GENERAL AGREEMENT ON TARIFFS AND TRADE. RESTRICTED C/RM/G/7 3 July 1990 Limited Distribution. English TRADE POLICY REVIEW MECHANISM

Transcription

1 GENERAL AGREEMENT ON TARIFFS AND TRADE RESTRICTED C/RM/G/7 3 July 1990 Limited Distribution COUNCIL Original: English TRADE POLICY REVIEW MECHANISM HONG KONG In pursuance of the CONTRACTING PARTIES' Decision of 12 April 1989 concerning the Trade Policy Review Mechanism (L/6490), the initial full report by Hong Kong is herewith submitted. NOTE TO DELEGATIONS Until further notice, this document is subject to a press embargo

2 Page i EXECUTIVE SUMMARY PART A CONTENTS TRADE POLICIES AND PRACTICES CHAPTER 1 : OBJECTIVES OF TRADE POLICIES CHAPTER 2 : DESCRIPTION OF THE IMPORT AND EXPORT SYSTEM Licensing import licensing export licensing import of rice import of frozen meat and poultry import of ozone depleting substances import and export of textiles and clothing Certification Import and export declarations Tariffs Excise duties Training levy Subsidies and assistance to exports Page v CHAPTER 3 : Non-tariff measures THE TRADE POLICY FRAMEWORK Domestic laws and regulations governing the application of trade policies Summary description of the process of trade policy formulation and review Bilateral, multilateral, regional and preferential trading agreements, their scope, duration and goals

3 Page ii CHAPTER 4 THE IMPLEMENTATION OF TRADE POLICIES 16 Page Trade policy measures used 16 tariffs 16 tariff quotas and surcharges 16 rice control scheme 16 quantitative restraint 16 licensing 16 excise duties 16 rules of origin 16 government procurement 17 technical standards 17 export restrictions 17 other government assistance, including 17 subsidies, tax exemptions role of state-trading enterprises 17 foreign exchange controls 17 safeguards, anti-dumping or countervailing 18 actions, concessionary export financing, export taxes or government-mandated countertrade customs valuation 18 Prospective changes in trade policies 18 and practices PART B BACKGROUND AGAINST WHICH THE ASSESSMENT OF 19 TRADE POLICIES IS CARRIED OUT CHAPTER 5 : WIDER ECONOMIC AND DEVELOPMENTAL NEEDS, 21 POLICIES AND PRACTICES CHAPTER 6 : TE EXTERNAL ECONOMIC ENVIRONMENT 23 Major trends in imports and exports 23 Structural changes of the Hong Kong economy 28

4 Page iii Page CHAPTER 7 : Developments in the terms of trade and commodity prices Important trends in the balance of payments, reserves, debt, exchange and interest rates International macroeconomic situation affecting the external sector PROBLEMS IN EXTERNAL MARKETS Quantitative restrictions on textiles and clothing products Anti-dumping actions Origin rules CHAPTER 8 : STATISTICAL INFORMATION 40 Trade statistics of Hong Kong Concepts and definitions Source Tables of data APPENDICES 43 Note : Where dollars are quoted in this report, they are Hong Kong dollars. At the end of 1989, the market exchange rate of the Hong Kong dollar against the US dollar was HK$7.807 to US$1.

5 Page iv APPENDICES Appendix Fact sheet on the Rice Control Scheme "Textiles Export Control System 1987'' published by the Hong Kong Trade Department* Certificate of Hong Kong origin - processes Extract from Section 8 of the Import and Export (Registration) Regulations Schedule of Excise Duty rates origin criteria and principal Schedule LXXXII - Hong Kong's GATT tariff bindings Hong Kong's exports of textiles and clothing subject to restraint in 1989 Value and volume of Hong Kong's merchandise trade, Value of Hong Kong's imports by SITC R2 division (2-digit), Value of Hong Kong's (2-digit), Value of Hong Kong's Value of Hong Kong's (2-digit), Value of Hong Kong's 14 Value of Hong Kong's 15 Value of Hong Kong's 16 Value of Hong Kong's total exports by main market, Macroeconomic indicators domestic exports by SITC R2 division re-exports by SITC R2 division total exports by SITC R2 division imports by main supplier, (2-digit), domestic exports by main market, re-exports by main market, Paste *In E English only

6 Page v EXECUTIVE SUMMARY PART A : Objectives TRADE POLICIES AND PRACTICES of trade policies Hong Kong's trade policy seeks to promote a free, open and stable multilateral trading system; to safeguard Hong Kong's rights and fulfil its obligations as a contracting party to the General Agreement on Tariffs and Trade (GATT) and a party to the Multi Fibre Arrangement (MFA); within the context of the GATT, to secure, maintain and improve access for Hong Kong's exports and to ensure and maintain the integrity of all measures adopted by Hong Kong to meet its obligations under multilateral and bilateral trade or trade-related agreements. Description of the import and export system Hong Kong's import and export system is characterized by minimum controls, zero tariff and no subsidies or assistance to exports. Hong Kong is a party to the GATT Agreement on Import Licensing Procedures. Import and export controls are kept to a minimum, and either stem from obligations under various international undertakings, or are applied for health, safety or security reasons. Import and export licensing requirements are maintained under the Laws of Hong Kong. Such requirements are administered by the relevant government departments. Fees are charged to recover the operational costs of import and export licensing systems, including relevant enforcement activities. Quantitative import restrictions apply to ozone depleting substances. Imports of rice must meet, but may not exceed, minimum levels prescribed by the Director-General of Trade. Exports of a wide range of textiles and clothing are subject to quantitative restraints under agreements concluded under the MFA. Imports into Hong Kong are not required to be accompanied by certificates of origin issued by the exporting countries concerned. In regard to its exports, Hong Kong provides origin certification services as necessary to facilitate the trade in meeting requirements at the importing end. Any person or firm who imports, exports or re-exports any article other than an exempted article (e.g. personal baggage) is required, under the Import and Export Ordinance (Cap. 60), to lodge with the Customs and Excise Department an import or export declaration which is used to compile statistics on Hong Kong's merchandise trade. A charge is payable on each declaration. Such charges constitute part of the Government's general revenue.

7 Page vi The trade policy framework Domestic laws and regulations governing the application of trade policies The statutory provisions under the purview of the Director-General of Trade give legal backing to the control of imports and/or exports to enable Hong Kong to fulfil international/bilateral obligations or to meet Hong Kong's requirements on health, safety and security grounds. The main purposes of the provisions of the Import and Export Ordinance (Cap 60) and its subsidiary regulations are to enable Hong Kong to exercise its rights and meet its obligations under textiles agreements, to prevent the proliferation of chemical weapons, and monitor and control the flow of strategic commodities into and out of Hong Kong in accordance with requirements of the Co-ordinating Committee for Multilateral Export Controls. The purpose of the Reserved Commodities Ordinance (Cap 296) is to ensure the availability of certain essential foodstuffs for emergency situations. The Export (Certificates of Origin and Commonwealth Preference Certificates) Regulations and the Protection of Non-Government Certificates of Origin Ordinance (Cap 324) provide a system governing the issue of certificates of Hong Kong origin for goods. Summary description of the process of trade policy formulation and review Trade policy formulation involves the Governor, the Executive Council, the Legislative Council, the Administration and advisory boards and committees. The Administration is organized into branches and departments. The branches, each headed by a secretary, collectively form the Government Secretariat. The Trade and Industry Branch, headed by the Secretary for Trade and Industry, is the policy branch in the Government Secretariat responsible for trade policy formulation and review. The Trade Department, headed by the Director-General of Trade, is responsible for the implementation of trade policy. The Director-General of Trade also advises the Secretary for Trade and Industry on matters of policy affecting trade. The Commissioner of Customs and Excise is responsible to the Secretary for Trade and Industry in respect of trade-related enforcement activities. The Administration also involves the private sector to the widest possible extent in the process of formulating, implementing and reviewing trade policy so as to ensure that any proposal will command a high degree of public support. The Trade Advisory Board, the Textiles Advisory Board and the Free Trade Committee, which are advisory bodies chaired by the Secretary for Trade and Industry, advise the Administration on a wide range of trade policy issues.

8 Page vii Bilateral, multilateral. regional or preferential trading agreement, their scope, duration and goal The General Agreement on Tariffs and Trade (GATT) is the cornerstone of Hong Kong's trade policy. Hong Kong acquired separate contracting party status in April Hong Kong is a party to six Tokyo Round Agreements. It has participated fully in the MFA since its inception. Hong Kong at present has bilateral textiles agreements with Austria, Canada, the European Economic Community (EEC), Finland, Norway, Sweden and the US. These agreements have been concluded under the MFA, and cover a wide range of textiles and clothing products of cotton, wool, man-made fibre, silk blend and other vegetable fibres. In 1989, the value of textiles and clothing exports covered by the seven agreements amounted to $59,610 million, representing 67.2Z of Hong Kong's domestic exports of textiles and clothing and of all domestic exports. The implementation of trade policies Trade policy measures used Hong Kong applies zero tariff on all imports from all sources. Hong Kong does not maintain any tariff quotas or surcharges, safeguards, anti-dumping or countervailing actions, concessionary export financing, export taxes or government-mandated countertrade. Hong Kong offers neither subsidies nor tax exemptions. It does not operate any state-trading enterprises, and has no foreign exchange controls. Hong Kong maintains a number of trade policy measures, including tariff bindings of certain products at zero rate; rice control scheme; quantitative restriction on the import of ozone depleting substances into Hong Kong; licensing controls which either stem from obligations under international undertakings or are applied for health, safety and security reasons; excise duties; rules of origin; government procurement provisions, and export restrictions on textiles and clothing. Prospective changes in trade policies and practices Hong Kong does not have any prospective changes in its policies and practices. trade PART B : BACKGROUND AGAINST WHICH THE ASSESSMENT OF TRADE POLICIES IS CARRIED OUT Wider economic and developmental needs, policies and practices Given its small size and lack of natural resources, Hong Kong has to be externally oriented. Hong Kong's economic growth and prosperity are built upon its ability to participate in world trade. Hong Kong advocates and practices free trade. There is no foreign exchange control, and free movements of funds across the territorial boundary are assured. The Hong Kong dollar is freely convertible against all currencies.

9 Page viii Unless there are sound social or economic reasons suggesting otherwise, the Government normally does not interfere with the operations of the economy, particularly activities of the private sector. The Government does not provide subsidy to any particular economic sector or industry. The role of the Government in the economic development process is one of facilitation. The Government seeks to ensure a socio-economic environment which is conducive to economic growth and development, such as the provision of the necessary infrastructural facilities, a sound legal and institutional framework as well as an efficient administrative machinery. Business decisions are left entirely to the private sector. Pragmatism, adaptability and resilience, coupled with a strong sense of business enterprise and hard work, are key ingredients of the development of the Hong Kong economy. The external economic environment Major trends in imports and exports Some 80% of the manufactured products of Hong Kong are for export, while most of the foodstuffs and consumer goods, as well as raw materials and capital goods for production, are imported. Hong Kong's domestic exports, re-exports, total exports and imports increased rapidly during the ten years between 1979 and 1989 which had an average annual growth rate of 14.9%, 33.0%, 22.3% and 20.7% respectively. Hong Kong has been diversifying its export markets over the past decade. This was largely due to the initiatives taken by Hong Kong businessmen in tapping the global and regional markets, as well as the opportunities created by China's open door policy. Apart from a decrease in shares attributable to the United States, the Federal Republic of Germany and the United Kingdom, the most significant change between 1979 and 1989 was the emergence of China as the second largest market for Hong Kong's domestic exports. China also emerged as the largest market for Hong Kong's re-exports. As for sources of imports, Hong Kong imported more from within the Asia-Pacific region in 1989 than in China has also become the largest supplier of Hong Kong's imports since the early 1980s. Structural changes of the Hong Kong economy In line with changes in both the pattern of overseas demand and Hong Kong's own industrial structure, the local manufacturing sector was oriented to producing goods of a higher quality and of greater skill and design content. With the opening up of China's economy, Hong Kong businessmen set up production facilities and established outward processing arrangements in China, mostly in Guangdong Province, to engage in the more labour-intensive production processes. The local base is likely to concentrate more on strategic activities which relate to the service component of manufacturing production.

10 Page ix Besides moving up-market in the manufacturing sector, development of the Hong Kong economy is also characterized by a relative shift to the service sectors. In 1988, 67Z of the GDP was attributed to trading and services. This matches with the re-emergence of Hong Kong's role as an entrepot serving the Asia-Pacific region generally and China in particular, and the increasing importance of Hong Kong as a regional financial and business services centre. Developments in the terms of trade and commodity prices The prices of Hong Kong's domestic exports, re-exports and imports increased by broadly similar magnitudes over the period 1979 to This has resulted in generally stable terms of trade for Hong Kong. Important trends in the balance of payment. reserves, debt. exchange and interest rates Hong Kong does not compile balance of payment statistics in view of the reporting burden this would impose on respondents. In so far as visible trade balance is concerned, Hong Kong is neither building up big surpluses nor incurring chronic deficits. The visible trade deficits or surpluses, expressed as a percentage of the value of imports of goods, stabilized at low levels of -1.6Z to 1.12 during the period 1984 to This suggests that in this free market economy with no major structural rigidities, the adjustment mechanism to changes in the external environment has been operating well. Hong Kong has traditionally been running surpluses in the invisible trade account. Reflecting the buoyant tourist sector and the expansion of trade-related services in connection with the flourishing entrepot trade, such surpluses saw some increases in the last few years. Putting the visible and invisible trade figures together and considering a probable deficit in net investment income from abroad, Hong Kong's current account may come up to a rough balance or even a small deficit. There are no official statistics on the external debts of the private sector. The Government, on the other hand, has not incurred any external debts. The official foreign exchange reserves of Hong Kong are held by the Exchange Fund which is operated mainly for the purpose of maintaining a stable rate of exchange between the Hong Kong dollar and the US dollar. The Hong Kong dollar was linked to the US dollar at the rate of HK$7.80 to US$1 in October 1983, after a period of much instability in the exchange rate of the Hong Kong dollar owing to political uncertainties arising from the Sino-British negotiations on Hong Kong's future.

11 Page x The linked exchange rate system has provided a stable monetary system for Hong Kong. It helps to ensure orderly economic and financial conditions upon which business thrives. More importantly, it maintains confidence in Hong Kong dollars and in Hong Kong dollar assets. Hong Kong does not maintain the linked exchange rate to gain a competitive advantage or to build up trade surpluses. Under the linked exchange rate system, the movements of Hong Kong dollar interbank interest rates follow closely those of US dollar interest rates. Deposit rates on most types of Hong Kong dollar deposits are set by the Hong Kong Association of Banks, normally with regard to the movements of interbank interest rates. International macroeconomic situation affecting the external sector of Honx Kong The threat of protectionism remains Hong Kong's key concern. Protectionist measures are detrimental to the expansion of world trade and particularly to the growth prospects of small, export-oriented economies like Hong Kong. As a regional Financial centre, Hong Kong is affected by developments in major overseas financial markets. Under the linked exchange rate system, monetary developments in the United States are of particular relevance to Hong Kong. Problems in external markets Hong Kong's exports face a range of trade barriers maintained by the importing countries. Such trade barriers include quantitative restrictions on textiles and clothing products maintained under MFA bilateral agreements, anti-dumping actions against Hong Kong products, and introduction of more stringent rules of origin criteria.

12 PART A: TRADE POLICYAND PRACTICES

13 Page 3 CHAPTER 1 : OBJECTIVES OF TRADE POLICY 1.1 Hong Kong's trade policy seeks : (a) to promote a free, open and stable multilateral trading system through participation in the General Agreement on Tariffs and Trade (GATT) and other related international, multilateral or regional institutions/fora; (b) to safeguard Hong Kong's rights and fulfil its obligations as a contracting party to the GATT and as a party to the Multi-Fibre Arrangement (MFA); (c) within the context of the GATT, to secure, maintain and improve access for Hong Kong's exports through regular bilateral, plurilateral and multilateral dialogue with its trading partners; and (d) to ensure and maintain the integrity of all measures adopted by Hong Kong to meet its obligations under multilateral and bilateral trade or trade-related agreements.

14 Page 4 CHAPTER 2: DESCRIPTION OF THE IMPORT AND EXPORT SYSTEM 2.1 Hong Kong's import and export system is characterized by Licensing (a) minimum controls; (b) zero tariff; and (c) no subsidies or assistance to exports. 2.2 Hong Kong is a party to the GATT Agreement on Import Licensing Procedures. Import and export controls are kept to a minimum, and either stem from obligations under various international undertakings, or are applied for health, safety or security reasons. 2.3 Import and export licensing requirements are maintained under the Laws of Hong Kong. Such requirements are administered by the relevant government departments. Fees are charged to recover the operational costs of import and export licensing systems, including relevant enforcement activities. Quantitative import restrictions apply to ozone depleting substances. Imports of rice must meet, but may not exceed, minimum levels prescribed by the Director-General of Trade. Exports of a wide range of textiles and clothing are subject to quantitative restraints under agreements concluded under the MFA. Import licensing 2.4 Information on Hong Kong's import licensing requirements and practices can be found in Hong Kong's notification to the GATT, document L/5640/Add. 36/Rev. 3. The products which are subject to licensing requirements when imported into Hong Kong and the purposes of such licensing requirements are as follows (a) (b) Reserved commodities To provide information and control over stocks of rice, frozen meat and poultry. (See para below) Ozone depleting substances To protect the environment in accordance with the 1987 Montreal Protocol on Substances that Deplete the Ozone Layer. (See para. 2.8 below)

15 Page 5 (c) Agricultural pesticides: radioactive substances and irradiating apparatus: pharmaceutical products and medicine: (d) dangerous drugs: acetylating substances To protect human life and public health. Dogs and cats To prevent the spread of rabies. (e) Mammals, birds, reptiles and carcasses To prevent the (f) Plant, plant pests and soil introduction of infectious diseases. To prevent the introduction and spread of plant pests. (g) Meat and poultry: food containing added colouring matter, certain metals, artificial sweeteners, frozen confections: milk and milk beverages: smokeless tobacco (h) To protect public health. Textiles and clothing To assist with surveillance necessary to complement the enforcement of the textiles export control system. (see para 2.9 below). (i) Certain gold coins, iron and steel To enforce economic sanctions against South Africa in accordance with the Commonwealth Accord of 20 October (j) Worked ivory: medicines claiming to contain rhinoceros ingredients: and manufactured products of certain species (k) To protect animals and plants of endangered species, in conformity with the requirements of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Radio transmitting equipment To control the use of such equipment so as to avoid radio interferences to authorized radio equipment users.

16 C/RMIG/7 Page 6 (1) Sand (m) Export licensing To provide a mechanism to enable the protection of beaches and seabed within Hong Kong. Strategic commodities To monitor and control the flow of strategic commodities into Hong Kong in accordance with obligations laid down by the Co-ordinating Committee for Multilateral Export Controls (COCOM). 2.5 The following products are subject to licensing requirements when exported from Hong Kong : (a) Reserved commodities (see para 2.4(a) above). (b) Ozone depleting substances (see para 2.4(b) above). (c) Agricultural pesticides: pharmaceutical products and medicine: dangerous drugs: acetylating substances: poultry carcasses or poultry products (See para 2.4(c) and 2.4(g) above). (d) Textiles and clothing (see para 2.4(h) above) (e) (f) (g) To safeguard Hong Kong's rights and to discharge Hong Kong's obligations under bilateral textiles agreements concluded under the MFA. Worked ivory: medicines claiming to contain rhinoceros ingredients; and manufactured products of certain species (see para 2.4(j) above) Radio transmitting equipment (see para 2.4(k) above) Chemical weapon precursors To prevent the proliferation of chemical weapons. (h) Strategic commodities (see para 2.4(m) above). (i) Television sets and video cassette recorders To curb smuggling of such products.

17 Page 7 Import of rice 2.6 There is no commercial production of rice in Hong Kong. The Reserved Commodities Ordinance (Cap. 296) and its subsidiary regulations provide the legal framework for the import control of rice into Hong Kong for local consumption. Such imports are subject to a control scheme, for internal security reasons, to ensure regular and adequate supply. Under these arrangements, the Director-General of Trade prescribes each quarter, on the basis of current consumption of rice, the level of rice to be held in the territory, including a substantial reserve stock for emergency situations. Import licences for amounts equal to, but not exceeding this level, are then issued only to persons or firms registered as stockholders with the Trade Department. Stockholders are obliged to import rice in the amounts specified in such licenses. They are liable to direction from the Director-General of Trade on storage, movement, distribution, sale and pricing of rice. They are free to import rice from any source. Applications for imports of rice for subsequent re-export are freely approved. A fact sheet on the Rice Control Scheme is at Appendix 1. Import of frozen meat and poultry 2.7 Imports of frozen meat and poultry are subject to licensing control under the Reserved Commodities Ordinance (Cap. 296) and its subsidiary regulations. Frozen meat and poultry refer to frozen or chilled meat (including beef, mutton, pork, lamb and all offals) and frozen poultry (including fowl, duck, goose or turkey and parts thereof). The control on frozen meat and poultry allows the Department to monitor, for internal security reasons, the imports and stock levels of frozen meat and poultry in Hong Kong. Imports for local consumption are not subject to quota control. Applications for imports for subsequent re-export are freely approved. Import of ozone depleting substances 2.8 Ozone depleting substances (chlorofluorocarbons and halons) are controlled under the Ozone Layer Protection Ordinance The import of ozone depleting substances is subject to licensing control to ensure that the amount retained for local consumption does not exceed the levels agreed under the 1987 Montreal Protocol on Substances that Deplete the Ozone Layer. All imports of chlorofluorocarbons for local consumption are debited against valid import quota held by registered importers. Imports of halons for local consumption are not subject to import quotas. Imports of chlorofluorocarbons and halons for re-export are licensed but are not subject to quota control and applications are freely approved. Import and export of textiles and clothing 2.9 The Import and Export Ordinance (Cap. 60) and its subsidiary regulations provide the legal framework for the import and export control of textiles and clothing. The purpose of import control on textiles and clothing is to assist with surveillance necessary to complement the enforcement of the textiles export control system. The purpose of export

18 Page 8 control is to ensure that Hong Kong discharges fully its obligations arising from agreements concluded under the MFA, and that Hong Kong is able to maximize its use of limited quotas available under the agreements. The textiles export control system comprises a quota system governing allocation and use of textiles quota and a licensing system whereby all textiles exports from Hong Kong are required by law to be covered by valid licences. Details of the textiles control system are contained in the publication entitled 'Textiles Export Control System 1987' at Appendix 2. Certification 2.10 Imports into Hong Kong are not required to be accompanied by certificates of origin issued by the exporting countries concerned. In regard to its exports, Hong Kong provides origin certification services as necessary to facilitate the trade in meeting requirements at the importing end Hong Kong's origin rules follow the origin criteria recommended in the Kyoto Convention (Annex D1), i.e. the 'wholly produced' rule for products where only one country enters into consideration in attributing origin and the 'substantial transformation' rule for products where two or more countries are involved in their production Specific origin rules for Hong Kong manufactured products are laid down by the Trade Department, and the current list of specific rules is at Appendix 3. These specific origin rules are subject to review periodically to take account of technological changes and industrial developments. The Trade Department also defines in Appendix 3 the principal processes for specific products. The principal process is the manufacturing process required to be undertaken in Hong Kong to meet the origin rules. Products are eligible for a certificate of Hong Kong origin when all the principal processes of manufacture for the products in question have been performed in Hong Kong In addition to the Trade Department, there are five non-government organizations in Hong Kong which have been designated by the Government as competent to issue certificates of origin under Article 11 of the International Convention for the Simplification of Customs Formalities These Government-Approved Certification Organizations (GACOs) are (a) the Hong Kong General Chamber of Commerce; (b) the Federation of Hong Kong Industries; (c) the Indian Chamber of Commerce, Hong Kong; (d) the Chinese Manufacturers' Association of Hong Kong; and (e) the Chinese General Chamber of Commerce. Under the Protection of Non-Government Certificates of Origin Ordinance (Cap 324), certificates of origin issued by the GACOs have the same legal status as those issued by the Trade Department. The Trade Department assists the GACOs in the training of the-.r administrative and inspection staff dealing with certification of origin matters. The Department also

19 Page 9 co-ordinates certification policies and standardizes practices and procedures amongst the certificate-issuing organizations. In addition, the Trade Department monitors the certification by the GACOs to ensure that a uniform standard of certification is maintained. Import and export declarations 2.14 Any person or firm who imports, exports or re-exports any article other than an exempted article (e.g. personal baggage) is required, under the Import and Export (Registration) Regulations of the Import and Export Ordinance (Cap 60), to lodge with the Customs and Excise Department an import or export declaration within fourteen days of import, export or re-export. These declarations are used to compile statistics on Hong Kong's merchandise trade. A charge is payable on each declaration. Such charges constitute part of the Government's general revenue. The current level of charge is stipulated in Section 8 of the Import and Export (Registration) Regulations, an extract of which is at Appedix 4. Tariffs 2.15 Hong Kong applies zero tariff on all imports from all sources. Excise duties 2.16 The Dutiable Commodities Ordinance (Cap 109) provides for the collection of excise duty on six product groups : hydrocarbon oils, alcoholic liquor, methyl alcohol, tobacco, non-alcoholic beverages and cosmetics. Excise duty so collected is general revenue and is levied at the same rate for imported products as well as locally-manufactured products. Details of the excise duties are at Appendix 5. Training levy 2.17 A clothing industry training levy is collected under the Industrial Training (Clothing Industry) Ordinance (Cap 318) from exporters of clothing and footwear items of Hong Kong origin for the purpose of providing training facilities to employees of the clothing and footwear industries. Currently, the rate is at 30 cents per $1,000 or part thereof of the declared free on board (f.o.b.) value of the items exported. Subsidies and assistance to exports 2.18 Hong Kong is a party to the Agreement on Interpretation and Application of Article VI, XVI and XXIII of the GATT (Code on Subsidies and Countervailing Duties). No subsidy or assistance to exports is provided by the Government (please see Hong Kong's notification to the GATT in document L6630/Add.l). Non-tariff measures 2.19 Hong Kong does not maintain any non-tariff measures for the purpose of restricting trade.

20 Page 10 CHAPTER 3 : THE TRADE POLICY FRAMEWORK Domestic laws and regulations governing the application of trade policies 3.1 The Government does not normally interfere with the operations of the economy. The rationale for keeping Government intervention to a minimum is a firm belief in the efficient operation of market forces. The Government does not provide any subsidy nor other forms of incentive to promote exports. Neither does it provide any import relief to any particular industrial sector. 3.2 The statutory provisions under the purview of the Director-General of Trade give legal backing to the control of imports and/or exports to enable Hong Kong to fulfil international/bilateral obligations or to meet Hong Kong's requirements on health, safety and security grounds. The following is a description of such statutory provisions : Legal Authority Item Rationale Import and Export Ordinance (Cap. 60) & its subsidiary regulations : Import and Export (General) Regulations; Import and Export (Fees) Regulations; Import and Export Manifests Notice; Import and Export (Registration) Regulations; Import and Export (Removal of Articles) Regulations. Import and Export (Strategic Commodities) Regulations Reserved Commodities (Cap. 296) (a) (b) Textiles Chemical weapon precursors Strategic Commodities (other than explosives, arms and ammunition) Rice, frozen meat and frozen poultry To enable Hong Kong to exercise its rights and meet its obligations under textiles agreements. To prevent the proliferation of chemical weapons. To monitor and control the flow of strategic commodities into and out of Hong Kong in accordance with COCOM requirements. To ensure the Ordinance availability of certain essential foodstuffs for emergency situations. 3.3 In addition to the above, the Export (Certificates of Origin and Commonwealth Preference Certificates) Regulations and the Protection of Non-Government Certificates of Origin Ordinance (Cap. 324) provide a system governing the issue of certificates of Hong Kong origin for goods.

21 Page 11 Summary description of the process of trade policy formulation and review 3.4 Trade policy formulation involves the Governor, the Executive Council, the Legislative Council, the Administration and advisory boards and committees. 3.5 The Governor is advised by the Executive Council on all important matters of policy. The Governor in Council - the Governor acting in consultation with the Executive Council - is Hong Kong's central and most important decision making body. The Executive Council also advises upon all principal bills before they are introduced into the Legislative Council, and has the power to make subsidiary legislation under a number of ordinances passed by the Legislative Council. 3.6 The Legislative Council is the Hong Kong law-making body responsible for legislating bills. Members of the Council also approve public expenditure, debate government policy and question the Administration on policy issues. 3.7 The Administration is organised into branches and departments. The branches, each headed by a secretary, collectively form the Government Secretariat. The Financial Secretary, who is responsible for the fiscal and economic policies of the Government, oversees the operations of the Finance, Monetary Affairs, Trade and Industry, and Economic Services Branches of the Government Secretariat. The Trade and Industry Branch, headed by the Secretary for Trade and Industry who reports directly to the Financial Secretary, is the policy branch in the Government Secretariat responsible for trade policy formulation and review. The Trade Department, headed by the Director-General of Trade, is responsible for the implementation of trade policy. The Director-General of Trade also advises the Secretary for Trade and Industry on matters of policy affecting trade. The Commissioner of Customs and Excise is responsible to the Secretary for Trade and Industry in respect of trade-related enforcement activities, such as certification of origin matters. 3.8 The Administration also involves the private sector to the widest possible extent in the process of formulating, implementing and reviewing trade policy so as to ensure that any proposal will command a high degree of public support. The network of government boards and committees is a distinctive feature of the system of the Government which seeks to obtain, through consultation with interest groups in the community, the best possible advice on which to base decisions. The Trade Advisory Board, the Textiles Advisory Board and the Free Trade Committee, which are advisory bodies chaired by the Secretary for Trade and Industry, advise the Administration on a wide range of trade policy issues. 3.9 Consultations with the private sector are also facilitated by the Secretary for Trade and Industry's attendance at the regular meetings of both the Hong Kong Trade Development Council and the Advisory Board of the Hong Kong Export Credit Insurance Corporation which are composed of representatives of traders and businessmen from the private sector.

22 Page Meetings are also held from time to time with different sectors of the trading community to discuss specific issues. Other consultation procedures include briefing sessions or seminars involving representatives from major trade organizations with senior government trade officials at which trade issues are discussed. Bilateral.- multilateral. regional or preferential trading agreements. their scope. duration and goals General Agreement on Tariffs and Trade (GATT) 3.11 The General Agreement on Tariffs and Trade is the cornerstone of Hong Kong's trade policy. Hong Kong acquired separate contracting party status in April Hong Kong is a party to six Tokyo Round Agreements. These are : (a) Agreement on Technical Barriers to Trade; (b) (c) (d) Agreement on Government Procurement; Agreement on Import Licensing Procedures; Agreement on Interpretation and Application of Articles VI, XVI and XXIII of the GATT; (e) Agreement on Implementation of Article VI of the GATT; and (f) Multi-Fibre Arrangement Agreement on Implementation of Article VII of the GATT. (MFA) 3.12 Hong Kong has participated fully in the MFA since its inception. Hong Kong is a member of the Textiles Committee and also a member of the Textiles Surveillance Body Hong Kong at present has seven textiles agreements with : Austria, Canada, the European Economic Community (EEC), Finland, Norway, Sweden and the US. These agreements have been concluded under the MFA, and cover a wide range of textiles and clothing products of cotton, wool, man-made fibre (mmf), silk blend and other vegetable fibres. In 1989, the value of textiles and clothing exports covered by the seven agreements amounted to $59,610 million, representing 67.2% of Hong Kong's domestic exports of textiles and clothing and 26.6Z of all domestic exports The textiles agreements were sought by the textiles importing countries in question pursuant to Article 4 of the MFA to deal with problems of market disruption and the real risk thereof. The duration and scope of each of these agreements are detailed below.

