U.S. Department of Commerce

U.S. Department of Commerce commences a national security investigation under Section 232 of the Trade Expansion Act of 1962, as amended, on NdFeB permanent magnet imports

On September 24, 2021, the Biden Administration initiated its first Section 232 national security investigation. See U.S. Department of Commerce, U.S. Department of Commerce Announces Section 232 Investigation into the Effect of Imports of Neodymium Magnets on U.S. National Security, September 24, 2021, https://www.commerce.gov/news/press-releases/2021/09/us-department-commerce-announces-section-232-investigation-effect. As stated in the press release:

“Interested parties are invited to submit written comments, data, analyses, or other information to BIS by November 12, 2021. This is the first Section 232 investigation initiated under Secretary Raimondo’s leadership, and is consistent with a recommendation by the White House in the Biden-Harris Administration’s 100-day supply chain reviews to evaluate whether to initiate this investigation.

“Critical national security systems rely on NdFeB permanent magnets, including fighter aircraft and missile guidance systems. In addition, NdFeB permanent magnets are essential components of critical infrastructure, including electric vehicles and wind turbines. The magnets are also used in computer hard drives, audio equipment, and MRI devices.

“If the Secretary finds that NdFeB permanent magnets are being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security, the Secretary shall advise the President in her report on the findings of the investigation. By law, the Secretary of Commerce has 270 days from initiation, until June 18, 2022, to present the Department’s findings and recommendations to the President.

“U.S. Secretary of Commerce Gina M. Raimondo released the following statement: ‘The Department of Commerce is committed to securing our supply chains to protect our national security, economic security, and technological leadership. Consistent with President Biden’s directive to strengthen our supply chains and encourage investments to shore up our domestic production, the Department initiated a Section 232 investigation on imports of NdFeB permanent magnets to determine whether U.S. reliance on imports for this critical product is a threat to our national security.’”

Commerce’s Bureau of Industry and Security published in the Federal Register on September 27, 2021 the formal request for public comments. See U.S. Department of Commerce Bureau of Industry and Security, Notice of Request for Public Comments on Section 232 National Security Investigation of Imports of
Neodymium-Iron-Boron (NdFeB) Permanent Magnets, 86 Fed. Reg. 53,277-278 (September 27, 2021). The notice contained eight questions that the Department was particularly interested in getting comments on from the public:

“The Department is particularly interested in comments and information directed to the criteria listed in § 705.4 of the NSIBR as they affect national security, including the following:

“(i) Quantity of or other circumstances related to the importation of NdFeB permanent magnets;

“(ii) Domestic production and productive capacity needed for NdFeB permanent magnets to meet projected national defense requirements;

“(iii) Existing and anticipated availability of human resources, products, raw materials, production
equipment, and facilities to produce NdFeB permanent magnets;

“(iv) Growth requirements of the NdFeB permanent magnets industry to meet national defense requirements and/or requirements for supplies and services necessary to assure such growth including investment, exploration, and development;

“(v) The impact of foreign competition on the economic welfare of the domestic NdFeB permanent magnets industry;

“(vi) The displacement of any domestic NdFeB permanent magnets production causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects;

“(vii) Relevant factors that are causing or will cause a weakening of our national economy; and

“(viii) Any other relevant factors, including the use and importance of NdFeB permanent magnets in critical infrastructure sectors identified in Presidential Policy Directive 21 (Feb. 12, 2013) (for a listing of those 16 sectors see https://www.dhs.gov/cisa/critical-infrastructure-sectors).”

86 Fed. Reg. at 53,278.

The 100 day supply chain review referenced in the Commerce press release was released in June 2021. See White House, BUILDING RESILIENT SUPPLY CHAINS, REVITALIZING AMERICAN MANUFACTURING, AND FOSTERING BROAD-BASED GROWTH, 100-Day Reviews under Executive Order 14017 (June 2021), https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf. Discussion of the challenges relating to NdFeB permanent magnets is taken up in the Review of Critical Minerals and Materials by the Department of Defense (pages 151-204 (see pages 156-57, 160, 165-66, 170-171, 174, 177, 183, 189-92)).

But the White House Report (and the various sources cited therein) follows many years of articles and reports looking at the potential national security and economic security risks from dependence on certain minerals, materials and downstream products incorporating the same from limited foreign suppliers.

