    [Senate Hearing 116-627]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 116-627

                             EXAMINING THE AMERICAN
                    MANUFACTURING INDUSTRY'S RESPONSE TO THE
                                 COVID-19 PANDEMIC

    =======================================================================

                                    HEARING

                                   BEFORE THE

                     SUBCOMMITTEE ON MANUFACTURING, TRADE,
                            AND CONSUMER PROTECTION

                                     OF THE

                             COMMITTEE ON COMMERCE,
                          SCIENCE, AND TRANSPORTATION
                              UNITED STATES SENATE

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               NOVEMBER 17, 2020

                                   __________

        Printed for the use of the Committee on Commerce, Science, and
                                 Transportation

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                    Available online: http://www.govinfo.gov

                                  __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    52-854 PDF                  WASHINGTON : 2023

    -----------------------------------------------------------------------------------

           SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 SECOND SESSION

                      ROGER WICKER, Mississippi, Chairman
    JOHN THUNE, South Dakota             MARIA CANTWELL, Washington,
    ROY BLUNT, Missouri                      Ranking
    TED CRUZ, Texas                      AMY KLOBUCHAR, Minnesota
    DEB FISCHER, Nebraska                RICHARD BLUMENTHAL, Connecticut
    JERRY MORAN, Kansas                  BRIAN SCHATZ, Hawaii
    DAN SULLIVAN, Alaska                 EDWARD MARKEY, Massachusetts
    CORY GARDNER, Colorado               TOM UDALL, New Mexico
    MARSHA BLACKBURN, Tennessee          GARY PETERS, Michigan
    SHELLEY MOORE CAPITO, West Virginia  TAMMY BALDWIN, Wisconsin
    MIKE LEE, Utah                       TAMMY DUCKWORTH, Illinois
    RON JOHNSON, Wisconsin               JON TESTER, Montana
    TODD YOUNG, Indiana                  KYRSTEN SINEMA, Arizona
    RICK SCOTT, Florida                  JACKY ROSEN, Nevada
                           Nick Rossi, Staff Director
                     Adrian Arnakis, Deputy Staff Director
                        Jason Van Beek, General Counsel
                     Kim Lipsky, Democratic Staff Director
                  Chris Day, Democratic Deputy Staff Director
                          Renae Black, Senior Counsel
                                     ------

                     SUBCOMMITTEE ON MANUFACTURING, TRADE,
                            AND CONSUMER PROTECTION

    JERRY MORAN, Kansas, Chairman        RICHARD BLUMENTHAL, Connecticut,
    JOHN THUNE, South Dakota                 Ranking
    DEB FISCHER, Nebraska                AMY KLOBUCHAR, Minnesota
    DAN SULLIVAN, Alaska                 BRIAN SCHATZ, Hawaii
    MARSHA BLACKBURN, Tennessee          EDWARD MARKEY, Massachusetts
    SHELLEY MOORE CAPITO, West Virginia  TOM UDALL, New Mexico
    MIKE LEE, Utah                       TAMMY BALDWIN, Wisconsin
    RON JOHNSON, Wisconsin               KYRSTEN SINEMA, Arizona
    TODD YOUNG, Indiana                  JACKY ROSEN, Nevada

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on November 17, 2020................................     1
    Statement of Senator Moran.......................................     1
        National Association of Manufacturers--American Renewal Plan.     4
    Statement of Senator Blumenthal..................................    13
    Statement of Senator Cantwell....................................    43
    Statement of Senator Thune.......................................    45
    Statement of Senator Klobuchar...................................    46
    Statement of Senator Baldwin.....................................    48
    Statement of Senator Rosen.......................................    50

                                   Witnesses

    Ravi Bulusu, Founder, MolMas, Inc................................    15
        Prepared statement...........................................    17
    Neil Gilman, President, Gilman Gear..............................    18
        Prepared statement...........................................    21
    Rick Krska, President and Chief Executive Servant, InkCycle, Inc.    22
        Prepared statement...........................................    25
    Tiffany M. Stovall, CEO, Kansas Manufacturing Solutions, Kansas
      Manufacturing Extension Partnership (MEP)......................    27
        Prepared statement...........................................    29
    Michael Wessel, Commissioner, U.S.-China Economic and Security
      Review Commission..............................................    32
        Prepared statement...........................................    34

                                    Appendix

    Response to written questions submitted by Hon. Jacky Rosen to:
        Ravi Bulusu..................................................    53
        Tiffany M. Stovall...........................................    53
    Response to written questions submitted to Michael Wessel by:
        Hon. Dan Sullivan............................................    54
        Hon. Jacky Rosen.............................................    61

                             EXAMINING THE AMERICAN
           MANUFACTURING INDUSTRY'S RESPONSE TO THE COVID-19 PANDEMIC

                                  ----------

                           TUESDAY, NOVEMBER 17, 2020

                                   U.S. Senate,
    Subcommittee on Manufacturing, Trade, and Consumer
                                            Protection,
            Committee on Commerce, Science, and Transportation,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 2 p.m. in room
    SR-253, Russell Senate Office Building, Hon. Jerry Moran,
    Chairman of the Subcommittee, presiding.
        Present: Senators Moran [presiding], Thune, Fischer,
    Sullivan, Young, Blumenthal, Cantwell, Klobuchar, Baldwin,
    Sinema, and Rosen.

                OPENING STATEMENT OF HON. JERRY MORAN,
                        U.S. SENATOR FROM KANSAS

        Senator Moran. Good afternoon, everyone. Thank you for
    being with us or being near us, at least in the technology
    sense.
        As Chairman of the Senate Commerce Committee on
    Manufacturing, Trade, and Consumer Protection, I welcome all of
    you to today's hearing that we have entitled ``Examining the
    American Manufacturing Industry's Response to the COVID-19
    Pandemic.'' The Subcommittee, as of the pound of the gavel,
    will come to order.
        As the Nation continues to fight the unprecedented public
    health crisis brought on by the COVID-19 pandemic, Americans
    have worked to protect against further spread of the virus
    while trying to maintain a certain degree of normalcy,
    including maintaining a job and earning a paycheck. There is
    not a corner of the United States' economy that has not felt
    the impact of the pandemic, and today's discussion will focus
    on particularly harmful effects that this public health
    emergency has had on the manufacturing sector.
        During this pandemic, many in the manufacturing community
    have adapted their operations to help provide products needed
    to prevent the spread of the virus. Whether it is an early
    stage pharmaceutical wholesale distribution company that
    completely pivoted to manufacturing face masks in response to a
    dire national supply shortage or a successful printer cartridge
    remanufacturer shifting to production and distribution of hand
    sanitizer and other innovative sanitation solutions, we have
    examples of manufacturing businesses in Kansas taking the lead
    bolstering the U.S. manufacturing to compete globally and to
    assist in meeting the needs that arrive with the pandemic.
        There are a variety of Federal programs intended to provide
    assistance to our nation's manufacturers, and in response to
    the pandemic, Congress and the administration took action
    through the CARES Act to improve existing programs and to
    create a few new ones.
        As Chairman of the Senate Appropriations Subcommittee on
    Commerce, Justice, Science, and Related Agencies, I am
    particularly involved in the oversight of the National
    Institute of Standards and Technology Hollings Manufacturing
    Extension Partnership, MEP, which distributes resources to 51
    State designated centers to assist small and medium sized
    manufacturers. The CARES Act specifically provided an
    additional $50 million to the Fiscal Year 2020 appropriation to
    augment support in response to the pandemic. The law provided
    additional assistance by waiving the statutory non-Federal cost
    match requirement for all MEP funding for that fiscal year.
        The comprehensive pandemic response package offered
    assistance to manufacturers and other businesses, including but
    not limited to Small Business Administration's Paycheck
    Protection Program, the Treasury's Main Street Lending Program,
    the Manufacture USA Institutes, and the Economic Development
    Administration's Recovery Assistance Grants. Congress must
    uphold its oversight responsibilities to determine what worked
    in administrating these programs and make refinements, where
    appropriate, to ensure effective Federal investment.
        In addition to resources, the manufacturing community
    requires regulatory and technical guidance to enable new
    manufacturing venues such as production of masks, gloves,
    gowns, ventilators, and other relevant items.
        While I understand the U.S. Food and Drug Administration,
    the U.S. Centers for Disease Control and Prevention, the
    National Institutes of Health are fundamental in forming and
    sharing critical information needed to enable solutions, the
    private sector has played a critical role in the disbursement
    of this information.
        In addition, liability relief to the nation's small
    businesses, coupled with robust resources dedicated to testing
    and PPE, will play an enormous role in the nation's economic
    recovery.
        As Congress enters negotiations for a future COVID-19
    response package, I urge my colleagues to use today's
    discussion to reinvigorate their efforts to provide thoughtful
    Federal policies and resources to our nation's job creators and
    innovators.
        Additionally, I would like to highlight Senate bill 3705.
    It is a bipartisan piece of legislation that I have developed
    with Senator Warner designed to allow the aviation
    manufacturing sector to retain workers who are at risk of
    permanent reduction through furlough. This proposed cost
    sharing program would enable the private and public sector to
    come together to preserve a uniquely hard-hit industry and
    overall major contributor to the U.S. trade balance.
        Finally, I would be remiss if I did not address the unique
    national security and economic consequences if the U.S. does
    not immediately fortify and increase its manufacturing
    capacities and supply chain, specifically as it relates to the
    national strategic stockpile of PPE.
        The threat from China to our manufacturing sector is real.
    In 2019, U.S. imports of pharmaceuticals, medical equipment,
    and related products from China were estimated to have an
    approximately $20.7 billion of value according to the
    Congressional Research Service calculations based on official
    U.S. data. This number likely understates the current extent to
    which the U.S. relies on China for pharmaceuticals and medical
    equipment, products and supplies as demand in the United States
    for these products rose during the pandemic.
        All in all, the American manufacturing industry has played
    a critical role to date in mitigating harm stemming from this
    pandemic from both public health and economic perspectives, and
    it is vital for Congress to acknowledge this work by providing
    appropriate support through thoughtful policymaking.
        Kansas is home to the Air Capital of the World in Wichita
    which remains our nation's leader in industry and academic
    collaboration and manufacturing and workforce development. This
    type of innovative collaboration takes the form in various
    other manufacturing capacities across the State of Kansas, so
    today's conversation is personal to me and to my constituency.
        I look forward to hearing from our witness panel today that
    provides a variety of different perspectives to the same
    important issue.
        Joining us today is Mr. Ravi Bulusu, founder of MolMas,
    Inc. based in Haysville, Kansas; Mr. Neil Gilman, President of
    Gilman Gear in Connecticut; Mr. Rick Krska, Chairman and Chief
    Executive Servant of InkCycle, Inc. based in Shawnee, Kansas;
    Ms. Tiffany Stovall, Chief Executive Officer of Kansas
    Manufacturing Solutions which serves as Kansas' MEP center to
    our State's small and medium sized manufacturers; and finally,
    Mr. Michael Wessel, Commissioner of the U.S.-China Economic and
    Security Review Commission.
        Finally, the National Association of Manufacturers provided
    their American renewal action plan for the hearing record
    describing their collaborative efforts of their member
    companies in responding to the pandemic, and I ask this
    document be submitted for the record. Without objection, so
    ordered.
        [The information referred to follows:]

        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Moran. With that, I turn to the Ranking Member, Mr.
    Blumenthal, or perhaps the Ranking Member of the Full
    Committee. Richard, I have never seen you not in person. So
    glad you have joined us. Thank you.

                 STATEMENT OF HON. RICHARD BLUMENTHAL,
                     U.S. SENATOR FROM CONNECTICUT

        Senator Blumenthal. Thank you so much, Mr. Chairman.
    Ordinarily I would be with you in person. I am here in
    Washington, D.C., but I am taking this extra precaution to
    participate remotely just for today.
        And for you and for me and for many of us, this issue is
    indeed personal, and I am so glad that you and the Chairman,
    Senator Wicker, have agreed to do this hearing and especially
    grateful to Neil Gilman of Bozrah, Connecticut for
    participating remotely as I am doing.
        I want to just make a couple of quick points, and I know we
    have a vote so we may have to take a recess. But the
    coronavirus pandemic has created a surge in demand for personal
    protective equipment and other public health products all
    across our country and the world. Everyone, particularly health
    care professionals and essential workers, our heroes today,
    urgently needed face masks, gloves, and hand sanitizer, among
    other products. This sudden and universal need for critical
    supplies exposed alarming vulnerabilities in our system and our
    supply chain. The United States relies heavily on imports of
    key medical supplies and equipment, but China and other
    countries restricted exports and focused solely on their own
    national health response. As a result, supplies severely
    dwindled, and our health care professionals, first responders,
    and frontline workers were put at unacceptable risk.
        Fortunately, American manufacturers took up the mantle.
    They worked tirelessly to produce PPE, ventilators, and other
    supplies. All around the country, companies began repurposing
    existing manufacturing lines and investing in new equipment.
    They often paid to upgrade their infrastructure out of their
    own pockets during this crisis.
        Gilman Gear is a model American success story. It is a
    Connecticut story, but it also is a model for America. And I am
    very proud of Neil Gilman's family and all of the companies in
    Connecticut that stepped up, stood out, and spoke up to help
    address this crisis. And they helped really address this public
    health crisis.
        In Shelton, Connecticut, Modern Plastics created a new
    business division. They are currently producing 300,000 face
    shields every day. By early next year, they aim to ramp up to 1
    million face shields per day. They are growing. They are
    planning to open a facility in Derby. They are going to hire
    more employees to meet demand. I look forward to visiting with
    them and other companies in Connecticut such as in South
    Windsor, I spent some time at Preferred Protective Equipment.
    They put their expertise as a global leader in manufacturing
    high end retail stores display to public health use. Preferred
    Protective Equipment heard first responders' complaints of
    headaches and discomfort from extended face mask use, as well
    as concerns about the single use nature. They used their
    expertise to design a new face shield that is comfortable. It
    can be reused. It is affordable, and it is a great public
    service. The smart business sense and public service of Gilman
    Gear, Modern Plastics, Preferred Protective Equipment, and
    countless others that our first responders and essential
    workers have been served by is really a great success story.
        Safeguarding our supply of PPE is not only a matter of
    public health and national security, it is also a consumer
    protection issue. Throughout the pandemic, consumers and even
    hospitals were desperate to find face masks and other crucial
    equipment. Out of desperation, many turned to middlemen and
    online marketplaces. Unfortunately, counterfeit PPE such as
    fake 95 face masks flooded the market. There was little
    information available to consumers that could guide them
    through the morass of con artists and fakes. Online
    marketplaces often took inadequate measures to find and remove
    fake or suspicious PPE. The health consequences of fake medical
    supplies are potentially life-threatening.
        That is why it is so important to ensure a robust and
    reliable domestic supply of PPE, to have products from trusted
    companies close to their communities. Manufacturers can work
    with State officials and hospitals in hand.
        Congress and the Federal Government should do more for
    these business leaders. The Defense Production Act provides
    useful tools to the President to incentivize and require the
    production of key medical supplies. Regrettably and really very
    unfortunately for all Americans, the President has failed to
    fully utilize the Defense Production Act and support American
    manufacturers. They deserve it. So do the American people.
        The House-passed HEROES Act would provide tens of billions
    of dollars in funds to assist health care providers and boost
    domestic supplies. It would also require the President to use
    his authorities under the DPA to support more production of
    diagnostic tests, medicine, and other crucial medical supplies.
        I look forward to hearing from the witnesses.
        Again, my thanks to the Chairman and Senator Moran for
    holding this hearing. Nothing is more important than providing
    this kind of affordable, reliable, and robust supply of PPE,
    medical supplies, and other aid to our frontline workers and to
    Americans as a whole. Thank you, Mr. Chairman.
        Senator Moran. Senator Blumenthal, thank you. In my
    mistaken view that you were at least temporarily absent, I
    failed to compliment you and thank you for your cooperation and
    work in putting this hearing together. When you and I first
    discussed this, I think we thought this would be looking back.
    Unfortunately, we have not escaped the challenges that lie
    ahead, and so while we are looking at what has transpired in
    the past, we are doing so in preparation to make sure that our
    country is prepared for today and tomorrow. So thank you for
    your cooperation and your assistance. Thanks for working
    closely with me to see that this hearing took place.
        We are going to now turn to witness testimony. The order
    that our witnesses will testify is Mr. Bulusu, Mr. Gilman, Mr.
    Krska, Ms. Stovall, and Mr. Wessel. So, Mr. Bulusu, I now call
    on you for your 5 minutes of testimony. Welcome and thank you
    for being here. I would report it is a Kansan who is in the
    room testifying.

            STATEMENT OF RAVI BULUSU, FOUNDER, MolMas, INC.

        Mr. Bulusu. Chairman Moran. Thank you, Senator Blumenthal.
    I much appreciate this opportunity and thanks a lot for all
    your team that supported and guided us all through the way
    here.
        So we co-founded MolMas, Incorporated. I co-founded MolMas,
    Incorporated, and we are based out of the greater Wichita area
    in Kansas.
        I would like to take us through the journey that we have
    gone through so far since the COVID pandemic struck in the
    early part of this year.
        The COVID pandemic, which started at the beginning of this
    year, continues to impact how we live as a society. It exposed
    critical gaps in our health care system and opened up fault
    lines that we never knew existed. At the root of all of this is
    one sad, harsh reality. We do not have a strong manufacturing
    base for PPE or the equipment that is used to make PPE.
        At the ground level, single-use, disposable masks were
    being reused, going against the established practice for well
    over 50 years. Our PPE supply chain, including the machinery
    used to manufacture them, is oversees dependent, from masks to
    ventilators. They were throttled before and can be throttled
    yet again.
        For instance, we bought our machinery and raw material from
    overseas at many times the pre-COVID prices. The raw material
    was available at a minimum of 30 to 65 times from overseas.
        Domestic production continues to not meet the demand, so we
    rely on imports. However, do we have a handle on the quality?
    Are there quality controls on the manufacturing process
    overseas? We do not know. All these questions leave gaps in our
    preparedness that need to be addressed.
        How can we set up our economy and society for resilience in
    this pandemic or, God forbid, future disasters? Sirs, the
    simple mask was pioneered here in America. Why is it then that
    we have a scarcity of good quality face masks today?
        How can we achieve self-sufficiency? The only way to
    actually achieve that is through producing our own medical
    manufacturing equipment as well and to secure our raw materials
    supply chain.
        The very first case of COVID in our country was identified
    in my home State of Washington. The factory itself is based out
    of the greater Wichita area in Kansas. And this was a few miles
    north of where I live. My wife, a physician, works on the front
    lines in an underserved area. My younger daughter at that time
    was 9 months old and was still nursing. So I requested her,
    maybe selfishly, if she would consider quitting her job. She
    shot me down immediately and said that was what I had signed up
    for when I married her.
        So I started looking for solutions, solutions to keep her
    and also her colleagues safe. Quickly I realized that charity
    was just not going to cut it. We had to manufacture it, and we
    had to do that to address the three critical areas of
    availability, product quality, and supply chain reliability. We
    could not compromise on either. We needed to make PPE here in
    America out of American raw material. So we pivoted to make
    face masks.
        A whole range of new discoveries ensued. We quickly learned
    that the bulk buyers of PPE, that is, the State and local
    governments, were by policy procuring them at the lowest price.
    So the overseas product that is being dumped in the U.S. ends
    up being the default choice. Ironically, the best opportunity
    to strengthen our supply chain is instead perpetuating our
    dependence, not weaning us off of it.
        The direct-to-consumer sales front was very challenging as
    well. Well-intended policies by our social media and the e-
    commerce channels, aimed at preventing price gouging and
    protecting the consumer, were inadvertently stifling start-up
    American manufacturers like us. We were prevented from
    directly--we still are prevented from directly advertising to
    the consumer. We are forced to rely on old-fashioned cold
    calling. Net-net, the American manufacturer, who in the true
    American spirit of grit and fortitude, in the face of threat
    and stood up to fix the problem, is facing pressure on either
    end.
        I take inspiration from the race to the Moon. 1961
    propelled our dominance in space and the human race benefited.
    The superior technology is what inspired me, a first generation
    immigrant, to come to America, to contribute positively to
    change. We look at this honorable chamber to help evolve policy
    that unleashes the latent spirit of innovation, the prowess to
    manufacture at superior quality, and the zeal to take the human
    race forward. Let us not ask can America do it because America
    has done it multiple times before and very successfully so.
        I humbly submit a few recommendations for consideration.
        Treat self-sufficiency in the production of medical
    equipment as a national priority just like we treat national
    security, economic security, and some nations do food security.
        Incentivize startups in the area. Democratize to release
    the animal spirits of the innovators.
        Supportive policy in the immediate 3-year term will help
    them thrive, especially so in the face of relentless dumping of
    overseas product.
        Reduce regulation. Statistically speaking, 99 percent of
    startup businesses die in their infancy, and we are talking
    about the first 1 to 2 years. Regulation during this phase can
    be very detrimental to this very critical industry that is
    already under significant stress. If we do have to regulate,
    however, or restrict, let us remember that America has always
    produced more than enough, not just for ourselves, but for the
    entire world. The human race always benefited from America's
    progress. This will still be the same.
        As opposed to blanket restrictions, consider publishing a
    very nuanced data-driven policy that keeps the doors open for
    foreign markets. Such a major thrust of this nature will most
    certainly result in secondary and tertiary benefits that, in
    the post-pandemic world, will put us in a much, much better
    position much like the goal to land on the moon did.
        I take this opportunity to also urge my fellow
    manufacturers let us fix this.
        Thank you all for the opportunity.
        [The prepared statement of Mr. Bulusu follows:]

      Prepared Statement of Ravi Bulusu, Founder, MolMas Inc.--Face Mask
                                  Manufacturer
        The Covid19 pandemic which started at the beginning of this year
    continues to impact how we live as a society. It exposed critical
    faults in our healthcare system and opened up faultlines that we never
    knew existed. At the root of all of this is one sad yet harsh reality--
    We do not have a strong manufacturing base for PPE or the equipment
    used to make PPE.

