DAESH is making mustard gas and not taking it from the former stockpiles of Iraqi or Syrian regime forces, according to the Pentagon.
DAESH is "dead set" on using chemical arms and is likely to try them again as Iraqi forces advance on Mosul, a Pentagon spokesman said on Monday, a week after a rocket with a possible chemical agent landed near US troops in northern Iraq.
The rocket fired Tuesday landed in an unpopulated area near Qayyara West base, several hundred yards from where hundreds of US troops are working to prepare an airfield for an Iraqi offensive to recapture the city of Mosul.
No one was hurt in the attack.
The shell initially tested positive for a mustard agent, but two subsequent tests have been inconclusive and the device is undergoing further tests, Navy Captain Jeff Davis, a Pentagon spokesman, told reporters.
"We fully recognise this is something that DAESH has done before. They've done it many times, at least a couple dozen that we know of where they have launched crude makeshift munitions that are filled with this mustard agent," Davis said.
An air strike by the US-led military coalition destroyed a DAESH chemical weapons factory on Friday near Qayyara, the second attack against a chemical arms facility this month.
Davis said DAESH's ability to weaponise mustard agent has been rudimentary. The group typically uses a chemical powder bound together with tar, which leaves behind a telltale oil trace.
"It's not generally in a lethal concentration. It's more of an irritant than anything else, but again, not something we view as militarily significant," he said, noting that the gas form of mustard agent used in the First World War was far more lethal.
According to the Pentagon, DAESH is making mustard gas, and not taking it from the former stockpiles of Iraqi or Syrian regime forces.
Even though DAESH has not perfected the ability to weaponise chemicals, US and Iraqi forces still have to be prepared for a chemical attack, Davis said.
"We recognise this is real. They're dead set on it. They would love to be able to use chemical weapons against us, against the Iraqis as they move forward," Davis said. "We are making every effort to make sure that we're ready for it."
He said US troops deployed to the region have the training and equipment they need to defend against chemical attacks and are working to ensure the Iraqis are prepared and properly equipped as well.
Davis said the United States has provided more than 50,000 gas masks to Iraq, with about 40,000 going to Iraqi security forces.
DAESH have been accused of using improvised chemical weapons in Iraq and Syria for years. The internationally banned compounds have seriously injured or killed civilians and soldiers alike.
Mustard gas is a powerful irritant which causes severe blistering and the lungs to fill with liquid. Researchers say the agent is easy to produce.
US and Iraqi troops have been given special equipment to help protect themselves from various chemical weapons. But most civilians have little to no protection from agents like mustard, which can cause skin to melt off.
Iraqi forces' preparations are in full swing to retake Mosul, the largest city under DAESH control. DAESH leader Abu Bakr al-Baghdadi had declared his "caliphate" in the city around three years ago.
Whether DAESH makes a final stand in Mosul or slips away to fight another day remains in question, but Baghdad expects a fierce battle and the international coalition backing it is preparing for one.