By: Carlos Bentancor, Junior Associate & Jenny Hahn, President
Hong Kong Now an Arms Embargoed Destination Announced 7.14.2020 and License Exceptions for EAR Items are Suspended
The President signed an Executive Order (EO) on July 14, 2020, which requires the Special Administrative Region of Hong Kong (Hong Kong) to be treated as the People's Republic of China (PRC). The EO states pursuant to section 202 of the United States - Hong Kong Policy Act of 1992 that the U.S. Government no longer considers Hong Kong to be autonomous from China and no longer warrants treatment as an entity separate from China. The President directed the heads of various agencies to begin eliminating policy exemptions for Hong Kong. As a result, Hong Kong is now an arms embargoed destination included in the entry for China under section 126.1(d)(1) of the ITAR, and thus subject to a policy of denial for all transfers subject to the ITAR. This action includes all end-users in Hong Kong.
The Department of Commerce separately announced on June 30 the suspension of License Exceptions for Hong Kong.
In May 2020, China announced its plans to impose national security legislation unilaterally and arbitrarily on Hong Kong, and on May 27th, 2020 the U.S. Secretary of State declared the PRC had undermined Hong Kong's autonomy and reported this to the U.S. Congress. China has through a series of ongoing actions continued to follow through imposing national security legislation on Hong Kong undermining Hong Kong's autonomy, leading the U.S. government to take action intended to prevent any sensitive U.S. items from illegal diversion to the PRC or North Korea.
Government Agency Actions
The Directorate of Defense Trade Controls (DDTC) has announced two actions in response to the EO. First, there will be an exception made in favor of Hong Kong persons who reside outside Hong Kong or PRC, who have been previously authorized access to defense articles subject to ITAR, in future licensing; and second, any current, valid, non - exhausted ITAR licenses with Hong Kong as the transferred territory are not affected by the EO, DDTC is not revoking or rescinding previously approved licenses for defense articles or services to Hong Kong.
Prior to the publication of the EO, on June 30, 2020, BIS suspended any License Exception for exports, re-exports, or transfers (in-country) to Hong Kong of items subject to the EAR that would provide Hong Kong with differential treatment than those available to the PRC. On July 14, President Trump signed an Executive Order officially revoking the use of EAR License Exceptions for Hong Kong that will provide differential treatment compared to those applicable to exports to China.
The actions listed above under the ITAR and EAR are just two of the approximately twenty actions to be taken by various government agencies with respect to Hong Kong within 15 days of the Executive Order (i.e., by July 29, 2020).
The President's Executive Order on Hong Kong Normalization
Recommendations for Exporters:
FD Associates, Inc. strongly encourages all exporters who export products, provide services, or transmit technical data to foreign nationals or entities from Hong Kong, to evaluate these transactions before making any further exports.