Last week, President Trump issued a "Memorandum on Allocating Certain Scarce or Threatened Health and Medical Resources to Domestic Use," which including the following passage:
On March 25, 2020, the Secretary of Health and Human Services designated under section 102 of the Act 15 categories of health and medical resources as scarce materials or materials the supply of which would be threatened by accumulation in excess of the reasonable demands of business, personal, or home consumption, or for the purpose of resale at prices in excess of prevailing market prices (“scarce or threatened materials”). These designated items include certain PPE materials. 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.
An accompanying statement clarified:
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.
These kinds of memos and statements sometimes don't lead to much, and I wondered where this was going. But now it has gone somewhere. The following is from a temporary final rule just issued by FEMA (and scheduled to be published on April 10) entitled "Prioritization and Allocation of Certain Scarce or Threatened Health and Medical Resources for Domestic Use":
II. Provisions of the Temporary Final Rule
Following consultation with the Secretary of HHS; pursuant to the President’s direction; and as an exercise of the Administrator’s priority order, allocation, and regulatory authorities under the Act, the Administrator has determined that the scarce or threatened materials identified in the April 3, 2020 Presidential Memorandum (“covered materials”) shall be allocated for domestic use, and may not be exported from the United States without explicit approval by FEMA. See new 44 CFR 328.102(a).
The rule is necessary and appropriate to promote the national defense with respect to the covered materials because the domestic need for them exceeds the supply. Under this temporary rule, before any shipments of such covered materials may leave the United States, CBP will detain the shipment temporarily, during which time FEMA will determine whether to return for domestic use, issue a rated order for, or allow the export of part or all of the shipment under section 101(a) of the Act, 50 U.S.C. 4511(a). FEMA will make such a determination within a reasonable time of being notified of an intended shipment and will make all decisions consistent with promoting the national defense. See new 44 CFR 328.102(b). FEMA will work to review and make determinations quickly and will endeavor to minimize disruptions to the supply chain.
In determining whether it is necessary or appropriate to promote the national defense to purchase covered materials, or allocate materials for domestic use, FEMA may consult other agencies and will consider the totality of the circumstances, including the following factors: (1) the need to ensure that scarce or threatened items are appropriately allocated for domestic use; (2) minimization of disruption to the supply chain, both domestically and abroad; (3) the circumstances surrounding the distribution of the materials and potential hoarding or price-gouging concerns; (4) the quantity and quality of the materials; (5) humanitarian considerations; and (6) international relations and diplomatic considerations.
This rule contains an exemption that the Administrator has determined to be necessary or appropriate to promote the national defense. See new 44 CFR 328.102(c). Specifically, the Administrator has determined that FEMA will not purchase covered materials from shipments made by or on behalf of U.S. manufacturers with continuous export agreements with customers in other countries since at least January 1, 2020, so long as at least 80 percent of such manufacturer’s domestic production of covered materials, on a per item basis, was distributed in the United States in the preceding 12 months. The Administrator decided that this exemption is necessary or appropriate to promote the national defense because it would limit the impact of this order on pre-existing commercial relationships, in recognition of the importance of these commercial relationships to the international supply chain, and for humanitarian reasons, in consideration of the global nature of the COVID-19 pandemic. If FEMA determines that a shipment of covered materials falls within this exemption, such materials may be transferred out of the United States without further review by FEMA, provided that the Administrator may waive this exemption and fully review shipments of covered materials subject to this exemption for further action by FEMA, if the Administrator determines that doing so is necessary or appropriate to promote the national defense. FEMA may develop additional guidance regarding which exports are covered by this exemption, and encourages manufacturers to contact FEMA with specific information regarding their status under this exemption.
The Administrator may establish, in his discretion, additional exemptions that he determines are necessary or appropriate to promote the national defense and will announce any such exemptions by notice in the Federal Register.
FEMA will implement this rule with the cooperation and assistance of other U.S. Government agencies, including CBP, and will work with manufacturers, brokers, distributors, exporters, and shippers to ensure that the applicable requirements are carried out. Any covered materials intended for export may be detained by CBP while FEMA conducts its review of the shipment. FEMA will review the shipment and provide notification as soon as possible regarding the disposition of the covered materials under this order, provided that any goods that have been detained by CBP and are subsequently made subject to a DPA-rated order will be consigned to FEMA pending further distribution or agency direction. FEMA may provide additional guidance regarding the application of any exemptions to this temporary rule, as appropriate.
FEMA may conduct such investigations and issue such requests for information as may be necessary for the enforcement of the Act, including this rule. See new 44 CFR 328.104(a); see also section 705 of the Act, 50 U.S.C. 4555; Executive Order 13911, 85 FR 18403 (Apr. 1, 2020). FEMA may seek an injunction or other order whenever, in the Administrator’s judgment, a person has engaged or is about to engage in any acts or practices which constitute or will constitute a violation of the Act or any rule or order issued thereunder. See new 44 CFR 328.104(b); see also section 706 of the Act, 50 U.S.C. 4556. In addition to an injunction, failure to comply fully with this rule is a crime punishable by a fine of not more than $10,000 or imprisonment for not more than one year, or both. See new 44 CFR 328.104(c); see also section 103 of the Act, 50 U.S.C. 4513. In addition, pursuant to 18 U.S.C. 554, whoever fraudulently or knowingly exports or sends from the United States, or attempts to export or send from the United States, any merchandise, article, or object contrary to any U.S. law or regulation, or receives, conceals, buys, sells, or in any manner facilitates the transportation, concealment, or sale of such merchandise, article, or object, prior to exportation, knowing the same to be intended for exportation contrary to any U.S. law or regulation, faces up to 10 years’ imprisonment, a fine, or both, if convicted.
At any point in time, and to the extent consistent with United States policy, the FEMA Administrator may determine additional materials to be subject to this allocation order. Upon a determination under section 101(b) of the DPA that an additional material is a scarce and critical material essential for national defense, and that being allocated to domestic use under this allocation order is the only way to meet national defense requirements without significant disruption to the domestic markets, the Administrator will include these additional materials in this allocation order, and will provide notification of this decision through publication in the Federal Register.
I don't have a problem with this sort of export regulation in theory. I think governments should be keeping track of where all the personal protective equipment is, so they can make sure it gets to the people who need it most. And the six criteria set out above seem reasonable. What's going to be important here, in my view, is how the rule is applied and whether it prevents this equipment from getting where it should go.