Trump's EO Outlines Hong Kong Export Restrictions, Sanctions, Carve-Out for Certain Defense Exports
President Donald Trump’s executive order ending preferential treatment for Hong Kong details a range of sanctions authorities and export bans but includes a carve-out for certain defense exports authorized before the order was issued. The State Department’s Directorate of Defense Trade Controls issued a July 15 guidance to clarify the new restrictions and answer industry questions.
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The order, which Trump signed July 14, ends Hong Kong's preferential status under certain provisions in the Export Control Reform Act and the Arms Export Control Act. It also revoked all license exceptions for exports to Hong Kong for items subject to the Export Administration Regulations that provide “differential treatment compared to those license exceptions” for exports to China’s mainland (see 2006290063). However, the order offers a “specific carve-out” for exports of defense items to Hong Kong “persons” who are living outside of China or Hong Kong and were authorized to receive the items before July 14, DDTC said.
In its guidance, DDTC said it will review case by case all exports of defense services that fall under this carve-out. The agency said “the President is not required to make a determination ... in order for DDTC to authorize exports of defense services to Hong Kong persons,” adding that exporters “may continue to rely on available exemptions” under the International Traffic in Arms Regulations.
The DDTC added that previously approved export authorizations that name Hong Kong as a transfer territory are still valid. “Non-exhausted authorizations naming Hong Kong as a transfer territory are not affected by the Executive Order,” the agency said. DDTC added that it is not taking steps to revoke previously approved export authorizations for defense exports or services to Hong Kong “at this time.”
However, DDTC said it is now treating Hong Kong similar to China under the ITAR. The agency will apply a presumption of denial for license requests where a Hong Kong person is an end-user, licensee, sublicense or where Hong Kong “appears as a marketing, transfer, re-transfer, re-export, sales, or distribution territory.”
The executive order also outlines sanctions authorities, including asset freezes against people involved with Hong Kong’s so-called national security law. The order also authorizes sanctions against people involved in actions that “undermine” Hong Kong’s democracy, threaten its stability or autonomy and censor freedom of expression. The U.S. may designate leaders or officials of government entities involved in any of those activities, and may sanction people or entities who provided financial, material or technological support to officials associated with the national security law.
Trump also signed the Hong Kong Autonomy Act, which authorizes sanctions against Chinese officials and foreign banks involved with the passage of Hong Kong’s national security law. The move was praised by bill sponsors Sens. Chris Van Hollen, D-Md., and Pat Toomey, R-Pa. Trump “must impose the sanctions included in our bill,” Van Hollen said in a July 14 statement. “That is the only way to ensure that those involved in the crackdown on Hong Kong will feel the full consequences of their actions.” Toomey called the sanctions “punishing,” adding that the U.S. will continue to impose restrictions “until the Chinese government backtracks.”
In a July 15 statement, China’s Foreign Ministry criticized Trump’s signing of the bill and said it will retaliate. “We urge the U.S. to correct its mistakes, refrain from implementing the so-called ‘Hong Kong Autonomy Act,’ and stop interfering in any way in China's internal affairs, including Hong Kong affairs,” the statement said, according to an unofficial translation. “If the U.S. side sticks to its will, China will definitely respond.”