      1.  At the ground level, disposable masks, meant to be disposed off,
            after a single use to prevent cross infections were being
            reused. This goes against the prescribed and established
            practice for well over 50 years.

      2.  Our PPE supply chains including the machinery used to manufacture
            them, have been overseas dependent, whether for a simple mask
            or life saving ventilators. These supplies can be throttled at
            their origin like they were earlier this year, anytime!

         As a startup, we have first hand experience of such challenges. We
            bought our machinery and raw material from overseas at many
            times the pre-covid prices. The raw material was available at a
            minimum of 30--65 times from overseas. Worse, the prices were
            moving upwards on a daily basis. Many times the spike driven by
            apparent market forces, surprised us also in how there was not
            much variation in prices across vendors.

      3.  Domestic production continues to not meet the demand. So, the
            scarcity continued for months! While that might have since
            improved due to imports, it is not very clear if we do have a
            handle on their quality due to lack of adequate quality
            controls on the manufacturing process. The supply itself
            continues to be at risk as it may be throttled yet again like
            it was before.

        The above open questions leave gaps in our preparedness that need
    to be filled.
        States competed with each other to procure PPE at any price. When
    availability itself is a challenge, quality and reliability are far
    secondary considerations.
        How can we set up our economy, nay our society for resilience in
    this pandemic or God forbid, future disasters? Sirs, the simple mask
    was pioneered here in America in the 1920s. Why is it then that we have
    a scarcity of good quality masks? How can we achieve self-sufficiency
    in PPE and medical equipment?
        The only way to achieve that confidently and reliably is to produce
    our own medical supplies and also the equipment used to manufacture
    them and while simultaneously securing our supply chains for raw
    materials as well.
                                  Our journey
        The very first case of Covid in our country was identified in my
    home state, Washington, a few miles north of where I live. My wife, a
    physician, is contributing on the frontlines, in an underserved area.
    My younger daughter at the time was 9 months old, and still nursing.
    So, I asked my wife maybe selfishly, if she would consider quitting her
    job, because of the PPE scarcity. She immediately shot me down
    reminding me that, that was what I had signed up for when I married
    her. So, I started looking for solutions to keep her and also her
    colleagues safe. Charity just wasn't going to cut it.
        After some research it was clear that, to address the three
    critical issues of 1) availability, 2) product quality and 3) supply
    chain reliability, there was an urgent need to make face masks
    ourselves. The decision was not too difficult to take. So, we pivoted
    MolMas to manufacture face masks here in America!
        That, however, was only the beginning of a whole range of new
    discoveries in the process. We quickly learnt a few things:

      1.  The bulk buyers of PPE, especially face masks, i.e. the state and
            local governments were by policy, procuring them at the lowest
            price. This meant that overseas product that is being dumped in
            the U.S. ends up being the default choice. Ironically, an
            opportunity to strengthen our medical equipment supply chain is
            instead, benefiting the very same unreliable overseas
            manufacturers that we have over decades become accustomed to
            relying on.

      2.  On the direct to consumer sales front, was challenging as well.
            Well intended policies by our social media and e-commerce
            channels, aiming to prevent price gouging, were inadvertently
            stifling American manufacturers of the opportunity to directly
            advertise to the end consumer. As a consequence of the above
            two, our sales process was forced to rely on old fashioned cold
            calling to distributors, or on e-mail campaign strategies from
            20 years back.

        As a net effect, American manufacturers like us are stifled not
    because we are unable to manufacture but because the sales channels are
    at the very best severely throttled.
                             Policy Recommendations
        I take inspiration from the race to the moon! 1961 propelled our
    dominance in space and the human race benefited. That is what inspired
    me, a first generation immigrant to come to America, to contribute
    positively to change. We look to this honorable chamber to evolve
    policy that unleashes the latent spirit of innovation, the prowess to
    manufacture at superior quality, the zeal to take the human race
    forward. Let us not ask ``Can America do it?''. America has done it
    multiple times before. Supportive policy making will accelerate it and
    get us to where we need to be quicker. Below are a few recommendations
    for consideration.

      1.  Treat self-sufficiency in the production of medical equipment,
            including PPE as a national priority just like we treat
            national security, economic security and some nations do food
            security.

      2.  Incentivize startups in the area. Democratize to release the
            animal spirits of the entrepreneurs and innovators.

      3.  Supportive policy in the short to medium term will helps these
            startups thrive, especially in the face of relentless dumping
            of overseas product.

      4.  Avoid regulation--Statistically speaking, 99 percent of startups/
            new businesses die in their infancy, across sectors. Regulation
            during the startup phase can be detrimental to a very critical
            industry that is already under stress.

      5.  As opposed to blanket restrictions, consider publishing a nuanced
            data driven policy that specifies the quantities of products
            that could be allocated to exports.
                               Long term Benefits
        Innovations for the pandemic will directly help improve the quality
    of healthcare and quality of life of our baby boomers in specific and
    the society in general. Merely through requiring stricter quality
    checks and higher quality bar, cross contamination can be brought down.
    Innovation in this space will further reduce it thereby directly
    contributing to improving the quality of life and quality of care. That
    will in turn reduce the stress on medicare and medicaid.
        By going beyond incremental process improvements the medicare,
    medicaid funding situation could benefit directly.
        A major thrust of this nature will not merely improve our response
    to the pandemic, it will also result in secondary and tertiary benefits
    in the post-pandemic world much like the goal to land on the moon did.

        Senator Moran. Mr. Bulusu, thank you for your testimony and
    the passion with which you presented it.
        Mr. Bulusu. Thank you.
        Senator Moran. Let us now hear from Mr. Neil Gilman. Mr.
    Gilman?

            STATEMENT OF NEIL GILMAN, PRESIDENT, GILMAN GEAR

        Mr. Gilman. Senator Moran, Ranking Member Blumenthal,
    distinguished Senators, ladies and gentlemen, thank you for the
    opportunity to provide testimony today on the urgency of
    sustaining a domestic supply chain for PPE during the COVID
    pandemic.
        I come before you as a second generation business owner who
    runs a manufacturing business in Connecticut. My ancestors
    built one of the first textile mills in New England. My father
    built a business that pioneered the development of football
    training equipment, which he started in 1929. My company is the
    nation's leading manufacturer of blocking and tackling dummies
    and sleds.
        When the pandemic struck and the nation's Governors were
    issuing stay-at-home orders, most, if not all, the high schools
    and colleges closed, as well as the entire National Football
    League. The game of football was on hold. College football at
    591 schools was canceled or moved to the spring. High school
    football in 24 states was canceled or moved to the spring. Our
    whole market cratered and collapsed. We were on the brink of
    shutting down and laying off all of our employees and
    potentially going out of business.
        I thought of my grandfather, Nathan Gilman, who repurposed
    his textile mill to make Army blankets during World War II. I
    too wanted to contribute in some meaningful way to help the
    medical professionals on the front lines battling this deadly
    COVID virus. I read about the terrible shortage of PPE in our
    hospitals, nursing homes, assisted living and urgent care
    facilities. I saw pictures of doctors wearing rain ponchos as
    gowns, using ski goggles as eye protection, and recycling N95
    masks for days on end.
        I later learned that the whole domestic PPE market had
    moved their manufacturing mainly to China to take advantage of
    cheap labor and material. At the time, the Chinese were dealing
    with their own domestic pandemic and had decimated their own
    supply of PPE. When COVID spiked in the United States,
    hospitals found their normal supply chain choked off and the
    Chinese market was unable to meet their demand.
        Gilman Gear has a large cut and sew operation. I was
    determined to make an isolation gown because we had the
    equipment to cut and sew them.
        [Pause.]
        Senator Moran. I think we have lost Mr. Gilman. My
    suggestion is that we probably need to recess anyway so that I
    can go cast a vote, the other members can cast their votes.
    There are two votes, and by leaving now, I will arrive at the
    end of the first vote and vote the first one and return.
        Senator Thune is expected to come here and replace me to
    help accomplish that. If he arrives before I come back, he can
    reconvene the hearing.
        And, Mr. Gilman, if you can hear me, we will start that
    second phase of our hearing with the conclusion of your
    testimony. Thank you.
        So the Committee will stand in recess till the sound of the
    gavel.
        [Recess.]
        Senator Moran. There is a potential of a third vote now,
    which we will not know until--I do not know--a half hour from
    now whether that is happening, but maybe we can work it so that
    we can tag team the chairmanship. Senator Blumenthal I think is
    back with us, and I will make certain that maybe he and I can
    trade positions so we can both vote at different times, if that
    happens.
        The Committee is reconvened.
        Mr. Gilman, if you are available, you have about a minute
    and a half time left. I think we heard your testimony to that
    last point and would love to hear your concluding remarks.
        Mr. Gilman. Senator Moran, can you hear me?
        Senator Moran. Mr. Gilman?
        Mr. Gilman. Yes. Can you hear me?
        Senator Moran. Yes, sir.
        Mr. Gilman. OK. So I am going to pick up my testimony from
    where I left off.
        Senator Moran. Yes, sir.
        Mr. Gilman. OK.
        I was determined to make isolation gowns because we had the
    equipment to cut and sew them. I quickly got a sample from a
    local hospital, designed my own pattern, researched the
    materials the gowns were made of, and built a prototype. I sent
    it over to Yale New Haven Hospital. They evaluated it and
    awarded me my first big order. I was able to get business
    because there was surge demand. The hospitals needed more gowns
    than they could buy from their normal supply chain, and they
    turned to me to bridge the gap.
        The problem was twofold. The hospitals wanted the gowns
    fast and they wanted them cheap. To meet the aggressive supply
    schedule, I had to invest in new machinery and hire more
    employees. We went from making 200 gowns a week to making more
    than 12,000 gowns per week.
        Pricing was an even more difficult hurdle. The hospitals
    were reluctant to pay more than the price they had paid for the
    product exported from China. I could not match that price
    unless I moved my factory to China. My gowns are 100 percent
    American made. I am at a competitive disadvantage. My labor
    costs are higher. My material costs are higher. I am able to
    mitigate some of the cost disparity with technology. But at the
    end of the day, my American made gown is two to three times
    more expensive than those made in China. However, my American
    made gown is of a higher quality and meets a higher level of
    protection. But in the PPE market, an isolation gown is
    considered a commodity item and buyers in the medical community
    are just looking for the cheapest price.
        I am here with an urgent plea for the Federal Government to
    do more to help the private sector sustain the PPE business in
    the United States. China dominates the market for PPE. The
    Chinese Government has made manufacturing PPE a priority not
    only from a national security standpoint, but also with a view
    to creating domination over a globally critical marketplace.
    The Chinese Government has implemented this strategy by taking
    the following measures:
        First, factory owners get cheap land courtesy of the
    Chinese Government.
        Second, factory owners get loans and subsidies.
        Third, Chinese hospitals are told to buy local, giving
    China's suppliers a vast and captive market.
        The Federal Government can play a vital role in sustaining
    United States companies that have pivoted to making PPE if it
    will do the following:
        First, implement a Buy American preference across all
    Federal agencies that purchase PPE.
        Second, create a subsidy for companies investing in new
    plant and equipment for manufacturing PPE.
        Third, establish a tax credit for every job created to
    manufacture PPE.
        We are not looking for a handout. We want, to use a
    football term, a level playing field so we can compete with
    China.
        What is at stake here is the future of manufacturing PPE in
    Connecticut and, for that matter, across the United States. If
    we let China dominate the market for PPE, if we let them
    control the supply chain for PPE, does that not compromise our
    ability to cope with this pandemic? Do we want to be at the
    mercy of China when and if there is a pandemic in the future?
        What is at stake here is jobs. The 50 jobs we support at
    Gilman Gear are precious. If we lose them to China, they are
    not coming back.
        What is at stake here is our ingenuity and ability to pivot
    on a dime from a mature business making football equipment to
    making PPE to serve the medical community. We evolved and we
    reinvented ourselves during a national emergency and sustained
    50 jobs during the worst economic downturn in our history. Help
    us to sustain this critically important business today and in
    the future.
        Thank you.
        [The prepared statement of Mr. Gilman follows:]

       Prepared Statement of Neil Gilman, President and CEO, Gilman Gear
        Senator Moran and Ranking Member Blumenthal, distinguished
    Senators, ladies and gentlemen, thank you for the opportunity to
    provide testimony today on the urgency of sustaining a domestic supply
    chain of PPE during the COVID pandemic.
        I come before you as a second-generation business owner who runs a
    manufacturing business in the State of Connecticut. My ancestors built
    one of the first textile mills in Connecticut. My father built a
    business that pioneered the development of football training equipment
    in 1929. My company is the Nation's leading manufacturer of blocking
    and tackling dummies and sleds. When the pandemic struck and the
    Nation's governors were issuing stay at home orders, most, if not all,
    the high schools and colleges closed, as well as all of the NFL. The
    Game of Football was on hold. College football at 591 schools was
    cancelled or moved to the spring. High School football in 24 states was
    cancelled or moved to the spring. Our whole market cratered and
    collapsed. We were on the brink of shutting down and laying off all my
    employees, and potentially going out of business. I thought of my
    grandfather, Nathan Gilman who re-purposed his textile mill to make
    Army blankets during World War II. I, too, wanted to contribute in some
    meaningful way to help the medical professions on the front lines
    battling this deadly COVID virus. I read about the terrible shortage of
    PPE in our Hospitals, Nursing Homes, Assisted Living and Urgent Care
    Facilities. I saw pictures of doctors wearing rain ponchos as gowns,
    using ski googles as eye protection and recycling N95 masks for days on
    end. I later learned that the whole domestic PPE market had moved their
    manufacturing mainly to China to take advantage of cheap labor and
    material. At the time, the Chinese were dealing with their own domestic
    pandemic and had decimated their supply of PPE. When COVID spiked in
    the US, hospitals found their normal supply chain choked off and the
    Chinese market was unable to meet their demand. Gilman Gear had a large
    cut and sew operation. I was determined to make Isolation Gowns because
    we had the equipment to cut and sew them. I quickly got a sample from a
    local hospital. Designed my own pattern. Researched the materials the
    gowns are made of and built a prototype using a non-woven polypropylene
    material. I sent it over to Yale New Haven Hospital. They evaluated it
    and awarded me my first big order. I was able to get business because
    there was ``surge demand.'' The hospitals needed more gowns than they
    could buy from their normal supply chain, so they turned to me to
    bridge the gap.
        The problem was twofold. The hospitals wanted the gowns fast and
    they wanted them cheap. To meet the aggressive supply schedule, I had
    to invest in new machinery and hire more employees. We went from making
    200 gowns a week to more than 12,000 gowns per week. Pricing was an
    even more difficult hurdle. The hospitals were reluctant to pay more
    than the price they paid for the product exported from China. I
    couldn't match that price unless I moved my factory to China. My gowns
    are made 100 percent American made. I'm at a competitive disadvantage.
    My labor costs are higher. My material costs are higher. I'm able to
    mitigate some of the cost disparity with technology. But at the end of
    the day, my American made Gown is two to three times more expensive
    then those made in China. However, my American made Gown is a higher
    quality and meets a higher level of protection. But in the PPE market
    an Isolation Gown is considered a commodity item and buyers in the
    medical community are just looking for the cheapest price.
        I'm here with an urgent plea for the Federal Government to do more
    to help the private sector sustain the PPE business in the United
    States.
        China dominates the market for protective and medical supplies. The
    Chinese government has made manufacturing PPE a priority, not only from
    a national security standpoint, but also with a view to creating
    domination over a globally critical marketplace. The Chinese government
    has implemented this strategy by taking the following measures:

       Factory owners get cheap land courtesy of the Chinese
            government.

       Factory owners get loans and subsidies.

       Chinese hospitals are told to buy local giving China's
            supplier's a vast and captive market.

        The Federal Government can play a vital role in sustaining U.S.
    companies that have pivoted to making PPE if it will do the following:

       Implement a Buy American preference across all Federal
            agencies that purchase PPE.

       Create a subsidy for companies investing in new plant and
            equipment for manufacturing PPE.

       Establish a tax credit for every job created to make PPE.

        We're not looking for a hand-out. What we want, to use a football
    term, is a level playing field, so we can compete with China.
        What's at stake here, is the future of manufacturing PPE in the
    State of Connecticut and for that matter, across the United States. If
    we let China dominate the market for PPE. If we let them control the
    supply chain for PPE. Doesn't that compromise our ability to cope with
    this pandemic? Do we want to be at the mercy of China, when and if
    there is a pandemic in the future?
        What's at stake here is jobs! The 50 jobs we support at Gilman Gear
    are precious. If we lose them to China, and they are not coming back.
        What's at stake here is our ingenuity and ability to pivot on a
    dime from a mature business making football equipment to making PPE to
    serve the medical community. We evolved and re-invented ourselves
    during a national emergency and sustained 50 jobs during the worst
    economic downturn in our history. Help us to sustain this critically
    important business today and in the future!

        Senator Moran. Mr. Gilman, thank you for your testimony and
    for the response that it describes that you provided to COVID-
    19.
        Mr. Krska, Mr. Rick Krska, is our next witness. Mr. Krska,
    you are recognized for five minutes.

    STATEMENT OF RICK KRSKA, PRESIDENT AND CHIEF EXECUTIVE SERVANT,
                             InkCycle, INC.

        Mr. Krska. I am the founder of InkCycle located in Shawnee,
    Kansas, and I would like to thank Senator Moran and Senator
    Blumenthal for the opportunity to share my thoughts and
    testimony.
        After early careers in the industry of producing components
    for nuclear weapons, we started InkCycle in 1992 in the
    basement of our Kansas farm home. My wife Carol and I embarked
    on a new quest to bring manufacturing jobs to Kansas by
    starting a business which was and remains focused on four
    primary principles: number one, operate with the principles of
    servant leadership; two, serving our clients with high quality
    products; build a significant business that positively impacts
    a significant number of people internally and externally; and
    strive to create area employment and economic development.
        Prior to starting the business, my partners and myself were
    working for Allied Signal where we were involved in the
    production of components for nuclear weapons. We absolutely
    loved the engineering, production, and quality roles that we
    served in.
        With the end of the cold war, the demand for our products
    declined, and we, like thousands of others, found ourselves
    looking for a job. So looking to the future, we found a sense
    of purpose. We all had a deep love for manufacturing. We had a
    desire to provide manufacturing jobs and employment to as many
    people as possible. After all, we had personally experienced
    firsthand what happens when a large employer has to downsize.
        So here we are in 1992. We launched a new business. We
    began remanufacturing printer cartridges and rapidly became one
    of the largest toner cartridge remanufacturers in the USA. By
    1995, 3 years later, we had become fourth out of 500 companies
    and we began to expand in the growing inkjet market. So 10
    years later, by 2005 we had become the largest inkjet cartridge
    remanufacturer in the world employing over 800 people in
    Lenexa, Kansas.
        The demand for remanufactured cartridges was being fueled
    by: number one, skyrocketing growth of laser and inkjet
    printers both in the office and at home; two, consumer savings
    of 25 percent or more versus name brand; and three, the
    realization that hundreds of millions of empty name brand
    cartridges were ending up in landfills and a more sustainable
    solution was needed.
        So as the demand for remanufactured products continued to
    increase, this of course caught the eye of the Chinese. Many of
    the remanufacturing components were starting to be developed in
    China. Within a few years, China had become the dominant source
    of remanufacturing components and then, probably 5 to 10 short
    years later, the largest producer of newly built compatible
    after market cartridges in the world.
        They were called ``clones'' in those days because they were
    basically knock-offs of the original cartridges that were
    exported to the USA with absolutely no respect for intellectual
    property and patent law. China quickly began to flood the
    market to make it impossible for the U.S. remanufacturers to
    compete. Over time, China, using infringing products, built
    such a size and scale that they were becoming impossible to
    compete with, and U.S. patents were expiring while Chinese
    manufacturers developed their own intellectual property. As
    time went along, the Chinese suppliers did begin to pay a lot
    more attention to patents, but by that time, they had so much
    scale it was unbelievable.
        We found ourselves in a position where a Chinese product
    was available in China for $5. The same product remanufactured
    here would cost $20.
        So by around 2015, 90 percent of the 5,000 U.S.
    remanufacturing companies and their manufacturing jobs were
    gone. Today that number of companies that are viable is
    estimated to be no more than 100 companies in the U.S. that are
    left.
        So although we continue to remanufacture, we were forced to
    choose between buying and reselling a line of Chinese products
    or going out of business. I am proud to say that over the last
    5 years, somewhere around two-thirds of the products that we
    sell still continue to be remanufactured in our factory. But we
    do supplement that with Chinese products in some areas where we
    just cannot compete.
        Today, the two China-based companies now control over 80
    percent of all aftermarket cartridge chips which, of course, is
    a technology barrier, and they set the global price. And what
    we see is those two chip companies in China do things that are
    against the law here in the United States where they
    collaborate on the pricing. And I am sure there is a different
    name for that here in the U.S.
        But anyway, China-based Apex and affiliated companies is
    now the largest producer of newly built aftermarket cartridges
    and chips in the world.
        Summarizing, China has decimated a U.S. remanufacturing
    industry of over 5,000 companies of all sizes.
        However, our love for manufacturing has never wavered. As
    one of the last U.S. remanufacturing companies, we were
    frustrated with China's chokehold on our industry, but we were
    committed to producing what we could even if it meant also
    buying some products from China.
        So fast forward to this year. Early 2020, late January, we
    were returning from a sourcing trip to Asia that started in
    Wuhan, China. We obviously witnessed firsthand the beginning of
    the global COVID pandemic. This inspired us to begin exploring
    how we might serve and do a business pivot into manufacturing
    PPE supplies. After all, we had filled hundreds of millions of
    plastic objects with high quality fluid and powder. So quickly
    we found that most of the PPE products came from China, as has
    been mentioned in earlier testimony.
        The first product that we launched in our factory was a
    hand sanitizer that we used our manufacturing experience--and I
    have to say much of our equipment here too--to bottle this hand
    sanitizer in Kansas. Ironically, as we ramped up, we found that
    we would need to buy some of our materials still from China
    once again. The U.S. no longer has any real small bottle
    manufacturing capabilities. So we had to go to China to get the
    bottles.
        As we continue to create opportunities for U.S.
    manufacturing jobs, we are now engaged in a new and exciting
    endeavor, the production and bottling of an ultra-effective and
    very safe surface disinfectant called hypochlorous acid. It is
    also known as HOCl. This is the safest, very safe for humans,
    pets, plants, the environment, but 80 times more powerful than
    bleach against all the viruses and all the pandemic bugs out
    there, including COVID-19.
        So we are partnered up with another Kansas company here
    called Danolyte, and we are using our operations background and
    making preparations to produce and bottle HOCl in our factory.
    And we have been doing that now for some time. Our goal is to
    grow our company and once again bring in more production jobs.
    But interestingly, even in this area, we are still facing
    pressures from China as plastic bottle production, as I
    mentioned earlier, is still located primarily in China.
        I am not here today to complain about China. They are smart
    and ambitious people. One cannot blame them for taking
    advantage of the opportunities that are in front of them and
    the political realities. It has been my experience and
    observation from spending much time in China that the top
    manufacturing companies in China are strongly backed and
    supported by their government. It is my belief that if we
    seriously desire to bring manufacturing and critical supply
    chains back to the U.S., it will require strong support and new
    policy from Washington.
        Moving forward, we welcome any discussions about how to
    help bring manufacturing back to the U.S. Our core team
    consists of experienced manufacturing engineers, production
    teams, quality assurance, and labor. In short, we have a huge
    passion for manufacturing products in Kansas, and we look to be
    of service however we can.
        Thank you for your time.
        [The prepared statement of Mr. Krska follows:]

        Prepared Testimony of Rick Krska, President and Chief Executive
                            Servant, InkCycle, Inc.
       I would like to thank Senator Moran and Senator Blumenthal
            for this opportunity to share my thoughts and testimony.

