WORLD TRADE  
ORGANIZATION  WT/REG162/3 
25 January 2005 
 
 (05-0299) 
Committee on Regional Trade Agreements Original:   English 
  
 
CLOSER ECONOMIC PARTNERSHIP ARRANGEMENT 
BETWEEN CHINA AND HONG KONG, CHINA 
 
GOODS ASPECTS
 
 
Communication from the Parties  
  The following communication, dated 24 January 2 005, is being circulated at the request of the 
Delegations of China and Hong Kong, China.  
_______________ 
 
 
I. BACKGROUND INFORMATION ON THE ARRANGEMENT 
1. Membership And Dates Of Signature, And Coming Into Effect 
 The Parties to the Mainland and Hong Kong  Closer Economic Partnership Arrangement 
(hereinafter referred to as the “CEPA”) are the Peopl e’s Republic of China (hereinafter referred to as 
the “Mainland”
1) and Hong Kong, China (hereina fter referred to as “Hong Kong”2). The Mainland 
and Hong Kong signed the Main Text and the six An nexes of the CEPA on 29 June and 29 September 
2003 respectively3. The CEPA came into effect on the day of signature.   
 
 The Mainland and Hong Kong signed the Supplem ent to the Mainland and Hong Kong Closer 
Economic Partnership Arrangement (h ereinafter referred to as the “Supplement to the CEPA”) on 27 
October 2004 on further trade liberalization under the second phase of the CEPA.  The major 
liberalization measures set out in the Supplement to the CEPA took effect on 1 January 2005.  
  The CEPA was notified on 27 December 2003 purs uant to paragraph 7(a) of Article XXIV of 
the GATT 1994 and the Understanding on the Interpreta tion of Article XXIV of the GATT 1994, and 
in accordance with paragraph 7(a) of Article V of the GATS. The Notification of the CEPA can be found in the double symbol document WT/REG162/N1 – S/C/N/264. The text of the CEPA can be found in document WT/REG162/1. The text of the Supplement to the CEPA can be found in 
document WT/REG162/1/Add.1. 
 
2. Type Of Arrangement  
 The CEPA creates a free-trade area betw een the Mainland and Hong Kong within the 
meaning of Article XXIV: 8(b) of GATT 1994.  Article  1 of the CEPA specifically states that the 
                                                     
 
1 In the CEPA, "Mainland" refers to the entire cust oms territory of the People's Republic of China. 
2 In the CEPA, "Hong Kong" refers to the Hong Ko ng Special Administrative Re gion of the People's 
Republic of China. 
3 The CEPA (including the Supplement to the CEPA) is signed in the Chinese language, and only the 
Chinese text is authentic. The full texts of the CEPA (including the Supplement to the CEPA) and the English 
translation are available on the following websites: www.mofcom.gov.cn  , www.tid.gov.hk . WT/REG162/3 
Page 2  
 
 objectives of the CEPA are to strengthen trade a nd investment cooperation between the Mainland and 
Hong Kong and to promote joint developmen t of the Mainland and Hong Kong through the 
implementation of, inter alia, progressive reduction or elimination of tariff and non-tariff barriers on 
substantially all the trade in goods between the two sides.  3. Scope 
 Chapter 2 of the CEPA and Annex 1 to the C EPA cover trade in goods.  Chapter 3 of the 
CEPA and Annexes 2 and 3 to the CEPA concern the ru les of origin related to trade in goods.  Article 
3 of the CEPA provides that the Mainland and Hong Kong will broaden and enrich the content of the 
CEPA through continuous and further reci procal liberalization between them.   
 
 The CEPA also covers trade in services.  The aspects of the CEPA related to trade in services 
are notified in a separate document (WT/REG162/4).  In addition, the CEPA contains provisions on 
trade and investment facilitation in its Chapter 5 and Annex 6.  
 
