Overseas Market Profiles

Major Economic Indicators

Recent Developments

• Goods brought into the US are often subject to import duties, but import licences are generally not required. There are no foreign exchange controls over payments for imports.

• On 8 November 2005, China and the US formally signed a comprehensive bilateral agreement on textile and clothing trade. China and the US agreed on the re-imposition of quotas from 1 January 2006 through 31 December 2008, covering a total of 21 groups involving 34 categories of textile and clothing products, which expired on 1 January 2009. Textile and clothing shipments to the US made on or after 1 January 2009 are therefore no longer subject to any quotas.

• Signed into law in August 2008, the Consumer Product Safety Improvement Act (CPSIA) forms part of a comprehensive effort by the US government to enhance the safety of imported consumer goods, which could create additional hurdles for the entry of items such as toys and other children’s products. As a proactive effort in raising Chinese manufacturers and importers’ compliance with the US product safety standards, the US’s Consumer Product Safety Commission set up its first overseas office in Beijing in January 2011. The CPSIA was further revised in May 2011 and signed into law on 12 August 2011.

• The US is Hong Kong’s second largest export market. Hong Kong’s total exports to the US decreased by 0.1% to US$9 billion in the first quarter of 2012, while its imports from the US increased by 5% to US$6 billion.

• The US was the fifth largest source of foreign direct investment in Hong Kong after the Chinese mainland, British Virgin Islands, the Netherlands and Bermuda, with a total stock of US$39.5 billion (or HK$307.0 billion) as at the end of 2010.

• Mired in a sticky patch, the US economy expanded at a more modest pace of 1.7% last year. The gradual improvement in the labour market has started to provide more widespread support to consumption, despite the ongoing weakness in house prices and pressures to spending. That said, the long-running debt crisis in Europe, high oil prices and lengthy election season are expected to cast cloud on US economic growth. In all, the US economy is forecast to grow 2.1% this year, followed by a 2.4% rise in 2013.

Current Economic Situation

Mired in a soft patch, the US economy, after a 3.0% jump in 2010, expanded at a more modest pace of 1.7% last year. Despite the ongoing weakness in house prices, pressures to deleverage and the long-running debt crisis in Europe, the high but gradually easing level of unemployment and continuous improvement in retail sales eased growth worries in the US, while snapping up consumers’ spending on everything from cars and furniture to clothes and electronics.

Looking ahead, the US economy will still face a bumpy road in the course of recovery. For one, employment, domestic demand and investment may moderate in light of high oil prices and possible labour market deterioration. For another, the gridlock in the US Congress amid a lengthy election season and the subsequent lack of a fiscal consolidation strategy, can increase the US risk premium should growth disappoint or the international credit market stop thawing. On the other hand, the loose monetary environment is likely to remain intact and favourable to the housekeeping of US banks’ balance sheets and resolving household debt burdens as well as clearing the large number of foreclosed homes. Externally, the rebound of US exports, following the implementation of the National Export Initiative (NEI), is expected to fare better as the world economy stabilises. In all, the US economy is expected to grow 2.1% this year, followed by a 2.4% rise in 2013.

Trade Policy Developments

On 8 November 2005, China and the US formally signed a comprehensive bilateral agreement on textile and clothing trade. China and the US agreed on the re-imposition of quotas from 1 January 2006 through 31 December 2008, covering a total of 21 groups involving 34 categories of textile and clothing products, which expired on 1 January 2009. Textile and clothing shipments to the US made on or after 1 January 2009 are no longer subject to any quotas.

On 5 April 2005, the US Department of Commerce (DOC) announced two major changes to anti-dumping (AD) practices involving non-market economy (NME) countries, including China. Under the new practice, application for a separate AD rate will no longer be made by completing and returning the Section A of the questionnaire to the DOC. Instead, an applicant should complete an application form which will be posted for each investigation on DOC's website. In addition, each exporter applying for a separate rate will be required to list all the suppliers whose merchandise they export to the US during the period of investigation or review. The dumping margin assigned by the DOC to an exporter will be a combined rate, which is calculated from the rate of the exporter and those of the producers which supplied merchandise to it for export to the US.

In a landmark decision that confirmed a major reversal of US trade remedy policy for NME countries, the DOC issued on 30 March 2007 a preliminary affirmative determination of countervailing (CV) duty investigation of coated free sheet paper from China. Although the US government ultimately decided not to impose any CV duties in this proceeding, the investigation is significant in and of itself because it marked the reversal of a 20-year-old DOC policy against assessing CV duties on products from NME countries. Following this landmark decision, the US International Trade Commission (USITC) issued on 20 June 2008 a final affirmative injury determination in its anti-dumping and countervailing duty investigations of circular welded carbon-quality steel pipe from China, marking the first CV duty order on China over 20 years. This demonstrates the emergence of CV actions as a key weapon against allegedly subsidised mainland Chinese products.

In April 2012, the Office of the US Trade Representative (USTR) issued its annual “Special 301” report, evaluating the intellectual property rights (IPR) protection policies and enforcement measures in 77 trading partners. The report keeps China on the Priority Watch List by highlighting the ongoing concerns about the continuing high levels of trademark counterfeiting and copyright piracy in China and China’s implementation of “indigenous innovation” and other industrial policies that disadvantage US enterprises through measures or actions that effectively coerce the transfer of IPR from foreign rights holders to domestic entities. In addition to China, this year’s priority watch list includes Algeria, Argentina, Canada, Chile, India, Indonesia, Israel, Pakistan, Russia, Thailand, Ukraine and Venezuela.

The US has adopted various security initiatives since 9/11, including the introduction of the Container Security Initiative (CSI) in January 2002. The CSI purports to push the US cargo screening process outward to reduce the risk to US ports and cities. To date, CSI is operational at 50 ports, representing the point of origin of more than 80% of the cargo shipped to the US. Other than cargo screening, the Transportation Security Administration has met the August 2010 deadline for screening 100% of cargo transported on flights of passenger aircraft originating within the US, both domestic and outbound, and is working to meet a statutory mandate of 100% screening of all inbound air cargo by 31 December 2011.

Another cargo security initiative, the Customs-Trade Partnership Against Terrorism (C-TPAT), has been in force since November 2001. Through this initiative, CBP requests US companies to ensure the integrity of their security practices. Participants of C-TPAT are entitled to the convenience of fast-track clearance through US Customs. As such, major US importers have signed up to the programme, and request overseas suppliers to adopt measures in response to the C-TPAT requirement.

Regarding high-tech exports, the US Bureau of Industry and Security (BIS) created a Validated End-User (VEU) programme in June 2007 to facilitate civilian trade by reducing administrative and logistical hurdles for certain exports to pre-screened mainland Chinese companies. About four months later the BIS announced an initial list of five mainland Chinese companies approved to receive exports, re-exports and transfers of certain controlled goods and technology under the programme. Since then, several lawmakers and government watchdogs who are concerned that sensitive items exported without federal review could find their way to the Chinese military have called on the BIS to halt the VEU programme. In late January 2009, the BIS announced the full implementation of the VEU programme for China, and five authorised companies and 15 eligible facilities were included under the VEU programme for mainland China as of January 2010.

In his first State of the Union address on 27 January 2010, US President Obama unveiled the NEI to double exports and support two million new jobs in the next five years. This is the first time the US has a government-wide export-promotion strategy with focused attention from the president and his cabinet. The NEI is focused on three key areas: (i) a more robust effort by the US administration to expand its trade advocacy in all its forms, especially for small- and medium-sized enterprises. This effort includes educating US companies about opportunities overseas, directly connecting them with new customers and advocating more forcefully for their interests; (ii) improving access to credit with a focus on small- and medium-sized businesses that want to export; and (iii) continuing the rigorous enforcement of international trade laws to help remove barriers that prevent US companies from getting free and fair access to foreign markets.

Trade Rules and Regulations

Goods brought into the US are often subject to import duties, but import licences are generally not required. There are no foreign exchange controls over payments for imports.

Imports are usually subject to ad valorem and/or specific import duties. Regular rates are applied on imports from locations enjoying normal trade relations (NTR) or formerly most-favoured-nation status, including Hong Kong and the Chinese mainland. Products from some countries receive preferential import treatment via the US Generalised Scheme of Preferences (GSP). CBP has final authority on tariff classification for duty rates purposes.

The US rigorously enforces laws on dumping. When the DOC determines that a class of foreign goods is being, or is likely to be, sold to purchasers in the US at less than its fair value, an antidumping duty investigation may be conducted. The USITC is responsible for conducting the final injury investigation. If all the determinations are affirmative, the DOC will issue a duty order. On the other hand, the US also enforces laws on countervailing. When the DOC determines that a class of foreign goods receives countervailable foreign government subsidies, a countervailing duty investigation may be conducted. As a standard practice, the USITC is responsible for conducting the final injury investigation. If all the determinations are affirmative, the DOC will issue a duty order against the subject imports.

Imported goods are usually required to be marked with the country of origin in English. The marking has to be permanent, legible and conspicuous. Additional labelling is required on food, cosmetics, textiles and apparel, selected household products and flammable fabrics.

Certain imported products must be approved by the proper US authority. For example, certification by the Underwriters' Laboratory or ETL Testing Laboratories must be obtained for electrical appliances, gas equip­ment and fire prevention apparatus.

Signed into law in August 2008, the Consumer Product Safety Improvement Act (CPSIA) forms part of a comprehensive effort by the US government to enhance the safety of imported consumer goods, which could create additional hurdles for the entry of items such as toys and other children’s products. Manufacturers of children's products must subject their products to third party testing of safety standards compliance 90 days after the publication of the applicable accreditation rule by the Consumer Product Safety Commission (CPSC).

As a proactive effort in raising Chinese manufacturers and importers’ compliance with the US product safety standards, the US’s CPSC set up its first overseas office in Beijing in January 2011. Also, the CPSIA was revised in May and signed into law on 12 August 2011 to include several important amendments. For example, the legislation includes a provision that implements the new 100 parts per million lead content standard for products designed or intended primarily for children 12 years of age or younger on a prospective rather than a retrospective basis. As a result, the new lead standard will apply to products manufactured on or after 14 August 2011 and not to products in inventory or on store shelves as of that date. On the other hand, the legislation creates a “functional purpose” exception for products, classes of products, materials or component parts that cannot meet the lead limits if the lead content serves a functional purpose, provided they are not likely to be placed in the mouth or ingested and reasonably foreseeable exposure to the product will not result in elevated blood lead levels.

Under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), the US requires specific documents for fur imports. In addition, to close a loophole in the Fur Product Labelling Act (FPLA) that exempts fur-trimmed garments from the labelling requirements, President Obama signed the Truth in Fur Labeling Act of 2010 into law on 18 December 2010. This legislation amends the Fur Products Labeling Act to require labelling of all fur garments, regardless of value.

Hong Kong’s Trade with the US

The US is Hong Kong’s 2^nd largest export market, behind only the Chinese mainland. Hong Kong’s total exports to the US slid 0.1% to US$9 billion in the first quarter of 2012, after decreasing 0.4% to US$42 billion in 2011. Major export items in January-March 2012 included telecommunications equipment and parts (shared 16% of the total), articles of apparel, of textile fabrics (7%), women’s or girl’s wear of textile fabrics, not knitted (5%), jewellery (5%), toys, games and sporting goods (5%), footwear (4%), pearls, precious & semi-precious stones (4%), computers (4%), watches and clocks (4%), and travel goods & handbags (4%).

On the other hand, the US is Hong Kong’s 5^th largest source of imports. Hong Kong’s total imports from the US grew 5% to US$6 billion in the first quarter of 2012, following a 18% surge to US$27 billion in 2011. Leading import items in January-March 2012 included semi-conductors and electronic valves and tubes (shared 12% of the total), telecommunications equipment and parts (9%), pearls, precious and semi-precious stones (8%), aircraft & associated equipment; spacecraft; & parts (8%), fresh or dried fruit and nuts (5%), parts and accessories of office machines/computers (5%) and jewellery (4%).

* Insignificant

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the full picture of the export business managed by Hong Kong companies.

US Involvement in the Hong Kong Economy

There are approximately 1,300 US firms in Hong Kong, concentrated in trading, banking and finance, and transport. As of 1 June 2011, there were 315 regional headquarters and 525 regional offices of US companies in Hong Kong.

The US is one of the major sources of foreign direct investment in Hong Kong. According to the latest Hong Kong official statistics, the US was the fifth largest source of foreign direct investment in Hong Kong after the Chinese mainland, British Virgin Islands, the Netherlands and Bermuda, with a total stock of US$39.5 billion (or HK$307.0 billion) as at the end of 2010.

Most major US banks, insurance firms, transportation companies, and multinational corporations operate in Hong Kong. Among them are Citigroup, AIA, Federal Express, Exxon, Marriott International, Microsoft, IBM, Hewlett-Packard Company, American Express International, 3M and Coach.

Hong Kong invests in the US in various areas, such as hotel and manufacturing. The stock of Hong Kong's direct investment in the country amounted to US$4.6 billion (or HK$36.0 billion) as at the end of 2010. Hong Kong companies having presence/investment in the US include the Peninsula Group (hotel), the Bank of East Asia (banking), Lee Kum Kee and Vitasoy (food and beverage manufacturing), and Café de Coral (Fast Food restaurant).

As at the end of 2011, there were about 29,080 US nationals residing in Hong Kong, according to Hong Kong’s Immigration Department.

US States including California, Illinois, Nevada, New York State, North Carolina, Ohio and Virginia have set up representative offices in Hong Kong. In addition, US port authorities of Georgia, Long Beach, Los Angeles, New York & New Jersey, Tacoma and Virginia maintain a presence in Hong Kong.