European Critical Raw Materials Act

Position

European Critical Raw Materials Act (CRM Act)

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a framework for ensuring a secure and sustainable supply of critical raw materials and amending Regulations (EU) 168/2013, (EU) 2018/858, 2018/1724 and (EU) 2019/1020

Federation of German Industries e.V.

EU-Transparency Register Identification Number: 1771817758-48

As of 26 June 2023

1. Scope (General provisions Art. 1 and 2, Critical and strategic raw materials, Art. 3 and 4) 7

2. Strengthening the Union raw materials value chain (Strategic Projects Art. 5-7, Permit granting process Art. 8-13, Enabling conditions Art. 14-17, Exploration Art. 18) ........................................................................................9

3. Risk monitoring and mitigation (Art. 19-24 stress testing, information and reporting obligations, strategic stocks, company risk preparedness, joint purchasing) 13

4. Sustainability (Circularity Art. 25-28, Certification and environmental footprint Art. 29-30, Free movement, conformity and market surveillance Art. 31-32) 14

5. Strategic Partnerships (Art. 33) 19

6. Governance (European Critical Raw Materials Board Art. 34-35)..................20

7. Final provisions (Monitoring progress Art. 42, Reporting of member states Art. 43, Treatment of confidential information Art. 44, Penalties Art. 45, Evaluation Art. 46, Entry into force Art. 47).....................................................................20

Position on European Critical Raw Materials Act

Summary

With the EU Critical Raw Materials Act, the European Commission is sending an important signal to strengthen European sovereignty in the raw materials sector. We welcome the following measures to increase the security of supply:

➢ Ambitious benchmarks until 2030 on the annual consumption of strategic raw materials by building and expanding European production capacities in mining, processing and recycling, in order to strengthen the EU´s resilience;

➢ Access to finance and shorterapproval periods for selected “Strategic Projects” (for mining a maximum of 24 months, for processing and recycling 12 months), while deadlines need to accelerate further;

➢ Improving the collection of waste rich in critical raw materials and securing their recycling into critical secondary raw materials, including the potential recovery of critical raw materials from mining waste;

➢ Increasing the transparency of information on permanent magnets and facilitating the large-scale recycling of magnets;

➢ Diversification and thus increased resilience in raw material supply chains via new free trade agreements, the establishment of a Critical Raw Materials Club as well as the Global Gateway strategy.

However, the Commission's draft in its current form does not go far enough and central instruments for implementation are missing:

➢ The CRM Act is currently not sufficiently coordinated with other legislation and regulations such as on taxonomy, industrial emissions, chemicals, eco-design, net-zero industry or supply chain due diligence obligations. The EU Commission must resolve conflicting goals together with the member states in favor of greater security of supply by applying the 2030 benchmarks as Union priorities in all future EU policies

➢ The success of the CRM Act will mostly depend on the EU’s member states as it is their regions and municipalities that will implement the projects and ensure social acceptance. Therefore, the CRM Act must be closely intertwined with national legislation, such as the amendment of the Federal Mining Act in Germany Coordinated communication efforts of European and national policymakers must support the societal acceptance and expansion of the domestic mining industry Detailed implementation plans both by the Commission and Member States should analyse Europe’s self-sufficiency and project pipeline for each strategic raw material, quantifying the level of

investment needed to achieve the defined benchmark and current bottlenecks or challenges.

➢ The EU has the potential to lead the way in sustainable mining. The highest sustainability and environmental protection standards already apply in the EU. Due to their better carbon footprint and strengthening of the local industry domestic extraction and processing should therefore be fiscally incentivised.

➢ Policy responses are needed to address the high energy and electricity costs for the extraction, processing and recycling of strategic raw materials. So far, this challenge remains completely unanswered within the draft legislation.

➢ The CRM Act lacks an urgently needed financing offensive for the development and expansion of domestic projects for the extraction, processing or recycling of critical raw materials. In the US, mining companies and refineries of critical minerals can write off ten percent of their costs under the Inflation Reduction Act (IRA). While globally, investments in mining projects are made well before exploration begins, the CRM Act lacks a commodity investment fund. The EU therefore also needs such incentivizing instruments.

➢ Furthermore, aspects of recycling as well as the circular economy are not sufficiently coordinated with the eco-design regulation. The draft fails to address the interface with digitization. The use of quota for secondary raw materials in permanent magnets burdens companies with higher costs. Therefore, a corresponding assessment must closely examine the feasibility of this requirement, also from a business perspective. If the increased take-back of waste products with critical raw materials is organized solely at member state level, there is a risk of fragmenting the internal market.

➢ Closing the gaps in Europe’s supply chains requires a comprehensive raw materials policy that reflects the needs of the market-based transformation of the entire industry. As the European economy depends on all essential raw materials a categorization of raw materials into politically preferred and less preferred should be avoided Thus, the supply of e.g. further essential raw materials like potash for the goal of food security or construction raw materials for the goal of infrastructure maintenance and development should be ensured and managed in a similar way to critical and strategic ones when it comes to administrative streamlining measures, one-stop-shop approaches as well as accelerated permits.