 The Supplement to the CEPA aims to further liberalize trade in goods and trade in services in 
the Mainland for Hong Kong.  It comprises three anne xes, namely, the list of additional products that 
are given zero tariff preference, the schedule on rules of origin for these products, and further liberalization measures on trade in services.  Conse quently, the Supplement to the CEPA contains 
supplements and amendments to Annexes 1, 2, 4 and 5 to the CEPA. In this Communication, 
references to the CEPA or any of its Annexes incl ude, where the context permits, references to their 
respective supplements and amendments as set out in the Supplement to the CEPA. 
 
4. Trade Data 
 For the year 2003, the Mainland’s total imports from Hong Kong amounted to US$11,119 
million and Hong Kong’s total imports from  the Mainland totalled US$100,889 million.  
 
 More detailed trade data can be fo und in Annex to this Communication. 
  
II. TRADE PROVISIONS  
1. Import Restrictions  
 1.1 Duties And Charges 
  Hong Kong will continue to apply zero ta riff to all imported goods of Mainland origin 
[Article 5.1 of the CEPA].  The Mainland has applied zero tariff to the imports of Hong Kong origin (covering 273 tariff lines under the Mainland 2001 harmonized system
4) listed in Table 1 of Annex 1 
to the CEPA as from 1 January 2004 and has extended the zero tariff treatment to the imports of Hong 
Kong origin (covering 713 tariff lines under the Ma inland 2004 harmonized system4) listed in the 
supplement to Table 1 of Annex 1 to the CEPA (i .e. Annex 1 to the Supplement to the CEPA) with 
effect from 1 January 2005.   No later than 1 Ja nuary 2006, the Mainland w ill apply zero tariff to the 
import of remaining goods of Hong Kong origin. De tailed implementation procedures are set out in 
Annex 1 to the CEPA.  
 
                                                      
4 The 273 tariff lines under the Mainland 2001 harmonized system and 713 tariff lines under the 
Mainland 2004 harmonized system were subsequently converted to a total of 1,108 tariff lines under the Mainland 2005 harmonized system as a result of the annual adjustment exercises in accordance with the 
harmonized system principles.  WT/REG162/3 
 Page 3 
 
 
  1.2 Quantitative Restrictions 
  Neither side will apply non-tariff measures in consistent with the provisions of the WTO 
Agreements to goods imported and originated from th e other side [Article 6.1 of the CEPA].  The 
Mainland will not apply tariff rate quota to goods of H ong Kong origin [Article 6.2 of the CEPA].    
 
 1.3 Common External Tariff   Not applicable to the CEPA.   2. Export Restrictions  
 2.1 Duties And Charges 
  The CEPA does not contain any specific provisions on export duties and charges.   
 2.2 Quantitative Restrictions 
   The CEPA does not contain any specific provisions on export quantitative restrictions.  
3. Rules Of Origin  
 The rules of origin are set out in Chapter 3 of the CEPA and elaborated in Annex 2 to the 
CEPA. 
  Goods are treated as originating in the Main land or Hong Kong for the purpose of the CEPA 
if they are wholly obtained in the Mainland or  Hong Kong respectively.  For goods which are not 
wholly obtained, they are considered as originatin g in the Mainland or Hong Kong only if they have 
undergone “substantial transformation” in the Main land or Hong Kong respectively.  No cumulation 
rule is provided.   Depending on the individual product, “substantia l transformation” is defined by either one of 
the following criteria:  
(a) manufacturing or processing operations;  
(b) change in tariff heading;  
(c) 30% value-added content;  
(d) other criteria: criteria agreed by both sides other than (a), (b), and (c); or 
(e) mixed criteria: the use of two or more of the criteria in (a) - (d). 
 Simple diluting, mixing, packaging, bottling, drying, assembling, sorting or decorating is not 
regarded as substantial transformation.     Based on the above principles, specific origin criterion has been drawn up for each product and included in Table 1 of Annex 2 to the CEPA.  Go ods meeting the origin requirements are eligible 
for zero tariff preference under the CEPA. 
 
