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The Mainland and Macao Closer Economic Partnership Arrangement
In view of promoting the joint economic prosperity and development of the Mainland, China (hereinafter ¡§Mainland¡¨) and the Macao Special Administrative Region of China (hereinafter ¡§Macao¡¨); strengthening both sides¡¦ relations with other countries and regions, the two sides decided to establish an administrative arrangement with a view to achieving closer economic and trade links ¡V an FTA-like arrangement to the extent to which the nature is under an umbrella of two separate customs territories of a single sovereignty state. Considering the excellent background of economic ties as well as the longstanding relation between the Mainland and Macao; recognizing the necessity of advancing the level of economic cooperation between the Mainland and Macao for the purpose of promoting the stable economic development as well as the improvement of living standard for the two sides, the Mainland and Macao initiated their work on the consultations for establishing the CEPA in conformity with the WTO rules.
The CEPA consultations started on June 2003. The two sides engaged substantially in several rounds of discussion under the principle of ¡§tackling the easy before the difficult¡¨, by focusing sequentially on three main areas: Trade in Goods, Trade in Services, and Trade and Investment Facilitation. The two sides concluded and officially signed the General Principles of CEPA and its Six Annexes on 17 October 2003 in Macao, affirming that all commitments as stipulated in CEPA will fully enter into force on 1 January 2004.
As a full package, the implementation of CEPA will be effective on 1 January 2004, covering extensive commitments, such as granting zero tariff trade for 273 product lines of Macao origin into the Mainland, classified under the Mainland 2001 version of tariff codes; lowering the market access thresholds into the Mainland for 18 service sectors for those eligible as ¡§Macao Service Suppliers¡¨ in addition to establishing mechanisms to promote trade and investment facilitation.
The CEPA text consists of the General Principles and six Annexes. It provides for liberalization encompassing three main economic and trade areas, namely: trade in goods, trade in services and trade and investment facilitation.
The General Principles of CEPA formulates framework for the objectives, principles, contents and rules to establish closer economic and trade relations. The Annexes elaborate further details of the General Principles in each specific area, including:
- Arrangement for Implementation of Zero Tariff for Trade in Goods (Annex 1)
- Rules of Origin for Trade in Goods (Annex 2)
- Procedures for the Issuing and Verification of Certificates of Origin (Annex 3)
- Specific Commitments on Liberalization of Trade in Services (Annex 4)
- Definition of ¡§Service Supplier¡¨ and Related Requirements (Annex 5)
- Trade and Investment Facilitation (Annex 6)
Trade in Goods
The Mainland has agreed to eliminate tariffs on imported goods originating from Macao, that fulfill the rules of origin criteria for 273 items of products, classified under the Mainland tariff codes, including:
Food and Beverages: Prepared or preserved fruit, sugar confectionery, pasta, ice-cream; non-alcoholic and alcoholic beverages.
Chemical Products: Adhesives, paints and varnishes, pigments, catalytic preparations, printing ink, essential oil, other mixtures of odoriferous substances and mixtures used in industry.
Pharmaceutical Products: Tetracyclines, erythromylin, penicillin, cephamycins; essential balm, other medicaments of Chinese type.
Cosmetics: Eye, lip, manicure and beauty make-up preparations; perfumes and toilet waters.
Plastic Articles: Plastic materials, boxes, cases, sacks, bags, parts and other articles; certain plastic scraps.
Paper Articles: Specified papers, paperboards and corrugated papers; certain paper cartons, boxes, cases and labels; specified printed matters.
Textiles and Clothing: Cotton and knitted fabrics; fibers; certain shirts, blouses, pullovers, T-shirts, skirts, trousers, singlets and underwear, pajamas; down apparels; accessories for clothing.
Jewellery: Jewellery articles of pearl, precious and semi-precious stones; articles and parts of gold, silver and other precious metals; imitation jewellery of base metal or of materials not specified.
Electrical and Electronic Products: Washing, bleaching or dyeing machines; certain electric generators, electrical transformers and converters, electronic ballasts, electric conductors; magnetic discs; portable electric torches, household electric appliances, audio-visual appliances.
Optical Apparatus, Clocks, Watches and Musical Instruments: Lasers, hand magnifying glasses, liquid crystal devices and optical appliances; watches and clocks; clock movements, cases, straps, bands, bracelets and other parts for clocks and watches; upright pianos.
Other: Lighting fittings; articles and equipments for sports or outdoor games; gloves, mittens and mitts; footwear; hats and other headgear; buttons, slide fasteners; cement; saddlery and harness for any animal; glass and glassware; table, kitchen and other household articles and parts of stainless steel; refined copper foil; articles of precious metal or of metal clad with precious metal for technical or laboratory use.
