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United States Government Accountability Office: 
Washington, DC 20548: 

April 14, 2010: 

The Honorable Carl Levin:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate: 

The Honorable Ike Skelton:
The Honorable Howard P. "Buck" McKeon: 
Ranking Member:
Committee on Armed Services:
House of Representatives: 

Subject: Rare Earth Materials in the Defense Supply Chain: 

This letter formally transmits the enclosed briefing in response to 
the National Defense Authorization Act for Fiscal Year 2010 (Pub. L. 
No. 111-84), which required GAO to submit a report on rare earth 
materials in the defense supply chain to the Committees on Armed 
Services of the Senate and House of Representatives by April 1, 2010. 
As required, we provided a copy of this briefing to the committees on 
April 1, 2010, and subsequently briefed the Senate Armed Services 
Committee staff on April 5, 2010, and the House Armed Services 
Committee staff on April 6, 2010. 

We are sending copies of this report to the appropriate congressional 
committees. We are also sending copies to the Secretaries of Defense, 
Commerce, Energy, and the Interior. This report is also available at 
no charge on the GAO Web site at [hyperlink,]. 
Should you or your staff have any questions concerning this report, 
please contact me at (202) 512-4841 or Contact points 
for our Offices of Congressional Relations and Public Affairs may be 
found on the last page of this report. Key contributors to this report 
were John Neumann, Assistant Director; James Kim; Erin Carson; Brent 
Corby; Marie Ahearn; Barbara El Osta; and Morgan Delaney Ramaker. 

Signed by: 

Belva M. Martin:
Acting Director:
Acquisition and Sourcing Management: 


[End of letter] 

Rare Earth Materials in the Defense Supply Chain: 

Briefing for Congressional Committees: 
April 1, 2010: 

* Introduction; 
* Objectives, Scope, and Methodology; 
* Background; 
* Summary; 
* Objective 1: Current and Projected Availability; 
* Objective 2: Defense System Dependency; 
* Objective 3: DOD Identified Risks and Actions; 
* Agency Comments; 
* Points of Contact. 


Rare earth elements are used in many applications for their magnetic 
and other unique properties. These include the 17 chemical elements 
beginning with lanthanum, element number 57 in the periodic table, up 
to and including lutetium, element number 71, as well as yttrium and 
scandium, which have similar properties. 

Rare earth materials—rare earth ores, oxides, metals, alloys, 
semifinished rare earth products, and components containing rare earth 
materials—are used in a variety of commercial and military 
applications, such as cell phones, computer hard drives, and 
Department of Defense (DOD) precision-guided munitions. Some of these 
applications rely on permanent rare earth magnets that have unique 
properties, such as the ability to withstand demagnetization at very 
high temperatures. 

Media reports have noted worldwide availability of these materials may 
be limited to a few overseas sources—primarily China. 

[End of section] 

Objectives, Scope, and Methodology: 

The National Defense Authorization Act for Fiscal Year 2010, Section 
843, directed GAO to submit a report on rare earth materials in the 
DOD supply chain.[Footnote 1] 


* What does existing information show about current sources and 
projected availability of rare earth materials? 

* Which defense systems have been identified as dependent on rare 
earth materials? 

* What national security risks has DOD identified due to rare earth 
material dependencies, and what actions has it taken? 

To conduct our work, we obtained documentation and interviewed 
officials to determine the current sources and projected availability 
of rare earth materials and national security risks DOD has identified 
and actions DOD has taken. 

We contacted federal agencies and offices, including the following: 

* Department of the Interior,
- U.S. Geological Survey (USGS); 

* Department of Commerce,
- Bureau of Industry and Security,
- International Trade Administration; 

* Department of Energy,
- Vehicle Technology Program,
- Wind Technologies Program,
- Energy Information Administration, and, 
- Ames (Iowa) Laboratory; 

* DOD,
- Office of the Secretary of Defense — Industrial Policy, Office of 
Technology Transition, Defense Research and Engineering, Science and 
Technology, and Net Assessment, 
- Defense Logistics Agency, Defense Contract Management Agency, 
Defense Intelligence Agency, Defense Advanced Research Projects 
Agency, and Missile Defense Agency, 
- Military departments including: Army Research, Development and 
Engineering; Army Acquisition, Logistics, and Technology; Army Tank 
and Automotive Command; Air Force Research Lab Materials and 
Manufacturing; Naval Surface Warfare Center; Naval Research 
Laboratory; Navy Research, Development, and Acquisition; and Navy 
Program Executive Office for Ships. 

