Programmes initiated by Trade and Industry Department

The Trade and Industry Department organises seminars regularly to brief traders, including exporters, importers and carriers of the strategic trade control system especially when new changes are made to the legislation and the control lists. In addition, circulars explaining licence application procedures are updated from time to time and are available to traders free	(pdf format)
of charge and can be downloaded from our website. Advice on licensing and decisions with regard to classification are also given readily by officers of the Trade and Industry Department either by telephone, in writing or in person.

Prevention of the Proliferation of Chemical, Biological and Nuclear Weapons

To avoid inadvertent involvement in clandestine activity and inadvertent transfers of resources or technology to chemical/biological/nuclear weapons proliferators, importers/exporters and various industries are requested to exercise self-regulation and to remain vigilant to suspicious transaction. In the event that traders feel uneasy about any potentially sensitive or unusual order or approach for materials, information or scientific liaison, they should contact the Strategic Trade Controls Branch of the Trade and Industry Department for advice.

Internal Compliance Programmes

Maintaining effective controls to prevent the diversion of materials and equipment capable of producing weapons of mass destruction (WMD) involves responsibility on both the Government as well as individual traders. Since Hong Kong is a major international commercial and trading centre through which large quantity of high technology goods are imported and exported everyday, traders must share responsibility in ensuring that goods passing through Hong Kong are not involved in WMD programmes. Moreover, laws have been enacted to forestall activities related to the development of WMD. All companies have an obligation to strictly comply with the Laws of Hong Kong. The establishment of an effective internal compliance  programme, or Code of Practice, provides companies with
a method of routinely screening transactions in order to eliminate suspicious approaches, thereby ensuring that only legitimate business transactions proceed and the risk of breaching the law in this area is minimised.	(pdf format)                    (pdf format)

An internal compliance programme involves a company's commitment that its products will not be diverted to or used in weapons of mass destruction programmes. Vast majority of traders have no desire that their products be so used and wish to avoid such a possibility as much as they can. Implementation of an effective internal compliance programme is one way to demonstrate and ensure that this is the case.

Internal compliance programme differs from one company to another given the nature and size of the company concerned. There are, however, a number of essential elements common to all programmes :

Commitment to compliance

The company should make a firm commitment in writing clearly stating that its products will not be used for weapons of mass destruction programme purposes and that it will comply in full the Import and Export (Strategic Commodities) Regulations. It will need to set out its compliance policy in relation to imports/exports. Such policies should be brought to the attention of all employees within the company and preferably also to all the company's customers.

Nomination of responsible personnel for import/export controls

The company needs to nominate suitable officers responsible for import/export controls and assign duties as appropriate. The company's management should make the duties of these officers known amongst all employees and also keep records of specific import/export control duties to be undertaken by these officers. Officers with responsibility for import/export control matters should ideally belong to a different section of the company which is separate from the sales/marketing team in order to avoid any possible conflicts of interest when vetting orders and enquiries from customers. Ideally, a separate export control department should be set up and be staffed with more than one person. Ultimate responsibility for and oversight of import/export control matters should rest with one of the company's senior management. Personnel arrangements naturally vary with the size and nature of the company.

Procedures related to import/export control

The company needs to establish working procedures or routines for the screening of all business transactions and enquiries coming into its offices. These procedures have a number of elements. Management methods must be made transparent; manuals, guidelines and formats need to be established as to how screening is to take place; common standards of judgement need to be employed and a method by which decisions can be double-checked is needed. The screening of transactions and enquiries involves several elements : product screening (determining whether the item is a controlled commodity), customer screening (determining the bona fides of the customer), end-use screening (determining the legitimacy of the stated end use of the item to ensure it will not be used for weapons of mass destruction purposes) and transaction screening (viewing the transaction as a whole in order to make a judgement as to whether it is legitimate). These screening processes must take place before the company enters into a definite contract to supply. There should also be established methods by which a company can liaise with the Trade and Industry Department in the case of doubt about the control status of the particular item or if the company decides that a licence is required for the transaction.

Shipment Control

Companies need to ensure that the goods to be exported or sold are the same as those appearing on the documents/invoice/licence, and the shipping department should have the authority to halt the shipment if there is any discrepancy in this regard.

Internal Audits

The company should establish a regular programme of audits in order to ensure that the programme is being implemented effectively and any deficiencies are identified and rectified so that the integrity of its compliance programme remains intact. Audits should be conducted by someone independent of the section responsible for export control implementation and the reports should be presented to senior management.

Education and Training

The company needs to establish procedures for acquiring, keeping and disseminating information on import/export controls and its compliance programme at all levels. There will need to be an education and training programme/curriculum for all staff on a general level. For those staff directly involved in administration of export controls, specific and detailed training conducted by experts in the area is needed. Educational materials will need to be devised and widely disseminated within the company. Regular retraining, particularly as changes to control lists or procedures are adopted, should take place.

Record Keeping

The company needs to maintain books and records of all transactions and enquiries and all paperwork generated in relation to the internal vetting of a particular enquiry or order to facilitate inspection/verification by officers of the Customers and Excise Department or the Trade and Industry Department if required.

Guidance to Affiliates or Subsidiaries (if applicable)

If a company is the parent company of or company with a majority shareholding or interest in another company, it should provide direction/guidance to its affiliate or subsidiary and guide it to introduce a similar internal compliance programme.

Obligation to Report

All employees should be made aware of an obligation to report any deviations from or instances of abuse of the internal compliance programme. There should be a recognised procedure for reporting breaches.

Interaction with the Trade and Industry Department

In addition to having internal procedures for applying for licences where required, the company should ensure that it has regular interaction with the Trade and Industry Department. This is to ensure that it receives updates on any changes to the control lists by the international export control regimes and also information on the Licensing procedures maintained by Trade and Industry Department procedures. Where the company is a regular trader in strategic goods, the Department encourages the company to maintain a regular dialogue with it in order to ensure licensing and control issues affecting its business are promptly addressed.

Integration with Quality Management Practices

An internal compliance programme should not be an adjunct or an additional task mandated in isolation from the regular conduct of a company's business. It should be adopted as part of the company's strategy or code of practice that aims at activity of a high ethical and commercial quality and standard, just as other practices and objectives that have been adopted by the company. The company should ensure that the procedures for dealing with import/export control regulations and licensing procedures are treated in the same manner and with equal emphasis within quality management practices as other business practices within the company. Export control compliance should ideally have a status within the company equivalent to that of the sales/marketing area.

The Trade and Industry Department recognises the value of internal compliance programmes in contributing to the effective control of strategic goods. The Department endeavours to assist with the implementation of such programmes and the facilitation of licence applications for companies demonstrating such a commitment to import/export practices wherever possible. Traders who are interested in the details of an Internal Compliance Programme may approach the Strategic Trade Controls Branch of the Department for advice. A booklet (pdf format) and a set of core elements of a company's Internal Control Programme (pdf format) issued by the Department on the subject, are also available for reference by interested parties.