WT/TPR/S/173 Trade Policy Review 
Page 30 
 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
(1) OVERVIEW  
1. Since the previous Trade Policy Review of Hong Kong, China, in 2002, steps have been taken 
to facilitate trade and improve the enforcement of intellectual property rights.  The Hong Kong 
Special Administrative Region (HKSAR) of the People 's Republic of China remains a free port, and, 
by and large, relies on market forces to allocate resources. 
2. Restrictions at the border are few;  imports enter the territory duty free.  Nonetheless, the 
scope of HKSAR's tariff bindings remains low, at 42. 8% of all tariff lines (or 56.5% of the total value 
of imports in 2005).1  Excise duties are levied on imports and domestic production of four categories 
of goods (liquor, tobacco, hydrocarbon oil, and meth yl alcohol).  As there is little or no domestic 
production of these goods, revenue from excise duti es is mostly generated from imports.  Trade 
facilitation measures involved the introduction of electronic customs clearance and documentation 
procedures.  Non-tariff border measures, such as import licensing and prohibitions, are aimed mainly 
at ensuring security as well as protecting public health, the environment, and complying with international obligations.  Correspondingly, there ar e no government controls on exports other than 
licensing and restrictions maintained in order to fulfil international obligations, including UN 
sanctions and arrangements under the WTO Agreem ent on Textiles and Clothing (until the end of 
2004).  Although no subsidies are provided to exporte rs, the HKSAR's latest notification includes 
credit-related support to the fisheries sector.  Ther e are no legal provisions for the use of contingency 
measures to protect domestic producers from the entr y of dumped or subsidized products.  Nor is 
there any legislation on safeguards. 
3. During the period under review, the main instru ments used to assist production and trade have 
been tax incentives (including accelerated deprecia tion and tax exemptions), financing for R&D, 
design and innovation and technology u pgrading, credit facilities for fisheries, and measures related to 
land leasing.  Such assistance has seldom been secto r-specific;  it has been limited largely to the 
provision of public services and infrastructure that enable the private sector to develop.  In particular, 
the Government has attached priority to high technology and information technology activities in 
allocating funds;  it has also increased funds fo r supporting small and medium-sized enterprises 
(SMEs).  Steps were taken to reduce the Government 's influence in the land market by enhancing the 
efficiency and transparency of the Application List System involving land sale. 
4. Protection of intellectual property rights was reinforced, inter alia,  through improvements in 
the patents, trade marks, designs, and copyrigh t legislation and the introduction of electronic 
registration services.  The parallel importation of computer software has been allowed since November 2003.   
5. Although there are few restrictions at the border, the entrenchment of a few large 
conglomerates in the domestic market and the seeming lack of coherent measures to address 
anti-competitive practices in all but a few sector s may discourage greater competition from domestic 
and foreign firms in the provision of services.  The efficiency of the HKSAR's sector-specific approach to competition (i.e. where the existence of monopoly power is considered a concern), as a 
substitute for a comprehensive competition policy is open to question.  The ongoing review of 
competition policy is to encompass discussion of the need for comprehensive law on fair competition.  
Consumer protection cases have involved larg ely telecommunication services and related 
goods/services.  Efforts to bring corporate governance in to line with international standards have been 
made by, inter alia,  updating the legislation in this area.  
                                                     
 
1 These calculations refer to fully bound tariff lines (i.e. partially bound lines excluded). Hong Kong, China WT/TPR/S/173 
 Page 31 
 
 
(2) MEASURES DIRECTLY AFFECTING IMPORTS  
(i) Registration and documentation requirements 
6. Under the Import and Export (Registration) Re gulations, an import declaration must be 
lodged electronically with the Customs and Excise Department within 14 days of a consignment's 
import, except for exempted articles.2  Shipping documents, such as commercial invoices, bills of 
lading/airway bill, packing lists, etc. are considered helpful in expediting the clearance of shipments.  
Other documents, such as import licences, permits, sa nitary and phytosanitary certificates may also be 
required, depending upon the goods shipped (see below).3  A unified road cargo manifest, jointly 
designed by Hong Kong Customs and the Mainland Customs, was put on trial for 12 months on 
1 January 2004 and implemented formally as from 1 January 2005.4  
7. 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 documentation procedures.  HKSAR 's Government Electronic Trading Services 
(GETS)5 (previously called Community Electronic Trading Services) cover the electronic submission 
of certain types of trade documents including trad e declarations, dutiable permit applications, and 
cargo manifests (excluding road transportation).  El ectronic submission of trade declarations became 
mandatory as of 1 April 2000 and the electronic submission of permit applications for dutiable 
commodities became mandatory as of 21 July 2002.  Electronic means for submission to Hong Kong Customs and other government departments of cargo ma nifests in air, rail, river, and ocean transport 
(Electronic MANifest or EMAN) were introduced on 11 April 2003.  Subsequently, electronic 
submission became mandatory for air and rail cargo manifests from 17 July 2004, and for ocean and 
river manifests from 16 June 2006.
6  As of January 2005, the Mainland Customs and Hong Kong 
Customs formally implemented the unified road cargo manifest for submission to both Hong Kong 
and Mainland Customs for clearance, thus eliminatin g duplicate completion.  Before 1 January 2004, 
there was only one service provider of "front-end" electronic services for the submission of trade documents.  An additional service provider was appoi nted by the Government to provide GETS from 
January 2004.  Service providers' fe es are subject to price ceilings, which are set out in their service 
contracts with the Government.  Import declaration charges are specific, albeit on a value basis for non-food items (Table III.1).  Moreover, to enhance Customs' efficiency in processing cargoes at the 
land boundary control points, a system to enab le cargo operators to submit advance road cargo 
information electronically (e-ACI system) is under consideration.  
 
                                                     
 
2 Exempted articles are stipulated in regulation 3 of the Import and Export (Registration) Regulations. 
3 If transhipped through Hong Kong, China by air, some goods (such as dutiable commodities, 
pharmaceutical products and medicines, left-hand drive vehicles, marine fish , meat and animal products, optical 
disc mastering and replication equipment, outboard engines, ozone-depleting substances, pesticides, radio 
communication transmitting apparatus, rice, food materials such as colouring matter and preservatives, and 
smokeless tobacco products) are exempt from licensing control within the re stricted area of the airport (Air 
Cargo Transhipment (Facilitation) Ordinance 2000, 26 May 2000).  
4 Customs and Excise Department (2004). 
5 GETS refers to the front-end services of coll ecting data electronically from traders and carriers, 
validating such data, and transmitting them to the Government.   
6 Carriers need to submit their manifest information only once.  The system then sends the manifest 
automatically to:  the Customs and Excise Department (C&ED), the Census and Statistics Department (C&SD), 
and the Trade and Industry Department (TID).  All follow-up communication is online (Commerce, Industry 
and Technology Bureau online information.  Viewed at:  http://www.citb.gov.hk/cib/ehtml/gets_ td1.html#eman). WT/TPR/S/173 Trade Policy Review 
Page 32 
 
 
Table III.1 
Import declaration charges, 2006 
(HK$) 
 Electronic declaration 
Imports  
Food items 0.50 
Non-food items  
Value up to HK$46,000 0.50 
Each additional HK$1,000 0.25 
Source:  Hong Kong Trade Development Council [Online].  Av ailable at:  http://www. customs.gov.hk/eng/major_ 
declaration_charge_e.html.  
8. The 1980 Open Bond System (OBS) for breweries and hydrocarbon oil was extended to all 
dutiable commodities stored at bonded warehouses, tobacco factories, distilleries, and liquor 
manufacturers with effect from January 2004.  All bonded warehouses storing dutiable goods now 
operate without full-time Customs supervision7;  the system aims to fac ilitate trade in such goods by 
lowering traders' operating and compliance costs and allowing more flexibility in procedures affecting 
business operations.  As from 15 November 2004,  the Chinese Mainland Customs and Hong Kong 
Customs have used a mutually recognized Green Customs Seal to avoid unnecessary duplication of 
Customs examination, facilitate trade, and exped ite vehicular traffic at the land boundary on both 
sides. 
9. In January 2004, the licensing control on the impor t, export or transhipment of 9 out of 31 
categories of articles subject to licensing was re laxed or simplified following the implementation of 
the Import and Export (Facilitation) Ordinance 2003.8  This change does not affect the fulfilment of 
HKSAR's responsibilities in respect  of international obligations , public health and safety, 
anti-smuggling, and protection of public revenue. 
10. Shipments of suspected "strategic" commodities remain subject to physical examination, as 
well as to verification of the information provided in the import licence applications (section (v)(b)).9  
Verifications are conducted by authorized officers of the Customs and Exci se Department at entry 
points and other places and premises.  
11. Due to the very rapid growth of trade across the land boundary with Mainland China a 
balance is needed between speed y clearance and proper levels of surveillance for illegal cargoes of 
various kinds.10  Mobile and fixed X-ray vehicle scanning systems were recently installed to detect 
unmanifested consignments, false compartments, and a ltered structures in trucks or containers, even 
when fully laden.  Another major challenge is implementing new procedures to counter potential 
terrorist activities through increased surveillance of all aspects of trade.  The Hong Kong container 
port has been implementing the U.S. Containe r Security Initiative (CSI) since May 2003.  
                                                      
7 Supervision of vanning and devanning of dutiable goods and bond operations is conducted on a 
selective basis.  Traders are only required to pay fees covering costs for Customs attendance on the destruction 
of dutiable goods (Customs and Excise Department, 2004). 
8 Television sets, video cassette recorders and play ers;  air conditioners and refrigerators;  poultry 
carcasses and poultry products;  ozone depleting substances;  left-hand-drive vehicles;  outboard engines 
exceeding 111.9 kilowatts;  marine fish;  optical di sc mastering and replica tion equipment;  and radio-
communications transmitting apparatus (Customs and Excise Department, 2004). 
9 These commodities are listed in the Schedules to  the Import and Export (Strategic Commodities) 
Regulations.  They include items such as munitions, chemical and biological weapons and their precursors, 
nuclear materials and equipment, and industrial dual-use goods. 
10 APEC (2003). Hong Kong, China WT/TPR/S/173 
 Page 33 
 
 
12. The Government continues to evaluate the im pact on some specific Customs procedures of 
accession to the revised International Conventio n on the Simplification and Harmonization of 
Customs Procedures (the Revised Kyoto Convention).11  
13. Preshipment inspection is not required in the HKSAR. 
14. In March 2004, the Hong Kong Custom s and Excise Training School (HKCETS) was 
appointed by the World Customs Organization (WCO) as a regional training centre in the Asia Pacific 
Region.12  
15. Smuggling activities between the HKSAR and Mainland China remains a concern.13  In this 
regard, Mainland-bound items include computer parts,  electronic and electrical appliances, vehicles 
and vehicle parts, optical discs, Chinese tonics, high-value seafood, and marked diesel oil.  
HKSAR-bound "hot" items are illicit cigarettes and fuel , pirated optical discs, counterfeit goods, and 
chilled/frozen meat and poultry.14  To combat smuggling more effectively, Hong Kong Customs, apart 
from taking measures to intensify the application of risk management on cargo clearance, enhanced 
mutual cooperation with Mainland counterparts.  Ac tion was taken to strengt hen the liaison channels, 
exchange timely information and intelligence, step up joint enforcement actions, and regularly review 
the effectiveness of mutual cooperation. 
(ii) Tariffs 
(a) General features 
16. No tariffs or other import taxes are applied to imports entering the HKSAR. 
17. Hong Kong, China implemented the HS2002 nomenc lature on 1 January 2002.  The revised 
tariff schedule of commitments for the implementati on of HS2002 is under multilateral review (by the 
WTO Committee on Market Access) and should be ready for certification after its completion.  Furthermore, the HS2007 nomenclature  is to be adopted for import/export declaration purposes as 
from 1 January 2007.  The authorities indicate that necessary preparatory work is in progress;  and 
publicity measures to inform importers/exporte rs are to commence around October 2006.   
(b) MFN tariff bindings 
18. Hong Kong, China has made additional unila teral concessions since the Uruguay Round and 
the implementation of the Information Technology Agreement (ITA).  As a result of the introduction 
of the HS02 nomenclature, the number of bound tariff lines (at the 8-digit level) increased from 2,705 (41.8% of all tariff lines) to  3,011 (some 42.8% of all tariff lines) (Table III.2);  the number of 
partially bound lines has also increased, from 80 to  90 (1.3% of all tariff lines).  The HKSAR bound 
all agricultural products (WTO definition) in the Ur uguay Round at zero.  As of 2006, tariff bindings 
covered 33.8% of non-agricultural goods;  all tariffs  that are bound are at zero rates.  Despite the 
HKSAR's initiative of increasing the scope of its bindi ngs, in some sectors, such as petroleum, textiles 
and clothing, and chemicals and photographic suppl ies, the percentage of bound lines remains low 
(below 10%).  Hong Kong, China is, however, willing to negotiate the binding of more tariff lines in 
the context of the Doha Round of negotiations.  
                                                     
 
11 Customs and Excise Department (2004). 
12 Customs and Excise Department (2004). 
13 Customs and Excise Department (2004). 
14 The outbreak of Avian-flu in early 2004 and the subsequent temporary suspension of imports of live 
birds and poultry meat from the Mainland led to an increase of meat and poultry smuggling from the Mainland.   WT/TPR/S/173 Trade Policy Review 
Page 34 
 
 
Table III.2 
Share of fully and partially  bound tariff lines, 2001 and 2006  
 2001 2006 
 Total no. 
of lines Bound  Partially 
bounda Total no. 
of lines Bound  Partially 
bounda 
Total lines  6,465  2,705 (41.8) 80 (1.2) 7,037  3,011 (42.8) 90 (1.3) 
WTO agriculture 886  886 (100.0) 0 (0.0) 951  951 (100.0) 0 (0.0) 
Animals and products thereof 121  121 (100.0) 0 (0.0) 149  149 (100.0) 0 (0.0) 
Dairy products 26  26 (100.0) 0 (0.0) 26  26 (100.0) 0 (0.0) 
Coffee and tea, cocoa, sugar etc. 158  158 (100.0) 0 (0.0) 168  168 (100.0) 0 (0.0) 
Cut flowers, Plants 84  84 (100.0) 0 (0.0) 87  87 (100.0) 0 (0.0) 
Fruit and vegetables 184  184 (100.0) 0 (0.0) 196  196 (100.0) 0 (0.0) 
Grains 18  18 (100.0) 0 (0.0) 18  18 (100.0) 0 (0.0) 
Oil seeds, fats and oils and their products 79  79 (100.0) 0 (0.0) 79  79 (100.0) 0 (0.0) 
Beverages and spirits 44  44 (100.0) 0 (0.0) 57  57 (100.0) 0 (0.0) 
Tobacco 12  12 (100.0) 0 (0 .0) 12  12 (100.0) 0 (0.0) 
Other agricultural products n.e.s. 160  160 (100.0) 0 (0.0) 159  159 (100.0) 0 (0.0) 
WTO non-agriculture (incl. petroleum) 5,579  1,819 (32.6) 80 (1.4) 6,086  2,060 (33.8) 90 (1.5) 
WTO non-agriculture (excl. petroleum) 5,558  1,819 (32.7) 80 (1.4) 6,065  2,060 (34.0) 90 (1.5) 
Fish and fishery products 169  167 (98.8) 0 (0.0) 224  224 (100) 0 (0.0) 
Mineral prod., precious stones & metals 385  184 (47.8) 0 (0.0) 388  188 (48.5) 0 (0.0) 
Metals 609  461 (75.7) 3 (0.5) 639  476 (74.5) 3 (0.5) 
Chemicals and photographic supplies 1,306  108 (8.3) 1 (0.1) 1,356  135 (10.0) 1 (0.1) 
Leather, rubber, footwear and travel goods 177  69 (39.0) 1 (0.6) 217  83 (38.2) 1 (0.5) 
Wood, pulp, paper and furniture 265  252 (95.1) 0 (0.0) 297  279 (93.9) 0 (0.0) 
Textile and clothing 1,114  72 (6.5 ) 0 (0.0) 1,244  106 (8.5) 2 (0.2) 
Transport equipment 166  18 (10.8) 0 (0.0) 169  18 (10.7) 0 (0.0) 
Non-electric machinery 570  156 (27.4) 20 (3.5) 623  165 (26.5) 21 (3.4) 
Electric machinery 286  85 (29.7) 41 (14.3) 338  107 (31.7) 45 (13.3) 
Non-agriculture articles n.e.s. 511  247 (48.3) 14 (2.7) 570  279 (48.9) 17 (3.0) 
Petroleum 21  0 (0.0) 0 (0.0) 21  0 (0.0) 0 (0.0) 
a Only part of the HS line is bound.  
Note: Figures in parentheses refer to the share of bound and pa rtially bound rates by product group:  the 2001 tariff is based on HS96 
nomenclature;  the 2006 tariff is based on HS02 nomenclature. 
Source:   WTO Secretariat calculations, based on data provided by the authorities of Hong Kong, China. 
19. Hong Kong, China does not maintain tariff quotas. 
(iii) Other charges affecting imports 
20. Excise duties are levied on locally manufactured and imported liquor, tobacco, hydrocarbon 
oil, and methyl alcohol, consumed locally;  thei r rates have remained unchanged since March 2001, 
except for an increase from 60% to 80% on the ex-factory value of wine as from March 2002 
(Table III.3).  For tobacco, hydrocarbon oil, and meth yl alcohol, duties are charged at specific rates.  
Duty on liquor (i.e. alcoholic beverages) is levied ad valorem  at three different rates depending on 
alcoholic strength.15  Duties are payable at the point of importation or when the dutiable goods leave 
the local manufactorer.  Excise duty collection as a percentage of total tax revenue dropped from 
5.6% in 2001-02 to 4.4% in 2004-05 (Table I.3).  In 2004, 52.5% of the duties collected, came from 
                                                      
