Biden Administration Releases First 100-Day Review, Spurring Immediate Actions for US Supply Chains

On 24 February, 2021, President Biden issued Executive Order (“EO”) 14017 launching a “whole-of-government approach” to assessing vulnerabilities in and strengthening the resilience of critical supply chains.  The EO directed a federal government task force to examine the vulnerabilities of America’s supply chains of four critical industry sectors: (1) semiconductor manufacturing and advanced packaging; (2) large capacity batteries (i.e., those for electric vehicles); (3) critical minerals and materials; and (4) pharmaceuticals and active pharmaceutical ingredients (“APIs”), and to report on its analysis based on its initial 100-day review.  The EO further directed the task force to report on its initial analysis within 100 days.  The EO also set a one-year deadline for more extensive assessments of supply chains for six major industries, including the aerospace and defense, information and communications technology (“ICT”), energy, and transportation sectors. 

Over the past 100 days, an internal task force including more than a dozen federal departments and agencies consulted with stakeholders from labor, business, academic institution, Congress, and U.S. allies to examine supply chains of the first four critical sectors.  On 8 June, 2021 the Administration released the results of its first 100-Day Review under the EO, Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth (“the Report”) and also announced immediate actions it plans to take to address the issues identified in the Report.  The Report, which comprises the results of four separate supply chain reviews, lays out the task force’s findings and announces several immediate actions the Administration plans to take to address supply chain weaknesses and vulnerabilities, focusing on increased domestic production and decreased dependence on foreign supply.

Supply chain challenges, along with economic security, are front and center in the global economic agenda, as countries around the world continue to struggle with the human and economic costs of the COVID-19 pandemic. This supply chain initiative is a high priority for the Biden Administration, demonstrating the Administration’s desire to decrease dependency on foreign governments and suppliers and compete with those who capture a large portion of the market, particularly China.  We anticipate more actions to come from the additional supply chain reviews that will be issued, per EO 14017.  Companies involved in the four critical industries examined – semiconductor manufacturing, large capacity batteries, minerals and materials, and pharmaceutical products – should review the report and the newly announced programs closely to determine how they may relate to their business and how best to leverage these new opportunities.  Notably, Congress is similarly focused on ensuring U.S. competitiveness and supply chain resiliency.  The same day the Biden Administrations issued its Report, the Senate passed the U.S. Innovation and Competition Act (S. 1260), a sweeping bill that provides $250 billion dollars for research and development and advanced manufacturing, and includes other provisions aimed at addressing U.S.-China relations, to help America better compete in critical industries.

Below, we provide a high-level summary by sector of some of the key findings and recommendations in the Report.  We are happy to speak with you further about the details of the Report and the President’s supply chain review, including its implications for your company and sector.

Semiconductor Manufacturing and Advanced Packaging

Key Findings

Semiconductors are used in almost every part of our daily lives, including consumer electronics, home appliances, manufacturing, agriculture, healthcare and energy. U.S. semiconductor production has fallen from 37 percent of global semiconductor production to just 12 percent over the last 20 years. The Report found that the American semiconductor industry lacks production capability at the most advanced technology levels and looks (along with its allies) mostly to Taiwan for leading edge logic chips supply. The United States produces only 6 to 9 percent of the more mature logic chips, and even that supply has been further affected by the current shortage.  The lack of U.S. production, and centralized production in other countries, makes the United States highly dependent and without a diversified supply chain for semiconductors.

U.S. Actions to Address Semiconductor Shortage

The Administration announced that the Department of Commerce will bolster its already existing partnership with and investments in private sector domestic semiconductor manufacturing and R&D and promote improved transparency and data sharing. Further, the Administration will build on its already existing engagements with Japan and Korea, which include $17 billion in US semiconductor investments by Korean companies, to promote fair semiconductor chip allocations, increase production, and promote increased investment.

Large Capacity Batteries

Key Findings

Advanced, high-capacity batteries are critical to America’s transition to clean energy and its national security capabilities. Demand for these batteries, such as those used in electric vehicles, will only continue to increase. The Report found that America currently relies heavily on the imports of inputs used in the production of large-capacity batteries, exposing us to supply chain vulnerabilities. The Report concludes that, to meet the increasing demand associated with clean energy goals, the United States must scale its lithium battery supply chain, including the sourcing and processing of the critical minerals used in production, all the way to end-of-life battery collection and recycling.

U.S. to Secure End-to-End Domestic Supply Chain for Large Capacity Batteries

The Administration announced that the Department of Energy will release a National Blueprint for Lithium Batteries, codifying the findings of the battery supply chain review and helping to develop a domestic lithium battery supply chain.  This will create good paying clean energy jobs in the U.S. and decrease the nation’s dependency on imports.  Further, the Department of Energy’s Loans Program Office will make available $17 billion in loans under the Advanced Technology Vehicles Manufacturing Loan Program to provide financing to manufacturers of advanced technology vehicle battery cells and packs for re-equipping that are expanding or establishing their facilities in the United States. Additionally, the Department of Energy’s Federal Energy Management Program will launch a new effort to support the use of energy storage projects by federal agencies.  This effort will include a government-wide review to evaluate the opportunities to use battery storage at federal sites and provide technical assistance to build those projects once identified.

