The EU’s response to COVID-19
On 4 March 2020 Germany’s so-called emergency task force on the coronavirus epidemic decided to ban the export of many types of medical protection gear, including breathing masks, medical gloves and protective suits (see German Federal Gazette as of 4 March 2020, available at bundesanzeiger.de). There were limited exemptions to the ban including, among others, travellers who export or transfer the relevant products in reasonable quantities for their own use. The decree allowed exporters to apply for a licence in very limited circumstances, including, for example, when products are exported in connection with concerted international aid. All other exports were banned, whether destined for the rest of the EU or third countries.
France requisitioned all stocks of face masks of the types FFP2 and anti-projections masks from national producers and distributors in the public and private sectors as of March 4 2020 and extended the requisition to masks of the types FFP3, N95, N99, N100, P95, P99, P100, R95, R99 and R100 as of March 14 2020. Such measures prevent any export of masks from the French territory.
Understandably, these measures were seen with great suspicion, even anger, by the other Member States, particularly Italy, the first Member State to be hit by the virus and a country in need of such protective equipment.
In the face of this serious challenge to the EU’s single market, on 14 March 2020 the European Commission adopted a regulation making the exportation of certain products to countries outside the EU subject to the production of an export authorisation (Reg. (EU) 2020/402) in order to prevent and remedy the critical situation in the EU. Exports of personal protective equipment are now temporarily subject to an authorisation in order to ensure the Union’s capacity to meet the demand on its territory. Authorisations to export may be authorised under specific circumstances, for specific products, in limited quantity and if the needs of the Member States allow so. Such restrictions apply for six weeks as from March 15 2020.
On 20 March 2020, the Commission announced that it would exempt the EEA countries (Norway, Switzerland, Lichtenstein) and the small dependent countries and territories (including Andorra, Monaco, San Marino and Vatican) from these export controls, and clarified that the UK should still be treated as an EU Member State (see the amending regulation, and the Commission's guidance note). These changes entered into force on Saturday 21 March 2020.
Urged by the European Commission not to undermine cooperation and solidarity between the Member States, and now having at their disposal an EU tool to restrict exports outside of the Union, France and Germany have now both withdrawn their measures. France withdrew its measure on March 23 2020. Germany first relaxed its export ban on March 12 2020 by allowing intra-European export licences if the export is required to prevent a threat to the supply of vital needs in another Member State of the EU, provided that the vital needs of the German domestic market were ensured despite the export (see bundesanzeiger.de). Following the introduction of the European regulation, Germany finally withdrew its own measures on March 19 2020 (see bundesanzeiger.de), but with the possibility to review the situation regularly.
Thus, the European regulation is now the only instrument restricting the export of personal protective equipment to countries outside the EU.
What’s next?
The European Union has faced many challenges in the past five years: the migration crisis, an authoritarian and at times hostile Turkey, the destabilisation of the eastern border by the Russian annexation of Crimea and the war in eastern Ukraine, the loss of the United Kingdom, the destabilisation of global trade (WTO) and military (NATO) orders by the Trump administration, and the realisation that China presents a formidable challenge and will not become democratic through the effect of trade and development as was once believed. The sum of these challenges had already pushed the Union into a much more protectionist and introspective frame of mind, bringing about transformative projects such as the European industrial package proposed only a few weeks ago (see ec.europa.eu), and EU investment controls (see our alert at reedsmith.com).
The COVID-19 crisis is of an entirely different order; it is confining most Europeans to their homes, probably for months, stalling the European economy, and laying bare the EU’s dysfunctionalities and divisions.
In the health sector, it has shown that more integration and harmonisation is necessary to tackle future epidemics and prevent the significant disruption of the single market and EU unity that the absence of integration has caused.
Beyond health, the crisis is likely to accelerate significantly the growing distrust among European voters and governments of globalisation and the international multilateral order.
In the field of export controls and sanctions, the EU’s measures had so far been limited to the transposition into the EU legal order of international texts (such as the Wassenaar Arrangement) and UN decisions.
