The Federal Acquisition Regulatory (FAR) Council published a proposed rule on Feb. 17, 2026, to implement Section 5949 of the FY 2023 National Defense Authorization Act (NDAA). The proposal would amend the FAR to prohibit federal agencies from procuring products or services that include certain covered semiconductor products or services sourced from entities identified by statute or subsequently designated by the U.S. Government.
Background
Section 5949 of the NDAA prohibits federal agencies from acquiring products or services containing “covered semiconductor products” provided by specific entities connected to a foreign country of concern. The FAR Council’s proposal codifies these statutory prohibitions and clarifies contractor obligations for compliance in federal procurement.
Key Entities Covered
The statute specifically identifies the following entities, including their subsidiaries, affiliates, and successors, as suppliers of covered semiconductor products:
- Semiconductors Manufacturing International Corporation (SMIC)
- ChangXin Memory Technologies (CXMT)
- Yangtze Memory Technologies Corporation (YMTC)
The FAR rule also allows for additional entities to be added in the future if designated by the U.S. Government as connected to a foreign country of concern.
Key Provisions of the Proposed Rule
- Covered Items: Applies to electronic products or services that include covered semiconductor products from the above entities or any future designated entities.
- Scope: Prohibitions apply broadly, including commercially available off-the-shelf (COTS) items and purchases below the micro-purchase threshold.
- Certification and Reasonable Inquiry: Contractors must conduct a reasonable inquiry into their products and supply chains to identify covered semiconductor content and certify compliance or disclose any inclusion of covered semiconductors.
- Reporting Requirements: Contractors may be required to report any covered semiconductor products identified during contract performance, potentially within 72 hours of discovery.
- Safe Harbor: Safe harbor provisions are available for contractors that make timely and accurate disclosures.
Timelines
- Proposed Rule Publication: Feb. 17, 2026 (Federal Register, FR Doc. 2026-03065)
- Comment Period Ends: April 20, 2026
- Statutory Compliance Deadline: Dec. 23, 2027
Implications for Contractors
The proposed FAR rule signals heightened scrutiny of federal contractors’ supply chains, particularly those providing electronic products or services. Contractors may need to:
- Map semiconductor supply chains and identify third-party components.
- Establish protocols for reasonable inquiry and supplier verification.
- Prepare for certification and disclosure obligations pre-award.
- Consider strategic sourcing alternatives to avoid covered semiconductor products.
