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Trade and Industry Department The Government of the Hong Kong Special Administrative Region
Brand Hong Kong - Asia world city

24-hour hotline : 23 922 922

e-mail address : enquiry@tid.gov.hk

Ref: FRCP 1000/2/5

22 October 2010

Dear Sirs,

Certificate of Origin Circular No. 4/2010

Commercial Information Circular No. 479/2010

Certificate of Preference Circular No. 2/2010

Notice to Exporters :

Series 1 (USA) No. 3/2010

Series 2 (EU) No. 3/2010

Series 3 (Countries other than USA & EU) No. 3/2010

Textiles Trader Registration Circular No. 2/2010

Hong Kong, China - New Zealand
Closer Economic Partnership Agreement (CEP Agreement)

Exporting Goods Originating in Hong Kong to New Zealand

Introduction

This circular outlines the rules of origin, document requirements, record keeping requirements and other relevant issues for exporting goods originating in Hong Kong to New Zealand under the Hong Kong, China - New Zealand Closer Economic Partnership Agreement ("CEP Agreement").

The CEP Agreement

  1. Signed on 29 March 2010, the CEP Agreement covers a wide range of areas of mutual interest to Hong Kong and New Zealand and is expected to enter into force in January 2011, subject to completion of all necessary internal procedures of both sides. The full text and other details of the CEP Agreement are available from the webpage of the Trade and Industry Department (TID) at: http://www.tid.gov.hk/english/ita/fta/hknzcep/index.html.

 

Preferential Tariff Treatment

  1. In respect of goods that qualify as originating goods, the CEP Agreement provides for a total elimination of New Zealand's import tariffs in six years, subject to the relevant rules of origin being met and the relevant operational procedures being complied with.

  1. The schedule for reduction of import tariff by New Zealand is at Annex I to Chapter 3 (Trade in Goods) of the CEP Agreement which can be downloaded from the Department's webpage at: http://www.tid.gov.hk/english/trade_relations/hknzcep/files/HKNZCEP032_NZSchedule.pdf.

 

Rules of Origin under the CEP Agreement

  1. The rules of origin for the purpose of preferential tariff treatment under the CEP Agreement are set out in Chapter 4 (Rules of Origin) and its Annex, which provide that a good will qualify as an originating good if it meets other applicable provisions (including those provided for in paragraphs 6 to 19 below) and:

  1. is wholly obtained or produced in the Area of a Party1 in accordance with conditions set out in paragraph 6 below;

  1. is produced entirely in the Area of one or both Parties exclusively from originating materials from one or both Parties; or

  1. is produced in the Area of one or both Parties, using non-originating materials that conform to a change in tariff classification requirement, a regional value content ("RVC") requirement (as provided for in paragraph 7 below) or other requirements as specified in the product specific rules schedule at Annex I to Chapter 4 (Rules of Origin) of the CEP Agreement.

Wholly Obtained or Produced Goods

  1. Under the CEP Agreement, the following goods are considered as wholly obtained or produced :

  1. plant and plant goods, including fruit, flowers, vegetables, trees, seaweed, fungi and live plants, grown, harvested, picked or gathered in the Area of a Party;

  1. live animals born and raised in the Area of a Party;

  1. goods obtained from live animals in the Area of a Party;

  1. goods obtained from hunting, trapping, fishing, farming, aquaculture, gathering or capturing in the Area of a Party;

  1. minerals and other naturally occurring substances extracted or taken from the soil, waters, seabed or subsoil in the Area of a Party;

  1. goods of sea-fishing and other marine goods taken from the high seas, in accordance with international law, by any vessel registered in a Party and entitled to fly the flag of that Party in accordance with the United Nations Convention on the Law of the Sea 1982 ("UNCLOS");

  1. goods processed and/or produced on board any factory ship registered in a Party and entitled to fly the flag of that Party, in accordance with UNCLOS, from the goods referred to in subparagraph (f) above;

  1. goods extracted or taken by a Party, or a person of a Party, from the seabed or subsoil beyond the Exclusive Economic Zone and adjacent Continental Shelf of that Party and beyond areas over which third parties exercise jurisdiction, under exploitation rights granted in accordance with international law;

  1. goods which are:

  1. waste and scrap derived from production or consumption in the Area of a Party provided that such goods are fit only for the recovery of raw materials; or

  1. used goods collected in the Area of a Party provided that such goods are fit only for the recovery of raw materials; and

  1. goods obtained or produced in the Area of a Party solely from products referred to in subparagraphs (a) to (i) or from their derivatives.