Singularly, the new export controls for individual protection equipment are the first of their kind, dictated entirely by domestic concerns, adopted to protect the EU and its single market at the expense of the rest of the world. Once the Pandora’s box has been opened, it cannot be closed again. Expect the European Union to resort to export controls in the future in more aggressive, unilateral ways.
In the United States
The United States has not yet adopted these kinds of restrictive policies for protective medical equipment and devices, but that may just be a matter of time. White House trade adviser, Peter Navarro, has stated that the president was working on an executive order to tighten ‘Buy American’ rules and encourage more domestic production of medical products, and existing U.S. sanctions and export controls may nonetheless provide barriers to the free-flow of life-saving goods and services during this crisis.
For example, the U.S. Department of Commerce, Bureau of Industry and Security (BIS), regulates the export of U.S.-origin products, including many pharmaceuticals, vaccines, pathogens and safety equipment. Equipment used to manufacture vaccines and products designed to protect against biological threats may be subject to export licence requirements based on the characteristics of the products themselves, each product’s end user or the final destination. Items such as latex gloves and surgical masks, on the other hand, are classified as ‘EAR99’ and can generally be exported to most destinations and end users, without an export licence.
Included in the list of viruses that are subject to a BIS export licence requirement is the SARS virus, which is defined as a ‘severe acute respiratory syndrome-related coronavirus’ (SARS-related coronavirus). SARS is classified under ECCN 1C351.a.46. In February 2020, the International Committee on Taxonomy of Viruses (ICTV) named COVID-19 as a 'severe acute respiratory syndrome coronavirus 2' ('SARS-CoV-2'). BIS, however, issued guidance that COVID-19 is distinct from the SARS virus and is classified as ‘EAR99’ for export purposes, meaning it can be exported to most destinations without authorisation.
In addition to U.S. export controls, some of the regions hardest hit by COVID-19 are also subject to robust U.S. sanctions. Iran, for example, is one of the countries that has been hit hardest by COVID-19, with its relatively high percentage of cases per capita, deaths per case, and cases among the political elite. Yet, the import of COVID-19 testing kits, critical at this stage of the pandemic, has been delayed due to uncertainty surrounding the breadth of U.S. sanctions as well as the requirements for receiving payments from Iran.
The U.S. sanctions program, while quite comprehensive, has for the past twenty years allowed humanitarian aid to reach the Iranian people. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), the main regulatory body that governs U.S. sanctions programs, implemented this exception by issuing general licences that allow U.S. persons and non-U.S. persons to export food, agricultural commodities, medicine and medical devices to Iran from the United States or elsewhere, subject to certain requirements and exceptions.
In addition to keeping a humanitarian export channel open at all times, the United States has also historically allowed humanitarian donations when a natural disaster has struck Iran. Following the Bam earthquake in Iran in December 2003, OFAC temporarily allowed U.S. persons to make donations to nongovernmental organisations that aided affected Iranians. In August 2012, OFAC issued a similar authorisation to temporarily allow U.S.-based NGOs to transfer funds to Iran used for relief efforts in the aftermath of the East Azerbaijan earthquakes. Similarly, in response to the spread of COVID-19 in Iran, the State Department has expressed its desire to assist the Iranian people in this challenging time, and OFAC has released guidance stating that donations of humanitarian goods such as medical supplies are permitted, provided that such donations are not made to the government of Iran or any individual or entity that OFAC has specially designated or blocked under its sanctions authorities. OFAC also recently issued General Licence 8, which authorises transactions involving the designated Central Bank of Iran where such transactions involve the authorised export of food, medicine and medical devices to Iran.
The United States is also allowing international aid organisations working in North Korea some leeway in order to fight COVID-19. In early February 2020, a U.S. State Department spokesperson said the United States “stands ready and is prepared to expeditiously facilitate the approval of assistance from U.S. and international aid organisations to counter and contain the spread of #coronavirus in response to concerns about the vulnerability of the people of North Korea.”
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 many 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 Alert 2020-131a
