Hong Kong, though is part of China, has a distinct separate legal and economic system with protection for civil rights such as freedom of speech. This is particularly enshrined in the Joint Declaration and the Basic Law.
Under section 5(a) of HKAA, the US Congress has to be annually table a report informing about:
a) foreign individuals and entities that materially contributed to China’s failure to comply with the Joint Declaration or the Basic Law and
b) Foreign financial institutions (FFI) that deliberately conducted a significant transaction with such identified individuals and entities.
Section 5(b) provides that between 30 and 60 days after the submission of the Secretary of State’s report under section 5(a), the Secretary must submit “a report that identifies any identified FFI that knowingly conducts a significant transaction with a foreign person identified in the report”.
Further, section 6 of the HKAA empowers the President to impose sanctions, in the form of freezing of assets and prohibitions on dealing of any kind with the entities or identified FFI. Section 7(a) empowers the President to impose sanctions on an identified FFI. The Act enshrines 10 possible sanctions. The law would require the President to impose at least five of them within a year after an identified FFI is named in the Secretary Report and then to impose all of these sanctions within two years after the identified FFI is so named. The ten potential sanctions are given in section 7(b)
Section 8(a) empowers the President, at his discretion, to waive the imposition of sanctions with respect to any identified FFI especially if such waiver will be in the interest of the national security interest of the US.
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