15 Duty rates are prescribed in the Schedule to the Dutiable Commodities Ordinance (Chapter 109, 
Laws of Hong Kong). Hong Kong, China WT/TPR/S/173 
 Page 35 
 
 
hydrocarbon oil, 35% from tobacco, 12.4% from li quor, and 0.1% from meth yl alcohol and other 
products containing methyl alcohol.16  In December 2004, a two-month pub lic consultation exercise 
on lowering the duty on alcoholic beverages revealed a diversity in views;  by 2005 it was decided to 
maintain the status quo .17  As there is little or no domestic production of these or any other 
manufactured goods, these taxes are levied mostly on imports. 
Table III.3 
(a) Excise duties, 2001-06 
2001 2006 Commodity (before 7.03.01) (on or after 7.03.01)  
 (Per cent)  
Type of liquora    
Liquor with an alcoholic strength of more than 30% by volume 
measured at a temperature of 20°C 100 100 100 
Liquor, other than wine, with an alcoholic strength of not more 
than 30% by volume measured at a temperature of 20°C  30 40 40 
Wine  60 60 80 
 (Hong Kong dollar)  
Tobacco    
Per 1,000 cigarettes 766 804 804 
Cigars 986/kg. 1,035/kg. 1,035/kg. 
Chinese prepared tobacco 188/kg. 197/kg. 197/kg. 
All other manufactured tobacco except tobacco intended for the 
manufacture of cigarettes 928/kg. 974/kg. 974/kg. 
Hydrocarbon oil    
Aircraft spirit 6.51 /litre 6.51/litre 6.51/litre 
Light diesel oil 2.89/litre 2.89/litre 2.89/litre 
Motor spirit (unleaded petrol ) 6.06/litre 6.06/litre 6.06/litre 
Motor spirit (leaded petrol) .. .. 6.82/litre 
Ultra low sulphur diesel 1.11/litre 1.11/litre 1.11/litre 
Methyl alcohol and any admixture contai ning methyl alcohol HK$840/hectolitre measur ed at a temperature of 20°C;  plus 
HK$28.10/hectolitre for every 1% by which the alcoholic strength by volume exceeds 30%. 
.. Not available. 
a Where there is no or insufficient inform ation available to determine the value of imported liquor of less than 12 litres, the  
Commissioner of Customs and Excise (or authorized officer) ma y assess the duty payable at a rate of HK$160 per litre.  For 
quantities exceeding 12 litres, the transaction va lue of the goods will be used as the pr imary basis for determining value.  If  the 
transaction value cannot be established, the transacti on value of an identical or  similar good will be used. 
Source:  Customs and Excise Departmen t: http://www.customs.gov. hk/eng/major_dutiable_freeport_e.html#liq. 
(b) Local production of excisable commodities, 2001-06 
Commodity  2001/02 2002/03 2003/04 2004/05 2005/06 
Liquor (beer and 
Chinese-type spirits)  Quantity produced 
('000 litre) 47,814 47,891 39,957 37,197 44,930 
Tobacco (cigarettes)  Quantity produced  
(billion sticks) 11.2 13.3 15.1 17.7 16.6 
Source: Information provided by the authorities of Hong Kong, China. 
                                                      
16 Customs and Excise Department (2004). 
17 Government of the HKSAR (2005b). WT/TPR/S/173 Trade Policy Review 
Page 36 
 
 
21. The tax on the first registration of motor vehicl es, administered by the Transport Department, 
remains in place.18  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 2003.19  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.20  As no vehicles or parts subject to this ta x are produced in the HKSAR, the tax is, in 
practice, levied exclusively on imports.  
(iv) Customs valuation and rules of origin 
Customs valuation 
22. Since no customs duties or fees are levied on imports, there are no general laws, regulations, 
or administrative procedures for valuing goods for customs purposes.21  The  value of goods for the 
purpose of assessing the ad valorem excise duties is determined in accordance with the WTO 
Customs Valuation Agreement.22  For imported and domestically produced liquor, the ex-factory price 
is the basis for assessing the duty. 
Rules of origin 
23. As the HKSAR does not apply import tariffs, it has no preferential rules of origin.23  I n  
general, no certificate of origin is required for impor ts, nor is it mandatory to indicate the origin on 
imported goods.24  In the case of re-exports, the origin initially conferred by the place from where the 
goods originated is maintained.  As discussed earlier (Chapter II), in order to be eligible for duty-free 
tariff treatment under the Closer Economic Pa rtnership Arrangement (CEPA), HKSAR products 
should observe the agreed rules of origin requi rements (on 1,407 Mainland 2006 product codes);  for 
products that have no agreed rules of origin, their relevant rules are jointly worked out twice a year, on application by the industry.
25 
                                                      
18 Motor Vehicles (First Registration Tax) Ordinance (Chapter 330, Laws of Hong Kong). 
19 No exemption is granted for air-conditioners, audi o equipment, anti-theft devices or distributors' 
warranties.  The marginal tax rates system covers priv ate cars and van-type light goods vehicles not exceeding 
1.9 tonnes.   
20 Tax rates escalate on the basis of the vehicle value.   For example, a rate of 35% is charged for the 
first HK$150,000 of taxable value, 65% for next HK$150,000, 85% for next HK$200,000, and 100% for the 
balance (i.e. for taxable value over HK$500,000).  The taxable value of a vehicle is calculated on the basis of its 
published retail price or the provisional taxable value assessed by the Customs and Excise Department. 
21 WTO document G/VAL//N/1/HKG/1, 31 January 1996. 
22 Section 26A of the Dutiable Commodities Ordinance stipulates the valuation method used in 
Hong Kong, China. 
23 WTO document G/RO/N/1/Add.1, 22 June 1995. 
24 However, where an origin indication is given, the origin would be determined as the country in 
which the good last underwent a treatment or process that permanently and substantially changed the shape, 
nature, form, or utility of the basic materials used in its manufacture;  or in which it was wholly grown or mined 
(WTO documents G/RO/N/1/Add.1, 22 June 1995, G/RO/N/10, 16 August 1996, G/RO/N/24, 15 January 1999, G/RO/N/30, 13 February 2001). 
25 Under CEPA, three major types of rules of origin are used for most products concerned:  process-
based origin rules (for textiles and cl othing, food and beverages, pharmaceu tical, plastic and metal products);  
change in tariff heading;  and the 30% value-added requirement.  For other items, including fish and aquaculture Hong Kong, China WT/TPR/S/173 
 Page 37 
 
 
(v) Import prohibitions, licensing, and restrictions 
24. Hong Kong, China applies import restrictions to ensure security, protect the environment and 
public health, and comply with international oblig ations, including United Nations Security Council 
resolutions and international conventions. 
(a) Import prohibitions  
25. In accordance with decisions of the United Na tions Security Council, imports of rough 
diamonds from Liberia and Côte d'Ivoire are prohibited.26 
26. In general, imports of all oz one-depleting substances (ODS), are prohibited or controlled with 
import and export licences.  Methyl bromide can onl y be imported and used in HKSAR for quarantine 
and pre-shipment applications, which are exempted uses under the Montreal Protocol. 
27. Imports of hazardous wastes listed in Schedule 7 to the Waste Disposal Ordinance from 
member countries of the EC, the OECD, and Liechte nstein have been prohibited since April 2006.  
(b) Import licensing 
28. Hong Kong, China's import licensing regime has not  changed substantially since its previous 
Review in 2002.  The regime is mainly in pl ace for health, safety, environmental, and security 
reasons, but also to maintain a stable supply of ri ce and manage a reserve stock (Chapter IV), ensure 
the collection of excise duties, and enforce intellectual property rights.  The list of items subject to licensing in 2002 remains, by and large, unchanged (Table AIII.1).  The only change involves the 
addition of rough diamonds from countries/economies subject to the Kimberly Process Certification 
Scheme since 2 January 2003
27, in order to safeguard HKSAR's interest as a trading hub for diamonds 
in this region;  in 2004 and 2005, Customs and Excise Department officers, conducted 473 and 
447 consignment inspections and 9 and 20 investigations on rough diamonds.28  
29. Transhipment cargoes of "strategic" commodities (sections (2)(i) and (3)(iii)) are treated as 
imports and exports;  therefore, they are also s ubject to licensing requireme nts.  Except for some 
sensitive items, as set out under the la w, articles in transit are not subject to licensing.  HKSAR 
follows closely the thresholds adopted by certain international control regimes (section (3)(iii)).  
Whenever these regimes change their control lists, HKSAR follows suit, where appropriate, to ensure 
that its controls are up to international standards.   The last amendment of the strategic commodities 
control lists was effected in July 2006 and refl ects the changes adopted by international control 
                                                                                                                                                                     
products, agreed rules could be wh olly obtained, or take account of the characteristics of the products 
concerned.  Other criteria, such as Hong Kong brand, may also be used when applicable.  Government of the 
HKSAR (2004a);  Trade and Industry Department (2005);  in Trade and Industry Department (2006) it was announced that the Mainland and Hong Kong had signed the CEPA Supplement on further liberalization of 
trade in services in the Mainland for Hong Kong and strengthening cooperation in trade and investment;  and 
Trade and Industry Department (2006a). 
26 Prohibitions on imports from Iraq, and imports of  rough diamonds from Angola and Sierra Leone are 
no longer in force. 
27 The Kimberly Process (KP) Certification Scheme for rough diamonds seeks to stop trade in "conflict 
diamonds" from fuelling armed conflicts, activities of rebe l movements and illicit proliferation of armaments.  
For more information on trade-related aspects of the Scheme see WTO (2005) and (2006).  The WTO General 
Council accepted a waiver (from 1 Ja nuary 2003 to 31 December 2006 ) for the Kimberley Process on 
15 May 2003 (WT/L/518). 
28 Customs and Excise Department (2004). WT/TPR/S/173 Trade Policy Review 
Page 38 
 
 
regimes up to end 2005.  Amendments affected some 40 control items.29  The entry into operation of 
the Chemical Weapons (Convention) Ordinance in  June 2004, enabled full implementation of the 
Chemical Weapons Convention on the ban of ch emical weapons and the monitoring of activities 
involving sensitive chemicals.  Thus, the HKSA R ensures continued access  to the Convention's 
scheduled chemicals for use in its indus trial, medical, research, and trading areas.30 
30. There are no estimates of the percentage of trade covered by import licences. 
(c) Quantitative restrictions 
31. Imports of hydroclorofluorocarbons (HCFCs) fo r local consumption (i.e. not for re-export), 
continue to be subject to a quantitative restriction sy stem most recently revised in January 2004.  This 
is to ensure that the amount used for local consumption does not exceed levels agreed under the 
Montreal Protocol on Substances that Deplete the Ozone Layer.  The quota size is determined on a 
twelve-month basis.  Part of the quota (normal quotas)  is allocated automatical ly to importers, based 
on past performance;  the remainder (free quotas) is allocated on a first-come, first-served basis.  
Licences are issued to registered  companies for each consignment.   In the case of imports for 
re-export, which are not subject to quotas, import a nd export licences are issued at the same time and 
goods must be exported within the va lidity period of the export licences.  
32. The Rice Control Scheme was liberalized effec tive 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 (Chapter IV ).  Nevertheless, rice remains subject to import 
licensing procedures (Table AIII.1).   The Government only maintains minimum control (i.e. a 
registration and licensing system) to ensure a stable s upply of rice, and to keep a reserve stock to cater 
for emergencies or any short-term shortage. 
(vi) State-trading 
33. Hong Kong, China has notified that it does not ope rate any state-trading enterprises as defined 
in Article XVII:4(a) of the GATT 1994 and Paragra ph 1 of the Understanding on the Interpretation of 
Article XVII.31 
(vii) Government procurement 
34. Government procurement continues to be based on the principles of best value for money, fair 
competition, transparency, and public accountabilit y.  Purchases of goods, services, and construction 
services by the Government have continued their d eclining trend;  between  2002 and 2005 they fell 
from 2.59% of GDP to 1.2% (Table III.4).  Accord ing to the authorities, due to unavailability of 
locally produced goods, most products purchased by  government entities are imported and, in 2005, 
over 96% of the products purchased by the G overnment Logistics Department (GLD),32 the central 
procurement agency for goods and related servi ces for the HKSAR Government, were imported. 
                                                      
29 The major changes include the removal of controls over microprocessors that have multiple data or 
instruction bus or serial communication ports, the relaxation of control threshold in terms of operation speed for digital computers, and the new control imposed on certain chemicals that can be used as toxic chemical agents. 
30 Customs and Excise Department (2004). 
31 WTO document G/STR/N/11/HKG, 23 March 2006. 
32 The HKSAR Government does not maintain statis tics on the share of purchases from foreign 
suppliers under all government procurement contracts.  The GLD, however, maintains procurement statistics based on the place of origin for manufactur ing goods supplied under GLD contracts.  Hong Kong, China WT/TPR/S/173 
 Page 39 
 
 
35. Government procurement is governed by the Stores and Procurement Regulations (SPRs) 
issued by the Financial Secretary under the Public Finance Ordinance.33  The SPRs are supplemented 
by Financial Circulars issued by the Secretary fo r Financial Services and the Treasury.  The Treasury 
Branch of the Financial Services and Treasury Bureau  maintains online up-to-da te information on the 
legal and institutional framewor k (including the "Guide to Procurement" and information on 
tenders).34  The authorities consider that the principles underlying the government procurement 
system of the HKSAR are consistent with the spirit and objectives of the WTO Government Procurement Agreement to which the HKSAR is a signatory.   
Table III.4 
Government procurement, 2002-05a 
(HK$ million and per cent)  
 Central 
government 
entities Ratio to GDP Other entities Ratio to GDP Totalb Ratio to GDP
2001     
Goods 8,097.54 0.62 609.85 0.05 8,707.39 0.67 
Services (other than construction) 4,690.50 0.36 1,629.68 0.13 6,320.18 0.49 
Construction services 16,934.68 1.30 16,850.81 1.30 33,785.49 2.60 
Total  29,722.72 2.29     
2002       
Goods 4,423.21 0.35 489.07 0.04 4,912.28 0.38 
Services (other than construction) 3,593.19 0.28 2,914.19 0.23 6,507.38 0.51 
Construction services 25,093.42 1.97 12,260.52 0.96 37,353.94 2.93 
Total  33,109.82 2.59     
2003       
Goods 7,448.36 0.60 690.86 0.06 8,139.22 0.66 
Services (other than construction) 2,198.50 0.18 1,927.66 0.16 4,126.16 0.33 
Construction services 28,228.89 2.29 5,013.60 0.41 33,242.49 2.69 
Total 37,875.75 3.07     
2004       
Goods 4,324.44 0.33 1,341.56 0.10 5,666.00 0.44 
Services (other than construction) 2,807.94 0.22 1,891.45 0.15 4,699.39 0.36 
Construction services 16,743.66 1.30 5,534.93 0.43 22,278.59 1.72 
Total 23,876.04 1.85     
2005       
Goods 3,603.04 0.26 1,556.00 0.11 5,159.03 0.37 
Services (other than construction) 3,046.80 0.22 1,983.12 0.14 5,029.92 0.36 
Construction services 9,975.77 0.72 8,217.51 0.59 18,193.28 1.32 
Total 16,625.61 1.20     
a Statistics include only procurement of goods  and services of a value exceeding HK$0. 5 million, and construction services of a  
value exceeding HK$1 million. 
b There may be a slight discrepancy between the sum of individual items and the totals due to rounding.  
Source: Information provided by the authorities of Hong Kong, China.  
36. In general, the GLD is the central procurem ent agent for the HKSAR Government and for 
certain public-funded organizations, such as the Hosp ital Authority.  The GLD pays for these supplies 
                                                      
33 Chapter 2, Laws of Hong Kong. 
34 This information is available at:  http://www.fstb.gov.hk/tb/eng/procurement/content.html 
[4 April 2006]. WT/TPR/S/173 Trade Policy Review 
Page 40 
 
 
from an advance account and is reimbursed by th e end-users when they draw the goods from the 
GLD.  The GLD also acts as the purchasing agen t for stores and equipment required by specific 
government departments and a few non-government al organizations.  These departments and 
organizations pay from their own accounts directly but rely on the GLD for expertise in sourcing, 
tendering, negotiations, and contract administrati on.  The Marine Department has the delegated 
authority to purchase boats itself. 
37. Construction services are procured by the work s departments concerned, under the general 
supervision of the Environment, Transport and Wo rks Bureau.  The Bureau gives general guidance 
and technical advice on tendering procedures and cont ract administration matters in respect of works 
contracts, and maintains a register of approved works contractors and a performance report system. 
38. The authorities ensure that procurement procedur es and practices are clear and transparent.  
To encourage competitive tenders, all necessary info rmation is provided in the tender documents and 
all potential suppliers are given the same  information to prepare their bids.35  All suppliers are treated 
equally and there is no discrimina tion between products on the basis of origin;  where appropriate, 
consulates and overseas trade commissions may be notif ied of the calls for tenders.  In drawing up 
tender specifications, the authorities ensure that th e characteristics laid down for the products or 
services do not create unnecessary obstacles to trade.36  According to the authorities, to promote 
competition, works and services contracts, for instan ce, are normally split into optimal scale to avoid 
excessive market concentration.   
39. The authorities consider that open and competitiv e tendering is the norm.  However, selective 
tendering is normally adopted for works contr acts due to professional and financial capability 
requirements and magnitude:  contractors on the re levant approved list, wh ich is established through 
open and transparent procedures, are invited to tender.37  Restricted or single tendering are used only 
under specified circumstances, such as when strictly necessary to en sure compatibility with existing 
equipment or to protect patented or proprietary products.  In 2005, 21.9% of all contracts were 
awarded through restricted or single tender tende ring and another 48.4% through selective tender. 
40. The Financial Secretary has a ppointed several tender boards to  consider and decide on the 
acceptance of tenders.  The Central Tender Board ch aired by the Permanent Secretary for Financial 
Services and the Treasury deals with tenders exceeding HK$10 million for supplies and general 
services, and exceeding HK$30 million for construction services.  Tenders below these thresholds are 
dealt with by the subsidiary tender boards.38  When evaluating a tender, the authorities take into 
                                                      
