Billing Code 3510-33-P Department of Commerce
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This document is scheduled to be published in the Federal Register on 12/23/2020 and available online at BILLING CODE 3510-33-P federalregister.gov/d/2020-28101, and on govinfo.gov DEPARTMENT OF COMMERCE Bureau of Industry and Security 15 CFR Parts 738, 740, 742, 744, 745, 748, and 758 [Docket No. 201215-0345] RIN 0694-AI17 Removal of Hong Kong as a Separate Destination under the Export Administration Regulations AGENCY: Bureau of Industry and Security, Commerce. ACTION: Final rule. SUMMARY: In this rule the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) to remove the People’s Republic of China (PRC or China) Special Administrative Region of Hong Kong from the list of destinations in the EAR. The amendments implement Sections 2 and 3 of Executive Order 13936 of July 14, 2020, in response to new security measures imposed on Hong Kong by the government of China. These new measures fundamentally undermine Hong Kong’s autonomy increasing the risk sensitive U.S. technology and items will be diverted to unauthorized end uses and end users in China. DATES: This rule is effective [INSERT DATE OF PUBLICATION IN THE FEDERAL REGISTER] FOR FURTHER INFORMATION CONTACT: Tracy Patts, Foreign Policy Division, Office of Nonproliferation and Treaty Compliance, Bureau of Industry and Security, U.S. Department of Commerce, by email at [email protected], or by phone at 202–482–4252. SUPPLEMENTARY INFORMATION: Background This rule represents the culmination of a rapid escalation of tensions over several months between the United States and China over the Hong Kong Special Administrative Region (Hong Kong or HKSAR). A brief timeline follows below. On May 21, a spokesperson for the PRC's National People's Congress (NPC) announced the body would consider a resolution authorizing the adoption of national security legislation for the HKSAR. On May 27, the Secretary of State submitted the 2020 Hong Kong Policy Act Report to Congress, certifying that the HKSAR "does not continue to warrant treatment under U.S. laws in the same manner as U.S. laws were applied to Hong Kong before July 1997." The Secretary's certification was issued pursuant to sections 205 and 301 of the United States-Hong Kong Policy Act of 1992 (HKPA). On May 29, the President announced the Administration would "begin the process" of revoking the HKSAR's separate treatment from mainland China under U.S. laws, a status afforded to the HKSAR under the HKPA. In June 2020, China followed through on imposing national security legislation on Hong Kong, and on further denying Hong Kong’s autonomy and freedoms promised by China to the people of Hong Kong under the 1984 Joint Declaration of the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the People’s Republic of China on the Question of Hong Kong (Joint Declaration). This national security legislation fundamentally undermined autonomy in Hong Kong, thereby increasing the risk that sensitive U.S. technology and items will be diverted to unauthorized end uses and end users in China or elsewhere. BIS announced on its website on June 30, 2020, and subsequently published in the Federal Register on July 31 at 85 FR 45998, a notice suspending the availability of all license exceptions for Hong Kong that provide differential treatment as compared to those available to the PRC. A license exception is an authorization allowing exports, reexports, or transfers (in- country) under stated conditions of items subject to the EAR that would otherwise require a license. On July 14, the President signed Executive Order (EO) 13936 (85 FR 43413, 7/17/2020 ). The amendments in this rule relative to Hong Kong implement EO 13936 with regard to its effect on the Export Control Reform Act of 2018 (ECRA) and the EAR. Section 2 of EO 13936 suspends the application of section 201(a) of the HKPA, to a variety of statutes, including ECRA. Section 3 of EO 13936 directs the heads of relevant agencies to "commence all appropriate actions [within 15 days] to further the purposes" of EO 13936, including by amending any regulations implementing statutes specified in section 2 that provide different treatment for Hong Kong as compared to China. Summary of the Changes Proposed and their Impact Pursuant to EO 13936, BIS amends the EAR to remove provisions that provide differential and preferential treatment for exports to Hong Kong, reexports to Hong Kong and transfers (in-country) within Hong Kong of all items subject to the EAR when compared to the treatment for such transactions to or within China. As a result of this rule, Hong Kong will be treated the same as China under the EAR except in certain circumstances that do not provide preferential treatment. The references to Hong Kong that remain in the EAR support U.S. national security and foreign policy objectives, and recognize certain differences that remain in how trade is processed within and through Hong