EU Restricts Exports of Protective Equipment as Countries Attempt to Maintain Supply of Virus-Fighting Goods
The European Commission announced export controls on shipments of certain protective medical equipment, which will now require authorizations before being sent to third countries, according to a March 15 press release. Several European countries also announced travel restrictions due to the coronavirus, including Germany and Poland, which may impact supply chains and cargo shipments.
The new European Union export controls will cover “masks, protective spectacles and visors, face shields, mouth-nose protection and protective garments,” the commission said, citing “vital needs” for those goods within the EU. “The challenges presented by the spread of COVID-19 justify the urgency of this action,” Trade Commissioner Phil Hogan said in a statement. The controls took effect March 15 and will last six weeks.
In its notice, the EU said exports will be approved only under “specific circumstances,” such as “assistance” to countries in need. The EU also said the implementation of the controls will be left to the “discretion” of the individual EU member states. Member states must process those export applications in accordance with “national law,” the EU said, which includes a review time of not more than five working days from the date the completed application was submitted. That period may be extended past five days under “exceptional circumstances.” The notice includes an annex of the restricted exports, descriptions of each good and their Combined Nomenclature codes.
The demand for protective equipment “has been exacerbated in the last days,” the EU said, and is expected to increase “significantly,” leading to greater “constraints” throughout the EU market to meet demand. The EU pointed to the fact that other “third countries” have already restricted exports of equipment relating to the virus, some of which are suppliers to the EU and are “further exerting pressure on the Union market.” The U.S. has not yet announced export restrictions on protective equipment. The White House did not comment.
The EU said a “unified” export control “overcomes a situation” in which member states propose differing export policies for protective equipment and “reinforces European solidarity.” The EU said “certain first-mover Member states” have already “indicated acceptance” with the EU export controls -- such as Germany (see 2003130030) -- and added that it intends to help member states comply. “The Commission will assist Member States in setting up the relevant mechanisms to ensure a smooth and coordinated implementation of the regulation,” including the “integration of production and supply chains with such third countries.”
Other countries are taking similar measures, including India, which earlier this month announced export restrictions on 26 active pharmaceutical ingredients, causing panic in Europe, according to Reuters. Other countries placed bans on face mask exports, including Indonesia, Reuters said, and South Korea, according to The Korea Herald.
The commission also released on March 16 border management guidelines for movement of people and goods, saying it wants to ensure “essential goods and services remain available.” The commission said border control measures should not “cause serious disruption of supply chains” and urged member states to designate “priority lanes” for freight transport. “No additional certifications should be imposed on goods legally circulating within the EU single market,” the commission said.
Member states may introduce “internal border controls,” the commission said, which may require travelers to undergo a period of self-isolation. Several European countries imposed travel restrictions, including Germany, which announced border checks at internal borders with Austria, Switzerland, France, Luxembourg and Denmark to “contain the spread” of coronavirus, according to a March 16 notice. Germany clarified that the “cross-border flow of goods will continue to be permitted” and cross-border commuting will be allowed, but people traveling for “other reasons” should expect to face restrictions.
In addition, Poland is not allowing in foreigners and banned all international air and rail services for citizens, the country said March 13. Latvia will also close its borders, except for Latvian citizens, starting March 17 local time, according to the U.S. Embassy in Latvia. Kenya’s Ministry of Health said it will not allow travelers from countries with reported cases of coronavirus.
More countries are introducing export restrictions due to fears that surges in demand for face masks and other protective equipment will result in exporters selling to the highest bidder as opposed to exporting medical equipment to places where it is desperately needed, said Chad Brown, a trade policy fellow at the Peterson Institute for International Economics, speaking on a March 14 Trade Talks podcast. Countries are also worried speculators will buy large quantities of face masks and wait for prices to spike before selling them for profit, especially because “it looks like demand is going to outpace supply for a good long while,” Brown said.
These export restrictions could also have broader consequences for future partnerships, Brown said. As countries become more worried about the safety of their supplies, they may unintentionally cut off supply chains. “I think the really big risk that results from all of this is that there’s this tit-for-tat dynamic,” Brown said. “It just undermines the ability for them to cooperate in the future.”
In addition, quarantines and factory closures are decreasing exports from China and have “short-circuited the global supply chain,” although the country appears to be regaining its trucking capacity, according to a March 12 post from Venable. The cancellation of more than 100 trans-Pacific sailings to North America, however, has led to “container imbalance on both sides of the Pacific affecting both exporters and importers,” the post said. The law firm expects freight costs to increase until at least August, and shippers should be prepared for higher rates and surcharges, “given the predicted increase in port congestion and freight costs.”