WT/TPR/S/109 Trade Policy Review
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III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) INTRODUCTION
1. There have been only a few, but significant, changes in the trade or trade-related policies of
Hong Kong, China since its previous Trade Policy Review in 1998;  these include an increase in the
number of bound tariff lines, the phasing out of the Rice Control Scheme, and efforts to improve the
enforcement of intellectual property rights.  Hong Kong, China remains a free port, and, by and large,relies on market forces to allocate resources.
2. Restrictions at the border are few.  Imports enter the territory duty free.  Hong Kong, China
has increased its tariff bindings autonomously;  nevertheless, the number of bound lines remains low,
at 42% of all tariff lines;  they  covered 57% of the total value of imports in 2001.  Domestic taxes
(excise duties) are levied on imports and domestic production of four categories of goods;  however,they fall disproportionately on imports since there is little or no domestic production of these goods.
Non-tariff border measures, such as import licensing and prohibitions, are aimed mainly at ensuring
security as well as protecting public health, th e environment, and comply ing with international
obligations.  Correspondingly, there are virtually no government controls on exports besides export
licensing, and restrictions maintained as a result of UN Sanctions and the WTO Agreement onTextiles and Clothing.  No subsidies are provided to  exporters.  There are no legal provisions for the
use of contingency measures to protect domestic producers from the entry of dumped or subsidized
products.  Nor is there any legislation on safeguards.
3. Traditionally, Hong Kong, China has eschewed intervention in the market in an attempt to
"pick winners", preferring instead a laissez-faire  approach commonly known as "positive non-
intervention".  Nonetheless, government assistance has been provided in a few cases.  It would appear
that the main instruments used have been tax incentives (including accelerated depreciation and taxexemptions), financing for R&D and technology upgrading, and measures related to land leasing.
Such assistance has seldom been sector-specific;  it has been limited largely to the provision of public
services and infrastructure that enable the private sector to develop.  In particular, the Government has
attached priority to high-technology and information technology activities in allocating funds;  it has
also earmarked funds to assist small and medium-s ized enterprises (SMEs) in any sector of the
economy.  Recently, however, the Government indicated that it may become more "proactive"
1 in an
effort to promote high-value-added activities (notably financial services, logistics, tourism, and
producer and professional services) and to secure projects beneficial to the economy as a whole when
the private sector is not ready to invest in them.  It remains to be seen whether this "proactive"
approach is more a matter of form than of substance.
4. Although there are few restrictions at the border, the entrenchment of a few dominant
conglomerates in the domestic market and the seeming lack of coherent measures to address
anti-competitive practices in all but a few sectors could constitute an obstacle to greater competition
from domestic and foreign firms in the provision of services.  The efficiency of Hong Kong, China's
"sector-specific" approach to competition, as a substitute for a comprehensive competition policy isopen to questions.
                                                     
1 In his 2002-03 Budget speech, the Financial Secretar y indicated that the Government should play the
role of a "proactive market enabler".Hong Kong, China WT/TPR/S/109
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(2) MEASURES DIRECTLY AFFECTING IMPORTS
(i) Import registration
5. Under the Import and Export (Registration) Regulations, an import declaration must be
lodged with the Customs and Excise Department within 14 days after the consignment's importation,
except for exempted articles.2  Shipping documents, such as commercial invoice, bill of lading/airway
bill, packing list, etc. are considered helpful in expediting the clearance of shipments.  Otherdocuments such as import licences, permits, sanitary and phytosanitary certificates may also be
required, depending upon the goods shipped (see below).
3  Up to 1 April 2000 trade declarations
could be submitted either in paper form to the Customs and Excise Department Collection Offices
with payment of charges or lodged via the Electronic Data Interchange (EDI) (Table III.1);  all
declarations must now be submitted via the EDI.4
Table III.1
Import declaration charges (HK$), June 1999
Paper declaration Electronic declaration
Government Government Tradelink charge
Imports
Food items 13.00 0.50 11.00
Non-food items
Value up to HK$46,000 13.00 0.50 11.00
Each additional HK$1,000 0.25 0.25 n.a.a
a There is no charge for additional declarations.
Source: Hong Kong Trade Development Council [Online].  Available at:  http//www.tdctrade.com/sme/iepract/
tradedec1.htm;  and Government of the HKSAR.
6. Shipments of suspected strategic commodities are subject to physical examination, as well as
to verification of the information provided for the import licences application.  Verifications are
conducted by authorized officers of the Customs and Excise Department at entry points and otherplaces and premises.
7. Preshipment inspection is not required in Hong Kong, China.
(ii) Tariffs
8. No tariffs or other import taxes are applied to imports entering Hong Kong, China.
9. Hong Kong, China implemented the HS2002 nomenclature on 1 January 2002.  The revised
tariff schedule for the implementation of HS2002 is awaiting certification.
                                                     
2 Exempted articles are stipulated in regulation 3 of the Import and Export (Registration) Regulations.
For a complete list of exempted items see:  Customs and Excise Department (2001a).
3 If transhipped through Hong Kong, China by air, some goods (such as dutiable commodities,
pharmaceutical products and medicines, left-hand drive ve hicles, marine fish, meat and animal products, optical
disc mastering and replication equipment, outboard engines, ozone-depleting substances, pesticides, radiocommunication transmitting apparatus, rice, and smokeless tobacco products) are exempt from licensing control
within the restricted area of the airport. (Air Ca rgo Transhipment (Facilitation ) Ordinance 2000, 26 May 2000).
4 Hong Kong Trade Development Council (2000a).WT/TPR/S/109 Trade Policy Review
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10. Hong Kong, China has made additional unilateral concessions since the Uruguay Round and
the implementation of the ITA.   Thus, the number of bound tariff lines (HS96 at the 8-digit level)
increased from 2,270 in 1998 (some 36% of all tariff lines) to 2,705 (some 42% of all tariff lines) in
2001 (Table III.2).  Hong Kong, China bound all agricultural products (WTO definition) in the
Uruguay Round at 0%;  hence, the new bindings af fected only non-agricultural goods, most notably
metals, leather, rubber, footwear, and travel goods.  The number of partially bound lines has alsoincreased, from 76 to 80 (1.23% of all tariff lines) in 2001.  As of 2001, tariff bindings covered some
33% of non-agricultural goods. Tariffs were bound at 0%.  Despite Hong Kong's initiative of
increasing its bindings, in some sectors, such as petroleum, textiles and clothing, and chemicals and
photographic supplies, the percentage of bound lines remains low (below 10%).  The authorities
noted, however, that Hong Kong, China is willing to negotiate the binding of more tariff lines in the
context of the present negotiations.
Table III.2
Fully and partially bound tariff lines by WTO agriculture and non-agriculture definition, 1998 and 2001
(Number of lines and per cent)
1998 2001
Total no. of
linesBoundPartially
boundTotal no. of
linesBoundPartially
bound
Total lines 6,341 2,270 (35.8) 76 (1.4) 6,465 2,705 (41.8) 80 (1.2)
WTO agriculture  832 832 (100.0) 0 (0.0) 886 886 (100.0) 0 (0.0)
Animals and products thereof  114 114 (100.0) 0 (0.0) 121 121 (100.0) 0 (0.0)
Dairy products 25 25 (100.0) 0 (0.0) 26 26 (100.0) 0 (0.0)
Coffee and tea, cocoa, sugar etc.  156 156 (100.0) 0 (0.0) 158 158 (100.0) 0 (0.0)
Cut flowers, plants 55 55 (100.0) 0 (0.0) 84 84 (100.0) 0 (0.0)
Fruit and vegetables  183 183 (100.0) 0 (0.0) 184 184 (100.0) 0 (0.0)
Grains 18 18 (100.0) 0 (0.0) 18 18 (100.0) 0 (0.0)
Oil seeds, fats and oils and their products 77 77 (100.0) 0 (0.0) 79 79 (100.0) 0 (0.0)
Beverages and spirits 42 42 (100.0) 0 (0.0) 44 44 (100.0) 0 (0.0)
Tobacco 12 12 (100.0) 0 (0.0) 12 12 (100.0) 0 (0.0)
Other agricultural products n.e.s.  150 150 (100.0) 0 (0.0) 160 160 (100.0) 0 (0.0)
WTO non-agriculture (incl. petroleum) 5,509 1,438 (26.1) 76 (1.4) 5,579 1,819 (32.6) 80 (1.4)
WTO non-agriculture (excl. petroleum) 5,491 1,438 (26.2) 76 (1.4) 5,558 1,819 (32.7) 80 (1.4)
Fish and fishery products  161 159 (98.8) 0 (0.0) 169 167 (98.8) 0 (0.0)
Mineral prod., precious stones & metals  382 159 (41.6) 0 (0.0) 385 184 (47.8) 0 (0.0)
Metals  608 336 (55.3) 3 (0.5) 609 461 (75.7) 3 (0.5)
Chemicals and photographic supplies 1,277 87 (6.8) 1 (0.1) 1,306 108 (8.3) 1 (0.1)
Leather, rubber, footwear and travel goods  177 48 (27.1) 1 (0.6) 177 69 (39.0) 1 (0.6)
Wood, pulp, paper and furniture  265 249 (94.0) 0 (0.0) 265 252 (95.1) 0 (0.0)
Textiles and clothing 1,114 37 (3.3) 0 (0.0) 1,114 72 (6.5) 0 (0.0)
Transport equipment  166 11 (6.6) 0 (0.0) 166 18 (10.8) 0 (0.0)
Non-electric machinery  556 132 (23.7) 20 (3.6) 570 156 (27.4) 20 (3.5)
Electric machinery  280 70 (25.0) 39 (13.9) 286 85 (29.7) 41 (14.3)
Non-agriculture articles n.e.s.  505 150 (29.7) 12 (2.4) 511 247 (48.3) 14 (2.7)
Petroleum 18 0 (0.0) 0 (0.0) 21 0 (0.0) 0 (0.0)
Note: Figures in parentheses refer to the share.
Source: WTO Secretariat calculations, based on data provided by the authorities of Hong Kong, China.
11. Hong Kong, China does not maintain tariff quotas.Hong Kong, China WT/TPR/S/109
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(iii) Other charges affecting imports
12. Excise duties are levied on liquor, tobacco, hydrocarbon oil, and methyl alcohol, consumed
locally, irrespective of whether they are locally manufactured or imported.  For tobacco, hydrocarbon
oil, and methyl alcohol, duties are charged at specific rates per unit.  Duty on liquors is ad valorem
on the basis of three different categories of alcoholic strength (Table III.3).5  Duties are prepaid by the
seller and included in the price.  Excise duty collection as a percentage of total tax revenue was 5.8%
in 2000-01 and was estimated at 5.5% for 2001-02.  As there is little or no domestic production of
these or any other manufactured goods, these taxes fall disproportionately on imports;  indeed, local
production of liquor (beer and Chinese-type spirits) and cigarettes has been declining since 1998/99
(Table III.3b).
Table III.3
(a)  Excise duties, 2001-02
2001 2002
Commodity (before 7.03.01) (on or after 7.03.01)
(Per cent)
Type of liquora
Liquor with an alcoholic strength of more than 30% by volume
measured at a temperature of 20°C100 100 100
Liquor, other than wine, with an alcoholic strength of not more
than 30% by volume measured at a temperature of 20°C30 40 40
Wine 60 60 80b
(Hong Kong dollar)
Tobacco
Per 1,000 cigarettes 766 804 804
Cigars 986/kg. 1,035/kg. 1,035/kg.
Chinese prepared tobacco 188/kg. 197/kg. 197/kg.
All other manufactured tobacco except tobacco intended for the
manufacture of cigarettes928/kg. 974/kg. 974/kg.
Hydrocarbon oil
Aircraft spirit 6.51/litre 6.51/litre 6.51/litre
Light diesel oil 2.89/litre 2.89/litre 2.89/litre
Motor spirit (unleaded petrol) 6.06/litre 6.06/litre 6.06/litre
Ultra low sulphur dieselc1.11/litre 1.11/litre 1.11/litre
Methyl alcohol and any admixture containing methyl alcohol HK$840/hectolitre measured at a temperature of 20°C;  plus
HK$28.10/hectolitre for every 1% by which the alcoholic strength
by volume exceeds 30%.
a Where there is no or insufficient information available to determine the value of imported liquor of less than 12 litres, the
Commissioner of Customs and Excise (or any officer authorized by him in that behalf) may assess the duty payable at a rate of
HK$160 per litre.  For quantities exceeding 12 litres, the transaction value of the goods will be used as the primary basis in
determining the value of the good.  If the transaction value cannot be established, the transaction value of an identical or si milar
good will be used to determine the value of the good for duty assessment.
b As of 6 March 2002.c As of 1 April 2003, this duty will increase to HK$2.89/litre.
(b)  Local production of excisable commodities
(Per cent)
Commodity 1998/99 1999/00 2000/01 2001/02
Liquor (beer and Chinese-type spirits) Quantity produced ('000 litre) 32.1 23.9 23.0 22.1
Tobacco (cigarettes) Quantity produced ('000 pieces) 7.7 0.9 0.9 1.1
Source: Information provided by the authorities of  Hong Kong, China.
                                                     