➢ The planned review of the list of critical and strategic raw materials within a four-year cycle is unrealistic. The raw materials race is heating up as there will in the future be a threat of supply shortages even for raw materials - such as aluminum or silver - that are currently not on any list. Therefore, agile monitoring is needed.

➢ To safeguard critical raw material supply chains, the Commission wants companies to conduct stress tests meanwhile member states should build up strategic commodity reserves. EU-wide results of these stress tests and findings on strategic reserves would be published in aggregated form. The BDI however rejects this as the disclosure of European vulnerabilities weakens the negotiating position on raw material imports.

➢ The increasing systemic competition with autocratic regimes represents a structural challenge for Europe – both strategically and economically. Autocratic regimes are increasingly using control over supply chains as a geopolitical weapon. Commodity security must therefore become the central goal of both political and business leaders in Europe. The BDI therefore advocates for close cooperation between the EU Commission, member states and industry when it comes to the implementation of the CRM Act - also to quickly resolve existing political conflicts of interest.

Introduction

Raw materials are at the very beginning of the value chain of innovative technologies, industrial processes and applications. Without raw materials there can be no digitalization or Industry 4.0, no energy transition or emobility, no green deal or compliance with the Paris climate targets. German and European industry depends upon a secure and sustainable supply of raw materials.

The Federation of German Industries shares the analysis of the European Commission that in view of the growing global demand for raw materials for the energy transition, strategic technologies as well as increasing geopolitical challenges urgent efforts in the area of the EU’s raw material policy are needed to secure the supply of strategic raw materials for Europe’s industry

Free and fair access to raw materials is often obstructed through state measures that distort trade. Compounding the secure access to raw materials further is the high concentration of supply in one or a few countries, as well as the current rise in geopolitical tensions.

As the EU is heavily dependent on concentrated supply sources from a few countries for a number of strategic raw materials, it is urgent time to reevaluate and establish the tools needed to minimize and manage the projected structural supply risks that will most likely affect the EU’s ability to achieve the green and digital transitions.

With the EU Critical Raw Materials Act, the European Commission is sending an important signal to strengthen European sovereignty in the raw materials sector. While German industry welcomes the focus of the CRM Act to (re-)build European strategic minerals mining, processing and recycling capacities to be achieved by accelerated permit granting processes for so called Strategic Projects we miss central instruments for securing its successful implementation as well as a comprehensive raw materials policy that reflects the needs of a marketbased transformation of the entire industry.

With this position paper we want to provide for an evaluation of the legislative proposal and suggest ideas for its adaptation to be discussed in the European legislative process:

1. Scope (General provisions Art. 1 and 2, Critical and strategic raw materials, Art. 3 and 4)

BDI welcomes the objectives of the CRM Act as outlined in Art. 1, especially when it comes to the ambitious benchmarks to strengthen the European Union’s strategic raw materials’ extraction, processing and recycling capacities aiming by 2030 for at least 10, 40 and 15 per cent, respectively, of the Union’s annual consumption. At the same time, realistically, some targets will not be feasible when looking at individual metal markets or technologies that are in the ramp-up phase. For battery raw materials for example, the recycling benchmarks are even higher than the already ambitious targets in the recently adopted battery regulation Since there is currently a lack of efficient recycling technologies for many CRMs, measures to support R&D of innovative recycling technologies should be introduced to speed up this development. In any case, when assessing the benchmarks and their achievement these structural elements should be taken into account and no hasty conclusions be drawn.

We also welcome the goal to diversify the Union’s CRM imports. The benchmark that, by 2030, no more than 65 per cent of the Union’s annual consumption of any strategic raw material at any relevant processing stage should be provided by only one third country is also ambitiously set Its success depends more than anything on the ability of the EU and its partners to quickly incentivise the building and extension of CRM mining and processing capacities worldwide and secure accessibility for companies and traders (e.g. by trade policy) to provide for concrete alternative sourcing opportunities.

BDI proposes to clarify some of the definitions in Art. 2 As member states need to identify ‘key market operators’ for information obligations for monitoring as outlined in Art. 20 it is unclear especially what is meant by ‘downstream companies consuming significant amounts

of critical raw materials’. The Commission should clarify what it means by ‘significant amounts’.

Similarly, BDI proposes to be more precise when it comes to the definition of ‘strategic stock’ as outlined in Art. 2. When defining the operators, it only speaks of ‘public or private operator’ Only in Art. 21 it is clarified that it is ‘all public authorities, publicly owned companies or economic operators charged by a Member State to build up strategic stocks on its behalf’

Finally, ‘strategic technologies’ as outlined in Art. 2 miss clarification. Only in Art. 23 when it comes to company risk preparedness ‘strategic technologies’ are defined as they ‘shall include, but are not limited to, batteries for energy storage and e-mobility, equipment related to hydrogen production and utilisation, equipment related to renewable energy generation, traction motors, heat pumps, data transmission and storage, mobile electronic devices, equipment related to additive manufacturing, robotics, drones, rocket launchers, satellites and advanced chips’ Generally speaking, criteria for being considered a “strategic technology” should be defined more clearly to bring legal certainty. Furthermore, the success of the ambitious goals of the energy transition requires not only the construction of renewables or energy grids, but also the market-based transformation of the entire industry.

