Signed and sealed: Financial Secretary Henry Tang and Vice Minister of Commerce An Min sign the legal text on further trade liberalisation under CEPA II.

Hong Kong and the Mainland have announced the agreed rules of origin for Hong Kong-made products included in the second phase of the Closer Economic Partnership Arrangement.

Financial Secretary Henry Tang and Vice Minister of Commerce An Min signed the legal text on further trade liberalisation under CEPA II today after the fourth high level meeting of the CEPA Steering Committee.

The legal text, which gives expression to the package of liberalisation measures under CEPA II, contains three annexes:

* the list of additional products that will be given zero tariff preference;

* the rules of origin for these products; and,

* further liberalisation measures in services.

74% adopt existing rules of origin

As regards the rules of origin for the 713 Mainland product codes covered in CEPA II, 74% of the products will adopt Hong Kong's existing process-based origin rules as the CEPA rules of origin. These items include textiles and clothing, food and beverages, pharmaceutical products as well as some plastic and metal products.

Another 11% of the products will adopt the 'Change in tariff heading', and only 7% will use the '30% value-added requirement' as the CEPA rules of origin.

For the rest, including fish and aquaculture products, both sides have agreed on their rules of origin after taking into account the characteristics of the products concerned.

CEPA I stipulates that for products planned to be manufactured in Hong Kong, zero tariffs would only be applied from January 1 of the following year upon confirmation by both sides that the products have come into production. That means a manufacturer would only be able to enjoy zero tariff status in 2006 if production of the planned products commenced in 2005.

Time gap to shorten

The Mainland has now agreed to a proposal put forward by the Hong Kong Government to shorten the time gap.

Under the new agreement, manufacturers will enjoy zero tariff status upon confirmation by both sides that the planned products have come into production. This flexibility allows manufacturers to enjoy the benefits of CEPA early and encourages them to speed up implementation of their new investment plans.

The two sides will continue to pursue further liberalisation in goods and services trade through the established liaison mechanisms.

Next cycle of talks to start next year

The next cycle of applications for and consultation on additional products to enjoy zero tariff status will begin in January.

The Government will continue to consult the business and professional communities to understand their needs and discuss with them appropriate policy measures that may be required to enable them to gain the greatest benefits from CEPA.

A note on the new liberalisation measures and the CEPA II rules of origin, together with the legal text including the three annexes are available on the Trade & Industry Department website.