35 Key information on all tenders is published in the Government Gazette  (http://www.gld.gov.hk/cgi-
bin/gld/egazette/index.cgi?lang=e&agr ee=0) and supplemented by noti ces (http://www.fst b.gov.hk/tb/eng/ 
procurement/tender01a.html).  Invitations to tender for works contracts are published in the Works Digest  
(http://www.etwb.gov.hk/press_releases_and_publications /publications/digest/index.aspx?langno=1&nodeid=85
3), and in the Environment, Transport and Works Bureau online information (http://www.etwb.gov.hk). 
36 According to the author ities, "unnecessary obstacle to internatio nal trade" carries the same meaning 
as in Article VI.1 of WTO GPA. 
37 The lists and the method for admission are published on the Environment, Transport and Works 
Bureau website and annually in the Government Gazette .  Contractors can apply for admission to the approved 
lists any time.  Moreover, tender invitations under selective tendering are published in the Government Gazette  
and on the internet.  Tenders from tenderers not on the lists of approved contractors will also be considered 
provided there is sufficient time for the procuring bureaux and departments to complete the qualification procedures.  Selective tendering is th erefore considered by the authorities as  equivalent to an open tendering 
process. 
38 The Government Logistics Department Tender Board for tenders, except public works contracts, not 
exceeding HK$10 million;  the Public Works Tender Boar d for tenders for public wo rks and related contracts Hong Kong, China WT/TPR/S/173 
 Page 41 
 
 
account price competitiveness, as well as compliance with users' requirements, reliability of 
performance, best quality, whole-life costs,  and after-sales support, where applicable. 
41. As a signatory to the Agreement on Governme nt Procurement, since 30 December 1998 an 
independent Review Body on Bid Challenges has handled  complaints in this area (Table III.5).  Any 
supplier or contractor with a grievance may also l odge a complaint with the procuring department or 
the relevant tender board and/or the Office of th e Ombudsman.  Suppliers or contractors making an 
allegation of corruption can approach the Independent Commission Against Corruption.  The HKSAR's government procurement system has an  independent scrutiny mechanism to ensure 
accountability.  This includes the Audit Commission head ed by the Director of Audit, the Office of 
Ombudsman, the Independent Commission Against Co rruption, and the Legislative Council.  In 
addition, the GLD has an independent secti on that functions as an internal audit. 
Table III.5 
Contracts awarded by government entities under various tender proceduresa, 2001-05  
 2001 2002 2003 2004 2005 
Contracts awarded 2,438 2,052 2,062 1,896 1,887  
Open tender 1,280 720 750 646 558 
Selected tender 750 902 929 839 914 
Restricted tenderb 408 430 383 411 415 
Single tenderb .. .. .. .. .. 
Complaints by suppliers, contractors or consulting firms to 
the relevant tender board, the Office of the Ombudsman, or 
the Independent Review Body on Bid Challenges 5c 9 6d 2e 0 
.. Not available. 
a The statistics cover only procurement of goods and services of a value exceeding HK $0.5 million, and cons truction services of  a 
value exceeding HK$1 million. 
b Statistics for restricted tenders include single tenders;  sepa rate records are not available for awards by single tenders. 
c Includes three complaints to the Review Body on Bid Challenge s.  Two were considered outside the purview of the Review 
Body, and the third was heard by the Review Body in May 2001. 
d All of the six complaints were made to the Review Body on Bid Challenges.  One was considered outside the purview of the 
Review Body and another was withdrawn by the appellant. 
e Includes one complaint to the Review Body on Bid Challenges. 
Source:  Information provided by the authorities of Hong Kong, China. 
(viii) Local-content requirements 
42. Hong Kong, China does not apply any local-content requirements.   
(ix) Contingency measures 
43. Hong Kong, China has no laws or regulati ons governing anti-dumping and countervailing 
actions39;  nor laws, regulations, or administrativ e procedures related to safeguard actions.40  A s  a  
consequence, the HKSAR has never taken such actions.  
                                                                                                                                                                     
not exceeding HK$30 million;   and the Marine Department Tender Board for marine tenders not exceeding 
HK$5 million. 
39 WTO document G/ADP/N/1HKG/1, 24 March 1995. 
40 WTO document G/SG/N/1HKG/1, 20 March 1995. WT/TPR/S/173 Trade Policy Review 
Page 42 
 
 
(x) Standards and other technical requirements 
(a) Standards 
44. As a predominantly trading economy, conformity  with international standards is of great 
importance to the HKSAR.  Hong Kong, China does not have an official standards authority or 
standardization body producing official domestic standa rds.  Standards, if applied in the HKSAR, are 
imposed for safety, health, and environmental reasons and are essentially based on international 
standards and/or prevailing overseas standards. 
45. The Hong Kong Accreditation Service (HKA S) of the Innovation and Technology 
Commission (ITC) provides accreditation services to laboratories, certification bodies and inspection 
bodies on a voluntary basis under the Hong Kong La boratory Accreditation Scheme (HOKLAS), the 
Hong Kong Certification Body Accreditation Scheme  (HKCAS), and the Hong Kong Inspection Body 
Accreditation Scheme (HKIAS).  HK AS is a signatory to several  mutual recognition arrangements 
(MRAs) or multilateral rec ognition agreements (MLAs).41  By May 2006, HOKLAS has concluded 
MRAs for accreditation of laboratories with 53 accreditation bodies in 45 economies;  HKCAS has 
concluded MLAs for accreditation of quality manage ment system (QMS) certification bodies with 36 
accreditation bodies in 36 economies;  HKIAS has c oncluded MRAs for accreditation of inspection 
bodies with 9 accreditation bodies in 9 economies.  H ong Kong, China has also participated in APEC 
MRAs.42  This enables industry to obtain inform ation on overseas regulatory requirements and 
facilitate trade in relevant products by st reamlining the conformity assessment procedures.43 
46. In general, telecommunications equipment is subject to type approval.  In 1998, the 
Telecommunications Authority (TA) launched the Hong Kong Telecommunications Equipment 
Evaluation and Certification (HKTEC) Scheme.  Th e TA is the only authority allowed to grant 
certificates for radio and wireline equipment.  To  provide a better framework for certification, 
telecommunications equipment is classified under tw o schemes.  Under the Voluntary Certification 
Scheme (VCS) certification of telecommunications  equipment is voluntary and equipment can be 
marketed or used in the HKSAR ev en if it has not been certified.  Examples of equipment that falls 
under the VCS are single-line equipment (e.g. simple  telephones, fax machines, and dial-up modems) 
and low power radio devices.  Under the Compulsory Certification Scheme (CCS), telecommunications equipment must be certified befo re it can be marketed or used in the HKSAR.  
The HKTEC scheme also defines the labelling re quirement for equipment certified by the TA. 
47. Electrical products for household use require a certificate of safety compliance.
44  Electrical 
products are classified as non-prescribed products (e .g. air conditioners, audio and video equipment, 
electric fans, information technology equipment)  or prescribed products (e.g. plugs, adapters, lamp 
holders, flexible cords, and electric water heaters) .  A certificate of safety compliance for a prescribed 
product can be a certificate/report issued by a certification body recognized by the Director of 
                                                      
41 International Accreditation Forum (IAF) MLA, International Laboratory Accreditation Cooperation 
(ILAC) MRA, Pacific Accreditation C ooperation (PAC) MLA, and Asia Pacific Laboratory Accreditation 
Cooperation (APLAC) MRA. 
42 Hong Kong, China's participation in APEC MRAs includes the APEC Arrangement for the 
Exchange of Information on Toy Safety, the APEC MRA on Conformity Assessment of Food and Food 
Products, APEC Arrangement for the Exchange of  Information on Food Recalls, the APEC MRA on 
Conformity Assessment of Electrical and Electronics Products Part I Information Exchange, and the APEC 
MRA on Telecommunications Equipment Part I:  Mutual Recognition of Test Reports and Part II:  Mutual 
Recognition of Certification. 
43 APEC (2003). 
44 Electrical Products (Safety) Regulation (Chapter 406G, Laws of Hong Kong). Hong Kong, China WT/TPR/S/173 
 Page 43 
 
 
Electrical and Mechanical Services (DEMS) or a declaration of conformity issued by the 
manufacturer recognized by DEMS.  A certificate of safety compliance for non-prescribed electrical 
products can be a self-declaration of conformity i ssued by a product manufacturer who does not need 
to be recognized by the DEMS, a test certificate/re port issued by a certification body recognized by 
DEMS, or a declaration of conformity issued by a manufacturer recognized by DEMS.  
48. Between 2002 and March 2006, the HKSAR made  16 notifications to the WTO Committee 
on Technical Barriers to Trade, including eight regarding voluntary labelling requirements.  The 
requirements cover mainly telecommunication equipm ent, laser printers, dehumidifiers, domestic gas 
appliances, computers, televisions, liquid crystal display screens, food products, safety seat belts, and 
motor vehicles.  Table AIII.2 shows the amendments /revisions made to exis ting standards/technical 
regulations, and the new standards/technical re gulations adopted since 1999 in the HKSAR.  The 
Innovation and Technology Commission is the WTO T echnical Barriers to Trade enquiry point.   
(b) Sanitary and phytosanitary regulations 
49. The objective of Hong Kong, China's food safety control system is to ensure that food 
products are hygienic, safe, and fit for human consum ption.  This system is based on risk assessment, 
placing particular emphasis on safety control at the source.  The authorities consult with traders and consumers on issues regarding the control of food safety. 
50. The Public Health and Municipal Services Or dinance (Chapter 132) and its subsidiary 
regulations stipulate sanitary controls.
45  The Ordinance is aimed at preventing the consumption of 
food unfit for human consumption.  It lists the offe nces of selling such food, and authorizes officers to 
seize, remove, and destroy it.  A subsidiary re gulation prescribes detailed rules on food standards, 
controls on imports of food, and re lated matters.  Regarding phytosanitary control, which is aimed at 
preventing the introduction and spread of plant p ests and diseases, Hong Kong, China continues to 
maintain a quarantine system for plants based on the recommendations of the Asia and Pacific Plant 
Protection Commission (APPPC). 
51. All food items available in the market (w hether imported, domestically produced or 
processed) are surveyed at random in order to ensure safety.  Priority is given to high-risk foods, 
products that are subject to complaints, and items su spected of being related to food poisoning cases.  
Collected food samples are subject to chemical tests (to detect additives and contaminants), 
microbiological tests (on bacteria and virus), or radioactive tests (to monitor the level of radioactivity in food supply), depending on the product's nature and associated risks.   
52. As from 2000, the authorities are promoting the adoption of the Hazard Analysis Critical 
Control Point (HACCP) system of controls to pr event food safety hazards rather than relying on 
end-product testing.  The HACCP is integrated into the food production and manufacturing process.  
However, it is not mandatory for the operators to im plement the HACCP system.  It is estimated that 
about 30 out of 19,500 food establishments were implementing the HACCP system in their production processes in 2005.   A Centre for Food Safety under the Food and Environmental Hygiene 
                                                     
 
45 These regulations are:  Colouring Matter in Food Regulations;  Dried Milk Regulations;  Food 
Adulteration (Artificial Sweeteners) Regulations;  Food Adulteration (Metallic Contamination) Regulations;  
Food and Drugs (Composition and Labelling) Regulations;  Frozen Confections Regulation;  Harmful Substances in Food Regulations:  Imported Game, Meat and Poultry Regulations;  Milk Regulation;  Mineral 
Oil in Food Regulations;  Preservatives in Food Regulations;  Food Business Regulation and Slaughterhouse 
Regulation;  and Smokeless Tobacco Pr oducts (Prohibition) Regu lations (viewed at:  http://www.feh d.gov.hk/ 
safefood/foodlaw1.html [5 April 2006]. WT/TPR/S/173 Trade Policy Review 
Page 44 
 
 
Department  is to promote HACCP;  efforts are under way to  modify the HACCP system to help small 
and medium-sized enterprises (SMEs) adopt the system.   
53. Sanitary controls on imported food are imposed solely on public health grounds and on the 
basis of scientific evidence.  Imports of perish able products (e.g. milk, milk beverages, frozen 
confections,  game, meat, and poultry) must be accompanied by official health certificates issued by 
recognized overseas authorities.  Inspection and random sampling of these goods are carried out at import control points. 
54. Vegetables imported from Mainland China must be accompanied by an official pesticide 
declaration form.  Random samples of vegetables are taken at the Man Kam To control point for 
pesticide residues testing;  if the results are positive, goods are recalled. 
55. Seafood is considered a high-risk food.  He nce, seafood shipments are subject to random 
inspection and sampling for testing at import control points.  In particular, importers of coral reef fish from "high-risk" harvest zones (i.e. where ciguatoxin has previously been found) need to submit fish 
samples to the Food and Environmental Hygiene Depa rtment (FEHD) for testi ng before importation.  
Importation may only take place once the samples are show n to be ciguatoxin free.  For coral reef fish 
from other harvest zones, traders are required to notify the FEHD upon importation, and random 
samples are taken upon arrival. 
56. Various measures are implemented to ensure that live animals are safe for human 
consumption:  verification and inspection of hea lth documents, of tags/tatt oos, and of the general 
health conditions of imported food animals at poi nts of entry;  ante-mortem inspection of every 
animal to be slaughtered;  and random urine samplin g of live food animals to test for prohibited and 
restricted chemicals as specified in the Public Health (Animals and Birds) (Chemical Residues) 
Regulation.  All consignments of local and importe d poultry are tested for the avian influenza virus 
before being sold or slaughtered.  Also, all lo cal and imported poultry is required to be channelled 
through the government wholesale market and all liv estock slaughter is required to be at government-
licensed slaughterhouses. 
57. Between 2002 and March 2006, H ong Kong, China made eight notifications (including 
addenda and revisions) to the WTO Committee on Sa nitary and Phytosanitary Measures.  It has 
notified, inter alia,  the temporary suspension of imports (i ncluding special permits) of food (cream, 
meat) and live animals originating in various countries  that have not eradicated diseases, such as foot 
and mouth disease and equine disease, as well as the lifting of these measures once the health threat 
disappeared.  It also notified the entry into for ce in December 2003 of the new regulation on chemical 
residues in fodder, food animals and food animal products, and that of the special permit for imports of live dogs and cats as of September 2005.
46  
(c) Marking and labelling 
58. There are a number of regulations governing labelling, packaging and/or advertisement 
requirements for imported or domestically produced articles (Table III.6). 
59. Food labelling requirements are reviewed regularly  by the Government, taking as a reference 
the international standards on food labelling devel oped by the Codex Alimentarius Commission.  The 
Food and Drugs (Composition and Labelling) (Amendment) Regulation 2004 requires the 
manufacturer or packer of prepackag ed food to declare the presence of allergenic substances in food 
                                                      
46 WTO documents G/SPS/N/HKG/12/Add.1, 27 October 2003, and G/ SPS/N/HKG/22/Add.1, 
3 August 2005. Hong Kong, China WT/TPR/S/173 
 Page 45 
 
 
and the functional use and specific name or INS nu mber of food additives added to the food.  The 
Amendment Regulation also provides more flexibility for the indication of durability.  The Administration plans to introduce legislative amendment on mandatory labelling of nutritional 
information in 2007.  To ensure that food labelli ng requirements are observed, regular inspections are 
carried out and random food samples are tested to ve rify the stated contents;  appropriate action is 
taken to enforce compliance.  Depending on the po ssible health impact, an offender (i.e. importer 
and/or seller) may either be warned or prosecuted. 
Table III.6 
Labelling requirements, 2006 
Goods  Labelling requirement  
Toys and children's products (covered under the Toys and 
Children's Products Safety Ordinance) (Chapter 424)) Trader's name or other identifica tion mark and local address of the 
manufacturer, importer or supplier must be in either English or 
Chinese, or both.  Any warning or caution with respect to the safe 
keeping, use, consumption or dis posal must be in both English and 
Chinese. 
Consumer Goods Safety Ordinance (Chapter 456) Warning or caution labels on consum er goods (e.g. cosmetics, 
condoms, etc.) with respect to thei r safe keeping, use, consumption 
or disposal must be in both English and Chinese. 
Telecommunications equipment including radiocommunications equipment for use in Hong Kong and wireline equipment for 
connection to the public tel ecommunications network (The 
Telecommunications Ordinance (Chapter 106))  Labels may be affixed to certifie d telecommunications equipment, 
the format of which is determined by the Telecommunications 
Authority (TA), on a voluntary basis.   
Pre-packaged foods  (Food and Drugs (Composition and 
Labelling) Regulations (Chapter 132W)   Name or designation of food;  list of ingredients;  durability 
indication;  special conditions for st orage or instructions for use;  
name and address of manufacturer or packer;  count, weight, or 
volume. 
Packaged pharmaceuticals (The Pharmacy and Poisons Ordinance (Chapter 138)) Bilingual dosage direction and other applicable cautionary 
statement(s).  Packages must be in impermeable containers to 
prevent accidental leakage. 
Dangerous goods covered under th e Dangerous Goods Ordinance 
(Chapter 295) Labels, setting out the nature of h azards, must be bilingual (Chinese 
and English)  
Source:  Information provided by the authorities of Hong Kong, China. 
60. Hong Kong, China has continued to introduce new voluntary labelling requirements under its 
energy efficiency labelling scheme (EELS) for vari ous household electrical appliances;  notifications 
to the WTO Committee on Technical Barriers to Trade from 2002 to March 2006, covered laser printers, dehumidifiers, liquid crystal display monito rs, televisions, computers, electronic ballasts, and 
domestic gas instantaneous water h eaters were covered.  Participating manufacturers, agents or 
retailers must affix energy labels in specified form at onto their registered appliances, indicating that 
the appliances have met certain energy efficiency  and performance requirements in accordance with 
the EELS. 
61. The process of putting in place labelling re quirements for nutritional information and 
genetically modified foods is under way.
47  The Government completed the regulatory impact 
assessment study on nutrition labelling scheme and propo sed to implement the nutrition regulations in 
two phases;  the legislative amendments are to be introduced to the Legislative Council in 2006/07.  A 
set of voluntary guidelines on labelling of genetically  modified food is to be issued in 2006. 
                                                      
47 Health, Welfare and Food Bureau online inform ation.  Viewed at: h ttp://www.hwfb.gov.hk/en/ 
press_and_publications/otherinfo/050826_labelling/labe lling.html, and http://www.hwfb.gov.hk/en/committees/ 
board/paper2003_03.html [31 January 2006];  WTO documents G/TBT/N/HKG/2, 4 April 2001 and G/TBT/N/HKG/18, 16 January 2004. WT/TPR/S/173 Trade Policy Review 
Page 46 
 
