Key Takeaways: The Bureau of Industry and Security (“BIS”) issued a temporary final rule under the Defense Priorities and Allocations System (“DPAS”) that restricts exports of shredded lithium-ion battery scrap containing cathode material, known as “black mass,” as well as tungsten and other waste by U.S. entities. Published on August 6, 2026, and effective immediately upon publication, the rule’s Directive Allocation Order takes effect on August 27, 2026, at which point all monthly sales of these materials must be allocated exclusively to U.S. buyers. The Directive Allocation Order remains in effect through August 27, 2027 (unless adjusted by BIS). Exports to non-U.S. persons require a separate DPAS authorization, which does not replace a BIS export license under the Export Administration Regulations (“EAR”), if required. BIS considered the directive necessary citing the threat to national defense and security posed by the “inadequate supply of critical minerals and materials” (“CMMs”).
What Happened: On August 6, 2026, BIS published a temporary final rule (FR Doc. 2026-16078) in the Federal Register implementing a Directive Allocation Order under § 700.33 of the DPAS that restricts the export of specified critical mineral materials from the United States without explicit BIS authorization. The rule follows a Presidential Determination issued on July 30, 2026, finding that certain recoverable CMMs are scarce and critical materials essential to national defense.
Scope: The Directive Allocation Order applies to U.S. persons engaged in the sale of black mass (Schedule B codes 8549.13.00.00, 8549.14.00.00, and 8549.19.00.00) and tungsten waste and scrap (Schedule B code 8101.97.00.00), requiring that these materials remain physically located within the United States unless otherwise authorized by BIS. Key elements of the order include:
- Black mass defined: “Black mass” means any shredded lithium-ion battery scrap containing cathode material (including lithium, cobalt, nickel, and manganese), anode material (graphite, silicon), or other residual battery cell materials. Only materials meeting this definition under the covered Schedule B codes are subject to the order.
- 100% domestic sales requirement: All monthly sales of covered black mass and tungsten waste and scrap must be allocated to U.S. persons, unless an adjustment or exception is granted in advance by BIS.
- Duration: The order is effective 21 days after publication in the Federal Register (i.e., August 27, 2026) and expires August 27, 2027, unless adjusted or extended by BIS.
- CBP enforcement: BIS will implement the rule with the cooperation of U.S. Customs and Border Protection (“CBP”); covered materials intended for export may be detained by CBP during BIS review.
Rationale for Change: BIS cited an inadequate domestic supply of CMMs as posing an increasing risk to national defense and security, noting that U.S. reliance on imports of certain CMM commodities from foreign sources threatens serious, sustained supply chain disruptions. BIS determined that urgent and compelling circumstances made compliance with the normal notice-and-comment rulemaking process impracticable, and accordingly issued the order as a temporary final rule consistent with section 709(b)(2) of the Defense Production Act (DPA) (50 U.S.C. § 4559(b)(2)). BIS has, however, opened a 90-day public comment period and invites comment on whether any additional sales requirements are necessary or appropriate to promote the national defense, as well as on the framework of the temporary regulatory provisions added to the DPAS.
Implications for Exporters: U.S. sellers of black mass or tungsten waste and scrap must immediately identify any non-U.S. customers and secure prior written BIS authorization– via a DPAS license or temporary license– before proceeding with such sales. Requests for adjustments or exceptions do not pause the obligation to meet domestic sales requirements, which remain in force until BIS provides written interim relief.
Request for Authorization: Companies subject to the domestic sales requirement may request a DPAS authorization from BIS. BIS has stated that it intends to respond to requests within 14 days of receipt and may grant interim relief in the form of a DPAS temporary license while a request is pending.
Under the rule, BIS may grant relief on the following grounds, among others:
- The domestic sales requirement creates an undue or exceptional hardship on the requesting company that is not suffered generally by others in similar situations and circumstances;
- Compliance with the domestic sales requirement would be contrary to the intent of the rule or the DPA (for example, because it would actually reduce the domestic supply of CMMs);
- The covered materials will be sold to a person outside the United States solely for processing or refining, and the processed or refined material will be returned to the United States;
- Compliance with the domestic sales requirement would result in irreparable harm to the requesting company; or
- Additional time is needed to come into compliance with the domestic sales requirement.
Crowell & Moring will continue to monitor BIS’s implementation of the order and further regulatory developments related to critical minerals and materials export controls and DPAS enforcement.
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