This past week, the Trump administration announced a ban on exports of certain types of Personal Protective Equipment (PPE) in response to the COVID-19 crisis. The new rule became effective immediately and will last four months (until August 8, 2020).
While this type of activity is unusual due to its breadth and scope, those of us in the trade compliance community recognize it as just another extension of the U.S. government’s export control laws and regulations. So, in some ways, it’s not surprising at all.
What is covered under these export control restrictions?
The new order, published by the Federal Emergency Management Agency (FEMA), prohibits the export of five different types of equipment, as follows:
- 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, 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
- 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, including those defined as “exam gloves” and “surgical gloves” and other such gloves intended for the same purposes
It’s important to note that the above equipment is a preliminary list. At any point in time, the administration or FEMA may determine other items are “scarce and critical” and add them to the current restrictions.
According to the Federal Register notice, the above types of PPE may not be exported from the United States without the explicit approval of FEMA. This stipulation is unique in that it delegates export approval to a different agency of the U.S. government.
Currently, most U.S. exports are controlled by the Department of Commerce, Bureau of Industry and Security (BIS) and the U.S. Department of State, Directorate of Defense Trade Controls (DDTC).
Normally, a company must apply to one of those agencies (or similar regulatory departments) in advance to obtain an export license or other authority to allow the movement of restricted goods across the border.
However, under this temporary order, there is no provision for a manufacturer to proactively apply to FEMA for an export license of PPE. Instead, FEMA will work with U.S. Customs and Border Patrol (CBP) to identify and temporarily detain any equipment prior to export.
During this detainment, FEMA will then decide to either return the equipment for domestic use or allow the export of all (or part) of the equipment. It’s important to note that this detainment period may last indefinitely, although FEMA will work to make decisions “within a reasonable time.”
Is it legal for the government to restrict exports?
The short answer is, yes – absolutely. We often remind our clients that “exporting is a privilege, not a right.” This latest order is just one example of that principle. The U.S. government has broad authority to control the export and import of items across borders.
Specifically, this latest control is being implemented under the authority of the Defense Production Act of 1950, as well as a handful of executive orders.
The Defense Production Act is a Korean War-era law with many provisions designed to ensure civil defense and military mobilization. That said, the United States (like any nation) has a long history of prohibiting exports during times of crisis. Some examples include:
- During the Cold War, the United States and its allies banned the export of everything to the former Soviet Union and the People’s Republic of China.
- In 1975, in response to OPEC and the energy crisis, the United States banned the export of crude oil.
- In 1940, the Export Control Act prohibited exports of aircraft parts, chemicals and minerals without a license. Later, in 1942 as the U.S. entered World War II, these restrictions were extended to all commodities and a wide range of foreign destinations.
- Going back even further, in 1775, Congress outlawed the export of all goods to Great Britain.
In addition to these types of far-reaching bans that cover broad restrictions, the U.S. has also implemented targeted controls for certain entities and organizations. For example:
- In 2018, the Commerce Department prohibited U.S. telecommunications firms from selling components and equipment to China’s ZTE Corp.
- Beginning in 1979 and continuing today, the United States has targeted sanctions, embargoes and other economic controls against Iran.
- There are numerous examples of specific individuals and entities being targeted through the various restricted party lists administered by BIS, DDTC, OFAC and other federal agencies.
Are there any exemptions for this current export ban?
The current order from FEMA does allow for exemptions from the PPE export ban, but these are narrow and should be applied carefully.
Specifically, FEMA may allow the export of PPE from a manufacturer that has had a “continuous export agreement” with other countries since at least January 1, 2020, and where at least 80 percent of that manufacturers’ domestic production of covered PPE has been distributed in the United States in the preceding 12 months.
Currently, this exemption appears to be on a case-by-case basis, although further exemptions may be allowed as the situation unfolds.
What are the penalties for violating the PPE ban?
As with most U.S. export controls, the penalties for non-compliance can be costly and ruinous to both companies and individuals. Under this latest order from FEMA (using the Defense Production Act as the legal basis), failure to comply may result in a maximum fine of $10,000 or imprisonment for one year (or both).
To those of us in the trade compliance community, at first glance, these penalties may seem “light.” For example, by comparison, an ITAR violation can land you with a maximum criminal fine of $1 million per violation and/or up to 20 years imprisonment.
However, the FEMA rules also invokes 18 U.S.C. 554 related to smuggling goods from the United States. Under this statute, the maximum penalties rise to $1 million and/or up to 10 years’ imprisonment. Suffice it to say, attempting to willfully disobey this order is not a good idea.
In summary, the latest export ban in response to the coronavirus pandemic may just be a first step. Depending on the needs of the United States going forward, will we see other restrictions on different goods and technologies? Export Solutions will continue to monitor this situation and report on topics as the COVID-19 crisis unfolds.
If your company needs help navigating the complex world of import/export regulations, please schedule a no-charge consultation with one of our experts today. We’ll be happy to talk with you about how to mitigate your risks and secure more international business.
Tom Reynolds is the President of Export Solutions, a consultancy firm which specializes in helping companies with import/export compliance.