In response to shortages of Personal Protective Equipment (PPE) critical to limiting the spread of and mitigating the impact of COVID-19, the United States has recently issued a series of rules, memoranda, and other guidance that, taken together, make it easier to import PPE but more difficult to export it. Among the most needed but scarce PPE are surgical and N95 masks, filtering respirators, and surgical gloves and gowns. This alert reviews and summarizes those measures affecting critical COVID-19 PPE.

  1. Importing PPE: Customs, FDA and USTR Ease Burdens

Imports of PPE products entering the US are regulated by US Customs and Border Protection (Customs). Like other products, the import of PPE generally requires: 1) the submission of entry documents; 2) payment of the estimated duties, including any additional tariffs (determined by the Office of the US Trade Representative (USTR)) on the goods; and 3) examination by and release of the goods from Customs. Depending on whether an item qualifies as a “medical device,” PPE products may also be subject to additional US Food and Drug Administration (FDA) entry documentation and registration requirements. In light of the COVID-19 pandemic and supply shortage, Customs, the FDA, and the USTR have exercised their authority in an effort to reduce import burdens and make it easier for needed PPE products to enter the US.

  1. Import Filing, Emergency Use Authorizations, and Enforcement Guidance

First, Customs will “assist… in expediting the release of COVID-19 relief materials” but has advised importers that as much information as possible regarding the shipment and cargo should be provided, including: (i) shipment information, (ii) conveyance information, (iii) cargo description, (iv) country information, and (v) the identity of the parties involved. Customs has also provided a hub of COVID-19-resources, including a list of COVID-19 relief materials and their HTSUS code numbers, which will help importers determine the applicable duties and additional tariffs (described below) owed on the PPE.

Second, the FDA recently has clarified its import requirements for three categories of PPE: (1) non-FDA regulated products, (2) regulated products subject to an Emergency Use Authorization (EUA), and (3) regulated products subject to an FDA Enforcement Guidance. Typically, PPE that qualifies as a medical device (and therefore is subject to FDA regulation) requiring FDA approval in order to be imported into and distributed throughout the US, as well as registration and pre-market notification with the agency.

  1. Non-FDA Regulated Products

Significantly, the FDA has clarified that, for PPE products not considered medical devices (products not intended to prevent illness), entry information should be transmitted to Customs; additional FDA entry filings and import requirements do not apply.

A PPE product is a medical device and, therefore, regulated by the FDA if it is an “instrument, apparatus, implement… or other similar or related article… intended for use in the… mitigation, treatment, or prevention of disease.” The FDA has advised that PPE is a regulated device “when [it is] intended for a medical purpose, such as prevention of infectious disease transmission (including uses related to COVID-19).” The PPE described in the guidance documents (including gowns, gloves, face masks and respirators) do not need to be intended for use in a hospital or other health facility to be considered a medical device.

Under these standards, most of the PPE needed for use with COVID-19 will be regulated as a medical device because it is clearly intended for “a medical purpose” (i.e., the prevention of transmission of a highly infectious disease). Thus, as a practical matter, such PPE is subject to FDA regulation, but it currently benefits from the relaxed approval and clearance restrictions as described below.

  1. EUA Approved PPE

Entry information for imported PPE medical devices that are authorized for emergency use pursuant to an EUA should be submitted to the FDA and must comply with any specific requirements set out in the applicable EUA. An EUA allows unapproved medical devices (or unapproved uses of devices) to be imported and used in an emergency to treat or prevent severe illness.

PPE that are currently subject an EUA include certain: (i) diagnostic tests, (ii) masks/respirators, and (iii) ventilators. On April 3, 2020 the FDA issued an EUA for unapproved respirators made in China, which authorized certain KN95 masks eligible for import and use in healthcare settings if the product meets specific criteria (including filtration standards). (See Appendix A of the April 3 EUA for a list of the authorized respirators.)

Additionally, upon filing entry documents and information for PPEs with applicable EUAs, importers should specify an Intended Use Code of 940.000 (Compassionate Use/Emergency Use Device) and an appropriate FDA product code. Under this Intended Use Code, the Affirmations of Compliance for Medical Devices (such as the Registration, Listing, and Premarket numbers) are optional for the entry filing.

