Battery recycling equipment processes black mass at a U.S. industrial facility.
By Penny Langford
The United States has moved to keep more battery and tungsten feedstock at home, requiring U.S. persons to allocate 100% of monthly sales of covered black mass and tungsten waste and scrap to U.S. persons unless the Bureau of Industry and Security grants relief.
The measure, issued through a temporary final rule by the Department of Commerce’s Bureau of Industry and Security (BIS), is more than a conventional export restriction. It uses the Defense Priorities and Allocations System (DPAS) to direct the domestic distribution of materials that Washington has classified as essential to national defense.
For recyclers, refiners, miners and manufacturers, the immediate issue is where material can be sold. The larger strategic question is whether a one-year retention policy can create enough domestic processing capacity to support a more resilient U.S. critical minerals supply chain.
What the BIS order does
The rule, titled “DPAS Directive Allocation Order and Additional Requirements for Recoverable Critical Minerals and Materials,” was published in the Federal Register on Aug. 6. Its allocation requirements took effect Aug. 27 and are scheduled to remain in place through Aug. 27, 2027, unless BIS modifies or extends them.
The order covers:
- Black mass classified under Schedule B codes 8549.13.00.00, 8549.14.00.00 and 8549.19.00.00, where the material meets BIS’ definition.
- Tungsten waste and scrap classified under Schedule B code 8101.97.00.00.
BIS defines black mass as shredded lithium-ion battery scrap containing cathode material, anode material or other residual battery cell materials. The definition can include materials containing lithium, cobalt, nickel, manganese, copper, aluminum, iron, graphite or silicon.
The order applies to U.S. persons engaged in the sale of those materials. It defines a sale broadly enough to include deliveries to affiliates and subsidiaries, as well as transfers between branches or divisions under common ownership or control. A U.S. company therefore cannot necessarily avoid the requirement by shipping black mass to its own overseas processing operation.
The practical effect is a sharp restriction on exports. Covered materials must remain physically in the United States unless BIS authorizes an adjustment, exception or temporary license.
The rule applies to both rated and unrated orders. That distinction matters because DPAS requirements are often associated with priority-rated defense contracts. In this case, the domestic allocation obligation is broader: ordinary commercial sales are also covered.
Why the Defense Production Act matters
The order follows a July 30 presidential determination under Section 101 of the Defense Production Act of 1950.
That determination found that recoverable critical minerals and materials are scarce, critical to national defense and vulnerable to supply disruptions. It authorized the Commerce secretary to take action under the DPA, including issuing rules, regulations and procedures to secure supply.
BIS said urgent and compelling circumstances justified issuing the measure as a temporary final rule rather than completing the usual notice-and-comment process first. Public comments remain open through Nov. 4 under docket BIS-2026-0364.
The underlying presidential determination covers a wider group of recoverable materials, including black mass, end-of-life rare-earth permanent magnets, swarf and other waste and scrap containing critical minerals. Copper scrap is excluded because it is addressed separately under a 2025 proclamation.
For now, however, the operative BIS allocation order is focused on black mass and tungsten waste and scrap. The agency has reserved the ability to add other materials through a future Federal Register publication.
Policy timeline and operating requirements
| Milestone | Policy action | Commercial significance |
|---|---|---|
| July 30 | Presidential determination issued under DPA Section 101 | Recoverable critical minerals and materials are designated as essential to national defense |
| Aug. 6 | BIS publishes temporary final rule | Allocation order, material definitions and compliance procedures become public |
| Aug. 6 onward | BIS begins accepting adjustment and exception requests | Companies can seek relief, but filing alone does not suspend the order |
| Aug. 27 | Domestic allocation requirement begins | Covered U.S. sales must be allocated entirely to U.S. persons unless BIS grants written relief |
| Nov. 4 | Public comment period closes | Industry can submit evidence on capacity, trade flows and implementation effects |
| Aug. 27, 2027 | Current expiration date | The order ends unless BIS adjusts, extends or replaces it |
BIS has said it intends to respond to requests within 14 days. That target may help companies manage urgent shipments, but it does not create an automatic safe harbor. Until written interim relief or a final authorization is issued, the domestic allocation requirement remains in force.
A DPAS authorization also does not replace other export approvals required under the Export Administration Regulations. Companies must satisfy both systems where applicable.
Implications for recyclers
The order is likely to create the most immediate operational pressure for battery recyclers and tungsten scrap traders.
Many U.S. battery recyclers have built collection and shredding capacity faster than domestic hydrometallurgical refining capacity. Black mass can be produced in the United States but shipped overseas for recovery of nickel, cobalt, lithium, manganese and other materials.
That business model now requires a review of every shipment, customer and contract. Recyclers will need to:
- Confirm whether each material stream meets the BIS definition of black mass.
- Verify the applicable Schedule B classification.
- Identify whether each buyer qualifies as a U.S. person under the order.
- Review exports and transfers to foreign affiliates.
- Track monthly sales volumes, destinations and inventory locations.
- Amend contracts that depend on unapproved overseas delivery.
The rule could improve feedstock visibility for emerging U.S. refiners. It could also create a bottleneck if domestic plants cannot absorb the volume or specifications of material generated by recyclers.
