HHS Issues Advisory Opinion and Amendment to Public Readiness and Emergency Preparedness Act Declaration

U.S. Export Restrictions on PPE

On April 3, 2020, the Trump administration issued a “Memorandum on Allocating Certain Scarce or Threatened Health and Medical Resources to Domestic Use,” which directed the Department of Homeland Security (DHS), through the Federal Emergency Management Agency (FEMA), in consultation with the U.S. Department of Health and Human Services (HHS), to use the Defense Production Act to keep certain medical resources within the United States for domestic use.  

Specifically, the President’s memorandum covers five types of PPE (the “covered materials”):

• N95 Filtering Facepiece Respirators (including devices that are disposable half-face-piece nonpowered air-purifying particulate respirators intended for use to cover the nose and mouth to help reduce wearer exposure to pathogenic biological airborne particulates)
• Other Filtering Facepiece Respirators (including single-use, disposable half-mask respiratory protective devices that cover the nose and mouth and offer protection from particulate materials at an N95 filtration efficiency level)
• 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 

On April 7, FEMA issued a temporary rule restricting the export of the covered materials from the United States without explicit approval.¹  By its terms, the temporary rule took effect immediately. Unless extended or otherwise withdrawn, the rule is set to expire on August 8, 2020.

The covered materials represent five of the 15 categories of materials that HHS has identified as “scarce or threatened materials.” The rule does not include the other materials that HHS has identified as “scarce or threatened materials,”² such as drug products with the active ingredient chloroquine or hydroxychloroquine HC1; ventilators and related materials; certain sterilization services; certain sanitizing and disinfecting products; and medical gowns or apparel. However, FEMA has stated that at any point in time, and to the extent consistent with U.S. policy, FEMA may extend the list of materials subject to the export restrictions. Indeed, some lawmakers have called for restrictions on the export of ventilators as well.

To be clear, the exportation of covered materials is not prohibited outright. Rather, exports of covered materials will be temporarily detained by U.S. Customs and Border Protection (CBP) so that FEMA can determine whether to (1) return the shipment for domestic use (i.e., prohibit the export), (2) issue a rated order (i.e., FEMA would place its own order to purchase the products, and the seller would be required to prioritize FEMA’s order) or (3) allow the export of part or all of the shipment. CBP will likely make the detention decisions based on electronic export documentation filed with CBP.

In determining whether it is necessary or appropriate to purchase covered materials, or allocate materials for domestic use, FEMA will consider the totality of the circumstances, including the following factors:

• the need to ensure that scarce or threatened items are appropriately allocated for domestic use
• minimization of disruption to the supply chain, both domestically and abroad
• the circumstances surrounding the distribution of the materials and potential hoarding or price gouging concerns
• the quantity and quality of the materials
• humanitarian considerations
• international relations and diplomatic considerations

There is a narrow exemption for shipments made by or on behalf of U.S. manufacturers with continuous export agreements with customers in other countries since at least January 1, 2020, as long as at least 80 percent of their domestic production of covered materials (on a per item basis) was distributed in the United States during the past 12 months. FEMA decided that this exemption is necessary or appropriate to promote the national defense because it would limit the impact of the rule on pre-existing commercial relationships and “for humanitarian reasons, in consideration of the global nature of the COVID-19 pandemic.” FEMA may develop additional guidance about this exemption and encourages manufacturers to contact FEMA with specific information about their status under the exemption.

To date, little to no guidance has been issued explaining how this will work in practice. For example, at present, there is no mechanism for exporters to notify CBP of the intended export or for FEMA to respond with the required authorization. Will the tariff classification for the PPE included on the electronic export information (EEI) flag the shipment for review by CBP/FEMA? What should a company do if it does not? Should companies seeking to export covered PPE to Canada start filing EEI? We expect that FEMA and/or CBP will issue further guidance on the mechanics of how this will work shortly. In the meantime, companies seeking to export PPE should consider proactively reaching out to CBP prior to shipment.

EU Export Restrictions on PPE

In an attempt to ensure availability of PPE in the EU, and to block attempts by certain EU member states to impose their own national export bans, the European Commission has, since March 15, 2020, imposed temporary rules subjecting exports of PPE to an export authorization.³

The list of covered PPE currently includes protective spectacles and visors, face shields, mouth-nose-protection equipment, protective garments and gloves. The European Commission has cautioned that this list may be reviewed and expanded as the situation evolves. Some member states have been calling for the addition of ventilators, which are in high demand across the EU, to the list of targeted PPE.

For an initial period of six weeks, beginning on March 15, 2020, any export outside the EU of the targeted PPE, whether or not originating in the EU, is subject to an export authorization granted by the competent authority of the member state where the exporter is established. Member states have already signaled their intention to extend the initial period of six weeks beyond April 25. Significantly, the restrictions do not apply to exports to the United Kingdom, Norway, Iceland, Lichtenstein, Switzerland, the Faeroe Islands, Andorra, San Marino and Vatican City.  

In its guidance note,⁴ the European Commission stresses that member state competent authorities should grant export authorizations only where the export at stake does not pose a threat to the availability of PPE on the market of the member state in question or elsewhere in the EU.  

In their assessment, member state competent authorities should also take into account humanitarian objectives, such as the support of the activities of the World Health Organization, the support of EU-level coordinated responses to crisis situations and the request for assistance by third countries or international organizations, including the need for emergency supplies required by humanitarian NGOs or international organizations.

¹ See https://s3.amazonaws.com/public-inspection.federalregister.gov/2020-07659.pdf?utm_medium=email&utm_campaign=pi+subscription+mailing+list&utm_source=federalregister.gov.
² See https://www.hhs.gov/sites/default/files/hhs-dfa-notice-of-scarce-materials-for-hoarding-prevention.pdf.
³ See https://eur-lex.europa.eu/legal-content/GA/TXT/?uri=CELEX:32020R0402.
⁴ See https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ%3AJOC_2020_091_I_0002.