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Department of 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

Kerry Contini is a partner in the Firm’s Outbound Trade Practice Group in Washington, DC. She has served as co-chair of the Firm's Pro Bono committee for several years and has managed award-winning pro bono work involving Baker McKenzie professionals in North America, Europe and Asia. She has written on export controls and trade sanctions issues for several publications, including The Export Practitioner and Ethisphere. Kerry is a co-chair of the Export Controls and Sanctions Section of the Association of Women in International Trade. She joined the Firm as a summer associate in 2005 and became a full-time associate in 2006.

Author

Lise Test, an associate in Baker & McKenzie’s International Trade Group in Washington, DC, practices in the area of international trade regulation and compliance — with emphasis on US export control laws, trade sanctions, anti-boycott laws and the Foreign Corrupt Practices Act. Prior to joining Baker & McKenzie, Ms. Test served as a lawyer at the Danish Ministry of Defence where she focused on international public law and Danish torts, administrative law and military criminal law. In addition to her practice, Ms. Test also taught international humanitarian law and contract law at the Danish Royal Naval Academy.

Author

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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