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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 1000/2/7

22 January 2019

Dear Sirs,

Certificate of Origin Circular No. 1/2019

Commercial Information Circular No. 64/2019

Certificate of Preference Circular No. 1/2019

Notice to Exporters :

Series 1 (USA) No. 1/2019

Series 2 (EU) No. 1/2019

Series 3 (Countries other than USA & EU) No. 1/2019

Textiles Trader Registration Circular No. 1/2019

Hong Kong, China - Georgia Free Trade Agreement (HKCGFTA)

Exporting Goods Originating in Hong Kong to Georgia

I. Introduction

Hong Kong and Georgia have signed the Hong Kong, China - Georgia Free Trade Agreement (HKCGFTA). It is scheduled that the HKCGFTA will enter into force on 13 February 2019.

2.Under the HKCGFTA, Hong Kong-origin exports which comply with the applicable preferential rules of origin (ROOs) and fulfill the relevant requirements set out in Chapter 3 (Rules of Origin) of the FTA can enjoy preferential tariff treatment provided by Georgia. This Circular outlines the ROOs, documentary requirements, record keeping requirements and other relevant issues for importing Hong Kong-origin goods to Georgia under the HKCGFTA. The application conditions and procedures for Certificate of Hong Kong Origin - Georgia (CO(Georgia) ) are covered in Certificate of Origin Circular No. 2/2019.

3.The full text and other details of the HKCGFTA are available on the Trade and Industry Department (TID)'s webpage <https://www.tid.gov.hk/english/ita/fta/hkgefta/index.html>. Traders are advised to read the relevant provisions of the HKCGFTA and its Annexes, other relevant Circulars issued by TID as well as updated information posted on TID's website from time to time, in conjunction with this Circular.

II. Preferential Tariff Treatment

4.Upon entry into force of the HKCGFTA, Georgia will eliminate import tariffs on 96.6% of its tariff lines for Hong Kong's originating products, subject to the relevant ROOs being met and the relevant operational procedures being complied with. The remaining 3.4% of its tariff lines, comprising mainly agricultural products such as fruits and nuts and their preparations as well as beverages and spirits, will continue to be subject to import tariff due to domestic sensitivity in Georgia. The excluded products are listed in Annex 2-1 (Georgia's Exclusion List) of the FTA <https://www.tid.gov.hk/english/ita/fta/hkgefta/files/GEHKFTA_Chapter_2_Annex_2-1.pdf>.

III. Rules of Origin under HKCGFTA

5.The ROOs for the purpose of preferential tariff treatment under the HKCGFTA are set out in Chapter 3 and its Annex 3-1 (Product Specific Rules of Origin). It is stipulated that the following goods will qualify as originating goods if they meet other applicable provisions (including those detailed in paragraphs 6 - 20 below) :

  1. goods wholly obtained or produced in a Party (i.e. either Hong Kong or Georgia) as defined in Article 3 (Goods Wholly Obtained) of Chapter 3 of the HKCGFTA. Appendix A (pdf format) contains the list of goods which will be considered as wholly obtained or produced goods under the HKCGFTA;
  2. goods produced in a Party exclusively from originating materials (Note 1); and
  3. goods produced from non-originating materials in a Party, provided that the goods conform to a regional value content (RVC) of no less than 40% of ex-works price, except for the goods listed in Annex 3-1 (Product Specific Rules of Origin) which must comply with the requirements specified therein. Annex 3-1 is available for download at TID's website <https://www.tid.gov.hk/english/ita/fta/hkgefta/files/GEHKFTA_Chapter_3_Annex_3-1.pdf>. Please refer to paragraph 6 for the calculation of the RVC of goods to be exported from Hong Kong.

Some special rules regarding ROO application for goods claiming Hong Kong-origin under the HKCGFTA are highlighted in the following paragraphs.