BDI proposes for the list of strategic raw materials as outlined in Art. 3 and Annex I to extend the list to aluminum and silver. According to calculations of the German Raw Materials Agency DERA 1.2 million tons of aluminum will be needed for 161 GW photovoltaic installations until 2030 in Germany alone. Similarly, potash is of strategic importance when defining food security as one further criterion (alike e.g. Canada). When following the methodology to select strategic raw materials in the Annex other materials could be considered. An example is steel scrap, essential for the production of green steel which itself is indispensable in most of the applications and technologies considered strategic for the green and digital transition.

In general, despite frequent calls from the industry to extend the scope of the CRM Act, most raw materials are left out of the proposal, they do not benefit at all and, quite the contrary, could be less accessible. This regulation should thus improve the functioning of the internal market by establishing a framework to ensure the Union‘s access to a secure and sustainable supply of all raw materials reflecting the needs of the market-based transformation of the entire industry. This comprises critical, strategic as well as essential raw materials like e.g. construction raw materials needed for infrastructure maintenance and development.

Furthermore, BDI suggests deleting the limitation when it comes to certain strategic raw materials. Nickel is not only be needed ‘battery-

grade’ but also as nickel for superalloys e.g. in the aerospace and defense industries. Similarly, rare earths elements should not be limited to magnets but overall given the crucial importance of REE in a broad variety of industrial applications and technologies. Finally, lithium is not only be needed ‘battery-grade’ but also as lithium technical-grade e.g. in the glass and ceramics industries.

While not strategic raw materials, indium and borates should be included in the list of critical raw materials (Art. 4), due to their importance for the semiconductor production.

2. Strengthening the Union raw materials value chain (Strategic Projects Art. 5-7, Permit granting process Art. 8-13, Enabling conditions Art. 14-17, Exploration Art. 18)

BDI welcomes the general idea of Strategic Projects as the main element of strengthening the Union’s strategic raw materials’ extraction, processing and recycling capacities. Domestic production strengthens national resilience. The recognition criteria set in Art. 5 (1) and Annex III should not be too difficult to achieve Especially Strategic Projects abroad should also be recognized if there is no Strategic Partnership nor trade agreement (yet) in place, as outlined in Annex III 2. (b) That a Strategic Project in the EU needs to comply with existing Union legislation (Annex III 4.) does in our opinion not need to be assessed Similarly, the participation of project promoters in a recognized certification scheme should remain – as outlined in point (11) of the introduction of the proposal - but one element (next to compliance with relevant Union legislation, international standards, guidelines and principles) to prove the sustainability of a Strategic Project – not the exclusive one as outlined in Annex III 4.

The same is true for Art. 6 when it comes to the application requirements which as well shall not be too difficult to achieve. E.g. Art 6 1. (c) requests ‘a timetable for the implementation of the project, including an overview of the permits required for the project and the statusof the correspondingpermit grantingprocess’.BDIsuggestslowering thisrequirementsincetheoverview of the permits required might not be available, depending on the member states and project promoters should not be penalized if public authorities cannot provide such an overview.

As for the implementation of Strategic Projects as outlined in Art. 7 BDI suggests to clarify potential ambiguities and questions when it comes to Strategic Projects ‘considered as having an overriding public interest provided that all the conditions set out in those Directives [Articles 6(4) and 16(1)I of Directive 92/43/EEC, Article 4(7) of Directive 2000/60/EC and Article 9(1)(a) of Directive 2009/147/EC] are fulfilled’. E.g. article 6(4) of Directive 92/43/EEC obliges to consider alternative solutions. The

Commission should thus clarify this to avoid that this alternative solutions condition can easily be called into question causing permit processes to be delayed.

BDI welcomes the idea or Art. 8 that member states shall designate one national competent authority as ‘One Stop Shop’ which shall be responsible for facilitating and coordinating the permit-granting process for critical raw material projects and provide information on administrative processes The one-stop-shop approach should also be applicable to essential raw materials. In any case the CRM Act should be closely linked to ongoing processes in the member states as is the case in Germany with the review of the Federal Mining Act.

BDI also welcomes Art. 9 that outlines the priority status of Strategic Projects. As in the Federal Government’s amendment of the Renewable Energy Sources Act in Germany Strategic raw material Projects should be defined as in the overarching public interest and in the interest of public security. Thereby decision-making processes would be given precedence over other interests.

