Administration Halts Exports of Personal Protective Equipment

On April 8, the Federal Emergency Management Administration (FEMA) published a draft Interim Final Rule for the Federal Register that will halt all exports of certain scarce or threatened materials (referred to generally as personal protective equipment (PPE)) without FEMA authorization. This came just days after a White House memorandum and subsequent “clarification” statement caused confusion among U.S. companies planning to export or exporting PPE and U.S. Customs and Border Protection (CBP) monitoring exports of such PPE.

Pursuant to this Rule, beginning from the date of publication in the Federal Register (which is scheduled for April 10, 2020) and for 120 days following such publication, CBP will detain shipments of the following items until FEMA explicitly approves their exportation (this list may be amended by FEMA, as necessary):

• N95 Filtering Facepiece Respirators.
• Other Filtering Facepiece Respirators (N99, N100, R95, R99, R100 or P95, P99, P100).
• Elastomeric, air-purifying respirators and appropriate particulate filters/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.

During CBP’s detention of the above PPE, FEMA will determine whether to return the shipment for domestic use, issue a rated order for, or allow for all or part of its export. The Rule states that FEMA’s determination will be made within a reasonable time of being notified of an intended shipment, as FEMA will endeavor to minimize disruptions to the supply chain. To make its determination, FEMA may consult with other agencies and may consider the following factors:

• Need to ensure that scarce/threatened items are appropriately allocated for domestic use.
• Minimization of disruption to the supply chain, both domestically and abroad.
• Circumstances surrounding the distribution of the material and potential hoarding or price-gouging concerns.
• Quantity and quality of the materials.
• Humanitarian considerations.
• International relations and diplomatic considerations.

The Rule exempts certain shipments from this determination. Specifically, if an export is made by or on behalf of U.S. manufacturers with continuous export agreements with customers in other countries since at least January 1, 2020, so long as 80% of the manufacturer’s domestic production of these material was distributed in the United States during the preceding 12 months, then it may be released. However, FEMA reserves the right to halt even those shipments, if it determines such a halt is appropriate to promote the national defense.

The Rule is silent on whether this applies to exports within the Customs Territory of the United States, which includes Puerto Rico or exports to Insular Possessions of the United States, which includes the U.S. Virgin Islands, Guam, American Samoa, Wake Island, Midway Islands and Johnston Atoll. We believe this Rule would not apply to exports within the Customs Territory but may apply to exports to Insular Possessions. This belief is supported by the fact that the prior use of the Defense Production Act allowed FEMA to prioritize supplying Puerto Rico with necessary items after Hurricane Maria.

FEMA will enforce this Rule not just with detentions at the border, but also with injunctions and fines of $10,000 or imprisonment of one year. If FEMA believes a shipment is exported or there was an attempt to export by means of fraud, the penalty is 10 years imprisonment or a fine.

For more information on exporting PPE or liaising with CBP, please contact any member of Faegre Drinker’s customs and international trade team.

As the number of cases around the world grows, Faegre Drinker’s Coronavirus Resource Center is available to help you understand and assess the legal, regulatory and commercial implications of COVID-19.