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8 May 2018
Strategic Trade Controls Circular No. 6/2018
Import and Export of Encryption Products
This circular reminds traders of the licensing requirements for the import and export of encryption products. Circular No. 7/2009 dated 12 May 2009 of the same subject is hereby superceded.
(I) The Legal Basis
2. The legal basis for imposing licensing control over strategic commodities in Hong Kong is the Import and Export (Strategic Commodities) Regulations (to be referred as "the Regulations" hereafter) made under the Import and Export Ordinance, Chapter 60
, Laws of Hong Kong. Articles contained in the Schedules to the Regulations are regarded as strategic commodities, the import and export of which must be covered by valid licences issued by the Director-General of Trade and Industry. The Regulations contain four Schedules. Schedule 1 is the full list of strategic commodities subject to import and export licensing control. Schedule 2 contains products which, in addition to being subject to import and export control, are controlled even if they are in transit through Hong Kong. Schedules 3 and 4 are items and activities subject to end-use control (also read paragraph 17
(II) Control on Encryption Products
3. In implementing licensing control on strategic commodities, Hong Kong follows closely the controls adopted by the international control regimes. Encryption products are controlled under the Wassenaar Arrangement, an international control regime overseeing the controls over the transfer of both munition items and dual-use goods and technology. Accordingly, encryption products may fall under "Category 5, Part 2 - Information Security" of the Dual-use Goods List of Schedule 1 to the Regulations. Import and export of the encryption products so specified are subject to licensing control.
(III) Exemptions of Control
4. While the Regulations impose control over encryption products with a symmetric key length above 56-bits, exemptions are granted for products, of whatever key length provided that they are under either one of the following scenarios:
i. accompanying the user, for the user's personal use; or
ii. meeting all of the following conditions :
a. Generally available to the public by being sold, without restriction, from stock at retail selling points by means of any of the following :
- Over-the-counter transactions;
- Mail order transaction;
- Electronic transactions; or
- Telephone call transactions;
b. The cryptographic functionality cannot easily be changed by the user;
c. Designed for installation by the user without further substantial support by the supplier; and
d. When necessary, details of the items are accessible and will be provided, upon request, to the appropriate authority in the exporter's country in order to ascertain compliance with conditions described in paragraphs (a) to (c) above.
(Classification advice by the Trade and Industry Department ("TID") is required to determine if the product meets the criteria in paragraph 4 (ii) above
. Details please refer to paragraph 6 (d)
For details of the above exemptions as well as further information on other exemptions provided for certain products, traders may refer to Notes 2 or 3 (also known as the Cryptography Note) and the Note for "Category 5, Part 2 - Information Security" of Schedule 1 to the Regulations. This part of legislation can also be found at the Strategic Commodities Control System Website (the "SC Website") at http://www.stc.tid.gov.hk/english/checkprod/cat_5_2.html
(IV) Licensing Procedures
(A) Paper Application Forms
5. Licence applications should be made on Import Licence (Strategic Commodities) Application Form [TID 501] (Annex A
) (fillable pdf format) or Export Licence (Strategic Commodities) Application Form [TID 502] (Annex B
) (fillable pdf format) respectively. These forms are free of charge and available at the Integrated Customer Service Centre at Room 1324, 13/F, Trade and Industry Tower, 3 Concorde Road, Kowloon City, Hong Kong. They can also be downloaded from the SC Website at http://www.stc.tid.gov.hk
. Licence applications should be submitted to the Integrated Customer Service Centre. A numbered receipt will be issued for each licence application.
(B) Declaration and Supporting Documents
6. In addition to basic application particulars, the following information/documents will also be required to support a licence application covering encryption products :
- the name and full address of end-user;
- the specific end-use of the goods concerned;
- if the shipment is supported by an export/re-export authorization issued by the supplier (originating) country/place: essential details of the licence or licence exception and a copy of the export/re-export authorization issued by the supplier (originating) country/place of the goods giving explicit approval to the export/re-export concerned. If the licence/authorization is written in languages other than English or Chinese, a translated version (either in English or Chinese) prepared by a registered translation company in Hong Kong or certified correct by the relevant consulate offices in Hong Kong will be essential to the processing of the case;
- the technical specifications and/or the completed Cryptography Questionnaire (Annex C) (fillable pdf format). This questionnaire is for ascertaining whether the products can meet the criteria listed in paragraph 4(ii) and giving the general technical features of the products; and
- depending on the circumstances of individual cases, the following documents may also be required for certain applications:
the original End-user Statement duly completed by the end-user (Annex D
(fillable pdf format) for import licence application or Annex E
(fillable pdf format) for export licence application); and/or
original of the Importer/End-user Statement for supporting import licence applications covering the goods (for imports from the UK only) (Annex F
) (fillable pdf format); and/or
a copy of the valid business registration certificate of the applicant or local end-user.