 
(3) MEASURES DIRECTLY AFFECTING EXPORTS  
(i) Registration and documentation 
62. An export declaration must be lodged electroni cally with the Customs and Excise Department 
within 14 days of the export of a consignment, except for exempted articles.  Electronic submission of 
trade declarations using the Government El ectronic Trading Services became mandatory from 
April 2000.48  Trade declarations are also required for re -exports.  The data on trade declarations are 
used mainly for compiling trade statistics. 
63. The Trade and Industry Department (TID) admini sters a certification system to establish the 
origin of the HKSAR's exports and to meet the re quirements of the importing countries, including for 
GSP49, exports of restrained textiles (until end 2004) , and CEPA-covered products (section (2)(iv) and 
Chapter II).  The TID along with five industry or ganizations are responsible for issuing these 
certificates of origin (COs).50  Only registered manufacturers with verified manufacturing capacity to 
perform the origin-conferring processes may apply for COs.  TID also ensures that the other issuing 
organizations adopt the same practices and pr ocedures, and follow the rules of origin. 
64. If requested by the importing country, exports originating in Hong Kong, China are 
accompanied by a sanitary and/or phytosanitary certif icate issued by the Ag riculture, Fisheries and 
Conservation Department and by the Food  and Environmental Hygiene Department.51   
(ii) Export charges and levies 
65. No major changes have been made to the expor t declaration charges, which are specific in 
nature but escalate by value (Table III.7).  By contr ast, exports of clothing and footwear continue to 
be subject to a clothing industry training levy of HK$0.30 per every HK$1,000 exported.52  
Hong Kong, China does not levy any export-related duties or taxes. 
(iii) Export prohibitions, licensing, and restrictions 
(a) Export prohibitions 
66. Exports of ozone-depleting substances (ODSs) to non-parties to the Montreal Protocol are 
banned. 
                                                      
48 Customs and Excise Department online information.  Viewed at:  http://www.customs.gov.hk/eng/ 
major_declaration_statutory_e.html [5 April 2006]. 
49 Hong Kong, China is a beneficiary under the GSP schemes operated by Canada, Norway and the 
Russian Federation. 
50 The five organizations, designated by the Government under Article 11 of the International 
Convention for the Simplification of Customs Formalities 1923, are:  the Hong Kong General Chamber of 
Commerce;  the Federation of Hong Kong Industries;  the Indian Chamber of Commerce, Hong Kong;  the Chinese Manufacturers' Association of Hong Kong;  an d the Chinese General Chamber of Commerce.  CITES 
certificates of origin for the purpose of exporting an endangered animal or  plant species are issued in the form of 
an export licence by the Agriculture, Fisheries an d Conservation Department (section (3)(iii)(b)). 
51 Since 1 January 2000 health cer tificates for food of animal origin are issued by the Food and 
Environmental Hygiene Department. 
52 Customs and Excise Department online information.  Viewed at:  http://www.customs.gov.hk/eng/ 
major_declaration_charge_e.html [5 April 2006]. Hong Kong, China WT/TPR/S/173 
 Page 47 
 
 
67. Hong Kong, China complies with trade sancti ons imposed by the UN Security Council.53  
Table III.7 
Export declaration charges, 2006 
(Hong Kong dollars) 
 Government 
(declaration charge) Service providers (service 
charge for direct electronic 
declaration) (HK$)b Paper-to-electronic 
conversion service charge 
(HK$)a,b 
Exports/Re-exports    
Value of up to HK$46,000 0.50 about 12 about 30-50 
Each additional HK$1,000 0.25 n.a.c n.a.c 
n.a. Not applicable. 
a The charge includes converting the information into el ectronic messages and onward transmission to Government. 
b These are standard charges published by service providers from time to time and may be subject to change.   
c There is no charge for additional declarations. 
Source:  Customs and Excise Departmen t: http://www.customs. gov.hk/eng/major_declaration_charge_e.html. 
(b) Export licensing and restrictions 
68. Certain exports require an export licen ce, permit or certificate on grounds of, inter alia,  
protection of the ozone layer and the environmen t, security, public health, and food security.54  These 
exports are:  textiles;  ozone-depleting substances (ODS);  "strategic" commodities;  dangerous drugs, 
pharmaceutical products, and medicines;  rice (the only reserved commodity)55;  dutiable 
commodities;  endangered animals and plant species (secti on (3)(i));  optical disc mastering and 
replication equipment;  controlled chemicals, pe sticides, hazardous wastes and non-recyclable 
wastes56;  rough diamonds;  radio transm itting apparatus;  w eapons, explosives, firearms, ammunition, 
and weapons. 
69. Exports of "strategic" commodities must be li censed by the Director-G eneral of Trade and 
Industry.57  Export controls are aimed at preventing the HKSAR from being used as a conduit for 
proliferation of weapons of mass destruction, and to secure the HKSAR's  continued access to 
technology and high-tech goods.  The HKSAR's "strategic" trade control lists are based on the controls adopted by various internationa l export control regimes and conventions.
58  The control lists 
are updated from time to time in or der to reflect changes made by international regimes (see also 
                                                      
53 UN Security Council Resolutions adopted by China extend to Hong Kong, China. 
54 Information on controlled exports (last updated 30 March 2005) by the Customs and Excise 
Department.  Viewed at:  http://www.customs.gov.hk/eng/major_import_prohibited_export_e.html#top [5 April 2006].  Poultry carcasses and poultry produ cts have been free of e xport licence requirements 
since 2000. 
55 Under the Reserved Commodities Ordinance and the Reserved Commodities (Control of Imports, 
Exports and Reserve Stocks) Regulations a reserve stock of scheduled commodities has to be kept, and imports 
and exports of these commodities ar e subject to licensing control. 
56 Hong Kong, China has been exercising permit control since 1996 for exports of hazardous wastes 
(listed in Schedule 7 to the Waste Disposal Ordinance) and non-recyclable wastes (wastes not listed in Schedule 
6 to the Waste Disposal Ordinance, contaminated, or not intended for recycling or re-use purposes) in accordance with the Basel Convention. 
57 These commodities are listed in the Schedules to  the Import and Export (Strategic Commodities) 
Regulations.  They include munitions, chemical and biological weapons and their precursors, nuclear materials and equipment, and industrial dual-use goods. 
58 These are:  the Wassenaar Arrangement, Nucl ear Suppliers Group (NSG), Zangger Committee 
established under the Nuclear  Non-Proliferation Treaty (NNPT), Missile Technology Control Regime (MTCR), 
Australia Group (AG), and Chemical Weapons Convention (CWC). WT/TPR/S/173 Trade Policy Review 
Page 48 
 
 
section (2)(v)).  Transhipments and re-exports of "strategic" commodities are treated as imports and 
exports and are also subject to licensing. 
70. Until the end of 2004, a major portion of the textiles and clothing exports from Hong Kong, 
China was subject to quantitative restrictions by  Canada, the EC, and the United States under the 
WTO Agreement on Textiles and Clothing (ATC).  Amendments to the Import and Export (General) 
Regulations were made to provide for the implemen tation of a modified textiles control and licensing 
system as from 1 January 2005 in view of the quota phase-out.  To facilitate trade, in 2005 the textiles control arrangements have been simplified.  A ll quota-related services have ceased.  Under the 
post-2004 textile control system, licensing requireme nts for commercial shipments of textiles have 
been streamlined and different licensing arrangeme nts applied to "sensitive" and "non-sensitive" 
markets.
59  Sensitive markets include Mainland China, the United States, and the EC.  All other 
economies are regarded as non-sensitive markets. 
71. 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 Trader Registration Scheme (TTRS).
60  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 garments destin ed for the United States and the 
EC have been subject to the produc tion notification (PN) requirement.61  Textiles shipments involving 
non-sensitive markets are covered by comprehensiv e or consignment-specific import or export 
licences.62 
72. In order to detect and prevent fraudulent e xports of textiles and clothing products, the 
HKSAR maintains strict controls.  The Commissi oner of Customs and Excise is responsible for 
enforcing this system through the examination and inspection of goods covered by PN, certificates of origin, import/export licences, and notifications at f actories and at entry and exit points.  Customs 
officers verify the origin-conferring production pr ocesses for goods and the accuracy of material 
particulars declared.  Moreover, the factory's pr oduction capacity is measured against its export 
performance.  Offenders may be subject to crim inal prosecution and/or administrative action. 
(iv) Export support 
73. Hong Kong, China does not provide any subsidies to exporters.  
74. Hong Kong, China continues to grant excise  duty exemptions and refunds on duty-paid 
exports upon written consent of the Commissioner of Customs and Excise, or for other specific 
purposes.  The excise duty refunded must in no cas e exceed the amount of duty paid on the goods.  
                                                     
 
59 Details of the import and export licensing requirements for textiles were viewed at:  
http://www.tid.gov.hk/english/ import_export/textiles/ts_maincontent.html [5 April 2006]. 
60 The Import and Export (General)(Amendment) (No. 2) Regulation 2003 introduced the legislative 
framework for the TTRS electronic submission of textiles notifications.  The Amendment Regulation provided 
an open-ended transitional period during which traders may continue to submit notifications in paper form. 
61 Under the Import and Export Ordinance and its subsidiary legislation, no-one can commence 
production of cut-and-sewn garments destined for the Un ited States and the EC unless they lodge a PN with the 
DGTI no earlier than three working days before the day on which production commences.  The PN requirement ensures that the origin-conferring process for the manuf acture of these garments has taken place in Hong Kong, 
China. 
62 A comprehensive import or export licence may cover multiple shipments by the licence holder for 
one year, regardless of the product type, quantities, and import/export market (except sensitive markets). Hong Kong, China WT/TPR/S/173 
 Page 49 
 
 
Duties are also refunded on:  imported goods that do not correspond to the description of the contract 
of sale or are damaged in transit and therefore d estroyed in the HKSAR or returned to the overseas 
suppliers;  goods imported for consular  use;  samples drawn for analysis by the Government Chemist;  
and light diesel oil used in franchised buses and support vehicles.63  Excise duties revenue forgone as 
a result of these exemptions and refunds amounted  to HK$1,718 million for the financial years 
2002/03 to 2005/06.64 
(v) Export finance, guarantees, and insurance 
75. The Hong Kong Export Credit Insurance Corporation (ECIC) provides insurance protection 
for exporters against non-payment by buyers, and country-risks arising from commercial and political 
events;  ECIC covers domestic e xports, re-exports, and external trad e of goods.  Exports of services 
are also covered through policies designed to meet  the requirements of specific service sectors.65  The 
total value of goods and services insured by EC IC increased from HK$26.68 billion in 2001/02 to 
HK$32.39 billion in 2004/05.66  Re-exports was the largest insure d export type, followed by external 
trade and domestic exports, in line with the con tinuing shift of production and sourcing activities to 
Mainland China.  The demand for cover from servi ce providers increased, partly due to increased 
promotional activities by ECIC and partly to th e impact of CEPA.  The ECIC Supported Export 
Finance for SMEs, introduced in May 2000, supports  SMEs involved in exporting in obtaining export 
finance facilities up to HK$1 million per overseas buyer with a ceiling of HK$3 million per exporter. 
(vi) Export promotion and marketing assistance 
76. The Hong Kong Trade Development Council (HKTDC), established in 1966, is the statutory 
organization promoting HKSAR's trade in goods and services.  Its major objectives are to diversify 
markets for HKSAR's exports, and to promote HK SAR's products and services and its role as an 
international business hub for services and information.67  To promote exports, the HKTDC provides, 
inter alia,  trade contacts and business information on a wide range of industries and services;  it also 
holds international trade fairs.  The HKTDC ha s developed specific programmes to support SMEs, 
including a Business Advisory Se rvice and a Customer Service Centre and a Business InfoCentre. 
77. The SME Export Marketing Fund (EMF), set up by the Government in December 2001, is 
aimed at encouraging SMEs to participate in export promotion activities, such as overseas trade 
fairs/exhibitions and study missions, as well as local export-oriented trade fairs/exhibitions. 
Improvement measures introduced since then include  raising the maximum cumulative grant per SME 
from HK$10,000 to HK$80,000.  The application procedures were also simplified on 1 July 2005.68  
                                                      
63 Customs and Excise Department online information, Granting of a Refund .  Viewed at:  
http://www.customs.gov.hk/eng/major_dutia ble_refund_e.html [31 January 2006]. 
64 HK$430.9 million, HK$425.8 million, HK$432.1  million and HK$429.5 million, respectively. 
65 For example, these policies include the Aircraft Services Policy, the Freight Forwarding Services 
Policy, the Hotel Services Policy, the Construction Pr ofessional Services Policy, the Testing and Inspection 
Services Policy, and the Travel Agent Services Policy. 
66 Hong Kong Export Credit Insurance Corporation (2005). 
67 In addition to the head office in Hong Kong, China, TDC has branches in various countries to 
facilitate the implementation of its programmes.  HKTDC's annual expenditu re is around HK$1.64  billion, of 
which about 87%  is covered by self-generated income and the rest by a government subsidy financed through 
the trade declaration charge.  
68 TID online information, SME Funding Schemes .  Viewed at:  http://www.smefund.tid.gov.hk/eng/ 
eng_main.html [7 April 2006]. WT/TPR/S/173 Trade Policy Review 
Page 50 
 
 
(4) MEASURES AFFECTING PRODUCTION AND TRADE  
(i) Incentives 
78. According to its notifications to the WTO Committee on Subsidies and Countervailing 
Measures, during the period under review, Hong Kong , China did not grant any subsidies within the 
meaning of Article XVI:1 of the GATT 1994 and Article 25.2 of the Agreement on Subsidies and 
Countervailing Measures.  Nevertheless, in its last  notification, which now covers support under the 
Fisheries Development Loan Fund, the Fish Ma rketing Organization Loan Fund and the Kadoorie 
Agricultural Aid Loan Fund (Chapter IV) for the fiscal  year 2004/05, it is stated that the notification 
in question "should not prejudge either their lega l status, effects or nature under GATT 1994 and the 
ASCM".69  In his 2006-07 Budget Speech, the Financial Secretary stated that the HKSAR was to 
"continue to promote … economic restructuring, m ove up the value chain and exercise creativity".70  
He also stated that the development of high-va lue-added commercial, fina ncial, and professional 
services, on which HKSAR support was focused at the time of the last Review, had stimulated growth in other sectors, such as convention and exhibition, electronic trading, transportation, hospitality, and 
retail services. 
(a) Tax measures 
79. The income tax system is characterized by lo w statutory tax rates and relatively few tax 
incentives.  Nonetheless, taxes on profits and earni ngs accounted for 64% of total tax revenues in 
fiscal year 2004/05, up from 58.5% in 2000/01 (Chapter I).  To help restore fiscal balance, since 2003/04 changes have been made in the income ta x system, including increases in statutory tax and 
other tax rates.
71  Statutory tax rates on the profits of corporations rose from 16% in 2002 to 17.5% in 
2003/04;  tax rates on the profits of unincorporated  businesses were increased from 15% to 15.5% in 
2003/04 and 16% in 2004/05.72 
80. Effective tax rates on profits tend to be lower th an statutory rates, however, mainly because of 
the tax exemption of dividend income, the absence of capital gains tax, the exclusion from tax of 
offshore income/profits and interest income unde r specified circumstances, as well as generous 
depreciation allowances. For example, compan ies may immediately write off 100% of their 
expenditure on manufacturing plant and machinery and on computer software and hardware.  
Moreover, certain profits earne d from international shipping73, and from airline services74, and interest 
                                                      
69 WTO documents G/SCM/N/95/HKG, 30 October 2 003, and G/SCM/N/123/HKG, 9 February 2006. 
70 Government of the HKSAR (2006a). 
71 For example, for certain payments, such as royalties and licence fees, received by non-residents who 
are not otherwise carrying on business in Hong Kong, the assessable profits are deemed to be a fixed percentage 
(30%) of their receipts instead of th eir actual profits.  The profits tax pa yable is computed by applying the 
appropriate tax rate, depending on whether the recipient is a corporation or an unincorporated business, to the deemed assessable profits.  When the deemed assessable pr ofits rate was increased from  10% to 30% with effect 
from 1 April 2003, the profits tax payable was correspondingly increased. 
72 There is also a salaries tax, calculated on a sliding scale, that cannot exceed the standard rate of 16% 
(from 2004/05 onwards) of total income;  this rate was 15% in 2002/03, and 15.5% in 2003/04. 
73 Shipping profits are exempted from tax when they are derived from:  international operations of a 
Hong Kong registered ship;  the international operation of a ship by a non-resident ship-owner from a country 
that provides tax exemption in respect of uplifts by a non-resident ship-owner from Hong Kong, China;  and the 
international operation of a ship by an enterprise of  a country with which Hong Kong, China has signed an 
agreement for the avoidance of double taxation on/covering shipping income.  The extent of exemption depends 
on the terms of the double taxation agreement (DTA). 
74 Aircraft owners are taxed on a portion of their worldwide profits that is derived from Hong Kong, 
China.  Where there is a DTA covering airline profits , the HKSAR will also tax a resident airline operating Hong Kong, China WT/TPR/S/173 
 Page 51 
 
 
income from deposits placed locally with all author ized banking institutions by corporations (except 
financial institutions) and unincorporated businesses ar e exempt from tax.  No breakdown is available 
on the amount of revenue forgone as a consequence of individual tax incentives, such as accelerated 
depreciation. 
81. To support creativity and innovation, the 2004/05 Budget proposed to extend the profits tax 
deduction for research and development expenses to  cover expenses on design-related activities;  the 
cost of this measure, which was implemented thr ough the Revenue Ordinance 2004, was estimated at 
HK$30 million a year.  To reinforce the status of HKSAR as an international financial centre and to 
bring it in line with major financial markets such as New York and London, the 2003/04 Budget 
proposed to exempt offshore funds from profits tax;   the relevant law, which was passed in March 
2006, is to apply retroactively.75 
82. Owners of land or buildings are charged property tax on their rental income at the standard 
rate of 15% (less an allowance of 20% for re pairs and maintenance).  Properties owned by a 
corporation carrying on a business in HKSAR are exempt from this tax.   However, the corporation’s 
rental income from the properties is included in its assessable profits subject to profits tax.  
83. Waivers and concessions reduce business operating co sts.  The 2002/03 Budget  allowed for 
one-year waivers for water and sewerage charges, th e trade effluent surcharge (imposed on activities 
that emit pollutants), and the business registration fee, as well as a one-year concessionary duty rate 
for ultra-low-sulphur diesel (ULSD).  The authorities indicate that business registration fees were waived only for one year (2002/03), with estim ated revenue forgone of about HK$1.3 billion.   To 
provide temporary relief for the transport indust ry, the Government has extended the concessionary 
duty rate of HK$1.11 per litre on ULSD  up to the end of 2006;  the estimated cost of the concession is 
about HK$1.1 billion in forgone  tax revenue for 2006.   
(b) R&D and technology measures 
84. Since its establishment in May 2001, th e Hong Kong Science and Technology Parks 
Corporation (HKSTPC) has facilitated research and development (R&D), as well as application and 
transfer of technologies to industries in the HKSAR.
76  The HKSTPC continues to provide services 
such as:  nurturing technology start-ups through the incubation programme, providing premises and 
services in the Science Park for R&D activities, a nd offering land and premises in the industrial 
estates for production.  Technology-based companies interested in investing in the HKSAR may apply 
for admission to the various facilities of the HKSTPC.  To qualify for admission, a company must be 
registered in the HKSAR and meet the admi ssion criteria of HKSTPC's respective support 
programmes.  Priority  is given to companies contributing to  the "focus clusters", which HKSTPC 
fosters, namely information technology and te lecommunications, electronics, biotechnology, and 
precision engineering.   
85. The Science Park, which has been develope d and managed by the HKSTPC, is another 
initiative aimed at turning the HKS AR into a regional hub for innova tion and technology.  The Park 
has an area of 22 hectares to be developed in th ree phases.  The first phase was opened in June 2002 
                                                                                                                                                                     
