Tech Law Journal Daily E-Mail Alert
December 29, 2010, 10:00 AM, Alert No. 2,189.
Home Page | Calendar | Subscribe | Back Issues | Reference
OUSTR Is Considering Filing WTO Complaint Against PRC For Its Rare Earths Export Restraints

12/23. The Office of the U.S. Trade Representative (OUSTR) released its report [124 pages in PDF] titled "2010 Report to Congress On China's WTO Compliance". It states that the OUSTR is considering filing a complaint with the World Trade Organization (WTO) alleging that the People's Republic of China's (PRC) restrictions on the export of rare earth materials (REM) violates its WTO obligations.

The PRC followed this announcement with its own announcement that it will further restrict exports of REMs. See, related story in this issued titled "PRC Further Curtails Exports of Rare Earths".

There is already a pending WTO complaint, filed by the US and EU in 2009, regarding the PRC's export quotas and export duties on bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc.

The just released OUSTR report states that "Since its accession to the WTO, China has continued to impose restraints on exports of raw materials, including export quotas, related export licensing and bidding requirements, minimum export prices and export duties, as China’s economic planners have continued to guide the development of downstream industries. These export restraints are widespread. For example, China maintains some or all of these types of export restraints on antimony, bauxite, coke, fluorspar, indium, magnesium, magnesium carbonate, manganese, molybdenum, phosphate rock, rare earths, silicon, silicon carbide, talc, tin, tungsten, yellow phosphorus and zinc, all of which are of key interest to U.S. downstream producers." (Emphasis added.)

It continues that "These types of export restraints can significantly distort trade, and for that reason WTO rules normally outlaw them. In the case of China, the trade-distortive impact can be exacerbated because of the size of China's production capacity. Indeed, for many of the raw materials at issue, China is the world's leading producer."

It also states that these restraints "affect U.S. and other foreign producers of a wide range of downstream products, such as ... hard-disk drives, magnets, lasers, ... semiconductor chips,  ... fiber optic cables ... among numerous others."

The report also speculates regarding the PRC's motives for imposing these restraints. "The export restraints can create serious disadvantages for these foreign producers by artificially increasing China's export prices for their raw material inputs, which also drives up world prices. At the same time, the export restraints appear to artificially lower China’s domestic prices for the raw materials due to significant increases in domestic supply, enabling China’s domestic downstream producers to produce lower-priced products from the raw materials and thereby creating significant advantages for China’s domestic downstream producers when competing against foreign downstream producers both in the China market and in other countries' markets. The export restraints can also create incentives for foreign downstream producers to move their operations and technologies to China."

This report also states that the US "began raising its concerns about China's continued use of export restraints shortly after China’s WTO accession, while also working with other WTO members with an interest in this issue, including the EU and Japan. In response to these efforts, China refused to modify its policies in this area. In fact, over time, China's economic planners expanded their use of export restraints and also made them increasingly restrictive, particularly on raw materials."

This report also summarizes the steps taken by the PRC to restrict exports of REMs. "In 2010, China's export restraints on rare earths -- a collection of 17 different chemical elements used in a variety of green technology products, among other products -- generated significant concern among China's trading partners. Even though it controls about 97 percent of the global rare earths market, China has been imposing increasingly restrictive export quotas and export duties on rare earth ores, oxides and metals."

"In July 2010, China sharply reduced its export quotas, causing world prices for some of the rare earths to rise dramatically higher than China's domestic prices and further hindering efforts in other countries to develop expertise in the increasingly important downstream manufacturing of green technology products."

Then, the report states, "in September 2010, China reportedly imposed a de facto ban on all exports of rare earths to Japan, causing even more concern among China’s trading partners."

"The United States pressed China during the run-up to the December 2010 JCCT meeting to eliminate its export restraints on rare earths and also used the November 2010 G-20 meeting, as did Japan, the EU and other trading partners, to try to persuade China to pursue more responsible policies on raw materials."

It concludes that the US "will continue these efforts in 2011 while also considering other options for addressing China’s use of export restraints, including WTO dispute settlement, if appropriate."

PRC Further Curtails Exports of Rare Earths

12/28. The People's Republic of China's (PRC) Ministry of Commerce announced in a vague statement on December 28, 2010, that it will further restrict exports of rare earth materials. Rare earth elements, such as Neodymium, are used to make permanent magnets, which are used in computer hard drives and other tech products.

While there are major deposits of rare earth elements in the U.S. and Australia, around 97% of the world supply of rare earth materials (REM) are produced in the PRC. Moreover, the PRC has begun to reduce exports, but has not been forthcoming in explaining its reasons.

One reason might be to favor domestic producers of things that include REMs, including many information and communications technology (ICT) products. Another reason might be to leverage US and other foreign companies to locate production facilities in the PRC, and to transfer technologies, trade secrets and intellectual property to PRC entities. Another reason might be to raise long term prices of REMs.

