[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]




 
                        SUPPLY CHAIN RESILIENCY

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

                                HEARING

                               before the

        SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL ACCESS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                              JULY 2, 2020

                               __________

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]     

                               

            Small Business Committee Document Number 116-085
             Available via the GPO Website: www.govinfo.gov
             
             
             
                             ______

             U.S. GOVERNMENT PUBLISHING OFFICE 
41-296                  WASHINGTON : 2021 
              
             
             
                   HOUSE COMMITTEE ON SMALL BUSINESS

                 NYDIA VELAZQUEZ, New York, Chairwoman
                         ABBY FINKENAUER, Iowa
                          JARED GOLDEN, Maine
                          ANDY KIM, New Jersey
                          JASON CROW, Colorado
                         SHARICE DAVIDS, Kansas
                         KWEISI MFUME, Maryland
                          JUDY CHU, California
                       DWIGHT EVANS, Pennsylvania
                        BRAD SCHNEIDER, Illinois
                      ADRIANO ESPAILLAT, New York
                       ANTONIO DELGADO, New York
                     CHRISSY HOULAHAN, Pennsylvania
                         ANGIE CRAIG, Minnesota
                   STEVE CHABOT, Ohio, Ranking Member
   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
                          TROY BALDERSON, Ohio
                          KEVIN HERN, Oklahoma
                        JIM HAGEDORN, Minnesota
                        PETE STAUBER, Minnesota
                        TIM BURCHETT, Tennessee
                          ROSS SPANO, Florida
                        JOHN JOYCE, Pennsylvania
                       DAN BISHOP, North Carolina

                 Melissa Jung, Majority Staff Director
   Justin Pelletier, Majority Deputy Staff Director and Chief Counsel
                   Kevin Fitzpatrick, Staff Director
                   
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Brad Schneider..............................................     1
Hon. Kevin Hern..................................................     3

                               WITNESSES

Dr. Eswar Prasad, Professor of Trade Policy, Cornell University, 
  Senior Fellow, Brookings Institution, Ithaca, NY...............     6
Ms. Christine Fagnani, Co-Owner and Vice President, Lynn Medical 
  Instrumentation Company, Wixom, MI.............................     7
Mr. David Billstrom, CEO, Kitsbow Cycling Apparel, Old Fort, NC..     9
Ms. Sheila Lawson, Chief Operations Officer and Vice President of 
  Supply Chain, RL Hudson, Broken Arrow, OK......................    12

                                APPENDIX

Prepared Statements:
    Dr. Eswar Prasad, Professor of Trade Policy, Cornell 
      University, Senior Fellow, Brookings Institution, Ithaca, 
      NY.........................................................    24
    Ms. Christine Fagnani, Co-Owner and Vice President, Lynn 
      Medical Instrumentation Company, Wixom, MI.................    32
    Mr. David Billstrom, CEO, Kitsbow Cycling Apparel, Old Fort, 
      NC.........................................................    38
    Ms. Sheila Lawson, Chief Operations Officer and Vice 
      President of Supply Chain, RL Hudson, Broken Arrow, OK.....    64
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.


