As the United States seeks to rebuild its defense industrial base, Washington is scrambling to understand an industrial ecosystem that it no longer controls, nor largely understands. China has been able to achieve strategic advantage against the United States through the targeted application of export controls and licensing requirements on specific materials at specific supply chain nodes. U.S. responses, by contrast, have largely been broader in scope and shallower in effect. It is as though China is striking the supply chain with precision-guided munitions while the United States is still using dumb bombs.
Maintaining weapons stockpiles and a resilient force, let alone operationalizing surge capacity, will require a better understanding of where critical materials originate and how they can be scaled. The main driver of supply chain tracking within the government is the Department of Defense, which is the agency with the largest acquisition budget and a mandate from Congress to delve into its supply chains.
It has been said that “nobody wants a responsibly mined missile,” but the department is likely to find that using the expertise and experience of existing organizations — broad-based ones like the Responsible Business Alliance, industry-specific ones such as the Initiative for Responsible Mining Assurance or the Textile Exchange, and even government-run ones such as the Kimberley Process — is a good approach to implementing supply chain tracking in an affordable, efficient, and workable manner. Even when the goals of these organizations differ from U.S. national security goals, the methods they have developed to achieve measures of transparency, resiliency, and buy-in in complex, real-world supply chains will be important to informing a workable system for national security requirements.
The United States is Adapting
China’s internal incentives in supplying the United States with critical minerals have changed as China has further industrialized, and the Chinese government has been able to change its policies rapidly. Meanwhile, U.S. domestic incentives, statutes, and policies have been slower to change.
From the 1970s through the 1990s, the overriding incentive for Chinese policymakers was to sell critical minerals to the West in order to build market share and drive onshoring of mineral processing and downstream technologies. Chinese industrial policy then changed to capture more downstream value-add manufacturing, reorienting around maintaining and growing its downstream capabilities.
On the American side, the industrial incentive structure from the 1990s until roughly the immediate post-Covid 19 period was informed by principles such as lean manufacturing that emphasized low inventories and a priority on low-cost and responsive, not resilient, supply chains. In the commercial sector, this was sometimes countered by activist networks and public relations concerns that drove efforts to build alternative supply chains. For companies that had the Pentagon as their major customer, however, activist efforts were less effective. Under pressure from the wars in Iraq and Afghanistan, the Pentagon continued driving for low-cost, market-first solutions even after China had begun demonstrating its capability to interrupt supply chains for rare earths for geopolitical reasons.
In the past few years, the U.S. government has accelerated efforts to identify dozens of key national security supply chains, with rare earths being the most visible. Mostly driven by Congress, these supply chain tracking initiatives are an overlapping mess of reports and requirements that may improve national security but will take time and effort to implement.
Previous efforts, such as the Berry Amendment and 10 U.S.C. 4872, required supply chain tracing as a byproduct of source restrictions. The current round of U.S. government efforts began with Section 857 of the National Defense Authorization Act for Fiscal Year 2023, a provision that required any contractor delivering any item containing a rare-earth permanent magnet to the Department of Defense to disclose “the provenance of the magnet.” Any contractor unable to disclose such provenance had 180 days after delivery to implement a supply chain tracking system. The section provided a standard of “commercially reasonable inquiry” and maintained visibility into dual-use supply chains.
Section 856 of the Fiscal Year 2024 National Defense Authorization Act established a pilot program to map the whole supply chain for five selected weapon systems. Section 849 of the FY2025 National Defense Authorization Act provided for the incentivization of “each contractor of the Department of Defense to assess and monitor the entire supply chain of goods and services provided to the department,” with Section 833 of the FY2026 National Defense Authorization Act further expanding the incentives for “supply chain illumination.”
Section 849 seems to reach the outer limits of what is achievable within the Department of Defense supply chain, but despite clear congressional authority, nothing has successfully made it through the regulatory process. There remain serious questions about implementation, such as rights to data, how to require compliance from non-defense and foreign suppliers, and even what a commercially reasonable effort entails. The House used Section 1808 of its version of this year’s defense authorization act to direct the Pentagon to report on the progress it has made in reviewing some 30 different supply chain categories, including recommendations for action.
The 4872 issue highlights the need for proactive efforts by the Pentagon to engage with multiple levels of the supply chain and drive changes in contractor behavior. 4872 was first passed in 2018, significantly modified in 2021, and then given a final rulemaking in 2024, yet some contractors have consistently agitated for waivers and delays in implementation rather than conducting the due diligence necessary to achieve compliance with the law before Jan. 1, 2027. Strong leadership will be needed to implement future supply chain traceability initiatives, as even Deputy Secretary of Defense Steve Feinberg has encountered.
Where Previous Efforts Come In
Building a workable regulatory regime for a topic as wide as “supply chain security” is a difficult proposition, even in a monopsony environment. The most prudent and efficient method would be building on the backs of efforts made by organizations other than the U.S. government over the past two decades. Though these efforts had different, non-national security objectives, they generated a mass of literature and discussions that are useful to inform any supply chain tracking regime by identifying common problems and conflicts.
One of the major criticisms of humanitarian supply chain tracking efforts is that they are naïve or ineffective at responding to political or geopolitical changes. But the alternative view is that the narrow focus of these efforts has been a clever approach to build wider acceptance of, and integration into, their frameworks. The Kimberley Process had to be a government-oriented approach to get buy-in from Western African nation-states in the wake of the civil wars of the late 1990s and early 2000s. A noted downside of this approach was that the presence of Russia, a major diamond exporter, as a nation-state participant effectively shielded it from sanction under the Kimberley Process after the 2022 invasion of Ukraine. However, the ability of affected stakeholders to then set up a separate process within a couple of years to address that oversight should be seen as a strength of the overall approach.
