How to Start a Trading Company in Hong Kong
As the 10th largest trade economy worldwide, Hong Kong is considered Asia’s leading commercial and trade centre. Among the reasons for the country’s success as one of the world’s largest trade economies is the free trade policy. Tariffs are not imposed on both exports and imports of goods into the country, which helps to minimize trade barriers.
Hong Kong’s Trade and Industry Department only imposes licensing on imports and exports into the country when there is a real need to fulfil these obligations, to meet public health and safety, or to fulfil internal security needs. This guide on how to start a trading company in Hong Kong will highlight all the key points you need to know before commencing your business.
How to Incorporate a Trading Company in Hong Kong
Your business may require valid import/export licenses to operate in Hong Kong. This would depend on the types of goods you intend to import or export. Licenses can be obtained from the relevant government departments in Hong Kong.
Types of Goods or Products That Require Import/Export Licenses in Hong Kong
There are various goods or products which will require import/export licenses before you can bring them in or out of Hong Kong. The categories of goods involved are as follows:
- Dutiable Goods Import/Export Licenses. Applicable if you intend to import or export dutiable goods. The license must be obtained from the Customs and Excise Department of Hong Kong. Dutiable goods include alcoholic liquors, tobacco products, hydrocarbon oils and methyl alcohol.
- Controlled Chemicals Import/Export Licenses. Licenses must be obtained from the Customs and Excise Department of Hong Kong.
- Animals or Birds Import/Export Licenses. Licenses can be acquired from the Import and Export Division, Agriculture, Fisheries and Conversation Department. For endangered animals, licenses must be obtained from the Endangered Species Protection Division, Agriculture, Fisheries and Conservation Department. Importing live birds, mammals and reptiles requires permits to do so.
- Pharmaceutical Products, Medicines and Dangerous Drugs Import/Export Licenses. The licenses can be obtained from the Pharmaceuticals Import/Export Control Unit, Pharmaceutical Service, Department of Health. This includes the import of Chinese herbal medicine and certain dangerous drugs.
- Importing Food Items. Prior permission must be obtained from the Centre of Food Safety, Food and Environmental Hygiene Department. This includes importing milk or milk beverages, and confectionary. Imports are only allowed if they come from approved sources of manufacture. Importing frozen or chilled meats requires licenses to be granted by the Food and Environmental Hygiene Department’s Import Registration Office.
- Hazardous Chemicals Import/Export License. Non-pesticide hazardous chemicals include those subjected 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.
- Pesticides Import/Export Licenses. This must be obtained from the Plant and Pesticides Regulatory Division, Agriculture, Fisheries and Conservation Department.
- Plants Import License. This must be obtained from the Plant and Pesticides Regulatory Division, Agriculture, Fisheries and Conservation Department. Plants imported and produced in mainland China, including the import of fruits, cut flowers and vegetables for consumption, are exempted from this license requirement.
- Radio Transmission Equipment Import/Export License. Permits are issued by the Licensing Unit, Office of the Telecommunications Authority.
- Licenses for Rice Import/Export. Because rice is considered a reserved staple in Hong Kong, it is scheduled as a reserved commodity. This falls under the Reserved Commodities Ordinance subsidiary regulations. Therefore, you must apply for the necessary licenses under the Trade and Industry Department’s Rice Control Unit.
- Rough Diamonds Import/Export Licenses. All imports and exports of this commodity must be covered by a valid Kimberley Process Certificate (Import) and Kimberley Process Certificate (Export). These are issued by the Director-General of Trade and Industry.
- Strategic Commodities Import/Export Licenses. Controlled commodities in Hong Kong are subjected to specific import/export licenses. These will be issued by the Strategic Trade Controls Branch of the Trade and Industry Department. Any goods which are re-exported or transhipped will be subjected to the same licensing requirements. Controlled goods which are in transit (goods that remain on the aircraft or vessel throughout their journey) normally do not require licenses unless they are sensitive items (biological, chemical or nuclear weapons).
- Textiles Import/Export Licenses. These licenses are issued by the Director-General of Trade and Industry. Textiles are subjected to this requirement, unless they have been specifically exempted. The requirements will vary for sensitive and non-sensitive markets. Sensitive markets in this case, refer to imports and exports to mainland China, and exports to USA.
- Irradiating Apparatus and Radioactive Substances Import License. This will be issued by the Department of Health. You must obtain this license before you will be allowed to import these substances and apparatus.
Import/Export Declaration Requirements in Hong Kong
Any person who is involved in importing or exporting goods and articles (except those exempted) will be required to file an Import/Export Declaration with the Commissioner of Customs and Excise. This requirement is mandated by the Import and Export (Registration) Regulations, and must be done within 14 days after the goods or articles have been either exported or imported. Declarations can be electronically filed through the Government appointed service providers.
Import/Export Clearance Procedure in Hong Kong
The Hong Kong Customs and Excise Department will thoroughly inspect all goods and articles before they can be cleared for import. The department may conduct the occasional inspection of cargo if they deem fit.
For imported dutiable goods to be given clearance, the importer will be required to file a Removal Permit with the Customs Department. When dealing with dutiable commodities, the permit holder assumes responsibility for ensuring that the goods are removed within the approved time and date. The permit holder must also ensure that the goods are removed from the releasing location and conveyed directly to the designated receiving point. In addition, the packaging, quantity and description of the goods must match the details listed in the permit.
For import/export clearance to be granted, the documents which must be provided include manifests, bill of lading, invoice or packing list and relevant documents (including import/export licenses and removal permits).
Hong Kong’s Import/Export Taxes and Fees
Since Hong Kong is a free port, there are no customs fees imposed on imports and exports. There is also no VAT or GST imposed.
Hong Kong does impose an excise duty, but only on four goods categories. This is irrespective of whether those goods are locally manufactured or imported. These four groups are liquors, tobacco, hydrocarbon oil and methyl alcohol.
Hong Kong’s Import/Export Financing
Because Hong Kong is such a thriving business hub, trade financing as also increase, and there are several financing options now available for trading companies in the country. Among the major finance instruments to help facilitate trade are:
- Letters of Credit
- Short-term finance
- Export Credit Insurance
The Free Trade Agreement Between Hong Kong and China
Hong Kong and mainland China are part of the Closer Economic Partnership Agreement (CEPA). This is a bilateral free trade agreement signed between both countries and was in effect since January 2004. The benefits of the CEPA agreement include that Hong Kong made products are entitled to preferential access to the mainland Chinese market, enjoying zero tariffs in the process.
The CEPA agreement makes it much faster and easier for qualifying Hong Kong based service supplies to access the mainland Chinese market. The CEPA agreement also helps to facilitate trade and investment between both countries. Especially in certain areas which include customs clearance, trade and investment promotion, and transparency when it comes to laws and regulations.
To be eligible for the tariff preference, each goods consignment exported to the mainland must be accompanied by a Certificate of Hong Kong Origin, which is issued by the Trade and Industry Department. The certificate can also be issued by one of the five government approved certificate organisations. These organisations are:
- Hong Kong General Chamber of Commerce
- Federation of Hong Kong Industries
- Chinese Manufacturers Association of Hong Kong
- Chinese General Chamber of Commerce
- Indian Chamber of Commerce, Hong Kong.