On 11 August 2020, the Customs and Border Protection (CBP) of the United States of America proclaimed that pursuant to the Executive Order issued by the US President on 14 July 2020, imported goods produced in Hong Kong SAR could no longer be marked after the transition period to indicate “Hong Kong SAR” as their origin but must be marked to indicate “China” for compliance with the marking requirements under the Tariff Act of 1930.
The Tariff Act requires that imported goods into the USA are marked with the English name of the country of origin of the goods, failure of which would be subject to an ad valorem duty of ten percent of the value of the goods concerned.
On 13 August 2020, CBP further clarified on its website that the change in marking requirements does not affect the determination of country of origin of goods produced in Hong Kong SAR which should continue to report International Organization for Standardization (ISO) country code “HK” as the country of origin. There will be no increase on import tariffs levied on goods produced in Hong Kong SAR to the levels levied on goods produced in China.
For producers in Hong Kong SAR, this change of the US marking requirement has immediately raised costs as a result of re-labelling goods produced for the US market. In the long run, the change may also erode the goodwill and reputation enjoyed by Hong Kong SAR products as being goods produced in a city known for high quality and strong safety controls. As certain countries are well-known for manufacturing certain products, labels of the country of origin would affect the value and attractiveness to consumers.
In Hong Kong SAR, the Trade Descriptions Ordinance (Cap. 362) (the “Ordinance”) aims to protect consumers by prohibiting false trade descriptions, misleading or incomplete information and misstatements in respect of goods provided in the course of trade. The definition of “trade description” is broad in scope and includes indications of place or date of manufacture, processing or reconditioning of goods. The Customs and Excise Department (“HKC&E”) is responsible for enforcing the Ordinance and carries out market inspections and investigations against suspected violations to ensure that the provisions of the Ordinance are complied with.
Under the Ordinance, it is an offence for any person, in the course of trade, to supply, offer, or have in his possession for sale or for any purpose of trade or manufacture, any goods which have a false trade description. An offender is liable:
- on conviction on indictment to a fine of $500,000 and imprisonment for 5 years; and
- on summary conviction to a fine of $100,000 and imprisonment for 2 years.
Since a “trade description” in relation to goods is defined as any material indication including the place of manufacture, it may be an offence for a producer or distributor to possess, supply or offer goods and label it as originating from a different country.
To cope with public concern on protective products against COVID-19, HKC&E has been conducting large-scale special operations codenamed "Guardian" since 27 January 2020. Thousands of officers have been mobilized to conduct over 37,000 spot checks and enforcement operations on common protective items at retail spots. As a result, criminal investigations are being conducted against suspected violations of the Ordinance including a case in which surgical masks suspected of bearing a false origin claim, were supplied to the Government Logistics Department.
In order to avoid any breaches of the Trade Descriptions Ordinance, manufacturers and distributors selling goods to Hong Kong SAR should ensure that every indication on the goods sold, including place of manufacture, is accurate.