5 May 2008

Strategic Trade Controls Circular No. 6/2008

Introduction

            The Department has announced via Strategic Trade Controls Circular No. 3/2007 the launch of the Approval-in-Principle Arrangement for Bulk Users of Strategic Commodities Licensing Service (hereafter referred to as "the Approval-in-Principle Arrangement" or the new Arrangement), which applies to telecommunications and information security products in Category 5. This circular serves to inform traders of the extension of the Approval-in-Principle Arrangement to cover electronic products in Category 3. Starting from 28 May 2008, importers and exporters of Category 3 products fulfilling the criteria set out in paragraph 5 below may also apply to join the new Arrangement. Carriers are also reminded to note the new form of import and export licences issued by the Director-General of Trade and Industry for the new scheme as outlined in paragraphs 8 -11 below. The information in the following paragraphs applies to Category 3 products only. The details of the scope, operation, eligibility and procedures of the Approval-in-Principle Arrangement for Category 5 products remain those set out in Strategic Trade Controls Circular No. 3/2007.

What is Approval-in-Principle Arrangement ?

2. The Approval-in-Principle Arrangement is a trade facilitative measure applicable to companies who frequently import a less sensitive product from the same supplier or frequently export a less sensitive product to the same consignee. It aims to further streamline licensing procedures and expedite processing time for certain frequent and qualified users of licensing service.

Operation of the New Arrangement

3. At present, strategic commodities licence applications covering Category 3 products are considered by the Department on the merits of individual cases. To streamline licensing procedures, the new Arrangement will operate in the following manner:-

1. A company who frequently imports or exports a product in Category 3 from the same supplier or to the same consignee may apply to join the Approval-in-Principle Arrangement. Eligible company (please see paragraph 5 below) is required to complete an application form providing detailed information on their import and export shipments to be covered by the Arrangement, together with relevant supporting documents, for an overall assessment by the Department.
   
   
2. After examining the application with regard to the eligibility of all parties involved and the sensitivity of the destinations and products concerned, the Department will come to an initial view on whether the company concerned may participate in the Arrangement and the possible scope of its participation. It should be noted that the Department has the right to limit the eligibility of parties/shipments/places in respect of each application. Before the Department can approve the company's application, the company is required to complete a copy of undertaking and declarations on compliance with the conditions of the Arrangement laid down by the Department in Appendix A (pdf format).
   
   
3. Upon receipt of the duly completed undertaking and declarations from the company, the Department will issue an "Approval-in-Principle" letter to the company concerned setting out the relevant products, suppliers/consignees, endusers, etc. for shipments that may be covered by the Arrangement as well as its validity period (normally one year). The company has to re-apply for the Approval-in-Principle before its expiry.
   
   
4. After receiving the "Approval-in-Principle" letter, the company concerned is required to lodge, on a pre-shipment basis, an application for import or export licence to cover each and every shipment which is within the scope of the "Approval-in-Principle" Arrangement. Unless otherwise specified by the Department, the applicant is not required to furnish supporting documents every time a licence application for individual shipment that is covered by the Approval-in-Principle Arrangement is lodged. Such an application must be made through the electronic application system (i.e. e-application system) via the Strategic Commodities Control System Website (www.stc.tid.gov.hk).
   
   
5. A licence application within the scope of an "Approval-in-Principle" will be processed and vetted by the Department's computerised licensing system automatically upon receipt and may be processed outside office hours. In general, an import/export licence application lodged under the new Arrangement would require less processing time.
   
   
6. After the licence application is approved, a notification message about the approval and a soft copy of the licence will be transmitted via the Internet to the applicant. The licence should be printed at the applicant's office and lodged to the relevant carrier. The applicant is not required to and should not collect the approved licence in person.

4. It should be noted that the "Approval-in-Principle" letter is not equivalent to a licence under the Import and Export Ordinance (Cap 60) and Import and Export (Strategic Commodities) Regulations (Cap 60G). It does not exempt an importer or an exporter from the legislative licensing requirements in arranging shipment of strategic commodities. It only facilitates the process by enabling more expeditious processing of licence applications which involve consignments within the scope of an "Approval-in-Principle" granted in advance.

Eligibility for the Approval-in-Principle Arrangement

5. A company must fulfil the following criteria in order to be eligible for the Approval-in-Principle Arrangement:-

1. An eligible company should be a frequent user of strategic commodities licensing service, i.e. at least 100 licences covering Category 3 products were issued to the company in the 12-month period preceding the application. For those without a frequent licensing pattern, it would be more convenient and cost-effective for them to lodge individual licence applications under the normal channel.
   
   
2. An eligible company should have a good compliance record. Specifically, a company with the following conviction/warning record will not be eligible for the new Arrangement:-
   
   
   1. A company with one or more conviction record(s) involving strategic commodities in the 24-month period preceding the application; or
      
      
   2. A company receiving more than ten warning letters involving strategic commodities issued by the Department on average per year in the 24-month period preceding the application.

Companies not eligible for the new Arrangement shall lodge licence applications under the normal channel.

6. As mentioned in paragraph 3(d), an eligible company must make use of the e-application system at Strategic Commodities Control System Website (www.stc.tid.gov.hk) to lodge licence applications to cover individual shipments within the scope of the Arrangement. To qualify as an e-applicant, a company should make a registration with the Department in advance and has to be a subscriber of digital (Organizational) certificate issued by a certification authority recognized by the Government of the Hong Kong Special Administrative Region. For details of the e-application service, please refer to Strategic Trade Controls Circular No. 3/04.

