The Latest Development of the Mainland’s New Measures on Processing Trade
Our previous memo (Ref No 2006/247 dated 18 September 2006) informed members that the Ministry of Finance, State Development and Reform Commission, Ministry of Commerce, General Administration of Customs and the State Administration of Taxation have jointly issued a circular ‘Adjustment of the Export Tax Rebate Rates for Certain Goods and Revision of the List of Prohibited Category of Processing Trade’ [Caishui (2006) No. 139]. Starting from 15 September 2006, export tax rebate rates for certain goods will be adjusted whilst the revised list of prohibited category of processing trade will be effective.
Furthermore, it has been reported that the Mainland intends to modify its policy on processing trade. It was speculated that such new policy may be implemented by the end of this year. The new policy will include metallurgy, paper manufacturing, metal casting and smelting in the list of prohibited category of processing trade as well as including textiles and garments, shoes, bags, furniture, plastic materials and products in the list of restricted category of processing trade. In addition, transfer of bonded goods for deep processing will be subject to rules for goods sold on the domestic market.
As the above-mentioned policies will have severe repercussion on Hong Kong manufacturers, the top management of the FHKI has showed great concern regarding the matter and by taking the members’ comments into consideration, swiftly adopted the following actions:
1. On 24 October 2006, the FHKI organised a seminar (港商對有關加工貿易政策調整的意見座談會) where Wang Hui of the Liaison Office of the Central People's Government in the Hong Kong SAR was invited to attend. The FHKI’s submission on the matter was presented at the meeting. Over 100 members participated in the seminar and expressed their opinions.
2. On 25 October 2006, Stanley Lau, deputy chairman of the FHKI, Robin Chiu, director-general and Rebecca Zhang, secretary-general of the PRD Council as well as representatives of other chambers of commerce held a meeting with Peter Leung of the Hong Kong Economic and Trade Office in Guangdong, to express their views on the matter.
3. On 27 October 2006, Kenneth Ting, chairman of the FHKI and Robin Chiu together with top management of the Hong Kong General Chamber of Commerce, the Chinese Manufacturers’ Association of Hong Kong and the Chinese General Chamber of Commerce held a meeting with Joseph Wong, Secretary for Commerce, Industry and Technology. We expressed our views and requested the Government to help resolve the matter.
4. On 31 October 2006, the FHKI and the Hong Kong Economic & Trade Office in Guangdong organised a seminar in Guangzhou (加工貿易有關政策座談會). Wang Tao, Deputy Director of Processing Unit of the Department of Foreign Trade & Economic Cooperation of Guangdong Province, Peng Haiping, Deputy Director of Processing Unit of Guangdong Sub-administration of Customs and other officials attended the meeting to explain to participants the current situation. During the meeting, Stanley Lau reiterated the FHKI’s position on the matter.
5. During the meeting, it was mentioned that due to ambiguities of the concerned notices, the Ministry of Commerce and the General Administration of Customs are working on the supplementary regulations. In addition, the officials stated that the Ministry of Commerce, General Administration of Customs and the State Environmental Protection Administration would come up with a revised list of prohibited/ restricted category of processing trade in early November 2006. The revised list would clearly categorise the goods concerned into prohibited imported products, exported products and both imported and exported products. It is likely that those goods that enterprises have shown great concern such as paper, paper board and zinc alloy would be excluded from the list of prohibited category of processing trade. Details are subject to publication of final announcement.
6. On 31 October 2006, FHKI deputy chairman Cliff Sun and LegCo rep the Hon Andrew Leung, together with top management of the three chambers of commerce held another meeting with Wang Hui of the Liaison Office of the Central People's Government in the HKSAR. It was emphasised that as enterprises had failed to import the required raw materials, they had to stop production. If the matter could not be resolved shortly, the operation of the enterprises would be seriously affected and some of them might go bankrupt. Thus, we sought the assistance of the Liaison Office of the Central People's Government to relay our concerns to the Central Government and request for a cancellation or postponement of the concerned policies.
7. Participants of the meeting agreed that:
l The four chambers of commerce would issue a joint letter to the Central Government to express our views and recommendations;
l The representatives of the four chambers of commerce would visit officials of the Central Government in Beijing; and
l The four chambers of commerce would prepare a joint position paper on the matter.
8. On 31 October 2006, the FHKI forwarded to Joseph Wong and Wang Hui its initial assessment of the impact of the Mainland’s measures of processing trade on Hong Kong manufacturers and FHKI’s members.
9. On 1 November 2006, the joint letter of the four chambers of commerce was forwarded to Zeng Qinghong, Vice President of the PRC, Wu Yi, Vice Premier, Liao Hui, Director of the Hong Kong and Macao Affairs Office of the State Council, Gao Siren, Director of the Liaison Office of the Central People's Government in the HKSAR, and the concerned five ministries/commission and other officials.
For the FHKI’s major views on the new measures of processing trade, please refer to the following website:
http://www.industryhk.org/english/news/news_ind/files/policy.pdf
The FHKI will keep members abreast of the latest developments; members are asked to pay close attention to FHKI’s circulars for updates. Members are also invited to forward any views they may have on the matter, particularly the impacts of the new policy on their operations, to the FHKI (our fax no: 2721 3494).