 The procedures for the issuing and verification of certificates of origin are set out in Annex 3 to the CEPA.  WT/REG162/3 
Page 4  
 
  
4. Standards  
 4.1 Technical Barriers to Trade  
   The two sides will promote cooperation in comm odity inspection, quality and standardization 
[Article 17.1.3 of the CEPA].   
  The two sides will urge their respective organisa tions to strengthen cooperation with a view to 
promoting conformity assessment (including testin g, certification and inspection), accreditation and 
standardization management  [Item 5.2.4 of Annex 6 to the CEPA].  
 
 4.2 Sanitary And Phytosanitary Measures    The two sides will promote cooperation in co mmodity quarantine and food safety [Article 
17.1.3. of the CEPA].  The two sides will make us e of the existing co-ordination mechanism to step 
up cooperation in inspection and quarantine of animals and plants as well as in food safety, so as to 
enable both sides to enforce their respective regulations more effectiv ely  [Item 5.2.2 of Annex 6 to 
the CEPA].  
5. Safeguards 
 If the implementation of the CEPA causes shar p increase in the import of a product included 
in Annex 1 to the CEPA originating from the other side which has caused or threatened to cause 
serious injury to the affected side’s domestic industry that produces like or directly competitive 
products, the affected side may, after giving written notice, temporarily suspend the concessions under the CEPA on the import of the concerned product from the other si de, and will, at the request of 
the other side, promptly commence consultations under  Article 19 of the CEPA in order to reach an 
agreement  [Article 9 of the CEPA].  
 
6. Anti-Dumping And Countervailing Measures 
 6.1 Anti-Dumping 
  The two sides undertake that neither si de will apply anti-dumping measures to goods 
imported and originated from the other side [Article 7 of the CEPA].  
  6.2 Subsidies And Countervailing Measures   The two sides reiterate their observan ce of the WTO “Agreement on Subsidies and 
Countervailing Measures” and Article XVI of the GATT 1994, and undertake not to apply 
countervailing measures to goods impor ted and originated from each other [Article 8 of the CEPA].   
 
7. Subsidies And State-Aid 
 The CEPA does not contain any specific pr ovisions on subsidies or state-aid.  
 8. Sector-Specific Provisions 
 The CEPA does not contain any sector-specific provisions. 
  WT/REG162/3 
 Page 5 
 
 
 9. Other 
 9.1 Competition, Customs Valuation, Government Procurement, and Import Licensing 
  The CEPA does not contain any specific pr ovisions on competition, customs valuation, 
government procurement, and import licensing. 
 
 
III. GENERAL PROVISIONS OF THE ARRANGEMENT 
1. Exceptions And Reservations 
 The CEPA and provisions in its Annexes will not affect the ability of the Mainland or Hong 
Kong to maintain or adopt exception measures consis tent with the provisions of the WTO Agreements 
[Article 18 of the CEPA].   
2. Accession  
 The CEPA does not contain any specific provisions on accession. 
 
3. Dispute Settlement Procedures 
 The two sides have set up a Joint Steering Committee to, among others, supervise the 
implementation of the CEPA, interpret the provisi ons of the CEPA, and resolve disputes that may 
arise during the implementation of the CEPA.  The two sides will resolve any problems arising from 
the interpretation or implementation of the CEPA through consultation in the spirit of friendship and 
cooperation.  The Joint Steering Committee will make its decisions by consensus [Article 19 of the 
CEPA].  
4. Relations With Other Trade Agreements 
 Article 2.2 of the CEPA provides that the c onclusion, implementation and amendment of the 
CEPA will be consistent with the pr ovisions of the WTO Agreements.  
  The two sides agree that Articles 15 and 16 of the “Protocol on Accession of the People's 
Republic of China to the WTO”
5 and paragraph 242 of the “Report of the Working Party on the 
Accession of China”6 will not be applicable to trade betw een the Mainland and Hong Kong [Article 4 
of the CEPA].  
 
