The US Department of Commerce’s (Commerce) Bureau of Industry and Security has initiated an investigation under Section 232 of the Trade Expansion Act of 1962 to determine the effects on US national security from imports of Neodymium-iron-boron (NdFeB) permanent magnets, a product used in a wide range of critical defense and civilian applications. This is the first Section 232 investigation initiated under the Biden Administration, and it follows from a recommendation contained in White House supply chain reviews. This White House review found that only China has active capacity across all supply chain tiers of the NdFeB industry—meaning that this imbalance may be a focus of the investigation and any resulting remedy.
The investigation will assess whether NdFeB permanent magnets are being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security. If Commerce makes an affirmative finding, US President Joe Biden is authorized to take action he deems necessary “to adjust the imports” of the NdFeB permanent magnets and its “derivatives” so that such imports will not threaten to impair the national security. Such action could include the imposition of tariffs or other measures designed to ensure the national security of the United States is not reliant on foreign supply.
Companies that are interested in this proceeding have an opportunity to provide comments to Commerce by November 12, 2021.
BACKGROUND ON THE PRODUCT AT ISSUE
NdFeB permanent magnets have permanent magnetic fields, and they contain rare earths which increase the strength of the magnet. These magnets are used for a broad range of products, including the following:
- Military applications, such as fighter aircraft and missile guidance systems;
- Climate-related applications, such as electric vehicles and wind turbines; and
- Consumer electronics, such as computer hard drives, audio equipment and MRI devices.
Given that these magnets are often embedded in technology, one of the challenges in this investigation is that it may be difficult to identify the source of such magnets.
This investigation is part of heightened US government attention to the importance of critical minerals and rare earth elements to the US supply chain.
Commerce has invited interested parties to submit comments—including any data, analyses or information pertinent to its investigation—by November 12, 2021.
Although interested parties are free to submit comments on any topic relevant to the investigation, Commerce has expressed particular interest in comments addressing the following topics:
- Quantity of or other circumstances related to the importation of NdFeB permanent magnets;
- Domestic production and productive capacity needed for NdFeB permanent magnets to meet projected national defense requirements;
- Existing and anticipated availability of human resources, products, raw materials, production equipment and facilities to produce NdFeB permanent magnets;
- Growth requirements of the NdFeB permanent magnets industry to meet national defense requirements and/or requirements for supplies and services necessary to assure such growth, including investment, exploration and development;
- The impact of foreign competition on the economic welfare of the domestic NdFeB permanent magnets industry;
- The displacement of any domestic NdFeB permanent magnets production causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects;
- Relevant factors that are causing or will cause a weakening of the country’s economy; and
- Any other relevant factors, including the use and importance of NdFeB permanent magnets in the following “critical infrastructure sectors”: (1) chemical; (2) commercial facilities; (3) communications; (4) critical manufacturing sector; (5) dams; (6) defense industrial base; (7) emergency services; (8) energy; (9) financial services; (10) food and agriculture; (11) government facilities; (12) healthcare and public health; (13) information technology; (14) nuclear reactors, materials and waste; (15) transportation systems; and (16) water and wastewater systems.
TIMING FOR DECISION
By law, the US Secretary of Commerce (the Secretary) has up to 270 days from initiation, until June 18, 2022, to present Commerce’s findings and recommendations to the President. If the Secretary finds that NdFeB permanent magnets are being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security, the Secretary shall advise the President in her report on the findings of the investigation and recommendations regarding remedy.
Once the Secretary has delivered such a report to the President, the President then has 90 days to decide whether he concurs with the Secretary’s finding. If so, the President determines the nature and duration of the action that 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. Typically, remedies involve tariffs or quantitative restrictions.
For questions regarding the potential implications of this investigation for your business, assistance in filing comments or other opportunities to participate in this proceeding, please contact the experienced attorneys in McDermott’s International Trade team.