WT/REG390/2  
 
8 November 2018 
(18-6994) Page: 1/4 
Committee on Regional Trade Agreements  Original: English  
 
CLOSER ECONOMIC PART NERSHIP ARRANGEMENT BETWEEN HONG KONG, C HINA AND 
MACAO, CHINA,  GOODS  AND SERVICES   
QUESTIONS AND REPLIE S 
 The following communication, dated 31 October 2018 , is being circulated at the request of the 
delegations of  Hong Kong, China and Macao, China.  
 
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Question from the delegation of the European Union  
 
Provisions on trade in goods  
Import duties and charges, and quantitative restrictions  
Liberalization schedule  
 
Paragraph 3.5 and 3.6  
 
1.1.  "Paragraph 3.5:  In 2017, and based on the HS 2017 nomenclature, Macao, China's 
tariff was composed of 6,641 tariff lines (at the eight -digit level) and Hong Kong, China's 
tariff consisted in 7,551 tariff lines (at the eight -digit level). In both cases, all tariff lines 
were all duty free on an MFN basis.  
 Paragraph 3.6 : Consequently, and as all products originating in a Party shall be 
granted duty free access in the market of the other Party, no liberalization schedule is 
attached to the Agreement. Moreover, both Parties already granted MFN duty free access 
to all products prior to the entry into force of the Agreement, thus providing no additional 
preferential treatment as a result of the implementation of the Agreement."  
 
 Could you please clarify the interplay between t his Closer Economic Partnership 
Arrangement between Hong Kong SAR and Macao SAR, with the Closer Economic 
Partnership Arrangement between China and Hong Kong SAR?  
 
Joint r esponse from the delegations of Hong Kong, China and Macao, China  
 
 Hong Kong, China signed the Closer Economic Partnership Arrangement (CEPA) with China in 
2003; and signed another CEPA with Macao, China in 2017.  The two CEPAs are separate free trade 
agreements.  
 
Question from the delegation of the Separate Customs Territory of Taiwan, Pe nghu, 
Kinmen and Matsu  
 
Investment  
Provisions on trade in services and investment  
Regulatory provisions  
 
1.2.  Paragraph 4.51: Under Article 25, the Parties agree to commence discussions on an 
investment agreement to promote and protect investment.   WT/REG390/2  
 
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   Is there a proposed timeframe for commencing discussions on the Hong Kong -Macao 
investment agreement mentioned in paragraph 4.51?  
 
Joint r esponse from the delegations of Hong Kong, China and Macao, China  
 
 Hong Kong, China and Macao, China have agreed in principle to  discuss a separate instrument 
on investment with a view to further enhancing investment flows. Whilst no timeframe is prescribed 
in the agreement, both sides will continue to work together to identify a mutually convenient time 
for the discussion.  
 
Questi ons from the delegation of Thailand  
 
Provisions on trade in g oods  
Rules of origin  
 
1.3.  Paragraph 3.8 : The Agreement does not contain any specific preferential rules of 
origin . Article 7 simply states that the rules of origin specified by one Party shall be applied 
to the goods imported by the other Party (paragraph 1 of Article 7) . 
 According to the underlined te rm in paragraph 3.8, could the P arties identify specific 
preferential rules of origin in order to avoid circumvention under ASEAN – Hong Kong, 
China  Free Trade Agreement (AHKFTA)?  
 
Joint r esponse from the delegations of Hong Kong, China and Macao, China  
 
 Under the Closer Economic Partnership Arrangement between Hong Kong, China and Macao, 
China (HK -Macao CEPA), the existing non -preferential origin rules of Hong Kong , China  and Macao , 
China  will be used to establish the origin of the exported Hong Kong and Macao products respectively.  
 
