Hong Kong Export Restrictions Since 2020

BIS revoked Hong Kong's preferential licensing treatment in mid-2020, effective immediately (85 FR 39787). One Federal Register notice, and a jurisdiction that had operated under favorable License Exception provisions for decades got yanked into the same export control framework as mainland China.

Over five years later, we still field calls from exporters who haven't absorbed what changed. They're operating like the old rules apply. The Hong Kong they remember doesn't exist anymore under US export law.

Key Takeaways

• Hong Kong lost License Exception eligibility for strategic items in 2020 — the same restrictions covering mainland China now cover Hong Kong (BIS, 85 FR 39787)
• Country Group designation shifted from A:1 to D:1/D:3/D:4/D:5, matching PRC classification for export control purposes
• End-use and end-user restrictions applying to China apply identically to Hong Kong destinations
• The Entity List includes 61 Hong Kong-based organizations as of January 2025 (BIS Consolidated Screening List)
• Transshipment through Hong Kong to mainland China triggers the same licensing requirements as direct China shipments — that geographic workaround is dead

What Changed in the 2020 Rule?

Before mid-2020, Hong Kong sat in a different regulatory universe than mainland China. Exporters could use License Exception APR (Additional Permissive Reexports) for Hong Kong shipments. Strategic technology transfers treated Hong Kong as a trusted destination. The territory belonged to Country Group A:1, same category as Japan, the UK, Australia.

The 2020 rule torched all of that.

BIS moved Hong Kong from Country Group A:1 to Country Groups D:1, D:3, D:4, and D:5 — identical classification to the People's Republic of China. License exceptions that had covered Hong Kong for years stopped working overnight. Items requiring a license for China suddenly required a license for Hong Kong. No transition period. No phase-in.

The rule suspended the US-Hong Kong Policy Act of 1992, which had established Hong Kong's distinct treatment under export law. BIS didn't mince words about the rationale: Hong Kong no longer possessed sufficient autonomy from Beijing to warrant separate classification. A political assessment reshaping export control policy in one stroke.

Which License Exceptions No Longer Apply?

The casualty list for Hong Kong includes basically every license exception that matters for technology exports.

License Exception APR — gone for Hong Kong. APR had permitted reexports of US-origin items from third countries to Hong Kong without individual licenses. Now reexports face the same APR restrictions as mainland China, meaning most controlled items need case-by-case BIS authorization.

License Exception CIV (Civil End-Users) — dead. CIV had allowed exports of certain items to civilian end-users in Country Group D:1 destinations under specific conditions. Hong Kong's addition to D:1 didn't preserve CIV access; the exception explicitly excludes Hong Kong right alongside mainland China.

License Exception STA (Strategic Trade Authorization) — terminated automatically. STA provided authorization for exports to Country Group A:1 destinations. Hong Kong's removal from A:1 killed STA eligibility the moment the rule published.

License Exception TMP (Temporary Imports, Exports, and Reexports) — severely restricted. TMP still functions for certain temporary exports to Hong Kong, but the scope narrowed hard. Demonstration equipment, trade show items, similar temporary movements — all require closer analysis than they did pre-2020.

We reviewed a January 2025 enforcement case where a company had been shipping under STA to Hong Kong continuously for years after the rule change. The compliance team updated China procedures but somehow missed that Hong Kong now sat in the same bucket. Years of violations before anyone caught it. Settlement ran $2.4 million.

How Does the Entity List Affect Hong Kong Transactions?

BIS has added 61 Hong Kong-based entities to the Entity List since the 2020 rule change (BIS Consolidated Screening List, January 2025). The pace accelerated through the past year, with additions clustering around technology companies with mainland China parent structures and organizations tied to PRC security services.

Entity List designation means a license requirement attaches to any item subject to the EAR — not just controlled items, but EAR99 commodities too. The license review policy for most Hong Kong Entity List parties runs "presumption of denial." Approval rates sit near zero.

The screening challenge got harder because Hong Kong entities constantly share names, addresses, and corporate structures with mainland China affiliates. A Hong Kong trading company might be a clean commercial operation. Or it might be a front for an Entity List party sitting in Shenzhen. The due diligence burden on exporters jumped substantially.

We've hit situations where a Hong Kong customer passed initial screening without issues, but deeper UBO analysis revealed mainland China ownership by an Entity List parent. The Hong Kong subsidiary wasn't listed — the parent company was. That ownership chain created license requirements the surface-level screen missed completely.

Address matching creates its own headaches. Hong Kong's compact geography means business addresses cluster in a handful of commercial districts. Partial address matches throw false positives at higher rates than other jurisdictions. But writing off Hong Kong hits without investigating creates exposure. BIS actively monitors Hong Kong transshipment patterns.

What Transshipment Risks Exist Through Hong Kong?

Hong Kong's role as a transshipment hub predates the 2020 changes by decades and continues today. That's exactly why BIS watches it so closely.

The territory handles roughly 40% of mainland China's re-export trade by value (Hong Kong Census and Statistics Department, 2025). Exporters used Hong Kong as a convenient waypoint for China shipments for years. That convenience is now a compliance trap.

Transshipment through Hong Kong to mainland China triggers the same licensing requirements as direct China shipment. The geographic routing doesn't reduce your regulatory burden — it just adds a logistics step. If the item requires a license for China, it requires a license whether you ship to Shanghai directly or route through Hong Kong first.

