I 

115TH CONGRESS 

1ST SESSION H. R. 1407 

To establish a strategic materials investment fund, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 7, 2017 

Mr. HUNTER introduced the following bill; which was referred to the Committee on Armed Services, and in addition to the Committees on Financial Services, Foreign Affairs, and Energy and Commerce, for a period 

to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee 

concerned 

A BILL 

To establish a strategic materials investment fund, and for 

other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Materials Essential 

5 To American Leadership and Security Act’’ or the ‘‘MET6 ALS Act’’. 

7 SEC. 2. SENSE OF CONGRESS ON DOMESTIC PRODUCTION 

8 OF RARE EARTH ELEMENTS. 

9 (a) FINDINGS.—Congress finds the following: 


rfrederick on DSKBCBPHB2PROD with BILLS
2 

•HR 1407 IH

1 (1) In the wake of increased tension between 

2 the People’s Republic of China and the nation of 

3 Japan in 2010, the People’s Republic of China en4 acted a de facto embargo of all rare earth elements 

5 which placed the Department of Defense at risk of 

6 losing access to materials used in the manufacture 

7 of key components of numerous major weapons sys8 tems. The potential for the People’s Republic of 

9 China to suspend exports of rare earth elements to 

10 the United States still exists today. 

11 (2) In 2015, a major United States corporation, 

12 the only major domestic producer of certain rare 

13 earth products, filed for bankruptcy after compiling 

14 $1.4 billion in debt. Assets from the company were 

15 sold to operators in the People’s Republic of China 

16 to pay off creditors while the domestic mine and 

17 processing plant were shuttered and disassembled. 

18 (3) The People’s Republic of China currently 

19 dominates the supply chain for the production of 

20 rare earth elements controlling more than 90 per21 cent of the world’s production. 

22 (4) Rare earth elements are used in a host of 

23 advanced defense applications and technologies 

24 which would largely be rendered ineffective without 

25 these materials. 


rfrederick on DSKBCBPHB2PROD with BILLS
3 

•HR 1407 IH

1 (b) SENSE OF CONGRESS.—It is the sense of Con2 gress that— 

3 (1) in the interest of national security the 

4 United States must develop a domestic industrial 

5 base for the production of strategic and critical ma6 terials; 

7 (2) considering the host of defense-related ap8 plications that would be rendered ineffective if 

9 United States access to foreign strategic and critical 

10 materials was restricted, the United States must en11 sure a safe and secure supply chain for strategic and 

12 critical materials for defense purposes; 

13 (3) given the current supply chain for strategic 

14 and critical materials the United States, and specifi15 cally the Department of Defense, is at considerable 

16 risk for a supply interruption; 

17 (4) if it is to divest itself from a dependence on 

18 foreign-produced strategic and critical materials, the 

19 United States must be willing to accept some risk in 

20 the form of aiding domestic investment opportuni21 ties; 

22 (5) the United States must support the domes23 tic production of strategic and critical materials by 

24 creating a fund which uses a small percentage, 1 

25 percent, of the internal programmatic administration 


rfrederick on DSKBCBPHB2PROD with BILLS
4 

•HR 1407 IH

1 costs of major aircraft and missile weapons systems 

2 to promote investment in domestic production of 

3 strategic and critical materials; 

4 (6) the fund should only leverage those funds 

5 used by the Department of Defense for internal pro6 grammatic administration costs and should not de7 crease quantities to be procured by the Department 

8 of Defense; 

9 (7) the fund should be managed by the Defense 

10 Logistics Agency Strategic Materials; 

11 (8) the purpose of the fund should be to provide 

12 5-year, interest-free loans to domestic producers of 

13 strategic and critical materials in an attempt to re14 duce American dependence on foreign sources of 

15 these materials and the loans should be paid back to 

16 the fund at the termination of the loan period; and 

17 (9) in those cases where domestic materials are 

18 more expensive than materials available from inter19 national sources, often owing to unfair trade and 

