ These 
provisions

[[Page 9475]]

should cover NdFeB magnets. In addition, electric vehicles and wind 
turbines might be procured by state or local governments or with state 
or local funding, and such content requirements could expand to these 
purchases. Domestic content requirements could mirror those of defense 
applications, which already have non-Chinese content requirements, and 
thereby include U.S. allies. Ensuring that requirements are structured 
to include magnets produced by U.S. allies is important to guarantee 
U.S. Government demand is adequately supported. To minimize disruption 
to U.S. procurement, content requirements can be phased-in and waived 
if insufficient quantities of eligible NdFeB magnets are available.
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    \399\ ``Fact Sheet: President Biden Signs Executive Order 
Catalyzing America's Clean Energy Economy Through Federal 
Sustainability,'' The White House, December 8, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/12/08/fact-sheet-president-biden-signs-executive-order-catalyzing-americas-clean-energy-economy-through-federal-sustainability/.
    \400\ ``Fact Sheet: Biden Administration Jumpstarts Offshore 
Wind Energy Projects to Create Jobs,'' The White House, March 29, 
2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/29/fact-sheet-biden-administration-jumpstarts-offshore-wind-energy-projects-to-create-jobs/.
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Consumer Rebates
    Consumer rebates are another mechanism to incentivize the domestic 
production of NdFeB magnets. The Department recommends that the 
Administration develop and implement a tax rebate for consumers who 
purchase electric vehicles that are certified to contain U.S. or U.S. 
ally origin content. This rebate would help compensate automobile 
manufacturers for the increased cost of using domestic or ally produced 
NdFeB magnets. Such a rebate need not be limited to NdFeB magnets but 
could include U.S. or U.S. ally origin content batteries as well.
9.4.4 Support Medium- to Long-Term Industry Development and Resiliency
Research Into Reducing the Use of Rare Earth Elements
    The Department recommends that the Administration continue to fund 
research that seeks to reduce rare earth element content, and 
especially heavy rare earth element content, in NdFeB magnets, develop 
NdFeB magnet substitutes, and avoid the use of magnets, including NdFeB 
magnets, in end-use products. This includes support for research on MQ3 
magnets, which could reduce or eliminate heavy rare earth contents, 
more efficient NdFeB magnets, potential non-NdFeB magnets such as iron-
nitride magnets, and assemblies that obviate the need for NdFeB magnets 
in applications such as electric vehicle motors and wind turbine 
generators.\401\ Reducing rare earth element content would help 
alleviate projected rare earths shortages and increase supply chain 
resiliency by reducing dependence on China.
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    \401\ [TEXT REDACTED]. Meeting between Turntide Technologies and 
the Department of Commerce, (Virtual Meeting, February 17, 2022).
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Human Capital Development
    The Department recommends that the Administration use applicable 
programs to support the development of human capital as required by the 
nascent U.S. NdFeB magnet industry. The collapse of the U.S. NdFeB 
magnet industry in the 1990s hollowed out industry-specific knowledge 
and skills, such that the United States' stock of NdFeB magnet-related 
human capital is limited. Current and potential domestic producers 
indicated that finding qualified and experienced manufacturing 
engineers and scientists is an important constraint on their 
operations. Some firms also indicated that finding qualified and 
experienced production line workers is an issue. The U.S. Government, 
state governments, and local authorities should work with industry, 
labor, and educational institutions to develop skills relevant to NdFeB 
magnet production by creating and expanding training programs and 
scholarships. For example, the Department of Labor's Employment and 
Training Administration funding opportunities, such asthe Strengthening 
Community Colleges Training Grant, could be used to establish and 
enhance educational programs that teach NdFeB magnet-related 
skills.\402\
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    \402\ For current Employment and Training Administration funding 
opportunities, see ``Funding Opportunities,'' U.S. Department of 
Labor, n.d., https://www.dol.gov/agencies/eta/grants/apply/find-opportunities.
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    In addition, eligible entities should be encouraged to apply for 
the Economic Development Administration's Public Works and Economic 
Adjustment Assistance programs.\403\ For example, higher education 
institutions or local governments in distressed communities (including 
coal communities) could apply for grants to develop and strengthen 
training facilities related to NdFeB magnet manufacturing, such as 
materials science.\404\ Supporting the development of human capital 
related to the NdFeB magnet value chain would help grow a robust 
domestic NdFeB magnet industry and by extension enhance the resiliency 
of end-use product supply chains, including electric vehicles and 
offshore wind turbines.
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    \403\ See ``PWEAA2020 FY 2020 EDA Public Works and Economic 
Adjustment Assistance Programs Including CARES Act Funding,'' 
Grants.gov, last modified April 1, 2022, https://www.grants.gov/web/grants/view-opportunity.html?oppId=321695.
    \404\ Some planned NdFeB magnet industry participants are 
located in areas that may qualify as distressed communities, while 
others are situated in places that could qualify as coal 
communities, such as Kentucky and Tennessee. Training facilities in 
these areas could be particularly useful for developing a local 
pipeline for talent.
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9.4.5 Continue To Monitor the NdFeB Magnet Value Chain
    The Department recommends that the Administration continue to 
monitor the NdFeB magnet value chain to ensure that U.S. and ally firms 
are not adversely impacted by non-market factors or unfair trade 
actions, such as intellectual property violations or dumping. As 
previously discussed, the U.S. NdFeB magnet industry disappeared in the 
1990s and early 2000s in part because of Chinese policies such as tax 
rebates and subsidies as well as intellectual property infringement. To 
ensure that the nascent U.S. NdFeB magnet industry survives, the U.S. 
Government should remain cognizant of the health of the industry and 
the effects of Chinese competition. The Department and the Supply Chain 
Trade Task Force should periodically assess the health of the U.S. and 
global NdFeB magnet value chain to determine whether additional actions 
should be undertaken to counterbalance non-market factors or unfair 
trade practices.

Thea D. Rozman Kendler,
Assistant Secretary for Export Administration.
[FR Doc. 2023-03078 Filed 2-13-23; 8:45 am]
BILLING CODE 3510-33-P