EXTRA: MIIT Publishes New Draft For Management Of China's Rare Earth Industry

2021 Rare Earth January 16

On January 15, 2021 China’s Ministry of Industry & Information Technology published a draft of proposed regulations on rare earth for public consultation until February 15.

Our objective is to prevent media hyperventilation and related build-up of bovine brown matter.

We give you here a rough translation with our comments and add emphasis where we feel it is due. The originals you can find on the site of the MIIT linked in the bottom of this page.

Generally, what we see here is reminscent of measures taken 10 years ago to reign in on China’s runaway steel industry at that time.

If you haven’t been reading The Rare Earth Observer, the official explanation and the regulations tell you everything that has been going wrong and what is going wrong right now.

These regulations, if adopted and faithfully implemented, will aid international junior RE miners development and will add a lot of transparency for all of us, including sceptical investors.

We can find nothing bad in this, but one thing is glass-clear: There will be less rare earth exported from China, if ‘illegal production’ is really weeded out.

Here the official explanation, followed by the draft regulations:

Explanation on "Regulations on Rare Earth Management (Draft for Soliciting Comments)"

In order to regulate the production and operation order of rare earth mining, smelting and separation according to law, to develop and utilize rare earth resources in an orderly manner, and to promote the high-quality development of the rare earth industry, the Ministry of Industry and Information Technology drafted the "Regulations on Rare Earth Management (Draft for Comment)" (hereinafter referred to as the "Regulations") ). The description is as follows:

1. The necessity of legislation

One is the need to effectively safeguard national interests and industrial security. Rare earth is an important strategic resource as well as a non-renewable resource. my country is a big country with rare earth resources and has a pivotal position in the production and utilization of rare earths. Accelerating the formulation of the "Regulations" and legally clarifying various systems for rare earth management are conducive to safeguarding my country's national interests and the security of the strategic resource industry.

The second is the need to regulate the order of rare earth production and operation in accordance with the law. Aiming at the problems of private digging and illegal mining, destructive mining, unplanned and over-planned production, illegal trading of rare earth products, destroying the ecological environment, disrupting the order of production and operation, etc., it is urgent to formulate comprehensive regulations covering the entire rare earth industry chain to strengthen Industry management, investigation and punishment of illegal acts according to law.

The third is the need to improve the rare earth management system. The rare earth industry covers many links such as mining, smelting and separation, storage, product circulation, secondary utilization, and import and export. It involves industry and information technology, natural resources, development and reform, commerce, market supervision and management, taxation, customs and other departments. It is necessary to formulate "Regulations" and establish a management system with clear division of labor and close cooperation in accordance with the law.

2. The general idea of ​​legislation

The first is to insist on protection first. Rare earths are of irreplaceable significance for the transformation of traditional industries, the development of emerging industries, and the progress of national defense science and technology industries. Special protection must be given to them. Administrative licenses and project approvals for rare earth mining and smelting separation are required.

The second is to adhere to source governance. Establish a total amount indicator management system for rare earth mining and smelting separation. The third is to adhere to the entire industry chain management. Regulate the mining, smelting and separation, metal smelting, comprehensive utilization, and sales and circulation of the rare earth industry chain to ensure safe, green and sustainable development of the rare earth industry. The fourth is to pay attention to institutional convergence. Do a good job in linking up with laws and regulations such as mineral resource management, environmental protection, enterprise investment project approval records, and import and export management.

3. The main content of the "Regulations"

There are 29 articles in the Regulations, mainly stipulating the following contents:

(1) Clarify the division of responsibilities for rare earth management. The State Council has established a rare earth management coordination mechanism to study and decide major policies for rare earth management, and coordinate the resolution of major issues in rare earth management. The competent departments of industry and information technology of the people’s governments at or above the county level are responsible for the management of the rare earth industry. Development and reform, public security, finance, natural resources, ecological environment, commerce, emergency management, state-owned assets, customs, taxation, market supervision and management and other departments are in their respective responsibilities Responsible for rare earth management related work within the scope. (Article 3)

(2) Clarify the approval system for rare earth mining, smelting and separation investment projects. Investing in the construction of rare earth mining projects or rare earth smelting and separation projects shall go through the approval procedures in accordance with the "Regulations on the Administration of Enterprise Investment Project Approval and Filing" (Article 7).

