The Hong Kong Policy Act

Companies relocating production from Mainland China to Hong Kong to avoid the Section 301 tariffs on China are getting the jitters. China and Hong Kong operate under a "One National, Two Systems" policy that provides, among other things, for a separate Hong Kong Customs Territory. This system is acknowledged internationally, with China and Hong Kong, China both being members of the World Trade Organization. However, a little-known U.S. law gives Congress and the President, or the President alone by Executive Order, the power to suspend U.S. recognition of the separate Hong Kong Customs Territory if the U.S. determines that Mainland China has suppressed Hong Kong's autonomy. The current tension in Hong Kong, with protesters saying that China is attempting to do just that could trigger President Trump to invoke the Hong Kong Policy Act and subject goods of Hong Kong origin to the Section 301 tariffs.

Here's the law:

The United States–Hong Kong Policy Act or more commonly known as the Hong Kong Policy Act is a 1992 act enacted by the United States Congress. It allows the United States to continue to treat Hong Kong separately from Mainland China for matters concerning trade export and economics control after the 1997 handover.

22 USC 5721: Continued application of United States law

(a) In general

Notwithstanding any change in the exercise of sovereignty over Hong Kong, the laws of the United States shall continue to apply with respect to Hong Kong, on and after July 1, 1997, in the same manner as the laws of the United States were applied with respect to Hong Kong before such date unless otherwise expressly provided by law or by Executive order under section 5722 of this title.

22 USC 5722: Presidential order

(a) Presidential determination

On or after July 1, 1997, whenever the President determines that Hong Kong is not sufficiently autonomous to justify treatment under a particular law of the United States, or any provision thereof, different from that accorded the People's Republic of China, the President may issue an Executive order suspending the application of section 5721(a) of this title to such law or provision of law.

(b) Factor for consideration

In making a determination under subsection (a) with respect to the application of a law of the United States, or any provision thereof, to Hong Kong, the President should consider the terms, obligations, and expectations expressed in the Joint Declaration with respect to Hong Kong.

(c) Publication in Federal Register

Any Executive order issued under subsection (a) shall be published in the Federal Register and shall specify the law or provision of law affected by the order.

(d) Termination of suspension

An Executive order issued under subsection (a) may be terminated by the President with respect to a particular law or provision of law whenever the President determines that Hong Kong has regained sufficient autonomy to justify different treatment under the law or provision of law in question. Notice of any such termination shall be published in the Federal Register.