20 labor practices in foreign countries, the fund should 

21 reimburse weapons systems programs for cost in22 creases as a result of procuring strategic and critical 

23 materials from domestic sources. 


rfrederick on DSKBCBPHB2PROD with BILLS
5 

•HR 1407 IH

1 SEC. 3. STRATEGIC MATERIALS INVESTMENT FUND. 

2 (a) ESTABLISHMENT.—There is established in the 

3 Treasury of the United States a separate fund to be 

4 known as the ‘‘Strategic Materials Investment Fund’’ (in 

5 this section referred to as the ‘‘Fund’’). The Fund shall 

6 consist of amounts deposited to it under subsection (e). 

7 (b) FUND OPERATIONS.—The Secretary of Defense, 

8 acting through the Administrator of the Defense Logistics 

9 Agency Strategic Materials, may make expenditures from 

10 the Fund to develop the domestic strategic and critical 

11 materials industrial base, including by— 

12 (1) making loans to domestic producers of stra13 tegic and critical materials in accordance with sub14 section (c) for the purposes of— 

15 (A) constructing, upgrading, and operating 

16 facilities inside the United States for the smelt17 ing, sintering, leaching, processing, separation, 

18 beneficiation, or production of strategic and 

19 critical materials; and 

20 (B) developing new technologies for the 

21 more efficient smelting, sintering, leaching, 

22 processing, separation, beneficiation, or produc23 tion of strategic and critical materials; and 

24 (2) reimbursing original equipment manufactur25 ers in accordance with subsection (d). 

26 (c) LOANS TO DOMESTIC PRODUCERS.— 


rfrederick on DSKBCBPHB2PROD with BILLS
6 

•HR 1407 IH

1 (1) IN GENERAL.—Amounts from the Fund 

2 may be used to make loans to domestic producers of 

3 strategic and critical materials for the purposes de4 scribed in subparagraphs (A) and (B) of subsection 

5 (b)(1). 

6 (2) ELIGIBILITY.—A domestic producer of stra7 tegic and critical materials shall not be eligible to re8 ceive a loan from the Fund if such producer— 

9 (A) is carrying out an activity described in 

10 subsection (f); 

11 (B) has a history of financial insolvency or 

12 bankruptcy; or 

13 (C) is controlled by or acting on behalf of 

14 the People’s Republic of China or the Russian 

15 Federation. 

16 (3) LOAN TERMS.— 

17 (A) INTEREST.—Interest shall not accrue 

18 on any loan made under paragraph (1). 

19 (B) REPAYMENT.— 

20 (i) REPAYMENT REQUIRED.—Not 

21 later than 5 years after receiving a loan 

22 under paragraph (1), the recipient of the 

23 loan shall repay the full amount of the 

24 loan— 

25 (I) to the Fund; or 


rfrederick on DSKBCBPHB2PROD with BILLS
7 

•HR 1407 IH

1 (II) if the Fund has terminated 

2 under subsection (h), to the Treasury 

3 of the United States 

4 (ii) PENALTY.—If a recipient does not 

5 repay the full amount of the loan in the 

6 time period described in clause (i), the re7 cipient— 

8 (I) shall not be eligible to receive 

9 additional disbursements from the 

10 Fund; and 

11 (II) shall be liable to the United 

12 States for the full amount of the loan 

13 plus a penalty in an amount equal to 

14 50 percent of the amount of the loan. 

15 (C) PROHIBITION ON TRANSFER TO FOR16 EIGN ENTITY.— 

17 (i) PROHIBITION ON TRANSFER.—A 

18 recipient of a loan from the Fund shall not 

19 transfer to a foreign government or an en20 tity controlled by or acting on behalf of a 

21 foreign government, any interest in— 

22 (I) any facilities constructed, up23 graded, or operated by the recipient; 

24 or 


rfrederick on DSKBCBPHB2PROD with BILLS
8 

•HR 1407 IH

1 (II) any new technologies devel2 oped by the recipient for the more ef3 ficient smelting, sintering, leaching, 

4 processing, separation, benefaction, or 

5 production of strategic and critical 

6 materials. 