5 Duty rates are prescribed in the Schedule to the Dutiable Commodities Ordinance (Chapter 109, Laws
of Hong Kong).WT/TPR/S/109 Trade Policy Review
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13. The tax on motor vehicles administered by the Transport Department remains in place.6
Rates are ad valorem,  and vary according to the vehicle's value category and class (e.g. private car,
light bus, bus, etc.).  In general, the tax is levied on the vehicle's published retail price.  If there is no
published price, the tax is assessed on the purchase price plus insurance and freight fees.  Tax rates
have not changed since the previous Review;  they range from 60% for private cars of a value higher
than HK$300,000 to 4% for taxis, public and private light buses, etc.7  None of the vehicles and parts
subject to taxes are produced in Hong Kong, China.  
(iv) Customs valuation and rules of origin
(a) Customs valuation
14. Since no customs duties or fees are levied on imports, there are no general laws, regulations,
or administrative procedures for valuing goods for customs purposes.8  The authorities note, that the
value of goods for the purpose of assessing the ad valorem excise duties is determined in accordance
with the WTO Customs Valuation Agreement.9  For imported and domestically produced liquor, the
factory price is the basis for assessing the duty.
(b) Rules of origin
15. As Hong Kong, China has no preferential agreements, it has no preferential rules of origin.10
In general, no certificate of origin is required for imports of goods into the Hong Kong, China.  Nor is
it mandatory to give indications of origin on imported goods.11  In the case of re-exports, the initial
conferred origin of the goods is maintained.
(v) Import prohibitions, restrictions, and licensing
16. Hong Kong, China applies import restrictions to ensure security, protect the environment and
public heath, and comply with international obli gations, including United Nations Security Council's
resolutions and international conventions.12
(a) Import licensing
17. Hong Kong, China's import licensing regime has not changed substantially since its previous
Review in 1998.  The regime is mainly in place for health, safety, environmental, and security
reasons, but also to manage the rice reserve stocks, ensure the collection of excise duties, and enforce
intellectual property rights.  The list of items subject to licensing in 1998, remains, by and large,
                                                     
6 The First Registration Tax Ordinance (Chapter 330, Laws of Hong Kong).
7 WTO (1998);  and Customs and Excise Department (2001b).
8 WTO document G/VAL//N/1/HKG/1, 31 January 1996.
9 Section 26A of the Dutiable Commodities Ordinance stipulates the valuation method used in
Hong Kong, China.
10 WTO document G/RO/N/1/Add.1, 22 June 1995.
11 However, if the Customs and Excise Department requires it, the origin of a good would be
determined according to the country in which the good la st underwent a treatment or process that permanently
and substantially changed the shape, nature, form, or utility of the basic materials used in its manufacture;  or inwhich it was wholly grown or mined.  (WTO documents G/RO/N/1/Add.1, 22 June 1995, G/RO/N/10,16 August 1996, G/RO/N/24, 15 January 1999, G/RO/N/30, 13 February 2001).
12 These include the Basel Convention, the Montreal Protocol, and CITES.Hong Kong, China WT/TPR/S/109
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unchanged (Table AIII.1).  The only change involves the addition of chilled meat and poultry since
2000, for public health reasons.13
18. Trans-shipment cargoes of strategic commodities are treated as imports and are therefore also
subject to licensing requirements.  Except for some sensitive items, as set out under the law, articles-
in-transit are not subject to licensing.
19. The authorities noted that there are no estimates of the percentage of trade covered by import
licences.
(b) Quantitative restrictions
20. Imports of rice, and of hydroclorofluorocarbons (HCFCs) for local consumption (i.e. not for
re-export), continue to be subject to quantitative restriction.  In the case of rice, the restrictions are to
provide a reserve stock for emergency situations and thereby ensure adequate supply.  For HCFCs,
they are to ensure that the amount used for local consumption does not exceed levels agreed under the
Montreal Protocol on Substances that Deplete the Ozone Layer.
21. Rice quotas are set according to demand and adjusted every six months.  The Trade and
Industry Department is in charge of allocating quotas and granting licences.  Licences are issued to
registered rice importers.  Once the rice quotas are announced, applications for import licences maybe immediately submitted.  Imports for re-export are not subject to quotas, but still require an import
licence, which is issued on condition that the goods are exported.  The import quota on rice will be
lifted in January 2003.
22. In January 2000, a revised quota system was introduced for imports of HCFCs.  The quota
size is determined on a twelve-month basis.  U nder the new system, part of the quotas (Normal
Quotas) are automatically allocated to importers, based on past performance;  the remainder (Free
Quotas) is allocated on a first-come, first-served basis.  Licences are issued to registered companiesfor each consignment.  In the case of imports for re-export, which are not subject to quotas, import
and export licences are issued at the same time on condition that the goods are exported within the
validity period of the export licences.
23. The requirement for importers to keep a reserve stock of frozen and chilled meat and frozen
poultry was lifted on 1 August 2000.
14
(c) Import prohibitions
24. In order to comply with United Nations resolutions, imports from Iraq, imports of diamonds
from Angola, and imports of rough diamonds from Sierra Leone are banned.  A new regulation to ban
imports of rough diamonds from Liberia is being put in place.
25. In general, imports of all ozone-depleting substances (ODS), are prohibited.  However, as of
1 January 1995 and 1 January 1996, respectively, imports of methyl bromide and HCFCs originating
in a country that is party to the Montreal Protocol are allowed, for local consumption only (i.e. not for
re-export).
                                                     
13 WTO documents G/LIC/N/3/HKG/1-6.
14 Information provided by the authorities (Reserved Commodities Ordinance and the Reserved
Commodities (Control of Imports, Exports and Reserve Stocks) Regulations).WT/TPR/S/109 Trade Policy Review
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(vi) Contingency measures
26. Hong Kong, China has no laws or regulations governing anti-dumping and countervailing
actions15;  nor does it have any laws, regulations, or administrative procedures related to safeguard
actions.16  As a consequence, Hong Kong, China has never taken such actions.
(vii) Standards and other technical requirements
(a) Sanitary and phytosanitary
27. The objective of Hong Kong, China's food safety control system is to ensure that food
products are hygienic, safe, and fit for human consumption.  This system is based on risk assessment,
placing particular emphasis on safety control at the source.  The authorities consult with traders and
consumers on issues regarding the control of food safety.
28. Since its last Review, Hong Kong, China has made 22 notifications (including addenda and
revisions) to the Committee on Sanitary and Phytosanitary Measures.  It has notified, inter alia,  the
imposition of temporary import restrictions (including licensing and prohibitions) on food and live
animals originating in various countries that have not eradicated diseases such as foot and mouth
disease and equine disease, as well as the suspension of these measures once the health threat
disappeared.17  A proposal to amend labelling requirements for pre-packaged food was also notified.18
29. The Public Health and Municipal Services Ordinance (Chapter 132) and its subsidiary
regulations stipulate sanitary and phytosanitary controls.19  The Ordinance is aimed at preventing the
consumption of food unfit for human consumption.  It lists the offences of  selling such food, and
authorizes officers to seize, remove and destroy it.  A subsidiary regulation prescribes detailed rules
on food standards, controls on imports of food, and related matters.  Hong Kong, China continues to
maintain a quarantine system for plant and animals based on the recommendations of the Asia and
Pacific Plant Protections Commission (APPPC).
30. All food items available in the market (i.e. imported and domestically produced or processed)
are surveyed at random in order to ensure their safety.  Priority is given to high-risk foods, products
that are subject to complaints, and items suspected of being related to food poisoning cases. Collected
food samples are subject to chemical tests (on additives and contaminants), microbiological tests (on
bacteria and virus), or radioactive tests (to monitor the prevalent level of radioactivity in food supply),depending on the product's nature and associated risks.
31. The authorities state that sanitary and phytosanitary controls on imported food are imposed
solely on public health grounds and on the basis of scientific evidence.  Imports of perishable products
(e.g. milk, milk beverages, frozen confections,  game, meat, and poultry) have to be accompanied by
                                                     
15 WTO document G/ADP/N/1HKG/1, 24 March 1995.
16 WTO document G/SG/N/1HKG/1, 20 March 1995.
17 WTO document series G/SPS/N/HKG/-, April-October 1999;  G/SPS/N/HKG/-,
April-November 2000;  G/SPS/N/HKG/-, March- July 2001;  and G/SPS/N/HKG/18, 29 January 2002.
18 WTO document G/SPS/N/HKG/11, 20 October 2000.
19 These are:  Colouring Matter in Food Regulations;  Dried Milk Regulations;  Food Adulteration
(Artificial Sweeteners) Regulations;  Food Adulteration (Metallic Contamination) Regulations;  Food and Drugs(Composition and Labelling) Regulations;  Frozen Confections Regulation;  Harmful Substances in FoodRegulations:  Imported Game, Meat and Poultry Regulations;  Milk Regulation;  Mineral Oil in FoodRegulations;  Preservatives in Food Regulations;  and Smokeless Tobacco Products (Prohibition) Regulations.Hong Kong, China WT/TPR/S/109
Page 25
official health certificates issued by recognized overseas authorities.  Inspection and random sampling
of these goods are carried out at import control points.
32. Vegetables imported from China must be accompanied by official pesticide declaration form.
Random samples of vegetables are taken at the Man Kam To control point for pesticide residues
testing;  if the results are positive, goods are recalled.
33. Seafood is considered a high-risk food.  Hence, seafood shipments are subject to random
inspection and sampling for testing at import control points.  In particular, importers of coral reef fish
from "high-risk" harvest zones (i.e. where ciguatoxin has previously been found) need to submit fish
samples to the Food and Environmental Hygiene De partment (FEHD) for te sting before importation.
Importation may only take place once the samples are shown to be ciguatoxin free.  For coral reef fish
from other harvest zones, the trader is required to notify the FEHD upon importation, and randomsamples are taken upon the shipment's arrival in Hong Kong, China.
34. To ensure that live animals are safe for human consumption, the following measures are
implemented:  verification and inspection of health documents, of tags/tattoos, and of the general
health conditions of imported food animals at points of entry;  ante-mortem inspection of every
animal to be slaughtered;  and random urine sampling of live food animals to test for prohibited andrestricted chemicals as specified in the Public Health (Animals and Birds) (Chemical Residues)
Regulation.  All consignments of local and imported poultry are tested for the avian influenza virus
before being sold or slaughtered.  Also, all local and imported poultry is required to be channelled
through the government wholesale market and all livestock is required to be slaughtered at
government-licensed slaughterhouses.
35. The authorities are promoting the adoption of the Hazard Analysis Critical Control Point
(HACCP), system of process controls to prevent f ood safety hazards.  The HACCP is integrated into
the food production and manufacturing process.  However, it is not mandatory for the operators to
implement HACCP.
(b) Standards
36. Hong Kong, China does not have an official standards authority or standardization body
producing official domestic standards.  Standards, if applied in Hong Kong, China, are imposed forsafety, health, and environmental reasons and are essentially based on international standards and/or
prevailing overseas standards.  Since its last Review, Hong Kong, China has made 23 notifications to
the Committee on Technical Barriers to Trade, including five regarding voluntary labelling
requirements.  The requirements notified cover mainly telecommunication equipment, motor vehicles,
and petrol and fuel.
20  Table AIII.2 shows the amendments/revisions made to existing
standards/technical regulations, and the new standards/technical regulations adopted since 1999 in
Hong Kong, China.
37. In general, telecommunications equipment is subject to type approval.  For instance, in 1998,
the Telecommunications Authority (TA) launched the Hong Kong Telecommunications Equipment
Evaluation and Certification (HKTEC) Scheme.  The TA is the only authority allowed to grantcertificates for radio and wireless equipment.  To provide a better framework for certification,
telecommunications equipment is classified under two schemes:  the Voluntary Certification Scheme
(VCS), and the Compulsory Certification Sche me (CCS).  Under the VCS, certification of
telecommunications equipment is voluntary and equipment can be marketed or used in Hong Kong,
                                                     