23 Page 13 HK/Austria Textiles Agreement (GATT document COM.TEX/SB/1274, 1413, 1461) 3.15 The Hong Kong/Austria Textiles Agreement (1 February 1987 to 31 January 1990) originally covered 4 restraint categories and 14 export authorization (EA) categories of cotton, wool and man-made fibre. Following consultations in October/November 1988, an additional category was brought under restraint while part of an existing restraint category was derestrained and came under EA. The Agreement then covered 5 restraint categories and 14 EA categories. Consultations in November 1989 led to a successor agreement for the period 1 February January Some liberalization was achieved with the number of quota categories reduced from 5 to 4 and EA categories from 14 to 8 as well as improvements on growth rates In 1989, 33.3% ($216 million) of Hong Kong's exports of textiles and clothing to Austria were under quota and 40.2% ($261 million) under EA. HK/Canada Textiles Agreement (GATT document COM.TEX/SB 1409) 3.17 The Hong Kong/Canada Textiles Agreement (1 January 1987 to 31 December 1991) succeeded the previous HK/Canada Textiles Agreement ( ) and covers 17 types of textiles and apparel products of cotton, wool, mmf, silk blend and other vegetable fibres In 1989, 91.3% ($2,997 million) of Hong Kong's total exports of textiles and clothing to Canada were under quota and 0.8Z ($6 million) under EA. HK/EEC Textiles Agreement (GATT document COM.TEX/SB/1372) 3.19 The Hong Kong/EEC Textiles Agreement (1 January 1987 to 31 December 1991) originally covered 97 categories. Following consultations to address problems in relation to implementation of the Harmonised System (HS), certain quota items were recategorised. The Agreement now covers 96 categories of textiles products made of cotton, mmf, and wool. Of these, 30 categories are subject to Community-wide restraint, 4 categories to regional restraint and the remaining ones under EA surveillance In 1989, 80.5? ($17,076 million) of Hong Kong's total exports of textiles and clothing to the EEC were under quota and 11.6% ($2,455 million) under EA. HK/Finland Textiles Agreement (GATT document COM.TEX/SB/1246, 1378, 1432) 3.21 The Hong Kong/Finland Textiles Agreement (1 January 1987 to 31 December 1991) originally covered 3 restraint categories and 3 EA categories. Following consultations held in November 1987 and May 1988, two additional categories were put under restraint In 1989, 44.7Z ($195 million) of Hong Kong's total exports of textiles and clothing to Finland were under quota and 27.5% ($120 million) under EA.

24 Page 14 HK/Norway Textiles Agreement (GATT document COM.TEX/SB/1346, 1465) 3.23 The Hong Kong/Norway Textiles Agreement (1 July 1987 to 30 June 1990) originally covered 11 restraint categories and 4 EA categories of products of cotton, wool and mmf. Following consultations in October 1988, improvements to the current agreement were achieved with the liberalization of 3 restraint categories and the abolition of the EA arrangement as from November In 1989, 75.8% ($432 million) of Hong Kong's total exports of textiles and clothing to Norway were under quota. HK/Sweden Textiles Agreement Textiles Surveillance Body) (Agreement to be notified by Sweden to the 3.25 The Hong Kong/Sweden Textiles Agreement (1 September 1987 to 31 August 1992) originally covered 14 restraint categories. Following consultations in November 1989, part of a restraint category was placed under an EA arrangement, the remaining parts of the category were merged with another quota item to allow greater flexibility in market access. The duration of the Agreement was also shortened by 13 months to coincide with Sweden's decision to liberalize all import restriction on textiles when MFA IV expires on 31 July In 1989, 81.3% ($1,144 million) of Hong Kong's total exports of textiles and clothing to Sweden were under quota. HK/US Textiles Agreement (GATT document COM.TEX/SB/1186, 1454) 3.27 The Hong Kong/US Textiles Agreement (1 January 1986 to 31 December 1991) is a modification and extension of the previous Agreement ( ). In 1986, the Agreement was extended to cover 109 categories of products of cotton, mmf and wool and 25 categories of products of silk blend and other vegetable fibres. Following consultations to address problems in relation to implementation of the HS, certain quota items were recategorised. The Agreement now covers 147 categories of products made of cotton, mmf, wool, silk blend and other vegetable fibres The Agreement's structure is as follows (a) Group I comprising non-apparel of cotton, mmf and wool with 9 specific limits and an overall group limit; (b) Group II comprising apparel of cotton, mmf and wool with 45 specific limits, 4 sub-limits and an overall group limit; (c) Group III comprising silk blend and other vegetable fibres apparel (except sweaters) with 5 specific limits and an overall group limit; (d) Four specific limits for sweaters of silk blend and other vegetable fibres, without an overall group limit; and

25 Page 15 (e) An open-ended export authorization system for 6 categories of non-apparel of silk blend and other vegetable fibres In 1989, 91.4% ($31,769 million) of Hong Kong's total exports of textiles and clothing to US were under quota, 8.3% ($2,869 million) under EA quota (i.e. products not subject to specific limits but subject to group limits) and 0.2% ($70.2 million) under EA surveillance.

26 C/RM/G/ 7 Page 16 CHAPTER4:THEE IMPLEMENTATION OF TRADE POLICIES Trade policy measures used Tariffs 4.1 Hong Kong applies zero tariff on all imports from all sources. 4.2 Hong Kong has bound tariffs on certain items at zero. A copy of GATT Schedule LXXXII containing these tariff bindings is at Appendix 6. Tariff quotas and surcharges 4.3 Hong Kong does not maintain any tariff quotas or surcharges. Rice control scheme 4.4 The import of rice must meet, but may not exceed, levels prescribed by the Director-General of Trade. Details are described in paragraph 2.6 of Chapter 2. Quantitative restraint 4.5 The import of ozone depleting substances into Hong Kong is subject to quantitative restriction. Details are described in paragraph 2.8 of Chapter There is neither any voluntary export restraint nor orderly marketing arrangement at the government or industry level affecting Hong Kong's imports or exports. Licensing 4.7 Hong Kong's licensing controls are kept to a minimum and either stem from obligations under international undertakings or are applied for health, safety and security reasons. Details of export and import licensing controls are described in paragraphs 2.2 to 2.9 of Chapter 2. Excise duties 4.8 Excise duty is collected on liquors, tobacco, hydrocarbon oil, methyl alcohol, non-alcohol beverages and cosmetics. Duty rates are listed at Appendix 5. Rules of origin 4.9 Details are described in paragraphs of Chapter 2.

27 Page 17 Government procurement 4.10 Hong Kong is a party to the GATT Agreement on Government Procurement. The Government Supplies Department (GSD) was designated a procurement entity to the Agreement. The GSD has established an Information Centre to respond to any questions raised by would-be tenderers within and from outside Hong Kong. Technical standards 4.11 Hong Kong is a party to the GATT Agreement on Technical Barriers to Trade. It does not have its own system of technical standards or regulations. Where standards, regulations, or technical certification requirements for products are embodied in the Laws of Hong Kong, international standards, for example those set out in International Organisation for Standardization (ISO), International Electrotechnical Commission (IEC), or World Health Organisation (WHO) are adopted in many cases. Reference is also made to national standards of Hong Kong's major markets, in particular the United States and the United Kingdom. Technical standards are applied non-discriminatorily to imports and domestic production. Export restrictions 4.12 In keeping with obligations arising from bilateral textiles agreements under the MFA, Hong Kong maintains a textiles export control system. Details of the system are described in paragraph 2.9 of Chapter 2. Statistics showing Bong Kong's exports of textiles and clothing subject to restraint in 1989 are at Appendix 7. Other government assistance, including subsidies, tax exemptions 4.13 Hong Kong is a party to the Agreement on Interpretation and Application of Articles VI, XVI and XXIII of the GATT. The Government offers neither subsidies nor tax exemptions. Promotion of Hong Kong's trade is undertaken by the Hong Kong Trade Development Council, a statutory body established under the Hong Kong Trade Development Council Ordinance (Cap 1114). Role of state-trading enterprises 4.14 Hong Kong does not operate any state-trading enterprises. (GATT document L/6629/Add2) Foreign exchange controls 4.15 There are no foreign exchange controls. More generally, there are no controls on the movements of funds into or out of Hong Kong. The Hong Kong dollar is a freely convertible currency.

28 Page 18 Safeguards, anti-dumping or countervailing actions, concessionary export financing, export taxes or government-mandated countertrade 4.16 Hong Kong maintains none of these measures. Hong Kong is a party to the Agreement on Implementation of Article VI of the GATT. Customs valuation 4.17 Hong Kong is a party to the Agreement on Implementation of Article VII of the GATT. Hong Kong is a free port and customs valuation entails no more than assessing the value of imported goods for the collection of excise duties and declaration charges. Prospective changes in trade policies and practices 4.18 Hong Kong does not have any prospective changes in its trade policies and practices.

29 page PART B: BACKGROUND AGAINST WHICH THE ASSESSMENT OF TRADE POLICIES IS CARRIED OUT

30 Page 21 CHPTER 5 : WIDERECONOMIC AND DEVELOPMENTAL NEEDS. POLICIES AND PRACTICES Economic and developmental needs 5.1 Given its small size (with an area of only square kilometers) and lack of natural resources, Hong Kong has to be externally oriented in order to support a population of 5.8 million. Hong Kong's economic growth and prosperity are thus built upon its ability to participate in world trade. 5.2 Besides satisfying the essential needs of life, the rising aspiration of people in Hong Kong, itself a cause for and a consequence of economic and social development, must also be met. Expectations for a better quality of life result in increased demand for better housing, a better environment, as well as a variety of entertainment and cultural activities. Improvements in these areas can only be supported by continued economic growth. 5.3 Furthermore, in the interest of increasing productive capacity and efficiency, it is necessary to undertake further investment in physical infrastructure such as the port, airport, transport links and telecommunications network, as well as in human resources such as education, training and health, in order to sustain the growth momentum of the economy. Policies 5.4 Hong Kong advocates and practises free trade. There is no foreign exchange control, and free movements of funds across the territorial boundary are assured. The Hong Kong dollar is freely convertible against all currencies. 5.5 Unless there are sound social or economic reasons suggesting otherwise, the Government normally does not interfere with the operations of the economy, particularly activities of the private sector. The rationale for keeping Government intervention to a minimum is a firm belief in the efficient operation of market forces, which should be free from such distortions and constraints as would be caused by excessive official tampering. The Government does not provide subsidy to any particular economic sector or industry. 5.6 A high degree of external orientation implies the need for Hong Kong's private sector, entrepreneurs and workers alike, to respond promptly and efficiently to changes in market conditions overseas. Hence the size of the public sector in Hong Kong has to be kept small relative to the economy so as to leave a major proportion of resources at the disposal of the private sector. In 1989, total public sector expenditure in national accounts terms amounted to only about 11% of the gross domestic product (GDP).

31 Page As Hong Kong's economic success depends largely on the willingness and ability of businessmen to exploit opportunities open to them, the role of the Goveinment in the economic development process is one of facilitation. The Government does not attempt to plan the economy nor to tell individual entrepreneurs what to do. Business decisions are left entirely to the private sector. 5.8 In fulfilling the facilitating role, the Government seeks to ensure a socio-economic environment which is conducive to economic growth and development. This includes the following specific aspects :- Objectives (a) provision of the necessary infrastructural facilities which are only appropriately provided by the public sector or would otherwise not be provided by the private sector; (b) provision of a sound legal and institutional framework as well as an efficient administrative machinery; (c) implementation of social programmes in such areas as housing, medical and welfare services; (d) prudent management of public finances; and (e) maintenance of the linked exchange rate system (see para ) which has proved to be effective in providing an important measure of stability in the Hong Kong economy. 5.9 Government's policies are formulated in such a way as to enable Hong Kong to capture the full benefit of world economic growth and take advantage of economic opportunities as they arise. To achieve this objective, the cost/price structure of the Hong Kong economy has to be sufficiently flexible in responding to changes in external conditions. Pragmatism, adaptability and resilience, coupled with a strong sense of business enterprise and hard work, are key ingredients of the development of the Hong Kong economy.

32 Page 23 Major trends CHAPTER 6 : THE EXTERNAL ECONOMIC ENVIRONMENT in imports and exports 6.1 Hong Kong has always been highly dependent on external trade. Some 80Z of the manufactured products of Hong Kong are for export, while most of the foodstuffs and consumer goods, as well as raw materials and capital goods for production, are imported. 6.2 Hong Kong's domestic exports, re-exports, total exports and imports increased rapidly during the ten years between 1979 and 1989 (Table 1). Domestic exports Table 1 Hong Kong's external trade Average annual growth rate (10 years) ($ Bn) ($ Bn) ($ Bn) (%) (5 years) (%) 10.2 Re-exports Total exports Imports Between 1979 and 1989, the relative importance of clothing in Hong Kong's domestic exports decreased from 36.0% to 32.1% of the total. That of watches and clocks also declined from 7.8% to 7.3% and that of toys and dolls from 7.5% to 2.6%. On the other hand, the relative importance of textile fabrics, electronic components and parts for computers, and jewellery, goldsmiths' and silversmiths' wares increased during the same period (Table 2).

33 Page 24 Table 2 HonG Kong's domestic exports breakdown by principal commodities Share in total domestic exports (%) (%) (%) Articles of apparel and clothing accessories Watches and clocks Textile fabrics Toys and dolls Electronic components and parts for computers Jewellery, goldsmiths' and silversmiths' wares Manufactures of metal (largely cutlery and household utensils) 6.4 On re-exports, the relative importance of foodstuffs decreased from 6.6% in 1979 to 3.3% in 1989, while that of raw materials and semi-manufactures fell from 37.9Z to 34.5%. Over the same period, the relative importance of consumer goods, capital goods and fuels increased (Table 3). Analysed by commodities, the major re-export items in 1989 included textile yarn, fabrics and made-up articles, miscellaneous manufactured articles, clothing, electrical machinery and appliances, and telecommunications and sound reproducing equipment.

34 Page 25 Table 3 Hong Kong' s re-exports : breakdown by end-use categories Share in total re-exports (%) (%) (%) Foodstuffs Consumer goods Raw materials and semi-manufactures Fuels Capital goods Comparing 1989 with 1979, the relative importance of foodstuffs in Hong Kong's imports decreased from 11.6% to 6.0%, that of raw materials and send-manufactures from 43.7% to 40.9% and that of fuels from 5.4Z to 2.2%. On the other hand, the relative importance of consumer goods rose from 25.1% to 35.8%. The relative importance of capital goods also increased slightly over the same period (Table 4). Analysed by commodities, the major import items in 1989 were textile yarn, fabrics and made-up articles, electrical machinery and appliances, clothing, telecommunications and sound reproducing equipment, miscellaneous manufactured articles, and photographic equipment and optical goods. Table 4 Hong Kong's imports breakdown by end-use categories Share in total imports (%) (%) (%) Foodstuffs Consumer goods Raw materials and semi-manufactures Fuels Capital goods

35 Page Hong Kong has been diversifying its export markets over the past decade. This was largely due to the initiatives taken by Hong Kong businessmen in tapping the global and regional markets, as well as the opportunities created by China's open door policy. Apart from a decrease in shares attributable to the United States, the Federal Republic of Germany and the United Kingdom, the most significant change between 1979 and 1989 was the emergence of China as the second largest market for Hong Kong's domestic exports (Table 5). China also emerged as the largest market for Hong Kong's re-exports. This was followed by the United States. The relative significance of Japan, Taiwan, South Korea and Singapore as markets for Hong Kong's re-exports, however, declined (Table 6). China also emerged as the largest market for Hong Kong's total exports. China and the United States accounted for about half of Hong Kong's total exports (Table 7). Table 5 Major markets for Hong Kong's domestic exports Share in total domestic exports Markets (%) (%) (%) United States China Federal Republic of Germany United Kingdom Japan Canada Singapore The Netherlands Taiwan Australia (EEC) (30.1) (20.3) (20.1)

36 Page 27 Table 6 Major markets for Hong Kong's re-exports Share in total re-exports Markets (%) (%) (%) China United States Japan Taiwan South Korea Federal Republic of Germany Singapore United Kingdom Australia Canada (EEC) (8.8) (4.5) (12.1) Table 7 Maior markets for Hong Kong's total exports Share in total exports Markets (%) (%) (%) China United States Japan Federal Republic of Germany United Kingdom Taiwan Singapore South Korea Canada Australia (EEC) (24.5) (14.3) (15.2)

37 Page As for sources of imports, Hong Kong imported more from within the Asia-Pacific region in 1989 than in In this context, China has overtaken Japan to become the largest supplier of Hong Kong's imports since the early 1980s (Table 8). Table 8 Major source of Hong Kong's imports Share in total imports Sources (%) (%) (%) China Japan Taiwan United States South Korea Singapore Federal Republic of Germany United Kingdom Italy Switzerland (EEC) (14.2) (11.2) (9.9) Structural changes of the Hons Kong economy 6.8 In line with changes in both the pattern of overseas demand and Hong Kong's own industrial structure, the local manufacturing sector was oriented to producing goods of a higher quality and of greater skill and design content. The share of the textile industry in the net output of the manufacturing sector declined from 27Z in 1973 to 17% in Offsetting this decline was an expansion of the clothing, electrical appliances and electronics, and watches and clocks industries. Between 1973 and 1987, the shares of these industries in the net output of manufacturing increased from 20% to 24%, from 9Z to 15%, and from 1% to 3% respectively.

38 Page The structural changes within the local manufacturing sector in the 1980s were facilitated by the opening up of China's economy, which had enabled Hong Kong businessmen to set up production facilities and establish outward processing arrangements in China, mostly in the Guangdong Province. To the extent permitted by the rules of origin of Hong Kong which are vigorously enforced by the Trade Department (para of Chapter 2 refers), the more labour-intensive production processes were progressively moved across the border. As a consequence, the processes remaining in Hong Kong have become more demanding in terms of technical knowledge and skill. Moreover, the local base is likely to concentrate more on strategic activities such as product design and development, marketing and negotiation of orders, sourcing of materials, and overall production scheduling and supervision. These relate to the service component of manufacturing production A favourable consequence of these structural changes has been a significant increase in labour productivity of manufacturing workers in Hong Kong. This is reflected by the fact that, despite a significant decline in the share of the manufacturing sector in total employment from 42% in 1980 to 30% in 1989, its contribution to the GDP showed only a moderate decrease, from 24% in 1980 to 20% in Besides moving up-market in the manufacturing sector, development of the Hong Kong economy is also characterised by a relative shift to the service sectors. In 1988, 67% of the GDP was attributed to trading and services. This matches with the re-emergence of Hong Kong's role as an entrepot serving the Asia-Pacific region generally and China in particular, and the increasing importance of Hong Kong as a regional financial and business services centre. Following sustained rapid growth in the 1980s, the value of Hong Kong's re-exports in 1989 was 55% larger than the value of its domestic exports. Moreover, about 80Z of Hong Kong's re-exports in 1989 involved China, either as a market or as a source of supply. In recent years Hong Kong's invisible trade also grew significantly. Develoments in the terms of trade and commodity prices 6.12 The prices of Hong Kong's domestic exports, re-exports and imports, as measured by the respective unit value indices, increased by broadly similar magnitudes over the period 1979 to This has resulted in generally stable terms of trade for Hong Kong. The terms of trade index, with the base year in 1981 at 100, fluctuated within a high of in 1985 and a low of 99.7 in It was in 1989 (Table 9).

39 Page 30 Table % change between 1979 and 1989 Unit value indices ( ) Total exports Domestic exports Re-exports Imports Terms of trade index * * Denotes less than 0.5%. Important trends in the balance of payments. reserves, debt. exchange and interest rates Balance of payments 6.13 Hong Kong does not compile balance of payment statistics in view of the reporting burden this would impose on respondents. Visible trade balance 6.14 As depicted in Graph 1, during the period 1980 to 1989, Hong Kong incurred visible trade deficits in eight years. The two exceptions were 1985 and 1989, when small trade surpluses of $2.5 billion and $5.3 billion were recorded respectively.

40 Page Graph 1 VISIBLE TRADE BALANCE ( ) 4 - balance trade (HK$ bn) SD//XZZ The visible trade deficits or surpluses, expressed as a percentage of the value of imports of goods, stabilized at low levels of -1.6% to 1.1% (Table 10) during the past six years. This was so even in the face of the fluctuations in the overall exchange value of the Hong Kong dollar (along with the movements of the US dollar) and the changing economic conditions in our major overseas markets. This suggests that there has been an efficient economic mechanism to adjust to changes in the external environment.

41 Page 32 Table 10 Year Visible trade balance I Imports (a)/(b) (a) (b) (Z) ($mn) ($mn) , , , , , , , , , , , Adjusted to take account of imports of gold for industrial and commercial use, which represent about 52 of the total imports of gold. In Hong Kong's merchandise trade statistics, all imports and exports of gold are excluded With the exchange rate of the Hong Kong dollar linked to the US dollar since 1983, exchange rate is no longer a variable in the economic adjustment process. Adjustments to balance of payment pressures fall upon variables such as the level of economic activities, price and money supply Several factors have contributed to the flexibility of the Hong Kong economy to adjust to external imbalance. In the first place, given the external orientation of the economy, the limited natural resources and the virtual absence of import restrictions, the propensity to import is very high. For instance, in 1989, the ratio of retained imports to gross domestic products was as high as 0.4:1. Hence, an improvement in overall income generated by an increase in export activities will in turn result in a greater demand for retained imports, for production as well as consumption needs. On the other hand, should export activities slacken, import growth will correspondingly slow down. Secondly, there is a high degree of flexibility in the determination of wages. Experience in past years suggests that not only are wages flexible upwards, in periods of sluggish economic growth, workers have been willing to accept only modest increase in wages. This flexibility allows economic adjustments to be made through internal cost/price structure. Thirdly, rapid growth in labour productivity, made possible by capital investment and improved knowledge and skill of the workers, constitutes a favourable background for wage adjustment particularly in periods of sluggish activities. Hence labour productivity growth contributes to the overall flexibility of the Hong Kong economy in adjusting to external changes. Fourthly, the free enterprise system in Hong Kong exposes enterprises to changes in the external environment and adjustments will normally take place when imbalance occurs.

42 Page 33 Invisible trade balance 6.18 Hong Kong has traditionally been running surpluses in the invisible trade account. Reflecting the buoyant tourist sector and the expansion of trade-related services in connection with the flourishing entrepot trade, such surpluses saw some increases in the last few years (Graph 2). 50 Graph 2 INVISIBLE TRADE BALANCE ( ) Putting the visible and invisible trade figures together, there were surpluses in the combined account during the past six years. These surpluses were equivalent to 4.OZ to 6.2Z of the total imports of goods and services, The combined visible and invisible trade balance cannot be taken as the balance in the current account because several major items including net investment income from abroad and net unilateral transfers have been omitted. Considering a probable deficit in net investment income from abroad, Hong Kong's current account may come up to a rough balance or even a small deficit.

43 Page 34 Debts 6.20 There are no official statistics on the external debts of the private sector. The Hong Kong Government, on the other hand, has not incurred any external debts. There have only been two domestic issues of government bonds. The first issue in 1975 involved a sum of $250 million and matured in The second issue involved $1,000 million and matured in Reserves 6.21 The official foreign exchange reserves of Hong Kong are held by the Exchange Fund which was established in Under the linked exchange rate system, the Fund is operated for the purpose of maintaining a stable rate of exchange between the Hong Kong dollar and the US dollar, and for other purposes incidental thereto. Exchange rate 6.22 The Hong Kong dollar was linked to the US dollar at the rate of HK$7.80 to US$1 in October 1983, after a period of much instability in the exchange rate of the Hong Kong dollar owing to political uncertainties arising from the Sino-British negotiations on Hong Kong's future The operation of the linked exchange rate system is fairly simple. Currency notes are issued by the two note-issuing banks against holdings of Certificates of Indebtedness issued by the Exchange Fund. Prior to 17 October 1983, Certificates of Indebtedness were issued and redeemed against payments in Hong Kong dollars. Under the present linked exchange rate system, such payments are made in US dollars at a fixed rate of US$1 to HK$7.80. The note issuing banks in turn extend this fixed rate in their dealings in banknotes with other banks in Hong Kong. In the foreign exchange market, the exchange rate of the Hong Kong dollar continues to be determined by the forces of supply and demand. But operating against the fixed rate for the bank note issue, the forces of arbitrage ensure that the rate in the foreign exchange market stays close to the linked rate of The linked exchange rate system has provided a stable monetary system for Hong Kong. It helps to ensure orderly economic and financial conditions upon which business thrives. More importantly, it maintains confidence in Hong Kong dollars and in Hong Kong dollar assets Hong Kong does not maintain the linked exchange rate to gain a competitive advantage or to build up trade surpluses. There have been periods when the US dollar was strong and Hong Kong's competitiveness suffered, resulting in very sluggish growth in domestic exports. But the link has not been changed. Hong Kong has thus taken the rough with the smooth. Even in 1986 and 1987, when the value of the Hong Kong dollar was declining with the US dollar, Hong Kong's overall visible trade account was in rough balance.

44 Page Since October 1983 when the link was introduced, the overall value of the Hong Kong dollar, measured in terms of its trade weighted exchange rate index, has appreciated by around 10Z (Graph 3). Graph EFFECTIVE EXCHANGE RATE INDEX x V % ra II 'I I 88 I 89

45 Page 36 Interest rates 6.27 Under the linked exchange rate system, the movements of Hong Konst dollar interbank interest rates follow closely those of US dollar interest rates. However, there have been periods when the differential between Hong Kong dollar and US dollar interest rates widened in response to speculative pressures on the exchange rate of the Hong Kong dollar (Graph 4). Graph 4 HK$ INTERBANK RATE & EURO$ (THREE-MONTH) DEPCOSIT PATE 14 1 E C 0 0i ii 9 - s- I --t - '- : _ P P Deposit rates on most types of Hong Kong dollar deposits are set by the Hong Kong Association of Banks (HRAB), normally with regard to the movements of interbank interest rates. It is a statutory obligation of EKAB to consult the Government on these deposit rates. This procedure is designed to ensure that HKAB takes account of the wider public interest in its decisions, including their effect on the exchange rate.

46 Page 37 International macroeconomic situation affecting the external Hong Kong sector of 6.29 The threat of protectionism remains Hong Kong's key concern. Protectionist measures are detrimental to the expansion of world trade and particularly to the growth prospects of small, export-oriented economies like Hong Kong. Hong Kong's economic attainment reinforces our view that global free trade should continue to be advocated and strived for, since it facilitates international division of labour according to relative resource endowment and comparative advantage, and this should result in benefits for all As a regional financial centre, Hong Kong is affected by developments in major overseas financial markets. A sound and efficient global financial system is highly desirable, as it facilitates the mobilisation of financial resources and provides an effective payment system for trade in goods and services Under the linked exchange rate system, monetary developments in the United States are of particular relevance to Hong Kong. The overall exchange value of the Hong Kong dollar follows the movements of the US dollar. Likewise, the Hong Kong dollar interest rates follow closely the US interest rates. However, given the flexibility of the Hong Kong economy, it is capable of accommodating such changes in the external environment.

47 Page 38 CHAPTER 7 : PROBLEMS IN EXTERNAL MARKETS 7.1 The economy of Hong Kong is highly externally oriented and dependent on trade with the rest of the world. Some 80Z of Hong Kong's manufactured products are for export. In 1989, the value of Hong Kong's total trade amounted to $1,133 billion, or nearly 2302 of the value of its GDP for that year. Hong Kong's exports face a range of trade barriers maintained by the importing countries including : (a) quantitative restrictions on textiles and clothing products maintained under MFA bilateral agreements; (b) anti-dumping actions; and (c) rules of origin criteria. Quantitative restrictions on textiles and clothing products 7.2 The bilateral textiles agreements negotiated with Austria, Canada, the EEC, Finland, Norway, Sweden and the US under the MFA oblige Hong Kong to restrain its exports in a wide range of textiles and clothing products. For some products, Hong Kong has to limit its exports to certain agreed quantitative levels whilst for others, exports are regulated under an export authorisation system for surveillance purposes. In 1989, by value of Hong Kong's domestic exports of textiles and clothing were covered by these agreements. The maintenance of the bilateral agreements restricts Hong Kong's export potential. Hong Kong and like-minded participants have submitted proposals to the Uruguay Round Negotiating Group on Textiles and Clothing on phasing out the MFA and the integration of this sector into the GATT. Anti-dumping actions 7.3 Hong Kong is extremely concerned at the recent spate of antidumping proceedings initiated in its major export markets against Hong Kong products. In 1989 alone, 5 anti-dumping proceedings were initiated in the EEC and the US against Hong Kong involving tungsten ores and concentrates, audio tapes, silicon metal, denim cloth and man-made fibre sweaters. In Hong Kong's view, some national legislation contains unsatisfactory provisions, the application of which can have the effect of selective safeguards and thereby seriously disrupting legitimate trade. Hong Kong considers that some procedures and practices are biased towards finding dumping. Hong Kong is particularly concerned about actions taken by the EEC and the US on denim cloth and man-made fibre sweaters respectively which are already restrained under the MFA. Hong Kong has tabled specific proposals for improvements to the Anti-dumping Code in the Uruguay Round Negotiating Group on MTN Agreements and Arrangements.

48 Page 39 Origin rules 7.4 There are no internationally agreed definitions of origin or specific rules of origin. Importing countries may change their origin rules unilaterally and arbitrarily. Hong Kong is concerned that although origin rules should in principle be technical and neutral, they can be used with trade policy objectives in mind and thereby become non-tariff barriers to trade. In this connection, Hong Kong is concerned at the recent introduction of modifications t. origin rules for individual products by certain importing countries. For example, the EEC introduced in 1989 two origin rules for specific products (integrated circuits and photocopying machines) which are much more severe than the hitherto general rules of "originating in the country in which the last substantial process or operation that is economically justified was performed' (Article 5, EEC Regulation No. 802/6 ). These new origin rules require the performance of specific technologically-intensive manufacturing processes in the originating country in order to obtain origin status. When these changes result in determining a different country as the origin of the product and if such product is subject to other trade restrictive measures applied to that country, the export capability and opportunity of the exporting countries could be eroded because of their inability in meeting such origin rules. 7.5 Another example occurred in August 1984 when the US Customs promulgated revised regulations governing country of origin arrangements for textiles imports subject to bilateral agreements. The regulations provided for a new approach to the determination of country of origin status for such textile imports and stipulated certain specific processes which did riot confer country of origin on the finished products. The Hong Kong knitwear industry was compelled to make very substantial adjustments as a result of these changes. 7.6 One of Hong Kong's priorities in the Uruguay Round is to introduce GATT disciplines into the formulation, modification, interpretation and application of rules of origin to ensure that these are administered in a fair and transparent manner. To this end, Hong Kong has submitted proposals to the GATT Negotiating Group on Non-tariff Measures.

