CBP's announcement follows from President Trump's Executive Order on Hong Kong Normalization suspending the application of section 201(a) of the United States-Hong Kong Policy Act of 1992 to Section 304 of the Tariff Act of 1930 as amended (19 U.S.C. 1304). The action also marks the latest move in a comprehensive effort across government agencies tasked with administering U.S. trade policy to suspend or eliminate preferential treatment for Hong Kong as an autonomous territory from mainland China in the aftermath of China's passage of a National Security Law for Hong Kong.

We have previously discussed China's implementation of the National Security Law for Hong Kong here, the United States' passage of the Hong Kong Autonomy Act and its implications here, and recent actions taken by the United States to sanction senior Hong Kong officials for actions taken to degrade Hong Kong's autonomy here.

Once effective, the rule will subject goods originating from Hong Kong to the same tariffs currently in place on Chinese-origin goods, including additional tariffs of 7.5% to 25% on approximately $370 billion worth of Chinese-origin products under Section 301 of the Trade Act of 1974 ("Section 301 Tariffs"). The resulting impact will affect companies that modified their supply chains to rely on Hong Kong as a viable alternative to mainland China and avoid Section 301 Tariffs. According to the U.S. Census Bureau, total Hong Kong imports through the first half of 2020 alone totaled approximately $6 billion, already exceeding the region's total imports for the entirety of the previous year.

CBP's announcement coincides with the expiration or winding down of available product exclusions issued by the U.S. Trade Representative ("USTR") for various Chinese-origin products exempted from Section 301 Tariffs. Affected companies should carefully review existing product exclusions issued by the USTR to determine whether their products of Hong Kong origin may fit within the scope of any exclusions and, therefore, be exempt from Section 301 Tariffs while the applicable exclusions remains active. Companies should also monitor USTR announcements for opportunities to participate in public comment processes concerning the extension of existing product exclusions.