In a post on January 14, I noted that the first actions in the WTO dispute settlement system included Costa Rica’s request for consultations with Panama on various import restraints on agricultural products and the EU’s request for the establishment of a panel to examine its concerns with Indonesia’s export restraints on various raw materials used in stainless steel production. See January 14, 2021, First dispute settlement cases of 2021 at the WTO — Costa Rica requests consultations with Panama for various restrictions on agricultural products viewed as violating SPS obligations and more; EU requests establishment of a panel to address its concerns with Indonesia’s export restrictions on inputs for stainless steel, https://currentthoughtsontrade.com/2021/01/14/first-dispute-settlement-cases-of-2021-at-the-wto-costa-rica-requests-consultations-with-panama-for-various-restrictions-on-agricultural-products-viewed-as-violating-sps-obligations-and-more-eu-re/.
A third action has occurred, a request from Hong Kong, China, for the establishment of a panel contesting the United States origin marking requirements. The request was also filed on January 14 and was posted on the WTO website on January 15. See WT/DS567/5 (15 January 2021). The request for establishment of a panel is embedded below.597-5
The origin of the dispute is the actions of China in imposing national security legislation on Hong Kong that was viewed by the United States as rendering Hong Kong not sufficiently autonomous to justify it not being treated as part of China and posing national security concerns for the United States. The part of the request for establishment of a panel titled “Background” provides Hong Kong, China’s description of the developments leading to the dispute.
“On 11 August 2020, the United States Customs and Border Protection (USCBP) published a notice that, after 25 September 2020, goods produced in Hong Kong must be marked to indicate that their origin is ‘China’ for the purposes of the origin marking requirement set forth at Section 304 of the Tariff Act of 1930, 19 U.S.C. § 1304. By subsequent notice, the USCBP extended the date for compliance with this requirement to 10 November 2020.
“Section 304 of the Tariff Act of 1930 requires articles of non-United States origin imported into the United States to be marked ‘in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article’. Prior to the imposition of the revised origin marking requirement as announced in the notice published on 11 August 2020, the United States has required, and therefore permitted, goods produced in Hong Kong, China to be marked to indicate that their origin is ‘Hong Kong’. The United States’ prior treatment of goods of Hong Kong, China origin was consistent with the fact that the United States generally permits goods originating within the territory of other WTO Members, including separate customs territory Members, to be marked with the English name of that territory.
“The USCBP published the notice on 11 August 2020 pursuant to the ‘Executive Order on Hong Kong Normalization’ signed by the President of the United States Donald J. Trump on 14 July 2020. The Executive Order suspends the application of Section 201(a) of the United States-Hong Kong Policy Act of 1992, 22 U.S.C. § 5721(a), to a variety of United States statutes, including Section 304 of the Tariff Act of 1930.
“Under Section 201(a) of the United States-Hong Kong Policy Act of 1992, the laws of the United States apply to Hong Kong, China in the same manner as those laws applied to Hong Kong prior to the resumption of the exercise of sovereignty by the People’s Republic of China on 1 July 1997, unless the President of the United States determines and issues an Executive Order that Hong Kong, China ‘is not sufficiently autonomous to justify treatment under a particular law of the United States … different from that accorded the People’s Republic of China’. The suspension of Section 201(a) of the United States-Hong Kong Policy Act of 1992 as it applies to Section 304 of the Tariff Act of 1930 is the legal basis upon which the USCBP ordered that goods produced in Hong Kong ‘may no longer be marked to indicate ‘Hong Kong’ as their origin, but must be marked to indicate ‘China’.”
The Executive Order and U.S. Customs and Border Protection notices are embedded below.2020-15646
The Executive Order articulates the concerns of the U.S. Administration with the actions taken by China.
“In late May 2020, the National People’s Congress of China announced its intention to unilaterally and arbitrarily impose national security legislation on Hong Kong. This announcement was merely China’s latest salvo in a series of actions that have increasingly denied autonomy and freedoms that China promised to the people of Hong Kong under the 1984 Joint Declaration of the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the People’s Republic of China on the Question
of Hong Kong (Joint Declaration). As a result, on May 27, 2020, the Secretary of State announced that the PRC had fundamentally undermined Hong Kong’s autonomy and certified and reported to the Congress, pursuant
to sections 205 and 301 of the United States-Hong Kong Policy Act of 1992, as amended, respectively, that Hong Kong no longer warrants treatment under United States law in the same manner as United States laws were
applied to Hong Kong before July 1, 1997. On May 29, 2020, I directed the heads of executive departments and agencies (agencies) to begin the process of eliminating policy exemptions under United States law that give
Hong Kong differential treatment in relation to China.