49 Page 40 CEAPTER 8 : STATISTICAL INFORMATION Trade statistics of Hong Kong 8.1 The following contains external trade value statistics analysed by commodity at the SITC R2 Division (2-digit) level, and by principal countries and geographic regions of consignment. In the case of trade by country, only the top 20 trading partners are presented. The changes in trade value and volume during the last decade, , are also presented. Concepts and definitions 8.2 The external trade statistics of Hong Kong cover movements of merchandise between Hong Kong and her trading partners by land, air, water and by post, except the following classes of goods : (a) transhipment cargo under through bill of lading or through air waybill; (b) transit cargo; (c) articles imported or exported by the armed forces of the Crown; (d) ships' stores, including bunker fuel; aircraft stores, including aviation fuel; (e) personal baggage and possessions of travellers, not including motor vehicles; (f) advertising materials supplied free of charge and samples of no commercial value or valued at less than one thousand dollars; (g) marine fisn arriving direct from fishing grounds on fishing craft registered or licensed in Hong Kong; (h) gifts of a personal nature where no payment has been made by the receiver; (i) articles temporarily imported and exported solely for exhibition and subsequent return; (j) articles imported or exported under and in accordance with an A.T.A carnet; (k) circulatory used freight containers and the like; and (1) banknotes after issue into circulation, being legal tender in any country.

50 Page The external trade statistics related to movements of merchandise only. Statistics on gold and specie are not included but are separately available. 8.4 Imports are c.i.f (cost, insurance and freight) values while exports and re-exports are f.o.b. (free-on-board) values. 8.5 Imports are goods which have been produced or manufactured in places outside the jurisdiction of Hong Kong and brought into Hong Kong for domestic use or for subsequent re-exports. 8.6 Domestic exports are the natural produce of Hong Kong or the products of a manufacturing process in Hong Kong which has changed permanently the shape, nature, form or utility of the basic materials used in manufacture. 8.7 Re-exports are products which have previously been imported into Hong Kong and which are re-exported without having undergone in Hong Kong a manufacturing process which has changed permanently the shape, nature, form or utility of the product. 8.8 Commodity items are based on the United Nations Standard International Trade Classification (SITC) Revision 2 with some modifications to suit Hong Kong's local requirements. 8.9 In the external trade statistics analysed by trading partners, the country of consignment is the basis for determining the partner country. Imports are credited to the country from which the goods were first consigned to Hong Kong without any further intermediate commercial transaction, which is not necessarily the country of origin, manufacture or shipment. Exports and re-exports are credited to the last country to which goods are consigned from Hong Kong without any further intermediate commercial transaction, which is not necessarily the country in which the goods are unloaded nor their ultimate destination. A consignment on an optional bill of lading is credited to the first port declared. Source of data 8.10 The external trade statistics are compiled from information given in import/export declarations which importers and exporters are required by the Import and Export (Registration) Regulations to lodge with the Customs and Excise Department. Import/export declarations are checked against cargo manifests supplied by carriers to ensure that there are no omissions or duplications Hong Kong has adopted the Harmonized System on a partial basis since 1 January 1988 for import and export declaration purposes. All the 1,241 4-digit headings and about half of the 5,019 6-digit subheadings of the Customs Co-operation Council's Harmonized System (CCC HS) are adopted in this partial system. To take into account local requirements, digits

51 Page 42 are added to the CCC HS headings or subheadings to form some 5,500 8-digit commodity codes in the Hong Kong Harmonized System (EK HS). Commodity data reported in HK ES codes are converted into SITC codes for the purpose of trade statistics publication, but trade statistics classified by HK HS codes are also available on computer printouts for reference. Hong Kong plans to adopt the CCC HS in full as from 1 January Tables 8.12 External trade value statistics tables are shown in Appendices 8 to A table showing some macroeconomic indicators are at Appendix 17.

52 Page 43 APPENDIX 1 Fact Sheet on Rice Control Scheme 1. Rice is the most important staple foodstuff in Hong Kong. The control of rice is mainly for internal security purposes to ensure regular and adequate supply and to provide a reserve stock for emergency situations. 2. There is no commercial production of rice in Hong Kong. All rice is imported and importers are entirely free to import rice from any source. Importers are registered with the Trade Department as stockholders to ensure that they share the responsibility of maintaining a reserve stock of rice in the territory. Imports of rice require licenses. However, those for subsequent re-export are freely approved. Imports for local consumption are governed by quotas. 3. The amount of import quotas is determined on a quarterly basis taking into account the demand and supply of rice in the coming quarter plus a reserve stock set at 45,000 tonnes (i.e. approximately 2 months' consumption of rice). Unlike most other import quota regimes which aim at curbing imports, under the rice control scheme importers are required to import in excess of the amount required for consumption. The level of imports per quarter is worked out, as explained above, to ensure that at any given time there is reserve stock equivalent to the amount required for two months' consumption. It is not advisable to require importers to import more as any increase in their storage costs would be passed on to consumers. Importers are required by law to import no more or less than what is stipulated by the Trade Department. In sum, the establishment of import quotas is a regulatory measure to ensure that rice is imported in each quarter not only to match consumption but to maintain a steady resere stock to cushion any sudden disruption of supply in coming months. 4. The Reserved Commodities Ordinance (Cap 296) and its subsidiary regulations provide the legal framework for the control of rice. The law confers extensive powers on the Director-General of Trade to control not just import and stock keeping of rice, but also on storage, movement, distribution, sale and pricing of rice. In practice the Director-General of Trade exercises only his powers in relation to import and stockholding (including storage) but has never taken any measures to regulate the price of rice. This is because the scheme has been developed for internal security rather than for economic purposes.

53 Page 45 APPENDIX 2* Textiles Export Control System 1987 TRADE DEPARTMENT * In English only/anglais seulement/ingles solamente

54 Page 46 This publication describes the textiles export control system as operated by the Trade Department in August There may be exceptional control measures governing exports to individual export markets and these details are set out in the Department's Notices to Exporters. Changes to the system, and hence to the arrangements described in this publication, may be made from time to time. Any such change will be notified to the trade in advance. Trade Department Hong Kong 1987

55 Page 47 Paragraph Chapter Contents No. INTRODUCTION Background Objectives of the Textiles 4-5 Export Control System 2 TEXTILES EXPORT LICENSING Legal Framework Textiles Export licences 8-15 (a) Form 4 (white licence) 9 (b) Form 5 (blue licence) 10 (c) Sample Licence 11 (d) Non-restrained Licence 12 (e) Re-export Licence 13 - Notification Requirements for Short-shipments and Cancellations of Export Licences - Export Authorisations Local Appointed Agents ALLOCATION OF QUOTAS Introduction 27 - Textiles Controls Registration Textiles Export Quotas and Permits Quota Supply Condition Allocation of Quotas (a) For New Restraints (b) For Subsequent Restraint Periods Preliminary and Final Allocations Acceptance of Quotas 49 - Final Licensing Date 50 4 TRANSFER OF QUOTAS Objectives 51 - Permanent and Temporary Transfers 52 - Allocation Against Temporary Transfers 53 - Source of Quotas for Transfer 54 - Application Procedure Validity Period of Type A Transfers 58 - Rule regarding Permanent Transfers 59 - Rule regarding Temporary Transferors Rule regarding Temporary Transferees 64-67

56 Page 48 Paragraph Chapter Contents No. 5 SURRENDER OF QUOTASAND FLEXIBILITY PROVISIONS - Surrender Flexibility Provisions (a) Swing (b) Carryover 77 (c) Carryforward (Anticipation) FREE QUOTA SCHEMES Objectives 81 - Sources of Free Quotas 82 - Free Quota Schemes Conditions for Participation 87 - Conditions for Utilization 88 - Restriction on Transfer after 89 Obtaining Free Quota - Entitlement Arising from Free Quota 90 Performance - Textiles Year Calendar 91 7 ENFORCEHMENT AND SANCTION Enforcement (a) Documentation Checks 93 (b) Physical Checks 94 - Sanction for Malpractices 95 8 DISSEMINATION OF INFORMATION AND ENQUIRIES - Notice to Exporters Enquiries Section 98-99

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58 Page 9 CHAPTER : 1 Background The textiles and garments industry in Hong Kong started to develop in the early 1950's and has since become the mainstay of the Hong Kong economy. In 1986, the industry employed 371,000 persons, or 43% of the total manufacturing workforce, and accounted for HK$63,117 million or 41% of Hong Kong's domestic exports. 2. Hong Kong was able to export its textiles products freely to most countries in the world until 1959 when it agreed to exercise restraint on its exports of cotton piecegoods to the United Kingdom. Since then, Hong Kong has concluded bilateral textiles agreements with a number of countries. Agreements with the following seven countries or groups are currently in force Austria Canada European Economic Community Finland Norway Sweden United States of America These agreements cover a wide range of textiles and clothing products. They provide, in respect of some of these products, for Hong Kong to limit its exports to certain agreed quantitative levels. For some other products, no limits are set but exports are regulated under an export authorization system for surveillance purposes. 3. The framework for negotiating such agreements, and the rules governing the conduct of international trade in textiles, are embodied in the "Arrangement Regarding International Trade in Textiles" (commonly known as the Multi-Fibre Arrangement or the MFA). The MFA. is a multilateral treaty negotiated under the umbrella of the General Agreement on Tariffs and Trade (GAIT). Hong Kong is a party to the MFA as well as a contracting party to the GATT. Objectives of the Textiles Export Control System 4. To implement the bilateral agreements, the Trade Department operates a textiles export control system. The broad objectives of this system are as follows (a) to ensure that Hong Kong discharges fully its obligations arising from the bilateral agreements and the MFA; (b) to ensure that Hong Kong derives optimum benefits from the rights it has secured under the agreements; and (c) to provide accurate and up-to-date information on the pattern and destination of Hong Kong's exports and re-exports of textiles. 5. This publication describes the principal features of this control system and how it is operated.

59 Page 50 CHAPTER :2 TEXTILES EXPORT LICEDING Legal Framework 6. Underlying the textiles export control system is the legal requirement, embodied in the Import and Export Ordinance and its subsidiary regulations (Chapter 60 of the Laws of Hong Kong), for all textiles exports from Hong Kong to be covered by valid export licences issued by the Director of Trade. This legislation also provides, among other things, that : (a) the Director of Trade may attach such conditions as he sees fit to the issue or use of export licences; (b) the owner of a vessel, aircraft or vehicle shall not accept any textiles products for export unless it receives a valid export licence covering the consignment concerned; (c) the owner of a vessel, aircraft or vehicle shall submit the export cargo manifest to the Trade Department within 14 days of shipment. Where the shipment covers textiles products, the cargo manifest must be accompanied by the relevant export licenses; (d) any person who (i) in applying for an export licence, provides information which is false or misleading in a material particular or omits any material particular; or (ii) (iii) forges any licence; or without the authority of the Director makes any alteration to any licence; or (iv) knowingly utters or makes use of any licence that has been forged or altered; commits an offence and shall be liable on conviction to a fine of HK$500,000 and to imprisoment for 2 years. 7. For the purposes of this legislation, textiles are defined as any products made of natural or artificial fibre, or of any combination of natural and artificial fibres, in the form of yarns, fabrics, garments or other manufactured articles. This is normally taken to mean products falling within the description of Division Numbers 65 and 84 of the Hong Kong Imports and Exports Classification List. Textiles Export Liceaes 8. There are two types of textiles export licence forms : (a) Export Licence (Textiles) Form 4 : normally referred to by the trade as a 'white licence' (Form TIC 3531;

60 Page 51 (b) Export Licence (Textiles) Form 5 : normally referred to by the trade as a 'blue licence' [Form TIC 353A]. App.1 Specimen copies of these forms are at Appendices 1(a) and 1(b). (a) Form 4 (White Licence) 9. For shipments subject to surveillance or quota export authorizations (see paragraph 18 below), export licences are issued only to those companies holding valid export authorisations or quota export authorisations. Applications should be made on Export Licence (Textiles) Form 4 (white licence), in quadruplicate. (b) Form 5 (Blue Licence) 1.0. For exports of products subject to specific quota restraint, export licences are issued only to those companies which are able to supply quota to cover the consignment in question. Applications should be made on Export Licence (Textiles) Form 5 (blue licence), again in quadruplicate. (c) Sample Licence (White Licence) 11. Exports of products subject to quota or export authorization control may be licensed outside such control if the products concerned are bona fide samples or if the consignment complies with the exemption provisions in the relevant bilateral agreement. The issue of licences to cover such exports is conditional upon certain criteria being met, e.g. as regards the value and quantity of the consignment. Applications should be made on white licence forms in triplicate or quadruplicate, depending on the arrangement with the importing country. (d) Non-restrained Licence (White Licence) 12. For exports of products not covered by any bilateral agreement, applications should be made on white licence forms in triplicate. (e) Re-export Licence (White Licence) 13. For re-exports of textiles products of non-hong Kong origin to overseas markets, applications for re-export licences should be made on white licence forms in triplicate. All applications must be supported by photocopy(ias) of the relevant valid import licence(s) under which the subject consignment was first imported into Hong Kong. 14. Once approved, an export licence is normally valid for 28 days from the date of issue or, where applicable, until the end of the restraint period, whichever is the earlier. (For exports of quota products to the EEC, export licences valid for 3 months may be issued on request.) 15. When a licence is issued, the Trade Department retains the original copy and issues the remaining copies to the exporter. The triplicate copy of the licence must be presented by the exporter to the shipping or airline company before the latter will accept the goods for export. The duplicate copy is kept by the exporter for his own use. The fourth copy (where applicable) is sent by the exporter to the overseas importer to assist the latter in obtaining customs clearance of the goods. (In the case of exports to the EEC, the Department retains the duplicate copy; the exporter sends the original copy to the overseas importers, presents the triplicate copy to the shipping or airline company and retains the fourth copy for his own use.)

61 Page 52 Notification Requirements for Short-shipments and Cancellations of Export Licences 16. Exporters and manufacturers should ensure, in their own interest, that licensed quantities of export licences. are wholly shipped. If that does not occur, short-shipments or cancellations of export licences should be notified to the Department in accordance with the requirements set out below together with relevant shipping documents as appropriate: (a) Short-shipment - short-shipment of each export licence must be reported to the Department within 14 working days after the date on which the goods are exported; (b) Cancellation - an export licence which is not utilised for shipment within its validity period must be cancelled within 14 working days after the expiry date. 17. Companies which fail to comply with the notification requirements at paragraph 16(a) and (b) above may be subject to legal and administrative action taken by the Trade Department. Export Authorisations 18. Export authorisations may be issued for the purposes of (a) authorizing exports of products which are not subject to specific limit but subject to group quota limit (i.e. an overall limit covering a 'basket' of categories each of which is not subject to a specific limit); such export authorizations are normally referred to by the trade as quota export authorizations; (b) monitoring exports of a product which is qot subject to restraint; or (c) distributing free quotas. 19. Where a particular textiles product is subject to an export authorization arrangement, licence applications will be considered only if the applicants concerned hold valid export authorisations. Export authorizations are not transferable. 20. There are two types of export authorisations (a) Normal Export Authorisations (Form TIC 355 and TIC 355A) : to cover textiles products subject to surveillance or in quota export authorization categories; (b) Free Quota Export Authorisations (Form TIC 355(FQ)) : to cover textiles products subject to quota restraint, in respect of which balances of quota are available for application under free quota schemes. App. 2 Specimen copies of these forms are at. Appendices 2(a) to (c). 21. A normal export authorisation is usually valid for 3 or 6 months from the date of approval. It provides its holder with the certainty that he can obtain export licenses, during the validity period of the export authorization, to cover the category and quantity of goods concerned. Quota export authorisations are issued only against the appropriate quotas held by the applicants concerned.

62 Page Free quota export authorisations are issued with varying validity periods. In addition to the usual rules governing the use of export authorisations, the conditions pertaining to free quota schemes also apply to this type of export authorisation. For details, see Chapter 6 on free quota schemes. 23. In all cases, applications for export authorizations must be supported by evidence of firm contracts placed by overseas buyers. Such evidence normally takes the form of : (a) the original copy of the contract signed by both the overseas buyer and the local exporter; or (b) the original copy of the purchase order from the overseas buyer; or (c) the original copy of the confirmation order from the exporter, supplemented by the importer's endorsement/confirmation; or (d) the original copy of the letter of credit from the overseas buyer. 24. In applying for an export authorisation, including quota export authorisation, both the manufacturer and the exporter accept an obligation to produce and export the category and quantity of goods covered by the export authorisation within the validity period. Any exporter or manufacturer who fails to do so may be subject to denial ot further export authorisations for the product and the market concerned for a specified period, and/or other administrative actions. Local Appointed Agents 25. Some overseas buyers may have appointed local companies as their buying agents in Hong Kong. Orders and contracts signed by such appointed agents with local manufacturers and exporters are acceptable as evidence of firm contracts placed by overseas buyers, provided that the agents are registered with the Department as buying agents of overseas buyers. Companies wishing to be so registered should apply to the Department in writing, and provide documentary evidence in the form of letters of authorisation or agency agreements showing that they have been appointed to sign or countersign orders and contracts on behalf of their overseas buyers. This procedure for registration also applies to local representative offices of overseas companies conducting business on behalf of their overseas principals. 26. Registered local appointed agents are, like other exporters, required to satisfy in full the quota supply condition mentioned at paragraph 36 or 88 (d) below, if they wish to supply quota for their own export of restrained textiles. Registration with the Trade Department as local appointed agents will not derogate from any condition governing the utilisation of quota. The Department also reserves the right to ask for information and documentary proof regarding the orders and contracts signed by local appointed agents.

63 Page 54 CHAPTER : 3 ALLOCATION OF QUOTAS Introduction 27. This and the following three chapters describe the control arrangements for restrained textiles products. Textiles Controls Registration 28. A pre-requisite for companies to participate in the export of restrained textiles is that they must register with the Trade Department. Companies applying for registration must possess valid business registration certificates and be actively participating in the textiles trade, either as exporters or as manufacturers. Only one registration is accepted from each company. Companies holding different Textiles Controls Registration Numbers are treated as separate and distinct entities for the purposes of textiles export control irrespective of any relationship which may exist between them. 29. On applying for registration, each company is required to complete Textiles Controls Registration Form TIC 473 and Textiles Controls App. 3 Registration Cards, specimen copies of which are at Appendices 3(a) and 3(b). When the application is accepted by the Department, a fee is charged and a textiles controls registration (TCR) number is assigned to the company concerned. This number has to be quoted Whenever the company submits applications for quota export licenses, transfers, swing, anticipation, free quota export authorisations, etc. 30. On registration, the company concerned authorises certain of its officials to sign, on its behalf, export licences and other related documents. These authorised officials are required to provide specimens of their signatures for verification. The purpose is to prevent unauthorised or fraudulent access to a company's quotas. 31. All registrations have to be renewed annually, at a fee. 32. Any change in the company's particulars, including cessation of business, must be reported to the Department immediately. Companies which have ceased business will have their registrations cancelled, and their quota-holding reverted back to the Department. They will not be allowed to dispose of their quotas by transfer or other means, and applications from them for quota licences, transfers of quotas, etc. will be automatically rejected. Textiles Export Quotas and Permits 33. The export of textiles products which are subject to quantitative restraints under bilateral textiles agreements is controlled through quota. Under this control arrangement, the restraint limit for a particular category in a particular restraint period is apportioned and distributed among qualified Hong Kong companies in the form of textiles export quotas.

64 Page 55 When a particular company applies for an export licence to cover a textiles consignment which is subject to restraint, the application must be made against the appropriate export quota held either by the exporter or by the manufacturer of the goods in question. The consignment must be shipped (see footnote) within the validity period of the export licence. 34. Export permits, on the other hand, are instruments to supplement the controls through quota. For example, where a quota category covers two or more products and, within the category limit, a sub-limit has been set for one of the products, an export permit arrangement. is employed to ensure that the sub-limit is not exceeded. A company applying for an expolr licence covering a consignment of goods which are subject to a sub-limit within a restrained category must be in possession of the requisite permit in addition to the necessary quota for that category. Permits are not additional quota allocations but only serve to limit the use of such quotas. 35. Quotas and permits must only be used to cover exports of textiles of Hong Kong origin. Goods claiming Hong Kong origin must have undergone principal manufacturing processes in Hong Kong : these are processes specified in the Department's certification circulars, and generally refer to manufacturing processes which permanently and substantially change the nature, shape, form and utility of the raw materials used. Quota Supply Condition 36. In supplying quota (including export authorisation quota) for the export of a consignment, the company concerned, irrespective of whether it is an exporter or a manufacturer, must satisfy the following condition Either perform at least four of the following functions (a) receive order from the overseas buyer, (b) receive payment from the overseas buyer, (c) purchase or supply the raw materials for the manufacture of the goods, (d) contract with the manufacturer for the manufacture of the goods, (e) make payment to the manufacturer for the goods, and (f) arrange the export of the goods; Or perform the principal processes in the manufacture of the consignment in question. This quota supply condition aims to ensure that the quota supplier is genuinely involved in the export or manufacture of the consignment. App. 4 Particular requirements (see Appendix 4) of each of the above functions are set out in Notices to Exporters issued by the Trade Department. These particular requirements must also be complied with. Footnote: The term 'shipped' generally means that the goods in question are cleared of Hong Kong waters en route to the country of destination. The Director of Trade at all times reserves the right to determine whether, in any case, the goods have been shipped.

65 Page The condition set out in paragraph 36 above is solely for the purpose of determining whether the company in question is qualified to supply quota and does not otherwise affect the status of the parties to the licence. Where a company does not satisfy this condition, it cannot supply quota for the export of the consignment; to do so may render it liable to prosecution as well as to administrative action taken by the Department. A company which purports to have satisfied this condition must, on request, produce evidence in support of its claim. Allocation of Quotas 38. Quotas are allocated according to the basic principle of past performance, i.e. they go to those companies which have demonstrated their ability to export the particular products to the markets concerned. This means that quotas have to be earned, and will be lost unless they are re-earned by export performance. The past performance principle of allocation not only ensures continuity to the trade but also contributes towards the optimum utilization of the restraint limits. In applying this principle, a distinction is made between newly restrained product categories and categories in a subsequent restraint period. (a) For New Restraints 39. When a product is newly brought under restraint, quotas are allocated to companies on the basis of their performance during a reference period. This reference period is usually the 12-month period which reflects the most recent ascertainable shipment performance prior to the introduction of restraint. (In exceptional circumstances, a different 12-month period could be used instead.) To establish performance, exporters are invited to submit to the Department records of shipments during the reference period showing, in respect of each consignment, the quantity of goods shipped, the name of the manufacturer (or the names of the weaver and the finisher in the case of finished fabrics), the date of shipment and the number of the export licence covering the consignment. These details are then checked against the licensing records kept by the Department. 40. Following verification of these shipment returns, and where the level of past performance qualified for quota allocation is equal to or less than the restraint limit, allocations are made up to the level of such performance. Where the level is greater than the restraint limit, allocations are scaled down proportionately. An illustration of how quotas arising from a new restraint agreement are calculated is shown in App. 5 Appendix Quotas are allocated to the exporter and the manufacturer on a 50/50 basis, i.e. each party receives 50% of the parcel of quota pertaining to a shipment within the reference period. (Where the exporter and the manufacturer are the same company, it receives 100%). The exception to the 50/50 rule concerns finished piece-goods where quotas are allocated on a 40/30/30 basis among the exporter, the finisher and the weaver; where the finished fabrics are manufactured using imported grey fabrics, quotas are allocated on a 50/50 basis to the exporter and the finisher. 42. Any quota balance remaining after allocation to all qualified companies are put into a pool and made available to all comers under free quota schemes described in Chapter 6.

66 Page 57 (b) For Subsequent Restraint Periods 43. Where a restraint agreement is renewed, or where a restraint agreement provides for more than one restraint period (an agreement may cover five 12-month periods, each of which is normally referred to as a 'textiles year'), quotas are allocated in a subsequent restraint period according to the following rules : (a) a company which used less than 95% of its quota holding in a particular category in the preceding restraint period will be offered an allocation equal to the amount it used; (b) a company which used 95% or more of its quota holding in a. particular category in the preceding restraint period will be offered an allocation equal to 100% of its holding in the category; (c) a company which falls under (b) above and which did not transfer out on a temporary or permanent basis any of its quota in a particular category in the preceding restraint period will be offered an additional amount equivalent to the growth factor for that category provided for in the restraint agreement (see footnote). 44. For the purpose of the above allocation rules, (a) Any use made by the transferee of temporarily transferred quotas is counted as performance by the transferor. This is an exception to the past performance principle. [The extent to which the transferor will receive an allocation for such performance may, however, be affected by the extent of his transfer-out, according to the rule regarding temporary transferors (see paragraphs 60 to 63 below). On the other hand, the transferee may, depending on the extent of his transfer-in, receive an allocation according to the rule regarding temporary transferees (see paragraphs 64 to 67 below)]. (b) Performance through a swing of quotas is attributed to the source category from which the quota for swing has been derived (see paragraphs for swing schemes). Footnote: To illustrate, a company which was allocated 100 units, and used 99 units of quota in a category for which the annual growth rate is 2% would : (a) if it has not transferred out on a temporary or permanent basis any of its quota in that category, be allocated 102 units (100 units + 2 units growth) in the subsequent restraint period; or (b) if it has transferred out on a temporary or permanent basis one unit of its quota in that category, be allocated 100 units in the subsequent restraint period.

67 Page 58 Preliminary and Final Allocations 45. As quota entitlements in a subsequent restraint period are based on shipment performance in the preceding period, quotas can only be allocated after the performance has been fully verified against shipping documents. This verification process usually takes two to three months to complete. Consequently, the final quota entitlements of qualified companies cannot be ascertained until some time after the commencement of a restraint period or textiles year. To make a portion of quotas available during the first few months of the year, the Department makes preliminary quota allocations to companies. 46. Preliminary quotas are allocated, generally two weeks before a new textiles year begins, according to verified shipments by a specified date (normally two or three months prior to the expiry of the preceding year). 47. After the Department has completed the verification of all licensed shipments in the preceding year, final quota allocations are made, normally in the third month of the year, superseding any preliminary quota allocations. 48. Between the preliminary and final quota allocations, companies may request for additional preliminary quotas. Such requests are considered on individual merits, and should be supported by evidence from shipping or airline companies confirming that shipments licensed but not yet verified by the Department have been effected by the companies concerned. Acceptance of Quotas 49. Companies qualified to receive quotas are issued quota allocation certificates which set out, among other things, the conditions for quota App. 6 utilization. A specimen of such a certificate is at Appendix 6. A company accepting the allocation must complete an acceptance letter and return it by hand to the Department within a specified period together with a copy of its valid business registration certificate. Quotas not accepted within the specified period will be withdrawn by the Department. Final Licensing Date 50. Although shipments of restrained products may be effected up to the last day of a textiles year, all licences covering these shipments applied for against quotas held by the company have to be taken out not later than the first day of the last month of the textiles year -- the final licensing date. Any quotas against which export licenses have not been applied for by that date are automatically withdrawn by the Department and made available to all comers under the Year-end Special Shipment Scheme (see Chapter 6).

68 CHAPTER: 4 TRANSFER OF QUOTAS C/RM/G/7 Page 59 Objectives 51. Quotas and permits are transferable so as to (a) facilitate optimum utilization of quotas by Hong Kong as a whole by providing flexibility to the trade; (b) provide the opportunity for companies with no or insufficient quotas to obtain them, therefore creating a channel for new comers; and (c) encourage the movement of quotas from the hands of those who are no longer able to use them to those who are. Permanent and Temporary Transfers 52. There are two types of transfers (a) permanent transfers (Type B) - in which the transferee obtains the use of the quota for the year in question and, based on his performance against the transferred quantity, receives a quota allocation in the succeeding year; (b) temporary transfers - in which the transferee obtains the use of the quota for the year in question, but the performance against the transferred quantity is attributed to the transferor. There are two kinds of temporary transfers : straightforward transfers (Type A) and swing transfers (Type S), which is a combination of a Type A transfer and a swing (see paragraphs for swing schemes). Allocation Against Temporary Transfers 53. The temporary transfer arrangement, whilst providing flexibility to the trade in using their quotas, enables a quota-holder to earn an allocation despite the lack of performance on his part. To prevent excesses, such allocation is circumscribed by the rule regarding temporary trensferors (see paragraphs 60 to 63 below). Thus a quota-holder can normally expect to earn quotas not less than his own performance. While he may also expect an allocation arising from performance by others against quotas which he has transferred out on a temporary basis, the extent of such allocation may be affected by the extent of his temporary transfer-out, as determined by the rule regarding temporary transferors. The extent of the transferor's future quota allocation may also be affected by any under/non-utilisation of the temporary transferred quota by the transferee.

69 Page 60 Source of Quotas for Transfer 54. Quotas from preliminary allocations, final allocations, or allocations against free quota performance, are transferable on a permanent or temporary basis. Quotas from anticipated quotas may be transferred only on a temporary basis. Transfers of permanently transterred-in quotas are subject to the rule regarding permanent transfers described in paragraph 59. On the other hand, quotas deriving from swing, temporary transfers, swing transfers, or free quota applications are not transferable. The exception to this latter rule is a transfer-back of unutilized quotas (which have been transferred on a temporary basis) to the original transferor; for a swing-transfer, the transfer-back is possible only where a swing margin is available in the source category. Application Procedure 55. All quota transfers must be registered with the Trade Department. Prosecution and/or administrative action may be taken against companies involved in unregistered transfers. 56. A company applying to transfer quota should complete the following forms, as appropriate : (a) Form TIC 396 (yellow form) - Application for Type A transfer of quota to be completed in triplicate; (b) Form TIC 397 (pink form) - Application for Type B transfer of quota to be completed in triplicate; (c) Form TIC 398 (green form) - Application for swing transfer of quota to be completed in triplicate. App. 7-9 Specimen copies of these forms are at Appendices When applying for a transfer of quotas, the transferee should first complete Part II of the appropriate application form which should then be submitted to the Department for validation. The transfer form thus validated will bear a date (7 working days from the date of validation) on or before which it should be completed and returned to the Department for processing. Validated transfer forms returned to the Department after the date specified on the form will not be accepted. However, the validation does not confer any guarantee that the transferor will have the necessary quotas at the time the transfer application is re-submitted to the Department for processing. The Department will not accept transfer applications after a final transfer date, normally about the middle of the 11th month of the relevant textiles year. Validity Period of Type A Transfers 58. For Type A transfers, the transferor and transferee are allowed to agree on a validity period, provided that it does not go beyond the Department's closing date for registering transfers during the textiles year in question. At the end of this validity period, if licences for shipment have not been taken out against the transferred quota, the transferor is free to request the Department to revert the quotas to him. Quotas so reverted will be considered as quotas not having been transferred out, and the quota records of both the transferor and the transferee will be amended accordingly.

