Koon Chun Sauce Factory is dropping its “Made-in-Hong Kong” label for one that says “Made in China” to ensure it can continue selling to the United States after Tuesday.
Retaliating against Beijing’s imposition of a national security law on Hong Kong in June, he ordered an end to preferential treatment for the city under the Hong Kong Policy Act of 1992. He also said its exporters must switch to using made-in-China labels to reflect that Hong Kong was “just another Chinese city”.
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Daniel Chan, who runs the sauce factory his great-grandfather co-founded in 1928, said he would comply, but the packaging would still mention that the brand was established in Hong Kong.
The company has been sending its soy sauce products to America since the 1930s, and nearly half its annual production today is for the US market. Its exports include soy sauce and hoisin sauce, the sweet and smoky dip served with Peking duck and barbecued pork.
Chan is not too worried about losing his commercial customers, mainly restaurant operators familiar with the brand, but is uncertain about how new retail shoppers will react.
“The US’s current attitude to China is not just from the government. Ordinary citizens have reacted negatively towards made-in-China goods over these few years,” he said.
Not everyone, particularly in the US, might have a good impression of China-made masks. So we’ve added the line ‘Factory in Hong Kong’ close to the ‘Made-in-China’ tag
Albert Chen, co-founder Masklab
Other Hong Kong manufacturers have reluctantly begun ripping out their tags and, like Chan, will retain a hint of their identity by stating “factory in Hong Kong” below the new label.
On October 30, the Hong Kong government complained formally to the World Trade Organization and called for dialogue with the US, saying if both sides failed to come to a resolution within 60 days, the city could seek arbitration from the trade body. Its request was circulated to WTO members on November 3.
The Commerce and Economic Development Bureau told the Post that Hong Kong was an independent customs territory and the US order violated WTO rules, undermined the rules-based multilateral trading system, and confused the market.
Experts do not expect the Hong Kong government action to help its exporters to avoid changing their labels.
“I can’t see the US giving in or resolving this matter to Hong Kong’s satisfaction within the 60-day period,” Chinese University law professor Bryan Mercurio said. “This matter is not a stand-alone issue, but certainly from the US point of view, is wrapped around the larger US-China tensions.”
What complicated matters, he said, was the outcome of the US presidential election, which would have implications for US-China relations.
With US news agencies calling the race for Democrat Joe Biden, a new administration could be expected to make changes in personnel and strategic directions.
According to the US regulations on labelling of imported goods, serious non-compliance could result in a fine of up to US$100,000 or a maximum jail term of one year or both, for importers upon first conviction. The maximum fine for subsequent convictions is US$250,000, but the jail term stays the same.
The US is Hong Kong’s second largest domestic export market, with US$441 million trade in the first nine months of this year, or just 0.1 per cent of the city’s total exports, according to Louis Chan Wing-kin, the Hong Kong Trade Development Council’s assistant principal economist in global research. Hong Kong’s total export figures also include goods in transit from mainland China.
Chan said Hong Kong-made products were known for their good quality, and even after the label change, manufacturers could step up their promotion and marketing efforts on social media to emphasise their roots in the city.
“It’s just like the iPhone,” he said. “People won’t regard its branding or quality as poorer because it’s made in China.”
He said US-bound exports included jewellery, edible products and pearls, precious and semi-precious stones.
We explain to each customer from the US that though it [tourbillon watch] has a ‘Made-in-China’ label, in reality, it is made in Hong Kong
Gary Ching, co-founder, Anpassa Watch
Gary Ching See-yuen, co-founder of the high-end Anpassa Watch, will no longer engrave the made-in-Hong Kong hallmark on any timepieces produced at its Kwun Tong workshop when the new label rule takes effect.
But certificates accompanying its custom-made watches will state that they are made in Hong Kong.
“When I set up the business seven years ago, I was so proud of my products being purely made in Hong Kong, but now I feel awkward and uneasy to say they are made in China,” the 47-year-old entrepreneur said. “Even my customers in the US, who are supporters of Hong Kong-made products, are unhappy about this.”
The company produces about 200 upmarket tourbillon watches a year, and about 10 per cent go to customers in the US. They cost anywhere between HK$6,000 and HK$50,000 with some priced at more than HK$1 million.
“The watch has a Hong Kong story,” he said. “We explain to each customer from the US that though it has a made-in-China label, in reality, it is made in Hong Kong.”
Ching said the political tensions between the US, China and Taiwan resulted in his distributor in Taiwan demanding that Anpassa watches headed there remain labelled “Made in Hong Kong”, not “Made in China”.
Mask maker masklab’s new packaging, meanwhile, will include a line saying “factory in Hong Kong”.
Albert Chen, 33, co-founder of the factory in San Po Kong, which can produce 100,000 masks a day, said 60 per cent of its output between March and May was sold to the US.
“Not everyone, particularly in the US, might have a good impression of China-made masks. So we’ve added the line ‘factory in Hong Kong’ close to the made-in-China tag to make it clear to consumers,” he said.
Unsure whether the policy would be reversed even with Biden as president, Chen said he would be sad if the label change was permanent because Hong Kong formed a big part of his identity.
“When I’m in the US and people ask me where I’m from, I usually say I’m from Hong Kong. I think most Hongkongers do the same, even though Hong Kong is part of China,” he said.
Universal Jewellery director Jessica Kwan Mun-hang said the 71-year-old Hong Kong company had no choice but to follow the new rule and change its label.
Located in industrial Hung Hom, the company’s factory has about 100 skilled workers turning out high-end rings and necklaces encrusted with diamonds and precious stones.
Kwan said about 30 per cent of its products went to the US and the rest to Europe, Southeast Asia and China.
“We have had business ties with our customers for decades, they know our brands and products well, even if they are labelled ‘Made in China’,” she said. “We are more concerned about the tax arrangements affecting US-bound products.”
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