The bill would force defense contractors to stop buying rare earths from China by 2026 and use the Pentagon to build a permanent stockpile of strategic minerals.
The bill, spearheaded by Senators Tom Cotton, Republican of Arkansas, and Mark Kelly, Democrat of Arizona, is the latest in a series of US laws aimed at preventing China from effectively controlling the sector.
Essentially, he is using the Pentagon's billion-dollar purchase of fighter jets, missiles, and other weapons as leverage to demand contractors stop relying on China and, more broadly, support a resurgence in US rare earth production.
The bill only applies to weapons, not other equipment purchased by the US military.
Rare earths are a group of 17 metals that, after processing, are used to make magnets used in electric vehicles, weapons and electronics. While the United States created the industry during World War II and US military scientists developed the most widely used type of rare earth magnet, China has gradually taken control of the entire sector over the past 30 years.
There is only one rare earth mine in the United States, and they do not have the capacity to process rare earth minerals.
"Ending America's dependence on China for rare earth mining and processing is critical to strengthening the US defense and technology sectors," Cotton told Reuters.
However, to create this reserve, the Pentagon is purchasing some of the supplies from China, a paradox that Senate officials hope will settle over time.
The rare earth manufacturing process can be highly polluting, which is one of the reasons it has become unpopular in the United States. Ongoing research is trying to make the process cleaner.
Stimulate domestic production
Most members of the nascent U.S. rare earths sector have praised the bill, though some concerned defense contractors may continue to ask for a waiver of buying Chinese rare earths even after 2026.
The Aerospace Industries Association, the trade group for Northrop Grumman Corp, Lockheed Martin Corp and other U.S. aerospace and defense companies, declined to comment on the bill.
The bill, which sponsors expect could be included in Pentagon funding legislation later this year, does not offer direct support for U.S. rare earth miners or refiners.
Instead, it requires Pentagon contractors to stop using Chinese rare earths within four years, only allowing waivers in rare cases. Defense contractors will be required to immediately disclose where they are extracting minerals from.
Over the past two years, the Pentagon has provided grants to companies trying to restart rare earth processing and magnet production in the US, including MP Materials, Australia's Lynas Rare Earth Ltd, TDA Magnetics Inc and Urban Mining Co.
Kelly, a former astronaut and member of the Senate Armed Services and Energy Committees, said the bill should "strengthen America's position as a world leader in technology by reducing our country's dependence on adversaries like China for rare earths."
In addition, the US Trade Representative will have to investigate whether China is distorting the rare earths market and recommend whether trade sanctions are needed.