A change that arrived with the 2026 construction year has moved supply chain paperwork from the back office to the front of solar procurement. Projects claiming federal clean electricity credits now have to demonstrate that their equipment does not draw too much value from prohibited foreign entities – and the test reaches further up the supply chain than most buyers expect.
This is a practical guide to what that means when you issue a purchase order. It is written for developers, EPCs and procurement teams working on US projects. It is not legal or tax advice – your counsel owns the final determination – but it covers the questions that determine whether your documentation will hold up.
What the rules actually test
The restrictions apply to entities classed as prohibited foreign entities, in two broad categories. The first covers entities identified directly – including companies headquartered in, or controlled by, covered nations. The second catches entities that are not themselves listed but are subject to significant influence: thresholds in the published guidance touch board appointment rights, equity ownership at or above 25 per cent, collective ownership at or above 40 per cent, and control of a meaningful share of company debt.
The operative point for a buyer: the test looks at ownership and control, not just at where the box was assembled. A module brand headquartered in an allied country can still sit on a restricted upstream chain.
The threshold is a ratio, not a pass or fail per component
The material assistance cost ratio measures the share of manufactured-product cost attributable to non-prohibited sources under the applicable calculation rules. For solar facilities beginning construction in 2026, 2027, 2028 and 2029, the minimum ratios are 40, 45, 50 and 55 per cent respectively; for 2030 and later, the minimum is 60 per cent. Energy storage has higher minimums: 55, 60, 65 and 70 per cent for those same years, and 75 per cent for 2030 and later.
Certain inputs are carved out of the calculation – including raw polysilicon and main power transformers among others – which is helpful but does not remove the need to do the arithmetic. Do it early, because the answer can change which suppliers you can use.
Why "assembled in the USA" does not settle it
U.S. assembly alone does not establish PFE compliance. Review the manufacturers’ ownership and control, sourcing evidence, and the inputs included in the applicable material-assistance calculation.
Imported does not automatically mean prohibited. Country-of-manufacture requirements for the domestic-content bonus are a separate test from prohibited-entity sourcing. Keep the two calculations separate and use model-specific supplier evidence with the applicable IRS rules.
Ask for the manufacturer’s own published certification rather than a distributor’s summary. If a supplier answers “everything we use is compliant” without producing a document, treat that as a finding.
Domestic content is a separate test with a separate reward
These are separate tests. The sourcing restriction is an eligibility condition: failing it can disqualify the credit. Domestic content is a bonus with a different calculation. For an investment tax credit, the domestic content increase is 10 percentage points where prevailing-wage and apprenticeship requirements or an applicable exception are satisfied; otherwise it is 2 percentage points. For a production tax credit, the increase is 10 per cent of the credit amount, not 10 percentage points.
Domestic-content thresholds depend on the credit, project type and construction-start date, with separate steel and iron requirements. Model the applicable bonus before committing to a supplier. Missing this bonus does not by itself remove the base credit; all other eligibility requirements still apply.
The documents to request before you pay a deposit
Compliance is a date-stamped snapshot, not a permanent state, and guidance has continued to evolve. Build the following into the purchase order rather than requesting it at commissioning:
- A supplier attestation certifying the products were not manufactured by a prohibited foreign entity, for each major component category – modules, inverters, batteries, electrical equipment.
- Cost allocation documentation supporting the material assistance calculation.
- Manufacturing location records for cells and wafers, not only for final assembly.
- Ownership disclosure sufficient to support an influence analysis.
- Purchase orders, invoices and payment confirmations retained against the project.
- Contractual warranty of compliance with a stated remedy if the credit is later disallowed.
Timing, safe harbour and the audit window
Projects that had begun construction before the relevant cutoff may be able to rely on prior rules, but only with dated evidence – either significant physical work of a permanent nature, or a defined share of project cost paid or incurred before the cutoff. If a supplier claims safe harbour treatment, ask for that evidence specifically.
Also note the enforcement horizon: for these provisions the tax authority has a substantially longer challenge window than the standard period, and miscalculation carries a percentage penalty on top. That is a long tail of exposure for a project that will be owned for decades.
Tariffs are a separate line on the same spreadsheet
Sourcing compliance is not the only cost variable. Duty rates vary by producer rather than only by country, and deposits are estimates that get liquidated later – sometimes upward. Two practical habits follow: lock pricing with a duty-change clause rather than accepting a bare price hold, and qualify two module options per project so a rate change does not stall the build.
Procurement checklist
Reference table
Swipe horizontally to view all columns →
| Stage | Require | Why it matters later |
|---|---|---|
| Before PO | Supplier FEOC attestation per component category | Cannot be reconstructed after shipment |
| Before PO | Manufacturing locations for cell and wafer | Final assembly is not the test |
| Design | Material assistance ratio modelled, PV and storage separately | Storage threshold is stricter |
| Design | Domestic content scenario priced both ways | The applicable bonus can exceed equipment savings; a 10-point ITC increase requires qualifying conditions |
| Contract | Compliance warranty with remedy, duty-change clause | Allocate risk before deposit |
| Construction | Retain invoices, POs, payment confirmations | Audit window runs years |
| Pre-filing | Internal review of the full documentation pack | Gaps are cheaper to close early |
Working with a supplier on this
The useful question to ask any supplier is not “are you compliant” but “what will you warrant, in writing, and what happens if it is wrong”. Our import and documentation checklist covers the shipping paperwork side, and the equipment categories involved are listed on the products page – including energy storage, which carries the stricter threshold. For project-specific documentation, start from the contact page.
This article is general information for procurement planning, not tax or legal advice. Confirm your project’s position with qualified counsel.
PRACTICAL ANSWERS
Questions buyers ask about this
What does the FEOC test actually look at?
It is a ratio, not a pass or fail per component. It looks at how much of the cost or material content traces to a foreign entity of concern, so a single component does not decide the outcome on its own.
Does assembled in the USA settle it?
No. Assembly location and material origin are separate tests. Domestic content has its own threshold and its own reward, and passing one does not pass the other.
What documentation do buyers need?
A supply-chain traceability file for the components in scope: manufacturer, sub-component origin and the cost breakdown. Without it the project cannot demonstrate compliance even if it would qualify.
Can stocked U.S. inventory help?
It helps on schedule, and the documentation still has to be assembled. We supply the traceability documentation for the models we quote so the compliance question is answered before shipment rather than after.
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