70 Page 61 Rule regarding Permanent Transfers 59. Any company which has permanently transferred in quotas in any category is not allowed to transfer out any quotas in that category on a permanent basis in the year in which the transfer-in has taken place and in the year immediately following. Rule regarding Temporary Transferors 60. A company which, during any one year, gross transfers out in any group [see (a) below] on a temporary basis 50% or more of its quota holdings in that group will be liable to have its quota allocation in the following year reduced. For the purpose of this rule : (a) temporary transfers (including swing transfers) are considered on App. 10 a by-market and by-group basis. Appendix 10 lists the groupings under the various bilateral agreements; (b) in calculating a company's gross transfer-out percentage in a group: (i) quota holdings in any group for the year in question include all quota allocations within that group minus all permanent transfers-out plus all utilized permanent transfers-in; and (ii) temporary transfers-out in any group are calculated on a gross basis, i.e. any temporary transfer-in in any category or categories within that group will not be included in the calculation to offset temporary transfers-out; (c) the maximum reduction to which the company is liable is 40% of its total temporary transfers-out in that group for the market concerned. 61. The following points are also relevant in applying this rule (a) quota 'utilized' means quota covering the actual export quantity licensed and shipped; (b) quota permanently transferred-in (TB-in) in any category is merged with a company's allocation, if any, in that category. Any quota remaining unutilized at the end of the year, up to the total TB-in quantity in that category, would be regarded as utilized TB-in (see footnote); Footnote: To illustrate, consider a quota-holder who holds 1,000 units of quota in a category, has made a temporary transfer-out (TA-out) of 700 units and a permanent transfer-in (TB-in) of 500 units in the same category. The total shipped performance of the merged quota is units (800 units by own performance and 400 units by performance of the temporary transferee). His utilization of TB-in quota under the transferor rule would be determined as follows : (i) utilization of own quota 1,000 units (ii) utilization of TB-in quota 200 units (iii) un-utilized TB-in quota 300 units

71 Page 62 (c) quota surrendered to the Department under the surrender scheme is deducted as appropriate in calculating a company's quota holding in a group; (d) transfers of permits are counted in the same way as transfers of quota in the same group, e.g. 100 units of quota in category X and 100 units of permit in category X(P) shall be counted as 200 units; (e) quota holdings and transfers are calculated in common quota units (equivalent square yards or kg) using the conversion factors ', the respective bilateral agreements. App. 11 Appendix 11 illustrates the application of the rule regarding temporary transferors. 62. When a reduction of quota is applied to a temporary transferor, and where the company qualifies for allocation of quota in that year in more than one category in that group for the market concerned, the reduction will be effected in the following manner : (a) it will be distributed among those categories in the group with temporary transfers-out, in proportion to the gross temporary transfers-out in the year concerned; or (b) where (a) above is not applicable (e.g. where the company does not have sufficient allocation in the categories concerned, or where changes in categorisation have occurred), the reduction will be distributed among all categories in that group in which the company holds quotas, in proportion to the amounts of quota held in those categories (see footnote). Footnote: Assuming, for example, that the quantity to be withdrawn is 180 units, then the reductions would be effected as follows Case A Case B Gross Method of Quota Method of Temporary Quota Reduction Holding Reduction Transfers-out Holding Under in Under Group Category in Year 1 in Year 2 para 62(a) Year 2 para 62(b) A x D x 20 ' x w x 600~~~~09n x x (i.e. transfers in 100 units) Total

72 Page Before any action is taken to reduce the allocation to a temporary transferor, the company concerned will be notified of the Director of Trade's intent to take such action and given the opportunity to make representations for the specific purpose of allowing the Director to take into account the individual circumstances before deciding on the reduction. The Director reserves his discretion in deciding the actual reduction to be applied, taking into account the extent of the gross transfers-out. A App. 12 general reference guideline is provided at Appendix 12. It must however be emphasized that this guideline is not part of the rule and the Director is not bound under any circumstances to act in strict accordance with it. Rule Regarding Temporary Transferees 64. As a general rule, a company which, during any one year, net transfers In on a temporary basis more than 35% of its quota holdings in a particular category will be eligible for a bonus allocation in that category in the following year, of an amount not exceeding its net utilised temporary transfer-in in the category concerned. This general rule is however subject to the condition that if a company's calculated bonus in the category concerned is less than the following cut-off quantities in the respective categories, it is not eligible for any bonus allocation : Control Unit in the Category Cut-off quantity less than which calculated bonus will not be offered Dozen piece 5 Dozen pair 5 Piece 60 Pair 60 Set 60 Square yard 200 Square metre 200 Pound 60 Kilogram 30 Calculated bonus below the above cut-off quantities will be pooled and allocated to other eligible companies in the category concerned on a proportionate basis. 65. For the purpose of this rule, (a) eligibility is determined on a category by category basis; (b) a company's eligibility for a bonus allocation in a particular category will be nullified by any permanent transfer-out in that category in the year in which temporary transfers-in have taken place; (c) in calculating a company's net transfer-in percentage in a category for the market concerned, (i) quota holdings in the category for the year in question include all quota allocations plus all permanent transfers-in; and (ii) net temporary transfers-in quantities for the year in question include all utilized temporary- transfers-in minus all temporary transfers-out.

73 Page The following points are also relevant in applying this rule (a) quota 'utilized' means quota covering the actual export quantity licensed and shipped; (b) quota surrendered to the Department under the surrender scheme is deducted as appropriate in calculating a company's quota holding; (c) swing transfers are regarded as temporary transfers but eligibility arising therefrom will be attributed to the swung-in category; (d) transfers of permit are counted in the same way as transfers of quota in a different category (e.g. 100 units of quota in category X and 100 units of permit in category X(P) are counted as 100 units in each of 2 different categories). App. 13 Appendix 13 illustrates the application of the rule regarding temporary transferees. 67. Allocations to eligible temporary transferees will be derived from quotas recovered from temporary transferors plus any balance from the restraint limits after allocations to qualified quota-holders and free quota performers. If the total entitlements exceed the quantities available, allocations will be scaled down proportionately. Any quotas remaining after allocations to temporary transferees under this rule are added to the free quota pool.

74 Page 65 CHAPTER:5 SURRENDEROF QUOTASAND FLEXIBILITY PROVSIONS Surrender 68. A quota-holder may find, during the course of a year, that he is unable to utilize his allocation fully. To ensure maximum utilization of the restraint limit for Hong Kong as a whole, the quota-holder is encouraged to surrender the "excess" quotas to the Department as early as possible so that they can be made available to other companies under free quota schemes. Incentive for early surrender is provided in the form of a partial re-allocation in the following year. 69. Surrender schemes are operated in 3 phases as follows (a) Phase I : from the beginning of the textiles year to the end of the 4th month (i) an allocation equal to 50% of the surrendered quantity is offered to the company in the following year; (ii) further qualification for quota allocation in the following year is based on performance against the original allocation less the surrendered quantity. (b) Phase II : from the beginning of the 5th month to the end of the 7th month (i) an allocation equal to 25% of the surrendered quantity is offered to the company in the following year; (ii) as in (a)(ii) above. (c) Phase III : during the 8th and 9th months (i) no reclaim of quota in the following year; (ii) as in (a)(ii) above. Companies can continue to relinquish quotas after the end of the 9th month, but there will be no reclaim and further qualification for quota allocation in the following year will be based on performance against the original allocation (less deductions, if any, permitted under (a) to (c) above). Flexibility Provisions 70. The bilateral textiles agreements contain flexibility provisions in the forms of swing, carryover and carryforward (anticipation). The following paragraphs describe the implementation of these provisions. (a) Swing 71. Swing may be defined as an exchange involving the surrender of quota in one category or sub-category in return for an equivalent quantity of quota in another category or subcategory.

75 Page Swing schemes are normally operated as soon as final quota allocations have been completed, in two phases (a) Phase I -- in which a quota-holder may increase his holding in any category, up to the swing percentage specified, provided that he surrenders to the Department an equivalent amount of quota in another category or categories. (b) Phase II - in which all companies, whether or not they are quota-holders in the categories concerned, may participate. The margin by which each category may be increased is converted from a percentage into an absolute quantity. As in Phase I, a company applying for increase in one category is required to surrender an equivalent amount of quota in another category or categories. Phase II is operated in two stages : Stage I -- all applications received within a specified period are considered together. If the quantity available is less than the total quantity applied for, it will be apportioned among the applicants on a proportionate basis. Otherwise, all applications will be approved in full. Stage II - all balances remaining after the operation of Stage I are made available and applications are processed on a day-by-day basis, i.e. all applications received on the same day will be considered together and approved on a proportionate basis, if necessary. (There may be a combined free quota/swing scheme after the expiry of the pro-rata stages of the swing scheme and the main free quota scheme : see paragraph 86 below) Where restraint agreements feature basket categories or sub-limits, a further step may be operated prior to Phase I, whereby quota-holders are allowed to swing from one sub-limit to another or to down-swing from specific categories into the "basket' categories. This operation continues throughout the year. 73. Quotas required to be surrendered for swing can be obtained from the following sources : (a) the company's own quota holding in other categories; (b) quotas transferred in from another company. 74. Quota-holders may swing quotas into a category from which they have previously swung out quotas, and vice versa. However, the parcel of quota which has been swung into a category may not subsequently be transferred out or swung out again within the same restraint period, even if the swing is back to the original source category. 75. Quota obtained through temporary transfers may subsequently be used as source yardage for swing increase in another category or itself be increased by swing. However, in either case, the written consent of the transferor is required; additionally, swing increase on temporary transferred-in quota is subject to the swing right not having been exercised by the transferor.

76 Page Applications for swing and swing transfer should be made on Form App. 14 TIC 395 (Blue form) and TIC 398 (Green form), specimen copies at Appendix 14 App. 9 and Appendix 9, and should be submitted to the Department in duplicate and triplicate respectively. (b) Carryover 77. Carryover provides for a portion of a restraint limit, if not fully used during one textiles year, to be retained for use ta the immediately following textiles year, up to a specific percentage of the restraint limit for the latter year. Such carryover quantities are added to the pool of free quotas. (c) Carryforward (Anticipation) 78. Caarryforward or anticipation enables. Hong Kong to borrow, for use in the current textiles year, a portion of the restraint limits for the immediately following textiles year. This flexibility is made available to all, companies which currently hold quotas in that category through the operation of anticipation schemes. Anticipated quotas may be swung or transferred on a temporary basis. Shipments and temporary transfers against anticipated quotas are debited to the companies' allocations in the subsequent year. 79. Anticipation schemes are operated in two phases (a) Phase I -- in which all quota-holders may borrow by category up to the percentage specified or to the level of verified shipment performance at that time, whichever is the less. (b) Phase II - in which the margin by which each category may be increased is converted from a percentage into an absolute quantity, and all quota-holders may anticipate up to their actual levels of verified shipment performance. If the quantity available is less than the total quantity applied for, it will be apportioned among the applicants on a proportionate basis. Otherwise, all applications will be approved in full. 80. Some restraint agreements provide for a combined maximum percentage for carryover and anticipation subject to a sub-limit on anticipation. In such cases, carryover will be utilized first; anticipation will be used only where the use of carryover has not exhausted the combined percentage.

77 Page 68 CHAPTER: 6 FREE QUOTA SCHEMES Objectives 81. Free quota schemes provide opportunities for new comers to export restrained textiles, facilitate the gradual movement of quotas into the hands of companies which are able to utilize them, and ensure optimum utilization of quotas for Hong Kong as a whole. Sources of Free Quotas 82. Free quotas are normally derived from the following sources (a) balance of quotas remaining after allocations to qualified companies on the basis of past performance; (b) quotas allocated to but not accepted by companies in (a) above; (c) quotas recovered from temporary transferors and not allocated to eligible temporary transferees; (d) quotas forfeited from companies by way of administrative action against non-compliance with quota allocation and utilization conditions; (e) (f) surrendered quotas; carryover; (g) quotas remaining unutilized after the final licensing date of a textiles year. Free Quota Schemes 83. Free quotas are made available to all comers under free quota schemes. Normally three schemes are operated during each textiles year : (a) Cold Category Free Quota Scheme - operated before final quota allocations, to make available quotas in those categories substantially under-utilized in the preceding year; the quantities to be made available depend on the extent of under-utilization. (b) Main Free Quota Scheme - operated Immediately after final allocations and allocations against free quota performance, to dispose of unallocated balances and quotas returned to and forfeited by the Department. (c) Year-end Special Shipment Scheme - operated in the last month of a textiles year after the final licensing date, to dispose of all quotas unutilized up to then. In addition, special free quota schemes may be operated to dispose of any quotas carried over from the preceding year.

78 Page In the Cold Category and the Main Free Quota Schemes, free quotas are allocated in the form of free quota export authorisations [Form TIC 355 App. 2(c) (FQ) - specimen copy at Appendix 2(c)] normally valid for three months from the date of issue. In the Year-end Special Shipment Scheme, free quotas are allocated in the form of export licences [Form TIC 353A for quota categories and Form TIC 353 for quota export authorisation categories - specimen copies App. 1 at Appendices 1(a) & 1(b)] valid for 28 days or until the end of the textiles year, whichever is the shorter. 85. Free quota schemes are operated in two phases (a) Phase I -- in which all applications received during a specified period are considered together. If the quantity available is less than the total quantity applied for, it will be apportioned among the applicants on a proportionate basis. Otherwise, all applications will be approved in full. (b) Phase II -- in which the quantity remaining available after the operation of Phase I is open for application on a day-by-day basis, i.e. all applications received on the same day will be considered together and approved on a proportionate basis, if necessary. 86. There may be a combined free quota/swing scheme after the expiry of Phase I of the main free quota scheme and Phase II, Stage I of the swing scheme. This combined scheme is operated on a day-by-day basis. Participants may apply for either the free quotas or the swing margin (in the latter case they are required to surrender an equivalent amount of quotas in another category). Conditions for Participation 87. The conditions for participation in free quota schemes are as follows : (a) applicants must be registered with the Department for textiles controls purposes; (b) all applications must be supported by documentary evidence of firm orders from overseas buyers or their registered local agents (see paragraphs 23 and 25 above). In this connection, the Department reserves the right to ask for additional information and further documentary proof to substantiate the claim of firm orders. The Director of Trade may at his discretion reject any free quota applications which are not properly supported by documentary proof, or if he considers that the orders are speculative in nature; (c) no company, either as an exporter or as a manufacturer, may apply for a quantity greater than that available in the category concerned. Where its involvement, either as an exporter or as a manufacturer, exceeds the quantity available, all applications involving the company in respect of the category concerned will be rejected; (d) a quota-holder who has net transferred out, on a temporary or permanent basis, 10% or more of his holding in a particular category will not be allowed to participate in Phase I of the free quota scheme in that category;

79 Page 70 (e) manufacturers applying for free quotas in garment categories may not apply for an amount in excess of their declared monthly manufacturing capacities. In this connection : (i) manufacturers concerned are required to make separate declarations to the Department in respect of their monthly manufacturing capacity if they have not yet done so, or if their declared monthly manufacturing capacities have already changed; (ii) for the purpose of this condition, the manufacturers' declarations should be based on their capacity to undertake, within their own factory premises, the entire production, or at least the principal processes of manufacture. The declarations should not take into account subcontracting of the principal processes of manufacture (but sub-contracting of minor or subsidiary processes such as embroidering, button-holing and button-fixing is permissible). A specimen copy of the declaration form for this pu pose is at App. 15 Appendix 15; (iii) where the total quantity applied for under a free quota scheme by a manufacturer exceeds his monthly manufacturing capacity, the Department may reject all applications involving the manufacturer; (f) in oversubscribed categories, an exporter will not be allowed to pool the pro-rated quantities under one manufacturer (see footnote) unless the quantities approved are less than 30% of the quantities applied for and his application is supported by not more than 3 different manufacturers. Conditions for Utilization 88. The conditions for utilization of free quotas are as follows (a) free quota allocated is valid for the period specified. No extension of validity period will be granted. Companies that fail to utilize 95% or more of the quantities approved within the validity period may be debarred from participation in future free quota schemes for a specified period; (b) goods for which the free quotas have been allocated must be licensed and shipped (see footnote to paragraph 33 for the meaning of the term 'shipped') in full during the validity of the licence; (c) free quotas are not transferable; (d) exporters allocated with free quotas must perform at least four of the following six functions : (i) receive order from the overseas buyer; (ii) receive payment from the overseas buyer; Footnote: Pooling means that an exporter whose applications in a particular category are supported by more than one manufacturer can nominate one of them to manufacture all the quantities approved on a pro-rata basis.

80 Page 71 (iii) purchase or supply the raw materials for the manufacture of the goods; (iv) contract with the manufacturer for the manufacture of the goods; (v) make payment to the manufacturer for the goods; and (vi) arrange the export of the goods. Manufacturers allocated with free quotas must perform the principal processes of manufacture of the goods for which the free quotas have been allocated. The particular requirements of each of the above functions for exporters and manufacturers are set out in Notices to Exporters issued by the Trade Department. These particular requirements must also be complied with. A company which purports to have satisfied this condition must, on request, produce evidence to support its claim. All goods shipped under free quota must be of Hong Kong origin (see paragraph 35 above). Restriction on Transfer after obtaining Free Quota 89. A quota-holder who has obtained free quota in any category may not subsequently transfer out, either on a temporary or permanent basis, any of his own quota (including anticipated quota) in the same category in the same year, unless he returns to the Department from his holding a quantity equal to the quantity of free quota issued to him. A quota-holder who returns quota to the Department under this condition will be subject to the following : (a) if he acts either as the exporter or as the manufacturer, the quantity to be returned should be equal to half of the total quantity of free quota issued to has in the category. If he acts as both the exporter and the manufacturer, the quantity to be returned should be equal to the total quantity of free quota issued to him in the category; (b) quota so returned will not qualify him for allocation in the subsequent year. However, for the purpose of subsequent allocation, his performance will be calculated against his original allocation less all quantities so returned to the Department. Entitlement Arising From Free Quota Performance 90. Companies which have utilized 95% or more of the quantities approved on an individual free quota export authorisation basis (or on an individual export licence basis under year-end special shipment schemes) are deemed to have fully utilized the free quota approved to them and will qualify for quota allocation in the subsequent year subject to quota balances being available in the categories concerned following the issue of final allocation. If quota available is less than the total qualified performance, the allocation will be scaled down proportionately. Allocations are shared on a 50:50 basis between exporters and manufacturers (or, in respect of finished fabrics, 40% to the exporter, 30% to the weaver, and 30% to the finisher). On the other hand, companies which fail to utilize fully the quantities approved to them may be subject to administrative action taken by the Director of Trade. In addition, no quota allocation will be made against free quota export authorisat!ons which are not fully utilized.

81 Page 72 Textiles Year Calendar 91. This and the preceding 3 chapters describe how exports of restrained textiles are controlled, in the form of various schemes at different times of the textiles year. To give the trade an indication in advance of the approximate timings of these schemes, the Department publishes a textiles year calendar at the beginning of each year. A App. 16 representative alendar is shown in Appendix 16.

82 Page 73 CHAPTER: 7 ENFORCEMENT AND SANCTION Enforcement 92. To ensure the integrity of the textiles export control system, the Department conducts documentation checks and, in conjunction with the Customs and Excise Department, physical checks on textiles consignments. (a) Documentation Checks : Manifest checks/licence verification 93. A system of manifest checks and licence verification is operated to ensure that textiles exports are covered by valid export licences, and that shipment details conform with those contained in the approved licences. This requires shipping and airline companies and vehicle owners to submit export cargo manifests to the Department whenever a ship, aircraft or vehicle leaves Hong Kong. The manifests must contain details of each consignment, including the description, quantities, shipping marks and export licence numbers where applicable, and must be returned to the Department within 14 days of the date of departure from Hong Kong of the vessel, aircraft or vehicle concerned. If the cargo contains textiles products, the manifests must be accompanied by the triplicate copies of the relevant textiles export licenses. These manifests and licences are examined by the Manifest Checking Section of the Department; the details in the manifests are checked to ensure that they conform to those on the export licences. These licences are then matched with the copies kept by the Department to ensure that no unauthorized amendments have been made. (b) Physical Checks 94. Physical checks on textiles consignments are conducted to verify the accuracy of material particulars declared on export licences. Inspectorate staff of the Customs and Excise Department are empowered by law to enter the premises of the manufacturer/exporter concerned, and to conduct inspections at any reasonable time. Inspection of goods may also take place at the container terminal, the airport, and other points of exit. Where necessary, sealed packages or containers are opened for inspection. Suspected malpractices are subject to full investigations. Sanction for Malpractices 95. The Department takes a serious view of companies which breach any of the conditions of the textiles export control system. In addition to prosecution under the Import and Export Ordinance, which provides for a maximum penalty of a fine of HK$500,000 and 2 years' imprisonment, the Department may impose administrative actions against these companies. Such administrative actions may involve, but shall not necessarily be confined to, any or all of the following : forfeiture or surrender of quota (on a permanent or temporary basis), withdrawal of the balance of quota remaining unlicensed at that time, debarment from all export licensing facilities, disqualification from eligibility for receipt of further allocation of quota, refusal to issue a licence, suspension of a licence and debarment from participation in textiles export control schemes.

83 Page 74 CHAPTER : 8 DISSEUtNATION OF INFORMATION AND ENQUIRIES Notices to Exporters 96. To disseminate information and announce any new control arrangements to the trade, the Department issues Notices to Exporters under the following series Series 1 : USA Series 1A : USA Series 2 : EEC Series 2A : EEC Series 3 : Countries other Series 3A : Countries other than USA and EEC than USA and EEC Series 1, 2 and 3, in both English and Chinese, contain information on the control arrangements for, and any modifications to, the textiles export control system to the respective markets in the Series. Series 1A to 3A contain monthly information on quota utilization in the individual restraint markets, and provide lists of quota-holders and their respective holdings. 97. A direct mailing service under which Notices to Exporters are sent to subscribers is operated by the Department at a nominal charge per annum. Application forms for direct mailing of Notices to Exporters are available on request from the Enquiries Section of the Department at ground floor, Ocean Centre, Canton Road. Enquiries Section 98. Enquiries relating to licensing services, licence applications, quota allocations and information on the various export control schemes may be directed to the relevant markets/sections at the following counters or telephone numbers of the Trade Department : Market/Section Enquiries Section Telephone No. EEC Counter No. 31, Curve Block, 15th floor, Ocean Centre USA Counter Nos. 47 & 48, Curve Block, 15th floor, Ocean Centre Canada Counter No. 54, Straight Block, 15th floor, Ocean Centre Other Regions Counter No. 74A, (markets other Straight Block, 15th floor, than EEC, Ocean Centre USA & Canada)

84 Market/Section Enquiries Section Telephone No. Registrations and Textiles Controls Registration Licence Room 1543, 15th floor, Verification Ocean Centre Registration of local appointed agents Room 1326, 13th floor, Ocean Centre Licence Verification Room 1326, 13th floor, Ocean Centre General Ground floor, Enquiries Ocean Centre C/RM/G/7 Page In making enquiries about the status of applications submitted to the Department, companies should provide such details as the name and telephone number of the company, the number and date of receipt, the type of application involved, and the market and category of goods concerned. The Department will provide a response as soon as possible and normally within 24 hours.

85 EXPORT LICENCE (TEXTILES) FORM 4 Exporter (Name & Address) T.C.R. No. (where applicable) Tel No. Consignee ORIGINAL Dare of Receipt and Recept No Date of Issue and Licence No. Issue of this Iicence is approved Appendix 1(a) Page 77C/RM/G/7 HONG KONG GOVERNMENT Import and Export Ordinance (Cap 60) Import and Export (General) Regulations Manufacturer (Name & Address) T.C.R. No (where appliable) Tel. No. Departure Date Country of Final Destination for Director of Trade MANUFACTURER'S DECLARATION Date..... principal official of.... Date (Name of Munufacturer's Co.) hereby declare that I am the manufacturer of the goods or respect of which this application is made, that the goods are of Hong Kong origin in accordance with condition (2) overleaf and that the particulars given herein are true. Stamps Vessel/Flight No. C.O./Form A No /Country of Manufacture (if not of H.K. Origin) FOR CONDITIONS OF ISSUE PLEASE SEE OVERLEAF Mark(s) and Number(s) No. of packages of Value I o b HKS ;1 Total Amount Item No Commodity Item Code No. EXPORTER'S DECLARATION... I... principal official of (Name of Exporter's Co.) hereby declare that I am the exporter of the goods in respect of which this application is made and that the particulars given herein are true 7 Tic~ ~~_5 NCPRGTRSRE TIC 353 (Rev CROWN COPYRIGHT RESERVED _Signature Chop

86 Page 78 CONDITIONS OF ISSUE OF THIS LICENCE INCLUDE THE FOLLOWING: (1) This licence is valid for twenty-eight days from the date of issue, unless otherwise stated. (2) Goods claiming Hong Kong origin must have undergone principal processes in Hong Kong. These are processes which permanently and substantially change the nature, shape, form and utility of the raw materials used, as laid down by the Director of Trade in certificate of origin circulars. IMPORTANT WARNING: Breach of any of the conditions of issue renders this licence null and void and any company guilty of such a breach is liable to prosecution and heavy penalties under the Import and Export Ordinance. EXPLANATORY NOTES: (1) This form must be submitted in quadruplicate. The ripcate must be surrendered to the Transportation, Shipping or Airline before departure of goods, and returned to the Trade Department Trrtata n, Shipping or Airline Company together with the releva ni ith days after the day on which the goods are exported req d ct n of the import and Export Ordinance, Cap. 60. (2) The exporter must file Expo Dec in respect of items on this licence as required by Regulation 5 and Export (Registration) Regulations. (3) Provided their e om licence will be ready for collection two clear working s e. Sundays and public holidays) after the date upon whifocreclf/ -)k~ ~ ~~lckala --+A f L1 6 9 i (HIf --LO WXfT ft 4itrtM-I11 i F 4f EI~~~~~~~~~~~ - Xk-f'~kfl 0 II ' E 0 Z _6T x;/-aefs it c g@6fjb>-xaifhr-iiawzmwg g«na ( RaA %u (a )CfWJRi*Lox'thra~z~ ;,fi El rllxtm IF ( -7)f%.% A* trf:(r -,IG9,k;i1AiZ*M6ZT E3 kg ffi VI f'p LI ( 0 R5,AMM ) - it on BT MiR I EJ - I'll,

87 Exporter (Name & Address) EXPORT LICENCE (TEXTILES) FORM 5 ORIGINAL Dare of Receipt and Receipt No. Date of Issue and Licence No. Audit No. C/RM/G/7 Page 79 Appendix 1(b) HONG KONG GOVERNMENT Import and Export Ordinance (Cap. 60) Import and Export (General) Regulations TCR No (where a pplicable) Tel. No. Consignee Issue of this licence is approved. Manulacturer (Name & Address) T C R No (where applicable) Tel. No. Departure Date Country of Final Destination...f... for Director of Trade MANUFACTURER'S DECLARATION Date principal official of i... (Name of Manufacturer's 4 Co.) hereby declare that I am the manufacturer of the goods in respect of which this application is mode, that the goods are of Hong Kong origin in accordance with condition (2) overleaf and that the particulars given heroin are true. "I further declare that I am supplying the quotas for the goods covered by this application in accordance with condition (3) overleaf. ( Delete if not applicable) Stamps Vessel/Flight No C O./Form A No. FOR CONDITIONS OF ISSUE PLEASE SEE OVERLEAF Mark(s) and Number(s) No. of packages... Signature Full Description of Goods (State Country of Origin of raw materials) Chop l _, l No. of Units Value f.o.b. HKS Total Amount Item No Camgomy/Sub- Categoryor Commodity ItemCode No. T C R No. of Quots/ Export Authorization/ Permit Holder O.a Ref.erc. (See below) Quantity Shipped in Quota Units EXPORTER'S DECLARATION I.... Date principal official of (Name of Exporter's Co.) hereby declare that I am the exported of the goods in respect of which this application is made and that the particulars given herein are true. "I further declare that I am supplying the quotas for the goods covered by this application in accordance with condition overleaf. (3) ("Delete if not applicable) 4 5 Insert here:-type of Quota Export Authorization Number. Swing Transfer or A-Type Transfer Number or Quota Permit Number as appropriate. nature Chop _~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ CROWN COPYRIGHT RESERVED TIC 353A (Rev 1985)

88 Page 80 CONDITIONS OF ISSUE OF THIS LICENCE INCLUDE THE FOLLOWING: (1) This licence is valid for twenty-eight days from the date of issue, unless otherwise stated (2) Goods covered by this licence must be of Hong Kong origin. Goods claiming Hong Kong origin must have undergone principal processes in Hong Kong. These are processes which permanently and substantially change the nature, shape, form, and utility of the raw materials used, as laid down by the Director of Trade in certificate of origin circulars. (3) The company supplying the quotas for the goods covered by this licence must. Either (i): perform at least four of the following functions: (a) receive order from the overseas buyer. (b) receive payment from the overseas buyer for the goods. (c) purchase or supply the raw materials for the manufacture of the goods. (d) contract with the manufacturer for the manufacture of the goods. (e) make payment to the manufacturer for the goods: and (f) arrange the export of the goods. or (ii): perform the principal processes in the manufacture of the consignment in question. Please note that the particular requirements of each of the above functions are set out in Notices to Exporters issued by the Trade Department. These particular requirements must also be complied with in order to satisfy this condition. Accordingly, the companies concerned should contact the Enquiry Section of the Trade Department if they are in any doubt as to the content and/or application of these particular requirements. Please note further that in cases of export against free quota, this condition will additionally be governed by any Notice to Exporters relevant to the free quota scheme. (4) The exporter and manufacturer declared on this licence must comply with the conditions governing the allocation and utilisation of quota. as stipulated in the quota allocation certificate issued to quota holders and in Notices to Exporters issued by the Trade Department from lime to time. The companies concerned should contact the Enquiry Section of the Trade Department if they are in any doubt as to the content and/or application of these conditions. IMPORTANT WARNING Breach of any of the conditions of issue renders this licence null and void and any company guilty of such a breach is liable to prosecution and heavy penalties under the Import and Export Ordinance In addition, the Director of Trade reserves the right to take administrative action against the company, including the cancellation of any balance of unshipped quota/permits and the denial of future allocations. EXPLANATORY NOTES: (1) This form must be submitted in quadruplicate. The triplicate must be surrendered to the Shipping or Airline Company before departure of goods, and returned to the Trade Department by the Shipping or Airline Company together with the relevant manifest within fourteen days after the day on which the goods are exported as required by Section 11 of the Import and Export Ordinance. Cap. 60. (2) The exporter must file an Export Declaration in respect of items on this licence as required by Regulation 5 of the Import and Expor (Registration) Regulations. (3) Provided there are no complications, the licence will be ready for collection two clear working days (i.e. excluding Sundays and public holidays) after the date upon which the form is received. A SZtIn Z J5 42ctIN M4 it -I h If -,J-it IFF - (i : JVA 1P d (a) F Hl X 143 e!9l t )^i '2t~W (2) 4W(tRfRZ~rWt (3) (41 (4) rnvn61ff~fna* AftIAZST StZ1*K jitt Ra a ZZiM:011189ffis A E iftf tlltt42 A ri0 T P (d4) mfgas t14 ft lemi A &~gf* 4Flfl r PIliJ b ilqf PIZE 4t jel Iaet M ) $*1 - (6) i*e& If ' - i~*) : Xff 41 1 WiJz$tI fvz1mmwxi.tbilt2g f 19 W.:a~ Mt~z~ttS xeam~z4f-w4eeswswos Iaer