We contacted members of industry and academia, including the following: 

* Institute for Defense Analyses, a nonprofit corporation that 
administers federally funded research and development centers;
* Academic experts at the University of Delaware and Northeastern 
University;[Footnote 2] 
* The National Academies;
* Rare Earth Industry and Technology Association; and; 
* Selected rare earth suppliers from each stage of the supply chain.
[Footnote 3] 

To determine which defense systems are currently dependent on, or 
projected to become dependent on, rare earth materials, we held 
discussions with and gathered evidence from government, industry, and 
academic officials, who identified certain defense systems that use 
and will continue to use rare earth materials.[Footnote 4] In 
addition, we analyzed the supply chains of two specific defense 
systems to provide illustrative examples of systems that use rare 
earth materials. 

We used industry reports and data to evaluate the projected worldwide 
supply and demand of rare earth materials. Uncertainty exists in these 
estimates due to the assumptions made by different projections. As our 
findings do not rely on precise estimates of the amount of rare earth 
material available throughout the world, we found these data to be 
sufficiently reliable for the purposes of our reporting. 

We conducted this performance audit from January 2010 through April 
2010 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Background: The Rare Earth Elements: 

The term "rare earth" denotes the group of 17 chemically similar 
metallic elements, including lanthanum, cerium, praseodymium, 
neodymium, promethium, samarium, europium, gadolinium, terbium, 
dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, 
and yttrium. 

Figure 1: Rare Earth Elements in the Periodic Table: 

[Refer to PDF for image: periodic table] 
Source: GAO graphic based on USGS data. 

[End of figure] 

Rare earths are often classified into two groups: Heavy Rare Earth 
(HREE), and Light Rare Earth (LREE), according to their atomic weights 
and location on the periodic table. 

Background: Rare Earth Materials Are Used in Multiple Commercial 

Rare earth elements are used in materials for a number of commercial 
products, including hybrid cars, wind power turbines, computer hard 
drives, and cell phones. 

Table 1: Examples of Rare Earth Elements Used in Commercial Products: 

Rare Earth Element Used: Neodymium, praseodymium, dysprosium, terbium, 
lanthanum, cerium; 
Commercial Product: Hybrid electric motors and hybrid batteries. 

Rare Earth Element Used: Neodymium, praseodymium, terbium, dysprosium; 
Commercial Product: Computer hard drives, mobile phones, and cameras. 

Rare Earth Element Used: Promethium; 
Commercial Product: Portable x-ray units. 

Rare Earth Element Used: Scandium; 
Commercial Product: Stadium lights. 

Rare Earth Element Used: Europium, yttrium, terbium, lanthanum; 
Commercial Product: Energy-efficient light bulbs. 

Rare Earth Element Used: Europium, yttrium; 
Commercial Product: Fiber optics. 

Rare Earth Element Used: Cerium, lanthanum, neodymium, europium; 
Commercial Product: Glass additives. 

Source: GAO analysis of government and industry data. 

[End of table] 

Background: Rare Earth Material Production Requires a Number of Key 
Processing Steps: 

Rare earth materials require a number of processing stages before they 
can be used in an application: 

* mining rare earth ore from the mineral deposit; 

* separating the rare earth ore into individual rare earth oxides; 

* refining the rare earth oxides into metals with different purity 
levels;[Footnote 5] 

* forming the metals into rare earth alloys; and; 

* manufacturing the alloys into components, such as permanent magnets, 
used in defense and commercial applications. 

