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What is CEPA?

2005/10/31
Text by Joy Chen

CEPA is an acronym for the Closer Economic Partnership Arrangement, which was officially signed during Premier Wen Jiabao's visit to Hong Kong on June 29, 2003, and which became effective on January 1, 2004.

CEPA is divided into six chapters and 23 articles, with six appendices, covering the three major categories of goods trade, services and the facilitation of trade and investment. The implementation of CEPA was designed to gradually eliminate tariff and non-tariff barriers to goods trade, the realization of service-trade liberalization, and to promote trade and investment to enhance trade and economic cooperation between the Chinese mainland and Hong Kong to accomplish common development.

According to CEPA, with respect to goods trading, starting from January 1, 2004, 273 types of Hong Kong-made products under mainland tax items shall enjoy zero tariffs, provided they comply with regulations on place of origin. These products included: some electromechanical and electronic product parts, plastic products, paper products, textiles and garments, chemical products, medicines, timekeepers, ornaments, cosmetics, metal products. Hong Kong manufacturers, if meeting the principles of place of origins under CEPA, may apply for zero tariff preferences no later than January 1, 2006. The Hong Kong Special Administrative Region (SAR) Government agrees to maintain zero tariffs on all products with the mainland as a place of origin under CEPA, and will not impose restrictive trade rules on those products.

As regards services, 17 service sectors will obtain relaxed access according to CEPA. In terms of the facilitation of trade and investment, both parties agree to step up cooperation in 7 sectors of trade and investment: customs clearance, commodity inspection and quarantines, e-commerce, legal transparency, in the cooperation of small and medium-sized enterprises (SMEs) and in cooperation involving traditional Chinese medicine.

The zero tariff regime will be implemented in five steps:

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

(2) Beginning in 2005, responsible authorities under the Hong Kong SAR Government shall submit product listings to relevant mainland authorities no later than June 1 each year. Having conducted joint verification and confirmations, both parties shall hold consultations on the principles of place of origin of products.

(3) Before October 1 of each year, authorities of both parties shall complete the confirmation of products on which zero tariffs are scheduled to be practiced in the next year, and consultations on norms of place of origin and plans of tariff reduction, and release consensus should be reached.

(4) In light of consensuses reached, on January 1 of each year, the mainland will start implementing zero tariffs on the products confirmed during the previous year.

(5) Product listings submitted to the mainland authorities by the SAR Government authorities after June 1 each year will be brought into the tariff reduction arrangement in the third year.

In terms of Hong Kong, the SAR Government agrees to maintain zero tariffs on goods with the mainland as place of origin, and it will not introduce new pertinent measures biased against mainland services and service providers in the above industries.

Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA)

Summary of Trade and Investment Facilitation

Both sides agree on promoting cooperation in the following seven areas:

Area	Strengthened Cooperation
Customs Clearance Facilitation	Establish a customs information exchange system between the two sides. Explore the feasibility of data networking and the development of electronic customs clearance at control points. Strengthen the risk management ability of the two sides and enhance efficiency in customs clearance through technical cooperation.
Quarantine and Inspection of Commodities, Quality Assurance and Food Safety	Strengthen cooperation of the two sides in the inspection and monitoring of electrical and mechanical products, sanitary and phytosanitary measures, food safety, health and quarantine supervision, product certification and accreditation, standardization management.
Cooperation of Small- and Medium-sized Enterprises (SMEs)	Strengthen information exchanges between SMEs of the two sides. Organize exchanges and visits between SMEs of the two sides. Explore jointly the strategy and support policy to assist the development of SMEs of the two sides.
Cooperation in Chinese Medicine and Medical Products	Strengthen information sharing between the two sides in regulation formulation, development strategies and in the direction of development. For Chinese medicine and medical products. Foster the competitive edge of each side. Promote jointly the commercialization of Chinese medicine and medical products and make advancements in the international market.
Electronic Commerce	Strengthen the cooperation of the two sides in the research and formulation of rules, standards and regulations for electronic commerce and in its corporate use. Promote and provide training for electronic commerce and electronic government.
Trade and Investment Promotion	Strengthen mutual trade and investment promotions between the two sides. Cooperate in the joint development of international markets for commodities and engineering works.
Transparency in Laws and Regulations	The mainland notes that Hong Kong has built up transparency of laws and regulations on a good foundation, and the mainland is also actively fulfilling its WTO commitments. The two sides shall strengthen cooperation and strive to provide information to their commercial and industrial enterprises with a view to promoting bilateral economics and trade flows.



	Article featured in Business Beijing, October 2005 Publication sponsored by Information Office of the Beijing Municipal Government, Beijing Municipal Bureau of Commerce, Development & Reform Commission of Beijing Municipality, China Council for the Promotion of International Trade (Beijing Sub-Council)