Arrangement on Mutual Recognition and Enforcement of Judgments in Civil and Commercial Matters by Courts of Mainland And Hong Kong SAR
August 22, 2010
The Supreme People’s Court and HK SAR Government hereby make the following arrangement on recognition and enforcement of judgments in civil and commercial matters pursuant to choice of court agreements between parties concerned through consultation according to Article 95 of the Basic Law of Hong Kong Special Administrative Region of the People’s Republic of China:
Article 1 Final judgment, defined with payment amount and enforcement power, made between mainland court and HK SAR court in civil and commercial case with written jurisdiction agreement, the parties concerned shall apply to mainland people’s court or HK SAR court for recognition and enforcement based on this arrangement.
Article 2 “Final judgment with enforcement power” in this arrangement:
(1) On the mainland, it refers to:
1. Judgment of the supreme people’s court;
2. The second instance judgment and judgment made by the upper level people’s court according to judgment supervision procedure is effective, when judgment of first instance is not allowed to appeal by people’s high court, intermediate people’s court and basic people’s court (as appendix) that’s authorized to be in charge of foreign related, HK, Macao and Taiwan related civil and commercial matters of the first instance, or when the appeal is out of prescribed time limit.
(2) In HK SAR, it refers to effective judgment made by court of final appeal, court of the appeal of the high court, court of the first instance and district court.
Judgment in this arrangement refers to judgment paper, ruling paper, mediation agreement and payment order on the mainland; refers to judgment paper, order and evaluation certificate of legal expense in HK SAR.
After the party applies to HK SAR for recognition and enforcement of the judgment, if people’s court of the mainland shall legally review the case, such case should be raised by upper level people’s court of the court that makes effective judgment.
Article 3 “Choice of court agreement in written” in this arrangement refers to a written agreement defining the exclusive jurisdiction of either the mainland people’s court or HK SAR in order to revolve dispute with particular legal relation occurred or likely to occur by the parties concerned since effective date of this arrangement.
“Particular legal relation” of this article refers to contract of civil and commercial matters between parties, excluding contract of employment and contract involving natural person with individual consumption, family affair or other non-commercial purposes.
“Written form” in this arrangement refers to contract, letter and electronic data (including telegraph, telex, facsimile, electronic data exchange and email) and other forms that can physically present the carried content and can be used in the future.
Written choice of court agreement can be constituted of one or more copies.
The choice of court agreement exists independently and any change, relief, termination or invalidation of the contract won’t influence effect of the choice of court agreement, except when it’s otherwise prescribed in the contract.
Article 4 Application for recognition and enforcement of civil and commercial judgment prescribed in the arrangement, should be submitted to intermediate people’s courts of residence, living place or place of property of the applicant on the mainland, or submitted to high court of HK SAR.
Article 5 If residence, living place or place of property of the applicant are under jurisdiction of different intermediate people’s courts, the applicant shall choose one of the people’s court to apply for recognition and enforcement rather than applying it to two or more people’s courts.
If residence, living place or place of property of the applicant is both on the mainland and in HK SAR, the applicant can submit application to courts at these two places at the same time. Judgment enforcement amount of courts at both places shouldn’t exceed fixed amount of the judgment itself. Court that has partly or completely executed the judgment should provide status of executed judgment upon requirement of the other court.
Article 6 Applicant shall submit the following document for application of judgment recognition and enforcement:
(1) Application for recognition and enforcement;
(2) Copy of judgment paper with seal of court that makes the final judgment;
(3) Certificate issued by court of final judgment to prove such judgment is the final judgment referred to in Article 2 of this arrangement and can be executed at the place of judgment;
(4) Identification evidence:
1. If applicant is natural person, he shall submit ID card or notarized copy of ID card;
2. If applicant is legal person or other form of organization, they shall submit notarized copy of registration certificate of legal person or other form of organization;
3. If applicant is a foreign legal person or other form of organization, they shall submit related notarization and authentication materials.
If there’s no Chinese version of submitted document to the mainland people’s court, the applicant shall submit a correct Chinese translation.
Court at the enforcement place doesn’t need to require particular notarization for certificate issued by court prescribed in this article.
Article 7 The following items should be included in the application for recognition and enforcement:
(1) The name and living place of the party, who is natural person; name and location of legal person or other organization, and name, position and residence of the legal representative or principal;
(2) Reason of application and request content, place of property and property status of the applicant;
(3) Whether the judgment is applied in court of original place and the enforcement status.
Article 8 Applicant shall comply with law of the enforcement place while applying for recognition and enforcement of judgment of court on the mainland or in HK SAR, except for otherwise prescribed.