Critical Minerals and Materials

Key Findings

An increased supply of critical minerals and materials is necessary to develop clean energy technology and meet national and global climate goals.  The Report found that China captured large portions of the supply chain for these minerals and materials and holds most of the world’s refining capacity. This makes the United States highly dependent on China for processing even if it increases its domestic extraction or looks to other countries for critical mineral supply.

U.S. to Invest in Sustainable Domestic and International Production and Processing of Critical Minerals

To increase the nation’s domestic production of critical minerals and materials, the Department of the Interior (“Interior”) and White House Office of Science and Technology Policy will establish a working group composed of federal agencies including the US Department of Agriculture (“USDA”) and the Environmental Protection Agency (“EPA”) to identify sites where critical minerals could be produced and processed in the United States, while still adhering to high environmental, labor and sustainability standards.  The working group will collaborate with the private sector, states, Tribal Nations, and other stakeholders, including community and environmental leaders.

Further, the Administration will establish an additional interagency team composed of staff from the Interior, USDA, EPA and other federal agencies to identify gaps in statutes and regulations that may need updating to ensure new production: 1) meets strong standards throughout the mining process; 2) includes participating in meaningful community engagement and consultation with Tribal Nations; and 3) creates opportunities to reduce time, cost, and risk of permitting without compromising strong environmental and consultation benchmarks.

The federal government will also provide financing and increase its investments in the production of critical minerals in several ways.  First, the Department of Defense (“Defense”) will use Defense Production Act (“DPA”) Title III incentives such as grants, loans, loan guarantees, and offtake agreements, to support sustainably produced strategic and critical materials. Second, the Department of Energy Loans Program Officer will make available more than $3 billion in loan guarantees to support efficient end-use energy technologies such as mining, extraction, and processing. Additionally, the U.S. Development Finance Corporation will expand its international investments in projects that expand production capacity for critical products, including critical minerals, that support supply chain resilience.

Pharmaceuticals and Active Pharmaceutical Ingredients

Key Findings

The COVID-19 pandemic has shown the critical importance of the U.S. healthcare manufacturing sector. Although federal investment in the private sector’s innovation allowed the US to develop a strong COVID-19-related products supply chain, the Report found that the nation remains critically dependent on imports of pharmaceutical products and active pharmaceutical ingredients (APIs) which represent 90 percent of all prescriptions filled. The Report identified China and India as the main controllers of the supply chain, specifically the parts in which there have been shortages causing disruption to the United States’ supply.

U.S. to Support Domestic Production of Critical Medicines

To increase the nation’s production and decrease its dependence on foreign suppliers of pharmaceuticals and APIs, the Department of Health and Human Services (“HHS”) will establish a public-private consortium for advanced manufacturing and onshoring of domestic essential medicines production. This consortium will likely include participation from pharmaceutical companies and will serve as a working group to advise on expanding U.S. production of pharmaceuticals and developing new technologies that will reduce costs and increase the resilience of the domestic pharmaceutical manufacturing sector.  As a first step, the consortium will select 50-100 critical drugs from the essential medicine’s list developed by the FDA as directed per E.O. 13944, Combating Public Health Emergencies and Strengthening National Security by Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States. Additionally, HHS will make an initial commitment of approximately $60 million under the DPA appropriation in the American Rescue Plan to develop novel platform technologies to increase domestic manufacturing capacity for APIs.

“Whole-of-Government Effort”

The above actions, coined a “whole-of-government effort,” are intended to address the United States’ vulnerabilities in critical product supply chains and also to build fair and sustainable industrial bases – both in the United States and in our ally nations.   To support these initiatives, the Administration has announced the following additional governmental programs and actions aimed at supporting American workers and innovation and investing in sustainable supply chains at home and abroad:

• The Department of Labor will shortly announce more than $100 million in grants to be used to support and expand state-led apprenticeship programs and establish national Registered Apprenticeship Technical Assistance Centers of Excellence.

• The Department of Energy will require innovations developed with taxpayer dollars through its programs to be substantially manufactured in the United States.

• The Federal Acquisition Regulatory Council (“FARC”), in its implementation of E.O. 14005, plans to issue a proposed administrative rule to develop a new process for preferencing critical products that are in manufactured products or component parts under the Buy American Act.

• The USDA will commit more than $4 billion in initiatives focusing on rebuilding the nation’s food system and strengthening and diversifying its supply chain. USDA will specifically seek to improve access to nutritious food, address racial equity, make markets fair and competitive, and support producers and workers.

• President Biden plans to convene a global forum with U.S. allies on supply chain resilience.

Combatting Unfair Trade Practices

The Administration also announced the establishment of a trade strike force led by the U.S. Trade Representative (“USTR”) to propose unilateral and multilateral enforcement actions against unfair foreign trade practices causing harm to supply chains.  The trade strike force will also look for opportunities to use trade agreements to strengthen the collective global approach to supply chains and sustainability.   In her 10 June 2021 remarks before the AFL-CIO, USTR Ambassador Tai emphasized the importance of the elective vehicle battery supply chain in particular.

Further, the Administration has tasked Commerce with examining whether a Section 232 investigation regarding neodymium magnets, critical inputs in motors and other devices, is needed.

Authored by Kelly Ann Shaw, Joy Sturm, Cayla Ebert, Mary Anne Sullivan, David Horowitz, Lance Bultena, Craig Lewis, and Chandri Navarro.