Upholding Hong Kong's Trading Integrity

Given the importance of trade and industry to the economy of Hong Kong, the department enforces various trade controls systems including the Certification of Origin System, the Textiles Export Control System, the Strategic Trade Control System and the Import and Export Declaration System to ensure that Hong Kong fully discharges its international obligations and complies with multilateral trade agreements. Through its enforcement actions, the department also protects the legitimate interests of traders and manufacturers. In addition, the department mediates disputes between overseas traders and local suppliers to safeguard Hong Kong's trading reputation.

Certification of Origin System

2. Hong Kong maintains a comprehensive Certification of Origin System to establish the origin of goods produced in Hong Kong. To uphold the creditability and integrity of the System, the department conducts pre-registration inspections on factories applying for Certificate of Origin facilities to ensure their production capacities, periodic inspections on registered factories to ensure their compliance with registration conditions, and consignment checks on goods covered by Certificate of Origin applications. In 2003, the department conducted 4 024 factory inspections and consignment checks. In 2004, 4 136 factory inspections and consignment checks were conducted.

Textiles Export Control System

3. Under the WTO Agreement on Textiles and Clothing, Hong Kong is obliged to ensure that exports of textile products using Hong Kong quotas are manufactured in the territory.

4. To ensure that Hong Kong fully discharges its obligations under the Agreement, the department operates a comprehensive programme of controls and enforcement measures, and reviews regularly its strategies to meet the changing circumstances in the trade. The department has been adopting an intelligence-led strategy and a two-pronged enforcement programme to tackle the problem of illegal textile transshipment. Apart from the factory-based pre-shipment and post-shipment checks, real time production checks and factory audit checks, the programme regularises the blitz check operations and strengthens the targeted checks and investigations.

5. Blitz checks have been proven effective in tackling illegal transshipments. The more intensive use of intelligence and risk management in blitz check operations has greatly enhanced the department's effectiveness in combating illegal transshipment activities. In 2003, the department examined 26 163 textile consignments during 976 blitz check operations and detected 349 cases of illegal textile transshipment with seizures worth $54.2 million, representing an increase of 4.3 per cent in the number of cases detected and a drop of 8.3 per cent in the value of seizures as compared to 2002. Meanwhile, 820 persons/companies were prosecuted for various textiles-related offences, resulting in the imposition of court fines which amounted to $18.9 million and seizure of offending textiles and clothing goods worth $127.1 million.

6. In 2004, the department examined 25 829 consignments in 977 blitz check operations and detected 337 cases of illegal textile transshipment with seizures worth $53 million. Meanwhile, 952 persons/companies were prosecuted for various textiles-related offences, resulting in the imposition of court fines which amounted to $24.8 million and seizure of offending textiles and clothing goods worth $66.2 million.

7. In addition, to weed out shady establishments engaging in illegal transshipment of textiles, the department mounted a special operation in 2003 by conducting audit checks on 156 factories for ascertaining their production capability within a certain manufacturing period. As a result, eight factories were prosecuted and 66 factories were suspended from further using the licensing facilities.

8. Similar audit checks were conducted by the department in 2004 on 409 factories for ascertaining their production capability within a certain manufacturing period. As a result, 12 factories were prosecuted and 215 factories were suspended from further using the licensing facilities.

9. In the HK/US Joint Factory Observation Visits conducted in 2003, a total of 67 factories were visited. And in April and October 2004, another two such visits were conducted and a total of 98 factories were visited. The visits were part of the continuous co-operation programme under the Memorandum of Understanding signed between the HKSAR Government and the US Government.

Strategic Trade Control System

10. To maintain a free flow of strategic commodities for legitimate commercial and research use while at the same time to prevent Hong Kong from being used as a conduit for the proliferation of weapons of mass destruction, the department, in collaboration with the Trade and Industry Department, vigorously enforces the Strategic Trade Control System to monitor the flow of strategic commodities and to detect the provision of services used for the development and production of weapons of mass destruction.

11. The Chemical Weapons (Convention) Ordinance which aims to fully implement the Chemical  Weapons Convention in Hong Kong came into operation on 18 June 2004. The implementation of the Ordinance underlines Hong Kong's commitment to internationally agreed arrangements on the ban of chemical weapons and on the monitoring of activities involving sensitive chemicals. Through the enforcement of the Ordinance, the department helps ensure Hong Kong's continued access to the scheduled chemicals of the Convention for local uses in industrial, medical, research and trading areas.