Regional Value Content

6.The RVC criterion shall be calculated as follows:

RVC = ex-works price - value of the non-originating materials (VNM) ×100%
ex-works price

Ex-works price means the price paid for the good ex-works to the producer located in Hong Kong in whose undertaking the last working or processing is carried out, provided that the price includes the value of all the materials used, wage and any other cost, and profit minus any internal taxes returned or repaid when the good obtained is exported. VNM should be determined on the basis of the customs value at the time of importation of the non-originating materials, including materials of undetermined origin. If such value is unknown and cannot be ascertained, the first ascertainable price paid or payable for the materials in Hong Kong should be applied.

7.If a good (say Product A), which has acquired originating status in Hong Kong in accordance with the above RVC formula, is further processed in Hong Kong and used as material in the production of another good (say Product B), no account should be taken of the non-originating components of Product A in the determination of the originating status of Product B.

Accumulation

8.If an originating material of Georgia is used in the production of a good in Hong Kong, it should be considered to be originating in Hong Kong.

Minimal Operations or Processes

9.The HKCGFTA sets out a list of minimal operations or processes, which is extracted at Appendix B (pdf format). A good will not be considered to be originating if it has only undergone one or more of the listed minimal operations or processes in Hong Kong. When determining whether the working or process undergone by a good is considered as minimal operations or processes, all operations in the production of a good carried out in Hong Kong should be taken into account.

De Minimis

10.In cases where a good is subject to a change in tariff classification (CTC) criterion but not all of the non-originating materials used in its production have undergone the required CTC, the good will still be considered as originating if the value of those non-originating materials which have not undergone the required CTC does not exceed 10% of the ex-works price of the good.

11.The value of non-originating materials referred to in paragraph 10, including materials of undetermined origin, should be determined on the basis of the customs value at the time of importation. If such value is unknown and cannot be ascertained, the first ascertainable price paid or payable for the materials in Hong Kong should be applied.

Fungible Materials

12.Fungible materials refer to materials which are interchangeable for commercial purposes, whose properties are essentially identical, and between which it is impractical to differentiate by a mere visual examination. If both originating and non-originating fungible materials are used in the production of a good, the following methods should be adopted in determining whether the materials used are originating:

  1. physical separation of the materials; or
  2. an inventory management method recognised in the generally accepted accounting principles of Hong Kong. The method should be used for at least one fiscal year.

Neutral Elements

13.Neutral element refers to a good used in the production, testing or inspection of another good but not physically incorporated into that good by themselves. In determining whether a good is an originating good, any neutral elements as per the list extracted at Appendix C (pdf format) should be disregarded.

Packing Materials, Packaging Materials and Containers

14.Packing materials and containers used for the transport of a good should not be taken into account in determining the origin of the good.

15.The origin of the packaging materials and containers in which a good is packaged for retail sale should also be disregarded in determining the origin of the good, provided that the packaging materials and containers are classified with the good. However, where a good is subject to an RVC requirement, the value of the packaging materials and containers used for retail sale should be taken into account as originating or non-originating materials, as the case may be, in calculating the RVC of the good.

Accessories, Spare Parts and Tools

16.Accessories, spare parts, or tools presented and classified with a good should be considered as part of the good, provided:

  1. they are invoiced together with the good; and
  2. their quantities and values are commercially customary for the good.

17.Where a good is subject to a CTC criterion, accessories, spare parts, or tools described in paragraph 16 above should be disregarded when determining the origin of the good. Where a good is subject to an RVC requirement, the value of such accessories, spare parts or tools should be taken into account as originating materials or non-originating materials, as the case may be, in calculating the RVC of the good.

Sets

18.Sets should be regarded as originating if all component goods are originating. Nevertheless, when a set is composed of originating and non-originating goods, the set as a whole should be regarded as originating if the value of the non-originating goods does not exceed 15% of the ex-works price of the set.

Direct Consignment

19.Preferential tariff treatment under the HKCGFTA will only be granted to Hong Kong-origin goods which are transported directly from Hong Kong to Georgia. However, a good whose transport involves transit through one or more non-Parties (i.e. places other than Hong Kong or Georgia) with or without trans-shipment or temporary storage of up to 6 months in such non-Parties, will still be considered as directly transported between Hong Kong and Georgia, provided that the following conditions are met:

  1. the transit entry of the good is justified for geographical reason or by consideration related exclusively to transport requirements;
  2. the good does not undergo any other operation in those non-Parties other than unloading and reloading, or any operation required to keep it in good condition; and
  3. the good remains under customs control during transit in those non-Parties.

