WT/TPR/S/52 Trade Policy Review
Page 24
III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) OVERVIEW
1. While there have been several notable developments in Hong Kong's trade and trade-related
policies since the previous Trade Policy Review in 1994, no major changes have occurred since the
transfer of sovereignty on 1 July 1997, apart from measures aimed at enforcing the protection of
intellectual property rights.  The Government's basic approach is still to let markets operate freely andopenly as far as trade and investment are concerned.  Thus, it has not sought to promote or rescue
individual industries, even in the face of the Asian crisis.
2. The openness of the economy of Hong Kong, China to trade is such that all imports enter the
region tariff free, even though more than half of all tariff lines remain unbound.  Furthermore, there
are few non-tariff barriers; these include quantitative restrictions or trade controls for health, securityand environmental reasons.  Moreover, there is virtually no government controls on the composition
or destination of exports, except in the case of restrictions maintained under the WTO Agreement on
Textiles and Clothing and for UN sanctions (for which the Central People's Government is now
responsible).  Nor has Hong Kong resorted to unilateral action to address trade disputes and problems.
In addition, the HKSAR has few restrictions on inward and outward investment, and seemingly no
sector-specific incentives to attract foreign direct investment (FDI).  Its openness to FDI combined
with sound macroeconomic policies, its transparent rules-based legal environment, simple tax system
with low tax rates, skilled and reliable labour force, the availability of infrastructure together with its
proximity to other major markets have greatly contributed to Hong Kong's attractiveness to business.
3. Shortly before the transfer of sovereignty, the authorities acceded to the WTO Agreement on
Government Procurement (GPA), which entered into force on 19 June 1997.
4. The Government also confirmed its firm comm itment to a policy of "minimum intervention
and maximum support".  Furthermore, it indicated that, within the framework of a free market, it
would pursue a "proactive industrial support policy" aimed at sustaining and promoting the
productivity and international competitiveness of manufacturing and service industries.  The
characterization of its industrial support policy as proactive may be somewhat misleading, however,
as this policy does not appear to be aimed at "p icking winners" through the use of industry-specific
measures or incentives.  Instead, the authorities have sought to ensure a business environment
conducive to structural adjustment, investment, and growth by emphasising broad initiatives to
enhance the skills and technology base of the economy, encourage new products and processes,
remove infrastructural and land constraints, and liberalize regulated industries, particularly those
providing basic business inputs (e.g. telecommunications services).
5. Prior to the transfer of sovereignty, the authorities also implemented comprehensive
legislation aimed at ensuring Hong Kong's compliance with the TRIPS Agreement.  More recently,
perhaps in response to criticism by some WTO Members, the HKSAR authorities have taken steps to
strengthen the enforcement of these and other laws intended to protect intellectual property rights.
6. In the authorities' view, competition is best nurtured and sustained by allowing the free play
of market forces and keeping intervention to a minimum.  Hence, the Government has adopted what
might be characterized as a light-handed approach to competition and regulation, eschewing an
all-embracing comprehensive competition law.  Although the Consumer Council has questioned the
adequacy of Hong Kong's competition policy, particularly with regard to non-traded goods and
services, the authorities maintain that Hong Kong's high degree of openness to trade and foreign direct
investment and its strong reliance on market forces  in combination with sector-specific regulatory,Hong Kong, China WT/TPR/S/52
Page 25
administrative and, in the case of telecommunications, legislative measures are sufficient to ensure
highly competitive markets both for goods and services.  This issue is the subject of an ongoing
debate in Hong Kong.
(2) MEASURES DIRECTLY AFFECTING IMPORTS
(i) Import registration
7. Almost all shipments into Hong Kong, China are subject to a post-shipment trade declaration
primarily for statistical purposes.1  All cargo imports are also subject to an import manifest containing
detailed information on packages, accompanying documents, the consignor, the consignee and the
carrier.  The trade declaration and the import manife st must be lodged with the Customs and Excise
Department.  Declaration can either be lodged using prescribed paper forms or by using the Electronic
Data Interchange (EDI) service operated by Tradelink Electronic Commerce Limited.2 
Table III.1
Articles exempted from import/export declaration under the Import and Export (Registration) Regulations
Transshipment cargo.
Transit cargo.
Articles imported or exported by the Government or the Hong Kong Garrison.
Goods for sale in ship and aircraft stores.
Personal baggage.
Postal packets of a value less than HK$4,000.
Samples and advertising material supplied free of charge.
Articles imported for exhibition or to be used in a sports competition.
Marine fish arriving directly from fishing grounds on fishing craft registered or licensed in Hong Kong.
Gifts of a personal nature.
Used empty freight containers regularly imported.
Aircraft parts or accessories for maintenance imported by transport operators based outside Hong Kong and servicing internation al
routes.
Banknotes and coins after issue into circulation.
Radio and television production and broadcasting equipment owned and imported by a person established or resident outside HongKong.
Means of transport for the purpose of use as a means of conveyance for trade.
Source: HKSAR Government.
                                                     
1Every person who imports or exports any article other than an exempted article (Table III.1) is required
to lodge with the Customs and Excise Department an import or export declaration within 14 days after theimportation or exportation of the article.  For an exempted article, it is necessary to indicate clearly on the cargomanifest the relevant category of the exempted article in order to facilitate trade documentation and verification.
2Tradelink is a consortium;  the Government and, currently, 11 trade-related organizations in Hong
Kong are the shareholders.  The promotion of EDI is a main feature of the Community Electronic Trading
Service (CETS), which aims to implement EDI for Government trade-related documents, such as restrained
textiles export licences, trade declarations, certificates  of origin, cargo manifests and dutiable commodities
permits.  Currently, CETS, in addition to paper applications, may be used to apply for restrained textiles exportlicences and trade declarations.  CETS were launched  in January 1997 and April 1997 on restrained textiles
export licences and trade declarations, respectively.WT/TPR/S/52 Trade Policy Review
Page 26
(ii) Tariffs
8. The applied tariff of Hong Kong, China is 0%.  As of June 1998, 37.8% of all tariff lines
(HS 1996) were bound at zero representing 43.7% of the value of Hong Kong’s imports in 1996.  The
bound items include all agricultural, fish and fishery products (965  lines)  as well as various other
industrial goods (1,343 lines), accounting for 26.1% of industrial items (5,139 tariff lines).
9. In the context of the Uruguay Round and the implementation of the WTO Agreements, Hong
Kong bound 1,952 tariff lines (32.0% of tariff lines) at zero rates, accounting for 30.5% of the value
of Hong Kong's merchandise imports in 1996.  At the WTO Singapore Ministerial Conference in
early December 1996, Hong Kong was party to the Ministerial Declaration on Trade in Information
Technology Products (the “Information Technology Agreement” (ITA)), which bound tariffs on
specific information technology products at zero.  Hong Kong bound its tariff on all products coveredby the ITA at zero on 1 July 1997 (instead of in four stages):  the products covered accounted for
7.7% of the value of Hong Kong's imports in 1996.
10. At the APEC Economic Leaders Meeting in Osaka in November 1995, Hong Kong offered to
bind an additional 225 tariff lines at zero with ef fect from January 1996.  In its 1996 APEC Individual
Action Plan (IAP), Hong Kong committed itself to binding at zero a further 20% of its imports witheffect from January 2000 , another 25% of imports with effect from January 2005,  and all remaining
tariffs with effect from January 2010.  In 1997, the HKSAR proposed the removal of tariffs on toys,
as well as nuisance tariffs, in response to Econom ic Leaders' instruction on early voluntary sectoral
liberalization at their meeting in November 1996.  Toys were eventually selected as one of the nine
fast-track sectors for early voluntary liberalization at the Vancouver Ministerial Meeting in
November 1997.
3
11. As a result of the absence of tariffs, there are no laws, regulations or administrative
procedures governing product valuation for customs valuation purpose.  Except in the case of selected
for inspection by the Customs for the purpose of detecting contraband and mis-declaration, import
cargo is allowed immediate delivery upon fulfilment of licensing and import declaration requirements.
Average clearance time in the past three years has been two weeks for sea cargo and within 90
minutes for air cargo.4
(iii) Other import related levies and charges
12. A charge is payable to the Customs and Excise  Department at the time of lodging trade
declarations.  All goods other than those listed in Table III.1 are subject to the trade declaration
charge, irrespective of source or destination.  The revenue accrues to the general budget.  Since
1 August 1998, the declaration charge on imports  of non-foodstuffs has been HK$13 (for paper
declaration) for consignments worth up to HK$46,000;  a further HK$0.25 is levied on every
                                                     
3The 15 sectors are environmental goods and services, toys, energy, fish and fishery products, mutual
recognition arrangement for telecommunications equipment, gems and jewellery, forest products, medicalequipment and instruments, chemicals, automotive, fertilizers, oilseeds and oilseed products, natural andsynthetic rubber, civil aircraft, and food.  Of these sectors, the first nine were selected for fast-track action,
whereby the scope of coverage and implementation details were to be finalized by June 1998 with a view to
commencing implementation wherever possible in 1999.  The proposal on the other six sectors is to be furtherdeveloped by November 1998.
4The "clearance time" refers to the time actually taken to process the cargo selected for customs
inspection.Hong Kong, China WT/TPR/S/52
Page 27
additional HK$1,000 or part thereof.5  The charge on imports of foodstuffs is set at HK$13 per
shipment, irrespective of the value declared.6  In 1996/97, the trade declaration charge on imports and
exports generated revenue of HK$1.2 billion.  The revenue from such charges accrue to the General
Revenue.
Table III.2
Fees related to the issuance of import licences, August 1998
Product Licence application
(HK$)Price of licence forms
(HK$ per  pad)
Textiles:
Import Licence Form 7 40 13
Licences issued under Special Import Licensing (Textiles) 43 15
Scheme for piece-knitted garments:
Special Import Licences (Form 8b, 8c and 8a) .. 34
Ozone depleting substances 910 34
Pharmaceutical products and medicines 0 34
Radioactive substances and irradiating apparatus 0 20
Radio transmitting equipment 300a20
Reserved commodities 0 0
Rice 02 0
Sand:
Sand permit 0 0
Route permit 160 n.a.
Strategic commodities 0 20
Pesticides 02 0
Endangered species under CITES:
Live animals 420b0
Dead animals or their parts or derivatives, and plants 140 0
Plants and soil 00
Acetylating substances 0c0
Import of left-hand-drive vehicles 0 20
Optical Disc Mastering and Replication Equipment 0 20
Waste
Single shipment 11,500 n.a.
Multiple shipments 18,680 n.a.
.. Not available.
n.a. Not applicable, application to be submitted in the form of a letter.
a For import permit applicants who are not holders of a "Radio Dealers Licence".
For holders of a "Radio Dealers Licence", no import permit is required for individual shipment.
b Import licence fee for one licence covering the same species.
c Import authorizations are only issued to holders of valid licences.
Source: HKSAR Government.
                                                     
5When EDI service is used, the general rate affecting imports is HK$0.50 for consignments worth up to
HK$46,000;  a further HK$0.25 is levied on  every additional HK$1,000 or part thereof.
6For the items classified in Appendix I of the Hong Kong Imports and Exports Classification List.
When EDI is used, the rate is HK$0.50.WT/TPR/S/52 Trade Policy Review
Page 28
13. Additional fees are levied in the context of the licensing procedures required for a variety of
restricted or controlled products.  Traders of ozone-depleting substances covered by the Montreal
Protocol, exporters of restrained textiles, and participants in the Textile Traders Registration Scheme
must be registered with the Trade Department, which collects an annual registration fee.7  T h e
issuance of export and import licences, either for individual consignments or on an annual basis (for
excisable products and acetylating substances), may attract licence application and licence form fees.Table III.2 provides an overview of the import-related fees.  In 1996/97, the Government collected an
estimated HK$2.9 million from import and export licensing on dutiable commodities and
HK$239.9 million from textile licensing.
14. Anchorage, port clearance, buoy and port and light dues collected an estimated
HK$269 million in 1996/97.
15. Serious smuggling offences may be subject to heavy penalties, up to HK$500,000 and
imprisonment for two years upon summary conviction, and unlimited fine and seven years upon
conviction.
8  In 1997, the Customs and Excise Department seized HK$117 million worth of goods,
including cigarettes, smuggled between Hong Kong and China (mainland) with a potential loss of
excise duty of HK$13.6 million.
(iv) Import prohibitions, restrictions and controls9
16. Though a large number of products enter or leave the HKSAR freely, there exist various trade
restrictions including prohibitions and controls on health, safety, security or environmental grounds.
Some of these restrictions are designed to ensure compliance with international obligations, such as,
the requirements of the 1987 Montreal Protocol on Substances that Deplete the Ozone Layer (and its
subsequent amendments), the Convention on International Trade in Endangered Species of Wild
Fauna and Flora (CITES), and the Basel Convention.  Import quotas apply to rice (Chapter IV) and to
ozone-depleting substances covered by the Montreal Protocol.  The HKSAR does not impose specific
trade controls on cultural grounds.
17. The Government administers an import licensing or notification system for a variety of
commodities, on health, safety, environmental, security and anti-smuggling grounds, or to meet
obligations arising from international requirements.  Items covered by the system include strategic
commodities, reserved commodities, pharmaceutical products and medicines, pesticides, radioactive
substances and irradiating apparatus, left-hand-drive vehicles, ozone-depleting substances, textiles
and clothing, optical disk mastering and replication equipment, endangered species of animals and
plants, and waste.
                                                     
