New Restrictions on Foreign-Sourced Power Equipment: What Developers, Sponsors and Suppliers Need to Know—Executive Order 14420

Overview

On August 26, 2026, President Donald Trump signed Executive Order 14420 (the EO), “Declaring a National Emergency to Secure the United States Bulk-Power System,” invoking the International Emergency Economic Powers Act (IEEPA), the National Emergencies Act and Section 301 of Title 3, United States Code with respect to the foreign supply of bulk-power system electric equipment. The EO identifies increased risks stemming from the rapid growth of data centers, artificial intelligence, advanced manufacturing and defense production, all of which have heightened US dependence on reliable electricity and magnified the consequences of a successful attack or supply disruption.

The EO authorizes the Secretary of Energy to prohibit, condition, license, or require mitigation for certain transactions involving foreign-produced bulk-power system electric equipment linked to “Covered Foreign Entities.” While the order is effective immediately for transactions “initiated” after August 26, 2026, it is not self-executing. The Department of Energy (DOE) must establish implementing regulations through a rulemaking process, with rules due within 120 days (i.e., approximately December 24, 2026).

This Legal Update summarizes the EO’s key provisions and discusses the practical implications for developers, equipment suppliers, investors and lenders active in the US power sector.

Not a Blanket Ban: What Can Developers Safely Procure Today?

The EO does not automatically prohibit foreign equipment or equipment simply because it contains a Chinese or other foreign-produced component. Two conditions must both be satisfied before a transaction is barred:

First, DOE must determine that the transaction involves bulk-power system electric equipment (or any critical component, software, firmware, digital service, maintenance service or remote-access capability associated with such equipment) designed, developed, manufactured or supplied by persons owned by, controlled by or subject to the jurisdiction or direction of a Covered Foreign Entity.

Second, DOE must determine that the transaction poses one of three specified risks:

• Undue risk of sabotage, subversion, unauthorized access, malicious remote action, or supply disruption affecting the bulk-power system;
• Undue risk of catastrophic effects on US critical infrastructure or the economy; or
• Otherwise unacceptable risk to US national security or safety.

Until DOE publishes its implementing rules, developers and suppliers face uncertainty when making major procurement commitments. Those rules will determine which transactions are permitted, prohibited or subject to conditions.

DOE may establish a pre-qualification process for equipment and vendors and may issue licenses for otherwise-prohibited transactions. DOE may also negotiate mitigation measures as preconditions for approval of specific transactions or classes of transactions.

The EO also includes an anti-evasion provision. Any transaction that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any prohibition under the order is itself prohibited, as is any conspiracy formed to violate the order.

The Supply-Chain Inquiry May Go Well Below the Nameplate

The EO expressly contemplates scrutiny, not only of nameplate equipment but also of critical components, software, firmware, digital and maintenance services, remote-access capabilities, and other supply-chain dependencies. As a result, companies should be prepared to demonstrate supply-chain visibility beyond the original equipment manufacturer (OEM), with diligence extending, where appropriate, to upstream suppliers and technology and service providers.

Companies should be prepared to address several practical diligence issues, including that:

• Purchasers may need information about the origin of components and software embedded in the equipment;
• OEMs may be asked to certify relevant aspects of their supply chains; and
• DOE may expect tracing to extend to some or all upstream suppliers, depending on the equipment and the risk presented.

Purchasing from a US OEM may not fully resolve these issues because the order focuses on components, software and services (i.e., not only the final assembled product).

Existing Orders and Long-Lead Equipment May Present the Hardest Questions.

The EO applies to transactions “initiated” after August 26, 2026, but does not define “initiated.” It also expressly provides that its prohibitions apply notwithstanding pre-existing contracts, licenses, or permits.

Notably, the EO’s structure closely mirrors Executive Order 13873 (May 15, 2019), which addresses the information and communications technology and services (ICTS) supply chain and was also issued under IEEPA authority. EO 13873 uses nearly identical risk-triggering criteria and similarly applies to transactions “initiated” after the date of that order. The Commerce Department, Bureau of Industry and Security (“BIS”)c has since issued implementing rules under EO 13873 at 15 CFR Part 791, [TS1.1] and the approach taken in those rules (including with respect to the meaning of “initiated”) may signal how DOE will interpret the same concept under EO 14420.

The EO further provides that its prohibitions apply except to the extent provided by statutes, or in regulations, orders, directives, or licenses issued pursuant to the order (meaning DOE retains authority to create exceptions through future rulemaking or licensing).

These provisions create significant uncertainty for transactions and arrangements involving:

• Existing master-services agreements (MSAs) and framework arrangements;
• Turbine slot reservations and long-lead equipment purchase orders;
• Deposits and partial payments already made;
• Partially manufactured equipment; and
• Subsequent releases or call-offs under existing framework contracts.

Additionally, for foreign-manufactured or operated bulk-power system electric equipment acquired or installed before the EO, DOE has separate authority to impose conditions on continued use, operation, maintenance, servicing or updating of such equipment, including requirements to identify, isolate, monitor, secure, disconnect, replace or remove it (subject to consideration of reliability, safety, continuity of essential service and replacement availability, with possible phased compliance).

Who Bears the Risk While the Rules are Developing?

