Certificates of Or.
For an average trader, applying for This is the second most common type certain percentage of the applications
Certificates of Origin (called C/O's in of C/O's. As Hong Kong is a beneficiary for inspection. Inspectors are sent door
short) may seem a tedious and time- under the Generalised System of Pre- to door to conduct consignment checks.
consuming job. He has to type piles of ference (GSP) operated in 11 countries The Trade Department and each of the
appiication forms, filling in minute (with the EEC counted as one), this GACO's are all independent in their
details, and has to make sure that certificate is to certify the Hong Kong inspection operations, but are in con-
everything is spelled correctly, or else origin of products claiming preferential stant contact with each other to
rejection by the authorities will mean tariff terms under the GSP, Criteria for exchange views and experiences.
a three- to four-day delay, Why the origin are unique in each of the 11 In case of suspected malpractice
trouble of C/O applications? countries. after the first inspection, the case will
Looking at the history of C/O's, Endorsed Certificate of Origin (for be referred to the Customs and Excise
however, the system was, ironically, Commonwealth Preference purposes) Department, which will investigate fur-
designed to promote and facilitate — This works in a similar way as the ther and take administrative or legal
Hong Kong's exports. Certificate of Origin Form A: this is actions accordingly. With accumulated
The C/O system in Hong Kong dates to certify the Hong Kong origin of experience in dealing with malpractices,
back to the early 1950's, when a post- goods claiming preferential tariff for all bodies involved in certification in-
war population boom provided labour entry into certain British Common- spection have come up with a list of
for the prospering manufacturing in- wealth countries. Again, these countries "sensitive items", the C/O applications
dustry, boosting both production and have their own criteria for Hong Kong of which are most prone to misuse or
exports. Since Hong Kong has always origin. false declaration.
been a port of free trade, importing Certificate of Origin, Re-export — Criteria for Hong Kong origin are set
countries, at that time, had not imposed This is to certify the origin of goods by the Certification Co-ordination
any kind of trade restriction on pro- shipped through Hong Kong. Committee, which is headed by the
ducts made in Hong Kong. In order to Certificate of Origin, Non-transit — Trade Department and involves the
differentiate Hong Kong-made goods This is again to certify that a re-export participation of GACO's. Trade Depart-
from those produced elsewhere, the deal is made in Hong Kong although ment officials say that these criteria
Government introduced a legally pro- the actual goods are shipped directly are accepted internationally, and have
tected C/O system in 1953. Since then, from the exporting country to the so far not gone through any major
Hong Kong's exports accompanied by f inai destination. revision, not even in the case of US-
C/O's have gone through custom clear- Certificate of Origin, Processing — bound knitwear.
ance at their destinations much more This is to certify that some processes Last year, the United States imposed
efficiently. of production of a certain product are new country-of-origin regulations, sti-
The C/O system has grown more conducted in Hong Kong, but these pulating that panel-knitting is a major
sophisticated, as trading has become a processes are not major ones so the manufacturing step, and should be a
more complicated matter internation- product is not qualified as having a criterion determining the origin of a
ally, and more trade regulations have Hong Kong origin. certain knitwear product. With the
been promulgated everywhere. There Certificates of Origin are issued by new American regulation, import knit-
are now six types of Certificates of the Trade Department of the Hong wear products knitted outside of Hong
Origin issued in Hong Kong: Kong Government and five non- Kong and are sewn, linked, looped or
Certificate of Hong Kong Origin — government organisations, called the stitched in the territory are not con-
This is the most common type of C/O's, Government Approved Certification sidered as made in Hong Kong, In con-
certifying, as its name suggests, that a Organisations (GACO). They are: The trast, the criteria set by the Hong
certain shipment is made in Hong Hong Kong General Chamber of Kong Government do not include
Kong. To be qualified as having a Commerce; The Indian Chamber of panel-knitting as a major manufacturing
Hong Kong origin, the major manufac- Commerce, Hong Kong;The Federation step.
turing process of the product has to be of Hong Kong Industries; The Chinese Will the new U.S. country-of-origin
conducted locally. Criteria for the Manufacturers' Association of Hong rules set a trend in other importing
major manufacturing process, which are Kong; and The Chinese General countries? if most Importing countries
unique for each product, are based on Chamber of Commerce. impose regulations that conflict with
international standards. After C/O applications are received, the criteria set by Hong Kong, will the
Certificate of Origin Form A (or the Trade Department and the GACO's Government consider revising its pre-
Generalised Preference Certificate) — will screen through them, and pick a sent criteria accordingly? Trade Depart-
28 THE BULLETIN NOVEMBER 1986
As an average exporter in Hong Kong, Mr, Chu has may be rejected by the authorities and will take another
the following problems: three days to reprocess.
