Freer trade: Vice Minister of Commerce An Min and Financial Secretary Henry Tang sign the six CEPA Annexes at a ceremony this morning.

The Government and the Central Government have signed the six annexes to the main text of the Closer Economic Partnership Arrangement. 

Speaking at the signing ceremony, Vice Minister of Commerce An Min and Financial Secretary Henry Tang said this will bring more business opportunities to both Hong Kong and the Mainland.

They said the CEPA is a continuous and open agreement, adding that ongoing efforts will be made in enhancing and broadening its content.

The annexes signed today set out the arrangement's implementation details. They cover the following areas:

* arrangements for implementation of zero tariff for trade in goods;

* rules of origin for trade in goods, procedures for the issuing and verification of certificates of origin;

* specific commitments on liberalisation of trade in services;

* the detailed definition of "Service Supplier" and related requirements; and

* trade and investment facilitation.

Speaking at a press conference held after the signing ceremony, Secretary for Commerce, Industry & Technology John Tsang said that CEPA has good potential to open up many more new business opportunities in the Mainland for Hong Kong as well as to enhance Hong Kong's attractiveness to overseas investors. 

273 products to enjoy zero tariff from January 1

On trade in goods, the Mainland has agreed to eliminate tariffs on imported goods of Hong Kong origin in stages. Starting from January 1, 273 Mainland product codes meeting CEPA rules of origin will enjoy zero tariffs. 

For other products, the Mainland will apply zero tariff no later than January 1, 2006 upon applications by local manufacturers and upon CEPA rules of origin being agreed and met.

For 70% of the 273 Mainland product codes covered in the initial phase, Hong Kong's existing process-based origin rules will be adopted as the CEPA origin rules. For the rest, either the "Change in Tariff Heading" approach or the "30% value-added" requirement will be used.

"While the 30% rule already compares favourably with other free-trade agreements whose thresholds range from 40% to 60%, product development costs will also be counted in the calculation in the case of CEPA," Mr Tsang said.

On trade in services, the two sides have agreed on some further clarifications and refinements regarding the liberalisation of the 17 sectors of services agreed and announced.

Preferential treatment granted to telecoms services

Moreover, the Mainland has also agreed to grant preferential treatment in one additional sector - telecoms services - taking the total number of sectors covered under CEPA to 18. Also, equity participation in Mainland Insurance companies will also be relaxed.

As regards the definition of "Hong Kong Service Suppliers", generally speaking, "juridical persons" include companies, partnerships, sole proprietorships. "Juridical persons" and "natural persons" of Hong Kong will be able to enjoy preferential treatment provided that they fulfil the definition and related requirements of Hong Kong service suppliers stipulated in relevant annex of CEPA.

Unless otherwise specified in CEPA, a "natural person" means a Hong Kong permanent resident whereas a "juridical person" means any legal entity duly constituted or otherwise organised under the applicable laws of Hong Kong and which has engaged in substantive business operations in Hong Kong for three to five years.

The Trade & Industry Department will provide the one-stop enquiry and certification services for the implementation of CEPA in Hong Kong. A designated branch has been set up in the department to handle public enquiries, disseminate practical information and process applications for the certification of "Hong Kong Service Suppliers".

With regard to trade and investment facilitation, both sides agreed on the contents and modalities of cooperation for each of the seven areas which are stipulated in the main parts of CEPA, and that new areas of trade and investment facilitation might be added in future. 

Joint steering committee set up

With a view to broadening CEPA's scope and coverage, the two sides will pursue further liberalisation on goods and services trade in the latter phases. A Joint Steering Committee, responsible for overall coordination of CEPA, will be set up soon. It will be jointly chaired by the Financial Secretary and An Min.

"CEPA adopts a building-block approach and provides a mechanism for further liberalisation measures. In formulating the strategy for the subsequent phases of CEPA, we will continue to consult the business and professional communities to understand their needs," Mr Tsang said. 

"We will also discuss with the concerned business sectors on appropriate policy measures that may be required to enable them to gain the greatest benefits from CEPA," he added.