Merle M. DeLancey, Jr. and Samarth Barot ●
The Department of War (“DoW”) updated its 1260H List on June 8, 2026. The update adds approximately 65 new entities and includes an array of Chinese companies across several key areas of China’s economy. For example, the additions include electric vehicle and battery manufacturers, solar equipment manufacturers, display and optical-component manufacturers, drone and robotics companies, and Chinese technology companies including Alibaba.
Among the newly designated entities are several biotechnology-related companies, including WuXi AppTec Co., Ltd., Complete Genomics, Inc., and Novogene Company Limited. WuXi AppTec, a China-headquartered contract research, development, and manufacturing organization with extensive relationships with U.S. pharmaceutical and life sciences companies, has received particular attention given the scope of its partnerships across the biotechnology supply chain. WuXi AppTec has disputed its designation and is pursuing all possible remedies.[1] This post addresses the implications for companies being placed on the 1260H List and how being placed on the 1260H List could also result in consequences under the BIOSECURE Act.
Implications of a 1260H Designation
The DoW maintains a list of entities it determines to be “Chinese military companies” operating directly or indirectly in the United States, pursuant to Section 1260H of the National Defense Authorization Act (“NDAA”) for Fiscal Year 2021. Section 1260H requires DoW to identify entities that are directly or indirectly owned or controlled by the Chinese military or related authorities or identified as “military-civil fusion contributors to the Chinese defense industrial base.” The “military-civil fusion contributor” definition is expansive. It includes entities receiving assistance through the Chinese military industrial planning apparatus; entities affiliated with the Chinese Ministry of Industry and Information Technology; entities receiving direction from the State Administration for Science, Technology and Industry for National Defense; entities situated in military-civil fusion enterprise zones; and recipients of military production licenses issued by the Government of China, among others. Section 1260H further requires that the unclassified portion of the list be published in the Federal Register concurrently with its submission to Congress.
Initially, the primary consequence of inclusion on the 1260H List was reputational. Subsequent NDAAs, however, have attached specific procurement restrictions to the designation, transforming it into a regulatory tool with direct supply chain implications for government contractors.
For instance, Section 805 of the NDAA for Fiscal Year 2024 established two prohibitions tied directly to the 1260H List. First, effective June 30, 2026, DoW may not “enter into, renew, or extend a contract for the procurement of goods, services, or technology” directly with a 1260H-listed entity or an entity subject to its control. Second, effective June 30, 2027, the restriction expands to DoW contracts for goods or services that include goods or services produced or developed by a listed entity or an entity subject to its control, even where the listed entity appears only indirectly through a contractor’s supply chain. Notably, these restrictions do not apply to contracts entered into before the applicable effective dates, including when such contracts are subsequently modified, extended, or renewed.
It is important to note that these are DoW-specific restrictions; they do not constitute a general prohibition on private commercial transactions with 1260H-listed entities. Accordingly, purely commercial contracts with no nexus to a DoW contract remain permissible. Nevertheless, the restrictions require defense contractors and subcontractors to conduct due diligence to determine whether goods, services, or technology produced or developed by any listed entity are present in contract performance. Because the prohibition extends to entities “subject to the control” of a listed company, contractors must also evaluate subsidiaries and affiliates of designated entities.
Additionally, Section 851 of the NDAA for Fiscal Year 2025 prohibits DoW from entering into a contract with a company if that company itself contracts with a firm that provides lobbying activities on behalf of any entity on the 1260H List. Unlike the restrictions discussed above that impact the goods, services, or technology from a listed entity into DoW’s supply chain, Section 851 targets a contractor’s business relationships with lobbying firms and similar consultants that represent 1260H-listed companies, regardless of whether those companies have any nexus to the goods or services being procured.
Section 851 defines “lobbying activities” broadly to include written and oral communications with executive and legislative branch officials made on behalf of a client, as well as behind-the-scenes efforts undertaken in support of such contacts. As a result, contractors must look beyond their own direct vendors and consider the broader client rosters of their consultants, public relations firms, and other advisers in order to determine the risk exposure. Notwithstanding, Section 851 includes an exception for contractors that make “reasonable inquiries regarding the lobbying activities of another entity” and reasonably determine that the entity is not a covered lobbyist. As of this writing, however, DoW has not yet issued implementing regulations, expected to take the form of a Defense Federal Acquisition Regulation Supplement (“DFARS”) rule, and it remains unclear what due diligence will satisfy the “reasonable inquiry” standard at this time.