BDI welcomes Art. 10 outlining the shortened duration of the permit granting process für Strategic Projects in extraction (max 24 months) and processing or recycling (max 12 months), however, deadlines need to accelerate further In Germany, in principle, the permit granting process should not exceed 7 months (§ 10 Abs. 6 a BImSchG). While we do not see a necessity for 10 3. we strongly welcome Article 10 4 and the rule on fictitious approval This would lead to a significant accelerationof the permit granting process and put pressure on to the national authority to issue its decision on time. We however suggest clarifying 10 4. Regarding the environmental impact, it must be clarified under which rule of the cited legislation, an environmental impact assessment has to take place. As concerns the ‘exceptional cases’ requiring an environmental impact assessment or a determination of whether such environmental impact assessments is necessary, it should be clarified that in either such event, the administrative tacit approval period shall be extended by a maximum of two months.

Additionally, also with regards to the permit granting process, Art. 10 5 should be adapted in a way that it is ensured that the competent national authority only has one single possibility to require further information. Moreover,inits requestforfurther information,theauthoritymust beobliged to include a list of all the missing information that is required for the further application process. Otherwise, the provision of the documents and information requested by the authorities, in some cases successively, prolongsthelicensingprocedure astheauthority doesnot start theprocessing period until the application documents are complete.

Although it is considered appropriate that Strategic Projects enjoy an accelerated granting procedure, it is crucial that the problem of excessive administrativedeadlinesfacedbythe rawmaterials industryis addressedalso for essential raw materials. Permits that take years or even decades to be granted scare away investment and discourage the continuation of this activity on European soil, which seriously jeopardizes the continuity of supply that is now taken for granted. If the administrative situation continues in these terms, essential raw materials will reach critical or strategic status sooner rather than later, to the extent that a disruption between supply and demand will be created, since the activity will end up extinguishing in the European territory. Therefore, the permit granting process shall not exceed 36 months for projects involving essential raw materials extraction and 18 months for projects only involving processing or recycling of essential raw materials

BDI proposes to shorten the timeframes of Art. 11 outlining environmental assessments and authorizations. The reasoned conclusion on the environmental impact assessment of a Strategic Project should be issued by the national competent authority within two instead of three months receiving all necessary information (Art. 11 3.). The timeframe for consulting the public concerned on the environmental impact assessment report shall not be longer than 30 instead of 90 days in the case of Strategic Projects (Art 11 4.)

Land use conflicts can create serious barriers to the deployment of raw material projects, whether critical, strategic or essential. The plans must be well designed, so that they consider the potential to implement raw material projects, decreasing the risk of conflict and accelerating the sustainable deployment of raw material projects in the Union. Therefore, competent national, regional, and local authorities should consider including provisions for raw material projects when developing relevant plans (Art. 12). Welldesigned planning, considering competing interests, including extractive interests, should be an aspiration for all management plans.

BDI welcomes Art. 14 to accelerate implementation. The language of the text could be even stronger especially as concerns the administrative support of the member states for project promoters in complying with administrative and reporting obligations as well as increasing public acceptance In general, Strategic Projects should be supported already at an earlier application stage. Therefore, the project promoter should provide information to the European Critical Raw Materials Board in such a manner that the national permission processes will accept these documents as well

BDI is extremely disappointed that the CRM Act does not provide for a dedicated CRM Investment Fund but only for the coordination of financing as outlined in Art. 15. At the least, the Commission should

▪ Earmark a dedicated financial envelope for project support on the different segments of the SRM value chain during the next MFF midterm review.

▪ The Temporary Crisis and Transition Framework (TCTF) recently adopted by the Commission should also allow for the relaxation of state aid in the value chain of raw materials used inthe aerospaceand defense sectors and other industry sectors and not only the production and recovery of raw materials "for the transition to the net-zero economy" (defined in the Communication as batteries, solar panels, wind turbines, heat pumps, electrolysers and CCUS).

▪ Especially for the high-risk and capital intense exploration phase the EU should provide for seed money or venture capital and de-risking instruments for exploration projects.

▪ In order to attract investments into CRM projects in the EU, financial risk reduction, e.g. through investment guarantees or assured offtakeagreements should be offered.

The pure reference to existing Union funding and financing programmes such as Horizon Europe or the Innovation Fund [Art. 15 1 (d)] is not enough but should be extended to a clear mandate to the relevant authorities managing these funds and programmes to make them usable, i.e. accessible, for CRM Strategic Projects in the first place.

BDI welcomes that the Communication accompanying the CRM Act proposal makes the link to the taxonomy regulation. The Commission plans to ask the Platform on Sustainable Finance 2.0 to develop taxonomy criteria for mining and refining. While these discussions on technical criteria are already under way it should be highlighted that its goal should be to find reasonable and realistic definitions so that the financing of CRM mining, refining and recycling capacities in the EU is secured.

Other measures to think about and include in the proposal is that domestically mined, processed and recycled critical or strategic raw materials could benefit from tax reliefs or other financial incentives due to their better carbon footprint and strengthening of the local industry.

