REBO Quarterly: 2024 in Retrospect
STATE-LEVEL REAL ESTATE BENEFICIAL RESTRICTIONS ON OWNERSHIP
2024 was a busy year for legislatures throughout the United States on the topic of limitations and restrictions on ownership of real property assets. Last year, state legislators introduced over 75 bills in 29 states throughout the country that affect the beneficial ownership of real property. Legislative proposals affecting beneficial ownership generally fell into three categories: restricting ownership of agricultural land by foreign persons or entities; restricting ownership of any real property near critical infrastructure by foreign persons or entities; and restricting ownership of agricultural land by corporate entities.
The most common ownership bills specifically targeted individuals, entities, and governments from certain countries designated as “foreign countries of concern.” These “foreign countries of concern” most often included the People’s Republic of China, Iran, Russia, North Korea, and Venezuela.
While the majority of bills introduced pertain to foreign ownership, certain states have also explored restricting domestic corporate ownership of real property. Growing interest in enacting corporate farming laws has the potential to trigger unintended consequences that the commercial real estate industry must be aware of when acquiring tracts of land, particularly when acquired for development in rural or semi-rural areas. In addition, corporate ownership provisions may be intertwined within larger foreign ownership legislative proposals, necessitating a careful analysis of all bills affecting beneficial ownership of land.
Successfully Enacted State Beneficial Ownership Bills
Of the successful bills prohibiting certain parties from owning land, the definition of those subject to restriction varies by state. The majority of bills passed in 2024 prohibit “foreign adversary” citizens, governments, and business entities as defined in 15 C.F.R. § 7.4, a list generated by the secretary of the Department of Commerce, which currently lists the People’s Republic of China, Cuba, Iran, North Korea, Russia, and Venezuela. Others prohibit adversaries designated by the secretary of state as a Country of Particular Concern,1 or countries subject to international traffic in arms regulations under 22 C.F.R. § 126.1.2 Some seek to define adversaries as those parties on sanctions lists maintained by the Office of Foreign Assets Control,3 while others directly name a list of countries.4
States also diverge in the exemption provisions they include in law. Louisiana and Indiana exempt legal permanent residents from their foreign ownership laws. Louisiana’s HB 238 also contains a provision not found in other bills passed this year that exempts religious, educational, charitable, or scientific corporations. Oklahoma, Tennessee, Nebraska, and Kansas bills exempt from their ownership laws business entities that have a national security agreement with the Committee on Foreign Investment in the United States (CFIUS). Georgia, Mississippi, and South Dakota bills stipulate that foreign ownership prohibitions do not apply to business entities leasing land for agricultural research and development purposes. Indiana specifies that its prohibition law does not apply to agricultural land that has not been used for farming within the last five years, unless it is recognized by the US Farm Service Agency as farmland.
Proposed foreign ownership bills around the country differ in their treatment of existing real property owned by prohibited foreign parties. The most common treatment of the bills that were successful in 2024 was to direct any prohibited parties to divest of their ownership interest within a certain timeframe of the bill’s effective date, typically one or two years.5 Some bills specify that their provisions only apply after the bill’s effective date or a future date.6 In rare circumstances, a bill will apply retroactively; Idaho’s HB 496 was signed into law in March 2024 but applied retroactively to April 2023.
The following 15 bills impacting beneficial ownership of land were approved by state legislatures in 2024:
Georgia SB 420
Introduced on 29 January and signed into law on 30 April, the bill adds a new section to the code that provides that no nonresident alien shall acquire directly or indirectly any possessory interest in agricultural land or land within 10 miles of any military installation. In this case, “nonresident alien” is defined narrowly to mean a noncitizen of the United States who also is an agent of a foreign government designated as a foreign adversary and has been absent from the United States for six out of the preceding 12 months. The prohibition also applies to business entities domiciled in a foreign adversary or domiciled in the United States but with 25% ownership by a foreign adversary.
Idaho HB 496
HB 496 was introduced on 7 February and signed by the governor on 12 March. It amends existing foreign ownership restrictions to exempt federally recognized Indian tribes from the definition of “foreign government.” It also adds forest lands to the kinds of property that foreign governments and state-controlled enterprises are prohibited from acquiring.
Indiana HB 1183
Introduced on 9 January and signed into law on 15 March, the bill, in addition to prohibiting citizens or business entities controlled by a foreign adversary (which includes the People’s Republic of China, Cuba, Iran, North Korea, Russia, and Venezuela) from acquiring agricultural land in the state, also specifically prohibits the acquisition of mineral rights, water rights, or riparian rights on agricultural land.
Iowa SF 2204
Introduced on 1 February and signed into law on 9 April, the bill tightens existing Iowa statutes restricting foreign persons and business entities from acquiring agricultural land suitable for use in farming. The act amends Iowa code by eliminating a provision in law that suspends certain registration requirements, thereby restoring its requirements. SF 2204 also expands the information required to be completed in a registration form to include the identity of the foreign person or authorized representative; the identity of any parent corporation, subsidiary, or person acting as an intermediary; the purpose for holding the agricultural land; and a listing of any other interest in agricultural land held by the registrant that exceeds 250 acres.
Iowa SF 574
SF 574 was introduced on 24 April 2023, and carried over into 2024, where it was signed by the governor on 1 May. The bill created the “Major Economic Growth Attraction Program.” As part of multiple provisions relating to economic development, the law authorizes the Iowa Economic Development Authority board to give an exemption to the existing restrictions in law on agricultural land holdings for a foreign business if it meets certain requirements. These requirements include a business locating the project on a site larger than 250 acres and a business making a qualifying investment in the proposed project of over US$1 billion.
Kansas SB 172
SB 172 was introduced on 7 February and passed by the Kansas Legislature on 30 April. However, Kansas Governor Laura Kelly (D) vetoed the bill. The bill would have prohibited foreign principals from acquiring any interest in nonresidential real property within 100 miles of any military installation. Given the wide restriction range and the position of McConnell Air Force Base in Wichita near the center of the state, the bill would have applied to most areas of the state. Democrats largely opposed the legislation, and critics of the bill voiced concern that language in the bill allowing seizure of private property without guaranteed compensation would be unconstitutional. In her veto message, Governor Kelly wrote:
“While I agree that it is important for our state to implement stronger protections against foreign adversaries, this legislation contains multiple provisions that are likely unconstitutional and cause unintended consequences…the retroactive nature of this legislation raises further serious constitutional concerns.”
The bill ultimately was not reconsidered by legislators and did not become law.
Louisiana HB 238
HB 238 was introduced on 27 February and was signed into law on 3 June. The bill restricts foreign adversaries or corporations in which a foreign adversary has a controlling interest from owning, acquiring, leasing, or otherwise obtaining any interest in agricultural land. The law defines “foreign adversary” as the People’s Republic of China (and Hong Kong), Iran, Cuba, North Korea, Russia, and Venezuela.
Mississippi SB 2519
Introduced on 16 February and signed by the governor on 15 April, the bill prohibits ownership of majority part or a majority interest in forest or agricultural land by a nonresident alien. “Majority part” or “majority interest” means an interest of 50% or more in the aggregate held by nonresident aliens. “Nonresident alien” is defined as an individual or business entity domiciled in the People’s Republic of China, Cuba, Iran, North Korea, Russia, or Venezuela, or an entity domiciled in the United States but majority owned by a foreign adversary entity. In addition, the bill specifies that land classified as industrial or residential but is otherwise used as forest or agricultural land shall be subject to the act.
Nebraska LB 1301
Introduced on 16 January at the request of the governor, LB 1301 was signed on 16 April. The bill amends existing law to prohibit nonresident aliens, foreign corporations, and foreign governments from purchasing, acquiring title to, or taking any leasehold interest extending for a period for more than five years (or any other greater interest less than a fee interest) in any real estate in the state by descent, devise, purchase, or otherwise. The law also prohibits restricted entities from purchasing, acquiring, holding title to, or being a lessor or lessee of real estate for the purpose of erecting manufacturing or industrial establishments, with certain exemptions.
Nebraska LB 1120
Separately, LB 1120, which was introduced on 10 January and also signed into law on 16 April, requires that upon a conveyance of real property located in whole or in part within a restricted area (i.e., within a certain radius of critical infrastructure or a military installation), the purchaser must complete and sign an affidavit stating it is not affiliated with any foreign government or nongovernment person determined to be a foreign adversary pursuant to 15 C.F.R. § 7.4. Specifically, the bill targets those individuals and entities from the People’s Republic of China, Cuba, Iran, North Korea, Russia, and Venezuela.
