FY2023 NDAA: National Defense Stockpile

FY2023 NDAA: National Defense Stockpile

INSIGHTi

FY2023 NDAA: National Defense Stockpile
October 31, 2022
Congress is considering provisions in the House and Senate-committee versions of the Fiscal Year 2023
National Defense Authorization Act (FY2023 NDAA) that would make changes to the National Defense
Stockpile (NDS), a department of Defense (DOD)-administered reserve of critical materials. The House-
passed (H.R. 7900) and Senate Armed Services Committee (SASC)-reported (S. 4543) FY2023 NDAA
bills contain provisions which would expand NDS management authorities, introduce new planning and
reporting requirements, and authorize the largest new appropriations for material acquisitions in more
than 30 years. The Senate is considering the stockpile provisions of S. 4543 as part of S.Amdt. 5499, a
complete substitute amendment to H.R. 7900. The Senate is also considering some stockpile-related
amendments to S.Amdt. 5499.
Background
Title 50, Section 98a, of the U.S. Code establishes the NDS “to decrease and to preclude, when possible, a
dangerous and costly dependence by the United States upon foreign sources or a single point of failure for
[critical materials] in times of national emergency.” In a similar manner to other U.S. stockpile programs,
the NDS acquires and retains materials for use by critical civilian and defense manufacturers when
supplies are commercially unavailable. The stockpile also tracks the availability of rare materials used in
the manufacture of products that include munitions, batteries, laser equipment, and satellite components.
According to the Strategic and Critical Materials 2021 Report on Stockpile Requirements, the NDS
inventory contains stocks of 55 materials valued at about $888 million.
The President has authority over the NDS, but per 50 U.S.C. §98h–7, may designate another federal
official to exercise management responsibilities. Currently, the Under Secretary of Defense for
Acquisition and Sustainment (USD [A&S]) is the designated NDS Manager; additionally, the Defense
Logistics Agency (DLA) Strategic Materials division exercises operational oversight. The NDS funds its
annual operations and new acquisitions with the National Defense Stockpile Transaction Fund, a
revolving fund that receives money from multiple sources including appropriations and proceeds from the
sale of surplus inventory. In FY2022, Congress appropriated $125 million for the NDS, the first new
appropriation in three decades.
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Discussion
The NDS-related provisions of the House-passed and SASC-reported FY2023 NDAA bills reflect a
growing sense among some Members of Congress and other policymakers that the U.S. must do more to
ensure continued access to critical materials under adverse geopolitical conditions. Recent assessments
undertaken by DLA Strategic Materials and the White House have identified a number of material
shortfall risks. In its 2021 Report on Stockpile Requirements, DLA Strategic Materials projected wartime
shortfalls for 53 out of 283 monitored materials, and a 2021 ‘100-day supply chain review’ directed by
the White House found that, regarding the NDS specifically, “less than 10 percent of postulated wartime
material shortfalls are estimated to be mitigated.” In addition to supply chain vulnerabilities, a major
driver of potential shortfalls is the small size of NDS inventory when measured by historical standards.
From a reported $9.6 billion in 1989, the value of stockpiled materials has declined to $888.1 million in
2021.
NDS Transaction Fund Authorizations
Both bills would authorize the largest new appropriations for the NDS Transaction Fund in more than 30
years. The President’s budget for FY2023 requested $253.5 million in appropriations for the stockpile.
Section 4501 of the House bill would authorize $253.5 million for the acquisition of eight specific
materials, while Section 4501 of the Senate-committee bill would authorize $1.0 billion for the
acquisition of seven specific materials and any additional materials that the NDS Manager identifies as a
requirement. Section 228 of the House bill would further increase the authorized NDS Transaction Fund
appropriation by $2.0 million, to be used for research and development relating to rare earth permanent
magnet production (S.Amdt. 6360 to S.Amdt. 5499 would authorize an identical appropriation).
Management Authorities
Per 50 U.S.C. §98d, the NDS Manager must obtain specific congressional authorization prior to acquiring
new materials for the stockpile. The NDS administrator has asserted that this can create significant delays
between the identification of new material requirements and subsequent acquisition for new stockpile
inventory. Both Section 1421 of H.R. 7900 and Section 1411 of S. 4543 would allow the NDS Manager to
use appropriated funds to acquire materials determined to be in shortfall without specific congressional
authorization; Section 1411 of the Senate-committee bill would also shorten the congressional notification
period for inventory increases from 45 days to 30 days. S.Rept. 117-130 states that these modifications
are intended to give the NDS Manager “greater flexibility and agility to acquire critical materials.”
New Material Priorities
The House bill contains provisions that would prioritize certain materials for study or acquisition. These
include materials related to semiconductors, rare earth elements, and the manufacture of energy storage
technologies. The Senate-committee bill as reported does not contain similar provisions, but S.Amdt.
6139 would state that U.S. policy is to eliminate NDS dependence on critical minerals supplied by non-
allied countries by 2027 and direct DOD to undertake reporting and planning to realize this goal.
In addition to these legislative provisions, H.Rept. 117-397 directs DOD to provide a briefing to the
House Armed Services Committee (HASC) on the stockpile status and requirements for antimony, as well
as a report on the feasibility of stockpiling novel antibiotics.