       We love manufacturing and serving people with high quality
            products

       After early careers in the manufacturing industries of
            Telecommunications and Nuclear Weapons, we started InkCycle in
            1992 in the basement of our Kansas ranch home.

        1992: My partners and I embarked on a new quest to bring
    manufacturing jobs to Kansas City by starting a business which was (and
    remains) focused on three primary principles:

      1.  Design and produce high quality/high demand products

      2.  Create area employment and economic development

      3.  Build a business of significance--solve significant challenges
            and positively impact a significant number of people (internal
            and external)

      4.  Operate with principles of Servant Leadership

        Prior to starting the business, myself and my partners were working
    for Allied Signal where we were involved in producing triggers for
    nuclear weapons. The products we were directly responsible for,
    properly functioning triggers, absolutely had to fire when they were
    supposed to and not fire when they shouldn't. There was no margin for
    error.
        We absolutely loved the engineering, production and quality roles
    we served in and the challenging work environment. Our products
    demanded the utmost quality assurance and were subject to rigorous
    testing and audits daily.
        With the end of the Cold War, the demand for our products declined
    and we, like thousands of others, found ourselves being downsized from
    what was a large Kansas City employer. Looking to the future, we found
    a sense of purpose.

      1.  A deep love for manufacturing. A passion that began for me in
            high school when I went to work for Western Electric. A passion
            that still exists to this very day.

      2.  A desire to provide manufacturing jobs and employment to as many
            people as possible. We had experienced firsthand what happens
            when a large employer has to downsize,

        1992: We launch the new business. We began refurbishing printer
    cartridges and rapidly became one of the US's largest toner cartridge
    remanufacturers. By 1995 we had become the fourth largest in the
    country and began to expand into the growing inkjet market. By 2005 we
    had become the largest inkjet remanufacturer in the world, employing
    over 800 people in Lenexa, KS.
        The demand for remanufactured cartridges was being fueled by:

      1.  Skyrocketing growth of laser and inkjet printing, both at the
            office and in the home.

      2.  Consumer savings of 25 percent or more vs. the name brand.

      3.  Realization that tens of millions of plastic and metal name brand
            cartridges were ending up in the landfill and a more
            sustainable solution (refurbishing) was needed.

        As the demand for remanufactured products continued to increase,
    many of the remanufacturing components were being developed in China.
    Within a few years, China had become the dominant source of
    remanufacturing components and then later, the largest producer of
    newly built ``clone'' aftermarket cartridges in the world.
        These early-stage ``clones'' were imported with absolutely no
    respect for U.S. intellectual property and patent law. China quickly
    began to flood the market to make it impossible for U.S.
    remanufacturers to compete. Over time, China, using infringing
    products, built such size and scale that they were becoming impossible
    to compete with, and U.S. patents were expiring while Chinese
    manufacturers developed their own intellectual property.
        By this time, the prices for a newly built cartridge from China
    were less than our direct remanufacturing costs here in the US.
        The tipping point came when we saw that a cartridge that cost us
    $21 to refurbish was available newly built for $5.95 in China. $5.95 to
    cover all of their costs AND make a profit to produce something brand
    new vs. $21 to refurbish! Seemingly impossible, yet this is what we
    were competing with.
        By around 2015, 90 percent of the U.S. remanufacturing companies
    and their manufacturing jobs were gone. Today that number has dropped
    from over 5,000 to an estimated 100 or fewer companies.
        Until this time, we were producing in our Kansas factory 98
    percent+ of everything we sold. However, as China began shipping more
    and more newly built products into the US, we began to find ourselves,
    like every other U.S. remanufacturer unable to compete. We were forced
    to choose between buying and reselling a line of Chinese products or
    going out of business.
        Today, estimates are that over 90 percent of the U.S. aftermarket
    cartridge business is produced in China compared to less than 5 percent
    15 years ago. And prices continue to come down, along with U.S.
    refurbishing jobs.
        Yet it was not just that China was selling newly manufactured
    products at less than what it costs in the U.S. to refurbish those
    products. China was beginning to acquire the necessary technology for
    U.S. remanufacturing companies to refurbish the cartridges, giving
    China the ability to strangle the U.S. remanufacturing industry.
        In 2016, US-based Lexmark (printer manufacturer) was purchased by a
    Chinese consortium led by Apex Technology and PAG Asia Capital. Apex
    had already purchased the global leader in aftermarket print chips (US-
    based Static Control).
        Two China-based companies now control over 80 percent of all
    aftermarket cartridge chips and set the global price. APEX (and
    affiliated companies) is now also the largest producer of newly built
    cartridges in the world.
        As Apex/Lexmark controversial acquisition was finalized, it was
    apparent that China would control the U.S. aftermarket cartridge
    industry.

      1.  Set their new build prices at far under the cost for a U.S.
            remanufactured cartridge.

      2.  Provide chips only on specific models so there could be no
            competition from a U.S. reman company.

      3.  Control the cost of components so that their new-build cartridges
            would always remain priced under a U.S. reman version.

        Summarizing, China has decimated a U.S. re-manufacturing industry
    of over 5,000 companies of all sizes.
        Our love for manufacturing has never wavered. As one of the last
    U.S. remanufacturing companies, we were frustrated with China's
    chokehold on our industry, but we were committed to producing what we
    could, even if it meant also buying in some products from China.
        2020: In late January we were returning from a sourcing trip to
    Asia that started in Wuhan, China. We obviously witnessed firsthand the
    beginning of global COVID pandemic. This inspired us to begin exploring
    how we might serve and do a business pivot into manufacturing PPE
    supplies. Quickly we found that most of the PPE products came from
    China. Very few U.S. produced products were available.
        The first product we launched was a hand sanitizer that we used our
    manufacturing experience to bottle here in Kansas City. Ironically, as
    we ramped up, we found that we would need to buy materials from China
    once again. The U.S. no longer had any real small bottle manufacturing
    capabilities anymore.
        Interestingly, the strange Chinese ``economics'' we had seen in our
    core business was to be found in Chinese bottle manufacturing industry
    as well. Forced to buy bottles in China, we were purchasing our labels
    from a local Kansas label manufacturer at around $0.15. The Chinese
    bottle supplier offered to print and apply the labels for a single
    cent. The cost to print a label in the U.S.--15 cents. The cost to
    print the same label AND apply it to the bottle in China--1 cent. The
    U.S. loses label printing jobs and manufacturing application jobs.
        As we continue to look to create opportunities for U.S.
    manufacturing jobs, we are now engaged in a new endeavor, Hypochlorous
    Acid. At 500 ppm, the EPA recognizes certain registered brands of
    Hypochlorous Acid as an ultra-strong and ultra-safe way to kill
    bacteria, germs, and viruses, including COVID-19.
        We are moving forward with preparations to produce and bottle HOCL
    in our factory. Our goal is to grow our company and once again bring in
    more production jobs. Interestingly, we are again facing pressures from
    China as plastic bottles' production is controlled primarily by China.
        It has been our experience and observation that manufacturing
    companies in China are strongly supported by their government. It is my
    belief that if seriously desire to bring manufacturing and critical
    supply chains back to the US, it will require strong support from
    Washington.
        Moving forward, we welcome any discussions about how to help bring
    manufacturing back to the U.S. and insulate our country from unfair
    trade practices of other countries. Our core team consists of
    experienced manufacturing engineers, production teams, quality
    assurance, and labor. In short . . . we have a huge PASSION for
    manufacturing products in KANSAS!
        Please let us know how we can be of service,
                                                    Rick Krska,
                                 President and Chief Executive Servant,
                                                  TonerCycle InkCycle, Inc.

        Senator Moran. Mr. Krska, thank you. Thank you for your
    passion for what you do and for Kansas, as you mentioned.
        Ms. Tiffany Stovall is the Chief Executive Officer of the
    Kansas Manufacturing Solutions. And Ms. Stovall, you are
    recognized now as well for 5 minutes.

              STATEMENT OF TIFFANY M. STOVALL, CEO, KANSAS

             MANUFACTURING SOLUTIONS, KANSAS MANUFACTURING

                      EXTENSION PARTNERSHIP (MEP)

        Ms. Stovall. Good afternoon, Chairman Moran and Ranking
    Member Blumenthal and members of the Subcommittee. Thank you so
    much for this opportunity to appear before you to discuss the
    manufacturing community's response to the COVID-19 pandemic.
        I am Tiffany Stovall. I am the CEO of Kansas Manufacturing
    Solutions, and as Senator Moran said, we are the MEP center for
    Kansas.
        I am sure the Subcommittee is familiar with the
    Manufacturing Extension Partnership, also called MEP, but as a
    reminder, we are the nation's only program providing hands-on,
    in-depth support to small and medium sized manufacturers to
    help them compete more effectively in the global marketplace.
        As a public-private partnership, the MEP national network
    has 51 centers. We have got one in every state plus Puerto
    Rico. MEP also has 1,300 manufacturing experts on staff, 400
    service locations, and nearly 2,100 third party service
    providers and partners. We interact with over 28,000
    manufacturers per year. MEP centers truly are the go-to experts
    for advancing U.S. manufacturing.
        It is because of this history of working with manufacturers
    as trusted advisors that KMS, Kansas Manufacturing Solutions,
    and the MEP network was uniquely positioned to help support
    U.S. manufacturers when they had to adapt to this exceptional
    challenge that was presented to them during the COVID-19
    pandemic. Manufacturers have had to respond to COVID-19
    challenges within their own facilities, like we have heard
    about today, but they are also helping our Nation respond to
    the COVID-19 pandemic by producing critically needed personal
    protective equipment, PPE, ventilators, and other equipment and
    goods essential to the nation's public health efforts.
        We heard stories today of manufacturers shifting their
    capabilities to meet U.S. PPE needs, and the stories that we
    have heard are very similar to what is happening all across
    Kansas, as well as all across the United States.
        When the lockdowns began in March, manufacturers across the
    country had to close their doors. Their suppliers could not
    supply them. Their customers could not buy from them, and they
    faced a series of mortal threats, none of which had been seen
    before. KMS and the other MEP centers across the national
    network have been here for them, and we are here for them now
    as manufacturing continues to lead the way toward economic
    recovery.
        I would like to acknowledge and thank Congress for
    providing temporary cost share relief to the MEP for the 2020
    Fiscal Year. Ordinarily the cost share requirement leverages
    Federal funding with a non-Federal match, but this temporary
    cost share relief has allowed KMS and the other MEP centers
    across the national network to provide much needed services to
    manufacturers during these unprecedented times.
        Over the course of the last several months, thanks to the
    CARES Act funding and the temporary cost share relief, the MEP
    centers have done incredible work with manufacturers to help
    them retool, stay afloat, modify their processes and
    procedures, and to adapt to the new health and safety
    protocols. Many centers remain working remotely and have had to
    adjust their service delivery to protect their own staff and
    adjust to the changing protocols that are happening at
    manufacturing clients, as they are trying to protect their own
    staff as well. So, again, thank you, Congress, for the
    temporary cost share relief.
        Supply chain issues have also been heightened because of
    the pandemic. Believe it or not, there is no national supply
    chain data base. So organizations were scrambling to figure out
    where to go to get specific parts, materials, and PPE. KMS and
    other MEP centers worked around the clock in the early days of
    the pandemic and beyond to keep manufacturers viable by
    matching companies to suppliers and getting them the supplies
    they needed. We were building supply chain data bases
    particularly around PPE and critical need equipment as we went
    state by state and we linked them through our National Supplier
    Scouting System.
        An example of that and how that has worked in Kansas with
    the MEP is with the manufacturer Fuller Industries. They
    produce FDA-approved disinfectants, hand sanitizers, soaps, and
    other industrial strength janitorial products and cleansers.
    They also sell dispensers for soap and sanitizers. These
    dispensers had previously been sourced overseas, and Fuller was
    suddenly facing long lead times, short supplies, and a reduced
    ability to deliver this product to clients, along with medical
    centers after the onset of the pandemic. We were able to
    quickly match them with another manufacturer in southeast
    Kansas that could help them bring the production of the
    sanitizers not only back to the United States but in-house. So
    by connecting Kansas manufacturers, we were able to really keep
    the supply chain going.
        We just heard from Rick at InkCycle about the issues with
    bottling. That is another thing that we are really working
    across the national network with connecting manufacturers to
    those that are manufacturing bottles and those that have
    expanded their capabilities to meet the bottling needs of
    manufacturers.
        Workplace safety is also a huge concern for manufacturers
    during the best of times, and it has really heightened during
    the COVID pandemic. While a portion of the U.S. workforce could
    shift to remote work, manufacturers could not do that. So the
    MEP centers have helped manufacturers really understand the
    safety protocols and adjust everywhere from the front office
    all the way to the production floor and shipping facilities and
    beyond.
        In helping manufacturers respond to COVID-19, we are
    helping them build resiliency and to keep their workforce
    steady. As we know, manufacturers are driving economic recovery
    while also suffering an economic hit and uncertainty
    themselves. And so the role of KMS and the entire MEP national
    network is to help manufacturers get back on their feet and to
    deliver the tools to them to address the uncertainty while they
    help our country continue to get back on its feet by providing
    the critically needed equipment, as well as continue everything
    else that we need to have produced from our food supply to
    everything else that the manufacturers in the United States
    make.
        In the face of so much economic uncertainty, we really have
    worked hard to help manufacturers look forward. An example of
    one of these programs is a service developed by KMS called
    Future State Optimization. It really works to help
    manufacturers look forward and sustain profitability throughout
    the pandemic while building for their future. It provides a
    three-part framework delivering expert consultancy,
    comprehensive manufacturing centered assessment, and a
    strategic road map for manufacturers to ensure the future of
    their facilities, as well as the future for their employees.
        I hope that what I have shared today has given some insight
    on how KMS has responded to these unprecedented conditions here
    in the United States with COVID-19 and how the MEP national
    network has responded across the United States. In a strong and
    coordinated response to this pandemic, together we are
    partnering with manufacturers on their top COVID-19 concerns.
        And I certainly appreciate the opportunity to appear before
    the Subcommittee today, and I look forward to answering any
    questions you might have. Thank you.
        [The prepared statement of Ms. Stovall follows:]

      Prepared Statement of Tiffany M. Stovall, CEO, Kansas Manufacturing
          Solutions, Kansas Manufacturing Extension Partnership (MEP)
        Good afternoon Chairman Moran, Ranking Member Blumenthal and
    members of the Subcommittee. Thank you for the opportunity to appear
    before you to discuss the manufacturing community's response to the
    COVID-19 pandemic.
        I am Tiffany Stovall. I am the CEO of Kansas Manufacturing
    Solutions (KMS), the Kansas Manufacturing Extension Partnership (MEP)
    Center. I have been with MEP since 2010 and began leading, as CEO, in
    2017.
        I am sure that the Subcommittee is familiar with the Manufacturing
    Extension Partnership, but as a reminder, we are the Nation's only
    program providing hands-on, in-depth support to small and medium-sized
    manufacturers to help them compete more effectively in the global
    marketplace. The MEP National Network has 51 centers--one in every
    state plus Puerto Rico. MEP has over 1300 manufacturing experts on
    staff, 400 service locations, nearly 2100 3rd party service providers
    and partners, and we interact with over 28,000 manufacturers per year.
    MEP Centers are the go-to experts for advancing United States
    Manufacturing.
        As a public-private partnership, MEP delivers a high return on
    investment to taxpayers. The Upjohn Institute for Employment Research
    conducted a study of MEP this past year and found that the program
    generates a 14.4:1 return on investment. Each year, an independent firm
    surveys manufacturers regarding the impact they have achieved from MEP
    Center services. In 2019, MEP clients reported $15.7 billion in new and
    retained sales and the creation or retention of 114,650 jobs.
    Considering that the average U.S. manufacturing worker earns more than
    $87,185 in wages and benefits per year, MEP clients are economic
    drivers in their communities. MEP clients are also increasing their
    capacity for the production of goods. MEP clients reported $4.5 billion
    in new investments directly attributed to their work with MEP.
        It is because of its history of working with manufacturers as
    trusted advisors that MEP was uniquely positioned to support U.S.
    manufacturers when they had to adapt to the exceptional challenges
    presented to them during the COVID-19 pandemic. Manufacturers have had
    to respond to COVID-19 challenges within their own facilities, but they
    are also helping our Nation respond to COVID-19 by producing
    critically-needed personal protective equipment (PPE), ventilators, and
    other equipment and goods essential to the Nation's public health
    efforts. I would also like to mention the other manufacturing
    industries that have kept our food supply going as well as all of the
    other essential goods that may not be directly related to COVID-19
    response but need to stay in production.
        When the lockdowns began in March, manufacturers across the country
    had to close their doors. Their suppliers could not supply them, and
    their customers could not buy from them. They faced a set of mortal
    threats, none of which they had seen before. KMS and the other MEP
    Centers were there for them then, and we are there for them now as
    manufacturing leads the way to economic recovery. We helped
    manufacturers create new supplier networks, navigate stay-home orders,
    apply for Paycheck Protection Program (PPP) funds, develop and
    implement best practices for internal COVID-19 safety, and in many
    cases, retool their factories to make COVID-19-related products.
        I would like to acknowledge and thank Congress for providing
    temporary cost share relief to MEP for the 2020 Fiscal Year.
    Ordinarily, the cost share requirement leverages Federal funding with a
    non-federal match. When the pandemic hit, our non-federal funding
    stopped, which would have prevented us from unlocking the Federal
    funds. Temporary cost share relief has allowed KMS and the other
    Centers across the National Network to provide much-needed services to
    manufacturers during these unprecedented times. Over the course of the
    last several months, thanks to CARES Act funding and temporary cost
    share relief, the MEP Centers have done incredible work with
    manufacturers to help them re-tool, stay afloat, and modify their
    processes and procedures to adapt to the new health safety protocols.
    Many Centers remain working remotely; they have had to adjust their
    service delivery to protect their own staff and adjust to the changing
    policy protocols of their manufacturing clients. The temporary cost
    share relief has been critical in allowing them to do so.
        Some examples of the kinds of work that Kansas Manufacturing
    Solutions and other MEP Centers have been able to do as a result of the
    temporary cost share relief:

       Work with companies that needed to invest in pivoting their
            operations instead of paying for MEP services in the short
            term;

       Keep specialized expertise on staff at MEP Centers to
            provide guidance to manufacturers during this critical time;

       Provide webinars, instructional materials, and guidelines to
            manufacturers about how to get specific PPE and information
            regarding critical resources like PPP;

       Focus solely on meeting the needs of U.S. manufacturers and
            provide them with critical services at their time of greatest
            need, without worrying about the Center meeting payroll or
            paying rent; and