7 (ii) PENALTY.—If the recipient of a 

8 loan from the Fund makes a transfer pro9 hibited under clause (i), the recipient shall 

10 be liable to the United States for the full 

11 amount of the loan plus a penalty in an 

12 amount equal to 500 percent of the 

13 amount of the loan. 

14 (d) REIMBURSEMENT OF ORIGINAL EQUIPMENT

15 MANUFACTURERS.— 

16 (1) IN GENERAL.—Subject to paragraph (2), 

17 amounts from the Fund may be used to reimburse 

18 original equipment manufacturers for the increased 

19 costs that result from such manufacturers pur20 chasing strategic and critical materials produced in 

21 the United States from producers that have received 

22 disbursements from the Fund. 

23 (2) LIMITATIONS.— 

24 (A) LIMITATION ON AMOUNTS AVAILABLE

25 FOR REIMBURSEMENT.—Not more than 50 perVerDate Sep 11 2014 23:57 Mar 13, 2017 Jkt 069200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1407.IH H1407

rfrederick on DSKBCBPHB2PROD with BILLS
9 

•HR 1407 IH

1 cent of the amounts deposited in the Fund for 

2 a fiscal year shall be available for reimbursing 

3 original equipment manufacturers under para4 graph (1) in such fiscal year. 

5 (B) LIMITATION ON REIMBURSEMENT OF

6 EXCESSIVE COSTS.—Excessive costs, as deter7 mined by the senior acquisition executive for 

8 the program concerned, shall not be reimbursed 

9 under paragraph (1). 

10 (e) DEPOSITS TO FUND.— 

11 (1) IN GENERAL.—Except as provided in para12 graph (2), for each of fiscal years 2018 through 

13 2023, one tenth of one percent of the amounts ap14 propriated for covered programs shall be deposited 

15 to the Fund. Such deposits shall be taken from 

16 amounts allocated for the internal administration of 

17 the covered programs and shall not reduce the quan18 tities of items procured under the programs. 

19 (2) EXCEPTION.— 

20 (A) CERTIFICATION.—The requirement 

21 under paragraph (1) shall not apply to a cov22 ered program if the prime contractor for such 

23 program certifies to the senior acquisition exec24 utive concerned that no strategic or critical ma25 terials from the People’s Republic of China or 


rfrederick on DSKBCBPHB2PROD with BILLS
10 

•HR 1407 IH

1 the Russian Federation are included in the final 

2 item delivered to the Government or in any 

3 component thereof. 

4 (B) SUPPORTING DOCUMENTS.—Not later 

5 than 30 days after a prime contractor makes a 

6 certification under subparagraph (A), the senior 

7 acquisition executive concerned may require the 

8 prime contractor to provide supporting docu9 ments verifying that the final item delivered to 

10 the Government meets the requirements of such 

11 subparagraph. 

12 (C) CIVIL PENALTY.—A prime contractor 

13 who makes a false certification under this para14 graph shall be subject to a civil fine of not more 

15 than 1 percent of the value of the contract con16 cerned. 

17 (f) PROHIBITED USES OF FUNDS.—No amount may 

18 be expended from the Fund— 

19 (1) to develop technologies that would decrease 

20 the capacity of the domestic industrial base for stra21 tegic and critical materials; or 

22 (2) to redesign technologies to reduce the use of 

23 strategic and critical materials in such technologies. 

24 (g) DEFINITIONS.—In this section: 


rfrederick on DSKBCBPHB2PROD with BILLS
11 

•HR 1407 IH

1 (1) COVERED PROGRAMS.—The term ‘‘covered 

2 programs’’ means all major defense acquisition pro3 grams (as that term is defined in section 2430 of 

4 title 10, United States Code) for the development or 

5 procurement of aircraft or missiles. 