 Any action taken under the CEPA will not affect or  nullify the rights and obligations of either 
side under other existing agreements to which it is a contracting party, except as otherwise provided in 
the CEPA [Article 20.1 of the CEPA].   5. Institutional Framework [Article 19 of the CEPA]  
 The two sides have set up a Joint Steering Committee, which will comprise senior 
representatives or officials designated by the two sides.  
                                                     
 
5 The Article 15 of the Protocol is on "Price Co mparability in Determining Subsidies and Dumping" 
whereas Article 16 is on "Transitional Product-Specific Safeguard Mechanism". 
6 Paragraph 242 of the Report contains provisions applicable to trade in textiles and clothing products. WT/REG162/3 
Page 6  
 
  Liaison Offices will be set up under the Join t Steering Committee.  Working groups may be 
set up as the need arises.  The Liaison Offices will be set up respectively in the Ministry of Commerce 
of the Mainland and the Commerce, Industry and Technology Bureau of Hong Kong.   The functions of the Joint Steering Committee include: 
 
 (1) supervising the implementation of the CEPA;   (2) interpreting the provisions of the CEPA;  
 (3) resolving disputes that may arise during the implementation of the CEPA; 
  (4) drafting additions and amendments to the content of the CEPA;   (5) providing steer on the work of the working groups; 
 
 (6) dealing with any other business relating to the implementation of the CEPA.   The Joint Steering Committee will meet at least once a year, and may convene special 
meetings within 30 days upon request by either side.  
 The two sides will resolve any problems arisi ng from the interpretation or implementation of 
the CEPA through consultation in the spirit of friendship and cooperation.  The Joint Steering 
Committee will make its decisions by consensus.   IV. OTHER 
1. Trade And Investment Facilitation  
 The two sides will promote trade and invest ment facilitation through greater transparency, 
standard conformity and enhanced informa tion exchange [Article 16 of the CEPA]. 
  The two sides will promote cooperation in sev en areas, namely, (1) trade and investment 
promotion; (2) customs clearance facilitation; (3 ) commodity inspection and quarantine, food safety 
and quality and standardization; (4 ) electronic business; (5) transparency in laws and regulations; (6) 
cooperation of small and medium enterprises; and (7) cooperation in Chinese traditional medicine and 
medical products sector [Article 17 of the CEPA].  Details on the respective areas of cooperation are 
set out in Annex 6 to the CEPA. 
  WT/REG162/3 
 Page 7 
 
 
 ANNEX  
 
 Detailed trade statistics is as follows:  
 
 
The Mainland’s Imports from Hong Kong 
(Value in US$ million) 
 
  2001 2002 2003 2004 
Imports 9,423.0 10,741.3 11,119.1 11,800.0 
Share in China's total imports (%) 3.9 3.6 2.7 2.1 
Exports 46,546.6 58,465.4 76,288.6 100,871.8 
Share in China's total exports (%) 17.5 18.0 17.4 17.0 
Imports + exports 55,969.6 69,206.7 87,407.7 112,671.8 
Share in China's total trade (%) 11.0 11.1 10.3 9.8 
Source : Customs General Administration of China 
 
 
Hong Kong’s Import s from the Mainland 
(Value in US$ million) 
 
Year Total Trade 
2001 87,445 
2002 91,944 
2003 100,889 
Source : Census and Statistics Department of Hong Kong 
 
 
Top 20 the Mainland ’s Imports from Hong Kong, Year 2001-2004 
(Value in US$ million) 
 
