Exporters sending goods made in Hong Kong to the United States will be allowed a longer transition period for changing labels to “Made in China”, according to authorities.
US Customs and Border Protection said over the weekend it would extend the enforcement of the new label rule by 45 days, from September 25 to November 9, to give accounts and importers more time to prepare.
As part of US President Donald Trump’s executive order terminating the special treatment the city enjoyed under Hong Kong Policy Act of 1992, his administration stipulated Hong Kong exporters must relabel made-in-Hong Kong goods as “Made in China” to reflect the city’s status as “just another Chinese city”.
Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China.
“The measure is unnecessary and unreasonable. And they are malicious,” Secretary for Commerce and Economic Development Edward Yau Tang-wah said on Monday. “It is to threaten or attack Hong Kong’s special status as a separate customs territory under the [World Trade Organisation].”
He added the US wanted the made-in-Hong Kong label to disappear in front of consumers, which was “unfair and uncivilised”.
Yau said the Hong Kong government was exploring alternatives through its economic and trade office in the US.
“Are there other ways we can accept and satisfy the product origin rules? For example, ‘Hong Kong, China’ or similar labels?
“We are awaiting the US response. Their response is important.”
He said the government would take action if the US insisted on violating WTO rules.
However, the new label rule does not affect the place of origin, “HK”, which means made-in-Hong Kong exports will not be subject to any of the punitive tariffs the US has imposed on Chinese goods during the trade war since the summer of 2018.
Willy Lin Sun-mo, Hong Kong Productivity Council chairman, said consumer rights authorities and importers in the US had questions about the new arrangement, which he said had caused a certain amount of confusion.
“They are confused about the rule and risk breaching trade-description rules,” he said. “Some of them have no idea on how to advertise the Hong Kong products.”
The executive order was signed in response to Beijing’s decision to impose a national security law on Hong Kong in June, a move Trump said undermined the city’s democratic development and the autonomy guarantees under the “one country, two systems” governing principle.
“We hope that there will be a return of some common sense in this battle initiated by the US against China and likely against Hong Kong,” Yau said.
“There are sufficient mutual interests for all of us to work for the betterment of our own communities and economies. I’m hoping that common sense will be back.”
The US is the second-largest destination for Hong Kong-made shipments, accounting for 7.7 per cent of the city’s total domestic exports in 2019, with the mainland being the biggest destination.
In 2019, Hong Kong exported US$471 million worth of made-in-Hong Kong goods to the US, most of which were jewellery, food, electronic goods and electric appliances.
Heightened US-China tensions and the coronavirus dealt a severe blow to Hong Kong’s 342,000 small and medium-sized enterprises (SMEs), which employ 45 per cent of the city’s workforce in the private sector.
A government survey in July of about 600 SMEs found nearly one in 10 needed credit, up 93.9 per cent year on year. A different survey, by the Hong Kong General Chamber of Commerce, found about 42 per cent of 231 respondents would collapse within six months without another round of government relief measures.
The government has so far dished out HK$290 billion worth of measures for residents and businesses, with a fresh package expected imminently.
“Hong Kong enterprises are changing their strategies by diversifying and digitising their businesses to strengthen their resilience to the pandemic,” said Daniel Chan Hing-yiu, the head of business banking at HSBC Hong Kong.
Chan said the bank had allowed borrowers to defer the repayment of principal of HK$150 billion (US$19.3 billion) worth of interest-bearing loans since the start of the year to ease their financial burden. He added that HSBC had handled 4,000 applications for an SME lending scheme entirely guaranteed by the government since March.
Dr Daniel Yip Chung-yin, chairman of the Federation of Hong Kong Industries, said firms must diversify their markets away from the US into others, such as those in Asia, to mitigate risks.
“Hong Kong’s economy must also diversify,” he said. “In the past, we have relied too much on finance and real estate. If we continue to rely too much on these industries, we will have the problems we have now.”
He urged the government to help Hong Kong’s manufacturing industry transform their businesses, with great potential in emerging sectors such as food processing, environmental protection and microelectronics.
The Hong Kong Productivity Council and the Trade and Industry Department have organised a free three-day online fair between August 24 and 26 on what funding schemes are available and how to apply.
This article US authorities give Hong Kong exporters some breathing room over switch to ‘Made-in-China’ labels first appeared on South China Morning Post