Application period for recognition and enforcement by applicant is two years.
During the above period, if judgment on the mainland is applied to be executed in HK SAR, it will calculate from the last day of performance period prescribed by the judgment; if the judgment requires performance in different period, it will calculate from the last day of each performance period; if the judgment doesn’t prescribe performance period, it will calculate since effective day of the judgment; if judgment in HK SAR is applied to be executed on the mainland, it will calculate from the day of judgment mandatory enforcement, which is put in the judgment; if the judgment has other prescription during performance period, it will calculate since maturity of performance period.
Article 9 For application for judgment recognition and enforcement, if debtor of the first trial provides evidence that proves one of the following situations and is proved by the court that handles the application, the judgment will not be recognized or executed:
(1) The jurisdiction agreement is invalid according to local law at the original court chosen by the parties concerned, except for jurisdiction agreement that is judged by the chosen court as being valid;
(2) The judgment is performed completely;
(3) Court of the execution place enjoys exclusive jurisdiction based on local law;
(4) The party that loses a lawsuit and doesn’t appear in court has no legal summon or hasn’t acquired legal replying time though with legal summon according to law at the original court, except for cases that original court announce service based on law or related regulation;
(5) Judgment is acquired by cheating;
(6) Judgment of the same lawsuit by court at enforcement place, or judgment of the same lawsuit request by courts abroad, or arbitration made by related arbitration institute have been recognized or executed by court at the enforcement place.
If the people’s court of the mainland believes enforcement of the judgment made by HK SAR impairs social public interests, or court of HK SAR believes enforcement of judgment made by court on the mainland violates public policy of HK SAR, the recognition and enforcement are not permitted.
Article 10 For judgment made by court of HK SAR, if the debtor confirmed by judgment has lodged suit or the procedure is still underway, the people’s court of the mainland, after checking and verification, can pause recognition and enforcement of the procedure. If all or part of the original judgment is maintained after appealing, the reorganization and enforcement procedure can be recovered; if the original judgment is overthrown, the recognition and enforcement procedure can be ceased.
If local people’s court of the mainland has arraigned adjudication of the made judgment according to judgment supervision procedure, or the Supreme Court has arraigned another adjudication, after being checked by the court of HK SAR, the recognition and enforcement procedure can be paused. If the second judgment maintains all or part of original judgment, the recognition and enforcement can be recovered; if the second judgment has changed overall original judgment, the recognition and enforcement procedure should be ceased.
Article 11 The effect of judgment that’s recognized according to this arrangement should be equal to judgment of local court.
Article 12 If the party doesn’t agree to the judgment of whether it’s recognizable or executable, he can apply to the upper level people’s court for review on the mainland, or to lodge suit based on law and regulation in HK SAR.
Article 13 The court won’t handle lawsuit, lodged by the party with the same fact, while the court is handling the application of recognizing and executing judgment of the party.
The court won’t handle judgment that’s recognized or executed if the party lodges lawsuit with the same fact.
The applicant can’t submit application for recognition or enforcement again based on judgment that should not be recognized or executed in Article 9 of this arrangement, but can lodge suit to local court with the same case fact according to law of executing place.
Article 14 Before court handles application for recognizing and executing judgment, they can adopt protective or compulsory measures for applicant property based on regulations of property preservation or assets transferring prohibition of local law and according to application of the applicant.
Article 15 If the party applies to related court for judgment enforcement, they should pay execution fee or court expense based on law and regulation on lawsuit charge of execution place.
Article 16 The bidding scope recognized and executed by courts of the mainland and HK SAR includes but not limited to fixed amount confirmed in judgment, but also interests required by the judgment, lawyer fee and legal cost ratified by the court, excluding tax and fine.
Legal cost in HK SAR refers to lawsuit fee prescribed or ordered amount in evaluation certificate of lawsuit fee by the judge or judicial executive officer.
Article 17 This arrangement is applicable to judgment made by courts of the mainland and HK SAR since the effective day (including the effective day) of this arrangement.
Article 18 If any problem occurs during implementation of this arrangement or modification is necessary, the Supreme People’s Court and government of HK SAR shall resolve through consultation.
Appendix:
Name List of Basic People’s Court Authorized to Handle Foreign-Related, HK, Macao and Taiwan Civil and Commercial Case of the First Instance (omitted)
Source: http://www.fdi.gov.cn
Tags: Law, China, enforcementRelated Posts:
Difference between Trademark Registration and Company Registration
August 14, 2010
Separate laws and systems regulate the registration of company names, business names and trademarks in Hong Kong. A company name registration at the Companies Registry or a business name registration at the Business Registration Office (Inland Revenue Department) is not the same as a trademark registration at the Trade Marks Registry. A business or company name registration is not an indication of trademark rights.