                        SUPPLY CHAIN RESILIENCY

                              ----------                              


                         THURSDAY, JULY 2, 2020

                  House of Representatives,
               Committee on Small Business,
                   Subcommittee on Economic Growth,
                                    Tax and Capital Access,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 9:00 a.m., via 
Webex, Rayburn House Office Building. Hon. Brad Schneider 
[member of the Committee] presiding.
    Present: Representatives Schneider, Davids, Delgado, 
Chabot, Hern, Stauber, and Spano.
    Mr. SCHNEIDER. Well, I thank everyone for joining us today 
for our Committee's Hybrid Hearing. I want to make sure to note 
some important requirements.
    Let me begin by saying that standing House and Committee 
rules and practice will continue to apply during hybrid 
proceedings. All members are reminded that they are expected to 
adhere to these standing rules, including decorum.
    With that said, the technology that we are utilizing today 
requires us to make some small modifications to ensure that 
members can fully participate in these proceedings.
    During the covered as designated by the speaker, the 
Committee will operate in accordance with House Resolution 965 
and the subsequent guidance from the Rules Committee in a 
manner that respects the rights of all members to participate. 
House regulations require members to be visible through a video 
connection throughout the proceeding, so please keep your 
cameras on. Also, if you have to participate in another 
proceeding, please exit this one and log back in later.
    In the event a member encounters technical issues that 
prevent them from being recognized for their questioning, I 
will move to the next available member of the same party and I 
will recognize that member at the next appropriate time slot 
provided they have returned to the proceeding.
    Should a member's time be interrupted by technical issues, 
I will recognize that member at the next appropriate spot for 
the remainder of their time once their issue has been resolved.
    In the event a witness loses connectivity during the 
testimony or questioning, I will preserve their time as staff 
address the technical issue. I may need to recess the 
proceedings to provide time for the witness to reconnect.
    And finally, remember to remain muted until you are 
recognized to minimize background noise.
    In accordance with the rules established under House 
Resolution 965, staff has been advised to mute participants 
only in the event there is inadvertent background noise. Should 
a member wish to be recognized, they must unmute themselves and 
seek recognition at the appropriate time.
    For those members here in the room today, we will also be 
following the health and safety guidelines issued by the 
attending physician. That includes social distancing and 
especially the use of masks. I urge members and staff to wear 
masks at all times while in the hearing room, and I thank you 
in advance for your commitment to a safe environment for all of 
us here today.
    Again, good morning, and thank you all for being here. I 
would especially like to thank the witnesses for taking time 
out of their busy schedule to be with us this morning. I want 
to also thank the Small Business Committee staff for their 
extremely diligent work during this unique time.
    It is no secret that small businesses are reeling from the 
ongoing coronavirus pandemic which brought entire sectors of 
the U.S. economy to a standstill. Unemployment is at its 
highest level since the 1930s. Many businesses have been forced 
to shut their doors to comply with stay-at-home orders. 
Businesses and essential services that have been able to remain 
open face shortages for high-demand products, higher costs for 
production materials, and an inability to get finished goods to 
market.
    The COVID-19 pandemic has exposed many weaknesses in our 
supply chains, both global and domestic, affecting virtually 
every industry. Most notably, we have seen hospitals, states, 
and local governments scramble to ensure the integrity and 
continued flow of desperately needed personal protective 
equipment (PPE) and medical devices such as ventilators. Too 
many times our communities, healthcare systems, and businesses 
were competing with each other, bidding up prices and creating 
supply dislocations across the country. As well, severe COVID 
outbreaks at food processing facilities made consumers also 
experience the heavy costs of the pandemic on our food supply 
chain.
    Small firms can be particularly vulnerable to disruption in 
supply chains. Many spent years refining just in time supply 
systems, maintaining only a few days or a few weeks of 
inventory. Many others have limited control of their supply 
chain and depend on lower priced suppliers from overseas to 
support razor thin margins here at home. An overreliance on 
foreign countries for manufacturing components was already an 
issue before the pandemic hit. As the health crisis spread, 
Americans realize that too much of our medical supply and 
personal protective equipment sourcing was in China and other 
countries hit by COVID. As these countries nationalize their 
manufacturing capacities, shipments to the United States 
started to dry up. Initially the crisis was with PPE, than 
other finished products, but quickly moved to raw materials and 
components U.S. manufacturers depend upon to produce their 
goods for market. These supply disruptions affected businesses 
large and small in every state.
    However, as they so often do, American small businesses 
across a variety of industries have demonstrated incredible 
resiliency, resourcefulness, and ingenious flexibility shifting 
product lines, moving to more ecommerce and utilizing 
alternative supplies and modified distribution chains. Some 
shirted to making PPE and hand sanitizer in a matter of days. 
Others came up with new and innovative ways to source their 
products while they are still discovering new delivery channels 
in entirely new markets. We will hear inspiring stories of this 
adaptability today.
    So why are we here? Small businesses are the heart and soul 
of our local communities. They represent more than 40 percent 
of our national GDP and more than half our country's jobs. 
Today's hearing will focus on how we can help sustain our 
Nation's small businesses and explore potential solutions to 
establish more resilient supply chains through this crisis and 
into the future. Improving our Nation's supply chain resiliency 
will require an ``all hands on deck'' approach as both domestic 
and global supply chains are vastly interconnected, yet can 
vary significantly from industry to industry, product to 
product.
    We must also recognize that trade is an essential part of 
supporting small business in a modern economy. Ninety-five 
percent of the world's population reside outside the United 
States, and exporting provides small businesses with literally 
billions of new customers. However, it is important that we 
prioritize making things here at home to protect our national 
security and public health. Doing so will also create jobs and 
ultimately help us build a stronger economy and a better future 
for all of us.
    Second, to enhance our economy's resiliency, we can do 
better utilizing the distinct strengths and greater 
adaptability of small companies. In many ways, smaller firms 
are more nimble than larger ones and can quickly shift their 
manufacturing, distribution, and sales capacities to meet 
increased demands for certain goods.
    Third, much of the disruptions we are experiencing 
currently were both predictable and preventable. We need to 
establish better lines of communication and develop better 
coordination so that we can anticipate shortages, identify 
additional and alternative sources, and get critical goods and 
products where they are needed in the most timely, efficient, 
and cost-effective way.
    And finally, we need to help small companies be ale to 
diversify, reinforce, and scale their supply chains to better 
deal with unforeseen surges.
    I look forward to hearing from all of our witnesses today 
about their experiences and their ideas for charting a path so 
we avoid future crises. Hopefully this hearing can help us 
establish best practices for our small firms and some 
principles for our Federal government as the economy recovers.
    Thank you to everyone for being here today.
    I now recognize the Ranking Member, Mr. Hern, for his 
opening statement.
    Mr. Hern, I think you may still be on mute.
    Now we have you.
    Mr. HERN. All right, thank you.
    I would like to thank my colleague for sitting in the chair 
today and leading our Committee.
    You know, there is no question that this black swan event 
has sent a shock wave through the world and forcing supply 
chain leaders to rethink current operating models, questioning 
their operation's emergency preparedness and dependencies on 
primary sources. Industries of all kinds from medical to 
agricultural to automotive, retail, and manufacturing and more 
have been discriminately harmed by cascading effects of the 
novel coronavirus.
    In the medical industry, the pandemic created an 
international shortage of personal protection equipment 
necessary to protect healthcare workers and to heal patients. 
The flow of lifesaving pharmaceuticals in the United States has 
also choked disrupted the supply chains across the Nation. 
However, small businesses were able to quickly fill the gaps in 
supply chains pivoting from their operations to quickly produce 
critical medical supplies potentially saving countless lives.
    COVID-19 also rattled the agricultural foodservice 
industry, disrupting all parts of supply chain from farmers to 
processing plants and distributors with significant uncertainty 
still on the horizon. However, many farmers are rising to the 
challenges of the moment, adjusting the way Americans now shop 
and eat by experimenting with direct customer sales and 
deliveries. Additionally, the President's Executive Order 13917 
takes one step towards keeping food supply chains intact.
    In the manufacturing sector, businesses face several 
logistical hurdles trying to regulate their accounts payable 
and receivables. Having to reassess market demand (inaudible) 
output, tremendous hurdles exist in trying to manage the 
workforce, move inventory from one place to another, and keep 
customer relationships intact during the trying times.
    As we have seen in a number of other industries, small and 
local businesses have stepped into the breach, filling the void 
where traditional suppliers and distributors (inaudible).
    Unfortunately, for every small business success story that 
comes out of this pandemic, we also see mom and pop shops 
shutting down. Long unemployment lines (inaudible) country and 
other (inaudible) to the rippling effects of the coronavirus.
    Where a big company might have a contingency plan and a 
larger network built into their supply chain, many small 
businesses operate on a more linear path leaving them at a 
greater risk when disruptions occur.
    Even though the overall picture may seem bleak, the silver 
lining (inaudible) to reshape the supply chain (inaudible). 
(inaudible) with the local and small businesses to fit in 
anywhere along their supply chain.
    My hope today is that we can learn more about what we can 
do to help small businesses affected by the COVID-19 outbreak 
and how we can leverage the power of small businesses to 
fortify our national supply chain.
    With that, Mr. Chairman, I yield back.
    Mr. SCHNEIDER. Thank you, Mr. Hern.
    I would now like to take a moment to explain how this 
hearing will proceed. Each witness will have 5 minutes to 
provide a statement, and each Committee member will have 5 
minutes for questions. Please ensure that your microphone is on 
when you begin speaking and then that you return to mute when 
you are finished.
    With that, I would like to introduce our witnesses.
    Our first witness is Dr. Eswar Prasad. Dr. Prasad is the 
Tolani senior professor of trade policy at Cornell University. 
He is also a senior fellow with the Brookings Institution. He 
was previously chief of the Financial Studies division in the 
International Monetary Fund's research department, and before 
that he was head of the IMF's China division.
    Thank you, Dr. Prasad for being here today.
    Our second witness is Christine Fagnani. Ms. Fagnani is the 
co-owner and acting vice president of sales and marketing for 
Lynn Medical. She has held this position for the past 18 years. 
Prior to working at Lynn Medical, Christine worked for Johnson 
and Johnson for 16 years in their pharmaceutical division. 
Christine is also active with the Health Industry and 
Distribution Association, the leading trade association 
representing medical distributors.
    Thank you, Ms. Fagnani, for being here as well.
    Our third witness is David Billstrom. Mr. Billstrom leads 
Kitsbow Consulting Apparel in Old Fort, North Carolina. Along 
with a 39 year career that includes Intel Corporation and Walt 
Disney, he founded an Internet search engine company, helped 
build the Clover Coffee Company acquired by Starbucks, and 2 
years ago became the leader of Kitsbow, a cycling apparel 
company that recently moved from California to North Carolina.
    Thank you, Mr. Billstrom, for being here today as well.
    I now would like to yield to our Ranking Member, MR. Hern, 
to introduce our final witness.
    Mr. HERN. Thank you, Mr. Chairman.
    I would like to welcome our final witness who is from my 
district, Ms. Sheila Lawson. Good morning, Sheila.
    Ms. Lawson is the chief operations officer for RL Hudson 
and Company located in Broken Arrow, Oklahoma. RL Hudson and 
Company was founded in 1980, and founder Rick Hudson was at the 
tip of the sphere organizing the coming trend of Asian 
manufacturing where he began establishing relationships abroad. 
Soon, the small company that started out as a distributor of 
rubber O-ring sales became a booming success story with the 
capability to research, design, and test unique and patentable 
rubber compound.
    In 2017, the company launched a new in-house capability and 
continues to expand (inaudible) competitive industrial 
landscape. Ms. Lawson brings with her a deep well of experience 
having lived in the supply chain and operations world for 30 
years. She has been with RL Hudson for the past 14 years 
serving as COO for the past two. She is currently in her third 
term as president of the Association for Operations Management, 
previously known as the American Production and Inventory 
Control Society, where she has also been on the board of 
directors since 2004. Ms. Lawson is a thoughtful and 
intelligent leader continuously striving to stay informed as 
the landscape in her profession evolves. Thank you or your 
participation today, and I look forward to hearing your 
testimony.
    Mr. Chairman, I yield back.
    Mr. SCHNEIDER. Thank you, Mr. Hern.
    We will now recognize the witnesses. Dr. Prasad, you are 
recognized for 5 minutes.

