WORLD TRADE ORGANIZATION  
ORGANISATION MONDIALE DU COMMERCE  
ORGANIZACIÓN MUNDIAL DEL COMERCIO  WT/TPR/M/173/Add.1 
16 February 2007 
 (07-0669) 
Trade Policy Review Body 
13 and 15 December 2006 Original:  English/ 
                 anglais/                  inglés 
 
TRADE POLICY REVIEW 
HONG KONG, CHINA 
Minutes of Meeting
 
Addendum  
Chairperson:  H.E. Ms. Claudia Uribe (Colombia)  
 This document contains the advance written questions, and replies provided by Hong Kong, 
China.1 
  __________________________________________________________________________________ 
Organe d'examen des politiques commerciales 
13 et 15 décembre 2006 
 
EXAMEN DES POLITIQUES COMMERCIALES 
HONG KONG, CHINE 
Compte rendu de la réunion
 
Addendum  
Présidente:  S.E. Mme Claudia Uribe (Colombia) 
 
 Le présent document contient les questions écrites communiquées à l'avance et les réponses fournies par Hong Kong, Chine.
1 
  __________________________________________________________________________________ 
Órgano de Examen de las Políticas Comerciales 
13 y 15 diciembre de 2006 
 
EXAMEN DE LAS POLÍTICAS COMERCIALES 
HONG KONG, CHINA 
Acta de la reunión
 
Addendum  
Presidente:  Excma. Sra. Claudia Uribe (Colombia) 
 
 En el presente documento figuran las pre guntas presentadas anticipadamente por escrito, 
junto con las respuestas facilitadas por Hong Kong, China.1 
 
                                                      
1 In English only./En anglais seulement./En inglés solamente.  WT/TPR/M/173/Add.1 
 Page 3 
 
 
  WRITTEN QUESTIONS BY MEMBERS 
 
QUESTIONS BY SINGAPORE  
 Competition 
 
1. Hong Kong Special Administrative Region (HKSAR ) is generally regard ed as having an open 
and liberal FDI regime. Para 29 (page 28) of the Secretariat Report states that HKSAR remains receptive to foreign investment and does not discriminate between foreign and domestic investors.  It also states that attracting foreign investment is a priority of the Government. However, the Secretariat 
has also noted that despite the openness of the ex isting legal framework to FDI, in practice, the 
absence of a comprehensive legal framework  for competition policy and the presence of 
conglomerates may deter foreign service pr oviders from establishing in the HKSAR. 
 2. As highlighted in the Secretariat report, a lack of a competition framework could adversely 
impact on inward foreign investment. Re paras 96- 99 of the Government Report, we note that the 
HKSAR is currently  considering the report of an independent Competition Policy Review Committee 
(CPRC)  which had recommended that the Govern ment introduce a cross-sector competition law 
targeting specific types of anti-competitive conduct to be to enforced by a Competition Commission 
operating outside the normal government structure.   We also note that a separate consultancy study of 
the local auto-fuel retail market had recommended th at the Government consider preventive measures 
aimed at prohibiting cartel behaviour either thr ough general or sector-specific competition laws? 
  It would be useful if the HKSAR could share its views on the recommendation of the CPRC 
report. Noting that the study of the auto-fu el retail market had also recommended the 
possibility of a sector-specific competition law, what are the HKSAR's views on sector-
specific competition laws as opposed to a gene ral cross-sectoral one?  If the HKSAR had 
completed public consultations on this matter by  the time of the TPR in mid-Dec, we would 
also appreciate if HKSAR could share the outcome of these consultations.  
 
Import Licensing 
 3. Para 29 (page 37) of the Secretariat report states that the transhipment cargoes of "strategic" 
commodities are treated as imports and exports; ther efore they are subject to licensing requirements. 
Except for some "sensitive items", as set out under the law, articles in transit are not subject to 
licensing.   
 We would appreciate it if the HKSAR provide  details on what products would fall under the 
categories of "strategic" commodities and "sensitive" items?  
 4. Para 30 (page 38) of the Secretariat Report states that there are no estimates of the percentage of trade covered by import licenses.  
 Given the sophistication of the HKSAR's system of collecting and keeping trade statistics and 
data, it is rather surprising that there are no speci fic data or even estimates of trade covered by 
import licenses. What are the reasons for this? WT/TPR/M/173/Add.1 
Page 4  
 
  QUESTIONS BY SWITZERLAND
 
Report by the Secretariat 
 I. ECONOMIC ENVIRONMENT  
(2) R
ECENT ECONOMIC DEVELOPMENTS  
 (i) Growth, incomes and employment 
 Para. 8 of the Secretariat’s report suggests that Hong Kong, China’s real GDP per capita has risen 
steadily to an estimated US$30,032.-, that is to a level among the highest in the world and the highest 
in East Asia and the Pacific. In view of this  both welcome and favorable  economic development, 
could the authorities consider in not so distant fu ture to graduate Hong Kong, China in the WTO from 
the status of a developing country to the status of developed country ? If not, what conditions other 
than a high per capita income or a high ranking in  the UN human development index would need to 
be met for such a step to be considered ? 
 
(4) Structural Measures 
 (iv) Competition 
 
Para. 24 of the Secretariat’s report indicates that th e authorities were after apparently a long hesitation 
(see in particular Part III. Trade Policies and Pr actices by Measure, (4) Measures affecting Production 
and Trade, (iv) Competition policy, paras. 131- 141 and Box III.1) considering in July 2006 the 
recommendations of a Competition Policy Review  Committee (CPRC), a Committee made up mainly 
of non-government stakeholders, i.e., the introduc tion of a cross-sector competition law to better 
target anti-competitive practices notably from pow erful conglomerates able to hinder competition 
from both domestic and foreign competitors. Could th e authorities inform on the state of preparation 
of that new law and, in particular, provide some indication on the future characteristics of this new 
legislation ? Could the authorities provide their reac tion to the views expressed in Box III.1 in Part III 
of the Secretariat’s report (p. 66), notably in respect  to the fact that there is also a need for a 
competition law in structurally open economies such as Hong Kong, China ? 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
(2) M
EASURES DIRECTLY AFFECTING IMPORTS  
 (vii) Government procurement 
 
Para. 34: According to the report, the purchases of  goods, services, and construction services by the 
Government of Hong Kong continued their declinin g trend;  indeed, they fell between 2002 and 2005 
from 2.59% to 1.2% of GDP.  Could the authorities indicate the reasons which could explain this negative trend  ?  Para. 39: Restricted or single tendering are used under specified circumstances, such as to protect 
patented or proprietary products. Would it be possi ble for the Authorities of Hong Kong to develop 
the criteria on which limited tendering might be used  in place of selective or open tendering with the 
objective of protecting patented or proprietary products ?  Para. 41: Hong Kong is a signatory to the Agre ement on Government Procurement, since 1998. How 
does Hong Kong evaluate the added value of the GPA with regard to legal security, transparency, 
predictability, financial earnings, bribery and mark et access ? What is the nature of the difficulties  WT/TPR/M/173/Add.1 
 Page 5 
 
 
  encountered by Hong Kong in implementing the GPA ? What should be changed in a revised GPA in 
order to tackle the challenges and concerns en countered by Hong Kong by implementing the GPA 
since 1998 ?   
(i) Standards and other technical requirements 
 
(c) Marking and labelling  Para. 60. Voluntary labelling requirements: As mentioned in this paragraph, Hong Kong, China 
continued to introduce new voluntary labelling requi rements under its energy efficiency labelling 
scheme (EELS) for various household electrical appliances. If manufacturers, agents or retailers affix 
energy labels in a specified format onto their regist ered appliances, indicating that the appliances have 
met certain energy efficiency and performance re quirements in accordance with the EELS, they have 
to participate to the energy efficiency labelling sch eme. But these participating manufacturers, agents 
or retailers are not obliged to affix this energy label if they do not wa nt to, because they do not have to 
declare the fulfilment of a specific scheme. Could you please confirm that our understanding of this 
paragraph is correct?    
(4) M
EASURES AFFECTING PRODUCTION AND TRADE  
 
(i) Incentives  
(c) Land related policies  In para. 89, the Secretariat’s report suggests at line 4 that the Governement still owns all land in 
HKSAR, land which is leased. At the same time, para 90, indicates that since January 2004, sales of 
Government land have taken place. Could the aut horities clarify this apparent contradiction and 
confirm that land in HKSAR can indeed henceforth be purchased and not just leased. Also, if indeed 
land ownership policies have cha nged, could the authorities of Hong Kong, China indicate under what 
conditions, if any, land can actua lly be bought rather than lease d and whether both foreigner and 
residents or nationals can purchase land under the new policies ? Also, could the authorities indicate 
whether these new policies apply for residentia l or commercial use of land, or for both ? 
 (d) SMEs  Para. 92 suggests that the Government has devel oped since 2001 several funding and subsidy schemes 
to help SMEs securing loans to acquire business installation and equipment, enter new markets, 
upgrade human resources and enhance their competi tiveness. Given that 98 percent of businesses in 
HKSAR are SMEs, how can the authorities ascerta in that such economy-wide measures are 
compatible with the rules of the Agreement on Subsidies and Countervailing Measures and, in 
particular, with Article 3.1a) wh ich prohibits export subsidies ? Wh at controls have the authorities 
established to make sure that such funding or subsidies are not misused ? 
 
IV. TRADE POLICIES BY SECTOR 
 (5) S
ERVICES  
 
(iv) Financial Services 
 
Para. 31 states that by 2005 under the Closer Ec onomic Partnership Arrangement (CEPA), eight 
HKSR incorporated banks had benefited from the lowering of the asset level requirement and become 
eligible to establish branch operations on the Ma inland. Could Hong Kong indicate the names of the 
HKSR incorporated banks that had benefited from the CEPA ? WT/TPR/M/173/Add.1 
Page 6  
 
   
Report by Hong Kong, China 
 
Para. 59 of the Report issued by the Government st ates that Hong Kong is to enhance the attraction of 
Hong Kong to international investors in asset mana gement. Could Hong Kong indicate the laws and 
regulations governing market ac cess and national treatment fo r the cross-border supply of 
international investors in asset manage ment services into and from HKSAR?  
 
 QUESTIONS FROM AUSTRALIA
 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 (2) M
EASURES DIRECTLY AFFECTING IMPORTS  
 
(iii) Other charges affecting imports  
Hong Kong, China levies an excise duty on wine of  80% ad valorem, a level which disadvantages 
wine exporters and domestic cons umers of wine in Hong Kong, China.  The excise on wine is double 
that of the excise on other alcoholic beverages of similar alcohol content.  (WT/TPR/S/165, page 35, 
para 20 and Table III.3) 
 
- What is the purpose of this high level of excise duty on wine, including in relation to the level 
of excise on other alcoholic beverages?  No ting that 12.4% of excise revenues come from 
alcoholic beverages, what proportion of these co me from the excise on wine?  Are there any 
arrangements for future review of this excise? 
 
(4) M
EASURES AFFECTING PRODUCTION AND TRADE  
 (iv) Competition and consumer protection policy 
 
The Report by Hong Kong, China indicates that  the government-appointed Competition Policy 
Review Committee (CPRC) recommended in July th is year that Hong Kong, China introduce a cross-
sector competition law targeting anti-competitiv e conduct and enforced by an independent 
Competition Commission, and that a public consulta tion process would take place later this year.  
(WT/TPR/G/173, page 21, para 97)  
- Can Hong Kong, China provide an update on th is process?  In particular, when does Hong 
Kong, China expect to introduce a cross-sector  competition law and associated enforcement 
provisions? 
 
IV. TRADE POLICIES BY SECTOR 
 
(5) S
ERVICES  
 (ii) Overall commitments under the GATS 
 
We welcome the great importance Hong Kong, China attaches to the ongoing services negotiations in 
Doha Round (WT/TPR/G/173, page 22 , para 102) and the positive interest that it has displayed in 
those negotiations in exploring with Members opportunities to schedule commitments on education 
services.  We are sympathetic to concerns about what  market access and national treatment limitations 
in the education sector need to be scheduled, but ar e confident this can be resolved in a way that 
protects the integrity of the regulatory framework.    WT/TPR/M/173/Add.1 
 Page 7 
 
 
   
- Has Hong Kong, China further explored its ability to schedule market access or national 
treatment limitations in relation to private e ducation services and can we expect Hong Kong, 
China to make commitments on private education services in the Doha Round? 
 (iv) Financial services 
 
The Code on Unit Trusts and Mutual Funds (the Code) provides that collective investment schemes 
from ‘recognized jurisdictions’ enjoy fast-track a pproval procedures when applying for authorisation 
in Hong Kong.  The Code indicates that in principle ‘recognized jurisdictions’ have regulatory 
regimes which in substance comply with the require ments of the Code.  The Code does not appear to 
provide a detailed interpretation of what this requirement implies in practice.  Furthermore, past 
practice shows that ‘recognized jurisdiction’ stat us may be granted even where key structural 
requirements are not satisfied, such as those relati ng to a supervisory custodian or trustee.   
 
Can Hong Kong, China provide publicly accessible gui dance explaining the criteria which will be 
applied in assessing whether a jurisdiction complies with the requirements for obtaining ‘recognized 
jurisdiction’ status?  
(vii) Legal services 
 Hong Kong, China's trade policy objectives include  promoting a free, open and stable multilateral 
trading system, and sustaining the momentum of progressive global trade liberalisation.  According to the Report by Hong Kong, China, it is recognised as the world’s freest economy.  Hong Kong, China 
is a major financial centre, and home to the larg est cluster of international lawyers in Asia.  
(WT/TPR/G/173, pages 5 and 6 and WT /TPR/S/173, page 101, para 90) 
 
- What are the constraints therefore that H ong Kong faces in making commitments on legal 
services and can we expect Hong Kong to make  commitments on legal services in the Doha 
Round?  
  QUESTIONS FROM CANADA
 
 
Report by the Secretariat (WT/TPR/S/173) 
 
Summary Observations. Section 3: Trade and Tr ade-Related Policy Developments, page ix, 
paragraph 15, and Part III. Trade Policies and Practices by Measure, Section 4: Measures 
Affecting Production and Trade, (iv) Competit ion and Consumer Protection Policy, page. 68, 
paragraph 138 and Report by Hong Kong, Sectio n IV: Sectoral Developments, (E) Government 
Procurement, pages 21-22, paragraph 97. 
 
Canada welcomes Hong Kong, China’s initiative to  set up a Competition Policy Review Committee 
(CPRC) to review the effectiveness of its exis ting competition policy. Canada also notes the CPRC 
recommendation to Hong Kong, China’s government to  introduce a cross-sector competition law, 
targeting specific types of anti-competitive conduc t to be enforced by a Competition Commission 
operating outside the normal government structure; to give investigative powers to the CPRC; to establish penalties in the form of large fines; and disqualification from holding directorships to apply 
to parties found to have engaged in prohibited conduct. Canada understa nds that the Hong Kong, 
China government is now considering the recommendations in the CPRC report.   WT/TPR/M/173/Add.1 
Page 8  
 
  1. Has the government made a decision on whether or not it would implement the 
recommendations made by the Competition Po licy Review Committee? What is the 
Government plan of action?  
 
Part I. Economic Environment, Section 4: Stru ctural Measures, (iv) Competition, page 12, 
paragraph 24 and Part III. Trade Policies and Pr actices by Measure, Section I: Overview, page 
30, paragraph 5 
 
The WTO Secretariat Report states that HKSAR h as maintained a sector-s pecific approach to 
competition policy, allowing powerful conglomer ates to hinder competition from domestic and 
foreign firms (Part I. Economic Environment, Section 4: Structural Measures, (iv) Competition, page 
12, paragraph 24). The WTO Secretariat Report, altho ugh recognizing that there are few restrictions at 
the border, questions the efficiency of Hong Kong, China's "sector-specific" approach to competition 
as a substitute for a comprehensive competition po licy (Part III. Trade Policies and Practices by 
Measure, Section I: Overview, page 30, paragraph 5). 
 
2. Could Hong Kong, China explain its views on the effectiveness of its sectoral approach to 
competition policy?  
 
Part III. Trade Policies and Practices by Measu re, Section 2: Measures Directly Affecting 
Imports, (x) (a) Standards and Other Tec hnical Requirements- Standards, page 42, 
paragraph 44  
The Secretariat Report notes that standards are '... essentially based on international standards and/or 
prevailing overseas standards'.  
3. Could statistics and further specificity be pr ovided regarding this statement?  For example, 
what percentage of standards utilized in th e HKSAR are international standards?  Could 
further clarification be provided with respect  to what is a 'prevailing overseas standard?' 
 
Part III. Trade Policies and Practices by Measure, Section 4: Measures Affecting Production 
and Trade, (iii) Intellectual Property Rights, (a) Industrial Property, Patents, page 58, 
paragraph 105 
 
The Secretariat Report states that “[t]he Patents Ordinance allows for the granting of compulsory 
licences and government use of a patented product or  process without the authorization of the patent 
proprietor”; that a compulsory license may be gran ted “where the patented invention is not being 
commercially worked in the HKSAR, or where the de mand for a particular pr oduct is not being met”; 
and that “[a] patent holder must be compensated for government use”. Canada would be grateful if 
Hong Kong, China could advise:   4. What criteria are used to determine whether a patented invention is not being commercially 
worked? 
 
5. How the determination is made that  demand for a product is not being met? 
 6. Whether or not the patent ordinance provi des for compensation fo r compulsory licenses 
granted to third parties by the government? 
 
7. How the level of compensation is established?   WT/TPR/M/173/Add.1 
 Page 9 
 
 
  8. Whether or not Hong Kong, China’s legislation provides for a review mechanism of the 
decisions to grant a compulsory license, and the amount of the remuneration provided to the right holder? 
 
Part III. Trade Policies and Practices by Measure, Section 4: Measures Affecting Production 
and Trade, (iv) Competition and Consumer Protection Policy, page 65, paragraph 131 
 
The WTO Secretariat report notes that the HKSAR economy seems to be dominated by a few powerful cross-sector conglomerates (controlling Ho ng Kong’s port, supermar kets, pharmacies, one 
of the two electricity suppliers, much of real est ate, and large chunks of the telecoms sector).  
 
9. As these organisations may hinder greater competition from domestic and foreign firms, has 
Hong Kong, China considered the enactment of a competition law that covers horizontal and 
vertical collusive agreements and abuse of a dominant position?  
 Part III. Trade Policies and Practices by Measure, Section 4: Measures Affecting Production and Trade, (iv) Competition and Consumer Prot ection Policy, pages 65-68, paragraphs 132 and 
136  
In Part III, Section 4, paragra phs 132 and 136 of the report state th at Hong Kong, China’s government 
promulgated guidelines in 2003 to maintain a compe titive environment and defi ne and tackle anti-
competitive practices, and that all bureaus and depa rtments are responsible for overseeing competition 
issues. The report also states that guidelines, as well as Hong Kong, China’s Statement on 
Competition Policy lists and briefly defines some re strictive practices and types of abuse of market 
position, but none of these types of abuse are exte nsively defined nor does it mention any provisions 
regarding mergers and acquisitions.  
 
10. Could you explain how these bureaus and depa rtments identify anti-competitive practices?  
 11. How does the government ensure that the di fferent regulators interpret the competition 
provision the same way and consistently?  
 
12. What are Hong Kong, China’s intentions with  regards to mergers and acquisitions and their 
impacts on the competitive environment? 
 
Part III. Trade Policies and Practices by Measure, Section 4: Measures Affecting Production 
and Trade, (iv) Competition and Consumer Protec tion Policy, page. 68, paragraphs 137 and 138  
 
The report states that the Competition Polic y Advisory Group (COMPAG) keeps track of 
competition-related complaints and/or allegations of  restrictive practices Ho wever, in the absence of 
competition legislation, it is not clear on what grounds a firm or an individual could make a 
complaint. It is also unclear on what basis the COMPAG could make a determ ination. We understand 
that in 2004-05, COMPAG received 18 complaints.  
 
13. Could Hong Kong, China explain the procedure to deal with these complaints?   14. Has COMPAG found any anti-competition prac tices? If so, what were the measures put in 
place to ensure that these anti-comp etitive practices are changed?  
 
15. What are the actions taken by the government  to follow up on these issues to ensure that 
competition concerns are not relegated to a secondary status?  
 16. What are the measures put in place to deter others from using these practices in the future? WT/TPR/M/173/Add.1 
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Part IV. Trade Policies by Sector, Section 5: S ervices, (iv) Financial S ervices, (a) Banking and 
Finance, page 85, paragraph 37 
 
The Secretariat Report notes that an institution must have been a depos it-taking company or a 
restricted-licence bank for at least three continuous  years as a prerequisite to obtaining a “licensed-
bank” license.   17. Could Hong Kong, China outline the policy rationa le underlying this requirement?  If there is 
prudential justification for this requireme nt, could Hong Kong, China please explain the 
prudential reason? 
 
Part IV. Trade Policies by Sector, Section 5: S ervices, (iv) Financial Services, (b) Insurance, 
page 88, paragraph 44 
 The Secretariat Report notes that while insurance products are primarily distributed by insurance 
agents, "bancassurance" penetration (i.e. the distri bution of insurance products by banks) has been 
growing with some 41 banks registered as insurers in 2006.   18. Has Hong Kong, China identified any particular  consumer issues arising from the wider use 
of bancassurance in the distri bution of insurance products? 
 
19. To the extent that there has been an increase in the sale of insurance products through banks, 
could Hong Kong, China explain what impact th is has had on the number of insurance agents, 
and the volume and type of insurance products distributed? 
 Part IV. Trade Policies by Sector 5: Services,  (v) Communications, (a) Telecommunications, 
Box IV.1: Telecommunications services: market  structure and liberalization, Page 90 
 
The Secretariat Report indicates that for interna tional telecommunications services, the external 
telecommunications services market  has been liberalized since 1 January 1999. Hong Kong, China’s 
current GATS offer includes mode 1 and mode 3 ma rket access limitations on international services.  
 
20. Could Hong Kong, China explain to what ex tent the market liberalization of these services 
remains bound by these limitations? 
 
Part IV. Trade Policies by Sector 5: Services,  (v) Communications, (a) Telecommunications, 
page 91, paragraph 53  
The Secretariat Report indicates that the Telecommunications Ordinance prohibits all licensees from conduct that substantially restricts competition.   21. Could Hong Kong, China explain how it dete rmines whether a restriction on competition is 
‘substantial’? 
 
Part IV. Trade Policies by Sector; (5) Services,  (vii) Legal Services, page 101, paragraph 90 
 
The Secretariat Report indicates that Mainland Chin a is the most important export market for Hong 
Kong's legal services.  
 22. Does the government of HKSAR's commercial/ economic strategies include plans to diversify 
or expand its export of professional services (i n particular legal services) to other foreign 
markets?   WT/TPR/M/173/Add.1 
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QUESTIONS BY THE EUROPEAN COMMUNITIES  
 
II.  TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 
 
Sustainable development  
- Could some information be provided about how the issue of trade and sustainable 
development fits into the overall developm ent strategies of Hong Kong, China? Which 
particular measures have been taken sin ce the last Trade Policy Review in 2002? 
 
Trade and environment 
 
To address increasing pollution in HKSAR, the report by Hong Kong, China indicates (paragraph 152) that all major government policies are submitte d to environmental protection scrutiny and that 
the 'polluter pays' principle is applied, and eff ective since st January 2006 fees and charges were 
revised to achieve full-cost recovery for government services.   - Notwithstanding the short time of implemen tation, could Hong Kong, China's authorities 
report whether there are already first effects? 
 Trade and social development 
 
As Hong Kong, China's comparative advantages ha ve shifted from low-wage and labour-intensive 
production to high-value-added activ ities, the Government is committe d to promoting innovation and 
technology.  A number of schemes are in place to f acilitate structural adjustment, enhance industrial 
competitiveness and/or encourage the growth of sunrise activities. 
 - Please provide details of the skills-upgrading programmes and education reforms that have 
been undertaken.  
 
(7) F
OREIGN INVESTMENT REGIME  
 
Legal form of foreign invested companies 
 
Market access provisions under CEPA are supposed to be applicable to all companies registered in 
Hong Kong, China for more than three years. It is not clear, however, whether companies may be 
discriminated by their legal form of establishment. 
 - What are the conditions to be fulfilled by  Hong Kong, China-based foreign invested 
companies to be eligible for preferential treatment under CEPA? 
 
III.  TRADE POLICIES AND PRACTICES BY MEASURE 
 
(2) M
EASURES AFFECTING IMPORTS  
 (iii) Other charges affecting imports 
 We are seeking clarification on the operation a nd scope of detailed provisions on certain imported 
goods (such as tobacco, hydrocarbons, al coholic beverages and motor vehicles), which are subject to a 
sale or registration duty (of up to 35% in the case of  motor vehicles) that may, at least potentially, 
amount to "taxes on imports" in contrast with Art III of GATT.  WT/TPR/M/173/Add.1 
Page 12  
 
  The tax on the first registration of motor vehicles,  administered by the Transport Department, remains 
in place. Rates are ad valorem, and vary according to  the vehicle's value and class (e.g. private car, 
light bus, bus, etc.); they were most recently revi sed in June 2003. Electric vehicles are exempt from 
this tax from 1 April 2006 up to March 2009.  In gene ral, the tax is levied on the vehicle's published 
retail price.  If there is no published price, the tax is assessed on the purchase price plus insurance and 
freight, plus any handling charges for delivery of the vehicle to the HKSAR owner, and any other 
costs necessary for the vehicle to meet registration requirements.  Tax rates now range from 3.7% 
(previously 4%) for taxis, public and private light bu ses, etc. to at least 35% for private cars.  As no 
vehicles or parts subject to this tax are produced  in the HKSAR, the tax is, in practice, levied 
exclusively on imports”.   
- Taking into account that Hong Kong, China does not manufacture vehicles or parts, are you 
thinking about lowering these high tax rates?  
 With reference to the WTO Secretar iat's Report, high levels of duty  still exist on wine and spirits, as 
compared to other countries in the region; hence these are encouraging counterfeiting and smuggling. 
I seems that the increase of fiscal revenue does not comp ensate the structural cost of maintaining this 
system. Moreover, this excise specifically affects wi ne, while duty on liquors other than wine with an 
alcoholic strength below 30% remained unchanged at 40%.    - Given that income generated from excise duties contributes only marginally to the SAR 
government revenue, what is the purpose, ser ved by such a high level of taxation? 
 
- Is Hong Kong, China planning to reduce the duties on wine?  
(iv) Customs valuation and rules of origin  
 For trade in goods, under the CEPA between PR Ch ina and Hong Kong, China, rules of origin are 
negotiated and agreed on a product by product basis ev ery year. In effect this  mechanism of ad-hoc 
rules of origin allows China wide discretion to ch erry pick the beneficiaries of trade preferences, 
possibly leading to discriminatory treatment.  - We would like to know whether Hong Kong, China plans any action to address this problem 
and which? 
 
(v) Import prohibitions, licensing, and restrictions 
 
The Rice Control Scheme was liberalized effective 1 January 2003; this has eliminated the rice import 
quota system, removed entry barriers, reduced ope ration costs, and enhanced competition among 
operators in the local rice trade. Nevertheless, ri ce remains subject to import licensing procedures.” 
 - Given that Hong Kong, China’s authorities are still requiring licences for rice imports, does 
the Government of Hong Kong, China contemplate phasing out these import licenses for rice? 
 
(vii) Government Procurement 
 
- Could Hong Kong, China's authorities share with  us the results of the overall review of the 
government procurement regime that was recently undertaken?  
 
- In the framework of the ongoing GPA review , when do the authorities of Hong Kong, China 
expect to submit an initial offer to the GPA Committee? 
  WT/TPR/M/173/Add.1 
 Page 13 
 
 
  According to the footnote of paragraph 38, info rmation and notices on tenders are to be found in 
different websites (Government Gazette, Works Di gest and Environment, Transport and Works 
Bureau).   - For the sake of more transparency, would H ong Kong, China's authorities consider having 
only one website? 
 Hong Kong, China's authorities consider that  open and competitive tendering is the norm 
(paragraph 39).  
- Could Hong Kong, China explain to us, why the share of contracts awarded through open 
tendering has constantly decreased from 52% of  all contracts awarded in 2001 to 29% in 
2005? 
 
(3) M
EASURES AFFECTING EXPORTS  
 
(iii) Export prohibitions, licensing, and restrictions  
(b) Export licensing and restrictions 
 In an effort to avoid circumvention of Mainla nd specific textiles safeguard measures by means of 
illegal transhipment or false declaration of or igin, all textiles shipments involving the sensitive 
markets must be covered by either consignment-spec ific licences issued by the Director-General of 
Trade and Industry (DGTI), or export or import tex tiles notifications completed by textiles traders 
registered under the Textiles Trader Registration Scheme (TTRS).  The licensing requirements for 
Mainland China and the United States commenced on 1 January 2005, and for the EC on 15 March 
2006.  In addition, all cut-and-sew n garments destined for the United States and the EC have been 
subject to the production notification (PN) require ment.  Textiles shipments involving non-sensitive 
markets are covered by comprehensive or consignment-specific import or export licences.  - This system of export licensing has now been in place for exports to the EC since March 
2006. What preliminary conclusions can th e Hong Kong, China government take its 
implementation? Particularly regarding its re liability?  Can the triple digit percentage 
increases in exports of textiles and clothing to th e EC be verified through the export licensing 
system? 
 - Does Hong Kong, China forese e any similar system of export licensing for footwear, 
especially in view of the EC AD measures on leather footwear of Chinese and Vietnamese 
origin? 
 
(4) M
EASURES AFFECTING PRODUCTION AND TRADE  
 
From April 2006, five R&D centres have commenced  operations to promote technology development 
in:  textiles and clothing; nanotechnology and adva nced materials;  automotive parts and accessory 
systems;  logistics and supply chain manageme nt enabling technologies;  and information and 
communications technologies.  These centres con duct industry-oriented R&D in their respective 
technology areas and promote technology transfer to the industries.  
- What specific technological developments are pursued in these five R&D centres? Where can 
further information be obtained? 
 WT/TPR/M/173/Add.1 
Page 14  
 
  (iii) Intellectual property rights 
 
Patents 
 
Several European companies have complained of  Mainland Chinese companies being registered in 
Hong Kong, China, with names that contain all or major parts of well known brand or company 
names already registered in Euro pean jurisdictions. The Hong Kong Registry has argued that their 
registration criteria are similar to those operated in the EC, where it does not seem to pose any major problem. Depending on the sector the effect of this practice ranges from misleading customers up to the breach of health and security standards. 
 
- How does Hong Kong, China intend to address th e concerns of companies, whose names are 
being copied and the risks posed to the consumer by such misleading practices? 
 The pharmaceutical industry has been complaining fo r a long time about the registration system of 
pharmaceutical products which does not take into ac count patent linkage, and also does not provide a 
pre-registration alert system for patent holders to take early actions. The present practice allows 
generic copies of patented drugs to be registered  and hence, distributed legally in the market. The 
Hong Kong, China government has decided to mainta in the status quo after a prolonged period of 
active lobbying. The feedback from the Hong Kong, Ch ina Government has been negative. Only civil 
remedy is currently available to right holders. 
 
The defence of Hong Kong, China government to the EC argument is that Hong Kong, China has a similar system to the EC. However, the situation in Europe is very different, whereby infringing 
parties may be required to pay colossal damages, whereas in Hong Kong, China, the market is so 
small that the high legal costs incurred for seeking civil remedies are not justified. 
 
- Can Hong Kong, China indicate which measures it  has taken or intends to take to prevent 
drug administration authorities from approving the registration of a drug application that would infringe a patent? 
 
Copyright 
 
Industry associations are concerned that copyright legislation proposed by Hong Kong, China, does 
not offer the necessary protection for encrypted cont ent distributed through encryption devices, such 
as decoders. Hong Kong, China's draft legislati on would allow encryption mechanisms to be 
circumvented if the encrypted content is not copyri ght protected. In fact it requires prior knowledge of 
copyright infringement. 
 - How does Hong Kong, China intend to monitor whether the content obtained through 
circumvention devices is copyrighted or not? 
 - Can Hong Kong, China explain how the require ment of knowledge of copyright infringement 
provided for in Copyright (Amendment) Bill 20 06 contributes to an effective protection 
against circumvention of technological protection measures (TPMs)? 
 - Can Hong Kong, China explain how the exceptions to the prohibited acts provided for in 
Copyright (Amendment) Bill 2006 preserve the fundamental goals of the prohibition? Does 
Hong Kong, China envisage promoting voluntary  measures by right holders to accommodate 
specific exceptions? 
  WT/TPR/M/173/Add.1 
 Page 15 
 
 
  - Can Hong Kong, China indicate how it intends to tackle the criminal liability for the act of 
circumvention in Copyright (Amendment) Bill 2006? Does Hong Kong, China intend to 
introduce a criminal offence for the act of circumvention? 
 - Can Hong Kong, China clarify the rules applicab le to civil and criminal liability for dealing 
with circumvention devices under Copyright (Amendment) Bill 2006? 
 
Geographical indications 
 
Hong Kong, China does not possess a genuine system  of protection for geographical indications. 
Protection of geographical indications in Hong Kong, China is ensured through certification 
trademarks. It is therefore unclear how the TRIPS provisions on geographical indications are 
implemented.  - Can Hong Kong, China explain how Articl es 22 and 23 of the TRIPS Agreement are 
implemented in Hong Kong, China? How many ge ographical indications ha ve been registered 
so far? 
 - Can Hong Kong, China specify the number of geographical indications registered by 
foreigners?  
 Enforcement 
 
Hong Kong's efforts toward IPRs protection ar e welcome. We particularly appreciate the 
modernization of the legal framework and the po lice activities progressively and significantly hitting 
the centres of production of counterfeit products, wher eas most of them have been closed or moved 
outside of HKSAR. Nevertheless several problems still exist. 
 The proximity to the Chinese province of Guangd ong, one of the world’s most active production 
centres of counterfeit and pirated goods, makes Hong  Kong, China a convenient distribution market. 
Counterfeit and pirated goods are smuggled in for local  sales or transhipped to the world. Counterfeit 
and pirated goods transhipped a nd in transit through Hong Kong, China still constitute a major 
problem, including to the EC. The EC Customs st atistics for 2005 show that Hong Kong, China 
accounted for 8% of the counterfeit and pirated goods seized at the EC border last year. The situation 
has not improved compared to 2004.  - Can Hong Kong, China indicate which measures it  has taken or intends to take to better 
control transit and transhipment of count erfeit and pirated goods through its territory? 
 So far the local authorities have concentrated thei r action against counterfeit musical products, videos, 
software and internet piracy. Therefore a stronge r commitment against the spread of clothing and 
brand products fakes is deemed desirable.  Could we learn more about what counter-measures  Hong Kong, China's authorities are applying or 
envisaging against the spread of clothing and brand product fakes? 
 Trademark counterfeiting remains firmly under c ontrol, and there is no major manufacturing 
operation in Hong Kong, China. For the local retail market, only some low-level sales activities of a 
limited scale by hawkers are found in certain black sp ots.  Due to the vigorous enforcement actions of 
Hong Kong, China Customs, most counterfeiters op erating at the black spots have now adopted a 
stealthy mode of operation. Only photos of count erfeit goods are displayed and customers will be led 
to showrooms/ storage centres in near by buildings for the actual transactions. 
 WT/TPR/M/173/Add.1 
Page 16  
 
  - Considering the knowledge of these backroom sa les, what measures are envisaged to counter 
such illegal sales? 
 - Are textiles/clothing/footwear products sold in such centres?  (iv) Competition and consumer protection policy 
 
Hong Kong, China does not yet have comprehe nsive competition legislation to address anti-
competitive behaviour and consumer protection and applies a sectoral, rather than a cross-sectoral 
policy approach.  Since 2005 a Competition Policy Re view Committee has been  at work to study 
approaches to competition policies in various count ries and come up with recommendations for Hong 
Kong, China (see also WTO Secretariate's Report,   paragraph 15 and HKSAR 's Report, paragraph 
24)). The EC has been supportive to this process and aware that public consultations are to now to be 
held on the recommendations.   
Concerning the review of Hong Kong, China's Competition Policy, could Hong Kong, China's 
authorities provide us with an update on the envisag ed termination of the work of the Competition 
Policy  Review Committee, the public consultation of the recommendations and the final proposal of 
the authorities for the adoption of competition legi slation and the required institutional arrangements 
for the implementation and enforcement of competition policy?  IV. TRADE POLICY BY SECTOR 
 
(5) S
ERVICES  
 
Construction 
 
Hong Kong, China indicates that it has undertaken GATS commitments in construction services, and 
is aiming to improve them through its DDA offer. However, these commitments are limited to a small part of CPC 517- building completion and finishing work, and to project management services.   - Would HKC explain what its current regulatory regime is for commercial presence of foreign 
companies operating in the other construction services sub-sectors? 
 