7Textiles control registration is a prerequisite for exporters and manufacturers who wish to export
textiles to markets subject to restraint under the ATC.  The Trade Department accepts only one registration fromeach exporter or manufacturer. The annual fees for textile  controls registration and for participation in the
Textile Traders Registration Scheme are HK$1,712 and HK$2,825 per annum, respectively.  Traders of
ozone-depleting substances covered by the Montreal Protocol have to be registered under the Ozone LayerProtection Ordinance.  The registration fee for two years is HK$2,790.
8Smuggling offences considered “serious” includ e the alteration of transport, and construction,
repairing and maintenance of vessels for the purpose of smuggling.
9According to the authorities, the only requirement is that all cargoes must be properly recorded in
cargo manifests upon importation and exportation.  It was reported that in April 1998 an arms-
dealer/conglomerate based in China, whose subsidiaries  had been caught in the illegal trading of weapons and
military equipment in recent years, opened an office in Hong Kong.  The Government is committed topreventing the HKSAR from "becoming an arms-dealing centre" and pledged to monitor the activities of thedealer and other arms-related business. (South China Sunday Morning Post, 14 June 1998).Hong Kong, China WT/TPR/S/52
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18. For strategic commodities, controls through import licensing requirements are aimed at
ensuring compliance with controls laid down by various international agreements or arrangements.10
19. To secure a reserve of certain staple food products, reserve stock (and licensing) obligations
currently apply to rice, frozen meat and frozen poultry (Chapter IV) .
20. For the import of pharmaceutical products and medicine (defined by section 2 of the
Pharmacy and Poisons Ordinance), an import licence is required under the Import and Export(General) Regulations.  The issuance of an import licence for these goods is subject to the prior
endorsement of the Pharmacy and Poisons Board of  the Department of Health.  Licences are also
required to control imports of certain agricultural pesticides and insecticides or to ensure the
collection of excise duties.  Licensing requirements for textiles are imposed to ensure compliance with
regulations and to discharge obligations under the Agreement on Textiles and Clothing.
21. For the import of radioactive substances and irradiating apparatus
11, an import licence is
required under the Import (Radiation) (Prohibition) Regulations.  An import licence is also required
for the importation of left-hand-drive vehicles.
22. Changes in licensing requirements since the last Trade Policy Review in 1994 include:
- amendments made to the Schedules to the Import and Export (Strategic
Commodities) Regulations, to keep the control lists of Hong Kong in line with those
adopted by various international export control regimes12;
- the introduction of a permit system in 1996 for waste shipments into and out of the
HKSAR.  The system aims to ensure that prior consent is obtained from territories
concerned before commencement of any waste shipment, thereby fulfilling Hong
Kong's obligation under the Basel Convention13;
- the introduction of the Weapons of Mass Destruction (Control of Provision of
Services) Ordinance in June 1997.  Under the Ordinance, services knowingly
provided to assist programmes of weapons of mass destruction are prohibited;14  and
- the introduction of licensing schemes in 1997 to complete production lines of optical
discs and essential components of production lines for producing optical discs.  The
licensing system aims to better monitor the flow of optical disc mastering andmanufacturing equipment into and out of the HKSAR and to prevent their use in
copyright infringing activities.
15
                                                     
10These include the Wassenaar Arrangement, the Nucl ear Non-Proliferation Treaty, Nuclear Suppliers
Group, Missile Technology Control Regime, the Australia Group on Chemical and Biological Weapons
Proliferation.  Hong Kong, China is not a member of these regimes.
11An import licence for these goods is issued upon the applicant’s production of a licence issued under
the Radiation Ordinance for possession, use, or dealing in or with such goods.  All of the relevant licences mustbe issued prior to the import.
12The regimes include the new control list adopted by the Wassenaar Arrangement;  the Chemical
Weapons Convention;  and the export schedules of the U.S. and the EU.
13WTO document G/LIC/N/1/HKG/2 (G/LIC/N/2/HKG/1), 19 November 1996.
14Persons providing such services are liable to a fine of HK$500,000 and to imprisonment for two years
on summary conviction; and an unlimited fine and imprisonment for seven years upon conviction.
15WTO document G/LIC/N/1/HKG/3 (G/LIC/N/2/HKG/2), 9 February 1998.WT/TPR/S/52 Trade Policy Review
Page 30
23. Under a Transhipment Cargo Exemption Sche me implemented by the Trade Department,
transshipments of products such as pharmaceuticals, reserved commodities, and certain pesticides
may be exempt from licensing requirements .16
24. In addition to rice quotas, import quotas (and licensing) are required in Hong Kong for ozone-
depleting substances.  These measures have been put in place so as to protect the environment in
accordance with the Montreal Protocol on Substances that Deplete the Ozone Layer.17
25. For health reasons, import prohibitions are maintained on potentially harmful food products,
including certain smokeless tobacco products, products containing non-permitted colouring matter,
artificial sweeteners (and the sweeteners themselves), aflatoxins or erucic acid, and preservatives or
anti-oxidants.  The import and sale of two toxic forms of asbestos, i.e. amosite and crocidolite, are
prohibited, so as to protect public health.  Plants and animals are also subject to importrestrictions.
18
26. Since 1994, pharmaceutical products containing a number of drugs have been deregistered
due to their linkage with diseases such as cancer.19  Accordingly, these products can no longer be
imported, or manufactured in Hong Kong, for sale or use.
27. Hong Kong prohibits importation and exportation of the highly endangered species listed in
Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora
in order to fulfil its obligations under the Convention.
28. As a consequence of the outbreak of Bovine Spongiform Encephalopathy (BSE) in the
United Kingdom, import licences covering U.K. frozen/chilled beef have been suspended since
28 March 1996.  Importation of live poultry from China was prohibited for a certain period of timedue to the occurrence of Influenza A H5N1 cases in 1997.
20
                                                     
16Transshipment cargo is defined as any imported article that is consigned on a through bill of lading or
a through airway bill from a place outside the HKSAR to  another place outside the HKSAR and is or is to be
removed from the vessel, vehicle or aircraft in which it was imported and either returned to the same vessel,vehicle or aircraft or transferred to another vessel, vehicle or aircraft before being exported, whether it is to be
transferred directly between such vessels, vehicles or aircraft or whether it is to be landed in the HKSAR after
its importation and stored pending exportation.
17Import quotas are currently maintained on hydrochlorofluorocarbons (HCFCs) (Table III.3).  Quotas
are initially allocated to applicants who have made substantial imports of the controlled substances before thecontrol measures are implemented.  In the subseque nt control period, quotas are allocated according to
individual quota holders’ performance in the preceding period.  Any unused quotas will be allocated under a
points system, where preference is generally given to end-users or applicants who have installed recycling
facilities.
18Under the Rabies Ordinance, the import of all species of the family Desmodomtidae (vampire bats) is
prohibited. Species listed under Schedule 1 and 3 of the Animals and Plants (Protection of Endangered Species)Ordinance are subject to import control.  The First Schedule of the Plant (Importation and Pest Control)Ordinance lists plants subject to import restriction.
19Drugs may be de-registered on grounds of toxicity or their contribution to cancer or cardiac problems.
The de-registered drugs are Oxyphenisatin, Diethylstilbestrol, Fenfluramine, Dexfenfluramine and Potassiumantimony tartrane.  Only registered drugs can be imported or manufactured in Hong Kong for sale or use.
20Importations of live chickens, and ducks and geese resumed respectively in February and May 1998
with strengthened inspections put in place.Hong Kong, China WT/TPR/S/52
Page 31
Table III.3
Import quotas, 1994-97
(Tonnes unless otherwise specified)
Type of  product Quota period Quota level Local
consumptionDegree of utilization
(per cent)
(a) Substances depleting the ozone layer
Chlorofluorocarbons (CFCs)a1994 576.45 531.37 92
1995 576.45 451.30 78
1,1,1-trichloroethanea1994 277.95 237.89 86
1995 277.95 217.96 78
Ten other fully halogenated CFCsa1994 2,750 kg. 80.17 kg. 3
1995 2,750 kg. 79.59 kg. 3
HCFCs 1996 138.93 89.38 64
1997 138.93 97.23 70
(b) Rice 1994 328,500 328,248 100
1995 325,728 326,850 100
1996 329,184b331,607 100
1997 342,900 332,712 100
a Imports for local consumptions have been  banned since 1 January 1996.
b An additional 1,800 tonnes of rice was imported in 1996 outside the quota as reserve stocks for five newly registered
stockholders.
Source: HKSAR Government.
(v) Trade sanctions
29. The imposition of sanctions resulting from security and foreign affairs considerations is the
responsibility of the Central People's Government.21  Thus, sanctions arising from decisions made by
the UN Security Council are implemented in HKSAR upon the instruction of the Central People's
Government and by the enactment of United Nations Sanctions Ordinance and its subsidiary
regulations.  Currently, Hong Kong, China maintains trade embargoes, with varying coverage, on
Angola, Burundi, Iraq, Liberia, Libya, Rwanda, Somalia, Tanzania, Uganda and Zaire.  They are
administered by the Trade Department through circulars to traders stipulating the licensing
requirements and relevant conditions.  Monitoring is through manifest checking, the trade declaration,
and the enforcement of relevant legislation by the Customs and Excise Department.
(vi) Emergency trade measures
30. Hong Kong, China has not taken any safeguard action under Article XIX of the GATT.22
(vii) Countertrade
31. The Government maintains that there are no legal provisions covering countertrade.  Nor does
it engage in countertrade.  It does, however, compile information on the extent of countertrade or
similar arrangements in which Hong Kong firms may be involved.
(viii) State trading
32. Hong Kong, China does not maintain any state-trading enterprises.23
                                                     
21Before the transfer of sovereignty, sanctions arising from decisions made by the United Nations
Security Council were implemented in Hong Kong through Orders in Council issued by the U.K. Government.
22Hong Kong has notified that it had neither safeguard measures within the meaning of Article 10 of
the Safeguards Agreement, nor voluntary export restraints or similar measures within the meaning ofArticle 11.1(b) of the same Agreement on the entry into force of the WTO Agreement (WTO documentG/SG/N/2/HKG (G/SG/N/3/HKG), 12 March 1996).WT/TPR/S/52 Trade Policy Review
Page 32
(ix) Other measures
33. No origin certificates are needed for goods imported definitively into or in transit through
Hong Kong, China.  Hong Kong does not have any preferential rules of origin.24  Reflecting its open
market environment, Hong Kong, China has no local-content requirements.  Nor does the
Government contract for or mandate the use of preshipment inspection activities as defined under the
Agreement on Preshipment Inspection.
(3) MEASURES DIRECTLY AFFECTING EXPORTS
(i) Export prohibitions, controls and licensing requirements
34. As on the import side, Hong Kong, China maintains relatively few restrictions on exports.  A
tight regulatory framework in the textiles and clothing sector, required by commitments under the
WTO Agreement on Textiles and Clothing (ATC), is the only major exception.  Other export controlsare mainly for strategic reasons or to impl ement commitments assumed under international
agreements such as CITES or the Montreal Protocol .  An overview of the products covered by export
licensing requirements and the fees involved, if any, is found in Table III.4.
35. Hong Kong, China is currently subject to quantitative restrictions on textile exports to
Canada, the European Union, Norway and the United States in accordance with the ATC, which wasimplemented on 1 January 1995, replacing the Multifibre Arrangement (MFA).  The quantitative
restrictions associated with the ATC are to be removed by 2005 under a ten-year phase-out
programme.  Changes in the scope and content of these quantitative restrictions since the last Trade
Policy Review of Hong Kong include the eliminati on of some quotas in respect of imports from Hong
Kong.
25  A comprehensive system of export controls is applied to administer the existing restraints.
Export licences are issued by the Government for restrained textiles and clothing.  Certificates of
Hong Kong origin are required for the European  Union and Norway.  Under the Textiles Trader
Registration Scheme26, exports of textiles and clothing items to non-restrained markets must be
notified only by the exporter.  Quotas are transferable.27
                                                                                                                                                                    
23Hong Kong, China has notified that it had no state-trading activities under GATT Article XVII (WTO
document G/STR/N/3/HKG, 19 November 1997).
24WTO document G/RO/N/1/Add.1, 22 June 1995.
25One category subject to specific limit and 22 categories subject to group limits have been fully or
partially relaxed by the United States, under its stage 2 integration programme; two restraint items have beenrelaxed by Canada; and four categories by the EU, under its stage 2 programme.  Norway has implemented thefirst two stages of its liberalization programme since 1 January 1996 and 31 December 1997, respectively, and is
to lift its remaining restraints on HKSAR's textile and clothing exports on 31 December 1998.
26The scheme, aimed both at facilitating trade and tightening controls, covers all textile imports, textile
re-exports, domestic textile exports to non-restrained  markets, domestic exports of properly marked textile
samples not exceeding US$250 in f.o.b. value to the United States, domestic exports of mutilated or stampedsamples of no commercial value to the United States, and textiles transshipments.  Details of each consignmentmust be filed via carrier to the Trade Department.
27Two types of quota transfer system exist. Perm anent transfers enable th e transferee to continue
receiving a quota allocation based on his/her export performance against the transferred quantity.  In temporarytransfers, the transfer is only for the year in question, and the export performance of the transferee against thetransferred quantity is attributed to the transferor.  All quota transfers must be register with the Trade
Department.  For details of the operation of the quota transfer system, see GATT (1994).Hong Kong, China WT/TPR/S/52
Page 33
Table III.4
Fees related to the issuance of export licences, August 1998
Product Licence application
(HK$)Price of application fee
(HK$ per pad)
Textiles and Clothing:
Non-restrained products (Export Licence Form 4 ) 56 20
Restrained products (Export Licence Form 5):
Paper Licence 216 20
EDI Licence 141 n.a.
Licences issued under the Special Export Licensing (Textiles) Scheme forpiece-knitted garments:
Special Export Licences (Form 8a)
(Form 8d)58 15
34
Export Licence Form 8: n.a.
Paper Licence 216 20
EDI Licence 141 n.a.
Ozone depleting substances 910 34
Pharmaceutical products and medicines 0 13
Radioactive substances and irradiating apparatus 0 13
Radio transmitting equipment 300a0
Reserved commodities 0 13
Strategic commodities 0 13
Pesticides 01 3
Endangered species under CITES:
Animals and plants 140 0
Re-export certificate 255 0
Acetylating substances 0b0
Television sets, video cassette recorders and video cassette players carried by
small vessel less than 250 gross tonnes01 3
Left-hand-drive vehicles 0 13
Optical disc mastering and replication equipment 0 13
Waste:
Single shipment 11,500 n.a.c
Multiple shipments 18,680 n.a.c
n.a. Not applicable.
a For export permit applicants who are not holders of "Radio Dealers Licence".
For holders of "Radio Dealers Licence";   no export permit is required for individual shipment.
b Export authorizations are only issued to holders of valid licences.
c Application to be submitted in the form of a letter.
Source: HKSAR Government.
36. Since 1 July 1996, Hong Kong has implemented the Production Notification (PN), a
notification requirement for cut and sewn textiles and clothing to be lodged with the TradeDepartment before the commencement of production.  The purpose of the measure is to monitor
compliance under the new origin rule.
37. A permit system was introduced in 1996 for waste shipments out of HKSAR with the aim of
ensuring that prior consent from the territories concerned is obtained before commencement of any
waste shipment.  In 1997, an export licensing scheme for optical disc mastering and replicationWT/TPR/S/52 Trade Policy Review
Page 34
equipment was introduced.28  No major change has taken place in Hong Kong's export licensing
requirements in respect of other commodities.
38. According to the authorities, no changes have been made to export prohibitions and approval
procedures since the previous Trade Policy Review of Hong Kong.
(ii) Voluntary restraints, surveillance and similar measures
39. Apart from restrictions applied under the ATC, there is no evidence of the authorities' being
involved in arrangements, unilaterally or with importing countries, aimed at restricting, moderating or
otherwise influencing exports from Hong Kong, China.
(iii) Export-related charges and levies
40. Hong Kong, China does not impose export taxes. However, like imports, all exports other
than those listed in Table III.1 are subject to a trade declaration charge.29  The fees charged are
currently HK$0.5 (EDI declarations) or HK$13 (paper declaration) for consignments valued at less
than HK$46,000 and HK$0.25 for each additional HK$1,000 or part thereof.  The charge for export
declaration of goods with the country of origin other than HKSAR is HK$0.5 (EDI declaration) or
HK$13 (paper declaration) for the first HK$23,000 and HK$0.5 for each additional HK$1,000 or part
thereof.  Additional fees may be levied on specified services, including registration or issuance feesfor export licences, permits and certificates of origin; and charges on air cargo throughput, anchorage
and port clearance.  The application fees for textile export licences and for origin certificates are
estimated to have generated revenue of HK$143 million and  HK$5.6 million, respectively, in
1996/97.
41. For exports of Hong Kong manufactured clothing and footwear items specified in the
Schedule to the Industrial Training (Clothing Industry) Ordinance, there is a clothing training levy of
HK$0.3 in respect of each HK$1,000 value or part thereof in addition to the declaration charge.  Thelevies are used to finance the Clothing Industr y Training Authority, a statutory non-profit-making
organization with a mandate to provide training facilities for persons employed in the clothing
industry.
30
(iv) Certificates of origin
42. The Government provides an origin certification system to help exporters to meet the
requirements of importing countries.31  Certificates of origin are also required for the export of
restrained textiles to the EU to supplement Hong Kong's Textiles Export Controls System and to
provide evidence that the textiles exports are of Hong Kong origin.
43. The Trade Department is responsible for administering the origin certification system and
issuing certificates.  Five other organizations in  Hong Kong, China have been designated by the
                                                     
