On February 24, 2022, the Biden Administration announced the
release of six executive-branch reports and a White House
“capstone” report pursuant to
Executive Order (EO) 14017 on America’s Supply
Chains (February 24, 2021), which established a
policy of pursuing more resilient, diverse, and secure American
supply chains. These reports culminated year-long sectoral
assessments of the supply chains underlying the U.S. industrial
base from seven cabinet-level agencies – the Departments of
Commerce, Defense, Energy, Homeland Security, Transportation,
Health and Human Services, and Agriculture, following an initial
phase of reviews issued in June 2021. The sectoral
assessments reflect a stock-taking of vulnerabilities, an
envisioning of fundamental developments necessary for supply chain
security, and short- and long-term proposals that rely heavily on
industry participation.
Phase One: 100-Day Supply Chain Reviews
In the first initial work phase established by EO 14017, the
Departments of Commerce, Energy, Defense, and Health and Human
Services were instructed to assess supply chain vulnerabilities
across four key products: semiconductors, large-capacity batteries,
critical minerals and materials, and pharmaceutical and active
pharmaceutical ingredients. These assessments culminated in a
report of
“100-Day Reviews” published by the White House
in June 2021. The report containing reviews from all four
agencies identified insufficient U.S. manufacturing capacity,
misaligned markets, foreign nations’ industrial polices,
geographic (global) concentration of key supply chains, and limited
international coordination as drivers of the challenges faced in
those four sectors.
The 100-day report also provided recommendations ranging from
investing or promoting investment in manufacturing and R&D, to
deploying procurement, technical assistance, grants, and financing
to support supplier diversification, to using market tools to
support sustainability and workforce standards, to expanding
multilateral engagement with global allies and strengthening
international trade rules. For additional information and
analysis on the Executive order and the administration’s
100-day report, please visit our blog
here and
here.
Phase Two: One-Year Sectoral Assessments
The reports issued last month represent the second phase of work
under EO 14017, instructing the agencies to provide specific policy
recommendations and proposals for strengthening and ensuring
resilient supply chains. Links to the full reports with
areas of focus for each are highlighted below.
Key Takeaways
- Like the 100-day reports, the one-year and capstone
reports acknowledge the need to work with “allies and
partners” in securing supply chains, in particular where
domestic sources may not exist. The elevation of
“near-shoring” or “ally-shoring” as reasonable
alternatives to on-shoring or building up domestic production
capacity is an acknowledgment by the Administration that not every
link in every supply chain can be reasonably located in the United
States. But the identification of global trusted
partners as opposed
to adversarial or unaligned nations
is a critical element of the Administration’s approach to
supply chain security.
The events of recent weeks place this policy objective into
extreme focus. Russia’s invasion of Ukraine (and its
loose alliance with China) could invoke a reckoning for some
countries that have been deeply entrenched in certain supply
chains, but that are unlikely to be viewed as trusted partners
going forward. Industry should be prepared for longer-term
business impacts.
- Supply-chain policy is here to stay and U.S.
industry has a critical role in the development and implementation
of that policy. These sectoral assessments are the
result of what the report’s describe as a
“whole-of-government” effort that is supported, in turn,
by U.S. industry. In addition to the headlined agencies, many
other agencies and sub-agencies have been gathering data from
industry over the past year. By participating in these supply
chain analyses, industry has shaped these initial outcomes.
But the work outlined in EO 14017 has only begun and the next
stages offer both opportunities and risks for industry.
“As soon as practicable,” the Assistants to the President
for National Security Affairs and Economic Policy must make
specific recommendations to the President regarding the sectoral
assessments, focusing on making supply chains and the domestic
industrial base more resilient and effective through reforms to
domestic and international trade rules and agreements; education
and workforce reforms; policies that promote small business; and
procurement and incentive programs that attract and retain
investment in critical goods.
The EO also requires quadrennial reviews involving ongoing data
gathering and supply chain monitoring, with the next set of reports
to be released in 2025. In addition, many of the sectoral
reports note the creation of new interdisciplinary task forces that
will continue to grapple with supply chain policy issues. As
a result, industry members should continue to remain engaged and
look for opportunities to collaborate with the government.
- A critical pathway toward more resilient
supply chains is through promotion of targeted investment and
market development, both domestically and abroad.
The reports collectively identify several recent investments the
government has undertaken to support increased domestic production.
For example, the Department of Energy will invest $7 billion
from Bipartisan Infrastructure Bill in large-capacity battery
supply chain, including material refining and production, battery
cell and pack manufacturing, and recycling. Additionally, the
Department of Defense has invested to re-shore production of rare
earth metals. Investments in U.S. production of
semiconductors by leading foreign corporations in allied nations
are also touted.
Equally important to the U.S. government’s directing federal
dollars to developing markets and capacity in support of critical
supply chains is the need to partner with and/or promote industry
and foreign allies in strengthening industrial bases through
private, public-private, or cross-government collaborative
mechanisms. At the same time, the reports collectively
acknowledge the need to mitigate risk of “adversarial”
foreign ownership, control, or influence (FOCI) in supply
chains. Thematically, these dual goals – fostering market and
capacity growth while seeking to avoid harmful foreign influence in
supply chains – depend heavily on identifying and developing a
trusted global supply chain network.
A Larger Framework to Promote Domestic Manufacturing
EO 14017 is just one piece of a larger policy framework through
which the Administration seeks to promote the American economy and
domestic manufacturing.
For example, in June 2021, the Administration launched a
rapid-response, interagency Supply Chain Disruptions Task Force
(SCDTF) to address the immediate supply chain challenges arising
from the COVID-19 pandemic in the areas of transportation logistics
and labor shortages, semiconductor availability, food, and
agriculture.
In July 2021, President Biden issued
EO 14036 on Promoting Competition in the American
Economy. The EO recognized the importance of robust
and diverse agriculture, information technology,
telecommunications, and healthcare sectors to the long-term
resilience of competition, supply chains, U.S. workers, and
consumers. Through EO 14036, President Biden pledged a
whole-of-government approach to defending against “the
monopolization of the American economy.”
President Biden has advocated for comprehensive competitiveness
legislation, including the America Creating Opportunities
for Manufacturing, Pre-Eminence in Technology, and Economic
Strength (COMPETES) Act (which passed in the House of
Representatives) and the United States Innovation and
Competition Act (USICA) (which passed in the
Senate). These legislative vehicles include numerous,
wide-ranging provisions aimed at promoting investment in the
domestic industrial base and domestic manufacturing (including to
expand supply of semiconductors through the Creating
Helpful Incentives for Production of Semiconductors (CHIPS) for
America Act), shoring up supply chains, and combatting unfair
trade practices.
And most recently, consistent with the policy of leveraging the
government’s purchasing power to strengthen the resilience of
supply chains, the Federal Acquisition Regulatory (FAR) Council
published a
final rule amending the Federal Acquisition Regulation
(FAR) to strengthen Buy American Act (BAA) requirements in
accordance with President Biden’s January 25, 2021
Executive Order (E.O.) 14005, Ensuring the Future is
Made in All of America by All of America’s Workers.
This new rule increases the BAA’s domestic content threshold
for certain end products and construction materials.
As the Administration works toward institutionalizing domestic
competitiveness and supply chain resilience, policy recommendations
will translate into programs, guidance, and directives. This
may create opportunities or areas of risk for U.S. companies,
particularly domestic manufacturers, as the key agencies navigate
the complexities of implementing proposals and distributing
funds. We are available to help you understand and evaluate
how your company’s business strategy and planning may interact
with these broad-reaching, cross-government policies.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
