COVID-19: What you now need to know about the US Defense Production Act and the export ban


Why do Customs Managers and Global Trade Professionals need to know this?

To do their job, customs managers and global trade professionals need to always stay up-to-date with a dynamic legal landscape. They are required to have excellent knowledge of customs formalities, trade agreements and export control legislation They must be able to interpret law changes and explain them in a clear and simple manner to internal and external stakeholders.


In this section, we summarize what customs managers and global trade professional now need to know and be able to talk about when it comes to the Defense Production Act and the "Memorandum on Allocating Certain Scarce or Threatened Health and Medical Resources to Domestic Use".


Defense Production Act for ventilator equipment and N95 masks

President Trump on Friday said that he had ordered US companies to stop exporting crucial medical supplies and equipment to ensure that hospitals and health care facilities have the lifesaving supplies they need to battle the coronavirus pandemic.



What is the Defense Production Act?

1950 law gives the government more control during emergencies to direct industrial production. The Federal Emergency Management Agency describes the act as "the primary source of presidential authorities to expedite and expand the supply of resources from the US industrial base to support the military, energy, space and homeland security programs."


The President obtains "a broad set of authorities to influence domestic industry in the interest of national defense," according to an updated Congressional Research Service report on the act released earlier this month.

"The authorities can be used across the federal government to shape the domestic industrial base so that, when called upon, it is capable of providing essential materials and goods needed for the national defense," the report says.


The Defense Production Act is expected to lead to the manufacturing of ventilators and to ensure the production of additional N95 face masks. This will result in an export ban of these products, too



How is the Act structured?

The act is divided into three main sections:

  1. Priorities and Allocations, which allow the President to require corporations to accept and prioritize contracts for services and materials deemed necessary to aid US national defense.

  2. Expansion of Productive Capacity and Supply, which gives the President the authority to to create incentives for industry to produce critical materials.

  3. General Provisions, which broadly establishes government authority to strike agreements with private industry, to halt foreign corporate mergers that threaten national security and to create a volunteer bloc of industry executives who could be called to government service.

. What does the President say?


  • · “the outbreak of the virus has led to wartime profiteering by unscrupulous brokers, distributors, and other intermediaries operating in secondary markets. This wartime profiteering is leading to hoarding and soaring prices for Personal Protective Equipment (PPE) like masks, gloves, and N-95 respirators, all of which are needed to protect American citizens, including our heroic healthcare professionals, battling on the front lines”.

  • · “Today’s order is another step in our ongoing fight to prevent hoarding, price gouging, and profiteering by preventing the harmful export of critically needed PPE. It will help ensure that needed PPE is kept in our country and gets to where it is needed to defeat the virus”.

  • · “Nothing in this order will interfere with the ability of PPE manufacturers to export when doing so is consistent with United States policy and in the national interest of the United States”.


Export Ban

  • Under the new order, acting Homeland Security Secretary Chad Wolf will work with FEMA to “prevent the export of N-95 respirators, surgical masks, gloves and other personal protective equipment,” the President said.

  • “We need these items immediately for domestic use, we have to have ’em,” the president added.

Memorandum on Allocating Certain Scarce or Threatened Health and Medical Resources to Domestic Use


Referring to the Defense Production Act of 1950, as amended (50 U.S.C. 4501 et seq.) (the “Act”), the President ordered as follows:


  • To ensure that these scarce or threatened PPE materials remain in the United States for use in responding to the spread of COVID-19, it is the policy of the United States to prevent domestic brokers, distributors, and other intermediaries from diverting such material overseas.

  • Good covered:

(a) N-95 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;

(b) 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 per 42 CFR 84.181;


(c) Elastomeric, air-purifying respirators

(d) PPE surgical masks, including masks that cover the user’s nose and mouth and provide a physical barrier to fluids and particulate materials; and

(e) PPE gloves or surgical gloves, including those defined at 21 CFR 880.6250 (exam gloves) and 878.4460 (surgical gloves) and such gloves intended.


As a result, the export of this equipment should now be banned and companies wishing to export this type of equipment may face significant restrictions.


Sources:


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