Background

The Biden administration has elected not to impose higher tariffs or quotas on imports of neodymium-iron-boron permanent magnets, but will take other actions, after the Bureau of Industry and Security concluded a Section 232 investigation by determining that such imports threaten national security.

BIS states that NdFeB magnets are the strongest permanent magnets commercially available and improve the efficiency of electrical machines. They are used in hundreds of products, ranging from headphones to industrial robots, as well as defense systems and critical infrastructure applications.

U.S. consumption of these magnets is forecast to more than double from 2020 to 2030, driven by increased demand from electric vehicles and clean energy industries, but the U.S. is nearly completely dependent on imports to meet commercial and defense requirements and most of these come from China, which has captured nearly the entire supply chain over the last three decades. As a result, BIS states, the U.S. industry “faces significant barriers to reaching its production targets, including unfair Chinese practices.”

In response, rather than adjusting imports (such as through the use of tariffs or quotas), the U.S. will take steps to bolster domestic production throughout the supply chain, promote demand for U.S.-produced magnets, engage with allies and partners on supply chain resilience, support the development of a highly-skilled workforce, and support research to mitigate supply chain vulnerabilities. Specific efforts will include (1) encouraging eligible manufacturers and producers at upstream and downstream steps in the value chain to apply for financing for export-oriented domestic and manufacturing projects from the Export-Import Bank and (2) considering whether medium-term or long-term loans from the Ex-Im Bank may offer opportunities to utilize U.S. goods and services exports. BIS notes that if current efforts to establish domestic capacity at different steps of the value chain are successful, import penetration could decline significantly by 2026.

In the meantime, BIS and the Office of the U.S. Trade Representative will assess the U.S. and global NdFeB magnet value chain to determine whether additional actions should be undertaken to counteract non-market policies or practices or other unfair trade practices.

For more information on Section 232 tariffs, please contact attorney Kristen Smith at (202) 730-4965 or via email.

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