(3) Establish a management system for the total amount of rare earth mining and smelting separation. First, the State Council’s industry and information technology authorities, together with the State Council’s development and reform, natural resources and other departments, will study and formulate total rare earth mining and rare earth smelting and separation targets, which will be announced to the public after being approved by the State Council (Article 8). Second, the State Council's industry and information technology and natural resources departments determine the total quota usage plan based on the total quota approved by the State Council and comprehensively consider relevant factors (Article 9). Third, rare earth mining enterprises and rare earth smelting and separating enterprises shall implement rare earth mining or smelting separation in accordance with the total indicator use plan determined by the industry and information technology and natural resources authorities of the State Council (Article 10).

(4) Strengthen the management of the entire industry chain of the rare earth industry.

First, in terms of circulation, it is stipulated that no unit or individual shall purchase or sell rare earth products that are illegally mined, smelted and separated (Article 11).

Second, in terms of comprehensive utilization, encourage and support the use of environmentally friendly technologies and processes to recycle secondary resources containing rare earths, and prohibit comprehensive utilization companies from using rare earth products other than secondary resources containing rare earths as raw materials for smelting and separation production activities (Article 12).

The third is product traceability management. It is required that the State Council’s industry and informatization authorities, together with the State Council’s natural resources, customs, and taxation departments, establish a rare earth product traceability information system. Rare earth mining enterprises, rare earth smelting and separating enterprises, and rare earth metal smelting enterprises shall enter production and sales data and their packaging and invoice information into the traceability information system (Article 14).

Fourth, in terms of import and export management, it is stipulated that import and export enterprises of rare earth products should abide by foreign trade and export control laws and regulations (Article 15). Fifth, the state implements a strategic reserve of rare earth resources and rare earth products (Article 16).

(5) Strengthen supervision and management. The first is to strengthen daily supervision. The competent departments of industry and information technology of the people’s government at or above the county level, together with the public security, natural resources, ecological environment, commerce, customs, market supervision, taxation, emergency management and other departments, strengthen the supervision of rare earth mining, smelting and separation, metal smelting, The supervision and management of enterprises such as comprehensive utilization shall adopt the supervision mode of "double random and one open" (Article 17).

The second is to give the supervisory authority the necessary supervisory means, and stipulate that if the industry and informatization department of the local people's government at or above the county level finds suspected illegal activities during the supervision and inspection process, they can seize relevant rare earth products and equipment, seal up the production or sale of rare earth products Administrative coercive measures at the site (Article 18).

(6) Clarify legal responsibilities. Provisions are made for corresponding legal responsibilities for violations of the total quota use plan to engage in rare earth mining, smelting and separation, illegal purchase and sale of rare earth products, violation of the traceability information management of rare earth products, unauthorized use of rare earth reserves, and obstruction of supervision and inspection, etc. (Article 20) To Article 27).

And here are the regulations:

Rare Earth Management Regulations

(Draft for comments)

Article 1 [Legislative Purpose] In order to regulate the management of the rare earth industry, ensure the rational development and utilization of rare earth resources, promote the sustainable and healthy development of the rare earth industry, and protect the ecological environment and resource safety, these regulations are formulated.

Article 2 [Scope of Application] These Regulations shall apply to activities such as rare earth mining, smelting separation, metal smelting, comprehensive utilization, and product circulation within the territory of the People's Republic of China.

Article 3 [Management System] The State Council shall establish a rare earth management coordination mechanism, study and decide major policies for rare earth management, and coordinate the resolution of major issues in rare earth management.