Oklahoma SB 1705
Introduced on 5 February and approved by the governor on 31 May, the bill amends the exiting foreign ownership law to prohibit foreign government adversaries and foreign government enterprises from acquiring land in the state. The law defines a “foreign government enterprise” to mean a business entity or state-backed investment fund in which a foreign government adversary holds a controlling interest.
South Dakota HB 1231
HB 1231 was introduced on 31 January and signed by the governor on 3 March. Prior to passage, South Dakota prohibited aliens and foreign governments from acquiring agricultural lands exceeding 160 acres. HB 1231 prohibits foreign entities from owning, leasing, or holding an easement on agricultural land in the state unless the lease is exclusively for agricultural research purposes and encumbers no more than 320 acres, or the lease is exclusively for contract feeding of livestock.
Tennessee HB 2553
HB 2553 was introduced on 31 January and was signed into law on 21 May. The bill replaces the prior definitions of individuals and entities restricted in their real property ownership and expands upon land ownership restrictions through the creation of two separate prohibitions: one that restricts a prohibited foreign-party-controlled business from acquiring an interest in public or private land and another that restricts a prohibited foreign party from acquiring an interest in agricultural land (regardless of whether the party intends to use it for nonfarming purposes). Additionally, HB 2553 creates the Office of Agricultural Intelligence within the Tennessee Department of Agriculture to enforce the new law.
Utah HB 516
Introduced on 8 February and signed into law on 21 March, the bill modifies the definition of a “restricted foreign entity” to prevent entities owned or majority controlled by the following governments from obtaining any interest in real property in the state: the People’s Republic of China, Iran, North Korea, or Russia.
Wyoming SF 77
SF 77 was introduced on 6 February and signed by the governor on 14 March. The bill allows the governor and the Wyoming Office of Homeland Security to designate critical infrastructure zones and requires county clerks to report each transaction involving property within a five-mile radius of the designated zones. The law also authorizes the attorney general to take any action necessary to determine the identity of any party reported by the county clerks.
Corporate Ownership Spotlight
While the majority of bills introduced in the states regarding beneficial ownership of land focused on limiting foreign actors, at least five bills proposed changes that would reduce the ability of business entities to acquire real property. Nebraska’s LB 1301 and Iowa’s SF 2204, detailed above, both made changes to existing statutes that restrict corporate entities from engaging in farming in those states. In addition, two bills in California and one in Virginia took aim at investment funds acquiring land or water rights.
California Assembly Bill 1205
As originally introduced, the bill required the State Water Resources Control Board to conduct a study and report to the legislature on the existence of speculation or profiteering by an investment fund in the sale, transfer, or lease of an interest in any surface water right or groundwater right previously put to beneficial use on agricultural lands. The measure was amended in August 2024 to remove all study provisions and instead renames and makes changes to the unrelated California Promise Program.
California SB 1153
SB 1153 would have prohibited a hedge fund from purchasing, acquiring, leasing, or holding a controlling interest in agricultural land within the state. The bill would have required the California Department of Food and Agriculture to compile an annual report containing, among other information, the total amount of agricultural land that is under hedge fund ownership, how that land is being put to use, and any legislative, regulatory, or administrative policy recommendations in light of the information from the annual report. The bill did not receive a hearing before the end of the legislative session.
Virginia SB 693
SB 693 was introduced on 19 January but did not receive a hearing before the legislative session concluded. The bill would have restricted any partnership, corporation, or real estate investment trust that manages funds pooled from investors, is a fiduciary to such investors, and has US$50 million or more in net value or assets under management on any day during a taxable year from acquiring any interest in residential land in the state.
Ongoing Rulemaking and Court Challenges
In addition to the aforementioned bills that were signed into law in 2024, certain other bills that were passed in 2023 continue to be active in 2024 and 2025. Specifically, in Florida, bills related to the foreign ownership of real property in the state continue to make headlines. Florida Statute § 692.202–.205, which were signed into law in 2023, create a three-pronged approach to restricting foreign ownership of real property assets in the state.7 The first prong prohibits the foreign ownership of agricultural land in the state with few exceptions. The second prong prohibits foreign ownership of any real property within a certain radius of critical infrastructure or military installations within the state. Lastly, the third prong prohibits Chinese ownership (at the individual, entity, or government level) of any real property within the state. The statute also creates a registration regime for all real property assets held by foreign principals prior to 1 July 2023. Administrative rules and regulations regarding the first prong of the statute were finalized as of 4 April 2024. Final rules surrounding the third prong of the laws were published in late January by the Florida Department of Commerce and will become effective 6 February 2025. In addition to the rule promulgation, the third prong of the statute is also currently being challenged in the Eleventh Circuit Court of Appeals. We continue to actively monitor these developments.
In Arkansas, SB 383 was enacted in 2023. The proposal prohibited foreign investments through two separate restrictions: a restriction on foreign-party-controlled businesses from acquiring interest in land, and a restriction on prohibited foreign parties from acquiring any interest in agricultural land. In November 2024, Jones Eagle—a digital asset mining company owned by a Chinese-born naturalized US citizen—filed a lawsuit requesting a preliminary injunction against the law. On 9 December, the presiding federal judge granted the injunction, which prevents enforcement of the law against the company until further orders from the court. The plaintiff argues that the federal government retains exclusive authority over foreign affairs, and that the Arkansas law violates this foreign affairs preemption. The court found that Jones Eagle was likely to prevail on the question, noting that the Arkansas law “go[es] so far as to target specific foreign countries for economic restrictions and conflict with the express foreign policy of the federal government as represented by the FIRRMA and ITAR regimes.”8 The case is pending in the Eighth Circuit Court of Appeals. We will continue to actively monitor these developments and their effect on recent and upcoming legislation regarding foreign ownership of real property.
FEDERAL-LEVEL RESTRICTIONS ON BENEFICIAL OWNERSHIP OF REAL ESTATE
Like state legislatures, there was a strong focus on foreign investment in agricultural land in Congress in 2024. Unlike state legislatures, Congress has not yet implemented restrictive or prohibitive measures addressing foreign or corporate ownership of real property.
Though largely a Republican effort, a few bills were bipartisan: H.R. 7678, the Protecting Against Foreign Adversary Investments Act sponsored by then-Representative Elissa Slotkin (D-MI-7), would have required CFIUS’s approval of certain real estate sales to foreign entities of concern and required a report to Congress assessing the feasibility of divestiture of real estate owned by foreign entities of concern.
Members of Congress also introduced several bills building on the Agricultural Foreign Investment Disclosure Act (AFIDA) and CFIUS authorities by (i) expanding AFIDA reporting mandates or increasing penalties for nondisclosure or both, and (ii) extending CFIUS jurisdiction over broader categories of land. There were also bills that would create new stand-alone prohibitions on purchases of US land by certain foreign persons.
A provision of proposed bill H.R. 7476 to counter Chinese influence would have required the United States Department of Agriculture (USDA) to prohibit the purchase of agricultural land by companies owned in full or in part by the People’s Republic of China. S. 3666 would have required data sharing between the USDA and CFIUS, while S. 4443 would have directed the director of national intelligence to complete a study on the threat posed to the United States by foreign investment in agricultural land. Most recently, Senator Mike Braun (R-IN) and Representative Dan Newhouse (R-WA-4) introduced companion bills requiring the USDA to notify CFIUS of each covered transaction it has reason to believe may pose a risk to national security.
In addition to stand-alone legislation, elements of some of the above bills were included in annual budget appropriations omnibus packages. On 4 March 2024, the federal Fiscal Year 2024 Agriculture Appropriations bill was signed into law by President Joe Biden as part of the Consolidated Appropriations Act, 2024. The package included a section addressing foreign ownership of agricultural land: it required the secretary of agriculture to be included as a member of CFIUS on a case-by-case basis with respect to covered transactions involving agricultural land, biotechnology, or the agricultural industry. The bill also directed the USDA to notify CFIUS of any agricultural land transaction that it has reason to believe may pose a risk to national security, particularly on transactions by the governments of the People’s Republic of China, North Korea, Russia, and Iran.
2025 FORECAST
Federal Level
The Farm Bill is a five-year package of bills that governs a broad range of agricultural programs covering commodities, conservation, nutrition, rural development, forestry, energy, and more. The last time a Farm Bill was passed into law was the Agriculture Improvement Act of 2018, which was passed on 20 December 2018 and expired on 30 September 2023. Facing a stalemate on negotiations of a new Farm Bill in late 2023 and early 2024, members of Congress agreed to pass a one-year extension of the 2018 Farm Bill to continue authorizations until the end of the fiscal year (September 2024) and the end of the crop year (December 2024).
