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Exports to Hong Kong Subject to New Restrictions

Friday, July 17, 2020
Sandler, Travis & Rosenberg Trade Report

President Trump issued an executive order July 14 ending the United States’ special trade treatment of Hong Kong in response to China’s imposition of a new security law with respect to that special administrative region. Under this EO there will be “no special privileges, no special economic treatment, and no export of sensitive technologies,” for Hong Kong, Trump said, which the U.S. will now treat the same as mainland China.

For more information on this development, please contact ST&R’s export controls and sanctions practice leader Kristine Pirnia.

The EO suspends different and preferential treatment for Hong Kong with respect to the Arms Export Control Act and the Export Control Reform Act of 2018. The State Department’s Directorate of Defense Trade Controls said that as a result Hong Kong is now treated the same as China under section 126.1(d)(1) of the International Traffic in Arms Regulations and there is a presumption of denial for export license requests where a Hong Kong person is named as an end-user, licensee (signatory), or sublicensee or where Hong Kong appears as a marketing, transfer, re-transfer, re-export, sales, or distribution territory.

Federal agencies are directed to begin implementing this EO by July 29. This will include revoking license exceptions for exports to Hong Kong, reexports to Hong Kong, and transfers (in-country) within Hong Kong of items subject to the Export Administration Regulations that provide differential treatment compared to those license exceptions applicable to China. The Department of Commerce had already suspended such license exceptions as of June 30.

The EO also directs the termination of the export licensing suspensions under section 902(a)(3) of the Foreign Relations Authorization Act, Fiscal Years 1990 and 1991, insofar as they apply to exports of defense articles to Hong Kong persons who are physically located outside of Hong Kong and mainland China and who were authorized to receive defense articles prior to July 14. DDTC said it will review license applications for such exports on a case-by-case basis and that exporters may continue to rely on available exemptions consistent with the provisions of ITAR section 126.1(a).

DDTC said it is not taking steps at this time to revoke or rescind previously approved authorizations to export defense articles or services to Hong Kong. In addition, current, valid, non-exhausted export authorizations naming Hong Kong as a transfer territory are not affected by the EO.

The EO also blocks and prohibits exports of property and interests in property of specified persons (primarily those involved in developing or implementing the new Chinese law or that have undermined democratic processes in Hong Kong, as well as those who have aided them) that are currently or come within (1) the U.S. or (2) the possession or control of any U.S. person.

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