The U.S. and other governments have taken a number of actions that are affecting production, trade, and supply chains. This regular update will keep you posted on these actions, and help you separate reality from rumor.
- President Trump invokes Defense Production Act (DPA). On March 18, President Trump invoked the 1950 wartime law to expand the production of hospital masks and protective gear to help fight the coronavirus. The act will be administered by the Commerce Department and will allow the government to require contractors to switch their production lines to manufacture needed medical supplies and other necessary goods.
Importantly, companies will not be held liable for taking any action “resulting directly or indirectly from compliance with a rule, regulation, or order issued pursuant to” the DPA.
DPA allows the federal government to compel companies through loans, loan guarantees, purchases and purchase commitments to prioritize and expedite development of supplies and resources to support national defense. It has three main sections:
- Companies are required to accept and prioritize contracts from the government and to prioritize “materials, services, and facilities to promote the national defense or to maximize domestic energy supplies.” This provision has historically been used to ramp up military production, but will now be used for medical supplies.
- The Act provides for financial measures, such as loans, loan guarantees, purchases, and purchase commitments, to speed up the production of materials “needed to support national defense and homeland security procurement requirements.”
- The act also allows the government to approve voluntary agreements between business competitors to work together to plan and coordinate measures to increase the supply of materials.
Our team will continue to share the latest developments and provide insights on the spread of coronavirus and its impact across sectors.