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Ref: FRCP 1000/2/1
19 March 2012
Certificate of Origin Circular No. 2/2012
Commercial Information Circular No. 218/2012
Certificate of Preference Circular No. 1/2012
Notice to Exporters :
Series 1 (USA) No. 1/2012
Series 2 (EU) No. 2/2012
Series 3 (Countries other than USA & EU) No. 1/2012
Textiles Trader Registration Circular No. 1/2012
Mainland and Hong Kong
Closer Economic Partnership Arrangement (CEPA)
Requirements for including the value of raw materials and
component parts of Mainland origin in the "value-added content" origin rule
The Mainland agrees to fully implement zero tariff on imported goods of Hong Kong origin1 starting from 1 January 2006, upon applications by local manufacturers and upon the CEPA Rules of Origin (ROOs) being agreed and met. The tariff preference does not include customs duties other than tariff, such as value-added tax and consumption tax. Among which, certain Hong Kong products must fulfil the requirement of the "value-added content" before the trade can benefit from the zero tariff measures of CEPA. Under Supplement VIII to CEPA, the trade is allowed to include the value of raw materials and component parts originating from the Mainland when calculating the "value-added content" and this circular is issued to announce relevant requirements and additional conditions.
2.Please note that the requirements and additional conditions in this circular will only apply to CEPA ROOs including the "value-added content" requirements, as well as products of which manufacturers have used raw materials and component parts originating from the Mainland and wish to include the relevant value when calculating the "value-added content". Manufacturers of other products and manufacturers who do not intend to include the value of the raw materials and component parts originating from the Mainland in the calculation of the "value-added content" have to apply for the Certificate of Hong Kong Origin – CEPA (CO (CEPA)) according to current requirements and can disregard the requirements and additional conditions in this circular.
The "Value-Added Content" Origin Rule under CEPA
3.The "value-added content" origin rule under CEPA refers to the total value of raw materials, component parts, labour costs and product development costs exclusively incurred in one side being greater than or equal to 30% of the free-on-board (FOB) value of the exporting goods. Moreover, the final manufacturing or processing operations should be completed in the area of that side. The formula for calculation of the value-added content is as follows:
value of raw materials + value of component parts +
labour costs + product development costs
|x 100%||≥ 30%|
|FOB value of the exporting goods|
Supplement VIII to CEPA
Supplement VIII to CEPA sets out the following requirement regarding raw materials and component parts:
4."where one side incorporates raw materials and component parts originating in the other side as part of the exporting goods, such raw materials and component parts should be regarded as originating in that side in the calculation of the value-added content of the exporting goods; the value-added content of such exporting goods should be greater than or equal to 30%, and moreover, when the value of raw materials and component parts originating in that other side is not taken into account, the value-added content should be greater than or equal to 15%.
5.The abovementioned requirement concerning "value-added content" will be implemented on 1 April 2012. Hong Kong manufacturers can then include the value of raw materials and component parts originating from the Mainland which are in compliance with the abovementioned requirement in the calculation of the "value-added content".
6.Applicants must observe the requirements and conditions in paragraphs 7-11 below, so that assessment of Certificate of Origin (CO) applications concerning whether raw materials and component parts originating from the Mainland comply with the "value-added content" requirement can be made.
Additional Conditions under Factory Registration
7.If Hong Kong Manufacturers want to include the value of raw materials and component parts originating from the Mainland when calculating the "value-added content", in addition to complying with the original Factory Registration requirements under CEPA, they have to submit to the Trade and Industry Department (TID) the additional Declaration and Undertaking Form (Form FRVAC 1) at Annex 1 (pdf format). They must undertake to keep and maintain separate books and records on the purchase and consumption of raw materials and component parts originating from the Mainland. Commercial documents and certificate of origin documents related to the stock as well as the CO(CEPA) number obtained for the consumption of relevant raw materials and component parts must be recorded. Manufacturers must also specify in the Declaration and Undertaking Form the types of raw materials and component parts originating from the Mainland to be used and undertake to store raw materials and component parts originating from the Mainland separately. They also have to consent to our providing relevant information in the additional Declaration and Undertaking Form, including those of the manufacturers, the raw materials and component parts originating from the Mainland and the reference number assigned by TID etc, to the Mainland Customs.
8.Manufacturer must return the abovementioned Declaration and Undertaking Form to TID's Factory Registration and Origin Certification Branch at least 7 working days before submitting CO(CEPA) applications. Upon acceptance of the relevant additional Declaration and Undertaking Form, TID will issue a "reference number" to the manufacturer.
Export Declaration Requirements of Raw Materials and Component Parts Originating from the Mainland
9.Manufacturers are required to provide the reference number issued by TID to their Mainland export enterprises and obtain from them the photocopies of the export declarations or the filed goods lists for export and the original copies of the Mainland Certificates of Origin for CO (CEPA) applications. The export declarations or the filed goods lists for export must be completed in accordance with the Mainland Customs' requirements.
Special Arrangements for CO (CEPA) Applications
10.Manufacturers should comply with the following additional requirements when applying for CO(CEPA):
make the following special declaration in the CO (CEPA) application:
M18 - I declare that the goods described in this manufacturer declaration have fulfilled the 30% Hong Kong value-added content requirement under CEPA and that the value of the raw materials and component parts originating in the Mainland is included in the Hong Kong value-added content.
submit a proforma cost statement (at Annex 2 (pdf format)). The manufacturer must list out clearly in the proforma cost statement the information about the raw materials and component parts originating from the Mainland (including the names, specifications, model numbers, quantity and value, etc.) used and make declaration to confirm the origin of such raw materials and component parts used.
provide the photocopy of the export declaration or the filed goods list for export of the Mainland raw materials and component parts exporting from the Mainland to Hong Kong and the original copy of the relevant Mainland Certificate of Origin for verification by TID and Hong Kong Customs & Excise Department (C&ED).
