The Biden Administration Announces its Plan to Revitalize American Manufacturing and Secure Critical Supply Chains in 2022

The Biden Administration Announces its Plan to Revitalize American Manufacturing and Secure Critical Supply Chains in 2022

Client Alert


On February 24, 2022, the Biden Administration announced its plan to strengthen critical supply chains and invest in U.S. manufacturing and infrastructure. Seven agencies released six reports outlining key areas of vulnerability and policies that the federal government can take to strengthen U.S. supply chains in critical industrial base sectors. These reports mark the culmination of a two year-long supply chain review undertaken in response to Executive Order (“E.O”) 14017.

The reports focus in particular on addressing the United States’ dependence for critical products and materials on foreign economic competitors, such as China and the European Union. Most of the supply chain vulnerabilities identified in the reports reflect fundamental problems in the United States’ industrial bases – such as a lack of domestic manufacturing capacity, decaying infrastructure, and lack of skilled workforce – that require long-term solutions. However, the reports generally stop short of proposing new federal programs or funding mechanisms to address these core vulnerabilities. Companies in any critical industry – including defense, ICT, semiconductors, artificial intelligence, autonomous vehicles, energy, agri-business, pharmaceuticals, renewable energies, mining, and transportation – should stay abreast of the Administration’s supply chain initiatives and potential opportunities and risks that may arise as policymaking develops, including more domestic manufacturing incentives and new Buy America policies.

President Biden signed E.O. 14017, “America’s Supply Chains,” on February 24, 2021, launching a comprehensive interagency review to identify risks in the supply chains for products deemed critical to U.S. national and economic security, including: semiconductor manufacturing and packaging; large capacity batteries; critical and strategic minerals; and pharmaceuticals and active pharmaceutical ingredients (“APIs”). These reviews have been spearheaded by the Department of Commerce (“DOC”), the Department of Energy (“DOE”), the Department of Defense (“DOD”), and the Department of Health and Human Services (“HHS”).

The Administration announced the results of the initial 100-day supply chain reviews on June 8, 2021, with the release of four interagency reports. The 100-day reports examined a wide range of supply chain risks and identified five main sources of vulnerabilities: (1) insufficient U.S. manufacturing capacity; (2) misaligned incentives and “short-termism” in private markets; (3) strategic industrial policies adopted by competitor and allied nations, including China and the E.U., to advance their domestic competitiveness; (4) geographic concentration in global sourcing; and (5) limited international coordination on supply chain resilience. The 100-day reports also made a number of recommendations and announced immediate steps the Administration would take to strengthen U.S. supply chains while continuing to analyze potential long-term solutions to these problems. These immediate steps included:

  • Formation of a Supply Chain Disruptions Task Force (“SCDTF”) to address near-term supply chain discontinuities. In its first year of operation, the SCDTF focused primarily on relieving bottlenecks at U.S. ports and monitoring pandemic-related supply chain disruptions in the semiconductor industry.
  • DOE leveraging $17 billion in loan authority under the Advanced Technology Vehicles Manufacturing Loan Program to re-equip, expand, or establish advanced vehicle battery manufacturing facilities and $13 million in grants under the Federal Energy Management Program’s Assisting Federal Facilities with Energy Conservation Technologies.
  • DOD deploying over $3 billion in Defense Production Act (“DPA”) Title III incentives1  – including grants, loans, loan guarantees, and off-take agreements – to promote sustainably-produced critical minerals.
  • HHS establishing a public-private consortium under the DPA to on-shore production of 50-100 critical drugs from the Food and Drug Administration’s essential medicines list and making available $60 million in DPA funding from the American Rescue Plan to promote domestic manufacturing capacity for APIs.

This past week, the Administration issued the one-year reports. These reports detail the interagency working group findings of year-long reviews of the following six critical industrial base sectors: the defense industrial base (“DIB”); the public health and biological preparedness industrial base; the information and communication technology (“ICT”) industrial base; the energy sector industrial base (“ESIB”); the transportation industrial base; and supply chains for production of agricultural commodities and industrial food products.

There are several common themes and findings across the reports. First, they stress that any supply chain action must include significant investment in training and education of U.S. workers in critical industrial base sectors. Second, they call for the United States must invest in infrastructure and expand domestic manufacturing capacity. Third, they highlight the need to work with foreign partners to establish global standards to prevent supply chain vulnerabilities. Fourth, they recommend that the United States continue to diversify supply chains to improve resilience to global crises.

