By Martin Chan, Consultant, TITUS Solicitors
Law and regulatory materials as at 9 November 2026
On 5 November, Reuters reported, citing two people familiar with the matter, that about 600,000 Nvidia H200 chips were being stored in Hong Kong awaiting shipment to Mainland China. Beijing had yet to clear large-scale imports, according to the report.
Suppose you’re the distributor. The buyer’s deposit has cleared, the stock is in a Hong Kong warehouse and Mainland import approval is still pending. Another storage invoice is due next month. Your contract makes delivery conditional on a U.S. export licence and says nothing about who pays while the goods wait for a separate approval.
Start by checking what the U.S. authorisation covers and whether the goods need a Hong Kong strategic commodities licence. If the destination is the Mainland, confirm what approvals are needed there. Then read the contract for what happens if one of those approvals takes longer than expected or never comes through.
What the U.S. H200 rule changed
The U.S. Bureau of Industry and Security (BIS) removed Hong Kong as a separate destination under the Export Administration Regulations (EAR) in December 2020. BIS generally treats Hong Kong like Mainland China for EAR licensing purposes. Hong Kong remains a separate customs territory, and specific EAR documentation requirements still apply to certain transactions involving Hong Kong.
On 15 January 2026, BIS changed how it reviews applications for certain advanced computing exports. Eligible applications for exports from the United States to end users in China or Macau can receive case-by-case review. The H200 is an example of a chip within the rule’s performance limits. Applicants must meet conditions that cover U.S. supply, screening of end users and remote access, security and independent testing. BIS can still refuse the application.
That change matters if you are buying from the United States. If you are buying stock already in Hong Kong, start with the existing authorisation. Ask whether it covers the proposed buyer, end use and movement of the goods. Where a fresh licence is required for a covered reexport or in-country transfer to or within Macau or a Country Group D:5 destination, BIS retains a presumption of denial. Hong Kong is treated as part of China for this purpose. The presumption also applies to other applications involving entities headquartered, or whose ultimate parent is headquartered, in those destinations. The policy can therefore matter even if the end user is elsewhere.
Items subject to the EAR can remain subject after they change hands. BIS guidance distinguishes that underlying status from the licence requirement for a particular transaction. Check the item, the parties and any listed addresses, the end use, and the destination before assuming an existing licence covers a new sale. A change of end user or end use can matter even when the goods stay in the same warehouse. This matters to a lender or warehouse operator contemplating a sale of the inventory as much as to the distributor. General Prohibition Ten also restricts activities such as storing, financing or servicing an item subject to the EAR with knowledge of a relevant violation, including one that is about to occur.
BIS separately extended the suspension of its Affiliates Rule until 10 January 2027. The suspension concerns the rule that would extend certain restrictions to affiliates based on ownership. It leaves existing list-based, end-user and end-use controls in place.
When Hong Kong requires a strategic commodities licence
Hong Kong has its own controls under the Import and Export Ordinance (Cap. 60) and the Import and Export (Strategic Commodities) Regulations (Cap. 60G). If a shipment contains controlled goods, imports into Hong Kong and exports out of Hong Kong, including to the Mainland, generally need the relevant licence from the Trade and Industry Department (TID). Check the statutory exceptions and any separate end-use controls. Unlicensed import or export of a Schedule 1 article can be an offence under section 6A(2).
An H200 module, an assembly and a complete server can raise different classification questions. The U.S. classification does not settle the Hong Kong one. Hong Kong’s Category 4 control list includes digital computers with Adjusted Peak Performance (APP) exceeding 70 Weighted TeraFLOPS under item 4A003(b), as well as certain processor assemblies under 4A003(c). The statutory calculation depends in part on which processors can operate simultaneously and can access shared memory directly through hardware, without a software mechanism. A GPU count and a vendor’s published performance figure cannot establish the classification of the system by themselves. Give the supplier’s technical specifications for the exact configuration to TID through its Pre-Classification Service if the position is unclear.
TID’s no-undercutting policy can make an originating or exporting jurisdiction’s authorisation relevant. Under TID’s licensing circular, the department may require the relevant permit or other supporting evidence depending on the application. For certain categories of goods, EAR § 748.13 in turn requires the relevant Hong Kong import or export licence, or a government statement that none is required, before parties can use a BIS licence for the corresponding movement. That requirement applies to items controlled for specified reasons. A U.S. classification under ECCN 3A090 alone does not trigger it. For goods already in storage, check the original import licence too. TID may impose conditions on resale, transfer, disposal or reexport.
A handover in a Hong Kong warehouse does not, by itself, take goods out of Hong Kong. The position may change if a party arranges or assists an unlawful export. Section 35A of Cap. 60 separately addresses knowing possession, storage or other dealings with goods requiring an export licence where there is intent to evade that requirement or help someone else evade it. The section includes a rebuttable presumption of intent in specified circumstances.
Can a seller suspend delivery under Hong Kong law?
Start with the delivery obligation. A contract requiring the seller to export controlled servers without a required Hong Kong licence raises a different question from one requiring local delivery to a buyer that may later export them. A seller’s right to suspend the local handover depends on the contract, the licence conditions and what the seller would actually be doing. Where the seller must participate in the onward export, the absence of a required licence can affect whether the seller can lawfully perform. If delivery is local, the buyer’s plans to use the goods overseas do not by themselves give the seller a right to withhold them. An express delivery condition can give the seller a contractual basis to ask for proof of lawful export. Check exactly what the condition requires and follow the notice provisions before withholding delivery.