89 2.1 on behalf of... TO BE SUBMITTED IN DUPLICATE IMPORT AND EXPORT ORDINANCE (CHAPTER 60) EXPORT AUTHORISATION (Three-month validity) for Export of Textiles to... (importing Country) Date of Receipt and Receipt No. Export Athorisation No. PART I-APPLICATION AND DECLARATION BY EXPORTER Stamps C/RM/G/7 Page 81 Appendix 2(a) Quota Ref. Name of Quota Supplier Qty in Equivalent Quota Units Quantity in Commercial Units Category/Classification No. TOTAL: Full description of goods i , ;..; ; hereby declare that Ihave entered into a finn contract with an overseas buyer for supply textile of the goods described in paragraph I of Part I" and that I agree to supply the quota as stated above in accordance with indition (4) overleaf (4) anotpplicable), and I hereby apply to the Director ir Trade for an Export Authorisation in respect ot these goods to be exported to \ understand that it, for any reason whatsoever. I tail to export fully Use contract quantity shown above within the validity period or the expon licence(s) issued under this ExportAuthorisation, any tnutilised quantity Covered this authonsation may be forfeited and future authorisations and licenses to my company may be denied I declare that the above and any other information which I have given in support of this application is true. I have read and understood, and agree to abide by, the conditions overleaf. I have alsoread and undenstood the warning notes overleaf. 7/ Tel No. Date ,,,: r a,,,,/.f rsw.. _~ca.e 'ehvf PART II-DECLARATION BY MANUFACTURER B.R. No. I. on behalf of on b h l of... hereby declare that have contracted to manufacture and deliver the goods described in paragraph I of Part I in the total amount to permit shipment within the validity period of the export licence(s) issued under this authorisation- and that I agree to supply the quota as stated above in accordance with condition (4) overleaf (delete if not applicable). 2. The goods are or Hong Kong origin in accordance with condition (2) overleaf and that they will be manufactured by my factory registered with the Trade Department under registration No. for certification purposes understand that it I fail to deliver the goods in time to permit shipment within the validity period of the export licence(s) issued under this authorisation, it may result in the refusal of future authorisation. licences and certificates for the products ormy registered factory 4. I have read and understood, and agree to abide by, the conditions overleaf I have also read and understood the warning notes overleaf. Tel. No. Date.... Textile Controls Registration No. (Signature and Chop of manufacture) B.R. No. FOR OFFICIAL USE ONLY APPROVAL The issue of this Export Authorisation is approved for the period specified and in accordance with the conditions overleaf. Th s authorisation is valid until. Total quantity approved... Date (for Director of Trade) FOR CONDITIONS AND SHIPMENT RECORD SEE OVERLEAF

90 I REMARKS "IN LICENCE NUMBER DATE LICENSED Day Month CATEGORY OR CLASSIFI- CATION CODING PRESENT SHIPMENT PREVIOUS SHIPMENT TOTAL SHIPMENTS I I I I - -I - I I ALLOCATIONC/RM/G/7 Page 82 BALANCE Conditions ofam aftkm o1 Expri Auaeitia bimq *a lsehp. \ 1 Thisexport authorisation is validfor the period sptd only. No eaxtenion of tlb validity period of this autlorisation will be ased, 2. Goods covered by this upon au eatian must be of Hoeg Kong or.. Goods daleamg Hong Kong origin musthave under gone prinicipal processes in Hong Kong.These areprocesses whichpantlyand change the nature. shape, form, and saity of the raw mteals d u id do by e Diutor of Trade i certfise of odsn drailars. 3. The isue and as of this export authorisation are subjectto the codtions governing t Export AuthorisationScme under which thi export authorisations is applied for. The companies coludshould fefer to the relevant Notice to Exporters issed by thetrade Department or contact the Eaquiry Section of the Trade Department if they are in say doubt as to the content and/or application of these conditions. 4. If this export autbodatio is aplie foc spiest quote supplied by the appfiat. the company supplying the quota for the goods covered by this export authorisation must: (A) Either (i): performat leastfour of thefollowing fanctions: () reci order rwm the overs sayer. (I) recerve payment from th overseas buyr. (c) purchase or supp the raw materials of the manufacture of the goads. (d) contract with t miafacturer for the manufacture of the goods nuke payment to the msa ctssw r ror the goods; and rnu the export of the goods. or (ii): perform the peincipjl processesin the manufacture of the coasigarmnt in question. Please note that the particular requiments of each of the above functions are setout is Nots to Exporters isued by the Trade Department. These particular requirements maui also he complied with in oder to sotsy this condition Accordingly, the companies concerned should contact the Eaquiry Sactios or the Trade Departent ir they are in any doubt as to the content sadlo appliat iof these parliuar requirsnets. (3) Comply with th conditions governing Use allocation sd utiiation d quota. as stipuled or rreferrd to in the quota alocation rc iued to quota holders sd is Noti to Epoter isud b the Trade Department ftomn time to time. The companies concerned shouldcoatactcthe Eaquiry Section5S the T Department if they are in any doubt as to the content and/or appliation of these coaditios l.eerta Were: I. acsordance with Regulation 5(t) of the Import and Expon (Genral) Reunations, expon iceaces must be Ilied for within the validity period of this cxpon suthoristion. Any breach or this requirement sall render 51 fpon authoristion nuill, void and of no effct. 2. it is gn offence for sany unaulhorisud parson to make any altration dektion or addition to this espoet authoristion after issue. ~~~~~~~~ - \. "**MUU&nL " ~ MZft"at^tXI1 I <tw. -*Lbne MI)RDM33uiMwtP* uxmafft#m nffa; tf1fh3 :\ws j- ON*afUUMUhtfihiMtQ~flZ*tiR~ et*4t~i w\ }; -. Mfi2JIP.1EShRlt lilt)fd~~l~t ~ ilj12 4 a~~~~~ nlei toud*&rt!r* lat~lm~~:af *arfl (2)HUWW^t#ITSZ""ksU I3)mN*sr5NatE1-12IZ4 (4)ftl~aimlT;"; hs.otl) (5)hlUA3tf4*-Z' (6)23Nd:ftER, *t(ii)a hrtoel o Z NWt'l! h ;l~it.*i* bfm- )4lj(* 11f...#t #tlt 1 t ::zd a 31llbtdtpI~g4wrllg&li/#lsmtl~lft1fIwI1M * NtAI(5UiIMMath. t E5Elttill~x18 ~i'b* tktzi8u/t~fftilu if.l'w SRKltlZhrMMSI - digttt lidl jtirl S(llr ui~ ~llfie i&~t4t ltg2aft th t/la'p Jt'A t.s*'h sfstazitrtit ",^~~54tnt~ln}I Hi Z.#*lhfJl.lIOU3lh. flak.s&1t.r133 T.3.*

91 (name) (name factory) and address of C/RM/G/7 Page 83 TO BE SUBMITTED IN DUPLICATE Appendix 2(b) IMPORT AND EXPORT ORDINANCE (CHAPTER 60) EXPORT AUTHORISATION (Six-month validity) Stamps for Export of Textiles to... (Importing Country) Date of Receipt and Receipt No. Export Authorisation No. PART I-APPLICATION AND DECLARATION BY EXPORTER Quota Ref. Name of Quota Supplier Qty. in Equivalent Quota Units Quantity in Commercial Units 2. 1.onbehalfof. (name) (name and address of 2. I exporter)...on behalfof... hereby declare that I have entered into a firm contract with an overseas buyer for supply of tb tilegoods described in paragraph I of PartI" and that agreetosupply the quota as stated above in accordance with condition (4) overleaf ("delete if not applicable), nd I hereby apply to the Director oftrade for an Export Authorisation in respect to..,or.a.o v <v..:.._......i > / * understand that if, for any reason whatsoever to x r6fttlyticonoaiiit shown above within the validity period of the export licence(s) issued under this Export Authorisatin anutised entity in this authorisation may be forfeited and future authorizations and licences to my co 4. I declare that the above Iyot in support of this application is true. I have read and understood, and agree to abide by, the it understood the warning notes overleaf. Tel. No... Date... No Controls Registration B.R. tno... PART 11-DECLARATION BY MANUFACTURER 1. I...on behalfof hereby declare that I have contracted to manufacture and deliver the goods described in paragraph I of Part I in the total amount to permit shipment within the validity period of the export licence(s) issued under this authorisation" and that I agree to supply the quota is stated above in accordance with condition (4) overlaf (ddelte if not applicable). 2. The goods are ofhong Kong origin in accordance with condition (2) overleaf and that they will be manufactured by my factory registered with the Trade Department under registration No. forcertification purposes. 3. I understand that if I tail to deliver the goods in time to permit shipment within the validity period ofthe export licence(s) issued under this authorisation, it may result in the refusal of future authorisation, licences and certificates for the products of my registered factory. 4. I have read and understood, and agree to abide by, the conditions overleaf. I have also read and understood the warning notes overleaf, TIC 355A (Re. 1915) Tel. No... Date Textile Controls W... RegistrationNo. (Signature and Chop of.fafhswj B.R. No. FOR OFFICIAL USE ONLY APPROVAL I7k.--= of this Export Authorisation is approved for the period specified and in accordance with the conditions overleaf. This authorisation is valid until... Total quantity approved... Date.... (fi. ODa.'of Tra*) FOR CONDITIONS AND SHIPMENT RECORD SEE OVERLEAF

92 Page 84 DATE CATEGORY LICENCE LICENSED OR PRESENT - PREVIOUS TOTAL NUMBER Day Month -- TION., CLASSIFICA- CODING SHIPMENT SHIPMENT SHIPMENTS A BLN REMARKS * Eu*m.oA.M.MThfthl: JI- ta& W.-" A.A.A-fl- I.A." d. C"6"-- I. This export authorisation is valid for the period specified only. No extension of the validity pc jlws expert authorization will be granted. 2. Goods covered by this export authorisation must be of Hong Kong origin. Goods claiming Hong Kong origip must have undergone principal processes in Hong Kong. These are processes which permanently and substantially change the nature, shape, form, and utility of the raw materials used, as laid down by the Directer or Trade in certificate otoiin drculars. 3. The issue and use of this eaport authorisation arm subject to the conditions governing the Export Authorisation\ Scheme under which this export authorisation is applied for. The companies concerned should refer so the relevant Notice to Exporters issued by the Trade Department or contact the Enquiry Section of the Trade Department if they ore in any doubt as to the content and/or application of these conditions. 4. If this export authorization is applied for against quota supplied by the applicant, the company supplying the quotas for the goods covered by this export authorisation must: (A) Either (i): perform at least four of the following functions (a) receive order from the overseas buyer. (b) receive payment from the overs buyer (C) purchase or Supply the raw materials for the manufacture of the goods, (d) contract with the manufacturer for the manufacture of the goods. (e) make payment to the manufacturer for the goods; and (f) arrange the export of the goods. or (ii): perform the principal process in the manufacture of the consignment in question. Please note that the particular requirements of each of the above functions are set out in Notices to Exporters issued by the Trade Department. These particular requirements must also be complied with in order to satisfy this condition, Accordingly, the companies concerned should contact the Enquiry Section of the Trade Department i they are in any doubt as to the content and/or application of these particular requirements. (B) Comply with the conditions governing the allocation and utilisation of quota, as stipulated or referred to in the quota allocation certificate issued to quots holders and in Notices to Exportrs issued by the Trade Department from time to time The companies concerned should contact the Enquiry Section of the Trade Department if they are in any doubt as to the content and/or application of these conditions. ImportantWarning: 1 In accordance with Regulation 5(l) of the Import and Export (General) Regulations, export license must be applied for within the validity period of this export authorisation. Any breach of this requirement shall render the export authorisation null, void and of no effect. 2 It is an offence for any unauthorised person to make any alteration. deletion or addition to this export autharisation after issue. ZW- Uifff2JM ' tfi W IfKM 1 *:nat;#am# ~ ~ ~ S~lIIf Ao1&*/f.* FiZfiwA(fiTI~r. ' (3) 01Af6*%ftfW#ftW4'.XSn*ffia#XfiM 4460AW X't"l U11i2601m1au &.t$*f \I. j ts;g'j(ilitxl).: ~ (b) AA~*2AK god, ~~J5.. & WrJ2 0J~ff1,k h# a I 1I r1 j

93 TO BE SUBMITTED IN DUPLICATE IMPORT AND EXPORT ORDINANCE (CHAPTER 60) FREE QUOTA EXPORT AUTHORISATION for Export of Textiles to... (Importing Country) Date of Receipt and Receipt No. Export Authorisation No. Stamps C/RM/G/7 Page 85 Appendix 2(c) PART I-APPLICATION AND DECLARATION BY EXPORTER Free Quota Scheme Ref. Qty. in Equivalent Quota Units Quantity in Commercial Units Category/Classification No. TOTAL: Full description of goods _ -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ on behalf of... 7 \..d.,ab~u.1r.p.u hereby declare that I have entered into a firm contract withovas an... goods of... s described in paragraph I of Part I and. I hereby apply to the Director or Trade for.port.autl.tion...teseb...to bfe.d to. *' '' ' '; understand that ir. for any whatsoever I fail to export fully the contracted quantity shown above within the validity period of the export licence(s) issued under this Export Authorisation, any unutilised quantity covered in this authonsation may be forfeited and I shall be debarred rrom participation in other Free Quots Schemes for a specifed period. 4. I declare that the above and any other information which I have given in support of this application is true. have read and understood. and agree to abidc by the conditions overleaf. Tel. No X._crd Cho PART II-DECLARATION BY MANUFACTURER Date... B.R. No. 1..I I...on behalf of..._ f-) (-~~~~~~~~~~~~~~~m -d Ad,n f.j'fakrp... hereby declre that I hve contracted to manufacture and deliver the goods described in paragraph I of Part I in total amount to permit shipmer.t within the validity period of the cxpon licence(s) issued under this authonsation. 2. The goods will be manufactured by my factory registered with the Trade Department under registration No... for cerification purposes. 3. I understand that if I fail to deliver the goods in time to permit shipment within the validity period of the export licence(s) issued under this authorisation. I shall be debarred from participation in other Free Quota Schemes for a specified period. 4. I have read and understood, and agree to abide by. the conditions overleaf. Tel No greti ynk T. ~.,,S..d Crkp M1B.R. No FOR OFFICIAL USE ONLY APPROVAL The issue of this Export Authorisation is approved for the period specified and in accordance with the conditions overleaf. This authorisation is valid until... Totalquantity approved... Date FOR CONDITIONS AND SHIPMFNT RECORD SEE OVERLEAF (for Directorof Trade)

94 Conditionof lssueof thisexport Adherhados hicelbs hflw I. This export authorisation is valid for the period specified only. No extension of the validity period of this export authorisation will be granted. 2. The issue and use of this export authorization are subject to the conditions governing the Free Quota Scheme under which this export authorization is applied for. The companies concerned should refer to the relevant Notice to Exporters issued by the Trade Department of contact the Enquiry Section of the Trade Department if they. re in any doubt as to the content and/or application of these conditions. Important Warning: 1. In accordance with Regulation 5(1) of the Import and Export (General) Regulations, export licenses must be applied for within the valkity period of this export authorization. Any breach of this requirement shall render the export authorisation null, void and of no effect. 2. It is an offence for any unauthorinsed person to make any alteration, deletion or addition to this export authorisation after issue. *. DhtnR4*"** ltm * 1. * ~ lr^tm i"* ~trr~ 2. *^D#UA~A8itM 1MWXM**"(ft&nM (i**%) A* * M' 11AN5UWfl"MMMD. 2. &*ainefeu#ehja ffl~$stli87&mm#±~cr 3U

95 PART1: COMPANY PARTICULARS _5*: i English TRADE DEPARTMENT TEXTILES CONTROLS REGISTRATION FORM M A; a Company Name - 'iftm Chinese Correspondence Address Office Address Factory Address C/RM/G/7 Page 87 Appendix 3(a) Textiles Controls Registration No. Business Registration No. Tel.: Tel.: PART2: AUTHORISED SIGNATURES AND SPECIMEN OF COMPANY CHOPS MZg*: JX~'tf Only the officials whose names appear in Part 2 of this form are authorised by my company to sign textiles export licence applications, export authorisations, transfer and swing applications or any other document relating to textiles controls administered by the Director of Trade. Name in full and in block letters Position *.f & g ^ ' U WT UM2It0 Position Signature~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Restrictions (') if any Specimen Signature *4642* l I 4. 1 Remarks (e g. joint-signature required Specimen of all chops and seals used in the above documents including St.*ItIC40134 N* t^ ;@*a - - _. I PART 3: UNDERTAKING 9 -! f"f : *VW on behalf of my company, declare that to the best of my knowledge and belief, the information given above is true and undertake to inform the Systems Division, Trade Department in writing immediately of any change regarding the particulars mentioned above. * ft_*_* - 1:t 4fffNV]! - - Position U,: Date 1 M : Signature (#) Ad;: (") Please enter the types of applications [e.g. TA (temporary transfer), TB (permanent transfer), SW (swing) etc.] which the signatory is not authorised to sign on behalf of the company, if any. (#) The Signatory should be EINA4: (a) sole proprietorship: the proprietor (P) gxwiij: A: (b) partnership: one of the partners (L) 9 I'm 1::9rIA;!- (c) limited company a director or a responsible person authorized by the board of directors. in which case documentary evidence in support of his/herdirectorship or his/her authorised status is required. ti ) ]: 1{ A 1 ;Iq 1i5F ' A *VAA*"14 typ TIC 473

96 Page 88 Appendix 3(b) TEXTILES CONTROLS REGISTRATION CARD 1. Name At Specimen Signatures of Authorised Officials Rnme te vs il Restrictions (1if any Position A Specimen Signature tu* (i 3. - Remarks (e.g. joint-signature requirements). if any. b..56 1',;t () Please enter the types of applications (e.g. TA (temporary transfer). TB (permanent transfer). SW (swing) etc.] which the signatory is not authorised to sign on behalf of the company. if any. Ml 4WM 4,^,I'711$JBMW A. { j!ft h.u2j*1 0'JtZ ( tf+u.(*(m) TB ( 4cX143) - SW (00.A,#0 O) TRA 13

97 Page 89 Appendix 4 Particular Requirements of the Quota Supply Condition A company, irrespective of whether it in an exporter or a manufacturer, must satisfy either of the following conditions before it is qualified to supply quotas for the export of a particular consignment : Either (i) perform at least four of the following functions (a) receive order from the overseas buyer, (b) receive payment from the overseas buyer, (c) purchase or supply the raw materials for the manufacture of the goods, (d) contract with the manufacturer for the manufacture of the goods, (e) make payment to the manufacturer for the goods, and (f) arrange the export of the goods; Or (ii) perform the principal processes in the manufacture of the consignment in question. 2. Any company which does not meet the conditions specified above cannot supply quotas for the export of restrained textiles. Otherwise, it may render the company liable to prosecution as well as administrative action by the Department. 3. A company which purports to have satisfied the conditions must, on request, produce evidence in support of its claim. Explanatory Notes 4. For the purpose of the conditions set out in paragraph I above, the detailed conditions and evidence according to which the functions would be regarded as having been fulfilled are as follows : (1) to receive order from the overseas buyer (a) the order must be issued direct by the overseas buyer or his local buying agent who has registered with the TradeDepartent in accordance with the conditions and procedures as set out in the relevant notices to exporters; (b) the order may take one of the following forms (i) a contract signed by both the overseas buyer and the quota supplier; (ii) a purchase order from the overseas buyer; (iii) a sales confirmation from the quota supplier, supplemented by the overseas buyer's endorsement/confirmation; (iv) a letter of credit issued on the application of the overseas buyer and with the quota supplier as beneficiary; (2) to receive payment from the overseas buyer (a) the payment must be received direct from the overseas buyer or his registered local buying agent responsible for issuing the order, or the consignee provided his name appears on the original order as the consignee of the goods; (b) the method of payment must be in accordance with paragraph (7) below; (3) to purchase or supply the raw materials for the manufacture of the goods (a) where the materials are purchased direct from overseas, the quota supplier must be in possession of the relevant invoice and Hong Kong import licence issued by the Trade Department. Where the materials are purchased from another local supplier, the quota supplier must possess the relevant invoice or payment receipt issued by that local supplier; (b) the delivery of materials to the manufacturer must be evidenced by the relevant invoice or delivery note bearing reference to the quota supplier and by the manufacturer's acknowledgment of receipt; /(c)...

98 Page 90 (c) the materials delivered must be used for the manufacture of goods under contract; (4) to contract with the manufacturer for the manufacture of the goods (a) a contract for the manufacture of the goods must be entered into by the quota supplier direct with the manufacturer; (b) the content of the contract should tally, in material particulars, with that in the order placed by the overseas buyer; (5) to make payment to the manufacturer for the goods (a) payment must be made direct to the manufacturer; (b) forms of payment must be in accordance with paragraph (7) below; (6) to arrange the export of the goods (a) the quota supplier must be responsible for arranging for shipment of the goods from Hong Kong to the destination as declared on the licence and must appear on the relevant bill of lading/airway bill as the 'shipper' of the goods; (b) the quota supplier must be responsible for issuing the invoice for the goods; (7) For the purpose of (2), (3) and (5) above, open account transactions are also allowed. The method of payment must be documented and the actual payments traceable and identifiable in the books of account of each party to the transaction. In the normal course of events acceptable methods of payment, supported by copies of all relevant documentation, will be (a) documents against payment; (b) documents against acceptance; (c) letters of credit; or (d) where the terms are cash on delivery, by means of crossed cheques made payable to the account of the payee only. Where it is desired that payments should be made by other means, the approval of the Director of Trade should first be obtained. Payments should not be made by means of cash or negotiable cheques; (8) The term "manufacturer"refers to the declared manufacturer on the export licence or the company that performs the principal processes in the manufacture of the goods concerned; (9) The term "principal processes" is the same as that in use under the certification of origin system, and it generally refers to those processes which permanently and substantially change the nature, shape, form and utility of the raw materials used, as laid down by the Director of Trade in certification of origin circulars.

99 Page 91 Appendix 5 Calculation of Quota Allocation for a newly restrained category Premise (a) textiles restraint period (b) "past performance" reference period (c) total verified "past perfomance" during the reference period - 12 months - 12 months - 500,000 doz. Case I : verified performance greater than limit (d) restraint limit (e) company Z's performance during reference period ( f) company Z's allocation' - 400,000 doz. = 1,000 doz.. (e)/(c)x(d) doz. Case II: verified performance less than limit (g) restraint limit ( h) company Z' s performance during reference period (i) company Z's allocation* - 600,000 doz. - 1,000 dcz. = 1,000 do. * Note: Assuming that company Z performed both functions of exporter and manufacturer in all the consignments. Otherwise, part of this amount will have gone to other companies which have performed the remaining functions.

100 Page 92 Appendix 6 Serial No. Import and Export (General) Regulations Quota Allocation Certificate Date: Export of Restrained Textiles to for the period TO TCR No. In accordance with the principles of Notice to Exporters Series : No. hereby offered the following quotas/permits :- I quota allocation set dated out in my you are Market/ Quantity Category/Item Unit Own Bonus Total (Note (1)) Allocation Allocation Allocation t (a) (b) (c) = (a) + (b) i~~~~~~~~~~~~~~ IA'-- t'/ ----I E~~~~ I~_ Note: (1) The descriptions of these categories are set out in Appendix to Exporters under reference. I of the Notice Important Note The issue of this certificate and the utilisation of the allocation detailed herein are subject to the terms, conditions and warnings contained in the attached letter referenced dated Issued by Director of Trade

101 QAL C/RW/G/7 Page 93 By Recorded Delivery Trade Department Ocean Centre, Canton Road, Ref.: EIC ( ) Tsimshatsui, Kowloon. Date Dear Sirs, Import and Export (General) Regulations Preliminary Quota Allocation Export of Restrained Textiles to the ( Market ) for the period ( ) In accordance with the principles of quota allocation set out in my Notice dated, you are now offered the preliminary quota allocation shown in the attached Quota Allocation Certificate for the export of restrained textiles to the ( market ) during the period. This preliminary quota allocation shall cease to be valid once you have been offered and have accepted a final quota allocation. to Exporters, Series _ : ( ) No. -/- In this connection, any shipment made against this preliminary quota will be debited against the final quota allocation. Any swing, transfer or swing transfer of quota against this allocation will be treated as swing, transfer or swing transfer of quota against the final quota allocation. Conditions attached to this offer 2. The preliminary quota is offered to you subject to the following conditions: (a) Any article, which is subject to a quota system or an export authorization system, shall not be exported to the ( market ) unless your company is the holder of a valid export quota holding or a valid export authorization covering the export of that article, or unless the Director expressly gives his permission. (b) Where an export licence is applied for against valid quota holdings or valid export authorisations, the quantities covered by the export licence shall be debited against the appropriate quota holding or export author isat ion.

102 C/RM/C/7 Page 94 (c) In accepting this offer of quota, your company shall undertake to comply with the provisions of the textiles export control system operated by the Department (including registration for textiles controls purposes), as may be published from time to time by the Department, and any conditions which the Department may promulgate from time to time in Notices to Exporters. Conditions of Utilisation 3. The preliminary quota is offered to you subject to the following conditions of utilisation : (a) This quota shall be valid only so long as your company holds a valid Hong Kong Business Registration Certificate, is actively participating in the textiles trade as an exporter, manufacturer or finisher for export to the market referred to in this allocation and is registered with the Trade Department for textiles controls purposes. (In this connection, you are reminded that companies are required to renew their registration each year). (b) Companies holding different Textiles Controls Registration Numbers will be treated as separate and distinct entities for the purposes of the application of any condition of utilisation and this will be so irrespective of any relationship which may exist between registrants. (c) You should report any change of address or cessation of business to the Systems and Common Services Branch of the Department immediately. A company which has ceased business will have its textiles controls registration cancelled, and its quota-holding reverted back to the Department. It will not be allowed to dispose of its quota by transfer or other means, and its applications for quota licences, transfers of quota, etc. will be automatically rejected. (d) In applying for an export licence to cover a particular consignment, you are allowed to supply the required amount of quota from this allocation provided that you are able to satisfy the following requirements Either (1): perform at least four of the following functions: ( i) receive order fran the overseas buyer, ( ii) receive payment fran the overseas buyer,

103 Page 95 (iii) purchase or supply the raw materials for the manufacture of the goods, (iv) contract with the manufacturer for the manufacture of the goods, (v) make payment to the manufacturer for the goods, and (vi) arrange the export of the goods; Or (II): perform the principal processes in the manufacture of the consignment in question. Please note that the particular requirements of each of the above functions are set out in Notices to Exporters issued by the Trade Department. These particular requirements must also be complied with in order to satisfy this condition. The companies concerned should contact the Enquiry Section of the Trade Department if they are in any doubt as to the content and/or application of these particular requirements. (Warning: If you are not able to satisfy this condition., you cannot supply quota for the export of restrained textiles. Otherwise, you may be rendered liable to prosecution as well as administrative action by the Department.) Ce) Companies, particularly quote-suppliers and transferors of temporary quota, should ensure, in their own interests, that licensed quantities are wholly shipped or, if they are not, short-shipuents and cancellations of export licences are notified to the Department in accordance with the conditions in (f) and (g) following. Cf) Short-shipments in respect of each export licence must be reported to the Department within 14 working days after the date on which the goods are exported. (Warning: Failure to do so represents exports not in accordance with a licence, in respect of which the Department may take prosecution and/or administrative action against the exporter or the manufacturer concerned. Such administrative action may include: (i) non-credit back of the short-shipped quantity for subsequent re-use even if the exporter concerned can return the (original or visa) copy of the export licencefor amendment; Cii) nullification of the short-shipped quantity for the purpose of quota allocation; and

104 Page 96 (iii) other administrative action including permanent surrender of quota and debarment of the companies concerned from participation in future textiles export control schemes.) (g) If an export licence is not utilised for shipment within its validity period, the licence should be cancelled within 14 working days after the expiry date. (warning : Companies which fail to do so may be subject to (i) non-credit back of the licensed quantity for subsequent re-use even if the exporter concerned can return the (original or visa) copy of the export licence for cancellation; (ii) nullification of the licensed quantity for the purpose of quota allocation; and (iii) other administrative action including permanent surrender of quota and debarment of the companies concerned from participation in future textiles export control schemes.) (h) This quota shall be licensed not later than for shipment before. No shipment shall be made against this quota after. In this connection, the term 'shipment' generally means the goods in question are cleared of Hong Kong waters en route to ( country of destination ). (Warning : The Director of Trade at all times reserves the right to determine whether, in any case, shipment has been made against this quota. In the event the Director decides that, within the context of the textiles export control system, shipment has not been properly made, he may take administrative action against the company.) (i) All goods shipped against this quota must be of Hong Kong origin, and in the case of exports to USA, EEC and Norway, must additionally be covered by Certificates of Hong Kong Origin. Goods claiming Hong Kong Origin must have undergone principal processes in Hong Kong. These are processes which permanently and substantially change the nature, shape, form, and utility of the raw materials used, as laid down by the Director of Trade in certificate of origin circulars. (j) Whereas this quota may be transferred partly or wholly to another company, any such transfer must be registered with the Department on Form TIC396, 397 or 398, as the case may be, subject to the conditions contained therein and the rules regarding quota transfers and allocation to temporary transferors contained in (k) and (1) following.

105 Page 97 (k) A company which has permanently transferred in quotas in any category is not allowed to transfer out any quotas in that category on a permanent basis in the year in which che transfer-in has taken place (Year 1) and the year immediately following (Year 2). For the purpose of this rule, all transfers of 198(7) quotas processed in 198(6) will be deemed to be effected in 198(7) and will be subject to this rule in 198(7) and 198(8). (1) A company which, during any one year, gross transfers out in any group on a temporary basis 50% or more of its quota holdings in that group shall be liable to have its quota allocation in the following year reduced. For the purpose of this rule : (I) Temporary transfers (including swing transfers) are considered on a by-market and by-group basis. The grouping of categories for the ( market ) is set out at Appendix to Notice to Exporters, Series : No. / dated _ (II) In calculating a company's transfer-out percentage in a group for the ( market ), (i) quota holdings include all quota allocations in the categories within any group minus any permanent transfers-out plus any utilised permanent transfers-in; and (ii) temporary transfers-out in any group are calculated on a gross basis, i.e. any temporary transfers-in in any category or categories within any group will not be included in the calculation to offset temporary transfers-out. (III) The reduction to which the company is liable is up to a maximum of 40% of its total temporary transfers-out in that group for the market concerned as shown at Appendix to Notice to Exporters, Series : No. / dated _ (IV) When a reduction is applied to a temporary transferor, and where he qualifies for allocation in more than one category in that group for the market concerned, the reduction will be effected in the following manner :

106 Page 98 (i) the reduction will be distributed among those categories in the group with temporary transfers-out, on a proportionate basis; or (ii) where (i) above is not applicable (e.g. where the temporary transferor does not have sufficient allocation in the categories concerned, or where changes in categorisation have occurred), the reduction will be distributed among all categories in the group in which he holds quota, in proportion to the size of allocation in individual categories. (V) Allocations and transfers of permits will be considered but counted separately (i.e. 100 units of quota in Cat. X and 100 units of permits in Cat. X(P) shall be counted as 200 units, and a transfer of 10 units of Cat. X quota and that of 10 units of Cat. X(P) permits shall be counted as a transfer of 20 units). Your attention is invited to Notices to Exporters, all series, dated 12 June 1985 and 12 December 1986 which set out in detail the provisions of this rule. Explanatory Note 4. Under the quota system operated by the Trade Department, 'past performance' is the basic principle for determining how quotas are allocated. This means that quotas have to be earned and will be lost unless they are re-earned by own performance. The temporary transfer arrangement is an exception to this basic principle and the rule relating to temporary transfer (contained in para. 3(1) above) serves to circumscribe this exception to prevent excesses. Thus, a quota-holder can normally expect to earn quotas not less than his own performance. While he may also expect allocations arising fran performance by others against quotas which he has transferred out on a temporary basis, the extent of such allocation of quotas will bear an inverse relation to the extent of his temporary transfers-out. The rule contained in para. 3(1) above determines the extent of such allocations.