20 WTO document series G/TBT/Notif.99.-, January-October 1999;  G/TBT/Notif.00.-,
January-September 2000;  G/TBT/N/HKG/-, April-D ecember 2001;  and G/TBT/N/HKG/10, 13 February 2002.WT/TPR/S/109 Trade Policy Review
Page 26
China even it has not been certified.  Examples of equipment that falls under the VCS are single-line
equipment (e.g. simple telephones, fax machines, and dial-up modems) and low power radio devices.
Under the CCS, telecommunications equipment must be certified before it can be connected to the
public telecommunications networks, marketed or used.  The scheme also defines the labelling
requirement for certain equipment.
(c) Testing and certification
38. The Hong Kong Accreditation Service (HKAS) of the Innovation and Technology
Commission provides accreditation services to laboratories, and certification and inspection bodies on
a voluntary basis under the Hong Kong Laborat ory Accreditation Scheme (HOKLAS), the Hong
Kong Certification Body Accreditation Scheme  (HKCAS), and the Hong Kong Inspection Body
Accreditation Scheme (HKIAS).  HKAS is a member of several accreditation agreements21;  it has
also concluded 42 mutual recognition agreements/arrangements with accreditation bodies in other
countries.
39. Electrical products for household use require a certificate of safety compliance.22  Electrical
products are classified as non-prescribed products  (e.g. air conditioners, audio and video equipment,
electric fans, information technology equipment)  or prescribed products (e.g. plugs, adapters, lamp
holders, flexible cords, and electric water heaters).  For a prescribed product, a certificate of safety
compliance can be a certificate/report issued by a certification body recognized by the Director of
Electrical and Mechanical Services (DEMS) or a declaration of conformity issued by the
manufacturer recognized by DEMS.  For non-prescribed electrical products, a certificate of safety
compliance can be a self-declaration of conformity issued by a product manufacturer who does not
need to be recognized by the DEMS, a test certif icate/report issued by a certification body recognized
by DEMS, or a declaration of conformity issued by a manufacturer recognized by DEMS.
(d) Labelling
40. There are a number of regulations governing labelling, packaging and/or advertisement
requirements for articles supplied (i.e. imported or domestically produced) in Hong Kong, China
(Table III.4).
41. Food labelling requirements are reviewed regularly by the Government, taking as a reference
the international standards on food labelling developed by the Codex Alimentarius Commission.  In
order to enhance food safety the authorities are considering strengthening food labelling
requirements.23  To ensure that food labelling requirements are duly observed, regular inspections are
carried out and random food samples are collected to verify the labels' contents.  Based on the results
of inspection or laboratory testing, appropriate actio ns are taken to enforce compliance with labelling
requirements.  Depending on the possible health impact, the offender (i.e. importers and sellers) may
either be warned or prosecuted.
                                                     
21 International Accreditation Forum (IAF), International Laboratory Accreditation Cooperation
(ILAC), Pacific Accreditation Cooperation (PAC), an d Asia Pacific Laboratory Accreditation Cooperation
(APLAC).
22 Electrical Products (Safety) Regulation (Chapter 406G, Laws of Hong Kong).
23 Changes would include:  the inclusion of a list of the food additives that may cause allergic reactions;
the full name of the food additives;  the adoption of a more flexible system for the indication of minimumdurability;  and strengthening of the labelling of alcoholic drinks.Hong Kong, China WT/TPR/S/109
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Table III.4
Labelling requirements
Goods Labelling requirement
Toys and children's products (covered under the Toys and
Children's Products Safety Ordinance) (Chapter 424))Trader's name or other identification mark.
Local address of the manufacturer, importer or supplier in either
English or Chinese, or both.a
Consumer Goods Safety Ordinance (Chapter 456) Warning or caution labels on consumer goods (e.g. toys,
pharmaceuticals, etc.) must be in both English and Chinese.
Telecommunications equipment (The TelecommunicationsOrdinance (Chapter 106)) wireless equipment and some radio
equipment (including low power devices, model control
equipment, and cordless telecommunications apparatus)To help the public identify the conformity of telecommunications
equipment with technical specifications, certain types of certified
equipment, for example, cordless telephones, have to bear labels
with format determined by the Telecommunications Authority (TA).
Pre-packaged foods Name or designation of th e food product;  list of ingredients and
food additives;  durability period;  special condition for storage or
instruction for use;  name and address of manufacturer or packer;
count, weight, or volume.
Packaged pharmaceuticals (The Pharmacy and Poisons
Ordinance (Chapter 138))Bilingual dosage direction and other applicable cautionary
statement(s).
Packages must be in impermeable containers to prevent accidentalleakage.
Dangerous goods covered under the Dangerous Goods Ordinance(Chapter 295)Warning labels, setting out the nature of hazards and other relevant
information, must be bilingual (Chinese and English).
a This information may be marked on the good, its  package, on a label securely affixed to the package, or on a document enclose d
in the package.
Source: Information provided by the authorities of Hong Kong, China.
42. Hong Kong, China has introduced a voluntary efficiency labelling scheme for various
household electrical appliances, such as refrigerators, washing machines, dryers, water heaters, and
rice cookers.  The participating manufacturers, agents or retailers must affix energy labels in specifiedformat onto their registered appliances, indicating that the appliances have met certain energy
efficiency and performance requirements in accordance with the Hong Kong Voluntary Energy
Efficiency Labelling Scheme.
43. Hong Kong, China has started a process of consultation to put in place labelling requirements
for genetically modified food.
24
(viii) Government procurement
44. Purchases by the Government declined from 6.7% of GDP in 1998 to some 3.8% in 2001
(Table III.5).  According to the authorities, over 90% of the products purchased by the Government in
2001 were imported.
45. Government procurement in Hong Kong, China is governed by the Stores and Procurement
Regulations (SPRs).25  The SPRs are supplemented by Financial Circulars issued by the Financial
Secretary.  The Government has published a "Guide to Procurement" to facilitate understanding of the
procurement system.26  The authorities maintain that the procedures laid down in the SPRs are fully
consistent with the provisions of Agreement on  Government Procurement, to which Hong Kong,
China is a party.
                                                     
24 WTO documents G/TBT/N/HKG/2, 4 April 2001.
25 Chapter 2, Laws of Hong Kong.
26 The "Guide to Procurement" is available online at:  http://www.info.gov.hk/fstb/tb/tender/
english/e_guide.htm.WT/TPR/S/109 Trade Policy Review
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Table III.5
Government procurement, 1998-01a
(HK$ million)
Central government
entitiesSub-central
government entitiesOther entities Total
1998
Goods 3,931.02 63.83 464.76 4,459.61
Services (other than construction) 2,134.16 452.28 1,862.96 4,449.40
Construction services 23,941.79 - 51,279.05 75,220.84
1999
Goods 6,290.75 354.46 3,465.98 10,111.19
Services (other than construction) 1,312.21 1,119.78 662.86 3,094.85
Construction services 24,658.24 - 44,429.47 69,087.71
2000
Goods 3,851.85 n.a.b1,263.25 5,115.10
Services (other than construction) 2,481.61 n.a.b2,181.45 4,663.06
Construction services 18,851.20 n.a.b16,502.24 35,353.44
2001
Goods 8,097.54 n.a.b609.85 8,707.39
Services (other than construction) 4,690.50 n.a.b1,629.68 6,320.18
Construction services 16,934.68 n.a.b16,850.81 33,785.49
a The statistics include only procurement of goods and services of a value exceeding HK$0.5 million, and construction services o f
a value exceeding HK$1 million.
b The Provisional Urban Council and Urban Services Department, and Provisional Regional Council and Regional Services
Department, which were classified as sub-central government entities, were dissolved on 1 January 2000.
Source: Information provided by the authorities of Hong Kong, China.
46. In general the Government Supplies Department (GSD) is the central procurement agent for
the HKSAR Government and for certain public-funded organizations, such as the Hospital Authority.
The GSD pays for these supplies from an advance account and is reimbursed by the end-users when
they draw the goods from the GSD.  The GSD also  acts as the purchasing agent for stores and
equipment required by specific government depart ments and a few non-governmental organizations.
These departments and organizations pay from their own accounts directly but rely on the GSD for
expertise in sourcing, tendering, negotiations, and contract administration.  A few departments
conduct their own procurement of goods;  for instance, the purchase of vehicles by the Government
Land Transport Agency, boats by the Marine Department, and printing machines and paper by the
Government Printer.
47. Construction services are procured by the c oncerned works departments, under the general
supervision of Environment, Transport and Works Bureau.  The Bureau gives general guidance andtechnical advice on tendering procedures and contract administration matters in respect of works
contracts, and maintains a register of approved works contractors and a performance report system.
48. Government procurement continues to be based on the principles of public accountability,
best value for money, transparency, and fair competition.  When evaluating a tender, the authorities
take into account not just price competitiveness,  but also compliance with users' requirements,
reliability of performance, best quality, whole-life costs, and after-sales support, where applicable.
49. The authorities ensure that procurement procedures and practices are clear and transparent.
To encourage competitive tenders, all necessary information is provided in the tender documents andHong Kong, China WT/TPR/S/109
Page 29
all potential suppliers are given the same information to prepare their bids.27  All suppliers are treated
equally and there is no discrimination between products on the basis of origin;  where appropriate,
consulates and overseas trade commissions may be notified of the calls for tenders.  In drawing up
tender specifications, the authorities ensure that the characteristics laid down for the products or
services do not create unnecessary obstacles to trade.28  According to the authorities, to promote
competition, works and services contracts, for instance, are normally split into optimal scale to avoidexcessive market concentration.
50. The tendering procedure is usually open;  selective, restricted or single tenders are used only
in limited circumstances, such as when strictly  necessary to ensure compatibility with existing
equipment or to protect patented or proprietary products.
29  Nevertheless, in 2001, some 47% of all
contracts were awarded through selective, restricted, or single tenders (Table III.6).
Table III.6
Contracts awarded under various tender proceduresa, 1998-01
1998 1999 2000 2001
Contracts awarded 1,546 1,643 1,730 2,438
Open tender 568 828 746 1,280
Selected tender 687 448 640 750
Restricted tenderb291 367 344 408
Single tenderb.. .. .. ..
Complaints by suppliers, contractors or consulting firms to the
relevant tender board, the Office of the Ombudsman, or theIndependent Review Body on Bid Challenges3 8c5 5d
a The statistics cover only procurement of goods and services of a value exceeding HK$0.5 million, and construction services of a
value exceeding HK$1 million.
b The statistics for restricted tenders include single tenders;  separate records are not available for contracts awarded on sin gle
tenders.
c Includes two complaints to the Review Body on Bid Challenges.  One was considered outside the purview of the Review Body
and the other was withdrawn by the appellant.
d Includes three complaints to the Review Body on Bid Challenges.  Two were considered outside the purview of the Review
Body, and the third was heard by the Review Body in May 2001.
Note: There are no records on the number of contracts awarded to foreigners as there is no policy to distinguish between local a nd
foreign contractors.
Source: Information provided by the authorities of Hong Kong, China.
51. The Financial Secretary has appointed several tender boards to consider and decide on the
acceptance of tenders.  The Central Tender Board chaired by the Permanent Secretary for FinancialServices and the Treasury (Treasury) deals with tenders exceeding HK$10 million for supplies and
                                                     