       Shift the delivery of direct services and training to online
            and virtual platforms when we could not meet with companies in
            person.
    Supply Chain and Supplier Matching
        Supply chain issues have been heightened because of the pandemic.
    Believe it or not, there is no national supply chain database, so
    organizations were scrambling to figure out where to go to get specific
    parts, materials, and PPE. KMS and other MEP Centers worked around the
    clock in the early days of the pandemic and beyond to keep
    manufacturers viable by matching companies to suppliers and getting
    them supplies they needed. We built supply chain databases as we went,
    state by state, and linked them through our National Network Supplier
    Scouting system.
        KMS and the MEP National Network have been working tirelessly to
    build and strengthen PPE supply chains to ensure the United States has
    the critical PPE to meet the needs of our citizens during this
    unprecedented pandemic.
        One example of how this has worked here in Kansas is with a
    manufacturer, Fuller Industries, that produces FDA approved
    disinfectants, hand sanitizer, soaps and other industrial strength
    janitorial products and cleaners. They also sell dispensers for soap
    and sanitizer. These dispensers had been previously sourced overseas
    and Fuller Industries was suddenly facing long lead times, short
    supplies and a reduced ability to deliver this product to clients
    including medical centers after the onset of the pandemic. Fuller
    reached out to KMS with the urgent need to gain more control over their
    supply chain.
        KMS was able to quickly match them with another manufacturer in
    Kansas that could help them bring production of the sanitizer
    dispensers in-house. While the project is still ongoing, this a great
    example of the supply chain building that is happening by connecting
    one manufacturer to another--reshoring a production capability that
    helps meet the Nation's PPE needs. This effort will generate more U.S.
    investment, U.S. revenue, and U.S. jobs. An upside for Kansas is that
    it also is a significant investment in a rural community.
        This is the kind of work MEP is doing right now, every day, every
    month and as long as we need to help manufacturers weather the COVID-19
    storm.
    Adjusting to New Safety Protocols
        Workplace safety is a huge concern for manufacturers during the
    best of times, and is incredibly heightened during the COVID-19
    pandemic. While a portion of the U.S. workforce shifted to remote work,
    this is not an option for the manufacturing sector. MEP Centers helped
    manufacturers understand the recommended safety protocols and adjust
    everywhere from the front office to the production floor to shipping
    facilities and beyond.
        Centers have helped by creating and updating Safety Guides for
    manufacturers on COVID-19 practices in their facilities based on
    current best practices, including the appointing an infection control
    officer, use of thermometers, face shields, masks, and other PPE to
    keep staff safe.
        These safety protocols also include considerations on plant layouts
    to increase safety of the workforce and encourage six-foot distancing
    when possible, without disrupting production or efficiency. Again, MEP
    staff was already well positioned for this type of work because of the
    ongoing trusted advisor relationships we have had with manufacturers
    and the shop floor expertise within the Centers. MEP and KMS
    understands their business and has earned this trust.
        KMS has provided manufacturers throughout the state with COVID-19
    safety guidelines and updated COVID-19 policies for HR handbooks. This
    helps give companies peace of mind that they are doing the right things
    to keep their employees safe and communicating expectations effectively
    to their employees.
    Moving Forward: Sustaining and Growing U.S. Manufacturing
        In helping manufacturers respond to COVID-19, we are helping them
    build operational resiliency and keep their workforce steady.
    Manufacturers are driving economic recovery while also suffering an
    economic hit and uncertainty themselves. The role of MEP is to help
    manufacturers get back on their feet, deliver tools to address the
    uncertainty so the Nation can continue to get back on its feet.
        Throughout this pandemic, MEP Centers like KMS are continuing to
    provide critical services to help sustain and grow manufacturing, even
    if those services have to be delivered in different ways. We have long
    been known for working elbow-to-elbow with companies anywhere from
    strategy in the board rooms to process and efficiency on the shop
    floor. While we miss the face-to-face interaction, we have been able to
    pivot to meet the restrictions many manufacturing companies have had to
    set by putting our existing services on virtual platforms and
    developing new services that can be effectively delivered remotely.
        An example of one of these newly developed services from KMS is an
    on point new program called Future State Optimization. It is a
    proprietary multi-faceted program to help manufacturers sustain
    profitability throughout the pandemic while building for their future.
    This program provides a three-part framework for delivering expert
    consultancy, a comprehensive manufacture centric assessment and a
    strategic roadmap for manufacturers to ensure their future and the
    future of their employees.
        This comprehensive program will help manufacturers understand
    through the deployment of the assessment what will and has to change
    only temporarily, what will need to change permanently, and how to make
    good strategic decisions without full information in rapidly changing
    economic environments with the help of high level consultation from
    planning experts, financial scenario planning and a roadmap of how to
    pivot to sustained profitability.
        In the face of so much economic uncertainty, this program is
    designed to ensure manufacturing leaders get back into the driver's
    seat and be proactive with their current business strategies instead of
    reactive. The process can make the future much less daunting, and the
    feedback from the first few companies that have gone through the hands-
    on, intensive process has been outstanding. In the words of one early
    participant:

            ``KMS was able to take a very complex set of opportunities
            facing Mid-State Aerospace, distill them down to very
            understandable and prioritized list of actions to grow our
            business as well as develop a roadmap to address the COVID-19
            impacts from both an operational and economic standpoint.''--
            Robert Rogers, President, Mid-State Aerospace

        I hope the foregoing information has given insight on how Kansas
    Manufacturing Solutions has responded to the unprecedented COVID-19
    pandemic in Kansas and how the MEP National Network has responded
    across the United States. In a strong and coordinated response to this
    pandemic, together we are partnering with manufacturers on their top
    COVID-19 concerns about adjusting to new safety protocols, building
    operational resilience, supply chain concerns, and workforce needs
    while giving critical insight into investment plans and regional
    infrastructure need. Manufacturing generates the kind of jobs that come
    with benefits and a paycheck. Manufacturing matters to the health of
    Kansas and to the health of the US. Whenever, wherever, and however we
    can, we need to support domestic manufacturing. KMS does that and MEP
    does that!
        I sincerely appreciate the opportunity to appear before this
    Subcommittee. I look forward to answering any questions you may have.

        Senator Moran. Ms. Stovall, thank you. We appreciate your
    testimony, your willingness to appear.
        Our final witness is Mr. Michael Wessel, Commissioner,
    U.S.-China Economic and Security Review Commission. Mr. Wessel?

    STATEMENT OF MICHAEL WESSEL, COMMISSIONER, U.S.-CHINA ECONOMIC
                     AND SECURITY REVIEW COMMISSION

        Mr. Wessel. Chairman Moran, Ranking Member Blumenthal,
    members of the Subcommittee, thank you for the invitation to
    appear here today.
        My name is Michael Wessel, and I am appearing as a
    Commissioner on the U.S.-China Economic and Security Review
    Commission, but as the normal Washington disclaimer, I am only
    speaking for myself.
        The pandemic has put stress on supply chains and our
    manufacturing base, and it has spurred a debate about our
    preparation, the availability of public resources and public
    policy responses. We need to address today's needs and prepare
    for a possible future pandemic.
        Early on in the pandemic, I was contacted by some
    manufacturers wanting to contribute in confronting the crisis,
    much as my colleagues on this panel discussed earlier. The
    Federal Government was overwhelmed, and it became easier to
    match some of these firms up directly with States and hospital
    systems to meet their needs including, I should point out, Yale
    New Haven Hospital, Senator Blumenthal's home.
        Our nation owes a great debt of gratitude to our
    manufacturers and their workforce who have come to the aid of
    our country to meet the critical needs of our sick, our health
    care workers, first responders, and our entire population in
    this time of crisis. Today, as we all know, while supplies are
    more available, there are still shortages. Health care workers
    and others are having to reuse equipment, stressing safety
    protocols and putting their health at risk. America must do
    better to support our manufacturing base to help them protect
    our citizens.
        The Chinese Communist Party's industrial policies and our
    own shortsightedness in some ways have added to an unacceptable
    and dangerous reliance on China for our pharmaceuticals, active
    pharmaceutical ingredients, APIs, medical devices and
    equipment, including PPE.
        The virulence, breadth, and impact of the coronavirus was
    unexpected. But our increasing dependency on China is not news,
    and China is willing to use and abuse their manufacturing
    power. For example, the CCP leadership was willing to engage
    in, quote/unquote, mask diplomacy by using shipments of PPE to
    garner political support and foster diplomatic gains. The CCP
    has been willing to weaponize supply chains. We cannot allow
    the health and safety of our people to be held hostage during a
    diplomatic, economic, or military confrontation.
        We are overly dependent on China for our medical needs. We
    no longer have the fermentation capacity in the U.S. to make
    penicillin and are completely dependent on foreign sources. 80
    percent of the APIs we use come from abroad with a substantial
    portion coming from China. Of the 10 active ingredients in
    remdisivir, one of the therapeutics for treating COVID-19,
    eight come from China. For many other products, we are
    partially or entirely dependent on China. One DOD official
    testified that, quote, the national security risks of increased
    Chinese dominance on the global API market cannot be
    overstated. Unquote.
        Since China joined the WTO, U.S. business operations have
    expanded dramatically. China's policies were designed to
    promote that. But troubling is not just the loss of production
    but the expansion of R&D. U.S. multinational firms increased
    their R&D spending in China at roughly twice the rate of their
    domestic R&D spending. U.S. R&D expenditures in China on the
    improvement of manufacturing capability of chemicals, including
    pharmaceuticals, surged nearly 30fold between 2000 and 2017.
        Chinese state-directed and -controlled entities have
    engaged in massive cyber intrusions in the U.S., with many
    focused on the health care sector, including efforts to obtain
    vaccine information. Actors in China have used legal and
    illegal means to obtain the longitudinal health data of U.S.
    citizens that may allow their firms to dominate the
    increasingly important biosynthetic sector. Today the focus is
    on medical supplies, but our dependence on China for many
    products, some of them critical products, is broad and deep. In
    certain areas, this dependence reduces our potential
    resilience. Congress should carefully evaluate supply chain
    risks to determine what the potential impact is on our national
    health and economic security.
        Again, thank you for the opportunity to testify today. Your
    work on these critical issues will help lay a base for making
    sure that we never face these challenges again.
        [The prepared statement of Mr. Wessel follows:]

    Prepared Statement of Michael Wessel, Commissioner, U.S.-China Economic
                         and Security Review Commission
        Chairman Moran, Ranking Member Blumenthal, Members of the
    Subcommittee. I want to thank you for the invitation to appear before
    you today to examine the American manufacturing industry's response to
    the COVID-19 pandemic. Clearly, the COVID-19 pandemic has put stress on
    supply chains and our manufacturing base, and has spurred a debate
    about our preparation, the availability of public resources, and public
    policy responses. Your Subcommittee's jurisdiction covers many of the
    key issues that demand attention and forward-leaning approaches to
    better prepare America for the future. Our citizens want to know that
    our ability to respond to the ongoing pandemic, and to contain a future
    pandemic, should it occur, is being addressed.
        My name is Michael Wessel and I am appearing before you today as a
    Commissioner on the U.S.-China Economic and Security Review Commission
    (Commission), where I have served since its creation 20 years ago. But,
    as a disclaimer, I am speaking for myself, although my comments are
    informed by my service on the Commission and other work I have been
    involved in for many years.
        The Commission was created by Congress in 2000 in conjunction with
    the debate about the grant of Permanent Normal Trade Relations (PNTR)
    to China, paving the way for its accession to the World Trade
    Organization (WTO). The Commission was tasked with monitoring,
    investigating and submitting to Congress an annual report on the
    national security implications of the bilateral trade and economic
    relationship between the United States and the People's Republic of
    China, and to provide recommendations, where appropriate, to Congress
    for legislative and administrative action.
        The grant of PNTR ended the annual debate about whether to extend
    most favored nation status to China. But as it passed PNTR, Congress
    created the Commission because it did not want to forego the annual
    review of our relationship with China. Since the creation of the
    Commission, our mandate has been extended and altered as the U.S.-China
    relationship evolved.
        The Commission is a somewhat unique body: We report to and support
    Congress. Each of the four Congressional leaders appoint three members
    to the Commission for two-year terms. The Commission is scheduled to
    release this year's report in a couple of weeks, with unanimous
    support. In eight of the last ten years, we have issued unanimous
    reports. In the two years where it was not unanimous, there was only
    one dissenting vote. In many ways, the evolving challenges and
    opportunities posed by the relationship with China have united us in
    our analysis. All of our hearings, testimony, annual reports and
    research are available at our website www.uscc.gov.
        Our nation owes a huge debt of gratitude to our manufacturers and
    their workforce who have come to the aid of our country to meet the
    critical needs of our sick, our healthcare workers, first responders
    and our entire population in this time of crisis. Many worked
    tirelessly to retool and revamp operations to produce personal
    protective equipment (PPE), ventilators and other needed products and
    equipment.
        Indeed, early on in the pandemic, I was contacted by companies and
    their representatives wanting to contribute in confronting the crisis.
    A group of textile firms in the Northeast wanted to know what
    specifications they should use in producing masks, gowns and other
    equipment. A firm in Mississippi similarly wanted to know what they
    could do. The Federal government was overwhelmed, and it became easier
    to match some of these firms up directly with states and hospital
    systems to meet their needs.
        Today, as we all know, while supplies are more available, there are
    still shortages. Healthcare workers, and others, are having to reuse
    equipment, stressing safety protocols. And, as experts suggest a surge
    in cases will continue in the coming months, manufacturers will
    continue to face rising demand and limited capacity.
        Mr. Chairman, I want to focus my comments on questions relating to
    U.S.-China policy and its impact on meeting the crisis and future
    challenges. Other panelists can add to the Subcommittee's examination
    of the critical issues you have identified for this hearing.
        The debate about the impact of China's policies and practices on
    the U.S. continues to be divisive. There are some who view China's
    willingness to subsidize and dump products into the U.S. makes our
    people better off because it lowers consumer costs. While fewer and
    fewer people subscribe to this view, some still cling to it.
        I couldn't disagree more and believe that the wealth of opinion has
    concluded that China's predatory and protectionist trade and economic
    policies undermine U.S. economic, health and national security
    interests. The cost of products cannot be the only measure of economic
    benefit. The public understands that while the flat screen television
    in their living room may be cheaper, the manufacturing jobs to support
    that product are not here in the U.S. They know, all too well, that
    globalization has increased the downward pressure on wages and our
    standard of living. It has contributed to rising income inequality.
    And, if we lose all these jobs, few will have the income to even
    purchase the subsidized and dumped products.
        As predatory pricing drives outsourcing of jobs and offshoring of
    production, it can lead to a severe loss of domestic productive
    capacity. Industry after industry has faced this problem. Steel,
    aluminum, solar cells, rare earths have gotten the bulk of the
    attention. But China's industrial policies, as well as our own short-
    sightedness, have also created an unacceptable and dangerous reliance
    on China for our pharmaceuticals, active pharmaceutical ingredients
    (APIs), medical devices, and equipment, including PPE. In the early
    days, as we all know, the offshoring of manufacturing limited our
    capacity to surge production of ventilators and other critical
    equipment.
        China's economic policies, driven by the Chinese Communist Party
    (CCP), have contributed to the hallowing out of the U.S. industrial
    base. After years of these policies, the reality of our dependence, as
    well as the impact on our own capabilities, has been all-too-evident in
    the response to the current pandemic.
        While the virulence and impact of the coronavirus was unexpected
    and, to some degree, our unpreparedness is a function of
    underestimating how broad a health crisis could be, our increasing
    dependency on China is not news.
        In putting the spotlight on supply chains for medical equipment,
    the COVID-19 crisis taught the American public not only about our loss
    of productive capacity, but also China's policies that contributed to
    that problem and its ability to control supplies and use them as
    foreign policy leverage. The Chinese government's failure to conduct
    adequate inspections of manufacturing facilities and lack of quality
    control all became nightly news stories. Masks sold as meeting the N95
    standard were often found to be almost ineffective--possibly less
    effective than simply using a bandana as a face mask.
        We also saw that the CCP was willing to engage in ``mask
    diplomacy'' using shipments of PPE to garner political support and
    foster diplomatic gains.\1\ For many, it raised significant questions
    about the CCP's actions. We have seen prior examples of the CCP's
    willingness to ``weaponize'' supply chains, most notably with regard to
    rare earth exports to Japan in 2010. We cannot allow the health and
    safety of our people to be held hostage during a diplomatic, economic
    or military confrontation.
    ---------------------------------------------------------------------------
        \1\ Brian Wong, ``China's Mask Diplomacy,'' The Diplomat, March 25,
    2020.
    ---------------------------------------------------------------------------
        While the COVID-19 crisis brought all of this to the front pages
    and to the nightly news, the threats to our economic health and
    security have been building for years. In 2014, the Commission held a
    hearing entitled ``China's Healthcare Sector, Drug Safety, and the
    U.S.-China Trade in Medical Products.'' In July 2019, former Senator
    Jim Talent and I co-chaired a hearing on ``Exploring the Growing U.S.
    Reliance on China's Biotech and Pharmaceutical Products.'' Our work,
    and the witness testimony we heard, along with staff research,
    identified broad and deep dependence on China for our medical needs and
    deep vulnerabilities.
        We no longer have the fermentation capacity in the U.S. to make
    penicillin and are completely dependent on foreign sources. Eighty
    percent of the APIs we use come from abroad,\2\ with a substantial
    portion coming from China. Of the ten active ingredients in Remdisivir,
    one of the therapeutics for treating COVID-19, eight come from
    China.\3\ For many other products, we are partially, or entirely,
    dependent on China. As Christopher Priest, the Acting Deputy Assistant
    Director of the Defense Health Agency told our Commission, ``the
    national security risks of increased Chinese dominance of the global
    API market cannot be overstated.'' \4\
    ---------------------------------------------------------------------------
        \2\ U.S. Food and Drug Administration, FDA at a Glance: FDA-
    Regulated Products and Facilities, April 2017.
        \3\ Mary Denigan-Macauley, written testimony for U.S. House of
    Representatives Subcommittee on Oversight and Investigations, Committee
    on Energy and Commerce, Hearing on Securing the U.S. Drug Supply Chain:
    Oversight of FDA's Foreign Inspections Program, December 10, 2019, 1.
        \4\ Christopher Priest, testimony for U.S.-China Economic and
    Security Review Commission, Hearing on Exploring the Growing U.S.
    Reliance on China's Biotech and Pharmaceutical Products, July 31, 2019.
    https://www.uscc.gov/sites/default/files/Priest%20US-China%20Commis
    sion%20Statement.pdf.
    ---------------------------------------------------------------------------
        Today, the focus is on medical supplies, but our dependence on
    China for many products--some of them critical products--is broad and
    deep. In certain areas, this dependence reduces our potential
    resilience. Last year, despite rising trade tensions and the imposition
    of Section 301 tariffs, the U.S. ran a trade deficit in advanced
    technology products with China of more than $100 billion and an overall
    goods deficit of $345 billion. As has been seen with 5G, the predatory
    actions of China's Huawei have undermined the ability of market-
    oriented firms to develop the technology to ensure safe sources of
    supplies. Our dependence on China for telecom products has created
    dangerous vulnerabilities that our nation--and an increasing number of
    our allies--is only now really grappling with.
        Mr. Chairman, this Subcommittee's jurisdiction over consumer
    protection issues is also important in this area. There were numerous
    reports of masks and other supplies that were imported from China, but
    which did not meet appropriate regulations and safety standards. We saw
    this in the past with imports of tainted heparin that killed numerous
    citizens. We learned about blood pressure medications that were tainted
    with traces of rocket fuel, as both the APIs in the medication and
    rocket fuel were produced in the same facilities. The quality,
    efficacy, and safety of many Chinese-produced medical products must be
    addressed.
        Congress should carefully evaluate supply chain risks to determine
    what the potential impact is on our national, health and economic
    security.
    U.S. Business Activity in China and Its National Security Implications:
        At the beginning of July, the Commission issued a staff paper
    entitled ``Trends in U.S. Multinational Enterprise Activity in China,
    2000-2017.'' \5\ Since China's accession to the WTO in 2001, U.S.
    business operations in China have expanded dramatically. The staff
    report found that ``as U.S. MNE [multinational enterprise] activity in
    China increasingly focuses on the production of high-end technologies,
    the risk that U.S. firms are unwittingly enabling China to achieve its
    industrial policy and military development objectives rises.'' \6\
    ---------------------------------------------------------------------------
        \5\ Kaj Malden and Ann Listerud, ``Trends in U.S. Multinational
    Enterprise Activity in China, 2000-2017,'' U.S. China Economic and
    Security Review Commission, July 1, 2020. https://www.uscc.gov/sites/
    default/files/2020-06/
    US_Multinational_Enterprise_Activity_in_China.pdf.
        \6\ Ibid, at 3.
    ---------------------------------------------------------------------------
        Several of the report's findings are relevant to today's hearing:

       China's vast consumer market and the Chinese government's
            coercive policies have incentivized many U.S. MNEs to move
            their manufacturing operations to China. U.S. Department of
            Commerce Bureau of Economic Activity (BEA) data explored in
            this report indicates the major destination for goods and
            services supplied by U.S. MNEs in China is the Chinese market
            itself. In 2017, U.S. MNE foreign affiliates in China sold 82
            percent of the goods and services produced in China directly to
            Chinese customers. At the same time, trade barriers, including
            localization requirements and export restrictions on key raw
            materials, have further induced production within China. Sales
            to Chinese consumers may also constitute sales of intermediate
            goods and services which might be used in final goods for
            export to the United States.

       China is the fourth-largest destination for U.S. MNE
            research and development (R&D) expenditure and increasingly
            competes with advanced economies in serving as a key research
            hub for U.S. MNEs. The growth of U.S. MNE R&D expenditure in
            China is also comparatively accelerated, averaging 13.6 percent
            year-on-year since 2003 compared with 7.1 percent for all U.S.
            MNE foreign affiliates in the same period. This expenditure is
            highest in manufacturing, particularly in the production of
            computers and electronic products, but has diversified over
            time. For example, R&D expenditure on the improved manufacture
            of chemicals, including pharmaceuticals, surged nearly 30-fold
            from a low base of $13 million in 2000 to $392 million in 2017.

       China has grown from the 20th-highest source of U.S. MNE
            affiliate value added in 2000 ($5.5 billion) to the fifth
            highest in 2017 ($71.5 billion), driven primarily by the
            manufacture of computers and electronic products as well as
            chemicals. The surge is especially notable in semiconductors
            and other electronic components, which accounted for $5.6
            billion of total manufacturing value added in 2017, up 250
            percent from $1.6 billion in 2009. Separately, pharmaceutical
            manufacturing serves as the largest chemical sector in terms of
            value added, accounting for $2.6 billion in 2017.