However, Senate and House negotiations on a new Farm Bill did not sufficiently progress in 2024, so agriculture leaders again passed a one-year extension on 21 December 2024 to continue authorizations until September 2025. While there is strong commitment from Republican Congressional leadership to finalize the bill this year, success will depend on many factors, including on how quickly the House and Senate can address other policy priorities.
Both the Senate Democratic and the House Republican agriculture leaders have released draft Farm Bill proposals for a new five-year authorization. Both parties and chambers seem to agree on the need to address foreign ownership of agricultural land. The Senate Democratic and the House Republican proposals include provisions to the following:
Establish a minimum civil penalty if a person has failed to submit a report or has knowingly submitted a report under AFIDA with incomplete, false, or misleading information.
Direct outreach programs to increase public awareness and provide education regarding AFIDA reporting requirements.
Require the USDA to designate a chief of operations within the department to monitor compliance of AFIDA.
Mandate establishment of an online filing system for AFIDA reports.
In addition, the federal House Agriculture Committee has six incoming Republicans this year—five of them newcomers to Congress—who will want to make their mark on agricultural policy in the new legislative session. Newcomer Mark Messmer (R-IN-8) previously sponsored and passed a bill in 2022 in Indiana to cap the amount of agricultural land any foreign business entity can acquire in the state. In addition, Rep. Newhouse, who has prioritized addressing foreign ownership of agricultural land in the past two years, joins the House Agriculture Committee this year. We expect to see legislation from Rep. Newhouse in this area.
State Level
With respect to the outlook in the states, 46 states meet annually, while four states (Nevada, North Dakota, Texas, and Montana) meet only during odd-numbered years. With the additional four states convening this year, we expect to see a very active year for legislative proposals affecting beneficial ownership of real property.
New Jersey and Virginia are the only states where bills from the 2024 legislative session carry over into the 2025 session, which means that all legislative proposals that were not signed into law in 2024 in the other 48 states are considered to have died and must be re-introduced in 2025.
Already as of 29 January, at least 57 bills affecting beneficial ownership have been pre-filed or introduced in 22 different states. The majority of these bills so far are aimed at preventing foreign entities from acquiring agricultural land.
Footnotes
1 Oklahoma Senate Bill (SB) 1705.
2 Tennessee House Bill (HB) 2553.
3 Nebraska Legislature Bill (LB) 1301.
4 Utah HB 516, South Dakota HB 1231.
5 Tennessee HB 2553; Kansas SB 172; Mississippi SB 2519; Utah HB 516.
6 Louisiana HB 238; Wyoming Senate File (SF) 77.
7 Marisa N. Bocci, Kari L. Larson & Douglas Stanford, Real Estate Beneficial Ownership Regulatory Alert: Florida Restricts Real Estate Ownership by Individuals and Entities From “Countries of Concern”, K&L Gates HUB (Sept. 11, 2023).
8 Jones Eagle LLC v. Ward, 4:24-cv-00990-KGB (E.D. Ark. Dec. 9, 2024).
Tariffs on Mexico, Canada Paused for 30 Days
Earlier today, President Trump announced that he agreed to delay imposing the additional 25% tariff on Mexican products for 30 days after Mexican President Claudia Sheinbaum promised to send soldiers to the US-Mexican border to help stop the flow of fentanyl and migrants into the United States. The two Presidents also agreed to negotiations to be held between the U.S. Secretary of State, Secretary of Treasury and Secretary of Commerce, and certain Mexican government officials.
Similarly, after finishing a conference call this afternoon with President Trump, Canadian Prime Minister Justin Trudeau announced that President Trump agreed to delay imposing the additional 25% tariff on Canadian imports for 30 days in consideration for Canada implementing a $1.3 billion border plan to reinforce the border to stop the flow of fentanyl, including appointing 10,000 frontline personnel and appointing a “Fentanyl Czar.”
The 10% additional tariff on Chinese imports are still set to become effective on February 4, 2025 (see China EO).
The additional IEEPA national security tariffs to be imposed on Mexican and Canadian goods pursuant to President Trump’s executive orders have not been canceled. The imposition of the tariffs has been just suspended to allow further bi-lateral negotiations to occur.
Due to current uncertainty, importers of Mexican and Canadian goods may seek to stock up on inventories over the next 30 days, which could cause logistical problems and major traffic at U.S. ports. Importers, however, will likely be exempt from the additional tariffs only if they meet the deadlines stated in the executive orders. These dates will most likely be updated to reflect the delayed implementation of the goods.
But any such imported goods will be exempt from the additional tariffs only if they meet the deadlines stated in the executive orders, which dates may or may not be updated to reflect the delayed implementation of the executive orders. Thus, importers need to closely monitor whether and how the timing for assessment of additional tariffs will be changed in any future pronouncements. The current executive orders provide that, in order to be exempt from the additional tariffs, the imported goods must have either (i) cleared U.S. customs, or (ii) been loaded or in transit on the final mode of transit on the way to the United States as of a certain date and time, as follows:
Such rate of duty shall apply with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern time on February 4, 2025, except that goods entered for consumption, or withdrawn from warehouse for consumption, after such time that were loaded onto a vessel at the port of loading or in transit on the final mode of transport prior to entry into the United States before 12:01 a.m. eastern time on February 1, 2025, shall not be subject to such additional duty, only if the importer certifies to CBP as specified in the Federal Register notice (see Section 2(a) of the Mexico EO and the Canada EO).
In sum, as of the close of business today, the 25% tariffs on Mexican and Canadian imports that were promulgated pursuant to the Mexico EO and the Canada EO have been suspended for 30 days. Thus far, however, the additional 10% tariff to be imposed on Chinese imports still remains intact.
Wearable Technologies and Employment Risks – EEOC Issues New Guidance
From smart watches to exoskeletons, wearable technologies are quickly changing the landscape of the American workplace. Several states and administrative agencies have responded to this shift by enacting new laws and issuing regulatory guidance concerning the use of such technologies. The latest of these responses includes a fact sheet issued by the U.S. Equal Employment Opportunity Commission (EEOC) titled “Wearables in the Workplace: Using Wearable Technologies Under Federal Employment Discrimination Laws.” The fact sheet provides guidance on how employers can use wearable technologies while maintaining compliance with various federal employment laws. More broadly, the fact sheet signals growing concern over the use of employee-monitoring technologies.
The General State of Wearable Technologies
Wearable technologies are digital devices worn or carried by employees that are used to track and collect certain types of information. Smart watches and GPS devices are common examples of wearable technologies. However, wearable technologies include a broad range of devices, such as environmental or proximity sensors which alert employees of nearby hazards, smart glasses or helmets which measure electrical activity in the brain, and exoskeletons which provide employees with increased strength and mobility.
Wearable technologies are becoming increasingly common in the workplace – and for good reason. By augmenting employees’ physical and perceptual abilities, these technologies can enhance workplace productivity and safety. Wearable technologies can be particularly valuable for companies struggling with an aging workforce or shortages of skilled labor. They can also be particularly valuable in construction, manufacturing, and warehousing industries which experience hundreds of thousands of non-fatal injuries and thousands of fatal injuries per year.
However, these benefits come with risks. One of the biggest risks is employee privacy. Several state and federal laws, such as the Americans with Disabilities Act (ADA) and state biometric information laws, protect certain information given by employees to their employers. Other risks include employee health, data security, and data interpretation. Since the wearable technologies industry is likely to expand in the future, government regulators have started to enact new laws and to adapt existing laws to account for these risks. The EEOC fact sheet on wearable technologies represents one piece related to this growing concern.
EEOC Guidance on Wearable Technologies
The EEOC’s recent guidance on wearable technologies provides several important considerations for employers. The EEOC has explained how employers can implement wearable technologies in the workplace while maintaining compliance with a variety of federal employment laws. It remains to be seen whether the EEOC under the Trump Administration will rescind or amend this guidance that was issued at the end of Biden’s Administration.
Medical Examinations and Disability-Related Inquiries
The EEOC’s guidance provides that wearable technologies may constitute “medical examinations” and/or “disability-related inquiries” in violation of the ADA.
To determine whether a test or procedure is a medical examination under the ADA, the EEOC will consider several factors, including whether the test measures an employee’s performance, whether the test is normally given in a medical setting, and whether medical equipment is used. Wearable technologies may be deemed to be conducting medical examinations when they track and collect information about an employee’s physical or mental condition, such as blood pressure monitors and eye trackers. Wearable technologies may also be deemed to be conducting medical examinations where they are conducting diagnostic testing, such as EEGs.
Disability-related inquiries, on the other hand, are questions that are likely to elicit information about an employee’s disability. Employers may be making disability-related inquiries where employees are required to provide health information, such as information about prescription drug use or a disability, in connection with using wearable technologies.
