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Amid Pandemic, U.S. Tightens Export Controls on PPE and Medical Supplies

In response to supply concerns due to Coronavirus Disease 2019 (COVID-19), the Trump administration has tightened export controls on U.S. medical supplies and personal protective equipment (PPE). According to a statement from the White House, the United States will now detain certain export shipments of PPE at the border and evaluate on a case-by-case basis whether they should be returned for domestic use. Certain shipments of PPE may be exempted from the new measures, including exports to Canada and Mexico. The new restrictions became effective April 10, 2020.

Restrictions on PPE Exports

On April 3, the president issued a statement expressing concern about price gouging and diversion of PPE from domestic suppliers for use abroad, as well as a “Memorandum on Allocating Certain Scarce or Threatened Health and Medical Resources to Domestic Use.” The Memorandum authorized the Secretary of the Department of Homeland Security (DHS), through the Administrator of the Federal Emergency Management Agency (FEMA) to “allocate for domestic use” certain items previously designated as “scarce” by the Department of Health and Human Services (HHS) on March 25. The Memorandum applies specifically to five of the 15 categories of medical supplies designated by HHS:

1)

 

N-95 Filtering Facepiece Respirators;

2)

 

Other Filtering Facepiece Respirators;

3)

 

Elastomeric, air-purifying respirators and appropriate particulate filters/cartridges;

4)

 

PPE surgical masks; and

5)

 

PPE gloves or surgical gloves.

These five categories of PPE were subsequently named in the April 7 Temporary Final Regulation (TFR) issued by DHS/FEMA, which allows U.S. Customs and Border Protection (CBP) to temporarily detain shipments pending an evaluation and determination by FEMA. As of April 7, 2020, all qualifying exports of PPE are being detained at U.S. ports of exit.

While detained, FEMA will evaluate the shipments and take one of the following proscribed actions: 1) order the items returned for domestic use; 2) issue a Defense Production Act (DPA)-rated order and purchase the items for use by the U.S. government; or 3) allow some or all of the export. 

The TFR gives FEMA discretion in making its determination. In addition to allowing FEMA to consult other agencies, the rule calls for FEMA to consider the “totality of the circumstances” when making a determination using the six factors listed below:

1)

 

The need to ensure that scarce or threatened items are appropriately allocated for domestic use;

2)

 

Minimization of disruption to the supply chain, both domestically and abroad;

3)

 

The circumstances surrounding the distribution of the materials and potential hoarding or price-gouging concerns;

4)

 

The quantity and quality of the materials;

5)

 

Humanitarian considerations; and

6)

 

International relations and diplomatic considerations.

Five categories of PPE are currently subject to the FEMA order. However, other items designated by HHS, including ventilators, may become subject to similar export restrictions.

Exceptions to the Export Restrictions

The TFR contains one exception for “U.S. manufacturers with continuous export agreements with customers in other countries since at least January 1, 2020, so long as at least 80% of such manufacturer’s domestic production of covered materials, on a per item basis, was distributed in the United States in the preceding 12 months.”

In addition, on April 9, 2020, CBP issued a guidance memorandum to its Field Operations Directors indicating that CBP efforts will focus on commercial shipments of PPE valued at $2,500 or more and containing more than 10,000 units of the specified commodities. Further, the CBP guidance memo establishes exceptions for certain categories of shipments, listed below, that are not incorporated into the TFR. As such, it remains to be seen whether such exceptions will be applied consistently or further revised:

  • Exports to Canada or Mexico

  • Exports by or to U.S. Government agencies

  • Exports by U.S. charities

  • Exports by critical infrastructure industries for worker protection

  • Exports by the 3M Company

  • Express or mail parcels under the “commercial” thresholds

  • In-transit shipments

Practical Considerations

The practical impact of this rule on detained shipments remains to be seen. For example, it is not yet known how long the FEMA/CBP review process will take, and whether the exceptions outlined above will be applied uniformly. Because exporters of the enumerated categories of PPE may experience delays in exports, they may consider alerting end-users and customers accordingly. In addition, exporters of other types of PPE and medical devices may face heightened scrutiny and delays, as FEMA examiners and customs agents may inspect exports of COVID-19-related items.

©2020 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume X, Number 106

TRENDING LEGAL ANALYSIS


About this Author

Cyril Brennan, Greenberg Traurig Law Firm, Washington DC, International Trade Law Attorney
Shareholder

Cyril (Cy) Brennan focuses his practice on international trade regulation and compliance, with an emphasis on U.S. export controls and economic sanctions. Cy handles matters regarding the International Traffic in Arms Regulations (ITAR), the Export Administration Regulations (EAR), U.S. sanctions programs administered by the Treasury Department’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s anti-boycott regulations. In addition, he represents clients before the Committee on Foreign Investment in the United States (CFIUS), and advises clients...

202-533-2342
Renee Latour, Greenberg Traurig Law Firm, Washington DC, Corporate Law Attorney
Shareholder

Renee A. Latour focuses her practice on international trade regulation with an emphasis on compliance with U.S. export controls and economic sanctions. Renee assists clients on matters related to international trade that arise under the jurisdiction of various U.S. governmental agencies, including the Departments of Commerce, State, Treasury, and Defense. She advises on U.S. export control laws, anti-boycott laws and special sanctions maintained by the U.S. Government against various countries including Iran, Cuba and Sudan.

Renee also assists clients with matters relating to issues arising under the anti-bribery and record-keeping provisions of the Foreign Corrupt Practices Act (FCPA), the OECD Convention and the United Nations (UN) Convention Against Corruption. Additionally, she assists clients in designing and implementing internal compliance policies and procedures and conducting cross-border export and sanctions regulatory due diligence, particularly in the context of mergers and acquisitions. Renee also counsels on the Exon-Florio provisions of the Committee on Foreign Investment in the United States (CFIUS), and assists clients in mitigating foreign ownership, control or influence (FOCI) under the applicable national industrial security regulations.

202-533-2358
Sonali Dohale, Greenberg Traurig Law Firm, Washington DC, Environmental and International Trade Law Attorney
Associate

Sonali Dohale focuses her practice on compliance counseling, environmental due diligence and environmental litigation under state and federal statutes. Sonali’s experience at government regulatory agencies and her background in civil and environmental engineering help give her insight into both the legal and technical challenges faced by her clients.

In addition, Sonali assists clients engaged in international trade with a variety of federal regulatory issues, including matters related to the International Traffic in Arms Regulations (ITAR), the...

202-533-2381