Made in the USA: Defense companies tense as Congress pressures them to buy domestic

Lawmakers are increasingly worried about where defense companies get critical materials, like batteries, for military technologies. But industry is also concerned about pressure to buy domestic materials—without any extra funding to make that possible. 

“There's a sense in industry that the risk sharing, the burden sharing, is getting out of balance a little bit. And that creates a couple of problems, eventually, it creates an expense for the taxpayer,” Eric Fanning, the president and CEO of the Aerospace Industries Association, told reporters Thursday. “Everything is costed out in contracts when you are selling to the government, when you're 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.” 

Earlier this week, the House Armed Services Committee released a draft of its version of the must-pass 2025 defense policy bill, which highlights concerns about the supply chains for critical minerals and rare-earth elements that are essential for military technologies but sourced from foreign countries, like China. 

Under “items of special interest,” lawmakers said the Pentagon has “underutilized” its authority to buy critical materials domestically, and requested a briefing on a three-year plan to change that. 

“The 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,” the panel wrote. “The committee expects the National Defense Stockpile Manager to use the authority to develop and conserve reliable sources of critical materials aggressively in order to ensure that the domestic industrial base is ready to meet emergent demand.” 

For example, concern about where the U.S. gets materials for batteries has become an acute concern 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—up from $2 billion in 2020, according to an analysis from Govini, a decision-science firm. 

The bill also raised questions about sourcing materials from China for lithium-ion battery technology and neodymium magnets. 

One provision, if adopted in the final bill, would require the Pentagon to create a plan—from budget to civilian needs—to replenish the National Defense Stockpile for a prolonged national emergency. Additionally, the panel expressed disappointment in the Navy’s “slow” progress to adopt “durable devices and technologies designed to operate in remote regions with limited network connectivity” as part of its digital supply chain efforts.

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 survey conducted by the National Defense Industrial Association. 

“There's a lot of legitimate reasons why the government is asking for other things from its contractors,” said Fanning, who was previously secretary of the Army. “To think that we can just switch on the fly is not realistic. Sometimes it takes a long time to line up a replacement supplier.” 

The AIA is pushing Congress for legislation that encourages agreements with trade partners that would include high standards and source-of-origin rules for critical minerals, and also requires increased funding for domestic critical mineral efforts.

The geopolitical climate and increased demand for U.S. defense tech make worrying about supply chain and sourcing materials like minerals and metals from “risky places” expected, Fanning said. But defense companies argue that making changes takes time—and money.  

“Sometimes what we're trying to get is very small, and actually 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 really defense-focused, we need to make sure that there's an investment upfront—government investment—that public-private partnership to seed those efforts.”