There have been recent reports of registered trademarks or well-known trademarks being registered without authorization as company names with the Companies Registry (often with a minor variation of the name). We understand that such company name registrations are then used outside Hong Kong (principally in the Mainland) as a cover for promoting or dealing in infringing trademark goods.
A Hong Kong business registration certificate or a company registration certificate does not by itself indicate that the business or company has rights to use its name or a trademark in promoting or dealing in goods and services.
Tags: Hong Kong, mainland, registered trademarksRelated Posts:
Undisclosed Commercial Information – Trade Secrets
August 14, 2010
Trade secrets and undisclosed commercial information are confidential information in a commercial setting, such as formulaes, methods, technologies, designs, product specifications, business plans and client lists, that have commercial value. In Hong Kong, trade secrets and undisclosed commercial information are protected by common law of confidence. An obligation of confidence will arise whenever the information is communicated to or acquired by a person who knows or ought as a reasonable person to know that the other person wishes to keep that information confidential. An industry or trade custom or practice may also impose an obligation of confidence. The release of trade secrets and undisclosed commercial information would be detrimental to the owner or advantageous to his or her competitors or others. The remedies available for breach of confidence include injunctions, damages, account of profits and delivery up of materials containing confidential information. To enhance the protection of trade secrets and undisclosed commercial information, you should sign non disclosure agreement with everyone who has knowledge of your secrets.
Protection of trade secrets and undisclosed commercial information is of particular importance when the IP is not registrable or you find the period of patent protection (20 years) not long enough. Whereas patents enjoy a limited term of protection, trade secrets and undisclosed commercial information protection last until the information becomes public knowledge. The formulae for Coca Cola is a good example of long-kept trade secrets and undisclosed commercial information. However, trade secrets and undisclosed commercial information do not give you exclusive rights. Your competitors may independently invent an identical product or process or come up with the same ideas which they can exploit freely.
How do trade secrets and undisclosed commercial information differ from patents or copyright?
The application for a patent requires disclosure of details of invention. In other words, details of a patented invention cannot be kept confidential as trade secrets and undisclosed commercial information. As said above, patents enjoy a limited term of protection but trade secrets and undisclosed commercial information last for as long as the information remains confidential.
Copyright only protects the form in which ideas and information are expressed, but not ideas and information per se. The law of confidence protects the substance of ideas and information, no matter how they are expressed. There are statutory permitted acts for works protected by copyright but not works protected by confidence.
The above only set out some basic principles of trade secrets and undisclosed commercial information. You may seek independent professional advice for protection of your trade secrets and undisclosed commercial information from Ming Dynasty (HK) Limited.
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CEPA FURTHER LIBERALIZATION MEASURES IN 2010
June 12, 2010
The market access conditions in 14 service sectors will be further relaxed under Supplement VII to CEPA. The 14 service sectors include construction; medical services; technical testing, analysis and product testing; specialty design; audiovisual services; distribution; banking; securities; social services; tourism; cultural services; air transport; qualification examinations for professionals and technicians; and individually owned stores. Among them, “technical testing, analysis and product testing” and “specialty design” are new service sectors. In other words, the service sectors covered by liberalization of trade in services under CEPA will expand from 42 to 44.
Major market liberalization measures under Supplement VII to CEPA are highlighted below:
A. Medical services – Hong Kong service suppliers (HKSS) are allowed to set up wholly-owned hospitals in the municipalities of Shanghai, Chongqing, and the provinces of Guangdong, Fujian and Hainan; and to set up convalescent hospitals in the form of wholly-owned, equity joint venture or contractual joint venture in Guangdong Province. No requirement is imposed on the total investment in setting up hospitals by HKSS on an equity joint venture or contractual joint venture basis in Guangdong Province; and no restriction is imposed on the ratio of capital investment between Hong Kong and Mainland partners in setting up hospitals in the form of equity joint venture or contractual joint venture in the municipalities of Shanghai, Chongqing, and the provinces of Guangdong, Fujian and Hainan. Twelve categories of statutory healthcare professionals who are registered to practise in Hong Kong (medical practitioners, Chinese medicine practitioners, dentists, pharmacists, nurses, midwives, medical laboratory technologists, occupational therapists, optometrists, radiographers, physiotherapists and chiropractors) are allowed to provide short-term services in the Mainland.