Comment: Avid readers of this humble publication will be aware, what are the major issues referred to: Import, smuggle of RE raw materials, an unrealistic quota in terms of both, available domestic resources and market demand, production in excess of quota paired with others not producing at all, just trading, at least one of the Big 6 (reporting directly to the State Council) ignoring environmental regulations, departments and fines, illegal production, recycling that is more damaging to the environment than producing the original, and so on.

The competent departments of industry and information technology of the people’s governments at or above the county level are responsible for the management of the rare earth industry. Development and reform, public security, finance, natural resources, ecological environment, commerce, emergency management, state-owned assets, customs, taxation, market supervision and management and other departments are in their respective responsibilities Responsible for rare earth management related work within the scope.

Article 4 [Planning] The competent department of industry and information technology of the State Council [=MIIT] shall, in conjunction with other relevant departments of the State Council, formulate a development plan for the rare earth industry to regulate, guide and promote the sustainable and healthy development of the rare earth industry.

Comment: Same as before, why mention? There has always been a vice premier in charge of RE, but now it seems oversight on MIIT is getting tightened, but it remains in charge, no matter what pig’s breakfast it created.

Article 5 [Technical Progress] The state encourages scientific and technological innovation and talent training in the fields of rare earth exploration and mining, smelting and separation, metal smelting and comprehensive utilization, and supports the development and industrialization of new rare earth products, new materials and new processes.

Article 6 [Mining Management] The mining of rare earths shall be carried out in accordance with the relevant laws and administrative regulations on the management of mineral resources.

Article 7 [Project Approval] Investing in the construction of rare earth mining projects or rare earth smelting and separation projects shall go through the approval procedures in accordance with the "Regulations on the Administration of Enterprise Investment Project Approval and Filing". Without approval, no unit or individual may invest in the construction of rare earth mining, rare earth smelting and separation projects.

The project approval authority shall submit the list of approved rare earth mining, rare earth smelting and separation investment projects to the competent department of industry and information technology of the State Council, and the competent department of industry and information technology of the State Council will regularly announce to the public.

Comment: This is borrowing on regulation previously established for China’s steel industry, when it was running wild. Public announcements ensure, that no changes can be made afterwards without questions getting raised.

Article 8 [Total Index Management] The State implements total index management for rare earth mining and rare earth smelting and separation. The competent department of industry and information technology of the State Council, together with the development and reform, natural resources and other departments of the State Council, based on the development plan of the rare earth industry, mineral resources plan and national industrial policy, comprehensively considers the environmental carrying capacity, resource potential, market demand, and the technological level of mining, smelting and separation. Factors, research and formulate total rare earth mining indicators and total rare earth smelting and separation indicators, which will be announced to the public after being approved by the State Council.

In order to protect natural resources and the ecological environment, the state can take necessary measures to restrict or stop rare earth mining and rare earth smelting and separation.

Comment: The last paragraph sounds dramatic, but may be appropriate.

Article 9 [Indicator Use Plan] The State Council's industry, information technology, and natural resources department shall determine the total indicator use plan based on the total indicators approved by the State Council and comprehensively consider the following factors:

(1) National regional economic policies and requirements for the layout of the rare earth industry;

(2) Enterprise production capacity, production and operation conditions;

(3) The implementation of the total quota in the previous year;

(4) The efficiency of raw material conversion, safe production, green environmental protection, intelligent manufacturing, etc.

Article 10 [Enterprise Implementation] Rare earth mining enterprises and rare earth smelting and separating enterprises shall implement rare earth mining or rare earth smelting and separation in accordance with the total indicator use plan determined by the industry and information technology and natural resources authorities of the State Council.

Rare earth smelting and separation enterprises can use imported rare earth products for smelting and separation in addition to the total quota. The specific management measures shall be formulated by the competent department of industry and information technology under the State Council.

Rare earth mining enterprises and rare earth smelting and separating enterprises shall publicize the list of rare earth mines in production and rare earth smelting and separating production sites to the public every year.

Comment: We couldn’t possibly agree more, that secrecy is a problem in rare earth, it is not an asset. Look forward to better information on RE from China, which will create certainty for the investment plans of junior RE miners globally.

