Guide to Tariffs in Hong Kong: Important Things to Know

15 minute read


A tariff is a tax that is charged on goods or services as they get moved from one state to another. Some also refer to these tariffs as customs duty, the term used interchangeably with tariff.

Tariffs are usually charged by the country that imports the goods and they generally serve two basic purposes:

  1. Creating revenue for the importing country
  2. Protecting local businesses that manufacture the same goods

It is also worth noting that some tariffs are called protective tariffs and they charge a higher tax on imported goods so the domestically produced variations of the identical product can be sold at a more competitive price.

But are these tariffs lower in Hong Kong just like the taxes in this region? This article covers the most important details about tariffs in this city.

Overview:

Tariffs & Non-Tariffs Barriers

To begin with, there are three different concepts you should be aware of: tariffs, rules on alcoholic beverages, and non-tariff barriers.

Hong Kong tariffs

HK is a free port, imposing no general tariff on imported goods. Keep in mind, however, that excise duties apply on four commodity groups:

  • Alcoholic liquors
  • Tobacco
  • Hydrocarbon oil
  • Methyl alcohol

Excise duties are charged on these commodities even if they are locally manufactured.

Alcoholic beverages rules

Spirits exported to Hong Kong are subject to import duty. However, beer and wine are not subject to this duty.

This is due to the fact that Hong Kong exempts beverages with more than 10% alcohol content from its labeling requirements. Still, the alcohol content must be obviously stated on the product.

Liquor with more than 30% alcohol content is the only dutiable commodity subject to ad valorem duty (duty/tariff rate is calculated based on the percentage of the liquor value).

The duty applies to the following kinds of liquor at the tariff rates expressed as a percentage of the value:

  • 100% duty – liquor with an alcoholic strength of more than 30% by volume measured at a temperature of 20℃;
  • 0% tariff rate – liquor, other than wine, with an alcoholic strength of not more than 30% by volume measured at a temperature of 20℃;
  • 0% tariff rate – wine.

Additionally, beverages containing more than 30% of alcohol content are subject to a 100% excise duty, unless the product is to be re-exported and not consumed in Hong Kong. In that case, there is no excise duty.

Finally, only licensed importers can import alcoholic beverages (more than 30% by volume). Keep in mind that an import permit is required for each shipment before arrival.

Non-tariff barriers

Hong Kong is liberal with measures. It has no non-tariff measures that would protect domestic industries. The goal of this is to remain a global business and trading hub.

However, the city imposes a wide array of non-tariff measures to protect public health, safety, security, and the environment. These non-tariff measures usually come in the form of license requirements and are issued by the License Branch of the Trade and Industry Department.

In most cases, import license applications have to be endorsed by other Hong Kong departments.

These are the items that require import licenses:

  • Ozone-depleting substances
  • Powdered formula
  • Rice
  • Rough diamonds
  • Strategic commodities
  • Textiles
  • Wine exports to Mainland
  • Mainland cereals and grain flour

There is online search service on the Trade and Industry Department website. It is possible to search for import and export licensing requirements by types of goods, import/ export control, application document, and issuing authority.

Hong Kong Free Trade Agreements (FTAs)

Hong Kong is always looking to expand its FTA network in order to secure better conditions for its goods and services to enter the Mainland and international markets.

Hong Kong has signed eight FTAs in total to this day:

  1. Mainland China (June 2003)
  2. New Zealand (March 2010)
  3. The Member States of the EFTA (European Free Trade Association, June 2011)
  4. Chile (September 2012)
  5. Macao (October 2017)
  6. Association of Southeast Asian Nations (ASEAN) (November 2017)
  7. Georgia (June 2018)
  8. Australia (March 2019)

In addition, it has recently finalized FTA negotiations with the Maldives.

Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA)

Hong Kong is always looking to expand its FTA network in order to secure better conditions for its goods and services to enter the Mainland and international markets.

Hong Kong has signed eight FTAs in total to this day:

  1. Mainland China (June 2003)
  2. New Zealand (March 2010)
  3. The Member States of the EFTA (European Free Trade Association, June 2011)
  4. Chile (September 2012)
  5. Macao (October 2017)
  6. Association of Southeast Asian Nations (ASEAN) (November 2017)
  7. Georgia (June 2018)
  8. Australia (March 2019)

In addition, it has recently finalized FTA negotiations with the Maldives.

Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA)

The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) is the first free trade agreement ever signed between the Mainland of China and Hong Kong. The main text of this agreement was signed in 2003.

CEPA opens up huge markets for Hong Kong goods and services, significantly improving the already close economic cooperation and integration between the Mainland and HK. The agreement uses a building block approach, which means that both sides have been working together to introduce further liberalization measures.

HK, China – New Zealand Closer Economic Partnership Agreement

New Zealand is an important trading partner of HK. Goods and merchandise trade between these entities amounted to HK$11.4 billion in 2019. In terms of services trade, New Zealand was Hong Kong’s 27th largest trading partner, with bilateral services trade which amounted to HK$3.8 billion in 2018.

The event that preceded this trading success took place in 2010. HK and New Zealand signed the HK, China – New Zealand Closer Economic Partnership Agreement (CEP Agreement) on 29 March 2010.

The Agreement is Hong Kong’s first FTA with a foreign economy and the second FTA after the Closer Economic Partnership Arrangement with the Mainland of China.

Hong Kong, China, and the Member States of the EFTA

HK and the Member States of the European Free Trade Association (EFTA States), mainly Iceland, Liechtenstein, Norway, and Switzerland, concluded a comprehensive FTA on 21 June 2011 in Liechtenstein.

