Analysis_Foreign Suppliers

China's export restrictions on rare earth elements, crucial for avionics and other critical components, have raised concerns about potential impacts on the F-47 project. The US reportedly relies on China for some sole-sourced rare earth elements used in avionics, which could create vulnerabilities in the supply chain.

1. Problem:

Excerpt from GAO report dated: JULY 2025

What GAO Found

The Department of Defense (DOD) considers reliance on foreign sources for items it procures a national security risk. DOD estimates that over 200,000 suppliers help produce advanced weapon systems and noncombat goods. The primary procurement database for the federal government, however, provides little visibility into where these goods are manufactured or whether materials and parts suppliers are domestic or foreign. DOD is pursuing several supply chain visibility efforts designed to help improve its ability to identify risks of what it refers to as “foreign dependency.” DOD has made progress gathering supplier information for major subsystems and components. However, these efforts are uncoordinated and limited in scope and provide little insight into the vast majority of suppliers, including those that provide raw materials and parts.

DOD identified actions it can take to improve its ability to identify and mitigate foreign dependency issues, including:

• establishing an office to integrate efforts across DOD; and

• implementing leading commercial practices for supply chain visibility, such as focusing visibility efforts on high-priority programs.

However, DOD has yet to identify resources, priorities, and time frames for completing the integration. Additionally, it has not identified the organization responsible for implementing the leading commercial practices. Without doing so, DOD will be less able to identify and address foreign dependency risks. One untested approach that DOD officials stated could give DOD more visibility into foreign dependency risks is to contractually require suppliers to provide the information. While some DOD officials assert the information is readily available, others stated this approach may be too costly or that suppliers may not be willing to provide information. Unless DOD tests the costs and challenges of requiring suppliers to provide foreign dependency information, it could be missing an opportunity to address a mounting challenge to the security of its supply chains.

2. Analysis:

It’s important to front load the understanding that DOD can’t realistically eliminate all foreign dependencies, but it can prioritize critical technologies and materials (rare earths, semiconductors, batteries, energetic) for on shoring, while improving visibility into lower-tier suppliers. A mix of policy, incentives, and technology adoption is the most effective path forward. The report outlines some capabilities that we are reaching critical thresholds with, such as titanium molding, for which we have one primary source of in North America. The remedial measures should be broken down into strategic, operational and tactical actions in order to best parse and assign for action by proponent. The recommendations should be Specific, Measurable, Actionable, Relevant and Time oriented.

3. Recommendations:

Strategic-Level Actions

• Develop a National Industrial Base Strategy
  Align DOD, Department of Commerce, and Department of Energy efforts to ensure critical defense supply chains are mapped, monitored, and secured.

• Expand “Buy American” and Defense Production Act (DPA) Authorities
  Strengthen domestic sourcing requirements and use DPA Title III to directly fund U.S.-based production of critical materials (e.g., rare earth elements, semiconductors, energetics).

• Allied and Partner Sourcing Agreements
  Establish trusted supplier networks with close allies (e.g., NATO, Australia, Japan) to reduce reliance on adversarial nations while maintaining access to global supply capacity.

Operational-Level Actions

• Domestic Manufacturing Incentives
  Provide tax credits, grants, or low-interest loans for U.S. firms that onshore critical production (similar to CHIPS Act incentives for semiconductors).

• Critical Material Stockpiles
  Expand and modernize the National Defense Stockpile to include rare earths, microelectronics, specialty metals, and pharmaceuticals.

• Dual-Use Technology Development
  Partner with commercial industry to co-develop technologies (e.g., 3D printing, advanced composites, AI-driven manufacturing) that reduce dependence on foreign suppliers.

• Supplier Diversification
  Ensure no critical subsystem relies on a single supplier or geography by qualifying multiple domestic and allied suppliers.

Tactical-Level Actions

• Enhanced Supplier Vetting
  Require more detailed disclosure of sub-tier suppliers in contracts, coupled with data analytics to flag hidden foreign dependencies.

• Cybersecurity Standards for Suppliers
  Enforce strict cybersecurity compliance (CMMC and beyond) to prevent adversary influence over the supply chain.

• Test Domestic Alternatives Early
  Fund pilot programs to evaluate U.S.-based or allied substitutes for commonly imported raw materials and electronic components.

• Leverage Advanced Manufacturing
  Use additive manufacturing (3D printing) and digital twin modeling to locally produce spare parts, reducing reliance on overseas suppliers.

4. Other Approaches

Look at industry best practices for supply chain optimization, such as “blockchain for supply chain transparency”, this would provide immutable records for material origin and supplier sourcing. Curate a DOD supplier marketplace where allied firms can register certified capabilities for defense contracts and the registration provides a built in vetting process. Then, once an allied vendor is certified, maintain the relationship through long term contracts, with the provision that no sub contracts to other nation vendors be allowed.

More to follow, this is an initial analysis_21AUG25