TRADE IN THE TIME OF CORONAVIRUS: UPDATE #4

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At Neville Peterson LLP, we’ve transitioned to a remote working environment, and remain fully operational during the Coronavirus National Emergency. We’re abiding Samuel L. Jackson’s advice to stay at home and hope you are doing the same and staying safe.  Now, our latest update on the state of trade during these trying times.

FEMA: The Federal Emergency Management Agency (FEMA) has issued temporary regulations implementing an “allocation order” under the Defense Production Act. The order prohibits the exportation of certain medical articles, without the approval of FEMA.

The affected articles are:

  •   N95 Filtering Face Piece Respirators

  •  Other Filtering Face Piece Respirators such as N99, N100, R95, R99, R100, P95, P99, P100, including single use half masks and respiratory protection devices operating at N95 filtration efficiency;

  • Elastomeric air-purifying respirators and appropriate filters and cartridges;

  • Personal Protective Equipment (PPE) such as surgical masks or gowns;

  • PPE such as surgical gloves or protective gloves. 

The interim regulation indicates that Customs and Border Protection will temporarily detain all shipments of this merchandise until FEMA determines whether they should be returned for domestic use, whether a “rated order” should be issued, or whether part of all of the shipments should be permitted to be exported. FEMA will determine whether to purchase the materials or otherwise allocate them to domestic use.

FEMA’s regulation indicates that it will not purchase covered material shipments made by or on behalf United States manufacturers who have continuous export agreements in place with customer in other countries since January 1, 2020. However, this applies so long as 80 percent of each manufacturer’s domestic production of covered materials on a per item basis was distributed in the United States in the past twelve (12) months. This feature is apparently part of the resolution of the Administration’s dispute with 3M Corporation.

FEMA has the authority to issue requests for information regarding particular export shipments and to seek injunctions against any attempted violation or evasion of these new restrictions. FEMA has also indicated that criminal fines or penalties may be available under 50 U.S.C. §4513 for violation of these regulations, and/or under 18 U.S.C. § 554 for any knowing and fraudulent exportations made in violation of these rules.

The new temporary regulation is effective immediately. FEMA has indicated that the rule is not subject to notice and comment under the Administrative Procedure Act. FEMA has further indicated that more detailed regulations will be promulgated and issued in the near future.

World Customs Organization/World Health Organization:  The World Health Organization (WHO), with the assistance of the World Customs Organization (WCO), has issued a 2nd Edition of the Harmonized System Classification Reference for COVID-19 Medical Supplies. The indicative list, which has no legal effect, lists and provides tariff classification information for medical supplies deemed essential to the fight against COVID-19. Covered goods include diagnostic kits, protective garments and the like, disinfectants and sterilization product, oxygen therapy equipment and pulse oximeters, other medical devices and equipment, other medical consumables and vehicles. The reference is designed to assist customs authorities in identifying shipments of potentially critical goods.

Customs and Border Protection (CBP):  As a result of the Center for Disease Control’s March 14, 2020 “No sail” order, which was extended on April 8, 2020, cruise ship operators have  been required to cease operations and for the most part remain at dock or anchorage at United States ports. Ships’ crews’ which may number 1000 persons on average, are effectively quarantined  aboard these vessels. This has raised the question of whether these vessels may continue to receive deliveries of duty-and tax-free bonded supplies, under Sections 309 and 317 of the Tariff Act of 1930.

In a March 30, 2020 ruling issued to Carnival Cruise lines – in relation to an unrelated question first raised in 2014 – Customs indicated, in  a footnote to Customs Headquarters Ruling H260759, that “Prior to the resumption of their cruise itineraries, these vessels are not considered “actually engaged in foreign trade” within the meaning of 19 U.S.C. § 1309”. This determination effectively cuts off the cruise ships from bonded supplies for the crewmembers who are effectively quarantined aboard. The position is being challenged administratively, but has caused additional turmoil for the cruise ship industry.

If you have any questions regarding these issues, please contact any Neville Peterson LLP professional.