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Ref: FRCP 1000/2/6
9 May 2019
Certificate of Origin Circular No. 4/2019
Commercial Information Circular No. 352/2019
Certificate of Preference Circular No. 4/2019
Notice to Exporters :
Series 1 (USA) No. 4/2019
Series 2 (EU) No. 5/2019
Series 3 (Countries other than USA & EU) No. 4/2019
Textiles Trader Registration Circular No. 5/2019
ASEAN - Hong Kong, China Free Trade Agreement (AHKFTA)
Exporting Goods Originating in Hong Kong to ASEAN
Hong Kong and the Association of Southeast Asian Nations (ASEAN) (Note 1) have signed the ASEAN – Hong Kong, China Free Trade Agreement (AHKFTA). The commitments made under the Free Trade Agreement between Hong Kong and ASEAN amongst Hong Kong and three ASEAN Member States (AMS), namely Myanmar, Singapore and Thailand will enter into force on 11 June 2019. Goods of Hong Kong origin for exportation to Myanmar, Singapore and Thailand are eligible for preferential tariff treatment under AHKFTA. Subject to completion of the necessary procedures of the respective AMS, the effective dates for other AMS to provide preferential tariff treatment under AHKFTA will be separately announced.
2.Under the AHKFTA, 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 AHKFTA can enjoy preferential tariff treatment provided by the AMS. The AHKFTA also provides for a mechanism whereby AMS-origin goods passing through Hong Kong for re-export to another AMS can also enjoy the preferential tariff treatment offered by the importing AMS under the AHKFTA.
3.This Circular outlines the ROOs, documentary requirements, record keeping requirements and other relevant issues for exporting Hong Kong-origin goods to ASEAN under the AHKFTA. Details on the application procedures and conditions for the Certificate of Hong Kong Origin - Form AHK (CO(Form AHK) ) covering Hong Kong-origin goods and for the Movement Confirmation (MC) covering the above-mentioned eligible re-exports are provided in Certificate of Origin Circulars No.5/2019 and No.6/2019 respectively.
4.The full text and other details of the AHKFTA are also available on TID's website <https://www.tid.gov.hk/english/ita/fta/hkasean/index.html>. Traders are advised to read the relevant provisions of the AHKFTA 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
5.Under the AHKFTA, the AMS have agreed to eliminate/reduce their customs duties on goods originating from Hong Kong, subject to the relevant ROOs being met and the relevant operational procedures being complied with. Details of tariff reduction commitments of each AMS can be found on TID's webpage <https://www.tid.gov.hk/english/ita/fta/hkasean/text_agreement.html>.
III. Rules of Origin under the AHKFTA
6.The ROOs for the purpose of preferential tariff treatment under the AHKFTA are set out in Chapter 3 (Rules of Origin) and its Annexes. It is stipulated that the following good will qualify as originating if it meets other applicable provisions (including those detailed in paragraphs 7 - 27 below) :
- a good which is wholly obtained or produced in the exporting Party (Note 2) as set out in Article 4 (Wholly Obtained or Produced Goods) of Chapter 3 of the AHKFTA. Appendix A contains the list of goods which will be considered as wholly obtained or produced goods under the AHKFTA;
- a good produced in the exporting Party exclusively from originating materials from one or more of the Parties; or
- a good not wholly obtained or produced in the exporting Party, provided that the good is eligible under Article 5 (Not Wholly Obtained or Produced Goods). The requirements set out therein are explained in paragraphs 7 and 8 below.
Some special rules regarding ROO application for claiming Hong Kong-origin under the AHKFTA are highlighted in the following paragraphs.
7.In respect of "Not Wholly Obtained or Produced Goods" mentioned in paragraph 6(c) above, any such goods, except for those subject to the Product Specific Rules (PSRs) set out in Annex 3-2 (see paragraph 8 below) to Chapter 3, will be treated as a Hong Kong-origin good if the good has a Regional Value Content (RVC) of not less than 40 percent of its free-on-board (FOB) (Note 3) price in Hong Kong. The RVC is calculated using either of the formulae set out in paragraphs 9 - 10 below.
