This report examines the specialty metal clause in the Defense Federal Acquisition Regulation Supplement (DFARS), potential oversight issues, and options for Congress. The specialty metal clause prohibits DOD from acquiring end units or components for aircraft, missile and space systems, ships, tank and automotive items, weapon systems, or ammunition unless these end items or components have been manufactured with specialty metals that have been melted or produced in the United States. Specialty metals are used in components procured through DOD contracts, primarily for military aircraft, weapons, equipment, and within integrated circuits, wiring, and electrical components. Specialty metals covered by this clause include certain types of cobalt, nickel, steel, titanium and titanium alloys, zirconium, and zirconium base alloys. Thousands of products used for defense, aerospace, automotive, and renewable energy technologies rely on specialty metals for which there are often few, if any, substitutes. The availability of sources of supply of some elements that comprise some metals, particularly the access to rare earth elements, is an issue raised in recent news reports and congressional hearings. Policy makers are interested in the specialty metal clause because the specialty metal clause affects defense contractors who produce components for commercial weapons systems. In order to preserve and protect the United States industrial base so that it could meet DOD requirements during periods of adversity and war, in 1941 Congress passed a set of domestic source restrictions which became known as the Berry Amendment. In 1973, specialty metals become one of the items covered under the Berry Amendment, a domestic preference law requiring DOD to procure items that are wholly domestic. The specialty metal clause first appeared in the 1973 Defense Appropriations Act. At that time, Congress was concerned with protecting domestic source materials for the Vietnam War. At that time, the domestic specialty metal sector was hurt by subsidized imports into the United States. In order to insure an adequate domestic base for domestic items, Congress provided a guarantee to domestic suppliers for a portion of DOD's specialty metal business. Over three decades later, specialty metals are no longer part of the Berry Amendment and are now covered in a separate citation in the United States Code (U.S.C.). Congress took action in the FY2007 National Defense Authorization Act ( P.L. 109-364 ) to separate specialty metal from the Berry Amendment (Title 10, U.S.C. 2533a). Specialty metals are defined in 10 U.S.C. 2533b and were revised as part of the FY2008 National Defense Authorization Act ( P.L. 110-181 ). The current definition of specialty metals can be found in 10 U.S.C. 2533b, as described here: Specialty Metal Defined . — In this section, the term "specialty metal" means any of the following: (1) Steel— (A) with a maximum alloy content exceeding one or more of the following limits: manganese, 1.65 percent; silicon, 0.60 percent; or copper, 0.60 percent; or (B) containing more than 0.25 percent of any of the following elements: aluminum, chromium, cobalt, columbium, molybdenum, nickel, titanium, tungsten, or vanadium. (2) Metal alloys consisting of nickel, iron-nickel, and cobalt base alloys containing a total of other alloying metals (except iron) in excess of 10 percent. (3) Titanium and titanium alloys. (4) Zirconium and zirconium base alloys. According to DFARS 225.252.7009, specialty metals procured by DOD and used in defense articles must be melted in the United States or a "qualifying country," or melted anywhere but incorporated into an article that is manufactured in a qualifying country. The specialty metals clause allows a qualifying country to manufacture parts from metal that was melted anywhere, provided it meets specifications, but a United States company can only use metal that was melted in the United States or a qualifying country. The specialty metal clause provides for numerous exceptions, as described here: Waiver for national security purposes; Exceptions when compliant specialty metals are not available in satisfactory quality and sufficient quantity, in the required form, and cannot be procured as and when needed; Exceptions for acquisitions made outside of the United States in support of combat or contingency operations; Exceptions for the use of other than competitive procedures, in accordance with the Competition in Contracting Act (10 U.S.C. 2304 [c]) for circumstances of unusual and compelling urgency of need; Exceptions to comply with agreements with foreign governments; Exceptions for commissaries, exchanges, and other non-appropriated fund instrumentalities; Exceptions for small purchases (below the simplified acquisition threshold); Exceptions for electrical components; Exceptions for the acquisition of some commercial items; Exceptions for the acquisition of certain