This agreement is the region’s first FTA with the European economies and it is seen as a significant milestone in Hong Kong’s international trade relations with the four EFTA States. The agreement deals with trade in services and goods along with investment and other trade-related areas such as intellectual property protection policies.

FTA between HK, China, and Chile

The FTA between Hong Kong, China, and Chile was preceded by a joint feasibility study in 2009. The study found that improving the trade and economic relationships between Hong Kong and Chile would make a positive impact on both economies.

Following three rounds of negotiation, the FTA between HK and Chile was signed on 7 September 2012. Additionally, Hong Kong and Chile have signed a Memorandum of Understanding (MoU) on Labour Cooperation to address labor issues of mutual interest.

Hong Kong and Macao Closer Economic Partnership Arrangement (HK-Macao CEPA)

HK and Macao started formal discussions for HK-Macao CEPA in November 2015. It took three rounds of talks and subsequent discussions for the main text and the schedule of commitments to be made. This was finalized on 29 June 2017 and HK-Macao CEPA was signed on 27 October 2017.

The HK-Macao CEPA presents a comprehensive scope and the commitments that go beyond those undertaken by Hong Kong and Macao under the World Trade Organisation (WTO), providing improved legal certainty to market access or treatment to one another.

HK and Macao have close and strong bilateral trade relations. Both economies have highly liberalized trade regimes that are somewhat similar.

Hong Kong, China – Georgia FTA

HK and Georgia started the FTA negotiations in September 2016, which were finalized in April 2017. The FTA was signed in 2018. The FTA is comprehensive in scope, covering trade in goods, trade in services, investment, dispute settlement mechanism, and other related areas.

Hong Kong, China – ASEAN FTA

HK and ASEAN started negotiations of the FTA and an Investment Agreement in July 2014. It took ten rounds for Hong Kong and ASEAN to announce the conclusion of the negotiations in September 2017.

The agreements were signed in November 2017. These will extend Hong Kong’s FTA and Investment Agreement network to cover all important economies in Southeast Asia.

FTA between HK, China, and Australia

Hong Kong and Australia started negotiations about the FTA and an Investment Agreement in May 2017. The negotiations were completed in November 2018. The two agreements were signed on 26 March 2019.

The Agreements are comprehensive in scope and the stipulated commitments are of high quality, covering trade in goods, trade in services, investment, government procurement, intellectual property, competition, dispute settlement mechanism, and other related fields.

Transhipment Cargo Exemption Scheme (TGES)

Airlines, shipping companies, and freight forwarders registered under the Transhipment Cargo Exemption Scheme are, subject to certain conditions, exempted from import and export licensing requirements in respect of transhipment cargo they handle.

Transhipment cargo is any imported article that is consigned on a through bill of lading or a through-air waybill from a place outside Hong Kong to another place outside it.

Transhipment cargo also includes articles that need to be removed from the aircraft, vessel, or vehicle in which they were imported and either returned to the same vessel, aircraft or vehicle or transferred to another vessel, aircraft, or vehicle before being exported.

Product coverage

There are various exemptions that apply to certain types of transhipment cargo under the TGES:

  • Pharmaceutical products and medicine
  • Rice
  • Frozen or chilled meat and poultry
  • Chinese herbal medicines and proprietary Chinese medicine
  • Powdered formula
  • Rough diamonds

If the countries that import or export the mentioned goods are subject to trade sanctions of any kind, the relevant transhipment cargo is not eligible for any licensing exemption under the Scheme.

When it comes to rough diamonds, the exemption only applies to transhipment of rough diamonds from or to a country for which the Kimberley Process Certification Scheme is effective or as permitted by the Kimberley Process and the importation of the rough diamonds from the exporting country and exportation of which to the country or place of destination is not under any trade sanctions.

Legal & Administrative Actions

Make sure that you remember that any individual committing an offense will be held accountable and they will be convicted (fined and imprisoned).

The Import and Export Ordinance, Reserved Commodities Ordinance, Ozone Layer Protection Ordinance, and their subsidiary regulations stipulate rules of import of articles into Hong Kong and export of articles from the city.

The Import and Export Ordinance provides for a maximum penalty of an unlimited fine and a seven-year imprisonment sentence for any breach of the Import and Export regulations. In addition, keep in mind that the Reserved Commodities Ordinance stipulates the maximum penalty of HK$100,000 and imprisonment (2 years).

Administrative actions

Administrative actions can be taken against traders and registered businesses. These actions may involve but are not exclusive to:

  • Suspensions and license revocations
  • Suspension of all licensing facilities and all certification facilities
  • Rejection of a license
  • Cancellation or revocation of the certificate of origin

How To Apply For Import/Export-Related Services?

In order to apply for the import or export services, one has to either come in and file it in person or mail the form in. It is also possible to mail the necessary documents electronically, which is slowly becoming the preferred method due to the pandemic.

However, bear in mind that this depends on categories. The Trade and Industry Department has categorised services and means of submission.

Wrap Up

Hong Kong is a truly unique place and your business ideas are likely to become a reality there. You will have all the conditions in your favor because the region simply loves innovators and hard workers that have the courage to try new things.

But in order to increase your chances of success, make sure that you properly learn what things you should never do when setting up a business in Hong Kong. Sleek and its services such as corporate secretary and incorporation can help you avoid quite a few mistakes that many have made during the setup phase.

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