Hong Kong’s is the 10th largest trading economy in the world and is considered to be Asia’s leading trade and commercial center. According to the Hong Kong Trade Development Council, the total values of exports and imports increased by 10% to USD428 billion and 12% to USD483 billion respectively in 2011. One of the major factors that have contributed to Hong Kong’s status as one of the world’s largest trading economies is its free trade policy. Hong Kong does not impose any tariffs on the import or export of goods and minimizes other barriers to such trade. According to the Hong Kong Trade and Industry Department, import/export licensing is imposed only when there is a genuine need to fulfill obligations undertaken by Hong Kong to its trading partners, or to meet public health, safety or internal security needs.
This guide provides information on the various aspects of conducting a trading business in Hong Kong. Note that the information provided here is for general guidelines only and it is not meant to replace professional advice.
2. Incorporating a Hong Kong Trading Company
Once you have decided to setup a trading company in Hong Kong, you must first register a Hong Kong company and obtain a Certificate of Incorporation from the Hong Kong Companies Registry. For details on how to setup a Hong Kong company, please refer to Hong Kong Company Incorporation Guide.
3. Import/Export Licenses and Permits
Depending on the type of goods you intend to import or export, a valid import/export license must be obtained from the relevant government departments in Hong Kong. Detailed below are the various goods or products that require an import/export license in Hong Kong.
(1) Import/Export license for dutiable goods
If you intend to import or export dutiable goods, you must obtain an import/export license from the Customs and Excise Department of Hong Kong. According to the Dutiable Commodities Ordinance, dutiable goods include
Alcoholic liquors such as brandy, whisky, gin, rum, vodka, etc.;
Tobacco products such as cigars, cigarettes, smokeless tobacco products etc.;
Hydrocarbon oils such as motor spirit, aircraft spirit, kerosene and light diesel oil; and
(2) Import/Export license for optical disc mastering and replication equipment
If you wish to import or export optical disc mastering and replication equipment, an import/export license must be obtained from the Customs and Excise Department of Hong Kong.
(3) Import/Export license for controlled chemicals
If you wish to import or export-controlled chemicals, you must obtain an import/export license from the Customs and Excise Department of Hong Kong.
(4) Import/Export License for the import or export of animals or birds
You must obtain an import license from the Import and Export Division, Agriculture, Fisheries and Conservation Department in order to import animals or birds into Hong Kong. For the import/export of endangered animals, plants or species, an import/export license from the Endangered Species Protection Division, Agriculture, Fisheries and Conservation Department must be obtained. Furthermore, an import permit must be obtained in order to import live mammals, birds or reptiles.
(5) Import/Export license for pharmaceutical products, medicines and dangerous drugs
If you wish to import or export pharmaceutical products, medicines (including Chinese medicine) and certain dangerous drugs, you must obtain an import/export license from the Pharmaceuticals Import/Export Control Unit, Pharmaceutical Service, Department of Health. The common types of dangerous drugs are stimulants, hypnotics, tranquilizers and sedatives. Some examples include opium, morphine, heroin, cannabis, cocaine and amphetamines. For the import/export of Chinese herbal medicines, the import/export license must be obtained from the Chinese Medical Council of Hong Kong.
(6) Import of Food Items
Importing frozen confectionery: In order to import frozen confectionery, you must obtain prior permission from the Center of Food Safety, Food and Environmental Hygiene Department. Note that importation is allowed only from approved sources of manufacture.
Importing frozen or chilled meat and poultry: Importers of frozen or chilled meat and poultry must apply for an import license from the Food and Environmental Hygiene Department’s Import Registration Office.
Import of milk or milk beverages: In order to import milk or milk beverages you must obtain prior permission from the Center of Food Safety, Food and Environmental Hygiene Department. Note that importation is allowed only from approved sources of manufacture.
(7) Import/Export license for hazardous chemicals
An import/export license is required in order to import or export scheduled chemicals. At present, non-pesticide hazardous chemicals include chemicals that are subject to regulation under the Stockholm Convention on Persistent Organic Pollutants or the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade.
(8) Import/Export license for pesticides
If you wish to import or export pesticides, you must obtain an import/export License from the Plant and Pesticides Regulatory Division, Agriculture, Fisheries and Conservation Department.
(9) Import license for plants
If you wish to import plants into Hong Kong, you must first obtain a Plant Import License from the Plant and Pesticides Regulatory Division, Agriculture, Fisheries and Conservation Department. However, the import of plants produced in mainland China is exempted from the licensing requirement. The exemption also applies to the import of cut flowers, fruits and vegetables for consumption, from mainland China and other countries.
(10) Import/Export license for radio transmission equipment
An import/export permit issued by the Licensing Unit, Office of the Telecommunications Authority is required for the import or export of radio transmitting equipment.
(11) Import/Export License for rice
Rice is staple food in Hong Kong and is therefore scheduled as a reserved commodity under the subsidiary regulations of the Reserved Commodities Ordinance. If you wish to import or export rice into or from Hong Kong, you must apply for an import/export license under the Trade and Industry Department’s Rice Control Unit.
(12) Import/Export license for rough diamonds
The import or export of rough diamonds must be covered by valid Kimberley Process Certificates (Import) and Kimberley Process Certificates (Export), issued by the Director-General of Trade and Industry.
