White House Issues Sweeping Executive Order Targeting Defense Supply Chains and Critical Materials

• the Department of War (DoW) to significantly tighten waivers for sourcing requirements for “covered materials” under 10 U.S.C. § 4872 (discussed here) used in DoW contracts, effective January 1, 2027. While waivers may still be available, in order to obtain a non-availability waiver, the relevant prime or subcontractor must submit a formal mitigation plan, as described below, that is accepted by DoW. National security waivers may be granted where these requirements are met or alternatively, via a request as described below to the Assistant to the President for National Security Affairs (the National Security Advisor).
• DoW to require contractors to undertake extensive supply chain mapping and illumination for certain critical supply chains for DoW acquisitions (as determined by DoW), starting at the raw material level, including specific vetting measures of suppliers for certain identified risks, notification following vetting and mitigation. These requirements are forthcoming, and the scope of the requirements will depend on forthcoming policy and implementation guidance.
• DoW to initiate regulatory actions to require contractors to qualify alternative sources for material supplied by “unreliable foreign suppliers” for certain supply chains identified by DoW. These requirements are also forthcoming, and their scope will depend on forthcoming policy implantation and guidance.

Below we discuss the key provisions of the EO, issues that will be addressed in forthcoming guidance and regulations, and considerations for contractors and subcontractors at all tiers.

Waiver Restrictions
As discussed further below, the EO directs DoW to significantly limit non-availability or national security waivers issued related to sourcing restrictions applicable to “covered materials” under 10 U.S.C. 4872.

New requirements. On January 1, 2027, the Secretary of War and Secretaries of military departments must cease to issue non-availability waivers under 10 U.S.C. 4872(c)(1) or national security waivers under 10 U.S.C. 4872(e) for the acquisition of “covered materials” under 10 U.S.C. 4872 except where the prime contractor or subcontractor submits to the relevant DoW official for acceptance a formal mitigation plan that meets various requirements identified in the EO. These include:

• identifying the source of the covered material that would not be compliant under the statute absent a waiver;
• demonstrating evidence of exhaustive efforts made to acquire compliant material or that compliant material was not available at the time of acquisition of non-compliant material;
• describing steps to remove non-compliant material from supply chains; and
• establishing timelines for implementation of the mitigation plan.

Considerations related to qualification. The EO raises the bar for considerations related to qualification in connection with waivers. Specifically, it provides that a prime or subcontractor’s failure to qualify a domestic source of “covered material” does not constitute non-availability except where the prime or subcontractor “demonstrates active, adequately funded, and ongoing efforts to qualify a domestic source of the covered material at issue.”

Two pathways for national security waivers. National security waivers may be issued where the conditions above are met or, alternatively, following a request by the Secretary of War or Secretary of the military department to the Assistant to the President for National Security Affairs (the National Security Advisor).

DoW supply chain mapping. In response to supply chain vulnerabilities identified by contractors per the supply chain illumination requirements, DoW is required to map national security vulnerabilities related to raw materials and account for such vulnerabilities in connection with review of waivers.

Review of electronic device exemption. DoW is required to review the application of the exemption for electronic devices and ensure its continued application meets current national security needs. As background, 10 U.S.C. 4872(c)(3)(B) provides an exemption from the sourcing requirements for an electronic device, unless the Secretary, upon the recommendation of the Strategic and Critical Materials Board of Directors “determines that the domestic availability of a particular electronic device is critical to national security.” The Board was established in January 2025 and required under the FY 2023 National Defense Authorization Act. The Board is chaired by the Assistant Secretary of Defense for Industrial Base Policy and comprises representatives designated by DoW and the Departments of Energy, State and Interior, as well as the Armed Services Committees of the House and Senate.

Enforcement. DoW is authorized to take actions and exercise contractual remedies if DoW determines that a prime contractor or subcontractor has engaged in fraud or deliberately misled the government or knowingly failed to implement its mitigation plan. Within 180 days of the EO or by January 16, 2027, DoW is required to provide the White House with a list of actions and contractual remedies taken to address such issues. This signals that enforcement will be a priority.

Background on sourcing restrictions for “covered materials.” As we discuss here, under 10 U.S.C. 4872, DoW is prohibited from procuring: (1) any covered material melted or produced in any covered nation, or (2) any end item that contains a covered material manufactured in any “covered nation,” (China, North Korea, Russia, Iran) subject to exceptions. Currently, “covered materials” includes:

• samarium-cobalt magnets;
• neodymium-iron-boron magnets;
• tungsten metal powder;
• tungsten heavy alloy or any finished or semi-finished component containing tungsten heavy alloy;
• tantalum metals and alloys; and
• molybdenum.

