The Central People's Government and the Hong Kong Special Administrative Region (HKSAR) government signed Wednesday the legal text on further trade liberalization under the second phase of the Chinese mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA II).

Both sides also announced that they have agreed rules of origin for Hong Kong-made products included in this phase of liberalization, according to a government press release Wednesday.

Vice Minister of Commerce An Min, and Hong Kong Financial Secretary Henry Tang, signed in Hong Kong the legal text this morning after the fourth High Level Meeting of the CEPA Steering Committee.

The legal text, which gives expression to the package of liberalization measures under CEPA II, contains three annexes: the list of additional products that will be given zero tariff preference, the rules of origin for these products, and further liberalization measures in services.

As regards to the rules of origin for the 713 Chinese mainland product codes covered in CEPA II, 74 percent of the products will adopt Hong Kong's existing process-based origin rules as the CEPA rules of origin. These items include textiles and clothing, food and beverages, pharmaceutical products as well as some plastic and metal products.

Another 11 percent of the products will adopt the "Change in tariff heading", and only 7 percent will use the "30 percent value-added requirement" as the CEPA rules of origin.

For the rest of the products, including fish and aquatic products, both sides have also agreed on their rules of origin after taking into account the characteristics of the products concerned.

CEPA I stipulates that for products planned to be manufactured in Hong Kong, zero tariffs would only be applied from January 1 of the following year upon confirmation by both sides that the products have come into production. That means a manufacturer would only be able to enjoy zero tariff status in 2006 if production of the planned products commenced in 2005.

The two sides will continue to pursue further liberalization in goods and services trade through the established liaison mechanisms. With respect to trade in goods, the next cycle of applications for and consultation on additional products to enjoy zero tariff status will begin in January 2005.

The HKSAR government will continue to consult the business and professional communities to understand their needs and discuss with them appropriate policy measures that may be required to enable them to gain the greatest benefits from CEPA.

The Central People's Government and the HKSAR government reached an agreement on further liberalization measures under CEPA II on Aug. 27, 2004. Since then, the two sides have been working closely to thrash out the implementation details of these measures.

Under CEPA II, the Chinese mainland will apply zero tariff status to products under 713 Mainland 2004 tariff codes, which are on top of the 374 products that have been enjoying zero import tariff status since Jan. 1, 2004.