| Certificate
of Origin Circulars
Ref : CERT 510
9 July
1998
Dear Sirs,
Certificate
of Origin Circular No. 7/98
Local
Subcontracting Arrangement
Pursuant to Certificate
of Origin Circular No. 9/98 of 9 July 1998 announcing the lifting of Certificate
of Origin requirement for export of restrained textiles to the US as from
18 August 1998, traders may wish to note that there is no change to the
Local Subcontracting Arrangement (LSA). In other words, manufacturers
employing local subcontractors to carry out the principal process(es)
of manufacture or entire production of goods must obtain prior approval
from the Trade Department under the Local Subcontracting Arrangement regardless
of whether a Certificate of Origin is required.
- Details of the Local Subcontracting Arrangement are set out in the
following paragraphs. Certificate of Origin Circular No. 11/86 dated
2 December 1986 on the same subject is hereby superseded.
Local
Subcontracting Arrangement (LSA)
- Manufacturers are allowed to employ local subcontractors to carry
out either the principal process(es) of manufacture or entire production
of goods, provided that certain condition are met and prior approval
has been obtained from the Department under the LSA. Approval will be
valid for a period of 12 months, irrespective of the number of orders
involved. A list of definitions mentioned in this Circular is at Appendix
I.
(I)
Conditions
-
The approval of applications to subcontract the principal process(es)
of manufacture or entire production are subject to the following conditions
:
-
The principal process(es) of manufacture or the entire production
of goods may be subcontracted only to factories registered with
the Department for the production of the same type of goods as
the principal manufacturer;
-
No subcontractor may be employed to carry out a principal process
of manufacture or the entire production of goods unless prior
approval has been obtained from this Department;
-
The principal manufacturer will be held responsible for ensuring
that the principal manufacturing process(es) of the subcontracted
good is/are carried out by the subcontractor(s);
-
Subcontractors are not allowed to further subcontract the principal
manufacturing process(es) to other factories;
- Subcontractors are required to sign an undertaking not to transfer
the principal process(es) of manufacture to a third party.
(II)
Application Procedures
-
The procedures are as follows:
-
Applications for LSA have to be made on an appropriate form,
a specimen of which is at Appendix II
and Appendix IIA. The application
form is available free of charge from the Factory Registration
Section, Certification Branch, 3/F., Trade Department.
-
Applications should be jointly completed and signed by the authorized
representatives of the principal manufacturer and the subcontractor.
Where the principal manufacturer wishes to employ more than one
subcontractor, separate applications are required in respect of
each subcontractor.
-
Completed applications, in duplicate, should be submitted in
person to the Factory Registration Section, Certification Branch,
3/F., Trade Department.
-
Processing of application normally takes one clear working day
from the date of submission. If the application is in order, the
application form will be endorsed by the Department with an approval
reference number.
- The approval is valid for 12 months irrespective of the number
of orders involved. Manufacturers may renew the approval to subcontract
by submitting a fresh application.
(III)
Lifting of Certificate of Origin Requirement for the USA Market
- At present, manufacturers are required to provide, where applicable,
a Subcontractor's Declaration and information regarding the subcontractor
(name, address, Factory Registration Number of the subcontractor, process(es)
carried out by the subcontractor, etc) on the Certificate of Origin
application. With the lifting of Certificate of Origin requirement for
the USA market from 18 August 1998, manufacturers employing local subcontractors
to carry out principal process(es) of manufacture or entire production
of goods are reminded that apart from complying with the conditions
set out in paragraph 4 above, you are required to provide the Subcontractor's
information and/or Declaration on any specified trade documents i.e.
Production Notification, Certificate of Origin or Export Licence application,
depending on the type of product and destination in question The requirements
are set out in the following paragraphs for reference.
For
the USA Market
- Manufacturers have to provide the Subcontractor's Declaration, where
applicable, on the Production Notification for cut and sewn garments.
For piece-knitted garments, textiles and other made-up articles, the
Subcontractor's Declaration has to be provided on Export Licence application.
There is no need to provide a Subcontractor's Declaration on all Certificate
of Origin applications. Please refer to Notice to Exporters Series 1
(USA) No. 42/98 and Certificate of Origin Circular No. 9/98 dated 9
July 1998 for detailed licensing and certification requirements.