Tourism 
 
- Would Hong Kong, China inform us on how much of the FDI attracted by it in the last years 
has been in the tourism sector? 
 - Would Hong Kong, China inform us about their existing plans to promote the tourism sector, 
and what measures the government is taking to  ensure non-discrimination of Foreign Service 
suppliers? 
 
- Would Hong Kong, China inform us about th eir plans for improving professional education 
and training related to the tourism sector? 
 - What is the approach of Hong Kong to the regulation of tourism-re lated aspects of general 
interest such as environment, wildlife, urban planning, etc? 
 
- We would like to know about Hong Kong’s assessment of the effect of the tourism sector in 
overall economic growth and employment, and in  particular in other economic sectors like 
construction, transport, computer serv ices, education and professional training? 
  WT/TPR/M/173/Add.1 
 Page 17 
 
 
  - Would Hong Kong, China inform us about the existing legislation applicable to tour 
managers (professionals accompanying groups of tourists in their travel through the country) 
and tourist guides?  
 - Would Hong Kong inform us about the measure s that the government is applying to ensure 
non-discrimination of foreign service suppliers in these fields? 
 
Distribution services 
 
- Would Hong Kong, China inform us on how much of the FDI attracted by the country in the 
last years has been in the distribution sector? 
 - We would like to know about Ho ng Kong’s assessment of the effect of the distribution sector 
in overall economic growth, employment and soci al development, and also in other economic 
sectors like construction, transport, computer services, education and professional training. 
- Would Hong Kong, China inform us about exis ting and planned legislation applicable to 
retailing services? 
 
Telecommunications 
 
The WTO Secretariat's Report states that "there ar e no limitations on foreign e quity participation or 
ownership or any other FDI restrictions in the telecommunications market". 
 In practice, however, we have recent indication for the successful prevention of a foreign direct 
investor taking a controlling stake in a Hong Kong telecoms Company.   
- Could Hong Kong, China, inform us by whic h measures it ensures that FDI participation or 
ownership are not limited or prevented?  
 Maritime transport 
 
Cargo diversion away from Hong Kong, China is re garded as a potential crisis for the economy which 
is heavily service and trade oriented. Direct sh ipment from mainland China has become increasingly 
popular, with many Hong Kong, China manufacturers and traders shipping their Chinese-made goods 
to overseas markets directly, bypassing Hong Kong, Ch ina for reasons such as cost saving, logistics 
and proximity to the production base. In particular , Shenzhen’s ports are seen as posing a formidable 
challenge to Hong Kong, China ports. Shenzhen, alread y one of the busiest ports in the world in terms 
of container throughput handled, is growing at a doubl e-digit rate each year. The relative lead of Hong 
Kong, China as the world’s busiest port is gradually being eroded. Total Hong Kong, China port throughput rose only marginally by 2% in 2005. Hong Kong, China’s own container terminal 
operators are themselves investing heavily in devel oping container terminals in Southern China, while 
new development of container terminal s in Hong Kong remains stagnant.  
  
- How does Hong Kong, China plan to adjust its trade policy regime to tackle the competition 
brought about by the ports of Southern China in cargo diversion and the potential loss of traffic resulted form direct trade links betw een Mainland China and Chinese Taipei in the 
future?  
  WT/TPR/M/173/Add.1 
Page 18  
 
  QUESTIONS FROM THE UNITED STATES
  
 III. TRADE POLICIES AND PRACTICES BY MEASURE  
(2) M
EASURES DIRECTLY AFFECTING IMPORTS  
 (iii) Other charges affecting imports 
 1. On Paragraph 20 page 34, the Secretariat report indicates that Hong Kong, China levies an 
excise duty on,  inter alia,  locally manufactured and imported liquor, consumed locally;  their rates 
have remained unchanged since March 2001, excep t for an increase from 60% to 80% on the ex-
factory value of wine as from March 2002 (Table III.3) .  Duty on liquor (i.e. alcoholic beverages) is 
levied ad valorem  at three different rates depe nding on alcoholic strength.  In  December 2004, a two-
month public consultation exercise on lowering the dut y on alcoholic beverages revealed a diversity 
in views; by 2005 it was decided to maintain the status quo.  
 
As there is little or no domestic production of these goods and imports account for a minor part of the 
Hong Kong Government revenue, can  Hong Kong, China explain the rationale behind levying these 
taxes mostly on imports? 
 
(x) Standards and other technical requirements 
 Marking and labeling  
1. With respect to paragraph 61 on page 45, we  note Hong Kong, China’s intention to put in 
place labelling requirements for nutritional informa tion and genetically modified foods.  We look 
forward to receiving copies of these measures once Hong Kong, China is ready to notify their draft 
language to the WTO.  When does Hong Kong expect to do so?  
(4) M
EASURES AFFECTING PRODUCTION AND TRADE  
 
(iii) Intellectual Property Rights 
 
1. Trademark: We have received  reports that legitimate bra nd owners' brand names are being 
registered by unauthorized third-parties as "busin esses" in Hong Kong, China as part of company 
registration procedures, which are independent from trademark registration procedures.  These third-
parties then license the use of the (unauthorized) business names on products distributed in mainland 
China.  Hong Kong’s system of company registratio n laws allows this registration of a new company 
as long as its name is not exactly identical, even if  the name is confusingly similar.  Although these 
products are not sold in Hong Kong, weak comp any registration procedures in Hong Kong help 
facilitate intellectual property abuse in mainland Ch ina.  What, if anything, is Hong Kong doing to 
address this loophole in company registration procedures?  2. Copyright: We understand that Hong Kong, Ch ina's latest version of its 2006 Copyright 
Amendment Bill continues to provide for a blanke t exemption for "educational use" of copyright 
material.  We are concerned that the blanket ex emption is too broad and will not protect rights’ 
holders.  How does Hong Kong intend to further narro w the exemption to provide for some guidelines 
to determine that it is a fair use before the Amendment is passed?  Does Hong Kong intend to 
implement any specific measures to educate the public  and ensure that the users of the copyrighted 
works do not abuse the provisions to engage in large scale unlicensed use of copyrighted works? 
 
Also, the latest version of the Copyright Am endment Bill proposes a reduction of the period for 
criminal liability for parallel imports from 18 to 12-15 months after the publication of a work.  The  WT/TPR/M/173/Add.1 
 Page 19 
 
 
  U.S. Government is concerned that an 18 months ti meframe is barely sufficient for industry to recoup 
the investments made in creating a copyrighted work. Would the Hong Kong Government consider 
leaving this period for criminal lia bility for parallel imports unchanged? 
 3. Pharmaceutical Patent Linkage: We unders tand the local Hong Kong pharmaceutical industry 
association submitted a proposal to the Hong Kong govern ment in June that would give patent holders 
an opportunity to commence legal action agains t infringing generics before their marketing 
authorization applications are processed by the Depa rtment of Health.  However, the Department of 
Health claims it cannot adopt this proposal wit hout amending its pharmaceutical registration law.  
What can the Hong Kong government do to work on this issue of infringing generics? Would the 
Hong Kong Government consider establishing and ensuring adequate “patent linkage”, thereby 
removing the risk of arbitrary generic entrance a nd inadvertent approval of generics in the face of 
otherwise valid patent protected products?  4. We understand that Hong Kong recently deleted the knowledge requirement from the 
Copyright Amendment provision on the circumvention of technical prevention measures.   In doing 
so, however, it added a defense that allows a circum ventor to absolve his liability if he can establish 
that the circumvention act is done for the purpose of carrying out a non-infringing act.  We remain concerned that this new defense could become  a first step towards a general exception for 
circumventing TPM’s.  If implemented, how will Ho ng Kong guarantee that this new defense is not 
abused?  
 
IV. TRADE POLICIES BY SECTOR 
 (2) A
GRICULTURE AND FISHERIES  
 
1. We note on p. 116 in Table AIII.1 that import licenses for pesticides are required from both the Agriculture, Fisheries and Conservation Department as well as the Trade and Ministry Department. The purpose for both is stated as public health, but with different validity periods. What 
is the justification for the dual licenses?   
2. On page 115, Table AIII.1 Hong Kong, China lists rice as one of the goods subject to import 
licensing. The justification is to maintain a stable  supply and manage a rese rve stock for emergencies 
and short-term storage. What is the time period fo r maintaining the reserve stock? What timeframe is 
considered short-term storage?  
3. We note on page 123 in Table AIV.1 that you list an Agricultural Aid Loan Fund that 
provides working capital for individual farmers. The fund is maintained jointly with both government 
and non-governmental funds and in  2005 provided $HK10,685,000 in loans. Please further describe 
the objectives of this loan program.  
(5) S
ERVICES  
 
(vii) Legal Services  
 
On page 101, paragraphs 92 and 93 do not me ntion foreign legal consultants.  Could the 
representative of Hong Kong, China confirm whet her Hong Kong, China recognizes foreign legal 
consultant as a method of legal practice?  Also, we would like to ask how many foreign legal consultants, or foreigners in other types of law 
practice, are active in Hong Kong, China, and what are the principal countries of origin?   
 WT/TPR/M/173/Add.1 
Page 20  
 
  QUESTIONS BY JAPAN
 
 
Report by Hong Kong, China (WT/TPR/G/173) 
 
II. ECONOMIC AND TRADE ENVIRONMENT 
 
C. MONETARY POLICY 
 
(Page 8, Paragraph 18)  
While the exchange rate of Renminbi (RMB) agains t the US dollar (USD) has risen due to the reform 
of the exchange rate system, the Secretariat report states that the monetary system in Hong Kong fixes 
the exchange rate of the Hong Kong dollar (HKD) in the foreign exchange market against the USD at 
around HKD 7.8 to USD 1.   
1. Please indicate whether problems arise due to the exchange rate of RMB against the USD 
differing from that of the HKD against the USD.  
Report by the Secretariat (WT/TPR/S/173) 
 I. ECONOMIC ENVIRONMENT 
 
(4) S
TRUCTUAL MEASURES  
 (i) Tax reforms 
 
(Page 10-11, Paragraph 18-19)  The Secretariat report states that a Tourist Refund Scheme would allow visitors to obtain a refund of 
GST on goods they purchase in Hong Kong, Chin a and are taking home with them, and that 
residential property sales and rentals would not be subject to GST. 
 
2. Please indicate whether the introduction of su ch a tax system with exceptions may really 
serve to strengthen public finance.   
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
(4) M
EASURES AFFECTING PRODUCTION AND TRADE  
 (iii) Intellectual property rights 
 (Page 64, Paragraph 126, 128) 
 
(Report by Hong Kong, China (WT/TPR/G/173) 
 
(Page 18-20, Paragraph 78-90) 
 
As for the protection of intellectual property rights, Japan appreciates that the Hong Kong Special Administrative Region (HKSAR) of the People’s Republic of China (PRC) is making efforts to take measures, such as the establishment and expansion of related laws, and th e reinforcement of the 
enforcement division (Customs) by increasing the numbe r of officials. Nevertheless, the Government 
of Japan would like to ask the HKSAR to furt her reinforce its enforcement activities due to 
circumstances where unlawful goods ar e exposed in street markets.  WT/TPR/M/173/Add.1 
 Page 21 
 
 
   
3. Please indicate specific views on the circumstances mentioned above.  
 Currently, upon request from several Japanese co mpanies, the Government of Japan is in 
consultations with the HKSAR regarding the trad emarks of eminent Japanese companies which are 
also registered in Hong Kong as a part of the tr ade names kept by Hong Kong firms, on the grounds 
that the Japanese Government considers the remedi es taken by the HKSAR insufficient. The Japanese 
Government finds it necessary for the HKSAR to ta ke effective measures against the spread of 
counterfeits.   
4. Please indicate specific views on this issue. 
 According to the Secretariat report, the courts in  Hong Kong, China ordered some Internet Service 
providers (ISPs) to disclose personal data  of infringers to copyright holders.  
 
5. Please indicate whether the HKSAR has any lega l framework to restrict  the liability of ISPs 
for disclosing personal data of copyright infringers or for deleting information on the distribution of 
pirated goods in the Internet, upon request fro m rights holders. If it is the case, please provide 
information on the legal framework.  6. Please provide information on the ‘E-auctioning with Integrity Scheme’. Under this scheme, 
does ISP voluntarily delete information suspected to advertise the sale of pirated goods, or upon 
request from rights holder? In the latter case, please indicate specific criteria for deleting such 
information.   7. Please indicate whether the HKSAR charges as copyright infringement the advertisement of 
the sale of pirated goods by E-auctioning.  
  8. Please provide information on the ‘IPR Protection Alliance’.  
(iv) Competition and consumer protection policy 
 (Page 65, Paragraph 131) 
 The Secretariat report points out that although the HKSAR is perceived as one of the world’s freest 
economies, its market in major industry seems to  be anti-competitive due to problems such as 
industrial structure. 
 
9. Please indicate whether the HKSAR finds it nece ssary to correct such conditions in light of 
competition and consumer protection policy.   
 
IV. TRADE POLICIES BY SECTOR  
(5) S
ERVICES  
 
(Page 81, Paragraph 27)  
According to the Secretariat report, the HKSAR committed new sub-sectors of business services in its 
initial offer.  10. Please indicate the specific intentions of the HKS AR to take measures to further liberalize the 
sector. 
. WT/TPR/M/173/Add.1 
Page 22  
 
  In the area of computer and related services, the report by the Secretariat refers that the offer took 
account of the relevant sectoral initiatives and/or  proposals submitted by other WTO Members. 
  11. Please indicate the specific intentions of the HKS AR to take measures to further liberalize the 
sector. 
 
The Secretariat report points out that the HKSAR improved commitments for audiovisual services in its initial offer.   12. Please indicate the specific intentions of the HKS AR to take measures to further liberalize the 
sector. 
 As the Secretariat report indicates, the HKSAR im proved commitments for construction and related 
engineering services in its initial offer.   
13. Please indicate the specific intentions of the HKS AR to take measures to further liberalize the 
sector.  The HKSAR widened scope for distribution services in  its initial offer, according to the Secretariat 
report.   
14. Please indicate the specific intentions of the HKS AR to take measures to further liberalize the 
sector.  The Secretariat report states that the HKSAR improved commitments for tourism and travel-related services in its initial offer. 
 
15. Please indicate the specific intentions of the HKS AR to take measures to further liberalize the 
sector.   
QUESTIONS FROM ARGENTINA
 
 
On the WTO Secretariat Report (WT/TPR/173)  1. In pages 10/11, paragraph 18, the report says that the Government began a public consultation 
on the feasibility of introducing a new tax on goods and services (GST) th at would, inter alia, help to 
avoid further increases in the rates of salaries and pr ofits taxes. The report mentions that exports of 
goods, international supplies of services, and financia l supplies would not be subject to GST. Could 
you clarify in which stage is currently this public consultation? In the case the introduction of the tax 
has been approved: does the tax affect imports?  2. In page 33, paragraph 18, th e report mentions that in sectors such as petroleum, textiles and 
clothing, and chemicals, the percentage of bound lines remains low. Can you explain the reasons for 
this situation?   3. In page 45, paragraph 61, the report menti ons that in Hong Kong China the process of putting 
in place labelling requirements for nutritional inform ation and genetically modified foods is under 
way. Could you provide more details on these requireme nts and when they are expected to come into 
effect?   
  WT/TPR/M/173/Add.1 
 Page 23 
 
 
  QUESTIONS FROM NEW ZEALAND  
 Q.1  Competition 
 We are pleased that in July 2006, the authoriti es considered the recommendations of a Competition 
Policy Review Committee (CPRC) regarding introd ucing a cross-sector competition law, targeting 
specific types of anti-competitive conduct (WT/TPR/S/173 Part I, section 4 (iv), p 12).  What is the likelihood of competition legislation being introduced and if it is introduced what form is 
it likely to take? 
 If competition legislation is not introduced as a result of the CPRC recommendations and subsequent public consultation, how will Hong Kong, China im prove the environment for competition and deter 
anti-competitive practices?  Q.2  Electronic Registration and Documentation  
 
The Secretariat’s Report states that during the peri od under review Hong Kong, China has taken steps 
to facilitate trade by simplifying and reducing trad e procedures through, inter alia, the introduction of 
electronic customs clearance and documentation pro cedures (WT/TPR/S/173 Part III, section 2 (i), 
p 31). 
 Will Hong Kong, China be taking further steps to reduce trade procedures by, for example, moving from a paper based to electronic based certificat ion system for food products or accepting a 
completely paperless electronic based certification system? 
 
Q.3  Wine duty 
 
New Zealand is disappointed that the excise duty le vied on wine by Hong Kong, China has remained 
at 80% on the ex-factory value of wine since Ma rch 2002 (WT/TPR/S/173 Part III, section 2 (iii), p 
34).  As there is little or no domestic production of  liquor products in Hong Kong, China, this duty 
falls mostly on imports (WT/TPR/S/173  Part III, section 2 (iii), p 35).   
 New Zealand questions the need for such a high dut y, especially in light of the openness of the Hong 
Kong, China’s economy and its recent performance.  As a wine exporter to Hong Kong, China, New 
Zealand is concerned about the potentially negativ e impact that this high duty has on consumer 
demand. 
 Can Hong Kong, China please explain its reasons be hind retaining the excise tax on wine at 80% on 
the ex-factory value of wine?  Given Hong Kong’s promotion of itself as a regiona l tourism and cultural hub, might a reduction of 
the duty enhance its status as such a hub to the benefit of the wider economy?  
  WT/TPR/M/173/Add.1 
Page 24  
 
  QUESTIONS FROM COLOMBIA
 
 
Question 1 
 
I. Economic Environment;  (4) Structural Measures;  (i) Tax reforms;  Paragraphs 18 
and 19  
The WTO Secretariat report indicates that Hong Kong, China’s government is heavily dependent on rather volatile non-tax income (notably sales of gov ernment-owned land and investment income).  In 
order to broaden the tax base, the authorities are considering the introduction of a goods and services 
tax (GST). 
 Notwithstanding that the government may still be undergoing consultations on its feasibility, would 
Hong Kong, China please comment on how this tax would be applied to imports, and how the 
government assesses that the tax may affect imports of agricultural products? 
 
Question 2 
 IV. Trade policies by sector;  (2) Agriculture and fisheries;  (i) Features;  Paragraph 9 
 
The WTO Secretariat report indicates that after 48 years of implementation, on 1 January 2003, Hong 
Kong, China significantly liberalized the rice trade w ith the elimination of the import quota system for 
rice and the relaxation of registration criteria for ri ce stockholders.  However, the report also states 
that in 2005, 91% of the imported rice originated in Thailand.  Could Hong Kong, China please make an assessment of the reasons of why rice imports are not more 
origin – diversified? 
 
Question 3 
 II. Trade policy regime: Framework and objectives;  (6) Trade agreements and arrangements;  (ii) Regional and bilateral arrangements;  Paragraphs 22 and 25 
 
The WTO Secretariat reports that the Closer Economic Partnership Arra ngement (CEPA) between 
China and Hong Kong, China was signed on 2003, and it was first supplemented in 2004 and then in 2005.  The supplements are denominated CEPA II and CEPA III.  The Secretariat also reports that 
CEPA was notified in 2003 to th e Committee on Regional Trade Agreements as a free trade area that 
also provides for the liberalization of trade in services. 
 Could Hong Kong, China please confirm if CEPA was notified to the Council for Trade in Services?  
Could you please confirm if CEPA II and CEPA III were also properly notified?  
Question 4 
 
II. Trade policy regime: Framework and objectives;  (6) Trade agreements and arrangements;  (ii) Regional and bi lateral arrangements;  Paragraph 26 
 
The WTO Secretariat report only mentions an FTA negotiation with New Zealand which is still in 
progress.  However, it indicates that Hong Kong, Ch ina now has a more open – minded approach to 
the pursuit of free trade agreements.  Could Hong Kong, China please describe with more detail its policy regardin g the negotiation of free 
trade agreements, especially with WTO developing members?   WT/TPR/M/173/Add.1 
 Page 25 
 
 
  Question 5 
 III. Trade policies and practices by measure;  (4 ) Measures affecting production and trade;  
(i) Incentives;  Paragraph 78 
 The WTO Secretariat report indicates that Hong Kong,  China’s Financial Secretary stated that the 
development of high-value-added commercial, fi nancial and professional services had stimulated 
growth in sectors, such as convention and exhibition,  electronic trading, transportation, hospitality, 
and retail services.  
Colombia would be interested in knowing if Hong K ong, China has subsidies in force for any of those 
activities, and if it had, if they are already implem ented, or when will they be implemented, and how 
long will they last.  
Question 6 
 
III. Trade policies and practices by measure;  (4 ) Measures affecting production and trade;  
(i) Incentives;  Paragraph 80 
 
The WTO Secretariat report indicates that shipping  profits are exempted from tax when they are 
derived from the international operation of a ship by  a non-resident ship-owner from a country that 
provides tax exemption in respect of uplifts by a non-resident ship-owner from Hong Kong, China. 
 Could Hong Kong, China please explain the reasons why this measure is not listed in their Services 
MFN exemption list?  Question 7  IV. Trade policies by sector;  (5) Services;  (iv) Financial services;  Paragraph 40 
 
The WTO Secretariat report mentions the Guideline on Prevention of Money Laundering.  
Colombia would be interested in learning more a bout such guideline and its supplement.  Could Hong 
Kong, China please indicate where su ch information may be found? 
  
QUESTIONS FROM THE REPUBLIC OF KOREA
 
 
I. ECONOMIC ENVIRONMENT  
Structural Measures: Tax reforms (WT/TPR/S/173 p. 10~11 para. 18~19)  
- In June 2006, the government of the Hong Kong Special Administrative Region (HKSAR) 
announced its plan to introduce a single-rated goods a nd services tax (GST) at a rate of 5% to ensure 
sufficient financial funds in preparation of an aging society and to reduce over-reliance on volatile 
non-tax revenue in public finances.  Please provide  more details of the proposed GST framework, 
including specific schemes and the timing of its introduction.  WT/TPR/M/173/Add.1 
Page 26  
 
  II. TRADE POLICIES AND PRACTICES BY MEASURE 
 
Registration and documentation requirements (WT/TPR/S/173 p. 31 para. 6) 
 
- In case where one of the consignors has not file d for an export license, clearance is currently 
delayed for all LCL cargo in the same container.  Due to such delays of clearance, all the other 
consignors are subject to damages.  Please explain the measures that the government of HKSAR is 
taking to ensure prompt clearance in LCL cargo.   
 
QUESTIONS BY TURKEY
 
 
According to the financial regulati ons of Hong Kong, do the export  invoices issued by Hong Kong  
China companies:  
 (a) for the products directly shipped from mainland China to a third country,  
 (b) for the products imported from mainland  China to Hong Kong China and re-exported 
to a third country, 
 (c) for the products origin ated in Hong Kong China; 
 
generate same financial lia bility for the exporter?  
 Could Hong Kong China  Delegation provide informa tion about the related legislation on standard 
(common) liabilities?  I. ECONOMIC ENVIRONMENT   (6) D
EVELOPMENTS IN MERCHANDISE TRADE  
 
Secretariat Report notes that China remains the largest market for Hong Kong, China’s domestic 
exports, accounting for 32.8% of domestic exports in 2005.  
 The report also underlines that Ma inland China’s share in Hong Kong  China’s re-exports continued to 
increase.  
- According to customs legislation of Hong K ong,China for the “re-exported,  mainland China 
originated products”, is it required to submit import and export declarations as well as import 
and export invoices to Hong Kong China Customs Authorities?  
 - If not, could Hong Kong, China  Delegation ki ndly provide information on the legislation 
about the transactions of products that are in cluded in re-export statistics but not being 
declared or registered to Hong Kong, China Customs? 
 - We also would like to know, if transshipped pr oducts (products originated in Mainland China 
and those directly shipped to third countri es with the export invoice of Hong Kong China 
Company) are registered in the re-expo rt statistics of Hong Kong China?  
  WT/TPR/M/173/Add.1 
 Page 27 
 
 
  III. TRADE POLICIES AND PRACTICES BY MEASURE 
 (2) M
EASURES DIRECTLY AFFECTING IMPORTS  
 
(x) Standards and Other Technical Requirements  
(b) Sanitary and Phytosanitary regulations  According to the Secretariat Report,  the objectiv e of Hong Kong China’s food safety control system 
is to ensure  that food products are hygienic, safe and fit for human consumption and that this system 
which is based on risk assessment places particular  emphasis on safety control  at the source.   
 - Is there any requirement for the establishme nt of a mechanism between the Hong Kong Food 
and Environmental Hygiene Department and the related authorities of third countries in order 
to export animal products, especially poultry to Hong Kong China? 
 
- We would appreciate explanations of  Hong Kong China  delegation if there is such a  
requirement. 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
(4) M
EASURES AFFECTING PRODUCTION AND TRADE  
 (iv) Competition and Consumer Protection Policy   
 
It is noted in the Secretariat Report that although Hong Kong China is perceived as one of the world’s freest economies, its economy seems to be dominated by a few big companies and that it appears  a 
few powerful cross-sector conglomerates  may hi nder greater competition from domestic and foreign 
firms.  
Secretariat report further states that although an illust rative list of types of abuse of market position is 
included in the “Statement on Competition Policy”, none  of these types of abuse  as  is extensively 
defined nor does the statement mention any pr ovisions regarding mergers and acquisitions. 
 We have also noted in  the Secretariat  report that  Hong Kong China does not have a comprehensive 
competition law  or any other legislation  banni ng and/or sanctioning restrictive business practices. 
 - In line of the  fact that even in open economies, competition  law plays a key role in further 
enhancing  competitiveness in market place  and  consumer welfare, is it considered to  
improve competition legislation in a manner to  address the above mentioned issues that may 
hinder greater  competition? 
 
 
QUESTIONS BY BRAZIL
 
 
WT/TPR/S/173 IV (i) page 74 paragraph 07 
 
According to the Secretariat, "The Agriculture, Fisheries and Conservation Department (AFCD) is 
responsible for promoting the adoption of new pr oduction methods and helping producers to take 
advantage of new market opportunities.  The Gove rnment does not provide material of financial 
incentives to encourage switching production methods.  However, interested farmers may seek advice 
from the Department and visit the e xperimental station to obtain the relevant technical information WT/TPR/M/173/Add.1 
Page 28  
 
  and assistance.  The Department also operates three lo an funds to meet farmers' credit requirements;  
some HK$21.9 million was lent to farmers during 2005-06.  Emergency relief grants totalling HK$1.9 million we re distributed to 687 farmers during 2003-05.  
The authorities maintain that these loan funds are mainly financed from "non-governmental" sources."  
Could the Government explain how the operation of these funds? 
  
QUESTIONS FROM THAILAND
 
 
WTO Secretariat Report (WT/TPR/S/173) 
 
III. TRADE POLICIES AND PRACTICES BY MEASURES 
 (v) Import prohibitions, licensing, and restrictions 
 
(c) Quantitative restrictions  1. Para. 32:  Thailand welcomes the liberaliza tion of Hong Kong, China’s Rice Control Scheme 
since 2003, which served to eliminate the rice import quota system and aims to improve the 
conditions of competition in the local rice market.  Ho wever, the secretariat report indicates that rice 
imports remain subject to import licensing proce dures.  As over 90% of Hong Kong, China’s rice 
imports in 2005 originated in Thailand, we w ould appreciate further details on these licensing 
procedures, particularly in light of Article 2 of the Agreement on Import Licensing Procedures.  In addition, we would like to ask: what is the objective of the license? Who is eligible to apply for/obtain 
a license? What are the requirements, if any, that importers must fulfil to obtain a license?  What are 
the fees and expenses associated with this import licensing procedure, if any?   
(x) Standards and other technical requirements  
 (b) Sanitary and phytosanitary regulations 
 2. Para. 55: The secretariat notes that seafood is considered a “high-risk” food; hence, Hong 
Kong, China subjects certain imports from “high-ri sk” harvest zones to testing by its Food and 
Environmental Hygiene Department (FEHD).  Tha iland would like to request Hong Kong, China to 
clarify why it considers seafood to be “high-risk” food.  We also request clarification on Hong Kong, 
China’s definition of “high-risk” harvest zone, incl uding criteria it may use in evaluating whether a 
particular harvest zone is “high risk,” and the lis t of countries that Hong Kong, China has in the past 
designated or currently designates as having “high-risk” harvest zone(s).  Regarding fish samples testing performed by the FEHD, please describe in detail the procedures 
involved.  On average, how long does the testing procedure last? How much is the testing fee?   
 Normally who bears the cost of sample testing?  
(x) Standards and other technical requirements  
 
(c) Marketing and labeling  3. Para. 59: The report mentions that Hong Kong, China plans to introduce legislative 
amendment on mandatory labeling of nutritional inform ation in 2007.  Please provide the latest status 
of this amendment as well as deta ils of the new labeling system.  WT/TPR/M/173/Add.1 
 Page 29 
 
 
   
IV.  TRADE POLICIES BY SECTORS 
 (2) A
GRICULTURE AND FISHERIES  
 
(i) Features 
 
4. Para. 9: The secretariat report indicates that Hong Kong, China maintains a minimum reserve 
stock of rice, and that importers must be regist ered as stockholders and keep a minimum amount of 
reserve stock proportional to their share of total imports or sales.  Could Hong Kong, China please 
explain how it manages this reserve stock?  When  a stockholder imports rice, how much must that 
stockholder keep as reserve, i.e., what is the re quired proportion?  How are individual stockholder 
proportions determined in relation to the 15-day contingency reserve stock?  Once a stockholder 
meets the minimum reserve proporti on, can that stockholder sell its remaining rice to consumers 
immediately?  Would Hong Kong, China expect ch anges in its rice import trends if it reduced the 
required reserve stock proportion fo r stockholders?  If not, why not? 
 
SERVICES  
 5. Could Hong Kong, China please provide info rmation on the application procedures for spa 
and restaurant operation licenses?    
QUESTIONS FROM NORWAY
 
 
We have noted in para 25 on page  20 of the Secretariat report that: 
 "In December 2003,  the CEPA1 was notified jointly to the WTO Committee on Regional Trade 
Agreements as a free-trade area (within the meani ng of Article XXIV of the GATT 1994) that also 
provides for the liberalization of trade in services wi thin the meaning of Article V of the GATS.  In 
April 2006, the WTO Committee on Regional Trade Ag reements completed the factual examination 
of CEPA.”  Furthermore, para 71 on page 96 states:  
“Under CEPA, as from January 2004, Hong Kong, Ch ina has benefited from preferential market 
access to the sea transport services market of the Mainland of China.  Under CEPA I and II (section (5)(iii) and Chapter II), HKSAR's services providers ha ve been allowed to form wholly owned units 
in providing certain types of maritime services like international ship management services, container 
station and depot services, non-vessel-operating common carrying services, port cargo loading and unloading services.   Although HKSAR services  providers can only establish wholly owned 
companies to provide supplies services (except fuel and water) and shipping agency services for 
vessels owned or managed by their parent companies, this is considered important as HKSAR shipping companies will have greater autonomy in conducting their own business resulting from 
CEPA II provisions.  As from 1 January 2006, the scope of services that HKSAR service providers 
allowed to provide has been expa nded under CEPA III to cover:  ship maintenance and repair;  
international ocean container leasing, buying and se lling, as well as trading of container parts; and 
ship survey for ships registered in Hong Kong, China.  For an HKSAR company providing bilateral 
maritime transport services, 50% or more of the ships owned by it, calculate d in terms of tonnage, 
should be registered in Hong Kong, China.  But th is does not apply to bilateral towing services, for 
which HKSAR service providers may set up wholly  owned units to provide regular services under 
CEPA III.” 
 WT/TPR/M/173/Add.1 
Page 30  
 
  We note that the preferential trade in services betw een mainland China and Hong Kong in the service 
area is notified in accordance with GATS art. V.  We interpret this meaning that the trade in services 
between the two members is covered by  the GATS obligations and schedules. 
 On that background, we would like to have more information on the market access and national 
treatment situation with respect of maritime tr ansport of goods and p assengers between mainland 
China and Hong Kong.  We would therefore like know if any preferential treatm ent exists in this particular trade, and if and 
how this has been notified. 
 
   WT/TPR/M/173/Add.1 
 Page 31 
 
 
  REPLIES PROVIDED BY HONG KONG, CHINA 
 
 
ARGENTINA  
 
On the WTO Secretariat Report (WT/TPR/173)  Question 1  
 
 In pages 10/11, paragraph 18, the report says th at the Government began a public consultation 
on the feasibility of introducing a new tax on goods and services (GST) th at would, inter alia, help to 
avoid further increases in the rates of salaries and pr ofits taxes. The report mentions that exports of 
goods, international supplies of services, and financia l supplies would not be subject to GST. Could 
you clarify in which stage is currently this public consultation? In the case the introduction of the tax 
has been approved: does the tax affect imports? 
 
Answer 
 The nine-month tax reform public consultation in Ho ng Kong, China commenced in mid-July and will 
end in March next year. We have recently conducted an interim review of the consultation.  From the 
public views collected, we found that while the comm unity generally agrees that there is a need to 
broaden the tax base, the majority does not cons ider GST as an appropriate option to address the 
problem.  Therefore, for the remaining part of th e consultation, the Government will not advocate 
GST but will discuss with the public on the oth er viable options for broadening the tax base. 
 
Question 2  
 
 In page 33, paragraph 18, the report mentions that in sectors such as petroleum, textiles and 
clothing, and chemicals, the percentage of bound lines remains low. Can you explain the reasons for this situation?   
Answer 
 
All our bound tariffs are at zero rates.  It should al so be noted that the scope of binding aside, we 
have all along maintained a zero-tariff regime.  We have made unilateral efforts to increase binding 
over the years and the shares of bound tariff lines for the sectors of chemicals, textiles and clothing 
have increased during the past five years.    
We look forward to substantia l reduction and elimination of tar iffs by WTO Members under the Doha 
Development Agenda (DDA) negotiations.  After co mpletion of the Doha round negotiations, Hong 
Kong, China will review its tariff regime in the li ght of the negotiation results and consider binding 
additional tariff lines and the timing for doing so as appropriate.   
 
Question 3  
 
 In page 45, paragraph 61, the report mentions  that in Hong Kong China the process of putting 
in place labelling requirements for nutritional inform ation and genetically modified foods is under 
way. Could you provide more details on these requireme nts and when they are expected to come into 
effect?  
 WT/TPR/M/173/Add.1 
Page 32  
 
  Answer 
 Hong Kong, China is now finalizing the labelling requirements for nutr itional information.  We intend 
to introduce the legislative amendments to the Legislative Council in 2007  and will notify WTO once 
we are ready. 
 As regards the labelling requirment for genetically  modified foods, Hong Kong, China has released 
the "Guidelines on Voluntary Labelling of Genetica lly Modified (GM) Food" in July 2006.  The 
Guidelines aim to provide reference for the trade to make truthful and informative labels in a 
consumer-friendly manner.  They are available on  the webpage of the Centre for Food Safety. 
(http://www.cfs.gov.hk).  Hong Kong, China plans to  evaluate the effectiveness of the Guidelines 
before deciding on the way forward. 
  