The challenge for the U.S. with NdFeB permanent magnets is that supply of both the rare earth mineral and the processed product and down stream product are dominated by China with projected demand growth far outstripping likely existing supplies. See, e.g., Physics Today, US government acts to reduce dependence on China for rare-earth magnets, February 1, 2021, https://physicstoday.scitation.org/doi/10.1063/PT.3.4675 (“Driven by an expected surge in demand for electric vehicles (EVs), wind turbines, and other applications requiring permanent magnets, consumption of many rare-earth (RE) elements is expected to outstrip the global supply within a decade. Coupled with an almost total US dependence on China for separated REs and the magnets made from them, the impending shortage has prompted the US government to subsidize and stimulate domestic RE mining, metal-making, and magnet manufacturing.”)(contains a detailed review of U.S. efforts to expand options for procuring neodymium and magnets made with neodymium).

WTO issues

Many of our larger trading partners have challenged the U.S. 232 investigations on steel and aluminum and resulting import relief imposed by former President Trump. While the U.S. position has been that GATT Art. XXI does not permit WTO panel review of actions taken for national security reasons, prior panels looking at the issue have felt authorized to reach the merits. Decisions by panels in the various challenges to steel and aluminum 232 actions are expected possibly by the end of 2021. See United States — Certain Measures on Steel and Aluminium Products, WT/DS544/11 (9 February 2021)(“the Panel now expects to issue its final report to the parties no earlier than the second half of 2021.”)(identical extensions noticed in cases by India (WT/DS547), EU (WT/DS548), Norway (WT/DS552), Russian Federation (WT/DS554), Switzerland (WT/DS556), Turkey (WT/DS564).

As the report to the President from Commerce is likely to be presented in June 2022 (statutory time limit is 270 days after initiation), the Administration will have time to consider how, if at all, it will respond to any WTO panel decisions in the steel and aluminum cases and whether it will appeal any such panel decisions (likely if adverse). If the panels do not limit their reports to indicating national security actions are not reviewable, it is unlikely that Commerce will address issues of concern to the panel if potentially relevant in the U.S. investigation of NdFeB permanent magnets. But that could occur.

However, the U.S. interest in resolving the Appellate Body situation will likely be affected by whether national security policy decisions are accepted as nonreviewable by trading partners and the WTO’s dispute settlement system.

Vietnam and Switzerland found to be “currency manipulators” in latest U.S. Treasury semiannual report

In the United States, there has long been a concern that trading partners not generate an artificial advantage in international trade by taking steps to undervalue their currencies. The United States Department of the Treasury issues a semiannual report which now examines major trading partners against two U.S. laws to see if consultations are appropriate with particular trading partners. The latest report was issued earlier this month on December 16th. See U.S. Department of the Treasury, Office of International Affairs, R E P O R T T O C O N G R E S S, Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States, December 2020, https://home.treasury.gov/system/files/206/December-2020-FX-Report-FINAL.pdf. The press release that accompanied the release of the report is copied below.

“Treasury Releases Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States

“December 16, 2020

“WASHINGTON – The U.S. Department of the Treasury today delivered to Congress the semiannual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States. In this Report, Treasury reviewed and assessed the policies of 20 major U.S. trading partners during the four quarters ending June 2020.

The Report concluded that both Vietnam and Switzerland met all three criteria under the Trade Facilitation and Trade Enforcement Act of 2015 (the 2015 Act) during the period under review. Treasury consequently conducted enhanced analysis of Vietnam and Switzerland in the Report and will also commence enhanced bilateral engagement with each country in accordance with the 2015 Act. This engagement will include urging the development of a plan with specific policy actions to address the underlying causes of currency undervaluation and external imbalances.

Treasury also determined that, under the Omnibus Trade and Competitiveness Act of 1988 (the1988 Act), both Vietnam and Switzerland are currency manipulators. For each country, Treasury assessed, based on a range of evidence and circumstances, that at least part of its exchange rate management over the four quarters through June 2020, and particularly foreign exchange intervention, was for purposes of preventing effective balance of payments adjustments and, in the case of Vietnam, for gaining unfair competitive advantage in international trade as well. Consistent with the 1988 Act, Treasury will press for the adoption of policies that will permit effective balance of payments adjustments and eliminate the unfair advantages in trade that result from their actions.”

