*******************************************
The Dutiable Commodities (Amendment) Bill 2002, which seeks to adopt a more cost-effective way of supervising bonded warehouses storing dutiable commodities in Hong Kong by enabling them to operate under an Open Bond System (OBS), was gazetted today (January 18). .
"The adoption of an OBS will provide major facilitation for bonded warehouse owners and traders of dutiable goods by lowering their compliance costs and allowing them to operate under more flexible conditions, thereby improving their business environment," a Government spokesman said.
Owners of dutiable commodities may store their dutiable commodities "under bond" in bonded warehouses until they are ready to pay the duty or otherwise discharge the duty liability. All bonded warehouses are subject to the control of the Customs and Excise Department (C&ED) for revenue protection purpose.
Currently, most of these bonded warehouses (51 out of 60) are subject to C&ED full physical control under a closed bond system (CBS), i.e. C&ED officers are stationed full-time at the warehouses to supervise the movement and processing of dutiable commodities at an attendance fee payable by the warehouse operators and traders. In the absence of Customs officers, the warehouses are required to be closed under revenue locks.
Under an OBS proposed under the Bill, C&ED will do away with its physical control on bonded warehouses and instead supervise the bonded warehouses through a comprehensive audit and risk-management system (which includes periodic and surprise inspections by C&ED) as well as self-compliance by warehouse operators and traders.
The warehouse operators and traders will no longer have to pay any fee to the government for the stationing of C&ED officers, saving the warehouse operators and the trade some $70 million a year.
The spokesman said that the proposal to implement the OBS received an award from the Business Advisory Group under the Helping Business Awards Scheme 2001.
"The OBS is commonly adopted in other developed economies including Australia, Canada, New Zealand, Singapore, UK and USA. The full adoption of the OBS will make our bonded warehouse system on a par with those of other developed economies, thereby enhancing the competitiveness of our traders vis-a-vis their counterparts in the region," the spokesman said.
The feasibility and benefits of extending the OBS to all bonded warehouses in Hong Kong have been confirmed by a consultancy study in 1999. Following the conclusion of the study, the C&ED conducted a pilot scheme in the first half of 2001 on five bonded warehouses randomly selected.
" The pilot scheme was highly successful. Feedback from the participants was all very positive. No anomaly in the duty collected from the participating warehouses when compared to the trend in the same period in other bonded warehouses was observed," he said
The Government's plan is to implement the OBS in two phases upon the enactment of the Amendment Ordinance. The first phase would apply to all bonded warehouses, including warehouses storing tobacco and liquor, except distilleries. The second phase would be implemented some six months after the first phase and the OBS would be extended to distilleries.
The Bill will be introduced into the Legislative Council on January 30, 2002.
"We will minimise the risk of revenue loss under OBS by tightening the licensing, storage, record-keeping and auditing requirements in the Ordinance, the spokesman said.
As to transitional arrangements, upon the enactment of the Amendment Ordinance, existing bonded warehouse licensees would be allowed to operate according to the existing law and the terms and conditions of their existing licences, until expiry of the licences, whereupon C&ED would assess their applications for renewal, based on the requirements of the Amendment Ordinance.
Existing licence holders may also opt to surrender their licences and apply for new licences under the terms of the Amendment Ordinance. A pro-rata refund of the licence fee paid for the unexpired period of validity of the existing licence will be made.
End/Friday, January 18, 2002
NNNN
