U.S. Supply Chain

The Federal Emergency Management Agency (FEMA) issued a temporary final rule requiring FEMA approval before certain kinds of personal protective equipment (PPE) can be exported from the United States.  The temporary rule is being issued pursuant to, among other authorities, the Defense Production Act of 1950 and a series of Executive Orders.  Based on these authorities, the President has directed the Secretary of Homeland Security and, in turn, the FEMA Administrator, to allocate PPE to domestic use.  While the rule was filed for Public Inspection on Tuesday, April 7, 2020 and takes effect immediately, the rule will not be published in the Federal Register until Friday, April 10, 2020.  The rule will remain in effect for 120 days from its publication until August 8, 2020.

The rule covers various masks, respirators and their particulate filters and cartridges, and PPE and surgical gloves. U.S. Customs and Border Protection (CBP) will detain these items prior to export for FEMA inspection. Upon inspection, FEMA will either: return the PPE to domestic use, issue a rated order for the goods, or allow the shipment to be exported.  FEMA has a reasonable time to make this determination on the basis of six (6) factors: (1) scarcity in domestic circulation; (2) disruption to the supply chain; (3) circumstances surrounding distribution, including hoarding and price-gouging concerns; (4) quantity and quality of the PPE; (5) humanitarian considerations; and (6) international relations and diplomatic considerations.

The rule exempts U.S. manufacturers with contracts in place prior to January 1, 2020 who have distributed 80% of their production within the United States in the preceding 12 months.  The rule also allows the FEMA administrator to develop additional exemptions.  FEMA has indicated that it intends to “work to review and make determinations quickly and will endeavor to minimize disruptions to the supply chain.”

Husch Blackwell is monitoring this issue closely and will provide additional updates as more information becomes available. Should your company have any questions regarding the export of PPE, please contact Cortney Morgan or Grant Leach of our Export Controls & Economic Sanctions team.