B. Tourism – Hong Kong travel agents established on a wholly-owned or joint venture basis in Beijing and Shanghai Municipalities are allowed to apply for the operation, on a pilot basis, of group tours to Hong Kong and Macao for registered permanent residents of the Beijing and Shanghai Municipalities.
C. Banking – A Hong Kong bank that has maintained a representative office in the Mainland for more than one year (previously required more than two years) can apply to set up a wholly foreign-funded bank or a foreign bank branch. A Hong Kong bank’s operating institution in the Mainland which has been operating for more than two years and profitable for one year prior to the application (previously required profitable operation for two consecutive years prior to the application) can apply to conduct Renminbi business. Foreign banking institutions established in the Mainland by Hong Kong banks can establish specialized institutions to provide financial services to small enterprises.
D. Securities – Mainland and Hong Kong will deepen the cooperation in financial services and product development, and launch, in the Mainland at an appropriate time, ETF (open-end index-tracking exchange-traded fund) constituted by Hong Kong listed stocks.
E. Construction – Hong Kong professionals who have obtained Mainland’s class 1 registered architect qualification or class 1 registered structural engineer qualification, can act as partners to set up construction and engineering design offices in the Mainland in accordance with the relevant qualification requirements, without restrictions on the ratio of the number of Hong Kong partners to the number of the Mainland partners, the ratio of the total capital contributed by the Hong Kong partners to that by the Mainland partners, or the Hong Kong partners’ period of residence in the Mainland. Hong Kong professionals who have obtained Mainland’s class 1 registered architect qualification or class 1 registered structural engineer qualification by mutual recognition, can register and practise in Guangdong;
F. Air Transport – Airport transport sales agencies set up by HKSS in the Mainland in the form of wholly-owned enterprises, equity joint venture or contractual joint venture, can operate air transport sales agency services in the domestic routes in the Mainland. HKSS can also operate aircraft repair and maintenance services in the Mainland in the form of wholly-owned enterprises or with majority shareholding in the enterprises.
G. Distribution – Distribution enterprises set up by HKSS in the Mainland can sell books published in Hong Kong.
H. Technical testing, analysis and product testing services – Testing organizations in Hong Kong to cooperate with designated Mainland organizations to undertake testing of products under the China Compulsory Certification (CCC) System on a pilot basis, in respect of selected products listed in the CCC Catalogue and processed in Hong Kong (i.e. the processing facilities are located in Hong Kong). These testing organizations have to be accredited by the accreditation body of the HKSARG (i.e. the Hong Kong Accreditation Service) to be capable of performing testing for the relevant products under the CCC System.
I. Audiovisual services – HKSS can set up enterprises on a wholly-owned, equity joint venture or contractual joint venture basis in the Mainland to produce video and sound recording products.
J. Specialty design – HKSS can set up wholly-owned enterprises in the Mainland to provide specialty design services.
Apart from benefiting the larger enterprises, measures in Supplement VII to CEPA would also benefit individuals and small businesses, such measures include allowing registered healthcare professionals to provide short-term services in the Mainland, allowing Hong Kong permanent residents to take the qualification examination for real estate valuer in the Mainland, and allowing Hong Kong permanent residents with Chinese citizenship to set up individually owned stores in the Mainland to provide services in the areas of marriage, renting and leasing of comics books, and pet clinics.
All the service liberalization measures under Supplement VII to CEPA will take effect from 1 January 2011.
In accordance with Article 5 of Annex 4 of CEPA, Hong Kong will not impose any new discriminatory measures on the Mainland’s services and service suppliers in the service sectors covered by CEPA. This commitment will also apply to sectors covered by the liberalisation of trade in services measures under Supplement VII to CEPA.
Enhancing cooperation in area of trade and investment facilitation
To enhance trade and investment facilitation, in addition to strengthening the cooperation in testing and certification, the Mainland and Hong Kong have also included under Supplement VII to CEPA cooperation in the cultural, environmental, innovation and technology industries, as well as cooperation on education.
For cooperation in cultural and environmental industries, Supplement VII to CEPA fosters the joint development of the industries of both sides, mainly through strengthening exchanges and communication between relevant organizations and the trade of both sides, as well as cooperating in organization of visits and trade exhibitions and seminars. For cooperation in innovation and technology industry, both sides agree to progressively involve Hong Kong research institutes and enterprises in the national innovation system and encourage Hong Kong research personnel and organizations to participate in national science and technology projects, and also to strengthen exchanges and cooperation between the two places in high technology research, development and application, fundamental scientific research, etc.
