US requires Hong Kong products marked “Made in China” WTO ruling violation

International Business News  (Hong Kong)  –  According to a draft U.S. government announcement, goods manufactured in Hong Kong and exported to the United States must be marked “Made in China” after Sept. 25. This will result in Hong Kong companies facing the same trade war tariffs as mainland Chinese exporters if they produce the products targeted by these tariffs.

A WTO panel ruled on 21 May that the U.S. 2020 requirement that Hong Kong mark its exports as “Made in China” violates global trade rules. The United States said it would not comply with the ruling, while Hong Kong welcomed the outcome.

The World Trade Organization on Wednesday (Dec. 21) found that the United States insisted that imports from Hong Kong be marked as Chinese in violation of global trade rules, but Washington said the ruling was “flawed” and said it did not intend to comply with the findings.

The three-member WTO panel found that the U.S. had granted Hong Kong less preferential treatment than other WTO members after requiring that “Made in Hong Kong” be changed to “Made in China. The panel therefore found that this violated U.S. obligations to Hong Kong.

The U.S. also argued that the change in Hong Kong’s origin marking was based on exceptional circumstances, i.e., an “emergency in international relations” that allowed the U.S. government to take measures to protect the country’s “essential security interests”. But the WTO panel found that tensions between the U.S. and Hong Kong, while heightened, had not risen to the level of an “exigency in international relations” . The panel concluded in its 96-page ruling that the U.S. should bring its measures into line with global trade rules.

For its part, the Hong Kong government welcomed the ruling, saying it affirmed Hong Kong’s special status as an independent customs territory. “The revised origin marking requirement is politically motivated and is a futile attempt to interfere in Hong Kong’s internal affairs by weaponizing trade,” said Qiu Yinghua, Hong Kong’s secretary for commerce and economic development, in a statement.

Hong Kong’s importance as a re-export center is far greater than its importance as a direct trade center in its own right. Its economy is now in a very different position than it was in the 1970s and 1980s, when it was a manufacturing stronghold. Now, only 1 percent of the goods shipped out of Hong Kong are made in Hong Kong. For goods manufactured in and destined for mainland China, Hong Kong plays the role of a logistics gateway.

According to the HKSAR Government’s website, the HKSAR Government issued a press release on August 11, expressing strong opposition to the U.S. Customs and Border Protection’s notice on the Federal Register website on the same day regarding the new regulations on marking the origin of goods in Hong Kong.

The SAR Government said that the new regulations originated from the U.S. Presidential Executive Order issued on the 14th of last month, reflecting the U.S. disregard for Hong Kong’s status as a separate member of the World Trade Organization.

In addition to the relevant provisions may not be in line with WTO regulations, but also does not help to protect the interests of consumers, but will also bring confusion and damage to all parties, including the interests of the United States itself.

The SAR government will maintain communication with the industry and make explanations, and will carefully study whether the U.S. measures violate WTO rules, if necessary, do not rule out taking action under WTO rules to protect the interests of Hong Kong.

The United States or Hong Kong can appeal the decision to the WTO Court of Appeals. However, the WTO appellate body is not currently operating because the United States has blocked the appointment of new members to that court on its own. Therefore, any related appeal would go to arbitration nullification.