The PRC is acting from a position of strength. It would take time to develop a competing supply chain. Moreover, the US may lack the political will to develop significant domestic mining and REM manufacturing capacity because of the environmental politics of the Obama administration.

The PRC's Ministry of Commerce's English language web site published the following two paragraph statement on December 28, 2010:

    "The Ministry of Commerce (MOFCOM) set quotas for the first round of 2011 rare earth export on December 28. Head of the Department of Foreign Trade of MOFCOM stated that in order to facilitate the normal trade of rare earth, MOFCOM issued quota for first round of rare earth export in 2011 as usual when the yearly quotas are not decided."

    "Relevant departments are in consultation on yearly rare earth export quotas for 2011, which will be decided after evaluating domestic output and demand at home and abroad, as well as requirements for sustainable development, the Head said, it would be issued once decided. It is not proper to calculate yearly quotas based on quotas set for the first round of export."

REMs have a wide range of uses. Among other things, they are used in such ICT products as fiber optic cable and smart phone screens. However, one of their keys uses in is making permanent magnets, which have the properties of compactness, high strength, and very strong magnetic fields. These magnets are used in computer hard drives, cell phones, loudspeakers, headphones, magnetic resonance imaging, cordless electric tools, and other products.

There is not an organized and public effort by ICT companies in the US to influence policy making for the purpose of assuring a continued supply of REMs. TLJ has contacted numerous ICT companies and groups in the last three months regarding REMs. Some representatives of these companies and groups have said that this issue is of interest to them. Some have said that they are monitoring the issue. Some have said that the issue is not important to them. Some have said they are unfamiliar with the issue. Some did not return phone calls or e-mails.

David Sandalow, the Department of Energy's (DOE) Assistant Secretary for Policy and International Affairs, has spoken for the Obama administration on REMs. He testified at a Senate Energy and Natural Resource Committee (SENRC) hearing on September 30, 2010. He also gave a speech [6 pages in PDF] on March 17, 2010.

TLJ spoke with Sandalow on September 30 in a hallway of the Dirksen Building, and asked him questions regarding REMs and ICT. He provided no responsive answers; he deferred to other agencies on all questions.

The Obama administration's interest in REMs may be focused on their use in electric vehicles, rather than in ICT or other products.

The rare earth elements are Scandium, Yttrium, Lanthanum, Cerium, Praseodymium, Neodymium, Promethium, Samarium, Europium, Gadolinium, Terbium, Dysprosium, Holmium, Erbium, Thulium, Ytterbium, and Lutetium. See, periodic table.

Molycorp and Hitachi Plan Joint Ventures for Production of Rare Earth Magnets

12/21. Molycorp, Inc., which is based in the state of Colorado, plans to resume mining of rare earth elements at its Mountain Pass facility in the state of California.

It announced in a release on December 21, 2010, that Molycorp and Hitachi Metals, Ltd., which is based in Tokyo, Japan, "have entered into an agreement regarding the planned formation of joint ventures for the production of rare earth alloys and magnets in the U.S."

Hitachi companies make numerous products, including computers, hard drives, mobile phones, and other information and communications technology (ICT) products.

The PRC has imposed restraints on REM exports to Japan with particular malice.

Molycorp stated that "The ventures would be focused on the manufacture of neodymium-iron-boron (NdFeB) alloys and magnets that are vital to many clean energy, automotive, computer, health care, communications and other technologies."

Molycorp's CEO Mark Smith stated in this release that "We are very pleased to have reached agreement in principle with Hitachi Metals, the world's leading manufacturer of rare earth magnets, to launch these joint ventures ... These joint ventures are an integral part of Molycorp's `mine-to-magnets´ business plan, and they move our Company and the United States one step closer to realizing the strategic goal of re-establishing a complete rare earth manufacturing supply chain in the U.S."

In This Issue
This issue contains the following items:
 • OUSTR Is Considering Filing WTO Complaint Against PRC For Its Rare Earths Export Restraints
 • PRC Further Curtails Exports of Rare Earths
 • Molycorp and Hitachi Plan Joint Ventures for Production of Rare Earth Magnets
 • Outgoing Senators Bayh and Bond Introduce Rare Earths Bill
There was no issue of the TLJ Daily E-Mail Alert on Saturday, December 25, Sunday, December 26, Monday, December 27, or Tuesday, December 28, 2010.
Outgoing Senators Bayh and Bond Introduce Rare Earths Bill

12/15. Sen. Evan Bayh (D-IN) and Sen. Kit Bond (R-MO) introduced S 4031 [LOC | WW], the "Rare Earths Supply-Chain Technology and Resources Transformation Act of 2010" or "RESTART Act".

Neither Sen. Bayh nor Sen. Bond ran for re-election in November. Both have served their final days in the Senate. However, this bill, or similar bills, may be introduced in the 112th Congress by others.

