It is reasonable to expect that Hong Kong’s production for the balance of 2005 in the safeguard categories will increase as companies re-source goods away from China to Hong Kong in these categories. How much of an increase is anybody’s guess. Similar re-sourcing increases will occur in other jurisdictions, such as Macau. Whatever the increase is will be looked upon with some skepticism by US Customs who will follow the export numbers extremely closely. Yes, we expect that US Customs will be back in Hong Kong (and other jurisdictions) later this year to carry out production verification visits in the safeguard categories. Discussions are ongoing between US Customs and the Hong Kong authorities to renew the customs cooperation agreement that expired at the end of 2004, which provided the framework for the production verification visits and the lists published by US Customs of Hong Kong companies convicted of origin offenses.

These visits will lead to detentions, as they have always done in the past, of goods in the categories under scrutiny. Los Angeles, as before, will likely be a very active port for detentions. The message for Hong Kong companies producing goods in categories under safeguard or expected to go under safeguard is to have all the production records substantiating Hong Kong origin on the ready, so that the records can be provided within a day or two to the US importer in the event there is a detention. Remember that if the factory does not have sewing tickets, all is not lost. Look for a comparable record, such as a daily production log. The factory head can also issue a declaration explaining the factory’s recordkeeping system if records, such as sewing tickets, that US Customs expects to see are not records the factory ordinarily maintains.

Everybody in Hong Kong knows or should know what the drill is by now. We have all been through this before. It’s June 2005. But it sure feels a lot like June 2004. The more things change, the more they stay the same.