CEPA is the short for Closer Economic Partnership Arrangement, which was officially signed during Premier Wen Jiabao's visit to Hong Kong on June 29.

CEPA is divided into 6 chapters and 23 articles, with 6 appendices, covering the 3 major categories of goods trade, service trade and facilitation of trade and investment. The implementation of CEPA is designed to gradually eliminate tariff and non-tariff barriers on goods trade, realize liberalization of service trade, promote facilitation of trade and investment in a bid to enhance the trade and economic cooperation level between the mainland and Hong Kong to accomplish common development.

According to CEPA, with respect to goods trade, starting from Jan. 1, 2004, 273 types of Hong Kong-made products under mainland tax items shall enjoy zero tariff, provided they comply with regulations on place of origin.

The said products include part of electromechanical and electronic products, plastic products, paper products, textiles and garment, chemical products, medicine, timekeepers, ornaments, cosmetics, and metal products, etc. Hong Kong manufacturers, if meeting the principles of place of origins under CEPA, may apply for zero tariff preference no later than Jan. 1, 2006. And the Hong Kong SAR Government agrees to maintain zero tariffs on all products with mainland as the place of origin under CEPA, and will not impose restrictive trade rules on those products.

As regards service trade, 17 service sectors will obtain relaxed access according to CEPA; in terms of facilitation of trade and investment, both parties agree to step up cooperation in 7 sectors ¨C facilitation of trade and investment, facilitation of customs clearance, commodity inspection and quarantine, e-commerce, legal transparency, SMEs cooperation, cooperation in traditional Chinese medicine.

The zero tariff regime will be implemented in 5 steps:

(1) Starting from Jan. 1, 2004, Hong Kong manufacturing enterprises may file applications for preferential tariff for their products with the competent authority under the SAR Government, and submit such data as names of products produced, production capacity, import capacity, and so on, which will be checked, verified and summarized by the organization designated by the SAR Government.

(2) Starting from 2005, the competent authority under the SAR Government shall submit product listing to mainland competent authority no later than June 1 each year. Having conducted joint verification and confirmation, both parties shall hold consultations on the principles of place of origin of products.

(3) Before Oct. 1 each year, competent authorities of both parties shall complete confirmation of products on which zero tariff is scheduled to be practiced next year, and consultation on norms of place of origin and plans of tariff reduction, and release consensus thus reached.

(4) In light of consensus reached, on Jan. 1 each year, the mainland will start implementing zero tariffs on the products confirmed in the previous year.

(5) Product listing submitted to the mainland competent authority by the competent authority under the SAR Government after June 1 each year will be brought into the tariff reduction arrangement in the 3rd year.
In terms of Hong Kong, the SAR Government agrees to maintain zero tariff on goods with the mainland as place of origin, and will not introduce new pertinent measures biased against mainland services and service providers in the above industries.

Editor: Wing