There are a number of exceptions to the requirements, including non-availability and national security waivers, commercially available off-the-shelf (COTS) items with certain exceptions, certain procurements or sales in support of contingency operations or for use outside the United States, an electronic device, and “covered materials” manufactured from recycled materials that meet certain origin requirements with respect to recycling. These exceptions remain in place. As noted above, the EO provides direction to DoW related to the application of certain exceptions.

The statute and Defense Foreign Acquisition Regulation Supplement (DFARS) implement a staged expansion of supply-chain coverage. Effective through December 31, 2026, the restriction applies to any covered material melted or produced in any covered country, or any end item, manufactured in any covered country, that contains a covered material. For each covered material, the DFARS regulations provide particular stages of production for which the restrictions enter into effect and relevant timelines for entry into effect and exceptions applicable to the covered material. Effective, January 1, 2027, the restriction applies to any covered material mined, refined, separated, melted or produced in any covered country, or any end item, manufactured in any covered country, that contains a covered material. In addition, effective January 1, 2027, the COTS exception under the statute will no longer apply to a COTS item that is 50% or more covered material by weight. Finally, the FY 2026 NDAA added molybdenum, gallium and germanium to the definition of “covered materials.” The restrictions applicable to gallium and germanium take effect on December 18, 2027. The restrictions applicable to molybdenum apply on the same timelines that apply to other “covered materials.”

Forthcoming Supply Chain Mapping, Illumination, Vetting and Mitigation Requirements
The EO requires extensive supply chain mapping and illumination and mitigation requirements for “critical supply chains” for certain DoW acquisitions. Within 180 days of the EO, or by January 16, 2027, DoW is required to develop and implement guidance to require all prime contractors and subcontractors to map and illuminate “critical supply chains for all Department of War acquisitions that support, implicate, or relate to United States national security, as determined by the Secretary, from raw materials to the end use products such contractors deliver to the Department of War.” Within 90 days of providing such guidance, or by April 16, 2027, DoW is required to issue implementing regulations. As reviewed below, the regulations would include requirements related to mapping and vetting, sourcing and mitigation.

Mapping and vetting. The regulations will include requirements for contractors to submit to DoW an indentured Bill of Materials[1] that traces all components, parts, equipment, software and materials back to the origin of raw materials in their supply chains, and establish and implement procedures to vet all suppliers and subcontractors that support the critical supply chain with such vetting to include screening for the following risks:

- Financial risk, which is defined as the inability to meet financial obligations, which can lead to the inability to meet contractual obligations, hostile takeovers or bankruptcy

- Foreign ownership, control or influence (FOCI) risk, which can arise when a foreign interest has the power “to direct or decide matters affecting the management or operations of a company in a manner that may result in unauthorized access to information or may adversely affect the performance of contracts or programs which support national security.” This definition is broader than historical DoW definitions of FOCI, and tracks the expansion of FOCI review into unclassified areas.

- Manufacturing and supply risk. Relevant factors include reduced throughput or production delays caused by capacity constraints, obsolescence, industrial limitations, market conditions and the supplier’s practices across those markets, disrupted material delivery, availability of supply, capacity to surge, sole-source, and concentration within or over-reliance on a single source.

Sourcing. Subject to exceptions related to purchases for Project Vault and certain U.S. Government supported projects, companies and transactions (discussed below), the regulations are required to prohibit contractors from utilizing covered material by an “unreliable foreign supplier.” Under the EO, an “unreliable foreign supplier” is defined as any person subject to the FOCI of a covered nation as defined by 10 U.S.C. 4872(f)(2) (China, Russia, Iran, North Korea) or a nation otherwise designated by the Secretary of War. Among the questions to be addressed in forthcoming guidance and regulations is whether the contemplated sourcing restrictions are broader than those for “covered materials” under 10 U.S.C. 4872 discussed above.

Mitigation. Following the vetting activities, the forthcoming regulations must require contractors to:

- implement mitigation plans (including those identified in the required Supply Chain Risk Management Plan under Contract Requirement Data List DI-MGMT-82256A) for each identified risk;

- track active mitigations;

- notify DoW, within 15 days of completing vetting activities, of any significant supply chain risks identified; and

- submit a confidential corrective plan of action within 45 days of completing the vetting activities, and a closeout report after completing the corrective plan.

Forthcoming Qualification of Alternative Sources
As discussed below, the EO requires DoW to initiate regulatory actions to require qualification of alternative sources for material supplied by an “unreliable foreign supplier” (as defined above) for certain supply chains and to develop a strategy to accelerate testing and qualification of new sources.