  1. PPE Subject to Enforcement Guidance

Further, the FDA has issued enforcement policy guidance on the following regulated PPE (depending on its product code): (i) gowns, other apparel, and gloves; (ii) face masks and respirators; and (iii) ventilators and other respiratory devices. The guidance policies generally state that the FDA will not enforce compliance with certain import requirements (including premarket notification and registration and listing), as long as the product does not create “undue risk” and labeling criteria are met. Importers should submit this category of PPE’s entry information to the FDA and transmit an Intended Use Code 081.006 (Enforcement discretion per final guidance) and an appropriate FDA product code upon filing. Like PPE subject to an EUA, under this Intended Use Code (081.006), the Affirmations of Compliance for medical devices (such as the Registration, Listing, and Premarket numbers) are optional.

  1. Section 301 Tariff Exclusions

Section 301 tariffs for certain PPE products were already reduced or altogether lifted under previous Section 301 exclusion processes and in light of ongoing trade negotiations with China. For example, the general rate of duty for N95 masks (HTSUS code 6307.90.9889) from China is 7% and such masks currently are excluded from the additional Section 301 tariffs. On September 1, 2019, an additional 15% ad valorem tariff went into effect for all products on List 4A (including all products under the HTSUS code 6307.90.98) imported from China as a result of the USTR’s Section 301 determination. However, in light of the Phase 1 Deal between China and the United States, USTR lowered the additional tariffs for List 4A goods from 15% to 7.5% in January 2020. Further, on March 17, 2020, some products classified under 6307.90.98 were excluded from the Section 301 tariffs pursuant to an earlier exclusion process announced on October 24, 2019. This action excluded products with the 10-digit HTSUS code 6307.90.9889, which includes N95s.

On March 20, 2020, the USTR announced that it is accepting comments on possible exclusions from the China tariffs (Section 301) for medical PPE that is needed for the US to address the COVID-19 pandemic. Comments must include the relevant product’s ten-digit HTSUS subheading and its specific function and physical characteristics. USTR also suggests that comments explain how the product relates to (and aids in) the COVID-19 response to the outbreak. To date, many companies have submitted comments and the USTR has indicated that exclusions may be issued on a rolling basis. The comment period lasts until June 25, 2020.

  1. PPE Import Take-aways
  • First, import requirements are unique to the specific PPE. For FDA regulated medical devices, authorizations and approvals may apply to a product based on its FDA product code but can also be based on the product’s manufacturer and model. For Customs and the USTR, tariffs are based on a product’s HTSUS classification. Importers should therefore make an initial determination of the type and classification of the PPE it intends to bring into the US (e.g., whether it is a medical device and its HTSUS classification).
  • Second, importers should be aware that they will likely need to deal with multiple agencies when entering PPE into the US. Customs and the FDA will require entry filings (which can be submitted electronically with the help of an import broker) and, potentially, some pre-import notifications and clearances, depending on the PPE. The good news is that the agencies have shown that they are committed to reducing import burdens to address the COVID-19 pandemic and have taken steps to do so.
  • Third, Customs, the FDA, and the USTR continue to publish updated information and guidance on imports of PPE as the COVID-19 pandemic continues. Importers should stay apprised of these ongoing changes.
  1. FEMA Bans Exports of Scarce and Threatened Supplies

The US recently became one of a number of countries to impose export restrictions on critical PPE. Specifically, the US Department of Homeland Security’s Federal Emergency Management Agency (FEMA) issued a rule, effective April 7, 2020, that effectively prohibits the export of certain scarce or threatened medical PPE from the US without FEMA’s approval, unless the export is exempted by the rule.

