|The Executive Order and Review
Following the guidance Executive Order 14017, signed by President Biden on February 24, 2021, many federal agencies have begun the process of reviewing their supply chain. The guiding purpose of the Executive Order is to make America’s supply chains less vulnerable to disruptions such as pandemics, cyber-attacks, and economic competition and less reliant on foreign supplies, workforces, or stockpiles instead of domestic industry and businesses.
The Executive Order directs numerous federal agencies, in coordination with the Assistant to the President for National Security affairs (APNSA) and the Assistant to the President for Economic Policy (APEP) to identify vulnerabilities in important US supply chains and subsequently develop policy recommendations and plans to ensure the security and resilience of those supply chains going forward.
The Executive Order mandated review of two categories of supply chain vulnerabilities. First, a 100-day review of four sectors: semiconductor manufacturing and advanced packaging; high-capacity batteries; critical minerals and strategic materials, and pharmaceuticals and active pharmaceutical ingredients.
Second, a one-year review of supply chains for six “industrial bases”: defense; public health and biological preparedness; information and communications technology; energy; transportation, and agricultural commodities and food products.
Following these reviews, the APNSA, APEP, and the relevant agencies will submit reports to the President detailing their findings and actions taken in advancement of the Executive Order as well as recommendations to further strengthen the supply chain.
At present, no firm rules or regulations have been set forth, but the expectation is that there could be a mixed bag of additional compliance “burdens” (e.g., trade restrictions) in some instances and “incentives” (e.g., tax credits, federal procurements) in others. While the Executive Order and subsequent regulatory changes likely will not have the power to directly modify the supply chains of private companies, possible regulatory changes could, as a practical matter, necessitate modification. Such regulations might include imposition of additional tariffs to push companies away from certain suppliers, additional import requirements on certain goods from certain countries, inclusion of certain foreign companies to the Entity List, or modification of federal procurement regulations to favor domestic goods (as already seems to be happening with the expansion of Buy American domestic content thresholds).
Federal agencies have begun issuing public notices and requesting public comments to assist in the evaluation of relevant supply chains. For example, the Department of Commerce requested comments (submission deadline of November 4, 2021) regarding the information and communications technology supply chain. Other agencies, including the Department of Transportation, Department of Energy, Department of Agriculture, and Department of Defense have also issue requests for public comment.
Companies participating in any of the supply chains identified by the Executive Order should consider participating in these requests for public comments as these supply chain review will more than likely lead to policy, regulatory, and compliance changes. Additionally, companies will want to keep an eye on the regulations that develop from these reviews in order to adequately prepare for additional compliance standards and capitalize on possible new business opportunities.