Sou Hu Cai Jing·2025-10-10 06:52Core Insights - In April 2025, China implemented export controls on seven categories of medium and heavy rare earths, which initially raised concerns about the U.S. supply chain for rare earths, as 90% of refined rare earths in the U.S. come from China. However, three months later, U.S. companies like Lockheed Martin continued production of F-35s and Tesla maintained operations, indicating that smuggling may be occurring despite a 72% drop in Chinese exports [1][3]. Group 1 - The initial customs inspections of large containers yielded no results, but irregularities were discovered in cross-border express shipments labeled as "ceramic parts," which contained epoxy-encapsulated rare earth particles. This led to the uncovering of a smuggling network spanning China, Vietnam, and Mexico [3]. - The smuggling operations involved shipping "protein powder" to Vietnam, where it was mixed with clay and pressed into "ceramic tiles" for transport to Mexico. The extracted materials were then sent to U.S. military contractors as "scrap metal" [3]. - An anonymous tip from a U.S. molybdenum mining company revealed detailed information about the smuggling operations, including warehouses, contacts, and the flow of goods. The company reported that the smuggling of rare earths was undercutting its orders by 40% and causing issues with the purity of materials used in missile tests, prompting the report to protect the industry [3]. Group 2 - In August 2025, a joint law enforcement operation between China, Vietnam, and Mexico dismantled the smuggling network and intercepted shipments, revealing vulnerabilities in the U.S. "diversified supply chain." High-purity dysprosium and samarium are now primarily produced by China, leading to production cuts at Raytheon and Tesla [5]. - The molybdenum mining company that reported the smuggling has since signed long-term contracts with compliant companies, highlighting the importance of adhering to regulations for business sustainability [5]. - The situation illustrates a paradox where U.S. companies, in an effort to protect their interests, inadvertently assisted in closing off smuggling routes, reinforcing the notion that compliance with regulations is essential for survival in the industry [5].