The Mainland-Hong Kong Closer Economic Partnership Arrangement (CEPA), first concluded in June 2003 and implemented in stages from January 2004, is the first bilateral free trade agreement between Hong Kong and China. Under the three phases of CEPA, the Mainland agrees to give all products of Hong Kong origin (except for prohibited articles such as used electrical machinery and medical products, chemical residual, municipal waste and some others) tariff free treatment.

To enjoy zero import tariff Hong Kong products must fulfill CEPA rules of origin. As of November 2005, Hong Kong and the Mainland have reached agreement on the CEPA rules of origins for 1,369 products. Of the total products, covered by CEPA I, II & III, the mainland is currently applying zero import tariff for 1,014 of such products as: textiles and clothing, food and beverages, pharmaceutical, and certain metal and plastic goods. 155 products fall under the category “change in tariff heading (required),” while a 30% value-added requirement is applied to another 116 products. The remaining 84 products are subject to special rules of origin. Hong Kong will continue to pursue negotiations on other products which have no agreed CEPA rules of origin.

A long-term effect of the zero-tariff agreement, according to the Hong Kong Trade Development Council, is the potential for attracting to Hong Kong more foreign manufacturers that had previously planned to set up production lines in the mainland China for a number of reasons:

- savings in tariffs are expected to offset the higher than on the mainland production costs, which is especially feasible for products with high value-added or IP input industries;

- processed food manufacturers will benefit from rising demand for food items labeled “Made in Hong Kong” due to widespread food safety concerns on the mainland;

- companies working in industries that are still restricted from forming wholly-owned foreign companies on the mainland, will be able to invest in wholly owned ventures in Kong Hong and thus benefit from higher standards of IPR protection.

You can learn more about the main provisions of CEPA and its benefits for your company, as well as about Hong Kong’s potential as a gateway to China at “Hong Kong: Your Partner for Successful Business Ventures in China” symposium on March 16, 2006 at the Wharton School of the University of Pennsylvania. This event is organized by the World Trade Center of Greater Philadelphia in cooperation with the Hong Kong Economic and Trade Office, New York.

Event moderator: Gary P. Biehn, Esq., White and Williams, LLP. Presenters: Jacqueline Ann Willis, JP, Hong Kong Commissioner, USA; Robert Allcock, Solicitor General, Department of Justice, Hong Kong; Clarence Kwan, National Managing Partner, Chinese Services Group, Deloitte Touche; and others.

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March 3 , 2006
Visit of Sarath Menon,

PA Representative of Singapore

March 16, 2006
WTCGP China Symposium "Hong Kong: Your Partner for Successful Business Ventures in China"

April 18 , 2006
WTCGP Breakfast Around the Region "Export Management: Business Development, Legal Issues & Finance” - Chester County

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