For
the EU and Norway Markets
- Similarly, manufacturers have to provide the Subcontractor's Declaration,
where applicable, on the Production Notification for cut and sewn garments.
For products not supported by the Production Notification like piece-knitted
garments, textiles products and other made-up articles, the Subcontractor's
Declaration shall continue to be provided on the Certificate of Origin
application. Please refer to Notice to Exporters Series 2 (EU) No. 34/98
and Certificate of Origin Circular No. 9/98 dated 9 July 1998 for detailed
licensing and certification requirements.
For
the Canada Market
- Manufacturers have to provide the Subcontractor's Declaration, where
applicable, on the Production Notification for cut and sewn garments.
There is no need to provide a Subcontractor's Declaration on the Export
Licence application in respect of piece knitted garments, textiles and
made-up articles. Where a Certificate of Origin is applied for products
other than cut and sewn garments, a Subcontractor's Declaration shall
continue to be provided on the Certificate of Origin application, where
applicable. Manufacturers employing local subcontractors to carry out
the principal process of manufacture or entire production of goods are
also reminded that they must obtain the prior approval from the Trade
Department by registering under the LSA. Please refer to Notice to Exporters
Series 3 (Countries other than USA and EU) No. 43/98 and Certificate
of Origin Circular No. 9/98 dated 9 July 1998 for detailed licensing
and certification requirements.
(IV)
Subcontracting of Subsidiary Processes
- Subsidiary processes of manufacture may be subcontracted to any factory
in Hong Kong , whether or not they possess valid Factory Registration
with the Department. Prior approval from the Department is not necessary.
With effect from 18 August 1998, the Department will no longer accept
LSA applications involving registration to subcontract subsidiary manufacturing
processes. Those LSA approved by the Department before 18 August 1998
will continue to be valid until the expiry date or 17 August 1999, whichever
is the earlier.
(V)
Books and Records Requirement
-
Registered manufacturers employing subcontractors are reminded that
your books and records should clearly indicate when and to whom the
principal process(es) of manufacture have been subcontracted. The
'distribution and return' record should include the following details
(a) description of materials
(b) quantity
(c) date passed to subcontractor
(d) name of subcontractor
(e) process(es) carried out
(f) date returned from subcontractor
(g) remuneration paid for work done
- Manufacturers are reminded that failure to maintain the books and
records as required may lead to suspension/cancellation of your registration
by the Director-General of Trade and/or legal action being taken against
the factory.
(VI)
Important Notes
-
Traders are requested to note that the Hong Kong origin criteria
are subject to review periodically, taking into account of technological
changes and industrialisation in Hong Kong. The Department will, from
time to time, issue trade circulars to inform the trade of the up-to-date
information on Hong Kong's origin criteria and corresponding principal
manufacturing processes in respect of individual products.
-
For details of the prevailing principal manufacturing process(es)
for individual products, please refer to the Certificate of Origin
circular No. 14/96 dated 21 November 1996.
- Under the existing textiles export control system administered by
Trade Department, a manufacturer who participates in Quota Schemes or
Export Authorization Schemes may be required to abide by a number of
conditions, one of which being that he must perform the principal process
of manufacture. Manufacturers are reminded that approval to subcontract
given under the LSA will not derogate from any term or condition governing
participation in any Quota or Export Authorization Scheme, i.e. a manufacturer's
obligation not to subcontract will not be absolved by the approval to
subcontract under the LSA.
(VII)
Warning
- Manufacturers who need to subcontract the principal process(es) of
manufacture are reminded to follow the conditions and procedures as
set out in paragraphs 4-5 above. Manufacturers who fail to comply with
these conditions and procedures may render themselves liable to legal
action under the Import and Export Ordinance and the Protection of Non-Government
Certificates of Origin Ordinance. In addition, the Trade Department
may take administrative actions against the parties concerned irrespective
of whether they have been prosecuted. Such administrative actions may
include disallowing a manufacturer to contract the principal process(es)
of manufacture locally; and disallowing a subcontractor to undertake
the principal process(es) of manufacture.
(VIII)
Enquiries
-
Should you have any questions regarding the contents of this circular
or require further information, please contact Mr. K. Y. Wu, Trade
Controls Officer at Tel. No. 2398 5548.
Yours faithfully,
(Mrs Y K Ng)
for Director-General
of Trade
Encls.
To : All factories
registered with the Trade Department
All Trade and Industrial
Associations
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