Biden administration announces measures to strengthen critical supply chains | WilmerHale

On June 8, the Biden administration released reports on Supply Chain Reviews Led under Executive Order (EO) 14017, “America’s Supply Chains,” detailing key findings and next steps to strengthen the resilience of U.S. supply chains and promote the manufacturing capabilities of the United States. Reports, like OE 14017, are worded in general terms but clearly focus on the United States’ dependence for critical products and materials on foreign economic competitors, and China in particular. Companies in any strategically important sector including semiconductors, artificial intelligence, 5G, autonomous vehicles, healthcare, pharmaceuticals, defense, renewable energy, mining, transportation and industrial food production, must keep abreast of developments in this area and ensure that their actions are taken into account as policies are developed.

President Biden signed EO 14017 on February 24, 2021, initiating a 100-day interagency review to identify risks in supply chains for four products deemed critical to U.S. national and economic security: manufacturing and packaging semiconductors, high capacity batteries, including vehicle electronics (EV); critical and strategic minerals, including rare earth elements; and pharmaceuticals and active pharmaceutical ingredients (APIs). These reviews – which were conducted by the Department of Commerce (DOC), Department of Energy (DOE), Department of Defense (DOD), and Department of Health and Human Services (HHS), respectively – examined a wide range of risk offerings in the chain and identified five main sources of vulnerabilities:

  1. Insufficient American manufacturing capacity, as the United States lost more than a third of manufacturing jobs between 2000 and 2010 due to competition from low-wage countries and stagnant productivity, especially for small and medium-sized enterprises ( SME).
  2. Misaligned incentives and short-termism in private markets, as U.S. companies increasingly focus on maximizing short-term returns on capital while neglecting investments that would improve long-term quality, sustainability or productivity.
  3. Industrial policies of allied, partner and competitor countries, which have adopted strategic programs to advance their own economic competitiveness, such as the EU’s $ 3.5 billion R&D fund to increase the competitiveness of its advanced battery industry.
  4. Geographic concentration in global sourcing, as the pursuit of American companies for low-cost production and the industrial policies of competing countries have led to a concentration of the supply chain in a few key countries, such as China, India and Taiwan.
  5. Limited international coordinationbecause the U.S. government has under-invested in international diplomatic efforts to develop collective supply chain security approaches with its partners and allies.

The four supply chain review reports make a number of recommendations to strengthen U.S. supply chains for advanced batteries, critical minerals, pharmaceuticals and semiconductors, including through Federal procurement and federally funded grants, cooperative agreements and R&D contracts. In light of these recommendations, the Administration is taking the following immediate actions to address critical vulnerabilities in the U.S. supply chain:

  • The Administration is in the process of forming a Supply Chain Disruption Task Force to address short-term supply chain discontinuities. The working group will be led by the Secretaries of Trade, Transport and Agriculture and will focus on convening stakeholders to address the disparities between supply and demand in construction and construction of housing, semi – drivers, transport, agriculture and food.
  • DOC will continue its strategic engagement with the U.S. semiconductor industry to facilitate the flow of information between vendors, semiconductor producers, and end users, including bringing stakeholders together through advisory committees to improve transparency and data sharing. The administration will also engage with allies and partners to promote fair allocations of semiconductor chips, promote investment and increase semiconductor production.
  • The DOE will mobilize $ 17 billion in loan authorization under the Advanced Vehicle Manufacturing Loan Program to retrofit, expand or establish advanced vehicle battery manufacturing facilities. The DOE will also release a national lithium battery master plan to urgently develop a lithium battery supply chain to tackle climate change and create clean energy jobs. DOE’s Federal Energy Management Program (FEMP) will also launch a government-wide review and call for energy storage projects by federal agencies, using $ 13 million in FEMP grants to ‘assistance to federal facilities with energy conservation technologies.
  • DOD will deploy DPA Title III incentives – including grants, loans, loan guarantees, and operating agreements – to promote sustainably produced essential minerals. The DOE will make $ 3 billion in loan guarantees available as part of its Title 17 renewable energy and energy efficiency project solicitation to support critical materials projects that meet Title 17 requirements. Development Finance Corporation will seek to expand international investments in the production of essential minerals that meet environmental and social performance standards. An interagency working group led by the Home Office will also work to identify national sites for the production and processing of critical minerals.
  • HHS will establish a public-private consortium under the legal authority of the Defense Production Act (DPA) for the onshore production of essential drugs. The group is tasked with identifying 50 to 100 essential drugs from the Food and Drug Administration’s Essential Medicines List that will be at the center of this enhanced relocation effort. HHS will also commit $ 60 million in US bailout DPA funding to promote API’s domestic manufacturing capability.

In addition to these efforts, the administration is also training a “trade strike force” led by the Office of the United States Trade Representative to identify unfair foreign trade practices that have eroded critical United States supply chains and to recommend remedies. trade measures to combat these practices, especially in relation to China. The DOC will assess whether it is appropriate to initiate an investigation under section 232 of the Trade Expansion Act of 1962 – the provision of law that the Trump administration used to impose tariffs on steel and aluminum imports – to assess whether imports of neodymium magnets (used in engines) pose a threat to national security.

As the second phase of supply chain initiatives led under OE 14017, the Biden administration is launching a series of one-year reviews of the following six critical industrial base sectors: defense industrial base; the industrial base of public health and biological preparation; the industrial base of information and communications technologies; the industrial base of the energy sector; the industrial base of transport; and supply chains for the production of agricultural and food products. Interagency working groups are due to publish their reports on these sectors by February 24, 2022.