Hong Kong currently enjoys special trade status with the United States in comparison to China, as a result of China’s agreement in 1997 to allow Hong Kong continued autonomy in many economic and administrative ways. As recent press articles have indicated, the People’s Republic of China (PRC) has increasingly cracked down on the Hong Kong protests, which began in June 2019, over – among other things – judicial independence, limits on democracy, and increasingly harsh police actions. Consequently, the United States has pressed China to deescalate the situation and abide by its commitments to maintain Hong Kong as a special autonomous administrative region. The situation has instead only intensified, resulting in significant actions last week by China, the United States and other world leaders.
In November 2019, President Trump signed the Hong Kong Human Rights and Democracy Act of 2019, which requires the Secretary of State to make an annual certification about whether Hong Kong continues to merit special treatment under U.S. law. On May 27, Secretary of State Mike Pompeo announced that he would certify to Congress that Hong Kong no longer warrants such treatment, stating that, “No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground.”
On May 28, 2020, the governments of the United States, Australia, Canada, and the United Kingdom released a formal statement noting “deep concern regarding Beijing’s decision to impose a national security law in Hong Kong,” which jeopardizes Hong Kong’s stability and prosperity.
On May 29, 2020, in remarks to the press, Trump cited the PRC’s pattern of conduct and announced several measures, including:
- Beginning the process of eliminating policy exemptions that give Hong Kong different and special treatment;
- Issuing a proclamation to better secure vital university research and to suspend the entry of certain foreign nationals from China;
- Taking necessary steps to sanction PRC and Hong Kong officials directly or indirectly involved in eroding Hong Kong’s autonomy; and
- Revising the State Department’s travel advisory for Hong Kong to reflect the increased danger of surveillance by the Chinese state security apparatus.
In response, the Chinese Embassy in the United States issued a statement noting that it would “take necessary countermeasures in response” to any foreign meddling in Hong Kong affairs.
These developments may have a significant impact on companies that engage in business with Hong Kong. Although these measures have not yet been taken, companies should be aware that the United States may implement the following measures:
- Removing Hong Kong’s special customs status, and making imports of Hong Kong origin subject to the same duties as China, which may also lead to the imposition of Section 301 tariffs on products originating in Hong Kong that have been exempt so far;
- Export controls currently in place for China may be extended to Hong Kong;
- Further sanctions against persons determined to be facilitating the PRC actions in Hong Kong; and/or
- Further visa and immigration restrictions on individuals from the PRC or Hong Kong.
Trump and Trade will continue to closely monitor these developments and provide updates as more official actions and policy shifts are undertaken in the coming weeks.