        The impact of the CCP's industrial policies is broad and deep.
    China's government uses an ``all of the above'' approach to advancing
    its interests. For example, work by private sector forensic accounting
    experts \7\ uncovered acts of espionage to undermine the market value
    of firms which were later acquisition targets for Chinese firms. In
    other words, they undermined a company's value to put it into a
    ``distress'' situation, to reduce its attractiveness to other companies
    and to make it cheaper for them to acquire.
    ---------------------------------------------------------------------------
        \7\ Jeffrey Z. Johnson, testimony for the U.S.-China Economic and
    Security Review Commission, Hearing on Chinese Investment in the United
    States: Impacts and Issues for Policy Makers, January 26, 2017.
    ---------------------------------------------------------------------------
        Chinese state-directed and -controlled entities have engaged in
    massive cyber intrusions in the U.S. The first major indictment on this
    was brought forward by David Hickton, U.S. Attorney for the Western
    District of Pennsylvania, who alleged in 2014 that between 2006 and
    2012 five People's Liberation Army hackers had accessed the computer
    networks of the United Steelworkers union and five major U.S. firms to
    obtain trade secrets and other information.\8\ The next year, President
    Obama reached an agreement with General Secretary Xi whereby China
    agreed that they would not engage in hacking for economic gain. The
    premise of the agreement was faulty from the start as China treats
    economic and national security as inextricably intertwined. In short,
    all hacking undertaken by entities directed or controlled by the
    Chinese government was for national security reasons and, therefore,
    not covered by the agreement.
    ---------------------------------------------------------------------------
        \8\ U.S. Department of Justice, ``U.S. Charges Five Chinese
    Military Hackers for Cyber Espionage Against U.S. Corporations and a
    Labor Organization for Commercial Advantage,'' May 19, 2014. https://
    www.justice.gov/opa/pr/us-charges-five-chinese-military-hackers-cyber-
    espionage-against-us-corporations-and-labor.
    ---------------------------------------------------------------------------
        Massive hacking continued with incalculable harm. Indeed, press
    reports indicate that China, as well as Russia, has been trying to hack
    into our major medical firms to obtain vaccine information. As former
    FBI Director James Comey said, ``There are two kinds of big companies
    in the United States. There are those who've been hacked by the
    Chinese, and those who don't know they've been hacked by the Chinese.''
    \9\ The current FBI Director, Christopher Wray, recently said ``The
    greatest long-term threat to our Nation's information and intellectual
    property and our economic vitality is the counterintelligence and
    economic espionage threats from China . . . It's a threat to our
    economic security and, by extension, to our national security.'' \10\
    ---------------------------------------------------------------------------
        \9\ Maria Tadeo, ``FBI's James Comey accuses China of hacking into
    every major American company,'' The Independent, October 6, 2014.
        \10\ Christopher Wray, Director, Federal Bureau of Investigation,
    ``The Threat Posed by the Chinese Government and the Chinese Communist
    Party to the Economic and National Security of the United States,''
    remarks as delivered, Hudson Institute, July 7, 2020.
    ---------------------------------------------------------------------------
        In the area of medicine, multiple hacks attributed to actors in
    China, have obtained the longitudinal health data of U.S. citizens.
    While today's medicines are largely composed of APIs and other chemical
    compounds, tomorrow's medicines are likely to be biosynthetics. With
    the massive amount of data that Chinese entities collect--legally and
    illegally--they have the opportunity to develop new drugs and
    biosynthetics as a faster pace because of ``big data.'' Industries that
    fall under the umbrella of biotechnology are worth hundreds of billions
    of dollars annually, and their development will have a profound impact
    on U.S. economy and national security. There is also the potential to
    enable personalized medicine, to produce vaccines faster and more
    effectively and develop other products which have enormous national
    security implications. Earlier this year, the Theodore Roosevelt
    aircraft carrier was sidelined because of COVID-19. The implications
    are endless.
        The Chinese government is aggressively working to obtain America's
    secrets. The Chinese government maintains many talent recruitment
    programs, with the Thousand Talents Program being the most prominent
    example, that are aimed at attracting high-quality researchers, often
    with expertise in emerging technologies or areas with potential
    military applications.\11\ These programs offer a variety of
    incentives, including salaries, recruitment bonuses, and living
    allowances of up to $150,000.\12\ Chinese government guidance funds--
    more than 1,800 \13\ of them according to some estimates--seek to
    invest in, and obtain, technology and trade secrets to support the
    CCP's industrial policies.
    ---------------------------------------------------------------------------
        \11\ Anastasya Lloyd-Damnjanovic and Alexander Bowe, ``Overseas
    Chinese Students and Scholars in China's Drive for Innovation,'' U.S.-
    China Economic and Security Review Commission, October 7, 2020. https:/
    /www.uscc.gov/sites/default/files/2020-10/Overseas_Chinese_Students_
    and_Scholars_in_Chinas_Drive_for_Innovation.pdf.
        \12\ In the indictment of former Harvard professor Charles Lieber,
    the Justice Department alleged that under the terms of Lieber's three-
    year Thousand Talents contract, Wuhan University of Technology (WUT)
    paid Lieber a salary of up to $50,000 per month, living expenses of up
    to $150,000 and awarded him more than $1.5 million to establish a
    research lab at WUT. It is alleged that in 2018 and 2019, Lieber lied
    to Federal authorities about his involvement in the Thousand Talents
    Plan and his affiliation with WUT. U.S. Department of Justice,
    ``Harvard University Professor Charged with Tax Offenses,'' July 28,
    2020. https://www.justice.gov/opa/pr/harvard-university-professor-
    charged-tax-offenses.
        \13\ Karen Sutter, `` `Made in China 2025' Industrial Policies:
    Issues for Congress,'' Congressional Research Service, August 11, 2020.
    https://fas.org/sgp/crs/row/IF10964.pdf.
    ---------------------------------------------------------------------------
        In many other areas the Chinese government and the CCP are
    aggressively pursuing opportunities to advance their interests, often
    at the cost to our own national, health and economic security.
    Conclusion
        The policies of the CCP and the actions of their government have
    already triggered a reaction by the U.S. While the honeymoon period
    after China's entry into the WTO lasted too long, and the period of
    engagement and dialogue yielded too few results, policy makers have
    identified many actions that will make a difference.
        But the challenges posed by China's policies and practices are
    broad and deep and countering their negative impact on our interests
    will require concerted and long-term action. Action is needed not only
    in the economic policy realm, but on the diplomatic, human rights,
    health policy, military and other fronts.
        Mr. Chairman, Ranking Member Blumenthal, Members of the
    Subcommittee, thank you for the opportunity to testify today. Your work
    on these critical issues will help lay a base for making sure that we
    never face these challenges again. The Commission members and our staff
    and at your, and your staff's, disposal.

        Senator Moran. Mr. Wessel, thank you for your testimony. I
    know you indicated you speak for yourself, not the Commission,
    but I understand that in a short period of time, there will be
    a--first of all, let me say I agree with your assessment that
    China's predatory and protectionist trade and economic policies
    undermine U.S. economic health and national security interests.
    I appreciate you saying that and agree with you.
        But your Commission is expected to release this year's
    report in the next few weeks. Can you describe any formal
    recommendations that you would expect to be included in terms
    of assessing and improving production capacity in the United
    States, the manufacturing industry producing PPE, medical
    supplies, and even pharmaceuticals? What would those
    recommendations--what do you expect them to be?
        Mr. Wessel. Thank you for your question, and let me point
    out that in fact we have had already a public report on this
    matter. Former Senator Jim Talent of Missouri and I co-chaired
    a hearing on this issue in 2019, and the China Commission
    unanimously, six Democrats and six Republicans, released its
    report in 2019 and were unanimous behind a number of
    recommendations regarding this sector.
        Let me quickly review just three of those, if I could,
    which is Congress has the ability to dive deep, as you are
    doing today and as we have all been forced to as we look to
    address this pandemic. But we can harness Federal procurement
    policy through Medicare, Medicaid, Veterans Affairs, DOD to buy
    American products, to use our existing authorities and leverage
    those to try and bring these supply chains back to the U.S.
        Second, we have to do a much better job of having the FDA
    use its existing authority to ensure that we are protecting
    Americans in terms of their safety for many of these products.
    You are well aware of the heparin products that caused a number
    of deaths here in the U.S. coming from China. Two years ago, we
    found that the blood pressure medicine, valsartan, was actually
    tainted with rocket fuel because both the APIs and the rocket
    fuel were being produced at the same facility, and that product
    made its way to U.S. consumers.
        The FDA should be allowed to go into every facility in
    China that is sending their products to the U.S., and we need
    to make sure that that happens or that those products are
    unable to come here.
        Finally, we need to disclose where essential drugs and
    products are coming from, and again, we can do that through
    Federal procurement standards so that citizens and our
    officials know where the supply chains are linked, where the
    products are coming from, and how we can best prepare and
    protect.
        Senator Moran. Thank you very much for explaining that to
    me.
        Let me ask Mr. Bulusu and Mr. Krska and Mr. Gilman. Your
    companies have worked to create PPE manufacturing capabilities
    here in the U.S. in response to COVID-19 with the goal of
    creating a homegrown American product. However, not only does
    China dominate global PPE production, they also dominate PPE
    component and manufacturing equipment sectors. You have
    described some of those circumstances or at least those facts
    to us in your testimony. I wondered if you could go into more
    detail describing the challenges in finding PPE components and
    manufacturing equipment.
        Mr. Krska, you mentioned the bottles that are unsourceable
    in the United States. I just want to hear more about the
    challenges that you face. I would tell you that we had numerous
    Kansas counties, hospitals, nursing homes, and others call our
    office and ask for help in locating PPE. Often when it was
    discovered what they had purchased--what we discovered was
    sitting in a port in California waiting to be approved by the
    FDA, which was, in many instances, denied based upon quality.
    So I also would give you the chance to tell me or tell our
    committee about the quality nature of your competitors and
    their products from China.
        Mr. Krska. So one of the stories that I had in my
    testimony, but my testimony was too long already--I cut it out.
    But when we started our bottling operation, we started looking
    for bottles in the U.S. and we could not find manufacturers of
    it, and distributors were all sold out for 3 or 4 months. So
    having a lot of experience in China, we did go to China and
    start looking and narrowing down the field to find the right
    company. But here is an example of, you know, to give you an
    idea of the situation we ran into.
        So we found a bottle manufacturer in China that could
    produce the bottles for us. We inspected them. The samples were
    fine, and we started buying the bottles. We were currently
    purchasing a label from a Kansas label manufacturer for 15
    cents. The Chinese bottle manufacturer offered to make the
    label, print the label, and apply the label for one penny.
        So I think those are the kind of headwinds that we run
    into, and we have to change the game in regard to how we source
    and buy these products. And I think it is going to take some
    type of government involvement because right now it is all
    about just--as Mr. Gilman talked about, it all boils down to
    the mighty penny. Right? And if we get some type of help from
    our politicians to help us with this, I think it could change
    that.
        Anyway, that was an example that I wanted to share earlier.
    Here we have got a bottle that we are buying. We got a label
    that we have sourced in the U.S., and we have been buying it
    here in Kansas, but here this Chinese company offered to print
    the label, apply the label for one penny compared to 15 cents.
    Those are the kind of pressures that you run into.
        Senator Moran. [Inaudible] but what you would tell me is
    that they would be more expensive?
        Mr. Krska. Yes.
        Senator Moran. Mr. Bulusu or Mr. Gilman?
        Mr. Krska. What I was saying earlier--sorry--was that the
    bottles were not available in the United States at all. So this
    was just kind of an extension of that process of buying the
    bottles and then getting into the process of buying the label
    versus the labor and the extra process to apply the label. But
    here the Chinese supplier of the bottle was willing to do it
    for 1 penny versus probably spending somewhere around 20 cents
    in the United States to do it.
        Senator Moran. Thank you.
        Senator Moran. Mr. Bulusu?
        Mr. Bulusu. I will answer this in two different aspects.
        The first one, which is right now the most critical aspect,
    is that anecdotally what I understand from our counterparts in
    some of the best testing facilities in America, SGS, Nelson, is
    that the testing lines are really clogged up right now. And if
    we take a product, if we iterate on top of it, another testing
    cycle to complete on it takes months, and that slows us down.
    Part of the reason why is because there is so much product that
    is being tested which is not necessarily manufactured in
    America and is, what I hear, not of very good quality but is
    constantly clogging these lines. The net loser is the American
    consumer because the American product is not going to get to
    them faster and, two, whatever product they get is going to
    continue to be of inferior quality. This is not good.
        And the second aspect I am going to touch on is the abuse
    of dominant position. Back when we started, about 6 to 7 months
    back, the machines that we were trying to procure were
    available at least 5 to 10 times their pre-COVID prices. A
    typical machine which would cost $70,000 pre-COVID from China
    was costing us $75,000, and that was a bargain, by the way, to
    $150,000. We still went ahead.
        And the other thing is the raw material. Raw material pre-
    COVID that used to cost about $1,000 to $2,000 was being sold,
    offered to us at $115,000. If I remember right, I might have
    even seen $135,000 price on it. That is like 65,000, 67,000
    times more.
        The worst part, while I cannot really claim to put my
    finger on this, is that as we watched these prices go up day
    after day after day, week after week, we wanted to get into the
    market quickly because we did not want to be priced out. Every
    day these prices went out. No matter whether we spoke to one
    vendor or to half a dozen vendors, the prices were almost
    within a band. Are these guys marching to a beat? I do not
    know, but they were definitely very synchronized. Will market
    forces alone really achieve that kind of synchronization? I do
    not know. That is an open question I have not been able to
    figure out.
        But these are the kind of things that we have to brave. And
    we were still putting our faith in the American consumer, and
    we continue to believe that the American consumer, while they
    know what a bargain is, they still prefer quality.
        Thank you.
        Senator Moran. Let me turn to Senator Blumenthal for his
    questions. And, Senator Blumenthal, I am on my way to the
    Senate floor to vote.
        Senator Blumenthal. OK. I will be shortly as well.
        Senator Moran. Senator Sullivan is here, Senator
    Blumenthal, if we need to turn to him to chair the hearing
    while both of us are gone.
        Senator Blumenthal. OK. I will be brief in my questions
    because we do have a vote that is ongoing.
        I just want to make a quick point about Neil Gilman and
    about Gilman Gear just to impress some of my colleagues,
    including my friend from Kansas. Gilman Gear actually led the
    Nation in developing a product called ``pylon cam'' that was
    developed with ESPN, which now is an indispensable part of
    every NFL and college game day broadcast. And in 2015, Mr.
    Gilman designed and brought to market the roll tackle ring,
    which revolutionized the way tackling and blocking are taught
    in high school and elsewhere for the game of football to
    prevent concussions from being as prevalent as they have been.
    So he is a highly talented designer and manufacturer in that
    area of sports equipment but then had to pivot using what we
    know in Connecticut as good old Yankee ingenuity, not always
    Yankee ingenuity, but certainly innovative and inventive
    spirit, and began making the isolation and surgical gowns,
    isolation hoods, hairnet caps, and other PPE, which is now
    serving to protect countless health care workers across
    Connecticut and the country.
        I want to thank again Neil Gilman for being here and want
    to ask him and other members of the panel whether they think
    that the Defense Production Act would be useful in developing
    the supply chain and providing the kind of support that you
    have made reference to because it would, in fact, help to
    develop and make more robust that supply chain and perhaps even
    reduce the cost of the raw materials and equipment that you
    need to produce the equipment that you do?
        Mr. Wessel. Senator, I do not see Mr. Gilman responding, so
    let me jump in very quickly, and thank you for your question.
        I think the DPA is a critical part of what the solution
    needs to be. I think we saw in this pandemic that it was not
    utilized quickly enough, effectively enough, and there has been
    a lack of transparency and accountability. For many of the
    small businesses, all the way up to the big businesses, but
    small businesses, as you heard today, are in need of quick
    capital that can be effectively deployed to meet many of the
    gaps that exist in the supply chains to retool and do what they
    need to do. So DPA I think is a critical tool but needs to be
    enhanced for the future.
        Senator Blumenthal. Thanks for that comment, Mr. Wessel.
        I do not know whether Mr. Gilman is on. Probably not. I
    apologize that those technical difficulties have prevented us
    from connecting.
        Mr. Krska, I do not know whether you have any comment on
    the DPA.
        Mr. Krska. I personally like the idea. I think that when
    you are starting a new industry and you are competing with the
    Chinese, very established businesses with a lot of leverage, a
    lot of volume--you know, having purchased items in China for a
    long time, it is hard to figure out the pricing even, the
    expense. How could it be so cheap? Right? When I first started
    going there, the cost of labor was somewhere around 80 cents an
    hour. Now in some areas, it is $7-$8 an hour, but still the
    pricing is so low that you cannot even make sense of it.
        So if we were to have some environment, some part of the
    economy that was set aside to allow us to achieve momentum and
    get leverage--right--in all parts of the supply chain, it would
    go a long way to restarting many of these industries to get
    them going. That is my impression.
        Senator Blumenthal. Those comments are very, very pertinent
    and timely because as you know--or there is no reason you
    should know, but we have been pushing the President to use the
    Defense Production Act. In fact, in the HEROES Act, there is a
    specific measure that has been led by our colleague, Senator
    Baldwin, a member of this committee--we will be hearing from
    her shortly--that would compel the President to use the DPA
    which, for reasons difficult to comprehend, he has not done.
        But the points that you make and others, Mr. Krska, are
    very, very powerful. They relate to unfair competition from
    China. Some of us have been complaining about it for years.
    They affect Kansas. They affect every State in the country,
    including Connecticut. We hear the same kind of complaints, and
    using the Defense Production Act I think is an essential part
    of the picture and also developing the skilled labor that is
    needed to provide the human resources that you need. It is not
    only parts and components that are in the supply chain. It is
    very much the men and women who do these jobs and who have to
    learn new skills. When you convert to new PPE, when you
    reengineer your assembly lines, I think that is an important
    part of the picture.
        So thank you all for being a part of this panel. I have to
    go vote. You can see that just like you, we as Senators have to
    multitask. I am going to turn, I think, the gavel over to--I
    guess I am being told we are going to have to take a short
    recess. That is the last direction from our Chairman, Senator
    Moran, who is now on the floor voting, but he has communicated
    to me through the wonders of a text that I am instructed to
    declare a recess. So we will be in recess I hope for just a few
    minutes. Thank you all. Thanks for your patience and thanks for
    being a part of this hearing.
        [Recess.]
        Senator Moran. The Subcommittee will reconvene. This is the
    most clunky hearing I have ever participated in let alone
    chaired, and that is saying a lot for the U.S. Senate for
    clunky. So I apologize to our witnesses in particular but to
    all who are paying attention to this hearing how challenging it
    has been with a series of votes.
        I think it is Senator Cantwell who is next to question.

                   STATEMENT OF HON. MARIA CANTWELL,
                      U.S. SENATOR FROM WASHINGTON

        Senator Cantwell. Well, thank you, Mr. Chairman. So thank
    you for inviting a witness that is both a business owner in
    Kansas and a Washington State resident to boot.
        Senator Moran. [Inaudible] well for you and I to work
    closely together.
        Senator Cantwell. Exactly. And I do want to work with you
    on the manufacturing workforce issue that you and Senator
    Warner have introduced as it relates to helping keep the supply
    chain in aviation manufacturing.
        So I appreciate this hearing, and I know that we are all
    dealing with an increase in the number of cases and the
    challenges that we face. I am very proud that our State has
    kept our rates of infection and hospitalizations down and
    appreciate the ongoing efforts there.
        But I am also impressed by the manufacturing efforts in our
    State, everybody working together. Outdoor Research converted
    one of its Seattle facilities into making surgical masks. They
    used to make outdoor equipment. Now they are making 400,000
    surgical masks and 60,000 N95 respirators per week, creating
    200 new jobs. Aerospace manufacturers, GlobalTech Plastics in
    Fife and Tool Gauge in Tacoma, worked with Design that Matters,
    a Redmond nonprofit, on other medical expert designs to help
    with the shields. At one point in time, I know that Boeing was
    creating face shields as well. Kent-based Flow International
    produces high pressure jet cutting systems and has delivered
    over 200,000 medical grade face shields to the state and nearly
    40,000 different distributors--I am sorry--distillers,
    including the Chehalis Tribe that had just opened up this great
    new facility, switched over immediately to hand sanitizer. So I
    feel like the American spirit is alive and well by these
    manufacturers who had adjusted their production levels.
        So I wondered if our witnesses, Mr. Bulusu or any of the
    others, could talk about--obviously, we have had a lot of
    frustration here on the Defense Production Act. But what do we
    need to do to give clear indications to manufacturers that we
    still need this production level, and how can we gain their
    help now that we are seeing a spike again on this necessary
    equipment?
        Mr. Bulusu. Could you please repeat the first part of the
    question, please?
        Senator Cantwell. What do we need to tell manufacturers?
    What kind of guidance, directive do we need to give them to get
    these production levels up that we need because of the changing
    conditions we are now facing for the next several months?
        Mr. Bulusu. If I may take this opportunity. The biggest
    challenge that we face is being able to sell. There are two
    different channels that we pursued. One was to go after the
    opportunity to sell to governments at the local levels or the
    Federal level. The biggest challenge we ran into there was by
    default the policy favored the lowest price, which just meant
    that the product that is being dumped into the United States is
    the default choice.
        I would not say that we cannot necessarily compete, and I
    am not going to necessarily say that the American consumer has
    to pay a higher price. But before we achieve that level of
    economies of scale, there is a need for the American
    manufacturing industry to be supported. That is not going to
    happen over a day or two. It is a process through which we have
    to buildup scale to achieve the economies of scale.
        But the first helping hand could come from modifying policy
    to at least set aside a part of the procurement funds to go to
    American manufacturers. That will help us put our roots in the
    medium term.
        And the second one, which is probably not super relevant
    right here but is nevertheless affecting us significantly, is
    our organic growth is unfortunately--it is stifled given the
    fact that we cannot advertise directly to the consumer. The
    prominent search engines, Google, Bing, or social media like
    Facebook, Twitter--none of them really allow us to advertise
    because they are worried about price gouging. And the barriers
    that are established are making it difficult for us to
    establish ourselves, put our roots by reaching out directly to
    the consumer at least.
        Senator Cantwell. I am pretty sure this mask I am wearing
    right now--I am sure it was gotten off of Amazon. So what do
    you mean? There are manufacturers that are producing supplies
    and they are unable to sell them because----
        Mr. Bulusu. The modern way in general, if I wanted to reach
    the customer, would be to advertise on Google, maybe make it
    available on Amazon, and then send a link that would appear on
    Google and put an advertisement there or maybe on Facebook. And
    I come from the technology industry initially. So I worked to
    some extent on Bing, the search engine by Microsoft. All of
    these opportunities are blocked because the companies are
    worried--and rightly so--that there is price gouging practices
    that are due to false advertisement and everything.
        But the matter of fact is that American manufacturers, once
    we have a company on American soil, are completely traceable.
    So it is not like we should be scared of or we are not so prone
    to--or we cannot easily abuse the ability to sell to an
    American customer like maybe others could.
        Senator Cantwell. Yes. So basically we need something of a
    clearinghouse----
        Mr. Bulusu. Yes, ma'am.
        Senator Cantwell.--besides the funding.
        I know of another case, Mr. Chairman, of a point-of-care
    technology that just needed a little bit of funding to go to
    scale on what would be, you know, an airport test within 20
    minutes, which for aviation would be incredibly important. So
    we do have these manufacturers that are trying.
        So I agree with your first point about the funds. I agree
    that we should help with some sort of clearinghouse on making
    you feel comfortable that you can advertise these products. You
    need to know that they meet a standard.
        Was there a third point on this?
        Mr. Bulusu. That was it. And I tried, by the way, by
    reaching out to executives in Amazon. My partner--he actually
    worked for a very long--if for 3 and a half to 4 months we find
    it difficult and we cannot get into Amazon, then there is a
    problem.
        Senator Cantwell. OK. So basically funding and some way to
    make sure that you feel comfortable that you are meeting the
    standards and then advertising that people will feel
    comfortable that you are meeting that standard. OK, great.
        Thank you, Mr. Chairman.
        Senator Moran. Ranking Member, thank you very much.
        Senator Thune.

