Volume I, No. XI
A 1950 allocation power becomes an export control, and its first targets are battery scrap and tungsten
From August 27, U.S. sellers of black mass and tungsten waste and scrap must sell every ton to U.S. persons unless Commerce grants relief. The order rests on the Defense Production Act rather than the export control statute, and it borrows its border machinery from the 2020 PPE order.
The Bureau of Industry and Security (BIS) has published an order that will keep two kinds of scrap inside the United States. From August 27, any U.S. person who sells black mass, the shredded residue of spent lithium-ion batteries, or tungsten waste and scrap must allocate 100 percent of monthly sales to U.S. persons, and the material “must remain physically located within the United States” unless BIS authorizes otherwise1. In effect this is an export license requirement. It was not issued under the Export Control Reform Act or the Export Administration Regulations, the usual home of such controls. It rests on section 101 of the Defense Production Act of 1950, the statute that lets the government rank defense contracts ahead of commercial ones and allocate scarce materials1,3. The policy interest lies in that choice of instrument. A power written to steer supply to defense production is being used to hold a secondary raw material at home, so that domestic refiners rather than foreign buyers get first claim on it.
The instrument: section 101 and a presidential finding
Section 101(a) authorizes the President to “allocate materials, services, and facilities in such manner, upon such conditions, and to such extent as he shall deem necessary or appropriate to promote the national defense”3. Subsection (b) limits that power in the civilian market. It may not be used to control the general distribution of a material unless the President finds that the material is “a scarce and critical material essential to the national defense” and that defense needs “cannot otherwise be met without creating a significant dislocation” in normal civilian distribution3.
The President made both findings on July 30 in a memorandum to the Secretary of Commerce2. It states that “America’s inadequate supply of CMMs poses an increasing risk to our national defense and security,” and that heavy reliance on foreign sources “threatens serious, sustained supply chain disruptions”2. The determination defines recoverable critical minerals and materials broadly: black mass, end-of-life rare-earth permanent magnets and other finished goods, swarf, and “other waste and scrap containing critical minerals and materials”2. It excludes copper scrap, which it treats as already covered by Proclamation 10962, the Section 232 copper action of July 20252. The Journal described the reach of that copper proclamation in its essay on the metals derivative additions. The memorandum then directs the Secretary to act under the section 101 authority delegated by Executive Order 136032.
The procedural route is a second feature of the instrument. Section 709(a) of the Act exempts its regulations from the Administrative Procedure Act altogether4. Section 709(b) restores a 30-day comment requirement, but it may be waived for a temporary regulation when the issuing officer finds “urgent and compelling circumstances”4. BIS invoked that waiver. The Under Secretary for Industry and Security made the finding, the rule was issued as temporary, and a 90-day comment period runs alongside it, closing November 41. The rule also changes the Defense Priorities and Allocations System regulations themselves: a new paragraph in 15 CFR 700.34 lets BIS issue allocation orders by temporary final rule, and a new supplement no. 1 to part 700 carries this first one1.
The mechanism: Schedule B codes and a broad definition of sale
The order lists four Schedule B export codes, each at a 100 percent monthly domestic sales requirement from August 27, 2026, to August 27, 20271:
- 8101.97.00.00, tungsten waste and scrap [1].
- 8549.13.00.00, 8549.14.00.00 and 8549.19.00.00, waste and scrap of primary cells, batteries and accumulators that is sorted, unsorted or “other,” but only where it meets the definition of black mass [1].
That definition does much of the work. Black mass is “any shredded lithium-ion battery scrap” containing cathode material, which may include aluminum, copper, iron, lithium, cobalt, nickel and manganese, anode material such as graphite or silicon, or other residual cell materials1. Other battery scrap under the same three codes falls outside the order1. Tungsten scrap, as Resource Recycling explains, comes from filaments, electrical contacts and heat sinks in end-of-life electronics, and is usually reprocessed into carbide products or used as an alloying additive in tool steel7.
Two other definitions widen the order. “Sale” includes deliveries to affiliates and subsidiaries and transfers between branches or divisions under common ownership1. A recycler that ships black mass to its own refinery abroad is therefore making a covered sale, a point Resource Recycling noted7. “U.S. person,” by contrast, is narrow: it means a person “located in the United States”1. Baker McKenzie lawyers called that definition “much narrower than in other export controls and sanctions contexts,” and wrote that the practical result is that covered material must generally stay on U.S. soil8.
