Chapter IV, Article 13, Paragraph 4. · Regulation (EU) 2026/467

Contents

4.Defence products shall be produced in compliance with the following conditions:

(a)manufacturers and subcontractors involved in the production of the defence products shall be established and have their executive management structures in the Union, in an EEA EFTA State or in Ukraine. They shall not be subject to control by a third country which is not an EEA EFTA State or Ukraine or by another third-country entity which is not established in the Union, in an EEA EFTA State or in Ukraine;

(b)by way of derogation from point (a), in order to take into account industrial cooperation with non-EU partners, defence products that involve a subcontractor involved in the production which is allocated between 15 % and 35 % of the value of the contract, and that is not established or does not have its executive management structures in the Union, in an EEA EFTA State or in Ukraine, shall be eligible provided that at least one of the following conditions are met:

(i)a direct contractual relationship related to the defence product has been established between the manufacturer and that subcontractor prior to 28 May 2025; or

(ii)the manufacturer commits to studying, within two years, the feasibility of replacing the input provided by that subcontractor with an alternative, restriction-free input originating in the Union, in an EEA EFTA State or in Ukraine, and meeting technical and time requirements;

(c)by way of derogation from point (a) of this paragraph, defence products involving manufacturers or subcontractors established in the Union and controlled by another third country which is not an EEA EFTA State or Ukraine or by another third-country entity which is not established in the Union, in an EEA EFTA State or in Ukraine shall be eligible if that manufacturer or subcontractor has been subject to screening within the meaning of Regulation (EU) 2019/452 of the European Parliament and of the Council^note and, where necessary, to appropriate mitigation measures, or if that manufacturer or subcontractor provides guarantees in accordance with point (d) of this paragraph, verified by the Member State in which it is established;

(d)the guarantees referred to in point (c) of this paragraph shall provide assurances that the involvement of the manufacturer or subcontractor in the production of the defence product does not contravene the security and defence interests of the Union and its Member States as established in the framework of the CFSP pursuant to Title V of the TEU. Those guarantees shall in particular substantiate that, for the purposes of activities, expenditures and measures, measures are in place to ensure that:

(i)control over the manufacturer or subcontractor is not exercised in a manner that restrains or restricts its ability to carry out the activities, expenditures and measures supported; and

(ii)access by a non-associated third country or by a non-associated third-country entity to classified or sensitive information relating to the defence product produced is prevented and the employees or other persons involved in the production of the defence product have national security clearance issued by a Member State, where appropriate, in accordance with national laws and regulations;

(e)the infrastructure, facilities, assets and resources of the manufacturers and subcontractors involved in the production of the defence products shall be located in the territory of a Member State, an EEA EFTA State or Ukraine. Where manufacturers or subcontractors involved in the production of the defence products have no readily available alternatives or relevant infrastructure, facilities, assets and resources in the territory of a Member State, an EEA EFTA State or Ukraine, they may use their infrastructure, facilities, assets and resources which are located or held outside those territories, provided that such use does not contravene the security and defence interests of the Union and its Member States;

(f)manufacturers and subcontractors involved in the production of the defence products may be considered to fulfil the eligibility conditions referred to in this paragraph where they have fulfilled equivalent conditions under Regulations (EU) 2018/1092^note, (EU) 2021/697^note, (EU) 2023/1525^note, or (EU) 2023/2418^note of the European Parliament and of the Council or under Regulation (EU) 2025/1106 and provided that no subsequent changes call into question the fulfilment of those conditions;

(g)the cost of components originating outside the Union, EEA EFTA States and Ukraine shall not be higher than 35 % of the estimated cost of the components of the defence product. No component shall be sourced from a third country that contravenes the security and defence interests of the Union and its Member States;

(h)for defence products related to category two as referred to in paragraph 2, point (b), of this Article, manufacturers shall have the ability to decide, without restrictions imposed by third countries or by third-country entities, on the definition, adaptation and evolution of the design of the defence product procured, including the legal authority to substitute or remove components that are subject to restrictions imposed by third countries or by third-country entities.

For the purposes of the first subparagraph of this paragraph, ‘subcontractors involved in the production of the defence products’ means any legal entity which provides critical inputs that possess unique attributes essential for the functioning of the defence product, which is allocated at least 15 % of the value of the contract, and which needs access to classified information for the performance of the contract.