Impact of Section 232 on the Electric Mobility Supply Chain

ArentFox Schiff

Arent Fox

Rare-earth magnets (i.e., neodymium-iron-boron permanent magnets), widely considered the most efficient way to power EVs, are the latest commodity to be potentially subject to Section 232 tariffs, which have previously been imposed at a rate between 10 and 50% for the steel and aluminum industry.

More on rare earth magnets can be found here.

Section 232 Tariffs

  • Section 232 of the Trade Expansion Act of 1962 allows the President to impose import restrictions based on an investigation and determination by the Department of Commerce (Commerce).  
  • Between the Biden and Trump administration, nine Section 232 investigations have been opened on various industries impacting the electric mobility supply chain, including steel, aluminum, automobiles, and automotive parts, uranium ore, titanium sponge, and rare-earth magnets.
  • From March 2018 through the present, Section 232 has been used to impose 10% tariffs on aluminum imports and 25% tariffs on steel imports, with exceptions for Generally Approved Exclusions (GAEs) granted by Commerce, and quota mechanisms for various countries, e.g., EU steel and aluminum imports.

What to Know

  • To meet the Biden Administration's ambitious 2030 EV goals, the US requires ten times the amount of rare earth metals that it currently acquires. At the moment, no rare-earth magnets are being produced and processed in the United States.
  • Much of the sourcing and processing of rare earth magnets occurs in China. Because of the lack of domestic production and the dependence on foreign countries for rare-earth magnets, the Administration will argue that US reliance on imports for this critical product could pose a threat to national security.
  • On September 21, 2021, Commerce initiated an investigation to determine whether Section 232 measures should be taken against rare-earth magnets.  
  • Expect Commerce to reach a determination on whether Section 232 measures should be imposed on rare-earth magnets by the summer of 2022.
  • Considering the targets of previous Section 232 investigations, it remains possible that other commodities consumed through the electric mobility supply chain could face the challenge of a Section 232 investigation during 2022.

How We Can Help

While Section 232 tariffs have only been imposed on steel and aluminum imports, and the imposition on rare-earth magnets is still pending, Section 232 appears to be a bi-partisan trade enforcement tool that will not be going away any time soon. 

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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