28As in the case of imports, the scheme applies to complete production lines of optical discs, including
essential components of production lines for producing optical disks.
29Export manifests are also required for cargo exports in packages or bulk.
30A construction industry training levy is imposed on all construction works in Hong Kong to finance
the Construction Industry Training Authority, which provides craftsmen training for the construction industry.
31Certificates of origin for re-exports may also be issued, for trade facilitation purpose, against
established proof of the origin of the re-export goods, such as a certificate of origin issued by the originatingcountry.Hong Kong, China WT/TPR/S/52
Page 35
Government as competent to issue certificates of origin under Article 11 of the International
Convention for the Simplification of Customs Formalities 1923.32
44. The Government operates a manufacturer and product registration system and allows only
registered manufacturers with verified manufacturing capability to apply for a certificate of origin or
an export licence for restrained textiles.  Under the system (the Factory Registration System),
factories are required to demonstrate their capabilities to manufacture the product for which they areregistered before they are entitled to the issue of a Certificate of Hong Kong Origin or a restrained
textiles export licence.  The production capabilities, as evidenced by the requisite factory premises,
machinery and appropriate workforce, must be verified by Customs and Excise Department before
approving the factory registration.  Periodic re-inspections are envisaged to ensure that the registered
factories continue to engage in active production.
(v) Export promotion and marketing assistance
45. The status and function of the Hong Kong Trade Development Council (HKTDC), a statutory
body aimed at assisting manufacturers, exporters and importers to enter markets and expand sales,
have generally remained the same since the previous Trade Policy Review.
33  The HKTDC's major
activities include organizing trade fairs around the world, publishing market surveys, product reports,product-specific magazines, and a monthly newspaper targeting business leaders and decision-makers
in overseas markets.  Emphasis has been placed recently on the promotion of Hong Kong's services
exports;  of the HK$317 million budgeted for promotional expenditure in 1998/99, HK$40 million is
allocated to promote Hong Kong's services exports.  In addition to its Hong Kong offices, HKTDC
currently operates 51 branch offices in 34 countries and regions.
34  In 1997, the HKTDC organized
more than 300 promotional events, including 19 trade fairs in Hong Kong.
46. According to the authorities, about half of HKTDC's export promotion effort is focused on
Europe and the Americas, 20% on China (mainland) , 12% on Japan, 12% on organizing international
trade fairs in Hong Kong, and the remainder on the rest of Asia and other markets.
47. The HKTDC raises funds through fees for participation in fairs, the sale of publications and
the like.  The ratio of self-generated revenue to gross recurrent expenditure was over 70%, and
government funding amounted to HK$588 million in 1996/97.
48. Hong Kong, China maintains no export (or other) subsidies notifiable under Article XVI:1 of
GATT 1994 and Article 25.2 of the Agreement on Subsidies and Countervailing Measures.35
(vi) Export finance, insurance and guarantees
49. The Hong Kong Export Credit Insurance Corporation (ECIC) was established in 1966 to
provide insurance protection for Hong Kong exporters against non-payment risks arising from
                                                     
32These organizations are The Hong Kong General Chamber of Commerce, Federation of Hong Kong
Industries, The Indian Chamber of Commerce, Hong Kong, The Chinese Manufacturers' Association of HongKong, and The Chinese General Chamber of Commerce.
33The governing body of TDC is a 19 member council comprising representatives of Hong Kong trade
and industry bodies, private sector leaders and government officials.  The Chairman is appointed by the Chief
Executive of HKSAR.
34HKTDC opened offices (branch or consultant office) in Dalian, Jakarta, Kuala Lumpur, Moscow,
Santiago and Wuhan in 1994, and in Chengdu, Fuzhou, Johannesburg, Kunming, Prague, Qingdao, and SaoPaulo in 1995.
35WTO document G/SCM/N/25/HKG, 30 June 1997.WT/TPR/S/52 Trade Policy Review
Page 36
commercial and political events.  The ECIC is wholly owned by the Government, which therefore
guarantees all contingent liability.  As the ECIC operates in accordance with a statutory policy aimed
at securing reserves sufficient to meet all its expenditure, this guarantee does not necessarily
constitute government financial assistance to exports.  In fiscal year 1997/98, the total amount insured
by the ECIC amounted to some HK$21,50036, a 7% increase over the previous year.  In June 1998,
possibly as part of its "proactive industrial support policy" (section (4)(v)), the Governmentintroduced the Pilot Credit Guarantee Scheme for SMEs involved in exporting.  This scheme was
suspended in August 1998, however, and merged into the HK$2.5 billion Special Finance Scheme
(section (4)(v)(c)).
(vii) Measures maintained by importing countries
50. According to the authorities, exports from Hong  Kong are currently subject to provisional or
definitive anti-dumping duties in Argentina, Australia, Canada, the European Union, Mexico, the
Philippines, and South Africa.  It is estimated that Hong Kong's domestic exports subject to
anti-dumping actions amounted to some HK$73 million, representing some 0.035% of Hong Kong's
total domestic exports.
37
(4) INTERNAL MEASURES
(i) Taxation
(a) Indirect taxes
51. Excise duties and a motor vehicle first-registration tax are significant instruments of indirect
taxation.  In 1996/97, excises and the registration tax, respectively, accounted for an estimated
HK$8.4 billion, (4.1%), and HK$3.2 billion (1.5%) of total government revenue.
52. The Government levies excise duties on four types of goods:  alcoholic liquors, hydrocarbon
oil, methyl alcohol, and tobacco.  The excise duty regime applies equally to imported and locallymanufactured products, and a uniform duty rate and the same valuation methods apply to all products
of the same category, whether imported or locally manufactured.  Whereas a specific duty system is
used for hydrocarbon oil, tobacco, and methyl alcohol, ad valorem  duty rates apply for alcoholic
liquors.
38
53. Duties on hydrocarbon oil contribute about 55% to total excise revenue; the relevant rates,
and their development over time, are set out in Table III.5.  The Dutiable Commodities Ordinance was
amended in 1996 to improve efficiency by introducing an administrative penalty, in lieu of
prosecution, for offenders committing minor offences39, and streamlining the procedures for the
assessment of duty, and licence and permit control
                                                     
36Unaudited figures.
37According to the authoritie s, using the export statistics of 1997 as reference.
38In March 1994, a single ad valorem  system of duties was introduced for alcoholic liquor, replacing
the previous "specific-cum- ad valorem " system.
39Minor offences in this context include illega l possession of dutiable good at control points.Hong Kong, China WT/TPR/S/52
Page 37
Table III.5
Duty rates for dutiable commodities 1994-99
Hydrocarbon oil (HK$ per litre)
1994/95 1995/96 1996/97 1997/98 1998/99
Aircraft spirit 4.92 5.31 5.79 6.14 6.51
Leaded petrol 5.46 5.90 6.43 6.82 6.82
Unleaded petrol 4.86 5.25 5.72 6.06 6.06
Light diesel oil 2.45 2.65 2.89 2.89 2.00
Alcoholic liquors  (ad valorem  duty rates)
1994/95 1995/96 1996/97 1997/98 1998/99
Alcoholic beverages and ethyl alcohol
products with alcoholic strength above
30 per cent by volume100 100 100 100 100
Wine made from grapes 90 90 90 60 60
Alcoholic liquors (excluding wine made
from grapes) and ethyl alcohol productswith alcoholic strength of not more than
30 per cent by volume30 30 30 30 30
Methyl alcohol (HK$ per 100 litres)
1994/95 1995/96 1996/97 1997/98 1998/99
Methyl alcohol and any admixture
containing methyl alcohol747 747 747 792.0 840.0
In addition, for every 1 per cent by
which the alcoholic strength by volume
exceeds 30 per cent25 25 25 26.5 28.1
Tobacco
1994/95 1995/96 1996/97 1997/98 1998/99
Cigarettes (HK$ per 1,000 pieces) 580 626 682 723 766
Cigars (HK$ per kg.) 745 805 877 930 986
Chinese prepared tobacco (HK$ per kg.) 142 153 167 177 188
All other manufactured tobacco except
tobacco intended for the manufacture of
cigarettes (HK$ per kg.)701 757 825 875 928
Source: HKSAR Government.
54. Excise duty exemptions and refunds are granted on goods exported from Hong Kong with the
consent of the Customs and Excise Department, or for other specified purposes (Table III.6).  In the
fiscal year 1997/98, the revenue forgone as a consequence of exemptions and refunds under the
Dutiable Commodities Ordinance amounted to HK$2.6 billion (US$334 million), about 30.5% of
excise revenue collected on these items.  Drawbacks were removed from the Dutiable CommoditiesOrdinance in 1996.
40
                                                     
40According to the authorities, drawback was removed because there had not been any case of use of
duty-paid goods for production input, and because there is provision for claim of refund on goods used formanufacture of dutiable goods under the Dutiable Commodities Regulation.WT/TPR/S/52 Trade Policy Review
Page 38
Table III. 6
Products and activities qualifying for excise exemptions, refunds and drawbacks
Exemptions
Stores, lubricants and fuel for ships of more than 60 tonnes net register and for ocean-going tugs and aircraft in quantities
determined by the Commissioner of the Customs and Excise Department, for use either outside or partly inside Hong Kong (the fue l
exemption refers to vessels other than pleasure vessels):
- hydrocarbon oil for the bench testing of aircraft engines for aircraft operating mostly outside Hong Kong;
- light diesel oil with a marker and a colouring substance;
- diesel oil used in the blending of fuel oil in licensed depots;- vehicle fuel for disabled drivers (subject to quantitative ceilings);- export goods (including re-exports);
- goods destroyed with the consent of the Commissioner;
- duty-paid goods which have been exported and subsequently re-imported;- samples or advertising material of no commercial value and not intended for re-sale;
- goods drawn as samples for analysis by the Government Chemist;
- goods donated to charitable institutions;- goods imported by passengers or crew members for their own use in quantities determined by the Commissioner;  and
- goods for diplomats and international organizations operating in Hong Kong.
A refund of duty may be granted in respect of duty-paid goods used in the manufacture of any dutiable goods under Regulation 14 A
of the Dutiable Commodities Ordinance.
Refunds
Duty-paid goods:
- exported from Hong Kong with the consent of the Customs and Excise Department;
- which were imported in pursuance of a contract of sale, and for which the description, quality, state or condition of the
goods was not in accordance with the contract, or the goods were damaged in transit, and the importer, with the consent
of the Customs and Excise Department, has destroyed the goods unused or has returned them to persons outside Hong
Kong who supplied them;
- used in the manufacture of dutiable goods;
- supplied for the use or consumption of a person who is entitled immunity or exemption from duty;
- drawn as samples for analysis by the Government Laboratory;  and- comprising fuel placed in the fuel tank of pleasure vessel of more than 60 tonnes net register and for use by that vessel in 
reaching an identified port outside Hong Kong.
Source: HKSAR Government.
55. Excise duty paid on production inputs, such as tobacco or hydrocarbon oils, may be reclaimed
on exportation of the processed product (Table III.6).  There are no exemption or refund arrangements
for goods traded between Hong Kong and the main land.  Dutiable goods imported into Hong Kong
from the mainland and exported to the mainland from Hong Kong are treated in the same manner as
imports/exports from and to other parts of the world.
56. Since the last Trade Policy Review of Hong Kong, a new appeal procedure has been
introduced.  Parties affected by government decisions on excise taxation may now appeal to the
Administration Appeals Board.41  Regarding exemptions and refunds, aggrieved parties may appeal to
the courts for judicial review on the government decision.
                                                     