As regards cooperation on education, both sides agree to strengthen exchanges, communication, and exchange of information in respect of education, to strengthen cooperation in training and organizing visits, etc. to support the Mainland’s education institutions and Hong Kong’s higher education institutions to jointly provide education programmes, to establish joint research facilities and to nurture talents at undergraduate or above level in the Mainland
Moreover, for testing and certification, both sides agree to strengthen co-operation between relevant authorities of both sides, and the Mainland will also assist Hong Kong’s testing laboratories to be recognized under the international multilateral systems on mutual recognition of testing and certification that are open to national member bodies.
By establishing the above cooperation mechanisms, we hope to promote long-term cooperation in the aforementioned industries or service sectors between the two sides, and to jointly open up business opportunities and scope for development.
Conclusion
Inclusive of the measures in Supplement VII to CEPA, the two sides have so far announced nearly 280 liberalization measures in trade in services.
The measures under Supplement VII to CEPA will expedite and facilitate Hong Kong service industries to enter and expand in the Mainland market, and foster service industries integration and professional exchanges between the two sides. Moreover, most of the new measures cover the four pillar industries and six economic industries that Hong Kong has competitive edge, and as such will help consolidate Hong Kong’s status as an international financial, trade, logistics and high value-added service centre, and will lay the foundation for the two sides to jointly develop education, medical services, as well as testing and certification, environmental, innovative technology and cultural industries.
Since 2008, the Mainland and Hong Kong announced 41 measures (including related measures in Supplement VII to CEPA) for “early and pilot implementation” in Guangdong Province. These pilot measures serve to demonstrate the effect of liberalization in the respective service sectors and contribute positively to the exploration of cooperation and integration of the service industries of Hong Kong and Guangdong, and substantively respond to the policy direction of enhancing cooperation between the service industries of Guangdong and Hong Kong as stipulated in the “Framework for Development and Reform Planning for Pearl River Delta Region”; as well as to the positioning with respect to fostering the development of modern service industries under the “Framework Agreement on Hong Kong/Guangdong Co-operation”.
ECONOMIC IMPACT OF CEPA
HKSARG has been closely monitoring the implementation of CEPA from 1 January 2004. We collect statistics relating to the Certificates of Hong Kong Service Supplier (HKSS) and “Individual Visit Scheme” (IVS) etc. to conduct statistical analysis, as well as to assess the impact on Hong Kong’s economy. HKSARG has just updated the assessment of the impact of CEPA liberalisation of trade in services and IVS on Hong Kong’s economy. As reflected by the assessment report, during 2007-2009, liberalisation of trade in services and IVS have continued to bring benefits to Hong Kong enterprises and the economy as a whole.
During 2004-2009, cumulative business receipts obtained by companies in Hong Kong due to CEPA from Mainland-related business reached HK$61.6 billion. During 2007-2009, CEPA-induced business receipts obtained by operations established by Hong Kong service suppliers on the Mainland amounted to HK$198.5 billion. During the same period, companies in Hong Kong obtained additional business receipts totalling about HK$55.1 billion due to CEPA.
IVS is a tourism cooperation measure first introduced under CEPA in 2003. By now, the scheme has been extended to 49 Mainland cities. By March 2010, over 49 million Mainland visitors have come to Hong Kong under the scheme. The number of IVS visitors has drastically increased from 4.26 million in 2004 to 10.59 million in 2009, representing a robust average annual growth rate of 20%. In 2009, benefiting from the implementation of the “multiple-entry” individual visit endorsement to Hong Kong for Shenzhen permanent residents with effect from 1 April, an additional HK$26.4 billion in spending was generated by IVS visitors in 2009, which was almost 40% higher than that in 2008. In cumulative terms, during 2004-2009, IVS visitors brought about additional spending totalling over HK$84.8 billion.
As at end 2009, due to liberalization of trade in services and IVS under CEPA, a total of 54,700 jobs were created in Hong Kong, while 40,600 jobs were created on the Mainland.
CEPA also has a positive impact on attracting Mainland and foreign investments to Hong Kong. According to the information provided by InvestHK, among the 265 foreign companies assisted by InvestHK to invest or expand in Hong Kong in 2009, 70 (or 26%) cited CEPA as one of the key considerations for investing in Hong Kong. Moreover, since the Mainland streamlined the application procedures for Mainland enterprises to invest in Hong Kong in August 2004, the trade and investment between the Mainland and Hong Kong has further increased. According to the information provided by the Ministry of Commerce, between September 2004 and December 2009, 2,602 Mainland enterprises were granted approval to invest in Hong Kong, involving over US$24.4 billion of investment.
