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Legal Update

New Executive Order on Manufacturing Sheds Light on Possible Regulatory Changes for US Defense Contractors

3 August 2017
Mayer Brown Legal Update

On July 21, 2017, President Trump issued Executive Order 13806 on “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States.” Noting that the ability of US domestic manufacturers to supply “essential components” that are “critical to national security” is “essential to the economic strength and national security of the United States,” the Executive Order (EO) announced a policy of fostering “healthy manufacturing and defense industrial base and resilient supply chains.”

After lamenting the “loss of more than 60,000 American factories, key companies, and almost 5 million manufacturing jobs” since 2000, the EO called for a “comprehensive evaluation of the defense industrial base and supply chains” to help determine what further actions are needed to buttress these sectors of the American economy. Specifically, the EO requires the Department of Defense and other defense-related agencies to submit a report by April 17, 2018. The report is supposed to:

  • Identify military and civilian goods that are “essential to national security”;
  • Identify the manufacturing capabilities essential to producing these goods;
  • Identify contingencies that may disrupt, strain, compromise or eliminate the supply chains for these goods;
  • Assess the resiliency and capacity of US manufacturing and defense industrial base and supply chains to provide these goods upon the occurrence of these contingences (including assessments of manufacturing capacity, gaps in national-security-related domestic manufacturing capabilities, supply chains with single points of failure or limited resiliency, instances of exclusive or dominant supply of the goods or components by unfriendly nations, and possible substitutes for these goods);
  • Identify the causes of any deficiencies in US supply chains; and
  • Recommend legislative, regulatory and policy changes to address any weaknesses.

This new EO does not require the promulgation of any regulation or create any substantive rights. Nonetheless, viewed in conjunction with Executive Order 13788 on “Buy American and Hire American” (issued April 2017), the new EO presents a clear statement of the Trump administration’s priorities and an early indication of possible regulatory changes that would affect how government contractors acquire the components needed to perform their contracts. To the extent that they rely on foreign suppliers for component parts—particularly suppliers from “unfriendly nations”—government contractors would be well advised to begin identifying and pricing alternatives.

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