A temporary Commerce Department rule issued under Defense Production Act authority orders United States sellers of battery black mass and tungsten scrap to route all monthly sales to domestic buyers from August 27
By the Trade Desk, Peacock Tariff Consulting
WASHINGTON, August 7, 2026. The Commerce Department has closed the export door on two recovered materials that had been quietly flowing out of the United States to refiners in Asia, invoking Cold War era industrial mobilization authority to require that sellers of battery black mass and tungsten waste and scrap direct 100 percent of their monthly sales to domestic buyers.
The Bureau of Industry and Security published the temporary final rule in the Federal Register on Thursday, August 6, under the title “DPAS Directive Allocation Order and Additional Requirements for Recoverable Critical Minerals and Materials.” It takes effect August 27 and runs for approximately one year from that date. The agency bypassed normal notice and comment procedures, citing “urgent and compelling circumstances,” and will accept comments after the fact through November 4 under docket number BIS-2026-0364.
The action is not a tariff, and that distinction matters. It is an allocation order under the Defense Production Act, the statute that gives the executive branch authority to direct the distribution of materials deemed essential to national defense. Rather than taxing a transaction, the rule forbids it. A United States person selling covered material must allocate the entirety of monthly sales to other United States persons unless the bureau grants an adjustment or exception.
For recyclers, e-scrap processors and battery dismantlers, the effect is a sudden reordering of where their material can go. For the Asian refiners who have absorbed most of the world’s black mass, it is a supply shock. And for the broader debate about how the United States secures critical mineral inputs, it is the clearest signal yet that the administration intends to treat recovered domestic material as a strategic reserve rather than a tradable commodity.
What the rule covers
The order reaches four Schedule B commodity codes. Tungsten waste and scrap falls under 8101.97.00.00. Black mass is captured under 8549.13.00.00, 8549.14.00.00 and 8549.19.00.00, in each case only where the material meets the bureau’s definition.
That definition is broad. The bureau defines black mass as “any shredded lithium-ion battery scrap that contains cathode material,” which it notes may include lithium, cobalt, nickel and manganese, along with anode material such as graphite and silicon, or “other residual battery cell materials.” The formulation captures material at widely varying grades and stages of preparation, which means processors who have been sorting output into export and domestic streams by specification will find that both streams are covered.
Tungsten waste and scrap is a smaller volume trade with a disproportionate strategic profile. The metal is recovered from filaments, electrical contacts and heat sinks in end-of-life electronics, and recovered material is generally reprocessed into carbide products or used as an alloying additive in tool steel. Tungsten carbide is the working material in machine tooling, mining bits and armor-piercing ordnance, and global primary production is concentrated heavily in China, which has imposed its own export controls on the metal.
The most consequential drafting decision in the rule concerns what counts as a sale. The bureau defined the term to include “deliveries to affiliates and subsidiaries of a person” and transfers “from one branch, division, or section of a single entity to another branch, division, or section under common ownership or control.”
That language dissolves the distinction between an arm’s length export and an internal transfer. A United States recycling operation owned by a Korean or Chinese parent, shipping black mass to the parent’s hydrometallurgical plant, is bound by the same 100 percent domestic allocation requirement as a merchant seller quoting a cargo to a third party broker. Given how much recent investment in United States battery recycling capacity has come from foreign-owned processors building collection front ends to feed established overseas refining assets, this provision is likely to be the most heavily contested element of the rule.
The escape hatch and its limits
The bureau did leave a path open, and its shape reveals what the agency is actually trying to accomplish.
The rule states that the agency will consider adjustments where “a US person plans to sell black mass and tungsten waste and scrap to a person located outside the United States for processing or refining” if the “processed/refined material will be returned to the United States.” That provision is tailored to toll processing arrangements, in which a United States generator sends material abroad for treatment because domestic hydrometallurgical capacity remains limited, then brings the recovered metals home.
Read carefully, this is not an export ban so much as a repatriation requirement. The bureau appears less concerned with where the chemistry happens than with where the finished lithium, cobalt, nickel and tungsten ultimately land. That is a narrower and more defensible objective than autarky, and it may prove workable for companies with established toll relationships and the contractual documentation to prove that metal comes back.
The limits are practical. The bureau says it will grant adjustments and exceptions “at its discretion” and aims to respond to requests “within fourteen (14) days.” Fourteen days is fast by regulatory standards and slow by commodity trading standards, where cargoes are booked and vessels scheduled on shorter cycles. A discretionary approval with a two week turnaround introduces a timing risk that will have to be priced into contracts, and companies operating on spot terms may find the arrangement unworkable regardless of eligibility.