Regional Value Content ("RVC")

  1. The formula for calculating the RVC will be either:

  1. build-up formula

RVC = [(material cost + labour cost + overhead cost + profit + other costs)/FOB] x 100 %

or

  1. build-down formula

RVC = [(FOB - value of non-originating materials2)/FOB] x 100 %

where:

  1. material cost is the value of originating materials, parts or produce that are acquired or self-produced by the producer in the production of the good;

  1. labour cost includes wages, remuneration and other employee benefits;

  1. overhead cost is the total overhead expense including product development and other production costs;

  1. other costs are the costs incurred in placing the good in the ship or other means of transport for export, including domestic transport costs, storage and warehousing, port handling, brokerage fees and service charges;

  1. FOB3 is the free-on-board value of the goods; and

  1. value of non-originating materials is the CIF value4 at the time of importation or the earliest ascertained price paid or payable in the Area of a Party where the production takes place for all non-originating materials, parts or produce that are acquired by the producer in the production of the good. When the producer of a good acquires non-originating materials within that Party the value of such materials will not include freight, insurance, packing costs and any other costs incurred in transporting the material from the supplier's warehouse to the producer's location. Non-originating materials include materials of undetermined origin but do not include a material that is self-produced.

Accumulation

  1. Under the CEP Agreement, originating materials from a Party, incorporated into a good in the Area of the other Party, shall be considered to originate in the Area of the other Party. In other words, raw materials originating in New Zealand will be considered to originate in Hong Kong if they are incorporated into goods manufactured in Hong Kong and for export to New Zealand under the CEP Agreement.

Minimal Operations and Processes

  1. Any one or a combination of operations or processes for purposes such as the following are considered to be minimal and will not confer origin under the CEP Agreement:

  1. ensuring preservation in good condition for the purposes of transport or storage;

  1. facilitating shipment or transportation;

  1. packaging or presenting goods for sale;

  1. affixing of marks, labels or other like distinguishing signs on products or their packaging;

  1. simple processes consisting of sifting, classifying, washing, cutting, slitting, bending, coiling and uncoiling and other similar operations; and

  1. mere dilution with water or another substance that does not materially alter the characteristics of the goods.

  1. However, where a RVC approach has been applied, minimal processes and operations referred to in paragraph 9 above will be taken into account for the RVC calculation.

De Minimis

  1. A good that does not undergo a change in tariff classification pursuant to the product specific rules schedule at Annex I to Chapter 4 of the CEP Agreement is nonetheless considered to be an originating good if:

  1. the value of all non-originating materials, including materials of undetermined origin, used or consumed in the production of the good that do not undergo the required change in tariff classification does not exceed ten percent of the FOB value of the good; and

  1. the good meets all other applicable requirements of Chapter 4 of the CEP Agreement.

Direct Consignment

  1. A good of Hong Kong origin for export to New Zealand shall retain its originating status under the CEP Agreement if the following conditions have been met:

  1. the good has been transported to New Zealand without passing through the territory of any non-Party; or

  1. the good has transited through one or more non-Parties, with or without transhipment or temporary storage of up to six months in those non-Parties, provided that:

  1. the good has not entered trade or commerce there; and

  1. the good has not undergone any operation there other than unloading and reloading, repacking, or any operation required to preserve it in good condition or to transport it to New Zealand.

Treatment of Packing Materials and Containers

  1. Packing materials and containers for transportation and shipment of a good will not be taken into account in determining the origin of any good under the CEP Agreement.

  1. Packing materials and containers in which a good is packaged for retail sale, when classified together with that good, will not be taken into account in determining whether all of the non-originating materials used in the production of the good have met the applicable change in tariff classification requirements for the good under the CEP Agreement.

  1. If a good is subject to a RVC requirement, the value of the packing materials and containers in which the good is packaged for retail sale shall be taken into account as originating or non-originating materials, as the case may be, in calculating the RVC of the good under the CEP Agreement.

Accessories, Spare Parts, Tools and Instructional or Information Material

  1. For the purpose of determining the origin of a good under the CEP Agreement, accessories, spare parts, tools and instructional or other information materials presented with the good shall be considered part of that good and shall be disregarded in determining whether all the non-originating materials used in the production of the originating good have undergone the applicable change in tariff classification, provided that:

  1. the accessories, spare parts, tools and instructional or other information materials presented with the good are not invoiced separately from the originating good; and

  1. the quantities and value of the accessories, spare parts, tools and instructional or other information materials presented with the good are customary for that good.

  1. Notwithstanding the above, if a good is subject to a RVC requirement, the value of the accessories, spare parts, tools and instructional or other information materials presented with the good shall be taken into account as originating or non-originating materials, as the case may be, in calculating the regional value content of the good. This, however, shall not apply where accessories, spare parts, tools and instructional or other information materials presented with the good have been added solely for the purpose of artificially raising the RVC of that good.