107 Warning C/RM/G/7 Page Should you fail to comply with any of the conditions contained herein (as well as any relevant conditions contained in Notices to Exporters) whether relating to the acceptance of this offer or to the utilisation of the quota accepted (including transferring quota without proper registration) then, in addition to any prosecution which may be brought, the Director may take administrative action-against you. Such administrative action may involve, but shall not necessarily be confined to, any or all of the following: forfeiture or surrender of quota (on a permanent or temporary basis), withdrawal of the balance of quota remaining unlicensed at that time, debarment from all export licensing facilities and disqualification from eligibility for receipt of further allocations of quota. The Department reserves these rights also where, in its view, there is evidence which shows your involvement in any form of malpractice including falsifying of particulars affecting any export licence or document in support thereof. Acceptance of Allocation 6. I should be grateful if you would confirm in writing on or before ( ) whether you wish to accept this preliminary allocation, either in whole or in part, under the terms, conditions and warnings set out in this letter. Your written confirmation should be returned by hand to the Special Counter of the ( market ) Textiles Export Controls Branch of the Trade Department, 15th floor, Ocean Centre, Canton Road, and should include: (a) the reply form at Appendix I, and (b) a photocopy of the Quota Allocation Certificate attached to this letter, and (c) a copy of your company's valid Hong Kong Business Registration Certificate. 7. If you wish to accept this allocation in part only, you should indicate in your reply the amount you wish to accept and return the Quota Allocation Certificate attached to this letter for amendment.

108 Page 100 Acknowledgement of Reply Form 8. On receipt of your reply form and the accompanying documents stated at paragraphs 6(b) & (c) above, an acknowledgement letter will be issued to you. You should therefore complete the proforma letter at Appendix II and hand it in together with your reply form. This proforma will be signed, dated and chopped by a responsible officer and issued to the bearer of your reply form immediately upon receipt. In the case of any dispute in future as to whether you have returned your reply form to the Department, this acknowledgement letter will be accepted as conclusive evidence that you have completed your obligation as a quota recipient in returning the reply form to the Department. Important Notes 9. Please note that your confirmation of acceptance must be received by this Department on or before the date specified in paragraph 6 above. Failure to do so will be taken as a positive indication that you do not wish to accept any part of this allocation in which case the Department will re-allocate the quantities thus made available. Any confirmation of acceptance after ( ) will not be accepted. 10. You should also ensure that your confirmation of acceptance is returned by hand to the Special Counter of the ( market ) Textiles Export Controls Branch. Any confirmation of acceptance sent in through the mail will not be accepted. Such confirmation of acceptance will not be accepted by the Department's other offices. 11. The Department at all times reserves the right to adjust this allocation, as well as to vary the terms and conditions under which it is issued and utilised. In any such event, however, due notice will be given whenever possible. The right to make any adjustment may also be exercised in cases where, for any reason, a company is either over or under allocated. The Department accepts no liability whatsoever in the event that the quota system is revised, amended or abolished altogether. Queries 12. Should you have any queries regarding the calculation of the quotas offered to you, you should set out your queries Immediately in a letter to the Department before you confirm acceptance of this allocation.

109 Page 101 Enquiries 13. Should you require further information on this subject, please contact the following officers : Market Licensing Controls Officer Telephone No. Yours faithfully, Director of Trade

110 Page 103 To The Director of Trade Appendix I Trade Department, (Reply form) Ocean Centre, Canton Road, Kowloon. Export of Restrained Textiles to ( ) Preliminary Allocation of Quotas/Permits for export in the period With reference to your letter dated offering preliminary quota/permit allocation for export of restrained textiles to the ( ) for the period, I, the undersigned, being authorised to sign on behalf of (Name of Company)... (Address of Company)... (Textiles Controls Registration No.)... hereby declare that : *(a) I accept the full amount of quota/permit allocation set out in the Quota Allocation Certificate subject to all the terms, conditions and warnings stated in the letter under reference. I have read, understood and I agree to abide by these terms, conditions and warnings. I enclose herewith a copy of my company's valid Hong Kong business Registration Certificate. *(b) I accept (insert the amount accepted) of these quota/permit allocation subject to all the terms, conditions and warnings set out in the letter under reference. I have read, understood and I agree to abide by these terms, conditions and warnings. I enclose herewith a copy of my company's valid Hong Kong Business Registration Certificate and the Preliminary Quota Allocation Certificate for amendment. *(c) I do not wish to accept this allocation. * (Delete whichever is inapplicable) Signature and Company Chop For Official Use Acknowledgement letter issued Name in Block Letters on Tel. No. Date

111 Page 104 Appendix II (Acknowledgement Letter) Company Name and Address : - (To be filled in by the quota/permit holder) Textiles Controls Registration No * I Dear Sirs, Export of Restrained Textiles to Preliminary Allocation of Quotas/Permits for export in the period This is to confirm receipt of your letter indicating acceptance of the quotas/permits allocated to you in respect of the above market on _ Yours faithfully, for Director of Trade

112 TO BE SUBMITTED IN TRIPLICATE IMPORT AND EXPORT ORDINANCE (CHAPTER 60) Application for Type A Transfer of Quota for Export of Textiles to... (Importing Country) Stamps Appendix 7 Date of Receipt and Receipt No C/RM/G/7 Page 105 Part I 1. 1, the undersigned, being authorized to sign on behalf of (Name of Company)... (Address of Company)....j r Ref. No. TA Textile Controls Registration No... hereby agree to make available to the company named in Part HI below, from quota which has been allocated to my company in category/item no.under quota reference. a quantity of. grams/sq.m./sq.yds./pieces/doz./doz.pairs/pairs/lbs./kg./sets' (Delete if inapplicable) 2. Should any quota entitlement for a succeeding restraint period result from shipment performance against this quota, I request that it be assigned to my company have read and understood, and agree to abide by, the conditions of transfer contained in the reverse ot this form. I have also read and understood the warning notes overleaf. Part 11 I. 1, the undersigned, being (Name of Company). (Address of I Company)... "I'llv Signature /.... Name. B C~~~~~~~~~~4... ~ ~~...(Company...Chop)... (Company Chop) I-,... Date. Textile Controls Registration No t of.grams/sq. y hereby agree to receive the above transfer of...grams/sq. m./sq. yds./pieces/doz./doz. pairs/pairs/ lbs./kg./sets quota in category/item no.from the company (under TCR No. ) named in Part 1. (Delete if inapplicable) 2. Should any quota entitlement for a succeeding restraint period result from shipment performance against this quota, I request that it be assigned to the company making this transfer. 3. I have read and understood, and agree to abide by, the conditions of transfer contained in the reverse of this form. I have also read and understood the warning notes overleaf. Signature... Name in BLOCKLETTERS (Company Chop) Tel. No. Date. Part III For Official Use Only VALIDATION TCR No. Valid Until Serial No. Transferor's Quota Card adjusted Initials Transferee's Quota Card opened Transfer Record entered 7 Triplicate copy mailed to Transferor TIC 396 (Rev for Director of Trade The above transfer is acknowledged subject to conditions contained overleaf.... for Director of Trade Date...

113 CONDITIONS OF TYPE A TRANSFER (a) The transferee shall comply with all conditions governing the allocation and utilization of this quota, as stipulated or referred to in the quota allocation certificate issued to the transferor, and in Notices to Exporters issued by the Trade Department from time to time. The transferee should contact the Enquiry Section of the Trade Department if in any doubt as to the content and/or application of these conditions. (h) Quota received by a company on the basis of a type A transfer may not be further transferred on a type A basis, except when the transfer is back to the original transferor. However, the transferee to a type A transfer may subsequently transfer out quota from its main quota allocation in the same category or item during the same restraint period. (c) The Director of Trade reserves the right to refuse any application to transfer quota without assigning any reason. WARNING 1. The Director of Trade accepts no liability whatsoever in the event that quota systems are revised, amended, or abolished altogether. The fact that quota transfers hrve been acknowledged by the Director will not affect in any way his right to administer the quota system as he sees fit, or affect the revision, amendment or abolition of the quota system should circumstances so require. 2 On all export licencc applications in respect of shipments made against the transferred quota, the reference number given in the top right hand corner on the reverse of this form must be quoted. Any licence application made without this number will result in the shipment being debited against the transferce company's main quota allocation. 3. The Department undertakes no obligation to inform the transferor company of the transferee's export performance against the transferred quantity, but will provide such information on request. 4. Validation of this application does nog guarantee that the transferor will have the necessary quotas at the time thc transfer application is resubmitted to thc Department for processing. EXPLANATORY NOTES 1. Any company holding a textile quota may transfer it either wholly or in part to any other company registered with the Trade Department for textile controls purposes, provided the transferor and/or the transferee company have not been disqualified by the Trade Department from engaging in such transfers of quota or from holding quota in the category or item concerned. 2. The form overleaf should only be used when applying for type A transfers; that is, transfers effected on the understanding that any quotaentitlement for a succeeding restraint period resulting from shipment performance against the yansfcrredquota be assigned to the transferor company. Where the quota entitlement is to be. assigned to the transferecețype B transfer application (Form TIC 397) must be used. r A j14148t faee Al a~r St' A~M " As M *A$ );f 4 TO i ra.,uu3~1 e. AbeaNsE s 9 tikmi Z4 fw F- 15aM X * rj a V. IV i h (C. I~hqtA 4C%S 4-P3Eiff-Rit fi - of -IXWA;iUi: illu ** it WEEEr~l (b)..h *+S~heSgW~xt~lbe~s~tfl- {iq's.iy^ * N$~ * s ~ t z mf m~wr ~" M~~ *al 3.4s: W V. Afo4 83 k ia. 31 -I5Ah~~bji R1 W)La ltlim%3 KI,ZEEMn -Ii StA -f*."1 * 1-l Atk ; (TICS. }~( ik R 397 as Kfinn L nww)n- A. ljamr B?A;K Ais (TIC ah,397 AX) -

114 TO BE SUBMITTED IN TRIPLICATE Appendix 8 C/RM/G/7 Page 107 IMPORT AND EXPORT ORDINANCE (CHAPTER 60) Application for Type B Transfer of Quota Part I for Export of Textiles to... (Importing Cou 1. 1, the undersigned, being authorized to sign on bel (Name of Company). (Address of Company)... Registration S:amps Date of Receipt and Receipt No. Ref. No. TB Textile Controls N o hereby agree to make available to the company named in Part 11 below, from quota which has been allocated to my company in group/category' a quantity of... no... grams/sq. yds./pieces/doz./doz. pairs/pairs/lbs./kg.* (Delete if inapplicable) 2. Should any quota entitlement for a succeeding restraint period result from shipment performance against this quota, I request that it be assigned to the company receiving this quota transfer have read and understood, and agree to abide by, the conditions of transfer contained in the reverse of this form. I have also read and understood the warning notes overleaf: * (Company _.6op,' Part , the undersigned, being authorized to sign on behalf g1- (Name of A Company) (Address of Company)...I ';... Signature.. Name in * BLOCK LETTERS-..'.... Tel. No... : Date. Textile Controls Registration No Z ~ hereby agree to receive the above transfer of... grams/sq. yds./pieces/doz./doz. pairs/pairs! lbs./kg.0 quota in group/category* no.... from the company (under TCR No...) named in Part 1. ('Delete if inapplicable) 2. Should any quota entitlement for a succeeding restraint period result from shipment performance against this quota, I request that it be assigned to my company. 3. I have read and understood, and agree to abide by, the conditions of transfer contained in the reverse of this form. I have also read and understood the warning notes overleaf. (Company Chop) Tel. No Part III VALIDATION For Official Use Only TCR No. Valid Until Serial No. Signature... Name in BLOCKLETTERS... Date. ITransferor's Quota Card adjusted Transferee's Quota Card opened Transfer Record entered Triplicate copy mailed to Transferor TIC 397 (It" 19S5) Initials for Director of Trade The above transfer is acknowledged subject to conditions contained overleaf.... for Director of Trade Date...

115 7 Page 1 08 CONDITIONS OF TIPE B TRANSFER (a) The transferee shall comply with all conditions governing the allocation and utilization of this quota, as stipulated or referred to in the quota allocation certificate issued to the transferor and in Noticcs to Exporters issued by the Trade Department from time to time. The transferee should contact the Enquiry Section of the Tradc Department if in any doubt as to the content and/or application of these conditions. b) The Director of Trade reserves the right to refuse any application to transfer quota without assigning any reason. WARNING 1. The Director of Trade accepts no liability whatsoever in the event that quota systems are revised. amended, or abolished altogether. The fact that quota transfers have been acknowledged by the Director will not affect in any way his right to administer the quota system as he sees fit, or affect the revision, amendment or abolition of the quota system should circumstances so require. 2. Validation of this application does not guarantee that the transferor will have the necessary quotas at the time the transfer application is re-submitted to the Dcpartment for processing. EXPLANATORY NOTES 1. Any company holding a textile quota may transfer it either wholly or in part to any other company registered with the Trade Department for textile controls purposes, provided the transferor and/or the transferee company have not been disqualified by the Trade Department from engaging in such transfers of quota or from holding quota in the group or category concerned. 2. The form overleaf should only be used when applying for type B transfers; that is, transfers effected on the understanding that any quota entitlement for a succeeding restraint period resulting from shipment performance against the transferred quota shall be assigned to the transferee company. Where the quota entitlement is to be assigned to the transferor, type A transfer appliction (Form TIC 396) must be used. rb J~lSE1F,- / MV l~. 7.~f I -4a-4.As4 -~ ~ ~ ~~~~M AAUI UAI ' y votaf- l - KreswM1dWY-11 *R-Avk* M aft (Z;Y3F01 t$ml~l AMM sjjtt i(fly fl TI law Oe39 2)81)fi FfffzbF& rb1w9g~~ tl' 3ifithI*R1.?jp-unEff 0!;42 % WU t as a t*2 ( ) a r e um9slrraamw N -ElR

116 TO BE SUBMITTED IN TRIPLICATE import AND EXPORT ORDINANCE (CHAPTER 60) Application for Swing Transfer of Quota for Part I Export of Textiles to... (Importing Country) 1. 1, the undersigned, being authorized to sign on behalf of (Name of (Address of Compan y)... Company)).Registra.io..No... Registration I I Date of Receipt and Receipt No. Ref. No. s Textile Controls N o.... C/RM/G/7 Appendix 9 Page hereby agree to make available to the company named in Part 11 below, from the quota which has been allocated to my company in category/item' no.under quota reference.aquantity of.grams/sq. m/sq. yds./pieccs/doz./doz. pairs/pairs/lbs.,;kg.' ('Delete if inapplicable) 2. 1 have read and understood, and agree to abide by, the conditions of swing transfer contained on the reverse of this form. I have also read and understood the warning notes overleaf. Signature... Name in BLOCK... Tel. No... Date (Company Chop) Part If '',..7 I. 1, the undersigned, being authorized to sign on behalf of / (Name of Company)...I... (Address of * I. Textile Controls Company).....! Registration No & ,, hereby agree to receive the above swing transfer of quota from the company (un NTCR'.o, ) named in Part 1, which is required for utilization in category/ item" W.- no. "Conversion:- (a) Quantity of q t s ng out, as stated in Part I... (b) Conversion fact category/item' swung out... grams/sq. m/sq. yds. per unit/units per kg.' (c) Conversion factor of category/item' swung in... grams/sq. m/sq. yds. per unit/units per kg.' (d) Amount of increase: (i) (a) x(b) - (c)=.... grams/sq. m/sq. yds./pieces/doz./doz. pairs!pairs/lbs./kg.$ (ii) (a)-. (b)x(c)=.... grams/sq. m/sq. yds./pieces/doz./doz. pairs/pairs/lbs/kg.' Note: Use Formula (d)(i) if the conversion factor is in grams/sq. mrsq. yds. per unit. ('Delete if inapplicable) Use Formula (d)ii) ir the conversion factor is in units per kg have read and understood, and agree to abide by, the conditions of swing transfer contained on the reverse of this form. I have also read and understood the warning notes overleaf. (Company Chop) Part III VALIDATION For Official Use Only TCR No. Valid Until Serial No. Signature... Name in BLOCK LETTERS... Tel. No... Datė Transferor's Quota Card adjusted Transferee's Quota Card opened Swing Transfer Record entered Triplicate copy mailed to Transferor TIC 391 (R. ls#as Initials I for Director of Trade The above swing transfer is acknowledged subject to conditions contained overleaf for Director of Trade Date..

117 Page 110 CONDITIONS OF SWING TRANSFER (a) swing-transrefee The shall comply with all conditions governing the allocation and utilization of this quota. as stipulated or referred to in the quota allocation certificate issued to the transferor and in Notices to Exportcrs issued by the Trade Departrment from time to time. The transferee should contact the Enquiry Section of the Trade Dcpartment if in any doubt as to the content and/or application of these conditions. (h) Quota received by a company on the basis of a swing transfer may not be further swung out or transferred on a type A basis. except when the swing transfer is back to the original transferor. However the transferee to a swing transfer may subsequently transfer out quota from its main quota allocation in that same category or item to another company during the same restraint period. (c) The Director of Trade reserves the right to refuse any application for swing transfer without assigning any reason. WARN ING I T'he Director of' Trade accepts no liability whatsoever in the event that quota systems are revised. amended, or abolished altogether. The fact that quota swing transfers have been acknowledged by the Director will not affect in any way his right to administer the quota system as he sees fit, or affect the revision, amendment or abolition of the quota system should circumstances so require. 2. On all export licence applications in respect of shipments made against an approved swing transfer, the reference number given in the top right hand corner on the reverse of this form must be quoted. Any licence application made without this number will result in the shipment being debited against the transferee company's main quota allocation. 3. The Department undertakes no obligation to inform the transferor company of the transferee's export performance against the swing-transferred quantity, but will provide such information on request. 4. Validation of this application does not guarantee that the transferor will have the necessary quotas at the time the transfer application is re-submitted to the Department for processing. EXPLANATORY NOTES 1. Any company holding a texule quota mayswing or transfer it either wholly or in part to any other company registered with the Trade Department for textile controls purposes, provided a swing margin is available and the transfer and/or the transferee company have not been disqualified by the Trade apartmentt from engagingin such wing or transfer of quota or from holding quota in the category or item concerned The form overleaf should only ed when applying for a swing transfer of quota; that is, a type A transfer of quota held by another company in a different category/item, and effected on the understanding that any quota entitlement for a succeeding restraint period resulting from shipment performance against the swing transferred quota shall be assigned to the transferor company in the category or item from which quota has been swung out. i.e. the source category or item. Where the source of swing is obtained from quota held by the same company in a different category/item, swing application (Form TIC 395) must be used. ' (a) (b) &NililIJl* *1 A, E. W - i ;. Vh-..1 X S Il$ft * LA / f19 fiit RiC' ti ji;1hir A, MIMr. fit 0 t: Mb 1a (F301M$) aaimaxatr If rl1* $1inab - 'ena IIf NItIj' A. & N X$,fXrrA i;" ja:t t *sa ke1fi 2ElL A g t* 'H tlj1 I~lf~liltfliij -'Zi#s i -BI1Mlh' at *;14-M1 UV&~l[1]MJNIh izg~*i~ (e) *i Xk8tp lizl * e~frtqlem^mhgvj4in * jfsf Sj. I. &!ismt9m4zt IE * * ; WI-A:ff4Af~ * Pit' 1 A1SPAJ FlA8t 20 M0Iltitt.A A~fftU * IM IN~ateRz!*U t tozf~ FR )til1;jjh13.j J, fejffz#af.t'~ ti V ~ ~ ±~~t~ ~i -ON 3.~ **A "lt~f MM ~ B J E '1Ato$~.:R*lcalUitar tcsi: **$^ Mni1t.iX u* **fpft**i4 j4&jt 2. m X Jif1S l.r t * flhj rntii) * I~ rnwj~t*rijle-;w;ev4lij;miu/'git1.mqm#(tspiir{ Ic&S;3 95Pv )*

118 Page 111 Appendix 10 Grouping of Categories for the USA Market Group Cat. No. Description A B C Do F Yarns 604 WI1F yarn spun non-cellulosic 605(1) MMF sewing thread Fabrics and non-garment make-ups 313 Cotton sheeting 314/320-B Cotton broadcloth and poplin, not elsewhere specified 315 Cotton printcloths 317 Cotton twills and sateens 319 Cotton duck 369(1) Cotton shop towels Knit shirts and blouses 338/339 Cotton knit shirts & blouses 338/339(1) Cotton knit tank tops 638/639?tIF knit shirts 6 blouses Sweaters 345 Cotton sweaters 445/446 Wool sweaters 645/646 MMF sweaters 438 Wool knit shirts & blouses 845(l) Sweaters of OVF, not made from knit to shape component parts knitted elsewhere. 845(2) Sweaters of OVF, made from knit to shape component parts knitted elsewhere. 846(1) Sweaters of SB, not made from knit to shape component parts knitted elsewhere. 846(2) Sweaters of SB, made from knit to shape component parts knitted elsewhere. Trousers 347 Cotton trousers, m & b 348 Cotton trousers, w, g & i 647 MMF trousers, m & b 648 MMF trousers, w, g & i 847 SBOVF trousers G Blouses, not knit 341 Cotton blouses, not knit 641 MMF blouses, not knit 340 Cotton shirts, not knit 640 MMF shirts, not knit 840 SBOVF shirts and blouses, not knit H Dresses 336 Cotton dresses 436 Wool dresses 636 MhF dresses 836 SBOVF dresses

119 Page C/RM/G/7 III Group Cat. No. Description I J Skirts 342 Cotton skirts 442 Wool skirts 642 MMF skirts 842 SBOVF skirts Coats 333/334 Cotton coats, m & b 335 Cotton coats, w, g & i 633/634 MMF coats, m & b 635 MMF coats, w, g & i 835 SBOVF coats, w, g & i K Suits, wool coats and trousers 434 Wool coats, m & b 435 Wool coats, w, g&i 447/448 Wool trousers 443 Wool suits, m & b 644 MMF suits, w, g & i 444 Wool suits, w, g & i L M N O Nightwear 350 Cotton dressing gowns etc. 351 Cotton pyjamas & other nightwear 650 MMF dressing gowns etc. 651 MMF pyjanas & other nightwear Underwear and swimwear 649 MWF brassieres 352 Cotton underwear 652 MMF underwear 659(2) MMF swimsuits Gloves 331 Cotton gloves 631 MMFgloves Miscellaneous garments 359(1) Cotton overalls, coveralls, junpsuits 659(1) MMF overalls, coveralls, jumpsuits 359(2) Cotton outer vests 359(3) Cotton infants sets 337 Cotton playsuits, sunsuits, etc. 637 MMFplaysuits, sunsuits, washsuits, rompers, creepers P GI, GII and GIII A quotas Notes : MM - man-made fibre SBOVF - silk blend and other vegetable fibre (OVF : other vegetable fibre (SB : silk blend) m & b - man's and boys' w, g & i - wamen's, girls' and infants' * introduced from 1 January 1988

120 Grouping of Categries for the SEC Market Pace 113 Group Cat No. Description A Fabrice and no rent make-up 2/2A Woven cotton fabrics 3/3A Woven mmf fabric 32 Pile fabrics 39 Woven table linen 61 Woven narrow fabrics 109 (FR) Sails B 4 * Knitted shirts, T-shirts, etc. C 5 Knitted pullovers, cardigans D 6/6A * Woven trousers, shorts E 7 Blouses F 8 Woven shirts G Dresses and skirts 26 Dresses 27 Skirts H Woven parkas and ski-suits 21 * Woveu parkas and anoraks 77 Woven ski-suits and ski-overalls I J K Suits 16 Wovan suits, m & b 29 Woven suits, w & g 74 Knitted suits, w & g Indoor wears, nightwears, underwears and swimwears 13 Knitted briefs 13(S) Knitted briefs of regenerated textile fibres 18 Woven indoor wears, nightwears and other underwears 18A (FR) Woven nightwears 24 Knitted indoor wears and nightwears 31 Brassieres 72/79 Swimwears 86 (UK) Corsetry Gloves and stockings 10/11 Knitted gloves 12 Knitted stockings L Babies' garments and clothing accessories 68 Babies' garments 68 (S) Babies' clothing accessories except gloves and woven socks M Other outergarments 4 CS) Knitted outergarments similar to Cat 4 28 (UK) Knitted trousers 28 (S)(UK) Knitted shorts and bib-and-brace overalls 73 Knitted track-suits 78 Other woven outergarmients 83 Other knitted outergarments Notes : mmf = man-made fibre w & g = women's and girls' m & b = men's and boys' * including permits for children's wear

121 Grouping of Categories for the Canadian Market Description Fabrics and non-garment make-ups Bed sheets Cotton terry towels Denim fabrics Cotton polyester/cotton broadwoven fabrics other than denim and corduroy Sweaters Sweaters, pullovers, cardigans, MB Sweaters, pullovers, and cardigans, WGCI Trousers Trousers, MBWG Overalls and coveralls, MBWG Trousers, shorts, overalls and coveralls, CI, and shorts, MBWG Shirts and blouses, T-shirts and sweatshirts Shirts with tailored collars, MB Shirts other MB Blouses and shirts, WG T-shirts and sweatshirts, MBWGCI Blouses and shirts, CI Dresses and skirts, WGCI Outerwear Winter outerwear garments, MBWGCI Suits, co-ordinates, and outerwear sets, MBWGCI Overcoats, topcoats and rainwear, MEWGCI Jackets, professional coats and shop coats, M3WGCI Fine suits, MB Nightwear, underwear and swimwear Sleepwear, MBWG Foundatioin garments, Underwear, MBWGCI Swimwear, MBWGCI Work gloves MBWG Notes : MB - men's and boys' WG - women's and girls' CI - children's and infants'

122 Grouping of Categories for the Swedish Market C/RM/G/7 Page 115 Category/ Group Subcategory Brief Description No. A Nightwear, swimwear, stockings, bed linen and underwear, etc. 1 Knitted stockings and socks 3a Knitted night garment 3b Woven night garment 4a Knitted underwear, men's and boys' 4b Knitted underwear, women's and girls' 4c Knitted underwear, babies' lib Bathing suits and trunks 13 Bed linen 17 Brassieres B Shirts, blouses, costumes, dresses and skirts 2a Knitted shirts (other than T-shirts) 2b Woven shirts (other than T-shirts) 9a Knitted costumes, dresses and skirts 9bc Woven costumes, dresses and skirts Wa lob Knitted blouses Woven blouses C 5 Knitted sweaters D 6cd A Jackets and other outer-garments Jackets Protective clothing B-D Sets of matching garnents, woven waist coats and other outer-garments E 8 Trousers

123 Page 1 16 Grouping of Categories for the Norwegian Market Brief Description Woven trousers, coats and jackets Woven jackets, men's and boys', women's and girls' Woven trousers, men's and boys', women's and girls' Woven coats, men's and boys', women's and girls' Knitted shirts, blouses, sweaters, jeckets,dresses, etc Knitted shirts, and blouses, men's and boys', women's and girls', infants' Knitted sweaters and jackets, men's and boys', women's and girls', infants' Knitted dresses, suits, skirts and trousers, men's and boys', women's and girls' Knitted undergarments, woven gloves and bed linen Knitted undergarments,men's and boys', own's and girls', infants' Bed linen woven gloves Woven shirts and blouses Woven shirts, men' s and boys' Woven blouses, women' s and girls'

124 Grouping of Categories for Austria C/RM/G/7 Page 117 In view of the small number of items under restraint, all the categories for Austria are treated as one group. Group Cat. No. Description A 1 Shirts, not knitted or crocheted, wholly or mainly of cotton or of discontinuous synthetic fibres 2 Blouses, not knitted or crocheted, wholly or mainly of cotton or of man-made fibres, women's, girls' and infants' wear 3 Slacks, shorts, jeans, trousers and divided skirts, not knitted or crocheted, wholly or mainly of cotton or of man-made fibres 4 Dresses, knitted or crocheted, of synthetic fibres; dresses, not knitted or crocheted, of cotton or of man-made fibres; skirts, not knitted or crocheted, of cotton, women's, girls' and infants' wear

125 Page 118 Grouping ofcategories for Finaland In viw of the small number of items under restraint, a13 the categories for Finland are treated as one Group Cat. No. Description A la Briefs, drawers, panties, undershorts, and the like, knitted or crocheted, wholly or mainly by weight of cotton or of man-made fibres, women's and girls' wear lb Briefsdrawers, undershorts, and the likes knitted or crocheted, wholly or mainly by weight of ootton or of man-made fibres, men's and boys' wear 2a Shirts, not knitted or crocheted, wholly or mainly by weight of cotton or of man-made fibres, men's and boys' wear Zb Blouses, not knitted or crocheted, wholly or mainly by weight of cotton or of manmade fibres, woman's and girls' wear 3 Brassieres, wholly or mainly by weight of cotton or of man-made fibres 4 Trousers, not knitted or crocheted, wholly or mainly by weight of cotton, men's, boys', women's and girls' wear

126 Group Category Allocation Own Temporary Transfer (TA) Permanent Transfer (TB) Total Holding Gross TA Out X No. No. Utilisation -(c)+(h)-(i) (Note 1) Gross Utilised In * Utilised Out -(e)/(j) TA-out TA-out TB-in (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) A _ 2 50 s _ _ _ _ Total % (Note 2) D. I.- C/RM/G/7 14 ~.3 Application of the rule regarding temporary transferors Example (in equivalent unit) Notes: (1) Gross temporary transfer-out % is considered on a by-market by-group basis. (2) Gross temporary transfer-oat Z - S(e &20. (j) therefore subject to reduction in the following year. (3) This Illustration is not part of the rule regarding temporary transferors and as such, it serves as no more thin a useful reference.

127 Page 120 Apoendix 12 Central Guideline indicating the relationship between the rate of reduction and the temporary transfers-out (see note) Grom Temporary Transfers-out (I on holding) Reduction 2 (2 on gross temporary transfers-out) Important Pote L L. CO :3.O0O L, oO : ' This guideline is not part of the rule regarding temporary transfers and as such. it serves as no more chan a useful reference. The Direc:or of Trade reserves his discretion in deciding the actual reductions to be applied and, he is not bound under any circumstances to act in accordance with the guideline.

128 Category Unit Cut-off Allocation TB TA Net utilised TA-in Bonus Calculated Actual quantity entitlement Bonus (2) Bonus In Out In utilized Out Qty % (1) i-(j) if (k)>35% Allocation TA-in (a) (b) (c) (d) (e) (f) (g) (h) (i) (j)-(h)-(i) (k)=(j)/(d)+(e) (1) (m) (n) I1 Appendix 10 0 j:.- Application of the rule regarding temporary transferees Example I doz pr % PC (3) - 3 kg N A (4) - - Notes : 'I) (2) (3) (4) (5) Net transfer-in X is considered on a category-by-category basis Assuming that the bonus entitlement at (I) can be met in full Bonus allocation will not be offered if the calculated bonus at (m) is less than the cut-off quantity Any TB-out will nullify a company's bonus entitlement in that category This illustration is not part of the rule regarding temporary transferees and as such, it serves as no more than a useful reference. at (c)..

