On April 29, 2024, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule for a new license exception under the Export Administration Regulations (EAR), License Exception Medical Devices (MED) (15 C.F.R. § 740.23). BIS also issued a press release regarding the new license exception stating, in part, that License Exception MED “only authorizes transfers of medical devices that are regularly approved through the licensing process.” Additionally, BIS issued guidance in the form of Frequently Asked Questions (FAQs).
License Exception MED authorizes EAR99 “medical devices” and related “parts,” “components,” “accessories”, or “attachments” (as these terms are defined in the EAR) that are classified as EAR99 and exclusively for use in or with medical devices to or within Russia, Belarus, or the Crimea region and covered regions of Ukraine (currently the self-proclaimed Donetsk People’s Republic (DPR) and Luhansk People’s Republic (LPR)). License Exception MED explicitly imposes a verification requirement on exporters, reexporters, or transferors relying on this license exception.
License Exception MED is not available in certain circumstances, such as transactions involving “proscribed parties.” Additionally License Exception MED is not available when the medical devices or related parts are destined to a “production” “facility” or when the exporter, reexporter, or transferor has “knowledge” (actual or constructive) that the item is intended to develop or produce items (although this does not include assembly in a hospital or other health care facility of a finished “medical device” completely “produced” outside of Russia, Belarus, Crimea, DPR, or LPR only to use the medical device at that facility).
Please see below for more details on License Exception MED.
License Exception MED authorizes EAR99 medical devices and EAR99 related parts, accessories, components, or attachments that are exclusively for use in or with EAR99 medical devices
License Exception MED authorizes the export, reexport, or transfer (in country) to or within Russia, Belarus, or the Crimea, DPR, or LPR regions of:
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EAR99 “medical devices” as that term is defined in the EAR (i.e., “devices” as defined in section 201 of the Federal Food, Drug, and Cosmetic Act, including medical supplies, instruments, equipment, equipped ambulances, institutional washing machines for sterilization, and vehicles with medical testing equipment); and
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EAR99 “parts,” “components,” “accessories,” and “attachments” that are exclusively for use in or with EAR99 “medical devices” (i.e., those items that are necessary for replacement or maintenance in or with “medical devices”).
License Exception MED is available for licensing requirements under sections 746.5 (i.e., items set forth on Supplements No. 4 and No. 6 to part 746), 746.6 (i.e., imposing a comprehensive embargo on Crimea, DPR, or LPR), and 746.10 (imposing licensing requirements on “luxury goods” as set forth in Supp. No. 5 to Part 746) of the EAR.
Items such as temperature monitors and biologics that are subject to the EAR and identified on the CCL or in one of the Supplements to Part 746 require a license for export, reexport, or transfer to Russia, Belarus, Crimea, DPR, or LPR, as those items are not “medical devices” as defined under the EAR and therefore not eligible for License Exception MED. Additionally, parts, components, accessories, or attachments that are exclusively for use in or with EAR99 medical devices but are set forth on the Commerce Control List, are not eligible for License Exception MED.
Limitations of License Exception MED
In addition to only authorizing items that meet the definition of “medical devices” and are classified as EAR99, License Exception MED does not authorize exports, reexports, or transfers:
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To “proscribed persons” (i.e., persons who are prohibited from receiving the items at issue or participating in the transaction under the EAR without authorization under the EAR, including parties on the Entity List or the Military End User List).
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To a “production” “facility” (i.e., a building or outdoor area in which people use an item that is built, installed, produced, or developed for a particular purpose, including all production stages such as, product engineering, manufacture, integration, assembly (mounting), inspection, testing, and quality assurance); or
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When there is “knowledge” that the items are intended to develop or produce items.
However, License Exception MED clarifies that assembly in a hospital or other health care facility of a finished “medical device” completely “produced” outside of Russia, Belarus, Crimea, DPR, or LPR only to use the medical device at that facility is not considered “production” activity and would be eligible for License Exception MED. The FAQs also state that License Exception MED cannot be used if there is “knowledge” that any item “subject to the EAR” (including foreign-produced items to Russian or Belarussian “military end users”) is intended entirely or in part for a Russian or Belarussian “military end user” or could be used to support a “military end use” as defined in the EAR.
The FAQs confirm that items eligible for License Exception MED can be sold to “commercial entities and “enterprises” (i.e., retail outlets or distributors) that are not owned or operated by the Russian government that sells medical devices to individual Russian customers. However, those parties must conduct due diligence to confirm items eligible for License Exception MED are not re-sold to ineligible Russian parties, including “military end-user” or “military-intelligence end user.”
Finally, the FAQs state that License Exception MED cannot be used for exports, reexports, or transfers (in-country) destined to:
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Russian or Belarusian “military end users,” any Entity List party; any “production” “facility” in Russia, Belarus, Crimea, LPR, or DPR; or any other party that will use the items for “development” or “production” of items;
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Medical facilities that are owned or operating under the auspices of the Russian or Belarusian Ministries of Defense; or
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Any “proscribed person,” including but not limited to ‘military end users’ or in situations in which an entity on the Entity List or on the Military End-User (MEU) List is a party to the transaction as a “purchaser,” “intermediate consignee,” “ultimate consignee,” or “end-user.”
However, “proscribed persons” do not include parties on the SDN List that are authorized by a specific or general license, including SDNs subject to the expanded export controls under section 744.8 (imposing license requirements on items subject to the EAR when certain SDNs are involved in the transaction, including SDNs designated under Executive Order (EO) 14024). Under section 744.8(b), a BIS license is not required when the export, reexport, or transfer is authorized under an OFAC specific or general license or exempt under OFAC’s regulations. Therefore, License Exception MED appears to authorize the export, reexport, or transfer of eligible medical devices or parts, components, accessories, or attachments to SDNs designated under EO 14024 to the extent such transactions are eligible for OFAC’s GL 6C.
Verification requirement in License Exception MED
BIS expects exporters, reexporters, and transferors to follow the “Know Your Customer” Guidance as set forth in Supp. No. 3 to part 732 and other guidance to understand the ultimate end use and end users of transactions. Additionally, License Exception MED imposes a verification requirement on exporters, reexporters, or transferors. These parties are responsible for ensuring that the eligible items are not diverted to “proscribed persons,” to “production” “facilities,” or where there is “knowledge” that the items are intended to develop or produce items. License Exception MED includes examples of verification processes for obtaining information from a consignee:
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obtaining affirmations or other documentation from a consignee as part of an exporter, reexporter, or transferor’s compliance program; and
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periodic on-site spot-checks in Russia, Belarus, Crimea, DPR, or LPR, by the exporter, reexporter, or transferor; an internationally accredited auditing firm; or by an internationally recognized non-governmental humanitarian organization.
Next steps
Please reach out to any of the Hogan Lovells contacts below for additional information or to assess whether your company can rely on License Exception MED.
Authored by Annika Lichtenbaum, Ashley Roberts, Deborah Wei, Julia Diaz, Ajay Kuntamukkala, and Aleksandar Dukic.