“China has since followed through on its threat to impose national security legislation on Hong Kong. Under this law, the people of Hong Kong may face life in prison for what China considers to be acts of secession or
subversion of state power—which may include acts like last year’s widespread anti-government protests. The right to trial by jury may be suspended. Proceedings may be conducted in secret. China has given itself broad power to initiate and control the prosecutions of the people of Hong Kong through the new Office for Safeguarding National Security. At the same time, the law allows foreigners to be expelled if China merely suspects them of violating the law, potentially making it harder for journalists, human rights organizations, and other outside groups to hold the PRC accountable for its treatment of the people of Hong Kong.
“I therefore determine that the situation with respect to Hong Kong, including recent actions taken by the PRC to fundamentally undermine Hong Kong’s autonomy, constitutes an unusual and extraordinary threat, which has its source in substantial part outside the United States, to the national security, foreign policy, and economy of the United States. I hereby declare a national emergency with respect to that threat.”
Certainly the actions of the Chinese government in organizing mass arrests in Hong Kong undermine the concept that Hong Kong is autonomous. See, e.g., Washington Post, ‘Total submission,’ With mass arrests, China neutralizes Hong Kong democracy movement, January 6, 2021, https://www.washingtonpost.com/world/asia_pacific/hong-kong-arrests-national-security-law/2021/01/06/c3ccc248-4fbe-11eb-a1f5-fdaf28cfca90_story.html; New York Times, With Mass Arrests, Beijing Exerts an Increasingly Heavy Hand in Hong Kong, January 8, 2021, https://www.nytimes.com/2021/01/06/world/asia/china-hong-kong-arrests.html (“The central Chinese government, which once wielded its power over Hong Kong with a degree of discretion, has signaled its determination to openly impose its will on the city.”); BBC News, National security law: Hong Kong rounds up 53 pro-democracy activists, 6 January 2021, https://www.bbc.com/news/world-asia-china-55555299.
Hong Kong, China lists seven claims of violation of WTO obligations by the United States requiring goods from Hong Kong, China to be marked as goods of China. These include:
“1. Article I:1 of the GATT 1994, because in respect of the rules and formalities of importation pertaining to marks of origin, the United States does not extend to products of Hong Kong, China origin immediately and unconditionally the same advantages, favours, privileges, or immunities that the United States extends to like products originating in the territory of other countries;
“2. Article IX:1 of the GATT 1994, because the United States does not accord to the products of Hong Kong, China treatment with regard to marking requirements no less favourable than the treatment that the United States accords to like products of other countries;
“3. Article X:3(a) of the GATT 1994, because the United States does not administer its origin marking requirements in a uniform, impartial, and reasonable manner;
“4. Article 2(c) of the Agreement on Rules of Origin, because in respect of products produced in Hong Kong, the United States requires the fulfilment of a certain condition not related to manufacturing or processing, as a prerequisite for the determination of the country of origin;
“5. Article 2(d) of the Agreement on Rules of Origin, because the United States discriminates between Hong Kong, China and other Members in respect of the rules of origin that it applies to imports;
“6. Article 2(e) of the Agreement on Rules of Origin, because the United States does not administer its rules of origin in a consistent, uniform, impartial, and reasonable manner;
“Article 2.1 of the Agreement on Technical Barriers to Trade, because the origin marking requirements that the United States applies to imports are technical regulations and, in respect of those technical regulations, the United States does not accord to products imported from Hong Kong treatment no less favourable than the treatment that it accords to like products originating in other countries.
“In addition, and as a consequence of the foregoing, the measures at issue appear to nullify or impair the benefits accruing to Hong Kong, China directly or indirectly under the cited agreements.”
The United States position on the various claims is not known as yet. Presumably, the United States will raise as a defense national security claims as it has in a host of other cases.
The dispute will presumably take years to move to a conclusion, and absent a resolution of the Appellate Body impasse could result in the matter being appealed into the existing void.