Relief comes through what the rule calls adjustments and exceptions. BIS will consider requests where compliance causes hardship “not suffered generally by others,” where compliance would reduce domestic supply, where a seller plans to send material abroad for processing and bring the refined product back, where compliance would cause irreparable harm, or where a company needs more time1. Requests go to BIS in writing, with supporting data1. BIS intends to answer within 14 days, may issue a DPAS temporary license as interim relief, and may grant both company-specific and generally applicable exceptions1. Filing a request does not suspend the obligation1. Appeals go to the Assistant Secretary for Export Administration1.
The order also sits beside the export control system rather than inside it. A DPAS authorization “is neither equivalent to nor replaces” a license under the Export Administration Regulations, and holders must still comply with those regulations1. Baker McKenzie advised companies to expect to clear both regimes for some shipments8. Enforcement runs through the border. Customs and Border Protection (CBP) may detain covered material intended for export while BIS reviews it, and goods that are then made subject to a rated order “will be consigned to BIS”1. Penalties follow sections 103 and 705 of the Act, and BIS may seek an injunction1. Sellers face a new information collection, approved on an emergency basis under OMB control number 0694-0148, which may ask for buyer details, Schedule B code, quantity and sale value1.
Who bears the cost of a domestic sales requirement?
The rule itself offers no estimate. BIS classified it as a significant regulatory action but not an economically significant one, and prepared no regulatory flexibility analysis on the ground that none was required1. The only volume figures in public view come from the trade press. Argus Media, citing U.S. customs data, reported that tungsten waste and scrap exports reached 2,183 metric tons in the first half of 2026, close to the 2,202 tons exported in all of 20256. Black mass exports under the three listed codes totaled 46,693 tons in the first half of 2026, against 100,667 tons in 20256.
Those figures describe what the order takes off the export market. On the seller’s side are battery collectors, shredders and electronics recyclers that had foreign buyers or foreign affiliates for their output; from August 27 they may sell only to U.S. persons unless BIS says otherwise1. On the buyer’s side are domestic refiners and tungsten processors, which gain a feedstock that can no longer leave without permission. The rule’s own logic for that transfer is the presidential finding that the United States “relies heavily on imports” of critical minerals and must “take immediate action” to secure recoverable supply1,2. Whether U.S. processing capacity can absorb a volume of the size Argus reports is not addressed in either document, and the exception for material sent abroad for refining and returned suggests BIS expects some of it cannot, at least at first1.
The industry response so far is cautious. Resource Recycling reported that the Recycled Materials Association was evaluating the rule and had a meeting scheduled with senior BIS officials7. Argus noted that the order effectively closes off exports of both materials without prior approval6.
The longer view: from protective equipment to scrap
The closest precedent is six years old, and its text is visible in this rule. On April 10, 2020, the Federal Emergency Management Agency published a temporary final rule under the same section 101, allocating five types of personal protective equipment, among them N95 respirators and surgical masks and gloves, “for domestic use” so that they “may not be exported from the United States without explicit approval by FEMA”5. It ran from April 7 to August 10, 20205. It also relied on the section 709(b)(2) waiver for temporary rules5. Its enforcement paragraph reads almost word for word like the 2026 one: covered materials “intended for export may be detained by CBP” during review, and goods later made subject to a rated order would be consigned to the agency1,5.
The differences are where the policy has moved. FEMA’s stated reason was that “the domestic need for them exceeds the supply” during a pandemic5. The 2026 order makes no claim of a present shortage of scrap; its finding concerns import dependence in the minerals the scrap contains2. FEMA built in a standing exemption for U.S. manufacturers with export contracts in place since January 1, 2020, provided at least 80 percent of their domestic production had been distributed in the United States over the prior 12 months, and it listed “international relations and diplomatic considerations” among the factors it would weigh5. BIS offers no comparable carve-out for existing customers; continuity of trade enters only through case-by-case exceptions1. The PPE order kept finished goods at home for immediate use. The scrap order keeps raw material at home to supply processing that the determination says the country lacks2.
The scope may grow. The presidential determination already reaches rare-earth magnets and swarf, and BIS says it “may add additional materials” to the order by Federal Register notice1,2. Baker McKenzie read that as a signal and advised companies to plan for a wider rule8. The order takes effect on August 27. Comments on the framework, and on whether “any additional sales requirements are necessary,” are due November 4 under docket BIS-2026-03641.