6 (2) ORIGINAL EQUIPMENT MANUFACTURER.— 

7 The term ‘‘original equipment manufacturer’’ means 

8 a contractor or subcontractor in the supply chain 

9 that integrates strategic and critical materials into a 

10 component used in a product that is sold to the Fed11 eral Government. 

12 (3) STRATEGIC AND CRITICAL MATERIALS.— 

13 The term ‘‘strategic and critical materials’’ means— 

14 (A) the lanthanide elements, yttrium, and 

15 scandium; 

16 (B) titanium and titanium alloys; 

17 (C) magnesium; 

18 (D) antimony; 

19 (E) tungsten; 

20 (F) uranium; 

21 (G) tantalum; 

22 (H) fluorspar; 

23 (I) lithium; 

24 (J) strontium; 

25 (K) vanadium; 


rfrederick on DSKBCBPHB2PROD with BILLS
12 

•HR 1407 IH

1 (L) steel— 

2 (i) with a maximum alloy content ex3 ceeding one or more of the following limits: 

4 (I) manganese, 1.65 percent; 

5 (II) silicon, 0.60 percent; or 

6 (III) copper, 0.60 percent; or 

7 (ii) containing more than 0.25 percent 

8 of any of the following elements: alu9 minum, chromium, cobalt, columbium, mo10 lybdenum, nickel, titanium, tungsten, or 

11 vanadium; 

12 (M) zirconium and zirconium base alloys; 

13 (N) metal alloys consisting of nickel, iron14 nickel, and cobalt base alloys containing a total 

15 of other alloying metals (except iron) in excess 

16 of 10 percent; 

17 (O) thorium; and 

18 (P) any other materials determined to be 

19 materials critical to national security by the 

20 Strategic Materials Protection Board estab21 lished under section 187 of title 10, United 

22 States Code. 

23 (h) SUNSET.—The Fund shall terminate on Sep24 tember 30, 2023, and any amounts remaining in the Fund 


rfrederick on DSKBCBPHB2PROD with BILLS
13 

•HR 1407 IH

1 on such date shall be deposited in the Treasury of the 

2 United States. 

3 SEC. 4. NUCLEAR REACTORS ASSESSMENT. 

4 (a) FINDING.—Congress finds that section 1012 of 

5 the National Defense Authorization Act for 2008 (Public 

6 Law 110–181; 122 Stat. 303) required that the United 

7 States construct all major combatant vessels of the strike 

8 forces of the Navy with integrated nuclear power systems. 

9 (b) ASSESSMENT.—The Secretary of Defense, in con10 sultation with the Secretary of Energy, shall assess the 

11 ability of thorium-fueled nuclear reactors to meet the 

12 power generation needs of the Navy. 

13 (c) ELEMENTS.—The assessment under subsection 

14 (b) shall include— 

15 (1) an identification of the benefits to naval op16 erations of incorporating thorium-liquid-fueled nu17 clear reactors or uranium reactors into a range of 

18 naval vessels (including major surface combatants 

19 and conventionally fueled ships), including identifica20 tion of any such benefits with respect to— 

21 (A) fuel cycle, from mining of fuel to dis22 posal of fuel waste; 

23 (B) security of the fuel supply; 

24 (C) power needs for advanced weapons and 

25 sensors; 


rfrederick on DSKBCBPHB2PROD with BILLS
14 

•HR 1407 IH

1 (D) safety and operations, waste handling 

2 and disposal, and proliferation issues compared 

3 to uranium reactors; 

4 (E) refueling and logistics; 

5 (F) ship upgrades and retrofitting; 

6 (G) manning levels; 

7 (H) global range at flank speed, greater 

8 forward presence, and extended combat oper9 ations; 

10 (I) power for advanced sensors and weap11 ons, including electromagnetic guns and lasers; 

12 (J) survivability due to increased perform13 ance and reduced signatures; 

14 (K) high-power density propulsion; 

15 (L) operational tempo; 

16 (M) operational effectiveness; and 

17 (N) estimated cost effectiveness; and 

18 (2) an analysis of the domestic supply chain of 

19 thorium, including a description of— 

20 (A) domestic reserves; 

21 (B) operational mines; 

22 (C) separation and refinement capabilities; 

23 and 


rfrederick on DSKBCBPHB2PROD with BILLS
15 

•HR 1407 IH

1 (D) the ability for the domestic supply 

2 chain to meet the requirements of the Depart3 ment of Defense for thorium. 