commercial-off-the-shelf items; Exceptions for the acquisition of components if there is less than 2% of noncompliant metal (called the "de minimis" exception); Exceptions for the acquisition of certain commercially derivative defense articles ; and Exceptions for the acquisition of certain noncompliant materials if the Secretary of Defense certifies in writing that acceptance of such materials is required for reasons of national security, including certain conditions and requirements. H.R. 1960 was introduced in the House on May 14, passed the House in a recorded vote (315-108) on June 14, and was referred to the Senate on July 8, 2013. S. 1197 was introduced on June 20, 2013 and referred to the Armed Services Committee. The bill contains several provisions which give the President more authority to conserve strategic and critical materials, as well as direct the Secretary of Defense to report on plans to assess the supply chain diversification for rare earth substitutes and develop risk mitigation strategies. The provisions appear below. Section 1411 modifies the President's authority to maintain and manage a national defense stockpile, and allow the Defense Logistics Agency to more proactively engage in the market. These changes would grant the President the authority to conserve strategic and critical materials. (a) Presidential Responsibility for Conservation of Stockpile Materials - Section 98e (a) of Title 50, United States Code, is amended: (1) by redesignating paragraphs (5) and (6) as paragraphs (6) and (7), respectively; and (2) by inserting after paragraph (4) the following new paragraph (5): "(5) provide for the recovery of any strategic and critical material from excess materials made available for recovery purposes by other Federal agencies;" (b) Uses of National Defense Stockpile Transaction Fund - Section 98h (b) (2) of Title 50, United States Code, is amended— (1) by redesignating subparagraphs (D) through (L) as subparagraphs (E) through (M), respectively; and (2) by inserting after subparagraph (C) the following new subparagraph (D): "(D) Encouraging the conservation of strategic and critical materials." (c) Development of Domestic Sources - Section 98h-6(a) of Title 50, United States Code, is amended, in the matter preceding paragraph (1), by inserting 'and conservation' after 'development'. Section 1412 provides authority to acquire certain additional strategic and critical materials for the National Defense Stockpile. The materials anticipated to be acquired have been identified to meet the military, industrial, and essential civilian needs of the United States. (a) Acquisition Authority - Using funds available in the National Defense Stockpile Transaction Fund, the National Defense Stockpile Manager may acquire the following materials determined to be strategic and critical materials required to meet the defense, industrial, and essential civilian needs of the United States: (1) Ferroniobium. (2) Dysprosium Metal. (3) Yttrium Oxide. (4) Cadmium Zinc Tellurium Substrate Materials. (5) Lithium Ion Precursors. (6) Triamino-Trinitrobenzene and Insensitive High Explosive Molding Powders. (b) Amount of Authority - the National Defense Stockpile Manager may use up to $41,000,000 of the National Stockpile Transaction Fund for acquisition of the materials specified in subsection (a). (c) Fiscal Year Limitation - The authority under this section is available for purchases during Fiscal Year 2014 through Fiscal Year 2019. In H.R. 1960 , under Title XVI, Industrial Base Matters, there are two reporting requirements required by the House Armed Services Committee that address congressional concerns over maintaining a secure access and a diverse supply chain for rare earth elements to be used for national security purposes and in defense weapon systems. The first directive requires the Under Secretary of Defense for Acquisition, Technology and Logistics to submit a report to the congressional defense committees, by February 1, 2014, to outline a risk mitigation strategy focused on securing the necessary supplies of rare earth elements. The report language reads as follows: The committee is aware that in response to the report required by section 843 of the Ike Skelton National Defense Authorization Act for Fiscal Year 2011 ( P.L. 111-383 ) and based on forecasting demand for fiscal year 2013 only, the Under Secretary of Defense for Acquisition, Technology, and Logistics concluded that domestic production of rare earth elements could satisfy the level of consumption required to meet defense procurement needs by fiscal year 2013, with the exception of yttrium. However, the committee observes that the Future Years Defense Program indicates that consumption of rare earth elements is expected to increase after 2013. Specifically, the report on the feasibility and desirability of recycling, recovery, and reprocessing of rare earth elements required by the conference report ( H.Rept.