By Christopher R. Yukins, Lynn David Research Professor, Government Procurement Law, George Washington University Law School
Executive Summary:
- Although the Trump tariffs were largely struck down by the U.S. Supreme Court, tariffs remain a risk in the U.S. procurement market and is yet another indication of how “buy national” rhetoric is ramping up whether America First or Buy European
- U.S. Defense Department regulations include an explicit tariff exemption
- The Trump White House has criticized that sort of exemption, but it remains in place
- Congress and the Defense Department support the exemption so that tariffs do not weaken the Defense Department’s warfighting capacity
Table of Contents:
- Introduction
- The Trump Tariffs
- Defense Department Tariff Exception
- Guidance Regarding the Defense Department Tariff Exception
- Conflict Between the Senate and the Trump White House
- Conclusion
Introduction
Although President Donald Trump’s tariffs were largely struck down by the U.S. Supreme Court in February 2026, Trump has threatened to impose other tariffs, and they remain a risk for those exporting to markets in the United States – including procurement markets. But the largest procuring agency in the U.S. government, the Department of Defense (which the Trump administration calls the “Department of War”), has a special regulatory exception from tariffs. This updated piece reviews that Defense Department’s tariff exception, how it is exercised, and what the exception teaches us about procurement policy in the Trump administration.
The Trump Tariffs
The Trump administration’s tariffs have been controversial worldwide. One open issue for the U.S. procurement community has been whether those tariffs would be applied to items purchased from abroad by the U.S. government — in essence, whether the U.S. government would have to pay higher prices due to its own tariffs.
In order to avoid tariffs, vendors importing for sale to the U.S. government can point to a number of different regulatory exceptions. Those governmentwide exceptions, however, are sometimes difficult and uncertain to administer, which leaves open the risk that the Trump tariffs will drain resources from federal government procurement. A clear tariff exception was especially important for Defense Department purchases, because the Defense Department is responsible for well over half of the U.S. government’s annual procurements of roughly US$800 billion (€683 billion).
Defense Department Tariff Exception
The tariff exception is largely a process of claiming and applying the exception, which is described in detail in the Defense Federal Acquisition Regulation Supplement (DFARS) clause DFARS 252.225-7013, in DFARS Subpart 225.9, and in DFARS Procedures, Guidance and Implementation (PGI) Subpart 225.9. The Defense Department’s tariff exception has been in place for decades. Although the Trump administration is revamping thousands of pages of federal procurement regulations through the “Revolutionary FAR Overhaul,” the Defense Department’s tariff exemption in DFARS Subpart 225.9 is not being changed.
The administrative process for duty-free entry of Defense Department supplies is also explained in a July 2025 Defense Contract Management Agency (DCMA) presentation to through the Defense Acquisition University (now renamed the Warfighting Acquisition University (“WarU”) by the Trump administration).
The exception process, if properly followed by the importing vendor and government officials, should result in a certification from the Department of War that the supplies are entitled to duty-free entry under Section XXII, Chapter 98, Subchapter VIII, Item 9808.00.30 of the Harmonized Tariff Schedule of the United States, which covers “Materials certified to the Commissioner of Customs by the authorized procuring agencies to be emergency war material purchased abroad.” Customs rulings under Item 9808.00.30 are here.
Guidance Regarding the Defense Department Tariff Exception
In an August 25, 2025 Defense Department-wide memorandum, John Tenaglia, the Principal Director, Defense Pricing, Contracting, and Acquisition Policy, emphasized that existing Defense Federal Acquisition Regulation Supplement 225.901 (DFARS 225.901) exempts many Defense Department purchases of foreign supplies. “In accordance with DFARS 225.901,” noted the memorandum, “unless the supplies are entitled to duty-free treatment under a special category in the Harmonized Tariff Schedule,” or the contractor has already paid the duty, per DFARS 225.901 the Defense Department will issue duty-free entry certificates for:
- End products and components from “qualifying” countries (which have reciprocal defense procurement agreements with the U.S. Department of Defense), and
- End products (but not components) that are “eligible products,” i.e., come from nations that have free trade agreements with the United States (such as the WTO Government Procurement Agreement), and
- “Other foreign supplies for which the contractor estimates that duty will exceed $300 per shipment into the customs territory of the United States.”
