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FAR Council Proposes Rule Restricting Certain Semiconductor Products and Services

March 12, 2026

The Federal Acquisition Regulatory (FAR) Council published a proposed rule on Feb. 17, 2026, to implement Section 5949 of the FY 2023 National Defense Authorization Act (NDAA). The proposal would amend the FAR to prohibit federal agencies from procuring products or services that include certain covered semiconductor products or services sourced from entities identified by statute or subsequently designated by the U.S. Government.

Background

Section 5949 of the NDAA prohibits federal agencies from acquiring products or services containing “covered semiconductor products” provided by specific entities connected to a foreign country of concern. The FAR Council’s proposal codifies these statutory prohibitions and clarifies contractor obligations for compliance in federal procurement.

Key Entities Covered

The statute specifically identifies the following entities, including their subsidiaries, affiliates, and successors, as suppliers of covered semiconductor products:

  • Semiconductors Manufacturing International Corporation (SMIC)
  • ChangXin Memory Technologies (CXMT)
  • Yangtze Memory Technologies Corporation (YMTC)

The FAR rule also allows for additional entities to be added in the future if designated by the U.S. Government as connected to a foreign country of concern.

Key Provisions of the Proposed Rule

  • Covered Items: Applies to electronic products or services that include covered semiconductor products from the above entities or any future designated entities.
  • Scope: Prohibitions apply broadly, including commercially available off-the-shelf (COTS) items and purchases below the micro-purchase threshold.
  • Certification and Reasonable Inquiry: Contractors must conduct a reasonable inquiry into their products and supply chains to identify covered semiconductor content and certify compliance or disclose any inclusion of covered semiconductors.
  • Reporting Requirements: Contractors may be required to report any covered semiconductor products identified during contract performance, potentially within 72 hours of discovery.
  • Safe Harbor: Safe harbor provisions are available for contractors that make timely and accurate disclosures.

Timelines

  • Proposed Rule Publication: Feb. 17, 2026 (Federal Register, FR Doc. 2026-03065)
  • Comment Period Ends: April 20, 2026
  • Statutory Compliance Deadline: Dec. 23, 2027

Implications for Contractors

The proposed FAR rule signals heightened scrutiny of federal contractors’ supply chains, particularly those providing electronic products or services. Contractors may need to:

  1. Map semiconductor supply chains and identify third-party components.
  2. Establish protocols for reasonable inquiry and supplier verification.
  3. Prepare for certification and disclosure obligations pre-award.
  4. Consider strategic sourcing alternatives to avoid covered semiconductor products.

Contact Clark Hill

If you have questions regarding the content of this alert, or need assistance drafting and submitting a comment to this proposed rule, please contact one of the authors from our Clark Hill Government Contracts and Regulations Team:

Contributors: Lauren Tesler, Law Clerk

Click here to find these and other Government Contracts and Regulations Attorneys.

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This publication is intended for general informational purposes only and does not constitute legal advice or a solicitation to provide legal services. The information in this publication is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional legal counsel. The views and opinions expressed herein represent those of the individual author only and are not necessarily the views of Clark Hill PLC. Although we attempt to ensure that postings on our website are complete, accurate, and up to date, we assume no responsibility for their completeness, accuracy, or timeliness.

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