41The Administrative Appeals Board was established with the enactment of the Administrative Appeals
Board Ordinance in 1994 to hear and determine appeals lodged by any person aggrieved by certainadministrative decisions.  Members of the Board including the Chairman, Deputy Chairman and panel membersare appointed by the Chief Executive.Hong Kong, China WT/TPR/S/52
Page 39
Table III.7
Motor vehicle first registration tax in Hong Kong
(Per cent, and ad valorem  rates)
1993-94
Categories Rates (on c.i.f value)
Private cars (c.i.f. value)
Basic cars  (below HK$30,000) 90
Semi-luxury cars (between HK$30,000-HK$60,000) 105
Luxury cars (exceeding HK$60,000) 120
Motor cycles and motor tricycles 90
Other types of vehicles  (Taxis, public and private light buses, public and private buses, special
purpose vehicles)15
Goods vehicles
Van-type light goods vehicles: not exceeding 1.9 tonnes 90
exceeding 1.9 tonnes 50
Other types of goods vehicles 35
from August 1994
Categories Rates (on taxable value)
Private cars
taxable value not exceeding HK$100,000 40
taxable value between HK$100,001 and HK$200,000 45
taxable value between HK$200,001 and HK$300,000 50
taxable value exceeding HK$300,000 60
Motor cycles 40
Motor tricycles 40
Goods vehicles
   Van-type light goods vehicles not exceeding 1.9 tonnes:
taxable value not exceeding HK$100,000 40
taxable value between HK$100,001 and HK$200,000 45
taxable value exceeding HK$200,000 50
   Van-type light goods vehicles exceeding 1.9 tonnes: 20
   Other goods vehicles 18
Other types of vehicles  (Taxis, public and private light buses, public and private buses, special
purpose vehicles)4
Note: The taxable value of a vehicle is its published retail price excluding the value of three exempted accessories (i.e. air- conditioners,
audio equipment, and anti-theft devices) and distributor's warranties.  In the exceptional case where there is no published ret ail
price, e.g. when an individual imports a model which is not available for sale in ordinary markets, the Commissioner for
Transport, who is empowered under the Motor Vehicles (First Registration Tax) (Amendment) Ordinance 1994 to assess retail
prices of vehicles, has the power to determine the level of the first-registration tax.
Source: HKSAR Government.
57. Violation of excise regulations may result in confiscation of the goods, fines of up to
HK$1 million and imprisonment of up to two years.
58. Imports of excisable products must be stored in a general bonded warehouse, a public bonded
warehouse, or a licensed warehouse nominated by the importer until the duty is paid or the goods are
re-exported.  The same requirement applies to domestically produced excisable goods.  In 1996/97,
the Government collected HK$34.9 million from the bonded warehouse supervision charge, up by
10.8% on the previous year.WT/TPR/S/52 Trade Policy Review
Page 40
59. The motor vehicle first-registration tax is levied on the taxable value of motor vehicles.42  The
taxable value of a vehicle is its published retail price excluding the value of exempted accessories and
distributors' warranties.  Rates on passenger cars vary according to their taxable value (Table III.7).43
Since the last Trade Policy Review of Hong Kong, various amendments to the Motor Vehicles (FirstRegistration Tax) Ordinance have been made.  In 1996, the Ordinance was amended to enable the
Commissioner for Transport to set the maximu m value for tax-exempt items, i.e. exempted
accessories and distributors’ warranty, so that the va lue of these items in excess of the ceiling value
would be taxable.
44  In 1997, a further amendment was introduced concerning the redefinition of the
scope of dutiable accessories, trade operations, warranty, duties on resales, and of depreciation, as
well as strengthening of the customs' power of enforcement.  First-registration tax is not applicable to
any motor vehicle propelled solely by electric power and that does not emit any exhaust gas.
(b) Direct taxation
60. Hong Kong's income tax system is noteworthy fo r its simplicity and low tax rates, both of
which are partly the consequence of the virtual absence of incentives other than accelerated
depreciation that applies across the board.45  With the exception of income from certain international
shipping services, which are tax exempt, profits (total income minus total deductions) derived fromtrading, professional or business activities in Hong Kong are subject to statutory tax rates of 16% in
the case of corporations and 15% for unincorporated businesses.  No taxes are levied on dividends
received from a corporation subject to Hong Kong's profits tax or on capital gains.  The combination
of very generous depreciation allowances and no taxation of dividends or capital gains means that
companies operating in Hong Kong face marginal eff ective tax rates that are even lower than the 15%
statutory rate of profits tax:  11.9% for a typical manufacturing company and only 3.7% for a typical
service company, according to a recent study.
46  The maintenance of such a simple, low tax system
                                                     
42A disabled person is not liable for first-registration tax on the first HK$300,000 of the taxable value
of a motor vehicle.
43Motor cycles, motor tricycles, goods vehicles and other types of vehicles (taxis, public and private light
buses, public and private buses, special-purpose vehicles) are also subject to the motor vehicles first-registration
tax.  The Motor Vehicle (First Registration Tax) Ordinance was amended by a resolution in 1997 to extend thefirst-registration tax (FRT) exemption for electric vehicles for three years up to 31 March 2000.
44No ceiling values have been set on the exempted accessories and distributors' warranties as of
1 August 1998.  In the 1996 amendment, a provision on sanctions against abuse to obtain remission of the
first-registration tax was also introduced.  The remission scheme aims to provide an incentive for scrapping old
cars; car owners replacing vehicles of not less than ten years old by petrol driven cars may receive a reduction ofthe first-registration tax.
45Accelerated depreciation involves an initial write-off for machinery and buildings at rates of 60% and
20%, respectively;  a regular annual deduction is then allowed at the rate of 10, 20, 30 or 4% of the remainingbalance, using the straight-line method.  Where it is owned by the end user, a 100% write-off is allowed for
expenditure on plant and machinery specifically related to manufacturing, and for computer hardware, software
and development costs.  Capital expenditure on refurbishment and redecoration of buildings and structures isamortized over five years, based on a 20% straight-line annual write-off.
46Chen and McKenzie (1997).Hong Kong, China WT/TPR/S/52
Page 41
undoubtedly contributes to Hong Kong's attractiveness to foreign investors. 47  Marginal statutory tax
rates on salaries range from 2% to 17%.48
61. Property tax is charged to the owners of land and/or buildings in Hong Kong; it is computed
at the standard rate of 15% on the net rental value of the property.  However, corporations carrying on
an active business are exempt from property tax because income from property is aggregated with
other income and subject to the profits tax.
62. In 1996/97, profits taxes accounted for 24% of the Government's revenue while taxation of
salaries accounted for 13.7%.
(ii) Sanitary and phytosanitary (SPS) measures
63. All food imported for sale in Hong Kong must comply with the standa rds laid down in the
Public Health and Municipal Services Ordinance and its subsidiary legislation.  Monitoring samplesare taken by staff of the Department of Health for inspection, chemical analysis and bacteriological
examination at points of importation as well as at wholesale and retail levels to ensure that standards
of hygiene are met.  Laboratory spot inspections on import consignments are carried out to ensure
compliance.  The Health Department monitors the safety of imported and locally produced foods.
According to the authorities, the food standards correspond to ISO or other internationally acceptedstandards, insofar as those standards are applicable.
64. Hong Kong maintains plant and animal quarantine requirements based on the
recommendations of the Asia and Pacific Plan t Protection Commission (APPPC) and International
Office of Epizootics (OIE), respectively.  The Agriculture and Fisheries Department administers the
Plant (Importation and Pest Control) Ordinance, Pu blic Health (Animals and Birds) Ordinance and
Rabies Ordinance to implement SPS measures in Hong Kong.
65. Imports of all meat, meat products, poultry, milk, cream and frozen confectioneries require an
official health certificate issued by the competent authority in the country of origin.
49  The certificate
must state whether the goods has been properly packed under sanitary conditions, is fit for human
consumption and, in the case of meat, whether inspections (ante and post-mortem) have been carried
out.  Official health certificates from competent health authorities of the exporting country are also
required upon importation of game, meat and poultry.  Th e importation of game and prohibited meat
requires the approval of the Director of Health.50  Imported animals and birds must generally be
covered by an import permit issued in advance by the Agriculture and Fisheries Department,comply with the terms of such permit, and be accompanied by a health certificate issued by the
                                                     
47Interestingly, Hong Kong has no comprehensive double taxation treaties.  It does, however, have
limited arrangements concerning shipping profits (with the United States) and airline profits (with Canada,Germany, Korea, the Netherlands, New Zealand and the United Kingdom).  Furthermore, an understanding has
been reached with the People's Republic of China on tax relief for Hong Kong airlines and shipping companies
and for the avoidance of other cases of double taxation of income flows between Hong Kong and the mainland.The authorities envisage negotiations with a view to concluding comprehensive double taxation treaties withselected countries where this is considered to be in Hong Kong's interest.  Such negotiations have yet to begin.
48The total tax charged on total taxable income (income net of deductions) cannot exceed 15%.
49Before recognizing the certificates of an overseas authority, Hong Kong, China requests the country
concerned to provide information about the production plants (including slaughterhouses), domestic health and
sanitary requirements, and the legal controls over exported commodities.
50"Prohibited meat" is the kind of meat specified in the Schedule to the Imported Game, Meat and
Poultry Regulations.  According to the authorities, these are the kinds of meat for which sanitary conditioncannot be ascertained.WT/TPR/S/52 Trade Policy Review
Page 42
competent veterinary authority of the exporting country.  Similarly, the importation of plants
requires a phytosanitary certificate issued by the relevant authority of the exporting country.  Milk,milk beverages, cream and frozen confection imports must be from a source of manufactureapproved by the Provisional Urban Council or Provisional Regional Council.
66. Since the previous Trade Policy Review of Hong Kong, the Mineral Oil in Food Regulation
was amended to allow the presence of hydrocarbon wax in an amount not exceeding good
manufacturing practice in chewing gum products.  In 1996, the Food and Drugs (Composition and
Labelling) Regulation was amended to bring the provisions into line with the international standards
for labelling as prescribed by Codex Alimentarius.  In 1998, the Public Health (Animals and Birds)
Regulations were amended to prevent the spread of H5N1 avian influenza to Hong Kong, China.
(iii) Standards and other technical requirements
(a) Standards, testing and certification
67. Hong Kong, China does not have a single official standards authority.   The Industry
Department operates as the liaison point with WTO and the consultation point for other WTO
Members seeking information on standards.  Between January 1995 and February 1998, Hong Kong
made 21  notifications (including addenda and revisions) under the Agreement on Technical Barriers
to Trade (TBT Agreement).
51  All bureaux and departments concerned have the responsibility for
ensuring compliance with the WTO Agreements.  The Industry Department issues written reminders
to all standards-related bureaux and departments twice a year on Hong Kong, China's obligation to
adopt international standards whenever possible and to submit notifications of technical regulations to
the WTO.  Where standards have to be applied in Hong Kong for reasons including safety, health or
environmental considerations, they are based essentially on international standards and/or appropriateoverseas standards.
68. Since the last Trade Policy Review of Hong Kong, a total of nine legal regulations involving
the use of standards, relating to consumer protection and safety, health, environmental protection and
telecommunications, have been introduced.
52
                                                     
