Strategic Trade Controls Circular No. 9/2009

Introduction

This circular serves to remind traders of the features and application requirements of the Approval-in-Principle Arrangement for Bulk Users of Strategic Commodities Licensing Service (hereafter referred to as "AIP"). Strategic Trade Controls Circulars No. 3/2007 and No. 6/2008 on the same subject are hereby superseded.

2. As a trade facilitation measure, AIP is 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. AIP aims to further streamline licensing procedures and expedite processing time for certain frequent and qualified users of licensing service.
   
   
3. AIP was first introduced in July 2007 for Category 5 products (i.e. telecommunications and information security products) and was further expanded to cover Category 3 products (electronics products) in May 2008.

Operation of AIP

4. Strategic commodities licence applications are considered by the Department on the merits of individual cases. To streamline licensing procedures, AIP operates in the following manner:-

(a) A company who frequently imports or exports a product in Category 3 or Category 5 from the same supplier or to the same consignee may apply to join the AIP for Category 3 or 5 respectively. Eligible company (please see paragraph 6 below) is required to complete an application form providing detailed information on their import and export shipments to be covered by AIP, together with relevant supporting documents, for an overall assessment by the Department.

(b) 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 AIP 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.

(c) 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 AIP as well as its validity period (normally one year). The company has to re-apply for the AIP before its expiry.

(d) 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 AIP as granted by the Department. 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 AIP 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).

(e) A licence application within the scope of an AIP as granted by the Department 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 AIP would require less processing time.

(f) 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.

5. 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 AIP granted in advance.

Eligibility for AIP

6. Companies fulfilling the following criteria would in general be eligible for AIP:

(a) An eligible company should be a frequent user of strategic commodities licensing service, i.e. at least 100 licences covering Category 3 products or at least 100 licences covering Category 5 products were issued to the company in the 12-month period preceding the application. For those companies without a frequent licensing pattern, it would be more convenient and cost-effective for them to lodge individual licence applications under the normal channel.

(b) An eligible company should have a good compliance record. In general, good compliance record can be demonstrated by:

(i) no conviction record involving strategic commodities in the 24 month period preceding the application; and

(ii) receiving no 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.

7. As mentioned in paragraph 4(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 an AIP as granted by the Department. 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.
   
   
8. The Department reserves the right to reject, revoke, or refuse to renew any AIP should there be any adverse considerations.

Specific Form of Licences under AIP

9. Carriers are advised that their legal responsibilities under the Import and Export Ordinance (Cap 60) will not change under AIP. They are required to note that a specific form of import and export licences is issued by the Department under AIP. Specimens of licences issued under AIP are at Appendices B and C respectively. While the format of the licences is largely the same as that of conventional licences, carriers should note the major differences as follows:-

(a) 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.

(b) A licence access number will be included in the box at the upper left-hand corner of the new licence.

(c) An approval-in-principle agreement number, which is a specific case reference number for the company eligible for the AIP, can be found at the lower left-hand corner on all pages of the new licence.

(d) The background of the new licence is in light grey colour together with concealed watermark showing "Trade and Industry Department" in Italics.

(e) 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.

(f) The digital signature will bear a cross if the soft copy of the licence has been altered in an unauthorised manner. Carriers should notify the Department immediately when such a licence is identified.

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

10. To facilitate the verification of AIP licences, a licence access number generated by our computerised licensing system (please see paragraph 9(b) above) is included in AIP licences. Where necessary, carriers can enter the licence number and the licence access number at our Strategic Commodities Control System Website (www.stc.tid.gov.hk) to retrieve the departmental copy of the relevant licence for verification. Please note that no prior registration by carriers is required for this enquiry function.
    
    
11. To ensure that shipments covered by AIP can be effected smoothly, traders participating in AIP should keep their carriers closely informed of the details of their participation in AIP.

Important Note

12. Traders should note that AIP 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 AIP, or the lodgement of licence application with reference to AIP.
    
    
13. Traders are further reminded that AIP 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 AIP must be effected only after the issue of the valid licence. Also, AIP only facilitates the processing of the related licence applications. There is no necessary implication that applications for licences covering shipments that have gone through AIP 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 AIP, 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 AIP does not exempt 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 :-

    (a) On summary conviction to a fine of HK$500,000 and imprisonment for two years; and

    (b) 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 AIP granted within the validity period, refusal to renew the AIP upon its expiry, debarment of all licensing facilities, etc.

Enquiries

16. The Department has been providing information and assistance for individual companies which are potentially eligible for AIP. Traders who are interested in joining AIP are welcome to contact our enquiry hotline at 3403 6424 or our Customer Service Manager at 2398 5572 for enquiries.

Strategic Trade Controls Branch
Trade and Industry Department