Beginning in the summer of 2020, tensions between China and the United States began to mount with regard to the People’s Republic of China Special Administrative Region of Hong Kong. In June, the Chinese government imposed national security legislation over Hong Kong, which U.S. officials believed to be undermining the autonomy of the region, as well as heightening the level of risk that sensitive U.S. technology and other items may be diverted to unauthorized end uses or end users in China or elsewhere. Since that time, the U.S. government has taken definitive steps to safeguard U.S. items in danger of misuse by tightening regulations for shipments to Hong Kong, beginning with President Trump’s July 14, 2020 Executive Order 13936 on Hong Kong Normalization, and BIS’s July 31, 2020 suspension of all license exceptions that provided for differential treatment of Hong Kong as compared to China. The United States has continued to enact additional laws and regulations in order to fully implement the changes set forth in E.O. 13936. A summary of key actions is provided below:
- OFAC makes Hong Kong-related sanctions list designations. OFAC added 11 individuals to the specially designated nationals (SDN) list under Hong Kong-related sanctions on August 7, 2020. OFAC listed an additional 14 individuals under the Hong Kong-related sanctions on December 7, 2020, 10 individuals on October 14, 2020, and six individuals on January 15, 2021.
- Products made in Hong Kong must indicate China as country of origin. On August 11, 2021, U.S. Customs and Border Protection, acting in light of Executive Order 13936, gave notice that goods produced in Hong Kong may no longer be marked to indicate “Hong Kong” as their origin, but must instead be marked to indicate “China.” The notice specified that, unless excepted from marking, goods produced in Hong Kong that are entered or withdrawn from warehouse for consumption in the U.S. after September 25, 2020, must be marked with “China” as their origin.
- OFAC publishes FAQs on Hong Kong sanctions. On October 14, 2020, OFAC published four FAQs to provide information on reporting requirements under the Hong Kong Autonomy Act (HKAA).
- BIS amends EAR to remove Hong Kong as a separate destination. On December 23, 2020, the Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) to remove Hong Kong from the EAR’s list of destinations. BIS noted that China’s national security legislation fundamentally undermines Hong Kong’s autonomy, thereby increasing the risk that sensitive U.S. technology and items will be diverted to unauthorized end uses and end users in China. As a result of this rule, Hong Kong will be treated the same as China under the EAR except in certain circumstances that do not provide preferential treatment.
- OFAC publishes new Hong Kong Sanctions Regulations. On January 15, 2021, OFAC issued regulations implementing Executive Order 13936. OFAC said it published the regulations in abbreviated form in order to provide immediate guidance to the public and that it intends to supplement them with a more comprehensive set of regulations. The regulations delineate prohibitions, penalties, and findings of violation and provide definitions, interpretations, licenses, authorizations, and statements of licensing policy.
For more information on how these could impact your business, contact:
- Martin Lutz, Partner (firstname.lastname@example.org, 512-495-6024),
- Jamie Joiner, Special Counsel (email@example.com, 713-615-8530),
- Lindsey Roskopf, Partner (firstname.lastname@example.org, 713-615-8534),
- Justin Cawley, Senior Counsel (email@example.com, 202-812-2644), or
- Another member of the McGinnis Lochridge International Trade and Transactions Practice Group