27 Key information on all tenders is publicized in the Government Gazette  (http://www.info.gov.hk/pd/
index.htm) and supplemented by online notices (http://www.info.gov.hk/fstb/tb/tender/tender.htm).  Invitationsto tender for works contracts are published in the "Works Digest"  (http://www.wb.gov.hk/Digest/index.htm),
and in the Works Bureau online information (http://www.info.wb.gov.hk/index.htm).
28 According to the authorities "unnecessary obstacle to  international trade" carries the same meaning
as in Article VI.1 of WTO GPA.
29 Hong Kong, China's submission to APEC for the "Voluntary Review of the Consistency of
Hong Kong, China's Government Procurement System with the APEC Government Procurement Experts GroupNon-binding Principles on Government Procurement", September 2000 (Information provided by theauthorities).WT/TPR/S/109 Trade Policy Review
Page 30
general services, and exceeding HK$30 million for construction services.  Tenders of a lower value
are dealt with by the subsidiary tender boards.30
52. As a signatory to the Agreement on Government  Procurement, Hong Kong, China established
an independent Review Body on Bid Challenges on 30 December 1998 to handle bid challenges
(Table III.6).31  Any supplier or contractor with a grievance may also lodge a complaint with the
procuring department or the relevant tender boar d and/or the Office of the Ombudsman.  Suppliers or
contractors making an allegation of corruption can approach the Independent Commission Against
Corruption.  The HKSAR's government procurement system has an independent scrutiny mechanism
to ensure accountability.  This includes the Audit Commission headed by the Director of Audit, the
Office of Ombudsman, the Independent Commission Against Corruption, and the Legislative Council.
In addition, the Government Supplies Department has an independent section that functions as aninternal audit.
32
(ix) State trading
53. Hong Kong, China does not operate any state-trading enterprises as defined in Article XVII of
the GATT.33
(x) Local-content schemes
54. Hong Kong, China does not apply any local-content requirements.
(xi) Countertrade
55. Hong Kong, China does not maintain any legal provisions covering countertrade;  nor does it
engage in countertrade activities.
(3) MEASURES DIRECTLY AFFECTING EXPORTS
(i) Procedures
56. As in the case of imports, exports from Hong Kong, China must, with certain exceptions, be
accompanied by a trade declaration.34  Trade declarations are submitted via the Electronic Data
Interchange (EDI).35  Trade declarations are also required for re-exports;  they are used mainly for
compiling trade statistics.
                                                     
30 These are:  the Government Supplies Department Te nder Board to deal with  tenders, except public
works contracts not exceeding HK$10 million, the Public Works Tender Board to deal with tenders for public
works and related contracts not exceeding HK$30 million,  the Marine Department Tender Board to consider
marine tenders not exceeding HK$5 million, and the Printing Department Tender Board to consider Printing
Department tenders not exceeding HK$5 million.
31 Since 1998, the Review Body has received five bid challenges.  Three were dismissed as they were
found to fall outside the purview of the Review Body and one was withdrawn by the complainant.  Theremaining case was dealt with by the Body.
32 Hong Kong, China's submission to APEC for the "Voluntary Review of the Consistency of
Hong Kong, China's Government Procurement System with the APEC Government Procurement Experts Group
Non-binding Principles on Government Procurement", September 2000 (Information provided by the
authorities).
33 WTO documents G/STR/N/5/HKG to N/8/HKG, April 1999 to June 2002.
34 Customs and Excise Department (2001a).
35 Hong Kong Trade Development Council (2000a).Hong Kong, China WT/TPR/S/109
Page 31
57. The Trade and Industry Department (TID) administers a certification of origin system to
establish the origin for Hong Kong's exports and to  meet the requirements of the importing countries
(including for GSP36, exports of restrained textiles and arrivals controlled under CITES37).  TID is the
government agency responsible for issuing these certificates of origin (COs).38  Only registered
manufacturers with verified manufacturing capacity to perform the origin-conferring processes may
apply for certificates of origin.  TID also ensures that the other issuing organizations adopt the samepractices and procedures when issuing COs, and that the rules of origin are followed.
58. If requested by the importing country, exports originating in Hong Kong, China are
accompanied by a sanitary and/or phytosanitary certificate issued by the Agriculture, Fisheries and
Conservation Department and by the Food and Environmental Hygiene Department.
39  A fumigation
certificate is required by Australia, Brazil, Canada, the European Union, New Zealand, and theUnited States for solid wood packing material.
40
59. Export licences are also required in certain instances (see below).
(ii) Export taxes, charges, and levies
60. Table III.7 shows the export declaration charges.   Exports of clothing and footwear are
subject to an additional levy of HK$0.30 per every HK$1,000 exported.41
Table III.7
Export declaration charges, 2002(Hong Kong dollars)
Paper declaration Electronic declaration
Government Government Tradelink charge
Exports
Value of up to HK$46,000 13.00 0.50 11.00
Each additional HK$1,000 0.25 0.25 n.a.a
Re-exports
Value of up to HK$23,000 13.00 0.50 11.00
Each additional HK$1,000 0.50 0.25 n.a.a
a There is no charge for additional declarations.
Source: http//www.tdctrade.com/sme/iepract/tradedec1.htm.
61. Hong Kong, China does not levy any export-related duties or taxes.
                                                     
36 Hong Kong, China is a beneficiary under the GSP schemes operated by Canada and Norway,
Hong Kong Trade Development Council (2000a).
37 AFCD (2002).
38 Apart from TID, five organizations have been de signated by the Government as competent to issue
COs under Article 11 of the International Convention for the Simplification of Customs Formalities 1923.These organizations are:  the Hong Kong General Chamber of Commerce;  the Federation of Hong KongIndustries;  the Indian Chamber of Commerce, Hong Kong;  the Chinese Manufacturers' Association of
Hong Kong;  and the Chinese General Chamber of Commerce (Trade and Industry Department, 2001).
39 Since 1 January 2000 health certificates for food of animal origin are issued by the Food and
Environmental Hygiene Department.
40 Hong Kong Trade Development Council (2000a).
41 Hong Kong Trade Development Council (2000a).WT/TPR/S/109 Trade Policy Review
Page 32
(iii) Export prohibitions, restrictions, and licensing
(a) Export prohibitions
62. Exports of ozone-depleting substances (ODS) to non-parties to the Montreal Protocol are
banned.
63. Hong Kong, China complies with trade sanctions imposed by the UN Security Council.42
(b) Export licensing
64. Exports of textiles, ozone-depleting substances  (ODS), strategic commodities, pharmaceutical
products and medicines, rice, dutiable commodities, endangered animals and plant species, optical
disc mastering and replication equipments, and pesticides require an export licence on grounds of,
inter alia,  protection of the ozone layer and the environment, security, public health, and food
security.  The export licensing requirement for frozen and chilled meat and frozen poultry was liftedon 1 August 2000 when these commodities were removed from the list of reserved commodities.
43
65. Exports of strategic commodities must be licensed by the Director-General of Trade and
Industry.44  Export controls are aimed at preventing Hong Kong, China from being used as a conduit
for proliferation of weapons of mass destruction, and to secure the HKSAR's continued access to
technology and high-tech goods.  The HKSAR's strategic trade control lists are based on the controlsadopted by various international export control regimes and conventions.
45  The control lists are
updated from time to time in order to reflect changes made by international regimes.  Trans-shipments
and re-exports of strategic commodities are treated as imports and exports and are also subject to
licensing.
66. A major portion of the textiles and clothing exports from Hong Kong, China are subject to
quantitative restrictions by Canada, the European Union, and the United States under the WTO
Agreement on Textiles and Clothing (ATC).46  Certain of the quantitative restrictions have been fully
or partially removed pursuant to the phase-out programme of the ATC47;  they will be fully abolished
by 2005.
                                                     
42 UN Security Council Resolutions adopted by China extend to Hong Kong, China.
43 Under the Reserved Commodities Ordinance and the Reserved Commodities (Control of Imports,
Exports and Reserve Stocks) Regulations a reserve stock of specific commodities has to be kept, and importsand exports of these commodities are subject to licensing.
44 These commodities are listed in the Schedules to the Import and Export (Strategic Commodities)
Regulations.  They include items such as munitions, chemical and biological weapons and their precursors,nuclear materials and equipment, and dual-use goods that are capable of being developed into weapons of mass
destruction.
45 These are:  the Wassenaar Arrangement, Nuclear Suppliers Group (NSG), Zangger Committee
established under the Nuclear Non-Proliferation Treaty (NNPT), Missile Technology Control Regime (MTCR),
Australia Group (AG), and Chemical Weapons Convention (CWC).
46 In 2002, quota utilization has been low for some items in these three markets.  Details on quota
utilization are available on online at:  http://www.dfait-maeci.gc.ca/~eicb/reports/BRXA02E-02.TXT;
http://sigl.cec.eu.int/query.htm l;  and http://www.customs.ustreas.gov/quotas/hktxtrpt.htm.
47 Under the Stage 3 integration programme, commencing 1 January 2002, 11 categories subject to
specific limit and 26 categories subject to group limit from the United States,  and 9 items for Canada have beenfully or partially integrated;  and 9 categories for the EU  have also been fully integrated (Government of the
HKSAR).Hong Kong, China WT/TPR/S/109
Page 33
67. The comprehensive control system to administer these quantitative restrictions is regulated by
the Import and Export Ordinance and its subsidiary legislation.  All exports of restrained textiles and
clothing, other than a few exempted items48, must be covered by valid licences or notifications issued
by the Government.  Under the Textiles Trader Re gistration Scheme, exports of textiles and clothing
to non-restrained markets must be notified by the exporters to the Director-General of Trade and
Industry, as appropriate.49  In recent years, these procedures have been streamlined;  traders are now
able to lodge their applications for export licences, production notifications, and certificates of origin
electronically (through Electronic Data Interchange).
68. In order to detect and prevent fraudulent exports of textiles and clothing, the HKSAR
maintains strict controls.  The Commissioner of Customs and Excise is responsible for enforcing this
system through the examination and inspection of ca rgo at factories and at entry and exit points.
Customs officers verify the origin-conferring production processes for goods and measure the
factory's production capacity against their export performance.  Offenders may be subject to criminal
prosecution and/or administrative actions.
69. The mechanism used to allocate quotas in Hong Kong, China has not been changed since
1990.50  Quotas are generally allocated according to pa st performance.  In order to maintain their
quota level, firms must use at least 98% of their quota.  Traders who receive a quota based on their
past performance may either use the quota themselves during the year or transfer (i.e. sell) it to other
traders, either temporarily or permanently, to cover the latter's shipments.51  For temporary transfers,
the transferee may use the quota for the year in question but the performance arising therefrom is
attributed to the transferor, provided that the quotas have been fully and properly utilized.  For
permanent transfers, the transferee can use the quota for the year, and it will be counted towards this
trader's performance for the calculation of the following year's quota allocation.   All transfers must be
registered with the Trade and Industry Department.
(iv) Export support
70. Hong Kong, China continues to grant excise duty exemptions and refunds on exports upon
consent of the Commissioner of Customs and Excise, or for other specific purposes.  The duty
refunded must in no case exceed the duty paid on the goods.  Duties are also refunded on:  importedgoods that do not correspond to the description of the contract of sale or are damaged in transit and
therefore destroyed in the HKSAR or returned;  goods imported for consular use;  samples for
analysis by the Government Chemist;  and light diesel oil used in franchised buses and support
vehicles.
52  Duties forgone as a result of these exemption and refunds amounted to HK$2,232 million
for the period under review.
71. Hong Kong, China does not provide any subsidies to exporters.
                                                     
48 Exempted items are textiles products for personal use exported in the accompanied baggage of a
passenger leaving Hong Kong, China;  and textile products to be used by the crew or passengers of a vessel,aircraft, or vehicle.
49 The scheme, aimed both at facilitating trade and tightening controls, covers all textile imports, textile
re-exports, domestic textile exports to non-restrained mark ets, certain textiles export to the United States outside
quota, and textiles trans-shipments.  Details of each cons ignment must be filed via the carrier to the Trade and
Industry Department.
50 GATT (1990) and GATT (1994).
51 No records are kept on quota premiums.
52 Customs and Excise Department (2001c).WT/TPR/S/109 Trade Policy Review
Page 34
(v) Export cartels and other arrangements
72. There are no export cartels in Hong Kong, China.
73. With the exception of the restraints applied under the ATC, Hong Kong, China does not
implement any other arrangements aimed at restricting, moderating or otherwise influencing exports.
(vi) Export finance, insurance, and guarantees
74. The Hong Kong Export Credit Insurance Corporation (ECIC) provides insurance protection
for Hong Kong exporters against non-payment risk s arising from commercial and political events;
ECIC covers both export and re-exports.53  The total value of goods and services insured by ECIC
increased from HK$21.55 billion in 1997/98 to HK$26.68 billion in 2001/02.  Since 1998,  ECIC has
implemented several schemes to support SMEs involved in exporting.  In 1998, the  Credit Guarantee
Scheme for SMEs involved in exporting was launch ed;  in the same year it was merged with the
Special Finance Scheme for SMEs, to guarantee loans.  The ECIC Supported Export Finance for
SMEs, introduced in May 2000, covers up to HK$1 million of exports per overseas buyer with a
ceiling of HK$3 million per exporter.54
(vii) Export promotion and marketing assistance
75. Established in 1966, the Hong Kong Trade De velopment Council (HKTDC) is the statutory
organization in charge of promoting Hong Kong's trade in goods and services.55  Its major objectives
are to diversify markets for Hong Kong's exports, pr omote Hong Kong's products and services as well
as its role as an international business hub for services and information.56  To promote exports, the
HKTDC provides, inter alia,  trade contacts and business information about a wide range of industries
and services;  it also holds international trade fairs.57  The HKTDC has developed specific
programmes to support small and medium-sized enterprises (SMEs)58,  it has Training Centres for
SMEs and two SME Service Stations located around Hong Kong.
76. A new programme, the SME Export Marketing Fund (EMF), was set up in 2001 to promote
exports of goods produced by SMEs to new markets.   Through this fund, grants of up to HK$10,000
per SME are provided for their participation in overseas trade fairs/exhibitions and study missions, as
well as local export-oriented trade fairs/exhibitions.59
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE
(i) Incentives
77. During 1998-01  Hong Kong, China did not grant any subsidies within the meaning of
Article XVI:1 of the GATT 1994 and Article 25.2 of the Agreement on Subsidies and Countervailing
                                                     