The 273 goods stipulated in CEPA cover about 96% of the Macao products exported to all markets and 93% of the products to the Mainland alone in 2002.
A transitional mechanism is in place under CEPA to attain the objective of binding zero tariff to all products. Beginning 1 January 2004, the Mainland will apply, by stages, zero tariff on imported goods of Macao origin. At the initial stage, 273 imported goods of Macao origin under the Mainland tariff codes, will enjoy zero tariff preference. For those goods not included in the 273 Mainland tariff codes in the initial phase, the Mainland has agreed to apply zero tariff not later than 1 January 2006 upon petition by Macao manufacturers once the rules of origin criteria are met. Prior to the year 2006, both sides may submit product lists for further consultations in order to enjoy zero tariff preference in the following year.
Within the framework of CEPA, Macao agrees to bind its existing zero import tariff regime to all goods of Mainland origin and not to impose any additional restrictive measures on trade in such goods. The two sides also undertake that either side will not apply non-tariff measures that are inconsistent with WTO rules to goods, including anti-dumping measures, subsidies and countervailing measures, and safeguard measures. Furthermore, the Mainland will not apply tariff rate quota against goods of Macao origin.
Concerning the rules of origin, the aforesaid 273 items of products, classified under Mainland tariff codes, can enjoy preferential market access based on the following criteria:
- 198 goods (73%) are subject to ¡§manufacturing or processing operations¡¨, such as textiles and clothing, jewellery, chemical products, pharmaceutical products, pasta and biscuits, etc.;
- 52 goods (19%) are subject to ¡§change in tariff heading¡¨, such as chemical products, metal products, some electronics, footwear, glass fibers, and beverages, etc.;
- 23 goods (8%) are subject to ¡§value-added content¡¨, such as clocks, watches, some optical apparatus, some electronics, and electrical transformers and converters, etc.
Trade and Investment Facilitation
With regard to trade and investment facilitation, both sides agree to strengthen their cooperation in 7 areas, namely trade and investment promotion, customs clearance facilitation, commodity inspection, inspection and quarantine of animals and plants, food safety, sanitary and inspection, certification, accreditation and standardization management, electronic business, transparency in laws and regulations, cooperation between small and medium-sized enterprises, industrial cooperation, with a view to simplify trade procedures in both places. Contents of cooperation in each area are summarized as follows:
1. Trade and Investment Promotion
- Establish mechanism to notify and publicize trade and investment related policies, regulations and other relevant information and to communicate and exchange views on common problems in relation to trade and investment of both sides;
- Strengthen the cooperation between the two sides in organizing exhibitions and arranging participation of delegates of both sides in overseas exhibitions;
- Co-initiate trade and investment promotion activities so as to facilitate trade and investment between the two sides and the Portuguese-speaking countries.
2. Customs Clearance Facilitation
- Establish a reciprocal system to notify and publicize policies, regulations and information in relation to customs clearance; establish a regular liaison mechanism to exchange views on and cooperate in the differences and problems related to customs clearance; strengthen the cooperation in crisis management at control points;
- Explore the feasibility of data interchange and development of electronic customs clearance system at control points with an aim to enhance risk management and efficiency in customs clearance of both sides.
3. Commodity Inspection, Inspection and Quarantine of Animals and Plants, Food Safety, Sanitary Quarantine, Certification, Accreditation and Standardization Management
- Both sides agree to strengthen their cooperation on the study of signing the Cooperation Arrangement on Product Safety in order to step up their inspection and monitoring on product safety;
- Establish a mechanism for inspection and quarantine of animals and plants, including measures of providing customs declaration and inspection information of goods by both sides in advance so as to facilitate the smoothness in customs clearance;
- Study the feasibility of data interchange in mutual customs inspection, electronic monitor of inspection and quarantine at control points, and electronic data exchange mechanism on inspection and quarantine of products and persons;
- Notify each other, on regular basis, information about epidemic outbreaks.
4. Electronic Business
- Study and formulate rules, standards, and regulations of electronic business, especially the feasibility on mutual recognition and intercommunication of electronic certificate between the two places;
- Strengthen the cooperation in areas of corporate application, promotion, training and implementation of electronic government.
5. Transparency in Laws and Regulations
- Disseminate, through various media, information on policies and regulations and other relevant intelligence with respect to trade and investment in a timely manner;
- Provide advisory service to commercial and industrial enterprises through websites of both sides.
6. Cooperation of Small and Medium Sized Enterprises
- Explore jointly the strategies and policies for supporting Small and Medium Sized Enterprise development; promote cooperation of the intermediaries providing services to small and medium enterprises in the two places;
- Set up dedicated websites to bolster information exchange and to expedite the development of information interchange and the interconnection of information website databases of the two sides;
- Promote the exchange and cooperation between small and medium sized enterprises of the two sides and their overseas counterparts, through Macao as their economic and trade cooperation platform.
