Removal of Hong Kong as a Separate Destination Under the Export Administration Regulations

As recently announced in the Federal Register, the Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) to remove the People’s Republic of China (PRC or China) Special Administrative Region of Hong Kong from the list of destinations in the Export Administration Regulations (EAR). According to the Federal Register Notice “The amendments implement Sections 2 and 3 of Executive Order 13936 of July 14, 2020, in response to new security measures imposed on Hong Kong by the government of China. These new measures fundamentally undermine Hong Kong’s autonomy increasing the risk sensitive U.S. technology and items will be diverted to unauthorized end uses and end users in China.” The new rule is effective 12/23/2020. This rule represents the culmination of a rapid escalation of tensions over several months between the United States and China over the Hong Kong Special Administrative Region (Hong Kong or HKSAR).

As a result of this rule, Hong Kong will be treated the same as China under the EAR except in certain circumstances that do not provide preferential treatment. It is important to note that Supplement No. 1 to Part 738— Commerce Country Chart has been amended by removing the entry for Hong Kong from the Commerce Country Chart. License requirements for Hong Kong will now be governed by the Commerce Country Chart entry for China. Hong Kong, as part of China, will now effectively fall in Country Group D, which will affect license exception availability.

Regarding Export Clearance Requirements, BIS adds a note to paragraph (b)(10) of § 758.1 (The Electronic Export Information (EEI) Filing to the Automated Export System (AES)) stating that the EEI filing requirement for China described in paragraph (b)(10) applies to exports to Hong Kong for purposes of the EAR, even if the AES requirements state that the destination filed in EEI is to be listed as Hong Kong. In removing Hong Kong as a separate destination for purposes of export controls under the EAR, it is treated as part of China for export control purposes and, thereby, is subject to the same license requirements, license exceptions and other applicable provisions under the EAR.

Since the initial announcement, BIS has clarified the EEI requirements stating “What this means for freight forwarders filing an EEI is that even though BIS has removed Hong Kong from the EAR country lists, Census is continuing to keep statistics separately for Hong Kong. Therefore, the EEI must still be filed showing the country code “HK,” even though licensing requirements for Hong Kong will be the same as they are for China including the requirement that EEI must be filed regardless of value for any shipment that has an Export Control Classification Number (ECCN).”

V. Alexander will continue to monitor this situation and provide updates as warranted.

If you have questions or need additional information, please contact your V. Alexander representative.