Inclusion of businesses of parties to covered free trade agreements in definition of domestic source for title III of Defense Production Act of 1950

Section 702(7)(B) of the Defense Production Act of 1950 (50 U.S.C. 4552(7)(B)) is amended— (1) in clause (i)(I)— (A) in item (aa), by striking; or and inserting a semicolon; (B) in item (bb), by striking; and and inserting; or; and (C) by adding at the end the following: (cc) subject to clause (iii), the territory of a party to a covered free trade agreement (as defined in section 2 of the Securing Trade and Resources for Advanced Technology, Economic Growth, and International Commerce in Minerals Act); and; and (2) by adding at the end the following: (iii) Additional requirements for parties to covered free trade agreements (I) In general A business concern described in clause (i)(I)(cc) may be treated as a domestic source— (aa) only for purposes of the exercise of authorities under section 303(a)(1) relating to minerals activities related to minerals the supply of which in the United States and Canada is deficient; and (bb) only if, for minerals activities carried out pursuant to such exercise of authorities— (AA) the minerals are processed, beneficiated, or recycled only by entities owned by entities organized under the laws of the United States and not more than 10 percent or more of the equity interests of which are owned or controlled, directly or indirectly, by any foreign entity of concern, through any contract, arrangement, understanding, relationship, or otherwise; (BB) the business concern does not sell or transfer any of the minerals extracted, processed, beneficiated, refined, recycled, or otherwise transformed, or any revenues derived from those minerals, to entities located in the People’s Republic of China or to entities owned, directly or indirectly, held, or controlled by any foreign entity of concern; and (CC) no mine used for the mining of such minerals is owned, directly or indirectly, held, or controlled by any foreign entity of concern. (II) Determination of deficiency For purposes of subclause (I)(aa), in determining if the supply in the United States and Canada of a critical mineral or rare earth element is deficient, the Secretary of Defense, in consultation with the Secretary of the Interior and the Secretary of Energy, shall consider factors including— (aa) current domestic production levels; (bb) projected demand for national defense and critical infrastructure; (cc) dependence on foreign sources, especially from foreign entities of concern; and (dd) potential for supply chain disruptions. (III) Compliance and verification (aa) Guidance The Secretary of Defense shall provide guidance to business concerns on compliance with this clause. (bb) Notice of and penalties for noncompliance If a business concern is found to be in violation of this clause— (AA) the Secretary of Defense shall provide written notice to the business concern detailing the nature of the violation and the penalties to be imposed; (BB) the business concern may be required to repay any funds received under section 303(a)(1); (CC) the business concern may be disqualified from future contracts or financial assistance under this Act; (DD) the business concern may be subject to civil penalties under section 705; and (EE) the matter may be referred to the Attorney General for criminal prosecution under applicable laws. (IV) Definitions In this clause: (aa) Beneficiate; beneficiation The terms beneficiate and beneficiation mean the crushing and grinding of hardrock mineral ore and such processes as are employed to free the mineral from other constituents, including physical and chemical separation techniques. (bb) Control The term control means having the ability, directly or indirectly, to determine (without regard to whether exercised through 1 or more corporate structures) the manner in which an entity conducts mineral activities, through any means, including— (AA) ownership interest; (BB) authority to commit the real or financial assets of the entity; (CC) position as a director, officer, or partner of the entity; or (DD) contractual arrangement. (cc) Critical mineral The term critical mineral has the meaning given that term in section 7002(a) of the Energy Act of 2020 (30 U.S.C. 1606(a)). (dd) Deficient The term deficient, with respect to the supply in the United States and Canada of a critical mineral or rare earth element, means that supply is insufficient to meet national defense and essential civilian industrial requirements, as determined by the Secretary of Defense, in consultation with the Secretary of the Interior and the Secretary of Energy. (ee) Foreign entity of concern The term foreign entity of concern has the meaning given that term in section 40207 of the Infrastructure Investment and Jobs Act (42 U.S.C. 18741). (ff) Mineral activities The term mineral activities means any activity carried out on a mining claim, millsite, or tunnel site, for, related to, or incidental to, mining, beneficiation, processing, refining, alloying, or recycling activities for any critical mineral or rare earth element. (gg) Processing The term processing has the meaning given that term in Treasury Regulation section 1.30D–2(b)(37) (or a successor regulation). (hh) Rare earth element The term rare earth element has the meaning given that term in section 2 of the Securing Trade and Resources for Advanced Technology, Economic Growth, and International Commerce in Minerals Act. (ii) Recycling The term recycling has the meaning given that term in Treasury Regulation section 1.30D–2(b)(43) (or a successor regulation). (jj) Revenues The term revenues includes any income, profits, dividends, royalties, or other financial benefits obtained from the sale, transfer, or other disposition of the minerals produced. (kk) Sell or transfer The term sell or transfer includes any transaction that conveys ownership, possession, or control of minerals produced, or any interest therein, including sales, leases, exchanges, or gifts..