Revenue

In 2005, the excise duties collected amounted to $6 618.3 million, of which 50.8 per cent came from hydrocarbon oil, 36.0 per cent from tobacco, 13.1 per cent from alcoholic liquor and 0.1 per cent from methyl alcohol and other alcoholic products. It represented an increase of 1.2 per cent over 2004. The increase was mainly attributed to the rise in alcoholic liquor and tobacco consumption as a result of economic upturn. On the other hand, the drop in duty collected from hydrocarbon oil was mainly attributed to the increased use of duty-exempt LPG as fuel by public light buses. The percentage distribution of duty collection by commodities is shown below.

In 2006, the excise duties collected amounted to $6 956.5 million, of which 47.7 per cent came from hydrocarbon oil, 38.8 per cent from tobacco, 13.4 per cent from alcoholic liquor and 0.1 per cent from methyl alcohol and other alcoholic products. It represented an increase of 5.1 per cent over 2005. The increase was mainly attributed to the rise in tobacco and alcoholic liquor consumption as a result of price cut of most imported brands of cigarettes in April 2006 and economic upturn respectively. On the other hand, the drop in duty collected from hydrocarbon oil was attributed to less frequent driving of drivers, one consideration being the increase in pump price of motor spirit. The percentage distribution of duty collection by commodities is shown below.

Open Bond System

All dutiable commodities bonded warehouses in Hong Kong are currently licensed under the Open Bond System (OBS), which was introduced on 1 April 2003 with a view to facilitating legitimate business activities and lowering the operating cost of the trade. The OBS enables bonded warehouse operators and traders to save Customs attendance fees amounting to an estimate of $70 million per annum. Besides, it also enhances the flexibility of bonded warehouses’ operating environment by allowing the warehouse operators to determine the opening hours of the bonded warehouses according to their own business needs. The number of bonded warehouses has also been increasing, from 38 in April 2003 to 69 in December 2006 representing an increase of 82 pre cent rise). The OBS has achieved a win-win situation to both the Government and the trade by creating a favourable environment for the business and maintaining effective customs control on the trade.

Vinexpo Asia-Pacific 2006

The Vinexpo Asia-Pacific 2006 is a world-class wine and spirits exhibition targetted at wine traders in the Asia-Pacific region. The exposition was held at the Hong Kong Convention & Exhibition Centre from 23 to 25 May 2006. A total of 568 global exhibitors ranging from wine growers, traders to wine magazine publishers displayed their products to more than 6 800 wine traders from the Asia-Pacific region.

To support the Government policy of promoting Hong Kong as an international trading hub for wines and to strengthen the department image, the Office of Dutiable Commodities Administration set up a Customs booth in the exhibition to provide international traders, as well as the organizer and exhibitors, with on-site assistance and advices. Officers of the department manning the booth explained to the visitors the duty system, legislations and licensing/permit requirements in respect of liquor in Hong Kong. The information was useful and aimed at assisting visitors to establish/expand their businesses in Hong Kong.

The booth of the department was well received. More than 150 visitors, mostly from the Mainland, Hong Kong, Macau and Taiwan, Singapore, Malaysia, Australia and New Zealand, patronized the service offered. Through active participating in the event and providing quality advice to the visitors, the department has achieved in –

• promoting Hong Kong as an international liquor trading hub;
• fulfilling its key role in trade facilitation for the benefits of Hong Kong economy; and widening the participating officers’ horizons in acquiring useful, practical and job-related knowledge.

Illicit Fuel

To tackle the problem of illicit fuel, the department had strengthened its enforcement actions and adopted a multi-pronged strategy. Apart from launching operations to combat illicit fuel activities by pooling resources from different formations within the department and other law enforcement agencies, the department also fully used the intelligence-led strategy and adopted the tactic of tackling the fuel problem at source.

Moreover, the department stepped up control measures at land boundary control points and at sea against the illegal importation of fuel, and organized publicity campaigns to raise public awareness on illicit fuel and to encourage the public to report on illicit fuel activities.