HS Code  Product Description   2001 2002 2003 2004 
      Rank  
8542 Electronic integrated circuits and micro-
assemblies  1,100 1,807 1,708 1,664 
8529 Parts suitable for use solely or principally 
with the apparatus of headings 8525 to 
8528 176 332 429 485 
8541 Diodes, transistors and similar semi-
conductor devices; photosensitive semi-
conductor devices, including photovoltaic 
cells whether or not assembled in modules 
or made up into panels; light emitting 
diodes; mounted piezo-electric crystals  286 364 389 340 
7204 Ferrous waste and scrap; remelting scrap 
ingots of iron steel 92 90 265 292 
3915 Waste, parings and scrap, of plastics 244 271 252 582 
8473 Parts and accessories (other than covers, 
carrying cases and the like) suitable for use 
solely or principally with machines of 
headings 8469 to 8472  174 301 249 321 WT/REG162/3 
Page 8  
 
 HS Code  Product Description   2001 2002 2003 2004 
6110 Jerseys, pullovers, cardigans, waistcoats 
and similar articles, knitted or crocheted  249 242 246 247 
8522 Parts and accessories suitable for use solely 
or principally with the apparatus of 
headings 8519 to 8521  150 259 229 145 
5209 Woven fabrics of cotton, containing 85% or 
more by weight of cotton, weighing more 
than 200g/m2 210 249 218 246 
3903 Polymers of styrene, in primary forms 167 183 213 244 
9013 Liquid crystal devices not constituting 
articles provided for more specifically in 
other headings; lasers, other than laser 
diodes 120 134 202 264 
8536 Electrical apparatus for switching or 
protecting electrical circuits, or for making 
connections to or in electrical circuits, for a 
voltage not exceeding 1000 volts 190 189 201 192 
8504 Electrical transformers, static converters 
(for example, rectifiers) and inductors  198 196 191 184 
8471 Automatic data processing machines and 
units thereof; magnetic or optical readers, 
machines for transcribing data onto data 
media in coded form  and machines for 
processing such data, not elsewhere 
specified or included  104 89 174 187 
8534 Printed circuits  139 193 168 231 
7404 Copper waste and scrap  193 115 151 180 
2716 Electrical energy 91 121 149 165 
6006 Other knitted or crocheted fabrics   146 148 128 
3004 Medicaments (excluding goods of heading 
3002, 3005 or 3006) consisting of mixed or 
unmixed products for therapeutic or 
prophylactic uses, put up in measured doses 
(including those in the form of transdermal administration systems)  or in forms of 
packings for retail sale 89 106 148 124 
5407 Woven fabrics of synthetic filament yarn, 
including woven fabrics obtained from 
materials of heading 5404 164 141 145 132 
Sub-Total for top 20 products 4,138 5,529 5,876 6,349 
China’s Imports from Hong Kong 9,423 10,741 11,119 11,800 
Top 20 as % of Total Imports from Hong Kong 43.9 38.5 52.8 53.8 
Source : Customs General Administration of China 
  WT/REG162/3 
 Page 9 
 
 
 Top 20 Hong Kong’s Imports from the Mainland, Year 2001-2003 
(Value in US$ million) 
 
