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US – Commerce suspends license exceptions for Hong Kong that provide differential treatment relative to China

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On July 31, 2020, the Department of Commerce Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) to suspend the availability of all License Exceptions for Hong Kong that provide differential treatment relative to mainland China. Our blog post on prior steps taken to revoke preferential treatment for Hong Kong, including the initial announcement of these suspensions, is available here.

The following partial or full License Exceptions are no longer available for exports and reexports to Hong Kong, and transfers within Hong Kong, of all items subject to the EAR:

  1. Shipments of Limited Value (LVS) (§ 740.3);
  2. Shipments to Group B Countries (GBS) (§ 740.4);
  3. Technology and Software under Restriction (TSR) (§ 740.6);
  4. Computers, Tier 1 only (APP) (§ 740.7(c));
  5. Temporary Imports, Exports, Reexports, and Transfers (in-country) (TMP) (§ 740.9(a)(11), (b)(2)(ii)(C, and (b)(5));
  6. Servicing and Replacement Parts and Equipment (RPL) (§ 740.10(a)(3)(viii), (a)(4), (b)(1) except as permitted to Country Group D:5, and (b)(3)(i)(F) and (ii)(C));
  7. Governments (GOV) (§ 740.11(c)(1)—Cooperating Governments only));
  8. Gift Parcels and Humanitarian Donations (GFT) (§ 740.12);
  9. Technology and Software Unrestricted (TSU) (§ 740.13);
  10. Baggage (BAG) (§ 740.14) (except as permitted by § 740.14(d));
  11. Aircraft, Vessels, and Spacecraft (AVS) (§ 740.15(b)(1), (b)(2), (c));
  12. Additional Permissive Reexports (APR) (§ 740.16(a) and (j)); and
  13. Strategic Trade Authorization (STA) (§ 740.20(c)(2)).

In addition, reexports of items subject to the EAR from Hong Kong under License Exception APR § 740.16(a) are also restricted. The EAR’s Country Groups have not changed, and Hong Kong remains in the same groups as before. The suspension of the license exceptions has been implemented by adding a provision to the restrictions on all license exceptions in 15 C.F.R. Part 740.2.

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Author

Ms. Contini focuses her practice on export controls, trade sanctions, and anti-boycott laws. This includes advising US and multinational companies on trade compliance programs, risk assessments, licensing, review of proposed transactions and enforcement matters. Ms. Contini works regularly with companies across a wide range of industries, including the pharmaceutical/medical device, oil and gas, and nuclear sectors.

Author

Lise Test is an of counsel in the Firm’s International Trade Group in Washington, DC and practices in the area of international trade regulation and compliance — with emphasis on US export control laws (Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR)), trade sanctions, and anti-boycott laws. Ms. Test advises clients on issues relating to product classifications, licensing, regulatory interpretations, risk assessments, enforcement actions, internal investigations and compliance audits, as well as the design, implementation, and administration of compliance programs.

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Daniel Andreeff is an associate in the Firm’s International Trade practice group in Washington, DC. Prior to joining the Firm, he interned with the Department of the Treasury’s Office of Foreign Assets Control.

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