New Marking Requirement for Products from Hong Kong

While September 25, 2020 may seem far off, I expect a lot of importers of goods from Hong Kong will be keeping a close eye on the calendar until then. That’s the last date on which merchandise may be imported with Hong Kong identified as the country of origin. After that, they will be considered products of China by U.S. Customs and Border Protection, and must be marked as such along with their packaging.

As described in CBP’s notice, this change is a consequence of Executive Order 13936 (July 14, 2020). The EO stated that “[i]t shall be the policy of the United States to suspend or eliminate different and preferential treatment for Hong Kong to the extent permitted by law and in the national security, foreign policy, and economic interest of the United States.” Among the concrete actions ordered was suspension of Hong Kong’s differential treatment under “section 1304 of title 19, United States Code,” the country of origin marking statute.

Everyone knew that CBP’s announcement would be coming when the EO was issued. Rumor has it there was a mad dash to ship existing products to the U.S., so as to beat the September 25 deadline. Here’s hoping everyone’s successful.

Missing the Deadline Can Cause Problems

What happens, though, if a shipment of products marked to indicate Hong Kong origin arrives after that deadline has passed? If this is discovered by CBP before the goods are released from Customs custody, the agency may withhold delivery to the importer until proper marking is applied. If discovered afterward, CBP has thirty days after the date of entry or examination to issue a redelivery notice requiring the goods’ return to Customs custody. Alternatively, the importer may be able to arrange proper marking at its premises, in lieu of redelivery.

In theory, an importer may seek an exception to the marking requirement if its merchandise “cannot be marked after importation except at an expense that would be economically prohibitive.” Use of this exception is a tough sell to CBP in the best of circumstances, and I would be pessimistic that mismarked (as opposed to unmarked) goods would be given a pass.

If the importer has already disposed of the imported items, so redelivery or proper marking is impossible, it is subject to an assessment for “liquidated damages . . . in an amount equal to the value of the merchandise not returned.” Even if the claimed liquidated damages amount is mitigated, , it’s unlikely to go to zero. And, a prerequisite for mitigation is the deposit of marking duties for 10 percent of the value of the goods.

Importers should be aware, then, that entering goods from Hong Kong without marking them as having Chinese origin will soon result in a range of consequences, none of them good, if CBP finds out. I’m sure that agency will be on the lookout for mismarked merchandise on September 26 and thereafter, so mark the date in your calendars.