House Armed Services Committee Proposes Further Measures On Vulnerabilities In Rare Earths Supply Chain

by Gareth Hatch on May 19, 2010

in Legislation, News Analysis, Rare Earths

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Earlier this year, the release of the Government Accountability Office [GAO] report on rare earths garnered much attention, with its analysis of the vulnerabilities in the defense supply chain, particularly relating to to the geographic concentration of rare earth supply in China. Some may recall that this report was the result of language inserted into the National Defense Authorization Act [NDAA] for FY2010, which required that the head of the GAO, the Comptroller General, submit such a report to the Armed Services Committees in Congress. There was criticism of the report from a number of sources, primarily complaints that the report did little to move the issues of supply chain vulnerability forward.

Late last month, the Chairman of the House Armed Services Committee [HASC], Rep. Ike Skelton [D-MO], and the Committee’s Ranking Member, Rep. Buck McKeon [R-CA], introduced a proposed FY2011 version of the NDAA to the HASC. The bill was considered by the Committee and last week was recommended for consideration by the House as a whole, for a vote.

As was the case last year, language has been included in the proposed NDAA, relating to rare earths, and their role in the defense supply chain [language with which observers of the proposed RESTART Act will be familiar]. The language kicks things up a notch this time, with Section 835 of the Act requiring, if passed into law, that the Secretary of Defense be specifically tasked to:

undertake an assessment of the supply chain for rare earth materials and determine which, if any, rare earth materials are strategic materials and which rare earth materials are materials critical to national security.

The bill defines a “strategic material” as one which is “essential for military equipment”, is also “unique in the function it performs” and “for which there are no viable alternatives”. It also includes language that amends existing law to define “materials critical to national security” as those materials:

  • which are needed for the production and maintenance of equipment used by the Armed Forces in military operations, AND
  • whose supply could be restricted by actions outside of the control of the US Government.

The proposed legislation goes on to say that the Secretary of Defense may “consider the views of other Federal agencies, as appropriate”, likely a reference to the recent Request For Information published by the Department of Energy on rare earths, at the very least.

The bill goes on to state that:

any study conducted by the Director, Industrial Policy during fiscal year 2010 may be considered as partial fulfillment of the requirements of this section;

and that

any study conducted by the Comptroller General of the United States during fiscal year 2010 may be considered as partial fulfillment of the requirements of this section

The former comment here refers to a report on which the Department of Defense is presently working, which is due to be published in September 2010. The latter refers to the aforementioned GAO Report, published last month.

The bill specifically asks the Secretary of Defense to

consider the sources of rare earth materials (both in terms of source nations and number of vendors) including rare earth elements, rare earth metals, rare earth magnets, and other components containing rare earths.

The bill would require that, if the Department of Defense finds that one or more rare earths is indeed either strategic or critical in nature, a plan be developed to get the entire rare earths supply chain up and running in the USA again, and to eliminate any and all vulnerabilities in the supply chain, by the end of 2015. Areas for consideration in such a plan would include:

  • the possibility of stockpiling of such materials
  • the identification of problematic trade practices that could impede the supply chain
  • an assessment of the climate for financing the revival of all aspects of the rare earths supply chain
  • provision of R & D funding

The bill would give the Secretary of Defense six months from enactment, to report back to Congress on the findings of the assessment described earlier.

I asked Jeff Green, an industry lobbyist who worked with the US Magnet Materials Association on the recently proposed RESTART legislation, for his thoughts on the proposed language in the FY2011 NDAA.

“This will ensure that [the Department of Defense] does a complete assessment of the rare earth supply-chain,” said Mr. Green. “Congress is mandating an action plan rather than simply a status update.”

Despite prior efforts by Congress to provide mechanisms with which the Department of Defense could assess the criticality of certain materials in its supply chain, such as the creation of the Strategic Materials Protection Board [SMPB], there has apparently been little enthusiasm in the Department to use them. If this Act passes in its present form, or least without significant changes to the language described above, the Department would be required to take a number of concrete steps relating to the revival of the rare earths supply chain in the USA – IF it determines that such materials are either strategic or critical. If on the other hand the Department does not believe this to be the case [and this has been its position in the past, as evidenced by prior reports of the SMPB] then all bets are off.

We’ll continue to monitor progress with the legislation as it makes its way through Congress. In the meantime, you can see the current language in the legislation here.

First published at RareMetalBlog.

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