We would wish to point out that, as implementation of CEPA deepens, the economic impact of CEPA has become more closely interwined with the overall macro economic environment, and as such it has become more and more difficult to single out the CEPA-induced benefits for quantitative analysis. Also, the longer CEPA has been implemented, the respondents’ impression of the CEPA-induced effects might become less clear with the passage of time, and the value of conducting quantitative analysis of CEPA-induced impact through opinion survey would reduce over time.
Source: HK Trade and Industry Department
http://www.tid.gov.hk
Tags: China, mainland, TradeRelated Posts:
What Does CEPA Offer?
September 12, 2009
CEPA
■ Zero tariffs on 90% of Hong Kong exports to China
■ Faster/easier China market access for 18 service sectors
■ Lower entry thresholds for smaller players (capital/trading history
requirements)
■ 100% ownership of many China ventures
■ Manufacturers in China able to use Hong Kong services
■ Makes Hong Kong the easiest route into/out of China
WHO BENEFITS FROM CEPA?
Hong Kong-based service providers (in 18 sectors):
■ Company must be incorporated in Hong Kong
■ Doing business in Hong Kong for past 3-5 years
■ Liable for Hong Kong profits tax
■ Employing 50% of staff in Hong Kong
■ Any nationality
Manufacturers/distributors of goods (for 273 categories):
■ Goods must qualify as ‘made in Hong Kong’
■ Not necessary for company to be based in Hong Kong
■ To qualify, goods must be‘substantially transformed’ – 30% of
value must be added in Hong Kong (includes R&D, design costs)
CEPA – YOUR SPRINGBOARD TO CHINA
WHAT IS CEPA?
■ A free trade agreement between Hong Kong and mainland China
■ Effective from 1 January 2004
■ Preferential access to China’s market from Hong Kong
■ Significant China market liberalisation
■ Goes further than China’s WTO commitments CLOSER ECONOMIC PARTNERSHIP ARRANGEMENT HOW CAN OVERSEAS COMPANIES BENEFIT?
Service companies
■ Partner with, invest in, or buy into a Cepa-qualified firm in Hong Kong
Manufacturers or traders of goods
■ Partner with, or outsource to, a Hong Kong manufacturer
(no need for your company to have a base in Hong Kong)
HOW CAN COMPANIES APPLY?
■ Hong Kong-based service companies must apply for a Cepa certificate
■ Manufacturers must apply for a Cepa certificate for their products
Easy application procedure through Hong Kong’s Trade and Industry Department
MORE INFORMATION?
www.tid.gov.hk/cepa/eng – detailed information from Hong Kong’s Trade
and Industry Department
www.tdctrade.com/cepa – Hong Kong Trade Development Council’s Cepa
section
www.hktrader.net – e-newsletter with Cepa section for overseas companies
1HOW CEPA CAN HELP YOU
1 What is Cepa?
Cepa stands for Closer Economic Partnership Arrangement. It is a free
trade deal, operating from 1 January 2004, between Hong Kong and the
Chinese mainland. It is the first bilateral free trade deal signed by China.
2 What are the main provisions of Cepa?
Cepa is broadly divided into three sections:
Trade in goods
Any company (Hong Kong-based or from outside Hong Kong) can benefit
from zero tariffs on 273 categories of products exported from Hong Kong
into the Chinese mainland, as long as the products are classified as
‘Made in Hong Kong’.
Your company does not have to have an office in Hong Kong, but your
products must satisfy ‘Rules of Origin’ to classify as ‘Made in Hong Kong’.
Trade in services
Under Cepa provisions, the Chinese mainland has opened up its market to
Hong Kong-based service providers in 18 sectors.
Advertising, accountancy, audiovisual, banking, construction and real
estate, convention and exhibition services, distribution services, freight
forwarding, insurance, legal, logistics, management consultancy,
medical and dental, securities, storage and warehouse services,
telecommunications, tourism and transport.
Trade and investment facilitation
The main provisions relate to liberalising customs clearance, business
regulations and the standardisation of e-commerce.
23 How does Cepa add to Hong Kong’s position as Asia’s business centre?
Cepa offers preferential access to China’s markets, over and above
commitments made by China under WTO. Cepa adds to the long list of
reasons why international businesses choose Hong Kong as a base for
their China and Asia operations.