51The notifications related to the application of U.S. and EEC emission standards for large diesel
vehicles and the tightening the emission standards for light vehicles; a voluntary energy efficiency labellingscheme for household refrigeration appliances; labelling requirements for food and food products;  banningregistration of certain new vehicles powered by diesel compression ignition engines; identification marking andbilingual safety labelling requirement;  voluntary energy efficiency labelling scheme for air conditioners;imposition of a statutory duty on manufacturers, importers and suppliers of certain consumer goods to ensure
safety of the products; minimum requirements for achieving energy-efficient lighting installations;  tightening of
the emission standard of private cars in line with the U.S. State of California; tightening of the specifications ofdiesel fuel in line with the European CEN standard;  tightening of the emission standards for light and heavy
vehicles in line with the U.S. and EEC standards; minimum requirements for achieving energy-efficient designof air-conditioning installations in buildings; technical requirements for customer premises equipment to beconnected to the direct exchange lines of the public switched telephone networks; introduction of a voluntary
energy efficiency labelling scheme for washing machines; evaluation and certification requirement for
telecommunications equipment; and acceptance of various standards.
52WTO documents G/TBT/Notif. 95.73, 93, 152, 339, 345;  Notif. 96.38;  Notif. 97.152, 153, 154;
17 March 1995, 3 April 1995, 12 May 1995, 30 No vember 1995, 21 December 1995, 29 February 1996,
22 April 1997, 22 April 1997, 22 April 1997.Hong Kong, China WT/TPR/S/52
Page 43
Table III.8
Standards and technical regulations in HKSAR
Ordinance/Regulation Responsible
bureau /
departmentSummary of legislation
Road Traffic Ordinance (RTO)
(Chapter (Cap.)374-Laws of HongKong), Road Traffic (Construction
and Maintenance of Vehicles)
Regulations, Road Traffic (SafetyEquipment) RegulationsTransport
DepartmentThe two regulations cover an extensive requirement of vehicle construction
and standards.
Fire Service (Installation andEquipment) Regulations (Cap.295)Fire Services
DepartmentPortable equipment, e.g. fire extinguishers, fire blankets should be tested in
accordance with a set of recognized national/international standards and be
approved by Fire Services Department before putting in use in Hong Kong.
Dangerous Goods (General)Regulation (Cap. 295)Fire Services
DepartmentGas cylinders and pressure vessels should be tested in accordance with a set
of national/international standards and be approved by Fire Services
Department before putting in use in Hong Kong.
Electricity Ordinance
(Cap 406)Electrical and
Mechanical
ServicesDepartmentProvides statutory control over electricity safety in Hong Kong.
The Electrical Products (Safety)
Regulation (EPSR) and the Plugsand Adapters (Safety) Regulation(PASR)Electrical and
MechanicalServicesDepartmentBoth are sub-legislation under the Electricity Ordinance. In May 1998, when
the EPSR became effective, the PASR was repealed. Under the EPSR, allelectrical products designed for household use and supplied in Hong Kong
shall comply with the prescribed safety requirements and shall be issued with
certificates of safety compliance.  Concerning the safety standards, IECStandards as well as relevant international/national standards that comply withthe prescribed safety requirements of the EPSR are acceptable.
Ozone Layer Protection Ordinance(Cap 403)Environmental
ProtectionDepartmentUnder Section 4 of the Ozone Layer Protection Ordinance (Cap. 403), it is an
offence for any person to import or export ozone-depleting substances (ODSs)
without a licence.  With this control provision, coupled with an administrative
quota system, import of halons has been banned since January 1994.  Importof other ODSs such as chlorofluorocarbons, carbon tetrachloride, 1,1,1-
trichloroethane and hydrobromofluorocarbons has also been banned since
January 1996.
Under the Ozone Layer Protection (Products containing scheduled
substances) (Import Banning) Regulations, made under the Ozone Layer
Protection Ordinance (Cap. 403), no person shall import a product containingODSs from any country or place which is not a party of the Montreal
Protocol, unless these are imported for essential use as described in Section 3
of the regulation.  In addition, products containing halons are banned fromimport from all countries.
Noise Control Ordinance
(Cap. 400)Environmental
ProtectionDepartmentStipulating noise emission standards for certain portable air compressors,
hand-held percussive breakers and motor vehicles including motorcycles.The standards are either identical with or are substantially the same asinternational standards and/or appropriate overseas standards.
Table III.8 (cont'd)WT/TPR/S/52 Trade Policy Review
Page 44
Ordinance/Regulation Responsible
bureau /
departmentSummary of legislation
Waste Disposal Ordinance
(Cap. 354)Environmental
ProtectionDepartmentUnder the auspices of the United Nations Environment Programme, the Basel
Convention on the Control of Transboundary Movements of Hazardous
Wastes and their Disposal, came into effect globally in 1992.  Under this
Convention, control is effected by a system of notification and consentamongst the states of export, transit and import prior to the commencement of
transboundary waste movement.  The Convention also prohibits trade in
hazardous and other wastes with non-parties, except under separate bilateralor multilateral agreements which are compatible with the requirements of the
Convention.  In order to fulfil Hong Kong's obligation under the Basel
Convention, import and export of hazardous wastes, or of any waste fordisposal in Hong Kong is subject to a permit system control under the Waste
Disposal (Amendment) Ordinance 1995.  Waste importers and exporters are
required to apply for import and export permits from the EnvironmentalProtection Department prior to the commencement of the waste shipment.
Consumer Goods Safety Ordinance(Cap. 456)Trade and
Industry BureauStipulates that consumer goods shall comply with general safety requirements
(GSR).
Water Pollution Control Ordinance(Cap.358)Environmental
ProtectionDepartmentSets discharge standards for sewage in Hong Kong.
Public Health (Animals and Birds)
Ordinance (Cap.139), RabiesOrdinance (Cap.421)Agriculture and
FisheriesDepartmentLive animals imported into Hong Kong must be accompanied by a permit or
licence, which includes health requirements in line with those stipulated bythe International Office of Epizootics (OIE).
Plant (Importation and PestControl) Ordinance (Cap. 207)Agriculture and
FisheriesDepartmentPlants imported into Hong Kong must be accompanied by a permit or licence
which includes health requirements in line with those stipulated by theInternational Plant Protection Convention (IPPC).
Telecommunication Ordinance(Cap. 106)Office of Tele-
communicationsAuthorityThe Office of Telecommunications Authority may issue technical
telecommunications regulations in the form of HKTA specifications and
regulations/exemption orders for the purpose of licensing and control of
telecommunications, telecommunication services and telecommunicationapparatus and equipment.
Air Pollution Control Ordinance,(Cap. 311), Laws of Hong KongEnvironmental
ProtectionDepartmentUnder section.80 of the Air Pollution Control Ordinance (Cap. 311), it is an
offence for a person to import into Hong Kong any quantity of asbestos
known as amosite or crocidolite or any substance or item made with or
containing amosite or crocidolite.  It is however not an offence to importamosite and crocidolite if the substances form an integral part of the structure
or fittings of a ship brought into Hong Kong for repair or breaking-up.  The
authority may, on application in writing, grant an exemption to permit theimportation of amosite or crocidolite or substance to such conditions as the
authority may specify if he is of the opinion that such an exemption is
warranted and that the exemption would unlikely lead to a health risk to thecommunity.
Under the Air Pollution Control (Vehicle Design Standards) (Emission)
Regulations made under the Air Pollution Control Ordinance (Cap. 311),every motor vehicle manufactured after certain dates shall be so constructed
that the emission therefrom conforms to the relevant European, Japanese or
U.S. standards.  Vehicles meeting these standards with certification reportsrecognized by other governments will be type-approved.  This type-approval
is one of the prerequisites for vehicle registration under the Road Traffic
Ordinance (Cap. 374).  The authority may exempt any motor vehicle or classof motor vehicle from the provision of the Regulations if he considers that itwould be in the public interest to do so.
Table III.8 (cont'd)Hong Kong, China WT/TPR/S/52
Page 45
Ordinance/Regulation Responsible
bureau /
departmentSummary of legislation
Public Health and Municipal
Services Ordinance, (Cap. 132) andits subsidiary legislationDepartment of
HealthSets out standards regulating food.
Toys and Children's Products Safety
Ordinance, (Cap. 424).Trade and
Industry BureauPrescribes the requirement for toys and children's products to comply with the
stipulated safety standards.
Source: HKSAR Government.
69. Hong Kong has been a correspondent member  of the ISO (International Organization for
Standardization) since 1987.  There are more than 1,730 Hong Kong organizations certified to the ISO
9000 series of quality standards and 17 to ISO 14000 series.  The Government plans to launch an
accreditation scheme, operated by the Industry Department, to afford certification bodies the
opportunity to apply for accreditation and to demonstrate that they are operating in accordance with
the relevant ISO/IEC conformity assessment standards or guide.
70. Under the Hong Kong Laboratory Accreditation Scheme (HOKLAS), 74 laboratories are
currently accredited for local testing.53  Their activities cover calibration services and testing of
products such as chemicals, construction materials, electrical and electric goods, food, textiles and
toys, as well as environment-related testing.  The HOKLAS has established agreements/arrangements
for the mutual recognition of test results with accreditation schemes in 21 economies in Asia, Europe
and the United States.54  Under each mutual recognition agreement/arrangement, signatories accept
test reports endorsed by the other party.  Agreements or arrangements concluded by HOKLAS are for
the mutual recognition of test reports only; they are scheme-to-scheme arrangements, non-binding and
are not government-to-government agreements.  Thus, they do not confer any international rights nor
constitute obligations for the Government.  Nor do th ey commit the Government to accept test reports
from accredited laboratories of agreement partners for the enforcement of any laws or regulations.
Under these mutual recognition agreements, test reports endorsed by HOKLAS are considered by the
agreement partners as having the same technical validity as test reports endorsed by the partners
themselves.
71. The Industry Department, a correspondent member of the ISO, maintains a Product Standards
Information Bureau, which provides advisory serv ices to industry on technical requirements abroad.
The Industry Department is also a registered subscriber of the International Electrotechnical
Commission (IEC) standards.
(b) Marking, labelling and packaging requirements
72. Under the Trade Descriptions Ordinance, administered by the Customs and Excise
Department, false trade descriptions, marks and mis-statements in respect of goods supplied in the
course of trade are prohibited.
                                                     
53These comprise 12 government laboratories, two university laboratories, 56 commercial laboratories and
four accredited laboratories located outside Hong Kong.
54The names of signatory organizations and the dates of signature (in parentheses) are:  National
Association of Testing Authorities of Australia (1990) ;  American Association for Laboratory Accreditation
(1990);  United Kingdom Accreditation Service (1989);  Dutch Council for Accreditation (1993);  InternationalAccreditation New Zealand (1991);  European Cooperation for Accreditation (interim agreement - currently15 members) (1994);  Singapore Accreditation council (1996);  and Asia Pacific Laboratory AccreditationCooperation (APLAC) Mutual Recognition Arrangement (currently seven members) (1997).WT/TPR/S/52 Trade Policy Review
Page 46
73. Special labelling and marking requirements apply to vehicles, toys and children’s products,
consumer goods, gold and platinum articles, fire service products, electrical products, food, pesticides,
telecommunication products, pharmaceutical products, and radioactive substances and irradiating
apparatus.
74. Safety warning labels in both Chinese and English are generally required for consumer goods,
toys and children’s products.  The warning or ca ution phrases must be legibly and conspicuously
shown on the goods, any package of the goods, a label affixed to the package or a document enclosed
in the package.
75. Under the Weights and Measures Ordinance, pre-packaged food products must carry labels
indicating:
- percentage by weight or the actual amount of any ingredient where its labelling places
special emphasis on the presence or otherwise of that ingredient;  and
- "use by" dates for pre-packaged foods that are highly perishable and are therefore
likely after a short period to constitute an immediate danger to human health.55
There is no requirement that the labelling show whether rice is genetically engineered or whetherfrozen meat is hormone treated.
76. Food that is reasonably expected to last for more than 18 months or that is deep frozen needs
to be accompanied by an indication of its minimu m durability, by indicating "best before" in both
Chinese and English.
56  Food that has been irradiated needs to be suitably labelled.  The composition
of skimmed and semi-skimmed milk must be also indicated.
77. No eco-labelling system exists in Hong Kong, China.
(iv) Government procurement
78. The basic principles underlying government procurement policy are:  accountability to the
public for the use of taxpayer's money;  the achievement of the best value for money;  transparency in
procedures and practices for selling to the Government; and open and fair competition in tenders.
79. Hong Kong acceded to the WTO Agreement on Government Procurement (GPA) on
20 May 1997, which entered into force for Hong Kong on 19 June 1997.  According to the authorities,
Hong Kong, China maintains an open and non-discriminatory public procurement system for goodsand services, and extends voluntarily non-discriminatory treatment on an MFN basis to all countries
irrespective of whether they are signatories to the GPA.
80. The government procurement process is governed by the Stores and Procurement Regulations
issued by the Financial Secretary under the Public Finance Ordinance.  These regulations are
supplemented by Financial Circulars issued by the Secretary for the Treasury.  In order to fully realignthe tendering procedures with the GPA, the Government has revised certain provisions concerning
tender procedures (Chapter III of the Regulations).  Hong Kong was given a one-year deferred
application of Article XX of the GPA to allow time for the setting up of a Bid Challenge System,
                                                     
55WTO document G/TBT/Notif.95.152/Rev.1, 18 May 1995.
56Hong Kong's terms of accession to the GPA are found in a WTO document WT/Let/141,
22 May 1997.Hong Kong, China WT/TPR/S/52
Page 47
which is to deal with complaints from suppliers or contractors on alleged breaches of the Agreement.
According to the authorities, the Government  fully complies with the provisions of GPA.
81. Most government procurement of goods and services in Hong Kong is handled by the
Government Supplies Department (GSD), which is th e Government's central procurement agent.  The
GSD is involved in the purchases of goods and services, except those whose value is within the direct
purchase limits specified in the Stores and Procurement Regulations (SPR).57  A few departments
conduct their own procurement of goods, e.g. the purchase of vehicles by the Government Land
Transport Agency, boats and vessels by the Marine Department and printing machines and paper by
the Government Printer.  Construction services ar e procured by the individual works departments,
under the general supervision of the Works Bureau.58  Individual departments may make direct
purchases only of low value items or with special appr oval from the relevant authorities.  Services are
generally procured by individual departments. In the fiscal year 1996/97,  the Government awarded
supply contracts amounted to some HK$4,000 million though GSD, and some HK$17,700 million for
construction services.59
82. Contracts are awarded by various Tender Boards, depending on the procurement area and
costs involved.  The Government Supplies Tender Board is responsible for contracts concerninggoods and general services below a threshold of HK$6 million; the Public Works Tender Board for
works and related contracts below HK$15 million; the Marine Department Tender Board for
procurement of vessels and marine contracts worth HK$3.5 million or less;  the Home Affairs
Department Tender Board for contracts relating to local public works and minor environmental
improvement works contracts worth HK$3 million or less;  and the Printing Department Tender
Board for procurement of printing machines and paper with contract values worth HK$2.5 million or
less.  Tenders exceeding these limits are submitted to the Central Tender Board, chaired by theSecretary for the Treasury and including the Dire ctor of Government Supplies, the Secretary for
Works, the Deputy Secretary for the Treasury and a member of the Department of Justice appointed
by the Financial Secretary.  According to the authorities, the HKSAR does not  discriminate between
products on the basis of their country of origin.  Since 1996, the GSD no longer engages any buyer
agents and, accordingly, British Crown Agents are no longer used as agents for overseas purchases.
60
83. Open and competitive tendering procedures are normally employed for government
procurement exceeding:
- HK$500,000 for goods and general services;  and
- HK$1 million for construction and engineering services.61
                                                     
57All policy bureaux and departments are delegated the authority to make direct purchases of stores of a
value not exceeding HK$50,000.  This limit is raised to HK$75,000 for departments with Supplies Officers,HK$120,000 for departments with Senior Supplies Officers, and HK$200,000 for departments with ChiefSupplies Officers.  For overseas purchases, the financial limits include the f.o.b. value of the stores purchased,but exclude the freight, insurance and other incidental charges.
58The Works Bureau also maintains a register of approved works contractors and a central works
contractors performance report system.
59The share of the public sector in total investment expenditure on construction, in terms of the value of
work put in place for residential and non-residential build ings and other construction works in Hong Kong, was
47.2% in 1996 and 38.9% in 1997.
60Until 1995, the Crown Agents acted as a buyer's agent for the GSD, sourcing and negotiating
contracts with potential suppliers on behalf of the Hong Kong Government in return for a commission, which
was normally 2% of the contract value.
61Limited or restrictive tendering procedures ar e permissible only under specified exceptional
circumstances, and with the prior approval of the Secr etary for the Treasury or the Director of Government
Supplies (for tenders invited by GSD only).WT/TPR/S/52 Trade Policy Review
Page 48
84. For goods and services within direct purchasing limits, bureaux and departments are normally
required to obtain at least two quotations (for purchases with a value not exceeding HK$20,000) or
five quotations (for purchases with a value above HK$20,000) from suppliers/contractors capable of
providing the required stores/services, and to  accept the lowest offer to specification.
85. Bureaux and departments are generally required to use standard tender forms when inviting
tenders.62  The approval of the Secretary for the Treasury is required for use of other departmental
forms.
86. Unsuccessful tenderers are informed of the reasons for their rejection upon request; any
supplier or contractor who feels aggrieved may lodge a complaint directly with the procuring
department or to the relevant Tender Board, the Independent Commission Against Corruption, or the
Office of the Ombudsman.63  Any aggrieved supplier or contractor may also apply for judicial review
in accordance with the rules of the High Court.  There is no Hong Kong law that provides for
sanctions against bid-rigging and similar collusive business practices.  The Government is in the
process of establishing a bid challenge system that will be in conformity with the GPA.  The system
aims to deal with complaints from suppliers/contractors on alleged breaches of the GPA.
(v) Industrial support policies
87. While the Government has characterized its industrial support policy as proactive, this does
not appear to entail industry-specific intervention or other attempts to "pick winners".  On the
contrary, its industrial policy involves minimum government interference with the functioning of
markets, but maximum support for the development of human capital, infrastructure, applied research
and development, and facilitation of technology transfer and upgrading.  The policy also involves the
maintenance of a business-friendly regulatory regime and "light-handed" approach to competition.
(a) Promotion of new technologies and training
88. Hong Kong operates a variety of schemes intended to enhance the technology base of the
economy, encourage the development of new produ cts or production techniques, and/or remove
skills-related obstacles considered to impede new manufacturing and services activities.64
                                                     
