Supply Chain Executive Order Expands Defense Contractors’ Obligations

President Trump’s July 20, 2026, Executive Order 14415, entitled “Securing America’s Defense Supply Chains and Ensuring Domestic Acquisition of Critical Materials” (the EO), strengthens existing prohibitions on contractors acquiring critical materials from certain foreign adversary countries. The EO also directs the Secretary of War to develop and promulgate a regulatory process that would require covered contractors and subcontractors to map their supply chain (including components, parts, equipment, software, and materials) back to the origin of raw materials and implement supply chain due diligence and screening processes to identify and mitigate supply chain risks and restrict prohibited sources.

Current Statutory Acquisition Prohibitions

Pursuant to 10 U.S.C. 4872, as amended by the Fiscal Year 2026 National Defense Authorization Act (NDAA), the Secretary of War (“Secretary of Defense” as stated in the statute) is, among other things, prohibited from procuring “covered materials” from “covered nations.” Under the statute, “covered materials” means 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. The “covered nations” are the Democratic People’s Republic of North Korea, the People’s Republic of China, the Russian Federation, and the Islamic Republic of Iran. These statutory prohibitions have been implemented through the Defense Federal Acquisition Regulation Supplement (DFARS) §225.7018.

The statute and implementing regulations provide exceptions to the general prohibition. DFARS 225.7018-3 explains that the prohibition does not apply to acquisitions below the simplified acquisition threshold or acquisitions outside the United States for use outside the United States. The prohibitions also do not apply to procurement of an end item containing a covered material that is a commercially available off-the-shelf item (COTS), an electronic device, or a recycled neodymium-iron-boron (NdFeB) magnet (under certain conditions). The prohibition also does not apply to “non-available” items – those which cannot be procured domestically in the required form at a reasonable price. Additionally, the statute allows the Secretary to waive the prohibition for the procurement of a specific end item when necessary for U.S. national security interests.

EO Restriction on Waiver Authority

The EO strengthens the existing prohibition at 10 U.S.C. 4872 by curtailing the Secretary’s waiver authority. The EO directs the Secretary to cease, beginning January 1, 2027, issuing nonavailability waivers unless the prime contractor or subcontractor provides a formal mitigation plan that demonstrates the contractor’s efforts to source from non-adversary supply chains. The mitigation plan must:

• Identify the country from which the covered material is sourced;
• Document evidence of exhaustive efforts made to acquire compliant covered material or demonstrates that compliant covered material was not available at the time of the acquisition of the noncompliant covered material;
• Describe the steps to be taken by the prime contractor or subcontractor to remove the noncompliant covered material from its supply chains; and
• Establish a strict projected timeline for complete implementation of the mitigation plan.

The EO further emphasizes that a contractor’s failure to qualify a domestic supply source of the covered material does not constitute non-availability justifying a waiver. It also directs the Secretary to take enforcement actions in the event of misrepresentations in mitigation plans.

Supply Chain Mapping and Sourcing Due Diligence

The EO additionally directs the Secretary of War, within 180 days of the date of the order, to develop policy and implementation guidelines for contractors that support U.S. national security. The guidelines will require contractors at any tier that provide items or services essential to contract deliverables will be required to map their supply chains, including by:

• Providing the Department with indentured Bills of Materials that traces all components, parts, equipment, software, and materials back to the origin of raw materials in their supply chains;
• Establishing procedures to vet suppliers and subcontractors for supply chain risks and challenges, such as those posed by financial uncertainty, foreign ownership/control/influence, and reliance on sole-sourcing; and
• Notify the Department of War (DOW) of identified supply chain risks, submit a mitigation plan to DOW, and implement and track mitigation actions to reduce the likelihood or impact of financial, foreign ownership/control/influence, or manufacturing and supply risks identified in the contractor’s supply chain assessments and vetting processes.

Qualification of Domestic Sources

The EO further requires the Secretary to take regulatory action to identify all existing acquisitions by the DOW that relate to national security and require that contractors who rely on supply chains that include material or components supplied by an unreliable foreign supplier, as soon as possible, consistent with law, safety, mission requirements, and existing contract requirements, qualify and utilize an alternative source for the material or components supplied by the unreliable foreign supplier, except in cases where no such alternative source is available, subject to potential suspension or termination of such contract for failure to take action on the DOW directive.

Further, the EO directs the Secretary, within 90 days of the date of the order, to, “develop a strategy to accelerate testing and qualification of new sources and materials.” The strategy is required to include approaches such as developing new technology, testing procedures, methodologies for qualification, and resources, alongside identifying any existing regulations that impede rapid testing and qualification.

What It Means for Contractors

As a part of a broader policy imperative to end America’s import dependence on foreign adversaries for critical materials, this EO serves as a mandate to more rapidly shift to domestic and non-adversary supply sources. Contractors should not expect to receive nonavailability waivers unless they can demonstrate that they have taken “exhaustive efforts” to obtain a compliant covered material and have a plan to undertake the removal of the noncompliant material within a strict timeline. This is likely to increase the costs for products that use covered material and may potentially limit the pool of companies that pursue contracts or subcontracts with the Pentagon.

The EO also seeks to give the Pentagon better visibility into supply chain risks by requiring contractors and subcontractors that support U.S. national security-related functions to fully trace their supply chains and report them to the Pentagon. This could impose a significant burden on contractors and subcontractors and would require them to provide the Department of War with supply chain information that is not normally required and that companies may not regularly track. When issuing guidance, the Secretary of War will determine which contracts “support, implicate, or relate to United States national security,” so it remains to be seen how broadly this supply chain mapping requirement will reach. If broadly defined, even commercial companies that have third- or fourth-tier subcontracts could be required to provide DOW with a bill of materials that traces components, equipment, and software to the raw material level. In implementing the requirements, the Secretary is required to ensure that small businesses, nontraditional defense companies, and new entrant firms are not unduly burdened, although they must still comply with the intent of the requirement. In addition, the EO appears to also provide the DOW authority to suspend or terminate contacts for failure to comply with DOW requirements to shift their supply chains away from parties deemed to be unreliable foreign suppliers due to foreign ownership, control or influence of a covered nation. Contractors of any type and at all levels should pay close attention to the supply chain mapping requirements as they are issued.