US Bars DeepSeek From Civilian Federal Agencies and Government Contracts

The Department of Homeland Security has ordered civilian federal agencies to remove DeepSeek from their IT systems and barred the Chinese AI company from federal contracts under Exclusion and Removal Order #2026-01, signed by Homeland Security Secretary Markwayne Mullin on July 24 and reported by Bloomberg on October 19. Issued under the Federal Acquisition Supply Chain Security Act of 2018, the order requires agencies to immediately exclude DeepSeek, its affiliates and its products from procurement and to remove anything already running, treating the company as a supply chain risk rather than only a data-residency concern. The order does not add DeepSeek to the Commerce Department's Entity List, which would have triggered export controls reaching US chipmakers and cloud providers, and it leaves the Pentagon's separate restrictions untouched.

A Homeland Security order quietly dated this summer just became public, and it does something no prior DeepSeek restriction has: it reaches into federal procurement itself, not just employee devices. The US government has ordered civilian federal agencies to strip DeepSeek out of their IT systems entirely and barred the Chinese AI company from competing for federal contracts going forward. Bloomberg reported on October 19 that the order, formally called Exclusion and Removal Order 2026-01, was signed by Homeland Security Secretary Markwayne Mullin on July 24 and is only now coming to light. It was issued under the Federal Acquisition Supply Chain Security Act of 2018, a law originally built for hardware and cybersecurity vendors, not chatbots. DHS says the reasoning is straightforward: DeepSeek's models and infrastructure could hand Beijing, in the agency's words, actionable intelligence on US persons and government agencies, and the models themselves may carry hidden vulnerabilities. That's a step beyond the data-residency complaints that drove the first wave of bans back in early 2025. This time the government isn't just worried about what happens to a prompt typed into a chatbot. It's treating DeepSeek like a supply chain risk, the same bucket as a compromised router or a backdoored antivirus suite. Here's what the order actually does, and what it doesn't. Civilian agencies must exclude DeepSeek, its affiliated entities, and its products from procurement immediately, and remove anything already running. DeepSeek can no longer bid on or supply federal contracts. But the order stops at the civilian government's door. It does not touch the Pentagon's own separate restrictions, and DHS did not add DeepSeek to the Commerce Department's Entity List, which would have triggered export controls reaching into the private sector. That distinction matters. An Entity List addition would have forced US chipmakers and cloud providers to cut DeepSeek off at the infrastructure level. This order doesn't go there, at least not yet. Federal agencies have been chipping away at DeepSeek access for more than a year. NASA cut it off in January 2025. The Pentagon's Defense Information Systems Agency blocked it on military networks the same month, after officials found Department of Defense employees had been using the app on government devices for roughly two days before anyone noticed. The Commerce Department and the Navy followed with their own device-level bans, and the House of Representatives barred staff from installing it on official phones. None of that, though, touched whether DeepSeek could sell anything to the government or whether its code could sit inside agency infrastructure. This order does both. China Probes DeepSeek and Moonshot Over Secret Data Routing to Claude https://startupfortune.com/china-probes-deepseek-and-moonshot-over-secret-data-routing-to-claude/ Anthropic's September 10 threat report accused DeepSeek and Moonshot AI of secretly routing over 35 million combined user requests to Claude models, some containing Chinese police and military-linked data. China's Cyberspace Administration has now opened a formal probe into both companies, just days before planned Trump-Xi AI talks. - China AI companies secretly routing data to Claude https://startupfortune.com/china-probes-deepseek-and-moonshot-over-secret-data-routing-to-claude/ - how DeepSeek and Moonshot funneled requests to Claude https://startupfortune.com/china-probes-deepseek-and-moonshot-over-secret-data-routing-to-claude/ It also isn't the first time FASCSA has been used this way. The law's debut exclusion order, issued by the Office of the Director of National Intelligence in September 2025, targeted the backup software firm Acronis. Kaspersky got purged from federal networks under a related DHS directive back in 2017 over fears of Kremlin access, and Huawei has been locked out of federal contracts since 2019 under Section 889 of that year's defense authorization act. DeepSeek is now the fourth name added to a growing list of vendors the US government treats as untouchable regardless of product quality, and the first Chinese AI lab added to it. That's the part worth sitting with if you run procurement at a company that sells to Washington, or if your product stack touches a DeepSeek model anywhere. The government has made clear it will use supply chain law, not just export controls or app store takedowns, to wall off a foreign AI vendor it doesn't trust. DeepSeek has spent 2026 doing the opposite of retreating: it shipped V4.1 Flash on September 10, a sparse mixture-of-experts model with a million-token context window priced at just $0.15 per million input tokens, undercutting nearly every American rival on cost while it climbed coding leaderboards. The commercial pitch and the security verdict are now moving in completely opposite directions, and Washington just picked a side for its own agencies. Private companies aren't required to follow DHS's order. Plenty already have anyway. Enterprise security teams at hundreds of firms moved to block DeepSeek on their own networks last year, well ahead of any government mandate, according to reporting at the time from outlets including Fedscoop. Whether that pattern repeats now, with a formal federal procurement ban as the new benchmark, is the open question. The order gives risk-averse vendors and contractors a clean government precedent to point to the next time someone on their team asks why they can't just use the cheap, fast Chinese model. Also read: OpenAI Engineer Is Charged With Bugging Its Executive Boardroom https://startupfortune.com/openai-engineer-is-charged-with-bugging-its-executive-boardroom/ • Nvidia-Backed Firmus Grid Scraps Its IPO Entirely After Investors Balk https://startupfortune.com/nvidia-backed-firmus-grid-scraps-its-ipo-entirely-after-investors-balk/ • A Lone Hacker Used AI Agents to Breach More Than 100 Companies https://startupfortune.com/a-lone-hacker-used-ai-agents-to-breach-more-than-100-companies/ This article is posted in AI News https://startupfortune.com/category/ai/ , check it out for more related stories. Join the discussion Open in the community → https://startupfortune.com/community/ Almost there. Sign in and your reply posts straight away.