(13) Import/Export license for strategic commodities
Although Hong Kong is a free trade port, certain commodities are subject to control. The import or export of such controlled commodities requires a specific import/export license, issued by the Strategic Trade Controls Branch of the Trade and Industry Department. Note that controlled goods that are being re-exported or transshipped are also subject to the same licensing requirement. However, controlled goods that are in transit i.e. goods which at all times remain in the vessel or aircraft throughout their passage through Hong Kong, are normally not required to be covered by a license, except for particularly sensitive items such as nuclear, chemical or biological weapons. Strategic commodities include arms and ammunition, explosives, high precision machine tools, high performance computers, sophisticated communication systems, nuclear materials, high speed and high-density integrated circuits.
(14) Import/Export license for textiles
The import or export of textiles (including the export of non-Hong Kong origin textiles) must be covered by a valid import/export license, issued by the Director-General of Trade and Industry, unless specifically exempted. Note that the licensing requirements vary for sensitive markets and non-sensitive markets. Sensitive markets include imports from and exports to mainland China, and exports to the USA.
(15) Import license for radioactive substances and irradiating apparatus
An import license must be obtained from the Department of Health in order to import radioactive substances and irradiating apparatus.
4. Import/Export Declaration
According to the Import and Export (Registration) Regulations, every person who imports or exports any goods or articles (except exempt goods/articles) must file an Import/Export Declaration with the Commissioner of Customs and Excise, within 14 days after the goods or articles have been imported or exported. The declaration can be filed electronically via service providers that are appointed by the Government.
5. Import/Export Clearance Procedures
In order to clear imported goods or goods that are to be exported, the Hong Kong Customs and Excise Department will thoroughly inspect all import/export related documents. The Customs Department may also undertake a physical examination of the cargo, as and when it deems fit.
In order to clear imported dutiable goods, the importer must submit a Removal Permit to the Customs Department. A permit holder should take note of the following points when dealing with dutiable commodities:
The goods must be removed within the approved removal date and time;
The goods must be removed from the releasing place and conveyed directly to the designated receiving point; and
The description, quantity and packing of the goods must match with what is mentioned in the permit.
The documents that are required for import/export clearance include:
Bill of lading, airway bill or any other similar document,
Invoice or packing list, and
Other documents such as import/export license, removal permit etc.
6. Import/Export Fees and Taxes
(1) Customs Fees
Hong Kong is a free port and does not impose any customs fees on imports or exports.
(2) VAT or GST
Hong Kong does not impose any value added tax or goods and services tax.
(3) Excise Duty
Hong Kong imposes an excise duty on only four types of goods, irrespective of whether they are imported or locally manufactured. The goods that are subject to excise duty are liquors, tobacco, hydrocarbon oil and methyl alcohol. For tobacco, hydrocarbon oil and methyl alcohol, duties are charged at specific rates per unit quantity. For liquors, duty is assessed at different percentages based on the alcoholic strength of the liquor. For specific rates of duty, please click here.
7. Import/Export Financing
With the growth of international trade, the importance of trade finance has also increased. At present, there are a number of financing options available for trading companies in Hong Kong. The major trade finance instruments that facilitate trade in Hong Kong include:
(1) Letters of Credit
The Letter of Credit is the most widely used trade finance instrument and is an effective means for banks to finance import/export trade. A Letter of Credit is a letter issued by the buyer’s bank and guarantees payment to the exporter.
(2) Short-term finance
Almost all major banks in Hong Kong offer short-term finance options to trading companies. Some of the short-term financial products include term loans, overdraft, revolving loans, import/export loans, etc.
(3) Export credit insurance
Export credit insurance is cargo insurance on goods that insures the goods against damage, theft and loss and protects the exporter against non-payment by the buyer. The insurance policy can aid financing as it can be used as collateral against which banks charge lower rates for loans since the risks are reduced. The Hong Kong Export Credit Insurance Corporation (ECIC) issues insurance policies that are accepted by banks as useful collateral for trade finance. Around 70 banks in Hong Kong have accepted ECIC policies as useful collateral.
8. Hong Kong-China Free Trade Agreement
One of the benefits of setting up a trading company in Hong Kong is that Hong Kong based trading firms can benefit from the Free Trade Agreement (FTA) between Hong Kong and mainland China.
The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) is a bilateral free trade agreement between mainland China and Hong Kong, which came into effect in January 2004. Under CEPA, Hong Kong based companies and Hong Kong made products gain preferential access to the mainland China market. Specifically, all Hong Kong made goods that are exported to mainland China will enjoy zero tariffs. To claim the tariff preference, each consignment of goods that is exported to the mainland must be accompanied by a Certificate of Hong Kong Origin ?CEPA issued by the Trade and Industry Department or one of the five Government Approved Certification Organizations (i.e. the Hong Kong General Chamber of Commerce; Federation of Hong Kong Industries; the Chinese Manufacturers Association of Hong Kong, the Chinese General Chamber of Commerce and the Indian Chamber of Commerce, Hong Kong).
CEPA also enables certain qualifying Hong Kong based service suppliers easier and faster access to the mainland China market.
Furthermore, CEPA also serves to facilitate trade and investment between Hong Kong and the mainland in certain key areas including customs clearance facilitation, trade and investment promotion, transparency in laws and regulations, etc.