Three broad groups stand to benefit:
■ Companies already based in Hong Kong (of any nationality)
■ Overseas companies interested in developing their China business strategy
through Hong Kong
■ Chinese mainland enterprises that wish to use Hong Kong services to
streamline and expand their businesses overseas
Section 1
TRADE IN GOODS – HOW CEPA CAN HELP YOUR BUSINESS
4 What products are eligible for zero tariffs?
273 product categories have been selected to be tariff free from 1 January
2004. This covers 90 percent of Hong Kong products. The majority of
remaining products will be tariff free by 2006, at the latest.
For a full list, see www.tid.gov.hk/english/cepa
5 Do you have to have an office in Hong Kong for your products to qualify as
‘Made in Hong Kong’?
No. Cepa provisions that a company be based in Hong Kong for three to
five years; be liable to pay tax; and employ 50 percent of its workforce
locally, only applies to service companies.
For goods to qualify as ‘Made in Hong Kong’ they simply have to qualify
under the Cepa ‘Rules of Origin’.
36 Do your products have to be manufactured in Hong Kong to enjoy zero tariffs?
What are the Rules of Origin (ROO)?
Products must be classified as ‘Made in Hong Kong’ under Cepa ‘Rules of
Origin’ (ROOs). For goods to qualify as made in Hong Kong, they must
have been substantially transformed in Hong Kong.
Currently 273 product codes are covered by Cepa.
■ 187 of these will adopt Hong Kong’s existing origin rules (these include
textiles and clothing, jewellery, cosmetics, pharmaceutical products, and
plastic and paper articles).
■ 46 products (such as some chemical and metal products, some electronic
products and electronic components) will adopt a ‘Change in Tariff
Heading’ (CTH) approach. CTH is widely used by most WTO members.
■ The remaining 40 products (electrical and optical components, watches
and clocks) will adopt a 30% value added requirement. R&D and design
will be counted under this value adding requirement.
7 Will you need a Certificate of Origin to benefit from zero tariffs?
Yes. Hong Kong’s Trade and Industry Department has set up a new unit to
administer certification. Companies do not have to wait until 1 January
2004 to seek certification. Please click on www.tid.gov.hk for details.
8 Do the zero tariffs apply to taxes levied by the Chinese government?
Cepa only covers import tariffs. VAT and other domestic taxes in China
are not exempt.
49 Will Cepa help you to source products efficiently from the Chinese mainland?
Yes. Cepa opens up the Chinese mainland to more Hong Kong companies
working in the trade support industries.
In particular, Cepa looks set to further integerate the economies of
Hong Kong and the Pearl River Delta region of southern China.
The economy of the Pearl River Delta is dominated by manufacturing,
while Hong Kong excels in trade services, such as sourcing, financing,
logistics and transportation. The combination of these two regions (often
called the Greater Pearl River Delta) offers a compelling and competitive
way to do business.
10 If you want to sell products into China, how can Hong Kong and Cepa help?
Under Cepa, Hong Kong-based companies can set up wholly-owned
distribution ventures to manage the full process of getting your products to
retailers and consumers.
Working with a Hong Kong partner, you can find suitable markets, better
understand local consumers and distribute to all regions on the mainland.
Please note that your products will still be subject to mainland Chinese
import tariffs, unless they have Cepa certification.
511 What are the advantages of manufacturing in Hong Kong – and how can you satisfy the ‘Rules of Origin’?
Cepa establishes Hong Kong as a competitive manufacturing location for
high-value goods, especially those with strong design content, or valuable
trademarks. Hong Kong’s strict intellectual property legislation and strong
service sectors support the manufacture and distribution of high value
products.
Using Hong Kong’s free port system, raw materials or semi-made products
can be imported into Hong Kong tariff free. ‘Boutique’ factories in Hong
Kong can manage the specialised stages of the design, manufacturing
and IP protection of the product. Your products can then be exported tariff
free to China (i) for further mass production (ii) for China-wide distribution,
or (iii) exported to the rest of the world.
You can either invest in your own production lines, or license/outsource to
Hong Kong factories to satisfy the Rules of Origin.
Section 2
TRADE IN SERVICES ñ HOW CEPA CAN HELP YOUR BUSINESS
12 If you have a services company, can you take advantage of Cepa provisions to enter the China market?
Cepa provisions cover 18 service areas. You must also qualify as a
‘Hong Kong company’. To satisfy these criteria, your company must:
■ Be incorporated in Hong Kong for three to five years (depending on
the sector)
■ Be liable to pay profits tax
■ Employ at least 50% of staff in Hong Kong
Any company, regardless of nationality, which satisfies this criteria, can
benefit from Cepa provisions.