AUSTRALIA
 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
Question 1  
(2) M
EASURES DIRECTLY AFFECTING IMPORTS  
 (iii) Other charges affecting imports 
 
 Hong Kong, China levies an excise duty on wine of 80% ad valorem, a level which 
disadvantages wine exporters and dom estic consumers of wine in Hong Kong, China.  The excise on 
wine is double that of the excise on other alc oholic beverages of similar alcohol content.  
(WT/TPR/S/165, page 35, para 20 and Table III.3) 
 
 What is the purpose of this high level of excise duty on wine, including in relation to the level of excise on other alcoholic beverages?  Noting th at 12.4% of excise revenues come from alcoholic 
beverages, what proportion of these come from th e excise on wine?  Are there any arrangements for 
future review of this excise?  Answer  Our ad valorem duty rates for spirits, wine and alco holic beverages with alcoholic strength not more 
than 30% (mainly beer in this category) are 100%, 80% and 40% respectively.  These duty rates are generally commensurate with the respective alco holic strength of the three types of alcoholic 
beverages, and have generally reflected their consumers’ ability to pay.   
 We only levy a single duty on wine and the levy is ba sed on ex-factory price.  Compared with some 
other jurisdictions that levy multiple taxes (includi ng sales tax) on wine, the average tax incidence on 
a bottle of wine in Hong Kong, China is not high.  Besides, our duty regime applies equally to both 
imported and locally-produced pr oducts, and is GATT-consistent. 
 Duties on alcoholic beverages are an important source of revenue for Hong Kong, China (some 
HK$880 million were collected in 2005-06, 44% of which from wine duty), and, just as in many other 
jurisdictions, they are also aimed at deterring excessive drinking.  
From time to time we review all kinds of taxes,  including duties on alcoholic beverages, to see how 
our taxation system could be further improved. 
  WT/TPR/M/173/Add.1 
 Page 33 
 
 
  Question 2 
 
(4) M EASURES AFFECTING PRODUCTION AND TRADE  
 
(iv) Competition and consumer protection policy  
 The Report by Hong Kong, China indicates that the government-appointed Competition Policy Review Committee (CPRC) recommended in July  this year that Hong Kong, China introduce a 
cross-sector competition law targeting anti-compet itive conduct and enforced by an independent 
Competition Commission, and that a public consulta tion process would take place later this year.  
(WT/TPR/G/173, page 21, para 97)   Can Hong Kong, China provide an update on th is process?  In particular, when does Hong 
Kong, China expect to introduce a cross-sect or competition law and associated enforcement 
provisions? 
 
Answer 
 
We launched a three-month public consultation exerci se in early November. Following the completion 
of this, and taking account of feedback received fr om the public, we will draw up proposals for the 
way forward with Hong Kong, China’s competition policy. 
 
IV. TRADE POLICIES BY SECTOR 
 
Question 3 
 (5) S
ERVICES  
 
(ii) Overall commitments under the GATS  
 We welcome the great importance Hong Kong, China attaches to the ongoing services negotiations in Doha Round (WT/TPR /G/173, page 22, para 102) and the positive interest that it has 
displayed in those negotiations in exploring w ith Members opportunities to schedule commitments on 
education services.  We are sympathetic to concer ns about what market access and national treatment 
limitations in the education sector need to be sched uled, but are confident this can be resolved in a 
way that protects the integrity of  the regulatory framework.   
  Has Hong Kong, China further explored its ability to schedule market access or national 
treatment limitations in relation to private educa tion services and can we expect Hong Kong, China to 
make commitments on private education services in the Doha Round? 
 
Answer 
 Hong Kong, China has in place a very liberal regime on private education.  Our regulations are kept 
to the minimum to ensure an acceptable level of standard and to protect the interest of students.  
Education services providers from other econom ies should have no problem  entering Hong Kong, 
China’s education services market, provided that  they are recognized by the accreditation authority 
in their own economies, or in the absence of such  an authority, by the academic community there; and 
that the courses they offer are properly registe red with our authorities and the registration 
requirements are met.  The requirements are simple  and applicable to all non-local courses without 
differentiation.  WT/TPR/M/173/Add.1 
Page 34  
 
  Question 4 
 (iv) Financial services 
 
 The Code on Unit Trusts and Mutual Funds (t he Code) provides that collective investment 
schemes from ‘recognized jurisdic tions’ enjoy fast-track approval procedures when applying for 
authorisation in Hong Kong.  The Code indicates th at in principle ‘recognized jurisdictions’ have 
regulatory regimes which in substance comply with the requirements of the Code.  The Code does not 
appear to provide a detailed interpretation of what th is requirement implies in practice.  Furthermore, 
past practice shows that ‘recognized jurisdiction’ st atus may be granted even where key structural 
requirements are not satisfied, such as those relati ng to a supervisory custodian or trustee.   
  Can Hong Kong, China provide publicly accessi ble guidance explaining the criteria which 
will be applied in assessing whether a jurisdictio n complies with the requirements for obtaining 
‘recognized jurisdiction’ status? 
 
Answer 
 Under our Recognized Jurisdiction Schemes (RJS) po licy, jurisdictions are recognized on the Hong 
Kong Securities and Futures Commission (SFC)’s und erstanding that the types of scheme referred to 
are governed by laws and regulations of their hom e jurisdiction, which are comparable to the Hong 
Kong Code on Unit Trusts and Mutual Funds (“Code”)  and offer equivalent investor protection.  In 
considering whether a jurisdiction can be recogni zed, the SFC would consider, among other things, 
the jurisdiction’s regulatory framework for public offering of collective investment schemes (CIS), 
with due consideration on the structural and operational requirements and core investment 
restrictions.  For instance, a jurisdiction is exp ected to have structural safeguards to ensure 
segregation and protection of the CIS assets by way of appointing an independent trustee/custodian.  
There should also be diversification requirements on th e CIS investments.  As stated in Appendix A1 
of the Code, the SFC expects the relevant jurisdicti on to comply in all ma terial respects with the 
Code.  The acceptability of a jurisdiction is caref ully considered on a case-by-case basis based on 
requirements in the Code which is published on SFC’s website.   
 
We would like to clarify that the appointment of an independent trustee/custodian for segregation and 
protection of assets is a fundamental structural requirement of the Code and the SFC has never 
granted any waivers from such trustee/custodian app ointment, although waivers from certain specific 
duties on a supervisory custodian may be granted on  a case-by-case basis.  Further guidance on this 
should be sought from the SFC.  
Question 5 
 (vii) Legal services 
  Hong Kong, China's trade policy objectives in clude promoting a free, open and stable 
multilateral trading system, and sustaining the moment um of progressive global trade liberalisation.  
According to the Report by Hong Kong, China, it is recognised as the world’s freest economy.  Hong 
Kong, China is a major financial centre, and home to  the largest cluster of international lawyers in 
Asia.  (WT/TPR/G/173, pages 5 and 6 a nd WT/TPR/S/173, page 101, para 90) 
 
 What are the constraints therefore that H ong Kong faces in making commitments on legal 
services and can we expect Hong Kong to make co mmitments on legal services in the Doha Round? 
  WT/TPR/M/173/Add.1 
 Page 35 
 
 
  Answer 
 Compared to other services sectors, practition ers in professional services are generally more 
cautious and conservative.  Legal services is no ex ception.  We will continue our efforts in our 
consultations with the trade.  Despite the lack of commitments in this sector, we would like to stress 
that the legal services regime in Hong Kong, Chi na is indeed very open.  For example we have 
adopted an open policy for foreign lawyers to practi se law of their own jurisdictions and to obtain 
local qualifications to practise local law as solic itors.  There is also open examination for foreign 
lawyers from both common law and non-common law jurisdiction wishing to be admitted as 
barristers in Hong Kong, China.  In the past, only commonwealth lawyers were eligible for such 
examinations.  So the de-facto regim e became more open than before. 
 
 
BRAZIL
 
 
Question 1  WT/TPR/S/173 IV (i) page 74 paragraph 07 
 
 According to the Secretariat, "The Agricu lture, Fisheries and Conservation Department 
(AFCD) is responsible for promoting the adopti on of new production methods and helping producers 
to take advantage of new market opportunities.  The Government does not provide material of 
financial incentives to encourage switching produc tion methods.  However, interested farmers may 
seek advice from the Department and visit the experime ntal station to obtain the relevant technical 
information and assistance.  The Department also ope rates three loan funds to meet farmers' credit 
requirements;  some HK$21.9 million was lent to farmers during 2005-06. 
  Emergency relief grants totalling HK$1.9 milli on were distributed to 687 farmers during 
2003-05.  The authorities maintain that these loan funds are mainly financed from "non-
governmental" sources."  Could the Government  explain how the operation of these funds? 
 Answer 
 
The Kadoorie Agricultural Aid Loan Fund was established in 1955 with donations from Lord 
Lawrence Kadoorie.  It is administered by a comm ittee comprising experts from the financial sector, a 
nominee from the Kadoorie family, and representatives  from the agriculture and fisheries industries. 
  The Committee meets twice yearly to review the financial situation and decide on loan policies and 
practice.  These are then applied across the board to the other loan funds, i.e. J.E. Joseph Trust Fund 
and Vegetable Marketing Organization Loan Fund by the Agriculture, Fisheries and Conservation Department (AFCD). 
 
The J.E. Joseph Trust Fund is another private donat ion in 1954 entrusted to AFCD.  The Vegetable 
Marketing Organization Loan Fund is derived from  levies collected from farmers for selling 
vegetables through the non-government, financially i ndependent Vegetable Marketing Organization.  
 
Emergency Relief Grants are temporary relief provided  by the Government to tide farmers over losses 
suffered due to natural calamities such as tropical cyclones.  To qualify for the grant, the losses have 
to be significant.  AFCD verifies the damages suffere d after the calamity has passed and arrange for 
the issue of the grant.   
  WT/TPR/M/173/Add.1 
Page 36  
 
  CANADA
 
 
Report by the Secretariat (WT/TPR/S/173) 
 Question 1  
 
 Summary Observations. Section 3: Trade a nd Trade-Related Policy Developments, page 
ix, paragraph 15, and Part III. Trade Policies a nd Practices by Measure, Section 4: Measures 
Affecting Production and Trade, (iv) Competit ion and Consumer Protection Policy, page. 68, 
paragraph 138 and Report by Hong Kong, Sectio n IV: Sectoral Developments, (E) Government 
Procurement, pages 21-22, paragraph 97.  
 Canada welcomes Hong Kong, China’s initia tive to set up a Competition Policy Review 
Committee (CPRC) to review the effectiveness of its  existing competition polic y. Canada also notes 
the CPRC recommendation to Hong Kong, China’ s government to introduce a cross-sector 
competition law, targeting specific types of anti-co mpetitive conduct to be enforced by a Competition 
Commission operating outside the normal government st ructure; to give investigative powers to the 
CPRC; to establish penalties in the form of large fi nes; and disqualification from holding directorships 
to apply to parties found to have engaged in pr ohibited conduct. Canada unde rstands that the Hong 
Kong, China government is now considering the recommendations in the CPRC report.  
 
 Has the government made a decision on whether or not it would implement the 
recommendations made by the Competition Policy Revi ew Committee? What is the Government plan 
of action?   
Answer 
 
We launched a three-month public consultation exerci se in early November. Following the completion 
of this, and taking account of feedback received fr om the public, we will draw up proposals for the 
way forward with Hong Kong, China’s competition policy. 
 
Question 2  
 
 Part I. Economic Environment, Section 4: Structural Measures, (iv) Competition, page 
12, paragraph 24 and Part III. Trade Policies and Practices by Measure, Section I: Overview, 
page 30, paragraph 5 
  The WTO Secretariat Report states that HKSAR has maintained a sector-specific approach to 
competition policy, allowing powerful conglomer ates to hinder competition from domestic and 
foreign firms (Part I. Economic Environment, Section 4: Structural Measures, (iv) Competition, page 12, paragraph 24). The WTO Secretariat Report, altho ugh recognizing that there are few restrictions at 
the border, questions the efficiency of Hong Kong, China's "sector-specific" approach to competition 
as a substitute for a comprehensive competition po licy (Part III. Trade Policies and Practices by 
Measure, Section I: Overview, page 30, paragraph 5). 
  Could Hong Kong, China explain its views on the effectiveness of its sectoral approach to competition policy?   Answer 
 
The sector-specific approach to competition legisla tion has helped to en sure the effective de-
regulation of the broadcasting and telecommunicatio ns sectors, and has contributed to the emergence 
of more choices, improved products and service s, and competitive prices for consumers and  WT/TPR/M/173/Add.1 
 Page 37 
 
 
  businesses. The current policy review explores the pros  and cons of introducin g a competition law to 
cover other sectors of the economy. 
 
Question 3  
 
 Part III. Trade Policies and Practices by Measure, Section 2: Measures Directly Affecting Imports, (x) (a) Standards and Oth er Technical Requirements- Standards, page 42, 
paragraph 44 
 
 The Secretariat Report notes that standards are '...essentially based on in ternational standards 
and/or prevailing overseas standards'. 
  Could statistics and further specificity be provi ded regarding this statement?  For example, 
what percentage of standards utilized in the HKS AR are international standards? Could further 
clarification be provided with respect to what is a 'prevailing overseas standard?  
 
Answer 
 
Hong Kong, China does not have a central standa rds body developing and issuing “Hong Kong 
standards”.  As an export-oriented economy, it is essential that our  goods meet the standards of our 
major overseas markets.  Where standa rds have to be applied in Hong Kong, China for health, safety 
or environmental reasons, our regulatory agencies in general adopt available international standards 
and where not available or not applicable, adopt p revailing overseas standards, to avoid the position 
where setting the standards dictates market development or becomes a means of protecting certain 
sectors of the economy.  In many cases, inter national standards and prevailing overseas standards 
may be applied equally.  Regulatory agencies in H ong Kong, China do not normally keep stock of a 
percentage of international standards utilised as compared to other national or regional standards 
utilised in Hong Kong, China.  Examples on the appl ication of international  standards and prevailing 
overseas standards are set out in Annex 1. 
 
Question 4  
 
 Part III. Trade Policies and Practices by Measure, Section 4: Measures Affecting 
Production and Trade, (iii) Intellectual Property Rights, (a) Industrial Property, Patents, page 
58, paragraph 105  
 The Secretariat Report states that “[t]he Pa tents Ordinance allows for the granting of 
compulsory licences and government use of a patent ed product or process without the authorization of 
the patent proprietor”; that a compulsory license ma y be granted “where the pa tented invention is not 
being commercially worked in the HKSAR, or where the demand for a particular product is not being 
met”; and that “[a] patent holder must be co mpensated for government use”. Canada would be 
grateful if Hong Kong, China could advise:    What criteria are used to determine whether a patented invention is not being commercially 
worked? 
 
Answer 
 The grounds upon which compulsory licences may be  granted are provided for under sections 
64(2)(a) to (e) of the Patents Ordinance.  Und er section 64(2)(a), a compulsory licence may be 
granted where the patented invention is capable of be ing commercially worked in Hong Kong, China, 
and that it is not being so worked or is not being so worked to the fullest extent that is reasonably 
practicable. WT/TPR/M/173/Add.1 
Page 38  
 
   
It is for the courts in Hong Kong, China to determ ine, on the facts of any particular case, whether the 
ground is established.  So far no compulsory licence has been granted in Hong Kong, China under 
this ground. 
 A similar ground is provided for under section 48B(1)(a ) of the UK Patents Act 1977.  In determining 
whether a patented invention is not be ing commercially worked to the full est extent, it is likely that the 
courts in Hong Kong, China will make reference to  UK case authorities which interpret the similar 
UK provision.  In the UK, “commercially worked” has been given a plain meaning and held to be 
satisfied by “straight-forward manufacture of goods  for the purposes of trade” (Enviro-Spray’s 
Patents [1986] RPC 147.  In Kamborian’s Patent [ 1961] RPC 403, it is considered that the fullest 
extent to which an invention may be worked may be expressed as “the highest rate of production 
which is practicable and necessary substantially to m eet the demand”.  In order to be successful, the 
applicant must bring evidence to show what the demand for the invention might reasonably be 
expected to be, and how far short, if at all, produc tion under the patent falls, as far as is practicable 
to supply it. 
 
Question 5  
 
 How the determination is made that demand for a product is not being met?  
 
Answer 
 
Under section 64(2)(b) of the Patents Ordinance,  a compulsory licence may be applied for on the 
ground that a demand for the product in Hong Kong, China is not met on reasonable terms.  So far no 
compulsory licence has been granted in Hong Ko ng, China under this ground.  In determining 
whether the demand for the products is not being met on reasonable terms, it is likely that the courts 
in Hong Kong, China will make reference to UK case authorities wh ich interpret the similar UK 
provisions, i.e. sections 48A(1)(a) and 48B(1)(b)(i ) of the UK Patents Act 1977.  Under the UK 
provisions, the applicant needs to show that a demand is not being met on reasonable terms.  The 
demand must be an actual one a nd not merely one which an applicant hopes and expects to create if 
and when he has obtained a licence and commenced business (Cathro’s Patent (1934) 51 RPC 475).  
What constitutes “reasonable terms” depends  on a consideration of all the surrounding 
circumstances in each case, for example, the natu re of the invention, the terms of any licences under 
the patent, the expenditure and liabilities of the paten tee in respect of the pat ent, and the requirements 
of the purchasing public. 
 
Question 6 
 
 Whether or not the patent ordinance provi des for compensation fo r compulsory licenses 
granted to third parties by the government?   
Answer 
 
Yes. 
 
Question 7  
  How the level of compensation is established?  
  WT/TPR/M/173/Add.1 
 Page 39 
 
 
  Answer 
 
Section 66(1)(b) of the Patents Ordinance states that  the inventor or other person beneficially entitled 
to a standard patent shall receive reasonable rem uneration having regard to the nature of the 
invention.  
Question 8  
 
 Whether or not Hong Kong, China’s legislation provides for a review mechanism of the decisions to grant a compulsory license, and the amount of the remuneration provided to the right 
holder?   
Answer 
 
Under sections 64-66 of the Patents Ordinance, any decision to grant, vary or cancel a compulsory 
licence and any decision concerning the remuneration of the patent proprietor under a compulsory 
licence are to be made by the Court of First Inst ance in Hong Kong, China.  Appeals from the Court 
of First Instance are heard by the Court of Appeal.  There is also the avenue of final appeal to the 
Court of Final Appeal. 
 
In relation to Government use under section 72(1) of  the Patents Ordinance, any dispute as to the 
exercise by a public officer, or a person authorised by a public officer, of the powers to use an 
invention, or any dispute as to the terms for Gove rnment use, or the right to compensation may be 
referred to the Court of First Instance.  Appeals from the Court of First Instance are heard by the 
Court of Appeal.  There is also the avenue of  final appeal to the Court of Final Appeal. 
 
Question 9  
 
 Part III. Trade Policies and Practices by Measure, Section 4: Measures Affecting 
Production and Trade, (iv) Competition and Consumer Protection Policy, page 65, 
paragraph 131  
 The WTO Secretariat report notes that the HKS AR economy seems to be dominated by a few 
powerful cross-sector conglomerates (controlling Ho ng Kong’s port, supermar kets, pharmacies, one 
of the two electricity suppliers, much of real est ate, and large chunks of the telecoms sector).  
 
 As these organisations may hinder greater co mpetition from domestic and foreign firms, has 
Hong Kong, China considered the enactment of a comp etition law that covers horizontal and vertical 
collusive agreements and abuse of a dominant position?    
Answer 
 
We note the Secretariat’s statement but we hold a different view.  We believe Hong Kong, China’s 
environment has been as competitive as ever.  The current competition policy review addresses the 
issue of the types of conduct that might be pr ohibited under any new comp etition law.  Such conduct 
could include collusive agreements and abuse of dominance. 
 
Question 10  
 
 Part III. Trade Policies and Practices by Measure, Section 4: Measures Affecting 
Production and Trade, (iv) Competition a nd Consumer Protection Policy, pages 65-68, 
paragraphs 132 and 136 
 WT/TPR/M/173/Add.1 
Page 40  
 
   In Part III, Section 4, paragraphs 132 and 136 of the report state that Hong Kong, China’s 
government promulgated guidelines in  2003 to maintain a competitiv e environment and define and 
tackle anti-competitive practices, and that all burea us and departments are responsible for overseeing 
competition issues. The report also states that guide lines, as well as Hong Kong, China’s Statement on 
Competition Policy lists and briefly defines some re strictive practices and types of abuse of market 
position, but none of these types of abuse are exte nsively defined nor does it mention any provisions 
regarding mergers and acquisitions.    Could you explain how these bureaus and departments identify anti-competitive practices?   Answer 
 
 Such practices are normally identified either by internal review or as a result of complaints 
from the public.  Question 11  
 
 How does the government ensure that the di fferent regulators interpret the competition 
provision the same way and consistently?   
Answer 
 
The regulators in the relevant sectors, i.e., tel ecommunications and broadcasting, are responsible for 
the enforcement of sector-specific legislation, th erefore the problem of inconsistency in having 
separate regulators interpreting the same legislation does not apply. 
 
Question 12  
 
 What are Hong Kong, China’s intentions with regards to mergers and acquisitions and their 
impacts on the competitive environment?   
Answer 
 
 We will await the outcome of the public c onsultation on the way forward for Hong Kong, 
China’s competition policy before coming to a firm view on whether to propose merger and 
acquisition controls as part of any new competition regulatory framework. 
 
Question 13  
 
 Part III. Trade Policies and Practices by Measure, Section 4: Measures Affecting 
Production and Trade, (iv) Competition and Co nsumer Protection Policy,  page. 68, paragraphs 
137 and 138  
  The report states that the Competition Polic y Advisory Group (COMPAG) keeps track of 
competition-related complaints and/or allegations of  restrictive practices. However, in the absence of 
competition legislation, it is not clear on what grounds a firm or an individual could make a 
complaint. It is also unclear on what basis the COMPAG could make a determ ination. We understand 
that in 2004-05, COMPAG received 18 complaints.  
 
 Could Hong Kong, China explain the procedure to deal with these complaints?    WT/TPR/M/173/Add.1 
 Page 41 
 
 
  Answer 
 
COMPAG takes these complaints very seriously.  CO MPAG refers complaints received to individual 
bureaux of Government, which then investi gate and present their findings to the group. 
 
Question 14  
 
 Has COMPAG found any anti-competition practi ces? If so, what were the measures put in 
place to ensure that these anti-comp etitive practices are changed?  
 Answer 
 
Where COMPAG has taken the view that a co mplaint of anti-competitive conduct might have 
occurred, the bureau responsible for the investigation is asked to consider measures to rectify the 
situation. 
 
Question 15  
 
 What are the actions taken by the government  to follow up on these issues to ensure that 
competition concerns are not relegated to a secondary status?   Answer 
 
All cases considered by COMPAG are presented in an annual report that is m ade publicly available, 
thereby ensuring that bureaux are acc ountable for taking appropriate action. 
 
Question 16  
 
 What are the measures put in place to deter ot hers from using these practices in the future?  
 
Answer 
 
The public reporting of cases in the COMPAG annual re port serves as a notice that certain practices 
are discouraged.  We also ensure that the COMPAG  Guidelines on the type of conduct that might be 
considered anti-competitive are promulgated to the business community and made publicly available. 
 
Question 17  
 
 Part IV. Trade Policies by Sector, Section 5: Services, (iv) Financial Services, (a) 
Banking and Finance, page 85, paragraph 37 
 
 The Secretariat Report notes that an institution must have been a deposit-taking company or a restricted-licence bank for at least three continuous  years as a prerequisite to obtaining a “licensed-
bank” license.  
  Could Hong Kong, China outline the policy rationa le underlying this requirement?  If there is 
prudential justification for this requirement, c ould Hong Kong, China please explain the prudential 
reason?  
 
Answer 
 
The Hong Kong Monetary Authority (HKMA) review ed the market entry criteria for the banking 
sector in 2001.  Following the 2001 Review, a numb er of entry requirement s have been relaxed.  WT/TPR/M/173/Add.1 
Page 42  
 
  Prior to the relaxation, foreign banks might obtain a licensed bank license and set up a branch in 
Hong Kong, China as long as the HKMA satisfie s that such foreign bank meets the prudential 
requirements stipulated in the Guide to Authorizati on.  There is no pre-requisite requirement of three 
continuous years of operation in Hong Kong, China as deposit-taking company (DTC) or a restricted-
license bank (RLB).  However, a foreign bank was prohibited from subsidiarizing its Hong Kong, 
China operations through a new locally incorporated company.    
 
As a relaxation of entry requirement, a foreign ba nk may now subsidiarise its operations in Hong 
Kong, China.  As pre-conditions, the bank should have been authori zed to conduct banking business 
in Hong Kong, China for not less than 3 years and the amounts of customer deposits and assets that will be transferred to the subsidiary seeking author ization are not less than HK$ 3 billion and HK$ 4 
billion respectively.  Given that the new locally in corporated company does not have any track record 
for running banking business in Hong Kong, China and needs time to build up the critical mass to 
meet the asset and deposit requirements, the HK MA requires the foreign bank having three years of 
operational experience in Hong Kong, China.  Th ese requirements are simila r to the requirements 
that are applicable to a locally incorporated DTC or RLB applying for an upgrade to a licensed bank. 
 
Question 18 
 
Part IV. Trade Policies by Sector, Section 5: Services, (iv) Financial Services, (b) 
Insurance, page 88, paragraph 44 
 
 The Secretariat Report notes that while insurance products are primarily distributed by 
insurance agents, "bancassu rance" penetration (i.e. the distribut ion of insurance products by banks) 
has been growing with some 41 banks registered as insurers in 2006.    Has Hong Kong, China identified any particular  consumer issues arising from the wider use 
of bancassurance in the distri bution of insurance products?  
 
Answer 
 
There have not been any significant consumer issues identified with bancassuran ce.  There have been 
some complaints that insurance products are misconceived to be banking products.  Unlike 
conventional insurance intermedia ries, personalized after-sale service may not be available for 
bancassurance.  
Question 19 
 
 To the extent that there has been an increase in the sale of insurance products through banks, 
could Hong Kong, China explain what impact this has had on the number of insurance agents, and the 
volume and type of insurance products distributed?   
Answer 
 
As at 30 November, 42 banks have been registered as insurance agents providing bancassurance 
services to their customers.  The bank staff in these banks wishing to provide advice on the insurance 
products to their customers have to be registered as technical representatives of the banks concerned.  
However, due to the absence of the relevant statis tics, the Office of the Commissioner of Insurance 
(OCI) is unable to ascertain the impact of banca ssurance on the number of insurance agents, the 
volume and type of insurance products distributed.  
  WT/TPR/M/173/Add.1 
 Page 43 
 
 
  Question 20  
 
 Part IV. Trade Policies by Sector 5: Services, (v) Communications, (a) 
Telecommunications, Box IV.1: Telecommuni cations services: market structure and 
liberalization, Page 90 
 
 The Secretariat Report indicates that for in ternational telecommunications services, the 
external telecommunications services market has been  liberalized since 1 January 1999. Hong Kong, 
China’s current GATS offer includes mode 1 and m ode 3 market access limitations on international 
services.  
 
 Could Hong Kong, China explain to what extent the market liberalization of these services remains bound by these limitations?   
Answer 
 
The international telecommunications services mar ket in Hong Kong, China is fully liberalized 
pursuant to the Government's liberalization policy for the telecommunications market.  The extent of 
liberalization exceeds the commitments made by Hong Kong, China for telecommunications services 
in the WTO.   
Question 21  
 
 Part IV. Trade Policies by Sector 5: Services, (v) Communications, (a) 
Telecommunications, page 91, paragraph 53  
 The Secretariat Report indicates that the Telecommunications Ordinance prohibits all 
licensees from conduct that substantially restricts competition.  
  Could Hong Kong, China explain how it determ ines whether a restriction on competition is 
‘substantial’?   
Answer 
 
The Telecommunications Authority (TA) has issued  a set of Guidelines on Mergers and Acquisitions 
in Hong Kong Telecommunications Market (the Guidelines), providing practical guidance on the 
analytical and procedural approach that the TA inte nds to follow in forming such opinion.  The 
Guidelines have a discussion on the issue of “substan tiality”.  In essence, the test is whether the 
change (i.e. merger and acquisition as defined) would have, or be likely to have, the effect of 
substantially lessening competition in a telecommunications market. 
 In the discussion of “substantiality”, the guide lines have made reference to the opinion of the 
Telecommunications (Competition Prov isions) Appeal Board in the context of Section 7N of the 
Telecommunications Ordinance (which prohibits di scrimination having the effect of preventing or 
substantially restricting competition), the Tel ecommunications (Competition Provisions) Appeal 
Board held that the word “substantially” means “l arge enough to be worthy of consideration for the 
purpose of the particular section”.  The Appeal Board went on to observe that for an effect on 
competition to be substantial, it must be at  least “significant” but need not be “big”. 
 
The above-mentioned Guidelines have been uploaded onto the websites of the Office of the Telecommunication Authority (http://www.o fta.gov.hk/en/report-paper-guide/guidance-
notes/gn_20040503.pdf).  The relevant provision in the Telecommunications Ordinance for the 
competition and merger and acquisition  provisions are also available in the Department of Justice's WT/TPR/M/173/Add.1 
Page 44  
 
  website (http://www.legislation.gov.hk/blis_i nd.nsf/CurAllEngDoc?Ope nView&Start=106&Count= 
30&Expand=106.1#106). 
 
Question 22  
 
 Part IV. Trade Policies by Sector; (5) S ervices, (vii) Legal Services, page 101, 
paragraph 90 
  The Secretariat Report indicates that Mainland China is the most important export market for 
Hong Kong's legal services.    Does the government of HKSAR's commercial/eco nomic strategies include plans to diversify 
or expand its export of professional services (in partic ular legal services) to other foreign markets?  
 Answer 
 
The Government is working closel y with all the stakeholders to  pursue the policy objectives and 
targets for strengthening Hong Kong, China as a regional legal services centre.  These include 
stepping up efforts in reinforcing and promoting Hong Kong, China as a regional centre for legal 
services and resolution of commercial disputes, in particular those involving the Mainland and 
foreign countries.  Furthermore we will also explo re further legal services outlets and markets for the 
local practitioners where appropriate. 
 
 COLOMBIA
 
 
Question 1  
 I. Economic Environment;  (4) Structural Measures;  (i) Tax reforms;  Paragraphs 18 
and 19 
 
 The WTO Secretariat report indicates that  Hong Kong, China’s government is heavily 
dependent on rather volatile non-ta x income (notably sales of govern ment-owned land and investment 
income).  In order to broaden the tax base, the authorities are considering the introduction of a goods 
and services tax (GST). 
 
 Notwithstanding that the government may still be undergoing consultations on its feasibility, 
would Hong Kong, China please comment on how this tax would be applied to imports, and how the 
government assesses that the tax may affect imports of agricultural products?  
Answer 
 
The nine-month tax reform public consultation in Ho ng Kong, China commenced in mid-July and will 
end in March next year. We have recently conducted an interim review of the consultation.  From the 
public views collected, we found that while the comm unity generally agrees that there is a need to 
broaden the tax base, the majority does not cons ider GST as an appropriate option to address the 
problem.  Therefore, for the remaining part of th e consultation, the Government will not advocate 
GST but will discuss with the public on the oth er viable options for broadening the tax base. 
  WT/TPR/M/173/Add.1 
 Page 45 
 
 
  Question 2  
 IV. Trade policies by sector;  (2) Agriculture and fisheries;  (i) Features;  Paragraph 9 
 
 The WTO Secretariat report indicates that after 48 years of implementation, on 1 January 
2003, Hong Kong, China significantly liberalized the rice trade with the elimination of the import 
quota system for rice and the relaxation of registra tion criteria for rice stockholders.  However, the 
report also states that in 2005, 91% of the imported rice originated in Thailand. 
  Could Hong Kong, China please make an assessment of the reasons of why rice imports are 
not more origin – diversified? 
 
Answer 
 
In Hong Kong, China, the rice trade essentially operates in a free market environment where the 
importation, storage and distribution of rice is pl anned and executed by registered rice stockholders, 
in order to meet the needs of  consumers through the market mechanism.  The Government does not 
interfere with the process and source of import which is to tally market-driven.  This is the case before 
and after the significant liberalization in 2003.  A ccording to feedback from some stockholders, the 
dominant import share of rice from Thailand may attribute to many factors such as consumer 
preference, price competitiveness, reliable supply and delivery.  
Question 3  
 
II. Trade policy regime: Framework and objectives;  (6) Trade agreements and 
arrangements;  (ii) Regional and bilateral arrangements;  Paragraphs 22 and 25 
 
 The WTO Secretariat reports that the Closer  Economic Partnershi p Arrangement (CEPA) 
between China and Hong Kong, China was signed on 20 03, and it was first supplemented in 2004 and 
then in 2005.  The supplements are denominated CE PA II and CEPA III.  The Secretariat also reports 
that CEPA was notified in 2003 to the Committee on Regional Trade Agreements as a free trade area 
that also provides for the liberalization of trade in services.   Could Hong Kong, China please confirm if CEPA  was notified to the Council for Trade in 
Services?  Could you please confirm if CEPA II and CEPA III were also properly notified? 
 
Answer 
 
 Hong Kong, China (HKC) appreciates and is fully obliged by the relevant WTO provisions on 
notification and provision of in formation to the Committee on Regional Trade Agreements (CRTA) 
and the Council on Trade in Services (CTS) regardi ng the conclusion and significant development of 
the CEPA.  
 In accordance with the WTO requirements  concerned, HKC and China submitted a joint 
notification on the CEPA to the WT O in December 2003.  The notification was circulated to both the 
CRTA and CTS via double symbol WTO document WT/REG162/N/1, S/C/N/264 dated 12 January 
2004.  HKC and China provided further informatio n to the CRTA on the Supplement, Supplement II, 
and Supplement III to the CEPA on 21 Janua ry 2005, 13 January 2006, and 6 December 2006 
respectively.  The information was circulated to all WTO Members via Addenda to WT/REG162/1 
which sets out the legal text of the CEPA.  WT/TPR/M/173/Add.1 
Page 46  
 
  Question 4  
 
II. Trade policy regime: Framework and objectives;  (6) Trade agreements and 
arrangements;  (ii) Regional and bi lateral arrangements;  Paragraph 26 
  The WTO Secretariat report only mentions an  FTA negotiation with New Zealand which is 
still in progress.  However, it indicates that Hong Kong, China now has a more open – minded 
approach to the pursuit of free trade agreements.   Could Hong Kong, China please describe with mo re detail its policy re garding the negotiation 
of free trade agreements, especially with WTO developing members? 
 
Answer 
 
Hong Kong, China is a staunch supporter of th e multilateral trading system (MTS) and considers a 
multilateral approach to trade liberalization the best  option for Hong Kong, China and the world at 
large.  Nonetheless, we recognize that high-quality  FTAs consonant with WTO provisions could help 
facilitate the promotion of the MTS.  
We have reviewed our policy and concluded that, while upholding our commitment to the primacy of 
the MTS, we should adopt an open-minded ap proach in pursuing high-standard FTAs with our 
trading partners to safeguard our lo ng-term economic interests.  
 We are interested in exploring the possibility of more FTAs with our trading partners in the WTO, 
whether they are developed or developing members,  so long as these are in Hong Kong, China’s 
interest, are consistent with WTO principles, and contribute to multilateral trade liberalizations. 
 
Question 5  
 
III. Trade policies and practices by measure;  (4 ) Measures affecting production and trade;  
(i) Incentives;  Paragraph 78 
 
 The WTO Secretariat report indicates that Hong Ko ng, China’s Financial Secretary stated that 
the development of high-value-added commercial, financial and professional services had stimulated 
growth in sectors, such as convention and exhibition,  electronic trading, transportation, hospitality, 
and retail services.   Colombia would be interested in knowing if Hong Kong, China has subsidies in force for any 
of those activities, and if it had, if they are alre ady implemented, or when will they be implemented, 
and how long will they last. 
 
Answer 
 
As a staunch supporter and practitioner of free and open trade, we do not provide trade distorting 
subsidies to our services.   
For example, in the area of electronic trading, Hong Kong, China has a vibrant electronic business 
sector.  The value of business receipts from se lling of goods, services or information through 
electronic means totalled at HK$43.9 billion in  2005, up significantly by 59.0% over 2004.  
Moreover, about 51% of business establishments had received goods, services or information (other 
than from the Government) through electronic me ans between May 2005 and May 2006, while more 
than 97% of all persons aged 15 and over had used electronic business services of one form or 
another for personal matters in the same timefram e.  According to the annual e-readiness ranking  WT/TPR/M/173/Add.1 
 Page 47 
 
 
  published by the Economist Intelligence Unit (EIU), which is a measure of an economy’s e-business 
environment - a collection of factors that indica te how amenable a market is to Internet-based 
opportunities, Hong Kong, China is ranked 10th in the world and 1st in Asia.   
 
