The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has published the final rule in the Federal Register amending the Export Administration Regulations (EAR) to suspend all License Exceptions for Hong Kong that provide preferential treatment as compared to those available for exports to China.  This amendment to the EAR implements the announcement BIS made on June 30, 2020, which provided that, as of June 30, these License Exceptions were no longer available for exports and reexports to Hong Kong or transfers within Hong Kong.  Additionally, the final rule is adding a new, Hong Kong-specific paragraph to EAR Section 740.2 (“Restrictions on all License Exceptions”), as well as making some other conforming changes to Section 740.2.

A License Exception is an authorization contained in Part 740 of the EAR that allows exports, reexports, or transfers (in-country) of items subject to the EAR that would otherwise require a license for export to the destination.  As a result of the suspensions, absent a license from BIS, no items subject to the EAR may be exported to Hong Kong, reexported to Hong Kong, or transferred within Hong Kong unless it would otherwise be eligible for export to China under the applicable reason for control or a License Exception available for exports to China.  The suspended License Exceptions for Hong Kong include:

  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)).

BIS has taken this action as part of a broader U.S. policy change toward Hong Kong in response to the newly imposed security measures on Hong Kong by China.   For more information on related developments concerning Hong Kong, please see Trump and Trade posts for June 1, 2020, June 30, 2020, and July 16, 2020.