Background
President Biden has declared that the United States needs resilient, diverse, and secure supply chains to ensure our economic prosperity and national security, and he has made the security of these supply chains a priority. In the wake of the COVID-19 pandemic and other biological threats, cyber-attacks, extreme weather events, terrorist attacks, geopolitical and economic competition, and other conditions, the viability of the critical manufacturing capacity of the United States and the availability and integrity of critical goods, products, and services has been put at risk. Citing the pressure of these events, President Biden signed a comprehensive EO that directs the heads of federal departments and agencies to identify ways to secure and protect U.S. supply chains from various risks and maintain the nation’s competitive edge in the global economy while improving its national security posture. The ultimate objective of the reviews ordered by the EO is to generate well-informed recommendations that will create more resilient supply chains that are secure, utilize domestic production as much as possible, enable adequate stockpiles, and maintain close cooperation on strong supply chains with allies.
100-day review details
The 100-day review will focus on the following supply chains: API supply chains, as the administration cites, in recent decades more than 70 percent of API production has moved offshore; critical minerals supply chains,4 such as rare earths for electric motors, carbon fiber for manufacturing, and other commodities that are vital for the defense, technology, and manufacturing sectors; semiconductors and advanced packaging supply chains; and large capacity batteries supply chains, such as those used in electric vehicles.
The target of the 100-day review is to identify the steps that the administration can quickly take, including in conjunction with Congress, to protect U.S. supply chains. This review will be coordinated by the assistant to the president for national security affairs (APNSA) and the assistant to the president for economic policy (APEP), who will coordinate with the following specified heads of departments, who will work in consultation with the heads of appropriate agencies,5 to create recommendations to fulfill the goal of the EO: the secretary of commerce (Commerce); the secretary of energy (Energy); the secretary of defense, as the national defense stockpile manager (Defense); and the secretary of health and human services (HHS).
Commerce will identify risks in the semiconductor manufacturing and advanced packaging supply chains; Energy will identify risks in the supply chain for high-capacity batteries; and Defense will identify risks in the supply chain for critical minerals and other identified strategic materials, including rare earth elements. Additionally, Defense will describe and update work done pursuant to EO 13953 of September 30, 2020 (Addressing the Threat to the Domestic Supply Chain From Reliance on Critical Minerals From Foreign Adversaries and Supporting the Domestic Mining and Processing Industries), and HHS will identify risks in the supply chain for pharmaceuticals and active pharmaceutical ingredients, which will complement the ongoing work to secure the supply chains of critical items needed to combat the COVID-19 pandemic, including personal protective equipment, conducted pursuant to EO 14001 of January 21, 2021 (A Sustainable Public Health Supply Chain).
The APNSA and APEP will review the submitted reports and submit them to the president, making overall recommendations to fulfill the purpose of the EO.
One-year review details
The one-year review will focus on the following sectoral supply chains: the defense industrial base, the public health and biological preparedness industrial base, the information and communications technology (ICT) industrial base, the energy sector industrial base, the transportation industrial base, and supply chains for agricultural commodities and food production.
Each department will submit a report on the supply chains for the industrial base for their department. Defense will also submit a report on supply chains for the defense industrial base that updates the report provided pursuant to EO 13806 of July 21, 2017 (Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States), and builds on the Annual Industrial Capabilities Report mandated by Congress pursuant to section 2504 of title 10 of the United States Code. In addition to the departments that are included in the 100-day review, the secretary of homeland security (Homeland Security), the secretary of transportation (Transportation), and the secretary of agriculture (Agriculture) will also submit reports.
The reports will include reviews of the critical goods and materials in each supply chain; reviews of other essential goods and materials; the manufacturing or other capabilities needed to produce the critical goods and materials, and essential goods and materials; and an analysis of the defense, cyber, intelligence, homeland security, health, climate, market, and other risks that may disrupt, strain, compromise, or eliminate the supply chain.
The critical part of the reports will be focused on the resiliency and capacity of the manufacturing supply chains and the industrial and agricultural base, whether civilian or defense, of the United States to support national and economic security, as well as emergency preparedness.
Recommendations may include sustainably reshoring supply chains and developing domestic supplies, cooperating with allies and partners to identify alternative supply chains, building redundancy into domestic supply chains, ensuring and enlarging stockpiles, developing workforce capabilities, enhancing access to financing, expanding research and development to broaden supply chains, addressing risks due to vulnerabilities in digital products relied on by supply chains, and addressing risks posed by climate change.
Steps that could be taken include statutory, regulatory, procedural, and institutional design reforms in all areas of supply chains including domestic statutes and international trade rules. Additionally, they could include federal incentives and any amendments to federal procurement regulations that may be necessary to attract and retain investments in critical goods and materials and other essential goods and materials, including any new programs that could encourage both domestic and foreign investment in critical goods and materials.
Key takeaways
The ultimate intention of these reviews is to make recommendations that the administration can use to strengthen and fortify U.S. supply chains for these critical products and industries. Specifically, the Biden administration is looking to avoid the failure that happened early in the pandemic when there was a lack of protective equipment and other critical goods due to a combination of reliance on other countries and inadequate stockpiles.
Companies that do business within the targeted supply chains, or utilize goods from those supply chains, should begin reviewing their practices and internal processes in preparation for changes that the government may implement. Particularly, businesses that have migrated their manufacturing capabilities offshore should prepare for pressure to move these aspects of their business back to the United States. Moreover, the Biden administration has strongly asserted that it seeks to reduce dependency on a single supply chain source, so businesses should start proactively looking at ways to diversify their resources and supplier base.
- “Critical minerals” has the meaning given to that term in EO 13953 of September 30, 2020 (Addressing the Threat to the Domestic Supply Chain From Reliance on Critical Minerals From Foreign Adversaries and Supporting the Domestic Mining and Processing Industries).
- “Critical goods and materials” means goods and raw materials currently defined under statute or regulation as “critical” materials, technologies, or infrastructure.
- “Other essential goods and materials” means goods and materials that are essential to national and economic security and emergency preparedness, or to advance the EO, but not included within the definition of “critical goods and materials.”
- “Supply chain,” when used with reference to minerals, includes the exploration, mining, concentration, separation, alloying, recycling, and reprocessing of minerals.
- “Agency” means any authority of the United States that is an “agency” under 44 U.S.C. 3502(1), other than those considered to be independent regulatory agencies, as defined in 44 U.S.C. 3502(5). “Agency” also means any component of the Executive Office of the President.
Client Alert 2021-057