4 (d) SUBMISSION TO CONGRESS.—Not later than De5 cember 31, 2020, the Secretary of Defense shall submit 

6 to the congressional defense committees a report on the 

7 results of the assessment under subsection (b). 

8 (e) CONGRESSIONAL DEFENSE COMMITTEES DE9 FINED.—In this Act, the term ‘‘congressional defense 

10 committees’’ has the meaning given that term in section 

11 101(a)(16) of title 10, United States Code. 

12 SEC. 5. LIMITATION ON AMMONIUM PERCHLORATE FROM 

13 FOREIGN SOURCES. 

14 (a) LIMITATION.—Beginning not later than 180 days 

15 after the date of the enactment of this Act, the Secretary 

16 of Defense shall ensure that any covered ammonium per17 chlorate is obtained from sources inside the United States. 

18 (b) COVERED AMMONIUM PERCHLORATE.— 

19 (1) Except as provided in paragraph (2), the 

20 term ‘‘covered ammonium perchlorate’’ means any 

21 ammonium perchlorate (or any sodium perchlorate 

22 used as a precursor to ammonium perchlorate) 

23 that— 

24 (A) is incorporated into any item procured 

25 by the Department of Defense; or 


rfrederick on DSKBCBPHB2PROD with BILLS
16 

•HR 1407 IH

1 (B) is used to launch a national security 

2 payload into space. 

3 (2) The term does not include ammonium per4 chlorate obtained from sources outside the United 

5 States for use in an air-to-air missile program and 

6 qualified for such use as of the date of the enact7 ment of this Act. 

8 (c) WAIVER.—The Secretary of Defense may waive 

9 the limitation in subsection (a) if the Secretary makes a 

10 determination in writing that obtaining covered ammo11 nium perchlorate from sources outside the United States 

12 is in the national security interests of the United States. 

13 SEC. 6. PROHIBITION ON SALE OF DOMESTIC RARE EARTH 

14 MINES. 

15 (a) PROHIBITION.—The Committee on Foreign In16 vestment in the United States shall not approve any for17 eign government-controlled transaction relating to a do18 mestic rare earth facility if a party to such transaction 

19 is controlled by or acting on behalf of— 

20 (1) the People’s Republic of China; or 

21 (2) the Russian Federation. 

22 (b) CERTIFICATION.—Before approving a foreign 

23 government-controlled transaction relating to a domestic 

24 rare earth facility, the Committee shall submit to Congress 

25 a written certification that the transaction— 


rfrederick on DSKBCBPHB2PROD with BILLS
17 

•HR 1407 IH

1 (1) does not violate the prohibition under sub2 section (a); and 

3 (2) will not compromise the national security of 

4 the United States. 

5 (c) DEFINITIONS.—In this section: 

6 (1) The term ‘‘Committee on Foreign Invest7 ment in the United States’’ means the committee es8 tablished under section 721(k) of the Defense Pro9 duction Act of 1950 (50 U.S.C. 4565(k)). 

10 (2) The term ‘‘domestic rare earth facility’’ 

11 means any facility inside the United States at which 

12 rare earth elements are mined, produced, or proc13 essed, regardless of whether such facility is oper14 ational. 

15 (3) The term ‘‘foreign government-controlled 

16 transaction’’ has the meaning given the term in sec17 tion 721(a) of the Defense Production Act of 1950 

18 (50 U.S.C. 4565(a)). 

Æ 


rfrederick on DSKBCBPHB2PROD with BILLS