Indirect Materials

  1. An indirect material will be treated as an originating material under the CEP Agreement without regard to where it is produced and its value will be the cost registered in the accounting records of the producer of the good. In this connection, an indirect material means a good used or consumed in the production, testing or inspection of a good but not physically incorporated into the good, or a good used or consumed in the maintenance of buildings or the operation of equipment associated with the production of a good, including:

  1. fuel and energy;

  1. tools, dies and moulds;

  1. spare parts and materials used in the maintenance of equipment and buildings;

  1. lubricants, greases, compounding materials, and other materials used in production or used to operate equipment and buildings;

  1. gloves, glasses, footwear, clothing, safety equipment and supplies;

  1. equipment, devices, and supplies used for testing or inspecting the goods;

  1. catalysts and solvents; and

  1. any other goods that are not incorporated into the good but whose use in the production of the good can reasonably be demonstrated to be a part of that production.

 Identical and Interchangeable Materials

  1. In determining whether a good is an originating good, any identical or interchangeable materials (goods or materials which are interchangeable for commercial purposes and whose properties are essentially identical, and between which it is impractical to differentiate by a mere visual examination) will be distinguished by:

  1. physical separation of the goods; or

  1. an inventory management method recognised in the generally accepted accounting principles of the exporting Party.

 

Document Requirements for Exporting Hong Kong Goods to New Zealand under the CEP Agreement

Declaration of Origin

  1. New Zealand may require a declaration of origin for granting preferential tariff treatment under the CEP Agreement. In such cases, the importer will have to provide:

  1. a declaration of origin of the good; or

  1. other evidence to substantiate the origin of the goods.

  1. In this connection, a declaration of origin means an appropriate statement as to the origin of the goods made, in connection with their exportation, by the manufacturer, producer, supplier, exporter or other competent person on the commercial invoice or any other document relating to the goods. The declaration of origin should be completed in English and may be made in respect of one or more goods in the shipment. Besides, it should be specified on the face of the document issued that the goods enumerated thereon are of Hong Kong origin and meet the relevant requirements. The declaration of origin should include the following details:

  1. a full description of the goods;

  1.  the goods' six digit Harmonized System reference;

  1. the rule of origin by which the goods qualify (wholly obtained, produced entirely from originating materials or by product-specific rule including, where applicable, the RVC);

  1. the producer's name(s);

  1. the exporter's name(s), address and contact details;

  1. the consignee's name(s), address and contact details; and

  1. the importer's name(s) in respect of imported goods, if known.

Exceptions from Declaration of Origin

  1. New Zealand may not require a declaration of origin to admit goods pursuant to tariff preference under the CEP Agreement where:

  1. the customs value of the importation does not exceed US$1,000 or the equivalent amount in New Zealand's currency or a higher amount as it may establish; or

  1. in respect of specific goods, New Zealand has waived the requirement for a declaration of origin.

  1. That said, where an importation forms part of a series of importations that may reasonably be considered to have been undertaken or arranged for the purpose of avoiding the requirement for a declaration of origin, New Zealand may deny preferential tariff treatment.

Goods Falling within Chapter 61 or Chapter 62 of the Harmonized System

  1. With respect to a good falling within Chapter 61 or Chapter 62 of the Harmonized System where preferential tariff treatment is claimed under the CEP Agreement, New Zealand will require that a Certificate of Hong Kong Origin - New Zealand ("CO(NZ)") issued by TID or one of the Government Approved Certification Organizations (GACOs)5 for the good be obtained by the importer.

  1. Before the manufacturers in Hong Kong are eligible to apply for CO(NZ), they must first be registered with TID under Factory Registration in respect of the products they produce. They will also be asked to provide to TID a written commitment that all records which are necessary to demonstrate that a good for which a claim for tariff preference was made qualifies for preferential tariff treatment under the CEP Agreement will be maintained for a period of not less than seven years after the date of exportation. The written commitment would be recorded in the CO(NZ) issued subsequently.

  1. Further details on the procedures concerning the applications for CO(NZ) and lodgement of written commitments will be announced in a separate circular to be issued by TID at a later stage.

 

Record Keeping Requirements and Compliance with New Zealand's Request for Information

Requirements to Maintain Records and Verification of Origin

  1. Under the CEP Agreement, producers, exporters or importers, as appropriate, are required to maintain for a period specified in relevant domestic law all records relating to an exportation or importation which are necessary to demonstrate that a good for which a claim for tariff preference was made qualifies for preferential tariff treatment. In addition, producers and manufacturers in Hong Kong are informed by this Circular that they should maintain for a period of not less than seven years after the date of exportation all records relating to that exportation which are necessary to demonstrate to New Zealand that a good for which a claim for tariff preference was made qualifies for preferential tariff treatment.

