President Trump Signs Executive Order on Defense Supply Chains, Critical Materials

President Donald Trump on July 20, 2026, issued Executive Order (EO) 14415, "Securing America's Defense Supply Chains and Ensuring Domestic Acquisition of Critical Materials," directing the U.S. Department of War (DOW) to tighten the use of statutory sourcing waivers, develop substantially more detailed defense supply chain mapping and supplier vetting requirements, and require alternative sourcing for certain materials and components supplied by "unreliable foreign suppliers."

The EO is significant for two distinct reasons:

1. It imposes new limitations, effective January 1, 2027, on waivers under 10 U.S.C. § 4872¹ for covered materials that otherwise would violate the statute's sourcing restrictions involving North Korea, China, Russia or Iran.
2. It directs future regulatory action that could apply much more broadly to materials, components, software, suppliers and subcontractors supporting designated national security acquisitions.

Most of the EO's broader contractor requirements are not immediately effective. They must first be implemented through DOW policy, regulations, contract clauses or other acquisition actions. The EO also does not appropriate new funding, make awards, establish procurement quantities or create an immediate across-the-board domestic content mandate. Its implementation is expressly subject to applicable law and the availability of appropriations.

Nevertheless, the direction is clear: DOW contractors at all tiers should expect increased scrutiny of the origin and processing of materials, supplier ownership and control, supply chain vulnerabilities, and efforts to qualify domestic or alternative sources.

Key Provisions and Related Statutory Changes

Tighter Waiver Requirements Beginning January 1, 2027

Beginning January 1, 2027, the Secretary of War (Secretary) and secretaries of the individual military departments are directed to cease issuing nonavailability waivers² under Section 4872(c)(1), except as provided by the EO. The Secretary may continue to issue otherwise prohibited waivers under Section 4872(c)(1) or (e) if a prime contractor or subcontractor submits a formal mitigation plan accepted by the Secretary or the Secretary's designee. The plan must:

• identify the source of the noncompliant covered material
• document evidence of exhaustive³ efforts to obtain compliant material or demonstrate that compliant material was unavailable when the noncompliant material was acquired
• describe the steps that will remove the noncompliant material from the supply chain
• establish a strict projected timeline for complete implementation of the mitigation plan

A national security waiver under Section 4872(e) may also be issued following a request from the Secretary or the secretary of a military department to the Assistant to the President for National Security Affairs. The EO does not specify the process for such a requestor the Assistant's role in the waiver determination, but Section 4872(e) continues to require a written determination that acceptance of the end item is necessary to the national security interests of the U.S.

The EO also states that a failure to qualify a domestic source alone will not establish nonavailability. A contractor seeking a waiver on that basis must demonstrate "active, adequately funded, and ongoing efforts" to qualify a domestic source of the covered material at issue.

If the Secretary determines that a prime contractor or subcontractor committed fraud, deliberately misled the government regarding a mitigation plan, or knowingly or willfully failed to implement an approved plan, the Secretary must take all actions and exercise all contractual remedies the Secretary deems appropriate, consistent with applicable law, and may "refer the matter to the Attorney General for investigation and possible prosecution."

Contractors could face False Claims Act (FCA) exposure if they knowingly provide materially false or misleading information in a mitigation plan and that information is material to a claim for payment or approval.⁴ The FCA provides for treble damages and civil penalties. Separate from FCA liability, conduct involving fraud, false statements or other serious integrity concerns could support suspension or debarment under Federal Acquisition Regulation (FAR) Subpart 9.4.⁵ The EO also requires the Secretary, within 180 days, to provide the Assistant to the President for National Security Affairs a list of generally available actions and contractual remedies for knowing or willful noncompliance.

Materials Currently Covered by 10 U.S.C. § 4872

Following enactment of the fiscal year (FY) 2026 National Defense Authorization Act (NDAA), the current statutory definition of "covered material" includes:

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

The statute defines the "covered nations" as North Korea, China, Russia and Iran. Gallium and germanium have been enacted as future additions to the definition of "covered material," but those additions do not take effect until December 18, 2027.⁶

As of the date of this publication, Acquisition.gov identifies the current published Defense Federal Acquisition Regulation Supplement (DFARS) as "DFARS Change 5/7/2026," effective May 7, 2026. The current DFARS definition of "covered material" continues to include the two magnet categories, tantalum metals and alloys, tungsten metal powder, and tungsten heavy alloy or covered components but does not include molybdenum. The DFARS also has not yet incorporated the statute's newer recycled material exceptions for samarium-cobalt magnets or for certain tantalum, tungsten, and molybdenum produced from recycled material. The statutory and current DFARS texts therefore are not yet fully aligned.⁷

Separate Statutory Expansion Beginning January 1, 2027

Independently of the EO, a previously enacted amendment to 10 U.S.C. § 4872 will take effect on January 1, 2027. The amendment adds a separate prohibition on entering into a contract for any covered material mined, refined or separated in a covered nation.

