Agriculture & Food Products
On March 11, 2021, President Joseph R. Biden Jr. signed into law the American Rescue Plan Act of 2021 (“ARPA” or “the Act”),[i] which provides $1.9 trillion in federal funds for a broad array of programs at the national, state, and local levels. Included in the Act are provisions allocating billions of dollars to initiatives targeting the agriculture and food products industries.
Three provisions may be particularly meaningful for companies involved in these sectors. They are found in Section 1001 of the Act, entitled “Food Supply Chain and Agriculture Pandemic Response,” which provides $4 billion for a number of programs to be implemented by the U.S. Department of Agriculture (“USDA”). The first two provisions allocate funds to the USDA to purchase food and agricultural products. The third allocates funds to the USDA to assist in maintaining and improving the resiliency of the United States’ food and agricultural supply chains.
It is important to note that none of these provisions, on their own, provide government grants or funds to private businesses. Instead, they are broadly written budgetary provisions directing money to the USDA. To use the allocated funds, the USDA will need to create programs and issue guidance describing eligibility and other specifics. We are closely monitoring the development of these programs and will provide updates as more information becomes available. In the meantime, the following describes what we can glean from the text of these provisions and how we expect them to fit within the Biden Administration’s broader policy goals.
1. Section 1001(b)(1): Purchasing Food and Agricultural Products
This subsection sets aside an unspecified amount of the $4 billion dollars allocated to the USDA for the agency “to purchase food and agricultural products.” While vague, this provision allows the federal government to use potentially billions of dollars of purchasing power to buy a wide array of raw agricultural commodities and finished food products—allowing an influx of government funds up and down the supply chain.
The breadth of this program’s potential impact is underscored by the Act’s decision to not define the phrase “food and agricultural products,”[ii] provide examples of what specific types of products will be targeted, or specify (or exclude) vendors that will be eligible to participate in this program.
As we wait for the USDA to take further action, the domestic-producer preference signaled in President Biden’s Made-In-America Executive Order may bode well for American farmers and other domestic food and agricultural product producers.[iii] The Order states, in part:
The United States Government should, consistent with applicable law, use terms and conditions of Federal financial assistance awards and Federal procurements to maximize the use of goods, products, and materials produced in, and services offered in, the United States. The United States Government should, whenever possible, procure goods, products, materials, and services from sources that will help American businesses compete in strategic industries and help America’s workers thrive.
Accordingly, domestic producers in the agricultural and food product industries have reason to be optimistic that most of the funds allocated under this section will stay in the American market.
2. Section 1001(b)(2): Purchasing & Distributing Agricultural Commodities to Those in Need
This subsection is similar to § 1001(b)(1), but assigns an unstated amount of the allocated funds for the USDA “to purchase and distribute agricultural commodities (including fresh produce, dairy, seafood, eggs, and meat) to individuals in need, including through delivery to nonprofit organizations and through restaurants and other food related entities, as determined by the Secretary [of Agriculture], that may receive, store, process, and distribute food items.” Together with § 1001(b)(1), the federal government may use billions of dollars to purchase a wide array of “agricultural commodities.” Although the Act provides examples of such commodities (“including fresh produce, dairy, seafood, eggs, and meat”), this list is not exhaustive, and the Act does not otherwise define the phrase. We will continue to watch for further guidance on covered commodities from the USDA.
As to which vendors or entities can benefit from this program, the subsection is again broadly written, and further guidance is needed. But for now, the Act notes that nonprofits, restaurants, and “other food related entities” may be used as partners for the receipt, storage, processing, and distribution of these items. “[O]ther food related entities” could include logistics and transportation companies—especially those that specialize in the transportation and storage of food and agricultural products—or entities in the food-processing industry, which may be called upon to provide processing and packaging services for producers lacking such capabilities. Finally, producers of agricultural commodities, particularly those who sell “produce, dairy, seafood, eggs, and meat” will certainly benefit.
And once again, President Biden’s Made-In-America Executive Order may bode well for domestic agricultural producers and those related industries.