That tension is central to the policy. A domestic-only sales requirement can retain material in the country, but retention does not equal recovery. If black mass cannot be processed economically or safely, recyclers may face higher storage costs, delayed cash conversion and reduced collection incentives.
The Resource Recycling Association has warned that domestic processing capacity may not be sufficient to handle all material recycled in the United States. The group has also argued that international markets can function as a relief valve when domestic buyers lack the required capacity.
Refiners gain feedstock, but not automatically capital
For U.S. refiners, the order creates a potential window to secure long-term feedstock and demonstrate commercial demand.
Domestic projects that have struggled to obtain consistent black mass supply may now have a stronger negotiating position with recyclers. The same applies to tungsten processors seeking material for carbide, powder metallurgy and specialty alloy production.
But feedstock access is only one part of the financing equation. Refiners still need:
- Permits and environmental approvals.
- Qualified technology and reliable recovery rates.
- Product specifications accepted by downstream manufacturers.
- Long-term offtake agreements.
- Sufficient working capital for inventory and construction.
- Competitive operating costs.
The policy may support investment by reducing competition from offshore processors for U.S.-generated feedstock. It may also expose the cost gap between domestic and foreign processing. If U.S. refiners cannot match overseas recovery economics, domestic buyers may need to pay more or rely on policy support.
A further risk is that the order lasts one year while processing projects often take several years to finance, permit and build. Companies may hesitate to make permanent capital commitments based on a temporary allocation rule.
Tungsten-bearing scrap can be recycled into carbide products and specialty alloys.
Miners and downstream manufacturers
The order does not directly restrict newly mined ore in the same way it restricts covered scrap. Its effect on miners is indirect but relevant.
Primary producers of lithium, nickel, cobalt, manganese and tungsten compete with secondary supply. If domestic recycling expands, recovered material could supplement mined production and reduce the amount of new ore required by U.S. manufacturers.
That may benefit miners with domestic or allied-country projects if manufacturers need diversified supply. It could also increase competition for certain customers, particularly where recycled feedstock meets quality and traceability requirements.
Downstream manufacturers face a different challenge: access to domestic material may improve over time, but near-term availability could be uneven. Battery cathode producers, toolmakers, aerospace suppliers and defense contractors will need to understand whether their suppliers can provide consistent volumes and compliant documentation.
The order’s coverage of internal transfers is particularly important for multinational manufacturers with integrated supply chains. A U.S. facility sending covered scrap to a foreign affiliate for processing may need BIS authorization, even if the material is ultimately intended to return to the United States.
Key implementation risks
Capacity mismatch
The United States may not have enough refining and processing capacity to absorb all covered material. This is the principal risk to the order’s stated objective.
Classification disputes
Not every shipment under the listed electronic waste codes is black mass. BIS limits the allocation requirement to material that meets the definition. Companies will need defensible sampling, assay and classification procedures.
Contract disruption
Long-term offtake agreements, tolling arrangements and export contracts may conflict with the new domestic allocation requirement. Disputes could emerge over delivery obligations, force majeure and price adjustments.
Border delays
BIS says U.S. Customs and Border Protection may detain covered shipments while the agency reviews them. Delays could affect port costs, customer schedules and inventory planning.
Temporary policy uncertainty
The order may be extended, amended or expanded. BIS also invited comments on whether additional sales requirements are needed. Companies must therefore plan for policy change rather than treating the current text as permanent.
Scenario framework for the supply chain
| Scenario | Likely outcome | Watchpoint |
|---|---|---|
| Domestic capacity expands quickly | Recyclers secure U.S. buyers and refiners gain feedstock | Permitting, financing and plant commissioning |
| Capacity remains constrained | Storage rises and companies seek hardship or foreign-processing relief | BIS response times and approval criteria |
| Narrow exemptions develop | Overseas tolling continues under controlled conditions | Proof that refined material will return to the United States |
| Order expands to more materials | Broader domestic allocation across critical-mineral scrap streams | Future Federal Register notices |
| Policy expires without replacement | Export channels reopen, but domestic projects may retain new capacity | Long-term offtake and competitiveness |
For operators and investors, the most important distinction is between a regulatory requirement and a functioning supply chain. BIS can direct where material is allocated, but commercial resilience will depend on whether U.S. processors can convert that feedstock into products manufacturers are willing to buy.
The immediate compliance task is to map materials, codes, counterparties and physical locations. The strategic task is to determine whether the policy creates a durable domestic market or simply reroutes material during a temporary period of constrained trade.
For further context, see Skillings’ coverage of critical minerals, the copper market outlook, and ESG compliance risks.
Editorial note: This article is an industry analysis, not legal advice. Companies handling covered materials should review the Federal Register rule, DPAS regulations and applicable export-control requirements with qualified counsel.
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The United States is requiring U.S. persons to allocate 100% of covered black mass and tungsten waste and scrap sales to U.S. persons unless BIS grants relief. The DPAS order could strengthen domestic refining: but capacity, classification and contract risks will determine whether retention becomes resilience. Read Penny Langford’s analysis.
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BIS’ new DPAS order keeps covered black mass and tungsten scrap in the U.S. unless companies obtain written relief. The policy may improve feedstock security for domestic refiners, but limited capacity and border-risk could test recyclers first.