The ADA generally limits medical examinations and disability-related inquiries to situations where they are “job related and consistent with business necessity.” This may include situations where an employee makes a request for reasonable accommodation or where an employer is concerned that an employee poses a direct threat of serious harm due to their medical condition. Medical examinations and disability-related inquiries are also permitted: (1) when required under federal law or safety regulations; (2) for certain employees in positions affecting public safety, such as police officers or firefighters; and (3) when they are voluntary and part of an employee health program. If an employer uses wearable technologies to conduct medical examinations or disability-related inquiries outside of one of these exceptions, under the EEOC’s guidance, the employer risks violating the ADA.
Non-Discrimination
The EEOC’s guidance also provides that employers must not use information collected by wearable technologies to discriminate against employees based on a protected characteristic. Protected characteristics include, but are not limited to, race, color, religion, sex, national origin, age, disability, and genetic information.
For example, according to the EEOC, employers may violate non-discrimination laws by:
Using data from wearable technologies to infer that an employee is pregnant, then taking an adverse action against the employee as a result.
Relying on data from wearable technologies which produces less accurate results for certain protected classes, then taking adverse actions against those employees based on that data.
Tracking an employee to a medical center and then researching the purpose of the employee’s visit in a way that elicits genetic information.
Moreover, employers may not selectively use wearable technologies on a discriminatory basis nor use information from wearable technologies to make employment decisions which have a disproportionate adverse effect on the basis of a protected characteristic.
Reasonable Accommodations
The EEOC’s guidance also suggests that employers may need to make exceptions to the use of wearable technologies as reasonable accommodations under Title VII (religious belief, practice, or observance), the ADA (disability), or the Pregnant Workers Fairness Act (pregnancy, childbirth or related medical conditions).
Confidentiality
If an employer collects medical or disability-related data from wearable technologies, the employer, generally, must maintain that data in separate medical files and treat it as confidential medical information.
Other Laws and Guidance on Wearable Technologies
The guidance expressed in the EEOC fact sheet is similar to that presented by other administrative agencies. For example, the National Labor Relations Board’s (NLRB) former General Counsel Jennifer Abruzzo issued a memorandum in October 2022 addressing various technologies in the workplace, including wearable technologies. The memorandum warned that wearable technologies may impair or negate employees’ ability to engage in protected activity due to “the potential for omnipresent surveillance.”
In addition, several state legislatures have enacted laws regulating employee-monitoring technologies, including wearable technologies. Some of these laws regulate the collection and handling of employee biometric information.[1] Other laws regulate certain forms of employee location tracking,[2] or regulate employee surveillance more broadly.[3]
Key Takeaways
Employers who use wearable technologies in the workplace should:
Assess the type of information collected by the wearable technologies and determine whether that collection would constitute an improper medical examination or disability-related inquiry under the ADA.
Evaluate the accuracy and validity of the information collected by the wearable technologies before making any adverse employment decisions based on that information.
Refrain from using information collected by wearable technologies to discriminate against employees on the basis of a protected characteristic.
Consider whether any state or local laws govern the use of wearable technologies or the information collected by the wearable technologies.
Because the legal framework governing wearable technologies is quickly evolving, employers would be wise to consult with employment counsel to ensure their continued compliance with federal and state laws, regulations, and guidance.
Note: Since this post was written, the EEOC Fact Sheet appears to have been removed from the EEOC website. This may indicate that the new administration is not inclined to follow or issue the same guidance.
FOOTNOTES
[1] See, e.g., 740 Ill. Comp. Stat. 14/1 et seq.; Tex. Bus. & Com. Code § 503.001; Wash. Rev. Code § 19.375; H.B. 24-1130, 74th Gen. Assemb., 2nd Reg Sess. (Colo. 2024).
[2] See, e.g., Haw. Rev. Stat. § 378‑102; N.J. Stat. Ann. § 34:6B-22; Cal. Penal Code § 637.7; N.H. Rev. Stat. § 644-A:4.
[3] See, e.g., N.Y. Civ. Rights Law § 52-C; Conn. Gen. Stat. Ann. § 31-48d.
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New Tariffs on U.S. Imports from Canada, Mexico, and China
UPDATE (as of Feb. 3, 2025, at 10:45 AM ET): President Trump announced on TruthSocial an agreement with President Claudia Sheinbaum of Mexico to “immediately pause the anticipated tariffs for a one-month period during which we will have negotiations.” No similar such agreement has been announced with regard to Canada or China.
On February 1, 2025, President Trump utilized emergency powers to impose 25% tariffs on U.S. imports of goods from Mexico and most goods from Canada, and 10% tariffs on U.S. imports of goods from China and energy resources from Canada, effective Tuesday, February 4th.1 These tariffs are in addition to any other duties, fees or charges applicable to the imported products. Specific U.S. Harmonized Tariff Schedule classifications impacted will be identified in a forthcoming Federal Register notice, but no product exemptions are identified in the February 1st actions. In retaliation for these new actions, also on February 1st, Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum announced plans to implement retaliatory trade measures against U.S. exports to those countries.
The February 1st Executive Orders imposed an array of tariffs:
25% tariffs on all goods from Mexico.2
25% tariffs on all goods from Canada, except for “energy resources” from Canada. “Energy resources” will be subject to a 10% tariff. For purposes of these tariffs, “energy resources” from Canada are defined as: “crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water and critical minerals, as defined by 30 U.S.C. 1606 (a)(3).”3
10% tariffs on all goods from China.4
The tariffs are effective Tuesday, February 4, 2025, with respect to all goods entered for consumption or withdrawn from warehouse for consumption, on or after 12:01 AM Eastern Time. There is a limited exception for goods on the water or in the air at the time the tariffs were imposed: goods that were loaded onto a vessel at the port of loading or in transit on the final mode of transport for entry into the United States before 12:01 AM Eastern Time on February 1, 2025, will not be subject to the additional duties if the importer certifies as much to U.S. Customs and Border Protection (CBP) in accordance with forthcoming procedures.
Goods subject to these additional tariffs are ineligible for duty-free treatment under de minimis provisions (19 U.S.C. 1321), consistent with proposed regulations from U.S. Customs and Border Protection exempting other items subject to special duties from de minimis benefits. In addition, no drawback shall be available with respect to the duties imposed by these Orders. Goods subject to these tariffs that are admitted to a Foreign Trade Zone must be admitted in Privileged Foreign Status, as defined in 19 CFR 146.41.
U.S. import tariffs will be implemented through a Federal Register notice to be issued by DHS modifying the Harmonized Tariff Schedule of the United States (HTSUS) as needed “in order to effectuate this order consistent with law[.]”5 The forthcoming notice may identify narrow products or import classifications exempt from the actions, but the Executive Orders do not signal any products or sectors outside of the scope – nor do the Orders direct any agency to establish an exclusion process through which companies could request to be exempt.
The White House Fact Sheet accompanying President Trump’s Executive Orders focuses on the role of China, Canada and Mexico in “the sustained influx of illegal aliens and illicit opioids and other drugs”6 into the United States. The tariffs will remain in place until the President determines that sufficient action has been taken to alleviate the crisis. The Secretary of Homeland Security, in coordination with the Secretary of State, the Attorney General, the Assistant to the President for National Security Affairs and the Assistant to the President for Homeland Security, are tasked with monitoring the situation and informing the President when the governments of the subject countries have taken adequate steps to alleviate the public health crisis through cooperative enforcement actions.
The Executive Orders also reserve the ability of the President to “increase or expand in scope the duties imposed under [each] order” should the countries retaliate against the U.S. in response to this action through import duties on U.S. exports to those countries. Canada and Mexico are both poised to take countermeasures against the U.S. Prime Minister Trudeau announced that Canada would impose 25 percent tariffs on US $107 billion (C $125 billion) worth of U.S. goods, with a portion of those tariffs effective on February 4th, contemporaneous with the effective date of the U.S. tariffs, and the rest phasing in after a 21-day public comment period.7 The initial measures are expected to impact US $20 billion in exports of U.S. beer, wine and bourbon, fruits and fruit juices, vegetables, perfume, clothing, shoes, household appliances, furniture, sports equipment, lumber and plastics.8 A second wave on another US $85 billion of goods would include tariffs on cars and trucks, agricultural products, steel and aluminum and aerospace products.9 Non-tariff measures are also apparently being considered. President Sheinbaum also stated that Mexico would take retaliatory tariff and non-tariff measures.10 Although her statements did not include details, reporting suggests that Mexico’s government is considering “so-called carousel retaliation, which would periodically rotate the U.S. products subject to retaliatory tariffs.”11 China’s reaction was more muted. China’s Ministry of Commerce issued a statement that “the Chinese government would file a complaint with the World Trade Organization and take unspecified ‘corresponding countermeasures to firmly safeguard its own rights and interests.”12
We expect a rapidly changing trade and tariff environment during the duration of the Trump Administration.
