On August 11, 2020, US Customs and Border Protection (“CBP”) issued a notice in the Federal Register announcing that all Hong Kong products exported to the United States must be relabeled as “Made in China.” The change impacts goods produced in Hong Kong that are entered or withdrawn from warehouse for consumption into the United States after September 25, 2020. However, goods from Hong Kong will remain outside the scope of the Section 301 tariffs that the United States has imposed on mainland China—for now.
On July 14, 2020, President Trump issued “The President’s Executive Order on Hong Kong Normalization” (the “Order”) (see our Legal Update), which directs the suspension or elimination of special and preferential treatment for Hong Kong, laying the groundwork for the United States to treat Hong Kong in the same manner as Mainland China. The Order instructs federal agencies to commence, within 15 days, “all appropriate actions to further the purposes of this order.”
The Order sets forth a series of policy changes with respect to Hong Kong’s special status, including taking action to remove the special treatment of Hong Kong under US import-marking regulations. The import-marking regulations require every article of foreign origin or its container imported into the customs territory of the United States to be marked in a conspicuous place and in such manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. 19 U.S.C. § 1304.
The Marking Changes Will Not Impact Country of Origin for Other Purposes, Including Assessing Duties
The Order initially gave rise to concerns that the change in marking requirements could lead to products made in Hong Kong becoming subject to special US tariffs applicable to Chinese products, i.e., “Section 301” tariffs (Title III of the Trade Act of 1974, 19 U.S.C. §§ 2411-2420). However, the only provision of Title 19 that is affected by the Order is section 1304, the marking statute. The Order does not modify the treatment of goods from Hong Kong for purposes other than marking.
CBP recently released Frequently Asked Questions - Guidance on Marking of Goods of Hong Kong – Executive Order 13963 (the “FAQs”), which confirms that goods of Hong Kong will continue to have a country of origin of Hong Kong for all other purposes. The FAQs explain that the “change in marking requirements does not affect country of origin determinations for purposes of assessing ordinary duties . . . or temporary or additional duties under Chapter 99 of the HTSUS. [G]oods that are products of Hong Kong should continue to report International Organization for Standardization (ISO) country code ‘HK’ as the country of origin when required.” (Emphasis added.)
Impact of the Marking Changes
Imported goods that are produced in Hong Kong that are entered, or withdrawn from warehouse, for consumption into the United States after September 25, 2020, must be marked to indicate that their origin is “China.” Goods which are improperly or falsely marked may be brought into a Foreign Trade Zone under a permit to manipulate to correct or remove such markings so that the goods comply with the marking laws and regulations. 19 CFR § 134.13(b).
Entry summary procedures will remain the same. Therefore, filers should continue to file their entry summaries and duty payments according to current regulation and policy.
We will continue to monitor announcements for any new executive orders that could impact the treatment of goods from Hong Kong, including applicable rates of duty.