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Reporting Requirements
Both bills would establish new reporting requirements to assist Congress in assessing the state of the
NDS. Section 1421 of H.R. 7900 would direct DOD to annually brief Congress on stockpile inventories
and planned acquisitions, while Section 1412 of S. 4543 would direct DOD to annually brief on material
shortfalls and acquisition or disposal plans. Section 859F of the House bill would also direct DOD to
report on its strategic and critical materials requirements and identify measures to align NDS planning
with broader Department of Defense objectives.
In addition to the provisions of H.R. 7900 and S. 4543, the accompanying HASC report (H.Rept. 117-
397) directs the Government Accountability Office (GAO) to assess DOD management of the NDS by
April 1, 2023.
Table 1. Selected FY2023 NDAA National Defense Stockpile Provisions
House-passed (H.R. 7900)
SASC-reported (S. 4543)
NDS Transaction Fund Authorizations
Sec. 4501 would authorize the appropriation of $253.5
Sec. 4501 would authorize the appropriation of $1.0 billion
million for the NDS Transaction Fund.
for the NDS Transaction Fund.
Sec. 1414 would authorize the use of up to $253.5 million of Sec. 1413 would authorize the use of up to $1.0 billion of
the funds appropriated for the NDS Transaction Fund for
the funds appropriated for the NDS Transaction Fund for
the acquisition of eight specific materials.
the acquisition of materials during fiscal years 2023 through
2032.
Sec. 228 would increase the authorized appropriation for
No similar provisions; however, S.Amdt. 6360 would
the NDS Transaction Fund by $2.0 million, to be used to
increase the authorized appropriation for the NDS
strengthen the domestic industrial base for rare earth
Transaction Fund by $2.0 million, to be used to strengthen
metals.
the domestic industrial base for rare earth metals.
Management Authorities
Sec. 1421 would expand the NDS Manager’s authority to
Sec. 1411 would expand the NDS Manager’s authority to
acquire material without specific prior congressional
acquire material without specific prior congressional
authorization.
authorization, and shorten the required congressional
notification period for stockpile increases.
New Material Priorities
Sec 1413 would direct DOD to assess wartime
No similar provisions.
semiconductor needs and supply chain vulnerabilities, and
recommend mitigations via an NDS pilot program within
one year.
Sec. 1415 would mandate stockpiling rare earth permanent

magnets for defense needs, and direct DOD to report on
the feasibility of future stockpiling efforts within 90 days.
Sec. 1416 would direct GAO to report on the feasibility of

stockpiling materials required for battery and energy
storage-related defense needs within 360 days.

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No similar provisions.
S.Amdt. 6139 would direct DOD to undertake assessment
and planning in support of transitioning the NDS supply
chain to exclusively U.S. and Allied-processed critical
minerals by 2027.
Reporting Requirements
Sec. 1421 would direct the NDS Manager to annually brief
Sec. 1412 would direct the NDS Manager to annually brief
the state of the stockpile and planned acquisitions.
stockpile shortfalls and planned acquisition.
Sec. 859F would direct DOD to assess its strategic and
No similar provisions.
critical material requirements, including proposed
improvements to the NDS, by June 1, 2023.
Source: CRS analysis of legislation on Congress.gov.
Notes: In Sec. 1414 of the House bill, the eight materials are: (1) Neodymium oxide, praseodymium oxide, and
neodymium iron boron magnet block, (2) Titanium, (3) Energetic materials, (4) Iso-molded graphite, (5) Grain-oriented
electric steel, (6) Tire cord steel, (7) Cadmium zinc telluride, and (8) Scandium. Materials (1)-(7) are also enumerated in
Sec. 1413 of the Senate-committee bill.

Author Information

Luke A. Nicastro
Andrew Tilghman
Analyst in U.S. Defense Infrastructure Policy
Analyst in U.S. Defense Infrastructure Policy

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