Product Specific Rules
8.PSRs have been drawn up for a list of goods set out in Annex 3-2 (Product Specific Rules) of the AHKFTA. The list of PSRs is available for download at TID's website <https://www.tid.gov.hk/english/ita/fta/hkasean/files/AHKFTA_Chapter_3_Annex_3-2.pdf>. A good subject to the PSRs will be treated as a Hong Kong-origin good if it meets the PSRs accordingly:
- Where a PSR provides a choice of rules from a RVC-based ROO, a change in tariff classification (CTC)-based ROO (Note 4), a specific manufacturing or processing operation, or a combination of any of these criteria, the exporter of the good can decide which rule to use in determining whether the good qualifies as a Hong Kong-origin good.
- Where a PSR specifies a certain RVC, the RVC of a good should be calculated using the formula set out in paragraphs 9 - 10 below.
- Where a PSR requires that the materials used have undergone CTC or a specific manufacturing or processing operation, the rules should apply only to non-originating materials.
Calculation of Regional Value Content
9.For the purpose of calculating the RVC of a good under the AHKFTA, traders can make use of either of the follow formulae:
- Direct/Build-up Method
RVC = ASEAN - Hong Kong China Free Trade Area Material Cost + Direct Labour Cost + Direct Overhead Cost + Other Costs + Profit ×100% FOB Price
- Indirect/Build-down Method
RVC = FOB Price - Value of Non-Originating Materials, Parts or Produce ×100% FOB Price
- ASEAN - Hong Kong, China Free Trade Area Material Cost is the value of originating materials (Note 5), parts or produce that are acquired or self-produced by the producer in the production of the good;
- Value of Non-Originating Materials, Parts or Produce is the Costs, Insurance and Freight (CIF) (Note 6) value at the time of importation or the earliest ascertained price paid for all non-originating materials, parts or produce that are acquired by the producer in the production of the good; non-originating materials include materials of undetermined origin;
- Direct Labour Cost includes wages, remuneration and other employee benefits associated with the manufacturing process;
- Direct Overhead Cost includes, but is not limited to, real property items associated with the production process (insurance, factory rent and leasing, depreciation on buildings, repair and maintenance, taxes, interests on mortgage) ; leasing of and interest payments for plant and equipment; factory security; insurance (plant, equipment and materials used in the manufacture of the goods) ; utilities (energy, electricity, water and other utilities directly attributable to the production of the goods) ; research, development, design and engineering; dies, moulds, tooling and the depreciation, maintenance and repair of plant and equipment; royalties or licences (in connection with patented machines or processes used in the manufacture of the goods or the right to manufacture the goods) ; inspection and testing of materials and the goods; storage and handling in the factory; disposal of recyclable wastes; and cost elements in computing the value of raw materials, i.e. port and clearance charges and import duties paid for dutiable component; and
- Other Costs are the costs incurred in placing the good in the ship or other means of transport for export including, but not limited to, domestic transport costs, storage and warehousing, port handling, brokerage fees and service charges.
10.The value of goods under Chapter 3 of the AHKFTA will be determined in accordance with the Customs Valuation Agreement (Note 7).
11.A good from a Party which complies with the origin requirements provided in the AHKFTA and which is used in Hong Kong as a material for a finished good eligible for preferential tariff treatment should be considered to be originating in Hong Kong, where working or processing of the finished goods has taken place.
Minimal Operations and Processes
12.Any one or a combination of the minimal operations and processes, which is extracted at Appendix B, will not confer origin under the AHKFTA.
13.A good originating in a Party will retain its initial originating status, when exported from another Party, if operations undertaken have not gone beyond those referred to in paragraph 12 and Appendix B.
14.There may be cases where a good is subject to a CTC-based ROO but not all of the non-originating materials used in its production have undergone the required CTC in Hong Kong. In these cases, such goods may still be considered as of Hong Kong origin if the value of all such non-originating materials does not exceed 10 percent of the FOB value of the good, and the good meets all other applicable criteria set forth in the AHKFTA for qualifying as an originating good.
