Further to recent executive orders and a Presidential Memorandum, the Federal Emergency Management Agency (FEMA) has issued a temporary rule restricting exports from the United States of five types of personal protective equipment (PPE). The rule is effective now and will remain in effect until 120 days after publication in the Federal Register. The rule requires U.S. Customs and Border Protection (CBP) to detain shipments of the PPE while FEMA determines whether to permit the export, return the PPE for domestic use, or issue a rated order to purchase the PPE for use in the United States. This development in the United States follows similar developments in Europe and other places around the world.
Covered PPE
Tracking the scope of the presidential memorandum issued on April 3, 2020, the export restriction applies to the following:
- N95 filtering facepiece respirators, including devices that are disposable half-face-piece non-powered air-purifying particulate respirators intended for use to cover the nose and mouth of the wearer to help reduce wearer exposure to pathogenic biological airborne particulates.
- Other filtering facepiece respirators (e.g., those designated as N99, N100, R95, R99, and R100, or P95, P99, and P100), including single-use, disposable half-mask respiratory protective devices that cover the user’s airways (nose and mouth) and offer protection from particulate materials at an N95 filtration efficiency level per 42 CFR 84.181.
- Elastomeric, air-purifying respirators and appropriate particulate filters and cartridges.
- PPE surgical masks, including masks that cover the user’s nose and mouth and provide a physical barrier to fluids and particulate materials.
- PPE gloves or surgical gloves, including those defined at 21 CFR 880.6250 (exam gloves) and 878.4460 (surgical gloves), and other such gloves intended for the same purposes.
These five categories are a subset of the 15 categories designated by the Secretary of Health and Human Services (HHS) as scarce materials or materials that are at risk of hoarding in response to the pandemic. The broader HHS designation includes, for example, ventilators and certain related devices, certain types of disinfecting devices, medical gowns or apparel, and drug product with active ingredient chloroquine phosphate or hydroxychloroquine HCl. It is unclear whether the export restrictions will be expanded to include the broader HHS-designated categories at a later date.
CBP to Alert FEMA and Detain Shipments
Under this temporary rule, CBP will notify FEMA of an intended export of covered PPE and must temporarily detain the shipments pending FEMA’s determination of whether to return the shipment for domestic use or issue a rated order for part of all of the shipment. FEMA is not under a specific deadline to make this determination, but rather will do so within a “reasonable time of being notified” by CBP of an intended shipment.
Any goods that have been detained by CBP and are subsequently made subject to a rated order will be consigned to FEMA pending further distribution or agency direction.
FEMA’s temporary rule does not establish a process for U.S. manufacturers and exporters to obtain prior approval in advance of shipments, although the notice indicates that FEMA will issue comprehensive regulations in the “near future.”
Factors FEMA Will Consider in Reviewing Shipments
In making its determination of whether to permit the export, FEMA will consider the following factors: (1) the need to ensure that scarce or threatened items are appropriately allocated for domestic use; (2) the 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.
Exemption
This new rule includes one exemption for exports of covered PPE, in cases where (1) shipments are made by or on behalf of U.S. manufacturers with “continuous export agreements” with customers in other countries since at least January 1, 2020; and (2) at least 80 percent of the manufacturer’s domestic production of the covered PPE, on a per item basis, was distributed in the United States in the preceding 12 months. FEMA has discretion to waive this exemption if doing so is necessary or appropriate to promote national defense.
Enforcement
To enforce this rule, FEMA may conduct investigations, issue requests for information, and inspect records or premises. FEMA may also seek an injunction or other order whenever, in FEMA’s judgment, a person has engaged or is about to engage in any acts or practices which constitute or will constitute a violation of the temporary rule. Failure to comply fully with this rule is a crime punishable by a fine of not more than $10,000 or imprisonment for not more than one year, or both.
In addition, FEMA cites to the criminal statutory offense for smuggling under 18 U.S.C. 554, which makes it a crime for anyone to fraudulently or knowingly export or send from the United States, or attempt to export or send from the United States, any merchandise, article, or object contrary to any U.S. law or regulation, or receive, conceal, buy, sell, or in any manner facilitate the transportation, concealment, or sale of such merchandise, article, or object, prior to exportation, knowing the same to be intended for exportation contrary to any U.S. law or regulation. The crime carries a potential sentence of up to 10 years imprisonment, a fine, or both, if convicted.
FEMA references the smuggling offense, which criminalizes “knowingly” exporting merchandise contrary to U.S. law, but does not provide exporters with a process to seek prior authorization. Without much detail on CBP’s process for flagging shipments, exporters could face a difficult situation should CBP miss a shipment.
What Manufacturers and Exporters Should be Doing
Manufacturers and exporters of materials that could be covered by this new rule should consider taking the following steps:
- Review your pipeline of upcoming exports and classify your products against the rule to identify those items subject to the requirements.
- For those items subject to the requirements, assess whether domestic reprioritization is necessary or appropriate, communicate with your customers about the likelihood of potential delays and cancellations (if necessary), and provide the information necessary for your customs brokers to communicate with CBP about the shipment in light of the assessment factors laid out in the rule.
- For those items that are not subject to the requirements but may be confused for items within the scope of the rule, consider proactive communication to your customs broker to minimize the risk of unnecessary detainment of your exports.
- Work with your customs brokers and trade counsel to understand how the rule will affect your planned shipments and to be prepared to address shipments detained by CBP for FEMA review. Engage your government contracts counsel if you anticipate that orders may be subject to rated order purchases by FEMA.
- Continue to monitor FEMA’s publications in the Federal Register in anticipation of further guidance and regulatory requirements.
Our Reed Smith Coronavirus team includes multidisciplinary lawyers from Asia, EME and the United States who stand ready to advise you on the issues above or others you may face related to COVID-19.
For more information on the legal and business implications of COVID-19, visit the Reed Smith Coronavirus (COVID-19) Resource Center or contact us at COVID-19@reedsmith.com.
Client Alerts 2020-222
