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Rare-Earth Magnets Section 232 Investigation Ends Without Tariffs

China dominates in rare-earths magnet production, which is a threat to U.S. national security, the Commerce Department concluded, but the president will not be authorizing tariffs to bolster a nascent domestic rare-earths magnet industry.

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Instead, the government will continue to encourage high-tech magnet production -- important for wind turbines, electric vehicles, ship propulsion systems and guided missile actuators -- through tax credits for manufacturing, mining and refining operations and Defense Production Act grants. It also will aim to stimulate demand for domestic magnets and a friend-shored supply chain for those magnets through government purchase requirements for EVs and for offshore wind turbines that provide power to government buildings.

It said the government also should establish a consumer rebate for EVs tied to U.S. or ally-produced rare-earth magnets.

"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," the Section 232 report said.

This was the first Section 232 investigation begun since President Joe Biden took office. It will not result in tariffs on imported rare-earths magnets, but the White House said, "The Department of Commerce and the Office of the U.S. Trade Representative will assess the U.S. and global NdFeB [neodymium-iron-boron] magnet value chain to determine whether additional actions should be undertaken to counteract non-market policies or practices or other unfair trade practices." The Commerce Department said it would be monitoring to make sure U.S. and firms in ally countries "are not adversely impacted by non-market factors or unfair trade actions, such as intellectual property violations or dumping."

The Commerce Department said it would evaluate whether there should be export controls on rare earths produced in the U.S. if foreign buyers are making it hard for domestic magnet-makers to get domestic supply.

The report also said the federal government would establish a forum "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."

The government also will continue to fund research on other sorts of magnets that could serve the same function with different chemistry, research on how to make rare-earth magnets with a smaller amount of those rare earth elements, and research on how to avoid the use of magnets in wind turbines and EV motors.

Japan produces 7% of the world's rare-earth magnets, but is entirely reliant on rare earths refined in China; China is the source of nearly all of the rest of the rare-earth magnets.

The Section 232 report, released Sept. 21, said that four companies have announced they are going to open rare earth magnet manufacturing facilities in the U.S. by 2026, and two of those companies are also working on developing rare earth mining and processing domestically.

"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," the report said.

MP Materials, one of the companies mentioned in the report, said it will start with rare earth refining in late 2023, and it has a supply agreement with General Motors to produce alloy and magnets for EVs.

"MP Materials' Fort Worth facility will have the capacity to produce approximately 1,000 tonnes of neodymium-iron-boron (NdFeB) magnets per year, supporting the production of approximately 500,000 EV traction motors, with room to scale," the company said. "In addition to EVs, NdFeB magnets are critical inputs to robots, wind turbines, drones, defense systems, and many other high-growth technologies.

"In February, the Department of Defense awarded MP Materials $35 million to refine and separate heavy rare earth elements at the company's Mountain Pass, California, rare earth materials production facility. MP's Texas magnetics factory will source refined feedstock from Mountain Pass and transform it into finished products, delivering an end-to-end supply chain, including mining and refining, metal, alloy, and magnet manufacturing, and recycling," the company said.