The Director-General of Trade and Industry at all times reserves the right to request additional information and further documentary proof to substantiate the licence applications. Applications that are not properly completed or not accompanied by all the necessary documentation will be deferred/rejected. Blank forms for Annexes A to F can be downloaded from the SC website at http://www.stc.tid.gov.hk/english/download/by_formno.html.
(C) General Electronic Applications
7. Companies can also apply licences electronically ("E-Applications"). The E-Applications for import and export licences can be made through companies' E-Accounts in the SC Website at http://www.stc.tid.gov.hk > Login Your E-Account > E-Applications > Import /Export Licence Applications.
E-Applicants should provide requisite supporting documents as set out in paragraph 6
above. The forms mentioned in paragraph 6(d)
can be downloaded for completion if necessary. Afterwards, E-applicants should scan, upload and lodge the duly completed forms together with the related E-Import/Export Licence Application. Upon successfully lodging the application, E-Applicant should follow the instructions to print out by themselves the receipts for future collection of the approved licences. For applications which are subject to the requirement of End-user Statements, and/or Importer/End-user Statements as set out in paragraph 6 (e)
above, the provision of scanned copy will only serve to facilitate TID in processing their applications more expeditiously. Applicants should, after making the E-Applications, make sure to deliver the original signed End-user Statements and/or Importer/End-user Statements to TID as soon as possible. TID will withhold the issuance of licences unless and until the original End-user Statement(s)/ Importer/End-user Statement(s) are received.
(D) Electronic Applications made under the Approval-in-Principle Arrangement (AIP)
9. Companies which frequently import encryption products
from the same supplier or frequently export encryption products to the same consignee may apply to join the Approval-in-Principle Arrangement (AIP). For further information on AIP for encryption products, please refer to Strategic Trade Controls Circular No. 9/2009
(V) Export Control of Originating/Supplier/Foreign Exporting Country (Place) on Encryption Products
10. Traders should note that the originating/supplier/exporting country (place) of encryption products, especially if it is a member of the Wassenaar Arrangement Note
, may impose export control over the products by ways of individual licence, general licences, licence exceptions or other mechanisms. Since it is the policy of Hong Kong to maintain a licensing system complementary to the export control arrangement of our trading partners, TID will only approve licences to cover shipments that are in full compliance with the export control regulations of the originating/supplier/exporting country (place). To ascertain such compliance, licence applicants are required to provide additional supporting documents that may include, but shall not necessarily be confined to: the relevant government authorities' determination/ classification result indicating that the goods have been reviewed and classified to be eligible for export to the proposed destination(s)/end-user(s), individual export licence, the review request/notification submitted by the product's manufacturer to the relevant government authorities, manufacturer's certification letter etc.
11. For U.S.-origin encryption products, traders should be aware that the U.S. Department of Commerce (DoC) revises their control over encryption products from time to time. In addition to individual licences, U.S. Licence Exception ENC might be applicable to certain products subject to prior authorization from the DoC. Exports of certain type of encryption goods to specific type of end-users or countries (places) might not require prior review. For details of the U.S.' latest regulations, we would advise traders to consult their U.S. exporters/manufacturers direct or to visit the relevant U.S. Government's website at: http://www.bis.doc.gov
(VI) Issuance of Licence
12. For paper and general electronic licence applications, paper licences
will be issued upon licence approval. Under normal circumstances, applications duly completed and supported by the documents required will be processed within 2.5 clear working days after the date of receipt of the licence application. They are ready for collection at Room 1324, 13/F of Trade and Industry Tower. For cases with complications or if additional technical details, other documents and information and/or clarifications are necessary, it may take longer time to process the applications. Applicants may check whether their applications have been processed and are ready for collection by visiting the SC website at http://www.stc.tid.gov.hk
. In any event, applicants are advised to lodge their applications well in advance of shipments. Approved import and export licences are valid for six months and three months respectively.
(VII) Licence Conditions
13. The Director-General of Trade and Industry may, depending on the circumstances of individual cases, impose special and additional conditions on approved licences. At the time of receiving the licences, companies are advised to read the designated part, "Conditions of Licence", for the imposition of both the standard and special conditions.
