The U.S. will officially strip Hong Kong of its special trade treatment, which will include changes to U.S. export controls and sanctions against Chinese officials, President Donald Trump said May 29. Trump said the export controls will impact dual-use technologies and sanctions will target both Hong Kong and mainland China officials.

The Committee on Foreign Investment in the U.S. is increasing scrutiny on transactions involving basic medical supplies and sensitive technologies, trade lawyers said. Companies may also be seeing more CFIUS-related delays and a heavier involvement by political appointees in the CFIUS process as the Trump administration seeks to place more pressure on China, the lawyers said.

Wassenaar Arrangement members have begun virtual negotiations on export controls, in observance of mitigation measures recommended during the COVID-19 pandemic, said Heidi Grant, the director of the Defense Department’s Defense Technology Security Administration. The virtual negotiations, which Grant believes have never been done before, started after the pandemic forced the group to cancel in-person meetings for the 2020 cycle, including an April Experts Group meeting (see 2004290044). Grant said the group has submitted 90 export control proposals for negotiations this year, although it remains unclear whether members will be able to vote remotely.

The U.S. government decision to increase license requirements for certain foreign exports to Huawei may damage U.S. companies more than Huawei and China, experts said. The same may be true for sanctions being prepared against China for interference with Hong Kong’s autonomy (see 2005220011), the experts said, which may present a large challenge for U.S. businesses. “If the administration follows through on the kinds of threats that they’re talking about … it will have a hugely negative impact on U.S. companies operating there, it will have a hugely negative impact on the people of Hong Kong, and it will have a minuscule effect on China,” said Nicholas Lardy, a Chinese economy expert at the Peterson Institute for International Economics.

Secretary of State Mike Pompeo said, “No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground,” in a statement May 27 to Congress that Hong Kong no longer warrants the same treatment under U.S. laws as it did before the handover to China in 1997.

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Two senators plan to introduce a bill they say will expand U.S. sanctions against Chinese efforts to meddle in Hong Kong’s autonomy. The bill would impose sanctions on Chinese policymakers and entities and would introduce secondary sanctions against certain banks, said Sens. Pat Toomey, R-Pa., and Chris Van Hollen, D-Md.

A new law being considered by China’s National People's Congress could trigger U.S. export controls and cause the U.S. to revoke Hong Kong’s special customs status, said Jude Blanchette, a China expert at the Center for Strategic and International Studies. The new national security law, which is expected to be proposed during China’s current NPC session, would criminalize “treason, sedition and secession,” Blanchette said, and will likely cause the U.S. to enact measures under the Hong Kong Human Rights and Democracy Act, which passed in November 2019 (see 1911290012).

The Bureau of Industry and Security is adding 33 companies and governmental bodies to the Entity List for their roles in military and proliferation activities and human rights abuses in China’s Xinjiang province, BIS said May 22. The two agency press releases do not mention an effective date.

The government is considering how quickly it can get through a legislative fix to U.S.-Mexico-Canada Agreement implementation provisions that allow for duty refunds on post-importation preference claims, but not a refund of merchandise processing fees, said Maya Kumar, director of textiles and trade agreements at CBP. She said on May 22 that CBP officials “do not think that was the intent of the law.” Kumar, who was speaking at the National Association of Foreign-Trade Zones virtual conference, said that if it's at all possible, CBP would like to see that fixed by Congress before USMCA's entry into force July 1. “We’re trying to work with [the office of the U.S. Trade Representative] as well as Congress and see how quickly they can do that,” she said.