Kong. Specifically, in this rule, BIS amends: PART 738 – COMMERCE CONTROL LIST OVERVIEW AND THE COUNTRY CHART: Supplement No. 1 to Part 738 – Commerce Country Chart by removing the entry for Hong Kong from the Commerce Country Chart. License requirements for Hong Kong will now be governed by the Commerce Country Chart entry for China. PART 740 – LICENSE EXCEPTIONS: On July 31, 2020, BIS published a final rule amending the EAR to suspend the availability of all license exceptions to Hong Kong that provide differential and preferential treatment as compared to those available to China (See: 85 FR 45998). The changes implemented in this final rule are consistent with and in addition to the amendments of the July 31, 2020 final rule. License exceptions made unavailable to Hong Kong and listed by that rule in paragraph (23) of § 740.2(a) of the EAR remain unavailable. However, because Hong Kong is being removed as a separate destination on the Commerce Country Chart and in other places in the EAR, and will fall under the destination of China, this rule removes paragraph (23) of § 740.2(a) of the EAR, which is no longer necessary to bring license exception availability for Hong Kong in line with license exception availability for China. In addition, in order to remove specific references to Hong Kong in Part 740, BIS amends: Section 740.7 - Computers (APP) by removing Hong Kong from the list of Computer Tier 1 destinations in paragraph (c). Hong Kong will now be considered a part of China, in Computer Tier 3. Section 740.11 - Governments, international organizations, international inspections under the Chemical Weapons Convention, and the International Space Station (GOV) by removing Hong Kong from the description of ‘Cooperating governments’ in paragraph (c)(1). This paragraph of License Exception GOV is not available for China, and thus is not available for Hong Kong. Section 740.16 - Additional permissive reexports (APR) by removing Hong Kong from paragraphs (a) (formerly titled Reexports from Country Group A:1 and Hong Kong) and (b)- Reexports to and among specified countries. These paragraphs of License Exception APR are not available for reexports from China, and paragraph (b) is not available for reexports to China, and thus these paragraphs are not available for similar transactions to or from Hong Kong. However, as part of China in Country Group D:1, Hong Kong will now be an eligible destination for reexports consistent with the provisions of paragraph (a). Supplement No. 1 to Part 740 – Country Groups by removing the entry for Hong Kong from Country Group A:6, and from Country Group B. Hong Kong will no longer appear separately within the Country Groups but will instead be considered a part of China. China is currently in Country Groups D:1, D:3, D:4, and D:5, and limitations or authorizations that apply to transactions involving China as part of those country groups will now also apply to transactions involving Hong Kong. This includes any limitations that apply to China as a result of its placement in Country Group D:5, consistent with the State Department’s determination that the arms embargo on China also applies to Hong Kong. PART 742 – CONTROL POLICY – CCL BASED CONTROLS: Section 742.6 – Regional stability by removing and reserving paragraph (a)(6) – RS requirement that applies to Hong Kong – a license requirement. This license requirement, for Export Control Classification Number 6A003.b.4.b, already applies to China, so removal of this provision specific to Hong Kong will not change a license requirement in the EAR. PART 744 – CONTROL POLICY: END-USER AND END-USE BASED Supplement No. 4 to Part 744 – Entity List by removing the entries of entities under the separate entry for “Hong Kong” and merging, alphabetically, those entities under the entry for “China, the People’s Republic of”. Supplement No. 6 to Part 744 - Unverified List by removing the entries of entities under the separate entry for “Hong Kong” and merging, alphabetically, those entities under the entry for “China, the People’s Republic of”. PART 745 – CHEMICAL WEAPONS CONVENTION REQUIREMENTS: Supplement No. 2 to Part 745 – States Parties to the Convention on the Prohibition of the Development, Production, Stockpiles, and Use of Chemical Weapons and on Their Destruction by amending the first sentence with an asterisk that refers to Hong Kong at the end of the Supplement. This provision previously stated that Hong Kong was considered a part of China for CWC purposes only, but now it is considered a part of China for purposes of the EAR more generally. PART 748 – APPLICATIONS (CLASSIFICATION, ADVISORY, AND LICENSE) AND DOCUMENTATION: Section 748.10 – People’s Republic of China (PRC) End-User Statement by adding a NOTE 5 to paragraph (a) of the section to clarify for the public that a PRC-issued End User Statement is not required for license applications for exports or reexports to Hong Kong, even though Hong Kong is considered a part of China elsewhere in the EAR.