Being ranked by the Heritage F oundation and the Fraser Institute as the world's freest economy for 
the past 12 years, Hong Kong, China cherishes th e “Big Market, Small Government” policy, which 
means that we respond to the needs of the mark et and do our best to s upport and promote economic 
development within the limits of a small governme nt.  As such, subsidizing electronic trading 
activities directly is inconsistent with the Go vernment’s overall economic policy, and we do not 
foresee any plans to deviate from our current position.   
 We have instead played, and will continue to play, a significant role in facilitating a digital economy, 
as laid out in the draft 2007 Digital 21 Strategy to  be finalised and promulgated in the first half of 
2007.  The Government has supported the devel opment and adoption of e-business technology 
infrastructure such as the Digital Trade and Tr ansportation Network (DTTN) and the Government 
Electronic Trading Services (GETS).  The DTTN is a neutral and transparent platform that provides 
interconnection among the trade, logistics and finan ce industries to facilitate information flow and 
enhance efficiency.  The GETS offers front-end services for the electronic submission and processing 
of certain governmental trade-related documents.  Both DTTN and GETS are operated under public-
private partnership programmes between the Government and the private sector. 
 On the other hand, the Government endeavours to  promote wider adoption of electronic business 
through sponsorships and funding schemes, such as th e Sector-specific Programme (SSP).  Under the 
SSP which was launched in 2004, we provide sponso rships to industry bodies, rather than individual 
companies, for commissioning projects that aim to promote awareness and readiness among the small 
and medium-sized enterprises (SMEs) of the valu e of ICT to businesses, upgrade the ICT capabilities 
of the SMEs, and provide basic advice and pointers to  business application solutions. So far, the SSP 
has benefited 6 traditional business types including travel agencies, private medical practices, 
drugstores, accounting, logistics, and beauty servi ces.  We will expand the SSP to cover more 
business sectors in 2006-07. 
 With respect to hospitality/tourism sector, a terr itory-wide public education campaign to promote 
hospitality culture, "A Hospitable Hong Kong" Campai gn, has been launched since 2001 by Tourism 
Commission of Hong Kong, China.  It aims to en hance community awareness of the contribution of 
the tourism industry to Hong Kong, China and, through such heightened awareness, promote a 
hospitality culture within the community.  The cam paign includes a number of projects, including the 
Service Quality Study, the Hong Kong Young Amba ssador Scheme, production of promotional short 
TV series and posters, and a tourism education kit, most of which are still on-going projects.  
Basically, all the projects involved  are government-funded.  Only a very small contribution is made by 
private sector (printing) for th e Hong Kong Young Ambassador Scheme. 
 
Question 6  
 
III. Trade policies and practices by measure;  (4 ) Measures affecting production and trade;  
(i) Incentives;  Paragraph 80 
 
 The WTO Secretariat report indicates that shipping profits are exempted from tax when they are derived from the international operation of a ship by a non-resident ship-owner from a country 
that provides tax exemption in respect of uplif ts by a non-resident ship-owner from Hong Kong, 
China.  
Could Hong Kong, China please explain the reasons  why this measure is not listed in their 
Services MFN exemption list? WT/TPR/M/173/Add.1 
Page 48  
 
   
Answer 
 
The tax exemption for international operation of ships by non-residents is conferred on the basis of 
reciprocity.  It was not included in Hong Kong, China’s Services MFN exemption list because it is an 
exception to the MFN provision in Article II by virtue  of Article XIV(e) of the General Agreement on 
Trade in Services.  
Owing to the international nature of shipping op erations (and air services operations likewise), ship 
operators are more susceptible to double taxation than other taxpayers. It is thus internationally 
common for agreements or arrangements to be made  between trading partners for the avoidance of 
double taxation on income derived from interna tional traffic. The reciprocal tax exemption 
arrangement is one such example whereby, be tween two places having similar reciprocal tax 
exemption legislation in place for their tax regimes, the ship opera tors of the two places can benefit 
from the reciprocal tax relief that these places offer to one another.  
Question 7  
 IV. Trade policies by sector;  (5) Services;  (iv) Financial services;  Paragraph 40 
 
 The WTO Secretariat report mentions the Guideline on Prevention of Money Laundering.   Colombia would be interested in learning mo re about such guideline and its supplement.  
Could Hong Kong, China please indicate wh ere such information may be found? 
 
Answer 
 
The Hong Kong Monetary Authority's Guideline on Prevention of Money Laundering, together with 
its Supplement and Interpretative Notes are avai lable on the Hong Kong Monetary Authority’s 
website (http://www.info.gov.h k/hkma/eng/guide/index.htm). 
 
 EUROPEAN COMMUNITIES
 
 
II.  TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 
 
Question 1  
 
Sustainable development 
 
 Could some information be provided about how the issue of trade and sustainable development fits into the overall development st rategies of Hong Kong, China? Which particular 
measures have been taken since the last Trade Policy Review in 2002? 
 
Answer 
 
In the era of revolution in information technol ogy and accelerating globalization, the Government 
would strive to strengthen the foundations of sustainable development through the following:  
 
- To continue investing significan tly in education, especially to  nurture a larger pool of high-
quality members among our future workforce to exp edite the accumulation of human capital 
and strengthen the foundations of sustainable economic development. 
  WT/TPR/M/173/Add.1 
 Page 49 
 
 
  - To attract talent from all over the worl d, the “Quality Migrant Admission Scheme” was 
launched in June, which aims to attract highly-sk illed or talented persons to come to settle in 
Hong Kong, China and increase both the quantity and the quality in our human resources. 
 - To achieve sustainable development for the future generations, various initiatives were put 
forward to improve air quality and the genera l environment.  The Government is working 
closely with the Guangdong Provincial Government  in China, with a view to improving air 
quality over the Pearl River Delta region as a whole.  
- To facilitate the upgrade of traditional indus tries and to support the development of emerging 
industries, the Government has been acti vely promoting innovation and research and 
development and encouraging industries to move up the value chain 
. - On the public finance front, the Government al so launched a nine-month public consultation 
on tax reform and broadening of tax base in July.  The reform aims to stabilise public finances and to place Hong Kong, China in a better position to achieve sustainable economic 
growth in the long term. 
 All these are being done in the context of prov iding the best infrastructure for facilitating the 
development of our economy, without hand-picking winners or losers. 
 
Question 2 
 
Trade and environment 
 
 To address increasing pollution in HKSAR, the report by Hong Kong, China indicates 
(paragraph 152) that all major government policies are submitted to environmental protection scrutiny 
and that the 'polluter pays' principle is applied,  and effective since st January 2006 fees and charges 
were revised to achieve full-cost r ecovery for government services.  
  Notwithstanding the short time of implemen tation, could Hong Kong, China's authorities 
report whether there are already first effects?  Answer 
 
Paragraph 152 of our Report indicates that H ong Kong, China aims to submit all new major 
Government policies to environmental protection scru tiny.  This is an established practice of Hong 
Kong, China.  For example, since 1998, designated  projects defined under the Environmental Impact 
Assessment Ordinance must follow a statutory envi ronmental impact assessmen t process.  The same 
paragraph also indicates that the “polluter pays” pr inciple is applied.  We have been following this 
guiding principle.  The fee revision effective sinc e 1 January 2006 (as mentioned in the paragraph) is 
an example of our efforts towards achievi ng full-cost recovery for Government services. 
 
Question 3 
 
Trade and social development 
 
 As Hong Kong, China's comparative advant ages have shifted from low-wage and labour-
intensive production to high-value-added activiti es, the Government is committed to promoting 
innovation and technology.  A number of schemes are in place to facilitate structural adjustment, 
enhance industrial competitiveness and/or en courage the growth of sunrise activities. 
  Please provide details of the skills-upgrading programmes and education reforms that have 
been undertaken.  WT/TPR/M/173/Add.1 
Page 50  
 
   
Answer 
 
Education reforms -   
 
To keep up with the development of the changing wo rld and needs of our society in the 21st century, 
our education system has to progress in tandem to sustain the development of Hong Kong, China.  
The Education Commission in its Reform Proposals for the Education System in Hong Kong released 
in September 2000 made " Learning for Life, Learning  through Life" the aim of education for the 21st 
century. 
 
Since October 2000, Hong Kong, China has embarked  on a package of reform measures (including a 
New Senior Secondary Academic Structure) to enhance the quality of education, emphasizing 
diversity, lifelong learning, multiple progression pat hways, professionalism, quality assurance, 
school-based management and accountability. 
 
We have a diversified school sector comprising publ icly-funded schools, partia lly funded and private 
schools, catering for students’ diverse aptitudes and giving parents wide choices.  Hong Kong, 
China's education system has been producing stud ents who are highly competitive by international 
standards :  
Programme for International St udent Assessment (PISA) 2003 – 
Hong Kong ranked 1st in Mathematics, 2nd in Pr oblem-solving, 3rd in Sc ience and 10th in Reading 
among 41 participating countries/regions.  Trends in International Mathematics and Science Study (TIMSS) 2003 – 
Hong Kong, China ranked among top 4 in Math ematics and Science at P4 and S2 levels among 49 
participating countries/regions.  International Mathematics Olympiad 2005 – 1 gold, 3 silver, 1 bronze  
International Physics Olympiad 2005 – 
1 gold, 1 silver, 2 bronze  International English Language Testing System (IELTS) - 
Our undergraduates are regarded as competent in Eng lish, with average overall score of 6.67 on a 9-
point scale. 
 In December 2006, the Education Commission has  published its fourth Progress Report on the 
Education Reform to give an account on the pr ogress of the implementation of various reform 
measures covering curriculum refor m, assessment mechanism, langu age education, support for 
schools, professional development. admission mech anism, and increase in education opportunities.  
The Reform Proposals for the Education System in Hong Kong and the Progress Report on the 
Education Reform (4) are available on the E ducation Commission homepage tttp://www.e-c.edu.hk. 
 
Skills upgrading –  
 
To help low-skilled workers with low education level  to adapt to the changing economic environment, 
the Government introduced the HK$400 million Skills Upgrading Scheme (SUS ) in 2001 to provide 
subsidized skills upgrading training for in-servi ce workers in selected industries with economic 
contributions and prospect and a large number of wo rkers requiring such training.  The scheme aims  WT/TPR/M/173/Add.1 
 Page 51 
 
 
  to enhance the employability of trainees and provide employers with staff that are both experienced in 
a particular field and adequatel y equipped with latest skills required by the market. 
 SUS courses mainly focus on enhancing trainees’ industry-related skills and introduce them to new 
developments in the industry.  Safety and hygiene courses are also offered by the SUS in relevant 
industries.  Under the scheme, th e Government would subsidize 70% of the cost of the training 
courses, with the remaining 30% shared between trainees and their employers.  Trainees with 
financial difficulties could be exempt from fee payme nt.  The SUS now covers 23 industries and has so 
far offered over 8 500 classes and over 171 000 training places.  A list of industries covered by the 
SUS is at Annex 1. 
 
Despite steady improvements in the general em ployment scene, the mismatch in human resources 
brought by the structural change in the local economy still needs to be addressed.  The Labour 
Department (LD) administers the following empl oyment programmes aiming at enhancing the 
employability of different target groups: 
 
(1) Youth Pre-employment and Training Programme (2) Youth Work Experience and Training Scheme  (3) Employment Programme for the Middle-aged (4) Work Trial Scheme (5) Work Orientation and Placement Scheme 
 
Details of the above employment progr ammes are attached at Annex 2. 
 
Question 4  
 
(7) F
OREIGN INVESTMENT REGIME  
 
Legal form of foreign invested companies 
 
 Market access provisions under CEPA are suppo sed to be applicable to all companies 
registered in Hong Kong, China for more than th ree years. It is not clear, however, whether 
companies may be discriminated by their legal form of establishment. 
  What are the conditions to be fulfilled by  Hong Kong, China-based foreign invested 
companies to be eligible for preferential treatment under CEPA? 
 
Answer 
 
According to Annex 5 of CEPA, Hong Kong service suppliers providing services in the form of 
juridical persons would need to fulfill two criteria before they are entitled to  the treatment granted 
under the CEPA.  First, they should be incorpor ated or established pursuant to the Companies 
Ordinance or other relevant laws of the HKSAR,  and have obtained a valid Business Registration 
Certificate.  Second, they should engage in "subs tantive business operation" in Hong Kong.  These 
criteria apply to all Hong Kong companies, domestic ally or foreign owned alike.  Hence, these 
criteria are non-discriminatory in nature.  CEPA has excluded representative offices or branches of 
companies established or incorporated in o verseas countries, as these companies are not 
incorporated in Hong Kong.  They are not juridica l persons incorporated in Hong Kong, thus falling 
outside our definition of Hong Kong companies.  To prevent circumvention, CEPA has also excluded 
shell companies, and those with only a mail box address.  WT/TPR/M/173/Add.1 
Page 52  
 
  III.  TRADE POLICIES AND PRACTICES BY MEASURE 
 
Question 5  
 
(2) M
EASURES AFFECTING IMPORTS  
 
(iii) Other charges affecting imports 
 
 We are seeking clarification on the operati on and scope of detailed provisions on certain 
imported goods (such as tobacco, hydrocarbons, alc oholic beverages and motor vehicles), which are 
subject to a sale or registration duty (of up to 35% in the case of motor vehicles) that may, at least 
potentially, amount to "taxes on imports" in contrast with Art III of GATT.   The tax on the first registration of motor vehi cles, administered by the Transport Department, 
remains in place. Rates are ad valorem, and vary  according to the vehicle's value and class (e.g. 
private car, light bus, bus, etc.); they were most recently revised in June 2003. Electric vehicles are 
exempt from this tax from 1 April 2006 up to March 2009.  In general, the tax is levied on the 
vehicle's published retail price.  If there is no published price, the tax is assessed on the purchase price 
plus insurance and freight, plus any handling ch arges for delivery of the vehicle to the HKSAR 
owner, and any other costs necessary for the vehicle to meet registration requirements.  Tax rates now 
range from 3.7% (previously 4%) for taxis, public a nd private light buses, etc. to at least 35% for 
private cars.  As no vehicles or parts subject to this tax are produced in the HKSAR, the tax is, in 
practice, levied exclusively on imports”.  
 
 Taking into account that Hong Kong, China does not manufacture vehicles or parts, are you thinking about lowering these high tax rates?  
 
Answer 
 
Hong Kong, China levies excise duties on four gr oups of products - hy drocarbon oils, tobacco, 
alcoholic beverages and methyl alcohol.  A motor vehi cle first registration tax is also levied on cars 
first registered in Hong Kong.  Many other jurisd ictions also levy duties on these products.  Our duty 
regime applies equally to imported and locally manuf actured products, and is  GATT-consistent.   
 Apart from revenue generation, we also aim at achieving certain policy objectives through levying 
duties or taxes on the above-mentioned products.  The motor vehicle first registration tax, for 
example, helps to control the number of vehicles on Hong Kong, China’s congested roads.   
 
From time to time we review all kinds of taxes, in cluding the motor vehicle first registration tax, to 
see how our taxation system could be further improved. 
 
Question 6  
  With reference to the WTO Secretariat's Report,  high levels of duty still exist on wine and 
spirits, as compared to other countries in the re gion; hence these are encouraging counterfeiting and 
smuggling. I seems that the increase of fiscal reve nue does not compensate the structural cost of 
maintaining this system. Moreover, this excise sp ecifically affects wine, while duty on liquors other 
than wine with an alcoholic strength below 30% remained unchanged at 40%.   
 
 Given that income generated from excise duties contributes only marginally to the SAR government revenue, what is the purpose, ser ved by such a high level of taxation? 
  WT/TPR/M/173/Add.1 
 Page 53 
 
 
  Answer 
 
Our ad valorem duty rates for spirits, wine and alco holic beverages with alcoholic strength not more 
than 30% (mainly beer in this category) are 100%, 80% and 40% respectively.  These duty rates are generally commensurate with the respective alco holic strength of the three types of alcoholic 
beverages, and have generally reflected their consumers’ ability to pay.   
 We only levy a single duty on wine and the levy is ba sed on ex-factory price.  Compared with some 
other jurisdictions that levy multiple taxes (includi ng sales tax) on wine, the average tax incidence on 
a bottle of wine in Hong Kong, China is not high.  Besides, our duty regime applies equally to both 
imported and locally-produced pr oducts, and is GATT-consistent.  Counterfeiting and smuggling of 
alcoholic beverages is not common in Hong Kong, China.    Duties on alcoholic beverages are an important source of revenue for Hong Kong, China (some 
HK$880 million were collected in 2005-06, 44% of which from wine duty), and, just as in many other 
jurisdictions, they are also aimed at deterring excessive drinking.  
Question 7  
 
 Is Hong Kong, China planning to reduce the duties on wine?  Answer 
 
 From time to time we review all kinds of taxes,  including the duties on alcoholic beverages, to 
see how our taxation system could be further improved. 
 
Question 8  
 
(iv) Customs valuation and rules of origin  
 
 For trade in goods, under the CEPA between PR  China and Hong Kong, China, rules of origin 
are negotiated and agreed on a product by product basi s every year. In effect this mechanism of ad-
hoc rules of origin allows China wide discretion to cherry pick the beneficiaries of trade preferences, 
possibly leading to discriminatory treatment.   We would like to know whether Hong Kong, China plans any action to address this problem and which? 
 
Answer 
 
Since 1 January 2006, the mainland of China has app lied zero tariffs to all imports from Hong Kong 
provided that the CEPA rules of origin are met.  For products in respect of which CEPA rules of 
origin have not been drawn up, Hong Kong manufa cturers may apply to the authorities of Hong Kong 
who will jointly work out the rules of origin con cerned together with their Mainland counterparts.  
 Under this mechanism, development of CEPA rules of origin (ROOs) is initiated by Hong Kong 
manufacturers and the CEPA ROOs are formulated acco rding to the requests and application of our 
industries across the board without any discri mination.  Whereas PRC and Hong Kong aim to 
develop CEPA ROOs for all Hong Kong origin goods ev entually, this should be the best use of limited 
time and resources to first deal with produc ts that any Hong Kong manufacturers have the 
capacity/interest to produce.   The CEPA ROO discussi ons between the two sides will be held twice a 
year and the agreed ROOs will be promulgated promptly.   
 WT/TPR/M/173/Add.1 
Page 54  
 
  So far, CEPA ROOs had been developed for goods co vered in 1,452 Mainland 2006 tariff codes.  At 
present, about 96% of our domestic exports  to the Mainland are tariff free. 
 
Question 9  
 
(v) Import prohibitions, licensing, and restrictions 
 
 The Rice Control Scheme was liberalized effe ctive 1 January 2003; this has eliminated the 
rice import quota system, removed entry barriers, reduced operation costs, and enhanced competition 
among operators in the local rice trade. Nevert heless, rice remains subject to import licensing 
procedures.”   Given that Hong Kong, China’s authorities are still requiring licences for rice imports, does the Government of Hong Kong, China contemplate phasing out these import licenses for rice? 
 
Answer 
 
It has long been the policy of the Government to lib eralize the rice trade as far as practicable for the 
overall benefit of the community.  However, there is  still a psychological attachment to rice as a 
staple diet among the local population.  In case of  unexpected shortage and uncertainties, there may 
be a tendency to hoard, and the absence of  a reserve stock might arouse public concern.   
 Import/export licensing for rice is an integral part of  the Rice Control Scheme, which is essential in 
monitoring the registered rice stockholders’ fulfilment of reserv e stock requirement, thereby 
maintaining a stable supply of rice for the local po pulation and a reserve stock to cater for emergency 
or short term shortage of s upply.  At present, we have no plan to remove the reserve stock 
requirement, and hence to phase out the licensing requirement.   We are however mindful that the licensing requirem ent should not constitute barrier to trade.  At 
present, the processing of an import licence application for rice requires just a single working day.   
 
Question 10  
 
(vii) Government Procurement 
  Could Hong Kong, China's authorities share with  us the results of the overall review of the 
government procurement regime that was recently undertaken?   
Answer 
 
The domestic review is still underway.  Hong K ong, China’s government procurement regime firmly 
adheres to the principles of open and fair competition,  transparency, value for money, fair dealing, 
public accountability and non-discrimination.  Ther e has been no change to these principles.   
 
Question 11  
  In the framework of the ongoing GPA review , when do the authorities of Hong Kong, China 
expect to submit an initial offer to the GPA Committee? 
 
Answer 
 
 Hong Kong, China has already made very exte nsive commitments without any party specific 
discriminatory provisions under the existing GPA.  Our current commitments have already met the  WT/TPR/M/173/Add.1 
 Page 55 
 
 
  level of ambition and aspiration indicated by so me Parties and covered essentially the major services 
sectors.  Hong Kong, China has been providing th e most extensive covera ge feasible under the 
existing domestic circumstances. 
 
Question 12  
 
 According to the footnote of paragraph 38, in formation and notices on tenders are to be found 
in different websites (Government Gazette, Works Digest and Environment, Transport and Works 
Bureau).   
 For the sake of more transparency, would H ong Kong, China's authorities consider having 
only one website?  
Answer 
 
We have already suggested revising the footnote to  clarify that all key information and notices on 
tenders are available in a single website, i.e. Go vernment Gazette.  The Works Digest provides a 
forecast of invitations to tender for works cont racts and is meant to provide supplementary 
information which may be useful to interested  tenderers in planning their bidding for government 
tenders for works contracts. 
 
Question 13  
 
 Hong Kong, China's authorities consider that  open and competitive tendering is the norm 
(paragraph 39).  
 Could Hong Kong, China explain to us, why the share of contracts awarded through open 
tendering has constantly decreased from 52% of a ll contracts awarded in 2001 to 29% in 2005? 
 
Answer 
 
Open tendering is the norm.  Paragraph 39 explains the circumstances under which selective 
tendering are conducted.  As further explained in Footnote 37, we consider selective tendering 
currently adopted for works contracts as equivalent to open tendering.  The number, nature and value 
of the contracts would however determine the types of tendering to be adopted.  Restricted and single 
tendering are used strictly under specified circumstan ces such as to protect patented or proprietary 
products, and are tightly controlle d as procuring departments ha ve to seek the approval of the 
Financial Services and the Treasury Bureau in each case.  
Question 14  
 
(3) M
EASURES AFFECTING EXPORTS  
 
(iii) Export prohibitions, licensing, and restrictions 
 
(b) Export licensing and restrictions  
 In an effort to avoid circumvention of Mainland specific textiles safeguard measures by 
means of illegal transhipment or false declaration of origin, all textiles shipments involving the sensitive markets must be covered by either consignment-specific licences issued by the 
Director-General of Trade and Industry (DGTI), or  export or import textiles notifications completed 
by textiles traders registered under the Textiles Tr ader Registration Scheme (TTRS).  The licensing 
requirements for Mainland China and the United States commenced on 1 January 2005, and for the WT/TPR/M/173/Add.1 
Page 56  
 
  EC on 15 March 2006.  In addition,  all cut-and-sewn garments destin ed for the United States and the 
EC have been subject to the production notificatio n (PN) requirement.  Textiles shipments involving 
non-sensitive markets are covered by comprehensiv e or consignment-specific import or export 
licences.  
 This system of export licensing has now been in place for exports to the EC since March 
2006. What preliminary conclusions can the Hong Ko ng, China government ta ke its implementation? 
Particularly regarding its reliability?  Can the triple  digit percentage increases in exports of textiles 
and clothing to the EC be verified through the export licensing system?  Answer 
 
Hong Kong, China's (HKC) textiles origin control sy stem is fully backed up by the Laws of HKC and 
remains to be a credible and effective system as in  the quota era.  With effect from 15 March 2006, all 
textiles shipments to the EC are required to be  covered by either consignment-specific licences or 
export notifications completed by textiles traders registered under the Textiles Trader Registration 
Scheme (TTRS).  As part of the control mechanism, the law also requires all carriers not to accept for 
export any textiles and clothing until a valid licence/notification is produced.    
To ensure origin compliance for textiles and clothing products ex ported under a claim of Hong Kong 
origin to the EC, manufacturers of cut-and-sewn gar ments intended for export to the EC market are 
also legally obliged to notify the Trade and Industr y Department so that Hong Kong Customs if so 
wished can conduct real-time production checks to ascertain whether the origin-conferring processes 
have indeed taken place in HKC before processing app lications for Certificate of Hong Kong Origin 
(CHKO) for the garments concerned.   
 Export licences and notifications as well as CHKO are all legal documents which are subject to Hong 
Kong Customs' multi-tiered checking and inspections fo r verification of the material particulars of the 
export consignment declared therein including descripti on of goods, quantity and origin claims of the 
goods.  We hold our traders and manufacturers account able for accuracy of the declared information 
and ensuring that textiles and clothing exports clai ming a Hong Kong origin or bearing "Made in 
Hong Kong" marking must comply strictly with HKC's origin rules.  Origin frauds and false origin 
marking are criminal offences under the laws of H ong Kong, China.  We impose prompt and parallel 
legal and administrative sanction on offending parties.    
If importing end has doubts on wheth er a particular shipment of concern  is actually products of Hong 
Kong origin, it can conveniently rely upon a CHKO issued by the H KC competent authorities.  CHKO 
serves as evidence that the products concerned have come through the stringent origin control system 
of HKC. 
 
Question 15  
 
 Does Hong Kong, China forese e any similar system of export licensing for footwear, 
especially in view of the EC AD measures on leat her footwear of Chinese and Vietnamese origin? 
 
Answer 
 
As a liberal and externally oriented economy, we  keep our import and export licensing to the 
minimum, and will not impose more requirements than  is absolutely necessary.  The licensing systems 
in force are aimed mainly at complying with our commitments to fulfill international obligations, to 
ensure security or to protect public health, enviro nment and intellectual property rights.  On this 
basis, we do not foresee introducing any export licen sing system on exports of footwear which only 
constitutes a small fraction of our domes tic exports to the European Union.  WT/TPR/M/173/Add.1 
 Page 57 
 
 
   
Hong Kong, China has put in place a credible origin  control system to ensure that products claiming 
Hong Kong origin are genuinely pr oducts of Hong Kong.  The cent erpiece of our origin control 
system is the Certificate of Origin system which is fully backed by the law and enforced by the 
Customs and Excise Department. 
 
Question 16  
 
(4) M EASURES AFFECTING PRODUCTION AND TRADE  
  From April 2006, five R&D centres have commenced operations to promote technology 
development in:  textiles and clothing; nanotechnology  and advanced materials;  automotive parts and 
accessory systems;  logistics and supply chain mana gement enabling technologies;  and information 
and communications technologies.  These centres conduct industry-oriented R&D in their respective technology areas and promote technology transfer to the industries. 
 
 What specific technological developments are pursued in these five R&D centres? Where can 
further information be obtained?  
Answer 
 
The specific technology areas pursued by each Centre are as follow: - 
 - Textiles and clothing  - New Materials and Textile and Apparel Products  - Advanced Textiles and Clothing Production Technologies 
 - Innovative Design and Evaluation Technologies 
 - Enhanced Industrial Systems and Infrastructure  - Nanotechnology and advanced materials  - Nanomaterials: Functionalisation and Applications  - Nanotechnology Enabled Nano Opto-electronics 
- Nano-structured / textured Material Applications 
 - Advanced Materials for Interconnection, Packaging and Thermal Management  - Forming of Advanced Materials  - Automotive parts and accessory systems 
 - Electronics and Software 
 - Safety Systems  - Advanced Materials and Manufacturing Technologies  - Hybrid & Electric Drives  and Environmental Technologies 
 - Logistics and supply chain management enabling technologies 
 - Radio Frequency Identification (RFID) Hardware and Systems 
 - Networking and Infrastructure Technologies  - Applications and Decision Support Technologies  - Information and communications technologies 
 - Communications Technologies 
 - Consumer Electronics  - Integrated Circuit Design  - Opto-electronics  WT/TPR/M/173/Add.1 
Page 58  
 
  For further information about R&D Cent res, please visit http://www.rdc.gov.hk 
 
Question 17  
 
(iii) Intellectual property rights 
 
Patents 
 
 Several European companies have compla ined of Mainland Chinese companies being 
registered in Hong Kong, China, with names that contain all or major parts of well known brand or 
company names already registered  in European jurisdictions. The Hong Kong Registry has argued 
that their registration criteria are similar to tho se operated in the EC, where it does not seem to pose 
any major problem. Depending on the sector the effect of this practice ranges from misleading customers up to the breach of h ealth and security standards. 
 
 How does Hong Kong, China intend to address th e concerns of companies, whose names are 
being copied and the risks posed to the consumer by such misleading practices?  
Answer 
 
As an international financial and business centre, Hong Kong, China must provide for an efficient 
and cost-effective company registration system. Hong Kong, China’s current system is very similar to 
that in comparable common law jurisdictions, such as the United Kingdom and Australia where 
company registration and trademark registration are two distinct systems.  Under the Companies Ordinance (CO), the Registrar of Companies is empowered to issue a direction 
to require a company to change its name if it is too similar to the name of an existing company within 
12 months of the registration. This power has been used to deal with some of the complaints by 
famous brand name companies or trademark-owners against the registration of new company names 
containing their brand names or trademarks.  Neverthel ess, we are aware that some of the complaints 
cannot be tackled under the existing CO, for examp le, where the brand name company or trademark-
owner has not registered a company bearing its br and name or trademark in Hong Kong or where the 
objectionable company name is not  considered to be too similar to its name under the Companies 
Registry (CR)’s Company Names Guid elines (available at www.cr.gov.hk).  
 The Government will consider how to tackle the probl em in the context of rewriting the CO which 
started earlier this year.  We will take into acc ount the experiences of other comparable jurisdictions 
in the review, and consult relevant professional bodies, academics and the business community.   
 In the interim, the Government w ill take some administrative measu res to educate the public with a 
view to alleviating the problem. These include:  
 
 (i) adding a warning statement in the CR’s Company Names Guidelines asking anyone 
who register new company names to ensure that the use of his company name does 
not amount to an infringement of third parties’ IPRs;  
  (ii) displaying on the CR’s website a lis t of companies that have been directed by the 
Registrar to change their names; and 
 
 (iii) stepping up efforts to educate th e business community and law enforcement authority 
both in and outside Hong Kong, China about the company registration and trademark registration systems in Hong Kong, China. 
  WT/TPR/M/173/Add.1 
 Page 59 
 
 
  Question 18 
 
 The pharmaceutical industry has been compla ining for a long time about the registration 
system of pharmaceutical products which does not ta ke into account patent linkage, and also does not 
provide a pre-registration alert system for patent holders to take early actions. The present practice 
allows generic copies of patented drugs to be regist ered and hence, distributed legally in the market. 
The Hong Kong, China government has decided to ma intain the status quo after a prolonged period of 
active lobbying. The feedback from the Hong Kong, Ch ina Government has been negative. Only civil 
remedy is currently available to right holders. 
 
 The defence of Hong Kong, China government to  the EC argument is that Hong Kong, China 
has a similar system to the EC. However, the situa tion in Europe is very different, whereby infringing 
parties may be required to pay colossal damages, whereas in Hong Kong, China, the market is so 
small that the high legal costs incurred for seeking civil remedies are not justified.  
 Can Hong Kong, China indicate which measures it  has taken or intends to take to prevent 
drug administration authorities from approving the registration of a drug application that would infringe a patent?  
Answer 
 
The registration system for pharmaceutical produ cts and the patent protection system are two 
separate systems in Hong Kong, China.  The fo rmer ensures that pharmaceutical products made 
available in the local market are safe and efficac ious and of good quality.  The latter provides 
protection for technical innovation by granting the inventor a patent for his invention.  
 
Our patent protection system under the Patents Ordinan ce is in full compliance with the requirements 
under the Agreement on Trade-Related Aspects of Inte llectual Property Rights (TRIPs) of the WTO.  
An effective patent confers rights on its proprietor to prevent third parties without his consent from, 
among other things, making, putting on the market, us ing or importing or stocking a product which is 
the subject matter of the patent.  Patent owners may institute civil proceedings in courts against 
infringers of their rights, and seek remedies, incl uding an injunction restraining the defendant from 
any apprehended patent infringement  act; an order requiring the defendant to deliver up or destroy 
any patent infringing product; damages in respect of the infringement; an account of the profits 
derived by the defendant from the infringement; a declaration that the patent is valid and has been 
infringed by the defendant.  Patent owners may apply to the Court for award of legal costs from the 
infringing parties if the former win in the cases.     
Separately, all pharmaceutical products are required to be registered before sale in Hong Kong, 
China. The purpose of this registration requirement is to protect public health.  Under the Pharmacy 
and Poisons Ordinance (PPO), the Pharmacy and Pois ons Board (PPB) was tasked to register drugs 
complying with the scientific criteria of safety, efficacy and quality.  The rights of patent owners to 
civil remedies are not affected by PPB’s registration of a drug which is subsequently proven to be 
patent infringing. It should also be noted that th ere is no requirement of patent linkage under TRIPS.  
When approving applications for drug registrati on, PPB would also remind the applicants in writing 
that the registration is only evidence of the product having met the requirements to its safety, efficacy 
and quality and carries no implications  on intellectual property issues. 
 
To ensure patent holders have access to drug regis tration information, the information on all 
registered pharmaceutical products are made known through the “Compendium of Pharmaceutical 
Products”.  To facilitate protection of patent ri ghts established channels, the above information has 
been uploaded onto the Department of Health’s webs ite since October 2001.  A rapid search function 
was introduced on the website in March 2003. WT/TPR/M/173/Add.1 
Page 60  
 
   
Question 19  
 
Copyright 
  Industry associations are concerned that copyri ght legislation proposed by Hong Kong, China, 
does not offer the necessary protection for encrypted  content distributed through encryption devices, 
such as decoders. Hong Kong, China's draft legisl ation would allow encryption mechanisms to be 
circumvented if the encrypted content is not copyri ght protected. In fact it requires prior knowledge of 
copyright infringement. 
 
 How does Hong Kong, China intend to monitor whether the content obtained through circumvention devices is copyrighted or not?  
Answer 
 
Copyright:  General Information for Questions 19-23
 
 
Legislative proposals to amend, inter alia, provisions in the Copyright Ordinance relating to 
protection of technological measures (TPMs) have b een included in the Copyright (Amendment) Bill 
20061 (“Bill”).  The Bill was introduced into the Legislative Council in March 2006 and a Bills 
Committee was formed by the Legislative Council for the purpose of examining the Bill.  Since that 
time, stakeholder groups as well as members of th e Bills Committee have made submissions on the 
Bill.  The Administration has carefully consid ered those submissions and has proposed that 
amendments be made to the Bill in the fo rm of Committee Stage Amendments (CSAs).2  The Bill 
together with the proposed CSAs are presently subj ect to examination by the Bills Committee.  Hong 
Kong, China’s replies to Questions 19-23 belo w are based on the Bill and the proposed CSAs. 
 The policy objective of the anti-circumvention provisi ons is to protect copyright works in relation to 
which TPMs have been applied.  “Technological protec tion measure” is defined in the Bill to mean 
any technology, device, component or means which is  designed, in the normal course of its operation, 
to protect any description of copyright work.
3 
 
In any proceedings relating to the anti-circumven tion provisions, the plaintiff or the prosecution 
would have to show that the TPM concerned is applied for the protection of copyright works.  
 
In relation to “knowledge of copyright infringeme nt”, please refer to Hong Kong, China’s reply to 
Question 20 below.  
Question 20  
 
 Can Hong Kong, China explain how the require ment of knowledge of copyright infringement 
provided for in Copyright (Amendment) Bill 2006 contributes to an effective protection against 
circumvention of technological protection measures (TPMs)? 
 
                                                     
 
1 Available at http://www.legco.gov.hk/yr05-06/english/bills/b0603171.pdf. 
2 An outline of the proposed CSAs are set out in the paper "Proposed Amendments to the Copyright 
(Amendment) Bill 2006" (CB(1)283/0 6-07(01)) available at http://www.legco.gov.hk/yr05-06/english/ 
bc/bc01/papers/bc011120cb1-283-1-e.pdf. 
3 Proposed section 273(3)(a) of the Copyright Ordinance.  WT/TPR/M/173/Add.1 
 Page 61 
 
 
  Answer 
 
We consider that users who circumvent TPMs for the purpose of doing an act which does not infringe 
copyright (e.g. fair dealing with a work for rese arch or private study) should not be subject to 
liability.  However, taking into account the concer ns expressed by copyright owners, we now agree 
that the requirement of “knowledge of copyright in fringement” can be removed in its entirety.  
Instead, any person who circumvents TPMs for the purpose of doing any act which does not infringe 
copyright could raise this as a defence in any proceedings instituted against him. 
 To effectively prohibit the supply of circumvention devices in the market, we do not propose that a 
similar defence be made available to persons who deal in circumvention devices in a commercial 
context.
4  We believe that the proposed amendments would address the concerns of both copyright 
owners and users. 
 
