On Feb. 24, 2021, President Joe Biden signed an executive order (EO) triggering a comprehensive review of U.S. supply chains, ordering agencies to identify ways to secure the American economy against shortages of critical and essential goods.
As noted by the White House, this EO requires federal agencies to conduct a two-phase review of U.S. supply chains. First, the EO directs an immediate, 100-day review of key products in the supply chain, to include semiconductors, critical minerals, active pharmaceutical ingredients and large-capacity batteries. Second, the order calls for a more in-depth, one-year review of the domestic supply chain supporting six key industrial sectors: the defense industrial base, public health and biological preparedness industrial base, information and communications technology industrial base, energy sector industrial base, transportation industrial base, and supply chains for agricultural commodities and food production.
The EO orders a sweeping review of U.S. supply chains. Based on the White House briefing, the stated aim is to “ensure that production shortages, trade disruptions, natural disasters and potential actions by foreign competitors and adversaries never leave the United States vulnerable again.” To accomplish this, the order instructs federal agencies to: (1) identify critical goods and materials within supply chains; (2) make specific policy recommendations to address risks; (3) commit to long-term supply chain resiliency, including a quadrennial review process; and (4) consult with external stakeholders including those within state government and industry groups.
In connection with the issuance of the EO, the White House acknowledged that recent supply chain shortages of automotive semiconductor chips — used for numerous vehicle systems, including engine management, automatic braking and assisted driving — have limited automotive production in the United States. The EO does not contemplate a direct fix for the near-term chip shortage within the automotive industry; instead, it requires federal agencies to report risks in the semiconductor manufacturing and advanced packaging supply chains and make policy recommendations to address these risks.
This extensive review reflects the administration’s commitment to reduce the country’s dependence on foreign suppliers. Prior actions, including another executive order taking steps to strengthen Buy American rules, indicate that the Biden administration may intend to utilize federal procurement policy to strengthen domestic supply chains. The EO instructs federal agencies to provide recommendations based on their review of supply chains to identify any incentives or changes to federal procurement regulations that may attract and retain investment in supply chain stability. Through possible forthcoming regulatory changes, the Biden administration appears poised to incentivize companies to invest in domestic supply chains and mitigate risks related to reliance on foreign sources. Government contractors and subcontractors that sell products to the federal government should closely monitor developments in this area, as capturing such opportunities may require significant changes to their supply chain management.