international traffic on its income derived from an agreement country if such income has been granted tax relief 
by that country.  On the other hand, Hong Kong, China will not tax the income of airlines of the agreement 
country derived from the HKSAR. 
75 The exemption provisions of the Revenue (Profits Tax Exemption for Offshore Funds) Ordinance 
2006, passed on 1 March 2006, are to have retrospective effect from 1996/97;  the authorities consider that the 
actual cost to revenue of this proposal should not be significant. 
76 Further details are available at:  http://www.hkstp .org/english/aboutus/about.html [10 April 2006]. WT/TPR/S/173 Trade Policy Review 
Page 52 
 
 
and completed in October 2004.  At end-May 2 006, 82 tenants and 39 "incubatees" had been 
approved for admission.  Construction of the second phase is to be completed in stages from 2007 to 
mid 2008.  
86. The Innovation and Technology Commission opera tes two funds to further facilitate the 
development of the local industry;  these are the Innovation and Technology Fund (ITF), and the 
Applied Research Fund (ARF).77  The ITF, which amounts to HK$5 billion, was launched in 1999 to 
finance projects that contribute to innovation and technology upgrading; as of May 2006, 815 projects 
estimated at HK$2.5 billion had been approved.  The ARF, with HK$750 million, is a venture capital 
fund aimed at providing funds for technology ve ntures and R&D projects that have commercial 
potential.  Between November 1998 and May 2006,  the ARF approved HK$409.75 million to support 
25 projects (involving information technology, telecommunications, electronics, materials, biotechnology).  The Innovation and Technology Co mmission assists the Vocational Training Council 
in administering the new Technology Training Scheme .  In addition, the Hong Kong Applied Science 
and Technology Research Institute Company Limite d (ASTRI) was set up in January 2000 to enhance 
research capability. 
87. The HK$250 million DesignSmart Initiative is ope rated by the Government to strengthen 
support for design and innovation, install into industries high-value-added activities with high 
intellectual property and creativity content;  the aim is  to turn Hong Kong, China into a focal point of 
design excellence in the region.
78  The Initiative includes a Desi gn Support Programme and an 
InnoCentre (to be fully operational in the third quar ter of 2006);  the InnoCentre is a one-stop shop for 
cultivating a cluster of high-value-added desi gn activities, including services like incubation, 
professional education and traini ng, and networking.  Projects worth HK$49 million were approved 
between 2004 and mid 2006.  
88. From April 2006, five R&D centres have co mmenced operations to promote technology 
development in:  textiles and clothing;  nanotechnol ogy and advanced materials;  automotive parts 
and accessory systems;  logistics and supply ch ain management 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. 
(c) Land related policies 
89. The property market plays a pivotal role in the economy.  As a supplier of new land, the 
Government continues to influence prices and va rious industrial activities through its land policies.   
The aim of the HKSAR's land policy is  to ensure an adequate supply of land to meet the needs of the 
community in a timely manner.  The Government s till owns all land, which is leased.  In the post-
1997 period, with certain exception categories, lea ses are generally for 50 years, and are granted 
through public auctions, te nders or private treaty grants; new special purpose leases are granted for a 
specific tenure depending on the category concer ned (e.g. recreational purposes, petrol filling 
stations).  The Government publishes an annua l Application List comprising residential and 
commercial sites.  Interested developers can apply to "trigger" a site (see below) on the Application 
List for disposal by way of public auction or tender.  Land for development can also be purchased from the private market, by assembling residential fl ats within existing buildings or modifying the 
lease of existing private land holdings.  Land for railway  development is granted directly.  In addition, 
                                                     
 
77 Online information and further details on these funds were viewed at:  http://www.itc.gov.hk/en/ 
welcome.htm [10 April 2006]. 
78 Further information was viewed at:  http://www.designsmart.gov.hk/l-eng/About.asp 
[10 April 2006]. Hong Kong, China WT/TPR/S/173 
 Page 53 
 
 
under special circumstances, the Lands Departme nt grants land to meet social and policy 
requirements.   
90. The Government has taken various steps to  make the system more market-driven.79  Since 
January 2004, sales of Government land has been mainly conducted under the Application List 
System.80  In 2005, the Lands Department introduced a number of measures to enhance the efficiency 
and transparency of the Application List System.  These measures included the shortening of the processing time by 30% and the simplification of th e deposit requirement.  It has also been made 
possible to adjust the "triggering" requirement under the System;  a bid reaching at least 80% of the 
assessed open market value (OMV) will be accepted as a trigger to initiate an auction or a tender.  
However, the site cannot be sold unless the highest  bid meets or exceeds an undisclosed OMV reserve 
price assessed on the day of auction or tender closing.   According to the IMF, the recent changes in 
the Application List System appear to have induced  greater market interest and the authorities seem 
prepared to make further changes if the need arises.   
91. Manufacturing and service companies that have  new or improved technology and processes 
and cannot operate in multi-storey or commercial buildings may apply for admission to the industrial 
estates.  These firms are provided with land at cost.
81  At present there are three industrial estates;  two 
are practically full.82   
(d) SMEs83 
92. The Government continues to attach great im portance to supporting sm all and medium-sized 
enterprises (SMEs);  in March 2006, SMEs account ed for 98% of business units in the HKSAR and 
employed about 50% of the working population in the private sector.84  In October 2001, 
HK$1.9 billion was set aside for four funding schemes (established betw een December 2001 and 
January 2002) to help SMEs secure loans to  acquire business installations and equipment, enter new 
markets, upgrade human resources, and enhance thei r competitiveness.  These schemes are:  the SME 
Loan Guarantee Scheme (SGS) (previously the SME Business Installations and Equipment Loan 
Guarantee Scheme (BIG), renamed in March 2003 to reflect the expanded scope of Government's loan 
guarantee under the scheme);  the SME Training Fund (STF);  the SME Development Fund (SDF);  
and the SME Export Marketing Fund (EMF) (section (3)(vi) above). 
93. The BIG was aimed at helping enterprises secu re loans to acquire the necessary business 
installations and equipment for enhancing productivity and compe titiveness.  As of March 2003, its 
scope was expanded to include two new types of working capital loans (associated working capital 
loans for SMEs, which have acquired business inst allations and equipment under the scheme, and 
                                                      
79 See Legislative Council Secretaria t Information Note IN20/05-06 for further information on land 
supply in Hong Kong, China.  Viewed at:  http://www.l egco.gov.hk/yr05-06/english/ sec/library/0506in20e.pdf  
[8 June 2006];  and IMF (2005b). 
80 HKSAR Government Press release, 2006-07 Application List for land sale announced .  Viewed at:  
http://www.info.gov.hk/gia/general/200603/17/P200603170229.htm [20 April 2006]. 
81 The land premium in the industrial estates is only to recover the costs of developing the land. 
82 Online information viewed at:  http://www.h kstp.org/english/industrial/industrial.html . 
83 Section based on TID online information, SME Funding Schemes .  Viewed at:  
http://www.smefund.tid.gov.hk/eng/ eng_main.html [7 April 2006]. 
84 An SME is defined as a manufacturing business that employs fewer than 100 persons or a 
non-manufacturing business that employs fewer than 50 persons in the HKSAR.  The number of persons employed includes individual proprietors, partners, and shareholders actively engaged in the work of the 
company;  and salaried employees of the company, including full-time or part-time salaried personnel directly 
paid by the company, both permanent and temporary (TID online information, SME Funding Schemes .  Viewed 
at:  http://www.smefund.tid.gov.hk/en g/eng_main.html [7 April 2006]). WT/TPR/S/173 Trade Policy Review 
Page 54 
 
 
accounts receivable loans).  Through the STF, grants  are provided so that SMEs can train employers 
and employees, improving their human capital w ith a view to enhancing capabilities and 
competitiveness.  The SDF provides financial s upport to projects carried out by non-profit 
organizations, such as trade and industrial s upport organizations, professional bodies, and research 
institutes to enhance the competitiv eness of SMEs across all sectors. 
94. The SME funding schemes were reviewed  in December 2002 and January 2005.  
Improvements resulting from the first review were implemented during 2003 and included increases in the maximum amount of grant as well as in the subsidy level per successful application.  The 
changes under the 2005 review included:  (i) lowe ring the SGS's assumed loan default rate from 15% 
to 7.5% and re-deploying HK$200 million from the original expected maximum expenditure under 
SGS to EMF and SDF;  (ii) increasing the total loan guarantee commitment under SGS from HK$6.6 billion to HK$10.6 billion;  (iii) injecting an additional HK$300 million into EMF and SDF, thereby making a total of HK$500 million;  (iv) removing the requirement from SMEs to obtain in-principle funding approval under EMF prior to pa rticipating in export promotion activities;  and 
(v) allowing the STF to lapse.  At  present, the Government's total commitment is HK$12 billion (of 
which 88% relates to the SGS);  it was HK$7.5 billion before the 2005 review. 
95. The SMEs Office of the Industrial Support Divi sion of the Trade and Industry Department, 
which administers the SME funding schemes, al so develops and coordinates initiatives and 
programmes with a view to enhancing the competitiveness of SMEs.
85 
(ii) Role of state-owned enterprises  
96. The HKSAR Government is involved in only a fe w companies related mainly to the supply of 
transportation services (Table III.8).  
Table III.8 
Companies with government involvement, 2006 
(Per cent) 
Company Government shareholding 
Airport Authority (AA) 100.0 
Hong Kong Science and Technology Pa rks Corporation (HKSTPC) 100.0 
Kowloon-Canton Railway Corporation (KCRC) 100.0 
Hong Kong Cyberport Development Holdings Limited 100.0 
Urban Renewal Authority 100.0 
IEC Holdings Limited  89.0 
MTR Corporation Ltd. (MTRCL) 76.5 
Hong Kong International Theme Parks Ltd. (HKITP)  57.0 
Tradelink Electronic Commerce Ltd. (Tradelink)  12.3 
New Hong Kong Tunnel Company Ltd. 7.5 
Source:  Treasury online information, "Accounts of the Government for the year ended 31 March 2005" .  Viewed at:  
http://www.try.gov.hk/internet/pde_si nvest05.pdf.  See also KCRC online info rmation at:  http ://www.kcrc.com/ 
eng/corporate/ about/history.asp. 
(iii) Intellectual property rights 
97. The Convention Establishing the World Intellect ual Property Organization (WIPO) and other 
international conventions on intellectual property are applicable to the HKSAR.86  As Hong Kong, 
                                                      
85 TID online information.  Viewed at:  http://www.tid.gov.hk/english/smes_industry/smes/smes2_1 
[30 June 2006]. Hong Kong, China WT/TPR/S/173 
 Page 55 
 
 
China is not a sovereign State, application has been extended to the territory through China.  
Nonetheless, Hong Kong, China formulates its own po licies, laws, and administrative arrangements to 
protect IPRs.87  It operates independent trade marks, d esigns, and patent registries, and matters 
relating to the grant, administration or litigation of  trade marks, patents, and designs are decided 
within the territory.  The intellectual property system  of the HKSAR is thus separate from the system 
operating in the Mainland.  Patent and design rights  granted by the State Intellectual Property Office 
of China, or trade marks register ed in the Chinese Trade Marks Office, are not automatically protected 
in the HKSAR.88 
98. The Intellectual Property Department (IPD) of th e Government, which operates the register of 
patents, trade marks, and registered designs, has been developing electronic registration services since 
2003.  In 2003 and 2004, various services were la unched including web-based electronic search of the 
registers, electronic filing, and electronic publication of applications for registration of patents, trade 
marks, and registered designs.  The IPD has expande d the scope of services to interactive services for 
renewal of trade marks and patents and maintenanc e of patent applications since November 2005.  
This enables e-filed applications to be valid ated and approved.  The new system cut out 
double-handling of data, and hence reduces the chance of errors.  In February 2006, the IPD expanded 
further its interactive services to cover the change of name, address, and address for service in relation 
to trade marks, patents, and designs.  In May 2006,  the IPD further enhanced its electronic services for 
the registration of assignments and assents relatin g to registered trade marks and trade mark 
applications.  
99. Various changes to the HKSAR's intellectual pr operty legislation have been introduced since 
2002 (Table III.9).89  The new Trade Marks Ordinance (Chapt er 559) and the new Trade Marks Rules 
entered into force in April 2003.  Amendments to the Copyright Ordinance (Cap. 528) to remove the restriction pertaining to parallel importation of com puter software products entered into effect in  
November 2003.  In May 2004, legislative ame ndments were made to enable the electronic 
publication of notifications and a dvertisements of patents and desi gn, as well as electronic filing and 
processing of patents and designs applications.  In September 2004, amendments to the Copyright 
Ordinance to strengthen criminal sanctions agains t illicit reproduction of printed materials entered 
into force.  In May 2006, amendments were ma de to the Trade Marks Rules to facilitate the 
enhancement of electronic services relating to regist ered trade marks and trade mark applications.  
The HKSAR's intellectual property legislation, whic h was amended in 1996 to bring it into line with 
the TRIPS Agreement, was notified to the WTO a nd reviewed by the Council for TRIPS in June 
2000;  further notifications were submitted during the period under review (Table III.9).  Hong Kong, 
China's WTO contact point for intellect ual property rights purposes is the IPD.
90   
 
  
 
  
                                                                                                                                                                     
86 These include the Paris Convention for the protection of industrial property;  the Berne Convention 
for the protection of literary and artistic works;  the Universal Copyright Convention;  the Geneva Convention 
for the Protection of Producers of Phonograms against Unauthorized Duplication of their Phonograms;  the Patent Cooperation Treaty;  and the Convention establishing the World Intellectual Property Organization. 
87 The Basic Law, in Articles 139 and 140, stipulates that Hong Kong, China should on its own 
formulate policies and provide legal protection for IPRs.  
88 WTO document IP/N/1/HKG/2/Add.1, 29 February 2000. 
89 The HKSAR's intellectual property and other laws (including amendments) are available online at:  
http://www.legislation.gov.hk/eng/ home.htm [11 April 2006]. 
90 WTO documents IP/N/7/Rev.2/Add.4, 24 April 2001, and IP/N/3/Rev.6, 1 March 2002. WT/TPR/S/173 Trade Policy Review 
Page 56 
 
 
Table III.9 
Intellectual property laws and regulations, 2006 
Title Brief description 
Patents   
Patents Ordinance  
(Chapter 514) Makes provisions for the registra tion and protection of patents 
Amended in 2004 to facilitate electronic filing and processing of applications 
Patents (Transitional Arrangements) Rules 
 Provides transitional arrangements for the registration of patents in the 
Register of Hong Kong, China for patents registered under the old 
Registration of Patents Ordinance, whic h lapsed in 1997, and certain patents 
registered under the United Kingdom Patents Acts 1949 and 1977 
Patents (General) Rules Prescribes provisions  and procedures under the Patents Ordinance 
(Chapter 514) 
Amended in 2004 to facilitate elect ronic filing and processing of 
applications, to streamline procedures , reduce fees payable on filing and to 
require notification of agent's address/business address 
Patents (Designation of Patent Offices)  Notice Makes designations under Section 8 of the Patents Ordinance (Chapter 514) 
Plant varieties  
Plant Varieties Protection Ordinance 
(Chapter 490) Provides, inter alia , a sui generis  regime for the granting and protection of 
proprietary rights to persons who breed or discover plant varieties 
Plant Varieties Protection Re gulation 1997 Prescribes provisions and proce dures under the Plant Varieties Protection 
Ordinance (Chapter  490) 
Trade marks (including trade descriptions)  
Trade Marks Ordinance  
(Cap 559)  Makes provisions for the registration of trade marks (entry into force in 
2003);  simplified application and ex amination procedures, and reduced 
substantially the fee for registration of a trade mark;  broadened the range of 
marks that can be registered, for ex ample by allowing distinctive sound and 
smell marks to be registered;  simplified assignment and licensing 
procedures;  multi-class applications are allowed 
Amended in 2005 to clarify certain provisions 
Trade Marks Rules Prescribes provisions and procedures under the Trade Marks Ordinance 
(Chapter 559) 
Amended in 2004 to require an agent to notify the Registrar of Trade Marks 
of the address/business address in Hong Kong, China 
Amended in 2006 to facilitate enhanced electronic services 
Trade Descriptions Ordinance  
(Chapter 362) (as amended by Intellectual Property 
(World Trade Organization Amendments) Ordinance) Contains provisions prohibiting the use of false trade descriptions and the 
forgery of trade marks 
Geographical indications   
Trade Marks Ordinance  
(Chapter 559)  Enables geographical indications to be registered as certification trade marks 
Non-statutory protection of geographical i ndications The common law tort of passing- off may be used to protect geographical 
indications from being used without proper authorization 
Copyright and related rights   
Copyright Ordinance 
(Chapter 528) Makes provisions for the protection of copyright works; protection of the 
rights of performers and others in performances;  makes provisions with 
respect to devices designed to circumve nt copy-protection of works, rights 
management information, the fraudul ent reception of transmissions, and 
connected purposes 
Amended in 2003 to remove civil and criminal liabilities pertaining to 
parallel importation and subsequent dea lings in computer software products  
Amended in 2004 to stipulate the of fence under which a person would be 
criminally liable if for the purpose of or in the course of a copying service 
business he/she possesses a reprograp hic copy of a copyright work 
 Table III.9 (cont'd) Hong Kong, China WT/TPR/S/173 
 Page 57 
 
