As noted in our recent alert, President Trump signed into law the Hong Kong Autonomy Act (“HKAA”) on July 14, 2020. On the same day, the President also issued an Executive Order on Hong Kong Normalization (the “Executive Order”) confirming that it is the policy of the United States to suspend or eliminate all different and preferential treatment for Hong Kong compared to mainland China. The Executive Order supplements the HKAA without establishing major new trade policy measures.

The Executive Order provides direction to the U.S. government on the imposition of HKAA blocking sanctions on foreign persons found to be contributing to China’s alleged failure to observe its international obligations regarding Hong Kong. The order also confirms retraction of favorable U.S. export control treatment for Hong Kong.

The Executive Order adds to the large and ever growing authorizations of blocking sanctions. It provides for blocking sanctions on any foreign person determined by the Secretary of State or the Secretary of the Treasury:

• To have been involved in coercing, arresting, detaining or imprisoning of individuals under the authority of, or to be or have been responsible for or involved in developing, adopting or implementing, the “Law on Safeguarding National Security in the Hong Kong Special Administrative Region” imposed by China;
• To be responsible for or complicit in, or to have engaged in actions or policies that undermine democratic processes or institutions in, or threaten the peace, security, stability or autonomy of, Hong Kong, or censorship or activities that limit the exercise of freedom of expression in Hong Kong; or to be or have been a leader or official of an entity (including a governmental entity) that has engaged in any such activities or whose property are blocked under the Executive Order;
• To have engaged in serious human rights abuses in Hong Kong;
• To have materially assisted or provided support for, or goods or services to or in support of, or to be owned or controlled by, or acted on behalf of, or to be a director or senior executive officer of, any person whose property is blocked under the Executive Order.

Building on the HKAA and export control regulators’ announcements, the Executive Order instructs federal agencies, by July 29, 2020, to commence actions to revoke all license exceptions for exports to Hong Kong, reexports to Hong Kong, and transfers (in-country) within Hong Kong of items subject to the Export Administration Regulations (EAR) that provide differential treatment compared to those license exceptions applicable to China. The regulators are also to terminate export licensing suspensions with respect to exports of defense articles to Hong Kong persons who are physically located outside of Hong Kong and China and who were previously authorized to receive defense articles.