Blog · Section 805

Component or End Item? Five Decisions That Set Your Section 805 Exposure

Chris A. Grable · October 7, 2026

Most firms asking about Section 805 want a yes or no. The statute does not answer that way. It sets two dates, an entity test, a component carve-out and limits on earlier contracts, and it sits beside a drone regime where the carve-out does not exist. Exposure comes out of a sequence of decisions, and a wrong call at any step leaves a firm either overcautious or exposed. Here is the sequence UDC recommends.

Decision 1: Is anyone you contract with listed, or controlled by a listed entity?

Since 30 June 2026, DOW may not enter into, renew or extend a contract for goods, services or technology with a company on the Section 1260H list or an entity subject to its control. Control is tested by reference to 31 CFR 800.208. Contracts entered into before that date are protected, including their later modifications, extensions and renewals; contracts awarded after it get no such protection, and the class deviation treats exercising an option as an extension. Screen the firm, its parent, its subsidiaries and relevant suppliers against the named entries in the latest Federal Register notice, not a headline total. The June 2026 update removed ten entities, and the list is updated at least annually, so last year's clean result settles nothing.

Decision 2: Is the exposed item a component or an end good?

From 30 June 2027 the second phase bars contracts for goods or services that include goods or services produced or developed by a listed or controlled entity. The statute excludes components as 41 U.S.C. 105 defines them: items supplied to the Government as part of an end item or another component. A listed company's subassembly inside your end item is therefore treated differently from a listed company's product offered as your end item. Record each determination and its basis.

Treat that line as a checkpoint, not a settled answer. In Class Deviation 2026-O0025, Revision 3, the paragraph reserved for the 2027 phase is empty, and no proposed rule under DFARS Case 2024-D012 had appeared in the Federal Register as of October 7, 2026.

Decision 3: Is the offering on the U.S. Munitions List?

If it is, run a second, wider screen. The class deviation separately restricts covered USML products and services from Chinese military companies, companies on the Treasury Department's Non-SDN Chinese Military-Industrial Complex Companies List, PRC entities on the Commerce Department's Entity List, and certain entities owned or controlled by, or affiliated with, the Chinese government or armed forces. A match on those lists is not by itself a Section 805 hit, and a clean Section 805 result does not clear this screen.

Decision 4: Is it an unmanned aircraft?

Here the component analysis stops working. For drones in a DOW context, Section 848 of the FY2020 NDAA governs, and it applies at the component level with no components exception, subject to its own exemptions and waiver. A flight controller, radio, data transmission device, camera or gimbal from a covered foreign country can capture the whole system, as can a ground control system or operating software developed there, or network connectivity or data storage located in or administered by an entity domiciled there. Applying the Section 805 carve-out to a DJI-componented system would be a serious error. DJI, Autel Robotics and Aerospace CH UAV also appear on the June 2026 1260H list, and the American Security Drone Act and the FCC Covered List add further layers.

Decision 5: Can the exposure be resolved by 30 June 2027?

If not, the waiver is the bridge. A complete request to the Office of the Assistant Secretary of War for Industrial Base Policy includes the waiver form; a cover letter; a compelling justification narrative and market analysis addressing mission criticality, programmatic impact and lack of a mature market; and a detailed entity phase-out plan with corporate actions, milestones, dedicated resources and timelines. It goes to osd.805-waivers@mail.mil. A waiver can stay in effect until the Secretary determines that commercially viable providers outside the PRC can and will supply quality goods and services in the quantity the Department needs. It buys time against a plan. It is not an exemption.

Once the sequence is run, claim only what you can document. For SBIR, prototype, UAS, electronics, cyber and microelectronics efforts, documented screening can lower a reviewer's sense of compliance and transition risk. An unsupported "1260H-clean" claim does the opposite. UDC recommends stating instead that the firm has started 1260H screening, keeps provenance records for critical items, separates component-level content from end goods produced or developed by listed entities, and has identified re-source or waiver paths for anything unresolved. Re-run the sequence at every 1260H update, every revision of the class deviation and every proposal, award and modification.

Public sources

The paper behind this post cites these public documents, among others.

The full paper adds the legal scope guardrails with statutory pinpoints, the layered drone authorities table, the covered-lobbyist rule that sits beside Section 805, and seven recommendations for hardware builders and integrators.

Navigating Section 805: The 1260H Chinese Military Companies Procurement Prohibition and Waiver Path

See what is in the paper