The Hong Kong Secretary for Justice has stated that Hong Kong gives effect to United Nations Security Council sanctions under local legislation and that unilateral foreign sanctions have no legal force in Hong Kong. Export controls and sanctions are distinct regimes. The government’s statement on sanctions does not decide whether a particular EAR requirement affects a Hong Kong contract.
Foreign law can matter under Hong Kong conflict-of-laws principles. In Ryder Industries Ltd v Chan Shui Woo (2015) 18 HKCFAR 544, the Court of Final Appeal examined the law governing the contract, illegality at the place where performance is required, a common object to carry out an illegal act in a foreign and friendly jurisdiction, and the effect of actual illegality in performance. The governing law, the steps required by the bargain and the seriousness of the illegality can matter. A Hong Kong-law sale calling only for performance in Hong Kong raises different issues from a contract requiring the seller to carry out an export from the United States.
A Company v The Bank [2026] HKCFI 3169 illustrates a narrower point. The Court of First Instance declined to set aside or stay enforcement of an arbitral award in the face of an objection based on Canadian sanctions. The court applied Hong Kong public policy and found that the bank had not shown a real risk of prosecution. That was an award enforcement case. The seller’s rights in an H200 supply dispute would have to be analysed on their own facts.
A buyer who paid in advance and received nothing may have a separate claim to recover the money even if foreign illegality makes the contract unenforceable. In Mai Jieping v Wong Chi Hung [2026] HKCFA 14 at [134], the Court of Final Appeal allowed recovery in unjust enrichment after a failed currency exchange. That outcome depended on a total failure of consideration. The court also recognised exceptions, including where recovery would constitute or endorse a violation of the foreign law.
If the parties want a specific export restriction, licence refusal or listing to give either of them a right to suspend performance, they should say so in the contract. A generic force majeure clause may leave room for argument about which laws it covers, whether an actual prohibition is needed, and how hard the affected party must try to perform. Frustration is a narrow doctrine and depends on how radically the supervening event changes the obligation and how the contract allocates the risk.
Payment needs its own clause. Suppose the buyer has the money but its bank declines the transfer. The bank’s decision and the buyer’s payment obligation are separate questions. In RTI Ltd v MUR Shipping BV [2024] UKSC 18, the UK Supreme Court held that, absent clear wording, the reasonable endeavours proviso in the force majeure clause did not require the party to accept euros in place of the agreed U.S. dollars. A Hong Kong court may treat the UK decision as persuasive. If the parties want an alternative lawful payment method to count as performance, agree it in advance.
What changes if the dispute reaches a Mainland court?
The Mainland’s Anti-Foreign Sanctions Law does not apply in Hong Kong through Annex III of the Basic Law. It can still matter when there is a Mainland forum, counterparty or asset. In a maritime case published by the Supreme People’s Court, the Shanghai Maritime Court applied Article 12 as a mandatory rule despite a Singapore-law clause in the bills of lading. The Singaporean carrier initially refused to issue the bills, withheld delivery at the destination and returned the cargo after its Hong Kong shipper was listed under foreign sanctions. The court found that refusing to deliver and returning the cargo amounted to a fundamental breach.
The case concerned a sanctions listing. Whether Article 12 applies to a refusal based on a particular U.S. export control, or to a refusal arising from Hong Kong’s licensing requirements, needs separate Mainland advice. Review that exposure before issuing a suspension or termination notice.
What the contract should say about a licensing delay
Return to the warehouse example. Suppose the buyer cannot take delivery by the agreed date and neither party knows when approval will come. Five provisions can make that conversation much shorter.
- Approval and proof. Identify the approvals that each party must obtain and what evidence will satisfy the other side. Include the Hong Kong classification and licence where relevant. Decide who must apply, what the other party must provide and when they must update each other.
- Suspension and exit. Specify which events permit suspension, what notice is required and when either side can terminate. A fixed long-stop date gives the parties a point at which to decide whether to keep waiting.
- Inventory and deposits. Allocate storage, insurance and other holding costs during the delay. Say when title and risk pass, who can direct the warehouse and what happens to the deposit if approval never comes. Any sale or other disposal of the goods must comply with the applicable controls and licence conditions.
- Changes in counterparties or end use. Agree who must disclose changes to the buyer, ultimate end user, ownership, relevant addresses, destination or intended use. State when the parties must recheck the authorisations before proceeding.
- Payment and disputes. Agree what happens if a bank declines a payment and whether a lawful alternative is permitted. Review the governing law and dispute forum alongside where the goods, counterparties and assets are located.
If the stock is already in Hong Kong, pull the warehouse agreement as well as the sale contract and the licences. Check whose name is on the next storage invoice and whether that party can recover the cost under the contract. Do that before serving a notice or telling the warehouse to release or sell the stock.
For advice on Hong Kong strategic trade controls, supply and distribution contracts, or a dispute over delayed delivery, contact TITUS Solicitors.
This article is for general information and does not constitute legal advice. Obtain transaction-specific advice from qualified U.S. or Mainland counsel where their laws apply.