129 TO BE SUBMITTED IN DLPICATE Page 123 Appendix 14 IMPORT AND EXPORT ORDINANCE (CHAPTER 60) Stamps Application for Swing of Quota for Export of Textiles to.date ofreceipt and Receipt No. (Importing Country) 2, the undersigned, being authorized to sign on behalf of (Name of 1 Ref. No. SW (Address of Textile Controls apply for permission to swing from quota held in group/category no.... under quota reference. a quantity of~~~~~~~~grams/sq.m/sq.yds.pieestz/doz.pairs/lbs./kg.1; the swung quota will be utilized in the export of textiles ini groud/category no 'Conversion:- (a) Quantity of quota swung out.... (b) Conversion factor of group/category swung out... grams/lbs./sq. m/sq. yds. per unit*/units per kg.*... Company)~~~~~~~~~~~~~~~~~~Sgntr (d) Amount of increase: (i) ) +(4...grams/sq. rn/sq. yds./piecesi'doz./doz. pairs/pairs/lbs./ks..' Company).y Cop (ii) (a... grams/sq. m/sq. yds./pietcs/doz.idoz. pairs/pairs/lbs./kg. (c) Conversion factor of group/category, swung in...grarns/lbs.isq. rn/sq. yds. per unit./units per kg.* Note: Use Formula (dxi) if the conversion factor is in gramnsllbs..'sq. rnisq. yds. per unit. Use Formula (dxii) if the conversion factor is in units per kg. (,Delete if inapplicable) 2. 1 have read and understood, and agree to abide by, the conditions contained or the reverse of this form. I have also read and understood the warning note overleaf. (Company Chop) Signature.... Name in BLOCK LETTERS... Source Quota Card adjusted Swing Card opened Swing Record entered TIC A IRMe Initials For Official Use Only The above swing of quota is approved subject to conditions contained overleaf.... for Director of' Trade Dant...

130 Pace 124 CONDITIONS OF SWING (a) Quota swung into a group or category by a company may not be swung out or transferred on a type A basis. However, a company which has swung in quota may subsequently swing out quota from its main quota allocation in that same group or category during the same restraint period. (b) The utilization of the quota swung into a particular group or category will be subject to all the conditions of utilization as stipulated or referred to in the quota allocation certificate issued to quota holders, and in Notices to Exporters issued by the Trade Department from time to time. (c) The Director of Trade reserves the right to refuse any application for swing without assigning any reason. WARNING I. The Director of' Trade accepts no liability whatsoever in the event that quota systems arc revised. amended, or abolished altogether. The fact that swings of quota have been approved by the Director will not affect in any way his right to administer the quota system as he sees fit or affect the revision. amendment or abolition of the quota system should circumstances so require. 2. On all export licence applications in respect of shipments made against an approved swing, the reference number given in the top right hand corner on the reverse of this form must be quoted. Any licence application made without this number will result in the shipment being debited against the company's main quota allocation. EXPLANATORY NOTE The form overleaf should only be used when applying for a swing of quota; that is. the surrender of quota in one group/category for use in another group/category, and effected on the understanding that any quota entitlement for a succeeding restraint period resulting from shipment performance against the swung quota shall be attributed to the group or category from which quota has been swung out i.e. the source group or category. Where the source of quota for swing is obtained through a type A transfer in from another company, the swing transfer application (Form TIC 398) must be used and prior tonsent of the original transferor company must be obtained. Et 4kXfil Y ;1 ME Zkto F W,'4r i'; :19 A3 /kox--r ( 3)RAM-FE IU N itt i F1R aftis VW toxm 4; gj Me;E to,&,htadgs - (W tkg*el ZJftl a~t i& A im a 3 0 MUM~eIt" oft-p~ r JMa y ;r A f~ffo-tptff a 441j-KtoZ fl#,4 WESQ~~~~~~I W~0n((.Pd) -,izjju* r&. HA M-ICLJ1 A $.' * tt L. l'1s' l3"o s0ttffg~jf* 9pnffiew P*f,4 ';"i f TI T-PR MxM 9 rk fl 210ftĀ n t4 to4maz El Z fi t SI/SME (go*vi f St] -t, TR El), ff;,t- 3l ig. eto r Ai 0 O A itae13 i5 E~K vse~es31 MM1 AMO., ( TIC rfi f iok ) 1- *irifirj4 5q*Mtb de tozr.fit-t

131 To be submitted in Duplicate SYSTEM DIVISION 'i a g TRADE DEPARTMENT Appendix 15 C/RM/G/7 Page 125 DECLARATION OF MONTHLY MANUFACTURING CAPACITY Part I: Company Particulars loff&:e 1-MAIq. Textile C.O. Factory Controls Registrat ion Registration No. (if any) Name of Company No. AWKSil fi m 2; #; XIE R UJl ~~~~~~~~to 100awill Main Factory Tel. No.: Fac story Address Branch Tel. No.: Branch.Tl.\ No. : Name(s) of Owner(s)/ Director(s) Part Il Monthly Manufact i8 iti (a) No. and type of principal machines installed (Note 1) (b) Type of goods produced during the past twelve months_ {E~tt=uA P98 ZE*tlM (c) Monthly Manufacturing capacity (Note 2) pipces ta tr(ie2) 2 f$ based on la records in ~~~~~~~( (nonth and year) 5WeR 6) )ka zid U a a (d) No. of productive workers employed during the period declared in (c) above workers. (e) No. of productive workers employed currently Sl"*IFS QtAItt~tImw o workers

132 Page ff y r p lj s ii i Y ji w w S: Part III: Declarat ion and Undertaking M3 fet: in PR l I/We hereby declare that the information given overleaf is true. ard I/we undertake to inform the Director of 'Frade in writing immediately of any change iregarding the particulars mentioned overleaf. $A.4" Z$4 i^i * i it 8IM M. MAK a MR'J Signat ory (Note 3): * (It3 ) Signatory (Note 3): NO ( E 3 ) Name: (Engl ish) ( 3) Name: (English) ( *X ) (Chinese) ( tp4 ) (Chinese) ( Ipx) Position in Company : at&ief zzii Position in Company : M*AlA3ZUaL Company Chop NOTE: I. Principal 'machine: I le, cutting, sewing and knitting machines. 2-. (a) The Deparrment will accept adeclaration based on the highest monthly production recorded during the twelve inths prior to the date of the declaration. (b) Companies whic havemade such declarations will, at the request of the Department, be expected to pr evidence in support of their declarations. For this purpose, the Department will accept, as valid evidence, production records of the company for the twelve months prior to the date of the declaration. 3. here the manufacturer is a limited company, the declaration should be signed by two directors of the company. Where the manufacturer is a non-limited company, the declaration should be signed by the proprietor, or, in a partnership company, by two of the partners. i: 1, *9 Z niz^emdts **a 2. "rothk*qezqm --At**wVMMA** gag a fs It f-afluitzr2ws&zm 3. MIRAMUiAt 29#J5EQ;,jZ *SWF i i MEMlIN; MR-2iMA8&*! X ARjOMASAWN a

133 Appendix 16 C/RM/G/7 Page :127 TextilesYear Calendar YEAR 1 YEAR 2 YR 1 final date for transfer YR 1 final licensing date (normally set on the 1st day of the last month of a textilesyear) YR 1 Year-end Special Shipment Scheme YR 2 Preliminary quota allocation YR 2 Cold-category Free Quota Scheme YR 2 Final quota allocation YR 2 Quota allocation against free quota performance in YR. I JAN YR 2 Surrender -~ Scheme (Phase I) YR 2 Main Free Quota Scheme YR 2 Swing Scheme (Phase I) YR 2 Swing Scheme (Phase Il) _, :- YR 2 Anticipation Scheme -, YR 2 Carryover Free Quota Scheme,- 30 APRIL 1 MAY 31 JULY. fil _ 30 SEPT (Phase 2) :Phase 3) YR 2 final date for transfer YR 2 final licensing date YR 2 Year-end Special Shipment Scheme YR 3 Preliminary quota allocation

134 Page 129 APPENDIX3 Certificate of Hong Kong Origin- Origin Criteria and Principal Processes Product Principal Procoeses (I) Tetiles (a) Yarn (all types) (b) Bulked acrylic yarn Manufacture from cotton or fibre Bulking of foreign origin acrylic yar Spinning Bulking (c) Texturised polyamide yarn Texturizing of foreign origin polyamide yarn Texturizing d) Fabric including coated fabric, whether or not decorated or finished Manufacture from yarn Weaving/knitting (a) Decorated fabric Decoration* of fabrics foreign origin), (whether or not and the cost content achieved through such process represent at least 252 of the value of the finished product Decoration* (f) Finished fabric (other than woollen fabric) The fabric used (whetheror not foreign origin) must have undergone the following finishing processes in Hong Kong: All the finishing processes listed in the origin criteria Ci) Scouring; (ii) Bleaching or mercerizing:plus O) Printing or permanent dyeing (including optical whitening) plus (i) (a) Resin finish or pre-shrinking, or (b) shearing or burshing Cg) Finished woollen fabric The fabric used (whether or not foreign origin) ut Uve undergone the following finishing processes in Hong Kong: All the finishing processes listed in the origin criteria Ci) scouring plus Ci4) dyeing or printing (only in respect of undyed or unprinted grey cloth); plus (Jii) i11g4 Plus (iv) drying; plus (v) tentering; plus (h) Garmants madefrom woven or knitted fabrics (vi) shearing and/or raising end/or brushing; plus (vii) decatizing Manufacture from fabric Cutting of fabric and sewing/linking/looping/ stitching of cut pieces into garment Note: Decoration means such processes as embroidering, beading and sequinning.

135 Page 130 (II) (i) (J) (k) Piece-knitted garments Gloves and mittens made from woven or knitted fabric Piece-knitted gloves and mittens (1) Hats and caps (made from woven or knitted fabrics) Origin Crfteria Manufacture from knit-to-shape panel Manufacture from fabric Manufacture from yarn Manufacture frmo fabric (m) Piece-knitted bats and caps Manufacture from yarn (n) Piece-knitted scarves, hoods and leg-warmers (o) Curtain, shawls, scarves, (p) (q) Cr) (a) (t) (u) (v) Toys bags, sacks, tarpaulins, bedsheets, bedspreads, pillow covers, naperies, handkerchiefs, household linen, dish washers, tents, ammunitionbelt Socks and stockings, towels, shoe laces String shopping bags Mesh bags Woven labels, badges and the like Cotton sawing thread Mosquito nets Waist belt (a) Toys (all types) (b) Toy motor& Manufacture from yarn Manufacture from fabric Manufacture from yarn Manufacture from strings Manufacture from mesh fabric If not Printed. manufacture from yarn If printed: manufacture from fabric Manufacture from yarn spun in Bong Kong Manufacture from mosquito netting Manufacture from textile yarn Assembled in Hong Kong with at least 25S Hong Kong cost content attributable to local component parts and labour Assembled in Hong Kong with at least 25Z Hong Kong cost content attributable to local component parts and labour Principal Processes Assembling (i.e. looping/ linking, stitching) Cutting of fabric and sawing of cut pieces into gloves/ mittens Shell-knitting OR assembling (i.e. looping/linking, stitching) from knitted shells Cutting of fabric and sewing of cut pieces into hate/caps Assembling (i.e. looping/ linking, stitching) Knitting Cutting fabric and sawing cut pieces into products Knitting/weaving Weaving Cutting and sewing If not printed: weaving/ knitting/embroidering If Printed: printing cutting and Twining and winding Cutting and sewing Knitting/weaving, cutting and buckling Moulding/die-casting/cutting/ sealing of characteristic component parts) plus assembling Coiling and assembling Notes: Knit-to-shape pansies are panels knitted to shape reading for assembly without further manufacturing process other than minor trimming and/or cutting of the collar to shape. Shell-knitting is prohibited from sub-contraction outside Bong Kong under the Outward Processing Arrangement.

136 Page 131 (III) Plastic It Product Origin Criteria Principal Processes Ca) Plastic flowers Manufacture from plastic granules or Mouuldingparts and assembling (b) Plastic can-openr Manufacture from plastic granules or Plastic moulding and assembling (IV) (V) (c) P.V.C. garments (d) (e) (f) (g) Plastic sheeting bags Plastic tubing bags Plastic string woven bags Plastic band woven bags (h) Polythene (polyethylene) bags Ci) Type-setting, plastic - for offset-printing Electronic and Electrical Products (a) (b) (c) (d) (e) (f) Electronic and electrical products Decoration lamp sets Plastic vacuum brush Dry batteries of all kinds Electrical accessories such as plugs, sockets, switches, lamp holders, etc., made of bakelite Photocopying machines Clocks and Watches (a) Watches - cased with imported movements/ Hong Kong assembled movements (b) (c) Electrical clocks Mechanical clocks Manufacture from P.V.C. Manufactur Menufactur. shootings from plastic sheetings from plastic compounds Manufacture from plastic strings Manufacture from plastic bands Manufacture from polythene shootings Plastic type-setting moulded in Hong Kong Assembled in bong Kong with at least 252 Song Kong cost content attributable to local component parts and labour Manufacture of all parts (use of imported bulbs and wire is however permitted) and assembling Assembled in Hong Kong with at least 25S Hong Kong cost content attributable to local component parts and labour Assembled in Hong Kong with at least 251 Hong Kong cost content attributable to local component parts and labour Manufacture from bakelits powder and metal sheets, plates, rods or wires Assembled in Hong Kong with at least 251 Hong Kong cost content attributable to local component parts and labour Assembling in Hong Kong provided that: C) all processes of assembly are performed by registered factories; and (li) the watch cases (and watch bands as well for imported movements) are made by registered factories Manufacture of case and assembling Manufactureof case and assembling Cutting and assembling Cutting and assembling Extruding and sealing Weaving Weaving and assembling Cutting and sealing Moulding Assembling and testing Making decorative parts and assembling Assembling Anode fixing and sealing Moulding and assembling Assembling and testing Making watch cases and assembling (including the making of watch bands if imported movements are used) Case making and assembling Case king and assembling

137 Page 132 (VI) (d) (a) (f) (8) Product Watch movements assembled with imported/local parts Watch dials Watch cases Watch bands i) metal (Li) (Mi) Metal Items (a) (b) (c) Ashtrays Cutlery Enamelware plastic leather (d) Pots, basins, spittoon tumblers, tea trays (e) Badges, buckles (f) Small metal items such as D.D.T. sprayers, nail clippers, charcoal irons, staplers, etc. (g) Kay rings, chains and holders with or without pendants (h) Ci) Decoration sets with wire baskets etc. as base Screws, nuto and other similar metal accessories (J) Locks, keys, latches, bolts, hinges (k) Lanterns, hendlamps, wall lamps, etc., stoves (1) Screwdrivers, squeezers, peeling knife, can openers (C) Buttons, collar studs, cuff links, tags, buckles Origin Criteria Assembling, testing and tins adjusting of the movement Cutting or blanking and letter-making of the watch dials - Blanking or moulding and latha-shaping of the watch cases Manufacture of metal parts (however minor accessorisa such as spring nay be imported) and assembling Manufacture from plastic granules, compounds or shootings Manufacture from leather Manufacture from metal sheets,plates or strip. Manufacture from metal sheets, plates, strips, bers or rods Manufacture from metal shots, plates, strips, bars or rods Manufacture from metal sheetings Manufacture from metal sheets, plates or strips or ingots Manufacture from metal sheets, plates, strips, rods, bars or wires Making of decorative parts and assembling Manufacture from metal sheets, plates, rods or wires Manufacture from metal sheets, plates, rods, bars and wires Manufacture from metal sheets, plates, rods, bars and wires Manufacture from metal sheets, plates, rods, bars and wires Manufacture from metal sheets, plates, rods or wires Principal Processes Assembling and testing Cutting/blanking and letterking Blanking/moulding and latheshaping Making of parts and assembling (including chaining) Moulding/cutting and sealing Cutting and sewing Blankingand assembling Blanking Blanking and enamelling Blanking Blanking and assembling Blanking/cutting and assembling The key rings, chains or holders must be Blanking/cutting/chainin manufactured from metal sheets, plates, assembling wires or bars, end assembling (regardless of the origin of the pendants) and Making of decorative parts and assembling Threading/milling and cutting Die-casting/blanking and assembling Blanking and assembling Blanking/cutting and assembling Blanking/moulding and assembling

138 Page 133 (VII) (VIII) (IS) CX) (XI) ) Machine tools (lathes, shaping machines, milling machines, drilling mechines, presses and the like) Footwear Footwear Metal-working (the metal-working process may be carried out on imported component parts) and *seemblingin Hong Kong with at least 25% HongKong cost content attributable to local component parts and labour Manufacture assembling Jewellery end Precious/Semi-precious stones (a) Jade or precious/semiprecious stones (b) Jewellery, precious metal (c) (d) Jewellery, gem set Imitation jewellery (C) plastic (ii)metal Fish and Food (a) Canned fruits and vegetables (b) Prepared (other than canned) fruits and vegetables (c) (d) (e) Cf) (g) Fish and other natural produce of the sea Flour Gourmet powder Shark's fin cake Tropical fish Porcelainware and Ceramic Ware (a) Porcelainwar. decorated in Hong Kong (b) Ceramic ware Paper Products (a) (b) Printed xatters Paper lanterns Cutting and polishing of upper and sole and Manufacture from precious metal Manufacture from precious metal Manufacture from plastic granules or compounds Manufacture from metal sheets, plates, rods or wires Preserving and canning Preserving plus other working processes (e.g. seasoning/salting) with at least 252 Hong Kong cost content attributable to local component parts and labour Any catch landed in Hong Kong in a fresh state and covered by Certificates of Origin issued by the Agriculture and Fisheries Department Flour milled in Hong Kong Making up from locally manufactured monosodium glutamate Manufacture from shark's fin Tropical fish bred in Hong Kong Decorating and baking of porcelain blank and the coat content achieved through these processes represents at last 25% of the value of the finished product Manufacture from clay Type-setting and printing Manufacture from paper Prncipal Proceses Metal-working and assembling Making of upper and sole and assembling Cutting and polishing Moulding and assembling Moulding and setting Moulding/cutting and assembling Blanking and assembling Preserving and canning Preserving (Issue of CHKO conditional upon presentation of 00 issued by AUD) Milling Blending Scouring, skinning and setting Bred in Hong Kong Decorating and baking Moulding and kilning Type-setting and printing Cutting and pasting

139 Page 134 Principal Processes CII) Rattan Items (a) Rattan core and peel Made from rattan cane Cutting, peeling and shaping (b) Rattan - can, core and peel - PVC-coated PVC-coated in Hong Kong PVC-coating (XIII) Miscellaneous (a) Fur garment Manufacture from prepared animal skin (i) Trimming of fur garment parts to required shape; an Cii) sawing of Ci); and Ciii) fixing of lining onto Cii) (b) Cc) Fur garment part of *h ll Paintslenamls or similar products Manufacture from prepared animal skin Mixing of ingredients in a state other than paints/enamels or similar products, emulsification if necessary, and synthesis Sewing of cut pelts into garn parts or shells C) Mixing of ingredients and Cii) emulsfication (if applicable); ad (Ciii) synthesis (d) Belts (other than textile belts) i) Mafactur from rubber, leather or plastic sheetings; OR Cutting and buckle-fixing or decorating (ii) Decorating representing at least 25Z of the value of the finished product if manufacturefrom Imported belting (e) Whip N-factur st from leatheror PVC Cutting and sesembling Cf) Gloves (other than textile gloves): (g) th) Ci) Cii) Ciii) Handbags Cameras Leather Rubber Plastic Manufacture Manufacture from leather from rubber Manufacture from plastic granules, compounds, or sheetings Moulding/cutting and sewing Assembled in Bong Kongwith at least 25Z Hong Kong cost content attributable to local componenc parts and labour Cutting and sewing Extruding/cuting Extruding/cutting and and sealing sealing Moulding/cutting and sewing Assembling and testing (C) Cigarette lighters Assembled in Song MM with at least 25% Hong Kong cost content attributable to local component parts and labour Assembling and testing ti) Zip and elide fasteners Fixing of teeth onto the tape and assembling Teeth-fixing and assembling ) Pon Manufacture of case and assembling Case-making and assembling (1) (a) Bulbs of all kinds Torch s Manufacture of glass bulb and assembling ) T sacture of caseand assembling Inserting tungsten wire, evacuating air and sealing bulb to base Case-making and assembling

140 Page 135 Product (n) Vacuum flasks, jug., jars, (o) (p) etc. Hardwood-manufactures Hides of cattle: (q) Medicine - Chinese and Western type r) Wigs/wiglets (a) (t) Framed mirror Spectacle frames: Origin Critaria Manufacture from metal sheets, plates or plastic material, and glass bulbs Cutting, shaping and and aseembling Ci) (U) Processed from hides of cattle slaughtered in approved abattoirs inhong Kong Imported hides chroms-proceased in Hong Kong Medicine which has undergone more than the processes of simple mixing, bottling or repacking Manufacture from human hair or artificial fibre Manufacture of frame or mirror component (i.e. manufacture from glass sheets) and assembling PrincipalProcesses Moulding/bulb-usking and assembling Cutting, shaping and asemblitg Skinning and salting Chrome-processing Grinding end blending UR blending and bottling (for lotion, and syrups) Weaving and sewing Frame-making/mirror-making and assebling Ci) plastic Moulding and assembling Cutting/moulding and assembling (ii) metal Stampin and asaumbling Stamping end aseablig Cu) Camphor tablets Grinding and mulding Grinding and moulding (v) Feather trimmings Bleaching, stitching and trimming Bleaching, stitching and triin (W) Painting. Painting performed within registered Painting ) Cassette tapes and (i) Making of tape and case moulding; (i) Makingof tape and case similararticles OR moulding; O (e.g. word processing ribbon) (C) windingof tape, case moulding and (ii) tape-winding, caseasaembling moulding and anseabling (y) FiY and si4mil products Filing or processing (developing end Filming OR developing and printing) printing Cr) Pine cone decorations Scouring, peinting/colouring end assembling Painting/colouring and aeesmbling (a) Tooth brushes, hair Manufactur of handle and rooting of Randle-meking and rooting of brushes and simla bristles brietles products (ab) Umbrellas Making of covers end assambling by the Making of covera and am factory assembling (ac) Baby talcumpowder Manufactured from raw-talcum powder Blending, container making and packaging (ad) Fun/toilet soap Manufacture from soap bass Mixing/oulding, container meking/packaging Note: JA factory which does not make the container. for its fun/toilatsoap my still qualify for registration for the issue of Certificates of Bong Kong Origin provided that it undertakes writing, at the time of registration, that only contsiners of Hong Kong origin will be used for its production.

141 Page 136 Product Origin Criteria Principal Processes (ae) (af) Watergel explosives Scented flower petal Manufacture (of an explosive) by synthesis, dissolution and mixingof ingredients that are not explosive themselves Manufacture from fresh flower petal Manufacture (of an explosive) by synthesis, dissolution, and mixing of ingredients that are not explosive themselves Selecting, pre-drying, sterilizing, softening, mixing, dyeing, perfuming, second-drying (XIV) Mixed Origin Products Mixed origin (composite products Certificates of Origin can be issued if : (a) the value of foreign origin parts does not exceed 25% of the cost of the finished products; Asssembling (b) there is no origin making on foreign parts; (c) (d) the utility does not depend entirely on the foreign origin parts; the final process of manufacture or transformation is performed by registered manufacturer who makes the Bong Kong parts; and (e) where possible, the principal parts are made in Hong Kong Note: It may be necessary to modify or expend the above list of origin criteria and principal processes from timeto time as the need arises. In that event, the Department will make every effort to give adequate advance notice to the trade of such changes.

142 Page 137 APPENDIX 4 E 8 CAP. 60] Import and Export (Registration) Regulations [1986 Ed. Charges payable on lodgement of declarations. LN.294/82 8. (1) In respect of each import declaration relating to an article or articles imported after the commencement of these regulations and in respect of each export declaration relating to an article or articles exported after the commencement of these regulations, there shall be payable by every person who, pursuant to regulation 4(1) or 5(1), lodges the declaration: (a) (b) in the case of an import declaration relating to an article or articles classified under section 0 of the Imports and Exports Classification List, a charge of $5 irrespective of the value of the article or aggregate value of the articles specified in the declaration; and in the case of any other import declaration and in the case of any export declaration: (i) where the value of the article or the aggregate value of the articles specified in the declaration does not exceed $10,000, a charge of $5; (ii) where the value of the article or the aggregate value of the articles specified in the decleration exceeds $10,000, a charge calculated at the rate of $5 in respect of the first 10,000 dollars' value and 50 cents in respect of each additional 1,000 dollars' value or part thereof. (2) The charge under paragraph (1) in respect of every import declaration and export declaration shall be paid in cash or by cheque to the Commissioner at the time of lodging the declaration with the Commissioner and a receipt therefor shall be issued, and until the full amount of such charge is paid the declaration shall be deemed not to have been lodged with the Commissioner. LN.64/86 LN.64/86

143 Page 138 (3) No charge shall be payable under LN.23/76 paragraph (1)(b) by: (a) an air transport undertaking operating air services on international routes in respect of a declaration lodged by it relating solely to aircraft parts or accessories imported or exported for the purpose of being: (i) used in the repair or maintenance of aircraft owned or chartered by such undertaking and operated by it on any international air route; or (ii) given in non-profitable exchange for any other aircraft part or accessory to any other similar air transport undertaking for a similar use, and which are used for such purpose or so exchanged and used; (b) a transport undertaking operating sea or air freight transport services on international routes in respect of a declaration lodged by it relating solely to articles imported for the purpose of being use in the repair and maintenance of freight containers operated by that undertaking in the transport of goods by sea or air on its international routes and which is so used.

144 Page 139 APPENDIX 5 Dutiable Commodities Ordinance, CAP. 109 Schedule of Duty Rates (w.e.f hrs on ) PART I Duty on Liquor 1. Duty shall be payable on the following types of European-type liquor at the rate of 35 per cent of the value of the liquor (in accordance with Section 26A of the Ordinance) and, in addition, at the rate specified against that type of liquor, per litre measured at a temperature of 20 degrees Celsius: Type of Liquor $ Brandy Liqueurs, Whisky, Gin, Rum, Vodka and other spirituous liquors Champagne and other sparkling wines Intoxicating liquors in this Part above the strength of 45% alcohol by volume, for every 1% above such strength in addition to the duties specified above A. Duty shall be payable on the following type of European-type liquor at the rate of 20 per cent of the value of the liquor (in accordance with Section 26A of the Ordinance) and, in addition, at the rate specified against that type of liquor, per litre measured at a temperature of 20 degrees Celsius: Type of Liquor $ Still wines Duty shall be payable on the following type of European-type liquor at the following rate per hectolitre measured at a temperature of 20 degrees Celsius: Type of Liquor $ Cider and Perry and other similar beverages Beer

145 Page Repealed. 4. Duty shall be payable on the following types on Non-European-type liquor at the following rates per hectolitre measured at a temperature of 20 degrees Celsius: Type of Liquor $ Non-European-type wines 1, Chinese-type spirits and other spirituous liquors, Sake, Arrack and in addition for every 1% by which the alcoholic strength by volume exceeds 30% Duty shall be payable on the following types of Industrial-type liquor at the following rates per hectolitre measured at a temperature of 20 degrees Celsius: Type of Liquor $ Ethyl alcohol, and admixtures containing ethyl alcohol and in addition for every 1% by which the alcoholic strength exceeds 30Z The Commissioner may assess the duty on: (a) intoxicating liquors not specified in this Part at the rate prescribed for liquor which in his opinion most nearly approximates to the liquor on which duty is to be assessed; and (b) any quantity of liquor of less than 12 litres imported at any time in one consignment at $85.00 per litre.

146 Page 141 PART II Duty on Tobacco 1. Duty shall be payable on tobacco at the following rates: (a) for each 1,000 cigarettes $ (b) cigars $310.00/kg. (c) Chinese prepared tobacco $60.00/kg. (d) all other manufactured tobacco except tobacco intended for the manufacture of cigarettes $290.00/kg. 2. For the purpose of applying the duty under paragraph 1(a) a cigarette more than 90 mm. long, excluding any filter or mouthpiece, shall be treated as if etch additional 90 mm. or portion of 90 mm. were a separate cigarette. PART III Duty on Hydrocarbon Oil 1. Duty shall be payable on hydrocarbon oil at the following rates per litre: $ (a) motor spirit and aircraft spirit 3.58 (b) light diesel oil Where it is proved to the satisfaction of the Commissioner that light diesel oil on which duty has been paid under paragraph 1(b) has been used in road vehicles owned and operated by the grantee of a franchise under Section 5 of the Public Bus Services Ordinance (Cap. 230) in maintaining public bus services on specified routes as defined by Section 2 of that Ordinance, a sum amounting to $0.65 per litre of the light diesel oil so used shall be refunded to the grantee. 3. Where it is proved to the satisfaction of the Commissioner that light diesel oil on which duty has been paid under paragraph 1(b) has been used in road vehicles owned and operated by the Kowloon-Canton Railway Corporation under Section 4(1)(b) of the Kowloon-Canton Railway Corporation Ordinance in maintaining bus services within the North-west Transit Service Area, a sum amounting to $0.65 per litre of the light diesel oil so used shall be refunded to the Corporation.

147 Page 142 PART IV Duty on Methyl Alcohol 1. Duty shall be payable on methyl alcohol and any admixture containing methyl alcohol at the rate of $ per hectolitre measured at a temperature of 20 degrees Celsius and in addition, for every 1 per cent by which the alcoholic strength by volume exceeds 30 per cent, $18.00 per hectolitre. PART V Duty on Non-alcoholic Beverages 1. Duty shall be payable on non-alcoholic beverages at the rate of $60.00 per hectolitre. PART VI Duty on Cosmetics 1. Duty shall be payable on cosmetics at the rate of 25 per cent of the value of the cosmetics (in accordance with Section 26A of the Ordinance). Prepared by Excise Intelligence Unit 7 March 1990

148 Page 14 3 APPENDIX 6 Schedule LXXXII - Hong Hong This schedule is authentic only in the English Language.

149 Page 144 Notes to Schedule LXXXII - Hong Kong 1. As from not later than 1 July 1968 the rates of duty established on products of this heading shall not differ according to origin other than for products of Malawi origin. 2. Excluding duty on dutiable ingredients (intoxicating liquors or hydrocarbon oils), the rate of duty on imported products of these descriptions shall not exceed the rate of duty payable on similar products manufactured in Hong Kong. 3. As from not later than 1 July 1968 the rates of duty established on products of this heading of Malawi origin will be such that the differences between such rates and the equivalent most-favoured-nation rates shall not be greater than the differences existing on 30 June The term "proprietary medicaments" means brand name medicaments, as distinct from generic medicaments.

