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Dear Sirs,

Certificate of Origin Circular No. 8/2005

Commercial Information Circular No. 434/2005

The Mainland and Hong Kong
Closer Economic Partnership Arrangement (CEPA)

Implementation of Zero Import Tariff
Rules of Origin for Products Eligible for Zero Import Tariff in 2006

INTRODUCTION

Under CEPA I and CEPA II, the Mainland has applied zero import tariff for Hong Kong origin products covered in 1,108¹ Mainland 2005 tariff codes and meeting the CEPA rules of origin (ROOs). Under CEPA III, the Mainland has agreed to give all products of Hong Kong origin tariff free treatment starting from 1 January 2006 except for prohibited articles (such as used or waste electrical machinery and medical/surgical products, chemical residual, municipal waste, tiger bone and rhinoceros horn), upon applications by local manufacturers and upon the CEPA ROOs being agreed and met.

2. This circular informs the trade about the agreed CEPA ROOs for the 261 Mainland 2005 tariff codes eligible for zero import tariff with effect from 1 January 2006.

DETAILS

Implementation of Zero Import Tariff in 2006

3. With effect from 1 January 2006, the Mainland will extend the zero import tariff arrangement to an additional list of Hong Kong origin goods covered in 261 Mainland 2005 tariff codes. The list is set out at Annex 1 of the Supplement II to the Mainland and Hong Kong Closer Economic Partnership Arrangement dated 18 October 2005, which can be downloaded from 
   <http://www.tid.gov.hk/english/cepa/legaltext/files/sa2_annex1_e.doc>.

4. Traders should note that changes in the Mainland tariff codes will result in corresponding changes in the tariff codes set out in the table referred to in footnote 1 and the above-mentioned Annex. Traders should quote the tariff codes stipulated in the applicable "Customs Tariff of Import and Export of the People's Republic of China" when submitting applications for Certificate of Hong Kong Origin - CEPA ("CO (CEPA)"). The 2006 tariff codes will be announced in a separate circular to be issued in December 2005 when such information is available.

Origin Criteria

5. The origin criteria for the 261 goods that will be eligible for zero tariff from 1 January 2006 are set out in the same Annex mentioned above. Copies of this Annex are available at the Trade and Industry Department's Information Counter at G/F, Trade and Industry Department Tower, 700 Nathan Road, Kowloon. Traders may also visit 
   <http://www.tid.gov.hk/english/cepa/legaltext/files/sa2_annex1_e.doc> for online access to the Annex.

6. The broad principles of CEPA ROOs are stipulated in Supplement II to CEPA. Traders may visit http://www.tid.gov.hk/english/cepa/legaltext/cepa3.html for details.

7. Both sides have also agreed to relax the existing CEPA ROOs for watches by waiving the 30% value adding requirement for watches of Hong Kong brand names. Details on the revised ROO for watches will be announced in a separate circular to be issued shortly.

Certificate of Hong Kong Origin - CEPA

8. Products importing into the Mainland and claiming zero tariff under CEPA must be accompanied by a CO(CEPA) issued by the Trade and Industry Department or any one of the Government Approved Certification Organizations (GACOs)² . Manufacturers must be registered with the Trade and Industry Department for Factory Registration (FR) before they are eligible to apply for CO(CEPA). All applications for CO(CEPA) (including fresh application, re-submission and amendment request) must comprise a message submitted via Electronic Data Interchange (EDI) and a Web Portal submission of Chinese supplementary information. Traders are advised to refer to the following circulars for details of the application procedures of CO(CEPA), the conditions of issuing CO(CEPA) and the procedures for claiming zero tariff -

1. Certificate of Origin Circular No. 24/2003 on "Additional Conditions for Including Product Development Cost in CO(CEPA) Applications" dated 14 November 2003; and

2. Certificate of Origin Circular No. 19/2004 on "Mainland 2005 Tariff Codes for Application for Certificate of Hong Kong Origin - CEPA ("CO(CEPA)")" dated 30 December 2004.

For online access to the above circulars, please visit 
<http://www.tid.gov.hk/english/cepa/tradegoods/trade_goods.html>. CO(CEPA) applicants should also pay attention to the important notes and warnings set out in these circulars, as well as read the updated "Note for Traders Lodging CO(CEPA) Applications" ³ carefully before applying for CO(CEPA).

9. The application procedures and conditions of issuing CO(CEPA) will be subject to review. Traders will be kept informed of any changes.

Submission of CO(CEPA) Application for Goods Eligible for Zero Import Tariff from 2006

10. Subject to the availability of the 2006 Mainland tariff codes, traders can apply for a CO(CEPA) to cover the export of each consignment of CEPA goods starting from late December 2005. The exact date on which the Trade and Industry Department and the 5 GACOs will start receiving CO(CEPA) applications will be announced in a separate circular to be issued in due course.

ENQUIRIES

11. Should you require further information on the content of this circular, please contact us through any of the following channels -

Yours faithfully,

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

¹Please refer to the table "CEPA Tariff Preference - Mainland 2005 Tariff Codes, Product Description and Origin Criteria" available at 
<http://www.tid.gov.hk/english/cepa/files/mainland_2005.pdf>.

²The GACOs are the Hong Kong General Chamber of Commerce, 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.

³The Note can be downloaded from the Department's web site at 
<http://www.tid.gov.hk/english/aboutus/publications/registcert/registcert.html> and copies are available at the Factory Registration and CO(CEPA) Branch's Customer Service Centre.