Member Article

The Central Government of the People’s Republic of China (“the Mainland”) and the Government of the Hong Kong Special Administrative Region (“Hong Kong”) reached a further understanding regarding the Closer Economic Partnership Arrangement between the Mainland and Hong Kong (“CEPA”) (as discussed in the July 2003 and November 2003 issues of China Legal Update) on 27 August 2004. This supplement which is referred to as CEPA III, expands the scope of goods which are eligible for duty free treatment and further liberalises PRC market access for qualified Hong Kong service suppliers. It follows the first supplement, which is usually referred to as CEPA II, that was signed on 27 October 2004. Trade in goods Starting from 1 January 2006 all Hong Kong products, except for certain types of prohibited articles, may enjoy duty free treatment. The goods, however, must meet prescribed rules of origin (“ROO”). In addition to the goods previously exempted from import tariffs under the previous CEPA, the Mainland and Hong Kong have agreed to duty free treatment for goods covered in 261 tariff codes. For products that have no agreed ROOs, CEPA III has introduced a mechanism whereby interested enterprises may apply to include such products in subsequent phases of ROO discussions which will be held twice a year (rather than once a year as in previous phases of CEPA). Trade in services CEPA III introduces further measures to liberalise access by qualified Hong Kong service providers to 10 service sectors, namely legal, accounting, audiovisual, construction, distribution, banking, securities, tourism, transport and individually owned stores. These new measures enter into effect on 1 January 2006.