Commerce Section 232 Magnet Import Investigation Concludes Without Tariffs - Lexology

2022-09-23 22:21:12 By : Mr. Jack Zheng

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On September 21, 2022, after a year-long Section 232 investigation, the Department of Commerce’s Bureau of Industry and Security (BIS) announced that rare earth neodymium-iron-boron (NdFeB) magnet imports threaten national security. The investigation was initiated in September 2021 due to concerns that “critical national security systems rely on NdFeB permanent magnets, including fighter aircraft and missile guidance systems. In addition, NdFeB permanent magnets are essential components of critical infrastructure, including electric vehicles and wind turbines. The magnets are also used in computer hard drives, audio equipment, and MRI devices.” (See Update of September 28, 2021). While the full report concludes that NdFeB magnets are essential to national security and imports from China of NdFeB magnets constitute a national security threat — a finding that President Joseph Biden endorsed in his review of the report — Section 232 tariffs will not be implemented.

The public version of the report found that the People’s Republic of China (China) over the last three decades has essentially captured the entire supply chain — with nearly 60 percent of mined production, over 85 percent of processing capacity, and over 90 percent of permanent magnet production. The report also noted that U.S. consumption of these magnets, driven by increased demand from electric vehicles and wind energy industries, will likely double in the next decade. Despite these findings, the Biden administration intends to implement various Department of Commerce recommendations in lieu of tariffs on these imports. These recommendations include:

In addition, to ensure continued support for the domestic NdFeB magnet industry faced with unfair competition from China, the Department of Commerce and the Office of the U.S. Trade Representative (USTR) will continue to monitor the supply chain to determine whether additional actions should be undertaken to counteract non-market policies or practices or other unfair trade practices.

Due to heavy U.S. dependence on these magnet imports, the report notes, the Department of Commerce was not recommending the implementation of tariffs, quotas or other import restrictions. The report states that, “[g]iven 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.”

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