Special Licence Condition and Resale/Transfer Application for U.S.-origin Encryption Products
14. For U.S.-origin encryption products, one very common special licence condition is that "This licence only authorises import of the goods for civil end-use by non-government end-users. Any further re-export, resale or transfer of the goods for the use by government end-user(s) requires prior notice to and approval from the Director-General of Trade and Industry". Licensees imposed with this condition should carefully handle any subsequent resale/transfer of the goods covered by the licence. An Important Note shall be attached to the licences concerned and traders are required to pass on the Note to the new recipient of the goods whenever the goods are transferred in Hong Kong.
15. If the goods are to be resold/transferred for the use by any government end-user(s), the importer/owner of the products (i.e., the applicant) should lodge applications with the Strategic Trade Controls Branch in paper or electronically:
(a) Paper application(s) are to be made in the designated form SC054 (Annex G) (fillable pdf format). To facilitate TID's consideration of the applications, applicants should enclose in their applications supporting documents like original end-user statement duly completed by the proposed government end-user; technical specification and questionnaire of the products; valid export authorization issued by the U.S. Government giving approval to the proposed resale/transfer, etc. TID will give due consideration for the application and notify the applicant in writing whether the request can be approved. Only after TID's written approval has been obtained should the applicant proceed with the proposed resale/transfer of the goods.
(b) E-Applications for resale/transfer can be made through companies' E-Accounts in the SC Website under the program of "Resale / Transfer / Disposal of Products Under Approved Import Licence" provided at the E-Application menu (At http://www.stc.tid.gov.hk> Login Your E-Account > E-Applications > Resale / Transfer / Disposal of Products Under Approved Import Licence). E-Applicants could efficiently know the results of their applications by checking the application status through their E-Accounts. Once the application is approved, the applicants can simply print out by themselves the approval status of the application as an evidence of TID's approval for the resale/transfer request. (At http://www.stc.tid.gov.hk > Login Your E-Account > E-Applications > Resale / Transfer / Disposal of Products Under Approved Import Licence) > Check Previously Submitted Applications for Resale / Transfer / Disposal of Products Under Approved Import Licence).
(VIII) Pre-classification Service
16. For applicants who frequently import or export the same types of encryption products, they are advised to make use of our pre-classification service
. In brief, traders will be advised of the control status of a product through this service. Traders may download the pre-classification application form SC013 (Annex H
) (fillable pdf format) from the SC website, and make applications attached with corresponding technical specifications and where applicable, questionnaire(s) mentioned in paragraph 6(d)
above. After pre-classification, the Department will assign a Pre-Classification Reference Number to the product concerned. By quoting this reference number on future licence applications covering the same goods, the requirement to provide the technical specification/data sheets is waived. For details of the pre-classification procedures, please refer to the relevant information in the SC website at http://www.stc.tid.gov.hk/english/checkprod/pre_classification.html.
(IX) End-use Control
In addition to the control imposed on specific items as set out in Schedules 1 and 2 to the Regulations, traders are reminded that end-use control are imposed under Schedules 3 and 4 to the Regulations. The Regulations impose licensing requirement on articles specified in Schedule 3 to the Regulations, or any technological document containing information relating to any such article:
(a) if the importer/exporter knows that the article or document is intended or likely to be used in any activity related to nuclear, chemical or biological weapons or missiles capable of delivering them as specified in Schedule 4 to the Regulations; or
(b) if the importer/exporter has grounds for suspecting that the article or document may be used in any activity specified in Schedule 4.
18. Import and/or export licences are required if the end-use of the goods fall under (a) and/or (b) above.
19. Section 6A of the Import and Export Ordinance
stipulates that no person shall import or export any article specified in the Schedules to the Import and Export (Strategic Commodities) Regulations except under and in accordance with a licence issued by the Director-General of Trade and Industry. Any person who contravenes the provision commits an offence and is liable :
(a) on summary conviction to a fine of HK$500,000 and to imprisonment for two years; and
(b) on conviction on indictment to an unlimited fine and to imprisonment for seven years.
20. In addition to prosecution, the Department may impose administrative actions against these persons. Such administrative actions may involve but shall not necessarily be confined to, suspension of a licence, refusal to issue a licence, debarment of all licensing facilities, etc.
21. If you have any enquiry concerning licensing requirements for encryption products, please contact our Licensing Section at 2398 5575. For specific technical questions or matters concerning classification of the goods and the pre-classification service, please contact our Classification Section at 2398 5587. Enquiry could also be sent by fax to 2396 3070 (Liscensing Section) or 3525 1526 (Classification Section) or by email to firstname.lastname@example.org
Strategic Trade Controls Branch
Trade and Industry Department
Note : The Participating States of the Wassenaar Arrangement are : Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, India, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Malta, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Republic of Korea, Romania, the Russian Federation, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Turkey, Ukraine, the United Kingdom and the United States.