Hong Kong's Reversion to China:

Effective Monitoring Critical to Assess U.S. Nonproliferation Risks

NSIAD-97-149: Published: May 22, 1997. Publicly Released: Jun 4, 1997.

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Pursuant to a congressional request, GAO reviewed whether U.S. export control policy toward Hong Kong will adequately protect U.S. national security and nonproliferation interests after Hong Kong's reversion to China, focusing on: (1) the potential risks and consequences of continuing to export sensitive technologies to the territory after reversion, given China's past proliferation behavior; (2) how U.S. export controls are currently applied to Hong Kong as compared with China; (3) planned U.S. export control policy toward Hong Kong after reversion; and (4) possible safeguards and monitoring efforts to protect U.S. nonproliferation interests.

GAO noted that: (1) U.S. export control policy toward Hong Kong is less restrictive than that applied to China, based on Hong Kong's ability to protect sensitive technologies as well as concerns over China's proliferation activities; (2) the U.S. government allows Hong Kong greater and easier access to sensitive dual-use technologies; many items may be exported to Hong Kong without prior Commerce Department review and, even when prior approval is necessary, licenses are readily granted; (3) thus, exporters may export items such as titanium alloys, certain types of machine tools, and high-performance computers to Hong Kong without obtaining an export license; (4) in contrast, the export control rules applied to China are more stringent: more categories of exports require licenses, and the U.S. government has refused to export certain items owing to concerns over proposed end users and end uses; (5) in about 30 instances over the past 3 years, items that the United States has refused to export to China could have been exported to Hong Kong without prior U.S. government review or approval; (6) the U.S. government does not plan to change its export control policy toward Hong Kong after it reverts to China unless there is evidence that the Hong Kong authorities are unable to continue to operate an effective export control system; (7) as a result, Hong Kong will continue to have easier access to sensitive technology that is more tightly controlled for China; (8) major reasons for this decision include: (a) the Hong Kong Policy Act, which calls for continued separate treatment of Hong Kong in export controls so long as it is able to protect U.S. technology and equipment; (b) the U.S. government's overall commitment to supporting Hong Kong's continued autonomy; and (c) Hong Kong's record in maintaining an effective export control system; (9) given the decision to continue current U.S. policy toward Hong Kong, monitoring various indicators of Hong Kong's continued autonomy in export controls becomes critical to assessing the risk to U.S. nonproliferation interests; (10) this may not be an easy task, given the changes that could occur in Hong Kong and the difficulties in gauging Chinese intentions and behavior; (11) key indicators to watch would be changes in the composition and volume of U.S. exports of controlled items to Hong Kong, which could signal efforts by China to obtain sensitive technology such as optical sensors that it has previously been denied; and (12) the U.S. government has begun a process to develop a baseline of export data against which to measure such changes but may have difficulty in doing so because of data limitations.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The Secretary of Commerce should establish appropriate baselines to monitor trends in controlled items exported to Hong Kong and China after Hong Kong's reversion to Chinese sovereignty.

    Agency Affected: Department of Commerce

    Status: Closed - Implemented

    Comments: Commerce reported that it has established a group to monitor trends in exports of controlled items to Hong Kong. It also reported that it has established comprehensive benchmarks, gathered baseline information considered adequate for each benchmark, and will review the situation every 6 months for signs of change. Furthermore, Commerce provided a copy of its "Hong Kong Baseline Monitoring Report" in late 2000, which established a baseline and indicators for data using the Census Bureau's Shipper's Export Declaration forms and data.

    Recommendation: The Secretary of Commerce, working with the Commissioner of the Customs Service, should systematically assess data already filed by exporters, particularly information on license exceptions and controlled item category numbers, to determine whether the data are sufficiently complete and accurate to monitor trends in exports of nonlicensed controlled items to Hong Kong. If the export data cannot be relied upon for monitoring purposes, the Secretary of Commerce, in consultation with the Commissioner of Customs, should assess the causes for the problems and initiate corrective actions.

    Agency Affected: Department of Commerce

    Status: Closed - Implemented

    Comments: Commerce reported that it has established a group to monitor trends in exports of controlled items to Hong Kong. It also reported that it has established comprehensive benchmarks, gathered baseline information considered adequate for each benchmark, and will review the situation every 6 months for signs of change. Furthermore, Commerce provided a copy of its "Hong Kong Baseline Monitoring Report" in late 2000, which established a baseline and indicators for data using the Census Bureau's Shipper's Export Declaration forms.

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