Background: DOD Responsibilities for Managing Supplier Base: 

DOD's Office of the Director of Industrial Policy sustains an 
environment that ensures the industrial base on which DOD depends is 
reliable, cost-effective, and sufficient to meet DOD requirements. It 
routinely identifies and works to mitigate short-term supplier-base 
gaps when these gaps span multiple DOD components. 

The Defense National Stockpile maintains and manages strategic and 
critical materials. 

DOD military service components (Army, Navy, and Air Force) assess 
supplier-base issues for existing defense programs or sectors. 

[End of section] 

Summary: Objective 1: Current and Projected Availability: 

While rare earth ore deposits are geographically diverse, current 
capabilities to process rare earth metals into finished materials are 
limited mostly to Chinese sources. 

The United States previously performed all stages of the rare earth 
material supply chain, but now most rare earth materials processing is 
performed in China, giving it a dominant position that could affect 
worldwide supply and prices. 

Based on industry estimates, rebuilding a U.S. rare earth supply chain 
may take up to 15 years and is dependent on several factors, including 
securing capital investments in processing infrastructure, developing 
new technologies, and acquiring patents, which are currently held by 
international companies. 

Summary: Objective 2: Defense System Dependency: 

DOD is in the early stages of assessing its dependency on rare earth 
materials and is planning to complete its study by the end of 
September 2010. 

Government and industry officials have identified a wide variety of 
defense systems and components that are dependent on rare earth 
materials for functionality and are provided by lower-tier 
subcontractors in the supply chain. 

Defense systems will likely continue to depend on rare earth 
materials, based on their life cycles and lack of effective 

We found examples of components in defense systems that use Chinese 
sources for rare earth materials and are provided by lower-tier 

Summary: Objective 3: DOD Identified Risks and Actions Taken: 

DOD has not yet identified national security risks or taken 
departmentwide action to address rare earth material dependency, but 
expects to consider these issues in its ongoing study expected to be 
completed by the end of September 2010. 

Some DOD components, other federal agencies, and companies are taking 
initial steps to limit their reliance on rare earth materials or 
expand the existing supplier base. 

[End of section] 

Objective 1: Rare Earth Ore Deposits Are Geographically Diverse: 

Significant rare earth ore reserves exist in China as well as other 
worldwide locations, including the United States. 

The less-abundant, and more-valuable, heavy rare earth ore deposits 
are currently found in southern China, but such deposits have also 
been identified in Australia, Greenland, Canada, and the United States. 

According to industry, rare earth deposits in the United States, 
Canada, Australia, and South Africa could be mined by 2014. 

Table 2: World Mine Reserves and Production: 

Country: United States; 
Reserves (t REO)[A]: 13,000,000; 
2009 Mine Production (t REO): 0. 

Country: Australia; 
Reserves (t REO)[A]: 5,400,000; 
2009 Mine Production (t REO): 0. 

Country: Brazil; 
Reserves (t REO)[A]: 48,000; 
2009 Mine Production (t REO): 650. 

Country: China; 
Reserves (t REO)[A]: 36,000,000; 
2009 Mine Production (t REO): 120,000. 

Country: Commonwealth of Independent States (CIS)[B]; 
Reserves (t REO)[A]: 19,000,000; 
2009 Mine Production (t REO): N/A[C]. 

Country: India; 
Reserves (t REO)[A]: 3,100,000; 
2009 Mine Production (t REO): 2,700. 

Country: Malaysia; 
Reserves (t REO)[A]: 30,000; 
2009 Mine Production (t REO): 380. 

Other Countries: 
Reserves (t REO)[A]: 22,000,000; 
2009 Mine Production (t REO): N/A. 

World Total (rounded): 
Reserves (t REO)[A]: 99,000,000; 
2009 Mine Production (t REO): 124,000. 

Source: USGS.		 

Note: Data are from the Mineral Commodity Summaries 2010. 

[A] According to USGS, reserves are the part of the reserve base that 
could be economically extracted or produced at the time of 
determination but need not signify that extraction facilities are in 
place and operative. t REO = metric tons of rare earth oxide. 

[B] Regional association made up of former Soviet republics. 

[C] Not available. 

