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11 September 2020
On 21 August 2020 US Customs and Border Protection (CBP) issued new guidance providing an additional 45-day transition period for compliance with new marking requirements for goods produced in Hong Kong that are imported into the United States. This extends the transition period for companies to comply with the requirements from 25 September 2020 to 9 November 2020.
On 14 July 2020 the president signed Executive Order 13936 on Hong Kong Normalisation (for further details please see "Importers must act quickly to meet new marking requirements for goods from Hong Kong"). As a result, CBP has issued a new marking requirement for goods that are produced in Hong Kong which enter United States customs territory. Currently, such goods are marked as "Made in Hong Kong". However, according to an 11 August 2020 CBP Federal Register notice, goods produced in Hong Kong must be marked with China as their country of origin pursuant to 19 US Code Annotated (USCA) Section 1304 and 19 Code of Federal Regulations (CFR) Part 134. Specifically, the notice stated that goods produced in Hong Kong, which are entered or withdrawn from warehouse for consumption into the United States, must be marked with China as their country of origin as of 45 days from the notice's publication in the Federal Register. However, with CBP's updated guidance, this transition period has effectively been doubled.
Given the time necessary to mark goods, it is important that importers of goods produced in Hong Kong act quickly to ensure that they come into compliance with the marking requirements. Marking under 19 USCA Section 1304 requires that unless excepted, every article of foreign origin (or its container) imported into the United States must be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a way as to indicate to the ultimate purchaser in the United States the English name of the article's country of origin. Further, a 10% ad valorem duty will be applied to articles that are not properly marked in accordance with 19 USCA Section 1304 and 19 CFR Part 134.
One significant clarification that CBP has provided on this new rule is that although goods imported from Hong Kong will soon have to be marked country of origin China, this change in marking requirements will not affect country of origin determinations for purposes of assessing:
Despite this clarification, it is important to note that goods produced in Hong Kong and imported into the United States should continue to report the International Organisation for Standardisation country 'HK' as the country of origin when required. Thus, Hong Kong-produced goods will need to be physically marked 'China' with respect to the country of origin, but entry documentation should continue to report Hong Kong as the country of origin.
Currently, the executive order applies only to marking requirements under 19 USC Section 1304. CBP has also explained that there is no change regarding Hong Kong outward processing arrangements (OPAs). Thus, even when goods are produced under an OPA, CBP will independently review the processes conducted in Hong Kong and the OPA country to determine the origin of the product under the applicable CBP rules. Significantly, CBP has issued several textile and apparel rulings involving Hong Kong's OPA arrangement and in at least one, HQ 959425 (21 August 1996), China was determined to be the country of origin under the applicable origin rules for textile and apparel products in 19 CFR 102.21. Such a finding could create significant duty liability. According to CBP, these are case-specific findings, so stakeholders should seek advice regarding complex situations where significant portions of raw materials and processing occur outside Hong Kong.
CBP is expected to begin enforcing the marking requirements on or around 9 November 2020. As the United States has continued a high-pressure campaign against Hong Kong and CBP has extended the timeline for application of the new rule, it is imperative that importers act to comply within the allotted timeframe, as CBP may be expected to strictly enforce the rule.
For further information on this topic please contact Teresa Polino, David Salkeld or Natan Tubman at Arent Fox LLP by telephone (+1 202 857 6000) or email (email@example.com, firstname.lastname@example.org or email@example.com). The Arent Fox LLP website can be accessed at www.arentfox.com.
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