Overview
On July 20, 2026, President Trump issued Executive Order 14415 (the “Order”), directing the Department of War (“DoW”) to strengthen defense supply chains and increase domestic and allied sourcing. The Order has three principal components relating to DoW supply chains: (1) restricting available waivers under a prohibition on procuring certain critical metals and rare-earth magnets form countries of concern; (2) requiring critical supply‑chain mapping and supplier due diligence; and (3) requiring qualification of alternative sources of supply.
Only the first component is confined to existing requirements for critical metals and rare-earth magnets under 10 U.S.C. § 4872. The other provisions could reach contractors, subcontractors, and items of supply supporting a much broader range of national security-related acquisitions.
Restrictions on Waivers Under the Existing Regime for Critical Metals and Rare-Earth Magnets
Existing Statutory Prohibitions. Under 10 U.S.C. § 4872(a)(1), DoW is generally prohibited from procuring a “covered material” melted or produced in a “covered nation,” or included in an end item manufactured there. Section 4872 is distinct from, but partly overlaps with, the traditional specialty-metals rules in 10 U.S.C. § 4863.
Covered materials currently include samarium-cobalt and neodymium-iron-boron magnets; specified forms of tungsten and tantalum; and molybdenum. Gallium and germanium become subject to the restriction on December 18, 2027. Covered nations are North Korea, China, Russia, and Iran. The restriction applies to prime contracts and subcontracts at any tier, and is implemented principally through DFARS 225.7018 and DFARS 252.225-7052.
The statute and DFARS provide exceptions for certain low-value and overseas acquisitions, and certain end items that are commercially available off-the-shelf or “COTS” items, electronic devices, and manufactured from recycled materials, with precise rules applicable to each of these exceptions. They also authorize a nonavailability waiver when compliant material cannot be obtained when needed at a reasonable price, and a separate national-security waiver.
Independent of the new Order, the sourcing restriction was already scheduled to expand on January 1, 2027, from covered material “melted or produced” in a covered nation to material “mined, refined, separated, melted, or produced” there. The Order will therefore make waivers more difficult as that upstream restriction takes effect.
New waiver restrictions in the Order. Under the new Order, beginning January 1, 2027, a nonavailability waiver under the critical metals and rare-earth magnets regime generally will require a DoW-approved mitigation plan that:
- identifies the noncompliant source that will be used;
- documents “exhaustive efforts” to obtain compliant material or establishes nonavailability;
- explains how the contractor will remove the noncompliant material; and
- provides a strict implementation timeline.
Failure to qualify a domestic source will not itself establish nonavailability unless a contractor shows active, adequately funded, and ongoing qualification efforts. National-security waivers generally will require the same plan or escalation through a request to the National Security Advisor. The Order directs DoW to pursue contractual remedies—and permits referral to the Department of Justice—for fraud, deliberate misstatements, or knowing or willful failure to implement an approved plan.
Additionally, the Order directs DoW to issue regulations that prohibit use of a Section 4872 covered material supplied by an “unreliable foreign supplier.” This particular prohibition remains tied to Section 4872’s product list, but uses an ownership-based test: an unreliable foreign supplier is a person subject to foreign ownership, control, or influence (“FOCI”) from North Korea, China, Russia, Iran, or another nation designated by the Secretary.
The Order also directs review of the electronic-device exception for end items described above. Although the Order preserves sourcing through Project Vault and certain U.S.-financed overseas projects, it does not create an express Section 4872 safe harbor for material obtained from those sources.
Critical Supply-Chain Mapping and Supplier Due Diligence
Within 180 days, DoW must develop guidance requiring all prime contractors and subcontractors at any tier to map “critical supply chains” for acquisitions that the Secretary determines “support, implicate, or relate to” U.S. national security. Regulations are due within 90 days after the guidance is completed.
Crucially, this requirement is not limited to critical metals and rare-earth magnets. A critical supply chain includes all tiers providing goods, materials, systems, software, or services essential to contract deliverables, mission assurance, security, or resilience. The regulations must require contractors to:
- submit an “indentured Bill of Materials” tracing components, equipment, software, and materials to raw-material origin;
- maintain written procedures for vetting suppliers for FOCI, and manufacturing and supply risks;
- mitigate and track identified supply chain risks;
- notify DoW of significant risks within 15 days after completing vetting;
- submit a confidential corrective-action plan within 45 days; and
- provide a closeout report after completing corrective action.
Notably, the Order’s FOCI definition tracks 32 C.F.R. § 117.11(a)(1), but is not limited to risks involving classified information or contracts. FOCI screening will, therefore, likely extend beyond the cleared-contractor context as is contemplated more generally by another pending proposed rule.
Qualification of Alternative Sources
Within 180 days, DoW must initiate regulatory action to identify existing national-security-related acquisitions and require contractors using “material or components” supplied by an unreliable foreign supplier (subject to FOCI of the four nations identified above or others designated by the Secretary) to qualify and use an available alternative as soon as possible, consistent with law, safety, mission needs, and existing contract requirements.
This provision is broader than the critical metals and rare-earth magnets currently covered by Section 4872 because it refers to any “material or components” in covered acquisitions identify by the DoW––not only “covered material.” Failure to qualify an alternative may support suspension or termination of task orders, nonexercise of options, or contract termination. Within 90 days, DoW also must develop a strategy to accelerate testing and qualification and identify regulations that impede approval of new sources.
Outstanding Issues
The Order’s reach will depend heavily on forthcoming guidance and regulations. Open questions include which acquisitions DoW will treat as related to national security; whether thresholds or COTS and commercial-item accommodations will apply to the mapping rules; what constitutes raw-material “origin,” particularly for software and complex products; how contractors must evaluate FOCI; and how the requirements will be applied to existing contracts. The direction to avoid unduly burdening small businesses, nontraditional defense companies, and new entrants is not an exemption per se, but how this consideration is ultimately implemented by DoW in forthcoming regulations and practice warrants watching closely.
The Order also raises data and confidentiality concerns. Contractors may not possess raw-material information for lower-tier commercial components, and obtaining it may require new supplier certifications, audit rights, and flow-downs. The Order also contemplates disclosure of proprietary Bill of Materials data to government support contractors, subject to protections against unauthorized use or disclosure. Each disclosure to the Government based on third-party data sources also materially increases the risk of false claims or statement liability.
Finally, although Section 4 is titled “Qualification of Domestic Sources,” its operative language requires an “alternative source” and does not expressly require a domestic or allied replacement. The scope of permissible non-domestic sources that DoW ultimately allows for will be important to determining how stringent the requirements in that section ultimately prove to be.
What This Means For Contractors
Contractors should consider four steps now:
- Identify critical metal and rare-earth magnet exposure under Section 4872. Inventory covered materials, waivers, and products affected by the 2027 sourcing changes.
- Assess data gaps. Determine how far existing systems trace components to raw-material origin and identify missing lower-tier ownership and sourcing information.
- Review supplier agreements. Evaluate information, audit, flow-down, cure, replacement, and termination rights, as well as pricing and schedule impacts.
- Document qualification efforts. Preserve evidence of technical work, funding, supplier outreach, and other efforts needed to show “exhaustive efforts” or support a mitigation plan.
Contractors should treat waiver submissions and supply-chain representations as potential enforcement documents. Once implemented through regulations and contract clauses, inaccurate or unsupported representations could lead to contractual remedies, termination, referrals, and potential legal exposure for false statements or claims.
