A New Struggle for Hong Kong: U.S. to Treat as Same as China in Export Control Regime

Until now, as per the United States-Hong Kong Policy Act of 1992 (“the Policy Act”); Hong Kong was subject to a different policy of U.S. export control regime as long as Hong Kong remains its high degree of autonomy under the “One Country, Two Systems” principle. On July 15, 2020, President Trump announced that, after the imposition of a national security legislation on Hong Kong by Beijing, which allows mainland China’s security services to operate with impunity in Hong Kong, US authorities believed that Hong Kong’s autonomy has been broken.

With a statement released by Secretary of Commerce on June 29, 2020, it was announced that Hong Kong’s special status was revoked and thus Hong Kong’s benefits with regard to U.S. export control license exceptions removed. Accordingly, “Hong Kong will now be treated as same as mainland China” and license exceptions (exported to, re-exported to, or transferred (in-country) within Hong Kong) will only apply to Hong Kong if items concerned are eligible for a license exception for export to China.

Additionally, current valid licenses or agreements in relation with Hong Kong are not affected by the Executive Order dated July 14, 2020. License exceptions will apply for the transactions that were already happening on June 30, 2020 are permitted to proceed. And deemed exports or re-exports concerning Hong Kong authorized under a License Exception prior to June 30, 2020 may continue under the authorization until August 28, 2020.

Not only export license privileges but export of sensitive technologies and defense articles export exceptions were revoked also by the U.S. Secretary of State’s announcement on June 29, 2020. Accordingly export of made-in U.S. defense articles and dual use items are now subject to possible sanctions. As stated, Hong Kong is now considered to be included in the entry for China and is subject to a policy of denial for all transfers subject to International Traffic in Arms Regulations. We kindly suggest companies doing or planning to do business related to Hong Kong to be careful and advise counsels following to this very recent development.

Şafak Herdem, Deniz Çelikkaya