 For the purpose of ensuring that only goods originating from Hong Kong , China  are eligible to 
claim preferential t ariff treatment under the AHKFTA, goods exported from Hong Kong , China  will 
have to comply with the preferential origin rules agreed under the AHKFTA and be accompanied by 
a Certificate of Hong Kong Origin (CHKO) issued by the Government of the Hong Kong  Special 
Administrative Region  or by a Government Approved Certification Organisation.  A CHKO is issued 
under the Hong Kong origin certification system, which is administered by the Government and 
backed up by the laws of Hong Kong , China . It serves to ensur e origin compliance of the goods 
claiming Hong Kong origin.  
 
Denial of benefits  
 
1.4.  Paragraph 4.4: The Agreement does not contain any specific provision on denial of 
benefits.  
 Do the Parties allow Non -Party who has substantive business operations in the 
territory of a Party to enjoy benefits  under this Agreement?   
 
Joint r esponse from the delegations of Hong Kong, China and Macao, China  
 
 For the purpose of trade in services under the HK -Macao CEPA, the definition for "juridical 
person " is set out in Arti cle 16.3(iii) of  the HK -Macao CEPA as reproduced b elow:  
 
• juridical person  means any legal entity duly constituted or organised under the applicable 
laws of Hong Kong or Macao, whether for profit or otherwise, and whether privately -owned 
or governmentally -owned, including any corporation, trust, partnership, joint venture, sole 
proprietorship or association (business association), and engaged in substantive business 
operations in any side.  
 Service suppliers complying with  the requirements of the HK -Macao CE PA, including the above 
definition of "juridical person " where applicable, should enjoy the benefits under the HK -Macao CEPA.  
 
 
 WT/REG390/2  
 
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  General provisions on trade in services  
Performance r equirements  
 
1.5.  Paragraph 4.10: The Agreement does not contain any specific provision on 
Performance Requirements (PR). However, the Parties' Schedules of Specific 
Commitments refer to PR -related conditions and/or limitations applicable to certain 
sectors and/or subsectors.  
 As conditions/ limitations under the Parties' Schedules of Specific Commitments 
mostly subject to limitations on National Treatment and Market Access obligations, please 
elaborate on the Parties' Schedules of Specific Commitments relating to PR-related 
conditions  and provide us examples.  
 
Joint r esponse from the delegations of Hong Kong, China and Macao, China  
 
 Hong Kong, China and Macao, China maintain conditions and/or limitations in some services 
sectors or sub -sectors  which serve to achieve legitimate policy objectives . As there is no specific 
provision on PR in the HK-Macao CEPA, we do not label these conditions and/or limitations as such.  
 
Sector specific provisions on trade in services  
Financial services  
 
1.6.  Paragraph 4.52: According to Article 21, one Party shall not b e prevented from taking 
or maintaining measures relating to financial services for prudential reasons, which 
includes the protection of investors, depositor, policy holders or persons to whom a 
fiduciary obligation is owed by a financial service supplier, or to ensure the integrity and 
stability of the financial system.FN18 
 Footnote No. 18 : The term "prudential reasons" shall be interpreted as including the 
security, stability, integrity and financial responsibility of a single financial institution or 
a financial system, as well as protecting the security of payment and clearing system and 
the stability of finance and operation.  
 
 According to Footnote No. 18, as this agreement defines the term "prudential 
reasons" to include many areas of protecting finan cial system. Could it be interpreted that 
the term also covers measure ensuring the stability of the exchange rate  including  to 
prevent speculative capital flow ? If not, please provide us any relevant provisions 
covering this matter.  
 
Joint r esponse from t he delegations of Hong Kong, China and Macao, China  
 
 According to Article 21.2 of the HK -Macao CEPA, no provisions of the HK -Macao CEPA shall 
apply to non -discriminatory measures of general application in implementing monetary or related 
credit policies or exchange rate policies.  
 
 The monetary policy objective of Hong Kong , China  is currency stability.  The exchange rate 
stability in Hong Kong , China  is underpinned by the Linked Exchange Rate System (LERS), which is 
a credible and transparent regime adopt ed for over 35 years.  The LERS is operated in accordance 
with the currency board arrangements, which require both the stock and the flow of the Monetary 
Base to be fully backed by foreign reserves.  As a further general reference, Article 112 of the Basic 
Law of the Hong Kong Special Administrative Region of the People 's Republic of China stipulates that 
no foreign exchange control policies shall be applied in the Hong Kong  Special Administrative Region . 
 