Furthermore, exemptions from import duties and value-added taxes (in Germany e.g. import turnover tax) for certain essential primary products forthe further processingofcriticalorstrategicraw materialsin Europe could be examined in order to support the market ramp-up in this area.

When it comes to the facilitation of off-take agreements (Art. 16) BDI is of the opinion that the added value of such an administrative system is not straight forward. Furthermore, in our view the Commission is not suited for its management but should rather support industry-led platforms such as the European Raw Materials Alliance (ERMA) or the European Battery Alliance to offer this matchmaking service.

3. Risk monitoring and mitigation (Art. 19-24 stress testing, information and reporting obligations, strategic stocks, company risk preparedness, joint purchasing)

While BDI rejects the issue of stress testing as outlined in Art. 19, at least a balance must be struck between, on the one hand, the political desire for early warning systems, more comprehensive corporate risk management and transparency vis-à-vis the population, and, on the other hand, the recognition that information on raw material procurement, value-added networks and strategic reserves is extremely sensitive data and worthy of protection in terms of security policy. If at all, any prudent approach would need to be discussed with industry.

In any case, it would be important to strengthen Art. 44 on data confidentiality.We rejecttheproposed aggregatedpublicationof the data from the stress tests on the publicly available monitoring dashboard [Art. 19 4. (c)] as highly dangerous. It would weaken Europe in global competition and negotiations. Similarly, while the publication of the production capacities in the EU and globally and especially the geological potential for CRM exploration development in the EU makes sense from an investment attraction point of view, the publication of the calculation of the supply risk for critical raw materials [Art. 19 4. (b)] is not useful, neither on mitigation strategies as these are overly sensitive and strategic considerations

BDI is concerned about the survey that Member States will be empowered to send to the key market operators along the CRM value chain (Art. 20 2.) when monitoring their activities. In addition to the risks of leakage of confidential information, the administrative burden for companies shouldbe kept to a minimum. Again, apracticable and reliablesystem should be found between each member states’ authorities and industry.

In the opinion of BDI, possible strategic stocks (Art. 21) are best located at company level. We are thus in favor of tax incentives for storage at company level. In Germany we e.g. advocate for a change in the existing tax law and corresponding accounting rules that at the moment discriminate storage at company level.

In that line of thinking – looking at Art. 22 on the coordination of strategic stocks - BDI welcomes Art. 22 4. which highlights that the European CRM Board shall give particular weight to the need to maintain incentives for private operators, which rely on strategic raw materials as inputs, to constitute their own stocks or to take other measures to manage their exposuretosupplyrisks IncasetheCommission,takingaccountoftheviews of the European CRM Board, uses Art. 22 3. and issues opinions addressed to the member states to increase the level of strategic stocks and amend or coordinate the rules or procedures for the release, allocation and distribution of strategic stocks, this shall not lead to competitive imbalances within

European industry and shall critically assess the cost implications for companies. Furthermore, we see the need to reduce the role of the Commission in strategic stockpiling from coordination to monitoring.

While Art. 23 on company risk preparedness should in the opinion of BDI be deleted (as e.g. supply chain audits on base metals such as aluminum and copper would overburden companies inappropriately), it should at least be streamlined with the Corporate Sustainability Reporting Directive (CSRD) obligations and foresee exemptions (e.g. for the above-mentioned base metals). Also, the bureaucratic burden posed on SMEs in the supply chain of the large companies that manufacture strategic technologies to be identified by member states should be understood as it will be the SMEs that the auditor will question to provide for the necessary data. Consequently, SMEs should at least be supported in this task and the bureaucratic burden kept to a minimum e.g. by streamlining with the already above-mentioned Corporate Sustainability Reporting Directive (CSRD) obligations that SMEs havetofulfilanyway.Furthermore,the linkagesofparagraph23.2and23.3 and Art. 20 2. need to be clarified, at least in order to avoid creatingparallel flows of information requirements

Similar to matchmaking outlined in Art. 16, the question for BDI is whether the Commission is the right platform for joint purchasing (Art. 24) or whether it would not be better to support the companies in joining forces themselves, which they are already doing in part. Here, ERMA might be a suitable platform. In general, many questions arise (governance, prioritization of beneficiaries, inclusion of secondary SRM, interface with ‘consolidated purchasing strategies’ etc.) and it would be useful if the Commission concretizes its plans, also by referring to the recently started EU Energy Platform AggregateEU for joint gas purchasing and the interface with European competition rules. In any case, it is positive that joint purchasing remains voluntary. It could also be conceivable to cooperate with raw material traders or to provide guarantees for them conditioning the procurement and delivery of critical or strategic raw materials to European industry over a certain period of time. A template could be Germany’s Untied Financial Loan (UFK) for Trafigura, which supplies German industry with 500,000 tons of non-ferrous metals over 5 years. The debated EU Export Credit Facility outlined in the Communication accompanying the CRM Act proposal could be interesting in that regard.