20.As evidence that the above conditions are met, the customs authorities of Georgia should be presented with customs documents of the non-Parties, or with any other documents to the satisfaction of the customs authorities of Georgia.

IV. Document Requirements for Imports into Georgia

Obligations regarding Importations

21.Under the HKCGFTA, for the purpose of claiming preferential tariff treatment, the importer should:

  1. indicate in the customs declaration that the good qualifies as an originating good;
  2. possess a valid CO(Georgia), at the time the above-mentioned import customs declaration is made; and
  3. submit the valid CO(Georgia) and other documentary evidence related to the importation of the good, upon request of the customs authorities of Georgia.

Waiver of Certificate of Origin

22.The requirements for the presentation of CO(Georgia) may be waived for any consignments of originating goods of a customs value not exceeding US$600 or its equivalent amount. Yet waivers will not be available in cases of established or reasonably suspected circumvention of the CO submission requirements.

Record Keeping Requirements and Origin Verification

23.Manufacturers, exporters and importers of the goods claiming preferential tariff treatment under the HKCGFTA should retain documents that prove the originating status of the goods as well as the fulfilment of other requirements of Chapter 3 of the HKCGFTA for at least three years.

24.Subsequent verifications of origin may be carried out at random or whenever the customs authorities of Georgia have reasonable doubts as to the authenticity of a CO(Georgia), the originating status of a good concerned, or the fulfillment of other requirements of Chapter 3 of the HKCGFTA, in accordance with the procedures laid down in Article 19 of Chapter 3 of the FTA. As with other types of CO applications, Customs and Excise Department (C&ED) will conduct factory inspections and consignment checks on CO(Georgia) applications.

Denial of Preferential Tariff Treatment

25.Georgia may deny claim for preferential tariff treatment if:

  1. the good does not meet the requirements of Chapter 3 of the HKCGFTA;
  2. the importer, exporter or producer fails to comply with the relevant requirements of Chapter 3 of the HKCGFTA;
  3. the CO(Georgia) does not meet the requirement of Chapter 3 of the HKCGFTA; or
  4. the authenticity of the documents submitted or the originating status of the goods cannot be determined, because no response to the requests of the customs authorities of Georgia for information is received within six months from the date of receipt of the request, or the information provided is insufficient.

26.If preferential tariff treatment is denied, the customs authorities of Georgia will provide the reasons for that decision in writing to the importer.

Refund of Import Customs Duties or Deposit

27.If a CO(Georgia) is not submitted to the customs authorities of Georgia at the time of importation pursuant to Article 16 (Obligations Regarding Importations) of Chapter 3 of the HKCGFTA [paragraph 21 above], upon the importer's request, the customs authorities of Georgia may impose the applied non-preferential customs duties, or require a guarantee equivalent to the full amount of the customs duties on that good, provided that the importer formally declares to the customs authorities at the time of importation that the good in question qualifies as an originating good.

28.The importer may apply for a refund of any excess customs duties imposed or guarantee paid if they can present the customs authorities of Georgia with all the necessary documentation required in Article 16 (Obligations Regarding Importations) of Chapter 3 of the HKCGFTA [paragraph 21 above] within one year of the date on which the good was exported.

V. Enquiry

29.For enquiries, please contact us through the following channels:

Trade and Industry Department
(Factory Registration and Origin Certification Branch)
Address: 14/F, Trade and Industry Tower
3 Concorde Road, Kowloon City
Hong Kong
Tel: 2398 5545
Fax: 2787 6048
E-mail: co_enquiry@tid.gov.hk

Yours faithfully,




(Nicholas FUNG)
for Director-General of Trade and Industry

Encl.

Note 1: Original material means a material which qualifies as originating in accordance with the provisions of Chapter 3 of HKCGFTA.