[1] Imposing Duties to Address the Flow of Illicit Drugs across Our Northern Border, Exec. Order (Feb. 1, 2025) (“Canada EO”), available at https://www.whitehouse.gov/presidential-actions/2025/02/imposing-duties-to-address-the-flow-of-illicit-drugs-across-our-national-border/; Imposing Duties to Address the Situation at Our Southern Border, Exec. Order (Feb. 1, 2025) (“Mexico EO”), available at https://www.whitehouse.gov/presidential-actions/2025/02/imposing-duties-to-address-the-situation-at-our-southern-border/; Imposing Duties to Address the Synthetic Opioid Supply Chain in the People’s Republic of China, Exec. Order (Feb. 1, 2025) (“China EO”), available at https://www.whitehouse.gov/presidential-actions/2025/02/imposing-duties-to-address-the-synthetic-opioid-supply-chain-in-the-peoples-republic-of-china/.
[2] See Mexico EO at Sec. 2(a).
[3] See Canada EO at Sec. 2(a)-(b).
[4] See China EO at Sec. 2(a).
[5] See Canada EO at Sec. 2(e); see also Mexico EO at Sec. 2(d); China EO at Sec. 2(d).
[6] The White House, Fact Sheet: President Donald J. Trump Imposes Tariffs on Imports from Canada, Mexico and China (Feb. 1, 2025), available at https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-imposes-tariffs-on-imports-from-canada-mexico-and-china/.
[7] Department of Finance Canada: Government of Canada announces next steps in its response plan to unjustified U.S. tariffs (Feb. 2, 2025), available at https://www.canada.ca/en/department-finance/news/2025/02/government-of-canada-announces-next-steps-in-its-response-plan-to-unjustified-us-tariffs.html.
[8] Department of Finance Canada: List of products from the United States subject to 25 per cent tariffs effective February 4, 2025 (Feb. 2, 2025), available at https://www.canada.ca/en/department-finance/news/2025/02/list-of-products-from-the-united-states-subject-to-25-per-cent-tariffs-effective-february-4-2025.html.
[9] Department of Finance Canada: Canada’s response to U.S. tariffs on Canadian goods (Feb. 2, 2025), available at https://www.canada.ca/en/department-finance/programs/international-trade-finance-policy/canadas-response-us-tariffs.html.
[10] President Claudia Sheinbaum Pardo (@Claudiashein), X (Feb. 1, 2025, 8:07 PM), available at https://x.com/claudiashein/status/1885857655094415528?s=46.
[11] Santiago Pérez, Vipal Monga and Anthony Harrup, Canada, Mexico Want America to Feel the Pain of Tariffs Too, The Wall Street Journal (Feb. 2, 2025), available at https://www.wsj.com/economy/trade/canada-mexico-want-america-to-feel-the-pain-of-tariffs-too-f8119ccd (subscription required).
[12] Zia Weise, China to Retaliate after Trump Fires First Salvo in Trade War, Politico (Feb. 2, 2025), available at https://www.politico.eu/article/china-vows-retaliation-after-donald-trump-likely-trade-war-tariffs-chinese-imports/ (quoting the statement of China’s Ministry of Commerce from the Ministry’s website, available at https://www.mofcom.gov.cn/xwfb/xwfyrth/art/2025/art_a4a4f6e20b034cc78d506731007f1c1f.html).
The Trade War Begins with Canada, China, and Mexico
On February 1, 2025, President Trump declared a national emergency based upon the threat posed by undocumented foreign workers and drugs entering the United States. The White House has published a fact sheet outlining steps to address the threat by implementing (i) a 25% additional tariff on imports from Canada and Mexico, (ii) a 10% additional tariff on imports from China, and (iii) a carveout for a lower 10% tariff for energy resources from Canada (see Fact Sheet: President Donald J. Trump Imposes Tariffs on Imports from Canada, Mexico and China – The White House).
President Trump declared the national emergency pursuant to the International Emergency Economic Powers Act (IEEPA) and the National Emergencies Act. This action marks the first time a President has used the IEEPA to impose tariffs. President Nixon had used a precursor law to impose 10% tariffs on all imports in 1971 in order to avoid a balance of payments crisis resulting from ending the U.S. dollar’s gold standard (see prior alert Can the President Impose Tariffs Without Congressional Approval?).
President Trump issued Executive Orders imposing these additional tariffs on Canada, China, and Mexico (see link to Canada EO, China EO (unpublished), and Mexico EO (unpublished)).[1] The Executive Orders generally provide that the IEEPA national security tariffs may be removed if Canada and Mexico demonstrate adequate steps have been undertaken to alleviate the illegal migration and illicit drug crisis through cooperative actions, and China demonstrates adequate steps have been taken to alleviate the opioid crisis through cooperative actions.
A quick overview of five key initial questions:
1. When do the IEEPA national security tariffs take effect?
These IEEPA national security tariffs will be collected at the ad valorem rate of duty beginning 12:01 am ET, Tuesday, February 4, 2025.
2. How do I know if my import is subject to the IEEPA national security tariffs?
The Executive Orders reference “all articles” suggesting that the IEEPA national security tariff will apply to all merchandise imported from Canada, China, and Mexico; excepting that, there will be a carveout for energy from Canada, with the definitions based upon section 8 of Executive Order 14156 of January 20, 2025 (Declaring a National Energy Emergency). The necessary modifications to the Harmonized Tariff Schedule of the United States will be updated by the Department of Homeland Security and published in the Federal Register.
3. How is the IEEPA national security tariff rate calculated and applied?
The IEEPA national security tariff will be collected at an ad valorem rate based upon the entered value of the merchandise, meaning that the IEEPA national security tariff will be calculated on the entered value of the merchandise and simply added to any other duty applicable on the subject merchandise.
4. Who is responsible for paying the IEEPA national security tariff?
The importer of record is responsible for paying all duties to U.S. Customs and Border Protection. There is no change to this requirement.
5. Is there a process to apply for exclusions from IEEPA national security tariffs?
There have been no stated exemptions or processes for exclusions from the IEEPA national security tariffs, but importers may continue to review mitigation strategies for application (see prior alert Preparing for Tariff Increases – Mitigation Strategies: Miller Canfield).
In addition, the Executive Orders further provide that:
There is no duty drawback available for the covered merchandise, i.e. the refund of duties, taxes, and fees paid on imported merchandise subsequently exported or destroyed;
Merchandise must be admitted as “privileged foreign status,” meaning the merchandise remains subject to the tariff based upon its imported state, regardless of whether the classification changes in a Free Trade Zone, i.e. no avoiding the tariff by importing the merchandise into a Free Trade Zone;
There is no de minimis treatment available under Section 321, i.e. duty free treatment for shipments below $800; and
The President may increase or expand in scope the tariffs imposed under the Executive Orders upon retaliation against the United States by Canada, China, or Mexico through the application of tariffs or similar.
Because the imposition of additional IEEPA national security tariffs remains in flux, importers should carefully monitor this situation. For up-to-date advice and assistance on mitigation options to tariff exposure applicable to your business, please contact your Miller Canfield attorney or one of the authors of this alert.
[1] Press reports indicate that the China EO and Mexico EO have been signed and are similar in form, but as of the time of this publication the China EO and Mexico EO have not yet been posted to www.whitehouse.gov.
FDA & OHRP Draft Guidance: Including Tissue Biopsies in Clinical Trials
The U.S. Food and Drug Administration (FDA), and the Office of Human Research protections (OHRP) released draft guidance titled, “Considerations for Including Tissue Biopsies in Clinical Trials.” Although non-binding, the guidance document reflects FDA’s and OHRP’s current view on the inclusion of biopsies in clinical trials and is informative for sponsors.
Background
The draft guidance acknowledges that biopsies involve some inherent risk, and sponsors must consider whether the risk of including biopsies in a trial are reasonable in relation to the anticipated benefits and resulting knowledge. Within clinical trials, there are two types of biopsies — mandatory biopsies (which are required as a condition of trial participation) and optional biopsies (which are not required as a condition of trial participation).
Consideration for Conducting Tissue Biopsies in Clinical Trials
Generally, the following three factors should be considered when deciding whether to include biopsies (mandatory or optional) as part of a clinical trial: the purpose of the biopsy, the reason for its inclusion, and the associated risks. Because biopsies of different tissue types can have dramatically different levels of risk, the associated risks can vary greatly depending on the trial. Whenever biopsies are included in a clinical trial, the trial protocol should state the relevant rationale and scientific justification for the decision.
