On Friday, September 6, the United States Department of State, along with several other government departments, issued an updated warning on business operations in Hong Kong for American companies, highlighting new and heightened risks posed by actions taken by the Chinese Communist Party (CCP) and the Hong Kong authorities. This updated version comes after the previous warning was issued in July 2021.
The joint warning from the US Department of State, Department of Agriculture, Department of Commerce, Department of Homeland Security, and Department of the Treasury emphasized that the risks faced by American companies operating in Hong Kong have escalated due to the enforcement of the Hong Kong National Security Law and the National Security Law Implementing Regulations enacted in March 2024. These laws further erode basic freedoms in Hong Kong and protections for human rights.
According to the State Department’s statement, many of the risks faced by American enterprises in Hong Kong stem from the implementation of the CCP’s National Security Law for the Hong Kong Special Administrative Region (SAR) and the National Security Law Implementing Regulations introduced in March 2024. These laws have continued to undermine fundamental freedoms in Hong Kong and the protection of human rights.
“Businesses should be aware that the risks they face in the People’s Republic of China (PRC) are now increasingly manifesting in Hong Kong. The National Security Law, National Security Law Implementing Regulations, and actions taken by the authorities in mainland China and Hong Kong (such as rewards), could have adverse effects on company employees, finances, legal compliance, reputation, and operations. The updated business advisory provides information to companies to help them make informed business decisions and accurately assess risks,” the statement said.
The updated Hong Kong business advisory highlights several points:
– Companies operating in Hong Kong and individuals conducting business on behalf of these companies are bound by the broad and vague provisions of the National Security Law and National Security Law Implementing Regulations.
– Businesses should be aware that the extraterritorial application of the National Security Law can impact enterprises and individuals outside of Hong Kong.
– Companies operating in Hong Kong face potential legal, regulatory, operational, financial, and reputational risks, including increased scrutiny, potential economic penalties, and legal actions for alleged violations of the National Security Law or Implementing Regulations.
– Companies operating in Hong Kong may encounter conflicting jurisdictional requirements and responsibilities related to sanctions compliance work. Non-compliance with US sanctions under US law may result in civil and criminal penalties.
The Hong Kong business advisory also stated that the CCP’s National Security Law and its implementing regulations grant broad powers to the police to order the blocking and deletion of content from information publishers, platform service providers, hosting service providers, and network service providers. International media outlets have reported on numerous occasions that Hong Kong authorities, under the National Security Law, have exercised powers to require internet service providers to block access to certain websites or ban certain accounts.