HS 
Code Product description Year 2001 
IMPORTS 
from the 
Mainland Year 2002 
IMPORTS 
from the 
Mainland Year 2003 
IMPORTS 
from the 
Mainland  % Change 
2003/2002 
8473 Parts and accessories  (other than covers, 
carrying cases and the like) suitable for use solely or principally with machines of headings 
8469 to 8472. 2,887 3,312 5,232 58.0%
8471 Automatic data processing machines and units 
thereof; magnetic or op tical readers, machines 
for transcribing data onto data media in coded 
form and machines for processing such data, 
not elsewhere specified or included. 2,521 2,973 3,231 8.7%
6110 Jerseys, pullovers, cardigans, waistcoats and 
similar articles, knitted or crocheted. 3,177 2,971 3,057 2.9%
9503 Other toys; reduced-size ("scale") models and 
similar recreational models, working or not; 
puzzles of all kinds. 2,914 2,982 2,941 -1.4%
8525 Transmission apparatus for radio-telephony, 
radio-telegraphy, radio- broadcasting or 
television, whether or not incorporating 
reception apparatus or sound recording or reproducing apparatus; television cameras; still 
image video cameras and other video camera 
recorders; digital cameras. 1,973 2,089 2,900 38.9%
6403 Footwear with outer soles of rubber, plastics, 
leather or composition leather and uppers of 
leather. 2,614 2,718 2,764 1.7%
4202 Trunks, suit-cases, vanity-cases, executive-
cases, brief-cases, school satchels, spectacle and 
binocular cases, camera cases, musical instrument cases, gun cases, holsters containers; 
travelling bags, insulated food or beverages 
bags, toilet 
bags, rucksacks, handbags, 
shopping-bags, wallets, purses, map-cases, 
tobacco-pouches, tool bags, sports bags, bottle-
cases, jewellery boxes, powder- boxes, cutlery 
cases and similar containers, of leather or of 
composition leather, of plastic sheeting, of 
textile materials, of vulcanised fibre or of 
paperboard, or wholly or mainly covered with 
such materials. 2,913 2,758 2,741 -0.6%
8522 Parts and accessories suitable for use solely or 
principally with the apparatus of headings 8519 
to 8521. 1,583 2,442 2,515 3.0%
8529 Parts suitable for use solely or principally with 
the apparatus of headings 8525 to 8528. 963 1,317 2,509 90.5%
6204 Women's or girls' suits, ensembles, jackets, 
dresses, skirts, divided skirts, trousers, bib and 
brace overalls, breeches and shorts (other than 
swimwear). 2,332 2,344 2,315 -1.2%WT/REG162/3 
Page 10  
 
 HS 
Code Product description Year 2001 
IMPORTS 
from the 
Mainland Year 2002 
IMPORTS 
from the 
Mainland Year 2003 
IMPORTS 
from the 
Mainland  % Change 
2003/2002 
8504 Electrical transformers , static converters (for 
example, rectifiers) and inductors. 2,025 1,973 2,261 14.6%
8542 Electronic integrated circuits and 
microassemblies. 651 1,265 1,811 43.2%
8517 Electrical apparatus for line telephony or line 
telegraphy, including line telephone sets with 
cordless handsets and telecommunication 
apparatus for carrier-current line systems or for digital line system; videophones. 1,654 1,506 1,539 2.2%
8527 Reception apparatus fo r radio-telephony, radio-
telegraphy or radio- broadcasting, whether or 
not combined, in the same housing, with sound 
recording or reproducing apparatus or a clock. 1,624 1,767 1,534 -13.2%
9504 Articles for funfair, table or parlour games, 
including pintables, billiards, special tables for 
casino games and automatic bowling alley 
equipment. 1,138 1,191 1,532 28.6%
8534 Printed circuits. 946 1,154 1,473 27.6%
6402 Other footwear with outer soles and uppers of 
rubber or plastics. 1,693 1,488 1,419 -4.6%
8521 Video recording or reproducing apparatus. 744 1,016 1,407 38.4%
6006 Other knitted or crocheted fabrics.  N.A. 1,098 1,258 14.5%
5205 Cotton yarn (other than sewing thread), 
containing 85% or more by weight of cotton, 
not put up for retail sale. 703 896 1,123 25.4%
   
 Sub-Total for top 20 products 35,055 39,260 45,561 16.0%
 Hong Kong's Imports from the Mainland 87,445 91,944 100,889 9.7%
 Top 20 as % of Total Imports from the 
Mainland 40.1% 42.7% 45.2% 
Source : Census and Statistics Department of Hong Kong 
 
Notes :  (1) Gold and specie are excluded in th e calculation of merchandise trade by Hong Kong. 
 (2) N.A. denotes not available as the HS code was only created in 2002 arising from a major  
  HS revision exercise of the World Customs Organisation. 
 (3) The sum of individual items an d the corresponding tota l shown in the table may not tally because of 
rounding. 
 
 
__________