Governments Weigh In on Section 232 Investigation on Neodymium Magnets

As we reported here, in late September the Commerce Department’s Bureau of Industry and Security (BIS) initiated an investigation under Section 232 of the Trade Expansion Act of 1962 "to determine the effects on U.S. national security from imports of Neodymium-iron-boron (NdFeB) permanent magnets." China is by far the leading import source of NdFeB magnets. Comments from interested parties were due November 12. As of this writing, the docket page for this case indicates that 48 comments have been received, with 41 currently posted to the docket and available for download. We reported on the initial batch of posted comments here. In this piece, we offer highlights from recent comments received from several governments: The EU, Japan, Australia, and Canada.

The EU submission begins by putting forward strong objections to the recent U.S. use of Section 232:

The current US administration continues to launch US Section 232 national security investigations, for what appears to be industrial policy reasons. The proliferation of such investigations and possible actions under the guise of national security to protect certain industrial sectors against foreign competition is of great concern to the EU. The EU and its Member States have been a close national security partner of the United States (“US”) for decades and reject the notion that their exports as well as their industries, could threaten US national security.

The EU then acknowledges the U.S. goals but asks it to consider the broader impact:

The EU fully understands the need for the US to further enhance its domestic production capabilities in this strategic sector. ...

At the same time, to our knowledge, the US industry is not yet in a position to manufacture neodymium magnets at a commercial scale. As the US supply chain review notes, developing a complete supply chain for neodymium magnets is an extensive process, which is likely to take several years. As a result, the EU respectfully asks the US to consider the full extents of a potential US decision to apply unilateral measures, including import restrictions, at this stage of the respective development of the EU and US industries.

Japan then explained how its own industry is a secure part of the U.S. supply chain:

2. In the investigation on neodymium magnets under Section 232 of the Trade Expansion Act, we acknowledge that the U.S. has expressed its concerns about (1) the fact that numerous critical national security systems rely on neodymium magnets, including fighter aircraft and missile guidance systems, and (2) the fact that neodymium magnets are essential components of critical infrastructure, including electric vehicles and wind turbines. Japan’s high-grade neodymium magnets and the products using them are widely used in industrial factory automation systems and medical equipment, in addition to the above mentioned applications, which support the lifelines and supply chains of the American people.

3. The facts above show the high demand in the U.S. supply chain for Japan's high-grade neodymium magnets and products using them. In this regard, Japan has deeply contributed to the U.S. economy, including its economic security, as an important supplier of neodymium magnets and products using them.

Australia argued that it could play a positive and secure role in the U.S. supply chain by working with other U.S. allies such as Japan and South Korea:

Australia seeks to produce rare earth oxides and, potentially, metals domestically, but will continue to rely on stable and secure global supply chain partnerships – for example, with Japan and the Republic of Korea, and potentially the United States - for downstream metal and magnet-making to support end-use markets. The health of the U.S. magnet-making and - consuming sector is of fundamental interest to Australia. Our ability as a reliable and market-oriented producer of upstream materials is an ideal complement to a developing U.S. downstream magnet industry.

And Canada said that "the potential exists for Canada to further establish itself as a cost-efficient, stable, sustainable and reliable producer in the future":

Measures arising from this investigation have the potential to disrupt the ability of Canada to effectively participate in and support a North American supply chain related to production of these magnets. Canada has long been a trusted defence and security partner of the United States, as well as a secure, responsible source of critical minerals. Canada is currently working with the United States to advance our mutual objective of establishing diversified critical mineral supply chains through the Canada-U.S. Joint Action Plan for Critical Minerals Cooperation. These critical minerals include neodymium and other Rare Earth Elements (REEs) used in these magnets. In addition to the Joint Action Plan, Canada and the United States are engaged in ongoing discussions on critical minerals, as they relate to defence and security, through the National Technology and Industrial Base working group.

There are several Canadian companies or entities active in different stages of the REE supply chain, from mining to magnet production. While Canada is not currently a major global producer of REEs, or associated downstream products including finished magnets, the potential exists for Canada to further establish itself as a cost-efficient, stable, sustainable and reliable producer in the future. Canada’s current operations, as well as its additional potential, are at risk if the ongoing investigation affects Canada’s ability to fully participate in a North American supply chain for NdFeB magnets.