Understanding CEPA Hidden Opportunities in China for Hong Kong Business (Part Ⅱ)

1. Understanding CEPA Hidden Opportunities in China for Hong Kong Business (Part Ⅱ) William CW Lam Winy MH Tse Hui & Lam Solicitors 11 March 2010

2. Ways of Doing Business in China-Before CEPA

3. Modes of Foreign Investment in China (1) Equity Joint Venture (EJV); (2) Cooperative Joint Venture (CJV); (3) Wholly-owned Foreign Enterprises (WOFE).

4. Procedures of Setting up EJV, CJVand WOFE (3) Signing of Agreement*, Constitutions and other documents (1) Business Plan (5) Business Licenses (6) Company chops tax certificates customs bank accounts and etc. (2) Submission of Feasibility Study (4) Approval * not applicable for WOFE

5. CEPA Highlights

6. Signing Date: 29-06-2003 • 6 ancillary documents: 29-09-2003 • Annex 1：Arrangements for Implementation of Zero Tariff on Trade in Goods • Annex 2：Rules of Origin for Trade in Goods • Annex 3：Procedures for the Issuing and Verification of Certificates of Origin • Annex 4：Specific Commitments on Liberalization of Trade in Services • Annex 5 : Definition of "Service Supplier" and Related Requirements • Annex 6: Trade and Investment Facilitation

7. CEPA achieves-: (1) Trade in goods (2) Trade in services (3) Trade and investments facilitation

8. (1) Trade in Goods • Continuation of zero tariff for goods from the Mainland China • Up to 31/12/09, zero tariff for “Origin of Hong Kong Goods” (1585 item of goods) • Can apply for additional item of goods for zero tariff

9. “Origin of Hong Kong Goods”? (1) Wholly obtained in Hong Kong; or (2) Undergone “substantial transformation ” in Hong Kong • Process excluding (e.g.): (i) mainly for the purpose of transportation or storage (ii) mainly for the purpose of packaging (iii) mainly for the purpose of sales, marketing and etc.

10. Certificate of HK Origin – CEPA issued by the Hong Kong Trade and Industry Department or one of the Government Approved Certification Organization is required

11. (1) Management consulting (2) Exhibition (3) Advertising (4) Legal (5) Tourism (6) Transportation/ Logistics (7) Banking (8) Distribution……… (2) Trade in ServicesCurrently opened for over 40 service sectors

12. (2) Trade in Services Illustration of Benefits provided under CEPA

13. Case Study Before CEPA

14. Case Study After CEPA

15. (3) Trade and Investment Facilitation

16. Hong Kong Service Supplier in the form of Juridical Persons General “Hong Kong Service Supplier” is defined under Annex V of CEPA Be incorporated or established pursuant to the laws of Hong Kong and obtained Business Registration Certificate, and obtained necessary license or permit, if any Engage in substantive business operations in Hong Kong Engage in business for providing the relevant services in Hong Kong

17. Hong Kong Service Supplier in the form of Juridical Persons X Liaison Office X Mailbox Companies X Shell Company X Part XI Companies

18. Hong Kong Service Supplier Certificate General • Issued by Trade and Industry Department • One Certificate will be issued to a company for one service sector • One company can apply for more than one Certificate

19. Application Procedures Submission of all the documents and fees required TID will make assessment of whether the applicant meets the eligibility criteria for Hong Kong service supplier TID will then notify the applicant of the result of application. HKSS Certificate will be issued for each sector within 14 clear working days.

20. Documents to be Submitted A Duly Completed Application Form (Form TID 102) Statutory Declaration attested by a China-Appointed Attesting Officer Further supporting documents certified by China-Appointed Attesting Officer or Certified Public Accountant: - Certificate of Incorporation, - Business Registration Certificate and Extract of Information on Business Register

21. Further supporting documents: - Audited Financial Statements - Profits Tax Returns, Notice of Assessment and Demand for Tax - Documents to prove ownership/lease of premises in Hong Kong - Documents to prove employee engaged - Further documents as requested by CEPA and/or TID

22. Renewal arrangement for HKSS Certificates • Valid for 2 years • Renewal applications should be filed within the period of 60 days before and 180 days after the date of expiry of their HKSS certificates

23. Attested Documents Who can be qualified to issue? China-Appointed Attesting Officers What is Attestation? Notarization of Hong Kong Documents for use in China

24. Situation that Attested Documents will be required Supporting documents for Hong Kong Service Supplier Certificate applications and renewal; Incorporation of WOFE; Authorization from Hong Kong parties; Declaration by Hong Kong parties.

25. Who are CAAO? Must be Hong Kong lawyers who have been practiced for not less than 10 years and are appointed by Ministry of Justice of PRC Less than 400 CAAO in Hong Kong

26. Useful Documents • Mainland and Hong Kong Closer Economic Partnership Arrangement (with Supplemental Ⅰto Ⅵ) http://www.tid.gov.hk/english/cepa/legaltext/cepa_legaltext.html • Notice to Service Suppliers (3/2009) http://www.tid.gov.hk/english/aboutus/tradecircular/ntss/2009/ntss032009.html Source of Information • Trade and Industry Department ( http://www.tid.gov.hk/eindex.html) • Association of China-Appointed Attesting Officer Ltd. ( http://www.caao.org.hk/)

27. Thank you! Hui & Lam Solicitors Tel.:- 852-29139930 Email: info@hui-lam.com Web site: www.hui-lam.com