Enforcement runs partly through the border. Covered material “may be detained by CBP while BIS conducts its review of the shipment,” and any shipment swept into a rated order will be “consigned to BIS pending further distribution or agency direction.” That last phrase is unusual and worth noting: material caught in a rated order does not simply get turned back, it comes under the bureau’s direction. Noncompliance can be met with an injunction, and violations are punishable under the Defense Production Act’s enforcement provisions, which carry criminal exposure.
The bureau also reserved room to expand. It said it “may determine that additional materials identified” in the underlying presidential determination “be subject to an allocation order” through future Federal Register notices. Recyclers handling other recoverable critical minerals should read that sentence as a warning rather than boilerplate.
The legal foundation
The rule rests on a presidential determination issued July 30 finding that recoverable critical minerals and materials are “scarce and critical materials essential to the national defense.” An executive order signed the same day delegated the relevant Defense Production Act authority to the Secretary of Commerce, giving the department power to limit exports of industrial waste and scrap containing recoverable critical minerals.
That sequence is significant for anyone assessing the rule’s durability. The Defense Production Act is a different animal from the trade statutes that have absorbed most litigation attention this year. It was enacted in 1950 for industrial mobilization, it has been used across administrations for purposes ranging from defense procurement to medical supplies, and its allocation authority has not been the subject of the kind of major questions doctrine challenge that felled the emergency powers tariffs in February. The bureau’s decision to skip notice and comment is the most obvious procedural vulnerability, but the agency invoked the urgency exception that the Administrative Procedure Act provides, and the temporary one year duration of the rule is consistent with that framing.
Global Trade Alert catalogued the measure as an announced export-related restriction dated August 6, implemented August 27 and scheduled for removal August 27 of next year, assigning it a red rating, the monitor’s designation for measures that almost certainly discriminate against foreign commercial interests.
Industry response
The Recycled Materials Association, the trade group representing scrap processors, has responded with a mixture of endorsement and alarm.
The association said it is “currently evaluating the potential impact of this temporary final rule on our membership and the broader industry,” and that it had “already scheduled to meet with high-level political officials at BIS next week.” It said it would “convene a member-only discussion” once further details emerge.
Association president Robin Wiener has called for a “balanced approach” to critical minerals trade policy, saying the group supports efforts to strengthen domestic supply chains for critical minerals and recognizes the importance of ensuring the United States has reliable access to the materials it needs for national defense. In separate comments reported by the European recycling trade press, the association argued that the order overlooks critical industry dynamics, a formulation that points at the capacity problem rather than the policy objective.
That capacity problem is the substantive heart of the objection. Lee Allen of the price reporting agency Fastmarkets has noted that the United States lacks sufficient domestic processing capacity to absorb all the black mass and tungsten scrap it currently exports. Most black mass in the global market is processed in Asia, where hydrometallurgical refining capacity has been built out over the past decade at a pace domestic operators have not matched. If domestic refiners cannot take the volume, the material does not become domestic feedstock. It accumulates in warehouses, and its price falls.
Not all of the industry opposes the measure. A recycler coalition led by Amermin, based in Austin, Texas, wrote to Commerce Secretary Howard Lutnick in March arguing that uncontrolled exports of tungsten scrap represented an unacceptable risk to American industrial and military readiness. Domestic refiners who have struggled to secure feedstock against better capitalized overseas buyers stand to benefit directly from a rule that removes their competition for material.
The China shadow
No assessment of the rule is complete without the bilateral context, because the material at issue sits in the middle of an escalating exchange of restrictions between Washington and Beijing.
China dominates the midstream of the critical minerals economy. It holds the majority of global capacity for refining lithium, cobalt and graphite, it is the largest primary producer of tungsten, and it has spent the past two years demonstrating a willingness to use that position. Beijing has imposed export controls on tungsten and on a widening list of other critical minerals and mineral processing technologies, and it has coupled those controls with licensing regimes that give its ministries case by case discretion over foreign buyers.
The United States rule mirrors that architecture more closely than the administration’s public framing acknowledges. An allocation order administered at agency discretion, with case by case adjustments and a fourteen day review, is functionally an export licensing system by another name. Officials in Washington have criticized precisely that structure when Beijing has deployed it, on the grounds that discretionary licensing gives a government leverage over private commercial decisions and creates uncertainty that deters investment. Those criticisms do not become invalid when the tool changes hands, and companies subject to the new rule are entitled to raise them.
The escalation has continued in parallel on other tracks. In recent days Beijing has announced sanctions against a slate of United States entities and heightened scrutiny of drone industry exports, according to reporting in the South China Morning Post. The pattern is one of reciprocal narrowing rather than negotiation, and recovered materials are now inside its scope.
