Overview
On August 26, 2026, President Trump signed Executive Order 14420 (EO), declaring a national emergency to secure the U.S. bulk-power system and restrict procurement and installation of a broad array of foreign-produced equipment used in the U.S. electric power industry that is linked to “Covered Foreign Entities,” a list of entities that notably includes China. Implementing regulations are expected within 120 – 180 days.
Key takeaways
- General Prohibition – The EO prohibits transactions initiated after August 26, 2026 by any person, or with respect to any property, subject to U.S. jurisdiction involving the acquisition, importation, transfer, or installation of foreign-produced bulk-power system electric equipment tied to Covered Foreign Entities, where the transaction poses a risk of sabotage or disruptions to the bulk-power system, catastrophic effects on critical infrastructure, or unacceptable national security risk. The EO also allows the Secretary of Energy (Secretary) to (a) impose conditions on bulk-power system electric equipment acquired or installed before August 26, 2026, which may include disconnection or removal of such equipment and (b) establish pre-qualified (exempt) equipment vendors and a process for vendors to become pre-qualified.
- Applicable Equipment – The “bulk-power system electric equipment” addressed by this EO is broad, including transformers, inverters, circuit breakers, battery energy storage systems, generators, turbines, and industrial control systems. Associated software, firmware, remote-access capabilities, lifecycle maintenance and update mechanisms, and other supply chain dependencies may be considered in determining whether equipment is covered.
- Covered Foreign Entities – The restrictions apply to transactions with persons owned by, controlled by, or subject to the jurisdiction or direction of, Covered Foreign Entities, which includes China.
- Implementation – Implementing regulations are due within 120 days (late December 2026), and recommendations for Federal Acquisition Regulation (FAR) changes are due within 180 days (late February 2027).
- Action Items – Companies should audit their supply chains and identify foreign-produced covered equipment that is already installed, under contract, or planned for acquisition, particularly where equipment or components are sourced from entities with supply chains tied to China. Companies should also monitor Department of Energy (DOE) rulemaking, designations, and any licensing or prequalification.
What the EO does
The EO prohibits any person subject to U.S. jurisdiction from acquiring, importing, transferring, or installing foreign-produced bulk-power system electric equipment in a transaction initiated after August 26, 2026 if (A) the transaction involves any property in which any foreign country or a national thereof has any interest (including through a contract for the provision of equipment) and (B) the Secretary (in coordination with other departments) determines that both of the following conditions are met: (1) the equipment — or any critical component, software, firmware, digital service, maintenance service, or remote-access capability associated with such equipment — is designed, developed, manufactured, or supplied by a person owned by, controlled by, or subject to the jurisdiction or direction of a Covered Foreign Entity, and (2) the transaction presents an undue risk of sabotage, subversion, unauthorized access, malicious remote action, supply disruption, catastrophic effects on U.S. critical infrastructure or the economy, or another unacceptable national-security risk.
The list of Covered Foreign Entities, which may be expanded by the Secretary, currently includes countries subject to a U.S. arms embargo or sanctions regime under the International Traffic in Arms Regulations (22 C.F.R. 126.1) and persons owned by, controlled by, or subject to the jurisdiction or direction of those governments, which includes China.
Broad scope and existing equipment
The EO is intended to address risks in the “bulk-power system,” which is the interconnected transmission networks and generation needed for electric system reliability, including transmission lines rated at 69 kV or more, though local distribution facilities are excluded.
The definition of “bulk-power system electric equipment” to which the EO applies is broad. It encompasses substation and grid equipment (e.g., reactors, capacitors, substation transformers, voltage regulators, circuit breakers), generation equipment (large, small, and backup generators and generation turbines), power conversion and storage (e.g., utility-scale and grid-connected inverters, battery energy storage systems, and uninterruptible power supply systems supporting critical infrastructure), and control and safety systems (e.g., remote terminal units, programmable logic controllers, and intelligent electronic devices). In determining whether equipment falls within the scope of the EO, the Secretary may consider associated software and firmware, remote-access capabilities, lifecycle maintenance and update mechanisms, and other supply chain dependencies, along with distributed control and safety instrumented systems.
Equipment assembled in the U.S. could still raise issues if its software, firmware, or update infrastructure is controlled by a Covered Foreign Entity.
The EO does not automatically exempt equipment already purchased or in service prior to August 26, 2026. For foreign-manufactured equipment acquired before the effective date, the Secretary may impose conditions on continued use, operation, maintenance, servicing, or updating. Such conditions may require companies to identify and inventory assets, isolate them from network connectivity, implement enhanced monitoring, disconnect them from the bulk-power system, or replace or remove them. However, the Secretary must consider the effects on reliability and safety, the availability of secure replacements, and continuity of essential service; phased compliance is permitted.
Implementation
The Secretary’s authority to impose the core prohibition is available immediately, but the prohibition is not a blanket ban that applies automatically to every transaction. The prohibition applies to specific transactions only after the Secretary makes the affirmative determination required by the EO.
Regulations implementing the framework are due within 120 days and are expected to clarify Covered Foreign Entities, what transactions are permitted or not permitted, and any pre-qualification or exemption process for equipment or vendors.
Within 180 days, the Secretary must develop recommendations for Federal Acquisition Regulatory Council (FAR) revisions addressing national-security risks and prioritizing U.S.-manufactured energy infrastructure; the FAR Council then has 90 days to propose amendments.
What companies should do now
Companies developing projects that are touching the bulk-power system should consider performing: (i) a supply-chain audit and (ii) an installed asset inventory, identifying the country of production of equipment, ownership and control of suppliers and service providers, and remote-access pathways in procurement pipelines and in previously executed contracts. Companies should flag transactions involving potentially covered entities and assess whether existing contracts provide regulatory-change, force-majeure, termination, or substitution options.
Manufacturers, equipment suppliers, and other contractors should perform a similar analysis to ensure their own compliance with the EO and with a goal of easing compliance for developers to ensure efficient contracting.
At the same time, companies should identify domestic or allied alternatives for critical equipment and monitor DOE rulemaking, licensing, pre-qualification guidance, and directives concerning installed assets.
Federal contractors and subcontractors should assess foreign-sourced components in energy-related offerings now, before anticipated FAR changes affect sourcing, representations, or performance obligations. Additionally, companies should document interim decisions and controls so procurement teams can demonstrate how they evaluated origin, ownership, support, and risk while the rules are being developed.
Reed Smith’s International Trade and National Security and Energy & Natural Resources teams can assist with supply-chain reviews, existing-asset assessments, rulemaking, and procurement planning. The executive order can be found here: https://www.whitehouse.gov/presidential-actions/2026/08/declaring-a-national-emergency-to-secure-the-united-states-bulk-power-system/
Authors: Michael Lowell, Kevin Levy, Lizbeth Rodriguez-Johnson, Justin Angotti, Kirsten Lowell, Mitch Bailey, Alaina Billingham, Karla Perez Chacon, Bradley Myrthil, Lee Williams, Megan Finelli, and Erika Yeager
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