Washington declared disagreement with the decision of the WTO
According to the WTO's Dispute Settlement Body (DSB), an organization in which Hong Kong and China are two separate members, the U.S. measure does not comply with the 1994 General Agreement on Tariffs and Trade (GATT), in particular because the United States "has not demonstrated that the situation at hand constitutes a case of serious international destabilization."
In its conclusions, the DSB also found that "the difference in approach results from the United States requiring products from Hong Kong [...] to bear a country of origin mark with the name of another WTO member [China], while products from any third country must be marked with that third country name, not the name of another WTO member."
The DSB found that this difference in approach "alters the conditions of competition" to the detriment of Hong Kong products.
These products "are thus prevented from competing in the U.S. market under their own name and thereby affecting the value that may be due, now or in the future, to their origin, or to take advantage of that value," the DSB concluded.
In a statement, the U.S. announced that it "categorically rejects the commission's misinterpretation and conclusions," stating that China's "troubling actions" in Hong Kong "threaten the security of U.S. interests."
"To be clear, the United States does not intend to withdraw its labeling commitments as a result of this report, and we are not going to leave it to the WTO to judge and make decisions on critical security issues," Adam Hodge of the U.S. Embassy Commerce Department was quoted in a statement.
On July 14, 2020, Donald Trump, then U.S. president and candidate for his successor, announced the end of preferential treatment granted by Washington to Hong Kong after Beijing imposed a controversial national security law on the semi-autonomous territory
A month later, on August 11, 2020, the U.S. Customs Service announced that goods imported from Hong Kong would have to be labeled "made in China" in order to be sold in the United States.
In its conclusions, the DSB acknowledged that "there is evidence that the United States and other members are seriously concerned about the human rights situation in Hong Kong," but found that the situation "has not reached the threshold severity necessary" to constitute a case of serious international instability, for which GATT provides security exceptions (Article 21).
The U.S. is in principle obliged to follow the findings of the WTO, which can impose sanctions at the request of the complaining country. Washington could also appeal, which would stop the procedure, since the WTO appellate body has been dormant since Donald Trump blocked the appointment of judges, a blocking that Joe Biden has not stopped.