The 120-day implementation period for rules has direct implications for equipment supply agreements, engineering, procurement and construction (EPC) contracts, project financings, and M&A transactions. Key risk-allocation issues include:

• Compliance representations and warranties and supplier certifications;
• Supply-chain information and audit rights;
• Equipment substitution rights;
• Change-in-law provisions and their application to the EO;
• Schedule relief mechanisms;
• Termination rights; and
• Allocation of potentially substantial replacement costs if equipment is later prohibited.

A key issue will be how the parties address equipment that is permissible when contracted for but later becomes subject to a DOE prohibition or mitigation requirement.

Market participants familiar with the first Trump-era bulk-power system order (Executive Order 13920, May 2020) will recall that some tax equity investors and lenders moved to require developers to fund future costs to replace equipment the government later determined to be a threat. Such provisions remain in many existing financing documents and may become newly relevant. Some construction lenders also began requiring cybersecurity audits as a condition of funding.

What We Don’t Know Yet May Matter Most

DOE’s implementing regulations will need to address several issues that may materially affect procurement decisions, including:

• The definition of a transaction being “initiated” (and therefore within the scope of the prohibition), on which the Commerce Department’s ICTS rules under EO 13873 may offer interpretive guidance;
• The process DOE will use to identify Covered Foreign Entities and assess the specified risks;
• The level of component and supply-chain tracing DOE will expect;
• The availability of certifications or other practical safe harbors;
• The equipment and vendors that may be pre-qualified and the timing for pre-qualification;
• The operation of any licensing process and the applicable timetable;
• DOE’s approach to previously acquired or installed equipment; and
• The availability of interim guidance before final rules.

These issues are likely to determine the extent to which projects can make major procurement decisions during the implementation period.

Key Timelines

Key Definitions

Bulk-Power System: Facilities and control systems necessary for operating an interconnected electric energy transmission network, plus generation needed for system reliability. Includes transmission lines rated at 69 kV or more. Excludes facilities used in local distribution of electric energy.

Bulk-Power System Electric Equipment: Broadly defined to include reactors, capacitors, substation transformers, utility-scale and other grid-connected inverters, battery energy storage systems, uninterruptible power supply systems supporting critical infrastructure, large generators, small generators, backup generators, substation voltage regulators, shunt capacitor equipment, automatic circuit reclosers, instrument transformers, coupling capacity voltage transformers, protective relaying, metering equipment, high-voltage circuit breakers, generation turbines, industrial control systems (including remote terminal units (RTUs), programmable logic controllers (PLCs) and intelligent electronic devices), distributed control systems, safety instrumented systems, and associated software, firmware and remote-access capabilities.

Covered Foreign Entity: A country or person under US arms embargo or sanctions (under the International Traffic in Arms Regulations (ITAR), 22 C.F.R. § 126.1), or determined by the Secretary of Energy (in consultation with the Secretary of War, the Director of National Intelligence and the Assistant to the President for National Security Affairs) to be engaged in conduct detrimental to US national security or foreign policy. Currently encompasses 24 countries, most prominently China, but also including Russia, Iran, North Korea and others. DOE has broad discretion to add additional nations and entities.

Foreign-Produced: An article that is not manufactured, produced or assembled in the United States.

Note, the EO does not specify what percentage of domestic content or degree of US assembly qualifies an article as US-produced. However, other federal procurement frameworks, such as the Buy American Act (generally requiring 60%-75% domestic component cost, depending on the year of delivery) and the Build America, Buy America Act (generally requiring greater than 55% domestic component cost for manufactured products used in federally assisted infrastructure), apply quantitative domestic-content thresholds. DOE’s implementing regulations may need to establish criteria for determining whether equipment with mixed domestic and foreign content qualifies as “foreign-produced” under the EO.

Considerations for Developers and Investors

In light of the uncertainty during the implementation period, developers and investors should consider the following near-term steps:

• Assess current procurement pipelines for potential exposure to Covered Foreign Entities, focusing particularly on equipment with Chinese-origin components;
• Review existing contracts (equipment supply agreements, EPC contracts, financing documents) for change-in-law provisions, substitution rights, and termination mechanics;
• Evaluate supply-chain visibility, including how far component and software origins can be traced;
• Consider whether to seek advance engagement with DOE during the rulemaking process, either directly or through industry associations;
• Monitor DOE developments closely, including any interim guidance, pre-qualification criteria, or licensing procedures; and
• For transactions currently being negotiated, consider appropriate risk allocation provisions in light of the regulatory uncertainty.

The EO is primarily directed at the risk that foreign actors could use equipment communications functionality to access a power system remotely, whether to exfiltrate data or take control of the system. Market participants whose equipment and supply chains do not implicate these cybersecurity and remote-access concerns may ultimately find that the order has a limited practical impact on their operations. Until DOE provides additional clarity, however, the scope of the prohibition remains uncertain.

Conclusion

The EO represents a significant expansion of federal oversight over the supply chain for bulk-power system electric equipment. While the full scope of the prohibition will not become clear until DOE publishes its implementing regulations, companies active in the US power sector should begin assessing their exposure and preparing for compliance. The Mayer Brown team is available to support companies as they evaluate how this order may affect their projects and transactions.