                     STATEMENT OF HON. JOHN THUNE,
                     U.S. SENATOR FROM SOUTH DAKOTA

        Senator Thune. Thank you, Mr. Chairman.
        Commissioner Wessel, throughout the COVID-19 pandemic, we
    have seen the United States supply chain and manufacturing
    industry face a number of challenges to keep up with the demand
    of certain resources particularly personal protective
    equipment. What steps should the United States take today to
    ensure we have a more resilient supply chain?
        Mr. Wessel. Thank you for your question, Senator. And I
    think we face it all too clearly in this sector, PPE,
    medicines, et cetera, that has raised public attention, but
    this exists across a broad cross section of industries.
        First of all, in this sector I think we need to make sure
    that we have a strategic national stockpile that is adequate to
    the task. Again, as I said earlier, no one expected the
    virulence and breadth of this pandemic, but I think we have to
    understand that similar situations could arise in the future
    and we need to make sure that we are prepared. That means
    having domestic production available, including surge capacity.
    It may be idle, but we need to support it potentially with
    Federal funds. And we need to make sure that we have the
    stockpiles necessary to quickly deploy to meet needs. The fact
    is our health care workers, those on the front lines, should
    not be having to search for equipment, having to potentially
    use substandard equipment or having to reuse that equipment.
        The DOD has been looking at how to make sure that our
    industrial base is able to meet surge needs for any of a number
    of defense procurement needs. We need to focus more on our own
    security and what types of manufacturing capabilities must
    exist here to support our national economic health and
    agricultural security.
        Senator Thune. Thank you.
        Ms. Stovall, in your testimony you highlighted at the
    beginning of the pandemic, several manufacturers struggled
    finding suppliers to support their business needs. What other
    issues did you see with the supply chain, and how has the
    Manufacturing Extension Partnership program at NIST been able
    to help alleviate some of those issues?
        Ms. Stovall. Thank you for the question.
        Like I mentioned in my testimony, there is no national
    supply chain data base. And so early on in the pandemic, we all
    were looking around. Right? We all were saying where can we
    find ventilators, where can we find more masks, where can we
    find hospital gowns, hospital curtains, all of the things that
    were critically essential needs to help this public health
    emergency.
        So what we did very early on--I am reminded of a story that
    happened. I will never forget it. It was a Sunday afternoon
    back in March, and we got a call. We, center directors across
    the national network, got an e-mail from our executive director
    of the MEP program, Carol Thomas. And she sent out an e-mail.
    There was a request from the White House looking for what
    manufacturers across the United States could manufacture PPE
    equipment. We were very early in this pandemic. Everybody was
    trying to still kind of figure out what this was and what the
    needs were going to be.
        We had 2 hours to respond on a Sunday afternoon. And within
    2 hours, we as a national network were able to look in our
    own--each of the center directors were able to look into our
    own states, see what was being manufactured, even though there
    was not a national database and even though we did not have,
    frankly, at the State levels data bases of who manufactures PPE
    equipment in our state. Because of the relationships that we
    have, because of the work that we had done in our state and
    across the national network, we were able to come up with a
    pretty exhaustive list just within a couple of hours on what
    manufacturers, not just in Kansas but across the United States,
    could meet these PPE needs. So that is one of the things that
    we have been doing.
        One of the other things that we have been doing is we heard
    earlier from InkCycle from Mr. Krska talking about the need for
    bottles. We hear those kinds of needs all over the place.
    Manufacturers have really invested on their own to pivot their
    production to critical need PPE goods, but there are still gaps
    in the supply chain. And so what we at the State level MEP
    centers, as well as linking across the national network, have
    done are really build an understanding of what capabilities are
    in our states, what capabilities that are in our states that
    can help meet this crisis. And that is anything from bottles
    and caps to dispensers, hand sanitizers, masks, N95 masks, all
    of the things that might go into any part of this supply chain.
    So we have been doing this state by state, but we have also
    been linking that through the national network that we have. So
    we were able to help meet the needs not just in our state but
    across the country.
        Senator Thune. Thank you.
        And, Mr. Chairman, my time has expired. Thank you, and I
    will perhaps have some questions to submit for the record.
        Senator Moran. Senator Thune, thank you very much.
        The next Senator to inquire is Senator Klobuchar. You are
    recognized.

                   STATEMENT OF HON. AMY KLOBUCHAR,
                      U.S. SENATOR FROM MINNESOTA

        Senator Klobuchar. Well, thank you very much, Mr. Chairman.
    Thank you to all the witnesses on this really important topic
    of manufacturing.
        A few days ago, I talked to a number of manufacturers in my
    state, smaller companies who are really struggling in the
    pandemic because of employees with coronavirus, quarantines,
    everything. And so I would urge all of my colleagues that it is
    time to do pandemic relief in the next month, that we cannot
    wait until a new President comes in. I really think we have to
    do it now. So that is my only political statement here, Mr.
    Chair.
        So I will start with you, Mr. Gilman. Bold action is
    required to help newly unemployed American people who did not
    actually think they were going to lose their jobs. And then we
    are going to, I think, have--when we get to the day after
    tomorrow when a vaccine comes out, we will have different types
    of jobs available. And we were already seeing we did not have
    enough people in manufacturing to fill some of the jobs. We
    still have openings right now actually in my own state.
        So we have a bill for a skills training credit. It is
    bipartisan with Senators Sasse, Booker, and Tim Scott that I
    have led, and it can be applied to cover the cost of a wide
    range of training programs that build skills.
        Mr. Gilman, do you believe that increasing a worker's skill
    set through appropriate training will help workers to reenter
    the workforce now or after we get on the other side of this?
        [Pause.]
        Senator Klobuchar. Hello?
        Mr. Wessel. I am not sure, Senator, that Mr. Gilman is
    still there. Let me just say that is critical. If we do not
    have the skills, we cannot meet the needs of the manufacturers
    to get things back on line, get people back to work, and meet
    our needs.
        Senator Klobuchar. Very good.
        Anyone else want to chime in on this? Thank you, Mr.
    Wessel. That was very kind.
        Ms. Stovall. Hi, Senator. This is Tiffany Stovall.
        Senator Klobuchar. Yes.
        Ms. Stovall. I would like to comment on that as well.
        One of the things that--so we know that the workforce issue
    is one that is ongoing. It is not new to the COVID pandemic,
    obviously. Finding a skilled workforce has been a challenge for
    manufacturers for quite some time, and I think the
    manufacturers on the call would agree with that.
        But one thing that has been a particular challenge and a
    particular concern during this COVID pandemic is--as
    manufacturers have had to navigate how they keep operations
    going, one of the things that they are really worried about is
    keeping their work force.
        Senator Klobuchar. Some people are at home and they could
    go, and especially for smaller ones, it is hard.
        Ms. Stovall. Yes, absolutely.
        And so they are trying to avoid layoffs at all costs.
        We have helped, and I know it is not just us, just KMS, the
    Kansas MEP, but other MEPs across the network--we have really
    been hands on and helpful with manufacturers trying to get them
    access to the PPP and other resources that are available to
    them so that they can stay open and keep their folks employed.
        Senator Klobuchar. All right. Very good. Thanks. And I am a
    big fan of the MEP and thank you for the work you do.
        I have one last question and I will give this one to Mr.
    Wessel. Back in July when you testified before the full
    Commerce Committee, you talked about the importance of standing
    up to illegal and unfair trade practices such as steel dumping,
    particularly important to my state. My grandpa was an iron ore
    miner. Our northern part of our state--that is a large part of
    the workforce up there.
        Now we are going to have a new President coming in who I
    believe can usher in, I will say, the somewhat strategic era of
    U.S. trade policy, kind of go away from the ?go it alone?
    approach.
        But what should Congress do, Mr. Wessel, to best work with
    the new administration to stand up to unfair trade?
        Mr. Wessel. Well, thank you for your question. And that,
    you know, is the $64,000 or $64 trillion question I guess.
        First of all is not move quickly to dismantle what this
    administration has put in place. As you noted, there is
    questions about strategy, but that strategy must be based on a
    long-term approach and not simply responding to the tactics of
    the day.
        As you know, clearly over-capacity in steel, in aluminum,
    in fiber optics, and 15 or 18 other industries, mostly caused
    by China's economic policies, is what is threatening so many
    industries. We need specific disciplines that are enforceable,
    and those need to be done in a multilateral setting.
        But we have not had enough support from our allies and
    partners in the past. We have had, as you know, the Global
    Steel Forum and the OECD Steel Committee. I think they now
    understand that America is serious about addressing unfair
    trade. We want to do so with their support and cooperation. And
    I believe Congress is going to be a strong bipartisan partner
    with the incoming administration to do that.
        But no one should be confused by America's resolve to
    support our producers and our workers. That is steadfast. The
    question is what the long-term strategy is.
        Senator Klobuchar. OK. Very good. Thank you.
        Thank you, Mr. Chair.
        Senator Moran. Thank you, Senator Klobuchar.
        Now I will recognize Senator Baldwin.

                   STATEMENT OF HON. TAMMY BALDWIN,
                      U.S. SENATOR FROM WISCONSIN

        Senator Baldwin. Thank you very much, Mr. Chair.
        Commissioner Wessel, I am going to ask some questions, but
    I also just want to note for the record, as I have been
    shuttling back and forth to the floor to take votes, as
    sometimes happens, they may have been things you have tackled
    already, but that is OK.
        Look, we are 9 months into this pandemic, and I am still
    hearing on a routine basis from Wisconsin health care workers
    who cannot get a reliable supply of N95 masks that they need to
    protect themselves and provide care for their patients. And
    that is absolutely unacceptable in the United States of
    America.
        Since the pandemic began, I have been calling on the Trump
    administration to use the full power, all the power, of the
    Defense Production Act to alleviate these supply shortages,
    including the shortages of PPE that our essential workers need.
    So far, it is my observation that the Trump administration has
    only used it sporadically, well short of its full potential,
    failing to use all the tools that are available under the
    Defense Production Act.
        Also, I have been concerned that supposed DPA contracts
    have gone to shady middlemen, and when priority orders were
    issued to major U.S. companies under Title I, they failed to
    utilize the full weight of the U.S. Government backing to
    incentivize these companies to truly expand their manufacturing
    capacity.
        So, Commissioner Wessel, what would it have meant and what
    would it mean going forward to fully unlock the power of the
    Defense Production Act specifically from a manufacturing
    perspective?
        Mr. Wessel. Thank you for your question, Senator. Also
    thank you for your leadership on this issue. You have helped
    provide some critical thinking and policy approaches to address
    this issue.
        I think it would have been of immeasurable benefit to
    Americans, to the economy, to our health care workers, first
    responders, as well as patients avoiding sickness and worse, if
    we had utilized DPA effectively quickly with accountability and
    transparency. It is not only about getting the funds, which you
    have been a leader on and those authorities should have been
    triggered early, there was no accountability, no transparency
    as to where contracts were going for production or where the
    products were being deployed. And that needs to be fixed. We
    need legislation to make sure that never happens again.
        Senator Baldwin. Well, I appreciate that.
        I will note that in May of this year, I introduced the
    Medical Supply Transparency and Delivery Act with my colleague,
    Senator Chris Murphy, and many others, which does lay out a
    framework for an effective COVID-19 response by Federalizing
    and adding critical oversight and transparency to the supply
    chain for critical medical supplies and equipment. It also
    unlocked the full array of authorities under the Defense
    Production Act. I certainly hope that when President-elect
    Biden takes office in January, that he will use executive
    action to implement this framework and unleash that power as we
    will still have work to do.
        I know I have just a few seconds left but, Commissioner
    Wessel, the Trump administration claims to prioritize economic
    security as a national security issue. Peter Navarro in a 2018
    op-ed in Real Clear Politics stated that we are in an era of
    intense economic competition and that into this breach comes
    Donald Trump with a new organizing principle for strategic
    policy. Economic security is national security.
        In April, Acting Director of DHS Chad Wolf tweeted that
    economic security is homeland security and has made similar
    statements in testimony to Congress.
        Can you elaborate on how--well, when push comes to shove,
    it was a lot of talk and little action. While China views
    economic and national security as inextricably linked, as you
    note in your testimony President Trump has failed to underpin
    his economic policies with the national security concern. Can
    you elaborate on how this failure put us in a strategic
    disadvantage in relation to great power competition with China?
        Mr. Wessel. That is a great question--thank you--and a
    potentially long answer, but I will shorten it.
        Those interests are inextricably intertwined, and the
    workers in your state who provide countless benefits for making
    sure that we support a strong economy, that we are able to
    support industries, critical industries, critical
    infrastructure--their interests, their ability to support
    America has been undermined by China's non-economic, predatory
    policies over a long period of time. But the impact of those
    has accelerated as China has passed its industrial policies,
    Made in China 2025, its 5-year plan, which will be updated in
    March.
        We have seen tactics applied to China's policies but not a
    long-term strategy to address the overall problems. You know,
    tariffs, which I have supported, are not a long-term strategy.
    We need to, again, multilateralize our responses. We need to
    make sure they are sustainable, and we need to make sure that
    we have the ability here--manufacturers and others--to compete
    on a level playing field. So it is an all-of-the-above strategy
    that needs a coherent framework which we join with our allies
    on and where Congress is a true partner.
        Senator Baldwin. Thank you, Commissioner.
        And I yield back.
        Senator Moran. You have nothing to yield back.
        Senator Rosen is the last Senator I think to be able to
    question our witnesses, and we need to conclude our hearing
    shortly thereafter. This committee room is to be occupied
    again, and the preparation to do so needs to take place soon.
    Senator Rosen.

                    STATEMENT OF HON. JACKY ROSEN,
                        U.S. SENATOR FROM NEVADA

        Senator Rosen. Thank you, Mr. Chairman. I want to thank
    everyone here for being here, for what you are doing.
        I want to build a little bit upon what my colleagues have
    already asked you about workforce training and retraining
    because during the pandemic, of course American ingenuity has
    been a bright spot, and our Nation has exhibited with many of
    your companies and those in my State the ability to tackle
    these insurmountable problems.
        For example, when the pandemic hit, there was a plastics
    manufacturer in Sparks, Nevada. They started making face
    shields and safety partitions for casinos, restaurants, and our
    government agencies. The University of Nevada-Reno's Innovation
    Center teamed up with our State's MEP center, Nevada Industry
    Excellence, to produce gowns for local health care workers.
    This August I had the opportunity to virtually visit with Frey
    Ranch. It is in Churchill County--their distillery. They make
    whiskey and bourbon and they shifted to producing hand
    sanitizer, and similarly a Las Vegas distillery--in the
    Henderson area in the greater Las Vegas area--they pivoted
    their operations from vodka, rum, and whiskey to produce hand
    sanitizer.
        And so I want to thank you for addressing some of the
    challenges that we have doing this for PPE and some of the
    other things, workforce training, because you know that having
    a skilled workforce that is able to be nimble and readily adapt
    is going to impact how quickly our businesses come back.
        But I would like to build on that a little bit because I
    also believe that we have to build consumer confidence for
    going back indoors. What are we all worried about? The quality
    of our air. Indoor air quality is what stops us from going to
    restaurants, to marinas, to concerts, hotels and casinos like I
    have in Nevada.
        So, Ms. Stovall, in your experience working with small and
    medium sized manufacturers, do you know of companies that are
    working to produce the very important type of HEPA filters and
    the filtration systems that we are going to need, those
    electronic air cleaners that will help jump start an economy
    and make us feel more confident to go back indoors through this
    pandemic?
        Ms. Stovall. Thank you for the question.
        Yes, as a matter of fact. So one of the things--early in
    your comments, you referenced ingenuity and the ingenuity of
    manufacturers. Manufacturing is built on innovation. Right? We
    are a country of makers. We make things. And so it is in times
    like this where we have critical needs, needs that may be a
    little bit different than they were 6 months prior to that,
    that companies are looking to say how can we do better at
    meeting the need. That is where this innovation comes from.
        The companies are doing this on their own. I keep pointing
    that out because I want you all to really understand that the
    time, the dollar investment, what manufacturers are doing on
    their own and what we need to be able to do to support them.
        So back to your question of, are there companies that are
    looking at indoor air quality? Absolutely, they are because
    that is a need. So while we are looking at what are our needs
    right now, masks, ventilators, those kinds of needs, we are
    also looking at what gets us back to some sense of normalcy,
    which is what will make the public comfortable with going into
    buildings and to retail spaces and office spaces. And that is
    an increased focus on air quality. So, yes, that is something
    that is being looked at by manufacturers not only in Kansas but
    across the country.
        Senator Rosen. Well, I thank you for that. I would like to
    speak a little bit more about that, but I know that there is
    another committee coming in right after us, so I will submit
    those questions for the record. I think it is really important
    that we talk about indoor air quality because it is key to
    getting folks back to sports and school and all of the things
    that we all miss so dearly. So I will yield back my last few
    seconds, and I thank you all for being here today.
        Senator Moran. Senator Rosen, thank you for your
    cooperation. Thank you for your participation today.
        We are just about to conclude this hearing, but it is
    always my practice to ask any of our witnesses if they have
    anything they want to try to clarify or something they wish
    they would have been asked, something that they wish they would
    have said.
        [No response.]
        Senator Moran. Very good. Thank you all for joining us this
    afternoon. This is a very important topic, and we need to
    figure out the policies that are necessary to strengthen and
    grow our manufacturing economy, creating jobs in Kansas and the
    United States, but also a better way to protect our citizens
    from the pandemic and other emergencies and crises that will
    occur by having access to the various manufactured products
    that are necessary for our country's well-being, both health
    and economic.
        Senator Blumenthal. Mr. Chairman?
        Senator Moran. Yes, sir.
        Senator Blumenthal. Mr. Chairman, I note that Neil Gilman
    evidently is back on the line. I want him to know that I was
    bragging about him. He may not have heard it. I want to say to
    him how much I admire what he has done and all the
    entrepreneurs and manufacturers on this call. I think this
    hearing has really been very inspiring to see the kind of
    ingenuity and creativeness and innovativeness, which is really
    the hallmark of America.
        The Chinese can steal our intellectual property. They can
    exploit their workers, and they can try to undercut us, but I
    think in the long run our system will beat theirs and we will
    be safer in terms of our health care and our economy because of
    the patriots that we had at this hearing today you and I had a
    chance to talk about a little bit on the floor.
        And I think that your leadership here has been very
    important. I hope that you and I can work together in
    continuing showing how manufacturing of PPE and these health
    care supplies is so important to our country. So my thanks to
    you for holding this hearing and to all of our witnesses.
        Senator Moran. Senator Blumenthal, thank you for your
    assistance, your leadership, and I look forward to continuing
    our efforts to pursue this topic and others within the
    Subcommittee's jurisdiction.
        We are going to conclude. The hearing record will remain
    open for two weeks. During this time, Senators are asked to
    submit any questions for the record. Upon the receipt of those
    questions, the witnesses are requested to submit their written
    answers to the Ccommittee as soon as possible. That concludes
    today's hearing.
        And again, I thank our witnesses. I thank our staff, and I
    apologize for the on again/off again nature of today's hearing
    through no fault of anyone in this room's efforts. We just had
    a disjointed chance to have the testimony told, but it was very
    compelling and very useful and I am grateful for that.
        With that, the hearing is now adjourned.
        [Whereupon, at 4:42 p.m., the hearing was adjourned.]