STATEMENTS OF ESWAR PRASAD, PROFESSOR OF TRADE POLICY, CORNELL 
  UNIVERSITY, SENIOR FELLOW, BROOKINGS INSTITUTION; CHRISTINE 
      FAGNANI, CO-OWNER AND VICE PRESIDENT, LYNN MEDICAL 
INSTRUMENTATION COMPANY; DAVID BILLSTROM, CEO, KITSBOW CYCLING 
   APPAREL; SHEILA LAWSON, CHIEF OPERATIONS OFFICER AND VICE 
              PRESIDENT OF SUPPLY CHAIN, RL HUDSON

                   STATEMENT OF ESWAR PRASAD

    Mr. PRASAD. Small businesses are indeed the bulwark of the 
American economy, and in this very trying time when the COVID-
19 pandemic has ravaged the entire American economy, small 
businesses have taken the brunt of the burden. They have 
smaller tax buffers and smaller other sorts of buffers to deal 
with the shock of this sort. But the (inaudible) recognized 
factor that is affecting small businesses is, of course, the 
disruption of supply chains. So I commend the Committee for 
holding this hearing, and thank you, Chairman Kim and Ranking 
Member Hern, for allowing me to share my views with the focus 
especially on global supply chains which many of my 
distinguished fellow panelists will also be speaking about.
    Now, global supply chains have been a boom for small 
businesses in many ways. One of the reasons the supply chains 
have proliferated (phonetic) is that (inaudible) leadership 
over many decades, both tariff and nontariff barriers to trade 
have fallen around the world and transportation costs have 
declined. Small businesses have taken full advantage of these 
supply chain possibilities around the world and this has 
allowed them to reduce costs, increase efficiencies, and even 
expand into broader aspects of business that they might not 
have been able to do in other circumstances because for small 
businesses the option of vertical integration, that is 
basically trying to integrate all parts of the production 
process within one firm is not really a viable option. So I 
think the vitality of small businesses in the U.S. (inaudible) 
to the integration of supply chains.
    Now, supply chains are subjected to (inaudible) for a 
variety of reasons. One reason, of course, is health and 
natural disasters, such as the COVID-19 pandemic that we are 
experiencing right now. But there are other factors as well. 
Trade relationships are very important in terms of maintaining 
the viability of these supply chains, and trade tensions among 
the major economics, for instance, the U.S.-China trade 
relationship or even the North American trade relationships 
which are both very important for small business supply chains 
have certainly had their fair share of tensions in recent 
years.
    Geopolitical tensions in other parts of the world and 
weaknesses in other countries which are very important, export 
markets for small businesses, in addition to being part of 
supply chains also create vulnerabilities.
    So what can small businesses do to increase the resiliency 
of the supply chains? One potential strategy, of course, is 
onshoring. That certainly reduces vulnerability to global 
supply chains, but it also takes away many of the advantages of 
global supply chains that small businesses have benefitted 
from. So it is not clear that that is the optimal strategy.
    Another possible strategy is diversification. That is not 
relying just on one source of suppliers but trying to diversify 
across countries, across suppliers.
    Now, this has both advantages and costs. Certainly having a 
more diversified supply chain is going to create more 
resiliency, more redundancy, but it comes at a cost, especially 
in terms of efficiency. And for small businesses, cost is 
clearly a very important consideration.
    Small businesses can, of course, also increase the 
resiliency of the supply chains through using technology that 
can improve the logistics and other parts of their management.
    So there are many strategies that small businesses can 
employ but government has a crucial role to play as well. So 
what can the government do? In the short term it is very clear; 
small businesses are hurting as we will hear from my fellow 
panelists, and the sort of assistance the government has 
provided so far, both through the Paycheck Protection Program 
and also the Main Street Lending Program of the Federal Reserve 
have been very important and it is crucial that this assistance 
be continued, and more importantly, that congressional 
oversight, including by your Committee, make sure that this 
assistance does reach these firms and reaches them in a timely 
manner.
    In addition, the government can also play a useful role in 
terms of tapping (phonetic) down the uncertainty that is 
created by trade tensions around the world. Certainly, there is 
a case to be made, but effective negotiations by the U.S. would 
help to level the playing field that would help small 
businesses, but uncertainty in trading relationships and trade 
frictions suddenly do not help. Providing more assistance to 
the Export Import Bank for exporting drugs can certainly help 
as well, and America's support for the multinational 
institutions such as the International Monetary Fund and the 
World Bank, which in turn can help other countries of the 
export markets of the U.S. is a crucial factor as well.
    So between small businesses themselves and the government, 
I think this very difficult patch can be gone through. This is 
my hope, that working together, governments, the Federal 
government, local governments, and small businesses themselves 
can maintain the resiliency that they have shown in many times 
in the past and continue to remain very important bulwarks of 
the U.S. economy, especially as we start, as I hope we will, 
getting into the economic recovery. Thank you.
    Mr. SCHNEIDER. Thank you, Dr. Prasad.
    I would now like to turn to Ms. Fagnani. You are recognized 
for 5 minutes.