[End of table] 

Objective 1: U.S. Industry Previously Performed All Stages of the 
Supply Chain: 

U.S. industry previously performed all stages of the rare earth 
material supply chain, and the Mountain Pass mine in California 
produced the majority of the global supply of rare earth materials. 

Figure 2: History of the U.S. Rare Earth Industry: 

[Refer to PDF for image: illustration] 

Large rare earth deposits discovered in the United States: 
Large amounts of Light Rare Earth Elements (LREE) discovered at 
Mountain Pass, California. 

U.S. performs all stages of rare earth material processing: 
Mountain Pass deposit is the paramount source of rare earth elements. 

U.S. Rare Earth Manufacturing Begins to Decline: 
1998: Mountain Pass separation plant closes following regulatory 
problems with the main wastewater pipeline. 
2002: Mountain Pass rare earth mine suspends operations. 
2003: Magnequench, a NdFeB[A] permanent-magnet producer, closes plant 
and moves equipment to China. 
Germany's Vacuumschmelze, a NdFeB permanent-magnet producer, closes 
Elizabethtown, Kentucky, operations. 
2005: Hitachi Magnetics Corporation, a NdFeB permanent-magnet 
producer, closes its Edmore, MI, production facility. 

Some U.S. Production Resumes: 
Mountain Pass rare earth separation plant resumes operations. Mountain 
Pass facility separates bastnasite concentrates from stockpiles 
produced before the shutdown. 
Source: GAO analysis of USGS and industry data. 

[A] Neodymium iron boron. 

[End of figure] 

Objective 1: Most Rare Earth Material Processing Occurs in China: 

Most rare earth material processing now occurs in China. In 2009, 
China produced about 97 percent of rare earth oxides. 

Officials of the minerals and rare earth company that owns the 
Mountain Pass mine expect that by 2012 it will achieve full-scale 
production of mining and separating cerium, lanthanum, praseodymium, 
and neodymium oxides. 

The Mountain Pass facility does not currently have the full capability 
needed to refine the oxides into pure rare earth metals. 

Figure 3: Example of Permanent-Magnet Rare Earth Supply Chain: 

[Refer to PDF for image: illustration] 

1. Mine rare earth ore: 
No U.S. Production; 
China produces about 97 percent of rare earth ore. 

2. Separate ore into oxides: 
Limited U.S. Production; 
According to industry, China produces about 97 percent of rare earth 

3. Refine oxide to metal: 
No U.S. Production; 
Refined metal is available exclusively from China[A]. 

4. Form metals into alloys: 
Limited U.S. Production; 
According to industry, China produces 89 percent of rare earth alloys. 

5. Manufacture magnets/other components: 
Limited U.S. Production of SmCo magnets; No U.S. production of NdFeB 
According to industry, China produces 75 percent of NdFeB magnets and 
60 percent of SmCo magnets. 

Source: GAO analysis of industry data. 

[A] According to industry, only Chinese companies are producing and 
selling commercial quantities of rare earth metals. While some 
Japanese companies produce rare earth metals in a limited capacity, 
they do not offer these metals as a product but use them to produce 
alloys and magnet and are dependent on China for rare earth ore. One 
company in the United Kingdom produces a small quantity of samarium 
cobalt metal, but also relies on oxides and metals from China. 

[End of figure] 

According to industry data, refined rare earth metals are almost 
exclusively available from China. 

The United States has the expertise but lacks the manufacturing assets 
and facilities to refine oxides to metals. 

The United States is not currently producing neodymium iron boron 
(NeFeB) permanent magnets and has only one samarium cobalt (SmCo) 
magnet producer. 

Objective 1: China's Market Dominance May Affect Future U.S. 
Availability of Rare Earth Materials: 

According to government and industry data, the future availability of 
materials from some rare earth elements—including neodymium, 
dysprosium, and terbium—is largely controlled by Chinese suppliers. 

China's dominant position in the rare earths market gives it market 
power,[Footnote 6] which could affect global rare earth supply and 
prices. In addition: 

* China has adopted domestic production quotas on rare earth materials 
and decreased its export quotas, which increases prices in the Chinese 
and world rare earth materials markets. 