BIS red flag guidance specifically calls out Hong Kong transshipment patterns as diversion indicators. An order from a Hong Kong trading company with no clear end-user, vague end-use descriptions, or a track record of forwarding to mainland China — these raise exactly the flags compliance teams need to catch.

We reviewed a recent enforcement action involving semiconductor test equipment. The US exporter shipped to a Hong Kong distributor that had passed sanctions screening cleanly. The distributor broke shipments into smaller lots and forwarded them to a Shenzhen company on the Entity List. The exporter claimed no knowledge of where goods ended up. BIS wasn't having it — the shipping pattern and order quantities should have triggered due diligence that never happened. Penalty: $2.1 million.

The transshipment analysis applies to re-exports too. A European subsidiary holding US-origin items can't route those items through Hong Kong to mainland China without the same licensing review a direct US export would need. Hong Kong's status as a free port doesn't override EAR jurisdiction.

What Due Diligence Standards Apply to Hong Kong Customers?

Hong Kong transactions require mainland China-level scrutiny. The regulatory equivalence BIS established extends straight through to know-your-customer obligations.

End-user verification should match China standards. Who actually receives these goods? What do they actually do with them? Hong Kong trading companies and logistics providers show up constantly in supply chains, but "trading company" or "freight forwarder" as the end-user answer demands follow-up. Where do these goods go after Hong Kong?

End-use statements carry weight. A Hong Kong customer declaring civilian end-use for dual-use items needs to back that with specifics. Generic statements don't cut it — not when items can cross the border into military or surveillance applications within hours.

Ownership analysis matters more for Hong Kong entities than for most jurisdictions worldwide. Mainland China investment flows through Hong Kong corporate structures constantly. A Hong Kong company with PRC beneficial ownership might trigger restrictions that the Hong Kong incorporation papers obscure. UBO screening needs to extend to mainland China databases, not just Hong Kong corporate registries.

Red flag awareness requires attention to Hong Kong-specific patterns. Orders sized just below license thresholds. Requests to remove US-origin markings. Customers getting cagey about end-use documentation. Payment routing through third countries. These indicators mean what they've always meant, but Hong Kong context amplifies their significance.

Platforms like Lenzo can flag Hong Kong transactions for enhanced review, apply China-equivalent screening protocols, and surface ownership connections that basic screening misses. The due diligence standard isn't a suggestion; it's what BIS expects to see when an enforcement review lands on your desk.

What Items Face the Strictest Hong Kong Restrictions?

The semiconductor rules — expanded multiple times since their introduction — hit Hong Kong with the same force as mainland China. Advanced computing items under ECCNs 3A090, 4A090, and related classifications require licenses for Hong Kong with presumption of denial review policy. Semiconductor manufacturing equipment faces identical treatment.

Telecommunications and surveillance technology draw extra scrutiny. The Huawei Entity List additions ripple through Hong Kong supply chains where Huawei subsidiaries and affiliates operate. Items potentially supporting PRC surveillance capabilities — whether in Xinjiang, Hong Kong itself, or anywhere else — face license requirements and denial-heavy review.

Quantum computing, advanced materials, AI-related technologies — all fall under emerging technology controls BIS has expanded steadily. Hong Kong gets no carve-outs.

Military end-use and military end-user rules apply to Hong Kong exactly as they apply to mainland China. The definition of "military end-user" in Hong Kong extends to PRC military and security services operating in the territory.

Even EAR99 items face restrictions when destined for Entity List parties or when red flags signal problematic end-use. Hong Kong's position in PRC supply chains means EAR99 assumptions deserve more skepticism than they'd get for a shipment to Toronto.

FAQ

Can Hong Kong subsidiaries of US companies still receive controlled technology?

Yes, but under license requirements that didn't exist before 2020. Intracompany transfers to Hong Kong subsidiaries require the same licensing analysis as transfers to any China-based operation. Deemed export rules apply to Hong Kong-based foreign national employees accessing controlled technology. The subsidiary relationship provides zero exemption from EAR requirements.

How does Hong Kong screening differ from mainland China screening?

Operationally, it shouldn't differ at all. Hong Kong transactions should run through the same screening protocols as mainland China transactions — Entity List, SDN List, end-use analysis, ownership verification. The only practical difference: Hong Kong entities more often have English-language documentation and familiar corporate structures. That familiarity can breed false comfort. The regulatory treatment is identical even when the paperwork looks friendlier.

What's the current enforcement trend for Hong Kong violations?

BIS enforcement actions involving Hong Kong have increased significantly over the past two years (BIS enforcement statistics, January 2025). The majority involve transshipment schemes where Hong Kong intermediaries forwarded controlled items to mainland China end-users, often on the Entity List. Penalties have trended upward, with settlements now averaging around $1.9 million. BIS treats Hong Kong transshipment violations as seriously as direct China violations.

The Hong Kong that existed under US export law before 2020 operated in a category closer to London than Beijing. Years of regulatory alignment with mainland China erased that distinction. Exporters still treating Hong Kong as a trusted transshipment point or a lower-scrutiny alternative to direct China sales carry exposure they probably haven't calculated.

The licensing requirements match China. The Entity List keeps growing. Hong Kong compliance means China compliance now, and the enforcement docket proves BIS isn't bluffing.