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H&K: Legal Insights on the Import of PPE and Other Medical Supplies Vital to Fighting COVID-19

April 13, 2020

• The COVID-19 crisis has revealed the extent to which the United States and other countries are dependent upon a well-functioning global supply chain of critical medical supplies, including Personal Protective Equipment (PPE) essential to protecting doctors, nurses, EMTs and others on the front lines of the pandemic.

• As with many goods, the supply chain, from raw material to manufacturing to delivery, is global and depends on “just-in-time” supply chains. In normal times, this degree of global sourcing does not present a problem. But these are not normal times. The massive need, not only in the U.S. but in other countries as well, has led to a global hunt for PPE supplies.

• Given that background, a “Wild West”-style market for PPE has emerged – with governments, hospitals, healthcare companies, entrepreneurs and others all on a worldwide hunt for supplies to buy and sell.


The COVID-19 crisis has revealed the extent to which the United States and other countries are dependent upon a well-functioning global supply chain of critical medical supplies, including ventilators and Personal Protective Equipment (PPE) such as N95 respirator masks, surgical masks and other items essential to protecting doctors, nurses, EMTs and others on the front lines of the pandemic. As with many goods, the supply chain, from raw material to manufacturing to delivery, is global and depends on “just-in-time” supply chains. Indeed, while the various U.S. companies that sell N95 masks have U.S. manufacturing facilities, most masks are manufactured overseas – with roughly half made in China.

In normal times, this degree of global sourcing does not present a problem. But these are not normal times. Immediately after the pandemic outbreak, China moved to obtain most of the N95 masks and other PPE manufactured in that country for use by doctors and other health professionals caring for COVID-19 patients there. Then, as the virus spread globally beyond China, other countries – including PPE producers such as France, Germany and South Korea – similarly bought up available supply, and also severely restricted export of the precious commodities. In a few short weeks, the global market for PPE ground to a halt.

Now, amid the peak of the crisis in this country, the U.S. faces severe shortages of N95 masks and other PPE. In response, U.S. companies are currently manufacturing approximately 50 million N95 masks per month domestically. But this is not nearly enough to meet the demand. The U.S. Department of Health and Human Services (HHS) estimates that the U.S. needs 300 million N95 masks per month to fight the COVID-19 pandemic. This massive need, not only in the U.S. but in other countries as well, has led to a global hunt for PPE supplies.

Given that background, a “Wild West”-style market for PPE has emerged – with governments, hospitals, healthcare companies, entrepreneurs and others all on a worldwide hunt for supplies to buy and sell, logistics companies selling coveted air cargo capacity made scarce by the severe restrictions on international flights, and governments trying to figure out how to bring order to the chaos – all while making sure the equipment is legitimate and policing against scam artists and “virus profiteers,” as well as trying to facilitate the flow of genuine equipment to those who need it.

The Federal Emergency Management Agency (FEMA) and HHS are trying to enter the market, not only as a customer but also as regulators – attempting to bring order to the chaos through the creation of FEMA’s Supply Chain Stabilization Task Force. FEMA is working with logistics companies to facilitate the large-scale movement of PPE supplies to the U.S., such as through its “Project Airbridge” partnership with UPS. State governments are also making big purchases, with California making the biggest splash – announcing on April 7 that it was committing up to $1.4 billion to secure a monthly supply of 200 million N95 and surgical masks, as well as other crucial equipment, mostly sourced from suppliers in China.

Most recently, the federal government has also moved to restrict the export of N95 masks and other PPE – in much the same way that other governments did at the beginning of the crisis. FEMA released a temporary rule published in the Federal Register on April 10, implementing President Donald Trump’s April 3, 2020, Memorandum under the Defense Production Act allocating certain PPE to domestic use by barring the export of most such equipment, absent express authorization by FEMA. U.S. Customs and Border Protection (CBP) has already begun detaining such exports pending further review by FEMA.

For anyone seeking to participate in this volatile market, there are a number of legal, logistical and political issues that must be addressed. Below is an overview of key issues and questions that stakeholders should consider:

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AUTHORS:
• J. Michael Cavanaugh | Ronald A. Oleynik | George Mencio | Seth M.M. Stodder | Michael J. Werner | Hongjun Zhang Ph.D. | Jonathan M. Epstein | Toni D. Nguyen

Compliments of Holland & Knight – a member of the EACCNY.