FAR proposed rule would prohibit certain semiconductor products and services: Key points

On February 17, 2026, the Federal Acquisition Regulatory Council (FAR Council) issued a Notice of Proposed Rulemaking (FR Doc. 2026 03065) to amend the Federal Acquisition Regulation (FAR) to implement portions of Section 5949 of the FY 2023 National Defense Authorization Act (NDAA). The rule would restrict the United States government’s acquisition of certain semiconductor-related products and services on national security grounds.

Comments in response to the proposed rule may be submitted to the Federal eRulemaking Portal by searching for “FAR Case 2023-008.” Select the link “Comment Now” that corresponds with “FAR Case 2023-008.” The comment deadline for this proposed rule is April 20, 2026.

Background

Effective December 23, 2027, executive agencies would be prohibited from procuring or obtaining:

• Electronic products or electronic services that include covered semiconductor products or services and
  
  
• Electronic products for use in critical systems, if they rely on electronics that include covered semiconductors.

Products and services acquired before the effective date are grandfathered and may continue to be used for their full lifecycle.

Covered semiconductors

The rule reflects congressional concern about semiconductors linked to China’s military civil fusion strategy, particularly those designed, produced, or provided by entities such as:

• ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies Corp. (YMTC), as well as their subsidiaries, affiliates, or other entities determined to pose national security risks, or
  
  
• Any semiconductor, semiconductor product, or semiconductor service that is produced or provided by an entity linked to a foreign government of concern. An entity qualifies if the Secretary of Defense or Secretary of Commerce, in consultation with US intelligence or law enforcement leadership, determines that it is owned, controlled by, or otherwise connected to such a government. The determination must be formally published in the Federal Register to take effect.

Contractor requirements

The proposed rule implementing Section 5949 would introduce new FAR provisions and clauses requiring contractors to:

• Conduct a “reasonable inquiry” into their supply chains,
  
  
• Certify at the time of offer that covered semiconductors are not included,
  
  
• Disclose known non-compliant semiconductors and associated risks, and
  
  
• Notify contracting officers within 72 hours if covered semiconductors are discovered during performance.

The proposed rule provides safe harbor protections from civil liability and responsibility determinations for contractors that make timely, good faith disclosures and remediation efforts.

The Section 1260H list and other requirements

This FAR proposed rule comes on the heels of a briefly posted update to the 1260H list and two other supply chain requirements in the NDAA.

Specifically, Section 853 of the FY2025 NDAA prohibits the Department of Defense (DOD) from procuring semiconductors, semiconductor manufacturing equipment, and design tools from companies that knowingly supply such products to Chinese technology company Huawei and its affiliates or subsidiaries. It was implemented via Class Deviation 2025-O0007. DOD is currently drafting a proposed Defense Federal Acquisition Regulation Supplement (DFARS) rule to implement this requirement.

Moreover, Section 1260H of the FY 2021 NDAA requires DOD to identify and publish annually a list of “Chinese military companies” operating directly or indirectly in the US and linked to China’s military civil fusion strategy. Inclusion does not automatically impose sanctions, but it increasingly serves as a trigger for procurement restrictions and heightened regulatory scrutiny. The 1260H list for 2025 is available here.

Section 805 of the FY2024 NDAA prohibits, subject to certain exceptions, the DOD from:

• Entering into contracts for the procurement of goods and services from entities on the 1260H list (effective June 30, 2026) and
  
  
• Contracting for goods and services that include goods or services produced or developed by entities on the 1260H list or subject to the control of such entities (effective June 30, 2027).

The DOD is currently drafting a proposed DFARS rule to implement this requirement.

On February 13, 2026, DOD briefly posted an updated 1260H list to the Federal Register, adding several high profile Chinese firms. The same update removed several semiconductor firms, notably YMTC and CXMT.

Within hours, DOD withdrew the updated list from the Federal Register without public explanation, citing only an agency request for withdrawal. Pentagon officials have declined to comment on the reason or timing for republication.

The abrupt posting and withdrawal underscore regulatory uncertainty for contractors, particularly those with exposure to Chinese semiconductor supply chains.

Conclusion

Taken together, the proposed rule and the evolving 1260H list may signal a tightening US acquisition posture. While the FAR proposed rule focuses on components within products (in this instance, covered semiconductors), the 1260H list focuses on the companies supplying technology to the US market. Both frameworks reinforce supply chain due diligence expectations and may increase pressure on contractors to map, document, and potentially redesign products in advance of 2027.

If you have any questions navigating these issues, please contact any of the authors.