Article 11 [Prohibition Provisions] No unit or individual may purchase or sell rare earth products that are illegally mined, smelted and separated.

Article 12 [Comprehensive Utilization] The state encourages and supports the use of environmentally friendly technologies and processes to recycle secondary resources containing rare earths.

Comprehensive utilization enterprises shall not use rare earth products other than secondary resources containing rare earths as raw materials to engage in smelting and separation production activities.

Comment: This was one factor, that aided unplanned production and held rare earth prices down, not a communist conspiracy to disable global RE mining.

Article 13 [Environmental Protection Management] Rare earth mining enterprises, rare earth smelting and separating enterprises, rare earth metal smelting enterprises, and rare earth comprehensive utilization enterprises shall abide by environmental protection and clean production laws and regulations, and fulfill the obligation of ecological environment restoration and governance in accordance with national regulations.

Article 14 [Product Traceability] The competent department of industry and information technology of the State Council shall establish a rare earth product traceability information system in conjunction with the natural resources, customs, and taxation departments of the State Council.

Rare earth mining enterprises, rare earth smelting and separating enterprises, and rare earth metal smelting enterprises shall enter production and sales data and their packaging and invoice information into the traceability information system.

The packaging of rare earth products shall comply with relevant mandatory national standards and indicate the source enterprises of the rare earth products.

Comment: Bringing ‘illegal’ output to zero and living up to aspirations of EU officials.

Article 15 [Import and Export Administration] Import and export enterprises of rare earth products shall abide by laws and regulations such as foreign trade and export control.

Comment: Absent of such regulations, has it ever been ok not to abide by laws and regulation?

Article 16 [Reserve Management] The state implements a strategic reserve of rare earth resources and rare earth products.

The strategic reserve of rare earth resources shall be designated and implemented by the Department of Natural Resources of the State Council. The local people's government at or above the county level is responsible for the supervision and protection of the resource areas listed in the national strategic reserve, and shall not be exploited without the approval of the natural resources department of the State Council.

The strategic reserve of rare earth products implements a reserve mechanism that combines government reserves and corporate reserves. The strategic reserve plan for rare earth products was proposed by the development and reform and finance department of the State Council in conjunction with the State Council’s industry and informatization authorities, incorporated into the national strategic material reserve plan, and organized implementation, supervision and inspection. Rare earth products purchased and stored shall be included in the total amount of rare earth smelting and separation indicators, and shall not be used without approval.

Comment: Now that is new, however, this pratise has already been implemented, pre-regulation.

Article 17 [Inspection System] The competent department of industry and information technology of the people’s government at or above the county level, together with the public security, natural resources, ecological environment, commerce, customs, market supervision, taxation, emergency management and other departments, strengthen the supervision of rare earth mining, smelting and separation, and metal For the supervision and management of smelting, comprehensive utilization and other enterprises, a daily supervision and management system based on random inspections shall be established, a list of random inspection items shall be published, inspectors shall be randomly selected, and the enterprises to be inspected shall be randomly selected. The results of random inspections and investigations shall be announced to the public in a timely manner.

Comment: This shows, that corruption remain an issue, and be it only trading favours by indiscretion about forthcoming inspections.

Article 18 [Administrative Compulsory Measures] If the competent industry and information technology department of the local people's government at or above the county level discovers suspected illegal acts during the supervision and inspection process, it may take the following compulsory measures:

(1) Detain relevant rare earth products and equipment;

(2) Seal up places where rare earth products are produced or sold.

Comment: Local authorities often had no teeth to bite.

Article 19 [Credit Mechanism] Where enterprises such as rare earth mining, rare earth smelting and separation, rare earth metal smelting, and comprehensive utilization of rare earths are subject to administrative penalties for violating the provisions of these regulations, the relevant departments of the local people's government at or above the county level shall record the penalty information in their credit records , Into the national credit information sharing platform.