 
Title Brief description 
Prevention of Copyright Piracy Ordinance  
(Chapter 544) Makes provisions for the prevention of c opyright piracy using the medium of 
optical discs (including stampers).  Se ts out a statutory licensing scheme for 
manufacturers of optical discs in H ong Kong, China and makes provisions 
for optical discs manufactured in Hong Kong, China to be marked with an 
assigned manufacturer identification c ode.  Also combats bootlegging of 
copyright work by stipulating that  the unauthorized possession of video 
recording equipment in certain places of  public entertainment is an offence 
Industrial designs  
Registered Designs Ordinance 
(Chapter 522) Establishes a system for the registration of new designs 
Registered Designs Rules Prescribes provisions  and procedures under the Registered Designs 
Ordinance (Chapter 522) 
Amended in 2004 to facilitate elect ronic filing and processing of 
applications, to streamline procedures , reduce fees payable on filing and to 
require notification of agent's address/business address 
Copyright Ordinance  
(Chapter 528) Provides protection for commerci ally exploited artistic works 
Layout-designs (topographies) of integrated circuits  
Layout-design (Topography) of Integrated Circuits 
Ordinance  
(Chapter 445) Provides a sui generis  intellectual property regi me for the protection of 
layout designs (topographies) of integrat ed circuits and for legal remedies 
against infringement 
Layout-design (Topography) of Integrated Circuits 
(Designation of Qualifying Countries, Territories or 
Areas) Regulation Designates countries, territories or areas  as qualifying countries, territories or 
areas under Section 24 of the Layout-design (Topography) of Integrated 
Circuits Ordinance (Chapter 445) 
Protection of undisclosed information   
Personal Data (Privacy) Ordinance Requi res data users to use information only for the purposes for which it was 
collected, to inform people of the purposes  for which data is collected and to 
protect such information against una uthorized or accidental disclosure 
Source:  WTO documents IP/N/1/HKG/2, 29 February 2000;  IP/N /1/HKG/8, 19 July 2004;  IP/N/1/HKG/10, 19 July 2004;  
IP/N/1/HKG/T/4, 22 July 2004;  IP /N/1/HKG/9, 19 July 2004;  IP/N /1/HKG/11, 12 October 2004;  
IP/N/1/HKG/12, 25 November 2005.  
(a) Industrial property 
Patents 
100. There have been no major changes to the pate nt regime since the previous Trade Policy 
Review of the HKSAR;  changes that were made relate mainly to application processing procedures 
and fees (Table III.9).  Patent protection is needed in Hong Kong, China to stop unauthorized 
manufacture, use, sales, or import of an invention.   Applying for a patent in another country or in 
other regions of China does not automatically give protection in the HKSAR. 
101. An invention is patentable if it is susceptible to  industrial application, is new, and involves an 
inventive step.  A patent can be obtained for a pr oduct or a process no matter where it was invented or 
whether products are imported or locally produced (Section 93 of the Patents Ordinance).  Methods of 
treatment such as surgery or therapy for humans or animals, and diagnostic methods practised on 
humans or animals are not patentable (Section 93(4)  of the Patents Ordinance).  Plant and animal 
varieties or an essentially biological process for th e production of plants or animals (other than a 
microbiological process or the products of such a process) are not patentable (Section 93(6) of the Patents Ordinance);  plant varieties are protected by a sui generis system.  The Plant Varieties 
Protection Ordinance (Chapter 490) grants proprieta ry rights to persons who breed or discover plant 
varieties.  The Ordinance provides for legal remedi es against infringement.  A plant variety must be 
new, distinct, stable, and homogeneous to be protected under the Ordinance. WT/TPR/S/173 Trade Policy Review 
Page 58 
 
 
102. There are two types of patents in the HKSAR:  a standard patent and a short-term patent.  The 
granting of a standard patent is based on the regist ration of a patent granted by one of three designated 
patent offices:  the State Intellectual Property Office of the People's Republic of China;  the European 
Patent Office;  and the United Kingdom Patent Office (Section 3 Patents (Designation of Patent 
Offices) Notice).  Protection under a standard patent is for 20 years from the date of filing (Section 39 
of the Patents Ordinance).  At end 2005, 23,625 st andard patents had been granted in the HKSAR;  
the number granted annually increased from 2,176 in 2002 to 6,518 in 2005.91 
103. A short-term patent is granted on the basis of an examination of the formalities of the 
application;  the patent examination does not extend to the substantive issue of whether the invention 
is novel and inventive.  A short-term  patent is renewable, after four years  from the filing date, for a 
maximum term of eight years (Section 126 of the Pa tents Ordinance).  The scope of the short-term 
patent is no different from the scope of the standard  patent and it is available for the same subject 
matter.  Owners of products and processes with a short commercial life are more likely to be interested in a short-term than a standard patent;  as the application procedure is simpler and takes less 
time, they may have recourse to a quicker and less cos tly form of patent protection.  Even if a short-
term patent application is examined only in respect  of formalities, its validity can be challenged in 
courts on the basis, for example, that it was not new or did not involve an inventive step.  At 
end 2005, 1,578 short-term patents had been granted in Hong Kong, Ch ina;  the number of short-term 
patents granted annually increased from 265 in 2002 to 419 in 2005.
92  The benefits of a standard 
patent, as opposed to a short-term patent, are that the term of protection is longer (20 years instead of 
8) and it is easier to enforce (the owner of a short-te rm patent has to establish the validity of the patent 
in proceedings to enforce his rights).  
104. A patent holder has the right to prevent all th ird parties that do not have his consent from 
importing any product that is the subject-matter of the patent.93  This means that all unauthorized 
imports, including parallel imports, can be prohibited.  This also holds for a process patent holder, 
who has the right to prevent third parties from using the process or offering the process for use in the 
HKSAR.  If a product is obtained directly from the process, the proprietor can prevent third parties 
from putting the product on the market, or from using, importing or stocking the product (Section 73(b) and (c) of the Patents Ordinance). 
105. The Patents Ordinance allows for the granting of compulsory licences and government use of 
a patented product or process without the authoriza tion of the patent proprietor.  The effect of 
government use of a patented invention is equivalent to a compulsory licence.  A compulsory licence 
under a standard patent can be allowed on limited grounds, i.e., where the patented invention is not 
being commercially worked in the HKSAR, or where the demand for a particular product is not being 
met, for example, through imports.  Short-term patents are not subject to compulsory licensing (Section 64 of the Patents Ordinance);  it is consider ed that this may not be of practical value since the 
short-term patent could have  little time left to run.  Government use of a patented invention is allowed 
during a period of extreme urgency declared by th e Chief Executive (Sections 68 and 69).  A patent 
holder must be compensated for government use (Section 71). 
106. To assist local companies and individuals to apply for patents for their own inventions, a 
Patent Application Grant (PAG) has been provided since April 1998.
94  For an approved application, a 
                                                      
91 Intellectual Property Department online informa tion.  Viewed at:  http://www.ipd.gov.hk/eng/ 
intellectual_property/ip_statistics.htm [11 April 2006]. 
92 Intellectual Property Department online informa tion.  Viewed at:  http://www.ipd.gov.hk/eng/ 
intellectual_property/ip_statistics.htm [11 April 2006]. 
93 Section 73(a)(i) of the Patents Ordinance (Chapter 514, Laws of Hong Kong). 
94 Innovation and Technology Commission (2005). Hong Kong, China WT/TPR/S/173 
 Page 59 
 
 
grant is provided for not more than HK$100,000 or 90%  of the total cost of the patent application, 
whichever is the lower.  Up to the end of 2005, a total of 527 PAGs had been approved;  within the 
same period, 149 inventions have been commerciali zed into products or technology for adoption by 
the market. 
107. Criminal offences are provided for under the Patent s Ordinance in respect of:  falsification of 
the Register;  unauthorized claim of patent rights;  false representation that something is a patented 
product, or that a patent has been applied fo r;  and misuse of the title "Patents Registry".95 
Trade marks 
108. Since the last Review of Hong Kong, China, the trade mark legislation has been improved 
(Table III.9).  The Trade Marks Ordinance (Chapt er 559) and the Trade Marks Rules entered into 
force in April 2003 to replace the old trade marks la w, which was enacted in 1950s.  The Trade Marks 
(Amendment) Rules 2006 entered into force on 26 May 2006 to facilitate the enhancement of 
electronic services for the registration of assignments and assents relating to registered trade marks and trade mark applications. The Ordinance provides the framework for the system of registration of 
trade marks. It sets out the basis and criteria for re gistration and the rights attached to a registered 
trade mark.
96  The Ordinance has simplified applicati on and examination procedures and the fee for 
registration of a trade mark has been substantially re duced.  The range of marks that can be registered 
as trade marks has been broadened, for example by  allowing distinctive sound and smell marks that 
are capable of being represented graphically to be re gistered.  It allows filing of a single application 
for registration of a trade mark in respect of mu ltiple classes of goods or services, and provides for 
streamlined procedures for recording trade marks a ssignments and licences.  Parallel import of trade 
marked goods is permissible, unless the goods have b een impaired or changed and the reputation of 
the mark is adversely affected. 
109. Registered trade marks are protected under th e Trade Marks Ordinance whereas unregistered 
trade marks are protected under common law.  At end 2005, 200,456 trade marks had been registered in the HKSAR;  the number of trade marks re gistered annually peaked at 26,440 in 2004.
97  
Registration usually takes about six months if there is no opposition.  Protection of a trade mark is for 
ten years from the date of application for registra tion (Section 49), and may be  renewed indefinitely 
for periods of ten years.98    Under the Trade Marks Ordinance, it is an offence to make a false entry in 
the Register, and to falsely represent a trade mark as registered; the former is punishable by a fine of 
HK$50,000 and imprisonment for up to six months  on summary conviction, or by a fine of 
HK$50,000 and imprisonment for up to two year s on conviction on indictment (Section 93).  
110. The Trade Descriptions Ordinance prohibits the use of false descriptions, false marks, and 
mis-statements when selling or importing goods.  Unde r the Ordinance, it is an offence to forge any 
trade mark, falsely use a trade mark or any mark that resembles a trade ma rk so as to deceive the 
buyer, or possesses any equipment, machine or other in strument to forge a trade mark.  It is also an 
offence to import or export, other than for private use, a good with a false trade description (e.g. false 
indication of the place of manufacture) or with a forged trade mark (Chapter 362 Part II).  The maximum penalty for these offences is a fine of HK$500,000 and imprisonment for five years on a 
conviction on indictment, and a fine of HK$100, 000 and imprisonment for two years on summary 
                                                     
 
95 WTO document IP/N/6/HKG/1, 10 February 2000. 
96 Government of the HKSAR (2004b). 
97 Intellectual Property Department online informa tion.  Viewed at:  http://www.ipd.gov.hk/eng/ 
intellectual_property/ip_statistics.htm [11 April 2006]. 
98 The Trade Marks (Emergency) Ordinance, which provided for the suspension of trade mark 
registration to meet any emergency that may arise as a result of war (Chapter 263), has been repealed.  WT/TPR/S/173 Trade Policy Review 
Page 60 
 
 
conviction.99  With effect from 14 January 2000, offe nces under this Ordinance relating to the 
infringement of trade marks and the import or expor t of goods bearing a forged trade mark have been 
classified among offences under the Organized and Serious Crimes Ordinance.100  As a result, the 
enforcement powers of customs officers have been e nhanced, particularly where criminal syndicates 
are involved. 
Industrial designs 
111. Legislation was amended in 200 4 to deal with issues relati ng to the application processing 
procedures and fees  (Table III.9).  Industrial d esigns may be registered in the HKSAR under the 
Registered Designs Ordinance to obtain protection (i .e. to stop unauthorized manufacture, import, use, 
sale, or hire of a design product in Hong Kong, China).101  Unregistered designs may receive 
protection under the Copyright Ordinance.   
112. A wide range of products, including computers,  telephones, CD-players, textiles, jewellery, 
and watches, can be registered under the Registered  Designs Ordinance.  Registration of a design 
protects only the appearance of products;  it does not protect the way in which the product works.  
Protection for the way in which a product work s may be available under patent law (if the 
requirements of patentability are satisfied).  Computer programs and protected layout-designs (topographies) cannot be registered (Chapter 522, Section 8);  these are protected under the Copyright Ordinance and the Layout-designs (topographies) of Integrated Circuits Ordinances, respectively. 
113. Registered design owners have the right to prevent others from manufacturing, importing, 
using, selling, or hiring the design product.  Regist ered design protection is renewable for periods of 
five years up to a maximum of 25 years.  Application for registration of a design elsewhere in the world or in other parts of China does not automatically give a design protection in the HKSAR. 
114. A registered design owner, or an exclusiv e licensee, can bring civil proceedings for 
infringements committed after design registration is issu ed.  Infringement is not a criminal offence;  
the authorities consider that, in general, civil prot ection is adequate.  Under the Registered Designs 
Ordinance, falsification of the Register, false representation that a design is registered, and misuse of 
the title "Designs Registry" are considered criminal  offences.  At end 2005, 26,128 designs had been 
registered in the HKSAR;  the number of designs registered annually rose from 2,992 in 2002 to 4,989 in 2005.
102   
115. If a design is not registered, its owner still has copyright protection under the Copyright 
Ordinance (Section 87) for articles produced from th e original design drawing, for 15 years from 
first marketing of the article.  However, this h as limitations as the design owner cannot take legal 
action for copyright infringement where another person independently produces a similar design 
because that does not amount to the act of copying.  Protection is automatic;  there is no registration 
or other formality. 
                                                      
99 IP/N/6/HKG/1, 10 February 2000. 
100 IP/N/6/HKG/1, 10 February 2000. 
101 Registering a design in Hong Kong, China provides protection only in the HKSAR. 
102 Intellectual Property Department online inform ation.  Viewed at:  http://www.ipd.gov.hk/eng/ 
intellectual_property/ip_statistics.htm [11 April 2006]. Hong Kong, China WT/TPR/S/173 
 Page 61 
 
 
(b) Other intellectual property 
Copyright 
116. Since the last Review of Hong Kong, China, the Copyright Ordinance, which entered into 
effect in 1997, has been amended by the Copyright (Amendment) Ordinance 2003, and the Copyright 
(Amendment) Ordinance 2004 (Table III.9).   
117. The Copyright Ordinance provides comprehensive protection for recognized categories of 
literary, dramatic, musical, and artistic works, as we ll as for sound recordings, films, broadcasts, and 
cable diffusion, and works made available to the publ ic on the Internet.  In relation to performances, 
performers and persons who have exclusive reco rding contracts with performers are entitled to 
protection.  Computer programs are protected under copyright law.103  There are no formalities 
required to obtain copyright protection for a work  in Hong Kong, China.  Works of authors from 
anywhere in the world, or works first published an ywhere in the world, also qualify for copyright 
protection in the HKSAR. 
118. Protection, with some exceptions, extends for 50 years after the death of the creator or from 
the end of the year in which the work was made (Chapter 528 Sections 17-21).104  The law allows for 
the provision of an exclusive licence:  the copy right owner authorizes the licensee to exercise the 
rights, which would otherwise be exclusively exer cisable by the copyright owner (Section 103).   
119. Piracy, or possession of infringing articles for trade or business, is subject to a maximum fine 
of HK$50,000 per infringing article a nd up to four year's imprisonment.105  With effect from 14 
January 2000, offences relating to the making of and dealing with infringing copies of copyright 
works (under the Copyright Ordinance) have b een classified as offences under the Organized and 
Serious Crimes Ordinance.106  As a result, the authorities' powers to investigate and enforce have been 
enhanced. 
120. The amendments to the Copyright Ordinance, which were made to remove the civil and 
criminal liabilities pertaining to parallel importati on into Hong Kong, China of computer software 
products, took effect from 28 November 2003;  howe ver, if the principal attraction of a computer 
software product is musical sound or visual r ecordings, movies, television dramas, e-books, or a 
combination of them, the restriction continues to apply.107  The 2004 amendments to the Copyright 
Ordinance (effective 1 September 2004) introduced a "copyshop offence" to facilitate enforcement 
and prosecution against illicit reproduction of books, magazines or periodicals by copyshops for the 
purpose of or in the course of their business.  Unde r the offence, a person would be criminally liable 
if, for the purpose of or in the course of a copying service business, he possesses an infringing 
reprographic copy of a copyright work as published in a book, magazine or periodical.   
121. Certain provisions under the Copyright Ordinance have been subject to a suspension 
arrangement under the Copyright (Suspension of Amendments) Ordinance 2001 (Cap. 568) 
(Suspension Ordinance).  The end-user criminal liability relating to the possession of an infringing 
                                                      
103 Computer programs are classified as literary work under the Copyright Ordinance. 
104 Typographical arrangement of published editions is protected for 25 years from the end of the year 
in which the edition was first published (Chapter 528, Section 21);  and government copyright is protected for 
125 years from  the end of the year in with the work was made (Chapter 528, Section 182). 
105 Sections 23 to 35 of Ordinance defines how the work could be infringed and the meaning of 
"infringing copy";  sections 118 and 120 of the Ordinance set out the criminal offence. 
106 WTO document IP/N/6/HKG/1, 10 February 2000. 
107 Government of the HKSAR (undated). WT/TPR/S/173 Trade Policy Review 
Page 62 
 
 
copy of a copyright work for use in business is thus  confined to four categories of copyright works:  
computer programs, movies, television dramas, and musical recordings.  The suspension arrangement took effect from 1 April 2001, and was extended;  it is due to lapse on 31 July 2007.     
122. In March 2006, the Government introduced the Copyright (Amendment) Bill 2006 into the 
Legislative Council.  The Bill reflects the outcome of the public consultation ended in early 2005 and 
extensive discussions with stakeholders.  The main objectives of the Bill are to enhance protection for 
copyright owners whilst meeting the reasonable u se of copyright works by users, especially the 
education sector.  Major proposals include a new crim inal offence against making for distribution and 
distributing infringing copies of certain printed wo rks in business, strengthened protection against 
circumvention of technological protection measures for copyright works, rental rights for films and 
comic books, improvements to the existing copyright ex emption regime to meet the needs for use of 
copyright works for education and public administ ration purposes, and a new copyright exemption for 
persons with a print disability.
108  The Bill is currently being scru tinized by the Legislative Council. 
123. Since 1998, the Prevention of Copyright Piracy Ordinance (Chapter 544) has regulated the 
manufacture of optical discs in the HKSAR;  the manuf acture of stampers has been under the scope of 
the Ordinance since July 2002.109  Under sections 3 and 4 of the Ordinance, a person must obtain a 
licence to manufacture optical discs and stampers in Hong Kong, China at the premises specified in 
the licence.  The licence conditions imposed on local  optical disc manufacturers were revised on 
1 October 2004 to require that the licensed fact ories provide real-time information on production 
orders received;  as a result Hong Kong Customs is able to develop useful tactical intelligence on 
local optical disc production and use risk-profiling techniques to identify suspicious production for 
follow-up investigation.  In addition, all optical  discs and stampers produced must be permanently 
marked with a code unique to each licensed manuf acturer.  Customs officers are empowered to 
inspect licensed premises without a warrant.  The maximum penalty for manufacturing optical discs in 
the HKSAR without a licence is a fine of HK$500,000 and two years' imprisonment on a first conviction, and a fine of HK$1 million and four years' imprisonment on a second or subsequent 
conviction.  
(c) Enforcement action 
124. The Customs and Excise Department ensur es enforcement (through investigation and 
prosecution) of the Copyright Ordinance, the Tr ade Descriptions Ordinance and the Prevention of 
Copyright Piracy Ordinance (Table III.10) through various special teams.
110  The Department's major 
team, the Intellectual Property Investigation Bureau (IPIB), comprises 240 officers to combat crimes related to intellectual property rights.  Apart from eliminating pirated optical discs at the manufacture, 
storage, retail and import/export (airport and land bo undary control points) levels, it strives to fight 
against corporate piracy, (i.e., the use of pirate d software, movies, television dramas, and musical 
recordings within business).  To strengthen en forcement against infringing activities in the cyber 
world, a second Anti-Internet Piracy Team (AIP T) was set up in April 2005 through internal 
redeployment.
111  Since June 2001, a Special Task Force comprising about 150 officers has also had 
an important role in, inter alia,  combating copyright piracy.  Cooperation with relevant authorities in 
                                                      