Question 21  
 
 Can Hong Kong, China explain how the exceptions to the prohibited acts provided for in Copyright (Amendment) Bill 2006 preserve the funda mental goals of the prohibition? Does Hong 
Kong, China envisage promoting voluntary measures by right holders to accommodate specific exceptions?  Answer 
 
The policy objective of the anti-circumvention provisi ons is to protect copyright works in relation to 
which TPMs have been applied.  Limited excepti ons are proposed to address users' legitimate 
concerns.  In formulating the exceptions, we ha ve taken due care to balance the importance of 
protection of copyright works and the needs for technological advancement and other reasonable and 
legitimate uses of copyright works.  We have attached stringent conditions  to each of the exceptions to 
guard against possible abuses.  The exceptions are briefly explained below:  (a) Achieving interoperability of an i ndependently created computer software 
 
The purpose of this exception is to ensure that le gitimate software development activities would not be 
undermined. The safeguards imposed are that the circumvention act should be done: (i) for identification or analysis of particular elements of th e computer program that is not readily available; 
(ii) the sole purpose is to achieve interoperab ility; and (iii) the copy of the computer program 
concerned is not an infringing copy.  The Gover nment has further proposed that the acts of 
identification and analysis should not infringe copyright in the relevant works.
5  
 (b) Research into cryptography  This exception seeks to ensure that the anti-circumven tion provisions would not hinder technological 
developments and advances in the state of knowledge  in the field of cryptography.  Circumvention is 
only allowed where it is necessary for the sole purpose of cryptography research and no copyright 
infringement is involved.
6  There are strict conditions regarding dissemination of information derived 
from the research to ensure that such information will be disseminated in a manner that is reasonably 
calculated to advance the state of knowledge or development of cryptography (e.g. dissemination of 
information in an academic journal or conference) or must not affect prejudicially the copyright 
owner. 
                                                      
4 Item 2 under Major Amendments in Annex A of the paper mentioned in footnote 2 above. 
5 Item 6 under Major Amendments in Annex A of the paper mentioned in footnote 2 above. 
6 Item 7 under Major Amendments in Annex A of the paper mentioned in footnote 2 above. WT/TPR/M/173/Add.1 
Page 62  
 
   
(c) Identifying and disabling the function of a TPM  used to collect or disseminate information 
which tracks and records the manner of a person’s use of a computer network  
 The purpose of this exception is to protect the priv acy of individuals. The exception would not apply if 
conspicuous notice of the collection and disseminati on of personally identifying information is given 
to the person using the computer network.  Besid es, the exception only applies when the act is done 
for the sole purpose of identifying or disabling the function of the measure or work in collecting or 
disseminating personally identifying information.    
(d) Security testing for a co mputer or computer system/network 
 This exception is necessary for the efficient op eration of computer networks.  The act of 
circumvention should only be done for the sole pur pose of testing, investigation or correction of a 
security flaw of a computer system.  Furthermore,  it should only be done under the authority of the 
owner or operator of the system.  
 (e) Gaining access to parallel imported copies of copyright works  The use of parallel imported copyright works for private and business purpose is not prohibited under 
our present law (and as amended by the Bill when enacted).
7  In line with this policy, circumvention 
of TPMs should not be prohibited where the act is done for the sole purpose of gaining access to a 
parallel imported work.   (f) Preventing access by minors to har mful materials on the Internet 
 
The exception would only apply where protection of minors in the above circumstances is the sole 
purpose of the circumvention.  (g) Law enforcement  The exception applies to acts done by law enfo rcement agencies for prevention, detection or 
investigation of an offence. 
 (h) Time shifting  It is a permitted act in our copyright law for a person to make for private and domestic purpose a 
recording of a broadcast for the purpose of enabling it to be viewed at a more convenient time (time 
shifting).  The purpose of applying the exception for time shifting to the criminal provision against commercial dealing in circumvention devices or comm ercial provision of circumvention is to ensure 
that users’ legitimate recording activities should not be jeopardized by the use of TPMs.  Civil 
remedies are still available against such circumventi on activities.  However, TPMs applied to video-
on-demand, pay-per-view and other similar services w ill be protected by the criminal provision as we 
consider that there should not be a need to make any recordings for time-shifting purposes in relation 
to such services.
8 
 
                                                      
7 Exceptions would however apply to musical visual and sound recordings, movies and television 
dramas used by business end-users for the purpose of public showing.  These copyright works would remain 
subject to restrictions against parallel importation. 
8 Item 10 under Major Amendments in Annex A of the paper mentioned in footnote 2.  WT/TPR/M/173/Add.1 
 Page 63 
 
 
  We consider that by providing limited exceptions and imposing detailed and st ringent conditions to 
each of the exceptions, our objective with respect to  the anti-circumvention provisions would not be 
compromised.  To cater for future technological developments, we  propose that a rule-making power be conferred on 
the Secretary for Commerce, Industry and Technology so  that possible abuses arising from the use of 
TPMs to the detriment of legitimate users of c opyright works could be p revented.  Before exercising 
his power, the Secretary would make all nece ssary enquiries and consider all the facts and 
circumstances of the case.  Any voluntary measures  proposed by the copyright owners to mitigate the 
impact on legitimate users would be taken  into account by the Secretary.  
 
Question 22  
 
 Can Hong Kong, China indicate how it intends to tackle the criminal liability for the act of 
circumvention in Copyright (Amendment) Bill 2 006? Does Hong Kong, China intend to introduce a 
criminal offence for the act of circumvention? 
 
Answer 
 
We consider that commercial dealing of circum vention devices and the commercial provision of 
circumvention services should be a criminal offen ce whereas the act of circumvention should be 
subject to civil liability.  We consider that the proposed framework has struck a reasonable balance 
between the need to combat circumvention activiti es and the community’s grave concern that the anti-
circumvention provisions should not have any adve rse effect against consumers’ legitimate use of 
copyright works, advancement in technology and research activities. 
 
Question 23  
 
 Can Hong Kong, China clarify the rules applicab le to civil and criminal liability for dealing 
with circumvention devices under Copyright (Amendment) Bill 2006?  
Answer 
 
Broadly speaking, a person who makes, imports, ex ports or deals in circumvention devices or 
provides circumvention services would be subject to ci vil liability.  Where the dealing is done or the 
service provision is made in a commercial context (e .g. makes for sale or hire, imports for sale or 
hire, sells in the course of any trade or business) , the person could also be subject to criminal 
sanction.
9  
 In addition, we propose that any person who distributes (otherwise than in a business context) any circumvention device to such extent as to affect prejudicially the owner of the copyright may incur 
civil liability.
10 
 
In relation only to criminal liability, it would be a defence if a person charge d with the offence could 
prove that he did not know and had no reason to  believe that the circumvention device or service 
enabled or facilitated circumvention. 
 
                                                      
9 The proposed sections 273B and 273C of the Copyright Ordinance and items 2 and 3 under Major 
Amendments in Annex A of the paper mentioned in footnote 2.  
10 Item 3 under Major Amendments in Annex A of the paper mentioned in footnote 2. WT/TPR/M/173/Add.1 
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Question 24 
 
Geographical indications 
 
 Hong Kong, China does not possess a genuine  system of protection for geographical 
indications. Protection of geographical indicati ons in Hong Kong, China is ensured through 
certification trademarks. It is therefore unclear how the TRIPS provisions on geographical indications 
are implemented.   Can Hong Kong, China explain how Articl es 22 and 23 of the TRIPS Agreement are 
implemented in Hong Kong, China? How many geographi cal indications have been registered so far? 
 
Answer 
 
Geographical indications may be registered as ordinary trade marks or certification trade marks. 
 
An aggrieved party may take out an action for passing-off under the common law to prevent the 
misleading use of a geographical indication.  The owner of a registered certification trade mark may 
also bring an action under the Trade Marks Ordinan ce (Chapter 559) in respect of any infringement.  
The use of a misleading geographical indication may also constitute an offence under the Trade 
Description Ordinance (Chapter 362) (the offence is about applying a false description to any goods). 
 
The Registrar of Trade Marks may refuse to regist er a deceptive geographical indication as a trade 
mark or a certification trade mark under the Trade Marks Ordinance.  Any person may oppose the 
registration of such a trade mark, and, if such  a mark has been registe red, apply for revocation 
(under section 52, Trade Marks Ordinance) or decl aration of invalidity (under section 53, Trade 
Marks Ordinance) of registration. 
 In addition to the grounds for revocation or declar ation of invalidity provided under sections 52 and 
53 of the Trade Marks Ordinance, a certification trad e mark may be revoked or declared invalid on 
the grounds set out in sections 15 and 16 of Schedu le 4 to the Trade Marks Ordinance.  Such grounds 
include that the manner in which the owner uses th e certification mark or allows it to be used has 
caused it to become liable to mislead the pub lic as regards its character or significance. 
 The above legal protection is also applicable to geographical indications for wines or spirits. 
 
Question 25  
 
 Can Hong Kong, China specify the number of geographical indications registered by foreigners?   
Answer 
 
Whilst we are unable to provide the exact numb er of geographical indications registered by 
foreigners in Hong Kong, China, we note that the following, which appear to consist of or contain 
geographical indications, have successfully been registered in Hong Kong, China as certification 
marks: 
 
 
Harris Tweed mark:   in respect of Harris Tweed textile piece goods.    
  WT/TPR/M/173/Add.1 
 Page 65 
 
 
  
 
Scottish Cashmere Certification Trade Mark:    in respect of knitted articles of clothing made of wholly cashmere yarns, spun and knitted in Scotland.  
  
 
 
 
Swiss Embroidery Association mark:    in respect of embroidery.    
 
 
 in respect of oranges, grapefruits and tangerines.   
 
 
   in respect of spices, condiments,  sauces (except salad dressing) and 
flavouring. 
  
   
 
 
 
 Swiss Thai Hom Mali Rice mark:  
  in respect of white rice, brown rice (cargo rice, loonzain rice, husked 
rice). 
 
  
 
 
PROSCIUTTO DI PARMA  in respect of ham. 
 
 SWISS in respect of horological and chronometri c instruments; watches; clocks; parts and 
fittings for the aforesaid goods.  
 
Question 26  
 
Enforcement 
  Hong Kong's efforts toward IPRs protection are welcome. We particularly appreciate the 
modernization of the legal framework and the po lice activities progressively and significantly hitting 
the centres of production of counterfeit products, wher eas most of them have been closed or moved 
outside of HKSAR. Nevertheless several problems still exist.   The proximity to the Chinese province of Guangdong, one of the world’s most active 
production centres of counterfeit and pirated goods, makes Hong Kong, China a convenient 
WT/TPR/M/173/Add.1 
Page 66  
 
  distribution market. Counterfeit and pirated goods are smuggled in for local sales or transhipped to the 
world. Counterfeit and pirated goods transhipped and in transi t through Hong Kong, China still 
constitute a major problem, including to the EC. Th e EC Customs statistics for 2005 show that Hong 
Kong, China accounted for 8% of the counterfeit and pirated goods seized at the EC border last year. 
The situation has not improved compared to 2004. 
 
 Can Hong Kong, China indicate which measures it  has taken or intends to take to better 
control transit and transhipment of count erfeit and pirated goods through its territory? 
 
Answer 
 
Border Interception And Intelligence-Led Operations
 
 
Hong Kong Customs deploys significant enforcement resources to curb the flow of infringing goods 
across its boundary.  There are some 2,000 Custom s officers stationed at control points staying 
vigilant at all times to intercept contrabands , including counterfeit and pirated goods, through the 
intelligence-based selection of baggage, cargo, vehicles and vessels for examination.  They also 
conduct anti-counterfeit inspections at cargo lo ading areas where goods are transshipped via Hong 
Kong, China.  These inspections are also intelligence-led for increased effectiveness. 
 Hong Kong Customs has in place a new intelligen ce system, or the CEIS, since August 2005 to 
support enforcement action against importation/ ex portation and transshipment of infringing goods 
and other contrabands across the boundary.  Based on intelligence and risk assessment of cargo 
moving across the boundary, Hong Kong Customs has  made a significant number of seizures of 
infringing goods imported,  exported and transhipped th rough Hong Kong, China. 
 
Cooperation With Mainland China
 
 
For cross-boundary control of infringing goods, we have strengthened Customs cooperation with our 
counterparts in the mainland of China.  At the provincial level, a Customs liaison chan nel with Guangdong Customs has been established 
since 1996 to enhance co-operation on intellectual property right (IPR) enforcement through 
dedicated IPR Liaison Officers appointed by each side.  Through the dedicated liaison officers, 
intelligence and case information in regard to the export/re-export and transshipment of infringing 
goods detected by Hong Kong Customs is spont aneously shared with Guangdong Customs for 
necessary follow-up action.  Parallel operations are conducted periodically with Guangdong Customs 
at the land control points or at sea to target  passengers, cargoes and veh icles involved in the 
smuggling of pirated or counterfeit goods.  The Guangdong/Hong Kong IPR Expert Group was established in August 2003 to enhance cooperation on various aspects of IPR protecti on, in particular, cross-boundary IPR infringement 
cases.  Through this Expert Group, Hong Kong Customs disseminates intelligence and operational 
information to the IPR enforcement agenci es in Guangdong or even other provinces. 
 In addition, Hong Kong Customs also maintains close partnership with other counterparts at the 
national level.  For example, they have a Customs Cooperative Arrangement (March 2000) with the 
central General Administration of Customs on mut ual assistance and cooperation in Customs matters, 
including IPR enforcement.  They also have a Coop erative Arrangement with the National Copyright 
Administration (August 2002) on mutual assistan ce and exchange of information for fighting piracy. 
  WT/TPR/M/173/Add.1 
 Page 67 
 
 
  International Cooperation  
 
Hong Kong Customs actively supports the work of the Regional Intelligence Liaison Office of the 
World Customs Organization in the Asia Pacific Re gion as well as other regional and international 
organizations, e.g. Asia Pacific  Economic Cooperation (APEC).  Through these contacts and the 
worldwide network of the Customs community, H ong Kong Customs shares intelligence with overseas 
law enforcement counterparts to s uppress cross-boundary infringing activities. 
 As at December 2006, Hong Kong Customs has signed 11 bilateral customs co-operative arrangements with its overseas counterparts.  The Government has also signed an agreement with the 
European Community on Customs mutual assistance and co-operation.  
Other Measures
 
 
Hong Kong Customs maintains close cooperation with the IPR industry to obtain first hand 
intelligence to curb counterfeit trade.  They also administer reward schemes sponsored by the IPR 
industry to encourage reports of IPR crimes, in cluding illegal movement of infringing articles. 
 
Question 27  
 
 So far the local authorities have concentr ated their action against counterfeit musical 
products, videos, software and internet piracy. Ther efore a stronger commitment against the spread of 
clothing and brand products fakes is deemed desirable.    Could we learn more about what counter-measures  Hong Kong, China's authorities are applying or envisaging against the spread  of clothing and brand product fakes? 
 
Answer 
 
Hong Kong Customs spares no efforts to maintain vigorous enforcement action against the trade in 
counterfeit goods.  The measures detailed in Questi on 26 apply to counterfeit clothing and other fake 
brand products alike. 
 
Question 28  
 
 Trademark counterfeiting remains firmly under control, and there is no major manufacturing 
operation in Hong Kong, China. For the local retail market, only some low-level sales activities of a 
limited scale by hawkers are found in certain black sp ots.  Due to the vigorous enforcement actions of 
Hong Kong Customs, most counterfe iters operating at the black spots have now adopted a stealthy 
mode of operation. Only photos of counterfeit goo ds are displayed and customers will be led to 
showrooms/ storage centres in nearby buildings for the actual transactions.   Considering the knowledge of these backroom sa les, what measures are envisaged to counter 
such illegal sales? 
 
Answer 
 
 Hong Kong Customs mounts repeated and focussed  raids against the showrooms and storage 
for counterfeit goods.  They also mount surveilla nce operations to track down the counterfeit 
syndicates and raid both the sales stalls and the backr oom storage in one go.  They work closely with 
the IPR industry and other law enforcement departmen ts e.g. the police, to mount joint intelligence-
led operations targeting the showrooms and storage centres. 
 WT/TPR/M/173/Add.1 
Page 68  
 
   The sale of counterfeit goods is a serious o ffence under our Organized and Serious Crimes 
Ordinance.  The Ordinance enables enforcement age ncies to trace and freeze the proceeds of 
criminals and can be instituted to enhance the sente nce an offender receives.  We will continue to 
apply the Ordinance to combat counterfeiting at bot h the retail and storage levels, and endeavour to 
use the provisions thereof to effect  confiscation of crime proceeds. 
 
Question 29  
 
 Are textiles/clothing/footwear products sold in such centres?  Answer 
 
Some textiles/clothing/footwear items are found to be sold at such centres. 
 
Question 30  
 
(iv) Competition and consumer protection policy 
 
 Hong Kong, China does not yet have comprehe nsive competition legislation to address anti-
competitive behaviour and consumer protection and applies a sectoral, rather than a cross-sectoral 
policy approach.  Since 2005 a Competition Policy Re view Committee has been  at work to study 
approaches to competition policies in various count ries and come up with recommendations for Hong 
Kong, China (see also WTO Secretariate's Report,   paragraph 15 and HKSAR 's Report, paragraph 
24)). The EC has been supportive to this process and aware that public consultations are to now to be 
held on the recommendations.   
 Concerning the review of Hong Kong, Ch ina's Competition Policy, could Hong Kong, 
China's authorities provide us with an update on the envisaged termination of the work of the 
Competition Policy  Review Committee, the public c onsultation of the recommendations and the final 
proposal of the authorities for the adoption of comp etition legislation and the required institutional 
arrangements for the implementation and enforcement of competition policy?  Answer 
 
The Competition Policy Review Committee completed its  work in June 2006 with the submission of its 
report to the Financial Secretary.  The public c onsultation exercise began in early November and will 
last until early February 2007, following which we  will draw up a proposed way forward for the 
regulation of competition in Hong Kong, China, taking into account feedback received from the 
public. 
 
IV. TRADE POLICY BY SECTOR 
 
(5) S
ERVICES  
 
Question 31  
 Construction 
  Hong Kong, China indicates that it has undertaken GATS commitments in construction 
services, and is aiming to improve them through its DDA offer. However, these commitments are limited to a small part of CPC 517- building completion and finishing work, and to project management services. Would HKC explain what its current regulatory regime is for commercial presence of foreign companies operating in the other construction services sub-sectors?  WT/TPR/M/173/Add.1 
 Page 69 
 
 
   
Answer 
 
In Hong Kong, China’s current regulatory regime, there is basically no limitation on the commercial 
presence of foreign companies in construction servi ces sub-sectors 512-514 and 516-517, except that 
certain construction and building work can only be carri ed out under the co-ordination of Authorized 
Persons (AP), structural elements of any constr uction or building works by Registered Structural 
Engineers (RSE).  In order to be registered as AP or RSE, one should be a Registered Architect, 
Registered Professional Engineer in the relevant di sciplines or Registered Professional Surveyor and 
have year’s relevant experience in Hong Kong, Ch ina.  To register as a Registered Architect, 
Registered Professional Engineer in the relevant disciplines or Registered Professional Surveyor, a 
person has to be ordinarily resi dent in Hong Kong, China. 
 
Question 32  
 
Tourism 
  Would Hong Kong, China inform us on how much of the FDI attracted by it in the last years 
has been in the tourism sector?  
Answer 
 
The Census and Statistics Department does not comp ile FDI statistics regarding the tourism sector.  
Meanwhile, it is estimated that in sectors closel y related to tourism, which include restaurants and 
hotels, and transport and related services, the FDI inflow in 2004 was HK$12.1 billion. 
 
Question 33  
 
 Would Hong Kong, China inform us about their existing plans to promote the tourism sector, 
and what measures the government is taking to ensure non-discrimination of Foreign Service 
suppliers? 
 
Answer 
 
Hong Kong, China is the most popular city destination in Asia and to maintain and enhance our 
status, the Government will continue to adopt  multi-faceted strategies to promote tourism 
development in Hong Kong, China, including (1) to enhance existing tourist attractions and roll out 
new ones; (2) to upgrade the service standards of the i ndustry; (3) to facilitate the entry of visitors to 
Hong Kong, China; and (4) to support Hong Kong T ourism Board (HKTB)’s efforts to promote Hong 
Kong, China globally.  The regulation of travel agents in Hong Kong, Chin a is by means of a two-tier regulatory mechanism 
comprising the trade’s self-regulation and the issue of  travel agents licence by the Government.  The 
travel agent market is a free market with no restric tion in terms of nationality, residency, ownership 
of capital and number of players, etc.   
 
Question 34  
 
 Would Hong Kong, China inform us about th eir plans for improving professional education 
and training related to the tourism sector?  WT/TPR/M/173/Add.1 
Page 70  
 
  Answer 
 
To enhance the quality of travel service provided by  travel agents, training courses covering different 
job categories and aspects are provided.  For exa mple, the HKSAR Government provided financial 
assistance under its “Skills Upgrading Scheme ” to enable serving tourist guides to receive the 
prescribed training for the purpose of tourist guide accreditation.  There is also tailor-made training 
on eco-tourism, culture and heritage tours as well as  training on specific job skills such as ticketing 
matters and customer service skills, etc.  Apart from the above, there is also a wide variety of training courses available in the market that are 
organised by universities and various training institut es, covering formal academic training as well 
as training on specific subjects for trade prac titioners to acquire formal academic qualification and 
specific job knowledge. 
 
Question 35  
 
 What is the approach of Hong Kong to the regulation of tourism-re lated aspects of general 
interest such as environment, wildlife, urban planning, etc? 
 
Answer 
 
Our tourism initiatives regardless of nature and scale  are sustainable projects subject to relevant 
statutory procedures.  Where the utilization of natural areas is concerned, we have focused on 
existing resources based on positive promotion of our country parks which cover some 40% of Hong Kong, China’s land area housing a diverse range of scenic landscapes, natural features and heritage 
assets.  The Northern New Te rritories green tourism programme  is an initiative to explore 
opportunities for sustainably tapping this pristine area for tourism. 
 Based primarily on conservation and sustainability principles, some tourism development projects 
may adopt a minimal approach to improve the basic facilities aimed at enabling visitors to appreciate the rich natural, cultural and heritage assets in a more convenient and user-friendly environment.  
Other projects may focus on optimizing the use of the transport links and infrastructure while 
protecting some parts for nature conservation and su stainable recreational and visitor uses.  Such 
uses include theme attractions based on heritage, local character and natural  landscape, initiatives 
for maximizing the recreational potential of the co untry park, and measures for nature conversation. 
 We have engaged the expertise of different qualified parties relating to green/sustainable tourism 
through continuing consultation with  these parties as well as our adv isory mechanisms such as the 
Tourism Strategy Group, Government’s advisory body  in respect of strategic tourism development.  
For example, our extensive consultation with sta keholders of the tourism development programme in 
the Northern New Territories has included green groups, academics etc. to solicit their professional 
input from environmental and sustainability perspec tives.  The Tourism Strategy Group’s membership 
also covers eminent advocates for green and sustai nable tourism, as well as academics and experts 
from different related disciplines.  
Question 36  
 
 We would like to know about Hong Kong’s assessment of the effect of the tourism sector in 
overall economic growth and empl oyment, and in particular in other economic sectors like 
construction, transport, computer serv ices, education and professional training? 
  WT/TPR/M/173/Add.1 
 Page 71 
 
 
  Answer 
 
Tourism is one of the major economic sectors in Hong Kong, China and its vibrant performance has 
provided an important impetus to economic and em ployment growth in recent years.  From 2000 to 
2005, total incoming visitor trips and outgoing reside nt departure trips increased by averages of 
12.3% and 4.2% per annum respectively.  In the first  ten months of 2006, there were further increases 
of 8.7% and 4.7% respectively.  With its vibrancy, the direct contribution of the tourism sector (see Note) to GDP rose visibly from 2.3% in 2000 to 2. 9% in 2004, while its direct contribution to total 
employment went up from 3.4% to 4.6%.  Latest i ndications in 2005 showed that the direct percentage 
contribution of the tourism sector to GDP and tota l employment should have risen further.    
 
Direct contribution apart, the tourism sector makes significant indirect contribution to the economy, 
though such contribution cannot be easily quantified.  A case in point is the benefit accrued to the 
suppliers of goods and services to the tourism sector .  Examples include th e trading and logistics 
sector which supplies the goods sold in retail outle ts and food served in ho tels and restaurants; the 
construction and related sectors which execute devel opment of new hotels, tourism infrastructures 
and recreational facilities; and various professional and business services such as finance, insurance, 
legal, accounting and information technology servi ces which enable an efficient operation of the 
tourism sector.  As tourism is supported by a wide  range of economic activities in other sectors, its 
development has generated a substantial demand for manpower with diverse education and training 
background including but not limited to that required by the sector.    
 
Also, tourism development benefits the economy indi rectly by reinforcing Hong Kong, China’s image 
as a world city, and enhancing mutual understandi ng between Hong Kong, China and other places in 
respect of political, economic, social and cultural envi ronment. This is deemed positive to the trade 
and investment links as well as talent flow between  Hong Kong and the rest of the world, which in 
turn can give a boost to tourism through business tra vels.  In fact, Hong Kong, China is now well-
recognized as an ideal place for hosting interna tional commercial activities such as meetings, 
conventions and exhibitions.  In 2005, business travels accounted for 23% of incoming visitor trips.  
Meanwhile, business travels accounted for 39% of total resident departure trips.     [Note:  Tourism is regarded as a service domain in the context of statistical analysis, making 
reference to the Tourism Satellite Account fram ework as recommended by the World Tourism 
Organization.  It comprises economic activities st raddling different industries but are somehow 
related to the common purpose of serving incoming visitors and residents going abroad.  Industries 
covered include hotels and boarding houses; restaurants; air, water and land transport; retail; travel agents; cultural, amusement and recreational services; and convention and exhibition organising 
services.]  
Question 37  
 
 Would Hong Kong, China inform us about the existing legislation applicable to tour managers (professionals accompanying groups of tourists in their travel through the country) and 
tourist guides? Would Hong Kong inform us about the measures that the government is applying to 
ensure non-discrimination of foreign service suppliers in these fields?  
Answer 
 
To ensure the quality of service provided by tour ist guides, a “Tourist Guides Accreditation Scheme” 
was implemented since July 2004 under which trav el agents can only engage tourist guides issued 
with “Tourist Guide Pass” under the Scheme to receive inbound visitors.  The Travel Industry 
Council of Hong Kong (TIC), which is responsible fo r the self-regulation of the travel agents trade, 
will take disciplinary actions against travel agent s for non-compliance of the requirement including WT/TPR/M/173/Add.1 
Page 72  
 
  warning, suspension and termination of TIC memb ership which may lead to the revocation of the 
travel agents’ licence by the Travel  Agents Registry of the Government. 
 To become accredited tourist guide, a person has to attend the required training and pass the 
prescribed examination and apply for a “Tourist Guid e Pass”.  One of the application requirements 
is that the applicant has to be a permanent resident  of the HKSAR or one who is not subject to any 
condition of stay.  Regarding establishment of travel agencies and tour operators, there is no 
restriction in terms of nationality an d foreign ownership of capital. 
 
Question 38  
 
Distribution services 
 
 Would Hong Kong, China inform us on how much of the FDI attracted by the country in the last years has been in the distribution sector? 
 
Answer 
 
The FDI inflow in the distribution sector, i.e. wholesales, retail and import/export trades, was 
HK$49.5 billion in 2004.   
 
Question 39  
 
 We would like to know about Ho ng Kong’s assessment of the effect of the distribution sector 
in overall economic growth, employment and social development, and also in other economic sectors 
like construction, transport, computer se rvices, education and professional training. 
 
Answer 
 In broad terms, the distribution sector in Hong Kong, China comprises wholesale and retail, and 
import and export trades.  This sector is one of the key service industries of the Hong Kong, China 
economy, with its share in GDP rising from 21% in 1995 to 25% in 2005.  Since 2003, net output in this sector has sustained double-digit growth of  11-15% along with the economic recovery.  The 
sector is also an important contributor to em ployment, currently taking up 27% of our total 
employment, similar to ten years ago.  The restructur ing of companies in this sector over the past 
years, as well as technology upgrading in opera tions and management, have boosted productivity 
growth in this sector to 13.6% in 2003 and 11.2% 2004,  and to a still rapid growth of 9.6% in 2005.  
 The distribution sector has significant linkages w ith other economic sectors particularly financing 
and insurance, transport and storage, and the real est ates, although a precise quantification of the 
impact is not possible.  The pick-up in the distri bution sector amidst the current economic upturn has 
also been one underpinning factor for the recover y of the market for retail and office space, the 
strengthening demand in turn is expected to spill over to the construction sector in due course.  In 
addition, continuous improvement in productivity in this sector has also entailed substantial 
investment in both technology upgrading and human capital.   
 
Question 40  
 
 Would Hong Kong, China inform us about exis ting and planned legislation applicable to 
retailing services?   WT/TPR/M/173/Add.1 
 Page 73 
 
 
  Answer 
 Consumer products can generally be sold freely in the retail markets in Hong Kong, China, except for 
specific types of products which are subject to the applicable legislation due to health, public safety 
and security reasons.  Some examples are provided at Annex 3.    There is different legislation to protect consumers,  for example, the Weights and Measures Ordinance 
gives consumers protection against fra udulent or unfair trading practi ces in connection with quantity; 
the Toys and Children's Products Safety Ordinance re gulates toys and children's products that are 
manufactured, imported or supplied for local cons umption; the Consumer Goods Safety Ordinance 
provides that consumer goods should comply with a general safety requirement or safety standards 
and specifications set by the government.  For more details of product standa rds that apply in Hong 
Kong, China, please also refer to Hong Kong, China’s reply to Question 3 from Canada.  For further 
details on Hong Kong's cons umer protection legislation in different areas, please check the internet 
website of the Hong Kong Consumer Council at h ttp://www.consumer.org.hk/website/ws_en/legal_ 
protection/hk_consumer_protec tion_legislations/Index.html 
 
Question 41  
 
Telecommunications 
 
 The WTO Secretariat's Report states that "there are no limitations on foreign equity participation or ownership or any other FDI r estrictions in the telecommunications market". 
 
 In practice, however, we have recent indica tion for the successful pr evention of a foreign 
direct investor taking a controlling stake in a Hong Kong telecoms Company.    Could Hong Kong, China, inform us by whic h measures it ensures that FDI participation or 
ownership are not limited or prevented?  
 
Answer 
 
Hong Kong, China does not have foreign equity par ticipation or ownership or any other FDI 
restrictions imposed on the telecommunications regulat ory regime, as reflected from the fact that no 
such restriction is imposed as a precondition of  licence applications for both facilities-based and 
services-based telecommunications services and operations . and in any other laws of Hong Kong.  
This is a WTO commitment of Hong Ko ng, China and will be upheld.    
 The decision of minority shareholders of Pacific Ce ntury Regional Developments Limited (PCRD) to 
reject the proposed sale of shares of PCCW Limite d to Fiorlatte Limited was a commercial decision. 
 Please refer to the guidelines for licence application for the following licences: 
- Fixed Carrier Licence  
http://www.ofta.gov.hk/en/report-pap er-guide/guidance-notes/guidelines01_11.pdf 
- Services-Based Operator Licence  
http://www.ofta.gov.hk/en/legislation/guid eline_6d_2a/Guideline/SBO-Guideline.pdf 
 
Question 42  
 
Maritime transport 
  Cargo diversion away from Hong Kong, China is regarded as a potential crisis for the 
economy which is heavily service and trade oriented. Direct shipment from mainland China has WT/TPR/M/173/Add.1 
Page 74  
 
  become increasingly popular, with  many Hong Kong, China manufacturers and traders shipping their 
Chinese-made goods to overseas markets directly, b ypassing Hong Kong, China for reasons such as 
cost saving, logistics and proximity to the production base. In particular, Shenzhen’s ports are seen as 
posing a formidable challenge to Hong Kong, China ports. Shenzhen, already one of the busiest ports 
in the world in terms of container throughput handl ed, is growing at a double-digit rate each year. The 
relative lead of Hong Kong, China as the world’s busiest port is gradually being eroded. Total Hong 
Kong, China port throughput rose only marginally by  2% in 2005. Hong Kong, China’s own container 
terminal operators are themselves investing heavily  in developing container terminals in Southern 
China, while new development of container te rminals in Hong Kong remains stagnant.  
  How does Hong Kong, China plan to adjust its trade policy regime to tackle the competition 
brought about by the ports of Southern China in  cargo diversion and the potential loss of traffic 
resulted form direct trade links between Main land China and Chinese Taipei in the future? 
 
Answer 
 
Along with the rapid development in port facilities in southern part of China, there is keen 
competition between Hong Kong Port (HKP) and the ports in southern part of China.  On the basis of 
a free market mechanism, Hong Kong, China has to strive to enhance the efficiency and competitiveness of HKP to meet the challenges.  The following are the major policy areas to focus on 
– 
 - To explore further measures for improving cross-boundary trucking efficiency so as to 
strengthen Hong Kong, China’s road connectivity with the cargo sources in the mainland of 
China and reduce cross-boundary trucking cost. 
 
- To provide more cross-boundary freight tr ansport facilities.  The Hong Kong – Shenzhen 
Western Corridor is scheduled to open in mid-2007, which will triple the cross-boundary 
transport capacity to 120 000 vehicle trips per day. 
 - To smooth freight flow by strengthening info rmation connectivity, such as promoting the 
development of the Digital Trade and Transpor tation Network and research in the On-Board 
Trucking Information System.   
 - To provide more port back-up land adjacent to the Kwai Tsing Container Terminals in order 
to increase the cargo handling capacity and productivity of the terminals.   
 
- To enhance the attractiveness of HKP by reducing anchorage dues, and port facilities and 
light dues.  Also, the Government is making legislative amendments to introduce multiple 
entry permits for river trade vessels to streamline their entry procedures.   
 Once direct trade links between the mainland of Ch ina and Chinese Taipei is established, Hong Kong, 
China’s position as an entrepot for cargo between  Chinese Taipei and the Mainland ports outside the 
Pearl River Delta region will bear the brunt of the impact, due to geographical and cost considerations.  These transshipment cargoes, n evertheless, accounted for only 1% of Hong Kong, 
China’s total laden container throughput.  Wheth er the seaborne cargo between southern part of 
China and Chinese Taipei will continue to be routed through Hong Kong, China will depend on the 
competitiveness of HKP relative to other ports in southern part of China.   
 
Follow up on the written question 2  
 
 Question 2: “To address increasing pollution in HKSAR, the report by Hong Kong, China indicates (paragraph 152) that all major govern ment policies are submitted to environmental  WT/TPR/M/173/Add.1 
 Page 75 
 
 
  protection scrutiny and that the 'polluter pays' prin ciple is applied, and effective since 1st January 
2006 fees and charges were revised to achieve full-cost recovery for government services. 
Notwithstanding the short time of implementati on, could Hong Kong, China's authorities report 
whether there are already first effects?”   
 On question 2 (trade and environment) - we we re interested in learning more about the first 
experiences and effects of the measures undertaken by Hong Kong, China (sub mission of government 
policies to environmental protection scrutiny, applica tion of "polluter pays" principle, revision of fees 
and the new initiatives mentioned by Ms Choi dur ing the second day meeting) in order to reduce 
pollution?  
 
Answer  
 
The submission of all new major government polic ies to environmental protection scrutiny is an 
established practice of Hong Kong, China, rather th an a new measure. Thanks to this practice, Hong 
Kong, China has been successful in pre-empting environmental problems. The Environmental Impact 
Assessment Ordinance provides a transparent and systematic framework for assessing the 
environmental impact of designated projects and,  where avoidance is impracticable, identifying 
effective measures to reduce the impact to an a cceptable level. Since the implementation of the 
ordinance in 1998, the public and ecologically sens itive areas are protected against unacceptable 
environmental impact as a result of preventive or  mitigatory measures adopted in planning and 
design of developments.  
 As to the "polluter pays" principle, it is a guiding principle for the revision of fees and charges. Whilst 
there are examples of full-cost recovery, e.g. char ges levied under the Construction Waste Disposal 
Charging Scheme, we are making efforts towards fu ll-cost recovery in other cases. For example, we 
are working towards full-cost reco very in the case of sewage char ges through small, incremental 
steps.   As for the new initiatives which we mentioned during the Trade Policy Review meeting on 15 
December 2006, we expect the air quality to be fu rther improved upon implementation of the new 
initiatives. Past experience shows that our air pollu tion control measures have been effective. For 
example, roadside air pollution index exceeding 100 was reduced from 956 hours in 1999 to 419 
hours in 2005 (down 56%). The number of smoky vehicles on the roads was reduced by 80% compared to 1999.  
 
