Complying with New U.S. Requirements for Shipping to Hong Kong

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Today’s Speaker

Gwendolyn Wilber JaramilloPartner

Foley Hoag LLP

Deputy Chair of Foley Hoag’s International Business Practice

Counsels multinational companies on foreign investments, joint ventures, export controls,

and sanctions.

Advises clients regarding compliance with export control and sanctions programs,

including product classifications, development of compliance programs, compliance audits,

compliance with OFAC regulations, and voluntary disclosures.

Clients in industries ranging from life science/pharmaceuticals; higher education; oil and

gas; emerging technologies; software development.

Complying with New U.S. Requirements

for Shipping to Hong Kong

April 6, 2017

Gwendolyn W. Jaramillo

© 2016 Foley Hoag LLP. All Rights Reserved. 5

Agenda

Background

Requirements of Rule

Impacted Categories of Items/Parties

How to Comply

Tips & Resources


Poll

What industry do you represent?

- Manufacturing

- Life Sciences/Pharmaceuticals

- Defense

- Telecommunications

- Software/SaaS/other tech

- Legal/Professional services

- Other


Background

January 19, 2017: Publication of Final Rule “Support Document

Requirements with respect to Hong Kong” 82 FR 6216

Simultaneous publication of FAQ regarding implementation

Effective date of final rule: April 19, 2017

Key implications:

- No exports/re-exports to Hong Kong OR re-exports from Hong Kong of

certain items without additional documentation from importer or re-

exporter in Hong Kong

- No use of license exceptions or existing licenses without such

documentation


Context of Final Rule

Why Hong Kong? Why Now?

Novel Rule

Increasing focus on exports

to China

Focus on transshipment

risks generally

Hong Kong factor in

enforcement actions



Transshipment in East Asia (presentation at BIS Update 2016)

- Hong Kong: 23.4% of GFP is trading and logistics

- Entire infrastructure of service industries focused on facilitating

transnational/transboundary trade (for expertise, logistical, or darker

reasons)



Hong Kong is not a relevant market for most controlled items in end

use

Hong Kong maintains its own import and export requirements and

regulations

High level of formality for legitimate transactions

Close coordination between BIS and Hong Kong Trade and Industry

Department Strategic Commodities Control division in roll-out and

implementation of final rule


Poll

How is your organization impacted by the new rule?

- Frequently ship products to third countries via Hong Kong

- Use distributors or resellers in Hong Kong

- Occasional shipments to or via Hong Kong

- Hong Kong is an end market for us

- Just curious



Items subject to EAR and controlled on CCL for:

- NS

- MT

- NP column 1

- CB

Prior to export to Hong Kong or reexport from Hong Kong, exporter

or reexporter must obtain additional documentation demonstrating

compliance with Hong Kong licensing requirements

Exports:

- Copy of Hong Kong import license

- Written statement from Hong Kong gov’t that no license required

Reexports:

- Hong Kong Export license

- Written statement from Hong Kong gov’t that no license required



No additional license requirements imposed

- Rule reinforces existing Hong Kong law

- Adds documentation requirement under the EAR

If a Hong Kong license is required, must be valid at time of export or

reexport

Same documentation may be used for multiple exports or reexports

- As long as it is still valid!

Special Situations

Shipments in Transit as of April 19, 2017

- Not required to be held

Software Upgrades

- If software upgrades are in one of the affected control categories, they

are also covered

- Written documentation of NLR rquired for these items


Impacted Items/Parties

All entities exporting or re-exporting items

subject to the EAR to or via Hong Kong

Foreign subsidiaries of U.S. operations

Importers in Hong Kong

Exporters from Hong Kong

Distributors/transshippers in Hong Kong


Impacted Items/Parties

Items subject to rule – key categories (for example)

- 2B350 – pumps, valves, eg

- 1C210 – thermoset resin, carbon fiber, eg

- 5A002 – information security hardware, eg, routers

- 3A001 – chips, amplifiers, etc

NO LICENSE EXCEPTIONS PERMITTED WITHOUT

DOCUMENTATION

Documents as specified in rule must be obtained prior to export

or reexport

- License applications may be submitted prior to

requesting/obtaining documents


Poll

How advanced is your organization in preparing for the new

requirements?

- We are ready for April 19!

- We have begun assembling documents but it has been slower than

expected

- We are still determining whether we are impacted/how to comply

- This is the first step we’ve taken


How to Comply

Exports or Reexports to Hong Kong: Acceptable Documentation

- Confirmation on website of STC that no license is required (public search

tool)

• Specific to product/model/brand

- Formal NLR statement received from TID

- Affirmative Import License from TID

- Approval in Principle letter from TID of Government of Hong Kong

• AIP letter must be valid when shipment takes place

• AIP letter must cover items/parties subject to the export or reexport


How to Comply

Exports or Reexports from Hong Kong: Acceptable Documentation

- AIP LETTER DOES NOT WORK FOR THIS PURPOSE

- NLR Letter

- STC Website information

- Affirmative Export License from TID


How to Comply


How to Comply

Update export compliance procedures/policies/rubrics

Train key staff in sales/logistics/shipping/compliance

Coordinate with end user or customer in Hong Kong

Ensure that End User documentation is in order

Review Control Status of items to be exported, or for ultimate re-

export

Confirm NLR status or begin license request to obtain appropriate

documentation well in advance of ship date

Maintain documentation for each shipment/order with other required

export-related documentation


Tips and Resources

http://pepd.cloudapps.cisco.com/legal/export/pepd/Search.do


Tips and Resources


Tips and Resources

https://www.stc.tid.gov.hk/service/productSearch.do?locale=eng&text=0


Tips & Resources

Hong Kong TID Procedures

- Pre-classification service

- Electronic and paper licensing

- Approval in Principle Letters


Tips and Resources

Trading via Hong Kong

- Know your customer and end user

- Know your consignee

- Don’t rely freight forwarders or re-exporters to do your compliance work

- Differentiate between Hong Kong as destination and Hong Kong as

transshipment point


Tips and Resources

Contact Points:

BIS/USCIS in Hong Kong (Consulate General Hong Kong & Macau)

John Haberstock

[email protected]

Carrie Chan

[email protected]

U.S. Commercial Service

American Consulate General Hong Kong

26 Garden Road, Central

Hong Kong (SAR)

Tel: (852) 2521-1467

Fax: (852) 2845-9800

Email: [email protected]

Website: http://export.gov/hongkong

mailto:[email protected]



http://export.gov/hongkong


Tips & Resources

Strategic Trade Controls Branch

Trade and Industry Department

Room 1619, 16/F

Trade and Industry Tower

3 Concorde Road, Kowloon City, Hong Kong

https://www.stc.tid.gov.hk/eindex.html

Classification Questions: 011-852-2398-5587

Licensing Questions: 011-852-2398-5575

https://www.stc.tid.gov.hk/eindex.html


Questions?

Gwendolyn Wilber Jaramillo Partner-| +1.617.832.1224

[email protected]

Chair of Foley Hoag’s Trade Sanctions & Export Controls Practice Group

Deputy Chair of International Business Practice

Advises clients regarding compliance in areas of export control and

sanctions, as well as corporate social responsibility, including with

respect to voluntary standards on human and labor rights and reporting

requirements.

Counsels multinational companies on foreign investments, joint

ventures, and international operations.

Clients in industries including manufacturing; oil and gas; life

science/pharmaceuticals; emerging technologies; software

development.

Complying with New U.S. Requirements for Shipping to Hong Kong

Documents

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