The draft guidance notes that use of biopsy tissue in a trial may be reasonable, and thus mandatory, if the information from the biopsy is necessary to:
Evaluate the primary endpoint(s) or key secondary endpoint(s) of the clinical trial;
Identify participants who may derive clinical benefit from the investigational medical product or other study interventions;
Identify participants who should not be enrolled in the study due to the risk of certain side effects or toxicities associated with investigational medical products;
Identify participants whose current disease state would render it unlikely for them to derive benefit from the investigational medical product or other study interventions; and
Evaluate treatment response.
Conversely, the draft guidance states that use of biopsy tissue in a trial should be optional in clinical trials when:
Information from the biopsy will be used to evaluate non-key secondary and exploratory endpoints; and
The purpose of the biopsy is solely to obtain specimens that will be stored and used for future unspecified research.
Regardless of whether the biopsy is mandatory or optional in the trial, trial participants always retain the right to withdraw consent to undergo a biopsy. In the case of mandatory biopsies, a participant’s decision to withdraw consent for a biopsy may impact the participant’s ability to continue participating in the trial.
Considerations for Conducting Tissue Biopsies in Children in Clinical Trials
Although the above considerations are relevant for trials that involve children, the draft guidance provided that, with respect to children, any biopsy conducted for research purposes needs to be evaluated to determine if there is a direct benefit to the enrolled child. In circumstances where biopsies do not offer a direct benefit, the risk of the biopsy must be limited to “minimal risk” or a “minor increase over minimal risk.” Finally, a child’s parent or guardian must give consent to trial participation and the performance of the biopsy. There must also be adequate provisions for soliciting the assent of the children, based on the child’s age, maturity, and psychological state, when the child can provide assent.
Conclusion
Clinical trial industry sponsors and stakeholders should take note of guidance and considerations discussed in the draft guidance and implement recommendations as needed. When sponsors are considering inclusion of biopsies, whether optional or mandatory, in a clinical trial, the draft guidance is helpful in outlining risk factors that should be evaluated, considered, and addressed, in the clinical trial design. Adherence to the draft guidance could assist sponsors in expediting the reviews required to initiate clinical trials.
EC Launches Biotech and Biomanufacturing Hub to Support Innovative Companies
The European Commission (EC) announced on January 29, 2025, that it launched a Biotech and Biomanufacturing Hub to support companies — particularly start-ups and small and medium-sized enterprises (SME) — in bringing innovative products to the European Union (EU) market and increase their competitiveness. According to the EC, the Hub will also help companies identify available support at the EU level and how to access this support to help them expand and grow. The EC states that the Biotech and Biomanufacturing Hub explains:
The sources of EU funding available to biotech and biomanufacturing companies;
The research infrastructures that can support biotech or biomanufacturing research and development (R&D);
The resources available to help biotech or biomanufacturing businesses to scale up, including networks, pilot and testing facilities, and market insights;
The intellectual property protection to which innovative companies are entitled;
The processes for authorizing new biotech products, such as human and veterinary medicines or feed and food ingredients, and the support offered to applicants throughout these processes; and
The rules and requirements that companies must comply with when developing and marketing biotech products in the EU.
According to the EC, the continuous development of the Hub will be supported through a dedicated taskforce of SME advisors under the Enterprise Europe Network. The EC notes that biotechnology “is one of the fastest growing innovative industries in the EU, which has the potential to revolutionise health, agriculture, food and feed and industry in Europe over the coming years. A thriving biotechnology and biomanufacturing sector will be key to building a more competitive, innovative and resilient EU, that succeeds in its green and digital transitions.”
McDermott+ Check-Up: January 31, 2025
THIS WEEK’S DOSE
Senate Finance, HELP Committees Hold RFK Jr. Nomination Hearings. The Senate Finance Committee must vote on Robert F. Kennedy (RFK) Jr.’s nomination before it moves to the full Senate for confirmation.
Senate VA Committee Holds Oversight Hearing on Community Care. The hearing followed a House Veterans’ Affairs (VA) Committee hearing on the same issue last week, covering many similar topics.
Senate Aging Committee Holds Hearing on Fiscal Health for Seniors. The hearing focused on the causes of inflation, and health-related discussion centered mostly on prescription drugs and Medicaid.
Trump Issues EOs and Actions Focused on Abortion, Care for Transgender Children. The actions were highly anticipated and follow themes from his campaign.
White House Issues, Rescinds Memo Freezing Funding for Federal Assistance Programs. The original memo, now rescinded, directed agencies to temporarily pause all federal financial assistance funding that could be implicated by Trump’s executive orders (EOs).
Trump Administration Offers Deferred Resignation to All Federal Employees. The offer is in place through February 6 and states that employees who take advantage of this offer would be paid through September 2025.
CONGRESS
Senate Finance, HELP Committees Hold RFK Jr. Nomination Hearings. RFK Jr., nominated for Secretary of Health and Human Services (HHS), testified before the Senate Finance Committee on January 29 and before the Senate Health, Education, Labor, and Pensions (HELP) Committee on January 30. Some senators serve on both committees and therefore were able to question him twice. Republicans largely asked RFK Jr. about his positions and plans for issues such as Medicaid, rural health, food safety, transparency, and abortion. RFK Jr. noted that he would work with Members of Congress on such issues, if confirmed. While some Democrats agreed that the healthcare system was broken, they noted disagreement with several of RFK Jr.’s positions. Democrats on both committees largely questioned his qualifications and alleged that he had inconsistent views on issues such as abortion and vaccines. RFK Jr. defended his past statements and noted his belief that Democrats were misrepresenting his positions.
The next step for RFK Jr.’s nomination is a Senate Finance Committee vote, which has yet to be scheduled. His nomination would then move to the Senate floor. If every Democrat on the floor opposed him, he could only lose three Republican votes and still be confirmed.
Senate VA Committee Holds Oversight Hearing on Community Care. During the hearing, members heard from veterans, family members, and experts about how veterans continue to lack access to timely mental health and healthcare services in the Community Care program. Witnesses unanimously agreed that the VA fell short in providing access to timely and quality care for its veterans, and that the VA often restricted the use of the Community Care program. Democratic members focused on the recent firing of federal inspectors general and how federal funding cuts would impact these health programs, while Republican members focused on accountability and the inappropriate management of the VA.
Senate Aging Committee Holds Hearing on Fiscal Health for Seniors. The hearing included a panel of economic and social security experts to discuss how inflation has affected the lives of seniors. The hearing focused widely on what is causing inflation, and healthcare discussion centered on Medicaid, high prescription drug costs, and the Inflation Reduction Act (IRA). Republicans largely blamed inflation on government spending and welfare programs, while Democrats focused on the impact that inflation will have on housing, prescription drug, and retirement costs for older Americans.
ADMINISTRATION
White House Issues, Rescinds Memo Freezing Funding for Federal Financial Assistance Programs. Late on January 27, the Office of Management and Budget (OMB) released a memo directing federal agencies to pause all activities related to obligations or disbursement of all federal financial assistance and other relevant agency activities that may be implicated by President Trump’s recent EOs. The memo explicitly excluded Medicare and Social Security but caused widespread confusion as to the breadth of programs that could be impacted. Concerns were exacerbated by the release of an internal OMB listing of programs being investigated, which was far broader than the programs many stakeholders considered likely to be impacted by the EOs issued to date.
In the health arena, Medicaid was not given the protection that Medicare and Social Security received and also appeared on the OMB listing. Many organizations dependent on government funding were unable to access their funds on January 28, and the website used to track and disburse Medicaid funding was not operating correctly either. A lawsuit was immediately filed, and OMB released a Q&A factsheet noting that any program providing direct benefits to individuals was exempt from the pause, including Medicaid and the Supplemental Nutrition Assistance Program. OMB’s factsheet also noted that the only programs implicated were those impacted by seven specific Trump EOs, including those that address government diversity, equity, and inclusion programs; the Hyde Amendment; and gender ideology. Despite this communication, it remained unclear who would determine the scope of the temporary pause and how long the pause would last.
These actions from the Trump Administration were met with concern and criticism from impacted stakeholders and congressional Democrats, who noted that Congress approved these funds and that they are not optional. In response to the lawsuit, a federal judge granted an administrative stay that temporarily paused the order until February 3. On January 29, the Trump Administration rescinded the original OMB memo. Confusion remains, however, as Trump Administration officials stated that the rescission only applies to the memo, and that they will continue to proceed with freezing federal funds implicated by the EOs. In response, another federal judge has indicated that he may intervene with a broader action to prohibit the freeze in payments.