The Socialist Republic of Vietnam

Vietnam in particular is under pressure from the United States to clean up its currency practices.

First, the U.S. Department of Commerce has preliminarily found that its currency practices are countervailable subsidies in the passenger vehicle and light truck tire investigation. See U.S. Department of Commerce, International Trade Administration, C-552-829, Passenger Vehicle and Light Truck Tires From the Socialist Republic of Vietnam: Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Determination With Final Antidumping Duty Determination, 85 Fed. Reg. 71607-71610 (November 10, 2020); U.S. Department of Commerce Issues Affirmative Preliminary Countervailing Duty Determination for Passenger Vehicles and Light Truck Tires from Vietnam, November 4, 2020,ihttps://www.commerce.gov/news/press-releases/2020/11/us-department-commerce-issues-affirmative-preliminary-countervailing (“Among the subsidies preliminarily countervailed is Vietnam’s undervalued currency – making this the first time that Commerce has ever made an affirmative CVD determination regarding a foreign currency with a unitary exchange rate.”).

Second, the U.S. Trade Representative earlier this year commenced two Section 301 investigations on practices of Vietnam, one of which involves its undervalued currency. See Office of the United States Trade Representative, Docket No USTR-2020-0037, Initiation of Section 301 Investigation: Vietnam’s Acts, Policies, and Practices Related to Currency Valuation, 85 Fed. Reg. 63637-63638 (October 8, 2020); Office of the United States Trade Representative, Notice of Public Hearing in Section301 Investigation of Vietnam’s Acts, Policies and Practices Related to Currency Valuation, 85 Fed. Reg. 75397-98 (November 25, 2020). The notice of initiation contained the following description of the currency practices of concern to the U.S.:

“The Government of Vietnam, through the State Bank of Vietnam (SBV), tightly manages the value of its currency—the dong. The SBV’s management of Vietnam’s currency is closely tied to the U.S. dollar. Available analysis indicates that Vietnam’s currency has been undervalued over the past three years. Specifically, analysis indicates that the dong was undervalued on a real effective basis by approximately 7 percent in 2017 and by approximately 8.4 percent in 2018. Furthermore, analysis indicates that the dong’s real effective exchange rate was undervalued in 2019 as well.

“Available evidence also indicates that the Government of Vietnam, through the SBV, actively intervened in the exchange market, which contributed to the dong’s undervaluation in 2019. Specifically, the evidence indicates that in 2019, the SBV undertook net purchases of foreign exchange totaling approximately $22 billion, which had the effect of undervaluing the dong’s exchange rate with the U.S. dollar during that year. Analysis suggests that Vietnam’s action on the exchange rate in 2019 caused the average nominal bilateral exchange rate against the dollar over the year, 23,224 dong per dollar, to be undervalued by approximately 1,090 dong per dollar relative to the level consistent the equilibrium real effective exchange rate.” (85 FR 63637-38).

Third, are the Treasury Department findings under both statutes in its semi-annual report, findings which support USTR concerns being explored in the ongoing Section 301 investigation.

Thus, the pressure for Vietnam to address U.S. concerns on its currency practices is mounting.


For Switzerland, the pressure to date is arising only under the Treasury Department semiannual report. Treasury’s concerns as laid out in the Executive Summary of the semiannual report are copied below.

Treasury Conclusions Related to Switzerland

“Switzerland met all three criteria under the 2015 Act over the four quarters through June 2020. Treasury has conducted enhanced analysis of Switzerland in this Report and will also commence enhanced bilateral engagement with Switzerland in accordance with the Act. The bilateral engagement will include urging the development of a plan with specific policy actions to address the underlying causes of Switzerland’s external imbalances.