53 ECIC (undated a).
54 ECIC (undated b).
55 Hong Kong Trade Development Council (2000b).
56 In addition to their head office in Hong Kong, China, TDC has branches in different countries to
facilitate the implementation of their programmes. HKTDC's annual expenditure stands at around HK$1.4
billion, of which about 75% is covered by self-generated income and the rest by government subvention.
57 Hong Kong Trade Development Council (2000c).
58 Hong Kong Trade Development Council (2000d).
59 TID online information, SME Funding Schemes .  Available at:  http://www.smefund.tid.gov.hk/eng/
eng_main.html [30 April 2002].Hong Kong, China WT/TPR/S/109
Page 35
Measures.60  It did, however, extend various forms of assistance to certain activities, mainly with a
view to providing the necessary physical, human, and technological infrastructure and creating a
favourable business environment.  Such support has seldom been industry specific, with the
Government largely eschewing attempts to "pick winners", but this policy may have changed.  In his
2002-03 Budget Speech, the Financial Secretary stated that "the Government should be a proactive
market enabler" and that Hong Kong, China needed "to focus on high-value-added economicactivities" (financial services, logistics, tourism, and producer and professional services).
61  T h e
Financial Secretary also indicated that the Government would secure projects beneficial to the
economy as a whole when the private sector is not ready to invest in them.
(a) Tax incentives
78. There do not appear to have been any major changes in the HKSAR's income tax system, and
particularly the use of tax incentives, since the previous Review, with taxes on profits and earnings
accounting for almost 60% of total taxes collected in fiscal year 2000/01 (Chapter I).  The income tax
system retains low statutory tax rates and few tax incentives.  Statutory tax rates of 16% and 15% are
levied on the profits of corporations and unincorporated businesses, respectively.62  Effective tax rates
on profits tend to be lower than statutory rates, however, as a consequence of incentives, especiallyaccelerated depreciation;  for example, companies may immediately write off 100% of expenditure on
manufacturing plant and machinery and on computer  software and hardware.  Moreover, profits
earned from international shipping
63, and from airline services64, and interest income from deposits
placed locally with all authorized banking institut ions by corporations (except financial institutions)
and individuals are exempt from tax.  Exemptions on property tax are also provided.  Owners of land
or buildings are charged property tax at the standard rate of 15% (less an allowance of 20% for repairs
and maintenance);  however property owned by a co rporation carrying on a business in Hong Kong,
China is exempt from this tax.65  The authorities considered that during 1998/99 and 1999/00 the most
important tax incentives were those affecting profits and salaries taxes;  taxes forgone as a
consequence of these incentives amounted to HK$31.2 billion.  No breakdown was available on the
amounts of revenues forgone as a consequence of individual tax incentives, such as accelerated
depreciation and the other exemptions.
79. The 2002/03 Budget also proposed one-year waivers for water and sewerage charges, the
trade effluent surcharge (imposed on trades that emit pollutants), and the business registration fee, as
well as a one-year concessionary duty rate for ultra-low-sulphur diesel;  these waivers and concession
reduce business operating costs.
                                                     
60 WTO documents in the G/SCM/N/-/HKG series, 30 March 1999 to 25 April 2001.
61 Government of Hong Kong, China (2002a).
62 There is also a Salaries Tax calculated on a sliding scale that cannot exceed the standard rate of 15%
of total income.
63 Shipping profits are exempted from tax when they are derived from:  international operations of a
Hong Kong registered ship;  the international operation of a ship by a non-resident shipowner from a countrythat provides tax exemption in respect of uplifts by a non-resident shipowner from Hong Kong, China;  and the
international operation of a ship by an enterprise of a country with which Hong Kong, China has signed an
agreement for the avoidance of double taxation on/covering shipping income.
64 Profits earned from airlines originating in a country that has a double taxation agreement with
Hong Kong, China.
65 Inland Revenue Department (undated).WT/TPR/S/109 Trade Policy Review
Page 36
(b) R&D and technology
80. The Hong Kong Science and Technology Parks Corporation (HKSTPC) was established on
7 May 2001 to facilitate the application, research and development, and transfer of technologies to
industries in Hong Kong, China.  The HKSTPC wa s formed as a result of the merger of the
Provisional Hong Kong Science Park Company Limited, Hong Kong Industrial Estates Corporation
(HKIEC), and Hong Kong Industrial Technolo gy Centre Corporation (HKITCC).  The HKSTPC
continues to provide the services previously offered by the other three organizations:  nurturing
technology start-ups through the incubation programme, providing premises and services in the
Science Park for R&D activities, and offering land and premises in the industrial estates for
production.66  Technology-based companies interested in  investing in Hong Kong, China may apply
for admission to the various facilities of the HKSTPC.67  To qualify for admission, a company must
be a technology–based infant industry  registered in Hong Kong, China.  Priority  is given to
companies working in multimedia and networks, micro-electronics and components, software and
systems, and telecommunications.
81. The Science Park, which has been developed and managed by the HKSTPC, is another
initiative aimed at turning Hong Kong, China into a regional hub for innovation and technology.  ThePark will have an area of 22 hectares to be developed in three phases over nine years.  The first phase
was opened in mid-2002;  16 tenants have already been approved for admission to the Science Park.
The park will initially offer four clusters:  information technology, electronics, biotechnology, and
precision engineering.
82. The Innovation and Technology Commission operates two funds to further facilitate the
development of the local industry;  these are the Innovation and Technology Fund (ITF)
68, and the
Applied Research Fund (ARF).69  The ITF, which amounts to HK$5 billion, was launched in 1999 to
finance projects that contribute to innovation and technology upgrading.  The ARF, with
HK$750 million, is a venture capital fund aimed at providing funds for technology ventures and R&D
projects that have commercial potential.  As of May 2002, the ARF had approved HK$434 million to
support 47 projects.  The Innovation and Technol ogy Commission assists the Vocational Training
Council in administering the new Technology Traini ng Scheme.  In addition, the Hong Kong Applied
Science and Technology Research Institute Company Limited (ASTRI) was set up in January 2000 to
enhance research capability.
(c) Land-related policies
83. The Government continues to exercise significant influence over various industrial activities
through its land policies.70  The HKSAR's land policy has not changed since the previous Review;  the
aim is to ensure an adequate supply of fully servic ed land.  The Government still owns all land, which
is leased.  Leases are usually for 50 years, and are granted through public auctions, tenders, direct
grants, or private treaty grants.  The Government has a yearly land-sale programme, which lists the
                                                     
66 The Innovation Loan and the Early Technology Business Capital Loan Scheme, administered by the
former Hong Kong Industrial Technology Centre Corporation in force in 1998, were terminated as a result ofthe creation of the Hong Kong Science and Technology Parks Corporation (HKSTPC).
67 Innovation and Technology Commission (2002a).
68 The ITF has replaced the Industrial Support Fund (ISF) and the Services Support Fund (SSF) which
were mentioned in the previous TPR.   These funds had been set up to provide financial support for projects that
contributed to the industrial and technological deve lopment of the HKSAR and the overall development and
competitiveness of Hong Kong, China's services sector.
69 For further details on these funds, see:  Innovation and Technology Commission (2002b).
70 Chen and Lin (2002).Hong Kong, China WT/TPR/S/109
Page 37
available land (residential and commercial) to be auctioned during that year at specific dates.  Another
list of residential and commercial sites (the Application List) is also published each year.  Any
developer interested in buying a site listed on the Application List may purchase it through an open
bid.  Land for railway development is granted directly.  In addition, under special circumstances, the
Land Department grants land to satisfy social and policy requirements.  In these instances, prices are
negotiated amongst the interested parties.  Since 1998, land has been purchased under private treatygrants for non-commercial purposes, not just for use in subsidized housing, schools, and hospitals, but
also for commercial purposes, including the development of the Disneyland theme park, the
Cyberport, various electricity substations, and container terminals.
84. Manufacturing and service companies that have new or improved technology and processes
and cannot operate in multi-storey or commercial buildings may apply for admission to the "industrialestates".
71  These firms are provided with land at cost.72  At present there are three industrial estates;
two are practically full.
(d) SMEs
85. The Government has attached great importance to supporting small and medium enterprises
(SMEs) as these account for over 98% of business establishments in Hong Kong, China and employ
about 60% of the working population in the private sector.73  In October 2001, HK$1.9 billion were
set aside to establish four funding schemes to help SMEs to secure loans to  acquire establishments
and equipment, enter new markets, upgrade human resources, and enhance their competitiveness.
These schemes are:  the SME Business Installations and Equipment Loan Guarantee Scheme (BIG);the SME Training Fund (STF);  the SME Development Fund (SDF);  and the SME Export MarketingFund (EMF) (section (3)(vii) above).
74
86. The BIG scheme is aimed at helping enterprises secure loans to acquire the necessary
installations and equipment for enhancing productivity and competitiveness.  Through the STF, grantsare provided so that SMEs can train employers and employees, and improve their human capital, with
a view to enhancing capabilities and competitiveness.  The SDF finances projects to be carried out by
non-profit-organizations, trade and industrial organizations, professional bodies, and researchinstitutes to enhance the competitiveness of SMEs across all sectors.
87. The Industrial Support Division of the Trade a nd Industry Department also develops and
coordinates initiatives and programmes with a view to enhancing the competitiveness of SMEs.
75
(ii) Role of state-owned enterprises
88. The Government is involved in only a few companies in Hong Kong, China (Table III.8).
Nevertheless, it was estimated that as of end January 2001 approximately 30% of the entire market
capitalization comprised government-led listed companies.76
                                                     
71 Government of Hong Kong (undated).
72 The land premium in the industrial estates is only to recover the costs of developing the land.
73 An SME is defined as a manufacturing business that employs fewer than 100 persons in Hong Kong,
China;  or a non-manufacturing business that employs fewer than 50 persons in Hong Kong.  The number ofpersons employed includes individual proprietors, partners, and shareholders actively engaged in the work of thecompany;  and salaried employees of the company, incl uding full-time or part-time salaried personnel directly
paid by the company, both permanent and temporary.
74 For more details on the SME funding schemes see TID online information Industrial Support:  A
report on Support Measures for Small and Medium Enterprises .  Available at:  http://www.info.gov.hk./tid/
support/fullreport/smere_contents.htm [30 April 2002].
75 Trade and Industry Department (2001).WT/TPR/S/109 Trade Policy Review
Page 38
Table III.8
Companies with government involvement
(Per cent)
Company Government shareholding
Airport Authority (AA) 100.0
Hong Kong Science and Technology Parks Corporation Ltd. (HKSTPC) 100.0
Kowloon-Canton Railway Corporation (KCRC) 100.0
MTR Corporation Ltd. (MTRCL) 76.5
Hongkong International Theme Parks Ltd. (HKITP) 57.0
Tradelink Electronic Commerce Ltd. (Tradelink) 42.5
New Hong Kong Tunnel Company Ltd. 7.5
Source: Information provided by the authorities of Hong Kong , China.  For further details, see the Treasury online
information, "Accounts of the Government for the year ended 31 March 2001" .  Available at:
http://www.info.gov.hk/tsy/intrnet/sinvest.pdf.
(iii) Competition policy and regulatory issues
89. There have been no signficant changes to Hong Kong, China's competition policy since its
last Review in 1998.  Hong Kong, China does not have a comprehensive competition law, nor any
other legislation banning and/or sanctioning restrictive business practices.  However, some sectoral
legislation includes clauses aimed at preventing anti-competitive practices;  for instance, the
Telecommunications Ordinance and the Br oadcasting Ordinance (Chapter IV).
90. Hong Kong, China has reiterated on several occasions that competition policy is sector
specific.77  Although the Secretary of Economic Development and Labour is responsible for
developing overall competition policy and ensuring that it is applied consistently across all
government bureaux and departments,  the actual implementation of this policy rests with the relevant
policy bureaux and their executive departments.78  The Economic Development Branch within the
Secretary for Economic Development and Labour serves as the Secretariat to the Competition Policy
Advisory Group (COMPAG), a high-level inter-departmental advisory group created in 1997 to
coordinate competition policy.
91. Hong Kong, China has stated that the needs, requirements, and characteristics of individual
sectors vary extensively;  therefore, the Government has adopted a sector-specific approach tosafeguard competition.
79  Because of this  sectoral approach, all bureaux and departments are
responsible for overseeing competition issues within their portfolios.  Where necessary, to rectify
anti-competitive behaviour and/or to promote competition, the Government has taken sector-specific
actions, such as licensing, codes of practice, and legislation.80
92. The existence of different rules for different sectors could lead to a distortion of resource
allocation because firms would choose to enter sectors with clear competition rules, so that they could
not be coerced by incumbents.  Moreover, regulators (for instance in telecommunications) have to
perform a dual role of traditional regulator and of enforcer of competition policy, which could
compromise their impartiality.  Different regula tors may also interpret competition provisions
                                                                                                                                                                    