15.However, if the good is subject to an RVC requirement, the value of non-originating materials referred in paragraph 14 above should be included in the value of non-originating materials in the RVC calculation.
Packing and Packaging Materials and Containers
16.Packing materials and containers for transportation and shipment of a good should not be taken into account in determining the origin of any good.
17.Packaging materials and containers in which the good is packaged for retail sale should be disregarded in determining the origin of the good, provided that:
- the good is wholly obtained or produced in the exporting Party;
- the good is produced exclusively in Hong Kong from originating materials from one or more of the Parties; or
- the good is subject to a CTC requirement set out in Annex 3-2 (Product Specific Rules) to Chapter 3 of the AHKFTA.
18.If a good is subject to an RVC requirement, the value of the packaging materials and containers in which the good is packaged 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
19.If a good is subject to the requirements of CTC or specific manufacturing or processing operation, the origin of accessories, spare parts, tools and instructional or other information materials presented with the good should not be taken into account in determining whether the good qualifies as an originating good, provided that:
- the accessories, spare parts, tools and instructional or other information materials are not invoiced separately from the good; and
- the quantities and value of the accessories, spare parts, tools and instructional or other information materials are customary for the good.
20.If a good is subject to a RVC-based ROO, the value of the accessories, spare parts, tools and instructional or information materials should be taken into account as the value of the originating or non-originating materials, as the case may be, in calculating the RVC of the good.
21.In determining whether a good is originating in Hong Kong, it is not necessary to determine the origin of the neutral elements, as listed at Appendix C, which might be used in its production and not incorporated into the good.
Identical and Interchangeable Materials
22.Identical and interchangeable materials mean materials being of the same kind and commercial quality, possessing the same technical and physical characteristics, and which after being incorporated into the finished product cannot be distinguished from one another for origin purposes by virtue of any markings, or mere visual examination, etc. The determination of whether identical and interchangeable materials are originating materials should be made either by physical segregation of each of the materials or by the use of generally accepted accounting principles (GAAP) of stock control applicable, or inventory management method, in Hong Kong. The chosen inventory management method must be used throughout the fiscal year.
23.Preferential tariff treatment will be applied to eligible goods consigned directly from Hong Kong to the importing Party. However, goods transported through one or more other Parties, or through a non-Party, may also be considered as directly consigned provided that the following conditions are met:
- the transit entry is justified for geographical reason or by consideration related exclusively to transport requirements;
- the goods have not entered into trade or consumption there; and
- the goods have not undergone any operation there other than unloading and reloading or any other operation to preserve them in good condition.
24.Where transportation is effected through one or more non-Parties, the following should be produced to the competent authority of the importing Party:
- the Bill of Lading or other related transportation documents issued in Hong Kong;
- a CO(Form AHK) issued by TID or Government Approved Certification Organizations (Note 8) in Hong Kong, unless the Certificate of Origin (CO) requirement is waived because the FOB value of the consignment does not exceed US$200;
- a copy of the original commercial invoice in respect of the goods; and
- supporting documents evidencing that the Direct Consignment requirement set out in paragraph 23 above have been complied with.
25.Goods sent from Hong Kong for exhibition in a Party and sold during or after the exhibition for importation into a Party will be granted preferential tariff treatment under the AHKFTA, provided that it meets the requirements set out in Chapter 3 of the FTA and it is shown to the satisfaction of the relevant customs authority of the importing Party that:
- an exporter has dispatched those goods from Hong Kong to the Party where the exhibition is held and has exhibited them there;
- the exporter has sold the goods or transferred them to a consignee in the importing Party; and
- the goods have been consigned during the exhibition or immediately thereafter to the importing Party in the state in which they were sent for the exhibition.
26.A CO(Form AHK) should be provided to the customs authority of the importing Party. The name and address of the exhibition should be indicated. The relevant customs authority of the Party where the exhibition took place may provide evidence together with supporting documents set out in paragraph 24(d) above evidencing that the requirements for Direct Consignment have been complied with and for the identification of the goods and the conditions under which they were exhibited.
27.Paragraph 25 applies to any trade, agricultural or crafts exhibition, fair or similar show or display in shops or business premises with a view to sale and where the goods remain under customs control during the exhibition.