Qualification of alternative supply sources. Within 180 days of the EO or by January 16, 2027, DoW is required to initiate regulatory action:

- to identify existing DoW acquisitions that “support, implicate, or relate to United States national security.” This tracks the definition above for supply chains for which DoW must require supply chain illumination and mapping discussed above; and

- for contractors delivering identified acquisitions that rely on materials or components supplied by an “unreliable foreign supplier” to qualify and utilize an alternative source (except where such a source is not available). We note that the relevant section of the EO provides for qualification of “domestic sources,” but the subsequent text requires qualification of “alternative sources.” Accordingly, it is not clear whether DoW will require qualification of domestic sources, and if so, what the definition of “domestic” will be (i.e., whether it will include the Defense Production Act definition which includes the United States, Canada, Australia and the United Kingdom) or sources other than “unreliable foreign suppliers.” In addition, the language here is broader than that in the supply chain illumination and mapping section, which refers to covered materials only while the language here includes “materials or components.” These are among the issues to be addressed in forthcoming regulations.

A contractor’s failure to qualify an alternative source will constitute grounds for DoW to consider suspending or terminating task orders, declining to exercise contract options, and terminating existing contracts. Given the Government’s significant discretion to take such actions, this could present real business risk to contractors.

Qualification acceleration. Within 90 days of the EO or by October 18, 2026, DoW is required to develop a strategy to accelerate testing and qualification of new sources and materials. This will include developing new software, technical testing procedures, qualification methodologies and resources, and taking steps to rescind any identified regulations that prevent rapid testing and qualification. As we discuss here, the FY 2026 NDAA provided for several provisions intended to accelerate qualification, including requiring DoW to establish an online repository through which vendors may voluntarily register and attest that certain covered products comply with specified domestic and allied sourcing requirements, and to establish a working group to accelerate qualification of DoW-compliant sources.

Reporting 
Every six months from the date of the EO until January 1, 2028, DoW is required to submit a report to the White House regarding continued use of waivers under 10 USC 4872, mitigation plans accepted and progress made to complete those plans, and progress on implementing the regulations required related to the supply chain illumination and mapping and qualification sections of the EO.

Project Vault and U.S.-Funded Sources 
The EO provides that it will not impair or otherwise affect:

• Project Vault (financed by the Export-Import Bank of the United States (Ex-Im), which we discussed here); and
• the acquisition by a contractor or subcontractor of critical minerals produced by a foreign project, project or company or other transaction receiving support from various U.S. Government agencies, including Ex-Im, Development Finance Corporation, or the Departments of State, War, Commerce, or Energy. 

The EO also clarifies that the sale of critical materials or components by Project Vault to a contractor or subcontractor will not be a credit sale of a defense article or service under 12 U.S.C. 635(b)(6)(A), which prohibits Ex-Im from providing financing support in connection with any credit sale of defense articles and defense services to any country. 

Considerations for Contractors and Suppliers at All Tiers
The EO leaves a number of issues to be addressed in forthcoming guidance and regulations. These include, among other things:

• supply chains that will be determined by DoW to meet the supply chain illumination and mapping requirements as well as for qualification of alternative sources;
• guidance for the required vetting of suppliers and mitigation requirements;
• whether and the extent to which sourcing restrictions would be broader than those already in place for “covered materials”; and
• whether the alternative suppliers must be domestic and the definition of domestic for this purpose.

The EO does not provide for additional funding for compliance with its requirements; however, these requirements may amount to compensable changes that entitle contractors to cost or schedule adjustments.

In anticipation of the forthcoming guidance and regulations, contracts and suppliers at all tiers should consider:

• reviewing whether “covered materials” are being delivered to DoW;
• tracing the origin of “covered materials” at the raw material level;
• identifying alternative sources for “covered materials”;
• assessing the feasibility of tracing origin and processing of materials (in addition to “covered materials”) and components at the raw materials level;
• reviewing suppliers for risks identified in the EO (including FOCI, financial, and manufacturing and supply chain risks) and processes for mitigating risks;
• monitoring DoW guidance and rulemaking; and
• engaging with DoW to inform scoping and implementation of EO.

The authors would like to thank senior trade and policy specialist Xavier Gillett for his contribution to this article.

[1] Under the EO, “indentured Bill of Materials” means:

all the components, parts, equipment, software, and materials back to the origin of raw materials collected during the design, development, and initial fielding process of a system or end item. This term includes data for maintenance planning, logistics design requirements, reliability and maintainability, system safety, maintenance engineering, cost, cataloging, item management, and in-service feedback.