                 STATEMENT OF CHRISTINE FAGNANI

    Ms. FAGNANI. Yes, good morning. Thank you, Chairwoman 
Velazquez, Chairman Kim, Ranking Member Chabot, Ranking Member 
Hern, and distinguished members of the Committee for the 
opportunity to testify today.
    My name is Chris Fagnani, and I am the owner of Lynn 
Medical. Established in 1966, my company is a second 
generation, family-owned medical products distributor. We have 
30 employees and we are located in the suburb of Detroit, 
Michigan. We represent over 100 medical manufacturers, and we 
distribute nationally to hospitals, doctors' offices, and 
clinics.
    For this hearing, it is important to know the significant 
part of our customer base is also small businesses, practices 
owned by the physicians themselves. I also have the pleasure of 
appearing before you today as the Board Chair of the Health 
Industry Distributors Association (HIDA), the association that 
represents 100 distributor companies operating 500 distribution 
centers across the country, providing services to virtually 
every provider in the country. Small business is a significant 
part of our industry as 73 percent of HIDA members are small 
businesses.
    COVID-19 created several challenges and also opportunities 
for Lynn Medical, both as a small business and as a distributor 
in the healthcare market. The main challenge we had to deal 
with was the significant product shortage and disruptions to 
the healthcare supply chain.
    Representing quality products is a pillar of our 
organization. As demand was in many cases three times the 
capacity from our traditional manufacturer partners, we found 
ourselves having to vet new sources, something we were not used 
to doing as we had a very solid stream of manufacturer 
partners.
    We are also used to operating in a very black and white 
world. Products were either FDA approved and we distributed 
them, or they were not FDA approved and we did not distribute 
them. We now had to include understanding the FDA's guidance on 
products approved under Emergency Use Authorization and timely 
awareness of the shifting guidance from the FDA.
    As a small business, we do not have a legal department or a 
regulatory department or a very large purchasing department 
whose role it is to navigate through these complex issues. We 
found this a critical task we had to take on but very important 
that we navigate and very difficult to navigate through.
    I have two examples of how shifting EAU guidance affected 
Lynn Medical. The first is KN95 masks. KN95 masks were allowed 
under EAU due to the shortage of N95 masks in the United 
States. Guidance on what factories were approved to provide the 
KN95 masks and the labeling on the packages, the guidance from 
the FDA has shifted throughout this pandemic. We had product 
that had left China. When it left China it was on the approved 
list and it was labeled properly. Hours later when it reached 
the United States, the guidance had shifted. Our product was 
still allowable and approved, but the labeling on the box was 
not, so the product had to be flown back to China, the boxes 
needed to be relabeled, and then flown back to the United 
States. The product was already sold. We had already prepaid 
for the product. Our customers were faced with a 6-week delay 
in receiving product that was very important to them.
    Another example that highlights the challenge is the COVID-
19 antibody test. We had shipped product that was allowable as 
the manufacturer had filed for an EAU and the EAU was pending 
based on a March 16, 2020 FDA guidance document that deemed 
product allowable while EAU approval was pending. However, 
subsequent FDA guidance on May 4th stated it was not allowable 
to ship the product until the EAU was formally granted. It was 
very difficult to obtain clear answers from regulatory agencies 
and very difficult to explain to medical facilities why 
allowable product was now not allowable. There were significant 
hardships in searching for clear documentation to assure we 
were complaint.
    Currently, we are very concerned about payables from our 
healthcare customers. Many facilities closed or reduced 
operations while at the same time had large expenditures to 
procure PPE that was not budgeted for. Their cash flows are not 
at normal levels and they are asking for delayed payment plans. 
And with the shortage in product, we are being asked for 
prepayment of product.
    My company did apply and received approval for the Paycheck 
Protection Program. It was an easy and painless process for us, 
and I want to thank you for including this program in the CARES 
Act. This assistance is critical to Lynn Medical's financial 
health. It allowed us to stay whole and maintain our commitment 
to both our employees and our customers. While the regulatory 
environment was confusing, we utilized the flexibility and 
agility small business has to become adept at vetting new 
suppliers and becoming a resource for our customers. We found 
our biggest success in dealing with other small businesses 
domestically. We partnered with small manufacturing businesses 
whose primary product was deemed non-essential but wanted to 
keep their employees working and also assist in the COVID-19 
response.
    Two examples. We partnered with a family-owned business in 
Michigan that was primarily a cut-and-sew shop for the 
automotive industry. They made seat coverings and arm rests for 
cars. We collaborated with them, so they could transition to 
isolation gowns and fill a critical need in the COVID-19 
response. We also partnered with a drum-making company in New 
Jersey who retooled to make face shields. We found in the small 
business community innovation, a willingness to shift 
priorities and take risks to keep their businesses relevant and 
employees working.
    I would like to thank this Committee for its leadership on 
small business issues and the policies Congress has included in 
previous stimulus packages. As the Committee considers future 
opportunities to support small business----
    Mr. SCHNEIDER. Ms. Fagnani, your time has expired. If I can 
ask you just to wrap up.
    Ms. FAGNANI. Thank you. All right, thank you.
    Mr. SCHNEIDER. I am sorry. Thank you very much.
    We will now turn to Mr. Billstrom. You are recognized for 5 
minutes.

                  STATEMENT OF DAVID BILLSTROM

    Mr. BILLSTROM. Good morning, Chairman Kim, and Ranking 
Member Hern and all of the members. Thank you for having me 
here today. It is an honor to testify alongside these 
thoughtful and passionate witnesses.
    I am speaking to you this morning from North Carolina about 
a journey a bicycle clothing company took to respond to a 
national crisis and what we learned. It is an incredible story 
and one we never could have imagined.
    Our story is also remarkable because we are not an old-
school established apparel company in the South. In fact, we 
just got here. After 7 years in California, we moved to Old 
Fort, North Carolina in October to create a modern, made-to-
order clothing factory. Only one of our employees relocated 
from California, so nearly everyone at Kitsbow is a local.
    And for us, the COVID arrived in February. I say this with 
some irony because knew the situation in China was real in 
February because of our supply chain. You see, we make premium 
clothes, very expensive, designed very carefully. We use the 
latest technical fabric and every detail is considered. We use 
snaps, not buttons, for example, and the best snaps in the 
world are made in Japan. So, when our Asian suppliers of 
fabrics and snaps would not return emails and phone calls in 
February, we knew it was real. We took immediate precautious, 
established social distancing. We cleaned doorknobs. We stopped 
sharing tools and we even canceled events. By mid-March, we 
were considering layoffs or furloughs. But on the same day, our 
founder in California showed us how we could start making PPE. 
We elected to keep everyone and do our part to help first 
responders and medical.
    Now, the full story of we launched into PPE would take more 
time than we have today, but suffice to say that on the first 
day we showed the world that we were making PPE, the orders 
came pouring in. In fact, at the end of that first day we had 
orders for more than 25,000 units. It is the biggest shift in 
customer demand I have seen in 40 years in business and it 
happened in one day. We also knew that our community needed 
what we could do, so we made the pivot.
    We are now on day 104 in making PPE and we have shipped 
nearly 90,000 units in those 100 days from a cold start. We 
still cannot make enough, and it would be months before we 
could sell to the public. All of our output initially was 
reserved for first responders and medical professionals.
    Now, there are several reasons why a small business like 
ours can make this pivot. First of all, we have a modern, 
flexible factory. We can reconfigure the sewing machines and 
equipment in a few hours. We do this all the time.
    Second, we have an awesome product team. These leaders are 
experts in locating suppliers, designing products, and then 
moving them immediately into production.
    Third, we had the support of other businesses in the 
region, supplies and suggestions. We helped each other making 
PPE just as you heard a few moments ago from Lynn Medical.
    Fourth, and most importantly, we knew where our products 
would be going. I had connections in the public safety 
community, and we had a distribution partner.
    It is one thing to make PPE for the good of your community. 
It is another thing to get paid for it so the business can 
survive and so that you can pay your employees.
    Our distribution partner is a private foundation in our 
region called the Dogwood Health Trust. Dogwood is focused on 
health and the wellness of 18 counties in the far western 
portion of North Carolina where Kitsbow is located. The team at 
Dogwood heard about what we were doing and made contact 
literally on that first day.
    They apparently recognized our capabilities and commitment 
and immediately made an order, paying for it in advance to help 
our cashflow. They would, in turn, share our PPE with those who 
needed it.
    Now, I want to take you back in time. This is March 21. 
North Carolina had its first confirmed case just 2 days 
earlier, and California had issued the stay-at-home order just 
the day before. So this was early, and it was strategic.
    Dogwood's CEO, Antony Chiang shared with me that their 
concern was lack of enough PPE for the region should we 
experience a surge. His hope was that Kitsbow would become one 
of several local manufacturers of PPE.
    It was time to act, so we did. And together we created a 
local supply of PPE, and for bonus points, eventually most of 
our supply chain was in the U.S.
    Now, as the other people testifying here today already 
know, a manufacturing operation has two big knobs you can turn 
if you want to crank up the volume--the labor force and the raw 
materials. Word went out that we were looking for help, and 
within 2 days we doubled the number of employees to over 50. We 
had turned up that knob, so we went for the raw material. Our 
product design team hit the phones and the Internet. They 
worked 10 hours a day for weeks to source material.
    It is hard to describe the frustration after you have 
turned your entire workforce to making PPE only to find out 
that all the elastic in the United States has been purchased in 
the last 4 days. We were competing with hundreds of other 
businesses.
    Now, after 2 months of work by our product team and many 
disappointments, we now source almost 100 percent of the raw 
materials for our PPE here in the United States. It was a very 
heavy lift for a small business, just as you heard about Lynn 
Medical. Our team came in every day for months despite orders 
to shelter in place which, frankly, would have been the smart 
thing to do.
    In closing, we have a couple of requests for your 
consideration. First, we cannot overstate how appreciative we 
are of the FDA and their efforts to make it easy for small 
businesses to sell face shields. An emergency use authorization 
on April 13th allows Kitsbow to tell buyers that our shields 
are FDA authorized, that black and white that you just heard 
about. This is an absolute requirement for any buyer in a large 
organization because their internal policies require PPE to be 
FDA approved.
    Second, now we need the same thing for fabric masks. We are 
busy making thousands a week, but very few large organizations 
are allowed to buy them because of the lack of FDA guidance or 
an emergency use authorization.
    Third, we agree with HIDA that a streamlined information 
source for small businesses would be a huge help. Small 
businesses rarely have even one full-time administrative person 
able to address Federal requirements----
    Mr. SCHNEIDER. Mr. Billstrom, your time has expired.
    Mr. BILLSTROM. Thanks for the invitation to speak today.
    Mr. SCHNEIDER. Thank you very much, Mr. Billstrom.
    We will now turn to Ms. Lawson. You are recognized for 5 
minutes.
    Ms. Lawson, I think you may still be on mute.

