China Restricts Critical Mineral Exports

Jul. 17, 2023
By: Chaney A. Finn

Most electric consumer and military products used today depend on semiconductors to facilitate power and electrical distribution. Semiconductors are produced from critical minerals that primarily are sourced from foreign producers, including those in China. Our dependence on foreign sourcing poses economic and national security issues because these minerals may be subject to supply chain disruptions, such as shortages recently experienced during the COVID-19 pandemic.

China has introduced a new obstacle that will impact the supply chain for critical minerals which may cause supply chain disruptions. It is now requiring export licensing on gallium and germanium when those minerals are being exported from China, reportedly to protect its own national security and access to these minerals. The U.S. Commerce Department "firmly" opposes China’s new position, while underscoring the need for U.S. companies to diversify supply chains. China’s announcement appears to be in response to the U.S.’ continued efforts to restrict certain technologies from being sent to China and is expected to cause supply chain disruptions and an increase in commodity prices.

As we have previously reported, the U.S. has taken steps to strengthen partnerships with other critical mineral producers and establish domestic manufacturing to reduce, and eventually eliminate reliance on China. Despite these efforts, it could take decades for the U.S. to scale to the production level of other countries. Commerce Secretary Gina Raimondo previously stated, "The reason we're really in this mess is because for a long time, we haven't invested. We took our eye off the ball. We used to lead the world in semiconductor manufacturing and now we don't. We just disinvested."

Should you have questions regarding supply chain security, trade agreements, or any other trade-related question, do not hesitate to contact any attorney at Barnes, Richardson & Colburn.