On February 24, 2021, President Biden issued a new executive order (EO) intended to create resilient and secure supply chains for critical and other essential goods and materials. The EO addresses growing concerns by the new administration about the security and resiliency of U.S. supply chains, citing the strain caused by shortages of essential products ranging from semiconductor chips to personal protective equipment (PPE). The administration has specifically called out the shortage of PPE in 2020 at the beginning of the COVID-19 pandemic as unacceptable. More broadly, pandemics, cyber-attacks, climate shocks, terrorist attacks, and geopolitical and economic competition are all listed in the EO as examples of conditions with the potential to reduce critical manufacturing capacity for much-needed goods.
To address these issues, the EO calls for an immediate 100-day review of the supply chains of four sensitive high-tech sectors. As part of a longer-term review, the EO also directs the U.S. government to conduct a more in-depth analysis, over a year-long term, of a broader set of U.S. supply chains. The EO also stresses the importance of the United States coordinating with trading partners and allies to ensure supply chain resiliency beyond the U.S. The administration has expressed an intent to draw talent from the American workforce to build secure supply chains, in particular communities of color and economically distressed areas harmed by industrial decline. These directives are discussed in greater detail in this alert.
Consultation with Stakeholders and 100-Day Supply Chain Review
Notably, the EO’s initial directive is to create an interagency process to coordinate federal agencies to address these issues. Federal agencies are encouraged to consult with outside stakeholders – those in industry, academia, nongovernmental organizations (NGOs), communities, labor unions, and state, local, and tribal governments – on ideas for strengthening the resilience of U.S. supply chains. In particular, federal agencies are directed to conduct a comprehensive 100-day review of the supply chains in four important and sensitive high-tech sectors, as follows:
- Semiconductor Manufacturing and Advanced Packaging;
- Large-Capacity Batteries;
- Strategic and Critical Minerals; and
- Pharmaceuticals and Active Pharmaceutical Ingredients
The intent of the 100-day review is to identify potential near-term actions to address vulnerabilities in the supply chain of these critical goods and to close gaps, as needed. The Departments of Commerce, Energy, Defense, and Health and Human Services are directed to consult with heads of appropriate agencies to submit reports identifying risks in the supply chain for each of the relevant high-tech sectors, respectively.
These reviews will likely dovetail with overlapping priorities at the White House and on the Hill regarding these sensitive sectors, such as the increased concern over the recent semiconductor shortage. It echoes the calls from the Biden team in the leadup to last year’s election for increased focus on supply chains and calls for reshoring or “near-shoring” production of critical and essential goods.
Year-Long Sectoral Assessments of Supply Chains
The EO also requires an in-depth one-year sectoral assessment of a broader set of U.S. supply chains. These assessments are designed to focus on six key industrial sectors in particular:
- Defense Industrial Base;
- Public Health and Biological Preparedness Industrial Base;
- Information and Communications Technology (ICT) Industrial Base;
- Energy Sector Industrial Base;
- Transportation Industrial Base; and
- Agricultural Commodities and Food Production Supply Chains
The Executive Department with oversight over each sector is tasked with consulting the heads of the appropriate agencies and submitting a supply chain report. Each report shall include a review of:
- “Critical goods” (as defined by E.O. 13953, issued last fall) and materials within the supply chain;
- Other essential goods and materials, including digital products;
- Manufacturing or other capabilities necessary to produce identified goods and materials, including emerging capabilities;
- Supply chain vulnerabilities;
- Capacity of American manufacturing supply chains and the industrial and agricultural base, such as:
- Locations of key manufacturing and production assets;
- Substitutes or alternative sources for critical goods;
- The state of workforce skills and gaps; and
- The role of transportation in support of supply chains and industrial bases;
- Whether U.S. allies and partners have also identified and prioritized critical goods and materials and other essential goods and materials;
- Primary causes of identified risks;
- Prioritization of goods and materials pursuant to relevant statutory or regulatory requirements, and based on importance to national security, emergency preparedness, and the EO’s policy;
- Specific policy recommendations;
- Executive, legislative, regulatory, and policy changes or actions; and
- Proposals for improving supply chains.
Providers of transportation and logistics services must pay particularly close attention to this year-long assessment process, given the intense scrutiny of supply chain resilience, security, diversity, and strength. As the EO calls for a regular and ongoing process to review supply chain resilience, including a quadrennial review and reporting process, this issue appears poised to remain front and center for the foreseeable future.
Recommendations
Businesses will need to monitor the supply chain review process as it unfolds in order to stay abreast of any changes that could impact their supply chains. Proactive outreach to key government stakeholders may be critical during the review period. We will be fully engaged on these issues, given the importance of supply chains to so many businesses. If you have any questions on how this executive order and the resulting reviews could impact your operations, please reach out to Venable’s International Trade and Logistics Group for guidance.