Follow up on the written question 14  
 
 Question 14. “In an effort to avoid circum vention of Mainland specific textiles safeguard 
measures by means of illegal transhipment or fa lse declaration of origin, all textiles shipments 
involving the sensitive markets must be covered by e ither consignment-specific licences issued by the 
Director-General of Trade and Industry (DGTI), or  export or import textiles notifications completed 
by textiles traders registered under the Textiles Trader Registration Scheme (TTRS). The licensing 
requirements for Mainland China and the United States commenced on 1 January 2005, and for the 
EC on 15 March 2006. In addition, all cut-and-sewn ga rments destined for the United States and the 
EC have been subject to the production notificatio n (PN) requirement. Textiles shipments involving 
non-sensitive markets are covered by comprehensiv e or consignment-specific import or export 
licences.  
 
 This system of export licensing has now been in place for exports to the EC since March 2006. What preliminary conclusions can the Hong Ko ng, China government ta ke its implementation? 
Particularly regarding its reliability? Can the triple digit percentage increases in exports of textiles and 
clothing to the EC be verified through the export licensing system?”  WT/TPR/M/173/Add.1 
Page 76  
 
   
 On question 14 (export licensing for textiles and garments) - can the triple digit percentage 
increase in exports of textiles and clothing to the EC  be verified through the export licensing system?  
 
Answer  
 
As explained at the Trade Policy Review mee ting on 15 December 2006, Hong Kong, China (HKC) 
maintains a very stringent textiles origin control system which has been well established for many 
years and well recognised internationally.   
As a responsible trading partner, our firm commitm ent to uphold the integrity and credibility of our 
textiles control system remains the same before and after the global elimination of textiles quotas.   Given the different regimes under which HKC and the Mainland operate and our geographical 
proximity to and close economic integration with the Mainland, HKC has continued to operate a 
credible origin control system to forestall circumvention of quota restrictions on Mainland’s textiles 
and clothing (T&C) products in the guise of Hong Kong products. Following EU's re-imposition of 
quotas on Chinese T&C exports, we have further tight ened up our control system in March 2006 to 
ensure origin compliance of H KC's T&C exports to the EU.  
 HKC has a comprehensive control system on the im port and export of T&C products whereby all such 
imports and exports (other than a few exempted items
11) are required to be covered by valid licences 
and notifications. The centrepiece of HKC's contro l system is the Certificat e Origin (CO) system 
which serves to ensure that products claiming H ong Kong origin or carrying "Made in Hong Kong" 
labels are indeed produced in HKC in full complia nce of HKC's origin requirements. HKC’s textiles 
control system is fully backed up by the Laws of HKC.12 Export licences and notifications as well as 
Certificate of Hong Kong Origin (CHKO) are all legal documents which are subject to Hong Kong 
Customs' multi-tiered checking and inspections for verification of the material particulars of the 
export consignment declared therein, including descripti on of goods, quantity and origin claims of the 
goods. We also hold our traders and manufacturers legally accountable for accuracy of the declared information.   
On the enforcement side, HKC ha ve taken enhanced measures on a ll fronts to prevent abuse of our 
origin control system. Such measures include monito ring the export trends of products to watch out 
for any signs of irregularities; strengthening the intelligence system and surveillance; stepping up enforcement actions through intensified factory and c onsignment checks; targeted blitz operations at 
boundary control points; and a series of special operations. If we find that certain factories are 
engaging in export activities not commensurate w ith their production capacity, HKC Customs would 
conduct intensive checking or investigation against them.   We take our textiles control system very seriously. Or igin frauds/abuses and false origin marking are 
criminal offences under Hong Kong laws. Offenders fa ce stiff legal and administrative sanctions. On 
legal sanctions, offending parties are liable to a maximum penalty of HK$500,000 (roughly 
                                                     
 
11 Exempted items are woven or knitted fabric swatches and sample yarn imported by air and not 
exceeding 0.8m2 in size in respect of fa bric swatches and 1.2 ki lograms in weight in re spect of each type of 
yarn;  textiles articles that are imported or exported by an individual for his personal use or as a bona fide gift to another individual;  and textiles articles to be used by th e crew or passengers of a ve ssel, aircraft, or vehicle. 
12 HKC’s textile control system is fully backed up by the Laws of Hong Kong, namely the Import and 
Export Ordinance (Cap. 60) and its subsidiary legislation to govern export licences and COs issued by TID, the Protection of Non-Government Certificates of Origin Ordinance (Cap. 324) for COs issued by the Government 
Approved Certification Organisations, as well as the Trade Descriptions Ordinance (Cap. 362) to regulate origin 
marking.  WT/TPR/M/173/Add.1 
 Page 77 
 
 
  US$64,000) and 2 years’ (for origin fraud) or 5 yea rs’ imprisonment (for false origin marking). In 
addition, goods seized in origin fraud cases may be  forfeited. In addition to criminal penalty, 
offenders may also be subject to administrative ac tions such as revocation of COs and suspension of 
certification facilities etc.   
In short, we remain vigilant in upholding the inte grity of our textiles contro l system and in combating 
transshipment frauds. We take a serious view over il legal textiles transshipment and are determined 
to tackle it. We closely monitor export trends  of sensitive T&C products, along with the export 
activities of traders to watch out for any signs suggesting illegal transshipment activities. Should 
there be any irregularities detected, we will furth er step up enforcement actions through intensified 
factory and consignment checks together with paralle l blitz operations at boundary control points as 
necessary.   
 
Follow up on the written question 29  
  Question 29. “Are textiles/clothing/footwear products sold in such centres ?”  
  On question 29 - the sales of textiles and clothing and footwear in the showrooms and storage centers - would it be possible to learn more  about the actual quantities sold and seized?  
 
Answer  
 
To combat the sale of counterfeit goods at th e showrooms and storage centres, Hong Kong Customs 
have stepped up patrol at known black spots to iden tify counterfeiters touting customers, especially 
tourists to those venues. We also rely on intelligen ce provided by the IPR industry, other government 
departments, members of the public and our own Intelligence Bureau to stage intelligence-led 
operations targeting those showrooms and storage centres.  
 In 2006 (up to 20 December), a total of 25 opera tions have been conducted against showrooms and 
storage centres at known blackspots with seizu res worth HK$12.3 million made and 75 persons 
arrested. The seizures included around 3,300 pieces of  textile goods, 43,400 pieces of leather goods 
and 5,400 pieces of footwear. There are no statistics on the quantities of goods actually sold.  
 
  WT/TPR/M/173/Add.1 
Page 78  
 
  ANNEX 1 
 
Skills Upgrading Scheme - List of Industries 
 
1. Printing 
2. Chinese Catering 
3. Import / Export 
4. Clothing and Textile 
5. Transport 
6. Retail 
7. Tourism 
8. Hairdressing 
9. Electrical & Mechanical Engineering 
10. Property Management 
11. Insurance 
12. Real Estate 
13. Hotel 
14. Building Maintenance 
15. Beauty Care 
16. Passenger Transport 
17. Elderly Care 
18. Entertainment, TV and Film 
19. Recreation and Sports 
20. Horticulture and Floral Art 
21. Medical and Health Care 
22. Watches, Clocks and Jewellery 
23. Automobile 
 
  WT/TPR/M/173/Add.1 
 Page 79 
 
 
  ANNEX 2 
 
Employment Programmes administered  by the Labour Department 
  
Youth Pre-employment and Tr aining Programme (YPTP) 
 
1. Launched in September 1999, the Youth Pr e-employment Training Programme (YPTP) aims 
at enhancing the employability and competitiveness of school-leavers aged 15 to 19 through a wide 
range of employment-related modular training.  Ov er the past seven years, some 73 000 young people 
received training under the YPTP.  2. The YPTP offers four modular training courses, namely:   Module A:  Leadership, discipline and team building 
 Module B:  Job-search and interpersonal skills 
 Module C:  Elementary/intermediate computer application  Module D:  Job-specific skills (over 300 courses in 18 job categories are offered).  Attendance of Module B is mandatory.  A trainee may take a maximum of four other training courses 
from a mix of Modules A, C and D. 
 3. To facilitate sustainable development and en courage life-long learning, almost 300 training 
courses under Modules C & D of the YPTP are linked to elementary professional examinations in different trades.  Examination fees can be reimbursed from the YPTP. 
 
4. After completing the modular training, trainees can undergo one-month workplace attachment training at hosting organisations including government  departments, social service institutions, public 
organisations and private companies.  During the attachment period, trainees will be granted a training allowance of HK$2,000 (US$ 256) under the Progra mme.  Career counselling and support services by 
social workers will be rendered to trainees through out the training period lasting about six to nine 
months. 
 5. Special tailor-made training courses are also developed from time to time to meet the skill requirements of individual employers.  Whereas training will be provided free of charge by the YPTP, employers have to undertake to employ trainees in  on-the-job training of 6 to 12 months under the 
following Youth Work Experience and Training Scheme. 
 
Youth Work Experience and Training Scheme (YWETS) 
 
6. Launched in July 2002, the Youth Work Experience and Training Scheme provides employment in the form of on-the-job training of 6 to 12 months to young people aged 15 to 24 with 
educational attainment below the degree level. 
 7. Together with the YPTP, LD provides a one-s top service in offering training and employment 
opportunities to young people.  Through a “revolving  door” mechanism, trainees may move between 
the two schemes at different stages during the progra mme year.  If there is a need, case managers of 
YWETS trainees may refer them to take up appropr iate training under the YPTP.  Similarly, YPTP 
trainees will undergo on-the-job training under th e YWETS when they are ready for employment. 
 8. Under the YWETS, trainees are placed in trai ning vacancies and provided with on-the-job 
training under the guidance of mentors appointed by employers.  Additional support such as 
counselling service is available from case managers w ho are registered social workers.  Trainees are WT/TPR/M/173/Add.1 
Page 80  
 
  encouraged to attend suitable vocational courses and can apply for reimbursement of the related 
training course and examination fees from the YWETS, subject to a maximum of HK$4,000 (US$ 513).  9. Participating employers receive a monthly training subsidy of HK$2,000 (US$ 256) for each 
trainee engaged during the employment and training period up to one year, as well as full-package 
support services.  10. The YWETS offers a variety of tailor-made employment projects to cater for trainees’ needs 
and interests.  Over 40 projects, including those in conjunction with the YPTP, offering about 2 500 
vacancies have been organised, covering industries such as wholesale and retail, aviation, tourism, 
information technology, film and entertainmen t, education, social services, and catering. 
 11. Up to end-October 2006, 30 782 trainees were placed in training vacancies of the Scheme and 
another 15 516 found employment in the open ma rket with the assistance of their case managers. 
 
Employment Programme for the Middle-aged (EPM) 
 
12. The EPM was launched in May 2003 to enhance the employability and employment 
opportunities of the middle-aged through the provi sion of a training allowance to encourage 
employers to hire them.  Under the EPM, employ ers engaging job-seekers aged 40 or above in full-
time permanent jobs with on-the-job training will receive a training allowance of $1,500 (US$ 192) 
per month, for up to three months per trainee.  As at end-October 2006, the Programme has achieved 
26 454 placements.  
Work Trial Scheme (WTS) 
 
13. The WTS, launched in June  2005, aims to assist job-seekers having special difficulties in 
finding jobs.  They include those who have register ed with the LD for a prolonged period but remain 
unemployed and those who have failed repeatedly in  job interviews.  Participants are arranged to 
work in real jobs offered by participating orga nisations under the guidance of a mentor for a trial 
period of one month.  During that period, ther e will be no employment relationship between the 
participants and the participating organisations.  Upon completion of th e trial, each participant will be 
paid an allowance of $5,000 (US$ 641), of which $5 00 (US$ 64) is contributed by the participating 
organisation.  The organisations are encouraged to offer employment to the participants afterwards.  
As at end-October 2006, 994 job-seekers have been placed into work trials. 
 Work Orientation and Placement Scheme (WOPS) 
 
14. The WOPS has been launched in April 2005 to  help the disabled secure jobs in the open 
market.  It features a short pre-employment trai ning programme for each participating disabled job-
seeker as well as a financial incentive to the partic ipating employers for each disabled person engaged 
(half-month’s wages or $3,000 [US$ 385], whichever is the less) for up to three months.  In addition, 
the participating employer is encouraged to appoint an experienced staff as the mentor of the disabled 
employee.  As at end-October 2006, the WOPS has provided pre-employment training to 530 disabled 
participants and achieved 527 work placements.  15. The Government will continue to adopt a mu lti-pronged approach to promote employment on 
all fronts and strives to improve the business environment so that more job opportunities will be 
created in the open market.  December 2006   WT/TPR/M/173/Add.1 
 Page 81 
 
 
  ANNEX 3 
 
Examples of the legislation applicable to some consumer products for local 
use/consumption/sales  
 
The following are just some of the examples of th e legislation applicable to consumer products under 
retailing services (CPC 631, 632, 6111, 6113, 6121). 
 
 
Food products (CPC 631) 
 - Public Health and Municipal Services Ordinance, Cap 132 
 In Hong Kong, the relevant legislation governing the retail sale of food is laid down in Part V of the 
Public Health and Municipal Services Ordinance, Ca p 132 and its subsidiary legislation.  The main 
provisions cover general protection for food purchasers,  offences in connection with sale of unfit food 
and adulterated food, composition an d labelling of food, food hygiene, seizure and destruction of unfit 
food.  Control in specific areas is provided in subs idiary legislation under the Ordinance as follows:  
 (1) Colouring Matter in Food Regulations  
(2) Dried Milk Regulations  
(3) Sweeteners in Food Regulations (4) Food Adulteration (Metallic Contamination) Regulations  
(5) Food and Drugs (Composition and Labelling) Regulations  
(6) Food Business Regulation  
(7) Frozen Confections Regulation  
(8) Harmful Substances in Food Regulations  (9) Imported Game, Meat and Poultry Regulations  
(10) Milk Regulation  
(11) Mineral Oil in Food Regulations  (12) Preservatives in Food Regulations  
(13) Slaughterhouses Regulation  
(14) Smokeless Tobacco Products (Prohibition) Regulations  
 
The above legislation can be downloaded from the website:  http://www.legislation.gov.hk . 
 Planned legislation: 
In addition, the Government is planning to incl ude a labelling scheme on nutrition information and we 
are now finalizing the proposal.  
- Public Health (Animals and Birds) (Animal Traders) Regulation, Cap 139B 
 For item in CPC 63103, food snakes, turtles, lizards , pheasant, chuckar and guinea fowls are currently 
sold in Hong Kong retail markets.  The selling of  such food animals must first obtain an "Animal 
Traders Licence" issued under the Public Health (Animals and Birds) (Animal Traders) Regulation, 
Cap 139B. 
 
For item in CPC 6329, selling of mammals e.g. dogs a nd cats, birds e.g. pet birds or reptiles e.g. 
turtles or tortoises as pet animals, "Animal Trader s Licence" must also be obtained under the Public 
Health (Animals and Birds) (Anima l Traders) Regulation, Cap 139B. 
 WT/TPR/M/173/Add.1 
Page 82  
 
  Any person who carries on the business as an Animal Trader must have a licence issued by 
Agriculture, Fisheries and Conservation Department.  
An Animal Trader means a person who sells, or offe rs to sell, animals or birds other than a person 
selling or offering to sell any animal or bird kept by him as a pet or any offspring thereof.  
These regulations shall apply to all reptiles and warm-blooded vertebrates except cattle, sheep, goats 
and swine; and all birds except poultry. 
 
For Animal Trading Licence under CAP 139B PUBLIC HEALTH (ANIMALS AND BIRDS) 
(ANIMAL TRADERS) REGULATIONS, please visit the following websites: 
 
legislation website - http://www.legislati on.gov.hk/blis_ind.nsf/e 1bf50c09a33d3dc 482564840019d 
2f4/3cfc11a3217a51358825648 9000ae1de?OpenDocument 
 
AFCD web link - http://www.afcd.gov.hk/tc_chi/qua rantine/qua_awc/qua_awc _lic/qua_awc_lic_atl/ 
qua_awc_lic_atl.html 
 
Non-food products (CPC 632,  6111, 6113, 6121) 
 
Bottled gas* (LPG)   
*‘gas’ means (a) towngas; (b) liquefied petroleum g as; (c) natural gas ; or (d) any mixture of such 
gases, as defined in the Gas Safety Ordinance, Cap. 51. 
 
Existing legislation includes:  - Regulation 3 of the Gas Safety (Registra tion of Gas Supply Companies) Regulations 
(http://www.emsd.gov.hk/emsd/eng/pps/gas_reg_gsc.shtml)  
- Regulations 12, 13 and 14 of the Gas Safety (Registration of Gas Supply Companies) 
Regulations http://www.emsd.gov.hk/emsd/e_downloa d/pps/gas/1280820373 57782881_RGC505.pdf 
 - Regulation 7 of the Gas Safety (Gas Supply) Regulations 
http://www.emsd.gov.hk/emsd/e_download/ pps/gas/approved_list_cartridge.pdf 
http://www.emsd.gov.hk/emsd/e_download/pps/gas/a pproved_list_disposable %20LPG%20container.
pdf  
Toys  
 
- Toys and Children's Products Safety Ordinance (Cap. 424)  
We do have legislation on toy safety, namely th e Toys and Children's Products Safety Ordinance 
(Cap. 424); we are planning to make minor changes to this legislation next year to update safety 
standards. 
 
Pharmaceutical and medical goods  
 Related legislation includes: 
- Pharmacy and Poisons Ordinance (Cap . 138) and its subsidiary legislation 
- Dangerous Drugs Ordinance (Cap 134)  and its subsidiary legislation 
- Antibiotics Ordinance (Cap. 137) and its subsidiary legislation  WT/TPR/M/173/Add.1 
 Page 83 
 
 
  - Public Health and Municipal Services Or dinance (Cap. 132) and Food and Drugs 
(Composition and Labelling) Regulations (Cap. 132W)  
- Radiation Ordinance (Cap. 303)  For details of the above legislation, please visit the following websites: 
- www.legislation.gov.hk  
- www.psdh.gov.hk - www.info.gov.hk/dh-rhu  Hong Kong is planning to consult st akeholders on a proposed statutory regulatory system for medical 
devices.   
 
Retail products which are classified as dangero us goods, timber and portable fire extinguishers  
 
Retail products which are classified as dangerous goods, timber and portable fire extinguishers are 
under the regulatory control of Fire Service Depa rtment according to the following legislation:  
 - Dangerous Goods Ordinance, Cap. 295, Laws of Hong Kong  
 
If the retail products, such as paints, varnishes, lac quers, cleaning materials, fertilizers, fuel oil, 
bottled gas, etc., are classified as dangerous goods, their manufacture, storage, conveyance, use, 
classification, labelling and packaging will be subject  to the control under the above Ordinance and its 
subsidiary legislation.   
- Timber Store Ordinance, Chapter 464, Laws of Hong Kong 
 Any person who on any occasion operates, keeps, manag es or otherwise has control of a timber store 
in regard to the operation of which a licen ce is not in force commits an offence.  
 
- Fire Service (Installations and Equipment)  Regulations, Cap. 95B, Laws of Hong Kong 
 Pursuant to regulation 3, all portable equipment, i.e.  portable fire extinguishers and fire blankets, shall 
be approved by the Director of Fire Services before  they are allowed to be supplied or sold in Hong 
Kong. 
 
For further details of the regulatory control on dangerous goods, timber and portable fire 
extinguishers, please browse the website of th e Hong Kong Fire Services Department at: 
http://www.hkfsd.gov.hk/home/eng/fs_ordinance.html .  Planned legislation includes: 
 
Related subsidiary legislation of the Dangerous Goods (Amendment) Ordinance 2002 is being drafted 
to impose detailed regulatory control of dangerous goods in future.  Following the introduction of the 
amendment legislation, new dangerous goods classi fication as well as packing and labelling systems 
will be in line with the IMDG Code based on the UN Recommendations on the Transport of 
Dangerous Goods - Model Regulations. 
  WT/TPR/M/173/Add.1 
Page 84  
 
  JAPAN
 
 
Report by Hong Kong, China (WT/TPR/G/173) 
 
Question 1  
II. ECONOMIC AND TRADE ENVIRONMENT 
 
C. MONETARY POLICY  
(Page 8, Paragraph 18)   While the exchange rate of Renminbi (RMB) ag ainst the US dollar (USD) has risen due to the 
reform of the exchange rate system, the Secretar iat report states that the monetary system in Hong 
Kong fixes the exchange rate of the Hong Kong dolla r (HKD) in the foreign exchange market against 
the USD at around HKD 7.8 to USD 1.   1. Please indicate whether problems arise due to the exchange rate of RMB against the USD differing from that of the HKD against the USD.   
 
Answer 
 
The renminbi exchange rate against the US dollar has become more flexible and has shown larger 
daily appreciation recently.  If the trend continues, it is possible that the renminbi exchange rate will 
reach parity with or even surpass the value of the Hong Kong dollar some time in the future, although 
the exact timing is uncertain.  The direct impact of an appreciation of the renminbi  on Hong Kong’s near-term growth and inflation 
prospects has been limited, partly re flecting the small size of the appreciation.  Hong Kong’s entrepot 
role also gives rise to offsetting effects on trade.  While re-exports originating from the Mainland to 
the rest of the world could be affected, this woul d be partly offset by stronger domestic exports and re-
exports to the Mainland and in-b ound tourism.  The appreciation would also induce capital inflows 
into Hong Kong to ease monetary conditions, stim ulating asset prices and economic activities in 
Hong Kong.  Overall, simulation done by the Hong Kong Monetary Authority (HKMA) shows that the 
net impact on growth and infla tion is likely to be small. 
 
In the foreign exchange market, while the renminbi exchange  rate used to play an important role in 
affecting sentiments in the Hong Kong dollar, th e Hong Kong dollar spot exchange rate has recently 
decoupled with the renminbi, depreciating within the Convertibility Zone from May to October 2006 
despite continuous appreciation of the renminbi.  When the renminbi breached the psychological 
levels of eight and the weak-side Convertibility Und ertaking of 7.85, there were little repercussions 
for the Hong Kong dollar market.  These developments suggested that the co-movements of the two 
currencies have started to loosen over time and th e Hong Kong dollar is no longer used as a proxy 
vehicle for trading bet on renminbi appreciation.  As the impact of a renminbi appreciation is limited a nd is unlikely to lead to any fundamental changes 
in macroeconomic and financial conditions, there is no need to introduce any changes to the Linked 
Exchange Rate system. 
  WT/TPR/M/173/Add.1 
 Page 85 
 
 
  Report by the Secretariat (WT/TPR/S/173) 
 Question 2 
 
I. ECONOMIC ENVIRONMENT  (4) S
TRUCTUAL MEASURES  
 
(i) Tax reforms 
 
(Page 10-11, Paragraph 18-19)  
 The Secretariat report states that a Tourist Re fund Scheme would allow visitors to obtain a 
refund of GST on goods they purch ase in Hong Kong, China and are ta king home with them, and that 
residential property sales and rentals would not be subject to GST.  2. Please indicate whether the introduction of su ch a tax system with exceptions may really 
serve to strengthen public finance.  
 
Answer 
 
The nine-month tax reform public consultation in Ho ng Kong, China commenced in mid-July and will 
end in March next year.  We have recently conducted an interim review of the consultation.  From the 
public views collected, we found that while the comm unity generally agrees that there is a need to 
broaden the tax base, the majority does not cons ider GST as an appropriate option to address the 
problem.  Therefore, for the remaining part of th e consultation, the Government will not advocate 
GST but will discuss with the public on the oth er viable options for broadening the tax base. 
 
Question 3  III. TRADE POLICIES AND PRACTICES BY MEASURE  
(4) Measures Affecting Production and Trade 
 (iii) Intellectual property rights  
(Page 64, Paragraph 126, 128) 
 
Report by Hong Kong, China (WT/TPR/G/173)  
(Page 18-20, Paragraph 78-90) 
 
 As for the protection of intellectual property rights, Japan appreciates that the Hong Kong 
Special Administrative Region (HKSAR) of the Peopl e’s Republic of China (PRC) is making efforts 
to take measures, such as the establishment and expa nsion of related laws, a nd the reinforcement of 
the enforcement division (Customs) by increasing the number of officials. Nevertheless, the Government of Japan would like to ask the HKSAR to further reinforce its enforcement activities due 
to circumstances where unlawful goods are exposed in street markets. 
 3. Please indicate specific views on the circumstances mentioned above.  
 WT/TPR/M/173/Add.1 
Page 86  
 
  Answer 
 Hong Kong, China maintains its firm stance in er adicating infringing and counterfeit goods.  Its law 
enforcement agency, Hong Kong Customs, conducts vi gorous raiding actions on  a daily basis against 
infringement activities at all levels: manufacturing,  import and export, dist ribution and retailing.  
Apart from a 250-member dedicated intellectual property right (IPR) investigation bureau, the 
Customs also deploys another 150-member raiding squad to carry out intensive, territory-wide raids 
against the black spots where infringing goods are sold.    The unrelenting efforts of the Customs over the years have now put the piracy and counterfeiting 
problem firmly under control.  The number of pirate d optical discs (POD) outlets has greatly reduced, 
from around 1,000 in 1998 to less than 50 currently.  The availabi lity of PODs in the illicit market for 
circulation has also dropped tremendously, from ne arly 5 million copies at any one time in 1998 to 
around 2,000 in 2006.  A small number of outlets that strive to survive can only operate in a stealthy 
manner. 
 
Counterfeit activities are similarly placed under control.  There is no longer any manufacturing operation in Hong Kong, China.  In the local mar ket, only some low-level sales activities of a limited 
scale are found in two hawker areas and they can only operate irregularly under harsh conditions.  
Nonetheless, Hong Kong Customs will spare no effo rts to stifle the illicit trade by staging repeated 
raids against the counterfeit traders and their backroom activities. 
 
Apart from robust enforcement against piracy and c ounterfeiting, Hong Kong, China has also put 
equal emphasis on public education and awareness campaigns to promote the community’s respect 
for IPR. 
 
Question 4 
 
 Currently, upon request from several Japanese companies, the Government of Japan is in 
consultations with the HKSAR regarding the trad emarks of eminent Japanese companies which are 
also registered in Hong Kong as a part of the tr ade names kept by Hong Kong firms, on the grounds 
that the Japanese Government considers the remedi es taken by the HKSAR insufficient. The Japanese 
Government finds it necessary for the HKSAR to ta ke effective measures against the spread of 
counterfeits.   
4. Please indicate specific views on this issue.  
 
Answer 
 
As an international financial and business centre, Hong Kong, China must provide for an efficient 
and cost-effective company registration system. Hong Kong, China’s current system is very similar to 
that in comparable common law jurisdictions, such as the United Kingdom and Australia where 
company registration and trademark registration are two distinct systems.  Under the Companies Ordinance (CO), the Registrar of Companies is empowered to issue a direction 
to require a company to change its name if it is too similar to the name of an existing company within 
12 months of the registration. This power has been used to deal with some of the complaints by 
famous brand name companies or trademark-owners against the registration of new company names 
containing their brand names or trademarks.  Neverthel ess, we are aware that some of the complaints 
cannot be tackled under the existing CO, for examp le, where the brand name company or trademark-
owner has not registered a company bearing its br and name or trademark in Hong Kong, China or 
where the objectionable company name is not considered  to be too similar to its name under the 
Companies Registry (CR)’s Company Names Guidelines (available at www.cr.gov.hk).   WT/TPR/M/173/Add.1 
 Page 87 
 
 
   
The Government will consider how to tackle the probl em in the context of rewriting the CO which 
started earlier this year.  We will take into acc ount the experiences of other comparable jurisdictions 
in the review, and consult relevant professional bodies, academics and the business community.   
 
In the interim, the Government w ill take some administrative measu res to educate the public with a 
view to alleviating the problem. These include:    (i) adding a warning statement in the CR’s Company Names Guidelines asking anyone 
who register new company names to ensure that the use of his company name does 
not amount to an infringement  of third parties’ IPRs; 
  (ii) displaying on the CR’s website a lis t of companies that have been directed by the 
Registrar to change their names; and 
 
 (iii) stepping up efforts to educate th e business community and law enforcement authority 
both in and outside Hong Kong, China about the company registration and trademark registration systems in Hong Kong, China. 
 
Question 5 
  According to the Secretariat report, the cour ts in Hong Kong, China ordered some Internet 
Service providers (ISPs) to disclose personal da ta of infringers to copyright holders.  
 5. Please indicate whether the HKSAR has any lega l framework to restrict  the liability of ISPs 
for disclosing personal data of copyright infringers or for deleting information on the distribution of 
pirated goods in the Internet, upon request fro m rights holders. If it is the case, please provide 
information on the legal framework.  
Answer 
 
The identity and addresses of Intern et users are personal data prot ected under the Personal Data 
(Privacy) Ordinance (PDPO). Under this ordinance, personal data shall not be disclosed, without the 
prescribed consent of the data subject, for any purpo se other than (a) the purpose for which the data 
were to be used at the time they were collected or  (b) other purpose directly related to the purpose in 
(a).  However, the above principle would not apply  if the use of the data is for the prevention, 
preclusion or remedying of unlawful or seriously improper conduct and the application of the data 
protection would be likely to prejudice such matters.   The above principle applies to personal data 
kept by Internet Service Providers (ISPs) in  relation to personal data of their users. 
 In addition, there is a condition in the Public Non-exclusive Te lecommunications Service Licence 
(PNETS Licence) held by ISPs which prohibits IS Ps from disclosing the information of a customer 
except as authorized by law.  
 Notwithstanding restrictions on disclosure of personal data, any person aggrieved by the 
wrongdoings of another person whose identity is unk nown to him could apply to court for Norwich 
Pharmacal relief.  This is a well-established equitable relief under common law which requires a 
third party who has facilitated certain wrongdoings to disclose the identity of the wrongdoer to the 
aggrieved person.  The court will take into account the following considerations in any application 
for this relief: (a) there must be cogent eviden ce to demonstrate that serious wrongful activities have 
taken place; (b) it must be clearly demonstrated  that the aggrieved person will very likely reap 
substantial and worthwhile benefits from the or der; and (c) the discovery sought must not be unduly WT/TPR/M/173/Add.1 
Page 88  
 
  wide.  Where a person (e.g. an ISP) discloses personal  data of a third party (e.g. subscribers of the 
ISP) in compliance with the court order, the IS P would not contravene the PDPO or PNETS Licence. 
 There have been at least 3 cases in  2006 whereby the court granted th e Norwich Pharmacal relief to 
copyright owners (including sound recording comp anies and film companies) and ordered the ISPs 
concerned to disclose the personal data of users who were suspected of online copyright infringement. 
 As a step forward, the Government would issue a consultation paper s hortly on protection of 
copyright in the digital environment.  One of the topics covered in the public consultation would be to 
explore alternative measures to facilitate copyright owners to id entify suspected online infringers and 
to take civil actions against them.  
Question 6 
 6. Please provide information on the ‘E-auctioning with Integrity Scheme’. Under this scheme, 
does ISP voluntarily delete information suspected to advertise the sale of pirated goods, or upon 
request from rights holder? In the latter case, please indicate specific criteria for deleting such 
information.    Answer 
 
The "E-auctioning with Integrity Scheme" was launc hed in November 2005.  The Scheme calls for the 
support of four local auction sites and a host of right owners to combat  the sale of infringing products 
on the Internet.  Upon receiving reports from the participating right owners via Hong Kong Customs, 
the respective auction site operators will voluntarily take prompt action to remove the online listings 
of items suspected to be infringing goods.  
 
Question 7 
 7. Please indicate whether the HKSAR charges as copyright infringement the advertisement of 
the sale of pirated goods by E-auctioning.   
Answer 
 
Hong Kong Customs has established its own online inves tigation teams, Anti-Internet Piracy Teams, 
since April 2000.  All criminal infringement activ ities, including the sale of pirated goods through 
online auctions, are sanctionable and will be thorough ly investigated.  A criminal charge may be laid 
upon the actual seizure of the pirated goods as advert ised.  On the other hand, criminal charges will 
not be laid in regard to a mere sales advertisement. 
 
Question 8 
 
8. Please provide information on the ‘IPR Protection Alliance’.  
 
Answer 
 
The Intellectual Property Rights Protection Alliance (IPRPA) was established in March 2004 with the 
aim of strengthening Customs-industry partnership to  enable more timely and effective investigation 
of piracy and counterfeiting activities.  Assistance from the industry includes provision of market 
information and intelligence, identification and exami nation of seized goods, giving of evidence in 
criminal prosecutions, and organization of training  programmes for frontline Customs staff on 
product identification, etc.  To date, the memb ership of the IPRPA has exceeded 40.  Members are 
IPR owners or organizations participating on their behalf.  WT/TPR/M/173/Add.1 
 Page 89 
 
 
   
The IPRPA launched its website in  September 2004 to provide a multi-media communication channel 
for Hong Kong Customs and the IPR industry.  It also enables the Hong Kong Customs to access the latest information about the market situation and infringement activities, so that it can take swift actions against the illicit traders. 
 
Question 9 
 
(iv) Competition and consumer protection policy 
 
(Page 65, Paragraph 131)   The Secretariat report points out that although the HKSAR is perceived as one of the world’s 
freest economies, its market in major industry seems  to be anti-competitive due to problems such as 
industrial structure. 
 9. Please indicate whether the HKSAR finds it nece ssary to correct such conditions in light of 
competition and consumer protection policy.    Answer 
 
We launched a three-month public  consultation exercise on the way forward for Hong Kong, China’s 
competition policy in early Novembe r.  Following the completion of this, and taking account of 
feedback received from the public, we will draw up appropr iate proposals. 
 
Question 10 
 
IV. TRADE POLICIES BY SECTOR 
 
(5) S
ERVICES  
 
(Page 81, Paragraph 27)   According to the Secretariat report, th e HKSAR committed new sub-sectors of business 
services in its initial offer. 
 10. Please indicate the specific intentions of the HKS AR to take measures to further liberalize the 
sector.   Answer 
 
Hong Kong, China (HKC) has been attaching g reat importance to the current round of services 
negotiations and strongly believe that to move fo rward the negotiations, it is essential that WTO 
Members will collectively contribute to a critical  mass of high quality and commercially meaningful 
offers.  Accordingly, HKC has included in its initial and revised offers various new and improved commitments across different servi ces sectors which directly address the requests of its trading 
partners.  HKC's offers are exempla ry commitment to achieve a substantive outcome in the services 
negotiations.  
Given HKC's de facto liberal services regime, there is of course room for further improvement in its 
further offer(s) to be tabled fo r the current round of services negotia tions.  The prospect for HKC to 
offer further improvement will, however, be continge nt on the overall negotiation dynamics as well as 
the negotiating positions of our trading partners in the course of the negotiations, particularly as to WT/TPR/M/173/Add.1 
Page 90  
 
  whether comparable offers could be expected from  our trading partners in respect of those modes and 
sectors that are of interest to us. 
 
Question 11 
 
 In the area of computer and related services, the report by the Secretariat refers that the offer took account of the relevant sectoral initiatives and/or proposals submitted by other WTO Members.  11. Please indicate the specific intentions of the HKS AR to take measures to further liberalize the 
sector.  
 
Answer 
 
Please refer to Hong Kong, China’s reply to Question 10 from Japan. 
 
Question 12 
 
 The Secretariat report points out that th e HKSAR improved commitments for audiovisual 
services in its initial offer.  
 12. Please indicate the specific intentions of the HKS AR to take measures to further liberalize the 
sector.   
Answer 
 
Please refer to Hong Kong, China’s reply to Question 10 from Japan. 
 
Question 13 
 
 As the Secretariat report indicates, the HKSAR improved commitments for construction and related engineering services in its initial offer.   
13. Please indicate the specific intentions of the HKS AR to take measures to further liberalize the 
sector.   
Answer 
 
Please refer to Hong Kong, China’s reply to Question 10 from Japan. 
 
Question 14 
  The HKSAR widened scope for distribution servi ces in its initial offer, according to the 
Secretariat report.   14. Please indicate the specific intentions of the HKS AR to take measures to further liberalize the 
sector.  
 
Answer 
 
Please refer to Hong Kong, China’s reply to Question 10 from Japan. 
  WT/TPR/M/173/Add.1 
 Page 91 
 
 
  Question 15 
 
 The Secretariat report states that the HKSAR improved commitments for tourism and travel-related services in its initial offer.  
15. Please indicate the specific intentions of the HKS AR to take measures to further liberalize the 
sector.   
Answer 
 
Please refer to Hong Kong, China’s reply to Question 10 from Japan.  
 