The same statutory amendment also narrows the commercially available off-the-shelf (COTS) exception effective January 1, 2027. Beginning on that date, the exception will not apply to a COTS item that is 50 percent or more covered material by weight rather than only to a COTS item that is 50 percent or more tungsten by weight.

The current DFARS already contains implementing language scheduled to take effect on January 1, 2027, for the materials presently included in the DFARS definition of "covered material." Effective on that date, DFARS 225.7018-2 and the clause at DFARS 252.225-7052 will prohibit the acquisition or delivery of covered material mined, refined, separated, melted or produced in a covered country, as well as an end item manufactured in a covered country that contains covered material, subject to the applicable DFARS exceptions and nonavailability provisions. The clause also specifies material-specific upstream production stages for magnets, tantalum and tungsten products. The clause likewise provides that effective January 1, 2027, the COTS exception will not apply to an item that is 50 percent or more covered material by weight. As discussed above, the current DFARS definition does not yet include molybdenum.

The EO did not create this upstream expansion. It separately directs that beginning January 1, 2027, waivers under Section 4872(c)(1) and (e) will be subject to the new mitigation plan requirements and establishes a domestic source qualification standard specifically for nonavailability waivers under Section 4872(c)(1).

Comprehensive Supply Chain Mapping and Illumination

Under Section 3 of the EO, the Secretary has 180 days – by January 16, 2027 – to develop policy and implementation guidance requiring prime contractors and subcontractors at any tier to map and illuminate critical supply chains, from raw materials to the end-use products delivered to the DOW, for all DOW acquisitions that the Secretary determines support, implicate or relate to U.S. national security.

Within 90 days after completing the guidance, the Secretary must promulgate implementing regulations. If the guidance is completed on the 180-day deadline of January 16, 2027, the regulations would be due by April 16, 2027. The regulations must seek to enable small businesses, nontraditional defense companies and new entrants to comply without being unduly burdened and be consistent with all statutory domestic- and allied-sourcing requirements.⁸

The regulations must require contractors to submit a complete, indentured bill of materials tracing all components, parts, equipment, software and materials back to the origin of raw materials in their supply chains.

The order defines a "critical supply chain" broadly to include all tiers of suppliers and subcontractors providing goods, materials, systems, software or services essential to contract deliverables, mission assurance, security or resilience, as defined by the Secretary. The EO's definition of an indentured bill of materials also includes data concerning maintenance planning, logistics design, reliability and maintainability, system safety, maintenance engineering, cost, cataloging, item management and in-service feedback. The bill of materials will use a standard format and content prescribed through contract data requirements. It may be disclosed in limited circumstances to government support-contractor personnel, subject to scope and proprietary information protections.

Contractors would also be required, in accordance with existing DOW supply chain risk assessment procedures, to establish and implement written procedures to proactively vet all suppliers and subcontractors supporting a critical supply chain for:

• financial risk
• foreign ownership, control or influence
• manufacturing and supply risk, including capacity constraints, obsolescence, production delays, availability of supply, surge capacity, sole-source dependence and supplier concentration

Following the required vetting, contractors would be required to:

• implement timely mitigation actions – including actions identified in the required Supply Chain Risk Management Plan pursuant to Data Item Description DI-MGMT-82256A – to reduce the likelihood or impact of each identified risk and track those actions through closure
• notify the DOW of significant supply chain risks within 15 days after completing the vetting activities
• submit within 45 days⁹ after the vetting activities a written, confidential corrective action plan detailing implemented mitigations and establishing a strict projected timeline for complete implementation
• submit a closeout report upon completing the corrective action plan

The DOW must use contractor acquisition information to map national security vulnerabilities, bottlenecks and single points of failure – including through artificial intelligence tools – and account for those risks before issuing waivers under Section 4872(c)(1) or (e).

These requirements are not yet operative contract obligations. Their ultimate scope, format, applicability and timing will depend on the forthcoming guidance and regulations.

Prohibition Involving "Unreliable Foreign Suppliers"

The supply chain mapping regulations required under Section 3 must, subject to the exception in Section 6(a) for Project Vault and certain Export-Import Bank of the U.S. (EXIM)- or U.S. International Development Finance Corp. (DFC)-supported foreign projects or transactions, prohibit contractors from using in their supply chains covered material supplied by an "unreliable foreign supplier."

The EO defines an "unreliable foreign supplier" as any person subject to the foreign ownership, control, or influence of a covered nation, as defined in 10 U.S.C. § 4872(f)(2), or of a nation otherwise designated by the Secretary. "Foreign ownership, control, or influence" means that a foreign interest has the power – directly or indirectly, whether or not exercised – to direct or decide matters affecting a company's management or operations in a manner that may result in unauthorized access to information or adversely affect the performance of contracts or programs supporting national security.

