WASHINGTON ― The Pentagon has proposed legislation that aims to end reliance on China for rare earth minerals critical to the manufacturing of missiles and munitions, hypersonic weapons and radiation hardened electronics, by making targeted investments.

The proposed legislation would raise spending caps under the Defense Production Act to enable government to spend up to $1.75 billion on rare earth elements in munitions and missiles and $350 million for microelectronics. It would also eliminate caps when it comes to hypersonic weapons.

The proposal, obtained by Defense News, was offered earlier this month for inclusion in the annual defense policy bill Congress has been drafting.

“To me, this is the biggest thing that has happened to rare earths in a decade,” Jeffrey Green, a defense industry consultant and advocate for government intervention on rare earth materials, said Monday. “The policy shift is the government is realizing they have to put serious bucks into this.”

The U.S. government recently awarded contracts for heavy rare earth separation and issued solicitations for the processing of light separation and for neodymium magnets, which are used in Javelin missiles and F-35 fighter jets. Under current law, DoD cannot invest more than $50 million in DPA funds without additional congressional notification, but the Pentagon’s legislative proposal would raise this cap to $350 million, to invest in multiple projects.

These processes can be expensive, and the process for separating rare earth oxides can cost hundreds of millions dollars, Green said.

“The recent awards are like a drop in the bucket, for very small scale pilot programs. It’s nowhere near what they’d need to get a commercial facility, even to support DoD’s very small volume,” Green said. “They have to put big dollars in if they want to separate the oxide at a state-of-the-art facility that’s going to be anywhere close to Chinese pricing.”

China accounts for at least 71 percent of rare earth production globally and is the largest source of rare earth imports to the U.S., according to a Congressional Research Service report. The U.S. was once a major producer from the mid-1960s until around the late 1980s when China became a major low-cost producer and exporter.

In August, Undersecretary of Defense for Acquisition and Sustainment Ellen Lord told reporters that the Pentagon was in early talks with U.S. ally Australia to have it process a significant portion of rare earth materials for the U.S. military. The Australian firm Lynas, which has a mine in Australia and a processing plant in Malaysia, was central to that plan.

WASHINGTON, DC - MAY 07: U.S. Sen. Ted Cruz, R-Texas, takes an elevator as he leaves after a vote at the U.S. Capitol May 7, 2020 in Washington, DC. (Photo by Alex Wong/Getty Images)

In the wake of the coronavirus pandemic and rising tensions between Washington and Beijing, lawmakers have quickly introduced a range of measures aimed at creating domestic alternatives to Chinese supplies for protective equipment and medicines from China to the U.S. However, the DoD legislation is one link in a chain of actions in recent years by the Trump administration.

“China is currently the sole source or primary supplier for many chemicals required to make ingredients in missiles and munitions end items. In many cases, there is no other source for these foreign sourced materials and no drop-in alternatives are available,” DoD’s proposal reads.

“A sudden and catastrophic loss of supply due to restrictions from foreign suppliers, industrial accidents, natural disasters, or wartime damages would impact critical DoD programs for many years and severely disrupt DoD munitions, satellites, space launches, and other defense manufacturing programs.”

Texas Republican Sen. Ted Cruz made headlines last week with his own rare earths bill, called the Onshoring Rare Earths Act, to establish a supply chain in the U.S. and require the Defense Department to source these minerals domestically. Instead of direct investments, it includes tax incentives for buyers of rare earth minerals to source from U.S. suppliers ― a detail that places the proposal within House Ways and Means Committee jurisdiction.

"Our ability as a nation to manufacture defense technologies and support our military is dangerously dependent on our ability to access rare earth elements and critical minerals mined, refined, and manufactured almost exclusively in China,” Cruz said in a statement. “Much like the Chinese Communist Party has threatened to cut off the U.S. from life-saving medicines made in China, the Chinese Communist Party could also cut off our access to these materials, significantly threatening U.S. national security.”

Both Cruz and the DoD proposal accused China of predatory economic practices to secure its dominance in the rare earth elements market.

Joe Gould was the senior Pentagon reporter for Defense News, covering the intersection of national security policy, politics and the defense industry. He had previously served as Congress reporter.

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