Supply Chain

Barely noticed in the firehose stream of presidential activity since the inauguration was a brief Oval Office mention of cutting a deal with Ukraine for access to its critical minerals. Securing steady access to uranium, the rare earth elements, and other critical minerals is a natural priority for an America First agenda, so President Trump’s February 3 statement is unlikely to be his last. Changes to the tax code, permitting reform, regulatory incentives, and partnerships with allies as well as troubled nations are among the actions to watch for.

A Bipartisan Issue

Leaders of both parties agree that action is needed. “Whether it’s critical minerals with China … or uranium from Russia, we can’t be dependent on them,” Secretary of the Interior Doug Bergum asserted in his confirmation hearing. “We’ve got the resources here. We need to develop them.” Virginia Senator Mark Warner (D, VA) recently charged, “China dominates the critical mineral industry and is actively working to ensure that the U.S. does not catch up.” He urged, “The U.S. must, alongside allies, take meaningful steps to protect and expand our production and procurement of these critical minerals.” President Biden’s State Department was even more blunt, asserting that China is intentionally oversupplying lithium to “lower the price until competition disappears.”

Several recent developments have increased U.S. policymakers’ concerns about future supplies of critical minerals. New technologies, including artificial intelligence, promise to dramatically boost demand. China, meanwhile, is using new export control laws to curtail exports to the United States. A resurgent war in the eastern provinces of the Democratic Republic of the Congo (DRC), ostensibly over tribal rivalries, is actually a fight over the country’s rich mineral resources. These include gold and diamonds, but also coltan, an ore from which tantalum is extracted. Tantalum is extremely valuable for its use in the capacitors found in smartphones, laptops, and medical equipment.

The number of minerals in question (51), the usual number of steps in the production chain (4), and the variety of international agreements, public laws, private initiatives, and emerging technologies add up to a dizzyingly complex set of issues. Nevertheless, the bipartisan alignment evident in the above statements signals that impacted industries should watch closely for fast-moving legislative and regulatory developments.

Market Overview

Critical minerals are essential for a long list of industrial and defense-related needs. Attention is often focused on the 17 ‘rare earth elements,’ (REEs) but the U.S. Geological Survey (USGS) has a broader list of 50 mineral commodities that are critical to the nation’s economy and national security. Uranium is excluded by a statutory definition but is often tracked in parallel. Together, these 51 elements are used for a far wider array of products than is often recognized. The 17 REEs alone are also needed for oil refining, guided missiles, radar arrays, MRI machines, computer chips, hydrogen electrolysis, lasers, aluminum manufacturing, cameras, jet engines, satellite manufacturing, and a long list of other advanced applications.Continue Reading What President Trump Might Do on Critical Minerals

President Biden recently signed bipartisan legislation reinforcing anti-human trafficking prohibitions. The End Human Trafficking in Government Contracts Act of 2022 builds on the existing anti-human trafficking framework at Federal Acquisition Regulation (“FAR”) § 52.222-50 (Combatting Trafficking in Persons) by requiring agencies to refer contractor reports of potential human trafficking activity directly to an agency suspension and debarment official (“SDO”).  Prior to this legislation, contractors have been required to notify their contracting officer and the agency inspector general upon receiving “[a]ny credible information” that a human trafficking violation had occurred.  See FAR § 52.222-50(d)(1).  Now agencies will be required to refer these reports to their SDOs, creating additional risk for contractors that disclose potential violations. 

This legislation – which passed Congress unanimously – demonstrates the federal government’s ongoing focus on anti-human trafficking matters – a focus that has been shared across presidential administrations.  For instance, in 2015, President Obama significantly expanded the FAR’s anti-human trafficking prohibitions, and in 2019, President Trump sought to undertake a comprehensive review of the government’s anti-trafficking efforts and released a list of “best practices” to guide contractors.  President Biden now joins this ongoing, bi-partisan effort to increase government contractors’ focus on human trafficking by signing the recently-passed legislation.

Despite the federal government’s longstanding efforts to prevent human trafficking in its supply chain, many questions remain concerning how to comply with the requirements.  Below are three of the most common questions we encounter in applying the FAR’s anti-human trafficking provision:Continue Reading New Law Increases Government Scrutiny of Contractor Compliance with Anti-Trafficking Provisions

Late on July 27, Sen. Joe Manchin and Senate Majority Leader Charles Schumer announced an agreement on the Inflation Reduction Act (IRA): a reconciliation package that implements prescription drug pricing reform, invests in Affordable Care Act health care subsidies, imposes a corporate minimum tax and improves tax enforcement, and—most…

Continue Reading Overview of the Inflation Reduction Act

On November 27, 2019, the Department of Commerce issued a proposed rule to implement the May 15, 2019 Executive Order entitled “Securing the Information and Communications Technology and Services Supply Chain.”  Once finalized and effective, the regulations will govern the process and procedures that the Secretary of Commerce will use to determine whether certain transactions involving information and communications technology or services (“ICTS”) should be prohibited or otherwise restricted.  As currently drafted, the proposed rule goes further than many other legal authorities, in that it allows the government to prohibit or otherwise restrict a broad range of wholly commercial transactions that the Secretary determines present national security risks.

Details on key aspects of the proposed rule are in a Client Alert that we published, available here.  The public comment period remains open until December 27.  Given the breadth of the proposed rule and the significant number of open questions, thoughtful comments will be critically important in scoping a final rule.
Continue Reading Commerce Department Proposes Rule Impacting Information and Communications Technology Supply Chains

Generating and sustaining the United States’ global economic and military superiority over more than the last half century has depended on a dominant U.S. global economic position and perpetual technological innovation. The United States has increasingly relied on a global industrial supply chain and a relatively open environment for foreign investment in early stage technology development to sustain this dominant position, but in so doing has built risk into the foundation of its competitive advantage. The U.S. Government has growing concerns that these past practices meant to extend the U.S. economic and military advantage are contributing to its erosion. As a result, the Department of Defense (DoD), other Executive agencies, and Congress are taking steps to mitigate risks across the defense industrial and innovation supply chains that provide hardware, software, and services to the U.S. Government.
Continue Reading How Well Do You Know Your Supply Chain? New Policy Developments Affect Defense and Security Contractors