IV. Document Requirements for Exports into ASEAN Member States
Presentation of the CO(Form AHK)
28.Under the AHKFTA, for the purpose of claiming preferential tariff treatment, the importer should submit to the customs authorities of the importing Party at the time of import, a declaration, a CO(Form AHK) including supporting documents (i.e. invoices and, when required, bill of lading or other related transportation documents) issued in Hong Kong and other documents as required in accordance with the internal laws and regulations of the importing Party.
Waiver of CO(Form AHK)
29.In the case where the FOB value of a consignment of Hong Kong-origin goods does not exceed US$200, the presentation of CO(Form AHK) will be waived. Instead, the exporter should make a simplified declaration that the goods in question have originated in Hong Kong. Goods sent through the post not exceeding US$200 FOB will also be similarly treated.
Third Party Invoicing
30.The competent authority of the importing Party will accept CO(Form AHK) in the case where the sales invoice is issued either by a company located in a third party or by an exporter for the account of the said company, provided the good meets the requirements set out in Chapter 3 of the AHKFTA.
31.The exporter should indicate "Third-party invoicing" and provide such information as the name and country/party of the company issuing the invoice and the relevant invoice numbers in the CO(Form AHK) application.
Record Keeping Requirements and Origin Verification
32.The manufacturer and/or exporter applying for a CO(Form AHK) should keep its supporting records for application for not less than three years from the date of issuance of the CO(Form AHK) concerned.
33.The importing Party may request the Customs & Excise Department (C&ED) to conduct retroactive checks on CO(Form AHK) at random or when it has reasonable doubt as to the authenticity of the document, or as to the accuracy of the information regarding the true origin of the goods in questions or of certain parts thereof. It may also request verification visits to the premises of the exporter or manufacturer, in accordance with the procedures laid down in Rule 17 and Rule 18 respectively of Annex 3-1 to Chapter 3 of the AHKFTA.
34.As with other types of CO applications, C&ED will conduct factory inspections and consignment checks on CO(Form AHK) applications.
Denial or Suspension of Preferential Tariff Treatment under the AHKFTA
35.The importing Party may suspend the provisions of preferential tariff treatment as provided under the AHKFTA when Hong Kong and the importing Party have different tariff classifications for a good or if a good is subject to a retroactive check or a verification visit. The AHKFTA's preferential tariff treatment so suspended will be reinstated once the classification differences have been resolved or if the importing Party determines that the good qualifies as an originating good of Hong Kong after the verification visit or the receipt of the results of the retroactive check.
36.In the case where a CO(Form AHK) is rejected, the importing Party will provide the grounds for denial of preferential tariff treatment for Hong Kong issuing authority's clarifications.
37.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
for Director-General of Trade and Industry
Note 1: ASEAN comprises Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam.
Note 2: "Party/Parties" refers to Hong Kong and/or AMS whose commitments made under the AHKFTA have entered into force. As set out in paragraph 1 of this Circular, the commitments made under the Free Trade Agreement between Hong Kong and ASEAN amongst Hong Kong and three AMS, namely Myanmar, Singapore and Thailand will enter into force on 11 June 2019.
Note 3: Free-on-board (FOB) means the free-on-board value of the good, inclusive of the cost of transport to the port or site of final shipment abroad.
Note 4: A CTC rule requires that all non-originating materials used in the production of a good undergo a specified change in their tariff classification under the Harmonized System in Hong Kong.
Note 5: Originating material means a material that qualifies as originating in accordance with the provisions of Chapter 3 of the AHKFTA.
Note 6: Costs, Insurance and Freight (CIF) means the value of the good imported, and includes the cost of freight and insurance up to the port or place of entry into the importing Party.
Note 7: Customs Valuation Agreement means the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 in Annex 1A to the WTO Agreement.
Note 8: The Government Approved Certification Organizations (GACOs) include the Hong Kong General Chamber of Commerce; the Federation of Hong Kong Industries; the Chinese Manufacturers' Association of Hong Kong; the Indian Chamber of Commerce, Hong Kong and the Chinese General Chamber of Commerce.