7. Industrial Cooperation
- Taking into account the orientation and positioning of industrial development in the two places, both sides agree to cooperate in areas in which they have competitive advantages, to strengthen cooperation on industrial scientific research and development as well as commercialization of achievements from those researches;
- At this stage, both sides will launch cooperation in the industrialization of Chinese medicine and will extend their cooperation into other industrial projects in due course.
On trade and investment facilitation, cooperation modalities and mechanisms have been set out under CEPA. The contents of cooperation in those 7 areas are aimed at promoting and facilitating trade and investment of both places. Towards that end, both sides will formulate regulations and administrative procedures, in combination with the application of electronic technology in order to expedite trade and investment facilitation of the two places by means of enhancing transparency, standardization and information exchanges.
Arrangements in trade and investment facilitation highlight the crucial role of Macao as the bridge and the service platform connecting the Mainland and Portuguese-speaking countries. For instance, in the area of trade and investment promotion, both sides agree to jointly initiate trade and investment promotion activities so as to facilitate trade and investment between the two sides and Portuguese-speaking countries.
Apart from the three economic and trade areas, a steering committee, comprising of senior representatives or officials designated by the two sides, is set up with an objective to:
- Supervise the implementation of CEPA;
- Interpret the provisions of the CEPA;
- Resolve disputes that may arise during the implementation of CEPA;
- Draft additions and amendments to the content of CEPA;
- Provide steer on the relevant work; and
Deal with any other business relating to the implementation of CEPA.
Under CEPA, a product is qualified as ¡§made in Macao¡¨ as long as it satisfies the CEPA rules of origin criteria and, thus, entitled to export to the Mainland free of tariff. Hence, prior exporting goods of Macao origin to the Mainland, the Macao exporters must comply with the provisions set out in the CEPA and apply for the specific Certificate of Origin issued by Macao Economic Services. In making an import declaration, importers should take the initiative to inform the customs administration at the port of clearance that the goods are eligible for zero tariff and submit the foresaid valid certificate of origin as an evidence indicating that the respective goods have met the criteria and standards under the CEPA rules of origin.
After the issuance of a Certificate of Origin by Macao Economic Services, the department will immediately transmit basic information on the Certificate of Origin, including the certificate number, name of the exporter, industrial license number, port of customs declaration, Mainland Harmonized System code of the product, product name, unit of measures and quantity, amount and currency, etc., to the Customs General Administration through a designated line. The customs administration at the port of clearance will verify the Certificate of Origin submitted by the importer against the electronic data transmitted by Macao Economic Services. If the information is verified to be true and correct, the imported goods will be granted zero tariff treatment.
For other goods of Macao origin which are not covered in the CEPA Annex, beginning 1 January 2004, local manufacturers may provide the Macao Economic Services relevant information and data on proposed goods to be incorporated into the existing list for the next phase of zero tariff implementation in order to enjoy zero tariff treatment. If the application is submitted to the Macao Economic Services before 1st of June, zero tariff will be applied in the following year on the goods currently being produced with consent by the relevant Mainland departments; for goods to be produced in the future, import tariff will be eliminated as from 1st of January of the following year after the proposed goods have come into production. The timetable for tariff reduction will be deferred to the year after the following year if the request of zero tariff is claimed to the Macao Economic Services after 1 June. However, the Mainland agrees to apply zero import tariff the latest by 1 January 2006 for other product codes that are not covered in the CEPA Annex.
The Macao Economic Services will assess, verify and consolidate the information and data provided by the enterprises upon their applications for preferential tariff. The consolidated information and data will be submitted to the Ministry of Commerce before 1 June each year. Afterwards, in conjunction with the Ministry of Commerce, the relevant Mainland departments and the Macao Economic Services will jointly examine and confirm the list of goods before 1 August that year. After confirmation of the list of goods, the General Administration of Customs and the Macao Economic Services will enter into consultations on the rules of origin in respect of the relevant goods. Both sides will complete the consultations on the rules of origin before 1 October. The confirmed list of goods as well as the rules of origin criteria will be announced before 1 December, by both sides.
The main purpose of CEPA is to provide preferential treatment, in terms of market access into the Mainland, for individuals and enterprises in Macao, in conformity with the WTO rules in regional economic cooperation. The Macao Special Administrative Region shall spare no effort in promoting to and encouraging business sectors and service suppliers to make full use of the opportunities offered by CEPA through seminars, promotional material, telephone hotlines and website news ¡V with the aim to grant the business circle a better understanding of CEPA before it comes into effect, in the year of 2004.
Copies of the Full Text of the General Principles of CEPA and its Six Annexes can be downloaded from the Macao Economic Services¡¦ website at www.economia.gov.mo.