Strategic Trade Controls Circular No. 2/2010
Amendment of Schedule 1 and 2 to the
Import & Export (Strategic Commodities) Regulations

Background

Hong Kong's control list for strategic commodities, as set out in Schedule 1 to the Import and Export (Strategic Commodities) Regulations ("the Regulations"), mirrors those of the international non-proliferation regimes (viz. the Wassenaar Arrangement, the Australia Group, the Missile Technology Control Regime, the Nuclear Suppliers Group, etc.). The control list is under regular review and, where appropriate, is amended to reflect the latest revisions adopted by the regimes in their respective control lists.

2. Schedule 2 to the Regulations sets out those "more sensitive" products covered in Schedule 1, including certain munitions, all nuclear-related materials and equipment, and information security products (commonly known as encryption devices). They are subject to tighter control over transit and air-transhipment under section 2 of the Regulations.

The Amendment

3. Hong Kong's current control list, which was last amended in February 2010, covers the revisions adopted by the various international non-proliferation regimes up to end-2008. To reflect the latest changes in respect of commonly traded strategic commodities adopted in the international non-proliferation regime control list as well as to relax the control over transit and air-transhipment of information security products, the Import and Export (Strategic Commodities) Regulations (Amendment of Schedules 1 and 2) Order 2010 ("the Order") has been prepared.
   
   

4. The Order seeks to amend Schedule 1 to the Regulations to reflect the recent revisions adopted by Wassenaar Arrangement to some commonly traded strategic commodities (i.e. electronics, computers, and telecommunications and information security products) up to end-2009. The most significant changes include removal of control over certain goods which incorporate or use cryptography and fulfill either condition of (a) not having the primary functions of information security (e.g. those items for printing, business automation, manufacturing processing, transportation management, etc.); or (b) being produced specifically for entertainment, mass commercial broadcast, digital rights management, or medical records management. 
    

5.  The Order also amends Schedule 2 to the Regulations to relax the control over transit and air-transshipment of information security products by removing such items from the Schedule. In effect, it means that -
   
   
   1. encryption devices would no longer fall under the "more sensitive" group for strategic trade control, although they are still subject to the general control for items covered in Schedule 1;
      
      
   2. pursuant to section 2(2)(a) of the Regulations, encryption devices in transit through Hong Kong would no longer require a licence; and
      
      
   3. pursuant to section 2(2)(b) of the Regulations, encryption devices would no longer be debarred from the Air Transhipment Cargo Exemption Scheme. In other words, air-transhipments of encryption devices would be eligible for licence exemption if they fulfill all the terms and conditions of the Scheme.
      
      
6. A summary of the major revisions covered by the Order is at Annex. For full details of the amendments, please refer to the Order by visiting the websites of the Strategic Commodities Control System (http://www.stc.tid.gov.hk) or the Hong Kong Special Administrative Region Government (http://www.gov.hk) [Legal Supplement No. 2 of the Gazette published on 30 April 2010 (No. 17, Vol. 14)].
   
   

Effective Date of the Order

7. The Order was gazetted today (i.e. 30 April 2010) and will be tabled at the Legislative Council on 5 May 2010. Once the legal procedure is completed, the Order will come into effect on a day to be appointed by the Director-General of Trade and Industry by a notice published in the Gazette. A separate circular will be issued in due course to inform traders of the effective date of the Order. 
   
   

Enquriy

8. For any enquiry about the revisions brought about by the Order, please contact our Classification Section at 2398 5587. For other licensing matters, please contact our Licensing Section at 2398 5575.