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The Central People's Government (CPG) and the Hong Kong Special Administrative Region Government (HKSARG) today (October 27) signed the legal text on further trade liberalisation under the second phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA II). Both sides also announced the agreed rules of origin for Hong Kong-made products included in this phase of liberalisation.
The Vice Minister of Commerce, Mr An Min, and the Financial Secretary, Mr Henry Tang, signed the legal text this morning after the fourth High Level Meeting of the CEPA Steering Committee.
The legal text, which gives expression to the package of liberalisation measures under CEPA II, contains three annexes: the list of additional products that will be given zero tariff preference, the rules of origin for these products, and further liberalisation measures in services.
As regards the rules of origin for the 713 Mainland product codes covered in CEPA II, 74% of the products will adopt Hong Kong's existing process-based origin rules as the CEPA rules of origin. These items include textiles and clothing, food and beverages, pharmaceutical products as well as some plastic and metal products.
Another 11% of the products will adopt the "Change in tariff heading", and only 7% will use the "30% value-added requirement" as the CEPA rules of origin.
For the rest of the products, including fish and aquaculture products, both sides have also agreed on their rules of origin after taking into account the characteristics of the products concerned.
CEPA I stipulates that for products planned to be manufactured in Hong Kong, zero tariffs would only be applied from January 1 of the following year upon confirmation by both sides that the products have come into production. That means a manufacturer would only be able to enjoy zero tariff status in 2006 if production of the planned products commenced in 2005.
The Mainland has now agreed to a proposal put forward by the HKSARG to shorten the time gap. Under the new agreement signed today, manufacturers will enjoy zero tariff status upon confirmation by both sides that the planned products have come into production. This flexibility allows manufacturers to enjoy the benefits of CEPA early and encourages them to speed up implementation of their new investment plans.
The two sides will continue to pursue further liberalisation in goods and services trade through the established liaison mechanisms. With respect to trade in goods, the next cycle of applications for and consultation on additional products to enjoy zero tariff status will begin in January 2005.
The Government will continue to consult the business and professional communities to understand their needs and discuss with them appropriate policy measures that may be required to enable them to gain the greatest benefits from CEPA.
The CPG and the HKSARG reached an agreement on further liberalisation measures under CEPA II on August 27, 2004. Since then, the two sides have been working closely to thrash out the implementation details of these measures.
Under CEPA II, the Mainland will apply zero tariff status to products under 713 Mainland 2004 tariff codes, which are on top of the 374 products that have been enjoying zero import tariff status since January 1, 2004.
For trade in services, the Mainland has agreed to grant preferential treatment in eight new areas, and to broaden the liberalisation to 11 of 18 services sectors to which preferential treatment has already been provided under CEPA I.
A note on the new liberalisation measures and the CEPA II rules of origin, together with the legal text including the three annexes are available at the website of the Trade and Industry Department at http://www.tid.gov.hk.
Ends/Wednesday, October 27, 2004
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