There is a strategic logic to acting on scrap specifically. Recovered material is the one part of the critical minerals supply chain where the United States has a natural endowment advantage, because it is generated domestically by consumption rather than by geology. A country with limited lithium mining and no meaningful tungsten mining nonetheless generates substantial volumes of both in its waste stream. Treating that stream as a strategic asset rather than an export commodity is a coherent response to a midstream bottleneck that cannot be mined away.
Whether it is a proportionate response depends on volumes that neither the rule nor the presidential determination quantifies publicly. That omission is itself a fair subject for the comment docket.
Market consequences
The immediate price effect is likely to be a divergence. Domestic black mass and tungsten scrap prices should soften as sellers lose access to the bid that has been setting the market, while Asian refiners, deprived of United States supply, bid up alternative sources in Europe, Southeast Asia and Latin America. That divergence is exactly what an allocation order is designed to produce, and it is the mechanism by which the rule subsidizes domestic refining without appropriating money.
The distributional consequences fall unevenly. Large integrated recyclers with domestic refining assets are net winners. Independent collectors and shredders, who sell into whatever market pays best and operate on thin spreads, are net losers, and some of them have business models that depend on the export bid. Battery collection economics in particular are marginal in many jurisdictions, and a reduction in the value of recovered black mass reduces the amount collectors can pay for feedstock, which in turn affects collection rates.
Foreign-owned United States recycling operations face the sharpest adjustment. Their capital was deployed on the assumption that material could move to affiliated refining capacity abroad, and the rule’s treatment of intracompany transfers as sales removes that assumption. Their realistic options are to seek a toll processing adjustment with a documented repatriation commitment, to accelerate domestic refining investment, or to idle collection capacity. None of the three is fast.
What companies should do
For any United States entity that sells covered material, the calendar is short. The rule takes effect August 27, which leaves under three weeks.
Determine coverage first. The four Schedule B codes are the starting point, but the bureau’s definition of black mass is functional rather than code-based, and material entered under adjacent classifications may still meet it. Companies should assess physical material against the definition rather than relying on how it has historically been declared.
Map every outbound flow, including internal ones. The intracompany transfer provision is the element most likely to catch companies by surprise, because such movements are typically managed as logistics rather than as sales and may not appear in commercial contract reviews at all.
File adjustment requests early where an exception is needed. With a stated 14 day target response time and an effective date of August 27, a request filed in the second week of August has a chance of resolution before the rule bites. A request filed after the effective date does not.
Review contracts for force majeure, change of law and delivery obligations. Sellers with committed forward tonnage to overseas buyers may be unable to perform lawfully after August 27, and the allocation of that risk between the parties depends on language written before anyone contemplated a Defense Production Act allocation order.
Prepare a comment for the November 4 docket. The rule is temporary and the bureau has invited input on it, which makes the comment period the most direct available route to influencing what a successor rule looks like. Comments that quantify domestic processing capacity against actual export volumes will be more useful to the agency than comments that assert harm in general terms.
Downstream effects on manufacturers
The rule’s reach extends past the recycling sector to the manufacturers who buy the metals that come out of it, and here the effects run in the opposite direction.
Tool and die shops, mining equipment makers and defense contractors who buy tungsten carbide have spent two years managing a supply picture shaped by Chinese export controls, with lead times extending and prices climbing. A rule that keeps domestic tungsten scrap in the country increases the feedstock available to United States carbide producers, which over time should improve availability and reduce dependence on Chinese primary supply. Those buyers are among the few constituencies with an unambiguous interest in the order succeeding.
Battery manufacturers occupy more complicated ground. Cell producers building capacity in the United States need cathode and anode materials, and recovered content from domestic recycling is both cheaper and, under various procurement and tax credit regimes, advantageous on origin grounds. More domestic black mass staying domestic is helpful to them in principle. In practice it is only helpful if someone refines it, and the timing mismatch between when the material becomes available and when refining capacity comes online is the operational risk in the whole design.
Automakers with battery joint ventures sit on both sides. Their recycling partners may be foreign-owned and newly constrained, while their cell operations benefit from a deeper domestic feedstock pool. Companies in that position should expect to be asked by both partners to support inconsistent positions in the comment docket, and would be well advised to develop an internal view before that happens.
The larger pattern
The allocation order fits a pattern that has been building across the administration’s trade portfolio through 2026. Tariffs raise the cost of importing. Export controls reduce what leaves. Both are being deployed toward the same end, which is relocating industrial capacity inside United States borders, and both are increasingly resting on authorities chosen for legal durability rather than speed.
Whether the tool works on this material depends on a question the rule cannot answer by itself: whether domestic refining capacity materializes in the year the order runs. If it does, the order will look in retrospect like a bridge that gave domestic processors the feedstock security they needed to justify capital investment. If it does not, the country will simply have a larger stockpile of unprocessed battery scrap and a recycling sector with fewer buyers, and the material will still have to go somewhere.