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Following is the speech by the Secretary for the Treasury, Miss Denise Yue, in moving the resolution on Dutiable Commodities Ordinance (Cap. 109) under section 4(2) to allow the sale of duty-free goods on arrival in the Legislative Council today (Friday):

President,

I move the resolution standing in my name on the Agenda.

The resolution seeks to amend Schedule 1 to the Dutiable Commodities Ordinance to exempt from duty certain quantities of alcoholic liquors and tobacco which are sold to arrival passengers at entry points in Hong Kong. It aims at implementing the proposal of allowing duty-free shopping on arrival. Let me explain briefly the background of this resolution.

At present, the Dutiable Commodities Ordinance already exempts from duty certain quantities of dutiable goods which are imported into Hong Kong by passengers of ships, aircraft, trains or vehicles for their own use. However, such exemption does not apply to goods which are purchased on arrival. As such, we have not allowed the sale of duty-exempt goods at entry points to arrival passengers.

We estimate that about 20% to 30% of arrival passengers carry with them duty-free goods with an estimated value of about $1,200 million a year. Since at present we do not allow the sale of duty-free goods on arrival, all such goods are bought outside Hong Kong. Following requests from the Kowloon-Canton Railway Corporation and the Airport Authority, we have considered whether the duty-free concessions we have already provided for arrival passengers should be extended to cover goods purchased on arrival by such passengers.

We believe that allowing the purchase of duty-free goods on arrival would partly replace the purchase of such goods from equivalent outlets outside Hong Kong. As the quantities of and restrictions on duty-free concessions are not adjusted, the proposal should not have any revenue implications. But the proposal would bring some economic benefits to Hong Kong. This would be expressed in terms of value added or income to be generated from the increased retail, wholesale, and import and export activities in duty-free concessions. Assuming that 30% of the $1,200 million worth of duty-free goods brought into Hong Kong annually would be bought in the arrival concessions, we estimate that the value-added directly generated in the retail, wholesale, and import and export trades will amount to about $80 million each year.

Besides, the proposal should not significantly affect the sale of similar duty-paid goods in Hong Kong as it will mainly be made use of by those who would otherwise have bought such goods before arriving in Hong Kong. In addition, allowing the sale of duty-free goods on arrival is an international practice. Hong Kong should seek to remain competitive.

We note that in implementing the proposal, there are two important operational considerations, namely, crowd control in Lo Wu Railway Station, particularly at busy times, and the possibility of abuse of the allowances and arrangements. On the crowd control issue, the relevant government departments will work out with the respective operators suitable arrangements for operating the concessions and will prepare alternative arrangements for peak seasons. We will aim to work out an arrangement which would least affect passenger flow in the Lo Wu Railway Station and would not compromise customs and immigration controls. On the possibility of abuse, Customs and Excise Department will conduct more frequent checking of passengers, airport and railway staff. The resources involved in this respect should not be significant and would be absorbed by the Customs and Excise Department.

In light of the economic benefits that the proposal could bring to Hong Kong and with the provision of appropriate crowd control and enforcement measures, we hope Members would support the sale of duty-free goods to arriving passengers.

President, I beg to move.

End/Friday, July 16, 1999

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