A draft version of the 2025 Defense Authorization Act has several provisions targeting China-made critical materials.<\/p>\n\n\n\n
Lawmakers are increasingly worried about where defense companies get critical materials, like batteries, for military technologies. However, the industry is also concerned about pressure to buy domestic materials without any extra funding to make that possible.\u00a0<\/p>\n\n\n\n
\u201cThere’s a sense in the industry that the risk sharing, the burden sharing, is getting out of balance. And that creates a couple of problems. Eventually, it creates an expense for the taxpayer,\u201d Eric Fanning, the president and CEO of the Aerospace Industries Association, told reporters Thursday. \u201cEverything is costed out in contracts when you are selling to the government and selling things that don’t have a market value or other customers. And so eventually, everything that requires work effort will find its way into the contract.\u201d\u00a0<\/p>\n\n\n\n
Earlier this week, the House Armed Services Committee released a draft of its version of the must-pass 2025\u00a0defense policy bill<\/a>. The draft highlights concerns about the supply chains for critical minerals and rare-earth elements essential for military technologies but sourced from foreign countries like China.\u00a0<\/p>\n\n\n\n Under \u201citems of special interest,\u201d lawmakers said the Pentagon has \u201cunderutilized\u201d its authority to buy critical materials domestically and requested a briefing on a three-year plan to change that.\u00a0<\/p>\n\n\n\n \u201cThe committee is concerned that this authority remains underutilized, with the Stockpile allowing traders who are sourcing foreign materials, including from China, to bid for and potentially win National Defense Stockpile acquisition contracts,\u201d the panel\u00a0wrote<\/a>. \u201cThe committee expects the National Defense Stockpile Manager to use the authority to develop and conserve reliable sources of critical materials aggressively to ensure that the domestic industrial base is ready to meet emergent demand.\u201d\u00a0<\/p>\n\n\n\n For example, concern about where the U.S. gets materials for batteries has become acute as the military trains to be more dispersed, with troops in areas with little network access. In 2023, the U.S. imported just under $12 billion of lithium-ion batteries from China\u2014up from $2 billion in 2020, according to\u00a0an analysis<\/a>\u00a0from Govini, a decision-science firm.\u00a0<\/p>\n\n\n\n The bill also raised questions about sourcing materials from China for lithium-ion battery technology and neodymium magnets. <\/p>\n\n\n\n If adopted in the final bill, one provision would require the Pentagon to create a plan\u2014from budget to civilian needs\u2014to replenish the National Defense Stockpile for a prolonged national emergency. Additionally, the panel expressed disappointment in the Navy\u2019s \u201cslow\u201d progress in adopting \u201cdurable devices and technologies designed to operate in remote regions with limited network connectivity\u201d as part of its digital supply chain efforts.<\/p>\n\n\n\n Supply chain pressures have been a top concern for defense companies in recent years, ranking third behind complex government procurement and budgeting processes, according to a recent National Defense Industrial Association survey.\u00a0<\/p>\n\n\n\n \u201cThere’s a lot of legitimate reasons why the government is asking for other things from its contractors,\u201d said Fanning, previously secretary of the Army. \u201cThinking that we can just switch on the fly is unrealistic. Sometimes it takes a long time to line up a replacement supplier.\u201d\u00a0<\/p>\n\n\n\n The AIA is pushing Congress for legislation that encourages agreements with trade partners, including high standards and source-of-origin rules for critical minerals and also requires increased funding for domestic critical mineral efforts.<\/p>\n\n\n\n The geopolitical climate and increased demand for U.S. defense tech make worrying about the supply chain and sourcing materials like minerals and metals from \u201crisky places\u201d expected, Fanning said. But defense companies argue that making changes takes time and money.\u00a0\u00a0<\/p>\n\n\n\n \u201cSometimes what we’re trying to get is very small and can’t influence the creation of a new market. So in some cases, if we’re trying to bring something back to the United States, and it’s defense-focused, we need to make sure that there’s an investment upfront\u2014government investment\u2014that public-private partnership to seed those efforts.\u201d
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