American Elements Advises of New 25 Percent Export Tariff by Chinese Government on All Rare Earth Metals and Compounds

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The new round of tax increases on rare earth materials by the Chinese government first anticipated to occur two months ago (See American Elements September 18, 2007 press release) has finally been enacted taking effect as of January 1, 2008.

The new round of tax increases on rare earth materials by the Chinese government first anticipated to occur two months ago (See American Elements September 18, 2007 press release) has finally been enacted taking effect as of January 1, 2008.

American Elements originally advised its customers and supply chain partners of an anticipated new 10 percent export tax on all rare earth metals from China; essentially the sole world producer. However, the new taxes are far higher than anticipated with rates as high as 25 percent. This is in addition to two prior 10 percent increases in 2007 for a total of 45 percent in approximately one year for those products. The lowest new rate is 15 percent. The choice of rates clearly reflects the rare earth materials the Chinese government places greatest emphasis on. For example, the rate for all heavy or yttric rare earths, which are the most rare, are at 25 percent.

The metals and compounds affected include lanthanum, cerium, praseodymium, neodymium, samarium, europium, gadolinium, terbium, dysprosium, yttrium, holmium, erbium, thulium, ytterbium and lutetium.

The increase is in keeping with the Chinese government's stated intent to upwardly revalue and limit the export of China's significant recoverable rare earth reserves. This upward re-valuation has been accomplished through a mix of export tariffs and export quotas. In 2005, the PRC restricted the export of rare earths to domestic producers and distributors who were granted specific volume quotas. The number of producers and the limited export volume granted the remaining producers continues to be reduced quarterly by the Chinese government shrinking the global supply of new rare earth production outside of China at a time when world demand is rising. Because the quotas are based on volume irrespective of value they additionally put pressure on Chinese producers to only export added value and higher value rare earth production; one of the stated purposes of the quota system.

American Elements is a Los Angeles-based global manufacturer and developer of engineered and advanced materials with the world's largest industrial catalogue of rare earth materials accessible electronically at http://www.americanelements.com. For further information on the new Chinese rare earth tax rates, please contact your local American Elements distributor or American Elements U.S. corporate headquarters at (1)310-208-0551, FAX (1)310-208-0351 or customerservice@americanelements.com.

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