76 Standing Committee on Company Law Reform (2001).
77 WTO documents WT/WGTCP/W/53, 4 December 1997, WT/WGTCP/M/3, 26 February 1998,
WT/WGTCP/W/141, 2 August 2000, and WT/WGTCP/W/176, 13 December 2001.
78 APEC (2001).
79 WTO document WT/WGTCP/W/141, 2 August 2000.
80 Free Economy online information, Competition Policy .  Available at:  http://www.freeconomy.org/
freeconomy/eng/content/page_b54.htm [8 May 2002].Hong Kong, China WT/TPR/S/109
Page 39
differently and possibly inconsistently.  An independent competition body/agency/authority might
well better promote and enforce competition.
93. Hong Kong, China's competition policy is stipulated in the Statement on Competition
Policy.81  The statement lists some restrictive practices that should be "attended" to;  these are:
price-fixing, bid-rigging, market allocation, sales and production quotas, joint boycotts, and unfair or
discriminatory standards.  It also includes an illustrative list of abuses of market position, e.g.predatory behaviour such as selling below cost;  setting retail price minimums for products or services
where there are no ready substitutes; and conditioning the supply of specific products or services to
the purchase of other specific products or services.  However, none of these practices is defined.  Nor
does the statement mention any provisions regardin g mergers and acquisitions;  without these, it is
unclear how the Government can (transparently) pr event changes in HKSAR's industrial structure that
could be detrimental to consumer welfare and to competition itself.
94. To ensure competitive behaviour in the territory, the Government's bureaux/departments are
regularly requested to review their areas of jurisdiction to identify and propose remedies to
anti-competitive practices.  It is not clear, however, how they could identify anti-competitive practices
if there are no statutes defining them.  As for restrictive business practices, the Competition PolicyAdvisory Group (COMPAG) works closely with all government bureaux/departments, and with the
Consumer Council
82, a statutory organization responsible for protecting and promoting the interests of
consumers, to monitor the state of competition in different sectors and handle allegations of
anti-competitive behaviour.83
95. COMPAG also keeps track of competition-related complaints and/or allegations of restrictive
practices.  However, in the absence of competition legislation, it is not clear on what grounds a firm or
individual could make a complaint.  Likewise, it is unclear on what basis COMPAG could make a
determination.  Investigations and follow-up actions are carried out by the concerned
bureaux/departments;  COMPAG advises them and ensures that the complaints are properly dealt
with.  During June 1998-January 1999 a total of 16 complaints were received by or referred to the
COMPAG Secretariat.  The Trade Practices Divisi on of the Consumer Council is responsible for
examining restrictive business practices.84  The Consumer Council's receives complaints and monitors
trade practices.  The Council channels this information to COMPAG and other relevant departments.
96. The Consumer Council recommends the enactmen t of a competition law to cover horizontal
and vertical collusive agreements and abuse of a dominant position.  The Council also proposed the
establishment of a Competition Authority to investigate possible breaches of the Law and of an appeal
body to hear appeals against decisions by the Competition Authority.85
97. It is unclear whether the existing enforcement measures available to the various agencies
responsible for competition policy are sufficient to constitute an effective deterrent to anti-competitive
practices in Hong Kong, China.  The authorities no ted, however, that since its last Review in 1998,
                                                     
81 Available at:  http://www.info.go v.hk/tib/roles/psoc.htm [8 May 2002].
82 As of April 2000 the Consumer Council has b ecome a full Member of the Competition Policy
Advisory Group (COMPAG).
83 WTO document WT/WGTCP/W/141, 2 August 2000.
84 Trade and Industry Bureau (undated b).
85 Consumer Council (undated).WT/TPR/S/109 Trade Policy Review
Page 40
the HKSAR has adopted over 60 new initiatives to enhance competition in various sectors and taken
follow-up actions on over 50 competition-related complaints.86
98. There is some empirical evidence suggesting that although competition is as intense in the
HKSAR as in a typical OECD economy, it has become slightly less so as a result of the shift towards
services during the past decade.87  Moreover, across the sectors within the territory for which such
evidence was available, it would appear that competition is relatively less intense in real estate andtransportation.
(iv) Corporate governance
99. An efficient capital market capable of mobilizing savings and channelling them into the most
productive uses is essential for the HKSAR's successful economic restructuring and long-term
development.  Deficient corporate governance constitutes a potential impediment to the establishmentof such a market and thus an obstacle to the efficient allocation of capital.
100. Corporate governance practices in Hong Kong, China are governed by:  the Hong Kong
Companies Ordinance, which mainly outlines statutory provisions governing companies incorporated
in Hong Kong, China
88;  the Securities (Disclosure of Interests) Ordinance;  and the Securities (Insider
Dealing) Ordinance.  Non-statutory rules regulating corporate governance include the RulesGoverning the Listing of Securities on the Stock Exchange of Hong Kong Limited (SEHK);  the
Rules Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange of
Hong Kong Limited; the Codes on Takeovers and Mergers and Share Repurchases which apply to
listed companies in Hong Kong, China;  and the St atements of Standard Accounting Practice, which
are observed by the members of the Hong Kong Society of Accountants (HKSA).
101. The SEHK is the primary regulatory organization responsible for the supervision and
regulation of listed companies, their directors, and controlling shareholders in respect of alllisting-related matters.  The Securities and Futures Commission (SFC) exercises prudential
supervision over the securities, futures, and financial investment industries.  Rules established by the
two exchanges (SEHK, and Hong Kong Futures Exchange (HKFE)) and the clearing houses are
subject to SFC approval.  The SFC administers statutory requirements to ensure full disclosure and
fair treatment of investors and has the regulatory responsibility for takeovers and mergers.
102. Many companies listed in the SEHK are controlled by a single dominant shareholder or a
single group of persons;  in 1995 and 1996, of 553 listed companies 53% had one shareholder or one
family group of shareholders owning 50% or more of the issued capital.  More recently (end
January 2001) it was estimated that approximately 24% of the entire market capitalization comprised
family-led companies.
89  Moreover, the majority shareholder often serves as the chief executive
officer (CEO), and the board of directors may also be dominated by family members;  sometimes the
                                                     
86 Details of some of these initiatives and complaints are published in the annual reports of the
Competition Policy Advisory Group (COMPAG) [Online] .  Available at:  http://www.compag.gov.hk/report/
content.htm [4 October 2002].
87 Such evidence was available for eight manufacturing industries and five services (construction,
wholesale and retail trade, restaurants and hotels, transportation, and real estate.  (IMF, 2000a).
88 The Hong Kong Companies Ordinance also contains provisions relating to the registration of
overseas companies (i.e. companies not incorporated in Hong Kong).
89 Standing Committee on Company Law Reform (2001).Hong Kong, China WT/TPR/S/109
Page 41
chairman of the board is also the CEO.90  Minority shareholders seem to have little power and there
are no measures to protect them.
103. As a result of the pattern of ownership, of the Asian crisis, and of several cases of poor
corporate governance (e.g. the Peregrine case and the CA Pacific Securities case)91, and to make the
HKSAR's financial market more attractive to investors, Hong Kong, China has taken several measures
to improve corporate governance (Box III.1).  The 2000-02 Budget Speech highlighted additionalproposals to further improve corporate governance and to bring the regulatory regime into line with
overseas practices.  These proposals include: the amendment of the Companies Ordinance;  a review
of the code on Takeovers and Mergers and Share Repurchases;  a review the Listing Rules;  and the
strengthening of the regulatory regime and legislation for disclosure of market information.
92
Box III.1
Measures to improve corporate governance in Hong Kong, China
The Companies (Amendment) Bill 2002, introduced into the Legislative Council on 30 January 2002,
contains measures to raise corporate governance standards (e.g. a reduction of the threshold forshareholders' proposals;  and shareholders would be allowed to remove directors by ordinary resolution).
A review on corporate governance practices is curre ntly being undertaken by the Standing Committee on
Company Law Reform (SCCLR).  Phase I of this review was completed in July 2001.  Meanwhile, the
SCCLR is conducting Phase II of the Review and is expected to issue a consultation paper later this year(2002).
On 21 January 2002, the Stock Exchange of Hong Kong Limited (SEHK) also issued a Consultation Paper
on Proposed Amendments to the Listing Rules Relating to Corporate Governance Issues.  The proposalsrelate to three main areas:  the protection of shareh olders' rights;  directors' and board practices; and
corporate reporting and disclosure of information.
The Hong Kong Exchanges and Clearing Limited (HKEx), a for-profit company that regulates listed
companies, is restructuring its listing and appeal co mmittee to expedite the processing of non-compliance
cases whilst providing a channel for appeals.  In orde r to protect investors the Government, together with
the Securities and Futures Commission (SFC), will also continue to monitor the enforcement of the Listing
Rules.
The Securities and Futures Ordinance, enacted in Ma rch 2002, consolidates ten ordinances governing the
securities and futures market into one piece of legislation.  This should improve the existing regime tocombat corporate misconduct especially with reference to public mis-statements by listed companies.  The
SFC's power will be strengthened to facilitate its inquiries into alleged misconduct of listed companies.False disclosure, inducing transactions, will be punishable by civil or criminal sanctions under the new
market misconduct regime, which establishes a civil Market Misconduct Tribunal.  In addition, the
Ordinance created a right of private civil action by investors to seek compensation for loss arising from
false information from listed companies.  The Ordinance will be become operational in early 2003, oncethe necessary subsidiary legislation is in place.
Source:   Information provided by the Hong Kong, China's authorities.
                                                     
90 In 1998, 38% of the Hang Seng 100 (HS100) companies' CEO were also the chairman of the board
and 15% of the companies showed CEO dominance with family ties (OECD, 2000;  and Cheung, undated).
91 The case of Peregrine Investment Holding Ltd., which built up a fatally large exposure in the debt
market, was a case of faulty risk management and internal control.  CA Pacific Finance used investors' shares as
collateral to secure bank loans.  The company had a liquidity problem because of the drop in property and share
markets, and lost the investors' shares.  CA Pacific Fina nce should have notified the investors that their shares
were being used to secure bank loans so that they could have decided whether or not to withdraw them (Cheung,undated;  and Lague, 2001).
92 South China Morning Post,  7 March 2001.WT/TPR/S/109 Trade Policy Review
Page 42
(v) Intellectual property rights
104. Hong Kong, China is subject to the Convention Establishing the World Intellectual Property
Organization (WIPO) and other international conventions on intellectual property.93  As Hong Kong,
China is not a State, the application of those conventions (which accept only states as members) have
been extended to the territory through China.  H ong Kong, China formulates its own policies, laws,
and administrative arrangements to protect IPRs.94  It operates independent trade marks, designs and
patent registries, and matters relating to the grant, administration or litigation of trade marks, patents
and designs are decided within the territory.  The intellectual property system of Hong Kong, China is
thus separate from the system operating in the Mainland.  Patent and design rights granted by the
State Intellectual Property Office of China, or trade marks registered in the Chinese Trade Marks
Office, are not automatically protected in the HKSAR.95
105. Few changes have been introduced to the HKSAR's intellectual property legislation since
1998 (Table III.9).96  Hong Kong, China's intellectual property legislation was amended in 1996 to
bring it into line with the TRIPS Agreement.  This  legislation was notified to the WTO and reviewed
by the Council for TRIPS in June 2000.97  Hong Kong's contact point for intellectual property
purposes is the Intellectual Property Department of the HKSAR.98
Table III.9
Intellectual property laws and regulations
Title Brief description
Patents
Patents Ordinance
(Chapter 514)Provisions for the registration of patents.
Patents (Transitional Arrangements) Rules Provide transitional arrangements for the registration of patents in
the Register of Hong Kong, China for patents registered under the
old Registration of Patents Ordinance, which lapsed in 1997, andcertain patents registered under the United Kingdom Patents Acts
1949 and 1977.
Patents (General) Rules Prescribe provisions and procedures under the Patents Ordinance
(Chapter 514).
Patents (Designation of Patent Offices) Notice Makes designations under Section 8 of the Patents Ordinance
(Chapter 514).
Plant Varieties
Plant Varieties Protection Ordinance(Chapter 490)Provides, inter alia , a sui generis  regime for the granting and
protection of proprietary rights to persons who breed or discover
plant varieties.
Plant Varieties Protection Regulation 1997 Prescribes provisions and procedures under the Plant Varieties
Protection Ordinance (Chapter  490).
Table III.9 (cont'd)
                                                     