Trump Issues EOs and Actions Focused on Abortion, Care for Transgender Children. The anticipated actions provide further insight on the new Administration’s direction in these areas:
Enforcing the Hyde Amendment. This EO directs OMB to issue guidance ensuring that agencies comply with the Hyde Amendment, which is passed by Congress annually and prohibits federal funding for abortion.
Memo on the Mexico City Policy. This memorandum reinstates the so-called Mexico City Policy that prohibits foreign organizations that receive US federal funding from providing or promoting abortions. The policy has consistently been revoked by Democratic presidents and reinstated by Republican presidents, dating back to President Reagan.
Ending Gender-Affirming Care for Children. Entitled “Protecting Children from Chemical and Surgical Mutilation,” this EO states that federal agencies shall not “fund, sponsor, promote, assist, or support the so-called ‘transition’ of a child from one sex to another.” It defines a child as an individual under 19 years of age, and it defines “chemical and surgical mutilation” to include a range of services and medications, including certain applications of puberty blockers, sex hormones, and surgery. The EO directs agencies that provide research or education grants to medical institutions to ensure that grantees do not perform any care that is prohibited under this EO. It directs HHS, TRICARE, and the federal employee health benefits program to not cover this care, and it directs HHS to take action through vehicles such as Medicare or Medicaid conditions of participation, Section 1557, and mandatory drug use reviews.
Reinstating Service Members Discharged Under the Military’s COVID-19 Mandate. This EO reinstates service members who were discharged for refusing to comply with the COVID-19 vaccine mandate that was imposed in August 2021 and rescinded in January 2023.
Additional EOs are reportedly forthcoming as early as today. We will continue to provide updates on EOs impacting healthcare.
Trump Administration Offers Deferred Resignation to all Federal Employees. Federal employees have until February 6 to decide if they would like to accept the offer. The offer states that employees who accept will receive pay and benefits through September 30. The notice has caused widespread confusion and concern among federal employees, and labor representatives are urging federal employees to reject the offer, as it may not be enforceable. The administration subsequently released a frequently asked questions document with further information. The Trump Administration’s goal is to reduce the size of the federal workforce through voluntary means, but officials have indicated an intention to go further in the future, noting in the offer that they cannot provide assurance on the certainty of positions. Reductions in the federal workforce could have implications for federal healthcare programs.
QUICK HITS
Date Set for Trump Address to Joint Session of Congress. On March 4, President Trump will address both chambers for the first time since returning to office.
Trump Administration Removes Inspectors General. The Trump Administration fired 18 inspectors general across federal agencies, including the previous HHS Inspector General Christi Grimm. The action received broad criticism for violating a required 30-day notice to Congress to dismiss inspectors general. Senate Judiciary Chairman Grassley (R-IA) and Ranking Member Durbin (D-IL) issued a joint inquiry seeking “a lawfully-required substantive rationale behind his recent decision to dismiss Inspectors General (IGs) from 18 offices.”
CMS Issues Statement on IRA Medicare Drug Price Negotiations. The brief statement indicates that the Trump Administration is committed to incorporating stakeholder feedback and increasing transparency in the IRA drug price negotiation program.
NEXT WEEK’S DIAGNOSIS
The Senate Finance Committee has yet to schedule a vote on RFK Jr.’s nomination, but it could occur next week, before moving to the full Senate floor. The Senate will be in session all of next week, and the House will be in session starting on Tuesday. The House Energy & Commerce Committee Health Subcommittee will hold a hearing on combatting existing and emerging illicit drug threats. In addition, the House Budget Committee reportedly plans to mark up a budget resolution to formally begin the reconciliation process, although it has not yet been formally announced.
2025 Top-of-Mind Issues for Life Sciences Companies
Gathering topics and reviewing the articles for our annual Top-of-Mind publication is always one of my favorite yearly endeavors, allowing me to talk to clients, colleagues and industry experts about the overall state of the life sciences industry. The timing of this publication usually coincides with the J.P. Morgan Healthcare Conference, providing a key opportunity to vet our articles. The breath and scope of comments, concerns, predictions have been remarkable.
The excitement, fear, anxiousness—depending on the individual—is palpable. Change is coming. At the time of writing this opening, a flurry of new executive orders and rescissions of existing executive orders have impacted everything from diversity in clinical trial design to pricing. Rumors are swirling about everything from banning direct-to-consumer advertising for drugs to reducing the efficacy standard for clinical trials. This is all just in week one.
Uncertainty in the life sciences industry will be a big focus in 2025. As always, we will keep you informed with insights and trends as they unfold throughout the year.
Click here to read more.
FDA Releases Draft Guidance on AI-Enabled Medical Devices
Go-To Guide:
The FDA issued draft guidance on AI-enabled medical devices, emphasizing a total product life cycle approach from design to post-market monitoring.
The guidance outlines recommended documentation for marketing submissions, including device descriptions, performance validation, and risk management plans.
Transparency and bias mitigation are highlighted as crucial elements in fostering trust and ensuring equitable outcomes for AI-enabled devices.
The FDA encourages manufacturers to provide clear, user-friendly labeling that explains AI functionality, limitations, and instructions for use.
This guidance may be subject to review and revision in light of President Trump’s recent AI-focused Executive Order.
On Jan. 7, 2025, the FDA issued its draft guidance, “Artificial Intelligence-Enabled Device Software Functions: Lifecycle Management and Marketing Submission Recommendations.” In its latest draft guidance on medical devices, the FDA provides recommendations on the documentation and information that should be included in marketing submissions for devices that include AI-enabled device software functions.
The guidance emphasizes the FDA’s holistic total product life cycle (TPLC) approach, which requires manufacturers to consider the entire lifespan of an AI-enabled device—from initial concept and design to post-market performance monitoring. The guidance also underscores the importance of transparency and bias mitigation in AI-enabled devices to foster trust and equitable outcomes. By addressing the unique challenges AI poses, the guidance establishes standards for transparency, accountability, and flexibility in managing AI-enabled devices across their TPLC.
Total Product Life Cycle Approach
The guidance highlights the importance of managing AI-enabled devices using a TPLC approach. This method seeks to ensure continuous oversight, from design and development through post-market performance. The FDA’s recommendations for manufacturers at each TPLC phase include:
Design and Development: Integrate risk management and human factors engineering early in the design process to mitigate potential risks associated with AI functionalities.
Validation and Testing: Utilize rigorous methodologies to validate AI performance, ensuring effectiveness across diverse patient populations and real-world settings.
Post-Market Monitoring: Continuously monitor in real-time to identify and address performance deviations or safety concerns, supported by mechanisms for timely updates.
Marketing Submission Requirements
The FDA emphasizes the critical elements that sponsors should provide in premarket submissions for AI-enabled devices. These include:
Device Description: Clear, comprehensive details about the device’s inputs and outputs, an explanation of how AI is used to achieve the device’s intended use, a description of the intended users, the level and type of training intended users have or will receive, the intended use environment, the intended workflow of the use of the device, and a description of installation and maintenance procedures, as well as any calibration or configuration procedures that must be regularly performed by users.
User Interface Information: Information that demonstrates the device workflow and how that information is presented to users, which may be accomplished through graphical representations, written descriptions, example reports, and recorded videos.
Labeling: Explanations, in an appropriate reading level, that the device includes AI, how AI is used to achieve the device’s intended use, model inputs and outputs, any automated functions, model architecture, development and performance data and metrics, performance monitoring, any known limitations of the device, and instructions for use. Appendix E provides exemplar communication models for sponsors to consider when developing labeling.
Training and Testing Data: Descriptions of data collection, data cleaning and processing, test data independence, reference standards, and representativeness.
Performance Validation: Evidence to demonstrate accuracy, reliability, and repeatability in clinical and non-clinical settings, including testing for specific populations. Appendix C includes recommendations for clinical performance validation, while Appendix D describes human factors considerations.
Change Management Plans: Information regarding performance monitoring plans, including measures to capture device performance after deployment, including updates, mitigations, and corrective actions.
Risk Management: A risk management file that includes a risk management plan and robust assessments to evaluate the risks of AI functions and their impact on patient safety, considering biases, software malfunctions, or data inaccuracies.
Cybersecurity and Data Integrity: Information regarding the measures taken to protect against data breaches and ensure the integrity of AI models.
Public Submission Summary: A summary with details about the AI-enabled device’s characteristics for use in public facing documents. Appendix F provides examples for communicating the required information.
Appendix B includes recommendations for developing a transparent device centered on users. The draft guidance encourages sponsors to take a holistic, user-centered approach to transparency, beginning at the design phase of the TPLC to ensure important information is both accessible and functionally understandable. Because transparency is contextually dependent, appropriate information to include would vary across devices, and the draft provides examples for sponsors to consider.
