Supply chain (2): New measures on rare earths and other critical raw materials – government procurement, public procurement and PPP

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Both the EU and the UK are taking steps to secure supplies of critical raw materials. These include rare earths, which are essential for products supporting the green energy transition, such as batteries and magnets in wind turbines.

What is the EU doing with critical raw materials?

The European Commission issued a proposal of the Act on Critical Raw Materials (“CRMThe purpose of the CRMA is to ensure that the EU maintains access to resilient and sustainable supplies of critical and/or strategic raw materials.

New due diligence obligations

Among other things, CRMA provides for the monitoring of critical raw material supply chains and will require some large companies to audit their supply chains. Interestingly, however, these audit requirements are less demanding than other recently introduced and proposed EU due diligence regulations. In particular, CRMA only requires large companies to conduct an internal audit mapping their supply chain, assess their supply chain vulnerabilities and report to the company’s board of directors. This is in contrast to the more demanding due diligence requirements within the EU Deforestationand Battery Regulations.

The EU Deforestation Regulation requires third-party verification and auditing of due diligence processes and oversight by “top management”. The Battery Regulation goes further and requires a thorough due diligence assessment which will identify the exact geographical location of the land where the commodities were produced, details of the operator’s suppliers and downstream customers and, upon request, reporting to the relevant authorities. These due diligence obligations are part of the ongoing expansion of due diligence obligations across the EU, which include a proposal for a regulation on Products made by forced laborand the expected Corporate Sustainability Due Diligence (“CS3D“) (see our briefing). The expected impact of this development should not be underestimated as companies around the world become involved either directly or as part of a company’s wider value chain.

What else does CRMA do?

In addition, the CRMA would introduce a set of EU-wide targets designed to strengthen the resilience and circular economy of the EU supply chain. These measures include easier access to finance, a significantly shorter authorization period for “strategic projects” (which are projects that support CRMA objectives) and an initiative to create an international critical raw materials club that will act as a liaison for third country strategic partnerships. . For more information, see our
briefing on CRMA.

What is the UK doing with critical raw materials?

In July 2022, the UK government published its own Critical Minerals Strategy, which includes a framework for accelerating domestic production of critical materials in the UK. The framework includes provisions to help categorize materials deemed critical in the UK, flag government financial support, reduce barriers to domestic exploration and extraction of materials and increase foreign direct investment in the UK mineral sector. Whether the UK government will enshrine this strategy in law through the implementation of new legislation remains to be seen.

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The content of this article is intended to provide a general guide to the issue. Professional advice should be sought regarding your particular situation.

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