The U.S. Department of Commerce’s first-of-its-kind Supply Chain Center aims to leverage cross-sectoral expertise and data to better identify and safeguard vulnerable supply chains important to America’s national and economic security. This includes the development of a risk assessment framework to inform policymakers about current or prospective supply chain risks. In a notice published today, the agency has requested input on its risk assessment methodologies in general, as well as how it should identify “critical sectors” and “key goods” for purposes of supply chain cooperation under the Indo-Pacific Economic Framework for Prosperity (IPEF).
Commerce’s Supply Chain Center
Founded in 2023, the Supply Chain Center leverages deep industry expertise, quantitative data, and the advanced analytics of Commerce’s Industry & Analysis (I&A) unit to enhance the United States’ response to critical supply chain challenges. To strategically advance policy priorities and improve the effectiveness of U.S. government investments in supply chains, the Supply Chain Center collaborates across government agencies, ranging from Commerce, the Department of Energy, and the Department of Health & Human Services, as well as partners from industry, academia, labor, and civil society.
With the goal of presenting the U.S. government’s first comprehensive assessment of supply chain vulnerabilities, the Supply Chain Center is developing a cross-sectoral supply chain risk assessment framework (dubbed “the tool,” and explained in some detail for the first time in Commerce’s notice). At present, the tool consists of about 40 indicators across geopolitical, economic, logistical, business/financial, technological, and environmental risk categories. By identifying hidden vulnerabilities in critical supply chains, Commerce intends the tool to inform data-driven policy recommendations.
The first half of Commerce’s request for comments broadly concerns the activities of the Supply Chain Center as well as the specific indicators that might be utilized in “the tool.” Commerce requests input on risk identification methodologies, possible data indicators for identifying criticality, vulnerability, and resiliency, examples of practices used by other organizations to undertake similar supply chain assessments, and suggestions for additional types of supply chain data that the U.S. government may be able to develop.
IPEF Coordination to Secure “Critical Sectors” and “Key Goods”
The IPEF is a multilateral framework that aims to enhance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness across its 14 member economies. The Supply Chain Agreement (SCA) negotiated under IPEF auspices entered into force on February 24, 2024. The SCA establishes a framework for preventing, mitigating, and preparing for supply chain disruptions, such as those experienced during the COVID-19 pandemic. Six IPEF partners — Fiji, India, Japan, the Republic of Korea, Singapore, and the United States — have ratified the SCA.
One component of the SCA is the Supply Chain Council (Council), through which IPEF partners will identify “critical sectors” and “key goods,” defined in Article 1 of the SCA as those “critical to” (in the case of critical sectors) or having “a significant effect on” (in the case of key goods) “a Party’s national security, public health and safety, or prevention of significant or widespread economic disruptions.” The IPEF places particular emphasis on the clean energy, digital, and technological sectors. For such sectors/goods, the Council will establish teams to recommend Action Plans for increasing resilience and competitiveness among the partners, including recommendations for business matching, joint financing or investment, joint research and development, diversification, raw material production and processing capacity-building, relieving logistical bottlenecks, and improving interconnectivity.
Commerce will soon submit its initial list of “critical sectors” and “key goods” to the Council. By the terms of the SCA this would appear to be due later this month, though Commerce’s notice does not specify a date. The second half of Commerce’s request seeks public input to inform its work on the Supply Chain Council, including suggestions concerning how it should assess sectors and goods for inclusion on the United States’ lists. Such methodological comments may have ongoing implications, insofar as the SCA permits lists to be updated at any time.
Conclusion
Although Commerce’s request is broad and open-ended, the comment period is relatively short. Comments must be filed electronically, preferably via regulations.gov (Docket No. 240530-0148), by June 21, 2024. Supply chain issues will inform U.S. policymaking for years to come, and early input as agencies develop their information-gathering and assessment methodologies is likely to shape outcomes.
For those with an interest in U.S. supply chain policy, Cassidy Levy Kent is able to leverage its experience across a broad range of critical supply chains to assist in the preparation of comments.