The EO does not specify an ownership percentage or prescribe procedures for determining whether a supplier is subject to foreign ownership, control, or influence. Those issues will need to be addressed through implementation.

Alternative Source Requirements for Existing Acquisitions

Section 4, Qualification of Domestic Sources, is broader than the sourcing prohibition contemplated by Section 3 in two respects: It addresses "materials and components" rather than only "covered material," and it applies to existing acquisitions designed by the Secretary.

By January 16, 2027, the Secretary must initiate regulatory action to identify, in the Secretary's sole discretion, all existing DOW acquisitions that support, implicate or relate to U.S. national security. For those identified acquisitions, contractors that in the course of delivering the acquisitions rely on supply chains containing material or components supplied by an unreliable foreign supplier would be required to qualify and use an alternative source as soon as possible – consistent with law, safety, mission requirements and existing contract requirements – unless no alternative source is available.

Failure to qualify an alternative source would constitute grounds for the Secretary to consider suspending or terminating task orders, declining to exercise contract options or terminating the existing contract, consistent with applicable law and existing contract terms. The EO does not make any such action automatic.

Although Section 4 is titled "Qualification of Domestic Sources," its operative language requires an "alternative source" and does not expressly state that the source must be domestic or allied. The EO's policy statement favors domestic and allied sourcing, and the White House fact sheet refers to domestic and partner-nation sources,¹⁰ but the implementing regulations will need to define the geographic eligibility of acceptable alternative sources.

Strategy to Accelerate Testing and Source Qualification

Within 90 days of the EO – by October 18, 2026 – the Secretary must develop a strategy to accelerate the testing and qualification of new sources and materials by prime contractors and subcontractors at any tier. The strategy must include developing new software, technical testing procedures, qualification methodologies and resources. The DOW must also identify and begin steps to rescind any regulations that prevent the rapid testing and qualification of sources and materials necessary for defense production.

This provision may increase demand for technical testing, materials characterization, source qualification and validation capabilities. It does not, however, create a funding opportunity, guarantee an award or contract, or establish that the government will pay contractors' qualification costs.

Project Vault and U.S.-Funded Sources

The EO states that it will not impair or otherwise affect:

• Project Vault, the U.S. Strategic Critical Minerals Reserve¹¹ for which the EXIM is a lender
• the acquisition by a contractor or subcontractor of critical minerals or components produced by a foreign project or other transaction financed, guaranteed or insured by EXIM or DCF, or
• the acquisition by a contractor or subcontractor of critical minerals or components produced by a company or project receiving grants, financing, loans, equity investment or other support from the DOW or U.S. Departments of State, Commerce or Energy

The EO also provides that a sale of critical materials or components by Project Vault to a contractor or subcontractor will not be treated as a credit sale of a defense article or service for purposes of 12 U.S.C. § 635(b)(6)(A).

These provisions are savings clauses: They prevent the order itself from impairing Project Vault and the specified acquisitions projects and transactions. They do not, however, establish that any particular material, component, company or project satisfies separate statutory, regulatory, technical qualification or program-specific requirements. The relationship between these protections and other applicable sourcing requirements may require further clarification.

Reporting and Oversight

By January 16, 2027 – 180 days after the EO was issued – the Secretary must provide the Assistant to the President for National Security Affairs a list of generally available actions and contractual remedies that have been taken or may be taken or exercised to address knowing or willful noncompliance by prime contractors and subcontractors. Every six months from the date of the EO until January 1, 2028, the Secretary must submit a report to the Assistant to the President for National Security Affairs describing actions taken pursuant to the EO, including continued waiver use, accepted mitigation plans and contractor progress, implementation of the regulations required by Sections 3 and 4, and the acquisitions to be covered. The reports may include a classified annex.

What the EO Does Not Do

The EO does not:

• appropriate or announce new funding
• award contracts, grants, loans or equity investments
• Establish procurement quantities or Government purchase commitments;
• guarantee qualification of a proposed source
• require immediate submission of bills of materials
• immediately amend existing contracts
• repeal the statutory exceptions in 10 U.S.C. § 4872(c) or the national security wavier authority in Section 4872(e), although it imposes additional limitations and requirements on waivers under Section 4872(c)(1) and (e)
• automatically suspend or terminate a task order or contract because a contractor fails to qualify an alternative source, or
• define the full universe of acquisitions that will be subject to the forthcoming requirements

Other statutory exceptions – including exceptions for specified overseas procurements, certain commercially available off-the-shelf end items, electronic devices and qualifying recycled material, as well as magnets and certain tantalum, tungsten and molybdenum produced from recycled material – remain in effect. The EO separately directs the DOW to review its application of the electronic device exception and determine whether its continued application meets current national security needs.

