Overview
Download the full report (PDF).
On July 14, the president issued Executive Order (EO) 13936, directing US federal agencies to revoke or suspend the Hong Kong Special Administrative Region's (HKSAR) special status from mainland China under select laws and regulations.[1] EO 13936 specifies a wide range of differential treatment historically granted to Hong Kong by regulation and program inclusion, implemented by various US government agencies, from economic sanctions and export controls, to immigration and academic exchanges. As of August 15, several agencies have announced rule changes or proposed changes to implement the president's directive.
After one month, what are the major impacts of EO 13936 on individuals and companies doing business or investing in Hong Kong?
Background
On May 28, Secretary of State Mike Pompeo submitted the 2020 Hong Kong Policy Act Report to Congress, certifying that the HKSAR "does not continue to warrant treatment under US laws in the same manner as US laws were applied to Hong Kong before July 1997." The secretary's certification was pursuant to section 301 of the United States-Hong Kong Policy Act of 1992 (HKPA), as amended, which requires the Department of State to certify to Congress annually whether Hong Kong continues to warrant differential treatment under US law.
On May 29, the president announced that his administration would "begin the process" of revoking the HKSAR's separate treatment from mainland China under US laws, a status afforded to the HKSAR under the Hong Kong Policy Act of 1992. Furthermore, he said that his administration would sanction Chinese and Hong Kong officials "directly or indirectly involved in eroding" the HKSAR's autonomy.
On July 2, Congress passed the Hong Kong Autonomy Act (HKAA), authorizing sanctions on foreign persons responsible for certain actions in Hong Kong and financial institutions that knowingly engage in significant transactions with them. On July 14, the president signed the HKAA into law and issued EO 13936.
Scope of EO 13936
Section 3 of EO 13936 directs the heads of relevant agencies to "commence all appropriate actions [within 15 days] to further the purposes" of EO 13936 on 11 topics including export controls, immigration, and extraditions. Section 3 will also end Hong Kong's separate participation in the Fulbright exchange program and training of members of Hong Kong's Police Force at the State Department's International Law Enforcement Academies, among other actions.
The order excludes mutual legal assistance, civil aviation, and financial services regulation, and a handful of other areas where the HKSAR differs from mainland China. However, section 3 also directs agencies to recommend "further actions deemed necessary and prudent to end special conditions and preferential treatment for Hong Kong," leaving the door open to further changes.
Section 4 of EO 13936 authorizes the Treasury and State Departments to impose blocking sanctions on foreign persons in relation to certain events in Hong Kong. For discussion of economic sanctions under EO 13936, refer to Steptoe's July 15 client alert, "US Executive Order Implements, Strengthens Hong Kong Sanctions" and Steptoe's August 14 International Compliance Blog post, "Financial Institutions Watch and Wait as OFAC Sanctions Top Hong Kong Officials."
This client alert provides a summary of EO 13936's impact on export controls, arms controls, investigations and white-collar defense, immigration, and trade, with contributions from Steptoe’s cross-border teams based in Washington, DC, New York, and Hong Kong.
Download the full report (PDF).
[1] https://www.federalregister.gov/documents/2020/07/17/2020-15646/the-presidents-executive-order-on-hong-kong-normalization