Any new national security supply chain initiative will have to account for the limits and pushbacks that are going to occur, especially in the upstream reaches of the supply chain. U.S.-based defense contractors and foreign miners will differ in the type and quantity of information that they will be willing to share. U.S. national security goals may not always align with the goals of miners and processors. For example, the Uyghur Forced Labor Prevention Act generated immediate action among companies doing business in the United States, but it also led other companies, especially in China, to leave the supply chain altogether.
China is Responding
On Aug. 5, 2026, following U.S. bans on 43 Chinese entities for violations of the Uyghur protection law, China retaliated by effectively banning domestic entities from cooperating with six specific U.S. supply chain tracking organizations. The six, most notably the Responsible Business Alliance, had been at the tip of the spear in building awareness of which companies in China were operating in violation of the Uyghur protection law.
The ban built upon several years of complementary internal regulations concerning supply chain efforts that maintain China’s production monopolies, while giving the Chinese government unparalleled information about how critical minerals are produced and traded. These imbalances in production and information allow the Chinese government to more nimbly target international trade policies and acquire intelligence for its own national security and business advantages. For instance, the export controls imposed in April 2025 on rare earths and other critical minerals took the form of intrusive licensing requirements rather than outright bans. Consumers of Chinese-made critical minerals have been forced to hand over significant amounts of proprietary information, ostensibly so that China can verify the end-use applications. In practice, this appears to be combined with data the Chinese government obtains from domestic and overseas producers to build actionable intelligence for commercial and geopolitical advantage. And by being a license rather than a ban, China can also see which foreign companies are willing to offer information in exchange for continued access to materials.
A Workable Approach
The Chinese government’s approach only works because of the dominant, near-monopoly position that China occupies in supplying many critical materials, from mined products to industrial components. The United States, by contrast, will not be able to demand compliance from producers and consumers in the same fashion outside of the downstream segments of national security supply chains. If it wishes to get more buy-in to an alternative system, one that would encourage participation from nontraditional and small and medium enterprises, it will have to build a much more accessible and friendly supply chain tracking system that is flexible enough to accommodate the interests of companies in different industrial sectors, operating at different nodes of the supply chain, based in different geographic locations. That points to an approach that is simple in requirements and agile in implementation.
Building flexible frameworks has not traditionally been a strength of the Department of Defense, but by strategically working with experienced organizations outside of the U.S. national security ecosystem, the United States could build a supply chain tracking system that is more attractive for suppliers and consumers to use than the restrictive Chinese licensing system.
Flexibility does not mean having multiple offices within the Pentagon to compete with each other. Recently, there have been efforts to build supply chain cells in program offices and even in major commands. That approach likely leads to further fragmentation of understanding across the defense enterprise and multiplication of requirements for suppliers. The 2021 decision to elevate industrial base policy to an assistant secretary-level provided a senior-level office to coordinate the necessary efforts. And Feinberg has made security of supply a headline issue, not least through the major equity and debt deals that the Pentagon has instituted in the last 18 months. But investments are insufficient on their own to stabilize a supply chain: Additional transparency and predictable supply and demand dynamics will be needed. The existing industrial base policy framework is capable of providing both the government and its defense contractors with much of that information, but it demands full staffing and funding.
Second, the Defense Department should supplement its efforts through the use of outside auditors. Many companies, especially overseas, are going to be reluctant to hand data over to a U.S. government organization. Allowing a reputable auditor to handle the data and certify basic information about sources and consumers at various nodes of the supply chain meets minimum transparency requirements and mitigates burdens on the U.S. government and prime contractors.
Finally, the resulting system needs to be simple enough to be used by thousands of stakeholders. The Pentagon cannot build a supply chain model based on requirements the way it does for a next-generation weapon system, where every office gets to add its own set of requirements. End goals need to be tight and focused on defense priorities, while access to tools and methods should be diverse and expansive. That is, defense supply chain goals should be limited to accurate identification of which companies handle critical materials, who oversees and owns those companies, and basic questions of whether supply chain activities comply with local and international standards for human and environmental rights. They should not expand to cover all of the environmental, social, and governance goals of international stakeholders. At the same time, the Pentagon should incorporate many different tools — from onsite shipment fingerprinting to real-time specialty software to in-person audits — and allow the makers of those tools to demonstrate that they can achieve basic goals.
The United States retains enough economic power that it likely could continue “dumb bombing” the supply chain by trying to divide global supply networks into neatly intelligible, defense-unique supply chains that provide near-perfect transparency to U.S. policymakers. But as the world continues to evolve, that leads to fewer, more fragile sources of supply and skyrocketing costs as the more commercially competitive producers will seek out more user-friendly supply chain paradigms.
Rather than “dumb,” legacy approaches to supply chain transparency, the Pentagon should work with experienced supply chain experts to develop a framework that is flexible, competitive, and cost-effective. The expertise is out there, though largely located in non-defense enterprises: The U.S. military should be humble enough to listen.
Ryan Caldwell is the principal of De Stijl Consulting, where he provides advice on critical mineral supply chains to U.S. and allied companies. He previously worked for 15 years as a lobbyist at J.A. Green & Company, where he focused on supply chain security initiatives such as 10 U.S.C. §§4872-4873. He is a graduate of the University of Texas and Duke University School of Law.
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Image: Joshua Shinn via DVIDS.