11.The above proforma cost statement should make reference to the CO(CEPA) application and should be submitted to the issuing organisation together with the photocopy of the export declaration or the filed goods list for export and the original copy of the Mainland Certificate of Origin. The application will not be processed until the electronic data interchange (EDI) message, the corresponding cost statement and other necessary documents have been received by the issuing organisation. The "For Internal Use Only" column on the CO(CEPA) issued by the issuing organisation is printed with the words "S8" as a marking.
Verification and Arrangements for Messages Interchange
12.Manufacturers may request suppliers of raw materials and component parts originating from the Mainland to provide the CO issued by the China Council for the Promotion of International Trade or the General Administration of Quality Supervision, Inspection and Quarantine2 according to their needs and actual situation.
13.According to the electronic data interchange requirements under CEPA, TID would transmit the electronic data of the CO(CEPA) to the Mainland Customs. Upon the implementation of the above measure on 1 April 2012, the electronic data transmitted to the Mainland Customs may include information about whether the value of the raw materials and component parts of Mainland origin has been included in the "Value-added Content" (if applicable).
14.In addition, C&ED will, according to the risk assessment, conduct a random on-site inspection before or after the issuance of the relevant CO(CEPA), including the checking of the production record and, at the same time, the inspection of the supporting documents of the origin of the raw materials and component parts from the Mainland. If the raw materials and component parts originating from the Mainland involve Hong Kong suppliers, C&ED will make appropriate follow up to ensure that the supporting documents of the CO tally with the materials.
15.C&ED will visit the manufacturers from time to time to inspect the separate stock/consumption records and actual quantity of stock to ensure the authenticity of the records and that the manufacturers have fulfilled the undertaking in the additional declaration.
16.TID will keep the data provided by manufacturers in strict confidence. However, TID may under certain circumstances disclose such data to C&ED or other government departments, or to third parties within or outside Hong Kong. These circumstances include the following: the verification and arrangements for information exchange among TID, C&ED and Mainland Customs mentioned above; the disclosure is necessary to facilitate the verification, certification, or consultation procedures; the disclosure is authorised or required by the laws; or an explicit consent to the disclosure is given by the manufacturers concerned.
17.When filling in the form(s), manufacturers should ensure that the information provided is accurate and complete. If there are any changes in the information provided, manufacturers should immediately notify TID in writing. Furthermore, CEPA and its Supplements provide that TID should verify and certify the information provided by manufacturers. Therefore, for the purpose of verification and certification of the information provided by individual manufacturers, TID may require the manufacturers concerned to provide further information. TID may also request C&ED to seek entry into the office and factory premises of the manufacturers concerned in order to understand more about the applications. It is the responsibility of the manufacturers to provide necessary assistance when they are so required or requested.
18.Applicants/data subjects whose personal data are collected by TID may request access to such data under the Personal Data (Privacy) Ordinance, Cap. 486. Such requests should be made on the Data Access Request Form (No. OPS003) issued by the Privacy Commissioner for Personal Data, which is available at TID's Information Counter on G/F of the Trade and Industry Department Tower, or may be downloaded from TID's webpage
<http://www.tid.gov.hk/english/aboutus/form/publicform/others/files/dforme.pdf. The completed form should be forwarded to TID's Factory Registration and Origin Certification Branch. A charge will be made to cover the cost of photocopying the data supplied. In addition, if the data subject considers that the data supplied to TID is inaccurate after a data access request has been complied with, a request for correction of the personal data may be made in writing.
19.The TID and Government Approved Certification Organizations (GACOs) work closely with C&ED, through checks and inspections, to ensure compliance with the provisions of Import and Export Ordinance, Cap. 60 and its subsidiary legislations as well as the Protection of Non-Government Certificates of Origin Ordinance, Cap. 324. Companies/registered businesses/individual may be liable to criminal prosecution for circumventing the conditions of CO(CEPA). A company/registered business/individual which commits an offence under the above Ordinances is liable to a maximum penalty of a fine of HK$500,000 and 2 years' imprisonment. Moreover, TID and GACOs may take administrative actions against the traders concerned irrespective of whether they have been prosecuted. Such administrative actions may involve, but shall not necessarily be confined to all or any of the following: refusal to issue a CO (including CO(CEPA)); suspension of all kinds of certification facilities; suspension/cancellation of the Factory Registration concerned.
20. Should you have any enquiries, please contact us through any of the following channels:
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|
(Miss Judy Ting)
for Director-General of Trade and Industry
1. Imported goods do not include those prohibited by the Mainland's rules and regulations and those prohibited as a result of the implementation of international treaties by the Mainland, as well as products that the Mainland has made special commitments in relevant international agreements. Applicants are advised to consult the Mainland Customs and other relevant Mainland authorities concerning details of prohibited imports. They can also refer to Commercial Information Circulars issued by the Trade and Industry Department for information about the catalogues of prohibited Imports announced by the Mainland in the past (please refer to TID's webpage <http://www.tid.gov.hk/english/cepa/tradegoods/trade_goods.html>).
2. The web site of the China Council for the Promotion of International Trade and the General Administration of Quality Supervision, Inspection and Quarantine is http://www.ccpit.org and http://www.aqsiq.gov.cn respectively.