Key Takeaways:

• New License Exception MED under the Export Administration Regulations (“EAR”) authorizes the export, reexport, and/or transfer of EAR99 “medical devices,” or “parts,” “components,” “accessories,” and “attachments” that are exclusively for use in such medical devices to or within Russia, Belarus, and the Crimea, so-called Donetsk People’s Republic, and so-called Luhansk People’s Republic regions of Ukraine.
• The license exception does not cover the export, reexport, and or/transfer of medical devices to “proscribed persons,” a “production” “facility,” or when an exporter has “knowledge” that the item is intended to develop or produce other items.
• In addition, there are specific compliance requirements to use this license exception, including the establishment of a system of distribution to avoid delivering medical devices to unauthorized persons, and a requirement to verify the effectiveness of such system of distribution.

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License Exception MED
On April 25, 2024, the Department of Commerce’s Bureau of Industry and Security (“BIS”) announced a final rule for a new license exception for “medical devices” under § 740.23 of the EAR (“License Exception MED” or “MED”). License Exception MED is available as of April 29, 2024, and authorizes the export, reexport, or transfer (in-country) of “medical devices” or “parts,” “components,” “accessories,” and “attachments” that are used exclusively for use in such medical devices to or within Russia, Belarus, and the Crimea, so-called Donetsk People’s Republic, and so-called Luhansk People’s Republic regions of Ukraine under the following criteria:

• The items are designated as EAR99;
• Pursuant to § 772.1 of the EAR, the items meet the definition of “medical devices” as defined in section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321) to include medical supplies, instruments, equipment, equipped ambulances, institutional washing machines for sterilization, and vehicles with medical testing equipment.

Restrictions on License Exception MED
License Exception MED does not relieve exporters of applicable license requirements under § 746.8 or items otherwise captured by a foreign direct product rule. In addition, License Exception MED cannot be used to export: 

• To “proscribed person(s)” as defined in § 772.1, which includes a person on the Entity List, Military End-User List, or denied persons.
•  To a “Production” “facility” as defined in § 772.1. 
  • However, BIS does not consider the assembly in a hospital or other healthcare “facility” of a finished “medical device” completely “produced” outside of the covered territories for the sole purpose of using that “medical device” at that facility as a “production” activity.
• If the exporter has “knowledge” that the item is intended to develop or produce other items instead of being used exclusively as a medical device.
  • “Knowledge” under § 772.1 includes not only positive knowledge that the circumstance exists or is substantially certain to occur, but also an awareness of a high probability of its existence or future occurrence.

And if exporting medical device “parts,” “components,” “accessories,” and “attachments”:

• The item may be provided solely to replace a broken or nonoperational “part,” “component,” “accessory,” or “attachment” for use in or with a “medical device,” or the replacement is necessary and ordinarily incident to the proper preventative maintenance of such a “medical device;” and
• The quantity of replacement “parts,” “components,” “accessories,” and “attachments” that are exported, reexported, transferred (in-country), and stored does not exceed the number of corresponding operational items currently in use in or with the relevant medical devices.

Compliance Requirements
Lastly, BIS is imposing specific compliance program requirements to use the license exception to better monitor and avoid unintentionally delivering medical products to unauthorized persons and assisting the Russian industrial base. Exporters, reexporters, and transferors availing themselves of License Exception MED must meet the following compliance requirements: 

• They must maintain a system of distribution that ensures that “medical devices” are not delivered to “proscribed persons,” or entities engaged in the “production” of any product. They are responsible for ensuring that the items being exported, reexported, or transferred (in-country) are not diverted contrary to the terms and conditions of the MED.
• They must verify the effectiveness of the distribution system, which may entail obtaining certain information from a consignee, such as affirmations or other documentation from a consignee as part of their compliance program, or performing periodic on-site spot-checks.
  • If one chooses to use spot-checks, these can be completed by an exporter, reexporter, or transferor’s staff; or by hiring an internationally accredited auditing firm or an internationally recognized non-governmental humanitarian organization in Russia, Belarus, or the Crimea, so-called Donetsk People’s Republic, and so-called Luhansk People’s Republic regions of Ukraine.
• Records of these verification activities must be maintained for five years, and upon request, must be provided to BIS or any other official of the U.S. designated by BIS.

Foley Hoag will continue to provide updates as the situation with respect to Ukraine continues to develop.