{"id":4333,"date":"2025-12-22T04:25:31","date_gmt":"2025-12-22T04:25:31","guid":{"rendered":"https:\/\/sawahsolutions.com\/range\/pentagon-preps-to-enforce-ban-on-companies-with-indirect-ties-to-china\/"},"modified":"2025-12-22T04:25:31","modified_gmt":"2025-12-22T04:25:31","slug":"pentagon-preps-to-enforce-ban-on-companies-with-indirect-ties-to-china","status":"publish","type":"post","link":"https:\/\/sawahsolutions.com\/range\/pentagon-preps-to-enforce-ban-on-companies-with-indirect-ties-to-china\/","title":{"rendered":"Pentagon preps to enforce ban on companies with \u2018indirect\u2019 ties to China"},"content":{"rendered":"
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The Pentagon wants to eliminate Chinese military companies from the defense industry\u2019s supply chains, so it\u2019s preparing to alert contractors next year of any possible ties before a Congress-mandated ban takes effect, a defense policy official said Wednesday.\u00a0<\/p>\n

The Defense Department keeps a public list of banned \u201cChinese-military companies,\u201d which it updates periodically. But avoiding companies with indirect ties can be more challenging than avoiding companies on that list, particularly since some prime contractors don\u2019t know the affiliations of their subcontractors.\u00a0<\/p>\n

\u201cThere’s a lot of firms that are doing business, either knowingly or unknowingly, with firms that are connected to [banned] firms,\u201d Michael Cadenazzi, the Pentagon\u2019s head of industrial base policy, said during an Atlantic Council event on Wednesday. \u201cWe need to illuminate those challenges and those connections. We need to connect with the programs and the firms that are likely affected by this. And we need to [make] a direct effort to go ahead and remove them.\u201d<\/p>\n

Congress prohibited the government from doing business with certain China-based companies directly, as part of section 1260H of the 2021 National Defense Authorization Act, and indirectly, as part of section 805 of the 2024 NDAA. Enforcement for the latter is expected to take full effect by June 30, 2027, according to the bill text.\u00a0<\/p>\n

\u201cPeople need to get ahead of it, because if you’re starting to ask for a waiver starting in [2027], I think that’s going to be a painful process for everyone,\u201d Cadenazzi said.\u00a0<\/p>\n

That banned list is the basis for enforcement, and starting next year it will be consequential, according to a formal defense official.\u00a0<\/p>\n

\u201cBeing on the 1260H list is a flag and it may make a contracting officer look twice as to whether this is a relationship in which they want to engage,\u201d the former official said.\u00a0<\/p>\n

Starting in June 2026, the Pentagon will be banned from directly entering into any new or renewed contracts with companies on that list. And in June 2027, the Defense Department won\u2019t be able to contract\u2014even indirectly\u2014 with end-products or services developed by entities on the 1260H banned list.\u00a0<\/p>\n

That indirect ban has a nuance in that it doesn’t apply to components, but it\u2019s not clear yet how the Pentagon will address that.<\/p>\n

\u201cIn DOD procurement, there’s a difference between a component and an end item that’s ready to be used immediately,\u201d the official said. \u201cThe components of that car\u2014the spark plugs and the gas cap and the engine, perhaps. Those components are not affected by this indirect procurement ban. So, it’ll be very interesting to see how DOD interprets that to give this indirect ban teeth in a way that matters, while at the same time not requiring DOD to go under the hood of the car\u2026which is not usually feasible.\u201d\u00a0<\/p>\n

The plan dovetails with the Pentagon\u2019s inaugural defense industrial strategy and implementation plan published in 2024, which called for assessing supply chain vulnerabilities and onshoring critical production capacity over the next several years.\u00a0<\/p>\n

\u201cDiversifying supply chains through domestic investment will bolster resilience in the most critical supply chains, which currently rely partially on sources outside of the United States,\u201d the implementation plan states. \u201cSecurely producing the defense products, services, and technologies needed now and in the future at sufficient speed, scale, and cost requires a host of measures to mitigate or eliminate critical supply chain vulnerabilities, including single or sole sourcing and supply chains linked to adversarial actions. The most urgent of these measures address supply chain visibility, on-shoring and \u2018friend-shoring,\u2019 sole sourcing, cyber security, and bulwarks against sourcing materials and capital from adversaries.\u201d\u00a0<\/p>\n

Next year, the Pentagon plans to help companies track their subcontractors\u2019 affiliations using \u201cavailable supply chain illumination data\u201d to identify risks, notify partners, and then find \u201ca mechanism by which we can track it over time,\u201d Cadenazzi said.\u00a0<\/p>\n

The move will likely push companies to look for alternative suppliers, which could, in turn, create domestic supply chains and potentially rely on those of allies and partners.\u00a0<\/p>\n

\u201cWe think it’s going to be a great opportunity [for] us to shift investment into domestic firms and increase the amount of demand,\u201d Cadenazzi said. \u201cAnd that’s a key part of the acquisition transformation strategy itself\u2026increasing the demand signal for firms. So, anything we can do to increase demand is a great thing. We think this will be a key enabler of that.\u201d\n\n<\/svg><\/p>\n<\/div>\n