1. During peak shipping season, his shipping clerks 3, For each shipment, the clerks have to type the same
have to sit in the office day and night for at least four information on the eight to 10 export documents over
hours of overtime everyday, processing export documents, and over again. They feel that it is a tedious and boring
At other times, they sit around idle, job and most are thinking of resigning.
2, When the workload is heavy, the shipping clerks 4, Mr, Chu cannot afford to lose his shipping clerks.
are under so much stress that making mistakes in their Export document processing requires a lot of experience
typing is inevitable, Mr. Chu ends up checking every in the field, and hiring new staff means iong training
detail on the documents before they are sent out. Other- time and low efficiency.
wise, the documents such as export licence applications,
More and more exporters who share dures Board (SITPRO), part of the and the exporter's names and ad-
Mr. Chu's problems have increasingly British Board of Trade; and has been dresses, product description, price,
found automation a viable solution: a modified by TFS with recommenda- quantity, destination and product ori-
computer software programme, SPEX tions from Hong Kong businesses, it gin. Once these are entered into the
HK, has been designed specifically for has been widely adopted by traders in computer's memory, printing various
the processing of export documents. many countries, such as Britain, documents is a matter of simply press-
The software programme was intro- Finland and the Netherlands, and will ing a few keys. Up to now, the formats
duced to Hong Kong in March last soon be introduced in Australia and of 40 standard documents have been
year by Trade Facilitation Services the United States. There are now more built into the system; examples are
(TFS), the sales arm of the Trade than 50 SPEX HK users in Hong Kong. insurance applications and export
Facilitation Council. SPEX was ori- SPEX HK processes export docu- licence applications, standard invoices,
ginally developed by the Simplifi- ments by first storing information for packing lists, standard bank collection
cation of International Trade Proce- each shipment, such as the importer's orders and cargo shipping orders.
ment officials dismiss the possibility of lease exact figures and percentages, but with and approved by the Government.
such a trend, saying that the United says the drop was quite drastic. Among The rest of malpractice involves
States is the only country which has the cases of malpractice, the majority the delivery of goods earlier than
changed its country-of-origin regula- involve inadequate record-keeping, allowed. C/O applicants are supposed
tions. The Trade Department is satisfied which is considered a minor offense. to keep their shipments in Hong Kong !
with the present set of criteria and is According to the Trade Department for inspection until after inspections
not planning for any revision. regulations, all manufacturers registered are conducted and C/O's issued.
Issuing C/O's has over the last de- with the Department as C/O applicants Trade Department officials say the
cade proven to be a fast growing ser- are supposed to keep their records up- present inspection system is working
vice. The number of Certificates of to-date. well in keeping the number of mal-
Hong Kong Origin and C/O's Form A, Other malpractices involve the in- practices down. In general, they say,
which together make up the bulk of adequate or missing information on the C/O system in Hong Kong is com-
C/O's, increased from 670,000 in 1976 subcontract deals between the manu- prehensive and well-implemented. The
to 980,000 in 1985. However, the num- facturer (C/O applicant) and its sub- Trade Department is trying to move it
ber of C/O's issued depends very much contractors. For any factory taking up one step forward by computerisation.
on the current economic situation. For subcontract production from another The Department is now experimenting
example, the number of C/O's dropped manufacturer, it is required that the on using the computer to do prelimi-
in 1981-2 and in 1985, when Hong factory be registered with and approved nary checks on C/O applicants and
Kong experienced a decline in export by the Government. Details of the sub- handle statistics. However, the exact
orders. contracting should also be included in time when the computerised system is
Interestingly, the number of mal- the C/O application by the applicant. implemented is not known. •
practices has fallen in recent years. Subcontracting to individual outwork-
The Trade Department declined to re- ers are not required to be registered
THE BULLETIN NOVEMBER 1986 29