The COVID-19 pandemic has spotlighted the danger of relying on foreign sources of supply for pharmaceuticals and other medical supplies. However, a closer look shows that the United States is dependent on foreign sources of supply in many areas critical to our economy and national security, including semiconductors and other electronics, telecommunication equipment, electric power transmission equipment, and military parts and equipment.
Early in his administration, President Trump began encouraging businesses to increase domestic manufacturing activity, including relocating offshore production to the U.S., hence the term "onshoring." These early efforts involved tariffs, tax code changes and the bully pulpit.
As a result of the pandemic, many political and business leaders have taken up the cause of onshoring the production of critical supplies. Recently, President Trump issued executive orders that prohibit use of telecommunications equipment produced by a Chinese company with ties to the ruling Communist Party, and barring the purchase or use of electric power transmission equipment produced in countries deemed "foreign adversaries." The President is also reportedly considering an executive order that would require federal agencies to purchase domestically produced pharmaceuticals and other medical supplies.
Congress has joined the onshoring effort with several pending bills that would encourage or require expanded domestic production. These bills range from tax code changes that encourage onshoring, to "Buy American"-type prohibitions on the use of foreign-produced supplies by the federal government or by others that receive federal funds. State governments are also joining the effort by supporting manufacturers located within their respective states.
Onshoring provides tremendous challenges and opportunities for business in affected industries. After years of expanding global supply chains, onshoring requires changing business models to expand production and use of American-made products. Businesses may need to build and equip new plants, or to modernize and expand existing facilities located in the U.S. Businesses will need legal partners to assist with many aspects of the onshoring process, including site selection and land use, environmental issues, real estate, financing, construction and procurement, and compliance. Smith Gambrell & Russell is uniquely positioned to guide clients through the onshoring process because of the breadth of our practices and the experience of our attorneys. We have successfully helped both U.S.-based and foreign corporations create and expand manufacturing, distribution and other infrastructure in the United States.
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