150 Tariff Rate Present Initial Concession INR's on item Description of products of concession negotiating first earlier No. duty in right (INR) incorporated concessions concession schedule in (1) (2) (3) (4) (5) (6) (7) G/56 G/56 G/56 G/56 C/RM/G/7 Page Schedule LXXXII - Hong Kong PART I: Most-favoured-nation tariff Chapter 8: Edible fruit and nuts, peel of citrus fruit or melons 0805 Citrus fruit, fresh or dried ex ex ex ex Clementines, wilkings and similar citrus hybrids, fresh Lemons (Citrus limon, Citrus limonum) and limes (Citrus aurantifolia), fresh Grapefruit, fresh Other citrus fruit, fresh, excluding oranges, mandarins, clementines, wilkings and similar citrus hybrids, lemons, limes and grapefruit Grapes, fresh or dried Free Free Free Free G/HS/87/2 G/HS/87/2 G/HS/87/2 G/HS/87/2 US US US US

151 Tariff Rate Present Initial Concession INR's on Tariff negotiating first earlier item Description of products of concession right (INR) incorporated earlier No. duty in on the in a GATT concessions concession schedule in (1) (2) (3) (4) (5) (6) (7) G/56 G/56 G/56 C/RM/G/7 Page Grapes, fresh Free G/HS/87/2 US Chapter 11: Products of the milling industry; malt; starches; inulin; wheat gluten 1101 Wheat or meslin flour Wheat or meslin flour, self-raising Wheat or meslin flour, other than self-raising Cereal groats, meal and pellets Free Free G/HS/87/2 G/HS/87/2 US US Groats and meal of wheat Free G/HS/87/2 US G/56 ex Groats and meal of meslin Free G/HS/87/2 US G/ ex Pellets Pellets of wheat of meslin Free Free G/HS/87/2 G/HS/87/2 US US G/56 G/56

152 Tariff Rate Present Initial Concession INR's on item Description of products of concession negotiating first earlier No. duty in right (INR) incorporated concessions on the in a GATT concession schedule in (1) (2) (3) (4) (5) (6) (7) G/67 C/RM/G/7 Page147 Chapter 15: Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes Sunflower seed, safflower or cottonseed oil and their fractions, whether or not refined, but not chemically modified Cottonseed oil and its fractions Chapter 24: Tobacco and manufactured tobacco substitutes Unmanufactured tobacco; tobacco refuse Tobacco, not stemmed/stripped Of the Virginia type Other than Virginia type Tobacco, partly or wholly stemmed/stripped Free G/HS/87/2 US G/56 (Note 1) G/HS/87/2 G/67 (Note 1) G/HS/87/2 G/ Of the Virginia type (Note 1) G/HS/87/ Other than Virginia type (Note 1) G/HS/87/2 G/67

153 Tariff Rate Present Initial Concession INR'8 on item Description of products of concession negotiating first earlier No. duty in right (INR) incorporated concessions on the in a GATT concessions concession schedule in (1) (2) (3) (4) (5) (6) (7) C/RM/G/7 Page Tobacco refuse Chapter 30: Pharmaceutical products Medicaments (excluding goods of heading Nos. 3002, 3005 or 3006) consisting of two or more constituents which have been mixed together for therapeutic or prophylactic uses, not put up in measured doses or in forms or packings for retail sale ex Containing penicillins or derivatives thereof, with a penicillanic acid structure, or streptomycins or their derivatives, proprietary medicaments only (Note 2) G/HS/87/ ex ex ex Containing other antibiotics For veterinary use, proprietary medicaments only Other, proprietary medicaments only Containing hormones or other products of heading No but not containing antibiotics, proprietary medicaments only (Note 1) G/HS/87/2 G/67 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 US G/56 US G/56 US G/56 US G/56

154 G/56 G/56 G/56 G/56 G/56 G/56 G/56 G/56 G/56 Page 149 Tariff Rate Present Initial Concession INR's item on Description of products of concession No. right (INR) incorporated earlier duty in right (INR) incorporated concessions concession schedule in (1) (2) (3) (4) (5) (6) (7) G/56 C/RM/G/7 ex Containing alkaloids or derivatives thereof but not containing hormones or other products of heading No or antibiotics, proprietary medicaments only Other: (Note 2) G/HS/87/2 US ex 3003 ex 3003 ex 3003 ex 3003 ex 3003 ex 3003 ex ex ex Anaesthetics, proprietary medicaments only Dermatological preparations, proprietary medicaments only Eye-drops, proprietary medicaments only Fish liver oil, proprietary medicaments only Cardiovascular preparations (other than glycosides, including hypotensive agents), proprietary medicaments only Antihistamines, proprietary medicaments only Veterinary medicaments, proprietary medicaments only Anthelmintic preparations, proprietary medicaments only Laxatives, proprietary medicaments only (Note 2) G/HS/87/2 (Note (Note (Note (Note (Note 2) 2) 2) 2) 2) G/HS/87/2 G/HS/87/2 G/HS/87/2 G/HS/87/2 G/HS/87/2 (Note 2) G/HS/87/2 (Note (Note 2) 2) G/HS/87/2 G/HS/87/2 US US US US US US US US US

155

156 Tariff Rate Present Initial Concession INR's on item Description of products of concession negotiating first earlier No. duty in right (INR) incorporated concessions on the in a GATT concession schedule in (1) (2) (3) (4) (5) (6) (7) C/RM/G/7 Page150 ex ex ex ex ex ex ex ex Analgesics and antipyretics, proprietary medicaments only Sulphonamide preparations, proprietary medicaments only Animal nutritive agents, proprietary medicaments only Preparations for treatment of coughs, proprietary medicaments only Remedy for gastro-enteropathy, proprietary medicaments only Antituberculous preparations, proprietary medicaments only Central depressants, including hypnotics, sedatives and tranquillizers, proprietary medicaments only CNS stimulants and preparations used for mental and physical stimulants under the general description of 'pep pills', proprietary medicaments only ex Other, proprietary medicaments only (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 US US US US US US US US G/56 G/56 G/56 G/56 G/56 G/56 G/56 G/56 (Note 2) G/HS/87/2 US G/56

157 Concession first incorporated in a GATT schedule in (6) INR's on earlier concessions (7) C/RM/G/7 Page151 Tariff item No. (1) Description of products Rate of duty (2) (3) Present concession in (4) Initial negotiating right (INR) on the concession (5) 3004 Medicaments (excluding goods of heading Nos. 3002, 3005 or 3006) consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses or in forms or packings for retail sale ex Containing penicillins or derivatives thereof, with a penicillanic acid structure, or streptomycins or their derivatives, proprietary medicaments only (Note 2) G/HS/87/ ex ex ex ex Containing other antibiotics Cytotoxic agents, proprietary medicaments only For veterinary use, proprietary medicaments only Other, proprietary medicaments only Containing hormones or other products of heading No but not containing antibiotics, proprietary medicaments only (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 US G/56 US US US US G/56 G/56 G/56 G/56 ex Containing alkaloids or derivatives thereof but not containing hormones, other products of heading No or antibiotics, proprietary medicaments only (Note 2) G/HS/87/2 US G/56

158 Tariff Rate Present negotiating first Tariff Rate Present Initial Concession INR's on item Description of products of concession negotiating first earlier No. duty in right (INR) on the incorporated in a GATT concessions concession schedule in (1) (2) (3) (4) (5) (6) (7) C/RM/G/7 Page 152 ex Other medicaments containing vitamins or other products of heading No. 2936, proprietary medicaments only (Note 2) G/HS/87/2 Other: US G/56 ex ex ex ex ex ex Anaesthetics, proprietary medicaments only Dermatological preparations, proprietary medicaments only Eye-drops, proprietary medicaments only Fish liver oil, proprietary medicaments only Cardiovascular preparations (other than glycosides, including hypotensive agents), proprietary medicaments only Antihistamines, proprietary medicaments only (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 ex Veterinary medicaments, proprietary medicaments only (Note 2) G/HS/87/2 US G/56 US US US US US G/56 G/56 G/56 G/56 G/56 US G/56

159 Tariff Rate Present Initial Concession INR's on item Description of products of concession negotiating first earlier No. duty in right (INR) incorporated concessions on the in a GATT concession schedule in (1) (2) (3) (4) (5) (6) (7) C/RM/G/7 Page 153 ex ex ex ex ex ex ex ex ex Anthelmintic preparations, proprietary medicaments only Laxatives, proprietary medicaments only Analgesics and antipyretics, proprietary medicaments only Sulphonamide preparations, proprietary medicaments only Animal nutritive agents, proprietary medicaments only Preparations for treatment of coughs, proprietary medicaments only Remedy for gastro-enteropathy, proprietary medicaments only Antituberculous preparations, proprietary medicaments only Central depressants, including hypnotics, sedatives and tranquillizers, proprietary medicaments only (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 US US US US US US US US US G/56 G/56 G/56 G/56 G/56 G/56 G/56 G/56 G/56

160 Tariff Rate Present Initial Concession INR's on item Description of products of concession negotiating first earlier No. duty in right (INR) incorporated on the in a GATT concessions concession schedule in (1) (2) (3) (4) (5) (6) (7) C/RM/G/7 Page154 ex ex CNS stimulants and preparations used for mental and physical stimulation under the general description of 'pep pills', proprietary medicaments only Other, proprietary medicaments only Pharmaceutical goods specified in Note 3 to this Chapter (Note 2) G/HS/87/2 (Note 2) G/HS/87/2 ex Chemical contraceptive preparations based on hormones or spermicides, proprietary medicaments only (Note 2) G/HS/87/ Chapter 33: Essential oil and resinoids; perfumery, cosmetic or toilet preparations Beauty or make-up preparations and preparations for the care of the skin (other than medicaments), including sunscreen or suntan preparations; manicure or pedicure preparations US G/56 US G/56 US G/56

161 INR's on earlier concessions (7) C/RM/G/7 Page 155 Tariff item No. (1) Description of products Rate of duty (2) (3) Present concession in (4) Initial Concession negotiating first right (INR) incorporated on the in a GATT concession schedule in (5) (6) ex Talcum powder, prickly heat powder and baby powder (Note 2) G/HS/87/ Preparations for use on the hair Shampoos Preparations For oral or dental hygiene, including denture fixative pastes and powders Pre-shave, shaving or after-shave preparations, personal deodorants, bath preparations, depilatories and other perfumery, cosmetic or toilet preparations, not elsewhere. specified or included; prepared room deodorizers, whether or not perfumed or having disinfectant properties ex Pre-shave, shaving or after-shave preparations, pecfumed bath salts and other toilet preparations and animal toilet US G/56 (Note 2) G/HS/87/2 US G155 (Note 2) G/HS/8712 US G156 preparations (Note 2) G/HS/87/2 US G/56

162 Tariff Rate Present Initial Concession INR's on item Description of products of concession negotiating first earlier No. duty in right (INR) incorporated concessions on the in a GATT concession schedule in (1) (2) (3) (4) (5) (6) (7) G/67 G167 G/67 G/67 G/67 C/RM//G/G Page 156 PART II: Preferential tariff Chapter 24: Tobacco and manufactured tobacco substitutes 2401 Unmanufactured tobacco; tobacco refuse Tobacco, not stemmed/stripped Of the Virginia type (Note 3) G/HS/87/ Other than Virginia type (Note 3) G/HS/87/ Tobacco, partly or wholly stemmed/stripped Of the Virginia type (Note 3) G/HS/87/ Other than Virginia type (Note 3) G/HS/87/ Tobacco refuse (Note 3) G/HS/87/2

163 Page 157 APPENDIX 7 Hong Kong's Exports of Textiles and Clothing Subject to Restraint in 1989 Value in HK$ million Total textiles & Items under clothing Quota EA Restraint Country exports item (b)z items (c) (b) + (c) (a) (b) (a) (c) (a) (a) United States² 34,743 31, , Canada² 3,281 2, EEC 21,201 17, , Sweden³ 1,408 1, Finland Norway Austria Total 62,288 53, , Total textiles and clothing exports refer to domestic exports of yarn, fabrics, made-ups and clothing of textile materials other than fur, leather, plastic/rubber and other non-textile materials. ²While the product classification adopted in Hong Kong Trade Statistics does not correlate directly with the textile category systems under Hong Kong's textiles agreements with the United States and Canada, estimates are applied in the present compilation whenever necessary. Hence figures presented may not tally exactly with the actual amount of trade under restraint. ³Hong Kong's exports to Sweden were not subject to EA arrangement in The newly introduced EA arrangement would take effect as from 1 January As from 1 November 1988, specific categories 12, 13, 15 and all EA categories have been deleted fromi the HK/Norway Textiles Agreement. Source: Hong Kong Trade Statistics.

164 Page 158 APPENDIX 7 (cont'd) (B) Exports of textiles and clothing subject to quota 59,610 and EA (C) Exports of MFA textiles and clothing to the world = 75,708 (D) A x 100Z 71.1Z C (E) B x 100% 78.7Z C (F) Exports of all textiles and clothing to the world - 88,688 (G) A x 100Z 60.7Z (H) B x 67.2Z F x 100? (I) Domestic exports of all commodities to the world - 224,104 (J) A x 1OOZ 24.0? (K) B - 100Z 26.6Z I Commercial Relations Branch Trade Department 28 March 1990

165 Page 159 APPENDIX 8 Tabla 1: Value and Volume of Hong Knna'a Merchandise Trade Average annual Average annual Value growth rate in value growth rate in volume (HK$Mn) (M) (X) Imports 85, , , Domestic exports 55, , , Re-exports 20, , , Total exports 75, , , Total trade 161, , ,133,

166 Page 160 APPENDIX 9 Table 2: Value of Hong Kong's Imports by SITC R2 Division (2-digit), Value (HK$Mn) % Share Code - Division - Description in total imports FOOD AND LIVE ANIMALS CHIEFLY FOR FOOD 00 Live animals chiefly for food 1, , , Meat and meat preparations 1, , , Dairy products and birds' eggs , , Fish crustaceans and molluscs and preparations thereof 1, , , Cereals and cereal preparations 1, , Vegetables and fruit 2, , , Sugar, sugar preparations and honey , Coffee, tea, cocoa, spices and manufactures thereof , , Feeding stuff for animals (not including unmilled cereals) , Miscellaneous edible products and preparations , , SECTION 0 TOTAL 9, , , BEVERAGES AND TOBACCO 11 Beverages , , Tobacco and tobacco manufactures , , SECTION 1 TOTAL 1, , , CRUDE MATERIALS INEDIBLE EXCEPT FUELS 21 Hides, skins and furskins, raw , Oilseeds and oleaginous fruit Crude rubber (including synthetic and reclaimed) Cork and wood Pulp and waste paper * * * 26 Textile fibes (other than wool tops) and their wastes (not manufactured into yarn or fabric) 1, , , Crude fertilizers and crude minerals (excluding coal petroleum and precious stones) Metalliferous ores and metal scrap , Crude animal and vegetable materials, n.e.s. 1, , , SECTION 2 TOTAL 4, , , MINERAL FUELS, LUBRICANTS AND RELATED MATERIALS 32 Coal, coke and briquettes 8.1 1, ,692.4 * Petroleum, petroleum products and related materials 4, , , Gas, natural and manufactured Electric current SECTION 3 TOTAL 4, , , ANIMAL AND VEGETABLE OILS, FATS AND WAXES 41 Animal oils and fats * * * 42 Fixed vegetable oils and fats Animal and vegetable oils and fats, processed and waxes of animal or vegetable origin * * * SECTION 4 TOTAL ,

167 Page 161 APPENDIX 9 Value (HK$Mn) % Share Code - Division - Description in total imports CHEMICALS AND RELATED PRODUCTS, N.E.S. 51 Organic chemicals , , Inorganic chemicals , ,660.1 C Dyeing, tanning and colouring materials , ] Medicinal and pharmaceutical products , ,086.0 I Essential oils and perfume materials, toilet, polishing and cleansing preparations , , Fertilizers manufactured * 57 Explosives and pyrotechnic products Artificial resins and plastic materials and cellulose esters and ethers 2, , , Chemical materials and products. n.e.s , , SECTION 5 TOTAL 6, , , MANUFACTURED GOODS CLASSIFIED CHIEFLY BY MATERIAL 61 Leather, leather manufactures, n.e.s. and dressed furskins 1, , , Rubber manufactures, n.e.s , Cork and wood manufactures (excluding furniture) , Paper. paperboard and articles of paper pulp, of paper or of paperboard 1, , , Textile yarn fabrics, made-up articles, n.e.s. and related products 11, , , Non-metallic mineral manufactures, n.e.s. 5, , , Iron and steel 2, , , A Non-ferrous metals 1, , , Manufactures of metal, n.e.s. 1, , , SECTION 6 TOTAL 26, , , MACHINERY AND TRANSPORT EQUIPMENT 71 Power-generating machinery and equipment , , Machinery specialized for particular industries 1, , , ' Metalworking machinery ,222.1 v." General industrial machinery and equipment, n.e.s. and machine parts, n.e.s. 1, , , Office machines and automatic data processing equipment 1, , , Telecommunications and sound recording and reproducing apparatus and equipment 3, , , Electrical machinery apparatus and appliances, n.e.s. 5, , , Road vehicles (including air-cushion vehicles) 1, , , Other transport equipment , , SECTION 7 TOTAL 18, , , MISCELLANEOUS MANUFACTURED ARTICLES 81 Sanitary, plumbing, heating and lighting fixtures and fittings, n.e.s , Furniture and parts thereof , , Travel goods, handbags and similar containers , , Articles of apparel and clothing accessories 1, , , Footwear , , Professional, scientific and controlling instruments and apparatus, n.e.s , , Photographic apparatus, equipment and supplies and optical goods, n.e.s., watches and clocks 5, , , Miscellaneous manufactured articles, n.e.s. 3, , , SECTION 8 TOTAL 12, , ,

168 Page 162 APPENDIX 9 Code - Division - Description 1979 Value (HK$Mn) % Share in total imports COMMODITIES AND TRANSACTIONS NOT CLASSIFIED ACCORDING TO KIND AND TRANSACTIONS IN GOLD AND COIN 91 Postal packages not classified according to kind Declarations of a value of HK$6,000 or less , Live animals, not for food * * * 95 Armoured fighting vehicles, firearms and ammunition * * * 96 Coin, other than gold, not current * * * SECTION 9 TOTAL , MERCHANDISE TOTAL 85, , , denotes less than HK$ 0.5 million * denotes less than 0.5 per cent - Nil + Division 93 covers declarations of value < HK$3,000 in 1984 and those of value < HK$2,000 in 1979.

169 APPENDIX 10 C/RM/G/7 Page 163 Table 3: Value of Hong Kong's Domestic Exports by SITC R2 Division (2-Digit) Code - Dyision - Description 1979 Value 1984 (HK$Mn) 1989 % Share in total' domestic exports FOOD AND LIVE ANIMALS CHIEFLY FOR FOOD Live animals chiefly for food Meat and meat preparations Dairy products 3nd birds' eggs Fish crustaceans and molluscs ard preparations thereof Cereal s and cereal preparations Vegetables and fruit Sugar. sugar preparations and honey Coffee. tea, cocoa, spices and manufactures thereof Feeding stuff for animals (not including unmilled cereals) Miscellaneous SECTION 0 TOTAL 1 BEVERAGES AND TOBACCO edible products and preparations 11 Beverages 12 Tobacco and tobacco manufactures * 0.1 * , , ,013.2 * SECTION 1 TOTAL , CRUDE MATERIALS INEDIBLE EXCEPT FUELS Hides, skins and furskins, raw Oilseeds and oleaginous fruit Crude rubber (including synthetic and reclaimed) Cork and wood Pulp and waste paper Textile fibres (other than wool tops) and their wastes (not manufactured into yarn or fabric) 27 Crude fertilizers and crude minerals (excluding coal petroleum and precious stones) 28 MetalI 1 iferous ores and mnetal scrap 29 Crude animal and vegetable materials, n.e.s. SECTION 2 TOTAL 3 MINERAL FUELS, LUBRICANTS AND RELATED MATERIALS , , * * * , , Coal,* coke and briquettes 33 Petroleum, petroleum products and related materials 34 Gas, natural and manufactured 35 Electric current 6.4* SECTION 3 TOTAL ANIMAL AND VEGETABIL OILS, FATS AND WAXES 41 Animal oils and fats 42 Fixed vegetable oils and fats 43 Animal and vegetable oils and fats, processed and waxes of animal and vegetable origin SECTION 4 TOTAL ~97.0

170 Page 164 APPENDIX 10 Value (HK$Mn) % Share in total Code - Division - Description domestic exports CHEMICALS AN RELATED PRODUCTS, N.E.S. 51 Organic chemicals 52 Inorganic chemicals 53 Dyeing, tanning and colcuing materials 54 Medicinal and pharmaceutical products 55 Essential oils and perfume materials, toilet, polishing and cleansing preparations Fertilizers manufactured Explosives and pyrotechnic products Artificial esters and ethers Chemical materials and products, SECTION 5 TOTAL resins and plastic materials and cellulose n.e.s. 6 MANUFACTURED GOODS CLASSIFIED CHIEFLY BY MATERIAL Leather, leather manufactures, n.e.s. and dressed furskins Rubber manufactures, n.e.s. Cork and wood manufactures (excluding furniture) Paper, paperboard and articles of paper pulp, of paper or of paperboard Textile yarn fabrics, made-up articles, n.e.s. and related products Non-metallic mineral manufactures, Iron and steel Non-ferrous metals Manufactures of metal, n.e.s. n.e.s * , , , , , , SECTION 6 TOAL 6, , , MACHINERY AND TRANSPORT EQUIPMENT 71 Power-generating machinery and equipment 72 Machinery specialized for particular industries 73 Metalworking machinery 74 General industrial machinery and equipment, n.e.s. and machine parts, n.e.s. 75 Office machines and automatic data processing equipment 76 Telecommunications and sound recording and reproducing apparatus and equipment 77 Electrical machinery apparatus and appliances, n.e.s. 78 Road vehicles (including air-cushion vehicles) 79 Other transport equipment SECTION 7 TOTAL 8 MISCELLANEOUS MANUFACTURED ARTICLES 81 Sanitary, plumbing, heating and lighting fixtures and fittings, n.e.s. 82 Furniture and parts thereof 83 Travel goods, handbags and similar containers 84 Articles of apparel and clothing accessories 85 Footwear 87 Professional, scientific and controlling instruments and apparatus, n.e.s. 88 Photographic apparatus, equipment and supplies and optical goods, n.e.s., watches and clocks 89 Miscellaneous manufactured articles, n.e.s , , , , , , , , , , , , * * , , , , , , , , , , , , , , , , , , , ,866.9 SECTION 8 TOTAL 37, , , , , , , * *

171 C/RMI/G/7 Page 165 APPENDIX 10 Value (HK$Mn) % Share in total Code - Division - Description domestic exports COMMODITIES AND TRANSACTIONS NOT CLASSIFIED ACCORDING TO KIND AND TRANSACTIONS IN GOLD AND COIN 91 Postal packages not classified according to kind Declarations of a value of HK$6,000 or less , Live animals, not for food 0.3 * * * 95 Armouredfighting vehicles, firearms and ammunition * * 96 Coin, other than gold, not current * SECTION 9 TOTAL , , MERCHANDISE TOTAL 55, , , denotes less than HK$ 0.5 million * denotes less than 0.5 per cent - Nil + Division 93 covers declarations of value < HK$3,000 in 1984 and those of value < HK$2,000 in 1979.

172 C/RM/G/17 Page 166 APPENDIX 11 Table 4: Value of Hong Kong's Re-exports by SITC R2 Division (2-digit), Value (HK$Mn) % Share in Code - Division - Description total re-exports FOOD AND LIVE ANIMALS CHIEFLY FOR FOOD 00 Live animals chiefly fcr food 01 Meat and meat preparations 02 Dairy products and birds' eggs 03 Fish crustaceans and molluscs and preparations thereof 04 Cereals and cereal preparations 05 Vegetables and fruit 06 Sugar, sugar preparations and honey 07 Coffee, tea, cocoa, spices and manufactures thereof 08 Feedingstuff foranimals (not including unimilled cereals) 09 Miscellaneous edible products and preparations SECTION 0 TOTAL 1 BEVERAGES AND TOBACCO 11 Beverages 12 Tobacco and tobacco manufactures SECTION 1 TOTAL 2 CRUDE MATERIALS INEDIBLE EXCEPT FUELS 21 Hides, skins and furskins, raw 22 Oilseeds and oleaginous fruit 23 Crude rubber (including synthetic and reclaimed) 24 Cork and wood 25 Pulp and waste paper 26 Textile fibres (other than wool tops) and their wastes (not manufactured into yarn or fabric) 27 Crude fertilizers and crude minerals (excluding coal petroleum and precious stones) Metalliferous ores and metal scrap Crude animal and vegetable materials, n.e.s. SECTION 2 TOTAL 3 MINERAL FUELS, LUBRICANTS AND RELATED MATERIALS 32 Coal, coke and briquettes 33 Petroleum, petroleum products and related materials 34 Gas, natural and manufactured 35 Electric current SECTION 3 TOTAL 4 ANIMAL AND VEGETABLE OILS, FATS AND WAXES 41 Animal oils and fats 42 Fixed vegetable oils and fats 43 Animal and vegetable oils and fats, processed and waxes of animal and vegetable origin SECTION 4 TOTAL ? , , , , * , , , , , , , , , , , * * * , , , , ,

173 Page 167 APPENDIX 11 Value (HK$Nn) % Share in Code - Division - Description total re-exports CHEMICALS AND RELATED PRODUCTS, N.E.S. 51 Organic chemicals , Inorganic chemicals , Dyeing, tanning and colouring materials , , Medicinal and pharmaceutical products , Essential oils and perfume materials, toilet, polishing and cleansing preparations , Fertilizers manufactured * 57 Explosives and pyrotechnic products Artificial resins and plastic materials and cellulose esters and ethers , Chemical materials and products, n.e.s , SECTION 5 TOTAL 2, , , MANUFACTURED GOODS CLASSIFIED CHIEFLY BY MATERIAL 61 Leather, leather manufactures, n.e.s. and dressed furskins , Rubber manufactures, n.e.s Cork and wood manufactures (excluding furniture) , Paper. paperboard and articles of paper pulp, of paper or of paperboard , Textile yarn fabrics, made-up articles, n.e.s. and related products 2, , , Non-metallic mineral manufactures, n.e.s. 2, , , Iron and steel , , Non-ferrous metals , Manufactures of metal, n.e.s , , SECTION 6 TOTAL 6, , , MACHINERY AND TRANSPORT EQUIPMENT 71 Power-generating machinery and equipment , Machinery specialized for particular industries , , Metalworking machinery , General industrial machinery and equipment, n.e.s. and machine parts, n.e.s , , Office machines and automatic data processing equipment , , Telecommunications and sound recording and reproducing apparatus and equipment , , Electrical machinery, apparatus and appliances, n.e.s. 1, , , Road vehicles (including air-cushion vehicles) , , Other transport equipment SECTION 7 TOTAL 3, , , MISCELLANEOUS MANUFACTURED ARTICLES 81 Sanitary, plumbing, heating and lighting fixtures and fittings, n.e.s , Furniture and parts thereof , Travel goods, handbags and similar containers , , Articles of apparel and clothing accessories , , Footwear , Professional scientific and controlling instruments and apparatus, n.e.s , Photographic apparatus, equipment and supplies and optical goods, n.e.s., watches and clocks 1, , , Miscellaneous manufactured articles, n.e.s , , SECTION 8 TOTAL 4, , ,

174 C/RM/G/ 7 Page 168 APPENDIX 11 Value (HK$Mn) % Share in Code - Division - Description totalle-exports COMMODITIES AND TRANSACTIONS NOT CLASSIFIED ACCORDING TO KIND AND TRANSACTIONS IN GOLD AND COIN 91 Postal packages not classified according to kind Declarations of a value of HK$6,000 or less , Live animals not for food * * * 95 Armoured fighting vehicles, firearms and * * * 96 Coin other than gold, not current * * SECTION TOTAL , MERCHANDISE TOTAL 20, , , denotes less than HK$0.5 million * denotes less than 0.5 per cent - Nil + Division 93 covers declarations of value < HK$3,000 in 1984 and those of value < HK$2,00 in 1979.

175 APPENDIX 12 Table 5: Value of Hong Kong's Total Exports by SITC R2 Division (2-digit), C/RM/G/7 Page 169 Value (HK$Mn) % Share Code - Division - Description in total exports FOOD AND LIVE ANIMALS CHIEFLY FOR FOOD 00 Live animals chiefly for food 01 Meat and beat preparations 02 Dairy products and birds' eggs 03 Fish crustaceans and molluscs and preparations thereof 04 Cereals and cereal preparations 05 Vegetables and fruit 06 Sugar, sugar preparations and honey 07 Coffee. tea, cocoa, spices and manufactures thereof 08 Feeding stuff for animals (not including unfilled cereals) 09 Miscellaneous edible products and preparations SECTION 0 TOTAL 1 BEVERAGES AND TOBACCO 11 Beverages 12 Tobacco and tobacco manufactures SECTION 1 TOTAL 2 CRUDE MATERIALS INEDIBLE EXCEPT FUELS Hides, skins and furskins, raw Oilseeds and oleaainous frit Crude rubber (including synthetic and reclaimed) Cork and wood Pulp and waste paper Textile fibres (other than wool tops) and their wastes (not manufactured into yarn or fabric) Crude fertilizers and crude minerals (excluding coal petroleum and precious stones) Metalliferous ores and metal scrap Crude animal and vegetable materials, n.e.s , , , , , , , , , , , , , , , , , , , ,353.4 SECTION 2 TOTAL 2, , , MINERAL FUELS, LUBRICANTS AND RELATED MATERIALS 32 Coal, coke and briquettes 33 Petroleum, petroleum products and related materials 34 Gas, natural and manufactured 35 Electric current SECTION 3 TOTAL 4 ANIMAL AND VEGETABLE OILS, FATS AND WAXES 41 Animal oils and fats 42 Fixed vegetable oils and fats 43 Animal and vegetable oils and fats, processed and waxes of animal or vegetable origin * , , , SECTION 4 TOTAL * * *

176 C/RM/G/ 7 Page 170 APPENDIX 12 Value (HKSMn) % Share Code - Division - Description in total exports S CMERMICALS ANDRELATED PRCOUCTS, N.E.S Organic chemicals Inorganic chemicals Dyeing, tanning and colouring materials Medicinal and pharmaceutical products Essential oils and perfumeaceutical toilet, polishing and cleansing preparations Fertilizers manufactured Explosives and pyrotechnic products Artificial resins and plastic materials and cellulose esters and ethers Chemical materials and products. n.e.s. SECTION 5 TOTAL 6 MANUFACTURED GOODS CLASSIFIED CHIEFLY BY MATERIAL Leather, leather manufactures, n.e.s. and dressed furskins Rubber manufactures, n.e.s. Cork and wood manufactures (excluding furniture) Paper, paperboard and articles of paper pulp, of paper or of paperboard Textile yarn fabrics, made up articles, n.e.s. and related products 66 Non-metallic mineral manufactures, 6? Iron and steel 68 Non-ferrous metals 69 Manufactures of metal, n.e.s. SECTION 6 TOTAL 7 MACHINERY AND TRANSPORT EQUIPMENT n.e.s. 71 Power generating machinery and equipment 72 Machinery specialized for particular industries 73 Metalworking machinery 74 General industrial machinery and equipment, n.e.s. and machine parts, n.e.s. 75 Office machines and automatic data processing equipment 76 Telecommunications and sound recording and reproducing apparatus and equipment 77 Electrical machinery apparatus and appliances, n.e.s. 78 Road vehicles including air-cushion vehicles) 79 Other transport equipment SECTION 7 TOTAL 8 MISCELLANEOUS MANUFACTURED ARTICLES 81 Sanitary plumbing heating and lighting fixtures and fittings, n.e.s. 82 Furniture and parts thereof 83 Travel goods handbags and similar containers 84 Articles of apparel and clothing accessories 85 Footwear 87 Professional scientific and controlling instruments and apparatus, n.e.s. 88 Photographic apparatus equipment and supplies and optical goods, n.e.s., watches and clocks 89 Miscellaneous manufactured articles, n.e.s. SECTION 8 TOTAL , , , , , , , , , , , * , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,