* China increased export taxes on all rare earth materials to a range 
of 15 to 25 percent, which increases the price of inputs for non-
Chinese competitors. 

Some government and rare earth industry officials believe that China 
plans on greater vertical integration of the rare earth materials 
market in the future, which would increase China's total market power 
and dominance. 

While China is currently exporting rare earth oxides and metals, some 
rare earth industry officials believe that in the future China will 
only export finished rare earth material products with higher value. 

Objective 1: Rebuilding a U.S. Supply Chain Is Dependent on Several 

Although the Mountain Pass mine is the largest non-Chinese rare earth 
deposit in the world, the mine currently lacks the manufacturing 
assets and facilities to process the rare earth ore into finished 
components, such as permanent magnets. 

The Mountain Pass mine also does not have substantial amounts of heavy 
rare earth elements, such as dysprosium, which provide much of the 
heat-resistant qualities of permanent magnets used in many industry 
and defense applications. 

Other U.S. rare earth deposits exist, such as those in Idaho, Montana, 
Colorado, Missouri, Utah, and Wyoming, but these deposits are still in 
early exploratory stages of development. Once a company has secured 
the necessary capital to start a mine, government and industry 
officials said it can take from 7 to 15 years to bring a property 
fully online, largely due to the time it takes to comply with multiple 
state and federal regulations. 

Other factors may affect the rebuilding of a U.S. supply chain: 

* Capital investment: Industry officials noted that processing 
companies will need to secure a large amount of capital to begin 
operations, but investors are concerned about the possibility of the 
Chinese undercutting U.S. prices and negatively affecting their return 
on investments. 

* Processing plants: Industry officials said it would take from 2 to 5 
years to develop a pilot plant that could refine oxides to metal using 
new technologies, and companies with existing infrastructure said they 
would not restart metal production without a consistent source of 
oxides outside of China. 

* Environmental concerns: Some rare earth minerals are accompanied by 
radioactive products, such as thorium and radium, which make 
extraction difficult and costly. In addition, U.S. mines and 
processing facilities must comply with environmental regulations. 

* New technologies: Some academic experts believe that new processing 
technologies are needed in order to compete with Chinese producers on 
price, and academic experts do not believe these technologies will be 
available on a full production scale for up to 4 years and will 
require large start-up costs. 

* Intellectual property rights: Japanese and other foreign companies 
currently own key technology patents for manufacturing neodymium iron 
boron magnets. Some of these patents do not expire until 2014. As a 
result, companies preparing to enter the neodymium iron boron magnet 
market in the United States must wait for the patents to expire. 

* The development of alternatives to rare earth materials could reduce 
the demand and dependence on rare earth materials in 10 to 15 years, 
but these materials might not meet current application requirements. 

[End of section] 

Objective 2: DOD Has Begun Assessing Rare Earth Material Dependency: 

DOD has begun a review, on its own initiative, assessing its 
dependency on rare earth materials, that it plans to complete by the 
end of September 2010. DOD plans to assess its use of these materials 
as well as vulnerabilities in the supply chain.[Footnote 7] 

In 2008, DOD Industrial Policy conducted an initial inquiry of DOD 
departments and agencies to identify strategic and critical materials 
required for national defense purposes. Although respondents 
identified a range of systems and components whose production could 
potentially be delayed due to a lack of availability of rare earth 
materials, DOD officials stated that this information was not based on 
a formal study on the use of rare earth materials in these systems. 

Objective 2: Rare Earth Materials Are Widely Used and Lack Substitutes: 

According to government, industry, and academic officials the use of 
rare earth materials is widespread in defense systems. These include, 
among others: 

* precision-guided munitions,
* lasers,
* communication systems,
* radar systems,
* avionics,
* night vision equipment, and, 
* satellites. 

Officials emphasized the significance of the widespread use of 
commercial-off-the-shelf products in defense systems that include rare 
earth materials, such as computer hard drives. 

Officials also cited specific components within defense systems that 
rely on rare earth materials, such as traveling-wave tubes, which 
amplify radio-frequency signals using rare earth permanent magnets. 