The BIOSECURE Act
The addition of the biotechnology-related companies to the 1260H List may trigger additional national security concerns and heightened compliance obligations for government contractors. The BIOSECURE Act (the “Act”), enacted on December 18, 2025, as Section 851 of the NDAA for Fiscal Year 2026, represents the most significant legal consequence of a 1260H listing for biotechnology-related entities. Under the Act, any entity on the 1260H List may be designated a “biotechnology company of concern” (“BCC”) if it is “to any extent involved in the manufacturing, distribution, provision, or procurement of any biotechnology equipment or service” as determined through the process established by the Director of the Office of Management and Budget (“OMB”). For 1260H-listed entities, OMB need only confirm the nexus to biotechnology activities since the underlying national security determination has already been made through the 1260H designation process.
Once an entity is designated a BCC, the Act prohibits federal agencies from:
- procuring or obtaining any biotechnology equipment or services from the BCC;
- entering into, extending, or renewing a contract with any entity that uses BCC-sourced biotechnology equipment or services in performance of a government contract, including through subcontractors at any tier where the contractor knows BCC technology is present; and
- obligating or expending federal grant or loan funds for the BCC’s biotechnology equipment or services.
The knowledge standard under the Act requires that a contractor “knows” its performance will require BCC-sourced equipment or services. This actual knowledge standard creates a strong incentive for documented supplier verification and affirmative due diligence to demonstrate compliance.
Contractors have some lead time before the prohibitions take full effect. Under the Act, OMB must publish its initial BCC list within one year of enactment (i.e., by December 2026), issue implementing guidance within 180 days thereafter, and the Federal Acquisition Regulatory (“FAR”) Council then has one year from the issuance of guidance to revise the FAR. Prohibitions for 1260H-listed BCCs take effect 60 days after the FAR is updated. Thus, if the government uses all available time, the outer-limit effective date for 1260H-listed entities is approximately mid-to-late 2028. Separately, the Act provides a five-year grandfathering period, which states that contracts entered into before the applicable effective date, including previously negotiated contract options, are not subject to the prohibition on contracting with entities that use BCC equipment or services.
Importantly, the BIOSECURE Act’s prohibitions apply only where there is a nexus to federal procurement, grants, or loans; they do not prohibit purely commercial transactions with 1260H-listed entities or their affiliates.
Key Takeaways for Government Contractors
Government contractors currently engaged with any 1260H-listed entity, whether directly or through subcontractors or affiliates, should take the following steps now:
Map potential exposure. Conduct a comprehensive supply chain audit to identify all direct and indirect touchpoints with 1260H-listed entities and their subsidiaries, particularly where those relationships support performance of federal contracts, grants, or loans. Where subcontractors are involved, request written confirmation of compliance status and document supplier verification efforts.
Analyze lobbying and government-relations vendors. Separately from supply chain due diligence, contractors should review their lobbying, public relations, consulting, and similar advisory relationships to confirm that none of those vendors provide lobbying activities on behalf of a 1260H-listed entity, and should build ongoing certification and monitoring obligations into those vendor relationships given the dynamic nature of the 1260H List.
Evaluate safe harbors and grandfathering provisions. Pre-existing contracts entered into before the applicable effective dates are exempt from Section 805’s prohibitions. Similarly, the BIOSECURE Act’s five-year grandfathering period applies to contracts entered into before the FAR is revised with respect to the applicable BCC. While contractors can and should take advantage of the available safe harbors, contractors should not do so without a comprehensive review of the applicable contracts.
Begin diversification planning. Even with grandfathering provisions, contractors will need to make supply chain decisions well ahead of the prohibition dates. Contractors should identify alternative suppliers, assess transition costs and timelines, and develop contingency plans that account for the possibility that federal agencies may seek to implement these changes on an accelerated schedule.
The regulatory landscape surrounding Chinese military companies continues to evolve rapidly, and federal agencies are expected to move expeditiously. Thus, government contractors that act proactively by conducting supply chain due diligence, documenting compliance efforts, and developing transition plans where necessary will be best positioned to mitigate potential business disruption and enforcement risk.
[1] Novogene has also disputed its addition on the 1260H List.