  1. For the purposes of determining whether a good imported into New Zealand qualifies as originating in Hong Kong under the CEP Agreement, the New Zealand customs authorities may conduct a verification of eligibility for preferential tariff treatment. This may be in the forms of, among other means provided in the CEP Agreement, requesting for information from the importer; requesting for information from the exporter or producer in Hong Kong; requesting for information from the Customs & Excise Department (C&ED) of Hong Kong; or, subject to the consent of the relevant exporter or producer, visiting the premises of an exporter or producer in Hong Kong arranged by and in company with C&ED officers.

Compliance with Direct Consignment and Non-Party Invoicing

  1. Compliance with the direct consignment requirements in paragraph 12 may be evidenced by supplying to the customs authorities of New Zealand either customs documents of a non-Party or documents of the competent authorities of a non-Party, together with commercial shipping or freight documents.

  1. Besides, New Zealand may accept a declaration of origin in cases where the sales invoice is issued either by a company located in a non-Party or by an exporter for the account of that company, provided that the goods meet the requirements set out in paragraphs 5 to 19.

Denial of Preferential Tariff Treatment and Refund of Import Duties

  1. New Zealand may deny preferential tariff treatment for a good under the CEP Agreement when the good does not qualify as originating in Hong Kong; or the importer, exporter or producer, as appropriate, fails to provide information which New Zealand has requested in the course of a verification process, or otherwise fails to comply with any of the relevant requirements in Chapter 4 of the CEP Agreement.

  1. Where a declaration of origin is not provided at the time of importation of the good from Hong Kong, New Zealand may impose the applied non-preferential import customs duty or require payment of a deposit on the good, where applicable. In such a case, the importer may apply for a refund of any excess import customs duty or deposit paid within one year of the date on which the good was imported, provided that:

  1. a written declaration that the good presented qualifies as an originating good was provided to the customs administration of New Zealand at the time of importation; and

  1. a valid declaration of origin or other evidence to substantiate the origin of the goods is provided in relation to the good imported.

  1. Where a CO(NZ) has not been obtained in accordance with paragraph 24 at the time of importation of a good falling within Chapter 61 or Chapter 62 of the Harmonized System from Hong Kong, New Zealand shall impose the applied non-preferential import customs duty. In such a case, the importer may apply for a refund of any excess import customs duty within one year of the date on which the good was imported, provided that a valid CO(NZ) in relation to the good imported is provided to the customs administration of New Zealand.

 

Origin Marking and Labelling

  1. Origin marking or labelling is not mandatory for exports of Hong Kong goods to New Zealand under the CEP Agreement. However, if traders would like to apply origin marking on such goods, they should do so in accordance with the Trade Descriptions Ordinance (Cap. 362) and its subsidiary legislations, as amended from time to time.

  1. Under special circumstances which traders have doubt about origin marking and labelling concerning goods that are eligible for preferential tariff treatment under the CEP Agreement, such as goods partly originating in Hong Kong and partly originating in New Zealand (either by virtue of the manufacturing processes performed or the raw materials used), or wastes and scraps, they may contact TID for further information.

 

Enquiries

  1. For enquiries, please contact us through the following channels -

Address : CO(CEPA) Section
Factory Registration and Origin Certification Branch
3/F,Trade and Industry Department Tower
700 Nathan Road, Kowloon
Telephone No. : 3403 6432
Fax No. : 2787 6048
E-mail Address : cepaco@tid.gov.hk

Yours faithfully,


 

(Paul SHEN)
for Director-General of Trade and Industry

 1The word Party refers to a contracting party of the CEP Agreement, i.e. either Hong Kong or New Zealand.

2Chapter 4 of the CEP Agreement provides that non-originating good or non-originating material means a good or material which does not qualify as originating under this Chapter.

3Chapter 4 of the CEP Agreement provides that FOB or FOB value means the value of the good free on board inclusive of the cost of transport to the port or site of final shipment abroad.

4Chapter 4 of the CEP Agreement provides that CIF or CIF value means the value of the good imported inclusive of the cost of insurance and freight up to the port or place of entry in the importing Party.

5The GACOs are the Hong Kong General Chamber of Commerce; the Federation of Hong Kong Industries; the Chinese Manufacturers' Association of Hong Kong; the Chinese General Chamber of Commerce and the Indian Chamber of Commerce, Hong Kong.