                   STATEMENT OF SHEILA LAWSON

    Ms. LAWSON. Sorry for that.
    Good morning, Congressman Hern and other congressmen 
members. I am honored to be speaking with you today.
    Over RL Hudson's 40-year history, we have made the 
progression from distributor to custom molded part manufacturer 
by beginning (inaudible) plastic injection molding in 2017. The 
link between that chasm was superior supply chain management 
and engineering design support which is still heavily relied 
upon today by our OEM customers. Our primary products were 
molded rubber and plastic parts, extruded and formed hoses, 
shock and vibration isolation products, and sealing devices.
    Industry served our medium and heavy-duty trucks, 
agriculture, medical, power sports, recreational marine, 
hunting, and others.
    As an essential manufacturing company, it has been 
important for us to think safety first for our team members. 
Our leadership team took quick actions to augment our safety 
culture, including hospital drape cleaner, PPE, remote work and 
meeting options. Although we did have a few momentary concerns, 
we are thrilled to say we are all healthy.
    External supply versus demand has been a key challenge.
    Importing from 14 countries (over 400 containers and 92 
million units annually) and exporting to 20 countries (380 
customers and 78 million units annually) across the globe 
brought a list of challenges from the very onset of the COVID-
19 pandemic.
    As the Chinese New Year was being extended, customer 
forecast indicated inventories would be consumed soon if we did 
not respond with swift and creative action. Through strong 
relationships with our external partners and many conference 
calls, we were able to secure inventory availability details 
along with more challenging tasks and finding space on vessels 
sometimes, talking to new ports in order to get faster boats 
which allowed 2 additional weeks for production. Forty percent 
of production during March and April moved in this mode adding 
50 percent to our transit cost. All the while, customers were 
asking for daily meetings to ensure product availability.
    When COVID-19 reached the balance of the world, (inaudible) 
expedited containers began arriving to RL Hudson. With the U.S. 
implementing stay-at-home orders, and with many customers 
halting production, we needed to find a place to store the 
inbound inventory. We had had 18 containers lining our parking 
lot with an additional 30 moved to offsite storage. Both came 
with challenges and increased costs.
    Predicting future customer consumption required new tools. 
The customers had no way of predicting how they would be 
impacted. Our inventory dollars grew by 30 percent. Today, our 
in-transit inventory has been controlled and reduced by 50 
percent on average.
    Needless to say, this has placed a strain on our 
manufacturing partners. The events resulted in payables being 
greater than receivables for a short time which was a first 
during my 14 years with the company.
    As customers reopened their doors, we were forced to change 
company policies to not allow for ship dates on orders to be 
canceled or pushed out. Our company prides itself on 
flexibility, so this change has been challenging for both our 
team and the customer. We have allowed the policy to continue, 
however, should the customer factory be nonoperational.
    Our key customers provided a mountain of support by 
accepting earlier ship dates to make up for loss consumption in 
April. We are thankful for the true partnerships and support 
they have provided.
    Internal workforce versus demand has proven to have its own 
set of challenges. Late raw material arrival in Q1 forecasting 
need to remain strong. Our manufacturing team (inaudible) 
action to ensure product availability. As demand decreased due 
to the stay-at-home orders and factory closures, we kept our 
teams in production by building stock for products that are 
higher volume but with zero firm orders.
    With machine utilization in our injection molding dipping 
to 30 percent in April and finished goods filling the 
warehouse, we did move to a 4-day work week during May for all 
team members. We were thankful that the PPP loan allowed us to 
avoid layoffs and furloughing our team members. In addition, 
although our work hours were reduced in May, we were able to 
pay employees for that full 40 hours of work.
    Due to our flexible supply chain, RL Hudson has been able 
to gain 10 new customers during the pandemic. While we have 
responded very well, we would like to point out that we had 
begun a process of diversification long before this event. 
Using in-house manufacturing as an example, we have been taking 
more production in-house.
    We have a new strategy to diversify our global production 
even more, and while not yet fully implemented, this crisis 
revealed the wisdom of the strategy. We still appreciate our 
international partners and realize we need them for certain 
components which only frees up our expertise for items where we 
can excel in manufacturing domestically.
    Just as our society is trying to learn how to better 
celebrate diversity and the blessings it can bring, we believe 
diversity to be a principle that works well for business, even 
supply chains. Making America strong as a manufacturing leader 
will require diverse partnership with factories worldwide. 
Thank you very much.
    Mr. SCHNEIDER. Thank you, Ms. Lawson.
    And again, I want to thank all of our witnesses for joining 
us and sharing their experiences.
    I will begin now with the questioning and recognizes myself 
for 5 minutes.
    So I will start with something Ms. Lawson said in her 
comments. Customers are asking for daily meetings because there 
is so much uncertainty. This pandemic and the uncertainty in 
our supply chain has created extra costs, more uncertainty, 
higher risk, and certainly more frustration. As we heard from 
Mr. Billstrom, the level of frustration trying to figure this 
out in a very difficult world. And Mr. Billstrom, I am going to 
quote from your submitted testimony which I thought was 
fascinating, the full story, I wish we had time to hear it all, 
but on page 25 you say, ``Kitsbow was competing with dozens, 
hundreds, of other manufacturers for the same key material--
plastic, elastic, HEPA filter media, et cetera, all of which 
was obviously critical and essential supplies in a worldwide 
disaster. This could have been recognized and the appropriate 
material secured by a central authority.''
    I want to explore that idea. I have been searching for a 
centralized supply chain czar because this is so critical. We 
see it for our small businesses in their need to get everything 
from raw materials and supplies to manufacture their goods, one 
leading to another as small businesses rely on each other as we 
have heard from the witnesses, but also the fact that if we 
compete with each other prices are going up and it is making it 
very difficult for small companies. In particular, we have seen 
this with the PPE, the personal protective equipment--gloves, 
masks, gowns, et cetera.
    So I would like to start with Dr. Prasad. When you are 
looking at essential goods like PPE, medical devices, the food 
supply, et cetera, where do you see the Federal government has 
fallen short in the early months of this pandemic, in the 
spring, and what can we be doing to make sure that we do not 
fall short in the months ahead of us?
    Dr. Prasad, you are still muted.
    Mr. PRASAD. Sorry, Mr. Chairman.
    Your question is a very pertinent one, and as I think my 
fellow panelists have indicated, regulatory certainty is 
certainly one of the most critical aspects that small 
businesses seem to be contending with. Certainly, there are 
facts changing on the ground by (inaudible).
    Mr. SCHNEIDER. I think we lost the signal again, Dr. 
Prasad. You may be muted.
    Mr. PRASAD. Sorry. I think I was emphasizing the issue of 
regulatory certainty to make the point that the experiences 
that my fellow panelists suggest that while the FDA and other 
regulatory agencies have been flexible (inaudible) very 
welcome, the lack of certainty (inaudible) ultimately 
challenging for them. And that I think needs to be (inaudible) 
a critical element that the government can help with, in 
addition to providing more (inaudible) such programs.
    Mr. SCHNEIDER. Great. Thank you, Dr. Prasad.
    And let me turn to Mr. Billstrom because I quoted you. How 
would you see a centralized authority for supply chain possibly 
making a difference in the work you were trying to do as you 
touched on getting the raw materials and ultimately getting 
finished product to your customers?
    Mr. BILLSTROM. You know, I hate to say this, but I do not 
know. That is not my area of expertise. So I can explain the 
need, which is as scarce materials that are essential and 
