The Hong Kong Trade and Industry Department (TID) recently released a new circular concerning the control of strategic commodities. Hong Kong exporters of US-origin electronics, computers, and telecommunications equipment should be clear about whether US authorization is required for any export, and ensure that all relevant authorizations and licenses are obtained prior to any shipment. Exporters relying on “License Exception CIV” will no longer be able to do so after 29 June 2020.

Key Takeaways:

  • US Department of Commerce’s Bureau of Industry and Security (BIS) publishes final rule removing “License Exception CIV”.
  • US re-export authorization required for certain Hong Kong exports.
  • New TID circular states that Hong Kong export licenses approved on the basis of “License Exception CIV” will no longer be applicable after 29 June 2020.

In Depth:

Hong Kong regulates military and dual-use items under the Import and Export Ordinance (Chapter 60) and the Import and Export (Strategic Commodities) Regulations (Chapter 60G). It controls the import, export, transit and transshipment of these items, classifying them as “strategic commodities”.

Generally, applications for licenses must be made to the TID prior to their import or export. On 12 March 2020, the TID released Strategic Trade Controls Circular No. 3/2020 on “Re-exports of U.S.-origin Electronics, Computers and Telecommunications from Hong Kong” (“Circular“). The Circular notifies traders about recent changes to US export control rules, and their impact on Hong Kong rules.

Pursuant to the BIS final rule on the “Elimination of License Exception Civil End Users (CIV)”, License Exception CIV will be eliminated from 29 June 2020. This affects US exports, re-exports, and transfers of specified U.S.-origin electronics, computers and telecommunications products to Country Group D:1 countries. Country Group D:1 countries include (amongst others) China, Russia, and Vietnam. Such exports, re-exports and transfers will require US authorization. To understand more about changes to the US rules, click HERE to see our update on this topic.

While there is no change to Hong Kong law governing import and export control of strategic commodities, applicants are frequently required to provide demonstration of foreign export control law authorizations when applying for Hong Kong licenses.

In light of BIS’ final rule, traders exporting the concerned US-origin products from Hong Kong to D:1 countries should properly understand whether US authorizations are required prior to the Hong Kong export. As a first step, they can do so by checking with their U.S. suppliers, exporters or manufacturers. Hong Kong exporters should obtain necessary and applicable US authorizations before exporting to any of the D:1 countries. TID would likely not grant a Hong Kong export license should the exporter not be able to demonstrate foreign authorization.

TID also advises that all strategic commodities licenses previously issued featuring “US Licence Exception CIV” under the “Export Authorization of Foreign Exporting/Product’s Originating Country (Place)” should no longer be used after 29 June 2020. These licenses will likely be cancelled after that date.

Author

Jon joins Baker McKenzie from a large retailer where he was an Assistant General Counsel, Customs and International Trade, based in their head office in Oregon. He advised the global business on import and export laws and regulations in the areas of sanctions, customs, free trade agreements, export controls and anti-boycott. He also oversaw customs audits, investigations and litigation globally, and focused on improving supply chain efficiency and managing compliance risk. In this role, he worked extensively in the Asia Pacific region. Earlier in his career, Jon worked in trade teams in the Big Four accounting firms in the U.S. and in Baker McKenzie's Hong Kong office as an Associate between 2010 and 2012. He advised technology, apparel and consumer product companies on regional customs and international trade matters over the years.