4. Sustainability (Circularity Art. 25-28, Certification and environmental footprint Art. 29-30, Free movement, conformity and market surveillance Art. 31-32)

The European Commission proposes in Art. 25 that member states adopt and implement national measures on circularity and programmes for critical raw materials, respectively, with the aim to ensure several objectives.

According to the BDI, plans of the Commission fall too short to shift responsibility for overall CE-measurements and programmes to the member states. The Commission shall precisely assess which of its listed aimscanbetterbeaddressedwithprogrammesandmeasurementsbymember states and which aims must be addressed on a European level. Aims of increasing reuse and other criteria such as durability, repairability, recyclability must be targeted on a European level in accordance with EU's sustainable product and materials policy. Also, the aim of increasing secondary raw materials in manufacturing requires a level-playing field in the European market and, therefore, must be addressed with harmonized European regulation. More R&D is needed to foster such circularity and requires specific funding on a European level, such as within the European research program Horizon.

Here, the BDI also asks to consider conflicting objectives in the Circular Economy. The aim of raw material security should not get in conflict with sustainability objectives. Overall aim must be to improve the secondary raw material market using waste already accumulated, e.g. through better sorting, processingand recycling rates. Here, environmental and energyconsumption conflicts must always be considered.

We also see necessity in harmonized quality-standards for recycled raw materials so that companies in all 27 member states can use and process them. Without common standards, a European CRM-market is hardly imaginable.

We fully support that circularity is a core element of the CRMA. However, there are already existingandupcoming regulationsat nationaland EU level on the circular economy and recycling. This concerns in particular articles 27 and 28 on the recycling of permanent magnets. Chapter 5 should be clearly linked and harmonized with the eco-design regulations. We recommend carefully examining these provisions on potential overlaps and inconsistencies with the Ecodesign for Sustainable Products Regulation (ESPR) and align the regulations.

Ifrulesonminimumrecycledcontent isevaluatedand included intheCRMA as outlined in Art. 28 3., a prior assessment is necessary. There is currently no (scaled) magnet recycling in the EU and often magnets are lost in steel recycling processes, meaning that recyclers currently do not recycle magnets specifically, but rather other materials deemed more valuable. Recycling of permanent magnets underlies several technical, operational and economic challenges which leads to higher costs and energy consumption in the recycling process. Thus, BDI asks that a prior assessment for a minimum share, as proposed by the Commission, particularly looks to the operability of recycling, next to the existing and forecasted availability. There are still a lot of innovations and new technologies needed for the recycling of permanent magnets, so that it is not possible to set a date, as to when minimum recycled content shall apply. Therefore, we advocate that

there should be no specific time as to when include rules on minimum recycled content and that they should be advocated in the Regulation itself, not within delegated acts.

The requirements for products containing permanent magnets that are meanttoenablesuch large-scalerecyclingshouldstriketheright balance between effectively advancing this important goal and not creating unnecessary administrative burdens for companies in its course. Furthermore, Low-grade ferrite magnets that include less than 0.5% cobalt should thus be excluded from the recyclability requirements under the CRMA. Ferrite magnets are widely available on the international market and their supply is not critical. Moreover, recycling of low-grade ferrite magnets is often not economically meaningful since they do not contain much SRM material.

BDI also asks to set up enforceable requirements for a functioning market for recycled content, including early planning security for the calculation of the recycled share and investment security for companies for new recycling structures. Here, the Commission should also consider perspectivesofcostandenergyconsumption.Otherthantheminimumquota, theCommissionshall evaluateand giveprioritytofurthermeasurements such as financial incentive schemes and funding of R&D for the recycling of permanent magnets.

The BDI asks the Commission to clarify underlying definitions for terms of manufacturing waste and post-consumer waste, in harmonization with other Union legislation. The COM should also resolve the inconsistency betweenthe Def. in Art 28.1and 28.2. We think it highlyimportantto stress thatmanufacturingwasteneedstobeincludedinthe definition. Theproposed definition below is the one from the battery regulation, which should be used in the CRMA to ensure harmonization:

The definition of recycled content should include post-consumer waste as well as manufacturing waste, i.e. the materials rejected during the manufacturing process, which cannot be re-used as an integral part in the same process and need to be recycled. Including manufacturing waste will accelerate the development of the necessary recycling infrastructure and a functioning EU circular economy for permanent magnets. It will also have a positive effect on the availability and prices of recycled rare earth elements. In form of a delegated act, the Commission shall establish rules for the calculation and verification of the share of neodymium, dysprosium, praseodymium, terbium, boron, samarium, nickel and cobalt recovered from manufacturing waste or post-consumer waste (Art 28 2.).

Additionally, measures concerning the recyclability and recycled content of permanent magnets should follow a hotspot analysis, to identify product groups where most of total weight of permanent magnets are integrated. Specific requirements to improve the circularity of permanent magnets

should concentrate only on those components, e.g. traction motors in vehicles. Furthermore, the recycling requirements for traction motors should be discussed in the ELV directive and thus not be part of the CRMA.