cannot be replaced any other way are identified, we need some 
way of organizing it but I do not have a specific proposal on 
it.
    Mr. SCHNEIDER. And I appreciate you not wading in where you 
did not feel confident.
    One of the things I think, and just from my experience in 
business, is that to the extent we can have a centralized 
authority who understands where there are opportunities, as you 
touched on in your company, Kitsbow did a pivot and then you 
mentioned in your testimony, a pivot within a pivot within a 
very short period of time. Helping coordinate that in a 
centralized authority, understanding what is happening, the 
needs across the Nation, the resources across the Nation and 
trying to match those I think is a good opportunity. But I have 
used my time.
    I will now turn to my colleague, Mr. Hern, to ask his 
questions.
    Mr. HERN. Thank you, Mr. Schneider. I really appreciate it. 
Again, thanks for all the testimony that we just heard 
regarding supply chain.
    Ms. Lawson, I have had an opportunity to tour your 
manufacturing. Can you tell us more about how doing in-house 
productions is fair compared to working with outside 
manufacturing partners outsourcing?
    Ms. LAWSON. Sure. As we insourced, we had our own set of 
challenges. As we began pulling in from outside, we found that, 
you know, they had secondary operations and we needed to learn 
to (inaudible) ejected part out of the machine (inaudible) 
secondary operations. And we were able to control that, the 
quality of that much better because as it came out there were 
new additional trimming operations and such which can create 
gouges (inaudible) and those type of things. So, controlling 
that has been great.
    However, we do believe that there are sectors where we will 
need (inaudible) useful location for the means of production 
because there are some items that are better suited to be 
produced elsewhere and it frees our expertise for items that we 
can excel in manufacturing domestically. So we see (inaudible). 
We do and our customers do appreciate the additional control 
(inaudible) as we bring product in-house.
    Mr. HERN. I have got a series of questions. One question I 
am going to ask for all of you, and I will start with you. 
There has been a lot talked about across multiple industries--
pharmaceutical (inaudible) PPE and others that relate to 
bringing things in from Asia, and more specifically, China and 
Taiwan and places like that. What do you see (inaudible) Asian 
community and importing and exporting to them as well, what do 
you see changing right now among the perception of the American 
people, even if we talk buy American, how practical is that to 
bring what some would like 100 percent of all sourcing back to 
the United States? Or certainly to North America?
    Ms. LAWSON. RL Hudson has more than 5,000 parts numbers 
which we procure abroad in the Asian factories. And to bring 
all those back, the dollars for tooling, even if you are moving 
the tools, in some cases you can build new ones for the same 
cost as the other ones. There is testing. (inaudible) they have 
product that has good quality which requires testing. So the 
cost associated with that would really be (inaudible) for us. 
New product and where it makes sense to move them from critical 
parts, we support that and believe that (inaudible) parts will 
be great. But there is a (inaudible) to be left where they are, 
and we do see concern from our manufacturing partners that we 
worked with. And if they want as businessmen their selves and 
women, they want to provide good quality service to us, so it 
is a bit of a strain on a relationship and we want to make sure 
that we are able to provide product as promised to customers 
throughout the U.S.
    Mr. HERN. Thank you.
    Professor Prasad, just from a policy standpoint, when you 
are looking at what you are seeing the movement across the 
United States because of the pandemic, this bringing back, this 
acceleration and bringing back manufacturing from specifically 
China back to North America, yesterday was the first day of the 
USMCA bill, how do you see that opportunity that confluence of 
opportunity from China to now USMCA with free trade, lower 
labor costs in Mexico, how that would soften the blow of price 
increases and might affect the willingness to buy?
    Mr. PRASAD. Certainly, the onshoring and also the 
regionalization of supply chains as opposed to using global 
supply chains is going to have some positive benefits in the 
short term in terms of employment in the U.S. and on the North 
American continent. But I think with small businesses there are 
some real constraints enforced by that because the very limited 
supply chains here in a certain place, many of which are going 
through Asia as was the case for Hudson Manufacturing, has left 
enormous gains in efficiency, and frankly, it has allowed them 
to create certain products. Sometimes it might not be possible 
if you had much or regional supply chains. So I think it is 
going to be a tradeoff for every small business. There are huge 
benefits to be trained from a much broader supply chains, 
especially if you think about the sort of diversification that 
the lady from Hudson Manufacturing talked about. And that has 
to be offset against the fact that there are going to be job 
gains certainly if you have more onshoring. But from a longer-
term
    Perspective, I think the broader diversification of the 
supply chain is certainly going to be better for small 
businesses.
    Mr. HERN. Thank you.
    Mr. Chairman, I yield back.
    Mr. SCHNEIDER. Thank you, Mr. Hern. And I would now like to 
recognize the gentleman from Ohio, the Ranking Member of the 
Small Business Committee, Steve Chabot.
    Mr. CHABOT. Thank you very much, Mr. Chairman. I understand 
that my connection may have some challenges here, so hopefully 
you can hear me okay. If not, let me know.
    I will start with Ms. Lawson if I can.
    I want to thank all the witnesses for being with us today.
    You alluded to this in your testimony, but could you 
describe in a little greater detail some of the more 
significant tradeoffs that your company had to navigate in 
order to keep your supply chain intact, and do you think these 
tradeoffs could result in any long-term damages or challenges 
or disadvantages for your company?
    Ms. LAWSON. Sure. Some of the biggest challenges we are 
going to face as we go forward is that we have really strained 
your manufacturing partners. One of the keys to our success is 
making sure that we are an important customer to our partners, 
so we want to make sure that we are in that top one, two, three 
on their customer list. That we are a big percentage of their 
business. But we have some manufacturing partners who are only 
manufacturing 2 or maybe 3 days a week at this time. So as 
business begins to increase, we are going to face challenges 
for those products that must come from them because everything 
that we purchase is a one-one relationship between the 
customer. There is nothing that we can sell to another customer 
nor can it be produced by anyone else without additional 
tooling being built. So we are going to need to support these 
factories as they begin bringing up their production, maybe in 
some cases rehiring on their own and building back up their 
timelines to be able to manufacture. So it is going to be a big 
challenge. I also said in my statement we are looking to 
diversify, and we have already began through that process. We 
went through 101 different manufacturing companies. We have 
narrowed it down to almost 30. And due to the pandemic, we are 
a little bit strained opening up new factories as we cannot put 
boots on the ground to make sure that we do those full-scope 
audits to ensure the qualities are in place that our products 
require.
    Mr. CHABOT. Okay. Thank you very much.
    I will stick with Ms. Lawson at this point. What would you 
say was your greatest asset in weathering the disruptions in 
your (inaudible) COVID-19, and what would you say was your 
biggest challenge?
    Ms. LAWSON. Okay. I would say that we have built very 
strong relationships, and we communicate very well with our 
supply chain all the way from the supply chain being our 
factories and also being our customers. So communication has 
been key. And being very open with what we are being faced 
with. So we have had conference call after conference call. You 
know, 10, 11 o'clock at night followed by 7 a.m. conference 
calls with other countries in the morning. It is very important 
that we are communicating and that everyone knows what is the 
situation. And that includes our freight-forwarding teams.
    On the other side, the biggest challenge has really for us 
been where will we place this inventory and our payables have 
also, I forgot which one of my colleagues talked about 