613 How will Cepa make it easier for you to access the China market?
The exact provisions vary according to the sector. Please see page 9
for an overview, or click on www.tid.gov.hk/english/cepa for a sector-by-sector breakdown. However, broadly speaking, Cepa helps in four key areas:
■ Earlier market entry – Under WTO commitments China is gradually making
it easier for overseas companies to set up. Cepa offers a one to five year
head start to Hong Kong-based companies.
■ Setting up wholly-owned companies – Currently overseas companies have
to partner with Chinese companies. In many cases Cepa allows for the
creation of wholly-owned companies.
■ Lower capital thresholds – Capital requirements to set up in China have
been reduced substantially opening up the field to smaller players.
■ Recognition of qualifications – Many Hong Kong professional qualifications
will be recognized in China, and access to sit China professional exams will
be broadened.
14 If you would like to take advantage of Cepa provisions, but you do not have an office in Hong Kong, what should you do?
If you do not qualify as a ‘Hong Kong company’ under the criteria set out
in Q12, you can partner with, invest in, or buy into, a Hong Kong-based
company that already qualifies. You may then enjoy the advantages offered
by Cepa.
7 General questions
15 How does Cepa differ from China’s WTO commitments?
Cepa provisions offer two key benefits over and above WTO commitments:
■ Earlier implementation – in most cases, Cepa advantages will be available
to Hong Kong-made products and Hong Kong-based service providers
one to five years ahead of WTO benefits.
■ Better benefits – For ‘Made in Hong Kong’ products, Cepa provisions offer
zero tariffs on 90 percent of goods from 1 January 2004, and will offer zero
tariff on all goods by 2006, at the latest. Even under full WTO commitments, tariffs will remain between five and 30 percent.
Cepa-eligible service companies (of any nationality), benefit from lower
capital and asset requirements, no global quota restrictions and being able
to set up wholly-owned ventures. WTO commitments have no timetable for
wholly-owned ventures in areas such as logistics and exhibition services.
16 What is the difference between a Free Trade Agreement and Cepa?
Normally FTAs are signed between two countries. Because of the ‘one
country, two systems’ between the Chinese mainland and Hong Kong,
a different name has been used. In other ways, Cepa is comparable to a FTA.
8
“Made in Hong Kong” products covered by Cepa
• Electrical and electronic products • Metal products • Chemical products • Pharmaceutical products • Plastic articles • Paper articles • Textiles and clothing • Cosmetics • Clocks andwatches • Jewellery
For more detail, check www.tid.gov.hk/english/cepaService sectors covered by Cepa NB. Any company that satisfies Cepa-eligibility can benefit, regardless of nationality.
Accounting: One year permits for Hong Kong companies to conduct auditing services on the mainland. Hong Kong-qualified accountants who have practised on the mainland will be treated as Mainland accountants.
Advertising: Firms from Hong Kong can establish wholly-owned advertising companies on the mainland.
Audiovisual: Hong Kong-produced Chinese language movies will be exempt from the 20 overseas film quota and can be distributed on the mainland. Co-produced movies will be treated as mainland films.
Banking: Asset requirement for banks to establish mainland branches is reduced from US$ 20 bn to US$ 6 bn.
Conventions: Hong Kong firms can set up wholly owned operations.
Construction and real estate: Hong Kong firms can set up wholly-owned operations.
Distribution (exc tobacco): Hong Kong firms providing distribution services, retailing or franchising can set up wholly-owned operations. Hong Kong car dealers can open up to 30 wholly-owned retail outlets.
Freight forwarding: Hong Kong firms can operate on a wholly-owned basis.
Insurance: Max limit of capital by a Hong Kong insurance firm in a mainland firm is 24.9 per cent. Hong Kong insurance agents can practice with mainland professional qualifications.
Legal: Hong Kong lawyers can work for mainland firms. Minimum requirements are waived for those operating in Shenzhen and Guangzhou and shortened to two months for other areas.
Logistics: Hong Kong companies can set up wholly-owned operations on the mainland.
Management/consultancy: Most companies can set up wholly-owned enterprises.
Medical and dental: Hong Kong doctors can work on the mainland for up to three years.
Hong Kong medical workers can sit exams to work on the mainland.
Securities: Hong Kong Exchanges and Clearing can set up a representative office in Beijing.
Storage/warehousing: Hong Kong companies can operate wholly-owned operations.
Telecommunications: Hong Kong companies can set up JV enterprises on the mainland.
No geographic restriction for JV enterprises formed by Hong Kong service suppliers and the mainland to provide value-added services.
Tourism: Hong Kong companies can run hotels/restaurants on a wholly-owned basis.
Transport: Hong Kong companies can operate on a wholly-owned basis.
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