 Likewise, in accordance with Article 109 of the Basi c Law of the Macao Special Administrative 
Region of the People 's Republic of China, no foreign exchange control policies shall be applied in the 
Macao Special Administrative Region.  A linked exchange rate relationship with the Hong Kong dollar 
is establish ed under the currency board system. The pataca (Macao currency) issue is 100 -per cent 
backed by foreign exchange reserves under the currency board system. The note -issuing banks are 
required to pay the currency board an equivalent amount of Hong Kong dolla rs at a fixed rate as 
legal backing for the banknote issues.  
 
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  General p rovisions of the agreement  
Intellectual property rights  
 
1.7.   Paragraph 5.12: The Parties identify several areas for strengthened cooperation 
which include: (i) the exchange of information  on new initiatives, laws, and regulations, 
as well as the promotion of public awareness through contact points and targeted 
activities; (ii) personnel training; (iii) the exchange of information on information 
technology and automation system relating to intellectual property registration; and 
(iv) the promotion of the commercialisation of intellectual property and the fostering of 
intellectual property intermediary services  as well as intellectual property dispute 
resolution.  
 We would like to seek clarification on the scope of "the fostering of intellectual 
property intermediary services" and to enquire of what institutions in Hong Kong and 
Macao are in charge of providing such services.  
 
Joint r esponse from the delegations of Hong Kong, China and Macao, China  
 
 The Intellectual Property Department of Hong Kong, China (HKIPD) has been cooperating with 
the Macao Economic Bureau of Macao, China  (MEB)  on fostering of intellectual property (IP) 
intermediary services.  The two P arties  foster co -operation mainly by organi zing exchange activities 
to visit IP institutions and provide platforms for meeting relevant representatives in the region. 
Through these activities, both sides can enhance competitiveness with the latest updates on IP and 
explore co -operation opportunities.  
 
 In April 2018, the HKIPD and the MEB organised an exchange activity under the theme of 
"Co-operation on IP and Technological Innovation in the Bay Area — IP Co -operation in Technology 
Transfer " in collaboration with the Guangdong Intellectual Property Office (GDIPO). A total of 
15 representatives from the technology transfer centres of several universities in Hong Kong, 
research institutions, the Hong Kong Productivity Council and trade associat ions visited the Hengqin 
area of the Guangdong Pilot Free Trade Zone and met with relevant representatives from Guangdong 
and Macao for exchanges around the theme. They also explored co -operation opportunities in 
technology transfer, with a view to promoti ng IP commercialisation and innovation development in 
the region.  
 
 In May 2018, the HKIPD and the Guangdong Province Administration for Industry and 
Commerce (GDAIC) jointly organised an exchange activity on the Branding Globalisation in 
Guangdong, Hong K ong and Macao under the theme of "Brand Development of Classic Old Shops / 
Time-honoured Brands " in Guangzhou , China . Representatives from the trademark industry and 
trade associations in Hong Kong , China  conducted exchanges with experts and relevant 
repre sentatives from Guangdong , China  and Macao, China  around the theme and explored 
co-operation opportunities in the trademark area in the context of the Bay Area development, with 
a view to assisting enterprises in the Bay Area to develop international brand s and enhance their 
competitiveness via IP intermediary services.  
 
 There is no single institution in Hong Kong , China  in charge of providing IP intermediary 
services.  Some professional bodies in Hong Kong , China  such as the Law Society of Hong Kong, The 
Hong Kong Institute of Trade Mark Practitioners, Asian Patent Attorneys Association Hong Kong 
Group, the Hong Kong Productivity Council and the Federation of Hong Kong Industries are providing 
IP intermediary services.  
 
 There are some institutions in Maca o, China providing IP intermediary services, such as Macau 
Lawyers Association and commerce associations.  
 
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