payables, but it is a strain because we have seen some 
customers close their doors throughout this process, and that 
is concerning with our payables. And for the first time we had 
our receivables less than our payables. And it was a strain and 
a concern. But I am very thankful that our team members who 
have had long-term stability with our factories have been able 
to move from one side of our business to the other, so we have 
been fluid in being able to keep our headcount where it needs 
to be and manage our expenses accordingly.
    Mr. CHABOT. Thank you. Thank you very much.
    Mr. Chairman, on my screen the time clock is frozen, so I 
have no idea how much time I have left. Could somebody educate 
me on that?
    Mr. SCHNEIDER. You have 30 seconds.
    Mr. CHABOT. Okay. All right. Well, at this point, probably 
not having sufficient time to really get into, you know, 
another question, have the answer, to be fair to my colleagues 
I will yield back in a second.
    But I just once again want to thank all the witnesses for 
their testimony today. I think it has been very helpful. Supply 
chain is absolutely critical, and during these times, you know, 
a clear challenge. And it was helpful to hear how you all are 
dealing with it and recommendations that we can work as we are 
moving forward for potential legislation or other things that 
we are involved in. So thank you very much. I appreciate it, 
and I yield back.
    Mr. SCHNEIDER. Thank you, Mr. Chabot. And we will have a 
chance to go to a second round of questions if you want to stay 
on. But the gentleman's time has expired and yields back.
    I would now like to recognize the gentleman from Minnesota, 
Mr. Stauber. Mr. Stauber is the Ranking Member of the 
Subcommittee on Contracting and Infrastructure. He is now 
recognized for 5 minutes.
    Mr. STAUBER. Thank you very much, Mr. Chair. And thanks for 
the witnesses for being here.
    You know, since the beginning of the COVID-19 crisis, we 
have seen over 70 countries impose some sort of export 
restrictions on an array of different products, including 
medical supplies, pharmaceuticals, and food products.
    Can any of the witnesses tell me what would happen if 
tomorrow the communist country of China chose to implement an 
export ban on active pharmaceutical ingredients, medicines, and 
critical minerals that power our renewable energy? Anybody?
    Well, I can tell you what would happen. We would be in deep 
trouble. You know, currently, the United States relies on 
communist China and other foreign actors who do not have our 
best interests in mind for too many of our goods and services. 
China, for example, is one of the top producers of API active 
pharmaceutical ingredients, which are the basic components of 
antibiotics and other prescription drugs. And because of their 
poor environmental and labor standards, China manufacturers and 
exports many of the minerals critical to our national security.
    The Democratic Republic of the Congo exports about 60 
percent--60 percent of the world's cobalt supplies. Cobalt is 
used in batteries, computers, and yes, renewable energies.
    According to Amnesty International, this cobalt is mined by 
children in appalling conditions. These kids do not go to 
school. They do not get any protective equipment. They do not 
have a minimum wage or a limit on the hours worked. These kids 
mine cobalt for our renewable energy and our cell phones and 
our technology.
    Most of the United States, estimated 1 million tons of 
cobalt reserve are in my district and could be safely and 
responsibly mined with strong environmental standards and 
union-protected jobs.
    You know, during this pandemic it has become apparent more 
than ever, we must improve our domestic supply chain. We can no 
longer rely on our adversaries, like the Congo, Russia, and 
China, for resources that are critical to our economy, our 
national security, and our health.
    For these reasons, I recently introduced two pieces of 
legislation to bolster self-reliance on our own supply chain. 
First, I introduced Securing America's Critical Mineral Supply 
Chain Act, a bill that would incentivize manufacturers to 
purchase domestic minerals, like those mined in Northeastern 
Minnesota. And second, I introduced the Securing America's 
Pharmaceutical Supply Chain Act, a bill that would require our 
Federal agencies to purchase drugs made in the United States. 
And by incentivizing investments into America's supply chain, I 
am confident we can become a more self-reliant and resilient 
Nation. We have the opportunity. We now know the deficiencies 
in our Supply Chain Act. And I will state this to you all: The 
state of Minnesota is ready to help our Nation with its supply 
chain issues. We can supply the critical minerals for our 
national defense, our national security, to build our 
pharmaceutical instruments, to build ventilators. And we must 
take this opportunity and not falter. The supply chain is 
broken. We have relied, and we cannot rely any longer on 
nations that do not have our best interest at hand. The state 
of Minnesota played a big role in World War II with mining the 
iron ore that makes our steel, built our tanks, our ships, our 
airplanes, our weapons. And Northern Minnesota stands ready to 
secure our supply chain, both pharmaceuticals and our critical 
minerals. And I yield back.
    Mr. SCHNEIDER. Thank you so much.
    With that, that wraps up our first round of questioning. I 
would like to go to a second round if that is okay with the 
witnesses. And I will start by recognizing myself for 5 
minutes.
    And I want to turn to Ms. Fagnani. And I hope I am 
pronouncing your name right. I have a feeling I am close but 
not quite on. But you described in your written testimony some 
of the challenges you face but also shared some ideas. One of 
them was streamlined information source for small businesses.
    Having had my own small business in a prior career before 
coming to Congress, I know how important information is and how 
hard it is for small companies to get that information, 
especially because oftentimes there is not a dedicated 
resource, whether it is for compliance or for human resources, 
et cetera. People wear many, many different hats. And I also 
know that through the first few months of this pandemic, from 
the SBA, from Treasury, there has been fits and starts, changes 
in direction, whether it is applications for the IDA program or 
guidance on the forgiveness process for the PPP.
    So my question to you is, how important is that clear and 
simple communication? And what would be the impact of 
streamlining that communication and reducing the complexity for 
small businesses?
    Ms. FAGNANI. Well, thank you for the question.
    It is critical. We are selling medical supplies, medical 
equipment that are either going to protect our frontline 
workers or be used on patients. And it is critical that we 
understand what the FDA's guidance is.
    I mentioned in our old world it was very black and white. 
Things were FDA approved. They went through long laborious 
processes. But in an effort to get more product available, the 
FDA did enact emergency authorization use for many products. So 
our ability to understand guidance, guidance changing so that 
we are buying correctly is critical, that we are not 
distributing product that we should not be distributing.
    And then the other complication, and it was just explaining 
to our medical customers why guidance had changed and why 
perhaps the product that they had bought can no longer be 
bought or, you know, just why things were changing. There was a 
lot of information about bad product being distributed, and so 
a lot of skepticism as there should have been. And just it was 
critical to us to make sure that we were supplying the right 
product and we were able to communicate accurately with our 
customers. So the FDA website is a tremendous resource, but it 
is difficult to navigate through. And it became very 
cumbersome. So streamlining that for small business, some type 
of alert, letting us know that there has been a change in 
guidance so that we know to look would be helpful. But that 
would really be critical for us at this point.
    Mr. SCHNEIDER. Thank you. Thank you for sharing your 
thoughts on that.
    I want to shift gears and turn to Dr. Prasad for a moment. 
In your testimony, you talked about things that the government 
could do, you know, from developing consistently enforced 
domestic regulatory policies to providing greater certainty 
with our trade relationships around the world, including 
deescalating trade wars, your words, but you also talked about 
the advantages of multilateral versus bilateral approaches to 
our trading partners. I would ask you to expand on that a 
little bit.
    Mr. PRASAD. So one issue is, first, access to export 
markets in other countries. And second, access to reliable 
