Yesterday, U.S. Customs and Border Patrol (CBP) issued a new rule that requires importers to begin marking Hong Kong goods as “made in China” for purposes of 19 U.S.C. § 1304. Goods that are entered or withdrawn from warehouse for consumption into the United States after September 25, 2020 will be subject to the new requirements. The rule was issued pursuant to last month’s Executive Order (E.O.) on Hong Kong Normalization, which requires U.S. government agencies to update their regulations to eliminate the differential treatment between China and Hong Kong under U.S. international trade rules.

Importers should act now to ensure that subject imports are properly marked. As CBP notes in the rule notice, failure to comply with marking requirements will result in the imposition of a 10 percent ad valorem duty.

The new rule is effective today, but there is a savings clause that authorizes the use of license exceptions for shipments that were on the dock for loading, already loaded, or already en route by today. Certain deemed exports and deemed re-exports are also authorized under existing license exceptions until August 28, 2020.

This rule did not change the Export Administration Regulations’ (EAR) Country Chart, which means that all items that could be exported, re-exported, or transferred to Hong Kong without a license or the use of a license exception may still be shipped. However, it is likely that further restrictions on exports to Hong Kong are coming, given recent statements from the Commerce and the State Departments and proposed legislation under consideration in the Senate. Continued monitoring of these issues will be necessary to ensure compliance in this rapidly changing landscape.

The bill requires the Department of State to provide annual reports to Congress regarding whether Hong Kong retains enough autonomy to justify its unique treatment, which has especially important implications for trade between the United States and Hong Kong. Ending Hong Kong’s special status would see its imports and exports subject to the tariffs that currently exist on trade between the United States and China. The bill also requires that the Department of Commerce submit an annual report on the extent and nature of violations of U.S. export controls and sanctions law occurring in Hong Kong.

The bill provides for sanctions against persons responsible for the extrajudicial rendition, arbitrary detention, or torture of any person in Hong Kong, or gross violations of human rights within Hong Kong. The bill authorizes the President to impose sanctions by blocking assets, blocking persons from receiving a visa, admission, or parole into the United States, and revoking existing visas or entry documents.

Chinese officials have urged the United States to reconsider, and claimed that Beijing would impose “strong countermeasures” if the bill becomes law.

The bill’s timing complicates the “phase one” trade deal. While neither side has said that its passage into law will end negotiations, tensions have been rising since President Trump and President Jinping’s handshake agreement in October. President Trump recently noted the deal was close, but as more time passes without a concrete agreement, there are signs the two sides are slowly drifting apart, again.

A related bill, which also awaits President Trump’s signature, prohibits the export of tear gas, pepper spray, rubber bullets, and other crowd control munitions to the Hong Kong Police Force.