The implementation of new requirements concerning permanent magnets need transition phases in orientation to the usual duration of the product development process and can only be applied to new type approved products.

Concerning the recyclability of permanent magnets, according to Art. 27

1., legible and indelible labelling is to be ensured for several listed magnetic resonance imaging devices but also for product groups where they are integrated. As concerns recycled content of permanent magnets, Art. 28

1. foresees the obligation of any natural or legal person placing on the market productscontainingapermanentmagnettopubliclymakeavailable,onafree access website, the share of neodymium, dysprosium, praseodymium, terbium, boron, samarium, nickel and cobalt recovered from post-consumer waste present in the permanent magnets incorporated in the product.

The BDI requests that congruence with other legal acts and ongoing Commission initiatives regarding a Digital Product Passport must be ensured. Affected stakeholders must be involved in this process.

The BDI advocates that detailed information such as on the location of magnets in the product, their composition, and dismantling instructions should only be accessible for recyclers, market surveillance authorities and customs authorities and not for consumers or other companies since it might allow conclusions on confidential product design. Manufacturers should not be required to provide detailed information on dismantling processes and tools for removing magnets from products. This would not bring meaningful benefits for the recycling process as dismantlers have the specific know-how and often their own techniques, tools, and processes so that describingone possible wayof how todismantle a product orcomponent might not even be useful to them, while creating immense efforts for the product manufacturers. Favorably, this information should be part of the digital product passport which is soon to be introduced under the Ecodesign umbrella. The foreseen different access categories in the digital product passport will allow for targeted access to the necessary information.

Fourth and fifths aim of the Commission is to increase the technological maturity of recycling technologies and to ensure that the workforce is equipped with skills needed to support circularity [Art. 25 1. (d), (e)]. The BDI agrees with both aims. Measures must aim at a long-term increase and promotionofR&Dandtechnologicalinnovationforrecyclingprocesses.The potential of digitalisation as a lever for Circular Economy, in all stages of the product lifecycle (product design, manufacturing, end-of-life, sorting, recycling), has to be considered and assessed.

BDI calls to ensure that the interfaces between product, substance and waste law are coordinated in such a way that companies gain legal certainty in closing material cycles and that there are no contradictory regulations. In addition, new ordinances, guidelines, and regulations for the end of waste status and for by-products should also be considered. Scientific risk assessment must be retained as a core element of chemicals management.

The BDI points out that a consultation procedure can be carried out for implementing acts as foreseen in Art. 25 5., 7 within the framework of the Better Regulation Agenda. This procedure should be taken in any case.

Measures listed in Art. 26 focus on the recovery of critical raw materials from extractive waste, which can have a direct practical impact on businesses in the EU. The feasibility still has to be assessed, R&D in new technologies play a crucial role here.

The recognition of certification schemes (Art. 29) related to the sustainability of critical raw materials should differentiate between projectsin the European Unionand abroad. Whilemining, processingand recycling of strategic raw materials in the EU already takes place within a regulatory framework with high standards and might not necessarily need certification (though could be considered out of reasons to increase public acceptance and accelerated permitting), the reality outside of the EU is rather different. Thus, a variety of certification schemes that companies are using should be recognized when it comes to Strategic Projects abroad. In general, the participation of project promoters in a recognized certification scheme should remain but one element to choose (next to compliance with relevant Union legislation, international standards, guidelinesand principles)toprovethesustainabilityofaStrategicProject Still, in order to boost investments into mining, processing and recycling in Europe, industry, standardization bodies and politicians should continue the discussions about the development of European standards of CRM related industrial processes - as laid out in the accompanying Communication to the CRM Act proposal - which should then be pushed for in international standard setting bodies and via trade agreements.

The Commission should ensure that the environmental footprint declaration as outlined in Art. 30 does not create a negative impact on trade and the security of supply. It is therefore positive that the Commission plans to conduct a prior assessment of impacts based, inter alia, on a consultation of all relevant stakeholders including industry and third countries before deciding whether to adopt a delegated act to supplement the CRM regulation by establishing rules for the calculation and verification of the environmental footprint of different critical raw materials

In case the Commission adopts calculation and verification rules for a specific critical raw material and thus decides on an obligation to declare the environmental footprint of that material regarding the most important

impact category, when placing it on the market, a transitional period of two years shall apply before the delegated act enters into force. Thereby impacted economic operators in the EU and in third countries should be able to ensure full compliance when the rules apply It is noteworthy that the potential requirement shall apply to each individual critical raw material type placed on the market and shall not apply to critical raw materials included in intermediate or final products (Art. 30 5.)