62They are also required to ensure that a complete set of tender documents is issued to all tenderers,
these include:  the relevant standard tender form;  terms of tender including the conditions to be observed when
submitting a tender, the tender validity period, and the currency to be used for the contract;  general conditions
of contract covering the conditions the contractor ha s to comply with in executing the contract;  special
conditions of contract covering any conditions peculiar to the contract;  offer to be bound, signed and completedby the tenderer, to include his/her address and the tendered sum;  tender specifications that define therequirements of the contract;  bills of quantities or qu antities required of the contract where applicable;  and
detailed price schedules or schedule of rates where applicable.
63The Ombudsman is empowered to investigate a complaint concerning the procedures adopted in
inviting tenders, determining the qualification of persons to tender and the selection of the successful tenderer.
64Major public bodies responsible for the development and promotion of new technologies in industry
include the Hong Kong Productivity Council (HKPC), the Hong Kong Industrial Technology CentreCorporation (HKITCC), the Hong Kong Industrial Estates Corporation, and the Provisional Hong Kong Science
Park Company Ltd. For the development and applicatio n of new technologies for specific industries, the
Government has also provided funding support for the setting up of a number of centres, including the
Telecommunication Technology Centre, the Jewellery Technology Centre, the Hong Kong PharmaceuticalTechnology Centre, and the Consumer Media Laborat ory for Innovative Home Electronics Technology.
Support for these projects is usually provided in the form of grants and these centres are expected to self-financeafter a certain period of time.Hong Kong, China WT/TPR/S/52
Page 49
89. To promote the development of human capital, the Government provides technical education
and vocational training in eight public institutions:  the Vocational Training Council (VTC), the Hong
Kong Productivity Council, the Clothing Industry Training Authority, the Employees Retraining
Board, the Commission on Strategic Development, the Chief Executive's  Commission on Innovation
and Technology, and the Construction Industry Training Board.  Expenditure for scientific research
and payments for technical education related to the trade or business of a company are deductibleexpenses items in the calculation of profits tax.  The VTC administers the New Technology Training
Scheme, which started in 1992 to assist employers to have employees trained in new technologies.  In
February 1997, the Government raised the level of grant from 50% to 75% of the total cost of
training, removing the ceiling of the grant.  The scheme is funded by income from investment of the
New Technology Training Fund, consisting of HK$105 million in trust, established by theGovernment.  The VTC also administers the Engi neering Graduate Training Scheme to assist
engineering graduates to obtaining the training necessary to qualify as professional engineers.
90. In regard to the technological infrastructu re, the Government set up the Industrial Support
Fund to finance industry support projects that are beneficial to the industrial or technological
development of Hong Kong.  In addition, technology ventures or applied research and developmentprojects that have the potential for commercial exploitation may apply for funding support under the
Applied Research Fund.  The Hong Kong Industr ial Technology Corporation also administers the
Innovation Loan for technology-based start-up companies in general and the Early Technology
Business Capital Loan Scheme for its incubatees.
65
(b) Adjustment assistance
91. Various adjustment assistance programmes exist in Hong Kong, including the Employees
Retraining Scheme, Job Matching Programme, and other retraining schemes by the VocationalTraining Council as well as schemes run by the Clothing Industry Training Authority.
92. The Employees Retraining Scheme (ERS) is administered by the Employees Retraining
Board (ERB) which started full operation in 1993.  It is designed to provide adjustment training and
placement assistance for employees affected by changes in the labour market arising from economic
restructuring.  Apart from vocational skills and adjustment training, the ERS also offers placementassistance and follow-up services to retrainees with a view to helping them to re-enter the
employment market and to retain their new jobs.  Since its inception, the ERB has provided over
243,000 retraining places for more than 132,200 persons.  The average placement rate for graduate
retrainees looking for jobs was around 76% during the period from April 1997 to March 1998.
93. The Job Matching Programme, administered by the Labour Department, provides personal
counselling and job-matching services for unemployed local workers.  Suitable jobs for registered job
seekers under the programme are identified by placement officers in the Department.
(c) Assistance for current production
94. Hong Kong does not operate any financial support schemes to cushion domestic producers
from international market fluctuations or to  offset the impact of intervention abroad.
                                                     
65The Innovation Loan was launched on 23 January 1997 with an initial capitalization of HK$5 million.
Each technology start-up company may receive a maximum loan of HK$0.3 million.  The Early TechnologyBusiness Capital Loan offers loan facilities to HKITCC's incubatees of up to HK$1 million of each successfulapplication.WT/TPR/S/52 Trade Policy Review
Page 50
95. The Agriculture and Fisheries Department (AFD) encourages farm activities by providing
infrastructural and financial support through low-in terest loans to farmers to enhance agricultural
productivity and to promote safe and environmentally friendly production methods.66 In late 1994, the
AFD launched an Accredited Vegetable Farm Scheme, which is intended to better protect the
environment and consumers against pesticide residues.  Under the Scheme, vegetable farms that adopt
good horticultural practices, and use pesticides safely in accordance with a pest-control programmeare granted accreditation.  Accredited farms are strictly monitored and their use of pesticides
supervised.  The produce of accredited farms will go through the wholesale market in specially
marked vegetable baskets.
96. Within the framework of a free market economy, the Government provides various services
for small and medium-sized enterprises (SMEs)
67;  these comprise 98% of all manufacturing and
service establishments in the HKSAR, and employ about 60% of the working population.  The
Government believes that the key to success for SMEs lies in the increase in competitiveness through
productivity enhancement in terms of operational efficiency and the value added to products.  In July
1996, the Government set up a Small and Medium Enterprises Committee to address the specific
concerns of SMEs.68  The activities of the Committee include seminars and exhibitions.  The
Government also established a HK$2.5 billion Special Finance Scheme for Small and Medium
Enterprises in August 1998, aimed at helping SMEs to secure finance from lending institutions by
means of government guarantee.  This scheme was felt to be necessary to assist certain SMEs which,
in the face of the liquidity crunch caused by the Asian financial turmoil, would otherwise be unable to
obtain adequate financing from lending institutions, despite their good track record and credit
worthiness.
97. The Government also set up a Services Support Fund in 1996 to provide financial support for
projects that may contribute to the overall development and the competitiveness of Hong Kong's
services sectors.  Service support bodies, trade and industry associations, higher education
institutions, professional bodies, research institutes and locally incorporated companies are eligible to
apply for the funding support.  By August 1998, the Government has allocated a total of
HK$100 million to the Fund.  Of this amount, the Industry Department has approved about
HK$70 million to support 41 projects.
(d) Provision of industrial land
98. All land in Hong Kong is state property, and is granted for development by public auction,
tender, or private treaty under land leases, which are normally for a term of 50 years from the date of
grant.  According to the authorities, the Government 's industrial land policy is to ensure that there is
an adequate supply of fully serviced industrial land to cater for the changing needs of the industrial
sector.
99. Through the Hong Kong Industrial Estate Corporation (HKIEC), the Government offers land
in its industrial estates to industries with new or improved technology and processes, which cannot
                                                     
66The loan funds include the Kadoorie Agricultural Aid Loan Fund, the J. E. Joseph Trust Fund and the
Vegetable Marketing Organization Loan Fund. At the end 1997, loans issued since the inception of these funds
reached HK$387 million.
67An SME is a firm with less than 50 employees.
68The Small and Medium Enterprises Committee comprises government officials, representatives of
major industry-support organizations and industrial and trade associations, and other members from the privatesector with background knowledge of SMEs.Hong Kong, China WT/TPR/S/52
Page 51
operate in the multi-storey factory buildings, in which many factories are located in Hong Kong.69
Three industrial estates, providing 214 hectares of industrial land are currently in operation, and a
fourth estate is being planned.70  Reflecting recent development of the services sector in Hong Kong,
the Government has decided that with effect from mid-1998, the scope of the industrial estates would
be expanded to cater to services industries that cannot be accommodated in multi-storey buildings.
100. An enterprise wishing to set up a factory in an  industrial estate must meet the criteria laid
down by the HKIEC, i.e. that the industrial project is of a nature which prohibits it from being carried
out in an ordinary multi-storey building, that the project is not an offensive trade71, and that the
primary activity is not storage or warehousing.  Projects that are most welcome into the industrial
estates are those involving new/improved products  or technology, and with high value added.  No
specific industries, however, appear  to be targeted for eligibility.72
101. The Government is in the process of setting up of a Science Park, to help nurture technology-
based companies, promote technology transfer and enhance regional cooperation in technological
development. The Government is also planning to set up a second Industrial Technology Centre.73
(e) Business and services promotion
102. The Government aims to create a business-frie ndly environment to facilitate the development
of a world-class services sector in Hong Kong.  Thus, the Helping Business Programme was launched
in 1996 to cut red tape, reduce the costs to busine sses of complying with government regulations,
provide new business support services, and to transfer public services to the private sector, where
appropriate market conditions prevail.  A Servi ces Promotion Programme is in place to promote Hong
Kong as a pre-eminent services centre.  In 1997 a new, Permanent Business and Services Promotion
Unit was established in the Financial Secretary's office to take forward the two programmes.
(f) Investment strategies
103. According to surveys conducted by the Industry Department, banking and financial facilities
together with infrastructure are among the main factors contributing to Hong Kong's attractiveness to
foreign direct investment;  interestingly, the low level and simplicity of Hong Kong's tax system is
thought to be of lesser importance.  Hong Kong also has an investment promotion programme, which
                                                     
69The cost of land in these industrial estates is apparently set at a premium to cover the cost of
formation of the serviced land.  According to the authorities, it is inappropriate to compare the premium charged
by HKIEC with market prices because land in the industri al estates is subject to very restrictive lease conditions
which specify the use of the land and impose restrictions on assignment and sub-letting.  It is therefore not indirect comparison with the land sold by public auctio n or tender.  HKIEC reviews the premium levels every year
to determine whether they should be adjusted to reflect inflation.
70The land premiums for the three estates range between HK$2,250 and HK$3,400 per square meter.
71'Offensive trade' refers to any trade, business, pr ocess or manufacture which, in the opinion of the
designated authority (referring to either the Urban Council or the Regional Council), causes offensive or
noxious effluvia or dust or is otherwise of an offensive or harmful nature or which involves the slaughtering ofanimals or birds.
72In the three estates, there are various industries, including food products, electronics, electric
appliances, metal moulds and dies, satellite-related services, printing, machinery, chemicals andpharmaceuticals.
73The Hong Kong Industrial Technology Centre Corporation was set up in June 1993 and the first
Centre was opened in March 1995.  Major services provided by the Centre include administration of atechnology-based business incubation programme to support technology start-ups in their initial years;  lease ofoffice accommodation and facilities to established technology-based companies;  and organization of seminarsand exhibitions to facilitate technology transfer and commercialization of research and development activities.WT/TPR/S/52 Trade Policy Review
Page 52
seeks to attract overseas investments to Hong K ong's manufacturing and service sectors, and promote
Hong Kong's  further development as a regional and global service centre.  A variety of programmes
are implemented through a network of seven inve stment promotion units attached to Hong Kong
Economic and Trade Offices.  They are located in Tokyo, New York, San Francisco, London,
Brussels, Toronto and Sydney.  The 'One Stop Unit' of the Industry Department (HKOSU) also
implements the same programmes, including the following free services to:
- provide general and specific information on investment in the HKSAR, e.g. the
availability and cost of land, government regulations, and industrial and servicing
support services;
- arrange tailor-made programmes for visiting investors, including in-depth briefings,
visiting of sites and offices, meetings with local businessmen and relevantgovernment officials;
- match overseas investors with interested local businessmen to facilitate joint-venture
and technology-transfer projects;  and
- provide after-sales services to overseas investors already established in Hong Kong
and to assist in any expansion plans or reinvestment projects.
104. All businesses in the HKSAR must obtain a Business Registration Certificate from the Inland
Revenue Department (IRD) within one month of the commencement of business. The average time
for the IRD to complete the processing of an application is two weeks. The business registration fee is
HK$2,250.  The certificate must be renewed annually.  The placement of responsibility for business
registration under the IRD is justified by the authorities on the grounds that it facilitates tax collection
as persons who are required to obtain a Business Registration Certificate are also generally liable to
profit tax.
105. Foreign investors in the HKSAR may use all available forms of business entities. Private
limited companies and branches of foreign companie s are the two most commonly used forms. There
is no capitalization requirement for a private company.
106. According to the authorities, Hong Kong has an  open and free investment regime, offering a
level playing field for local and overseas investors, based on the principles of fairness andnon-discrimination.  There are no restrictions on foreign exchange transaction, capital movement or
repatriation of funds, nor special approval or noti fication requirements for foreign investment in Hong
Kong.  On a sectoral basis there are a few regulatory restrictions in some business sectors
(Table III. 9).  Recent deregulation measures include actions to liberalize international
telecommunications services, which has been franchised to a single provider, by terminating thefranchise eight years ahead of the original expiration, and by opening up at least 50% of the exchange
lines of the provider to other fixed network operators by early 1999 (Chapter IV).Hong Kong, China WT/TPR/S/52
Page 53
Table III.9
Regulating restrictions for foreign investment
Sector Nature of the
regulatory
measuresRemarks
Banking Commercial
presenceCommercial presence for banks incorporated overseas must take the followings forms:
(a) Banks incorporated overseas may maintain:  (i)  offices to which customers have access for
the purpose of banking business (or deposit-taking business in the case of a restricted licence bank)
and/or arranging or entering into any other financial transactions, in only one building;  and (ii)  no
more than two additional offices (other than an automated teller machine or similar devices) to whichcustomers and others have access for the purpose of any other types of business in a separate building
or buildings.  Such offices may consist of no more than one regional office and one back office.
(b) A limited company incorporated by an overseas bank in the HKSAR may apply for a
licence to operate as a licensed bank, restricted licence bank or deposit-taking company in the form ofa subsidiary with branching rights.  In the case of an application for a full banking licence, the
institution must have been an authorized institution for at least ten years and be closely associated and
identified with the HKSAR.  An overseas bank may also acquire an existing locally incorporated bankwith branching rights subject to the consent of the Monetary Authority.
(c) Banks incorporated overseas may also set up representative offices in the HKSAR, butsuch offices are prohibited from taking deposits and undertaking banking business in general.
Residencerequirementof the chief
executiveAs a licensing condition, institutions authorized under the Banking Ordinance must appoint a chief
executive and not less than one alternative chief executive, each of whom is subject to residence
requirement in Hong Kong.
Insurance Provision for
statutory
insuranceStatutory insurance, such as employer's liability insurance in respect of employees, must be purchased
from an insurer authorized in Hong Kong.
Commercial
presenceUnder the Insurance Companies Ordinance, only a company or an association of underwriters can
apply for authorization to carry on an insurance business.  In the case of the former, commercialpresence must take the form of a Hong Kong subsidiary, branch or representative office, although
insurance business cannot be carried out through a representative office.
Residencerequirement
for the chiefexecutiveAs a licensing condition, the chief executive of an insurer authorized in Hong Kong must be based in
Hong Kong.
Air transportsupport
servicesExclusive
franchise
agreementFranchises have been awarded by the Airport Authority (a government-owned statutory body) for
aircraft base and line maintenance services for the new airport at Chek Lap Kok.  On base
maintenance, the franchise will be non-exclusive.  On line maintenance, there will be not more thanthree franchisees in the first five years and not more than four franchisees in the following five years.
There are no restrictions on foreign ownership of the franchisees.  The award of these franchises
follows the level playing field principle.
Professionalservices
-  LegalRecognition
ofqualificationsForeign nationals who wish to practise as barristers in Hong Kong must satisfy one of the following
conditions:- they have obtained their qualifications in Hong Kong;
- they have obtained their qualifications in England, Northern Ireland or Scotland and have:
(i)  practised as a barrister or advocate in the Untied Kingdom for a least 3 years;  (ii)  are HongKong permanent residents;  or (III)  have been ordinarily resident in Hong Kong for at least 7
years;
- they are Commonwealth citizens or citizens of the Republic of Ireland, have been
ordinarily resident in Hong Kong for 7 years, and have obtained a Postgraduate Certificate in
Law from a local university (Bachelor of Law may be obtained in their country of origin);
- have been admitted as a solicitor in Hong Kong for at least 3 years before the application
for admission and during that time were in practice as a solicitor in Hong Kong or employed by
the HKSAR Government as a legal officer;
- have been admitted as a barrister or legal practitioner in Australia, Canada (except Quebec), New
Zealand, Republic of Ireland, Zimbabwe or Singapore;  have experience in advocacy;  and have
been employee in the Department of Justice of the Government of HKSAR as a legal officer for
at least 7 years and were so employed for at least 3 years on work similar to that usuallyundertaken by a barrister of 10 years' seniority;  and intend, if admitted, to practice as a barrister
in Hong Kong within 12 months after admission.
Table III.9 (cont'd)WT/TPR/S/52 Trade Policy Review
Page 54
Sector Nature of the
regulatorymeasuresRemarks
Market access Foreign law firms may operate in Hong Kong subject to the following restrictions:
restrictions - a law firm registered as a foreign firm is not permitted to practise Hong Kong Law or employ
and/or enter into partnership with Hong Kong solicitors;
- a registered foreign firm may enter into an association with a local law firm provided that the
number of foreign lawyers to local lawyers in the association does not exceed the ratio of 1:1(this requirement may be waived by the Law Society under exceptional circumstances);  and
- a branch of a foreign law firm registered as a local law firm (i.e. practises Hong Kong Law) may
bear the same name as the foreign firm provided that a registered foreign firm of the same namehas practised foreign law in Hong Kong in the immediate past three years.
-  Accounting Residence
requirementTo obtain a practising certificate, a professional accountant has to be present in Hong Kong for not
less than 10 days in the preceding 12 months.
-  Pharmacy Recognition
of
qualificationsRelevant U.K. or Commonwealth qualification holders may be registerable without taking the
registration examination, the Pharmacy and Poisons Board in practice requires holders of these
qualifications to meet all the above requirements before they can be registered.  Therefore, the
qualification requirements are in practice non-preferential.
Source: HKSAR Government.
(vi) Intellectual property
107. The legislation on intellectual property rights in the HKSAR provides protection for patents,
copyrights, trade marks, trade secrets (undisclosed information), industrial designs, layout designs
(topographies) of integrated circuits, and plant varieties.
108. Since the previous Trade Policy Review, there has been a major reform in Hong Kong's
legislation concerning intellectual property: the changes have occurred according to the relevant
provisions in the Basic Law, and in order to ensure full compliance with TRIPS, notably by
introducing the Intellectual Property (World Trade Organization Amendments) Ordinance in 1996.74
According to the Ordinance, various reforms in  a number of areas have been made, including
amendments to:
- the Registration of Patents Ordinance75, to provide for government use of patents in
times of declared extreme urgency76;
- the Trade Marks Ordinance, to allow for the registration of shape marks;
- the Trade Descriptions Ordinance and the Copyright Ordinance77, to enable a right
holder to apply for detention orders from the Hong Kong courts for pirated or
counterfeit goods;  and
- the Copyright Ordinance, to provide for  performers' rights for musical, dramatic and
literary works, and  rental rights for computer programs and sound recordings.
109. The Intellectual Property Department is responsible for the development of legislation on
intellectual property (IP), promotion and education on IP. The Department is required by statute to
                                                     