                                A P P E N D I X

        Response to Written Questions Submitted by Hon. Jacky Rosen to
                                  Ravi Bulusu
        Question 1. During this devastating pandemic, American ingenuity
    has been a bright spot, demonstrating our capacity as a nation to
    tackle seemingly insurmountable problems. Having a skilled workforce
    that is ready to quickly adapt to rapidly changing conditions has made
    a difference for these businesses and will impact how quickly our
    economy will recover from the pandemic.
        a.) How did you go about retraining your workforce to manufacture
    health and safety products? What do you recommend to small and medium-
    sized manufacturers who want to pivot into the PPE space and that need
    to do workforce retraining?

      a.  We are a startup that started from scratch and so are primarily
            focused on adding employees. Recommendations for manufacturers
            who want to pivot into PPE would be as follows:

          i.   Study the market and the players in the market. This will
                help establish a niche in a chaotic market in unusual
                times.

          ii.   Reach out to potential buyers, find out their requirements
                and also quantify potential demand.

          iii.  Ensure there is a reliable supply chain of the raw
                materials needed. Establish sufficient redundancy to avoid
                interruption in manufacturing.

          iv.   Traditional marketing strategies might not always work for
                your product. In such cases, the flexibility to think out
                of the box becomes important.

          v.   Get the product certified as early as you can.

        b.) How can Congress best assist manufacturers in providing a
    trained workforce? What actions can Congress take to support small
    manufacturers' efforts to meet product demand and retrain their
    employees to respond and adapt quickly to an evolving pandemic?

      a.  To help build a trained workforce, incentivizing training
            programs would be very helpful. The post-pandemic world is
            likely to be very different.

      b.  To help small manufacturers:

          i.   Allocate some percentage of government procurement to
                domestic PPE and medical equipment manufacturers for 5
                years. It will help our companies get competitive. Due to
                the established practice of procuring at the lowest price,
                most American small manufacturers of PPE are by default not
                able to compete with China made PPE despite significant
                difference in the quality.

          ii.  Establish a priority channel for American manufacturers in
                the testing and certification process during national
                emergency situations either through DPA or a different act.
                Despite having made a product, the certification pipeline
                is very crowded causing 3-4 months of delays. EUA is
                helpful but most consumers in the market prefer a certified
                product.
                                     ______

        Response to Written Questions Submitted by Hon. Jacky Rosen to
                               Tiffany M. Stovall
        Question 1. During these challenging times, Nevada's manufacturers
    and their workers have been resilient in ensuring that our communities
    have the protective equipment they need to keep our first responders,
    frontline workers, and families safe. However, despite these efforts to
    ramp up PPE production, as COVID-19 cases continue to climb, challenges
    remain--particularly our overdependence on global supply chains. I am
    curious, however, if American companies--through innovation--can help
    pave the way to creating new, domestic supply chains.
        a.) Are there COVID response-related sectors where small and
    medium-sized businesses can still step up and fill domestic supply
    chain needs? Where are the biggest gaps where American manufacturers
    can jump in to not only contribute, but even create jobs because unmet
    demand is so high? What would failure to fill these gaps mean for the
    American economy as a whole?
        There are absolutely COVID response related sectors where small and
    medium sized businesses can still step up and fill domestic supply
    chain needs. Notably, supplies related to prevention of spread as well
    as medical professionals such as masks, shields, gloves, gowns, hand
    sanitizer and such will continue to be in high demand for some time to
    come. Additionally, supplies that allow our country to remain in
    business are also critical such as physical barriers like those seen in
    retail check out lines, janitorial cleaners, and disinfectants for use
    in a wide variety of spaces and types of businesses from medical
    facilities and restaurants to manufacturing and distribution.
        Further, within the manufacturing industry there are a number of
    small and midsized companies with knowledge, expertise, and facilities
    to manufacture various scales of biological materials and
    biopharmaceuticals within sterile environments. Biomanufacturing is the
    application of manufacturing processes and biotechnology to produce
    products from biological origins. Through biomanufacturing, companies
    are able to produce important biologics and biomaterials that have
    broad applications across medicine, research, construction,
    engineering, foods and beverages, and other industrial application.
        The Biotechnology Innovation Organization and Boston Consulting
    Group identified three bottlenecks that need to be prioritized to
    manufacture COVID-19 related biologics:

       Biologics drug substance production

       Sterile fill and finish capacity

       Lyophilization capacity

        To increase capacity, existing biopharma and biologics
    manufacturers can partner or contract with small to mid-sized contract
    drug manufacturing companies (CDMOs/CMOs) to increase capacity to
    address supply shortages. Even in the absence of increased demand due
    to COVID-19, the changing biopharmaceutical industry will continue to
    have an increased demand for these types of manufacturing capabilities.
        By leveraging and building upon our existing companies that have
    the above capabilities, we can create additional jobs while also
    increasing the U.S. market share of the manufacturing and
    biomanufacturing industry.

        b.) What actions can Congress take to strengthen our Nation's
    domestic supply chains?
        Congress can strengthen our Nation's domestic supply chains by
    establishing and funding a National Supply Chain Database as proposed
    in the National Defense Authorization Act of 2020. COVID-19 has
    demonstrated the devastating effects of a global pandemic on public
    health and safety, our local economies, and global markets. Plant
    closures, a reduction in manufacturing operations, and in some cases,
    retooling of manufacturing plants to produce Personal Protective
    Equipment (PPE) and other products highlight the critical need to have
    a nationwide real-time understanding about the strengths and
    vulnerabilities of our national supply chain across various industries.
        Global pandemics are not the only threat to our supply chain.
    Natural disasters, cyber threats, trade agreements, and raw material
    shortages are but a few examples of threats to our supply chain. Since
    March, we have watched as our states, hospitals, and employers have
    struggled to secure access to PPE and other products necessary to
    protect our communities during the COVID-19 outbreak. It is clear that
    we need a centralized source of information on our Nation's supply
    chain of PPE and other products.
        Establishing a National Supply Chain Database will ensure the
    Nation's ability to minimize disruptions in the supply chain by having
    an accurate and real-time assessment of U.S. manufacturers'
    capabilities and inventories.
                                     ______

        Response to Written Questions Submitted by Hon. Dan Sullivan to
                                 Michael Wessel
        Question 1. The U.S.-China Economic and Security Review
    Commission's July 1 report on U.S. Multinational Enterprise Activity in
    China identified a number of concerning trends from our growing
    reliance on China for the production of goods. Globalization has not
    led to reliability through supply chain diversification across numerous
    countries in various parts of the world. Instead, we have increased our
    reliance on a single country--China, in ways that make us vulnerable to
    catastrophic supply chain disruptions like those that we see with the
    pandemic.
        1. The U.S.-China Economic and Security Review Commission's July 1
    report on U.S. Multinational Enterprise Activity in China identified a
    number of concerning trends from our growing reliance on China for the
    production of goods. Globalization has not led to reliability through
    supply chain diversification across numerous countries in various parts
    of the world. Instead, we have increased our reliance on a single
    country--China, in ways that make us vulnerable to catastrophic supply
    chain disruptions like those that we see with the pandemic.

        a. What initiatives are underway to encourage U.S. multinational
    enterprises to diversify outside of China?

       The U.S. government is considering strategies to bring
            supply chains in critical industries closer to home. Some
            initial steps have focused on addressing U.S. supply chain
            dependence on Chinese medical supplies \1\ and critical
            minerals.\2\ For example, in May 2020, the Trump administration
            authorized the Development Finance Corporation to execute loans
            using the Defense Production Act's Title III authorities to
            shore up domestic production of strategic resources needed to
            respond to the pandemic.i A separate Executive Order
            issued in September directed the Departments of Defense,
            Treasury, Commerce, Energy, and others to produce reports
            offering guidance on how to reduce U.S. overdependence on China
            for critical minerals. The reports, among other things, should
            include recommendations on potential incentives to promote
            domestic mining and processing of such minerals.ii
            Administration officials have also reportedly considered
            establishing a $25 billion ``reshoring fund'' to subsidize U.S.
            companies' movement of manufacturing activity out of
            China.iii
    ---------------------------------------------------------------------------
        \1\ According to research conducted by the Congressional Research
    Service, China accounted for over 15 percent of U.S. imports of medical
    ventilators and over 70 percent of imports of medical protective
    articles like masks. Karen M. Sutter, Andres B. Schwarzenberg, and
    Michael D. Sutherland, ``COVID-19: China Medical Supply Chains and
    Broader Trade Issues,'' Congressional Research Service R46304, April 6,
    2020, 17-18. https://crsreports.congress.gov/product/pdf/R/R46304.
        \2\ China produces more than 80 percent of rare earth elements
    globally, and broad provisions in Beijing's recently passed Export
    Control Law could see the Chinese government restrict exports of these
    elements as a tool of coercion. Jamie Smyth, ``Industry Needs a Rare
    Earths Supply Chain Outside China,'' Financial Times, July 27, 2020.
    https://www.ft.com/content/fc368da6-1c86-454b-91ed-cb2727507661; Lester
    Ross, Kenneth Zhou, and Tingting Liu, ``China Publishes Draft Export
    Control Law,'' WilmerHale, January 15, 2020. https://www.jdsupra
    .com/legalnews/china-publishes-draft-export-control-law-58113/.

        b. How do we incentivize businesses to pursue materials and
    manufacturing elsewhere while the People's Republic of China
    ---------------------------------------------------------------------------
    artificially keeps costs lower than other competing venues?

       The supply chain realignment process is in its early stages
            and will be challenging. The United States and other countries
            are just beginning to formulate and implement supply chain
            reshoring and diversification initiatives. Unfortunately, with
            supply chains in China, the outsourcing and offshoring that has
            occurred is also a result of deeply-embedded and supported
            industrial policies designed to promote China's interests often
            at the expense of other countries. While many of the
            dependencies have existed for some time, the current pandemic
            has elevated attention on these issues in the United States and
            in other nations.

       Some governments are providing subsidies and other
            investment incentives to encourage companies to diversify
            production away from China. The Japanese government has
            earmarked $2.2 billion to subsidize Japanese manufacturers'
            relocation of production out of China to diversify supply chain
            risks.iv So far, 57 Japanese companies have received
            a total of $535 million to open new factories in Japan, while
            another 30 companies have received $220 million to expand
            production in Vietnam, Myanmar, Thailand, and other Southeast
            Asian countries.v European leaders are also seeking
            to reshore supply chains in some critical industries, such as
            medical supplies.vi For example, in June French
            President Emmanuel Macron submitted a proposal to European
            Commission President Ursula von der Leyen asking Brussels to
            develop investment incentives to encourage the reshoring of
            active pharmaceutical ingredient production capacity to the
            EU.vii

       Despite its diminished competitiveness as a low-cost
            manufacturing base, China's extensive industrial ecosystem
            makes the complete transfer of supply chains out of the country
            a difficult prospect. China's ecosystem of suppliers, skilled
            labor, and efficient transportation infrastructure is difficult
            to match, cementing dependencies on production networks there.
            According to research from Bank of America, the cost to U.S.
            and European companies of moving manufacturing out of China
            could reach $1 trillion over the next five
            years,viii a hefty expense as the pandemic strains
            corporate finances and crimps investment. Preliminary trade
            data and market research suggests the diversification of
            discrete portions of production in select industries away from
            China, rather than a complete uprooting of supply chains out of
            the country, is more likely.\3\ Any movement of manufacturing
            production outside of China is made more difficult in the short
            term as resumption of industrial activity and economic recovery
            in China outpaces that of other countries still grappling with
            the pandemic and the fact that China's industrial policies and
            state-led market intervention creates incentives for Western
            companies to continue to rely on that country.
    ---------------------------------------------------------------------------
        \3\ For example, according to the World Trade Organization Economic
    Research and Statistics Division, in the first half of 2019 about $21
    billion in U.S. imports diverted from China to Mexico ($6.9 billion),
    the EU ($6 billion), Taiwan ($4.5 billion), and Vietnam ($2.8 billion).
    Looking forward, consulting firm McKinsey estimates that the production
    of 16 to 26 percent of globally traded goods could move to new
    countries over the next five years as companies and governments pursue
    supply chain resilience. Susan Lund et al., ``Risk, Resilience, and
    Rebalancing in Global Value Chains,'' McKinsey Global Institute, August
    2020, 61; Eddy Bekkers and Sofia Schroeter, ``An Economic Analysis of
    the U.S.-China Trade Conflict,'' World Trade Organization Economics and
    Statistics Division, February 26, 2020, 9. https://www.wto.org/english/
    res_e/reser_e/ersd202004_e.pdf.

        c. What more can be done to protect against supply chain
    vulnerabilities created by an overreliance on a single foreign nation
    ---------------------------------------------------------------------------
    like we have with China?

       The U.S. government must strengthen its ability to analyze
            U.S.-China economic relations. Our country's economic linkages
            with China are deepening beyond trade to include portfolio
            investment which is likely to create enhanced vulnerabilities
            and dependencies. As China's financial authorities
            strategically open China's financial sector to utilize foreign
            capital in shoring up China's economy, it becomes more urgent
            for the U.S. government to track and monitor U.S. exposure to
            risks and vulnerabilities in China's financial system and to
            ensure that U.S. investors, as well as our national interest,
            are protected. To that end, the Commission recommended in 2020:

         Congress enact legislation establishing a China
                Economic Data Coordination Center (CEDCC) at the Bureau of
                Economic Analysis at the U.S. Department of Commerce. The
                Center would be mandated to collect and synthesize official
                and unofficial Chinese economic data on developments in
                China's financial markets and U.S. exposure to risks and
                vulnerabilities in China's financial system, including:

                      Data on baseline economic statistics (e.g.,
                    gross domestic product [GDP]) and other indicators of
                    economic health;

                      Data on national and local government debt;

                      Data on nonperforming loan amounts;

                      Data on the composition of shadow banking
                    assets;

                      Data on the composition of China's foreign
                    exchange reserves; and

                      Data on bank loan interest rates.

        There are also many questions concerning the scope and scale of
    U.S. multinational firms' business in China that are left unanswered by
    data aggregated by the U.S. Department of Commerce. Enhanced collection
    of data on U.S.-China commercial ties will enable U.S. policymakers to
    more readily identify and assess supply chain vulnerabilities with
    respect to China and determine where we should prioritize our efforts
    to defend against related vulnerabilities. The Commission thus
    recommended in 2019:

         Congress enact legislation requiring the collection of
                data on U.S.-China economic relations. This legislation
                would:

                        Direct U.S. economic statistics-producing
                    agencies, including the U.S. Census Bureau, the U.S.
                    Department of Commerce's Bureau of Economic Analysis,
                    and the U.S. International Trade Commission, to review
                    methodologies for collecting and publishing not only
                    gross trade flows data, but also detailed supply chain
                    data to better document the country of origin for
                    components of each imported good before it reaches U.S.
                    consumers.

                        Direct the U.S. Census Bureau to restart
                    data releases in its Current Industrial Reports at the
                    ten-digit industry level.

                        Direct the U.S. Department of the Treasury
                    to coordinate with the U.S. Census Bureau to match U.S.
                    firm-level data with their U.S. employees' data.

       Develop new analytic tools to more effectively monitor
            supply chain vulnerabilities for materials critical to the U.S.
            manufacturing base. China dominates global supply of numerous
            critical minerals and metals used in energy storage and other
            advanced technologies, creating supply risks for materials,
            components, and end products sourced from China. The Chinese
            government's approach to establishing dominance in global
            supply chains has been systematic, requiring coordination
            between industrial policy, domestic geological exploration, and
            commercial engagement in resource-rich developing countries,
            all supported by substantial state funding. As China's control
            over these materials expands, risks to the United States of
            impaired or narrowed access to them heightens. To address this
            challenge, the Commission recommended in 2019:

         Congress direct the U.S. Geological Survey, in
                coordination with the U.S. Department of Energy, U.S.
                Department of Commerce, U.S. Department of the Interior,
                and U.S. International Trade Commission to develop and
                maintain a risk assessment framework that identifies
                materials used in manufacturing industries critical to both
                national security and commercial vitality. Such a framework
                should provide an early warning mechanism for any threats
                to the U.S. supply of these critical materials, including
                an increasing concentration of extraction and processing by
                another country or entity and acquisition of significant
                mining and processing facilities; increasing export
                restrictions by another country; large gaps between
                domestic prices for these materials in another country
                versus prices on international markets; sharp increases or
                volatility in price; and substantial control in supply of
                minerals used within the same industry or related minerals
                that serve as substitutes by another country.

       Incentivize U.S. enterprises to invest more in the basic
            research that underpins U.S. innovation and technological
            leadership. While the U.S. government funds some basic research
            and offers incentives like the research and development tax
            credit to spur innovation, the Chinese government uses
            prescriptive and interventionist methods to build supply,
            generate demand, and guarantee a market for nascent industries.
            The CCP broadly supports licit and illicit technology and
            talent acquisition strategies and programs. Beijing's statist
            approach helps new technologies overcome obstacles to
            commercialization. A U.S. policy environment that expands
            support to U.S. companies conducting innovative early-stage
            research in emerging industries will enable the United States
            to more effectively rise to the challenge of economic and
            technological competition with China. The Commission thus
            recommended in 2019:

         Congress amend Internal Revenue Code Section 41 to
                extend the research and development tax credit to initial
                stages of deployment for new products, processes, computer
                software, techniques, formulae, or inventions that increase
                the production of final and intermediary goods manufactured
                primarily in the United States. The tax credit should also
                extend to precompetitive commercial development of basic
                and applied research performed in the United States,
                particularly in industrial sectors where the People's
                Republic of China threatens the technological leadership of
                the United States.

        Question 2. Beijing has leveraged an array of economic incentives
    to induce U.S. companies to increase production in China, and U.S.
    companies have done so to realize their fiduciary duty to their
    shareholders. The U.S. government is increasingly asking U.S. companies
    to consider how their decisions can serve not just their shareholders'
    interests but also those of U.S. policy as strategic competition with
    China heightens.
        a. How can the U.S. government better engage with U.S. companies to
    enlist industry in shoring up U.S. economic competitiveness with
    respect to China?

       The COVID-19 pandemic is putting business and government on
            the same page with respect to resolving the risks of
            overreliance on China-based production networks. Shortages
            caused by the COVID-19 pandemic are sparking renewed interest
            on the part of multinational companies in reshoring or
            nearshoring production closer to home markets. As the
            international business community re-evaluates China as a
            production base, U.S. policymakers are presented with
            opportunities to elevate the attractiveness of the United
            States as an investment destination for U.S. and other
            multinational companies. According to a May 2020 survey of
            global supply chain executives conducted by McKinsey, about 40
            percent of companies intend to nearshore and increase their
            supplier base to bolster resilience.ix Analysts
            anticipate critical supply for strategic industries, such as
            healthcare products, personal protective equipment, or
            pharmaceuticals, may begin to reshore as governments and
            companies prioritize resilience and redundancy over
            cost.x Congress and the Administration must engage
            in a broader discussion to advance and accelerate these efforts
            and broaden them to other sectors.

       Continued formalization of rules and regulations to mitigate
            selected risks of U.S.-China commercial engagement may guide
            U.S. companies to make business decisions that more closely
            align with the national interest. U.S. policy efforts to halt
            the flow of U.S. advanced technologies to Chinese companies
            that pose a national security threat or are involved in human
            rights abuses in Xinjiang province, for example, signal to U.S.
            companies what kind of business activity runs counter to U.S.
            policy interests and harms U.S. national security in the long-
            run. As these companies may not consider risks to U.S. national
            security when conducting business in China, U.S. policy steps
            to defend against those risks can define the appropriate bounds
            for U.S. commercial activity in China as strategic competition
            between the two countries heightens.

       The United States can also work with likeminded partners to
            bolster supply chain resilience and develop alternatives to
            China-centric production networks. Supply shortages wrought by
            the COVID-19 pandemic have led some governments to explore how
            they can work together to assure supply chain security. For
            example, the Japanese, Australian, and Indian governments are
            mulling the establishment of a trilateral supply chain
            resilience initiative focused on securing supply chains in the
            Indo-Pacific region,xi while the British government
            has proposed the formation of a ``D10'' group of ten
            democracies to jointly develop 5G technology and reduce
            dependence on Huawei.xii U.S. engagement in these
            multilateral efforts can both strengthen U.S. supply chain
            security and bolster U.S. economic competitiveness with respect
            to China. Taiwan firms' central role in global information and
            communications technology supply chains makes Taiwan an
            attractive partner to the United States in this effort. To this
            end, the Commission recommended in 2020:

         Congress encourage the Administration to include
                Taiwan in multilateral efforts to coordinate and strengthen
                supply chain cooperation and security. This could be done
                through the expansion of Global Cooperation and Training
                Framework programming or a new multilateral arrangement
                with likeminded democracies. This multilateral engagement
                should focus on securing critical inputs and assuring
                supply chain resilience in strategic industries critical to
                economic competitiveness and national security, including
                information and communications technology, integrated
                circuits, and electronic components.

       Policymakers must make clear to multinational enterprises
            and companies that rely on China as either a location for
            production, or a supplier, that there are significant costs to
            producting in, or obtaining supplies from, that country. Short-
            term profits are not the only determinant for a fiduciary;
            rather, the long-term health and success of the enterprise are.
            The COVID-19 pandemic and the focus on supplier relationships
            with China has made clear that dependency on China creates
            enormous risks. China's technology acquisition strategies have
            undermined the value of many of our companies as their
            competitors have obtained technology, R&D, and manufacturing
            capabilities from multinational's activities in that country.
            The subsidies that China provides to many domestic champions
            also harm long-term competitiveness of U.S. companies. and in
            addition, the relationships that many U.S. firms have with
            Chinese companies now on the Entities List or identified by the
            Department of Defense as promoting the PLA, may expose U.S.
            companies to risks under U.S. law and undermine U.S. national
            security.

