National Security

Barely noticed in the firehose stream of presidential activity since the inauguration was a brief Oval Office mention of cutting a deal with Ukraine for access to its critical minerals. Securing steady access to uranium, the rare earth elements, and other critical minerals is a natural priority for an America First agenda. President Trump’s February 3 statement is unlikely to be his last. Changes to the tax code, permitting reform, regulatory incentives, and partnerships with allies as well as troubled nations are among the actions to watch for.

A Bipartisan Issue

Leaders of both parties agree that action is needed. “Whether it’s critical minerals with China … or uranium from Russia, we can’t be dependent on them,” Secretary of the Interior Doug Bergum asserted in his confirmation hearing. “We’ve got the resources here. We need to develop them.” Virginia Senator Mark Warner (D, VA) recently charged, “China dominates the critical mineral industry and is actively working to ensure that the U.S. does not catch up.” He urged, “The U.S. must, alongside allies, take meaningful steps to protect and expand our production and procurement of these critical minerals.” President Biden’s State Department was even more blunt, asserting that China is intentionally oversupplying lithium to “lower the price until competition disappears.”

Several recent developments have increased U.S. policymakers’ concerns about future supplies of critical minerals. New technologies, including artificial intelligence, promise to dramatically boost demand. China, meanwhile, is using new export control laws to curtail exports to the United States. A resurgent war in the eastern provinces of the Democratic Republic of the Congo (DRC), ostensibly over tribal rivalries, is actually a fight over the country’s rich mineral resources. These include gold and diamonds, but also coltan, an ore from which tantalum is extracted. Tantalum is extremely valuable for its use in the capacitors found in smartphones, laptops, and medical equipment.

The number of minerals in question (51), the usual number of steps in the production chain (4), and the variety of international agreements, public laws, private initiatives, and emerging technologies add up to a dizzyingly complex set of issues. Nevertheless, the bipartisan alignment evident in the above statements signals that impacted industries should watch closely for fast-moving legislative and regulatory developments.

Market Overview

Critical minerals are essential for a long list industrial and defense-related needs. Attention is often focused on the 17 ‘rare earth elements,’ but the U.S. Geological Survey (USGS) has a broader list of 50 mineral commodities that are critical to the nation’s economy and national security. Uranium is excluded by a statutory definition but is often tracked in parallel. Together, these 51 elements are used for a far wider array of products than is often recognized. The 17 REEs alone are also needed for oil refining, guided missiles, radar arrays, MRI machines, computer chips, hydrogen electrolysis, lasers, aluminum manufacturing, cameras, jet engines, satellite manufacturing, and a long list of other advanced applications.Continue Reading What President Trump Might Do on Critical Minerals

Updated August 8, 2023.  Originally posted May 1, 2023.

Last week, comment deadlines were announced for a Federal Communications Commission (“FCC”) Order and Notice of Proposed Rulemaking (“NPRM”) that could have significant compliance implications for all holders of international Section 214 authority (i.e., authorization to provide telecommunications services from points in the U.S. to points abroad).  The rule changes on which the FCC seeks comment are far-reaching and, if adopted as written, could result in significant future compliance burdens, both for entities holding international Section 214 authority, as well as the parties holding ownership interests in these entities.  Comments on these rule changes are due Thursday, August 31, with reply comments due October 2.

Adopted in April, the FCC’s item proposing the new rules also includes an Order requiring all holders of international Section 214 authority to respond to a one-time information request concerning their foreign ownership. Although last week’s Federal Register publication sets a comment deadline for the proposed rules, the reporting deadline for the one-time information request has not yet been established.  However, because the FCC has fulfilled its statutory obligations regarding the new information collection presented by the one-time reporting requirement, carriers — as well as entities holding an ownership interest in these carriers — should prepare for the announcement of the reporting deadline.

The FCC’s latest actions underscore the agency’s ongoing desire to closely scrutinize foreign ownership and involvement in telecommunications carriers serving the U.S. market, as well as to play a more active role in cybersecurity policy. These developments should be of interest to any carrier that serves the U.S. market and any financial or strategic investor focused on the telecommunications space, as well as other parties interested in national security developments affecting telecommunications infrastructure.

Proposed Rule Changes for International Section 214 Authority

The FCC’s proposed changes to its regulation of international Section 214 authorizations generally concern additional compliance, disclosure, and reporting requirements. The FCC’s proposed rule changes are far-reaching, but the most notable of the proposals concern the following:Continue Reading Comments Due August 31 on FCC’s Proposal to Step Up Review of Foreign Ownership in Telecom Carriers and Establish Cybersecurity Requirements

On the heels of Russia’s invasion of Ukraine, pandemic-induced supply chain disruptions, and U.S.-China tensions over Taiwan, 2022 accelerated a sweeping effort within the U.S. government to make national security considerations—especially with respect to China—a key feature of new and existing regulatory processes. This trend toward broader national security regulation, designed to help maintain U.S. strategic advantage, has support from both Republicans and Democrats, including from the Biden Administration. National Security Advisor Jake Sullivan’s remarks in September 2022 capture the tone shift in Washington: “…[W]e have to revisit the longstanding premise of maintaining ‘relative’ advantages over competitors in certain key technologies…That is not the strategic environment we are in today…[w]e must maintain as large of a lead as possible.”

This environment produced important legislative and regulatory developments in 2022, including the CHIPS and Science Act (Covington alert), first-ever Enforcement and Penalty Guidelines promulgated by the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”) (Covington alert), President Biden’s Executive Order on CFIUS (Covington alert), new restrictions under U.S. export control authorities targeting China (Covington alert), and proposals for a new regime to review outbound investments by U.S. businesses (Covington alert). The common thread among these developments is the U.S. government’s continuing appetite to use both existing and new regulatory authorities to address identified national security risks, especially where perceived risks relate to China.

With a Republican majority in the U.S. House of Representatives riding the tailwinds of this bipartisan consensus, 2023 is looking like a pivotal moment for national security regulation—expanding beyond the use of traditional authorities such as trade controls and CFIUS, into additional regulatory domains touching upon data, communications, antitrust, and possibly more. In parallel, the U.S. focus on national security continues to gain purchase abroad, with foreign direct investment (“FDI”) regimes maturing in tandem with CFIUS, and outbound investment screening gaining traction, for example, in the European Union (“EU”). It is crucial for businesses to be aware of these developments and to approach U.S. regulatory processes with a sensitivity towards the shifting national security undercurrents described in greater detail below.Continue Reading Will 2023 Be an Inflection Point in National Security Regulation?