3. Section 1001(b)(4): Improving Food and Agricultural Supply Chain Resiliency
This provision sets aside an undetermined portion of funds allocated to the USDA “to make loans and grants and provide other assistance to maintain and improve food and agricultural supply chain resiliency.” This subsection allows the federal government to invest potentially billions of dollars toward assisting food and agricultural products producers—as well as those in related support industries—work toward long-term sector stability and security. Again, this provision is incredibly vague, only stating that the expenditures must “maintain and improve food and agricultural supply chain resiliency.”
While this requirement is not explained or defined by the Act, excerpts from President Biden’s Executive Order on America’s Supply Chains[iv] may shed some light on areas of priority:
- Section 1 of the Order notes that the principle concerns justifying strengthened domestic supply-chain resilience included “[p]andemics and other biological threats, cyber-attacks, climate shocks and extreme weather events, terrorist attacks, geopolitical and economic competition.”
- It also states, “More resilient supply chains are secure and diverse—facilitating greater 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. Moreover, close cooperation on resilient supply chains with allies and partners who share our values will foster collective economic and national security and strengthen the capacity to respond to international disasters and emergencies.”
- Later, Section 5 of the Order calls for policy suggestions related to, among other things, “insulating supply chain analyses and actions from conflicts of interest, corruption, or the appearance of impropriety;” “reforms to domestic and international trade rules and agreements;” and “prevent[ing] monopolization.”
Taken together, these excerpts indicate that companies participating in, or someway impacting, the United States’ food and agricultural supply chain should be mindful that, under § 1001(b)(4) of the APRA, the USDA may make policies and expenditures focused on, for example:
- Strengthening cybersecurity and data privacy protections;
- Increasing standards for corporate compliance programs and internal controls;
- Reevaluating international trade rules and agreements;
- Increasing domestic production;
- Decreasing consumption from foreign suppliers, especially those in non-allied nations;
- Prioritizing antitrust enforcement
- Stress testing domestic supply chains;
- Strengthening environmental protections;
- Increasing climate change and extreme weather preparedness; and
- Building strategic national stockpiles.
Helpfully, within the next year, companies in the affected industries will have some idea of what policies the USDA may prioritize under § 1001(b)(4). Section 4 of the Order tasks the heads of federal agencies—including the Secretary of Agriculture—to submit reports evaluating the supply chains within their purview by February 24, 2022. Specifically, the Secretary of Agriculture will release “a report on supply chains for the production of agricultural commodities and food products.” Therefore, while it is possible that the USDA begins to take action in the near future, it is likely that most policies and expenditures made under § 1001(b)(4) will not occur until after the Secretary of Agriculture releases the agency’s supply chain status report.
[i] American Rescue Plan Act of 2021, Pub. L. No. 117-2 (2021).
[ii] While not dispositive, it is worth noting that the USDA has working categories of “food products” and “agricultural products” that it uses for calculating the United States’ trade balance. See, e.g., United States Department of Agriculture Foreign Agricultural Service, GATS Agricultural Products Definition (accessed March 22, 2021) https://apps.fas.usda.gov/gats/AgriculturalProducts.aspx; Congressional Research Service, U.S. Foods and Agricultural Imports: Safeguards and Selected Issues (July 1, 2020). Moreover, the USDA’s Foreign Agricultural Service recently adopted the World Trade Organization’s definition of “agricultural products” for its trade balance analysis. See United States Department of Agriculture Foreign Agricultural Service, Updated “Agricultural Products” Definition for Trade Reporting (accessed March 22, 2021) https://www.fas.usda.gov/updated-agricultural-products-definition-trade-reporting. These categories are helpful starting points but will not necessarily determine what products the USDA will ultimately choose to purchase under the Act.
[iii] For more information on President Biden’s Made-In-America Executive Order, please see our January 2021 client alert.
[iv] For more information on President Biden’s Executive Order on America’s Supply Chains, please see our February 25, 2021 client alert.