For the most part, the reports do not announce the creation of new programs to address the supply chain vulnerabilities they identify. Rather, the reports call for Congress to increase funding through existing or pending legislation – such as DPA Title III, the Bipartisan Infrastructure Bill (“BIL”), and the Creating Helpful Incentives to Produce Semiconductors for America Act (“CHIPS Act”) – in addition to agency-specific policy changes. Some of these policy changes can be implemented immediately with existing agency programs and funding, while others require congressional support. The Administration also identified the America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength Act (“COMPETES Act”), the United States Innovation and Competition Act (“USICA”), and President Biden’s Build Back Better Agenda as key policy initiatives that could be used to implement the agencies’ recommendations. The near-term prospects for securing funding under any of these legislative vehicles appear to be limited, with the possible exception of the CHIPS Act which already has strong bipartisan support in Congress. The Administration also announced it will propose a new domestic manufacturing initiative through the Export-Import Bank. This initiative will make available $44 million in funding for commercial-ready technologies.

Key findings from the six interagency reports include:

  • DOD’s analysis of the DIB found vulnerabilities in large capacity batteries, specifically lithium batteries, and casting and forging of metals and microelectronics. To strengthen these areas, DOD recommended the federal government: invest in training doctoral-level skilled labor; expand industrial security, counterintelligence, and cybersecurity; and expand domestic additive manufacturing. DOD also recommended that the DIB engage more small businesses as they are key members of the DIB supply chain.
  • The Department of Homeland Security (“DHS”) and DOC’s analysis of the ICT industrial base found that while U.S. ICT companies lead the world in innovation and development, most ICT products are made in China and the United States lacks the skilled work force to support re-shoring of ICT supply chains, leaving them vulnerable to continued disruptions. The report also identifies open-source software as a source of ICT supply chain vulnerability. To alleviate these vulnerabilities, DHS and DOC recommended that the United States invest in domestic manufacturing, work to improve international standards, and increase monitoring of ICT supply chains. Proposed sources of funding include the CHIPS Act, USICA and the COMPETES Act, and DPA Title III. The report also recommends use of “strong Buy America provisions,” particularly for projects funded under the BIL.
  • DOE’s analysis of the ESIB found that the United States has an opportunity to sustainably grow its domestic clean energy supply chains but currently lacks a manufacturing ecosystem for raw materials and adequate domestic production capabilities. DOE’s report includes more than 44 specific policy changes that the agency intends to implement, contingent upon the receipt of funding under the BIL. DOE also recommended that Congress enact legislation to provide tax incentives for domestic clean energy manufacturing and funding for domestic workforce training and that the federal government leverage foreign direct investment in U.S.-based clean energy technology manufacturing.
  • HHS’ analysis of the public health sector found that offshore manufacturing for personal protective equipment (“PPE”) and other health care supplies are a critical vulnerability and that pressure to reduce prices has resulted in a highly-concentrated manufacturing base that create vulnerabilities in supply chains. To address these issues, DHS recommended the United States invest in domestic manufacturing through DPA Title III funding; stockpile critical items; and improve workforce development.
  • The Department of Transportation’s (“DOT”) analysis of the freight and logistics supply chains found that U.S. ports are a key vulnerability and a bottleneck of supply chains and that domestic transportation infrastructure requires significant investment to alleviate supply chain vulnerabilities. DOT recommended that the federal government invest in U.S. infrastructure and building the U.S. workforce in this sector, with most proposed policy changes contingent upon funding under the BIL.
  • The Department of Agriculture’s (“USDA”) analysis found the agri-food supply chain vulnerabilities include: concentration of industrial food production; labor shortages; climate change; disease to livestock and poultry; transportation bottlenecks; and trade disruptions. USDA recommended taking action to address these challenges through existing funding mechanisms – such as USDA’s Local Agriculture Markets Program; Food Supply Chain Guaranteed Loan Program; Land Grant University System; and investments in Regional Rural Development Centers and Aquaculture Centers – as well as potential new sources of funding, such as the American Rescue Plan and the BIL.

WilmerHale will continue to monitor developments regarding the Administration’s supply chain security initiatives and provide strategic advice to impacted businesses.