5. Strategic Partnerships (Art. 33)

The EU should not and cannot be too picky about its access to critical and strategic raw materials, ergo, about establishing (Strategic) Raw Materials Partnerships. Global competition is in full swing. Art 33 (c) ii in particular should therefore recognize local realities and Strategic Partnerships should actively use all potential instruments, such as those of development cooperation, to make a mutually attractive offer.

BDI welcomes several measures announced in the Communication accompanying the draft CRM Act that need to be discussed and implemented:

▪ The creation of a Critical Raw Materials Club,

▪ efforts at WTO level in the area of investment facilitation,

▪ the advancement of FTAs such as with Chile and Australia,

▪ thepromotion ofundistortedtradeoractivitiesagainstexportrestrictions, respectively,

▪ CRM projects within the Global Gateway strategy,

▪ the examination of possible tariff reliefs or duty suspensions for raw material imports,

▪ trade defense instruments to protect the CRM mining, processing and recycling facilities to be built and expanded, and

▪ an EU Export Credit Facility.

In addition, money should be earmarked for strategic CRM projects in mining, processing and recycling within the Global Gateway strategy. In order to ensure a level playing field with third country competitors reciprocity in access to critical and strategic raw materials with partners such as the USA is key.

What is missing are more extensive links between foreign policy, trade policy and development policy as well as with the Global Gateway strategy. Next to the obvious resource-rich countries Australia and Canada, for example, Brazil is extremely relevant for the strategic raw material niobium, South Africa for the platinum group metals and Turkey for boron minerals. Strategic raw materials should be includedas a component of trade, investment and development policy agreements to encourage more sustainable local exploration and refining with credits, loans, investments and technical assistance as well as access to raw materials in

exchange for investments in infrastructure and technology transfer

Together with industry it should be elaborated where there is real potential and interest in scalable exploration both abroad and in Europe.

The EU has to be careful not to set the wrong framework conditions. Supply chain due diligence laws, for example, rightly emphasize the increased importance of risk management and prevention in the supply chain. In the currently envisaged form, however, there is a risk that companies will avoid certain countries and suppliers as a precautionary measure only because of incalculable liability risks, or that they will be faced with insolvable conflicts in countries on which they are heavily dependent. This makes diversification difficult. What is needed is thus the right sense of proportion and the targeted support of transformation paths. The EU risks to do the second step before providing for enough own capacities and resilience

6. Governance (European Critical Raw Materials Board Art. 34-35)

As for the composition and functioning of the European Critical Raw Materials Board (Art. 35) BDI proposes that on a regular basis, the Board shall organize open sessions, including of the standing or temporary subgroups referred to in Art. 35 6., with representatives of European economic operators. Given the need for strong public-private interactions and partnerships expected from the Critical Raw Materials Act, it is important to have such a structured dialogue at EU level as well.

7. Final provisions (Monitoring progress Art. 42, Reporting of member states Art. 43, Treatment of confidential information Art. 44, Penalties Art. 45, Evaluation Art. 46, Entry into force Art. 47)

The treatment of confidential information (Art. 44) is key when it comes to critical and strategic raw materials. Access to critical and strategic raw materials is in a lot of countries defined as part of national security and data often classified. BDI thus proposes to further strengthen Art. 44. When it comes to penalties (Art, 45), a patchwork of measures within the European Union and competition at the wrong place should be avoided.

8. Additional remarks

Beyond theCRM Act, considerationshouldbegivento how the use ofCRM derived from domestic mining, processing and recycling can be stimulated. The EU could follow the IRA example that works with tax credits for domestic mining and processing activities.

In addition, the success of the CRM Act depends on solutions on the energy front. Mining, processing and recycling of CRM are all energyintensive processes. Competitive energy and electricity prices are needed. Similarly, as the Communication accompanying the draft CRM Act outlines, measures to boost research and innovation including resource efficiency and substitution as well as skills development are urgently needed.

The success of the CRM Act also depends on the resolution of conflicts with other EU regulations, especially in the area of environmental and chemicalregulation(e.g.IEDandpossibleclassificationof threelithiumsalts as highly toxic by the ECHA), supply chain regulation CSDDD and taxonomy (potential financing difficulties for strategic CRM projects in mining and processing should these activities be classified as unsustainable).

About BDI

The Federation of German Industries (BDI) communicates German industries’ interests to the political authorities concerned It offers strong support for companies in global competition. The BDI has access to a widespread network both within Germany and Europe, to all the important markets and to international organizations. The BDI accompanies the capturing of international markets politically. Also, she offers information and politico-economic guidance on all issues relevant to industries The BDI is the leading organization of German industries and related service providers. It represents 39 inter-trade organizations and more than 100.000 companies with their approximately 8 million employees. Membership is optional. 15 federal representations are advocating industries’ interests on a regional level.

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Contact Anne Lauenroth

Senior Manager

a.lauenroth@bdi.eu

Stefan Steinicke

Senior Manager

s.steinicke@bdi.eu

Inken Sittler Senior

Manager

i.sittler@ice.bdi.eu

BDI document number: D 1773