The U.S. International Trade Commission (USITC) today released a report on U.S. industries producing COVID-19 related goods and the supply chain challenges and constraints that impacted the availability of such goods.
The investigation, COVID-19 Related Goods: The U.S. Industry, Market, Trade, and Supply Chain Challenges, was requested by the U.S. House of Representatives’ Committee on Ways and Means and the U.S. Senate Committee on Finance in a letter received on August 13, 2020.
As requested, the USITC, an independent nonpartisan factfinding federal agency, completed the investigation as a follow-on to an earlier report that identified goods related to treating and otherwise responding to the COVID-19 pandemic. Released in May 2020 and updated in June 2020, that report identified the goods’ source countries, tariff classifications, and applicable duty rates.
The new report, focused primarily on the availability of goods from the onset of the COVID-19 pandemic through September 2020, provides overviews of four key industry sectors (medical devices, personal protective equipment, pharmaceuticals, and soaps and cleaning compounds). In addition, the report includes case studies on ventilators, N95 respirators, surgical masks, surgical and isolation gowns, medical and surgical gloves, test kits, vaccines, and hand sanitizer.
Major Findings:
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- U.S. demand for all products covered in the case studies substantially increased in the first half of 2020, as compared to 2019, leading to significant shortages. Domestic industries were able to continue current operations but faced challenges in ramping up production to meet growing demand. Importers of COVID-19 related goods faced disruptions to normal levels of supply for some products and challenges associated with a rapid increase in global demand.
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- The United States produced all goods covered in the case studies before the pandemic, as well as many of the inputs. However, the extent of domestic production varied significantly. The U.S. industry supplied only a relatively small share of the domestic market for certain medical PPE, such as medical gloves and gowns, but supplied a large share of the domestic market for goods like ventilators, vaccines, N95 respirators, and hand sanitizer.
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- U.S. imports of most COVID-19 related goods covered in the case studies increased substantially beginning around April or May 2020, depending on the product. Imports of many products exceeded their normal levels by orders of magnitude. Medical and surgical gloves, however, remain among the most hard-to-find items, with glove imports up only 17 percent during January-September 2020.
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- Some of the initial supply chain challenges have eased, such as those for ventilators, but a number remain, including for many PPE items. Gloves, for example, are one of the most highly constrained COVID-19 related products, with shortages expected to continue beyond 2021.
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- The major factors affecting domestic production of COVID-19 related goods include the availability and costs of inputs, the time and cost of bringing additional production capacity online (including purchasing and installing new machinery), and the time needed to recruit and train new workers. For firms entering the market or bringing new products to the market, challenges also include the time associated with designing products and getting them certified, as well as issues related to a hesitancy among purchasers to use unknown suppliers. Finally, U.S. producers faced, and continue to face, a conundrum when deciding whether to invest in domestic production, as there is little certainty about long-term demand and the ability to recoup investments, and a concern that post-pandemic purchasers will revert to buying from the lowest-cost suppliers, which often manufacture overseas.
- The most significant factor affecting imports was that global demand significantly exceeded available supply of many COVID-19 related goods, making it difficult for U.S. importers to procure sufficient quantities. Other major factors included substantially higher prices for imports, foreign export restrictions, logistics disruptions and cost increases, quality concerns (a significant increase in the number of counterfeit, illicit, and flawed products), and imported products differing from those used in the U.S. market.
COVID-19 Related Goods: The U.S. Industry, Market, Trade, and Supply Chain Challenges (Investigation No. 332-580, USITC Publication 5145, December 2020) is available on the USITC website at: https://www.usitc.gov/publications/332/pub5145.pdf.
USITC general factfinding investigations cover matters related to tariffs or trade and are generally conducted at the request of the U.S. Trade Representative, the House Committee on Ways and Means, or the Senate Committee on Finance. The resulting reports convey the Commission’s objective findings and independent analyses on the subjects investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the USITC submits its findings and analyses to the requester. General factfinding investigation reports are subsequently released to the public, unless they are classified by the requester for national security reasons.