Comment: China’s much discussed ‘social credit system’, for companies already nationwide standardized and publically accessible to everyone, including banks, rating agencies, employees, investors, rare earth observers….

Everything from No. 20 onwards shows you nicely, what currently is not going to plan. Also these articles are to provide teeth to government departments.

Article 20 [Mining and Separation without Target Exceeding Targets] If a rare earth mining enterprise or a rare earth smelting and separating enterprise violates the total quota usage plan to engage in rare earth mining, rare earth smelting and separation, or processing illegally mined rare earth products, natural resources, industry and information According to the division of responsibilities, the competent chemical department shall order to stop illegal activities, confiscate rare earth products and illegal income, and impose a fine of 1 to 5 times the illegal income; if there is no illegal income, a fine of 100,000 yuan to 1 million yuan; if the circumstances are serious , ordered to stop production up to the market supervision and management department revoking the business license according to law.

Article 21 [Illegal Smelting and Separation] Where a rare earth comprehensive utilization enterprise uses rare earth products other than secondary resources containing rare earths as raw materials to engage in smelting and separation production activities, the competent department of industry and information technology shall order to stop illegal activities and confiscate rare earth products and For illegal gains, a fine of 1 to 5 times of the illegal gains shall be imposed; if there is no illegal gains, a fine of 100,000 to 1 million yuan shall be imposed; if the circumstances are serious, production shall be suspended until the market supervision and management department revokes the business license according to law.

Article 22 [Illegal Sales] Whoever purchases or sells rare earth products illegally mined, smelted and separated in violation of the provisions of these Regulations shall be confiscated by the competent authorities of industry and information technology in conjunction with relevant departments of the rare earth products and illegal income, and the illegal income shall be doubled More than 5 times the fine.

Article 23 [Violation of product traceability] Rare earth mining companies, rare earth smelting and separating companies, and rare earth metal smelting companies that forge data and information in the rare earth product traceability information system shall be ordered by the relevant administrative department to make corrections and may be fined less than 500,000 yuan .

Article 24 [Unauthorized Use of Reserves] Where the strategic reserve of rare earth products is used without approval, the development and reform department of the State Council shall order corrections, confiscate the illegal gains, and impose a fine of 1 to 5 times the illegal gains; if there is no illegal gains , impose a fine of 100,000 yuan up to 1 million yuan; the directly responsible person in charge and other responsible persons shall be punished according to law.

Article 25 [Dereliction of Duty] Personnel of the department responsible for rare earth management and other relevant departments who abuse their power, neglect their duties, or engage in malpractices for personal gains in the supervision and management work shall be punished according to law.

Article 26 [Obstructing supervision and inspection] In violation of the provisions of these regulations, refusing to provide relevant materials or providing false materials, obstructing supervision and inspection, or concealing, destroying, or transferring evidence, the supervision and inspection department shall order corrections, give warnings, and may also impose 20 A fine of less than 10,000 yuan.

Article 27 [Public Security and Criminal Penalties] Violation of the provisions of these Regulations and constitutes a violation of public security management shall be punished by the public security organ in accordance with law; if a crime is constituted, criminal responsibility shall be investigated in accordance with the law.

Article 28 [Interpretation of Terms] The meaning of the following terms in these regulations:

Rare earth refers to the general term of 17 elements including lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, and yttrium.

Rare earth mining refers to the production process of rock drilling, blasting, punching or excavation for the direct purpose of obtaining rare earth mineral products.

Rare earth smelting and separation refers to the production process of various single or mixed rare earth oxides, salts and other compounds produced after smelting and separating rare earth mineral products.

Rare earth metal smelting refers to the production process of using one or more rare earth oxides as raw materials to produce metals by molten salt electrolysis, metal thermal reduction or other methods.

Rare earth products, including rare earth mineral products, single rare earth compounds, mixed rare earth compounds, single rare earth metals, mixed rare earth metals, etc.

Article 29 [Effective Time] These Regulations shall come into force on [year, month and day].

We conclude: