Imagine you’re a Hong Kong trader importing electronics from China for re-export to the US. You’ve heard about anti-dumping duties but assume Hong Kong’s free port status protects you. Then comes the shocking news: your shipments face the same 25% duties as direct Chinese exports. This scenario became reality for many Hong Kong businesses in 2025. Understanding how anti-dumping and countervailing duties work—even though Hong Kong doesn’t impose them—is crucial for any company engaged in international trade.

Understanding Anti-Dumping and Countervailing Duties

Anti-dumping and countervailing duties (AD/CVD) are trade remedies used by countries to protect their domestic industries from unfair foreign competition. While Hong Kong maintains a steadfast free trade policy and doesn’t use these measures, Hong Kong businesses must understand them because their trading partners—especially the US and EU—actively employ them.

What Are Anti-Dumping Duties?

Anti-dumping duties target “dumping”—when foreign manufacturers export products at prices below their normal value or production costs, potentially harming domestic industries. Under WTO rules, three conditions must be met for anti-dumping duties:

• Dumping exists: Products sold below “normal value” (typically home market price)
• Material injury: Dumped imports cause or threaten harm to domestic industry
• Causal link: Direct connection between dumped imports and injury

What Are Countervailing Duties?

Countervailing duties (CVDs) offset subsidies provided by foreign governments to their exporters. The WTO Agreement on Subsidies and Countervailing Measures categorizes subsidies into three types:

Hong Kong’s Unique Free Trade Position

Hong Kong stands apart in the global trading system with its unwavering commitment to free trade principles. As a free port, Hong Kong maintains policies that differ fundamentally from most other WTO members.

No AD/CVD Mechanisms in Hong Kong

Hong Kong does not impose anti-dumping or countervailing duties on any imports, regardless of origin or pricing. This policy reflects Hong Kong’s fundamental approach to international commerce:

• No tariffs: Hong Kong levies no customs duties on imports or exports (except 4 specific commodities)
• No trade barriers: Hong Kong pursues free trade without protectionist measures
• Minimal licensing: Import/export licensing required only for specific goods to meet international obligations or public needs
• No AD/CVD framework: Hong Kong has no domestic legal framework to investigate or impose anti-dumping or countervailing duties

Hong Kong’s Separate Customs Territory Status

Hong Kong holds a unique position as a separate customs territory and independent WTO member. This status, recognized under the Hong Kong Basic Law, grants Hong Kong full autonomy to:

• Develop independent trade policies
• Negotiate and implement free trade agreements
• Maintain separate tariff schedules (zero tariffs in Hong Kong’s case)
• Establish relationships with other WTO members independently
• Participate in WTO dispute settlement as “Hong Kong, China”

Critical Implications for Hong Kong Businesses

While Hong Kong doesn’t impose AD/CVD, Hong Kong businesses face significant implications when exporting to countries that do. The key principle: country of origin determines duty treatment, not country of export.

Origin Determination Scenarios

Certificate of Hong Kong Origin (CHKO)

The Certificate of Hong Kong Origin serves as official proof that goods are manufactured in Hong Kong. This document is crucial for avoiding AD/CVD targeting other countries. Key requirements for Hong Kong origin certification:

• Wholly produced: Goods wholly grown, mined, or manufactured in Hong Kong
• Substantial transformation: Manufacturing processes that permanently and substantially change shape, nature, form, or utility
• Excluded processes: Simple diluting, packing, bottling, drying, simple assembling, sorting, or decorating are NOT considered genuine manufacturing

Major Trading Partners’ AD/CVD Measures

United States: Critical Policy Change (2025)

A significant development affecting Hong Kong businesses occurred in early 2025 when the United States changed its treatment of Hong Kong products for duty purposes.

Practical implications for Hong Kong exporters to the US:

• Even goods genuinely manufactured in Hong Kong may face duties previously applicable only to China
• All US AD/CVD orders targeting Chinese products now potentially apply to Hong Kong products
• Heightened scrutiny of origin documentation by US Customs
• Increased compliance burden for proving Hong Kong origin vs. Chinese origin
• Hong Kong/China products NOT eligible for “de minimis” exemption from duty

European Union Anti-Dumping Actions

The EU actively conducts anti-dumping investigations, many targeting products originating from Mainland China. Hong Kong’s Trade and Industry Department regularly issues circulars to inform Hong Kong traders about EU anti-dumping proceedings.

Recent EU anti-dumping actions affecting China/Hong Kong trade include investigations into products like monosodium glutamate and PET spunbond. The EU’s approach has evolved from treating China as a non-market economy (until 2017) to using special methodologies when significant market distortions exist.

Transshipment and Compliance Best Practices

Hong Kong’s role as a premier transshipment hub creates specific compliance challenges. Trade authorities worldwide are increasingly vigilant about circumvention schemes that use transshipment to evade anti-dumping or countervailing duties.

Common Circumvention Methods

• False origin declarations: Claiming Hong Kong origin when goods actually originate in a country subject to AD/CVD
• Minimal processing: Performing superficial operations in Hong Kong to claim substantial transformation
• Document fraud: Falsifying Certificates of Origin or other customs documentation
• Third-country routing: Routing goods through Hong Kong to obscure true Chinese origin

Best Practices for Hong Kong Businesses

Practical Examples for Hong Kong Businesses

Example 1: Electronics Re-Exporter

Scenario: ABC Trading Ltd. purchases smartphones manufactured in Shenzhen, China, and re-exports them to the US. The US has imposed a 25% anti-dumping duty on smartphones from China.

Analysis: Country of origin is China (place of manufacture). Goods merely transshipped through Hong Kong without substantial transformation. 25% anti-dumping duty applies plus additional duties under US policy change.

Example 2: Hong Kong Garment Manufacturer

Scenario: Fashion Co. Ltd. imports fabric from Vietnam, cuts and sews garments in Hong Kong, and exports finished clothing to the EU.

Analysis: Country of origin is Hong Kong (substantial transformation occurred). Cutting and sewing constitute substantial transformation. Eligible for Certificate of Hong Kong Origin. No EU AD duties apply (neither Vietnam fabric nor HK garments are subject).

Key Monitoring Resources

Hong Kong businesses should regularly monitor these resources to stay informed about AD/CVD developments:

In today’s complex global trade environment, Hong Kong businesses must navigate AD/CVD regulations even though Hong Kong itself doesn’t impose them. The February 2025 US policy change treating Hong Kong products the same as China has added new compliance challenges. By understanding origin rules, maintaining accurate documentation, and staying informed about trade remedy developments, Hong Kong companies can minimize risks and maintain their competitive edge in international markets.