The Defense Department exception thus covers (1) supplies from allied nations that have reciprocal defense procurement agreements with the United States, (2) supplies from nations with free trade agreements with the United States, and (3) other supplies if the duties will exceed $300 (€256) per shipment (i.e., if the shipment will exceed $3000 (€2562) with the Trump administration’s “baseline” 10% tariff) – essentially all significant shipments.
As was discussed above, the procedures for applying duty-free treatment to new Defense Department procurements are set forth in DoD guidance, PGI Subpart 225.9. The August 2025 memorandum further emphasized that “contracting officers shall include or modify contracts” (emphasis added) to include DFARS 252.225-7013 – Duty Free Entry (as prescribed in DFARS 225.1101(4)) for any “contracts or orders that anticipate delivery of end products, components, or materials imported into the customs territory of the United States.” The referenced clause, DFARS 252.225-7013, says that the exception is to extend to subcontracts, as well.
To “maximize the Department’s budget to meet warfighter needs,” the Defense Department memorandum said, contracting officers are to note in solicitations and contract materials “that any subsequent contract action will include the duty-free entry clause,” and that the “contractor should use the clause to assure that appropriate shipping documentation is used to prevent incurring duties.” The Defense Department memorandum thus leveraged existing exceptions to make it clear that Defense Department supplies from abroad should be exempt from tariffs.
Conflict Between the Senate and the Trump White House
Despite the Defense Department’s support for the tariff exemption, a political contretemps surrounding the exemption arose under the most recent version of the National Defense Authorization Act (NDAA), which is Congress’s primary annual vehicle for procurement reform. Section 874 of the Senate version of the National Defense Authorization Act (NDAA) for FY 2026, S. 2296, would have reinforced the tariff exemption for defense supplies. While it did not become law in the final version of the NDAA, Section 874 made clear the Senate’s support for the exemption.
In the committee report which accompanied the Senate bill, the Senate Armed Services Committee (SASC) explained the concerns that underlay Section 874. The Committee “emphasize[d] that defense-related acquisitions from qualified sources under Reciprocal Defense Procurement Agreements should remain exempt from any tariffs or trade restrictions,” and “urge[d] the Department of Defense and relevant interagency stakeholders to preserve existing exemptions and ensure that future trade actions do not hinder defense procurement or compromise national security priorities.”
But the Trump administration strongly objected to Section 874 in its response to the Senate bill. The White House said that President Trump had “imposed reciprocal tariffs to address the national emergency related to the asymmetries in trade relationships,” and that the “asymmetries have created an extreme goods trade deficit and contributed to the atrophy of domestic production capacity, especially that of the U.S. manufacturing and defense-industrial base.” The White House argued that Section 874, by reinforcing the tariff exception for Defense Department purchases, “would undermine domestic capacity-building efforts by allowing the Department of War to bypass the Administration’s tariffs, which were created to address trade imbalances and restore our Nation’s atrophied industrial base.”
In the face of the White House’s opposition, the final, compromise version of the NDAA for Fiscal Year 2026 (see summary) removed the controversial Senate provision regarding the tariff exemption. The congressional Joint Explanatory Statement, which accompanied the final legislation, noted Section 874’s removal, at page 193, and called for a report from the Defense Department on the impact of tariffs and trade agreements.
Conclusion
The regulations and guidance discussed above, which exempt much of the Defense Department’s purchases from tariffs, remain in place. The exemption reflects the Defense Department’s goal not to allow tariffs to reduce its purchasing power – its warfighting capacity – even though tariffs are a pivotal policy tool for the Trump administration. The Senate’s action on the tariff exemption reflected Congress’s shared concern that tariffs not undermine the Defense Department’s warfighting capacity; although that Senate action ultimately failed, as noted the regulatory exemption remains in place, and the political back-and-forth over the exemption showed that Congress and the Defense Department may diverge from the Trump White House on substantive issues of procurement policy.
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