Government and industry officials told us that where rare earth 
materials are used in defense systems, the materials are responsible 
for the functionality of the component and would be difficult to 
replace without losing performance. For example, fin actuators used in 
precision-guided munitions are specifically designed around the 
capabilities of neodymium iron boron rare earth magnets. 

Objective 2: Defense Systems Will Continue to Rely on Rare Earth 

Many defense systems will continue to use rare earth materials in the 
future based on their life cycles and the lack of effective 

* For example, the Aegis Spy-1 radar, which is expected to be used for 
35 years, has samarium cobalt magnet components that will need to be 
replaced during the radar's lifetime. 

* According to officials, defense system components that have rare 
earth materials in them will wear out and need to be replaced. 

* Defense officials said that future generations of some defense 
system components, such as transmit and receive modules for radars, 
will continue to depend on rare earth materials. Moreover, in some 
cases, new systems in development will also rely on components that 
depend on rare earth materials. 

Objective 2: DOD Defense Systems Use Rare Earth Materials from China: 

GAO analysis shows that subcontractors at the lower tiers of the 
supply chain use rare earth materials sourced from China to produce 
components used in larger defense systems. 

For example, the DDG-51 Hybrid Electric Drive Ship Program uses 
permanent-magnet motors using neodymium magnets from China. 

Figure 4: Neodymium iron boron (NeFeB) magnets used in DDG-51: 

[Refer to PDF for image: illustration] 

* Supplier purchases NeFeB magnets from Chinese company and refines 

* DOD subcontractor builds NeFeB permanent magnet motor; 

* DOD prime contractor uses motor to build hybrid electric drive on 

* DDG-51 delivery to Navy. 

Source: GAO analysis of data from government, defense contractors, and 
rare earth material suppliers. 

[End of figure] 

For example, the M1A2 Abrams tank has a reference and navigation 
system that uses samarium cobalt (SmCo) permanent magnets. The 
samarium metal used in these magnets comes from China. 

Figure 5: Samarium used in M1A2 Abrams tank: 

[Refer to PDF for image: illustration] 

* Company purchases samarium from China and makes SmCo magnets; 

* Subcontractor builds reference/navigation unit with SmCo magnets; 

* Prime contractor builds tank with reference/navigation unit; 

* Delivery of M1A2 Abrams tank to Army. 

Source: GAO analysis of data from government, defense contractors, and 
rare earth material suppliers. 

[End of figure] 

[End of section] 

Objective 3: DOD in Process of Identifying Departmentwide Security 

DOD has not yet identified departmentwide national security risks due 
to rare earth material dependencies and is in the process of assessing 
such risks. 

* While Industrial Policy is aware of rare earth material supply 
concerns raised by industry and in its initial 2008 inquiry, officials 
also noted that as part of the office's current study, to be completed 
by the end of September 2010, they will address vulnerabilities in the 
supply chain and include recommendations to mitigate any potential 
risks of supply disruption. 

* DOD has also been involved in efforts to transform the National 
Defense Stockpile so that materials not produced domestically will be 
available to support defense needs. 

* A 2009 National Defense Stockpile configuration report identified 
lanthanum, cerium, europium, and gadolinium as having already caused 
some kind of weapon system production delay and recommended further 
study to determine the severity of the delays.[Footnote 8] 

Industrial Policy has existing criteria in the Defense Acquisition 
Guidebook for when program offices should elevate supplier base 
concerns. These are when an item is produced by a single or sole-
source supplier and meets one or more of the following criteria: (1) 
is used by three or more programs; (2) represents an obsolete, 
emerging, or enabling technology; (3) requires 12 months or more to 
manufacture; or (4) has limited surge production capability. 

Generally, Industrial Policy can help DOD offices address a supplier 
gap or vulnerability when requested. For example, while not related to 
rare earth materials, Industrial Policy worked with the Army to 
request a waiver that would allow the Hellfire Missile program to 
procure a chemical from China that was no longer produced in the 
United States. This allowed the program to explore a longer-term 
solution to develop a domestic source for the chemical. 