108 The list of proposed changes are contained in Legislative Council Panel on Commerce and Industry 
(2005). 
109 A stamper is a special type of optical disc used as a master disc for the mass production of common 
optical discs.  It is an essential tool for the illegal production of optical discs containing pirated copyright works such as computer software, music, and films. 
110 Government of the HKSAR (2005), Customs and Excise ;  and Customs and Excise Department 
(2004). 
111 Hong Kong Customs established its first Anti-Internet Piracy Team in April 2000.   Hong Kong, China WT/TPR/S/173 
 Page 63 
 
 
Mainland China, a key component of the enforcemen t process, has included joint enforcement action, 
information exchange, investigation assistance, personnel training, etc.112  In July 2002, an 
Intelligence Bureau comprising about 200 officers w as established within the Customs and Excise 
Department to strengthen the intelligence work in general.  This has further improved the 
Department’s capability in targeting suspicious  shipments, including those of pirated goods.113  
125. Efforts since 2002 have led to improvements in IPR protection (Table III.10).  The authorities 
indicate that trade mark counterfeiting remains unde r control, and there is no major manufacturing 
operation in the HKSAR;  nevertheless, at the retail level, pictures of counte rfeit goods are shown in 
the street and customers are led to showrooms/st orage centres in nearby buildings for the actual 
transactions.  At the manufacture level, sustained efforts have driven underground large-scale optical 
discs (OD) production plants out of Hong Kong, Chin a;  at present, limited-scale workshops using 
computers and CD-writers replicate pirated ODs insi de small industrial or domestic premises.  In 
2004 and 2005, the Customs and Excise Department  destroyed 22 and 16 replicating workshops, 
respectively.114  At the retail level, the number of shops selling pirated optical discs (PODs) was 
reduced from over 100 (2002) to about 50 (2006)  thus cutting the "circulation at any one time" from 
20,000 to about 5,000 units;  these shops can now onl y operate at irregular hours and in the stealthy 
modes of "self-service" or "pre-order sale" with a very small stock.   
Table III.10 
Enforcement of intellectual property rights, 2002-05  
 2002 2003 2004 2005 
Prosecution and sentencing under the Copyright 
Ordinance     
Persons given prison sentence 550 562 583 522 
% of sentences of:     
<6 months 25.3 25.8 35.5 33.1 
6-12 months 70.0 67.6 57.1 62.1 
>12 months 4.7 6.6 7.4 4.8 
Maximum sentence pa ssed (months) 44 44 36 36 
% of cases with fines of:     
<HK$50,000 100.0 100.0 91.0 95.0 
HK$50,000-100,000 0.0 0.0 4.5 0.0 
>HK$100,000 0.0 0.0 4.5 4.8 
Maximum fine (HK$) 20,000 50,000 1,810,000 2,400,000 
Total fines (HK$) 366,500 600,200 4,443,185 7,613,260 
Prosecution and sentencing under the Trade 
Descriptions Ordinance     
Persons given prison sentence 35 77 102 94 
% of sentences of:     
<6 months 85.7 79.2 60.8 53.2 
6-12 months 14.3 20.8 33.3 44.7 
>12 months 0.0 0.0 5.9 2.1 
Maximum sentence pa ssed (months) 9 12 16 16 
% of cases with fines of:     
<HK$50,000 94.0 97.0 95.0 93.0 
HK$50,000-100,000 6.0 2.5 4.0 3.8 
>HK$100,000 0.5 0.4 0.9 3.5 
Table III.10 (cont'd) 
                                                      
112 WTO document IP/C/34, 9 December 2004. 
113 APEC (2003). 
114 Customs and Excise Department (2004). WT/TPR/S/173 Trade Policy Review 
Page 64 
 
 
 2002 2003 2004 2005 
Maximum fine 200,000 400,000 245,000 245,00 
Total fines 4,950,125 4,766,870 4,106,436 5,143,461 
Seizure of illegal merchandise goods     
Pirated optical discs     
Quantity ('000) 9,572.0 6,217.9 7,307.8 3,793.4 
Value (HK$ million) 335.5 229.5 273.4 136.6 
Counterfeit goods     
Quantity ('000) .. .. .. .. 
Value (HK$ million) 209.7 258.4 305.3 305.2 
.. Not available. 
Source: Data provided by the authorities of Hong Kong, China. 
126. A number of cases of copyright infringement on the Internet have been investigated and 
prosecuted;  in a criminal case involving copyrigh t infringement using a "peer-to-peer" (P2P) file-
sharing program known as BitTorrent (BT)115 the defendant was convicted and sentenced to three 
months' imprisonment (October 2005).  Since then, si milar posting of infringing material using this 
program have dropped significantly.  In late Janua ry 2006, the High Court ordered four Internet 
service providers (ISPs) to disclose to seven sound recording copyright owners (plaintiffs in the case) 
the personal data of 22 alleged online copyright infringe rs so as to enable the copyright owners to take 
legal action.  In another civil action in May 2006, the Court of First Instance ordered some ISPs to 
disclose to film companies the personal data of 49 alleged infringers. 
127. To enable the forfeiture of the financial pr oceeds obtained from IPR infringing activities, the 
Organized and Serious Crimes Ordinance (OSCO) w as first applied to piracy and counterfeiting cases 
in July 2004 and July 2005, respectively.  Restra int orders were sought from the High Court to freeze 
the financial proceeds of syndicates involved in IPR offences.  As at mid 2006, financial proceeds of 
about HK$97 million had been frozen in si x IPR cases pending confiscation proceedings.  
128. In an effort to strengthen the Customs-indus try partnership, Hong Kong Customs established 
the "IPR Protection Alliance" in March 2004 and la unched the Alliance websit e in September 2004.  
As at June 2006, 43 organizations from the copy right and trade mark industries have enrolled as 
members of the Alliance.  Since 1998, Hong Kong Customs has implemented four reward schemes116, 
in which cash rewards sponsored by the respective IPR industries are paid to informers who provide 
information leading to the successful seizure of a certain type and amount of infringing goods.  In 
November 2005, it launched the "E-auctioning with In tegrity Scheme" with four local auction sites 
and various IPR owners to combat the sale of in fringing items on the Internet.  Under the scheme, the 
participating ISPs are expected to step up the m onitoring of goods auctioned on their sites.  Over 
150,000 listings of auction items have been removed under the scheme.  In July 2006, the Hong Kong 
Customs launched the "Youth Ambassador Against In ternet Piracy Scheme" whereby youth members 
of participating organizations are to help mon itor the Internet and report suspected infringing BT 
seeds. 
129. To promote awareness of IPRs, particularly respect for IPRs in the Internet environment, the 
IPD has sustained public education efforts by or ganizing:  numerous educational programmes, 
territory-wide campaigns, seminars and exhibitions ;  and publicity campaigns  (television and poster 
                                                      
115 The essence of the BT programme is the efficient delivery of packets of digital information, which, 
when put together, create a large file such  as a film, which can then be viewed. 
116 The reward schemes cover optical disc and internet piracy;  corporate piracy in relation to computer 
software;  counterfeit pharmaceutical products;  and illegal photocopying. Hong Kong, China WT/TPR/S/173 
 Page 65 
 
 
advertisements) targeted at the general public .  An annual budget of about HK$7 million (or 
US$1 million) is allocated by IPD for such purposes.  
130. Although one major trading partner views the HK SAR as a model in Asia for its overall 
protection of IPRs117, certain industries of another major partner remain concerned over some 
legislative, regulatory and procedural matters, e nd-use piracy, the rapid growth of peer-to-peer 
downloading from the Internet, the illicit importation a nd trans-shipment of pirated and counterfeit 
goods, and issues relating to patents for pharmaceuticals.118  The HKSAR authorities had given 
detailed responses (made available to the WTO Secr etariat) to the entities making these allegations 
(the International Intellectual Property Alliance and the United States Tr ade Representative):  
concerning business end-user piracy, the Cu stoms and Excise Department had mounted 
172 operations since 2001, in which 120 companies were found to have breached the Copyright 
Ordinance giving rise to the arrest of 263 persons .  At the time of completion this report, 
54 convictions had been obtained in court, involvin g seizure of infringing software equivalent to 
legitimate products worth HK$17 million (US$2.18 milli on).  As regards the concern about lengthy 
and non-transparent drug approval procedures for pharm aceuticals, the Pharmacy and Poisons Board's 
(PPB) performance pledge was to complete the registration process within five months from receipt of 
all required documents.  In 2005, around 3,800 re gistration applications of pharmaceutical products 
were processed;  97% of these applications met th e performance pledge.  In addition, the PPB had 
adopted many measures to speed up the registration process and been responsive to the suggestions 
floated by the trade, as long as this was within its legal powers. 
(iv) Competition and consumer protection policy 
Competition policy 
131. Although the HKSAR is perceived as one of the world's freest economies, its economy seems 
to be dominated by a few big companies.119  More specifically, it appears that a few powerful 
cross-sector conglomerates (controlling Hong Kong 's port, supermarkets, pharmacies, one of the 
two electricity suppliers, much of real estate, a nd large chunks of the telecoms sector) may hinder 
greater competition from domestic and foreign firms.  According to the authorities, the domination of 
a few big companies in some sectors does not mean  that the companies have formed cartels or 
engaged in other anti-competitive conduct.  They co nsider that the degree of competition depends not 
only on the market structure (i.e. the number of firm s present), but also on the contestability of the 
HKSAR's open market (the possible entry of potential  competitors).  According to them, there is no 
evidence that the conglomerates have hindered co mpetition and when ever monopoly power was a 
concern, sector-specific regulations have been put in place to ensure that consumer benefits are 
protected and that competition, if re quired, is effective and adequate.  
132. There have been no significant changes to th e HKSAR's competition policy since its last 
Review.  Its competition policy is stipulat ed in the Statement on Competition Policy.120  The statement 
lists and briefly defines some restrictive practic es that should be "attended" to:  price-fixing, 
bid-rigging, market allocation, sales and pr oduction quotas, joint boycotts, and unfair or 
                                                      
117 Hong Kong Trade Development Council (2006). 
118 For more details on these concerns see Intern ational Intellectual Prop erty Alliance (2005);  
International Intellectual Property Alliance (2006);  and USTR (2005). 
 119 EIU (2005);  and Channel News Asia, Economists cry foul over Hong Kong's boasts of freest 
economy , 30 January 2005.  Viewed at: http://www.channelnewsasia.com/stories/afp_asiapacific_business/ 
view/129871/1/.html [8 June 2006]. 
120 Trade and Industry Bureau online information.  Viewed at:  http://www.info.gov.hk/tib/roles/ 
psoc.htm [10 April 2006]. WT/TPR/S/173 Trade Policy Review 
Page 66 
 
 
discriminatory standards.  It also includes an illustrati ve list of types of abuse of market position, e.g:  
predatory behaviour such as selling below cost;  setting retail price minimums for products or 
services, where there are no ready substitutes; and conditioning the supply of specific products or services upon the purchase of other specific products or services.  However, none of these types of 
abuse is extensively defined.  Nor does the stat ement mention any provisions regarding mergers and 
acquisitions;  without these, it is unclear how the G overnment can (transparently) prevent changes in 
the HKSAR's industrial structure that could be detrim ental to competition and to consumer welfare.   
133. Despite the key role of competition law, ev en in structurally open economies (Box III.1)
121, in 
preventing practices that can impede market c ontestability and/or exploit consumers, Hong Kong, 
China does not have a comprehensive competition law, nor any other legi slation banning and/or 
sanctioning restrictive business practices.  Hong Kong, China considers that the needs, requirements, 
and characteristics of individual sectors vary extensiv ely;  therefore, the Government has hitherto 
adopted a sector-specific approach to safeguard competition.122  Where necessary, to rectify 
anti-competitive behaviour and/or to promote compe tition, the Government has taken sector-specific 
actions, such as licensing, codes of practice, and legislation. 
Box III.1:  The need for competition law in structurally open economies 
The lowering or elimination of barriers to foreign trade and investment can enhance competition in markets 
for goods and services and thereby make it more diffi cult for domestic firms to exercise market power 
through anti-competitive practices.  Nonetheless, co mpetition law can play an important role even in 
economies characterized by low barriers to foreign comp etition, such as tariffs, quotas or other government 
measures. 
First, even in the most open economies, some markets will remain primarily local in nature.  This may be the case, for example, in markets ch aracterized by high transportation costs relative to the value of output, 
in markets for perishable goods, such as many foodstuffs, and in some services markets in which the scope 
for foreign competition may be limited by existing regulato ry constaints.  In such markets, the absence of 
tariffs or quotas may not be sufficient to prevent domestic firms from colluding to raise prices or engaging 
in other harmful practices. 
Second, the argument that competition la w is unnecessary in the absence of external barriers depends on the 
notion that, if domestic firms seek to raise prices, fo reign competitors will respond by increasing the supply 
of imports, thereby forcing price increases to be resc inded.  However, if the main foreign suppliers are 
members of a cartel, which also includes the domestic firms, this supply response may be short-circuited. 
The existence of international cartels in markets for goods and services, including goods that are important 
for development-related purposes, is not merely theoretical.  A study prepared for the World Bank found 
that, in 1997, US$81.1 billion in developing countries' im ports were affected by the operation of cartels.  As 
a result, prices in these industrie s were 20%-30% above competitive levels.  There is evidence that the 
magnitude of price increases caused by cartels is great er where a jurisdiction lacks an effective competition 
law.  The ability of foreign suppliers to discipline the exercise of market power domestically can also be 
affected by practices such as vertical market rest raints, for example exclusive dealing provisions that 
prevent distributors from carrying the products of foreign suppliers. 
Competition law also plays a key role in helping to prevent bid rigging in government procurement markets.  
Empirical evidence suggests that th e costs of bid rigging to public tr easuries can signif icantly exceed the 
costs of establishing a competition office to investigate and deter such activities.  Again, the possibility of 
rigged bids cannot be prevented merely by opening procurement processes to foreign competitors. 
Box III.1 (cont'd) 
                                                      
121 Structurally open in the sense of being free of tariffs or other formal barriers. 
122 WTO document WT/WGTCP/W/141, 2 August 2000. Hong Kong, China WT/TPR/S/173 
 Page 67 
 
 
 
Competition law is also important fo r other reasons.  In many jurisdic tions it is recognized that competition 
law can help prevent intellectual property rights abuses in the domestic economy.  The absence of traditional trade barriers may not prevent such practices, particularly since patents or copyrights can 
themselves affect the ability to supply domestic markets through imports. 
For these reasons, the absence of formal barriers to in ternational trade or investment is unlikely to make 
competition law redundant, even in open economies.  However, the application  of competition law can be 
tailored to take account of the role of  foreign competition in particular ma rkets.  For example, where foreign 
competition is robust and imports respond quickly to domestic price increases, a merger of domestic firms 
may not raise competition policy concerns.  Accordin gly, these factors are recognized as possible 
justifications for allowing mergers to proceed in variou s jurisdictions.  In addition, the deliberate opening of 
markets to foreign competition has been used to avoid the possibility of mergers having anti-competitive 
effects.  These points illustrate that, although market openness does not make competition law redundant, 
trade and competition policy can be mutually supporting. 
Similarly, competition policy can contribute to the continuing process of trade liberalization through what 
are known as competition advocacy ac tivities.  For example, in some  countries, competition offices 
themselves help to make the case fo r external liberalization and other ma rket reforms, and to challenge the 
imposition of restrictive measures in particular sectors. 
Source:  Anderson, Robert and Frederic Jenny (2005), "Competition policy, economic development and the 
possible role of a multilateral framework on competition policy:  insights from the WTO Working 
Group on Trade and Competition Policy", in Erlinda Medella and Peter Drysdale, eds., Competition 
policy in the East Asia Pacific Region, London:  Routledge, pp. 61-85;  Khemani R.S. (1991), 
"Merger Policy in Small vs. Large Economies", in Khemani and Stanbury, eds., Canadian 
Competition Law and Policy at the Centenary,  Institute for Research of Public Policy;  and 
Levenstein Margaret and Valerie Suslow (2001), Private International Cartels and Their Effect on 
Developing Countries, Background Paper for the World Bank's World Development Report 2001, 
9 January.  Viewed at:  http://www-un ix.oit.umass.edu/~maggiel/WDR2001.pdf) 
134. Some sectoral legislation incl udes clauses aimed at preventing anti-competitive practices;  for 
instance, the Telecommunications Ordinance and th e Broadcasting Ordinance (Chapter IV).  The 
existence of different rules for different sectors could lead to a distortion of resource allocation because firms would choose to enter sectors with clear  competition rules, so that they could not be 
coerced by incumbents.  Moreover, regulators (for instance in telecommunications) have to perform a 
dual role of traditional regulator and of enforcer of competition policy, which could compromise their 
impartiality.  Different regulators may also interp ret competition provisions differently and possibly 
inconsistently.  An independent competition body/a gency/authority might better promote and enforce 
competition. 
135. To promote competition and encourage self-regulation "proactively", the Competition Policy 
Advisory Group (COMPAG, see below) promulgated the Guidelines to maintain a competitive 
environment and define and tackle anti-competitive practices,  in September 2003
123, to supplement 
the 1998 Statement on Competition Policy.124  The guidelines aim to provide pointers with objective 
benchmarks and principles to assess the HKSAR's overall competitive environment, to define and 
tackle anti-competitive practices, and to ensure c onsistent application of competition policy across 
sectors.   
                                                      