 
Follow-up on Japan’s written question 5  
 
 Question 5. Please indicate whether the HKSAR  has any legal framework to restrict the 
liability of ISPs for disclosing personal data of c opyright infringers or for deleting information on the 
distribution of pirated goods in the Internet, upo n request from rights holders. If it is the case, please 
provide information on the legal framework?  
 
 Japan would like to raise one small point related to the intellectual property rights. It is just 
clarification whether your Government has any lega l framework to restrict the liability of internet 
services providers for disclosing personal data of copyright infringers or for deleting information on 
the distribution of pirated goods in the Internet.  
 
Answer  
 
In Hong Kong, China, Internet service providers (IS Ps) are restricted from disclosing personal data 
of their clients under the Personal Data (Privacy) Ordinance (PDPO) and Public Non-exclusive Telecommunications Service Licence (PNETS Licence) held by ISPs.  
 
Under the PDPO, personal data shall not be disclo sed, without the prescribed consent of the data 
subject, for any purpose other than (a) the purpose for which the data were to be used at the time they were collected or (b) other purpose directly related to  the purpose in (a). However, this principle 
would not apply if the use of the data is for the prevention, preclusion or remedying of unlawful or 
seriously improper conduct and the application of th e data protection would be likely to prejudice 
such matters. The above principle applies to personal data kept by ISPs in relation to personal data of 
their users.   In addition, there is a condition in the Public Non-exclusive Te lecommunications Service Licence 
(PNETS Licence) held by ISPs which prohibits IS Ps from disclosing the information of a customer 
except as authorized by law.  
 There is no express legal provision
 in Hong Kong, China that restricts the liability of ISPs for 
disclosing personal data of online infringers or for deleting information on the distribution of pirated 
goods in the Internet. However, right holders can apply for a court order to order ISPs to disclose the 
personal particulars of their clients who are alleged of  infringing the copyright of the concerned right 
holders. This is referred to as the Norwich Phar macal order which is a well-established equitable 
relief under the common law  which requires a third party who has  facilitated certain wrongdoings to 
disclose the identity of the wrongdoer to the aggrieved  person. The court will take into account the 
following considerations in any app lication for this relief: (a) there must be cogent evidence to 
demonstrate that serious wrongful activities have taken place; (b) it must be clearly demonstrated that 
the aggrieved person will very likely reap substantial and worthwhile benefits from the order; and (c) WT/TPR/M/173/Add.1 
Page 92  
 
  the discovery sought must not be unduly wide. Where an ISP discloses personal data of a third party 
(e.g. subscribers of the ISP’s servi ce) in compliance with the court order, the ISP would not 
contravene the PDPO or PNETS Licence .  
 There have been at least 3 cases in  2006 whereby the court granted th e Norwich Pharmacal relief to 
copyright owners (from the sound recording and film i ndustries) and ordered the ISPs concerned to 
disclose the personal data of users who were susp ected of online copyright infringement.  
 As a step forward, the Government of HKSAR i ssued in December 2006 a consultation document on 
protection of copyright in the digital environment.  Topics covered in the public consultation include: 
(i) whether there should be limitation to the li abilities of ISPs under specified circumstances, 
including the introduction of a system to enable e fficient take-down of infringing materials on the 
Internet, or blocking of access to such materials;  and (ii) whether alternative measures should be 
introduced to facilitate copyright owners to identify  suspected online infring ers to take civil actions 
against them. A copy of the consu ltation document will be available at the website of the Commerce 
and Industry Branch, Commerce, Industry and Tec hnology Bureau of the Government of HKSAR 
http://www.citb.gov.hk/cib/ from 19 December 2006.  
 
 
KOREA
 
 
Question 1  I. ECONOMIC ENVIRONMENT 
 
Structural Measures: Tax reforms (WT/TPR/S/173 p. 10~11 para. 18~19) 
  In June 2006, the government of the Hong Kong Special Administrative Region (HKSAR) 
announced its plan to introduce a single-rated goods a nd services tax (GST) at a rate of 5% to ensure 
sufficient financial funds in preparation of an aging society and to reduce over-reliance on volatile 
non-tax revenue in public finances.  Please provide  more details of the proposed GST framework, 
including specific schemes and the timing of its introduction.  Answer 
 
The nine-month tax reform public consultation in Ho ng Kong, China commenced in mid-July and will 
end in March next year.  We have recently conducted an interim review of the consultation.  From the 
public views collected, we found that while the comm unity generally agrees that there is a need to 
broaden the tax base, the majority does not cons ider GST as an appropriate option to address the 
problem.  Therefore, for the remaining part of th e consultation, the Government will not advocate 
GST but will discuss with the public on the oth er viable options for broadening the tax base. 
 
Question 2 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE  Registration and documentation requirements (WT/TPR/S/173 p. 31 para. 6) 
  In case where one of the consignors has not file d for an export license, clearance is currently 
delayed for all LCL cargo in the same container.  Due to such delays of clearance, all the other consignors are subject to damages.  Please explain the measures that the government of HKSAR is 
taking to ensure prompt clearance in LCL cargo.  
  WT/TPR/M/173/Add.1 
 Page 93 
 
 
  Answer 
 
Under Section 10(1) of the Import & Export Or dinance, carrier is prohibited from accepting 
prohibited article for export unless the cargo consig nment is properly covered by an export licence.  
The relevant Section is extract ed below for easy reference: 
 
“Carries prohibited from accepting prohib ited articles for export without licence 
 
(1) The owner of a vessel, aircraft or vehicle s hall not accept any prohibited article for export on 
the vessel, aircraft or vehicle until- 
 (a) there is produced to him an export licen ce issued on paper under this Ordinance or 
some other law in respect of the prohibited article; or 
 (b) he has obtained a notification sent by  the Director using services provided by a 
specified body notifying him that an expor t licence has been issued under this 
Ordinance in respect of the prohibited articles.” 
 
In other words, other LCL (less than container load) cargo consignments in the same container which 
are neither prohibited article nor under Customs deten tion are free to be removed or exported subject 
to the discretion of person in possession or control of these cargoes (i.e. carrier/cargo agent).  As 
such, any possible delay in export of other LCL car goes in the same container is a matter of business 
decision and should not be attributed to the licensi ng compliance of the clearance procedures.  No 
specific measures on the part of Customs or the Go vernment is considered ne cessary and appropriate 
in this regard.  
 
NEW ZEALAND
 
 
Question 1 
 Q.1  Competition 
  We are pleased that in July 2006, the au thorities considered the recommendations of a 
Competition Policy Review Committee (CPRC) regardi ng introducing a cross-sector competition law, 
targeting specific types of anti-competitive conduct (WT/TPR/S/173 Part I, section 4 (iv), p 12).   What is the likelihood of competition legislati on being introduced and if  it is introduced what 
form is it likely to take? 
  If competition legislation is not introduced  as a result of the CPRC recommendations and 
subsequent public consultation, how will Hong Kong, China improve the environment for competition 
and deter anti-competitive practices?  Answer 
 
We launched a three-month public  consultation exercise on the way forward for Hong Kong, China’s 
competition policy in early Nove mber. Following the completion of this, and taking account of 
feedback received from the public, we will draw up appropr iate proposals. 
 WT/TPR/M/173/Add.1 
Page 94  
 
  Question 2 
 Q.2  Electronic Registration and Documentation  
 
 The Secretariat’s Report states that during the period under review Hong Kong, China has 
taken steps to facilitate trade by simplifying and reducing trade procedures through, inter alia, the 
introduction of electronic customs clearance and doc umentation procedures (WT/TPR/S/173 Part III, 
section 2 (i), p 31).   Will Hong Kong, China be taking further step s to reduce trade proce dures by, for example, 
moving from a paper based to electronic based certification system for food products or accepting a 
completely paperless electronic based certification system?  
Answer 
 
Currently a trial run is being conducted by the Food and Environmental Hygiene Department 
(FEHD) on the use of Radio Frequency Identifica tion (RFID) for clearance/checking of livestock 
(currently pigs only) imported from China.  The Government will pursue any initiatives that will 
facilitate efficient movement of cargo (includi ng food products), enhance customs control and meet 
operational objectives. 
 
Question 3 
 
Q.3  Wine duty  
 New Zealand is disappointed that the excise duty levied on wine by Hong Kong, China has 
remained at 80% on the ex-factory value of wine since March 2002 (WT/TPR/S/173 Part III, section 2 
(iii), p 34).  As there is little or no domestic pr oduction of liquor products in Hong Kong, China, this 
duty falls mostly on imports (WT/TPR/S/173 Part III, section 2 (iii), p 35).     New Zealand questions the need for such a hi gh duty, especially in light of the openness of 
the Hong Kong, China’s economy and its recent perfo rmance.  As a wine exporter to Hong Kong, 
China, New Zealand is concerned about the poten tially negative impact that this high duty has on 
consumer demand. 
  Can Hong Kong, China please explain its reasons  behind retaining the excise tax on wine at 
80% on the ex-factory value of wine?  
 Given Hong Kong’s promotion of itself as a regional tourism and cultural hub, might a 
reduction of the duty enhance its status as such a hub to the benefit of the wider economy?  
Answer 
 
Our ad valorem duty rates for spirits, wine and alco holic beverages with alcoholic strength not more 
than 30% (mainly beer in this category) are 100%, 80% and 40% respectively.  These duty rates are generally commensurate with the respective alco holic strength of the three types of alcoholic 
beverages, and have generally reflected their consumers’ ability to pay.    We only levy a single duty on wine and the levy is ba sed on ex-factory price.  Compared with some 
other jurisdictions that levy multiple taxes (includi ng sales tax) on wine, the average tax incidence on 
a bottle of wine in Hong Kong, China is not high.  Besides, our duty regime applies equally to both 
imported and locally-produced produc ts, and is GATT-consistent.   
  WT/TPR/M/173/Add.1 
 Page 95 
 
 
  Duties on alcoholic beverages are an important source of revenue for Hong Kong, China (some 
HK$880 million were collected in 2005-06, 44% of which from wine duty), and, just as in many other 
jurisdictions, they are also aimed at deterring excessive drinking. 
  
NORWAY
 
 
Question 1 
 
 We have noted in para 25 on pa ge 20 of the Secretariat report that: 
 "In December 2003, the CEPA1 was notified join tly to the WTO Committee on Regional Trade 
Agreements as a free-trade area (within the meani ng of Article XXIV of the GATT 1994) that also 
provides for the liberalization of trade in services wi thin the meaning of Article V of the GATS.  In 
April 2006, the WTO Committee on Regional Trade Ag reements completed the factual examination 
of CEPA.”  
 Furthermore, para 71 on page 96 states: 
 “Under CEPA, as from January 2004, Hong Kong, Ch ina has benefited from preferential market 
access to the sea transport services market of the Mainland of China.  Under CEPA I and II (section (5)(iii) and Chapter II), HKSAR's services providers ha ve been allowed to form wholly owned units 
in providing certain types of maritime services like international ship management services, container 
station and depot services, non-vessel-operating common carrying services, port cargo loading and 
unloading services.   Although HKSAR services  providers can only establish wholly owned 
companies to provide supplies services (except fuel and water) and shipping agency services for 
vessels owned or managed by their parent companies, this is considered important as HKSAR shipping companies will have greater autonomy in conducting their own business resulting from 
CEPA II provisions.  As from 1 January 2006, the scope of services that HKSAR service providers 
allowed to provide has been expa nded under CEPA III to cover:  ship maintenance and repair;  
international ocean container leasing, buying and se lling, as well as trading of container parts; and 
ship survey for ships registered in Hong Kong, China.  For an HKSAR company providing bilateral 
maritime transport services, 50% or more of the ships owned by it, calculate d in terms of tonnage, 
should be registered in Hong Kong, China.  But th is does not apply to bilateral towing services, for 
which HKSAR service providers may set up wholly  owned units to provide regular services under 
CEPA III.”   We note that the preferential trade in servi ces between mainland China and Hong Kong in the 
service area is notified in accordance with GATS art. V.   We interpret this meaning that the trade in 
services between the two members is covered by the GATS obligations and schedules. 
  On that background, we would like to ha ve more information on the market access and 
national treatment situation with respect of ma ritime transport of goods and passengers between 
mainland China and Hong Kong. 
 
 We would therefore like know if any preferential tr eatment exists in this particular trade, and 
if and how this has been notified.  
Answer 
 
Market access by Hong Kong's  maritime goods and passengers tr ansport sector to the mainland 
China market are covered by the Mainland and Hong Kong Closer Economic Partnership WT/TPR/M/173/Add.1 
Page 96  
 
  Arrangement (CEPA) signed in 2003, and the tw o supplements to CEPA signed in 2004 and 2005 
respectively.   
 
In addition, Hong Kong had signed a Memorandum of Understanding with the Mainland of China, 
such that Hong Kong registered sh ips are entitled to preferential rat es of port dues when calling ports 
in the Mainland of China with effect from 28 January 2000.   In 2006, Hong Kong entered into a 
comprehensive double taxation arrangement with the Mainland of China to provide relief from double 
tax to all types of income including shipping income.  In regard to the supply of mode 1 maritime services to the Mainland of China, we are not aware of 
Hong Kong enjoying any preferential treatment.    
 
SINGAPORE
 
 
WT/TPR/G/173, pages 21-22, paragraphs 96-99  Competition  Question 1 
 
 Hong Kong Special Administrative Region (HKSAR ) is generally regard ed as having an open 
and liberal FDI regime. Para 29 (page 28) of the Secretariat Report states that HKSAR remains receptive to foreign investment and does not discriminate between foreign and domestic investors.  It also states that attracting foreign investment is a priority of the Government. However, the Secretariat 
has also noted that despite the openness of the ex isting legal framework to FDI, in practice, the 
absence of a comprehensive legal framework  for competition policy and the presence of 
conglomerates may deter foreign service pr oviders from establishing in the HKSAR. 
  As highlighted in the Secretariat report, a lack of a competition framework could adversely 
impact on inward foreign investment. Re paras 96- 99 of the Government Report, we note that the 
HKSAR is currently  considering the report of an independent Competition Policy Review Committee 
(CPRC)  which had recommended that the Govern ment introduce a cross-sector competition law 
targeting specific types of anti-competitive conduct to be to enforced by a Competition Commission 
operating outside the normal government structure.   We also note that a separate consultancy study of 
the local auto-fuel retail market had recommended th at the Government consider preventive measures 
aimed at prohibiting cartel behaviour either thr ough general or sector-specific competition laws. 
  It would be useful if the HKSAR could share its views on the recommendation of the CPRC report. Noting that the study of the auto-fuel reta il market had also recommended the possibility of a 
sector-specific competition law, what are the HKSAR 's views on sector-specific competition laws as 
opposed to a general cross-sectoral one?  If the HKSAR had completed public  consultations on this 
matter by the time of the TPR in mid-Dec, we would also appreciate if HKSAR could share the 
outcome of these consultations.  
Answer 
 
We recognize that there are pros and cons to the introduction of various aspects of competition law, 
as well as alternative options for the institutional framework that might be put in place to enforce 
such a law.  Before taking a position on the recomm endations of the CPRC, we therefore consider 
that it is important to gauge the views of the wi der public on the need fo r a general competition law 
for Hong Kong, China, and on the options for an enhanced competition regulatory mechanism.  The 
current public consultation period is due to end in  early February 2007, after which we will analyse  WT/TPR/M/173/Add.1 
 Page 97 
 
 
  the response of the public and draw up proposal s for the way forward for Hong Kong, China’s 
competition policy. 
 
WT/TPR/S/173, pages 37-38, paragraphs 29-30 
 
Import Licensing  Question 2 
 
 Para 29 (page 37) of the Secretariat report states that the transhipment cargoes of "strategic" 
commodities are treated as imports and exports; ther efore they are subject to licensing requirements. 
Except for some "sensitive items", as set out under the law, articles in transit are not subject to 
licensing.   We would appreciate it if the HKSAR provide  details on what products would fall under the 
categories of "strategic" commodities and "sensitive" items? 
 
Answer 
 
The Government maintains a comprehensive and eff ective control system on import and export of 
strategic commodities.  The legal basis for strategi c trade control in Hong Kong, China is set out in 
the Import and Export Ordinance.  The Ordinan ce requires the import and export of strategic 
commodities to be subject to licensing control.  Transshipment cargoes of strategic commodities are 
treated as import and export and a re subject to the same licensing requirement.  Certain sensitive 
items are also required to be covered by li cences when they are transiting through Hong Kong, 
China. 
 
The strategic commodities under import and export li censing control are listed in the Schedule 1 to 
the Import and Export (Strategic Commodities) Re gulations under the Ordinance.  They include 
munitions items, chemical and biological we apons and their precursors, nuclear materials and 
equipment, and industrial dual-use goods.  The items set out therein mirror the control lists adopted 
by various international non-proliferation regimes,  i.e. the Wassenaar Arrangement, the Missile 
Technology Control Regime, Zangger Committee est ablished under the Nuclear Non-Proliferation 
Treaty, the Nuclear Suppliers Group, the Australia  Group, and the Chemical Weapons Convention. 
 
Sensitive items that are required to be covered by licences when they are transiting through Hong 
Kong, China include specific munitions, encryption e quipment, items of nuclear concern, and articles 
for end-use relating to nuclear, chemical and bi ological weapons.  The details are listed in the 
Schedule 2 to the Import and Export (S trategic Commodities) Regulations. 
 
Question 3 
 
 Para 30 (page 38) of the Secretariat Report states that there are no estimates of the percentage 
of trade covered by import licenses. 
  Given the sophistication of the HKSAR's system of collecting and keeping trade statistics and data, it is rather surprising that there are no specifi c data or even estimates of trade covered by import 
licenses. What are the reasons for this? 
 
Answer 
 The primary purpose of Hong Kong, China's import licen ces is not to capture trade statistics but for 
health, safety, environmental and security reasons, as  well as to ensure that our international WT/TPR/M/173/Add.1 
Page 98  
 
  obligations are met.  For trade statistics, they a re collected through the system of Trade Declarations 
which reflect the actual trade volume and value.  For import licences, we would require the licence 
applicants to provide information that is relevant or pertinent to specific control regime and that 
might not include the value of goods.  A trader taking out an import licence may not effect the shipment eventually for various business or commercial reasons.   
 
 
SWITZERLAND
 
 
Report by the Secretariat 
 
I. ECONOMIC ENVIRONMENT  Question 1   
(2) R
ECENT ECONOMIC DEVELOPMENTS  
 (i) Growth, incomes and employment 
  Para. 8 of the Secretariat’s report suggests th at Hong Kong, China’s real GDP per capita has 
risen steadily to an estimated US$30,032.-, that is to a level among the highest in the world and the 
highest in East Asia and the Pacific.  In vi ew of this both welcome and favorable economic 
development, could the authorities consider in not so  distant future to graduate Hong Kong, China in 
the WTO from the status of a developing country to the status of developed country ? If not, what 
conditions other than a high per capita income or  a high ranking in the UN human development index 
would need to be met for such a step to be considered ?  
Answer 
 
It has been a long-standing practice under the GATT and the WTO that a Member’s development 
status, whether as a developed or developing economy, is by self-election upon accession.  The only 
exception is the designation of least-developed count ries for which the WTO follows the practice of 
the United Nations.  The rights and obligations t hat a particular Member adhered to based on the 
development status so elected are mutually bindi ng.  Hong Kong, China does not intend to deviate 
from this accepted practice, nor change th e rights and obligations agreed upon among WTO 
Members. 
 Graduation affects the rights and obligations of the entire WTO membership, and is therefore a highly sensitive matter.  As and when the WTO membersh ip agrees on the need to conduct discussions on 
this issue, Hong Kong, China will take part (in su ch discussion) in our usual constructive manner. 
 
Question 2  
 (4) S
TRUCTURAL MEASURES  
 
(iv) Competition 
 
 Para. 24 of the Secretariat’s report indicates th at the authorities were after apparently a long 
hesitation (see in particular Part III. Trade Polic ies and Practices by Measure, (4) Measures affecting 
Production and Trade, (iv) Competition policy, par as. 131-141 and Box III.1) considering in July 
2006 the recommendations of a Competition Policy Review Committee (CPRC), a Committee made 
up mainly of non-government stakeholders, i.e., th e introduction of a cross-sector competition law to 
better target anti-competitive pr actices notably from powerful conglomerates able to hinder  WT/TPR/M/173/Add.1 
 Page 99 
 
 
  competition from both domestic and foreign competitors.  Could the authorities inform on the state of 
preparation of that new law and, in particular, provi de some indication on the future characteristics of 
this new legislation ? Could the authorities provide their reaction to the views expressed in Box III.1 
in Part III of the Secretariat’s report (p. 66), notably in  respect to the fact that there is also a need for a 
competition law in structurally open economies such as Hong Kong, China ? 
 
Answer 
 
In the light of the CPRC findings and in line with its recommendations, we began a three-month 
period of public consultation on the way forward for Hong Kong’s competition policy on 6 November.  
At the end of the consultation period, we will assess and report on the views received, and draw up 
proposals for the further development of our comp etition regulatory regime.  We note the remarks 
from the Secretariat regarding the need for competition law in Hong Kong, China. 
 
III. Trade Policies and Practices by Measure 
 
Question 3   (2) M
EASURES DIRECTLY AFFECTING IMPORTS  
 
(vii) Government procurement  
 Para. 34: According to the report, the purchases of goods, services, and construction services by the Government of Hong Kong continued their d eclining trend;  indeed, they fell between 2002 
and 2005 from 2.59% to 1.2% of GDP.  Could th e authorities indicate the reasons which could 
explain this negative trend  ? 
 
Answer 
 
The volume of purchase depends on the level of activities based on demand .  The decline does not 
affect any change in the Government’s procurement policies. 
 
Question 4  
 
 Para. 39: Restricted or single tendering are used under specified circumstances, such as to 
protect patented or proprietary products.  Would it be possible for the Authorities of Hong Kong to 
develop the criteria on which limited tendering might  be used in place of selective or open tendering 
with the objective of protecting pate nted or proprietary products ? 
 
Answer 
 
Restricted or single tendering is used in the same context as limited tendering under GPA.  Restricted 
or single tendering are adopted only under specified ci rcumstances, e.g. for procurement of “patent” 
or “proprietary” items.  Restricted and single tendering are strictly controlled and require the 
approval of the Financial Services and the Treasury Bureau.  Each case has to be justified having 
regard to the relevant provisions of the GPA. 
 
Question 5  
 
 Para. 41: Hong Kong is a signatory to the Agreement on Government Procurement, since 
1998.  How does Hong Kong evaluate the added valu e of the GPA with regard to legal security, 
transparency, predictability, financial earnings, brib ery and market access ? What is the nature of the 
difficulties encountered by Hong Kong in implementing the GPA ? What should be changed in a WT/TPR/M/173/Add.1 
Page 100  
 
  revised GPA in order to tackle the challeng es and concerns encountered by Hong Kong by 
implementing the GPA since 1998 ?   
Answer 
 
The Government’s procurement policy has always b een guided by the principles of fair and open 
competition, transparency, public accountability and value for money.  Joining the GPA in 1997 has 
not led to any change in the Government’s procurem ent policies, while the added value is that the 
GPA provides non-discriminatory access by H ong Kong’s suppliers of goods and services to the 
government procurement markets of ot her GPA Parties.   It can thus ensure that Hong Kong, China’s 
suppliers compete on an equal footing with supp liers of other GPA Parties in those markets. 
 Hong Kong, China is supportive of the work to simp lify and improve the GPA provisions in the light 
of experience of implementation.  We consider t hat the revised GPA should continue to uphold the 
principles of non-discrimination, transparency and eff ective competition while preserving flexibility in 
implementation to cater for the different government structure and syst ems of all GPA Parties.  The 
revised text should also try to eliminate possi ble ambiguity of the current GPA provisions.  
 
Question 6  
 (i) Standards and other technical requirements 
 
(c) Marking and labelling  
Para. 60. Voluntary labelling requirements: As  mentioned in this paragraph, Hong Kong, 
China continued to introduce new voluntary labelling requirements under its energy efficiency 
labelling scheme (EELS) for various household electrical appliances. If manufacturers, agents or 
retailers affix energy labels in a specified format onto their registered appliances, indicating that the 
appliances have met certain energy efficiency a nd performance requirements in accordance with the 
EELS, they have to participate to the energy e fficiency labelling scheme. But these participating 
manufacturers, agents or retailers are not obliged to  affix this energy label if they do not want to, 
because they do not have to declare the fulfilmen t of a specific scheme.  Could you please confirm 
that our understanding of this  paragraph is correct?   
 
Answer 
 
Under the voluntary EELS, all manufacturers, importers and agents involved in the appliance 
distribution network in Hong Kong, China are invite d to join voluntarily.  Each make and model of an 
appliance participating in the scheme should me et certain energy efficiency and performance 
requirements as specified in the scheme document of  the particular appliance under the EELS.  Upon 
their successful registration und er EELS, the manufacturers/ importers/ agents would be required to 
ensure that the energy label is correctly printe d and affixed onto the “registered” model.  
 
As the scheme is now voluntary, the manufacturers/  importers/ agents are free to join the scheme, 
there is no need for the declaration by the manuf acturers of fulfilment of the requirements in the 
scheme if they do not join.  If the model is not  a “registered” model under EELS, the manufacturers/ 
importers/ agents are not be allowed to affix the Hong Kong energy label on their appliance. 
  WT/TPR/M/173/Add.1 
 Page 101 
 
 
  Question 7  
 (4) M
EASURES AFFECTING PRODUCTION AND TRADE  
 
(i) Incentives  
(c) Land related policies  
In para. 89, the Secretariat’s report suggests at line 4 that the Governement still owns all land 
in HKSAR, land which is leased. At the same time, para 90, indicates that since January 2004, sales of 
Government land have taken place.  Could the aut horities clarify this apparent contradiction and 
confirm that land in HKSAR can indeed henceforth be purchased and not just leased. Also, if indeed 
land ownership policies have cha nged, could the authorities of Hong Kong, China indicate under what 
conditions, if any, land can actua lly be bought rather than lease d and whether both foreigner and 
residents or nationals can purchase land under the new policies ? Also, could the authorities indicate 
whether these new policies apply for residentia l or commercial use of land, or for both ? 
 
Answer 
 
There is no change in policy.  All land within Ho ng Kong is owned by the Government.  Land is 
leased to private owners for development.  In paragraph 90, by the shor t-hand expression of "land 
sale", we are still referring to the process of leas ing of land to private owners by way of public 
auction or tender.  There are no restrictions in leasing of land to HKSAR residents and non-HKSAR 
residents.  
Question 8  
 
(d) SMEs  
Para. 92 suggests that the Government has de veloped since 2001 several funding and subsidy 
schemes to help SMEs securing loans to acquire  business installation and equipment, enter new 
markets, upgrade human resources and enhance thei r competitiveness.  Given that 98 percent of 
businesses in HKSAR are SMEs, how can the authoriti es ascertain that such economy-wide measures 
are compatible with the rules of the Agreement on Subsidies and Countervailing Measures and, in particular, with Article 3.1a) wh ich prohibits export subsidies ? Wh at controls have the authorities 
established to make sure that such funding or subsidies are not misused ?  Answer 
 
As a staunch supporter of the multilateral trading  system, Hong Kong, China takes its rights and 
obligations under the WTO seriously.  In respect of the SME Funding Schemes mentioned in the 
question, they are neither specific nor prohibite d subsides under the definitions of the Agreement on 
Subsidies and Countervailing Measures.  
 
The Export Marketing Fund only funds expenditures incu rred by SMEs in export promotion activities.  
The Government provides guarantee to SMEs under th e SME Loan Guarantee Scheme to secure loans 
from lending institutions for acquiring business in stallations and equipment as well as meeting 
working capital needs.  The SME Development Fund  provides grant to non-profit-distributing support 
organisations for carrying out projects to enhance th e competitiveness of SMEs across all sectors.  
The SME Training Fund, closed for applications sin ce July 2005, assisted SMEs in providing training 
to their employers and employees. 
 WT/TPR/M/173/Add.1 
Page 102  
 
  The grant/guarantee provided by the Government is  not specific as criteria and conditions of the 
schemes, established and published in application guidelines, are economic in nature and horizontal 
in application.  They do not favour certain SMEs or SMEs of certain industries. Eligibility is neither 
conditioned upon export perf ormance of the applicant.  Whether there is export of goods or services 
by the SMEs concerned is irrelevant in our cons ideration. All applications are carefully vetted to 
ensure compatibility with the Schemes' objectives and no misuse of funds.  
IV. TRADE POLICIES BY SECTOR 
 Question 9 
 
(5) S
ERVICES  
 (iv) Financial Services 
  Para. 31 states that by 2005 under the Closer  Economic Partnership Arrangement (CEPA), 
eight HKSR incorporated banks had benefited from the lowering of the asset level requirement and 
become eligible to establish branch operations  on the Mainland.  Could Hong Kong indicate the 
names of the HKSR incorporated banks that had benefited from the CEPA ?  Answer 
 
The eight HKSAR incorporated banks which had  benefited from the CEPA are as follows: 
 (1) Citic Ka Wah Bank Limited 
 (2) DBS Bank (Hong Kong) Limited 
(3) Dah Sing Bank, Limited (4) Fubon Bank (Hong Kong) Limited 
(5) Industrial and Commercial Bank of China (Asia) Limited 
(6) Shanghai Commercial Bank Limited (7) Wing Hang Bank, Limited 
(8) Wing Lung Bank Limited 
 
Report by Hong Kong, China 
 
Question 10  
 Para. 59 of the Report issued by the Govern ment states that Hong Kong is to enhance the 
attraction of Hong Kong to international investors in asset management.  Could Hong Kong indicate 
the laws and regulations governing market access and national treatment for the cross-border supply 
of international investors in asset management services into and from HKSAR? 
 
Answer 
 
Hong Kong, China is a free market with no restri ctions on capital or fund flow.  International 
investors can freely invest or divest their cap ital into/from Hong Kong, China subject to the 
applicable legislation on insider dealing, market  misconduct and money laundering etc.  To enhance 
investors protection and confidence, market operators in asset management, e.g. fund managers, are 
required to be licensed under the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) 
before they can carry out their asset management bu sinesses in Hong Kong, China.  Under the law, 
they have to demonstrate themselves as fit and prop er persons in terms of expertise, systems and 
controls, etc in order to get a licence.  As an international financial centre, we welcome qualified 
market players from all over the world to come and set up their operations in Hong Kong, China. 
  WT/TPR/M/173/Add.1 
 Page 103 
 
 
   
THAILAND  
 
WTO Secretariat Report (WT/TPR/S/173) 
 
Question 1  
III. TRADE POLICIES AND PRACTICES BY MEASURES 
 (v) Import prohibitions, licensing, and restrictions 
 (c) Quantitative restrictions 
  Para. 32:  Thailand welcomes the liberaliza tion of Hong Kong, China’s Rice Control Scheme 
since 2003, which served to eliminate the rice import quota system and aims to improve the 
conditions of competition in the local rice market.  Ho wever, the secretariat report indicates that rice 
imports remain subject to import licensing proce dures.  As over 90% of Hong Kong, China’s rice 
imports in 2005 originated in Thailand, we w ould appreciate further details on these licensing 
procedures, particularly in light of Article 2 of the Agreement on Import Licensing Procedures.  In addition, we would like to ask: what is the objective of the license? Who is eligible to apply for/obtain 
a license? What are the requirements, if any, that importers must fulfil to obtain a license?  What are 
the fees and expenses associated with this import licensing procedure, if any? 
 
Answer 
 
It has long been the policy of the Government to lib eralize the rice trade as far as practicable for the 
overall benefit of the community.  However, there is  still a psychological attachment to rice as a 
staple diet among the local population.  In case of  unexpected shortage and uncertainties, there may 
be a tendency to hoard, and the absence of  a reserve stock might arouse public concern.   
 Import/export licensing for rice is an integral part of  the Rice Control Scheme, which is essential in 
monitoring the supply and stock of rice, in partic ular on the fulfillment of reserve stock requirement 
by registered rice stockholders, thereby maintaining a stable supply of rice for the local population 
and a reserve stock to cater for emergen cy or short term shortage of supply.  At present, we have no 
plan to remove the reserve stoc k requirement, and hence no plan to phase out the licensing 
requirement.   
We are however mindful that the licensing require ment should not constitute barrier to trade and 
should be as simple as possible.  Any person /legal entity carrying on a business registered in Hong 
Kong, China under the Business Registration Ordinance can apply for registration as a stockholder of 
rice free of charge, and there is also no financia l or capital requirement on the applicant.   
 An import licence for rice is issued upon application by a registered rice stockholder.  An application 
for an import licence for rice has to be made by mean s of a specified form (current cost is HK$ 3 per 
set).  Processing and issuance of an import licen ce by the Trade and Industry Department (TID) is 
free of charge.  Applicant may be required to pr ovide necessary supporting documents together with 
the licence application, e.g. proof of business re gistration in Hong Kong, China.  At present, an 
import licence application for rice can usually be  processed by TID in one working day.  The 
procedures for an application of import licence for ri ce are highly transparent.  They are set out in 
the guidelines for stockholders wh ich are available in TID’s website and are distributed to all 
registered stockholders.   
 WT/TPR/M/173/Add.1 
Page 104  
 
  Question 2  
 
(x) Standards and other technical requirements  
 
(b) Sanitary and phytosanitary regulations 
 
 Para. 55: The secretariat notes that seafood is considered a “high-risk” food; hence, Hong 
Kong, China subjects certain imports from “high-ri sk” harvest zones to testing by its Food and 
Environmental Hygiene Department (FEHD).  Tha iland would like to request Hong Kong, China to 
clarify why it considers seafood to be “high-risk” food.  We also request clarification on Hong Kong, 
China’s definition of “high-risk” harvest zone, incl uding criteria it may use in evaluating whether a 
particular harvest zone is “high risk,” and the lis t of countries that Hong Kong, China has in the past 
designated or currently designates as having “high-risk” harvest zone(s).  
Regarding fish samples testing performed by the FEHD, please describe in detail the 
procedures involved.  On average, how long does the testing procedure last? How much is the testing 
fee?  Normally who bears the cost of sample testing?  
Answer 
 
As marine products are more liable to bacteriologi cal and chemical contaminations in the harvesting 
zone or during subsequent handl ings prior to importation, they are considered as high-risk food 
items.  The Centre for Food Safety of Food and  Environmental Hygiene Department strongly 
encourages importers to obtain health certificates issu ed by health authorities of countries of origin 
to accompany their imports certifying that th e marine products concerned are fit for human 
consumption.  High-risk zones of a country are th ose having involved in food poisoning cases or 
unsatisfactory sampling results in Hong Kong, China.  However, the status of a high-risk zone would 
be subject to review based on the submission of a satisfactory investigation report in respect of a food incident/unsatisfactory sampling result, and satisfact ory testing results of subsequent samples. 
 
The testing procedures are based on interna tionally recognized methods  and accredited under 
ISO/IEC17025.  Depending on the analysis items, the testing and analysis procedure normally takes 
an average of 1 week to 10 days and no examina tion fee would be charged to importers. 
 
Question 3  
 
(x) Standards and other technical requirements  
 
(c) Marketing and labelling  3. Para. 59: The report mentions that Hong Kong, China plans to introduce legislative 
amendment on mandatory labeling of nutritional inform ation in 2007.  Please provide the latest status 
of this amendment as well as deta ils of the new labeling system. 
 
Answer 
 
Hong Kong, China is now finalizing the labelling requirements for nutr itional information.  We intend 
to introduce the legislative amendments to the Legislative Council in 2007 and will notify WTO once 
we are ready. 
  WT/TPR/M/173/Add.1 
 Page 105 
 
 
  Question 4  
 IV.  TRADE POLICIES BY SECTORS 
 
(2) A
GRICULTURE AND FISHERIES  
 (i) Features 
 4. Para. 9: The secretariat report indicates that Hong Kong, China maintains a minimum reserve 
stock of rice, and that importers must be regist ered as stockholders and keep a minimum amount of 
reserve stock proportional to their share of total imports or sales.  Could Hong Kong, China please 
explain how it manages this reserve stock?  When  a stockholder imports rice, how much must that 
stockholder keep as reserve, i.e., what is the re quired proportion?  How are individual stockholder 
proportions determined in relation to the 15-day contingency reserve stock?  Once a stockholder 
meets the minimum reserve proporti on, can that stockholder sell its remaining rice to consumers 
immediately?  Would Hong Kong, China expect ch anges in its rice import trends if it reduced the 
required reserve stock proportion fo r stockholders?  If not, why not? 
 
