Wheel loaders fill trucks with ore at the MP Materials rare earth mine in Mountain Pass, California, U.S. January 30, 2020. REUTERS/Steve Marcus

Aug 10 (Reuters) - A Democrat in the U.S. House of Representatives introduced legislation on Tuesday extending tax credits to companies that domestically produce rare earth magnets, a sector currently dominated by China.

The bill is the latest in a string of U.S. legislation attempting to cobble together a national strategy to produce more lithium, rare earths and other so-called strategic minerals used to make electric vehicles (EVs), weaponry and electronics.

Representative Eric Swalwell, a California Democrat, introduced the Rare Earth Magnet Manufacturing Production Tax Credit Act, a bill co-sponsored by Representative Guy Reschenthaler, a Pennsylvania Republican.

The bill sets up a $20 per kilogram credit for neodymium iron boron magnets made in the United States, with the credit growing to $30 per kilogram for magnets made with rare earths sourced from American mines.

"As the Biden administration makes a strong commitment to vehicle electrification, it’s more important than ever that the United States secures all of the necessary components of the supply chain," said Swalwell, who unsuccessfully ran for the U.S. presidential nomination in 2020.

Swalwell and Reschenthaler had previously launched a bipartisan caucus to focus on ways to increase domestic rare earths production.

Rare earths are 17 metals that are difficult and costly to mine and process cleanly. MP Materials Corp's (MP.N) Mountain Pass mine in California is the only U.S. rare earths mine, but that facility relies on Chinese processors.

There are no facilities in the United States to produce rare earths magnets.

China is the world's largest producer of these minerals and magnets, and has threatened to stop their export to the United States.

The credit would be a boost to MP, which has said it aims to produce magnets at some point in the country, as well as privately held USA Rare Earth and other domestic projects.

"These credits would be a boost to U.S. manufacturing of rare earth permanent magnets essential to electric vehicles, as well as to U.S. defense and industrial supply chains," said Pini Althaus, chief executive of USA Rare Earth, which is developing a rare earths project in Texas.

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