The FEMA rule implements President Trump’s April 3, 2020 Memorandum on Allocating Certain Scarce or Threatened Health and Medical Resources to Domestic Use (the Memorandum) issued pursuant to the Defense Production Act (DPA) with respect to the export of five categories of materials designated by the Secretary of Health and Human Services (HHS). The rule relies on the President’s DPA authority to “allocate” for domestic use all proposed exports unless FEMA decides to allow the exports on an exception basis. While the DPA, by its terms, does not expressly authorize a prohibition on exports, its broad delegation of authority to the President to “allocate” resources during exigencies would in all probability be construed by the courts to allow this type of export restriction during a national emergency.

  1. PPE Products Covered by FEMA’s Rule

There are five categories of “covered material” (the PPE) currently prohibited for export (unless approved, exempted or otherwise excluded, as described below). These include:

  1. 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 exposure to pathogenic biological airborne particulates
  2. Other Filtering Facepiece Respirators (e.g., those designated as N99, N100, R95, R99, R100, or P95, P99, P100), including single-use, disposable half-mask respiratory protective devices that cover the user's airway (nose and mouth) and offer protection from particulate materials at an N95 filtration efficiency level
  3. Elastomeric, air-purifying respirators and appropriate particulate filters/cartridges
  4. PPE surgical masks, including masks that cover the user's nose and mouth and provide a physical barrier to fluids and particulate materials
  5. PPE gloves or surgical gloves, including exam gloves and surgical gloves and such gloves intended for the same purposes

FEMA may expand the categories of covered materials if the Administrator determines that additional products are “scarce and necessary for national defense” and that “consideration under this allocation order is the only way to meet national defense requirements without significant disruption to the domestic markets.”

  1. PPE Products Not Covered by the Rule

The five categories of covered materials in the Rule were selected from a longer list HHS issued on March 25 identifying scarce or threatened materials under section 102 of the Act. The HHS list not only included the five categories set out above but also ten other categories of PPE products. Among those additional product categories were power air purifying respirators, ventilators, medical and surgical gowns, PPE coveralls (e.g., Tyvek suits), PPE face masks (other than those described above), and face shields.

PPE products that are on the HHS list but not identified in the FEMA rule should not be subject to the export ban. Other products not specified by FEMA also are not covered by the FEMA rule.

  1. FEMA Approved Exports and Potential Exceptions to the Rule

There are several possible avenues for covered PPE to be exported under the new FEMA rule.

1. Case-by-Case FEMA Export Approvals. FEMA may approve the export of PPE covered by its rule on the basis of several specified factors and will consider the totality of the circumstances. Relevant factors identified by FEMA include: (i) minimization of disruption to the supply chain (domestically and abroad), (ii) humanitarian considerations, and (iii) international relations and diplomatic considerations.

Although it is possible that FEMA would approve an export if the exporter could demonstrate a clear humanitarian need (along with other factors), it is not clear what kind of showing would be required. Additionally, given the high demand for and current shortage of critical PPE in the US, making a successful claim may prove challenging in practice.

2. Mandatory Exemption for US Firms with Pre-Existing Export Agreements. The rule provides an exemption for exports of covered PPE from shipments made by or on behalf of US manufacturers that have: (a) export agreements with customers in other countries since January 1, 2020 (or earlier) and (b) sold 80% of their domestically produced covered materials in the US during the last 12 months. For example, if a US manufacturer seeks to export covered PPE under a supply agreement entered into with a Spanish company in December 2019, and the manufacturer sold 80% of domestically produced covered PPE to the US in the last year, the US manufacturer may export the products to Spain under the rule.

It is important to note, however, that this specific exemption is not absolute or self-executing. Under the rule, FEMA is authorized to waive the exemption and could still prohibit the export on national security grounds.

