(a) Establishment
Not later than 180 days after the date of the enactment of this Act, the Secretary of Defense shall establish a pilot program within the Defense Logistics Agency to develop and evaluate traceability systems for essential materials managed by the Agency, including materials held in or acquired for the National Defense Stockpile. In carrying out the pilot program, the Secretary of Defense shall seek to—
improve the ability of the Department of Defense to rapidly mobilize and allocate materials during national emergencies or contingencies; and
inform potential future Department-wide implementation of traceability requirements for defense-critical supply chains.
(b) Contracts
In carrying out the pilot program, the Secretary of Defense shall seek to enter into contracts with appropriate entities to provide traceability systems in accordance with this section.
(c) Traceability providers
(1) Requirements for providers
The Secretary of Defense shall require that any entity that enters into a contract under this section—
be organized under the laws of the United States;
be owned and controlled by a United States person; and
not be subject to foreign ownership or control or influence by any foreign government.
(2) Contract requirements
Any contract entered into under this section shall require that the entity operate exclusively as a noncustodial digital traceability and verification service and shall not—
extract, process, refine, transport, store, broker, finance, or take title to any covered material; or
exercise physical control, custody, or possession of any covered material.
(d) Traceability system
(1) Covered materials
Any contract entered into under this section shall require that the traceability system provided under such contract traces the following materials:
Titanium and titanium alloys.
Cobalt.
Rare earth elements and permanent magnet materials.
Lithium and battery-grade materials.
Such other strategic and critical materials as the Secretary of Defense determines are necessary to support defense production and surge requirements.
(2) Technical requirements
Any contract entered into under this section shall require that the traceability system provided under such contract—
provides end-to-end visibility of covered materials from point of extraction through processing, transportation, and end use in defense articles or defense services;
verifies the origin, chain of custody, mass balance, purity, and processing history of covered materials;
maintains tamper-resistant, immutable, and time-stamped records of custody events, transformation events, and compliance status for covered materials;
employs cryptographic mechanisms to protect sensitive commercial and national security data while enabling verification by authorized security personnel;
enables continuous auditing, anomaly detection, and identification and assessment of supply chain threats; and
integrates with existing Department of Defense procurement, intelligence monitoring, and risk assessment frameworks, including support compliance audits conducted under section 252.225-7052 of the Defense Federal Acquisition Regulation, or successor regulations.
(e) Enforcement
The Secretary of Defense may enforce compliance with the requirements of this section through—
suspension or termination of contracts with entities that fail to comply with traceability system requirements under this section;
withholding of payments for contractors or subcontractors that fail to provide required traceability documentation; and
exclusion from future defense contracts of entities that repeatedly fail to meet traceability system requirements under this section.
(f) Phased expansion
(1) Phase I
During the period beginning on the date the pilot program is established under subsection (a) and ending on September 30, 2028, the Secretary of Defense shall implement a traceability system for materials managed by the Defense Logistics Agency, with priority given to covered materials designated as critical to weapons systems production.
(2) Phase II
Subject to the results of the report required under subsection (h), the Secretary of Defense may expand the traceability system to covered materials procured under defense contracts subject to the Defense Federal Acquisition Regulation Supplement, beginning not earlier than October 1, 2029.
(g) Briefing
Not later than one year after the date on which the Secretary of Defense establishes the pilot program under subsection (a), the Secretary shall provide a briefing to the Committee on Armed Services of the House of Representatives. Such briefing shall include—
a description of each traceability system being evaluated under the pilot program, including an assessment of how such system satisfied the technical requirements under subsection (d);
the criteria and process used to select a traceability service provider for the pilot program, including how provider eligibility requirements under subsection (c) were assessed and enforced;
the timeline and status of pilot program implementation milestones; and
any challenges or resource requirements encountered in establishing the pilot programs.
(h) Report
Not later than two years after the date on which the Secretary of Defense establishes the pilot program under subsection (a), the Secretary shall submit to the congressional defense committees a report assessing the results of the pilot program. Such report shall include—
an assessment of the operational effectiveness of each traceability system evaluated under the pilot program;
an assessment of the impacts of such system on defense readiness an surge capacity;
an assessment of the implications of such system for National Defense Stockpile management and replenishment;
an assessment of the cost, scalability, and integration of such system with existing Department of Defense procurement systems; and
recommendations for expansion of the pilot program or permanent authorization of a traceability requirement for defense-critical supply chains.
(i) Definitions
In this section:
The term covered materials means any material listed in subsection (d)(1).
The term National Defense Stockpile means the stockpile provided for in section 3 of the Strategic and Critical Materials Stockpiling Act ( 50 U.S.C. 98b ).
The term United States person has the meaning given such term in section 7701(a)(30) of the Internal Revenue Code of 1986.