93 These include the Paris Convention for the protection of industrial property;  the Berne Convention
for the protection of literary and artistic works;  the Universal Copyright Convention;  the Geneva Conventionfor the Protection of Producers of Phonograms against Unauthorized Duplication of their Phonograms;  thePatent Cooperation Treaty;  and the Convention establishing the World Intellectual Property Organization(WTO, 1998).
94 The Basic Law, in Articles 139 and 140, stipulates that Hong Kong, China should on its own
formulate policies and provide legal protection for IPRs.
95 WTO document IP/N/1/HKG/2/Add.1, 29 February 2000.
96 HKSAR's intellectual property laws are available online at:  http://www.justice.gov.hk/Home.htm.
97 WTO document IP/Q/HKG/1 – IP/Q4/HKG/1, 2 August 2000.
98 WTO documents IP/N/7/Rev.2/Add.4, 24 April 2001, and IP/N/3/Rev.6, 1 March 2002.Hong Kong, China WT/TPR/S/109
Page 43
Title Brief description
Trade Marks (including Trade Descriptions)
Trade Marks Ordinance
(Cap 43) (as amended by Intellectual Property (World TradeOrganization Amendments) Ordinance)Makes provisions for the registration of trade marks. The
amendment made by the Intellectual Property (World TradeOrganization Amendments) Ordinance was designed to ensure
that Hong Kong, China's existing trade mark law is compatible
with the TRIPS Agreement.
Trade Marks Rules Prescribe provisions and procedures under the Trade Marks
Ordinance (Chapter 43).
Trade Descriptions Ordinance(Chapter 362) (as amended by Intellectual Property
(World Trade Organization Amendments) Ordinance)Contains provisions prohibiting the use of false trade descriptions
and the forgery of trade marks.
Trade Marks (Emergency) Ordinance
(Chapter 263)Contains provisions with respect to registered trade marks to meet
any emergency that may arise as a result of war.
Geographical Indications
Trade Marks Ordinance(Chapter 43) (as amended by Intellectual Property (World Trade
Organization Amendments) Ordinance)Enables geographical indications to be registered as certification
trade marks.
Non-Statutory protection of geographical indications The common law tort of passing off may be used to protect
geographical indications from being used without proper
authorization.
Copyright and Related Rights
Copyright Ordinance(Chapter 528)This Ordinance states the law of copyright, with amendments;
makes provisions for the rights of performers and others in
performances;  makes provisions with respect to devices designed
to circumvent copy-protection of works, rights managementinformation, and the fraudulent reception of transmissions;  and
for connected purposes.
It was designed to be compatible with the copyright provisions of
the TRIPS Agreement.
Prevention of Copyright Piracy Ordinance(Chapter 544)Makes provisions for the prevention of copyright piracy using the
medium of optical discs (including stampers).  It sets out a
statutory licensing scheme for manufacturers of optical discs in
Hong Kong, China and makes provisions for optical discs
manufactured in Hong Kong, China to be marked with an assigned
manufacturer identification code.  It also combats bootlegging ofcopyright work by stipulating that the unauthorized possession of
video recording equipment in certain places of public
entertainment is an offence.
Industrial Designs
Registered Designs Ordinance(Chapter 522)Establishes a system for the registration of new designs.
Registered Designs Rules Prescribe provisions and procedures under the Registered Designs
Ordinance (Chapter 522).
Copyright Ordinance(Chapter 528)Provides protection for commercially exploited artistic works.
Layout-designs (Topographies) of Integrated Circuits
Layout-design (Topography) of Integrated Circuits Ordinance
(Chapter 445)Provides a sui generis  intellectual property regime for the
protection of layout designs (topographies) of integrated circuits
and for legal remedies against infringement.
Layout-design (Topography) of Integrated Circuits (Designation
of Qualifying Countries, Territories or Areas) RegulationDesignates countries, territories or areas as qualifying countries,
territories or areas under Section 24 of the Layout-design
(Topography) of Integrated Circuits Ordinance (Chapter 445).
Protection of Undisclosed Information
Personal Data (Privacy) Ordinance Requires data users to use information only for the purposes for
which it was collected, to inform people of the purposes for which
data is collected and to protect such information againstunauthorized or accidental disclosure.
Source: WTO document IP/N/1/HKG/2, 29 February 2000.WT/TPR/S/109 Trade Policy Review
Page 44
106. The Intellectual Property (Miscellaneous Amendments) Ordinance 2001  introduced
amendments mainly concerning copyright;  but it also included an amendment related to applications
for divisional short-term patents.  The amended provision reflects more accurately the time limit for
filing.
(a) Patents
107. There have been no major changes to the patent regime since the previous Review of
Hong Kong, China.99  Patents are regulated by the Patents Ordinance, the Patents (Transitional
Arrangements) Rules, Patents (General) Rules, and the Patents (Transitional Arrangements ) Rules.
Patent protection is needed in Hong Kong, China to stop unauthorized manufacture, use, sales, or
import of an invention.  Applying for a patent in another country or in other regions of China does not
automatically give protection in Hong Kong, China.
108. An invention is patentable if it is new and involves an inventive step.  A patent can be
obtained for a product or a process no matter where it was invented or whether products are imported
or locally produced (Section 93 of the Patents Ordinance).  Treatments such as surgery or therapy for
humans or animals and diagnostic methods practised on humans or animals are not patentable
(Section 93(4) of the Patents Ordinance).  Plant and animal varieties or an essentially biologicalprocess for the production of plants or animals (other than a microbiological process or the products
of such a process) are not patentable (Section 93(6) of the Patents Ordinance);  plant varieties are
protected by a sui generis system.  The Plant Varieties Protection Ordinance (Chapter 490) grants
proprietary rights to persons who breed or discover plant varieties.  The Ordinance provides for legal
remedies against infringement.  A plant variety must  be new, distinct, stable, and homogeneous to be
protected under the Ordinance.
109. There are two types of patents in Hong Kong, China:  a standard patent and a short-term
patent.  The granting of a standard patent is based on the registration of a patent granted by one of
three designated patent offices:  the State Intellectual Property Office of the People's Republic of
China;  the European Patent Office;  and the United Kingdom Patent Office (Section 3 Patents
(Designation of Patent Offices) Notice).  Protection under a standard patent is for 20 years from the
date of filing (Section 39 of the Patents Ordina nce).  Since 1998, 6,819 standard patents have been
granted in Hong Kong, China.
110. A short-term patent is granted on the basis of an examination of the formalities of the
application;  the patent examination does not extend to the substantive issue of whether the invention
is novel and inventive.  The term of the short-term  patent is eight years from the filing date and is
renewable for a period of four years (Section 126 of the Patents Ordinance).  The scope of the short-term patent is no different from the scope of the standard patent and the short-term patent is available
for the same subject matter as the standard patent.  Owners of products and processes with a short
commercial life are more likely to be interested in a short-term than a standard patent;  as the
application procedure is simpler and takes less time, they may have recourse to a quicker and less
costly form of patent protection.  Even if a short-term patent application is examined only in respectof formalities, its validity can be challenged in courts on the basis, for example, that it was not new or
did not involve an inventive step, etc.  The number of short-term patents granted increased from 51 in
1998 to 271 in 2001.  However, the benefits of a standard patent, as opposed to a short-term patent,
are that the term of protection is longer (20 years instead of 8) and it is easier to enforce (the owner of
a short-term patent has to establish the validity of  the patent in proceedings to enforce his rights).
                                                     
99 The Intellectual Property (Miscellaneous Amendments) Ordinance 2001 and Patent (General)
Amendments Rules 2002, effected certain minor amendments to the Patents Ordinance, Patents (General) Rulesand Patents (Designation of Patent Offices) Notice.Hong Kong, China WT/TPR/S/109
Page 45
111. A patent holder has the right to prevent all third parties not having his consent from importing
any product that is the subject-matter of the patent.100  This means that all unauthorized imports,
including parallel imports, can be prohibited.  This also holds for a process patent holder, who has the
right to prevent third parties from using the process or offering the process for use in Hong Kong,
China.  If a product is obtained directly from the process, the proprietor can prevent third parties from
putting the product on the market, or from using, im porting or stocking the product (Section 73(b) and
(c) of the Patents Ordinance).
112. The Patents Ordinance allows for the granting of compulsory licences and government use of
a patented product or process without the authorization of the patent proprietor.  The effect of
government use of a patented invention is equivalent to a compulsory licence.  A compulsory licence
under a standard patent can be allowed on limited grounds where the patented invention is not beingcommercially worked in Hong Kong, China, or where the demand for a particular product is not being
met, for example, through importing.  Short-term patents are not subject to compulsory licencing
(Section 64 of the Patents Ordinance);  it is considered that this may not be of practical value since the
short-term patent could have little time left to run.  Government use of a patented invention is allowed
during a period of extreme urgency declared by the Chief Executive (Sections 68 and 69 of thePatents Ordinance).  A patent holder must be compensated for government use (Section 69 of the
Patents Ordinance).
113. Criminal offences are provided for under the Patents Ordinance:  falsification of the Register;
unauthorized claim of patent rights;  false representation that a design is registered, or that a patent
has been applied for;  and misuse of the title "Patents Registry".
101
(b) Trade marks
114. Since the last Review of Hong Kong, China, the trade mark legislation has been updated.102
The Legislative Council passed the new Trade Marks Ordinance (Chapter 559) on 31 May 2000.  This
Ordinance has not yet entered into force since the necessary subsidiary legislation and supporting
services, such as the computer system for trade mark registration, are still being prepared.  The new
Ordinance is expected to come into effect in early 2003.103  Thus, trade marks continue to be regulated
by the Trade Marks Ordinance (Chapter 43), the Trade Marks Rules, the Trade DescriptionOrdinance, and the Trade Marks (Emergency) Ordinance.
115. Trade marks do not need to be registered to be protected.  Registered trade marks enjoy
protection under the Trade Marks Ordinance whereas unregistered trade marks are protected under
common law.  Since 1998, 61,857 trademarks have been registered.  Registration usually takes about
six months if there is no opposition to the mark.  The existing Trade Marks Ordinance provides for atwo-part register;  however, the new Ordinance will abolish these to make registration easier.
Protection of a trade mark is for seven years from the date of application for registration (Section 17),
and may be renewed indefinitely for periods up to 14 years.  The Trade Marks (Emergency)
                                                     
