Hong Kong: Where 'Made in China' and 'Made in America' overlap
Business Management

Hong Kong: Where 'Made in China' and 'Made in America' overlap

The narrative around China at the moment is dominated, perhaps, by US President Trump's trade war and its effects. Hong Kong meanwhile is in the headlines for high levels of tension and violence stemming from local antipathy to the authoritarian People's Republic.

But behind the scenes, there's another story of Hong Kong and China that might unfold in the near future. Hong Kong's special status among Chinese administrative regions doesn't result entirely from the treaty under which the British handed their former colony over: it also has special status with the USA.

"It operates as a separate customs territory," according to the Office of the US Trade Representative, part of the Executive Office of the President working directly for Donald Trump. This status is guaranteed under the US-Hong Kong Policy Act of 1992, brought in by the USA in preparation for the 1997 handover by Britain.

This doesn't mean that one can simply move goods from China's giant Shenzhen manufacturing zone, right next to Hong Kong, into Hong Kong itself and then ship them tariff-free to the USA. However the US does have a so-called "first sale rule" meaning that Chinese goods can be sold in Hong Kong and then resold in the USA, and the US will charge its tariff on the first price, not the US price.

If, for example, an item subject to US tariffs of 20 per cent were purchased by a Hong Kong based firm for $80 and sold in the USA for $100, the tariff would be $16 rather than $20. This isn't entirely a simple matter: the documentation required by the US authorities imposes a significant administrative burden, and it's not entirely certain that the USA will continue to allow the "first sale rule" for Hong Kong: the EU doesn't. Nonetheless, more than 1300 US-based firms have set up entities in Hong Kong to take advantage of the situation.

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Lewis Page

Lewis Page has been writing about technology across various industry sectors since the early noughties. He has a degree in engineering and is based in London.

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