74Hong Kong's legislation on intellectual property had provided protection for patents, copyrights, trade
marks, industrial designs and, since 1994, layout designs (topographies) of integrated circuits.  Undisclosedinformation is protected by common law.  According to the authorities, Hong Kong's previous intellectual
property laws had largely been in compliance with the WTO Agreement on Trade-Related Aspects ofIntellectual Property Rights (TRIPS), and the new laws go beyond the TRIPS, incorporating part of provisions
under the WIPO Copyright Treaty 1996 and the WIPO Performances and Phonograms Treaty 1996.
75In force before 27 June 1997.
76Extreme urgency is whenever the Chief Executive considers it necessary or expedient for the
maintenance or securing sufficient supplies and services essential to the life of the community.
77In force before 27 June 1997.Hong Kong, China WT/TPR/S/52
Page 55
provide registration services and to maintain registries of rights for trade marks of goods and services,
patents, and registered designs.
110. The Customs and Excise Department is responsible for enforcing the criminal aspects of
infringement of intellectual property rights (IPRs).  The Department investigates complaints against
infringement of trade marks, copyright, and false trade descriptions.  Custom officers have extensive
powers of search and seizure at all levels where copyright piracy and trade mark counterfeiting maybe encountered, from street sale to manufacturing a nd import or export trade. It also collaborates with
overseas enforcement authorities and owners of trade marks and copyright to combat infringement of
intellectual property rights.  The number of officers in charge of IPR enforcement has also increased
in the past few years.
78  Large-scale operations have been carried out on shops and on-street unlawful
sale of pirated CD products.  From January 1998 to June 1998, pirated goods valued at HK$1,280million were seized and 1,116 people were arrested; goods with false trade descriptions and
counterfeit valued at HK63 million were seized and some 1,290 people were prosecuted; and some
320 persons were jailed for copyright and trade mark offences.  The courts of the HKSAR are also
responsible for the enforcement of patents and other IPR-related civil remedies.
111. Changes in the Custom's power of IPR enforcement since the previous Trade Policy Review
include the commencement of operation in December 1996 of legislation giving effect to TRIPS
border control measures;  the enactment of the Copyright Ordinance empowered Customs officers to
seize suspected copyright pirated goods, which may be deemed forfeited after a specified period,
79
and the enactment of the Prevention of Copyright Piracy Ordinance (Section viii) empoweringCustoms to inspect all licensed optical disc manufacturers without a warrant.
80
112. The HKSAR is a party to the main internationa l intellectual property conventions including
the Paris Convention for the protection of indust rial property;  the Berne Convention for the
protection of literary and artistic works;  the Universal Copyright Convention;  the Geneva
Convention for the Protection of Sound Recordings;  the Patent Cooperation Treaty;  and the
Convention establishing the World Intellectual Property Organization.
Table III.10
Seizure by Hong Kong Customs of infringement on copyright and trade mark counterfeits
(a) Copyrights
Type Quantity (number) Value  (HK$ ('000))
1996 1997 1998
(up to June)1996 1997 1998
(up to June)
Computer-related items (computer
manual, software, CD ROM, micro-
computer, etc.)286,358 694,438 614,886 12,104 26,874 18,973
Video-related items (audio equipment,
cassette tapes, laser discs, CD ROM,etc.)480,503 3,162,208 28,484,643 27,821 136,455 1,214,740
Sound recording (music compact
discs, karaoke laser discs, etc.)146,895 325,562 476,625 5,810 12,105 15,126
Literature (printed books, etc) 29,059 125,629 4,878 1,316 4,932 153
Miscellaneous .. .. .. 1,787 7,010 31,109
Total .. .. .. 48,838 187,377 1,280,101
                                                     
78From 117 in 1995 to 201 as of June 1998.
79Powers were also given for the disclosure of information to other enforcement agencies to facilitate
better cooperation in copyright protection.
80The Ordinance also enables Customs to better monito r the optical disc manufacturing industry by the
establishment of a compulsory registration system.WT/TPR/S/52 Trade Policy Review
Page 56
(b) Trade Descriptions
Type Quantity (number) Value  (HK$ ('000))
1996 1997 1998
(up to June)1996 1997 1998
(up to June)
Clothing 1,065,178 2,143,155 857,772 81,262 84,433 49,969
Leather goods 42,448 24,405 20,607 7,908 7,908 7,837
Watch and accessories 50,086 322,537 46,514 15,423 15,423 2,191
Computer and accessories 8,408 5,080 597 9,511 9,511 43
Pharmaceutical productand medicine85,756 680,743 6,669 331 331 128
Foodstuff 65,733 9,928 19,492 2,458 325 268
Electrical and electronic
goods72,904 407 130 3,985 129 75
Others .. .. .. 30,741 36,165 2,419
Total .. .. .. 151,619 154,224 62,930
.. Not available.
Source: Customs and Excise Department, HKSAR Government.
(a) Patents
113. Patent owners may obtain protection through registration in Hong Kong under the Patents
Ordinance, effective as an independent pate nt regime in the HKSAR since 27 June 1997.81  T h e
Ordinance provides for the granting of standard patents and short-term patents.82 Protection in Hong
Kong takes effect on the date on which the fact of the patent grant is  advertised in the GovernmentGazette.  The HKSAR courts enforce the patents registered under the Ordinance.
114. For standard patents, a two-stage registration system has been introduced.  In the first stage,
the applicant files a request to record a designated patent application with the HKSAR Patents
Registry, a newly established organization under the Intellectual Property Department.  The
application must be made within six months of the publication of the application in a designated
patent office.
83  In the second stage, the applicant files a "request for registration and grant" within six
months after the date of grant of the designated patent or publication of the request to record,whichever is later. Once granted in Hong Kong, Ch ina, the standard patent is independent of the
designated patent granted by the designated patent office.
115. For short-term patents, applications must be made directly to the Patents Registry. A short-
term patent is granted to products or processes only after a formality examination, though validity of
                                                     
81The previous patents system in Hong Kong, under Registration of Patents Ordinance, was based on
the registration in Hong Kong of U.K. patents or of European Patents designated in the United Kingdom. This
was essentially a re-registration system based on a first registration taking effect in the United Kingdom.  The
transitional arrangements under the Patents (Transitional Arrangements) Rules basically provided that patentsregistered under the previous law are treated as patents granted under the new law.
82A standard patent qualifies for protection for a maximum period of 20 years, and a short-term patent
for 8 years, subject to payment of renewal fees.  A desi gnated patent application is either an application in a
designated patent office for a patent, which application has been published under the law of the designated
patent office or an international application which has been published and which has validly entered its national
phase in a designated patent office.
83The designated patent offices are:  the Chinese Patent Office, the United Kingdom Patent Office and
the European Patent Office, in respect of patents granted under the European Patent Convention designating theUnited Kingdom.  However, patents granted by these offices are not automatically protected in the HKSAR.Hong Kong, China WT/TPR/S/52
Page 57
such patents is based on the usual standards of novelty, inventiveness and industrial applicability.
Applicants have to file a search report from a prescribed searching authority.84  The validity of the
standard and short-term patents is open to challenge in courts of the HKSAR.
(b) Copyright
116. The new Copyright Ordinance came into operation on 27 June 1997.85  Protection for
recognized categories of literary, dramatic, musical and artistic works, films, television broadcasts andcable diffusion, and works made available to the public on the Internet is within the scope of the
Ordinance. No formalities (including registration) are required to obtain copyright protection for
works in the HKSAR. Hong Kong, China's approach is to protect works and performances originating
from anywhere in the world without the need for reciprocity.
117. Both civil and criminal enforcement of copyright is available under the Copyright Ordinance.
Import or export of pirated articles as well as involvement in copyright piracy outside the HKSAR for
the purpose of importation into the HKSAR  is a criminal offence. Those who engage in copyright
piracy, production of infringing articles on a commerci al scale, or possession of infringing articles for
trade or business are subject to a maximum fine of HK$50,000 per infringing article and a term of
imprisonment of up to four years.
86 The Customs and Excise Department, as a primary agency for
enforcement of criminal sanctions against copyright piracy and trade mark counterfeiting,  accepts
written complaints filed by copyright owners or their legal representatives.87  Since December 1996,
the Department has implemented new border measures to assist copyright and trade mark holders in
applying to the High Court for a detention order for imports of pirated and counterfeit goods.  The
holders may then take civil action against the importers.
118. Under the Copyright Ordinance, the "paralle l importation" of a copyright work within
18 month period of its first publication or release anywhere in the world is both a criminal offence anda civil liability.  Civil remedies remain after the 18-month period and throughout the copyright term of
the work.  According to the authorities, this approach is intended to strike a balance between
competing interests of copyright owners and exclusive licensees on the one hand, and that of the retail
trade on the other.  There is a provision to defe nd a person who imports a work without the licence of
the copyright owner if a particular exclusive licensee has acted unconscionably.
88  It is required that
copyright owners publicize their intention to restrict importation or appoint a sole distributor, and
supply relevant information to the Customs to request enforcement of these provisions.  The
defendant must prove that he did not have reason to believe that the copy was an infringing copy.  If
the infringing act constitutes a criminal offence,  the general criminal procedure will follow;  the
Customs is the criminal copyright enforcement agency.  If the infringing act is a civil wrong, the
                                                     