sources of intermediate goods, imports, and so on.
    As the previous congressman made a statement about China 
pointed out, one needs consistent standards and the ability to 
rely on trading partners around the world. And bilateral 
trading relationships do create complications in particular for 
small businesses because it creates an array of different types 
of regulations that small businesses (inaudible) as they look 
to diversify.
    For instance, Ms. Lawson spoke about trying to diversify 
her suppliers and sources across a number of countries, and 
that becomes difficult if you are dealing with individual 
trading partners and their old requirements and provisions of 
an individual trade beam (phonetic). So if you think about 
something like the Trans-Pacific Partnership that the U.S. 
stepped back from, the other 11 countries went ahead, and what 
they did was institute a common set of regulations, a common 
set of neighbor, environmental, and other standards that now 
all those countries can use and they become benchmarks for 
further trading relationships. So these sorts of multi-lateral 
approaches I think would be good to be with the trading 
partners of the U.S. and could also be used to bring onboard 
countries like China because then they will be forced as well 
to take onboard those standards that the U.S. has negotiated 
with many of its trading partners. And frankly, many countries 
around the world have concerns about China's economic and 
trading practices. And rather than going it alone, I think if 
the U.S. joined forces with other trading partners it would 
certainly get a lot more of China than we have seen so far.
    Mr. SCHNEIDER. Great. Thank you. And my time has expired.
    I would like to turn now to the Ranking Member, Mr. Hern, 
for 5 minutes if he would like.
    Mr. HERN. Thank you.
    Professor, let us just continue on with that thought since 
we are on this train of thought. You talk about a standardized 
approach. I will just say for the last 20 years, certainly 
since 2001 and China's introduction into the World Trade 
Organization, some would argue there have been books written on 
it. Maybe you have written books on it. I am not sure. I would 
love to read them if you have. About China's just methodical 
move through tackling and taking over columns of industry to be 
able to take over that supply chain with low cost, very broad 
acceptance across the world.
    I want to go back to the onshore piece of this as well. You 
mentioned that I guess on the margin that it would be very 
difficult for businesses to realize the same cost of goods 
cost, if you will, as they would with China, and probably the 
breadth of the source as well. But do you not see that it is a 
possibility as we are all looking at USMCA, most people do not 
realize that Mexico is our largest trading partner second to 
Canada, and third China? And again, with the push for Buy USA, 
Buy North America, whatever, that we are going to see some of 
these more easily stood up industries come to Mexico so that 
more of the Western Hemisphere can join us without the 
geopolitical constraints (inaudible) of what China is trying to 
do?
    Mr. PRASAD. Congressman Hern, I think you have a legitimate 
point, that one could think about re-onshoring as part of a 
diversification process. Certainly, one does not want to leave 
American manufacturers, either small or large vulnerable to 
geopolitical tensions. And we have been vulnerable to single 
sources and suppliers that could be disruptive even by 
bilateral tensions or by conflicts that those countries might 
be engaged in that create disruptions within their own 
economies. So certainly it could be an effective part of 
onshoring.
    But I think one has to think about the other aspect as 
well. While we try to move jobs back to the U.S., one also 
needs to recognize that small businesses are very important 
exporters as well. So I think a far better solution might be to 
think about how in addition to using onshoring as a 
diversification strategy one tries to level the playing field 
in terms of creating relationships with all of our trading 
partners so that small businesses have diversified sources of 
production, but also diversify export markets which I think are 
equally important.
    Mr. HERN. And I guess to piggyback off of that, too, since 
we are on the policy conversation, that most of this is driven 
by (inaudible) markets' ability to grow your small business on 
the export side, but on the import side it is to drive down 
cost. We are a free enterprise society that we are looking at 
seeking for low cost providers, as well as to Mr. Billstrom's 
conversation earlier, just being able to find the product, or 
sourcing that from the Asian continent so that what China has 
done to deflect a lot of geopolitical issues is to disburse 
manufacturing across some of their allies in the Asian 
continent.
    Mr. Chairman, I think we can spend, probably I encourage 
Mr. Prasad to write a book. If you have one, I would love to 
read it about this whole concept because I think all of us 
here, we heard Ms. Fagnani talk about what happened with the 
discrepancy between the appropriate labeling of boxes of the 
KN95 masks and other PPE that had to go back in delays. And I 
think, you know, when we have these geopolitical problems, as 
we know, we are talking about supply chain here but there are 
other columns of air that stand up here from military, 
intellectual property issues, a vast verse engineering of our 
products, all these things are paramount for us to all 
understand and get our arms around.
    And I just want to again thank the witnesses for being 
experts in your areas and sharing with us your thoughts. This 
will go a long way to formulating our policies as we go 
forward. It is great to hear people that deal directly with the 
supply chains and also use them as an export market in many 
cases. I think as I said yesterday in a Small Business 
Committee hearing that we all need to learn from this pandemic, 
put together a pandemic playbook, and as just one column again 
of thought was with the IDA loans is to capture all these 
different communication breakdowns, these issues with labeling, 
all these things we could put into a nice book and be able to 
step away into legislation or to have. Hopefully, all of us 
will never have to experience another pandemic, but our country 
will, and that we have the playbook on the shelf to do things 
differently and better so that we do not have disruptions like 
we did this time. Thank each of you for being on this call.
    Mr. SCHNEIDER. Thank you, Mr. Hern. And I could not agree 
more. May we never experience anything like this again.
    Before I wrap up I would like to ask unanimous consent to 
submit to the record a letter from 14 associations, including 
the AICPA, the National Retail Federation, and others, calling 
for the Fed to create a short-term lending facility to help 
companies bridge supply chain disruptions.
    Without hearing objection, so ordered.
    Thank you. And let me now take a moment to close.
    And in closing, I want to thank our witnesses. Thank you 
for sharing your experiences, your perspectives, your insights. 
I know there were more members who would have liked to have 
joined us today. Unfortunately for many, it is a travel day. We 
have been in session this week and many are traveling back to 
their home districts. But I can assure you they will follow the 
testimony. I appreciate everything you said, for all that you 
have done.
    Before the COVID-19 pandemic, global supply chains were 
built to be linear and efficient, maximizing profits but 
leaving as vulnerable to disruptions. The pandemic has made 
clear the need to build a more resilient supply chain because 
we know future disruptions will occur.
    We heard today from experts and entrepreneurs that took the 
initiative early on to make their supply chains more resilient 
and establish some best practices we can employ at the Federal 
level as we move forward. I hope this is a wakeup call to our 
business community and our Federal policymakers to support 
policy that allows small businesses to survive and bounce back 
after a large-scale disruption like the COVID-19 pandemic. 
Doing so will allow our Nation's small businesses to 
successfully confront unforeseen circumstances and it will be 
critical to building a strong domestic economy.
    I ask unanimous consent that members have 5 legislative 
days to submit statements and supporting materials for the 
record.
    Without objection, so ordered.
    And if there is no further business before this Committee, 
I ask everyone to stay safe, stay healthy. I ask our small 
businesses to stay nimble, and this meeting is adjourned.
    [Whereupon, at 10:12 a.m., the Subcommittee was adjourned.]
    
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