Market Overview

House Democrats Raise Concerns About FEMA Logistics Initiative

Share:
House Democrats Raise Concerns About FEMA Logistics Initiative

The Federal Emergency Management Agency's airlift of emergency supplies to combat the novel coronavirus is kicking into overdrive, but House lawmakers are raising questions about how decisions are being made to intervene in private-sector supply chains and divert resources to locations identified by the agency or the White House.

Meanwhile, the U.S. government is implementing a ban on exports of personal protective equipment.

Seven all-cargo flights arrived Tuesday — six at Chicago's O'Hare International Airport and one at Los Angeles International Airport — marking the greatest number of flights since the start of Project Airbridge on March 29, according to FEMA.

The agency said an additional 72 flights are scheduled over the next three weeks. In the last week, air carriers under contract to FEMA and the Department of Health and Human Services have delivered 83.5 million gloves, 4.6 million surgical masks, 1.2 million surgical gowns and 300,000 N95 respirators from Asia, Central America and Mexico. Besides Chicago and Los Angeles, flights are going to Miami; Columbus, Ohio (Rickenbacker International Airport); and Louisville, Kentucky.

Materials are deconsolidated at local warehouses and delivered around the country by large health care distributors such as Cardinal Health and McKesson Corp.

Project Airbridge is part of a broader supply chain initiative to accelerate delivery of scarce medical supplies purchased overseas by private distributors to areas besieged with COVID-19 cases.

On Wednesday, FedEx Corporation (NYSE: FDX) unveiled details of its participation in the FEMA airlift. This week, in coordination with DuPont, FedEx aircraft transported more than 450,000 Tyvek protective suits from Vietnam to Texas. More than 500,000 of the suits will be shipped each week for several weeks, FedEx said.

The integrated logistics company, based in Memphis, Tennessee, will operate several flights this week carrying personal protective equipment (PPE) for Medline Industries Inc. from China to Chicago. Medline, a manufacturer and distributor in the FEMA program, anticipates bringing 7 million face masks, additional PPE and anesthesia supplies to the U.S., FedEx said.

Medline has said it is also ramping up production of reusable face masks and gowns manufactured in Latin America and is working to source additional manufacturing capabilities worldwide.

Other airlines involved in Project Airbridge include Atlas Air Worldwide Holdings, Inc. (NASDAQ: AAWW), National Airlines and United Parcel Service, Inc. (NYSE: UPS), which disclosed Tuesday that it is brokering and operating more than two dozen flights on FEMA's behalf. Both UPS and FedEx are also responsible for document preparation, export/import clearance, cross-docking and storage.

Congressional oversight

The heads of two House committees are seeking answers about FEMA's methods for acquiring and distributing PPE and other medical supplies to states, including the management of Project Airbridge.

Homeland Security Chairman Bennie Thompson and Carolyn Maloney, D-New York, chairwoman of the Oversight and Reform Committee, said they want details on how equipment is prioritized and what role distributors play in directing the flights since FEMA has previously said it doesn't know what is in the pipeline until the flights are loaded overseas. Information requested includes all flights scheduled through Project Airbridge, their destinations, the manifests detailing the quantities and types of PPE and essential medical supplies being imported, and all relevant documents.

Their letter to FEMA Administrator Peter Gaynor was prompted by reports FEMA is confiscating shipments of supplies and equipment ordered by states and hospitals, and redirecting them to other users. Several reports also revealed that President Donald Trump's adviser and son-in-law Jared Kushner is involved in the FEMA effort and may be circumventing standard protocols regarding emergency distribution of relief supplies.

"After encouraging the States to take care of themselves, the Trump Administration now appears to be positioning FEMA to engage in the redirection of private supply chains — but the agency's opaque and evolving processes are clearly not meeting the needs that communities have right now for PPE and medical supplies," the lawmakers wrote.

White House officials described FEMA's role as acting like a logistics "control tower," according to The New York Times.

According to the newspaper, FEMA "allows those distributors to sell about half the equipment to companies and counties that had previously placed orders" while the "other half of the shipments must be sold to counties that the federal government prioritizes by the severity of the outbreak."

PPE export ban

At the same time FEMA is accelerating efforts to import vast quantities of medical supplies, it announced plans to ban exports of PPE without its explicit approval. A ruling scheduled for publication in Friday's Federal Register will implement Trump's executive order last Friday limiting scarce medical resources to domestic use.

Under the recently invoked Defense Production Act, the president can control the distribution of materials deemed essential to national defense. The export ban, which lasts for four months, covers N95 filtering respirators and related equipment, air purifying respirators, and surgical masks and gloves.

FEMA and U.S. Customs and Border Protection are working together to prevent domestic brokers, distributors and other intermediaries from diverting the critical medical resources overseas. FEMA said CBP will detain PPE shipments at land, air and sea ports while it decides whether to return the goods for use within the U.S., to purchase the PPE on behalf of the federal government or allow it to be exported. FEMA said it will make a determination within "a reasonable time" and try to minimize supply chain disruptions.

An exemption to the export ban applies to U.S. manufacturers that had export contracts since at least Jan. 1 "so long as at least 80% 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 exemption is designed to limit the impact on preexisting commercial relationships that are important to international trade and for humanitarian reasons, the rule says. If FEMA determines that a shipment falls within the exemption, the materials may be transferred out of the country without further review.

Image: FEMA/Alex Hall

 

Related Articles (AAWW + FDX)

View Comments and Join the Discussion!

Posted-In: Congress Coronavirus Covid-19 FEMA Freaightwaves LogisticsGovernment News

Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com