To suppress the abuse of illicit diesel oil, the department has initiated a sustained territory-wide operation, code-named “Grand Rooster” in mid-June 2005to check the fuel tanks of heavy vehicles. A high profile publicity campaign was launched with emphases on education and cooperation. Four rounds of meetings were held with driver unions and associations to solicit their support on our enforcement action. In 2006, 20 362 various types of vehicles were checked. 138 of them were found using illicit fuel. The operation had brought strong deterrent effect. The number of vehicles found using illicit fuel out of number of vehicles being checked significantly dropped from 7 per cent in 2004 to 0.67 per cent in 2005 and 0.68 per cent in 2006.

With the multi-pronged strategy, the department effected 1 515 cases with 1 085 illegal filling stations, 22 oil detreating plants and 1 synthetic petrol plant smashed in 2005. The seizure involved 1.17 million litres of illicit fuel oil. As compared with the preceding year, the number of cases increased by 6.9 per cent, but the quantity of seizure dropped by 31.1 per cent. The drop in seizure despite more cases effected was due to the tendency that illicit fuel operators keeping fewer stocks in the face of stringent enforcement actions.

Among the successful cases in 2005, the most fruitful one was the neutralization of a syndicate involved with large-scale smuggling of motor spirit from the Mainland. Subsequent to intelligence exchange with Guandong Customs, the department mounted operations to intercept five shipments smuggled by the syndicate, two at sea and three at boundary control points, in the first half of 2005. As a result, 16 syndicate members were arrested, and 316  400 litres of illicit motor spirit and 9 vehicles totally valued at $5.25 million were seized.

Illicit Cigarettes

To tackle the problem of illicit cigarettes, the department is committed to fighting illicit cigarettes activities at all levels from import, distribution to street peddling. In 2005 and 2006, the intelligence-led strategy continued to energize the department in successfully suppressing illicit cigarette crimes in Hong Kong by targeting enforcement actions against the syndicate masterminds.

During 2005, the department effected a total of 52 445 cases with the seizure of 100.7 million sticks of cigarettes and the arrest of 5 895 persons. The total value of the seized illicit cigarettes was $ 153.9 million and the duty potential was more than $ 81 million. The cases effected and persons arrested were 3.7 per cent and 9.1 per cent respectively higher than those in 2004. The rise might in part be attributable to the implementation of the Red and Green Channel.

In 2005, seizures of 8.15million sticks of illicit cigarettes valued $ 12.4 million were effected through ports and maritime enforcement. The use of speedboats to smuggle illicit cigarettes into Hong Kong had once prevailed. In May 2005, officers arrested two Chinese men who were moving illicit cigarettes onto a lorry from a speedboat at Sai Kung waterfront. Totally 562 000 sticks of illicit cigarettes valued $843 000 with duty potential of $451 848 were seized.

In 2006, the department effected 35 835 cases with the seizures of 78.74 million sticks of cigarettes and the arrest of 10 702 persons. The total value of the seized illicit cigarettes was $119.32 million and the duty potential was in excess of $ 63.31 million.

Under the vigorous enforcement of the department, some local syndicates adopted fast changing tactics for smuggling and peddling of illicit cigarettes in 2006. They moved their illicit cigarette storages to the Mainland and smuggled cigarettes by “ant trade”, meaning that syndicates making use of smaller means of conveyance for conducting small scale but high frequency smuggling, into the local market only upon orders. Many local peddlers refrained from holding large stock and sold illicit cigarettes only by telephone orders. To circumvent Customs detection, some syndicates used hired trucks for smuggling, and employed Mainland visitors for the peddling jobs etc.

In March 2006, the department smashed a syndicate, which abused the dutiable commodities permit system and supplied duty free cigarettes to the local black market. The syndicate applied for export permits on false information, and diverted to the local black market duty free cigarettes, which were approved for export to ocean going vessels as ships’ stores. Apart from the arrest of five syndicate members, the investigation implicated two companies and 6.28 million sticks of duty free cigarette. The total value of the illicit cigarettes implicated amounted to $8.79 million with duty potential of $5.05 million.