This bill would promote exploration for and development of rare earth elements in the U.S., and reestablish a competitive supply chain for rare earth materials (REMs) in the U.S. and countries that are allies of the U.S. It was referred to the Senate Energy and Natural Resource Committee (SENRC).

The bill recites in its findings that "Rare earth materials also provide core functionality to a variety of high technology applications in computing, ... communications" and many other industry sectors.

The SENRC held a hearing on this issue on September 30, 2010. It was well attended, but not by representatives of technology companies or groups. See, SENRC web page with hyperlinks to prepared testimony.

Sen. Lisa Murkowski (R-AK) will likely be the Chairman of the SENRC in the 112th Congress. She is the sponsor of S 3521 [LOC | WW], also titled the "Rare Earths Supply Technology and Resources Transformation Act of 2010". She did not attend the September 30 hearing. She was engaged in a close re-election campaign.

S 4031, the Bayh Bond bill, also states that "Although at least 40 percent of the world's reserves of rare earth elements are located within the United States and countries that are allies of the United States, the United States now depends on imports for nearly 100 percent of its needs for rare earth materials because there are virtually no active producers of rare earth materials in the United States."

It adds that "more than 97 percent of all rare earth materials for world consumption are produced in the People's Republic of China."

Also, it states that the PRC "has taken several steps recently that have caused significant perturbations in the market for rare earth materials". For example, "In October 2010, the Government of China reportedly restricted the exportation of all rare earth oxides and metals to the United States and Europe, essentially cutting off the global community from supplies of rare earth materials."

It concludes that "The United States currently cannot produce valuable rare earth materials and permanent magnets. The capability to do so should be explored using appropriate research and development projects."

For more on this issue, see Department of Energy's (DOE) Request for Information (RFI) [4 pages in PDF] titled "DOE Materials Strategy", released on May 6, 2010. While this addresses REMs, it focuses on their use in technologies related to clean energy and energy efficiency. This RFI does not address the use of REMs in ICT. Nevertheless, the RFI asks for information about rare earth elements, including those that are used to make magnets, which are used in ICT devices.

The House, but not the Senate, passed HR 6160 [LOC | WW], the "Rare Earths and Critical Materials Revitalization Act of 2010". HR 6160 is a very limited bill. It would merely require the DOE to study the issue, including possible use of alternative materials, which the DOE is already doing, and write plans. The bill would also authorize the DOE to make loan guarantees to incent private sector activity. The bill would also amend the National Materials and Minerals Policy, Research and Development Act of 1980, which is codified at 30 U.S.C. § 1604, et seq.

See also, story titled "House Passes Rare Earths Bill" in TLJ Daily E-Mail Alert No. 2,136, September 30, 2010, and "House Science Committee Approves Rare Earths Bill" in TLJ Daily E-Mail Alert No. 2,134, September 28, 2010.

Washington Tech Calendar
New items are highlighted in red.
Wednesday, December 29

No events listed.

Thursday, December 30

No events listed.

Friday, December 31

No events listed.

Monday, January 3

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rulemaking and Notice of Inquiry (NPRM & NOI) [36 pages in PDF] regarding expanding the FCC's location surveillance mandates for mobile communications and devices. The FCC adopted and released this item on September 23, 2010. It is FCC 10-177 in PS Docket No. 07-114 and WC Docket No. 05-196. See, notice in the Federal Register, November 2, 2010, Vol. 75, No. 211, at Pages 67321-67333.

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) regarding its draft SP 800-51 Rev. 1 [13 pages in PDF], titled "Guide to Using Vulnerability Naming Schemes", released on December 6, 2010.

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) regarding its draft NIST IR-7694 [24 pages in PDF], titled "Specification for the Asset Reporting Format 1.1", released on December 6, 2010.

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) regarding its draft NIST IR-7693 [32 pages in PDF], titled "Specification for Asset Identification 1.1", released on December 6, 2010.

Tuesday, January 4

No events listed.

Wednesday, January 5

The House will meet. Members will take the oath of office.

The Senate will meet at 12:00 NOON.

About Tech Law Journal

Tech Law Journal publishes a free access web site and a subscription e-mail alert. The basic rate for a subscription to the TLJ Daily E-Mail Alert is $250 per year for a single recipient. There are discounts for subscribers with multiple recipients.

Free one month trial subscriptions are available. Also, free subscriptions are available for federal elected officials, and employees of the Congress, courts, and executive branch. The TLJ web site is free access. However, copies of the TLJ Daily E-Mail Alert are not published in the web site until two months after writing.

For information about subscriptions, see subscription information page.

Tech Law Journal now accepts credit card payments. See, TLJ credit card payments page.

Solution Graphics

TLJ is published by David Carney
Contact: 202-364-8882.
carney at techlawjournal dot com
P.O. Box 4851, Washington DC, 20008.

Privacy Policy
Notices & Disclaimers
Copyright 1998-2010 David Carney. All rights reserved.