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Export Restrictions Imposed on Hong Kong as Chinese Security Measures Advance

Thursday, July 02, 2020
Sandler, Travis & Rosenberg Trade Report

In response to new security measures China has voted to impose on Hong Kong beginning July 1, the U.S. is restricting exports of defense items and dual-use goods and technologies to Hong Kong. U.S. officials said China’s measures will undermine the autonomy of Hong Kong and thereby increase the risk that sensitive U.S. items will be illegally diverted to China’s People’s Liberation Army or Ministry of State Security, Iran, or North Korea.

Effective June 30 the Department of Commerce suspended regulations affording preferential treatment to Hong Kong over China, including the availability of license exceptions for items subject to the Export Administration Regulations. As a result, no items subject to the EAR may be exported to Hong Kong, reexported to Hong Kong, or transferred within Hong Kong based on an authorization provided by a license exception, except for transactions that would otherwise be eligible for a license exception if exported to China. Instead, a license must be sought and obtained whenever a license requirement applies for an export to, a reexport to, or a transfer within Hong Kong.

However, shipments of items that have been removed from eligibility for a license exception as a result of this action and were on dock for loading, on lighter, laden aboard an exporting or transferring carrier, or en route aboard a carrier to a port of export or reexport on June 30 pursuant to actual orders for export to Hong Kong, reexport to Hong Kong, or transfer within Hong Kong may proceed to their destination under the previous license exception eligibility. 

Similarly, deemed export/reexport transactions involving Hong Kong persons authorized under a license exception eligibility prior to June 30 may continue to be authorized under such provision until Aug. 28, after which such transactions will require a license. Exporters, reexporters, or transferors (in-country) availing themselves of this 60-day savings clause must maintain documentation demonstrating that the Hong Kong recipient was hired and provided access to technology eligible for Hong Kong under part 740 prior to June 30.

Separately, the State Department said that as of June 30 it would end exports of U.S.-origin defense equipment to Hong Kong and take steps toward imposing the same restrictions on exports of U.S. defense and dual-use technologies to Hong Kong as it does for such exports to China. Additional measures may also be imposed “to reflect the reality on the ground in Hong Kong.”

Official regulatory changes reflecting these announcements have not yet been made but are expected shortly.

For more information, please contact Kristine Pirnia.

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