President Biden signed an Executive Order on America’s Supply Chains, E.O. 14017, which initiates a 10-day period to review the strength of United States supply chains for four specific sectors.  The purpose of the Executive Order is to address weaknesses in, and shortages of, critical supplies in order to prevent future crises from dependency on adverse foreign suppliers.  As part of the review, the Biden Administration will determine if any legislative, regulatory or policy changes are needed to eliminate shortages of crucial supplies, which were identified during the COVID-19 pandemic.

The Executive Order cites several important benefits from securing the supply chain, including: (1) increasing “domestic production, a range of supply, built-in redundancies, adequate stockpiles, safe and secure digital networks, and a world-class American manufacturing base and workforce;” and (2) facilitate needed investments to maintain America’s competitive edge, and strengthen US national security, and to ensure “well-paid jobs for communities.”

President Biden identified the semiconductor issue as the highest priority in order to develop solutions to semiconductor shortages.  The other industries identified by President Biden’s Executive Order are: (1) large capacity batteries; (2) critical minerals; (3) Active Pharmaceutical Ingredients (APIs) used in the drug industry.  The 100-day review will focus on supply chains for semiconductors and these three product lines. In addition to these four industry sectors, the Executive Order mandates a one-year review for the defense base, public health, biological preparedness, energy, transportation, agricultural and food production. 

The 100-day review of the critical product lines for semiconductors, large capacity batteries, critical minerals and APIs will seek to develop government-wide solutions.  The recommendations and actions resulting from this review can have significant implications.  For example, if the review identifies significant supply chain risks from foreign manufacturing and sourcing of critical inputs, U.S. companies may face difficult remedies.  Companies that depend foreign suppliers in these four specific industries should participate in the review process.  It is very unlikely that the review will prohibit foreign manufacturing and sourcing but may result in new and significant incentives encouraging domestic manufacturing and sourcing.

An important part of the Biden Administration review is the impact that international trade laws and regulations have on U.S. supply chain resilience.  Again, this issue will focus on China but extend to other countries that supply critical inputs (e.g. Taiwan, E.U.).

The focus on the four critical industries is directed at U.S. trade activities with China, which supplies the vast majority of semiconductors, high-capacity batteries, critical minerals, and APIs for drug manufacturing.

Semiconductors

The U.S. has experienced a shortage of semiconductors which has been exacerbated by the rise in consumer demand for consumer electronics, the ongoing restrictions against Huawei and other Chinese companies.  The global shortage has had a devastating impact on automotive companies and other companies relying on IoT to provide smart products.  The Executive Order process is unlikely to address immediately the shortage problem, but will seek longer-term solution to protect against a shortage in semiconductors.

Large Capacity Batteries

The 100-day review of large-capacity batteries is focused on U.S. supply of lithium to support electric battery production.  The global demand for batteries for electric cars already is pressuring lithium battery supplies.  U.S. auto manufacturers are experiencing severe shortages as they convert to electric auto production.

Critical Minerals

The shortage in critical minerals has had a profound impact on defense industries.  The Trump Administration identified this problem in an earlier Executive Order 13953.  China has been identified as a significant risk in the supply of numerous rare-earth minerals (e.g. tungsten) needed

Active Pharmaceutical Ingredients

The Department of Health and human Services has identified risks in supply chains for key APIs used to make numerous drugs.  COVID-19 underscored possible shortages in key ingredients, and the Biden Administration is conducting this review as part of a proactive strategy to eliminate any possible weaknesses in response to a future pandemic.