Over 90% of rare earth global production occurs in China. The materials are needed for absolutely everything, namely the production of military equipment, which is why China has imposed new restrictions to prevent the United States from military expansion.
China is preparing to implement a “validated end-user” (VEU) system to forbid any corporation with ties to the US military from purchasing rare earths. The VEU system will facilitate trade to civilian corporations, as outlined during Chinese President Xi Jinping recent meeting with US President Donald Trump. The two sides may have agreed to ease restrictions on rare earth trade, but the silent Cold War between the two continues.
The US and its allies have been prohibiting China from purchasing semiconductor chips and intellectual property that could be utilized in military expansion. Both sides have implemented
end-user verification and approval systems. In fact, the US first implemented an end-user verification system specifically to weed out Chinese companies back in 2007.
Companies must first register to purchase any item that could be used by the Chinese or US military. Potential buyers must now be carefully vetted to ensure they are in compliance with national security standards. If approved, in the case of China, firms will receive a validated end-user certificate to confirm that they are authorized to purchase materials that will be used for civilian purposes. These certifications must be periodically renewed, and the government will be carefully monitoring companies granted approval. Exporters must verify that shipments will only be sent to verified end users. There will be ongoing monitoring and audits, shipment tracking systems, and careful record reporting.
The two nations are ultimately attempting to decrease their trade alliance. The US is completely banking on Japan to begin extracting rare earths to meet demand. Taiwan is the hot spot for all semiconductor chips, with the US and China both claiming rights to the island in various ways.