What is Cepa?

Cepa stands for Closer Economic Partnership Arrangement. It is a free trade deal, operating from 1 January 2004, between Hong Kong and the Chinese mainland. It is the first bilateral free trade deal signed by China.

What Does CEPA Offer?

* Zero tariffs on 90% of Hong Kong exports to China
* Faster/easier China market access for 18 service sectors
* Lower entry thresholds for smaller players (capital/trading history requirements)
* 100% ownership of many China ventures
* Manufacturers in China able to use Hong Kong services
* Makes Hong Kong the easiest route into/out of China

What are the main provisions of Cepa?

Cepa is broadly divided into three sections:

Trade in goods

Any company (Hong Kong-based or from outside Hong Kong) can benefit from zero tariffs on 273 categories of products exported from Hong Kong into the Chinese mainland, as long as the products are classified as 'Made in Hong Kong'.

Your company does not have to have an office in Hong Kong, but your products must satisfy 'Rules of Origin' to classify as 'Made in Hong Kong'.

Trade in services

Under Cepa provisions, the Chinese mainland has opened up its market to Hong Kong-based service providers in 18 sectors.

Advertising, accountancy, audiovisual, banking, construction and real estate, convention and exhibition services, distribution services, freight forwarding, insurance, legal, logistics, management consultancy, medical and dental, securities, storage and warehouse services, telecommunications, tourism and transport.

Trade and investment facilitation

The main provisions relate to liberalising customs clearance, business regulations and the standardisation of e-commerce.

Who Benefits From CEPA?

Hong Kong-based service providers (in 18 sectors):
* Company must be incorporated in Hong Kong
* Doing business in Hong Kong for past 3-5 years
* Liable for Hong Kong profits tax
* Employing 50% of staff in Hong Kong
* Any nationality

Manufacturers/distributors of goods (for 273 categories):
* Goods must qualify as 'made in Hong Kong'
* Not necessary for company to be based in Hong Kong
* To qualify, goods must be'substantially transformed'¨D30% of value must be added in Hong Kong (includes R&D, design costs)

How Can Overseas Companies Benefit?

Service companies
* Partner with, invest in, or buy into a Cepa-qualified firm in Hong Kong

Manufacturers or traders of goods
* Partner with, or outsource to, a Hong Kong manufacturer
(no need for your company to have a base in Hong Kong)

How Can Companies Apply?

* Hong Kong-based service companies must apply for a Cepa certificate
* Manufacturers must apply for a Cepa certificate for their products