        Question 3. U.S. laws, regulations, and practices afford Chinese
    companies certain advantages that U.S. companies do not enjoy. For
    example, Chinese firms that raise capital on U.S. stock markets are
    subject to lower disclosure requirements than their U.S. counterparts.
        a. Can you describe other benefits Chinese companies enjoy in the
    United States, especially in cases where U.S. companies do not enjoy
    reciprocal advantages in China?

       U.S. firms compete with unfairly subsidized Chinese
            companies both in the United States and abroad. Chinese firms'
            U.S. operations may pose competitive challenges if they receive
            below-cost financing or subsidies from the Chinese government.
            For example, state-owned China Railway Rolling Stock
            Corporation (CRRC), China's largest rail-car manufacturing
            company, reported that it received $37.1 million in government
            grants--including loans at below-market rates--in
            2017.xiii In the United States, CRRC has won four
            out of five major U.S. contracts for new railcars in the cities
            of Chicago, Philadelphia, Boston, and Los Angeles since
            2017.xiv U.S. firms can operate at a disadvantage in
            global markets as well. For example, Chinese construction firms
            operating in African countries have benefited from significant
            government subsidies, allowing them to submit lower bids for
            many construction projects.xv According to Aubrey
            Hruby, Senior Fellow at the Atlantic Council's Africa Center,
            Chinese firms have won 42 percent by value of all World Bank
            open bid contracts with bids that are often 40 percent less
            expensive than competitor firms.xvi The early entry
            of Chinese firms Huawei and ZTE into Africa's
            telecommunications sector, aided by generous subsidies from the
            Chinese government, has also helped Chinese companies gain an
            advantage over competitors in the continent's
            telecommunications and mobile phone markets. In order to equip
            the U.S. government with information needed to better address
            the ways in which Chinese government subsidies unfairly
            advantage Chinese companies, the Commission recommended in
            2020:

         Congress expand the authority of the Federal Trade
                Commission (FTC) to monitor and take foreign government
                subsidies into account in premerger notification processes.

                      The FTC shall develop a process to determine
                    to what extent proposed transactions are facilitated by
                    the support of foreign government subsidies.

                      The definition of foreign government
                    subsidies shall encompass direct subsidies, grants,
                    loans, below-market loans, loan guarantees, tax
                    concessions, governmental procurement policies, and
                    other forms of government support.

                      Companies operating in the United States that
                    benefit from the financial support of a foreign
                    government must provide the FTC with a detailed
                    accounting of these subsidies when undergoing FTC
                    premerger procedures.

                      If the FTC finds foreign subsidies have
                    facilitated the transaction, the FTC can either propose
                    a modification to remedy the distortion or prohibit the
                    transaction under Section 7 of the Clayton Act, which
                    prohibits mergers and acquisitions where the effect
                    ``may be substantially to lessen competition, or to
                    tend to create a monopoly.''

       U.S. firms have no existing tools to address the
            anticompetive practices of Chinese state-owned or state-
            supported firms operating in our market. To be actionable,
            existing U.S. laws against unfair competition require the
            pricing and market activities of a competitor be based on the
            theory of recoupment. In short, if a Chinese entity does not
            plan to recoup lost profits, their competitive strategies may
            not violate our existing laws. Therefore, a subsidized Chinese
            SOE, with little to no cost of capital, may be able to invest
            in plant and equipment at dramatically lower costs than their
            U.S. counterparts. This is an issue that Congress should
            examine.

        b. Does the ability of Chinese companies to access U.S. capital
    markets give them an advantage when competing against U.S. firms
    globally?

       Like all foreign issuers, Chinese firms that raise capital
            on U.S. exchanges have been subject to lower disclosure
            requirements than their U.S. counterparts, thereby affording
            them unfair advantages when competing with U.S. firms. This
            situation is particularly challenging because Chinese companies
            do not comply with U.S. regulations on disclosure requirements.
            Chinese firms have benefitted from the United States' deep and
            highly liquid capital markets without complying with U.S.
            disclosure standards and despite failing to disclose basic data
            on ownership, operations, and political ties to U.S.
            regulators. This noncompliance not only enables these companies
            to unfairly outcompete U.S. firms, but also erodes the
            integrity of U.S. capital markets and exposes U.S. investors to
            fraud, as the recent Luckin Coffee accounting scandal and
            numerous other past examples have demonstrated. The Commission
            is therefore heartened by the recent passage in the House of
            Representatives of the Holding Foreign Compaines Accountable
            Act, and looks forward to strengthened enforcement of listing
            standards on U.S. exchanges.
    ENDNOTES
        i White House, ``EO on Delegating Authority Under the
    DPA to the CEO of the U.S. International Development Finance
    Corporation to Respond to the COVID-19 Outbreak,'' May 14, 2020.
    https://www.whitehouse.gov/presidential-actions/eo-delegating-
    authority-dpa-ceo-u-s-inter
    national-development-finance-corporation-respond-covid-19-outbreak/.
        ii Jeffrey G. Weiss et al., ``U.S. and EU Actions to
    Address Supply Chain Threats Caused by Reliance on Critical Mineral
    Inputs,'' Steptoe, October 8, 2020. https://www.steptoe.com/en/news-
    publications/us-and-eu-actions-to-address-supply-chain-threats-caused-
    by-reliance-on-critical-mineral-imports.html; White House, ``Executive
    Order on Addressing the Threat to the Domestic Supply Chain from
    Reliance on Critical Minerals from Foreign Adversaries,'' September 30,
    2020. https://www.whitehouse.gov/presidential-actions/executive-order-
    addressing-threat-domestic-supply-chain-reliance-critical-minerals-
    foreign-adversaries/.
        iii Andrea Shalal, Alexandra Alper, and Patricia
    Zengerle, ``U.S. Mulls Paying Companies, Tax Breaks to Pull Chains from
    China,'' Reuters, May 18, 2020. https://www.reuters.com/article/us-usa-
    china-supply-chains/u-s-mulls-paying-companies-tax-breaks-to-pull-
    supply-chains-from-china-idUSKBN22U0FH.
        iv Isabel Reynolds and Emi Urabe, ``Japan to Fund Firms
    to Shift Production out of China,'' Bloomberg, April 8, 2020. https://
    www.bloomberg.com/news/articles/2020-04-08/japan-to-fund-firms-to-
    shift-production-out-of-china?sref=FlHD1WjR.
        v Hiroyuki Akiyama, ``Japan Companies Line Up for `China
    Exit' Subsidies to Come Home,'' Nikkei Asian Review, September 9, 2020.
    https://asia.nikkei.com/Economy/Japan-companies-line-up-for-China-exit-
    subsidies-to-come-home; Simon Denyer, ``Japan Helps 87 Companies to
    Break from China after Pandemic Exposed Overreliance,'' Washington
    Post, July 21, 2020. https://www.washingtonpost.com/world/asia_pacific/
    japan-helps-87-companies-to-exit-china-after-pandemic-
    exposedoverreliance/2020/07/21/4889abd2-cb2f-11ea-99b0-
    8426e26d203b_story.html.
        vi European Commission, ``Introductory Statement by
    Commissioner Phil Hogan at Informal Meeting of EU Trade Ministers,''
    April 16, 2020. https://ec.europa.eu/commission/commissioners/2019-
    2024/hogan/announcements/introductory-statement-commissioner-philhogan-
    informal-meeting-eu-trade-ministers_en; Philip Blenkinsop, ``EU Trade
    Chief Urges for More Diverse Supply Chains after Crisis,'' Reuters,
    April 16, 2020. https://www.reuters.com/article/us-health-coronavirus-
    eu-trade/eu-trade-chief-urges-for-more-diversesupply-chains-after-
    crisis-idUSKCN21Y27P.
        vii Leila Abboud and Michael Peel, ``Covid-19 Hastens
    French Push to Bring Home Medicines Manufacture,'' Financial Times,
    July 29, 2020. https://www.ft.com/content/80a4836b-ca25-48e0-996d-
    458186e968dc.
        viii Candace Browning Platt et al., ``The USD1 Trillion
    Cost of Remaking Supply Chains: Significant but Not Prohibitive,'' BofA
    Securities, July 22, 2020.
        ix Knut Alicke, Richa Gupta, and Vera Trautwein,
    ``Resetting Supply Chains for the Next Normal,'' McKinsey Global
    Institute, July 2020, 3. https://www.mckinsey.com//media/McKinsey/
    Business%20Functions/Operations/Our%20Insights/
    Resetting%20supply%20chains%20for%20the%20next%20normal/Resetting-
    supply-chains-for-the-next-normal.pdf?shouldIndex=false.
        x Shefali Kapadia, ``The 5 Ws of Reshoring Supply
    Chains,'' Supply Chain Dive, July 13, 2020. https://
    www.supplychaindive.com/news/5-ws-reshoring-supply-chains-diversify-
    localization/579943/.
        xi Rajeswari Pillai Rajagopalan, ``Australia-Japan-India
    Trilateral Sets Sights on Supply Chain Resilience,'' Diplomat, October
    2, 2020. https://thediplomat.com/2020/10/australia-japan-india-
    trilateral-sets-sights-on-supply-chain-resilience/.
        xii South China Morning Post, ``Britain Wants U.S. to
    Form a 10-Nation 5G Alliance to Cut Reliance on China's Huawei,'' May
    29, 2020. https://www.scmp.com/news/world/europe/article/3086774/uk-
    wants-us-form-10-nation-5g-alliance-cut-reliance-chinas-huawei.
        xiii CRRC Corporation Limited, ``CRRC Corporation
    Limited Annual Report 2018,'' March 2019, 121. https://www.crrcgc.cc/
    Portals/73/Uploads/Files/2019/4-26/636918870297486290.pdf.
        xiv Alexandra Alper and Allison Lampert, ``China to Bid
    on D.C. Metro Rail Deal as National Security Hawks Circle,'' Reuters,
    May 9, 2019. https://www.reuters.com/article/us-usa-china-trains-crrc-
    focus/china-to-bid-on-d-c-metro-rail-deal-as-national-security-hawks-
    circle-idUSKCN1SF0Y5; Faiz Siddiqui, ``China's State-Owned Rail-Car
    Builder Looks Close to Bidding on Metro Contract; Also Eying New York
    Subway Work,'' Washington Post, February 11, 2019. https://
    www.washingtonpost.com/local/trafficandcommuting/chinas-state-owned-
    rail-car-builder-looks-close-to-bidding-on-metro-contract-also-eyeing-
    ny-subway-work/2019/02/11/77c6da4c-2a53-11e9-984d-
    9b8fba003e81_story.html.
        xv DW, ``Building Africa: Can Europe's Construction
    Firms Compete with China's?'' February 21, 2020. https://www.dw.com/en/
    building-africa-can-europes-construction-firms-compete-with-chinas/a-
    52435595.
        xvi Aubrey Hruby, ``Deconstructing the Dragon: China's
    Commercial Expansion in Africa,'' Atlantic Council, July 2019, 10.
    https://www.atlanticcouncil.org/wp-content/uploads/2019/09/
    Deconstructing_the_Dragon-Chinas_Commercial_Expansion_in_Africa.pdf.
                                     ______

        Response to Written Questions Submitted by Hon. Jacky Rosen to
                                 Michael Wessel
        Question 1. During these challenging times, Nevada's manufacturers
    and their workers have been resilient in ensuring that our communities
    have the protective equipment they need to keep our first responders,
    frontline workers, and families safe. However, despite these efforts to
    ramp up PPE production, as COVID-19 cases continue to climb, challenges
    remain--particularly our overdependence on global supply chains. I am
    curious, however, if American companies--through innovation--can help
    pave the way to creating new, domestic supply chains.
        a.) Are there COVID response-related sectors where small and
    medium-sized businesses can still step up and fill domestic supply
    chain needs? Where are the biggest gaps where American manufacturers
    can jump in to not only contribute, but even create jobs because unmet
    demand is so high? What would failure to fill these gaps mean for the
    American economy as a whole?
        Although American small and medium enterprises (SMEs) stepped up to
    address PPE shortfalls at the start of the coronavirus crisis, ongoing
    PPE shortages mean their role remains critical in meeting domestic
    demand and protecting jobs. According to a December 9, 2020 report by
    the Wall Street Journal, despite an increase in PPE production since
    January (up to 150 million N95 masks a month from 20 million a month
    prior to the pandemic) there are still widespread shortages of N95
    masks and other personal protective equipment.\1\ Supplies of medical
    products that require certification, including testing kits, N95 masks,
    needles, and reagents, continue to be limited.\2\ According to a survey
    conducted by the Government Accountability Office (GAO) in September
    2020, one-third to one-half of the states reported shortages of testing
    supplies and one-third of states reported being very concerned about
    having sufficient supplies to administer COVID-19 vaccines.\3\ Even
    following the pandemic, concerns about reliance on China for medical
    equipment and supplies prompted by the experiences of COVID-19 may
    create a longer-term demand for U.S. sourcing that may create an
    opportunity for U.S. manufacturers. We must ensure that domestic
    capacity exists to meet our Nation's needs.
    ---------------------------------------------------------------------------
        \1\ Stephanie Armour, Betsey McKay, and Susan Pulliam, ``U.S.
    Supplies of Covid-19 PPE Fall Short of Targets,'' Wall Street Journal,
    December 9, 2020. https://www.wsj.com/articles/u-s-supplies-of-covid-
    19-ppe-fall-short-of-targets-11607509800.
        \2\ Cheyenne Haslett, ``Nonpartisan Report Warns of COVID-19
    Testing Shortages in Over Half U.S. States, Territories,'' ABCNews,
    November 30, 2020. https://abcnews.go.com/Politics/nonpartisan-report-
    warns-covid-19-testing-shortages-half/story?id=74469015.
        \3\ Government Accountability Office, ``COVID-19: Urgent Actions
    Needed to Better Ensure an Effective Federal Response,'' GAO-21-191,
    November 30, 2020. https://www.gao.gov/reports/GAO-21-191/.
    ---------------------------------------------------------------------------
        Another area where SMEs could contribute is in production of
    medicines and active pharmaceutical ingredients (APIs). The COVID-19
    outbreak highlighted the United States' reliance on China for APIs,
    some of which are critical for the production of therapeutics used to
    treat COVID-19, which may prompt demand for APIs processed in the
    United States. Willy Shih, a professor at Harvard Business School who
    focuses on manufacturing, notes that innovations in the production of
    APIs, including biomanufacturing, could allow existing businesses to
    pivot to the production of APIs at a competitive price point.\4\
    Generally, SMEs represent a growing share of the pharmaceutical
    development pipeline, increasing from 52 percent of late-stage product
    pipelines in 2003 to 73 percent in 2018. These companies' smaller size
    may allow them to pivot quickly to meet emerging health needs,
    indicating the capability of SMEs to play a critical role in addressing
    API shortages and diversifying the United States' pharmaceutical supply
    chains.\5\ These SMEs should have quick access to capital to shift
    production in the future, should their capabilities and production
    capacity be needed.
    ---------------------------------------------------------------------------
        \4\ Willy Shih, ``Companies That Want to Make Pharmaceutical APIs
    will be Producing Commodities. Here's What They Should Consider,''
    Forbes, July 29, 2020. https://www.forbes.com/sites/willyshih/2020/07/
    29/companies-who-want-to-make-pharmaceutical-apis-will-be-producing-
    commodities-heres-what-they-should-consider/?sh=2d0677d9af0f.
        \5\ IQVIA Institute for Human Data Science, ``Emerging Biopharma's
    Contribution to Innovation: Assessing the Impact,'' 2019. https://
    www.iqvia.com/insights/the-iqvia-institute/reports/emerging-biopharmas-
    contribution-to-innovation; Danielle Navarro, ``Research Synthesis:
    Role of Small and Medium-Sized Enterprises,'' Graduate Institute of
    Geneva Global Health Center, October 28, 2019. https://
    www.knowledgeportalia.org/small-and-medium-enterprises.
    ---------------------------------------------------------------------------
        In 2019, the United States imported 80 percent of its APIs, many of
    which were sourced from China or from third party countries that
    ultimately source from China.\6\ Generic drugs are particularly
    vulnerable to disruption: 40 percent of generic drugs sold in the
    United States only had one manufacturer.\7\ As highlighted in the
    Commission's 2019 annual report, the Food and Drug Administration (FDA)
    has faced difficulties inspecting China-based API production
    facilities, which may expose U.S. consumers to the risk of using APIs
    that have not been produced to acceptable standards.\8\ Efforts to
    diversify the United States' pharmaceutical supply chains and ensure
    sourcing from facilities inspected by the FDA in response to problems
    highlighted by the pandemic may create new market opportunities for
    U.S. manufacturers.
    ---------------------------------------------------------------------------
        \6\ U.S. Food and Drug Administration, FDA at a Glance: FDA-
    Regulated Products and Facilities, April 2017.
        \7\ Economist, ``A Dire Scarcity of Drugs Is Worsening, in Part,
    because They Are So Cheap,'' September 14, 2019. https://
    www.economist.com/international/2019/09/14/a-dire-scarcity-of-drugs-is-
    worsening-in-part-because-they-are-so-cheap.
        \8\ U.S.-China Economic and Security Review Commission, 2019 Annual
    Report to Congress, November 2019, 259.
    ---------------------------------------------------------------------------
        Failure to diversify supply chains for pharmaceutical products and
    medical protective equipment would make the United States vulnerable to
    future supply chain disruptions and risk potential exposure to products
    manufactured in facilities that do not meet U.S. health and safety
    standards.

        b.) What actions can Congress take to strengthen our Nation's
    domestic supply chains?
        The Commission has generated several recommendations to strengthen
    domestic supply chains by preventing the abuse of the United States'
    open market system by Chinese actors backed by Chinese government
    subsidies, supporting U.S.-based innovation, and reducing reliance on
    China-based suppliers that may pose a risk to U.S. consumers and
    industry.
        Strengthen regulatory oversight: A key recommendation from the
    Commission's 2020 Annual report is that Congress expand the authority
    of the Federal Trade Commission (FTC) to monitor and take foreign
    subsidies into account in premerger notification processes.\9\ This
    recommendation would limit the ability of companies aided by foreign
    government subsidies to engage in acquisitions that would reduce
    competition. This follows a 2018 recommendation that Congress direct
    the Office of the U.S. Trade Representative to identify the trade-
    distorting practices of Chinese state-owned enterprises and develop
    policies to counteract their anticompetitive impact.\10\
    ---------------------------------------------------------------------------
        \9\ U.S.-China Economic and Security Review Commission, 2020 Annual
    Report to Congress, December 2020, 536.
        \10\ U.S.-China Economic and Security Review Commission, 2018
    Annual Report to Congress, November 2018, 483.
    ---------------------------------------------------------------------------
        Shore up supplies of critical materials: In 2020 the Chinese
    government revised its export control law to include provisions
    allowing for blocking foreign access to strategic resources like rare
    earths, furthering highlighting the risk that the Chinese government
    may use its dominance in the production of rare earth materials as a
    tool for coercion.\11\ China produces more than 80 percent of rare
    earth elements globally.\12\ In contrast, U.S. export controls are
    limited to dual-use technologies and do not include raw materials. A
    2019 Commission recommendation would help the United States identify
    and respond to risks associated with the Chinese government's control
    of the supply of rare earth materials. The Commission recommended that
    the U.S. Geological Survey develop and maintain a risk assessment
    framework that identifies materials used in manufacturing industries
    critical to both national security and commercial vitality. This
    framework would provide an early warning mechanism for any threats to
    the U.S. supply of these critical materials.\13\ This could provide an
    initial step toward diversifying production of rare earth materials
    when necessary, insulating U.S. manufacturing industries from coercion
    and unexpected disruptions to the supply of rare earth minerals.
    ---------------------------------------------------------------------------
        \11\ Lester Ross, Kenneth Zhou, and Tingting Liu, ``China Publishes
    Draft Export Control Law,'' WilmerHale, January 15, 2020. https://
    www.jdsupra.com/legalnews/china-publishes-draft-export-control-law-
    58113/.
        \12\ Jamie Smyth, ``Industry Needs a Rare Earths Supply Chain
    Outside China,'' Financial Times, July 27, 2020. https://www.ft.com/
    content/fc368da6-1c86-454b-91ed-cb2727507661.
        \13\ U.S.-China Economic and Security Review Commission, 2019
    Annual Report to Congress, November 2019, 207.
    ---------------------------------------------------------------------------
        Boost U.S. innovation: Several Commission recommendations would
    support U.S. innovation and initial development in emerging tech
    sectors, creating an environment that is conducive to U.S.-based
    innovative industries. In the 2019 annual report, the Commission
    recommended that Congress amend IRS Section 41 to extend the research
    and development tax credit to initial stages of development.\14\
    ---------------------------------------------------------------------------
        \14\ U.S.-China Economic and Security Review Commission, 2019
    Annual Report to Congress, November 2019, 207.
    ---------------------------------------------------------------------------
        Secure the pharmaceutical supply chain: The Commission has also
    highlighted several steps that Congress could take to ensure that the
    United States has access to safe and secure supplies of critical
    lifesaving and life-sustaining drugs and medical equipment. This
    includes a recommendation from the 2019 Annual Report that Congress
    require Medicare, Medicaid, the U.S. Department of Veterans Affairs,
    the U.S. Department of Defense, and other Federal funded health systems
    to purchase their pharmaceuticals only from U.S. production facilities
    or from facilities that have been certified by the FDA to be in
    compliance with U.S. health and safety standards and that actively
    monitor, test, and assure the quality of the APIs and other components
    used in their drugs, unless the FDA finds the specific drug is
    unavailable in sufficient quantities from other sources.\15\ These
    actions would ensure that domestic health supply chains are sourced
    from facilities whose health and safety can be verified by the FDA.
    ---------------------------------------------------------------------------
        \15\ U.S.-China Economic and Security Review Commission, 2019
    Annual Report to Congress, November 2019, 249.
    ---------------------------------------------------------------------------

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