Objective 3: Some DOD Components Have Taken Steps to Address Rare 
Earth Risks: 

Apart from Industrial Policy's current study, DOD components are also 
taking steps to address rare earth risks. 

* Air Force's Materials and Manufacturing Directorate examined the 
availability of rare earth materials and manufacturers of rare earth 
magnets in a 2003 internal report, which raised concerns about U.S. 
dependency on Chinese rare earth materials and U.S. industry's lack of 
intellectual property rights to produce neodymium iron boron magnets. 
An Air Force industrial-base official told us that he was unaware of 
any actions taken to address the issues raised by the report. However, 
as we note in this briefing, DOD is in the process of studying these 

* Army's Armament Research Center and the Naval Surface Warfare Center 
have begun informal efforts to understand the extent of their current 
and future dependencies on rare earth materials. 

* Also in 2006, Navy considered funding the Mountain Pass mine and 
processing facility under a Title III[Footnote 9] program to secure a 
domestic source of supply for rare earth materials but ultimately did 
not award a contract for that purpose as it lost interest in the 

* Although DOD has initiated a Title III program for domestic 
production of traveling-wave tubes, the program does not address 
domestic sources for the rare earth materials that are required for 
their production. 

Objective 3: Other Government Agencies and Industry Also Starting to 
Address Rare Earth Risks: 

Several government agencies have made efforts, in which DOD 
participated, to address rare earth risks. 

* The Department of Commerce assembled a roundtable to review 
governmentwide options in addressing potential rare earth shortages. 

* The Office of Science and Technology Policy in the Executive Office 
of the President recently hosted an interagency meeting to discuss 
rare earth materials supply and demand and plans ongoing interagency 
coordination on the issue. 

The Department of Energy reported that it has several research and 
development efforts to develop non-rare-earth material-dependent 
motors, reduced rare earth material usage in magnets, and alternatives 
to rare earth dependent wind generators. In addition, the department 
recently announced that it will develop a strategic plan for 
addressing the role of rare earth and other strategic materials in 
clean energy technologies. 

A major defense contractor is informally surveying its suppliers to 
understand rare earth materials use in its defense system components 
and determine alternative solutions to their use. 

Rare earth industry and defense contractors have raised concerns about 
the Chinese monopoly for rare earth metals. 

[End of section] 

Agency Comments: 

We provided a draft of this briefing to DOD and the Departments of 
Commerce, Energy, and the Interior. DOD, Commerce, and Interior 
provided technical comments, which we incorporated as appropriate. 
Energy provided no comments. 

[End of section] 


[1] Pub. L. No. 111-84 (2009). 

[2] We selected a nongeneralizable sample of academics recommended to 
us through interviews. 

[3] 3We selected a nongeneralizable sample of suppliers representing 
each processing step from mining to end product based on interviews 
with government 6 and industry officials. 

[4] We contacted three of the top five defense contractors, as 
identified by DOD based on contract award value for fiscal year 2009, 
as well as selected subcontractors identified by government and 
industry officials as producers of components containing rare earth 
materials. These contractors are not intended to be representative of 
the entire defense supplier base. 

[5] Metallurgists refer to conversion of oxides into metals as 
reduction. For the purposes of this briefing, we refer to this step as 

[6] Market power is defined as the ability of sellers to exert 
influence over the price or quantity of a good, service, or commodity 
exchanged in a market. 

[7] USGS will conduct a portion of the study that focuses on rare 
earth element reserves and resources. The Defense Contract Management 
Agency's Industrial Analysis Center will review trends in pricing of 
rare earth materials and assess domestic rare earth material 
production capability. 

[8] Industrial Policy noted that the stockpile report relied on the 
same data collected by DOD's 2008 inquiry, which indicated that only 
one DOD office reported actual production delays due to rare earth 
material shortages. 

[9] Title III of the Defense Production Act of 1950, as amended, 
provides financial incentives to domestic firms to invest in 
production capabilities for national defense needs. 50 U.S.C. App. §§ 
2091 et seq. 

[End of section] 

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