Conclusion
By focusing on lifecycle management, transparency, bias mitigation, and flexibility, the FDA aims to balance innovation with public safety. Aligning with these recommendations may help manufacturers accelerate AI technology deployment in healthcare. The FDA actively seeks input from stakeholders, including manufacturers, healthcare professionals, and the public, to refine this draft guidance. Comments on the guidance are welcomed through April 7, 2025.
While currently uncertain, President Trump’s rescission of President Biden’s AI Executive Order No. 14110 and issuance of his own AI-focused Executive Order entitled “Removing Barriers to American Leadership in Artificial Intelligence” on Jan. 23, 2025, may lead to a widespread reevaluation of all AI policies and guidances agencies such as the FDA have submitted. Accordingly, relevant stakeholders should monitor the viability and advancement of this draft guidance.
Federal Appeals Court Holds New Jersey’s Cannabis Law Provides No Private Right of Action
The Third Circuit Court of Appeals has held that the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (“CREAMMA”) does not permit a private citizen to bring a civil action for enforcement of the provisions prohibiting discrimination against cannabis users. Erick Zanetich v. Wal-Mart Stores East, Inc. et al., Docket No. 23-1996 (3d Cir. Dec. 9, 2024).
CREAMMA was passed to control and legalize cannabis in a similar fashion to the regulation of alcohol for adults, including preventing the sale or distribution of cannabis to people under the age of 21. The law also provides certain protections to current and prospective employees, including preventing employers from refusing to hire a job applicant because of the applicant’s use or non-use of cannabis, as well as from taking an adverse employment action against an employee based solely on a positive cannabis drug test. However, CREAMMA does not expressly allow citizens to bring a private cause of action, such as a civil action, to remedy alleged employment discrimination suffered because of an individual’s use of cannabis. This conclusion recently was challenged and the Third Circuit confirmed that CREAMMA does not confer a private right of action.
Zanetich applied for an asset protection position at a Walmart facility in Swedesboro, New Jersey. Zanetich was offered the job, subject to taking and passing a drug test. After Zanetich tested positive for cannabis, the job offer was rescinded. He subsequently filed a two-count Complaint against Walmart alleging Walmart discriminated against him for his use of cannabis in violation of CREAMMA and that Walmart wrongfully rescinded his job offer in violation of public policy. Walmart removed the case to federal court and moved to dismiss. The District Court granted Walmart’s motion, with prejudice, dismissing the case and finding that CREAMMA does not contain an implied remedy for violations of its employment-related protections, nor does the public policy exception to the recission of a job offer based on a positive drug test for cannabis apply to Zanetich’s claims. As the case was dismissed with prejudice, Zanetich did not have the opportunity to cure any defects in the Complaint by filing an amended Complaint.
Zanetich appealed this decision to the Third Circuit Court of Appeals, which affirmed the District Court’s decision to dismiss the Complaint.
There was no dispute CREAMMA does not expressly provide for a private right of action, and, the Third Circuit ultimately held that CREAMMA did not imply a private right of action either. Specifically, the Court held CREAMMA protects both cannabis and non-cannabis users and, therefore, Zanetich could not establish the statute provided him with any special benefit. The Court further noted that if the Legislature wanted to include a private right of action for citizens, it would have done so explicitly. Finally, the Third Circuit held the CREAMMA’s explicitly-stated underlying purposes concerned the use and distribution of cannabis, which does not support a private right of action to enforce the employment-related provisions. Therefore, the Court upheld the District Court’s dismissal of Zanetich’s first claim.
The Court also analyzed the applicability of Pierce v. Ortho Pharm. Corp, which creates an exception to the at-will employment doctrine for employees who were terminated in violation of public policy. Ultimately, the Third Circuit held this exception only applies to former employees terminated from their position because of their complaints about a suspected violation of a clear mandate of public policy. As Zanetich was not a former employee, but instead was a prospective applicant, the Third Circuit upheld the District Court’s dismissal of this claim as well.
Bottling the Truth: Equivalence and Reverse Equivalence
The US Court of Appeals for the Federal Circuit ruled that the “substantially the same way” comparison in connection with a doctrine of equivalents (DOE) analysis involving a means-plus-function claim limitation should focus on the overall structure corresponding to the claimed function, not on unclaimed structure. Steuben Foods, Inc. v. Shibuya Hoppmann Corp., Case No. 23-1790 (Fed. Cir. Jan. 24, 2025) (Moore, Hughes, Cunningham, JJ.)
Steuben Foods holds patents for an aseptic bottling system designed to sterilize and fill bottles with foodstuffs at speeds exceeding 100 bottles per minute, making the technology suitable for high-volume food production. Steuben sued Shibuya for infringing its patents. At trial, Steuben successfully demonstrated that Shibuya’s aseptic bottling system infringed a patent claim related to a “second sterile region,” a feature designed to pre-sterilize a valve mechanism and prevent contamination. The jury awarded Steuben more than $38 million in damages and, in doing so, rejected Shibuya’s defense under the reverse doctrine of equivalents (RDOE). The RDOE is a rarely invoked defense that is asserted when an accused product, although meeting the literal terms of a claim, operates on fundamentally different principles and thus does not infringe. Despite the jury’s verdict, the district court granted judgment as a matter of law (JMOL) of noninfringement, holding that Shibuya’s RDOE defense precluded infringement. Steuben appealed.
The Federal Circuit reversed the JMOL based on the RDOE, finding that the district court improperly weighed evidence that should have been left to the jury. The Court emphasized that Steuben’s expert testimony constituted substantial evidence supporting the jury’s findings and warranted deference. The Court also rejected Shibuya’s narrow construction of the claimed “second sterile region,” which would have excluded food flow, and affirmed the broader interpretation adopted by the district court (an interpretation the Court noted better aligned with the claim language).
The Federal Circuit noted that it had “previously described RDOE as an ‘anachronistic exception, long mentioned but rarely applied.’” While the Court declined to definitively rule on the RDOE’s continued viability under the Patent Act of 1952, it favorably noted Steuben’s argument that “if a device literally falls within the scope of a claim, but the accused infringer believes the claim is too broad and its device should not infringe, the appropriate recourse is a § 112 challenge, not a claim of noninfringement under RDOE.” In this case, the Federal Circuit concluded that even if Shibuya had made a prima facie case under RDOE that the principle of operation of the accused product was so far removed from the asserted claim, “the jury’s verdict should not have been overturned under RDOE because [Steuben’s expert] provided rebuttal testimony that the jury was entitled to credit. JMOL of noninfringement was therefore improper.”
The district court had also analyzed whether, under the DOE, claimed structures, such as conveyor plates and systems, were equivalent to Shibuya’s rotary wheels and neck grippers. The district court concluded they were not. The district court had construed the term “means for filling the aseptically disinfected plurality of bottles at a rate greater than 100 bottles per minute” as a means-plus-function limitation and identified the function as “[aseptically] filling the aseptically disinfected plurality of bottles at a rate greater than 100 bottles per minute.” The corresponding structure was identified as filling valves, filling nozzles, “a control system, a conveyer plate, conveyor, and equivalents.” In granting JMOL, the district court concluded that no reasonable juror could find that “the way the accused machines’ rotary wheels and neck grippers operate in substantially the same as the way a conveyor and conveyor plate.” However, the Federal Circuit reversed, finding substantial evidence in Steuben’s favor. Steuben’s expert testified that although the accused structures differed in form, they performed the same function – moving bottles for filling – using a substantially similar method.
Steuben also argued that Shibuya’s continuous sterilization process was functionally equivalent to the intermittent sterilization described in the patent. Steuben’s expert testified that both methods ensured adequate sterilant delivery to the bottles, achieving equivalent sterilization outcomes. Despite this testimony, the Federal Circuit upheld the district court’s decision on this point, noting that the parties had stipulated to a claim construction of “intermittently added” as “[a]dded in a non-continuous matter.” Reasoning that something that is done non-continuously cannot be the equivalent of something done continuously, the Court concluded that any finding of infringement under DOE would vitiate the stipulated claim limitation.
Shibuya also sought a new trial on the validity of the asserted patents but failed to comply with Rule 50(a), which requires that such motions first be made at trial. Consequently, the district court denied Shibuya’s Rule 50(b) motion on validity, but conditionally granted a new trial without providing specific reasoning. On appeal, Steuben argued that the new trial should have been denied, while Shibuya contended that the jury’s validity verdict was against the weight of the evidence. The Federal Circuit vacated the district court’s conditional grant of a new trial, citing its failure to provide a rationale, and remanded the case for further proceedings.