BIS Issues Guidance, Savings Clause for Suspension of Hong Kong Export Licenses

The Bureau of Industry and Security clarified the agency’s suspension of license exceptions for exports to Hong Kong, saying it will no longer allow exceptions for items subject to the Export Administration Regulations “that provide differential treatment than those available” to China. In a guidance issued after its June 29 suspension announcement (see 2006290063), BIS said U.S. exporters cannot use license exceptions for any shipments to Hong Kong “except for transactions that would otherwise be eligible for a license exception” for mainland China.

In a 60-day savings clause, BIS said all exports that now require a license as a result of this change but were aboard a carrier June 30 may continue to their port of export or reexport destinations under the previous eligibility. BIS added that all deemed exports and reexports involving “Hong Kong persons” that were authorized before June 30 may continue to be authorized until Aug. 28. During this 60-day period, exporters and transferors must document that the Hong Kong recipient was “hired and provided access to technology” before June 30.

The agency took this step because China’s new national security law increases the risk that U.S. exports to Hong Kong will be diverted to China’s military, Iran or North Korea, the guidance said. BIS did not say whether it will reassess the suspension at a later date.

U.S. companies trading with Hong Kong should assume they are now subject to the same export restrictions that apply to mainland China, a June 29 Steptoe & Johnson International Compliance Blog post said. BIS may also impose a “more restrictive review” of future or pending requests for licenses to the region, the law firm said, and could continue to restrict other export control regulations, such as nuclear export controls. “Companies doing business with Hong Kong in the defense sector should be cautious in assessing whether US export control restrictions or obligations apply to their activity,” the firm said.