Answer 
 
It has long been the policy of the Government to lib eralize the rice trade as far as practicable for the 
overall benefit of the community.  However, there is  still a psychological attachment to rice as a 
staple diet among the local population.  In case of  unexpected shortage and uncertainties, there may 
be a tendency to hoard, and the absence of a reserve stock might arouse public concern.  We consider 
that on balance it would be desirable to keep a minimal reserve stock. 
 The current reserve stock level sufficient for 15 days’ consumption by the local population is 
calculated on the basis of the time required for arra nging importation and distribution of rice in case 
of an emergency or short term shortage of supply.   It includes the estimated time required in the 
various steps of the importation and distributi on process, such as liaison with overseas suppliers, 
shipment and transportation, delivery and distribution of  rice.  The objective is to ensure that there is 
sufficient stock of rice for consumption by the lo cal population while awaiting replenishment.  In 
considering the reserve stock level, we have regularly consulted the stockholders.  In the light of the 
advice from rice stockholders regarding the impr ovement in efficiency of the importation and 
distribution process, the reserve stock level had b een adjusted downward gradually from an amount 
sufficient for 45 days’ local cons umption in 1998 to 15 days since 2002.  The Government is open to 
proposal for further adjusting the rese rve stock level.  In this regar d, we have reviewed the existing 
reserve stock level earlier this yea r, in consultation with rice stoc kholders.  Feedback received from 
stockholders has reaffirmed that the current 15 days’ reserve stock level is reasonable and no 
adjustment is needed at this stage.  
The reserve stock is shared out amongst all registere d rice stockholders in proportion to their import 
quantity.  Specifically, the amount of reserve stock t hat a registered stockholder is required to hold 
for a 3-month import period normally is 17% of the stockholder’s offtake(note) of rice in the immediately preceding import period.  The amount of  reserve stock for a newly registered stockholder 
for its first import period is 17% of the quantity that  the stockholder has undertaken to import for that 
period.  A stockholder is also re quired to maintain his required l evel of reserve stock at all times 
throughout the import period in storage places appro ved by the Trade and Industry Department.  Any 
stock kept by a stockholder exceeding the required level  of reserve stock can be disposed of freely by 
the stockholder.    WT/TPR/M/173/Add.1 
Page 106  
 
  As stated above, we have reviewed the existing rese rve stock level earlier this year, in consultation 
with rice stockholders.  Feedback received from st ockholders has reaffirmed that the current 15 days’ 
reserve stock level is reasonable and no adjustment is needed at this stage. 
 
(Note: Offtake means the quantity of rice delivered fr om a rice storage place for local sale.  15 days 
in a 3 month import period represents 16.67%, which is rounded up to 17%.)  
Question 5  
 S
ERVICES  
 
5. Could Hong Kong, China please provide info rmation on the application procedures for spa 
and restaurant operation licenses?   
Answer 
 
Comprehensive information about application of  restaurant licences in Hong Kong, China is 
available at the following webpage:  ht tp://www.fehd.gov.hk/licensing/guide.html 
 From the public health's perspective, there is no speci fic legislation regulating spa treatment services.  
As far as massage services are concerned, under the Massage Establishments Ordinance, massage 
establishments being regulated under the Ordinance are required to obtain a licence from the Police. 
 
 
TURKEY 
 
 
Question 1  
 
 According to the financial regulations of Hong  Kong, do the export in voices issued by Hong 
Kong China companies:  
 (a) for the products directly shipped from mainland China to a third country, 
 (b) for the products imported from mainland  China to Hong Kong China and re-exported 
to a third country, 
 (c) for the products originated in Hong Kong China;  
 generate same financial liability for the exporter? 
  Could Hong Kong China Delegation provide info rmation about the related legislation on 
standard (common) liabilities?  
Answer 
 
In general, any person who imports goods into Ho ng Kong, China or exports (or re-exports) goods 
from Hong Kong, China are required to lodge a trade declaration with the Hong Kong Customs and Excise Department pursuant to the provisions of  the Import and Export (Reg istration) Regulations, 
Chapter 60E of the Laws of Hong Kong.  The p erson lodging the declaration is liable to pay a 
declaration charge as prescribed by the law, and any person who knowingly or recklessly lodges any 
declaration that is inaccurate in any material particular shall be guilty of an offence and shall be 
liable on conviction to a fine of HK$10,000.  There are, however, some exceptions to this trade declaration requirement.  For example, transit 
cargoes and transshipment cargoes are exempted ar ticles under the Import and Export (Registration)  WT/TPR/M/173/Add.1 
 Page 107 
 
 
  Regulations, and the person who brings them into  Hong Kong, China (i.e. imports) and then takes 
them out of Hong Kong, China (i.e. re-exports) is not required to lodge any declaration, nor pay any 
declaration charge.   In international trade, there are a number of wa ys in which a trading company may arrange to 
deliver goods produced in another country to a buyer in a third country.  The commonly used methods 
may include:  - Shipment direct from the originating country of  the goods to the country of final destination 
with or without transiting Hong Kong, China; and 
- Export from the originating country of the goods , with transshipment in Hong Kong, China or 
outside Hong Kong, China, to the country of final destination. 
 The goods shipped in the above manner, not being go ods originating in Hong Kong, China, belong to 
exempted articles within the meaning of the Import and Export (Registration) Regulations.  The fact 
that a Hong Kong, China trading company (or pers on) has issued an export invoice for those goods 
does not alter the situation, as the trading compan y concerned is perfectly entitled to make its own 
arrangement for delivery of the goods to its oversea s buyer.  The application of the relevant law is 
confined to those goods that have entere d Hong Kong, China’s commercial sector.  
 Put another way, as far as the relevant provis ions under the Import and Export (Registration) 
Regulations are concerned, the duty of a company to lodge declaration, and hence its liability to pay 
declaration charge, depends enti rely on the manner in which the goods are delivered to the overseas 
buyer, rather than the financial arrangement betw een that company and the manufacturer of goods in 
the originating country and the ultimate bu yer in the country of final destination. 
 
Any trading company that imports goods originatin g in a place or country outside Hong Kong, China 
(including the mainland of China), and then re-expor ts them to another country is required to lodge 
an import declaration as well as an export declarat ion for the goods, unless the goods are shipped in 
the manner as described above, such that they can be regarded as transit cargoes or transshipment 
cargoes.  When lodging the declarations, the trading  company is not required to submit the invoice.  
Officers of the Hong Kong Customs and Excise Department may, however, demand the trading 
company concerned to produce invo ices, purchase or sales orders, and other documents relevant to 
the transaction to verify the value of goods at any  time within two years from the date of importation 
or exportation, if they reasonably susp ect that it has been understated. 
 Data and information contained in import declar ations and export declarations are collected and 
processed mainly for the purpose of compilation of trade statistics.  Re -export of goods that have been 
declared in trade declarations lodged with the Hong Kong Customs and Excise Department are 
included in re-export statistics. 
 
Question 2  
 
I. ECONOMIC ENVIRONMENT 
 (6) Developments in Merchandise Trade 
 
 Secretariat Report notes that China remains the largest market for Hong Kong, China’s 
domestic exports, accounting for 32.8%  of domestic exports in 2005. 
  The report also underlines that Mainland Chin a’s share in Hong Kong China’s re-exports 
continued to increase.  WT/TPR/M/173/Add.1 
Page 108  
 
   According to customs legislation of Hong K ong, China for the “re-exported, mainland China 
originated products”, is it required to submit im port and export declarations as well as import and 
export invoices to Hong Kong China Customs Authorities?  
Answer 
 
Please refer to Hong Kong, China’s reply to Question 1 from Turkey above. 
 
Question 3  
  If not, could Hong Kong, China Delegation ki ndly provide information on the legislation 
about the transactions of products that are included in re-export statistics but not being declared or 
registered to Hong Kong, China Customs?  
Answer 
 
Please refer to Hong Kong, China’s reply to Question 1 from Turkey above. 
 
Question 4  
 
 We also would like to know, if transshipped pr oducts (products originated in Mainland China 
and those directly shipped to third countries w ith the export invoice of Hong Kong China Company) 
are registered in the re-export statistics of Hong Kong China? 
 
Answer 
 
Transshipped products are not registered in the re-export statistics.   
 
Question 5  
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
(2) Measures Directly Affecting Imports 
 (x) Standards and Other Technical Requirements 
 
(b) Sanitary and Phytosanitary regulations 
 
 According to the Secretariat Report, the obj ective of Hong Kong China’s food safety control 
system is to ensure that food products are hygienic , safe and fit for human consumption and that this 
system which is based on risk assessment places par ticular emphasis on safety control at the source. 
  Is there any requirement for the establishme nt of a mechanism between the Hong Kong Food 
and Environmental Hygiene Department and the re lated authorities of third countries in order to 
export animal products, especially poultry to Hong Kong China?   We would appreciate explanations of Hong Kong China delegation if there is such a 
requirement. 
 
Answer 
 
Hong Kong, China will only accept import of meat and poultry from countri es with established import 
protocol with Food and Environmental Hygiene Department (FEHD).  WT/TPR/M/173/Add.1 
 Page 109 
 
 
   
Should any country intend to establish an import pr otocol with FEHD for export of meat and/or 
poultry from that country to Hong Kong, China, sh e has to forward an application for export of meat 
and/or game to FEHD.   
 Upon receipt of the application, FEHD will assess the animal disease situation in the country 
concerned. 
 
If there is no in principle objection to the impor t of meat and/or poultry from the country concerned, 
FEHD will request the health authority of the coun try (usually through the Consulate General) to 
provide us with prerequisite information of th e country concerned in relation to the export for 
consideration.   
 The prerequisite information required includes the following –  
 (i) the legislation governing the hygi enic standards of meat or poultry; 
 (ii) details of inspection of meat or po ultry in the ante- and post-mortem process; 
 (iii) the training and qualification of the veterinarians and meat inspection officers and 
their international recognition; 
 (iv) the facilities and hygienic standards of the farms, the slaughtering plants and the 
processing plants; 
 (v) the monitoring systems on veteri nary drug residues and chemical residues; 
 (vi) a specimen of the official health cer tificate for accompanying export consignments; 
 (vii) the official name of the authority respons ible for issuing the health certificate; and 
 (viii) a list of slaughtering/processing plants approved for export to Hong Kong, China. 
 
In case FEHD satisfies with the di sease situation and the control of export of meat and/or poultry, 
FEHD will allow the import of meat and/or poultry fr om the country concerned on new trial shipment 
basis. 
 
Question 6  
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
(4) Measures Affecting Production and Trade 
 (iv) Competition and Consumer Protection Policy 
 
 It is noted in the Secretariat Report that a lthough Hong Kong China is perceived as one of the 
world’s freest economies, its economy seems to be dominated by a few big companies and that it 
appears a few powerful cross-sector conglomerat es may hinder greater competition from domestic 
and foreign firms.   Secretariat report further states that although an illustrative list of types of abuse of market 
position is included in the “Statement on Competiti on Policy”, none of these types of abuse as is 
extensively defined nor does the statement me ntion any provisions regarding mergers and 
acquisitions.   We have also noted in the Secretariat report that Hong Kong China does not have a 
comprehensive competition law or any other legi slation banning and/or sanctioning restrictive 
business practices. 
 
 In line of the fact that even in open economi es, competition law plays a key role in further 
enhancing competitiveness in market place and c onsumer welfare, is it considered to improve WT/TPR/M/173/Add.1 
Page 110  
 
  competition legislation in a manner to address the above mentioned issues that may hinder greater 
competition?  
Answer 
 
We are currently consulting the public on the way forward for competition policy in Hong Kong, 
China, and plan to draw up proposals for changes to the competition regulatory framework in 2007, 
based on the outcome of the public consultation process.  
 
UNITED STATES
 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE  Question 1  (2) M
EASURES DIRECTLY AFFECTING IMPORTS  
 
(iii) Other charges affecting imports 
 
 On Paragraph 20 page 34, the Secretariat re port indicates that Hong Kong, China levies an 
excise duty on, inter alia, locally manufactured and imported liquor, consumed locally;  their rates 
have remained unchanged since March 2001, excep t for an increase from 60% to 80% on the ex-
factory value of wine as from March 2002 (Table III.3) .  Duty on liquor (i.e. alcoholic beverages) is 
levied ad valorem at three different rates dependi ng on alcoholic strength.  In December 2004, a two-
month public consultation exercise on lowering the dut y on alcoholic beverages revealed a diversity 
in views; by 2005 it was decided to maintain the status quo.  
 
 As there is little or no domestic producti on of these goods and imports account for a minor 
part of the Hong Kong Government revenue, can Hong Kong, China explain the rationale behind 
levying these taxes mostly on imports?  
Answer 
 
Our duty regime applies equally to imported and locally-manufactured  products, and is GATT-
consistent.  As Hong Kong, China has relatively little local production or raw materials, any excise 
duties on such commodities (including alcoholic beverages) will fall mainly on imports, although 
locally-brewed beer is also liable to such duties. 
 
Duties on alcoholic beverages are an important source of revenue for Hong Kong, China (some 
HK$880 million were collected in 2005-06, 44% of which from wine duty), and, just as in many other 
jurisdictions, they are also aimed at deterring excessive drinking. 
 
Question 2 
 
(x) Standards and other technical requirements 
 
Marking and labeling 
 
 With respect to paragraph 61 on page 45, we  note Hong Kong, China’s intention to put in 
place labelling requirements for nutritional informa tion and genetically modified foods.  We look 
forward to receiving copies of these measures once Hong Kong, China is ready to notify their draft 
language to the WTO.  When does Hong Kong expect to do so?  WT/TPR/M/173/Add.1 
 Page 111 
 
 
   
Answer 
 
Hong Kong, China is now finalizing the labelling requirements for nutr itional information. We intend 
to introduce the legislative amendments to the Legislative Council in 2007  and will notify WTO once 
we are ready. 
 
As regards the labelling requirment for genetically  modified foods, Hong Kong, China has released 
the "Guidelines on Voluntary Labelling of Genetica lly Modified (GM) Food" in July 2006. The 
Guidelines aim to provide reference for the trade to make truthful and informative labels in a 
consumer-friendly manner.  They are available on  the webpage of the Centre for Food Safety. 
(http://www.cfs.gov.hk).  Hong Kong, China plans to  evaluate the effectiveness of the Guidelines 
before deciding on the way forward.  
Question 3 
 
(4) M
EASURES AFFECTING PRODUCTION AND TRADE  
 (iii) Intellectual Property Rights 
 
 Trademark: We have received reports that legitimate brand owners ' brand names are being 
registered by unauthorized third-parties as "busin esses" in Hong Kong, China as part of company 
registration procedures, which are independent from trademark registration procedures.  These third-
parties then license the use of the (unauthorized) business names on products distributed in mainland 
China.  Hong Kong’s system of company registratio n laws allows this registration of a new company 
as long as its name is not exactly identical, even if  the name is confusingly similar.  Although these 
products are not sold in Hong Kong, weak comp any registration procedures in Hong Kong help 
facilitate intellectual property abuse in mainland Ch ina.  What, if anything, is Hong Kong doing to 
address this loophole in company registration procedures?   
Answer 
 
As an international financial and business centre, Hong Kong, China must provide for an efficient 
and cost-effective company registration system. Hong Kong, China’s current system is very similar to 
that in comparable common law jurisdictions, such as the United Kingdom and Australia where 
company registration and trademark registration are two distinct systems. 
 
Under the Companies Ordinance (CO), the Registrar of Companies is empowered to issue a direction 
to require a company to change its name if it is too similar to the name of an existing company within 
12 months of the registration. This power has been used to deal with some of the complaints by 
famous brand name companies or trademark-owners against the registration of new company names 
containing their brand names or trademarks.  Neverthel ess, we are aware that some of the complaints 
cannot be tackled under the existing CO, for examp le, where the brand name company or trademark-
owner has not registered a company bearing its br and name or trademark in Hong Kong, China or 
where the objectionable company name is not considered  to be too similar to its name under the 
Companies Registry (CR)’s Company Names Guidelines (available at www.cr.gov.hk).  
 
The Government will consider how to tackle the probl em in the context of rewriting the CO which 
started earlier this year.  We will take into acc ount the experiences of other comparable jurisdictions 
in the review, and consult relevant professional bodies, academics and the business community.   
 
In the interim, the Government w ill take some administrative measu res to educate the public with a 
view to alleviating the problem. These include:  WT/TPR/M/173/Add.1 
Page 112  
 
   
 (i) adding a warning statement in the CR’s Company Names Guidelines asking anyone 
who register new company names to ensure that the use of his company name does not amount to an infringement  of third parties’ IPRs; 
 
 (ii) displaying on the CR’s website a lis t of companies that have been directed by the 
Registrar to change their names; and 
  (iii) stepping up efforts to educate th e business community and law enforcement authority 
both in and outside Hong Kong, China about the company registration and 
trademark registration systems in Hong Kong, China. 
 
Question 4 
 
 Copyright: We understand that Hong Kong, Ch ina's latest version of its 2006 Copyright 
Amendment Bill continues to provide for a blanke t exemption for "educational use" of copyright 
material.  We are concerned that the blanket ex emption is too broad and will not protect rights’ 
holders.  How does Hong Kong intend to further narro w the exemption to provide for some guidelines 
to determine that it is a fair use before the Amendment is passed?  Does Hong Kong intend to 
implement any specific measures to educate the public  and ensure that the users of the copyrighted 
works do not abuse the provisions to engage in large scale unlicensed use of  copyrighted works?  
 
Answer 
 
The educational sector has submitte d to us that educational use of copyright works in today’s 
environment covers not only classroom instruction but  also interactive and project-based teaching.  
Also, new teaching methods are evolving with th e result that traditional, item-by-item approach for 
permitted acts in our Copyright Ordinance could no longer adequately cater for their reasonable and 
legitimate needs.  The Administration therefore pr oposes that a new permitted act be introduced in 
the Copyright (Amendment) Bill 2006 (“Bill”).
13  Under this new permitted act, fair dealing with a 
work by a teacher or student for the purpose of givi ng or receiving instructions in a specified course 
of study provided by an educational establishmen t would not infringe copyright.  The proposed 
permitted act is by no means a blanket exemption.  Educational users have to comply with stringent 
conditions explained below.  General restriction 
 
First of all, the proposed permitted act is subject to  the general restriction (in the same way as other 
permitted acts in the Copyright Ordinance) that any act done pursuant to the permitted act should not 
conflict with a normal exploitation of the work by  the copyright owner nor unreasonably prejudice 
their legitimate interests.
14  
 
Fair dealing 
 To determine whether certain dealings with a work are fair, the court would be required to take into 
account all the facts and circumstances of the case including:  
(a) the purpose and character of the dealing, incl uding whether such dealing is for a non-profit 
making purpose and whether the dealing is of a commercial nature; 
(b) the nature of the copyright work; 
                                                     
 
 13 Available at http://www.legco.gov.hk/yr05-06/english/bills/b0603171.pdf.  
14 Section 37(3) of the Copyright Ordinance wh ich is in line with article 13 of TRIPs.   WT/TPR/M/173/Add.1 
 Page 113 
 
 
  (c) the amount and substan tiality of the portion dealt with in relation to the work as a whole; and  
(d) the effect of the dealing upon the pote ntial market for or th e value of the work.15   
 A specified course of study  is limited to a course of study that satisfies either one of the following 
conditions: 
 
(a) it is provided for the delivery of a curriculu m developed on the basis of guidelines issued by a 
body, the functions of which include cu rriculum development covering most of the 
educational establishments in Hong Kong, China; or 
(b) it consists of an assessment of a pupil’s comp etence in the area covered  by the course, and 
leads to the award of a qualification.
16  
 Additional restrictions in the digital environment  Some copyright owners have submitted, on the basis of the above provision, that they are concerned 
about the application of the fair dealing provision in  the digital environment.  Although we consider 
that abusive use of copyright works in the digital en vironment could not constitute fair dealing, we 
agree that educational establishments should prope rly manage their school network system due to 
potential prejudicial impact on the copyright owners arising from ease of reproduction and transmission of copyright works through digital media.   We therefore propose that further conditions 
be imposed before the fair dealing provision for education becomes applicable in the digital 
environment.  These conditions are: 
 (a) the adoption of technological measures to restrict  access to the copies of the copyright works 
maintained on the school netw ork system such that the copies are not accessible to anyone 
other than those necessary for th e purpose of receiving or giving instructions in the specified 
course of study; and  
(b) the copies so maintained on the school netwo rk system should not be retained for longer than 
is necessary for the purpose of giving or recei ving instruction in the specified course of 
study.
17  
 By imposing the above general and specific restricti ons on the proposed permitted act, we consider 
that we have struck a reasonable balance between th e legitimate interests of the educational sector 
and the copyright owner’s right to fair exploita tion of their works in the modern world.  
 Public education  
The Government of Hong Kong, China is committed to promoting awareness of and respect for IPR in 
the community.  Since 2002, the Education and Manpower Bureau (EMB) has included intellectual property rights (IPR) as a core learning elemen t in both the primary and junior secondary school 
curricula.  From 2009 onwards, the issue of I PR covering both legal and ethical aspects will be 
included in the subject of “Liberal Studies” for the senior secondary level.  The EMB will also feature 
the values associated with respect for IPR in the framework of moral and civic education, as part of 
the schools’ curriculum.  
 
                                                     
 
15 Proposed section 41A of the Copyright Ordinance (c lause 12 of the Bill).  The list of non-exhaustive 
factors are drawn up in the light of the fair use/fair dealing provisions in the copyright laws of the US, Singapore 
and Australia. 
16 Proposed section 198(1) of the Copyright Ordinance (clause 35(3) of the Bill). 
17 See item 12 under Major Amendments in Annex A of the paper “Proposed Amendments to the 
Copyright (Amendment) Bill 2006” (CB(1)283/06-07(01)) available at http://www.legco.gov.hk/yr05-
06/english/bc/bc01/papers/bc011120cb1-283-1-e.pdf. WT/TPR/M/173/Add.1 
Page 114  
 
  To promote awareness of and respect for IPR in the community, we have an ongo ing public education 
programme.  The Intellectual Property Department (IPD) has set aside an annual budget of about 
HK$8 million in support of this programme.  The school  sector is one of the major target groups of 
the activities under our programme.  Since 1997, IPD has been making visits to about 70 secondary 
schools every year to disseminate IPR messages to loca l students.  Talks are given to students, staff 
and lecturers in tertiary institutions.  Since 2005,  a programme has been organized to train qualified 
teachers to reach out to participating sec ondary schools to give IPR education.   
 As part of the Government’s enhanced efforts to pr omote a culture of respect for IPR in the digital 
environment, EMB has collaborated with IPD to produce an education TV programme on anti-
Internet piracy which will be released in the second term of the 2006/07 academic year.  In addition, 
the EMB will distribute in 2007 a teaching kit to assist primary and secondary schools in fostering a 
proper attitude in handling copyright works on the Internet.   In view of the proposed amendments to our copyri ght law, the Government would, in addition to the 
above public promotion and public education effort s, organize specific briefings and seminars for the 
educational sector to brief them  on the changes in our law and in par ticular how the new provisions 
would affect their daily work.  We are also happy to work closely with cop yright owners in our work 
to educate the public, especially the educatio n sector, on the scope and operation of the new 
exemption provisions contained in the Copyright Amendment Bill.   
 
Question 5 
 
 Also, the latest version of the Copyright Am endment Bill proposes a reduction of the period 
for criminal liability for parallel imports from 18 to 12-15 months after the publication of a work.  The 
U.S. Government is concerned that an 18 months ti meframe is barely sufficient for industry to recoup 
the investments made in creating a copyrighted wo rk.  Would the Hong Kong Government consider 
leaving this period for criminal liab ility for parallel imports unchanged?  
 
Answer 
 
Under the existing Copyright Ordinance, it is, among other things, a criminal offence to deal in, or to import otherwise than for private and domestic use,  any parallel imported copyright work if the work 
has been published anywhere in the world for 18 m onths or less.  The consumers and the business 
sector (particularly the retailers), are strongly in fa vour of liberalizing parallel importation.  They 
consider that allowing parallel importation would enhance competition, broaden the choice of works 
available and lead to a reduction in price.  On  the other hand, the Government notes the grave 
concerns expressed by the copyright  owners that liberalization might affect the level of investment in 
and development of the creative industry.  After reconsidering the matter, the Government now proposes that the criminal sanction p eriod be reduced to 12-15 months  (as opposed to being reduced 
to nine months).
18  
 
At the same time, some copyright owners have draw n to our attention that there are difficulties in 
bringing prosecution against persons who engage in commercial deali ngs in parallel imported works 
due to the evidential requirements in proving spec ific elements of the offence.  To facilitate 
enforcement (both civil and criminal), we propose that certain presumptions be introduced.  Furthermore, we propose that copyright owners (o r persons on their behalf) be allowed to make 
affidavits instead of having to a ttend court in person to give evidence on certain elements of the 
offence.
19 
 
                                                      
18 See item 16 under Major Amendments in Annex A of the paper referred to in footnote 5. 
19 See item 17 under Major Amendments in Annex A of the paper referred to in footnote 5.  WT/TPR/M/173/Add.1 
 Page 115 
 
 
  We consider that the amendments to the parallel im portation provisions should, as a whole, strike a 
reasonable balance between the interests of consumers and those of the creative industries. 
 
Question 6 
  Pharmaceutical Patent Linkage: We unders tand the local Hong Kong pharmaceutical industry 
association submitted a proposal to the Hong Kong govern ment in June that would give patent holders 
an opportunity to commence legal action agains t infringing generics before their marketing 
authorization applications are processed by the Depa rtment of Health.  However, the Department of 
Health claims it cannot adopt this proposal wit hout amending its pharmaceutical registration law.  
What can the Hong Kong government do to work on this issue of infringing generics? Would the 
Hong Kong Government consider establishing and ensuring adequate “patent linkage”, thereby 
removing the risk of arbitrary generic entrance a nd inadvertent approval of generics in the face of 
otherwise valid patent protected products?    Answer 
 
The registration system for pharmaceutical produ cts and the patent protection system are two 
separate systems in Hong Kong.  Th e former ensures that pharmaceutic al products made available in 
the local market are safe and efficacious and of good quality.  The latter provides protection for 
technical innovation by granting the inventor a patent for his invention. 
 Our patent protection system under the Patents Ordinan ce is in full compliance with the requirements 
under the Agreement on Trade-Related Aspects of Inte llectual Property Rights (TRIPs) of the WTO.  
An effective patent confers rights on its proprietor to prevent third parties without his consent from, 
among other things, making, putting on the market, us ing or importing or stocking a product which is 
the subject matter of the patent.  Patent owners may institute civil proceedings in courts against 
infringers of their rights, and seek remedies, incl uding an injunction restraining the defendant from 
any apprehended patent infringement  act; an order requiring the defendant to deliver up or destroy 
any patent infringing product; damages in respect of the infringement; an account of the profits 
derived by the defendant from the infringement; a declaration that the patent is valid and has been 
infringed by the defendant.  Separately, all pharmaceutical products are required to be registered before sale in Hong Kong, 
China. The purpose of this registration requirement is to protect public health.  Under the Pharmacy 
and Poisons Ordinance (PPO), the Pharmacy and Pois ons Board (PPB) was tasked to register drugs 
complying with the scientific criteria of safety, efficacy and quality.  The rights of patent owners to 
civil remedies are not affected by PPB’s registration of a drug which is subsequently proven to be 
patent infringing. It should also be noted that there is no requirement of patent linkage under TRIPS. 
When approving applications for drug registrati on, PPB would also remind the applicants in writing 
that the registration is only evidence of the product having met the requirements to its safety, efficacy 
and quality and carries no implications  on intellectual property issues. 
 To ensure patent holders have access to drug regis tration information, the information on all 
registered pharmaceutical products are made known through the “Compendium of Pharmaceutical 
Products”.  To facilitate protection of patent ri ghts established channels, the above information has 
been uploaded onto the Department of Health’s webs ite since October 2001.  A rapid search function 
was introduced on the website in March 2003. 
 
Question 7 
 
 We understand that Hong Kong recently de leted the knowledge requirement from the 
Copyright Amendment provision on the circumvention of technical prevention measures.   In doing WT/TPR/M/173/Add.1 
Page 116  
 
  so, however, it added a defense that allows a circum ventor to absolve his liability if he can establish 
that the circumvention act is done for the purpose of carrying out a non-infringing act.  We remain concerned that this new defense could become  a first step towards a general exception for 
circumventing TPM’s.  If implemented, how will Ho ng Kong guarantee that this new defense is not 
abused? 
 
Answer 
 
The policy objective of the proposed anti-circumventi on provisions is to protect copyright works in 
relation to which technological measures (TPMs) have been applied.  The intention is to protect 
copyright works rather than the TPMs per se.  The proposed defence which allows a circumventor 
from incurring liability for his act of circumvention is  to ensure that users’ legitimate use of copyright 
works (e.g. under any of the statutory permitted acts) would not be jeopardized.  An example is a student who circumvents a TPM (which prohibits th e copying of the work) for the purpose of copying 
a small portion of the work for his research or priv ate study.  To successfully invoke the defence, the 
student would have to prove, on balance of probabiliti es, that his act constitutes fair dealing for the 
purpose of research or private study.
20  As the defendant bears the burden of proving this in court, we 
do not consider that the provision would be easily abused.  It should be noted that the above defence would appl y only to liability arising from the act of 
circumvention.  It does not apply to persons engaged in dealing in circumvention devices or provision 
of circumvention services.  We believe that this wo uld effectively combat the supply of circumvention 
devices or services at source.   When formulating exceptions to th e anti-circumvention provisions, we  are always mindful that they 
should be limited in scope to avoid possible abu ses.  This is evident from the limited exceptions 
proposed in the Bill, which are all subject to stringent conditions.   
IV. TRADE POLICIES BY SECTOR 
 Question 8  
(2) A
GRICULTURE AND FISHERIES  
 
 We note on p. 116 in Table AIII.1 that import licenses for pesticides are required from both 
the Agriculture, Fisheries and Conservation Department as well as the Trade and Ministry 
Department. The purpose for both is stated as public h ealth, but with different validity periods.  What 
is the justification for the dual licenses?   
Answer 
 
As far as pesticides licences ar e concerned, the Trade and Indust ry Department (TID) only issues 
licences for methyl bromide.  Licen ces for other pesticides are issued  by the Agriculture, Fisheries 
and Conservation Department (AFCD). No du al pesticides licences are required. 
 
Methyl bromide is an ozone depleting substance (ODS) and imports of which are subject to ODS 
import licensing control which is administered by TID.  As ODS import licences are valid for sixty days, the same validity period has been adopted for the methyl bromide licences for the sake of 
consistency while other pesticides licences issued by AFCD are valid for six months. 
  
                                                     
 
20 Fair dealing with a work for the purpose of research and private study is a permitted act under 
section 38 of the Copyright Ordinance.  WT/TPR/M/173/Add.1 
 Page 117 
 
 
  Question 9 
 
 On page 115, Table AIII.1 Hong Kong, China lis ts rice as one of the goods subject to import 
licensing. The justification is to maintain a stable  supply and manage a rese rve stock for emergencies 
and short-term storage.  What is the time period fo r maintaining the reserve stock? What timeframe is 
considered short-term storage?  
 
Answer 
 
It has long been the policy of the Government to lib eralize the rice trade as far as practicable for the 
overall benefit of the community.  However, there is  still a psychological attachment to rice as a 
staple diet among the local population.  In case of  unexpected shortage and uncertainties, there may 
be a tendency to hoard, and the absence of a reserve stock might arouse public concern.  We consider 
that on balance it would be desirable to keep a minimal reserve stock.  Under the current Rice 
Control Scheme, a reserve stock of rice at a level  sufficient for consumption by the local population 
for 15 days is maintained at all time.  The reserve stock is shared out amongst all registered rice 
stockholders principally in propor tion to their import quantity.   
 The current reserve stock level sufficient for 15 days’ consumption by the local population is 
calculated on the basis of the time required for arra nging importation and distribution of rice in case 
of an emergency or short term shortage of supply.   It includes the estimated time required in the 
various steps of the importation and distributi on process, such as liaison with overseas suppliers, 
shipment and transportation, delivery and distribution of  rice.  The objective is to ensure that there is 
sufficient stock of rice for consumption of the local population while awa iting replenishment.  In 
considering the reserve stock level, we have regularly consulted the stockholders.  In the light of the 
advice from stockholders regarding the improvement in efficiency of the importation and distribution 
process, the reserve stock level had been adjusted do wnward gradually from an amount sufficient for 
45 days’ local consumption in 1998 to 15 days sin ce 2002.  The Government is open to proposal for 
further adjusting the reserve stock level. In this reg ard, we have reviewed the existing reserve stock 
level earlier this year, in consultation with sto ckholders.  Feedback received  from stockholders has 
reaffirmed that the current 15 days’ reserve stock level is  reasonable and no adjustment is needed at 
this stage.  
 
Question 10 
 
 We note on page 123 in Table AIV.1 that you list an Agricultural Aid Loan Fund that provides working capital for individual farmers. The fund is maintained jointly with both government 
and non-governmental funds and in  2005 provided $HK10,685, 000 in loans.  Please further describe 
the objectives of this loan program.   Answer 
 
The statutory objective of the Fund is for the purpose of encouraging or improving agriculture in 
Hong Kong, China by the issue of loans to farmers, groups of farmers or persons intending to become 
farmers.  WT/TPR/M/173/Add.1 
Page 118  
 
  Question 11 
 (5) Services  (vii) Legal Services  
  On page 101, paragraphs 92 and 93 do not mention foreign legal consultants.  Could the 
representative of Hong Kong, China confirm whet her Hong Kong, China recognizes foreign legal 
consultant as a method of legal practice?   Answer 
 
Foreign lawyers may register with the Law Society to  practise foreign law.  They may provide foreign 
legal services at a foreign law firm, a Hong Kong law firm or work “in-house” as foreign legal 
consultants.  A registered foreign lawyer is subject  to the restrictions provided under the Foreign 
Lawyers Registration Rules, such as the requiremen t to take out professional indemnity insurance.  
For foreign lawyers who choose to work as foreign le gal consultants in corporations or companies, 
they cannot provide legal services other than to their employer corporations or companies.  Their 
practice within their employer corporations or comp anies does not constitute a form of legal practice 
that requires registration or regulation by the Law Society. 
 
Question 12 
 
 Also, we would like to ask how many foreign lega l consultants, or foreigners in other types of 
law practice, are active in Hong Kong, China, and what are the principal countries of origin?  
 
Answer 
 
Since foreign legal consultants do not need to regist er with the Law Society as foreign lawyers, the 
Law Society does not keep a record of their numbers.   As regards registered foreign lawyers, there 
were a total of 873 foreign lawyers registered with the Law Society as at 31 December 2005.  The 
home jurisdictions of these foreign la wyers are shown in the attached.  WT/TPR/M/173/Add.1 
 Page 119 
 
 
  Table 1 
Size of firms and number of trainee solicitors in 2005 
No. of firms  No. of trainee solicitors 
Size of firm 
2004 2005  2004 2005 
Sole practitioners 294 301  40 36 
2-5 partners 318 328  155 172 
6-10 partners 35 34  118 112 
11-20 partners 18 19  144 149 
Over 20 partners 7 6  100 93 
Total 672 688  557a 562b 
a Excluding 10 in government and 3 working "in-house". 
b Excluding 5 in government and 3 working "in-house". 
 
 
Table 2 
Home jurisdictions of registered foreign lawyers in both foreign law firms and local law firms 
 Number Per cent 
United States 373 48.01 
England & Wales 143 18.40 
PRC 77 9.91 
Australia 74 9.52 
Singapore 28 3.60 
Bermuda 17 2.19 
France 8 1.03 
New Zealand  8 1.03 
Canada 7 0.90 
Germany 7 0.90 
Cayman Islands 5 0.64 
British Virgin Islands 4 0.51 
Italy 4 0.51 
The Netherlands 4 0.51 
The Philippines 4 0.51 
Malaysia 3 0.39 
Scotland 2 0.26 
Sweden 2 0.26 
India 1 0.13 
Ireland 1 0.13 
Japan 1 0.13 
Republic of Korea 1 0.13 
South Africa 1 0.13 
Sri Lanka 1 0.13 
Switzerland 1 0.13 
Note: As at 31 December 2005, 236 registered foreign lawyers (30% of those registered) worked with registered foreign law firms .  
474 registered foreign lawyers (61% of those registered) worked wi th local law firms.  67 registered foreign lawyers (9% of tho se 
registered) were not engaged in any law firms. 
Source:  Standing Committee on Compliance. 
 
__________