– Effective April 19, 2017, those planning to export or reexport to Hong Kong items subject to the Export Administration Regulations (EAR) under a license or license exception will generally need to receive from their clients or consignees before shipping a copy of the required Hong Kong import license or a written statement from the Hong Kong government that such a license is not necessary.
– Also effective April 19, 2017, the EAR will generally prohibit the use of an EAR license or license exception to reexport from Hong Kong items subject to the EAR, unless the reexporter obtains a copy of the Hong Kong export license for such shipments or a written confirmation from the Hong Kong government that a license is not needed.
– These new regulatory requirements apply to items subject to control under one of the four multilateral export control regimes, specifically those controlled in the EAR for national security (NS), missile technology (MT), nuclear nonproliferation (NP column 1), or chemical or biological weapons (CB) reasons.
On January 19, 2017, the Department of Commerce’s Bureau of Industry and Security (BIS) published a final rule increasing compliance requirements associated with the export and reexport of items controlled under the EAR to and from Hong Kong. Specifically, the new rule requires that exporters and reexporters obtain from their customers or consignees, prior to shipment, a valid import license or written authorization from the Hong Kong government that no such license is required. Similarly, the rule also prohibits the reexport of EAR-controlled items from Hong Kong, unless the reexporter obtains an export license or other written authorization from the Hong Kong government.
The amendments to the EAR do not impose any new licensing burdens on exports or reexports that are in compliance with Hong Kong export and import control regulations. Rather, they leverage the EAR to effectively compel compliance with Hong Kong export and import control laws by requiring proof of compliance with Hong Kong law as a support document necessary for shipping under an EAR license or license exception. Concurrent with the publication of the final rule, BIS published Frequently Asked Questions (FAQs), available on its website, which describe the purpose and effect of the new regulatory requirements.
This novel rule has a 90-day delayed effective date, which apparently is designed to give those affected by it time to ensure that their customers or consignees in Hong Kong are in compliance with existing Hong Kong export and import control laws and also to develop procedures to regularly provide the required Hong Kong licenses or other written confirmations. For those involved in controlled trade with Hong Kong, the failure of counterparties to provide documentation consistent with EAR requirements will likely result in delays and the possibility of penalties once the rule becomes effective.