Details Category:  Compliance & Training

As mentioned in BIS’s previous guidance on exporting items subject to the Export Administration Regulations (EAR) to Hong Kong, which can be found at Hong Kong Import/Export License Requirements (http://www.bis.doc.gov/index.php/policy-guidance/foreign-import-export-license-requirements/hong-kong), Hong Kong and Mainland China are treated as two separate destinations under U.S. law for export control purposes.  Certain items subject to the EAR that do not require an individual validated license for export from the United States to Hong Kong will require a license for re-export from Hong Kong to China.  BIS is providing additional guidance on possible red flags to prevent unauthorized transshipments/reexports.

When inquiring about the end user of an item procured through a Hong Kong company, an exporter should consider specific factors, including, but not limited to:

  • ·         Whether the company is registered with the Hong Kong Companies Registry.  All companies in Hong Kong are required to have company secretaries under the Hong Kong Companies Ordinance. While directors and shareholders do not need to be Hong Kong residents, the company secretary must ordinarily reside in  Hong Kong or be a body corporate having its registered office or place of business in Hong Kong.  While companies usually appoint an individual person as the company’s secretary, some companies engage the services of company secretarial firms who handle various administrative functions for their clients. Many secretarial firms offer a wide range of services, including registered office services for offshore clients. Shipments of controlled items to secretarial firms can be destined for transshipment/reexport.

  • Whether the company has received an import/export license issued by Hong Kong (see http://www.tid.gov.hk/eindex.html) for a control list item, or is aware of Hong Kong license requirements (if dealing with a company with a contact person outside of Hong Kong, this person could be less likely to be aware of Hong Kong license requirements). Exporters are reminded that most multilaterally controlled (i.e., National Security (NS), Nuclear Proliferation (NP), Missile Technology (MT), and Chemical Biological (CB)) items on the Commerce Control List, under Hong Kong’s export control regulations, require an import license even if such items are authorized for export from the United States to Hong Kong under License Exception or the designation No License Required (NLR).  Moreover, reexports of such multilaterally controlled items from Hong Kong require an export license from Hong Kong’s Trade and Industry Departmenteven if, under the Export Administration Regulations (EAR), the destination country of the end user is eligible for authorization for such reexports under License Exception or the designation NLR.

  • ·         Whether there is a legitimate consumer or company in Hong Kong for your product.

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  • ·         Whether the consignee knows the end user and end use are in Hong Kong. Of note, License Exception GBS (740.4) can only be used when a party in Country Group B, which includes Hong Kong, is the ultimate destination.  The exporter should pay attention to discrepancies in the destination country and the country from which an order is placed or payment is made.
     

  • ·         Where the Hong Kong importer is not the end user, whether the importer is willing to provide the purchase order or confirmation of such purchase from the end user. The provision of documents from both the importer and purchaser may reduce the chance of counterfeit documents (e.g., falsified importer letterhead and company stamps).
     

  • ·         Whether the Hong Kong party has an actual business in Hong Kong.  If the party has no actual business in Hong Kong, then whether the service of a logistics service provider is being used to send the consignment to an address which is neither the importer’s nor the end-user’s (e.g., the buyer sends an item to a storage unit of a storage company rather than taking possession of the item or send it to the end-user).

  • ·         Whether documents, particularly end-use statements, are incomplete or contain suspicious information, such as addresses that do not exist, first names only for contact persons (often, generic Western names), persons who cannot be linked to a company or university directory, or end-user names with no accompanying signatures.

  • ·         Whether the location of the end user’s point of contact is in Hong Kong, based on a review of the country code of the contact’s telephone number (i.e., Hong Kong’s country code is 852). A different country code may show some other intended destination country of the product.

Pursuant to Supplement No. 3 to Part 732 of the EAR, red flags must be resolved prior to shipment.  Exporters must not self-blind and ignore relevant information in any export transaction and need to be particularly sensitized to exports to Hong Kong. Exporters should always screen their customers against the U.S. Government’s consolidated export screening list (https://www.export.gov/Legal-Considerations). An interactive tool for searching this list based on entity name and address is also available.

Export controls are a shared responsibility between government and industry. If you have any concerns about suspicious inquiries that come to your firm, you are encouraged to contact your local BIS Export Enforcement Office or use BIS’s online tip form.

If you have any questions about export licensing requirements or submitting a license application, you may contact BIS’s Office of Exporter Services at (202)482-4811. If contacting the Office of Exporter Services via e-mail, please include a telephone number to facilitate BIS’s response to your request.

   
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