100 Section 73(a)(i) of the Patents Ordinance (Chapter 514, Laws of Hong Kong).
101 WTO document IP/N/6/HKG/1, 10 February 2000.
102 WTO document IP/Q/HKG/1 – IP/Q4/HKG/1, 2 August 2000.
103 The new Ordinance would enable easier registration of marks, increase the range of signs that can
be registered as trade marks, and streamline the pro cedures for recording assignments and licences of trade
marks.  The new law would:  allow parallel imports, unless the goods have been impaired or changed and the
reputation of the mark is thereby adversely affected;  allow for the filing of a single application for registrationof a trade mark in respect of several classes of goods or services.  The Ordinance and its subsidiary legislation,the Trade Marks Rules, which are under preparation,  would provide for electronic filing and electronic
publication of the trade marks applications.WT/TPR/S/109 Trade Policy Review
Page 46
Ordinance provides for the suspension of trade mark registration to meet any emergency that may
arise as a result of war (Chapter 263).  Under the Trade Marks Ordinance, it is an offence to make a
false entry in the Register, and to falsely represent a trade mark as registered; the former is punishable
by a fine of HK$50,000 and imprisonment for se ven years (Chapter 43, Sections 86 and 87).
116. The Trade Descriptions Ordinance prohibits the use of false descriptions, false marks and
mis-statements when selling or importing goods.  U nder the Ordinance, it is an offence to forge any
trade mark, falsely uses a trade mark or any mark that resembles a trade mark so as to deceive the
buyer, or possesses any equipment, machine or other instrument to forge a trade mark.  It is also an
offence to import or export, other than for private use, a good with a false trade description (e.g. false
indication of the place of manufacture) or with a forged trade mark (Chapter 362 Part II).  The
maximum penalty for these offences on a conviction on indictment, is a fine of HK$500,000 andimprisonment for five years, and on summary conviction, it is a fine of HK$100,000 and
imprisonment for two years.
104  With effect from 14 January 2000, offences relating to the
infringement of trade marks and the import or export of goods bearing a forged trade mark (under the
Trade Descriptions Ordinance) have been classified among offences under the Organized and Serious
Crimes Ordinance.105  As a result, the enforcement powers of customs officers have been enhanced,
particularly where criminal syndicates are involved.
(c) Copyright
117. Since the last Review, the Copyright Ordinance, which came into effect in 1997, has been
amended twice to better combat piracy;  first by the Intellectual Property (Miscellaneous
Amendments) Ordinance 2001, and then by the Copyright (Suspension of Amendments)
Ordinance 2001.106
118. The Copyright Ordinance provides comprehensive protection for recognized categories of
literary, dramatic, musical, and artistic works, as well as for sound recordings, films, broadcasts, and
cable diffusion, and works made available to the public on the Internet.  In relation to performances,
performers and persons who have exclusive recording contracts with performers are entitled to
protection.  Computer programs are protected under copyright law.107  There are no formalities
required to obtain copyright protection for a work in Hong Kong, China. Works of authors fromanywhere in the world, or works first published anywhere in the world, also qualify for copyright
protection in Hong Kong, China.
108
119. Protection, with some exceptions, extends for 50 years after the death of the creator or from
the end of the year in which the work was made (Chapter 528 Sections 17-21).109  The law allows for
the provision of an "exclusive licence".  The copyright owner authorizes the licensee to exercise therights, which would otherwise be exclusively exercisable by the copyright owner (Section 103).
                                                     
104 IP/N/6/HKG/1, 10 February 2000.
105 IP/N/6/HKG/1, 10 February 2000.
106 Commerce and Industry Bureau (2001).
107 Computer programs are classified as literary work under the Copyright Ordinance.
108 Intellectual Property Department (2001).
109 Typographical arrangement of published editions is protected for 25 years from the end of the year
in which the edition was first published (Chapter 528, S ection 21);  and government copyright is protected for
125 years from  the end of the year in with the work was made (Chapter 528, Section 182).Hong Kong, China WT/TPR/S/109
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120. Copyright piracy, or possession of infringing articles for trade or business, is subject to a
maximum fine of HK$50,000 per infringing article and up to four year's imprisonment.110  With effect
from 14 January 2000, offences relating to the making of and dealing with infringing copies of
copyright works (under the Copyright Ordinance) have been classified as offences under the
Organized and Serious Crimes Ordinance.111  As a result, the authorities' powers to investigate and
enforce have been enhanced.
121. The amendments introduced in 2000 to the Copyright Ordinance (implemented in 2001)
clarified the criteria for offences that constitute infringement of copyright.112  There was public
concern that as a result of these amendments the dissemination of information in enterprises as well as
in teaching activities in schools could be hampered.  Thus, the Legislative Council passed the
Copyright (Suspension of Amendments) Ordinance 2001 in June 2001.  As a result, the criminalprovisions stipulated in the recently amended Copy right Ordinance will continue to apply, with a
slightly narrowed scope, only to computer programs, movies, television dramas, and music
recordings.  For copyright works in other categories, the criminal provisions will revert to the
pre-amendments position.
113  The suspension arrangements will expire on 31 July 2002.114  T h e
Government of Hong Kong, China is drafting legislation to make the suspension arrangementspermanent.
122. To further strengthen the efforts to combat copyright piracy at the production level, the
HKSAR introduced the Prevention of Copyright Pi racy Ordinance (Chapter 544) in 1998 to regulate
the manufacture of optical discs in Hong Kong, China;  the manufacture of stampers was also brought
under the scope of the Ordinance in July 2002.
115  Under sections 3 and 4 of the Ordinance, a person
must obtain a licence to manufacture optical discs and stampers in Hong Kong, China at the premises
specified in the licence.  In addition, all optical discs and stampers produced must be permanentlymarked with a code unique to each licensed manufacturer.  Customs officers are empowered to
inspect licensed premises without a warrant.  The maximum penalty for manufacturing optical discs in
Hong Kong, China without a licence is a fine of HK$500,000 and two years' imprisonment on a first
conviction, and a fine of HK$1 million and four years' imprisonment on a second or subsequent
conviction.  Moreover, the Intellectual Property (Miscellaneous Amendments) Ordinance 2000, whichcame into effect on 1 April 2001, facilitates the prosecution of end-user corporate copyright piracy,
e.g. firms producing their goods or services us ing infringing copies of computer software.
116
(d) Industrial designs117
123. Industrial designs may be registered in Hong Kong, China under the Registered Designs
Ordinance to obtain protection (i.e. to stop unauthorized manufacture, import, use, sale, or hire of adesign product in Hong Kong, China).
118  Unregistered designs may receive protection under the
                                                     
110 Sections 23 to 35 of Ordinance defines how the work could be infringed and the meaning of
"infringing copy";  sections 118 and 120 of the Ordinance set out the criminal offence.
111 WTO document IP/N/6/HKG/1, 10 February 2000
112 These amendments were introduced through the Intellectual Property (Miscellaneous Amendments)
Ordinance 2001.  Amendments can be found in Sections 118 to 120 of the Copyright Ordinance Chapter 528[Online].  Available at:  http://www.justice.gov.hk/Home.htm [29 May 2002].
113 Commerce and Industry Bureau (2001).
114 On 12 July 2002 the Legislative Council extended the suspension arrangement until 31 July 2003.
115 A stamper is a special type of optical disc used  as a master disc for the mass production of common
optical discs.  It is an essential tool for the illegal production of optical discs containing pirated copyright works
such as computer software, music, and films.
116 WTO document IP/Q/HKG/1- IP/Q4/HKG/1, 2 August 2000.
117 This section is based on Government of the HKSAR (2001).
118 Registering a design in Hong Kong, China provides protection only in the HKSAR.WT/TPR/S/109 Trade Policy Review
Page 48
Copyright Ordinance.  Under the Registered Design s Ordinance, a wide range of products, including
computers, telephones, CD-players, textiles, jeweller y and watches, can be registered.  Registration of
a design protects only the appearance of products;  it does not protect the way in which the design
product works.  Protection for the way in which a product works may be available under patent law
(i.e. if the requirements of patentability are satisfied).  Computer programs and protected layout-
designs (topographies) are not registerable (Chapter 522, Section 8);  these are protected under theCopyright Ordinance and the Layout-designs (topog raphies) of Integrated Circuits Ordinances,
respectively.
124. Registered design owners have the right to prevent others from manufacturing, importing,
using, selling, or hiring the design product.  Registered design protection is renewable for periods of
five years up to a maximum of 25 years.  Application for registration of a design elsewhere in theworld or in other parts of China does not automatically give a design protection in Hong Kong, China.
125. A registered design owner, or an exclusive licensee, can bring civil proceedings for
infringements committed after the date on which the certificate of design registration is issued.
Infringement of a registered design is not a criminal offence.  The authorities consider that, in general,
civil protection is adequate.  Under the Registered Designs Ordinance, falsification of the Register,false representation that a design is registered, and misuse of the title "Designs Registry" are
considered criminal offences.
126. Designs can also be protected under the Copyright Ordinance for 15 years from first
marketing of the article.  However, protection provided by the copyright law has limitations as the
design owner cannot take legal action for copyright infringement.  If a design is not registered, its
owner still has copyright protection for articles produ ced from the original design drawing.  Protection
is automatic;  there is no registration or other formality requirements.
(e) Enforcement
127. In 1998, the International Intellectual Property Alliance (IIPA) noted that, despite
Hong Kong's efforts, piracy remained a problem  with estimated trade losses amounting to some
US$243 million.
119  Since then, the authorities have taken measures (legislative changes and education
campaigns) to improve the protection of intellectual property.120  To improve enforcement Hong
Kong, China implemented a surveillance mechanism on the production of optical discs, including
registration and documentation of CD-manufacturing equipment and premises.  In addition, copyright
piracy and trade mark counterfeiting have been designated criminal offences under the Organized and
Serious Crimes Ordinance, thus strengthening enforcement and increasing penalties against offenders.
The Intellectual Property (Miscellaneous Amendments) Ordinance 2000 is also aimed atstrengthening enforcement.  It stipulates, inter alia, that the possession of unauthorized video
recording equipment in a cinema or concert venue is an offence and facilitates the prosecution of
end-user corporate copyright piracy (e.g. firms producing their goods or services using infringing
copies of computer software).  Customs is also enforcing the end-user criminal provision under the
Copyright Ordinance.
128. The authorities believe that efforts since 1999 have led to improvements in the protection of
intellectual property rights.  For instance, regarding infringement of copyright, since 1998 the number
of retail shops has dropped from 1,000 to a 100;  the number of pirated discs in daily circulation has
dropped from 5 million to 50,000, and the number of factories producing optical discs has declined
                                                     
119 International Intellectual Property Alliance (2002).
120 Hong Kong, China was removed from the Watch List in 1999.  (International Intellectual Property
Alliance, 2002).Hong Kong, China WT/TPR/S/109
Page 49
from 11 factories with 62 production lines to 6 factories with 8 production lines.  As a result, seizures
of pirated optical discs have declined since 1998 (Table III.10).  In contrast, the number of seizures of
counterfeit goods has increased.  The number of prosecutions and sentences peaked in 2000 reflecting
Customs' efforts.121
Table III.10
Enforcement of intellectual property rights, 1998-02
1998 1999 2000 2001 2002a
Prosecution and sentencing under the
Copyright Ordinance
No. of persons with prison sentence 496 641 2,089 813 261
% of persons with prison sentence of:
<6 months 58.7 38.2 30.2 25.5 21.8
6-12 months 36.5 55.7 62.7 70.7 73.6
>12 months 4.8 6.1 7.1 3.8 4.6
Maximum sentence passed (months) 36 36 36 48 40
% of cases with fines of:
<HK$50,000 99.3 98.2 99.4 99.0 100.0
HK$50,000-100,000 0.6 0.4 0.3 0.9 0.0
>HK$100,000 0.1 1.4 0.3 0.0 0.0
Maximum fine (HK$) 672,000 1,043,510 385,000 60,000 15,000
Total fines (HK$) 4,864,101 3,898,114 2,323,400 479,750 134,100
Prosecution and sentencing under the TradeDescriptions Ordinance
No. of persons with prison sentence 96 77 103 37 13
% of persons with prison sentence of:
<6 months 81.3 59.7 62.1 62.2 84.6
6-12 months 18.8 36.4 33.0 37.8 15.4
>12 months 0.0 3.9 4.9 0.0 0.0
Maximum sentence passed (months) 12 16 27 12 9
% of cases with fines of:
<HK$50,000 97.5 96.9 94.5 94.0 93.0
HK$50,000-100,000 1.9 2.2 4.9 6.1 6.4
>HK$100,000 0.6 1.0 0.6 0.3 1.1
Maximum fine 226,836 335,000 220,000 130,000 200,000
Total fines 10,274,297 9,002,520 7,187,291 5,266,463 2,908,165
Seizure of illegal merchandise goods
Pirated optical discs
Quantity ('000) 38,969.2 16,945.3 8,261.2 9,270.2 ..
Value (HK$ million) 1,543.9 389.0 190.6 256.7 ..
Counterfeit goods
Quantity ('000) .. .. .. .. ..
Value (HK$ million) 126.1 138.2 147.2 213.8 ..
.. Not available.
a Up to June.
Source: Data provided by the authorities of Hong Kong, China.
                                                     
121 South China Morning Post,  1 June 2002.