12. In combating illegal diversion of strategic commodities, the department carries out licence checks to verify the authenticity of information given in import and export licence applications and disposal checks to ensure that articles imported are used as declared. In 2003, the department conducted 1 135 import licence checks, 1 404 export licence checks and 470 disposal checks; investigated 251 cases; and prosecuted 51 persons/companies resulting in a total fine of $2.29 million. In these cases, the value of goods involved was $23 million. In 2004, the department conducted 1 469 import licence checks, 2 249 export licence checks and 403 disposal checks; investigated 234 cases and prosecuted 57 companies leading to a total fine of $151 million. In these cases, the value of goods involved was $18 million.

Reserved Commodities Control

13. Through the enforcement of the Reserved Commodities Ordinance, the department monitors the import and export of rice and ensures a stable supply of such commodity in Hong Kong. In 2003 and 2004, the department respectively conducted 3 214 and 3 379 inspections under the rice control.

Import and Export Declarations

14. The department administers and enforces the Import and Export Declaration System. Any person who imports or exports an article other than an exempted article is required by law to submit a declaration within 14 days after importation or exportation and to pay a charge. For exports of Hong Kong manufactured clothing and footwear items specified in the Schedule to the Industrial Training (Clothing Industry) Ordinance, an additional clothing industry training levy has to be paid. The department conducts checks to ensure that declarations are submitted within the statutory time frame and contain accurate information. Late lodgment of declarations or lodgment of inaccurate declarations is liable to prosecution and penalties.

15. In 2003, the department received 17.2 million declarations and collected $938 million in import and export declaration charges/clothing industry training levies/late penalty. Short-paid declaration charges/clothing industry training levies recovered and late/administrative penalties imposed amounted to $14.9 million. In 2004, the department received 18.3 million declarations and collected $1 102 million in import and export declaration charges/clothing industry training levies/late penalty. Short-paid declaration charges/clothing industry training levies recovered and late/administrative penalties imposed amounted to $17.1 million.

Assistance to Overseas Customs Administrations on Valuation Fraud Cases

16. Being a member of the World Customs Organization, the department offers assistance to other Customs administrations upon their request for investigation of customs duty related frauds. In 2003 and 2004, the department respectively received 162 and 142 requests, and most of them involved under-valuation of goods.

Trade Mediation

17. To protect Hong Kong’s trading reputation, the department provides free mediation service to settle cases of trade dispute lodged by overseas trading firms against local companies. In 2003, the department mediated in 156 cases of trade dispute and 52 of them were successfully settled. In 2004, the department mediated in 141 cases and 39 of them were successfully settled.

Closer Economic Partnership Arrangement (CEPA) - Trade in Goods

18. Since the signing of the CEPA between Hong Kong and Mainland China in 2003, 374 items of Hong Kong products can, starting from 1 January 2004, enjoy zero tariff treatment upon importation into the Mainland if covered by a Certificate of Origin. CEPA adopts a building block approach and provides a mechanism for further liberalization measures. The Mainland has agreed to further eliminate the import tariff for another 713 items of Hong Kong products on 1 January 2005.

19. The department is charged with the enforcement duties of the CEPA Certification System. In 2004, the department conducted consignment checks against 766 applications for Certificate of Origin (CEPA) and examined 183 CEPA consignments at various cargo exit points.

Kimberly Process (KP) Certification Scheme

20. The Kimberly Process (KP) Certification Scheme for rough diamonds has been developed by the Kimberley Process, an international negotiating forum that seeks to stop trading in "conflict diamonds" from fuelling armed conflicts, activities of rebel movements and illicit proliferation of armament. Some 61 economies including the People's Republic of China (PRC) have participated in the Certification Scheme. Hong Kong joined the Scheme as a designated importing and exporting authority of the People's Republic of China in order to safeguard Hong Kong's interest as a trading hub of diamonds in this region. The Kimberly Process Certification Scheme has been implemented since 2 January 2003. The Scheme, which comprises a registration system and a certification system, is administered by the Trade and Industry Department and enforced by the Customs and Excise Department. In 2003 and 2004, officers of the Customs and Excise Department conducted 605 and 473 consignment inspections and 14 and 9 investigations on rough diamonds respectively.