Initial Considerations for Contractors and Suppliers

The EO leaves significant implementation questions unresolved, including the scope and applicability of the forthcoming requirements, their treatment of existing contracts, and their interaction with current and forthcoming statutory and regulatory requirements. Pending implementation, companies may wish to:

• identify contracts and subcontracts containing DFARS 252.225-7052
• determine where covered materials appear in products delivered to the DOW
• trace the origin and processing of covered materials as far upstream as currently possible
• review suppliers for foreign ownership, control, or influence, and other identified supply chain risks
• identify sole-source and concentrated supply dependencies
• document efforts, expenditures, testing and schedules associated with qualifying domestic or alternative sources
• assess whether current systems can generate an indentured bill of materials extending across supplier tiers
• review existing supply chain risk management plans and supplier-vetting procedures against the risk categories, mitigation requirements and closeout process identified in the order
• monitor DOW guidance, DFARS rulemaking, class deviations and program-specific contract actions
• prepare for potential new or expanded flowdown obligations to subcontractors at all tiers

These steps are not a substitute for the forthcoming guidance and regulations, but they may help companies identify supply chain gaps before the January 1, 2027, statutory and waiver changes take effect.

The EO does not allocate responsibility for costs associated with supply chain mapping, indentured bills of materials, supplier vetting, corrective action plans or alternative-source qualification. Whether contractors can recover those costs will depend on the contract type, applicable clauses and the manner in which the DOW incorporates the new requirements into individual contracts. Under cost-reimbursement contracts, such costs may be reimbursable if they are reasonable, allocable, and allowable under FAR Part 31¹² and terms of the contract. Under fixed-price contracts, contractors generally bear increased performance costs unless a government-directed change, an applicable changes clause or another contractual provision provides a basis for an equitable adjustment. Forthcoming regulations and contract actions may provide additional guidance.

Consolidated Compliance Timeline

Bottom Line

The EO signals a significant shift toward more extensive supply chain visibility, supplier risk analysis and documented source qualification efforts.

The most immediate changes are the January 1, 2027, restrictions on waivers under 10 U.S.C. § 4872(c)(1) and (e), the separate statutory prohibition on contracts for covered materials mined, refined or separated in covered nations, and the narrowing of the COTS exception. The broader – and potentially more consequential – requirements will come through forthcoming regulations that may reach materials, components, software, suppliers and subcontractors beyond the current Section 4872 covered material list.

The EO's ultimate impact will depend on which acquisitions the DOW designates, how it implements the bill-of-materials and supplier-vetting requirements, what sources qualify as acceptable alternatives, and how qualification costs and contract changes are allocated.

For more information or questions, please contact the authors.

Notes

¹ 10 U.S.C. § 4872, Acquisition of Sensitive Materials from Non-Allied Foreign Nations: Prohibition

² A nonavailability waiver under 10 U.S.C. § 4872(c)(1) applies to a specific end item and specific covered material when the Secretary determines that the material, of satisfactory quality and quantity and in the required form, cannot be procured as and when needed at a reasonable price. A waiver may not exceed 36 months.

³ The EO does not define "exhaustive efforts" or prescribe a submission process. By analogy, the current DFARS Procedures, Guidance, and Information nonavailability template requires detailed information regarding noncompliant and potential compliant sources, including origin, specifications, lead times, quantities, pricing, and redesign or requalification costs and timelines. Forthcoming guidance will determine the requirements applicable to mitigation plans. See DFARS PGI 225.7018-4(a)(2).

⁴ 31 U.S.C. § 3729(a)(1)(A)–(B).

⁵ FAR 9.406-2; FAR 9.407-2.

⁶ Section 844 of the FY 2026 NDAA, P.L. 119-60.

⁷ 10 U.S.C. § 4872(c)(3)(C)–(D), (f)(1); DFARS 225.7018-1; DFARS 252.225-7052, Restriction on the Acquisition of Certain Magnets, Tantalum, and Tungsten (DFARS change May 7, 2026).

⁸ The EO does not define these terms. Small business status generally is determined under U.S. Small Business Administration's industry-specific size standards. See 13 C.F.R. pt. 121. The closest statutory analogue to "non-traditional defense companies" is "nontraditional defense contractor," defined in 10 U.S.C. § 3014. The EO does not define "new entrant firms."

⁹ The order does not specify whether the 15- and 45-day periods are measured in calendar or business days. Implementing regulations will need to clarify the applicable calculation.

¹⁰ The White House, fact sheet: President Donald J. Trump Secures America's Defense Supply Chains and Ensures Domestic Acquisition of Critical Materials (July 20, 2026).

¹¹ EXIM, U.S. Strategic Critical Minerals Reserve (Project Vault) fact sheet.

¹² FAR 31.201-2.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.