7. The Department reserves the right to reject, revoke, or refuse to renew any Approval-in-Principle Arrangement should there be any adverse considerations.

New Form of Licences under the New Arrangement

8. Carriers are advised that their legal responsibilities under the Import and Export Ordinance (Cap 60) do not change under the Approval-in-Principle Arrangement. They are required to note that the new form of import and export licences issued by the Department under the new Arrangement as elaborated below.

9. Import and export licences issued under the new Arrangement have adopted some special features and their specimens are at Appendices B (pdf format) and C (pdf format) respectively. While the format of the new licences is largely the same as that of the existing licences, carriers should note the major changes/new features, as follows:-

1. The application receipt number, originally located in the box at the upper left-hand corner of the licence, has been removed as it is no longer required for collection of approved licences.
   
   
2. A licence access number is included in the box at the upper left-hand corner of the new licence.
   
   
3. An approval-in-principle agreement number, which is a specific case reference number for the company eligible for the Approval-in-Principle Arrangement, can be found at the lower left-hand corner on all pages of the new licence.
   
   
4. The background of the new licence is in light grey colour together with concealed watermark showing "Trade and Industry Department" in Italics.
   
   
5. A visible digital signature (in the form of the logo of the Trade and Industry Department) signed by an electronic certificate of Trade and Industry Department is applied at the bottom of the first page of the licence.
   
   
6. The digital signature will bear a cross if the soft copy of the licence has been altered in an unauthorised manner or opened in an Acrobat Reader of a version below 7.0. Carriers should notify the Department immediately when such a licence is identified.

It should be noted that the new form of licences only applies to licences issued under the Approval-in-Principle Arrangement. There is no change in the form of the strategic commodities licences issued by the Department outside the Arrangement.

10. The Department seeks to provide an enhanced feature in the new form of licences under the Approval-in-Principle Arrangement by including a licence access number generated by our computerised licensing system (please see paragraph 9(b) above). Where necessary, by entering the licence number and the licence access number at our Strategic Commodities Control System Website (www.stc.tid.gov.hk), carriers may retrieve the departmental copy of the relevant licence for verification in case they have doubt about the licence provided by the importer or exporter. Please note that no prior registration by carriers is required for this enquiry function.

11. To ensure that shipments covered by the new Arrangement can be effected smoothly, traders participating in the Arrangement should keep their carriers closely informed of the details of their participation in the Approval-in-Principle Arrangement.

Important Note

12. Traders should note that the Approval-in-Principle Arrangement is part of the licence application procedures. It is an offence if one makes or causes to be made any statement or furnishes or causes to be furnished any information which is false or misleading in a material particular or omits any material particular in relation to the request for the Approval-in-Principle Arrangement, or the lodgement of licence application with reference to the Approval-in-Principle Arrangement.

13. Traders are further reminded that the Approval-in-Principle Arrangement does not exempt the relevant importer/exporter from the need to lodge licence applications to cover the import and export of the strategic commodities as required under Section 6A of the Import and Export Ordinance (Cap. 60). The relevant importer/exporter should lodge application and obtain a valid strategic commodities licence from the Department before effecting the related import or export shipment. In other words, shipment of the products covered by the Approval-in-Principle Arrangement must be effected only after the issue of the valid licence. Also, the Approval-in-Principle Arrangement only facilitates the processing of the related licence applications. There is no necessary implication that applications for licences covering shipments that have gone through the Approval-in-Principle Arrangement will be granted as a matter of course.

14. The Department works closely with the Customs and Excise Department to ensure that all applications for strategic commodities licences, as well as application for the Approval-in-Principle Arrangement, are properly made in accordance with the provisions and requirements of the Import and Export Ordinance (Cap 60) and its subsidiary legislation by means of consignment checks.

15. Traders should also note that the granting of the Approval-in-Principle Arrangement does not relieve them from the need to comply with any of the requirements under the Import and Export Ordinance (Cap. 60) and the subsidiary legislation in respect of strategic commodities control. Breach of any of the provisions of the Import and Export Ordinance (Cap. 60) and its subsidiary legislation is an offence. Any person who imports or exports any article specified in the Schedules to the Import and Export (Strategic Commodities) Regulations (Cap 60G) not under and in accordance with a licence issued by the Department commits an offence and is liable :-

1. On summary conviction to a fine of HK$500,000 and imprisonment for two years; and
   
   
2. On conviction on indictment to an unlimited fine and imprisonment for seven years.

In addition to prosecution, the Department may impose administrative actions against such a person. Such administrative actions may involve, but shall not necessarily be confined to, suspension of a licence, refusal to issue a licence, revocation of the Approval-in-Principle Arrangement granted within the validity period, refusal to renew the Approval-in-Principle Arrangement upon its expiry, debarment of all licensing facilities, etc.

Effective Date for Extension of Coverage of the Approval-in-Principle Arrangement

16. The Approval-in-Principle Arrangement will be extended to cover Category 3 products with effect from 28 May 2008. The Department will soon notify the companies who are potentially eligible and invite them to attend a briefing on the new Arrangement and to apply for the Arrangement. It should be noted that in considering applications for the new Arrangement, priority will be accorded to companies who have registered with the Department as e-applicants.

17. For other traders who are also interested in the Approval-in-Principle Arrangement, they are welcome to contact our enquiry hotline at 3403 6424 or our Customer Service Manager at 2398 5572 for information.

Strategic Trade Controls Branch
Trade and Industry Department