123 The Hong Kong Retail Management Association developed a code of conduct for the supermarket 
sector on the basis of the Guidelines.  The Telecommunications Authority (TA) issued a set of guidelines on merger and acquisitions in May 2004 (Chapter IV), to provide practical guidance on the analytical and 
procedural approach that the TA intends to follow when administering the relevant provisions in the 
Telecommunications Ordinance (APEC, 2005). 
124 APEC (2005). WT/TPR/S/173 Trade Policy Review 
Page 68 
 
 
136. As all bureaux and departments are responsible  for overseeing competition issues within their 
portfolios, to ensure competition in the territory, they  are regularly requested to review their areas of 
jurisdiction to identify and propose remedies to an ti-competitive practices.  It is not clear, however, 
how they could identify anti-competitive practices if there are no statutes defining them.  As for 
restrictive business practices, the COMPAG works cl osely with all government bureaux/departments, 
and with the Consumer Council125, to monitor the state of competition in different sectors and handle 
allegations of anti-competitive behaviour.126   
137. COMPAG also keeps track of competition-related co mplaints and/or allegations of restrictive 
practices.  However, in the absence of competition legislation, it is not clear on what grounds a firm or 
individual could make a complaint.  Likewise, it is unclear on what basis the COMPAG could make a 
determination.  Investigations a nd follow-up actions are carried out by the bureaux/departments;  the 
COMPAG advises them and ensures that the compla ints are properly dealt with.  In 2004/05, 
18 complaints and issues were received by or referred to the COMPAG.127  The Trade Practices 
Division of the Consumer Council also examines restrictive business practices. 
138. On 1 June 2005, the COMPAG appointed a Competition Policy Review Committee (CPRC) 
to review competition policy, and, in particular, to  consider whether there was a need to introduce a 
general competition law as well as the compositi on, terms of referenc e, and operations of 
COMPAG.128  The CPRC, made up mostly of non-Government stakeholders from the business, 
academic, consumer protection, and other sectors, reported back to COMPAG in June 2006, and its 
report was published on 4 July 2006.129  The CPRC has, inter alia,  recommended that the Government 
introduce a cross-sector competition law targeting specific types of anti-competitive conduct to be 
enforced by an independent Competition Commission;  that the Commission be given appropriate investigative powers;  and that penalties in the fo rm of large fines and disqualification from holding 
directorships should apply to any parties found to have engaged in prohibited conduct.  The 
Government is considering the recommendations in the CPRC report.  Any additional measures, 
including legislation, will aim to facilitate new ve ntures by individuals and help small and medium 
enterprises operate and grow.
130 
139. The HKSAR has continued to promote the unders tanding by the international community of 
its competition policy.131  In 2003, it made a submission to the WTO Working Group on the 
Interaction between Trade and Competition Policy  discussing concerns of developing countries 
arising from the adoption of a multilateral framewo rk on trade and competition policy, and similar 
                                                      
125 As of April 2000, the Consumer Council, which is responsible for protecting and promoting 
consumer interests, became a full Member of  the Competition Policy Advisory Group. 
126 WTO document WT/WGTCP/W/141, 2 August 2000. 
127 These cases involved, inter alia :  unauthorized discounts in fixed telecommunication network 
services;  maintenance services for satellite TV rece ption facilities;  provision of electronic imaging and 
uploading of building plans and documents by the Buildings Department;  security services at the Hong Kong 
International Airport;  provision of Government Electronic Trading Services (sections 2(i) and 4(ii));  tendering 
arrangement for tuck-shop services in seven governmen t secondary schools;  tender of catering service in 
facilities under the Leisure and Cultural Services Depa rtment's purview;  introduction of short-haul 
cross-boundary coach services;  government practices fav ouring driving schools;  alleged restrictive practice of 
the Hong Kong Institute of Certified P ublic Accountants;  the anti-competitive practices of airlines and hotels;  
alleged collusive price fixing in the noodle trade;  th e live chicken wholesale trade;  and charges by laundry 
shops (Competition Policy Advisory Group, 2005). 
128 Competition Policy Advisory Group (2005). 
129 Viewed at:  http://www.edlb.gov.hk/edb/eng/info/CPRC.pdf.  
130 The Government of the HKSAR (2005h). 
131 Competition Policy Advisory Group (2005). Hong Kong, China WT/TPR/S/173 
 Page 69 
 
 
concerns of Members without  horizontal competition laws.132  While competition policy was excluded 
from the Doha Work Programme, the HKSAR continues to participate in relevant discussions in the 
WTO to safeguard its interests.   
140. The Government has introduced new tendering a rrangements for petrol filling station (PFS) 
sites since June 2003 to enable new market player s to acquire "commercially viable mass" sites to 
achieve economies of scale.133  Two new players secured all five PFS sites tendered in October 2003 
and February 2004.  As of mid 2006, the new entr ants had secured a total of 18 PFS sites.  
141. It is unclear whether the existing enforcement measures constitute an effective deterrent to 
anti-competitive practices in the HKSAR.  The authoriti es note, however, that since its last Review in 
2002, the HKSAR has adopted 14  new initiatives to enhance competition and taken follow-up actions 
on about 50   competition-related complaints.134  
Consumer protection 
142. Hong Kong, China's comprehensive consumer prot ection legislation covers contracts, safety, 
credit, health, and trade practices.135  The Consumer Council provides wide-ranging services to 
consumers, and raises matters for general discussion and action.136  It examines issues involving anti-
competitive behaviour and provides advice and comme nts on competition issues and works to ensure 
that fair competition in the marketplace enhances eco nomic efficiency, and thereby consumer welfare.  
The Consumer Legal Action Fund, established in 1994 with a Government grant of HK$10 million, 
aims to give easier consumer access to legal re medies through financial support and legal assistance 
for consumers, particularly groups with similar grievances in cases involving significant public 
interest and injustice.  If traders refuse to c ooperate in resolving justifiable complaint cases, 
consumers may seek redress at the Small Claims Tribunal and the Council tenders advice where 
appropriate.  In 2005, the Counc il received 36,614 complaints, larg ely involving telecommunication 
services and related goods/services (43.7% of tota l complaints), household electrical appliances 
(5.9%) and furniture and fixtures (4.5%).  In 2004/ 05, the Council helped resolve 92% of cases with 
"pursuable" grounds (i.e. where there was sufficient information to substantiate the complaint).   
                                                      
132 WTO document WT/WGTCP/W/224, 5 March 2003. 
133 APEC document 2005/SOM2/CPDG/007. 
134 Details of some of these initiatives and complaints are published in the annual reports of the 
Competition Policy Advisory Group.  Viewed at:  http://www.compag.gov.hk/enquiry/ [10 April 2006]. 
135 The legal framework covers general issues (Consumer Council Ordinance (Cap. 216), Small Claims 
Tribunal Ordinance (Cap. 338));  consumer contracts (Sales of Goods Ordinance (Cap. 26), Control of 
Exemption Clauses Ordinance (Cap. 71), Supply of Services (Implied Terms) Ordinance (Cap. 457), 
Unconscionable Contracts Ordinance (Cap. 458));  consumer  safety (Gas Safety Ordinance (Cap. 51), Pesticides 
Ordinance (Cap. 133), Electricity Ordinance (Cap. 406),  Toys and Children's Products Safety Ordinance 
(Cap. 424), Consumer Goods Safety Ordinance (Cap. 456));  consumer credit (Money Lenders Ordinance 
(Cap. 163), Pawnbrokers Ordinance (Cap. 166));  cons umer health (Public Health & Municipal Services 
Ordinance (Cap. 132), Pharmacy and Poisons Ordinance (Cap. 138), Undesirable Medical Advertisements 
Ordinance (Cap. 231), Chinese Medicine Ordinance (Cap. 549));  and trade practices (Money Changers Ordinance (Cap. 34), Weights and Measures Ordinance (Cap. 68), Travel Agents Ordinance (Cap. 218), 
Pyramid Selling Prohibition Ordinance (Cap. 355), Trade Descriptions Ordinance (C ap. 362), Personal Data 
(Privacy) Ordinance (Cap. 486), Estate Agents Ordinance (Cap. 511)).  Legislation is available in Consumer Council online information at:  http://www.consumer. org.hk/website/ws_en/legal_protection/hk_consumer_ 
protection_legislations/Index.html [10 April 2006]. 
136 More information on the Consumer Council's activities and objectives is available at:  
http://www.consumer.org.hk/website/ws_en/prof ile/mission/mission.html [10 April 2006]. WT/TPR/S/173 Trade Policy Review 
Page 70 
 
 
143. Enforcement of the consumer protection legisla tion is ensured to some extent by the Customs 
and Excise Department.137  Officers conduct spot checks and investigations to ensure toys, children's 
products, and consumer goods supplied on the market  are reasonably safe and bear bilingual warning 
labels.138  In 2004 and 2005, 5,953 spot checks and 1,28 3 investigations were conducted;  as a result, 
twelve traders were prosecuted.  During the same period the Department issued 94 Prohibition 
Notices (prohibiting the supply of unsafe products).139  
(v) Corporate governance 
144. An efficient capital market capable of mobiliz ing savings and channelling them into the most 
productive uses is essential for the HKSAR's su ccessful economic restructuring and long-term 
development.  Deficient corporate governance constit utes a potential impediment to the establishment 
of such a market and thus an obstacle to the effi cient allocation of capital.  The authorities consider 
that the HKSAR's corporate governance system and capital markets are on a par with international 
standards.140   
145. Corporate governance practices in the HKSAR are governed by:  the Hong Kong Companies 
Ordinance (amended in 2004, see below), which ma inly outlines statutory provisions governing 
companies incorporated in Hong Kong, China141;  and the Securities and Futures Ordinance.  
Non-statutory rules include the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (SEHK);  the Rules Governing the Listing of Securities on the Growth Enterprise 
Market of the Stock Exchange of Hong Kong Li mited; the Codes on Takeovers and Mergers and 
Share Repurchases, which apply to listed companie s in the HKSAR;  and the Hong Kong Financial 
Reporting Standards, which are observed by the me mbers of the Hong Kong Institute of Certified 
Public Accountants (HKICPA). 
146. The SEHK is the frontline regulator responsible for the supervision and regulation of listed 
issuers  in respect of all listing-related matters.  It may impose sanctions against a listed issuer, and 
any director, substantial shareholder, member  of the senior management, professional adviser, 
sponsor, etc. of a listed issuer.   The Securities and Futures Commission (SFC) is responsible for 
regulating the securities and futures markets in Hong Kong, China.  Rules established by the 
two exchanges (the SEHK, and Hong Kong Futur es Exchange (HKFE)) and the clearing houses are 
subject to SFC approval.  The SFC administers statutory requirements to ensure fair treatment to 
investors and that the disclosure is not false and misleading.  The SFC also has the regulatory 
responsibility for takeovers and mergers.   
147. Many companies listed in the SEHK are controlle d by a single dominant shareholder or a 
single group of persons;  it was estimated in May 20 06 that approximately 22% of the entire market 
capitalization comprised family-led companies.  Mo reover, the majority shareholder often served as 
the chief executive officer (CEO), and the board of  directors may also be dominated by family 
                                                     
 
137 Customs and Excise Department (2004). 
138 Action concerns the Toys and Children's Products Safety Ordinance, Consumer Goods Safety 
Ordinance, Weights and Measures Ordinance, and Trade Descriptions (Marking)(Gold and Gold Alloy) Order and Trade Descriptions (Marking)(Platinum) Order. 
139 Unsafe products dealt with in these Prohibiti on Notices included stuffed toys, battery-operated 
lanterns, toy train set, xylophone, baby walking frames, children's safety harnesses, bunk bed, and folding chairs.  
140 Government of the HKSAR (2006a) . 
141 The Hong Kong Companies Ordinance also contains provisions relating to the registration of 
overseas companies (i.e. companies no t incorporated in Hong Kong). Hong Kong, China WT/TPR/S/173 
 Page 71 
 
 
members;  sometimes the chairman of the board is also the CEO.142  Under the new Code on 
Corporate Governance Practices (see below), as from Ja nuary 2005, listed companies are expected to 
split the role of Chairman and CEO; where this is  not done the company is required to explain the 
reasons for not doing so in their annual and interim reports.  The main protection for minority 
shareholders is provided by the Listing Rules, which, inter alia,  require prior independent 
shareholders' approval for transactions with relate d parties, including with businesses owned by a 
director, chief executive or shareholder holding 10% or more of a listed company.  The Companies (Amendment) Ordinance 2004 also contains provision s to enhance shareholder remedies including the 
provision of statutory derivation actions by shareholders. 
148. During the period under Review, work has been under way to improve the regulatory and 
institutional framework on corporate governance.  A Corporate Governance Action Plan submitted to 
the Legislative Council in January 2003 set out a work programme that focuses on upgrading the quality of the equity market through efforts to brin g the corporate governance, in particular that of 
listed companies, into line with international st andards.  The Standing Committee on Company Law 
Reform concluded its comprehens ive corporate governance review in January 2004.  The Companies 
Ordinance was amended in July 2004 to make it ea sier for investors to seek compensation for unfair 
connected transactions involving major shareholders.
143  In November 2004, the SEHK published its 
final report on a new Code on Corporate Governan ce Practices (HK Code);  the HK Code constitutes 
a big improvement on the Code of Best Practice (a terse document dating back to 1993).  Also in 
November 2004, the SEHK issued mandatory corporate governance provisions and reporting 
requirements (via a corporate governance report (C GR) in both annual and half-yearly basis) for 
HKSAR's main board and Growth Enterprise Market (GEM) listed companies;  subject to transitional 
arrangements for 2005, non-compliance with the repo rting disclosures is to be viewed as a breach of 
the listing rules.144  The HK Code is based on the UK's Combined Code, and takes a comply-or-
explain approach;  it entered into effect for fina ncial periods starting 1 January 2005.  The HK Code 
has two levels of recommendations:  (a) code provisi ons that companies are ex pected to comply with, 
and must explain the reasons for any deviation in the CGR;  and (b) recommended best practice that are for guidance only.  The effect of the HK Code  and the CGR approach will be seen in 2006 as 
companies report on compliance with the HK Code in their CGRs. 
149. Moreover, HKSAR is to introduce a Secur ities and Futures (Amendment) Bill into the 
Legislative Council in 2006; the Bill aims to streng then the regulation of listed corporations and 
further increase local and overseas investors' c onfidence in Hong Kong China's securities market.
145  
Following the enactment of the Financial Reporting Council Ordinance in July 2006 (Chapter I), the 
HKSAR will establish a Financial Reporting Council in early 2007 to investigate irregularities of 
auditors of listed companies, and the financial re ports of these companies, to ensure their compliance 
with legal and accounting requirements.  
150. As regards the corporate governance of the S ecurities and Futures Commission (SFC), the 
Legislative Council passed the Securities and Fu tures (Amendment) Ordinance 2006, effective 
June 2006, which seeks to separate the role of the Chairman from that of the executive arm, and to 
create a Chief Executive Officer (CEO) post to head  the executive arm and be responsible for the day-
                                                      
142 In 2006, 24% of the HSI companies' CEO were al so the chairman of the board and another 12% of 
the companies showed CEO dominance with family ties.  
143 IMF (2005b). 
144 Hong Kong Audit Committee Institute online information.  Viewed at:  
http://aci.kpmg.com.hk/HK/regulations.html [11 April 2006];  and Asian Corporate Governance Association 
online information.  Viewed at:  http://www.acg a-asia.org/content.cfm?SI TE_CONTENT_TYPE_ID=12& 
COUNTRY_ID=292 [10 April 2006]. 
145 Government of the HKSAR (2006a). WT/TPR/S/173 Trade Policy Review 
Page 72 
 
 
to-day operation of the Commission.  This is in line with best governance practices both locally and 
internationally. 
151. The Professional Accountants (Amendment) Or dinance 2004, was enacted to improve the 
transparency and independence of the regulatory framework for the accounting profession.146  In 
March 2005, the Consumer Council produced a Good  Corporate Citizen's Guide that addresses 
corporate rights and responsibilities.147  Efforts are also being made to upgrade the standards of 
corporate governance within SMEs148;  the HKSAR Government has granted HK$2 million under the 
SME Development Fund to the Hong Kong Institute of  Directors to develop and promote a set of 
bilingual (Chinese, English) guidelines on corporate governance specifically for SMEs. 
(vi) Environmental measures 
152. With a view to addressing environmental problems149, Hong Kong, China aims to submit all 
new major government policies to environmental pr otection scrutiny, and implement the "polluter 
pays" principle.150  Fees and charges under the Air Pollution Control Ordinance, Ozone Layer 
Protection Ordinance, Noise Control Ordinance, Wa ter Pollution Control Ordinance, and Dumping at 
Sea Ordinance were revised in the fourth quarter of 2005 based on the "polluter pays" principle in 
order to achieve full-cost recovery for government services.  The revised scale of fees has been in 
effect since 1 January 2006.151 
153. As from January 2006, air pollution has been tackled, inter alia , with the progressive 
introduction of Euro IV emission standards for ne wly registered vehicles, the reduction of power 
consumption in all government office buildings by  1.5% annually, and the use of ultra-low sulphur 
diesel in all government projects.152  Work is under way with respect to the installation of effective 
emissions reduction facilities by the power compani es and the Pearl River Delta Regional Air Quality 
Management Plan (including a Pilot Emissions Tr ading Scheme among power plants).  Methods to 
resolve the waste problem include encouraging recovery and re-use of waste, and promoting recycling industries;  for this purpose, Phase I of an EcoPar k designated for the development of environmental 
industries was to be ready by the end of 2006. 
 
                                                     
 
146 Government of the HKSAR (2005b). 
147 Consumer Council (2005). 
148 APEC (2003). 
149 Reportedly, increasing pollution in the HK SAR is becoming a deterrent to FDI (see Hong Kong Air 
Pollution Threatens Business – Survey.   Viewed at:  http://www.planeta rk.com/avantgo/dailynewsstory.cfm? 
newsid=37848 [20 September 2006]. 
150 The Government of the HKSAR (2005h). 
151 The background and rationales for the amendments can be found in the Legislative Council brief at:  
http://www.legco.gov.hk/yr05-06 /english/subleg/brief/178_180_18 6_brf.pdf [17 April 2006]. 
152 The Government of the HKSAR (2005h).