84A prescribed searching authority refers to any one of the Patent Offices of Australia, Austria, China,
Japan, the Russian Federation, Spain, Sweden, the United States, and the United Kingdom and the EuropeanPatent Office.
85Since 1 July 1912, the relevant United Kingdom Copyright Acts had been applicable to Hong Kong
for copyright protection.
86The maximum penalty for dealing in or possessing articles or equipment for making infringing copies
for the purpose of trade is a fine of HK$500,000 and imprisonment for eight years.
87The complaints require proof of copyright subsistence and evidence to show that the copyright was
infringed for the purpose of trade.  The copyright owner or his representative is required to examine the seizures
and testify in the subsequent court proceedings.
88In determining whether the copyright owner or excl usive licensee had acted unconscionably, the court
shall take into consideration the established practices of the particular trade for the orderly distribution of copies
of that category of work and, in particular, whether the order, if fulfilled, would conflict with a normalexploitation of the work by the copyright owner or the exclusive licensee, or would unreasonably prejudice thelegitimate interests of the copyright owner or exclusive licensee.WT/TPR/S/52 Trade Policy Review
Page 58
copyright owner must initiate general civil proceedings.  In some cases, sole distribution rights may
be unduly restrictive, possibly causing consumer prices in Hong Kong to be unduly high and reducing
the choice of products, both of which contribute to the infringement of copyright laws.89
119. The Prevention of Copyright Piracy Or dinance was enacted on 25 March 1998. The
Ordinance sets out a statutory licensing scheme fo r the manufacture of optical discs in Hong Kong;
this is in addition to the import/export licensing requirements previously described.  The firstapplications for import and licenses were received by the customs in May 1998.  Under the main
provisions of the Ordinance:
- all business involved in the production of optical discs in Hong Kong are required to
obtain a licence from the Commissioner of Customs and Excise;
- the manufacture of optical discs in Hong Kong without a valid licence from the
Commissioner is a punishable offence with a maximum fine of HK$500,000 and
imprisonment for up to two years on first conviction.  The maximum penalties are
doubled for second and subsequent convictions;
- all optical discs manufactured in Hong Kong must bear a unique manufacturer's code
indicating their source of manufacture. The Commissioner of Customs and Exciseassigns the codes;
- customs officers have the power to inspect licensed premises at all reasonable times
without a warrant. They may seize, seal or detain any items in connection with
offences under the Ordinance;
90  and
- the Commissioner keeps a register of licences.  Information on the register is
accessible to the public.
(c) Trade marks
120. To obtain trade mark protection in Hong Kong , China, owners of trade marks can apply for
registration under the Trade Mark Ordinance.  They must show that the mark meets the relevant
requirements.91  Trade marks must be registered in the HKSAR to be protected under the Ordinance.92
Registration may be refused if the application fails to satisfy registration criteria, if it resembles amark registered previously in Hong Kong, or if there is likelihood to deceive. The owner of a
registered trade mark has an exclusive right to use the mark on his/her goods or services, and can take
legal action to prevent any party from using the registered mark without his/her consent.  The
registration remains in force for seven years from th e date of application for registration, and may be
renewed indefinitely for successive periods of a maximum of fourteen years.
                                                     
89South China Morning Post, 15 September 1998, "Piracy thrives under parallel import law".
 90In the first six months of 1998, Customs seized more than 29 million suspected pirated optical discs,
compared to around 4.5 million in 1997.
 91It normally takes no more than ten months for an applicant to be informed that the proposed mark
may be advertised.  The public then has a two-month period to object on legal grounds.  The mark can normally
be registered in a further two months, if no objection is received.  In total, therefore, the registration process
takes about 14 months if there is no opposition to the mark.  The registration is effective from the date of receiptof a valid application by the Trade Marks Registry.
92The Hong Kong Trade Marks Registry has been in operation since 1874;  registration of trade marks
in services started in 1992. In 1997, applications to the Registry numbered some 18,500.Hong Kong, China WT/TPR/S/52
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121. As in the case of copyrights, Customs officers have the power of investigation at all levels
where trade mark counterfeiting may be encountered , from street sale to manufacturing and import or
export trade.  The complaint procedures are similar to those for copyrights in that the right owners
should prove to Customs the subsistence of the rights concerned, identify to Customs the alleged
infringements of the subject goods, and testify such findings to the court to assist with prosection.
Fraudulent use of a trade mark, including selling and importing goods bearing a forged trade mark orpossessing or using equipment for that purpose, is a criminal offence under the Trade Descriptions
Ordinance.
93  The maximum penalties for trade mark offences are a fine of HK$500,000 and
imprisonment for five years on conviction on indictment, and a fine of HK$100,000 and
imprisonment for two years on summary conviction.
122. The Intellectual Property (World Trade Organization Amendments) Ordinance was enacted in
May 1996 to amend, inter alia , the existing Trade Marks Ordinance to ensure compliance with the
WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  A new Trade
Marks Bill is in the process of being drafted.94  The current Trade Mark Ordinance will continue to be
valid until it is replaced by the new one.
(d) Designs
123. On 27 June 1997, the new Registered Designs Ordinance came into force, and the HKSAR
established its own, independent designs registry.  A ccording to the authorities, the Ordinance enables
designs to be registered in Hong Kong, China, on the basis of a formality examination only.
124. Registered designs under the previous United Kingdom Designs (Protection) Ordinance enjoy
continued protection beyond their current periods of registration, provided the owner makes an
application to renew registration in the HKSAR.95
(e) Layout designs of integrated circuits
125. In 1994, the Layout-design (Topography) of Integrated Circuits Ordinance was enacted.
Under the Ordinance, the right is attached to a layout-design (topography) upon its creation; no formal
requirements, including registration or deposit, are necessary for protection of the right.
126. The duration of protection is ten years from the date of first commercial exploitation
wherever in the world it occurs, by, or with the licence of, the right holder, or 15 years after thecreation of the layout-design (topography).
(f) Trade secrets
127. Legal protection of trade secrets in Hong Kong, China, falls within the scope of legal
protection of undisclosed information, and is based on the common law. It is illegal for the recipient
                                                     
93Unregistered trade marks are protected by the ac tion of passing-off under the common law, though
this is generally considered more difficult to bring than an action for infringement of a registered trade mark.  Apassing-off action is a common law remedy for the invasion of a property right not in a mark, name or get-upimproperly used, but in the business or goodwill likely to be injured by the misrepresentation made by thepassing off of one person's goods as the goods of another.
94Major contents of the proposed Bill include broadening of the range of signs that can operate as trade
marks, such as permitting sound and scent to be registered;  simplification of licensing procedures;  and
broadening categories of applications.
95Before the enactment of the Registered Designs Ordinance, designs registered in the United Kingdom
under the Registered Designs Act 1949, as amended, were protected automatically in Hong Kong, under theUnited Kingdom Designs (Protection) Ordinance.WT/TPR/S/52 Trade Policy Review
Page 60
of confidential information to take an unfair advantage of it, and the recipient must not make use of
the information without the consent of the person communicating the information. In order to
establish a case of breach of confidence, the information must have the quality of confidence and must
have been communicated in circumstances that an y reasonable person standing in the place of the
recipient would have realized upon reasonable grounds that the information was given in confidence
and there must be actual or threatened unauthoriz ed use of the information to the detriment of the
party communicating it.  An action against a breach of confidence is through a civil proceeding in
court.  The civil remedies for breach of confidence granted by the court are similar to those available
to other intellectual property rights, namely, injunctions, damages and accounts for profit.
(vii) Competition and regulatory policy
128. Hong Kong's approach to competition and regulation involves minimum interference.
(a) Legislation on restrictive business practices
129. Hong Kong, China adopts a largely non-legislative approach to promote economic efficiency
through competition.  Hong Kong has no general co mpetition law, cartel law or other horizontal
legislation banning or sanctioning collusive or restrictive business practices such as bid-rigging, price
enforcement, boycotts or price arrangements between competitors.96  Instead, a sector-specific
approach has been preferred to safeguard competition through a combination of regulatory,
administrative and, in the case of telecommunications, legislative measures.  This approach reflects
the Government's view that Hong Kong is a small, open and thus highly competitive economy so that
there is no need to enact an all-embracing comp etition law. According to the authorities, the
Government is committed to the promotion of competition.  The Secretary for Trade and Industry is
responsible for developing overall competition poli cy for HKSAR and ensuring that this is applied
consistently across all government bureaux and depa rtments;  implementation of competition-related
measures rests with relevant policy bureaux and departments.
130. In response to a 1996 Consumer Council report recommendation, the Government agreed to
adopt a comprehensive competition policy.  This involved:
- issuing a policy statement on the objectives of promoting competition and
discouraging restrictive business practices;
- requiring all policy bureaux to give due regard to the competition angle;
- requesting all bureaux and departments to submit initiatives for promoting
competition;
- establishing a Competition Policy Advisory Group (COMPAG) to be chaired by the
Financial Secretary;
- requesting the Consumer Council to continue to monitor and review trade practices in
sectors prone to "unfair" trading activities;  and
- urging the Consumer Council to direct fu rther efforts to help businesses draw up
codes of practices that are pro-competition.
131. The Government holds the view that voluntary compliance with guidelines or codes of
practice is a more appropriate approach for a small, highly open and competitive economy like the
                                                     
96Complaints may be addressed to the Consumer Council, which can either investigate a complaint or
refer it to the relevant government department for investigation.  It is unclear whether the Government's existingprocedures for dealing with such complaints are sufficiently effective.Hong Kong, China WT/TPR/S/52
Page 61
HKSAR.  In its Statement on Competition Policy, released in May 1998, the Government stressed that
it will "not interfere with market forces simply on the basis of the number of operators, scale of
operations, or normal commercial constraints faced by new entrants."  It envisages taking action "only
when market imperfections or distortions limit market accessibility or market contestability, and
impair economic efficiency or free trade, to the detriment of the overall interest of Hong Kong."  The
Statement recognizes potentially restrictive practices97, noting that whether a practice is restrictive or
not must be determined in the light of the actual situation.  Major competition policy measures listed
in the Statement include raising public awareness and encouraging competition; initiating
pro-competition measures in the public sector; s upporting the Consumer Council's work in drawing
up codes of practice and in monitoring and reviewing business practices in sectors prone to
anti-competition behaviour; and establishing a repository of competition-related concerns andcomplaints.  For implementation of the policy, COMPAG is to invite all government entities to adhere
to the Statement, propose initiatives for furthering the competition policy objective, examine the
impact of all new proposals on competition and, where appropriate, bring this to the attention of the
ExCo and LegCo. Alleged restrictive practices may be referred to the relevant policy bureau or
department or to the Consumer Council for consideration.  The COMPAG Secretariat will keep trackof all referrals and bring these to the attention of COMPAG should there be substantial policy orsystemic implications.
Box III.1:  Consumer Council's  proposal for comprehensi ve competition policy and law.
The Consumer Council published a comprehensive re port on competition policy, titled "Competition policy:
the key to Hong Kong's future economic success" in  November 1996.  The report, submitted to the
Government for policy consideration, was also made available to the public.  The objective of the study was
to examine whether Hong Kong need ed a comprehensive competition po licy and competition law, and if so,
to consider what framework should be adopted, what should be enacte d, and what institutions should be
established.  The report followed a series of studies  by the Council since 1992 on certain key sectors of the
domestic economy including banking, domestic gas supply, broadcasting, telecommunications, and
residential property markets.
The report recognized that in the past two decades, Hong Kong had undergone an economic  structural
change from a manufacturing-based economy to a servi ce economy.  The report how ever finds that "not all
markets in service sectors are automatically highl y competitive under a laissez-faire regime."  Some
services are mainly provided domestically and insula ted from international competition.  These include
legal and accounting services, medi cal and dental services, public u tilities, local radi o and television
broadcasting, retail banking services, restaurants and supermarkets.  The report suggests that factors
behind a possible lack of competitiveness may be th e high property and wage costs in Hong Kong, partly
due to the lack of direct competition and imperfections in the market.
The report recommends the adoption of a comprehensive competition policy and, inter alia,  enactment of a
general competition law in Hong Kong, because legal enforcement is viewed as the only transparent and
effective way to prevent and deal with restrictive practices.
Source: Consumer Council (1996).
132. Hong Kong, China has no bilateral agreements for mutual cooperation in competition policy
with foreign countries.  Nor has it adopted any multilateral, regional or bilateral measures regarding
competition policy.  Hong Kong, China does, however, participate in competition policy dialogues inAPEC and the WTO.
                                                     
97These include price-fixing, bid-rigging, market allocation, sales and production quotas, joint boycotts,
unfair or discriminatory standards, predatory behaviour, retail price minimums, conditioning the supply ofcertain goods and services to acceptance of certain restrictions.WT/TPR/S/52 Trade Policy Review
Page 62
(b) Regulated industries
133. Regulatory arrangements governing certain basic services, such as electricity, gas, and mass
transport are intended to avoid the exploitation of natural (technical) monopolies and ensure
continuous supplies at reasonable prices.98
134. The Government considers that public transport services should be operated by the private
sector or by public corporations operating on prudent commercial principles, where the Governmentprovides a regulatory framework, such as the Road Traffic Ordinance.
135. No subsidies have been given to public transport services.  Competition is encouraged in the
sector; the Government grants new bus franchises and ferry services by public open tender, and no
exclusive rights are granted.  During the franchise period, if the performance of the franchisee is
found to be unsatisfactory, the Government has th e power to terminate the franchise and put the
service routes up for open tender to select a new franchise operator.
136. Though the number of suppliers is not regulated, electricity in Hong K ong is supplied by two
private companies, the Hong Kong Electric Company and China Light and Power. The former
supplies electricity in the Hong Kong Island and the outlying islands, and the latter in the Kowloon
Peninsula and the New Territories.  They generate and distribute electricity and are the sole andexclusive suppliers of electricity in the areas they serve.  The Government controls companies’ rates
of return from electricity-related activities and facilities, and monitors financial and technical
performance, by way of control agreements with each company.
99  There are no legal provisions
regulating these activities.  According to the authorities, the agreements do not bestow any exclusive
rights.  Nor do they exclude new entrants.  As they restrict companies' rates of return, the control
agreements may lead to over-investment.  With a view to promoting greater efficiency in the
distribution of electricity, the Government has comm issioned a study, to be completed by the end of
1998, on interconnection and competition in the electricity supply sector, including opening of access
to the two existing electricity grids to third parties.100
137. Gas is supplied by private sector companies.   According to the authorities, there is no
restriction on the number of firms in this market.  Nevertheless, one company, the Hong Kong and
China Gas Company (HKCG), produces and supplies  town gas through an extensive transmission
network reaching all major centres of population.101 The company has no exclusive rights to produce
or supply town gas.  There are no entry or price-related regulations in the sector.  The only
production-related regulation relates to operational safety (the Gas Safety Ordinance).  Liquefied
petroleum gas (LPG), on the other hand, is supplied by major oil companies in the form of cylinders
and through piped supply from bulk stores to some housing complexes.
                                                     
98Although claims about the existence of natural monopolies continue to influence public policy in Hong
Kong and elsewhere, the concept is becoming increasingly irrelevant as new technologies emerge that are efficient
at much lower levels of production than previously.  Consequently, the characterization of "natural monopoly" hasgiven way to the notion of "workable competition" (Rose, 1997, p. 2).
99Electricity tariffs fall into four broad categories:  domestic, commercial, small industrial, and large
industrial.  The average tariffs are about 85.0 cents per unit (kWh) for a typical domestic household (with a
monthly consumption of 250 units), 96.0 cents per unit for commercial consumers, 88.3 cents per unit for small
industrial consumers and 69.8 cents per unit for large industrial consumers
100Such interconnection has been implemented only in the case of emergency.
101The Consumer Council, in its reports, pointed out some restraints to competition in the piped town
gas sector, including the de facto monopoly and absence of price regulation enjoyed by the HKCG.