As a consequence of the promulgation of the National Security Law for Hong Kong by the Standing Committee of the National People’s Congress on June 30, 2020, in response to the “black-clad riots” in 2019-20, then-US president Donald Trump — claiming that Hong Kong was “no longer autonomous” — issued Executive Order 13936 on July 14, 2020, ordering the suspension of differential treatment toward Hong Kong in trade, and requiring “Made in China” labels for Hong Kong exports, despite the fact that those products are actually “Made in Hong Kong” in accordance with WTO’s “rules of origin”. Hong Kong is considered a separate customs territory by the US under the Hong Kong Policy Act 1992.
It shocked the world that the origin marking requirement for Hong Kong exports could be determined by the US’ Hong Kong Policy Act 1992, and that it was imposed by an executive order issued by a US president rather than by the WTO’s “rules of origin”, notwithstanding the fact that Hong Kong’s high degree of autonomy remains intact and social order has been restored subsequent to the implementation of the National Security Law.
Hong Kong is an inalienable part of China. But when it comes to international trade, Hong Kong is considered a customs territory separate from the Chinese mainland. So unreasonable was the US’ decision that it has been rejected by both Beijing and Hong Kong. Both the mainland and Hong Kong are accepted as separate customs territory (members) of the WTO. Hong Kong’s status as a separate customs territory is also stipulated in Article 116(1) of the Basic Law. How Hong Kong’s status as a separate customs territory, recognized globally, could be altered by US domestic laws is beyond logic.
Albeit the quantity of Hong Kong products exported to the US is not enormous, Hong Kong feels aggrieved by such an arbitrary, unjustified and illegal alteration.
It is recorded that Hong Kong requested consultation with the US concerning the origin marking requirement on Oct 30, 2020, and 13 other WTO members joined the consultation as third parties — namely Brazil, Canada, the Chinese mainland, the European Union, India, Japan, South Korea, Norway, Russia, Singapore, Switzerland, Türkiye and Ukraine. They were deeply concerned that the US may unexpectedly treat them as they have treated Hong Kong.
In accordance with the WTO’s Understanding on Rules and Procedures Governing the Settlement of Disputes, a WTO dispute settlement panel (the Panel) was requested, established, and composed on Jan 14, 2021, Feb 22, 2021, and April 29, 2021, respectively. And the Panel’s report (WT/DS597/R : US — Origin Marking Requirement) was circulated on Dec 21, 2022.
The issues of Hong Kong’s complaints include Articles I:1, IX:1, X:3(a) of GATT 1994(1947); Articles 2(c), 2(d), 2(e) of the Agreement on Rules of Origin; and Article 2.1 of Technical Barriers to Trade Agreement; whereas the US invoked Article XXI(b)(iii) of the GATT 1994(1947).
The Panel finds favorably to Hong Kong against the US in most, if not all, issues. But in the light of the complexity of the issues presented in the dispute, it is not possible to discuss all points in the eight issues mentioned above. The more crucial issues — concerning Article IX:1 on “Marks of Origin” and invocation of Article XXI(b) regarding “Security Exception” — are discussed here.
For Article IX:1 “Marks of Origin”, requiring “Each contracting party shall accord to the products of the territories of other contracting parties treatment with regard to marking requirement no less favorable than the treatment accord to like product of any third country”, the Panel found that the US requirement for different origin markings on products from Hong Kong was a requirement for a mark of origin indicating the name of another WTO member (the Chinese mainland), whereas goods from any third country must be marked with the name of that third country. This treatment modifies competition conditions to the detriment of products of Hong Kong.
For Article XXI “Security Exception” demanding nothing shall be construed to prevent any contracting party from taking any action which is considered necessary for the protection of its essential security interests taken in time of war or other emergency in international relations, the Panel carried out an interpretation analysis pursuant to Article 31 and 33 of the Vienna Convention on the Law of Treaties, and believes that it was appropriate and also the most efficient way to proceed, to examine the question of whether this provision is self-judging such that it excludes any review of the challenged measure by a panel, as argued by the US. The Panel considers, however, that the subparagraph in Article XXI(b)(iii) is not self-judging and subjected to review by the Panel. The Panel further concluded that although there was evidence of the US and other members being highly concerned about the human rights situation in Hong Kong, the situation had not constituted an emergency in international relations to justify actions.
In conclusion, the Panel set up by the WTO’s dispute settlement body opined that the US’ requirement for “Made in China” labels for Hong Kong products cannot be justified. But the US Trade Representative spokesperson has rejected the Panel report. As the possibility of the respondent may not be precluded, the claimant shall prepare to fight to the end.
The author is a guest professor at the Hong Kong and Macao Youth Education and Research Center, South China Normal University.
The views do not necessarily reflect those of China Daily.