“The Swiss franc has long been considered a safe haven currency that investors acquire during periods when global risk appetite recedes or financial volatility accelerates. These large safe haven flows pose challenges for Swiss macroeconomic policymakers, particularly in a period of negative interest rates and deflation. The Swiss National Bank (SNB) over the years has employed a range of tools to try to offset appreciation pressure on the franc and limit any associated negative impacts on inflation and domestic growth. Over the second
half of 2019 and particularly in the first six months of 2020, Switzerland conducted largescale one-sided intervention, significantly larger than in previous periods, to resist appreciation of the franc and reduce risks of deflation, as the SNB’s policy interest rates were significantly negative. While we recognize the extraordinary financial volatility in the first half of 2020 resulting from the COVID-19 crisis, the intervention was taken in the context of an extremely large current account surplus along with a growing bilateral trade
surplus with the United States and contributed to stemming the appreciation of the franc on a real, trade-weighted basis. Further franc appreciation would help facilitate gradual adjustment of Switzerland’s excessive current account surplus. Treasury therefore assesses, based on a range of evidence and circumstances, that at least part of Switzerland’s exchange rate management over the four quarters through June 2020, and particularly its foreign exchange intervention, was for purposes of preventing effective balance of payments adjustments. Hence, Treasury has determined under the 1988 Act that Switzerland is a currency manipulator. In the context of forthcoming negotiations with the Swiss authorities, Treasury will press for the adoption of policies that will permit effective balance of payments adjustments.

“• Switzerland was one of the countries in Europe hit early and hard by COVID-19, leading the government to declare a national state of emergency in mid-March. The number of active and new cases declined sharply from mid-to-late April but started rising again from mid-June as the authorities eased public health and mobility restrictions. Since mid-October, the number of new COVID-19 cases has surged, with new infections significantly above spring 2020 highs, leading the Swiss Federal Council to re-introduce several containment measures.

“Switzerland has for many years run extremely large current account surpluses, with the surplus reaching 10.9% of GDP in 2019. The current account surplus declined marginally, but remained elevated, at 8.8% of GDP over the four quarters through June 2020. The United States’ goods trade deficit with Switzerland widened notably over the last year, reaching $49 billion over the four quarters through June 2020, due partially to an increase in Swiss gold exports in the first half of 2020. The SNB disclosed that it spent $93 billion (90 billion francs) on currency interventions in the first half of 2020. Between July 2019 and June 2020, Treasury estimates that SNB net foreign purchases have totaled $103 billion (or 14% of GDP).

“Switzerland should employ a more balanced macroeconomic policy mix. Monetary policy continues to be relied on heavily despite the reduced effectiveness of unconventional tools, especially against a backdrop of persistent deflationary risks. We urge the SNB to deploy a broader and more balanced mix of monetary policy instruments, including domestic quantitative easing. Central to this recommended recalibration of monetary policy, we continue to urge the SNB to limit foreign exchange intervention to lean against large appreciation surges and allow real appreciation in line with the long-term trend. Treasury welcomes the SNB’s recent step to disclose foreign exchange intervention on a quarterly basis. Increased frequency of these disclosures – such as on a monthly basis – will help further improve transparency of the SNB’s actions. Fiscal policy should be deployed to reduce the economy’s reliance on the SNB’s policy measures, rebalance its external sector, and boost potential growth. The authorities should also take steps to raise potential growth by raising labor force participation rates and productivity growth, actions that would reduce Switzerland’s external imbalances and reliance on unconventional monetary policy.” (pages 5-6)


As exchange rates can move by large amounts in short periods of time, whether currencies are properly aligned can be critical to achieving the benefits of liberalized trade and not seeing trade distorted because of over- or undervaluation of one or more currencies. In its recent semiannual report, Treasury notes that the IMF views the U.S. dollar as significantly overvalued which by itself reduces U.S. exports and expands U.S. imports. If the overvaluation is created in part by trading partners deliberately undervaluing their currencies, there is a significant cost to Americans in terms of jobs and performance of companies. Indeed, many industries and workers have been concerned for decades that misaligned currencies were costing the U.S. jobs and manufacturing production and capacity. Congress was pressured for the last several decades to require Treasury to better analyze whether currencies were artificially valued by government action and to call out those countries who were engaged in such activities and to consult to achieve a correction. Last week’s semiannual report reflects the Congressional demand for a more fact-based analysis.

Beside Treasury, under the Trump Administration, there is greater ability of other U.S. agencies or entities to address problems posed by currency misalignment that is caused, at least in part, by government actions. Thus, Vietnam is having to deal with the U.S. Commerce Department, the U.S. Trade Representative and the U.S. Treasury Department.

It is to be hoped that the U.S. focus on important trading partners who have undervalued currencies caused in part by government interventions will be continued by the incoming Biden Administration. Currency misalignment can cause significant distortions in trade flows. A multipronged approach to addressing such problems has been and continues to be needed.