3. Additional FEMA Exemptions. On April 17, FEMA issued a list of additional exemptions under the rule pursuant to 44 C.F.R. § 328.102(d)(2), finding it necessary and appropriate to expand and clarify the category of shipments that may be exported in order to “promote the national defense.” This additional list of exempted exports of covered materials includes:

  1. Shipments to US commonwealths and territories, including Guam, American Samoa, Puerto Rico, US Virgin Islands, and the Commonwealth of the Northern Mariana Islands (including Minor Outlying Islands).
  2. Donations by non-profits or NGOs for foreign charities or governments for free distribution and not for sale at the shipment’s destination (i.e., the goods “must be shipped as donations in kind and cannot be sold upon receipt”).
  3. Intracompany transfers by US companies from domestic facilities to company-owned or affiliated foreign facilities.
  4. Exports of covered materials that will be assembled outside the US in medical kits and diagnostic testing kits that will then be shipped back into the US for sale and delivery.
  5. Sealed, sterile medical kits and diagnostic testing kits where only a portion of the kit is made up of one or more covered materials that cannot be easily removed without damaging the kits.
  6. Declared diplomatic shipments from foreign embassies and consulates to their home countries (shipments from and consigned to foreign governments, but intermediaries and logistics providers may actually ship the goods).
  7. Shipments to US military addresses, foreign service posts (e.g, diplomatic post offices), and embassies.
  8. Shipments in transit through the US with a foreign shipper and consignee (i.e., shipments “merely passing through the US”), including shipments temporarily entered into a warehouse or temporarily admitted to a foreign trade zone.
  9. Exports to Canada or Mexico.
  10. Shipments made by or on behalf of the US Federal Government (including its military).

These exemptions were granted to avoid humanitarian, international relations, and US supply chain issues, and the list is largely inclusive of the exclusions covered in an earlier Customs enforcement memorandum (described below). However, exporters may wish to exercise caution with shipments of covered materials that are not exempted by FEMA, such as shipments valued at less than $2,500 with fewer than 10,000 units because while Customs has stated it is not an enforcement priority, these types of shipments are not exempted under the rule.

Exemptions numbered 2, 3, 4, 8, and 9 require a letter of attestation certifying the purpose of the exempt shipment. The letters should be submitted to FEMA via Customs’ document imaging system and placed on file with Customs. The letter should include the following information on the exempt shipment: (i) the specific exemption the exporter is claiming, (ii) sufficient detail for Customs and FEMA to determine whether the shipment falls under the exemption, and (iii) a statement certifying that the information is “true and accurate to the best of the exporter’s knowledge, and that the exporter is aware that false information is subject to prosecution under the DPA.” (Additionally, for exports to Mexico and Canada, the attestation letter should state that the items being shipped are “for use in and not for transshipment through Canada or Mexico.”)

Again, however, these exemptions are not absolute as FEMA may waive them at any time if the agency finds it necessary and appropriate for the national defense.

4. Non-Binding Customs Guidance. On April 9, Customs issued an enforcement memorandum to its field directors interpreting the FEMA rule and Memorandum. Customs stated that certain exports of covered PPE are not the focus of FEMA’s efforts and may be excluded from the export ban. Specifically, the exports on which FEMA is not focused, and which Customs may exclude from the ban, include: i) shipments that are not in commercial quantities; ii) exports by 3M Company; and iii) exports by critical infrastructure industries to protect their workers.

It is not clear how Customs will implement these exclusions in practice. Whether individual customs ports nevertheless elect to stop shipments notwithstanding the guidance from Customs headquarters remains to be seen.

Additionally, the Customs guidance is not legally binding on FEMA in any case – i.e., FEMA could still penalize parties for violations for exports within the Customs exclusions. Thus, exporters should carefully consider whether to rely on the Customs enforcement policy in making business decisions.

  1. PPE Export Take-aways
  • First, FEMA’s rule grants the agency broad discretion in determining what exports of covered PPE will be approved under and exempted from the rule.
  • Second, how the rule will continue to develop and be enforced remains to be seen. Customs port officers may allow exports below the commercial quantity threshold, and FEMA may add more categories of PPE to the list and/or provide guidance on how it will weigh the factors in making pre-export approval determinations.
  • Third, there is no prohibition in the rule against the export from one foreign country to another of a US manufacturer’s products that are produced outside of the US. In other words, the export of foreign-produced surgical gloves directly from Vietnam to Spain by a US manufacturer is not prohibited. It is important to keep in mind, however, that many other countries ban the export of PPE. (You should reach out to your local Eversheds Sutherland contact to be put in touch with an advisor in the country of export.)