Setting Up A Trading Company In Hong Kong

Based on the report of World Trade Organization (WTO), Hong Kong is the 8th largest exporter of merchandise trade and the 17th largest exporter of commercial services in 2019.

Hong Kong’s free trade policy is one of the primary factors that have led to it being ranked among the world’s largest trading economies. Hong Kong does not levy any tariffs when importing or exporting goods and reduces other barriers to trade.

The Hong Kong Trade and Industry Department states that import/export licensing is only imposed where a genuine need arises to honor obligations Hong Kong has to its trading partners, or to protect public health, safety or domestic security.

This guide offers details regarding different features of trading business in Hong Kong.

It should be noted that the information presented here is only a general guide and is not intended to replace professional advice.

Incorporating a Hong Kong Trading Company

Once you are convinced that setting up a trading company in Hong Kong is in your best interest, the next step is to register a Hong Kong company and get a Certificate of Incorporation from the Hong Kong Companies Registry.

If you would like to understand the details of how to set up a Hong Kong company, you can view our Hong Kong Company Formation guide.

Import and Export Licenses and Permits Requirements in Hong Kong

According to the category of goods that you want to import or export, the special import/export license will be issued to you by the proper government departments of Hong Kong.

Many goods or products, that are mentioned below, need an import/export license in Hong Kong.

• Import/Export license for dutiable goods: In case, you are sourcing or channeling dutiable goods from abroad then you must have an import/export license from the Customs and Excise Department of Hong Kong, for the same. As evident in the Dutiable Commodities Ordinance, dutiable goods range from commodities such as:
  • Alcoholic drinks such as brandy, gin, whisky, rum, vodka, and many more.
  • Cigars, cigarettes, and smokeless tobacco items 
  • Hydrocarbon oils and fuel types such as motor spirit, aircraft spirit, and kerosene as well as light diesel oil
  • Methyl alcohol.
• Import/Export license for optical disc mastering and replication equipment: If optical disc mastering and replication equipment are many you wish to import or export, a license to trade must be obtained in Hong Kong from the Customs and Excise Department.
• Import/Export license for controlled chemicals: If you want to bring in or take out the controlled chemicals, you need to get a license of import/export from the Customs and Excise Department of Hong Kong.
• Import/Export License for the import or export of animals or birds: You are required to get the relevant import license from an Import and Export Division of Agriculture, Fisheries and Conservation Department of the Hong Kong government before you transport animals or birds into Hong Kong. To import and export endangered animals, plants, and species, an import/export license should be acquired from the Archaeology, Agriculture, Fisheries and Conservation Department’s Endangered Wildlife Protection Unit. Therefore, an import permit must be obtained by exporters to import live mammals, birds, or reptiles.
• Import/Export license for pharmaceutical products, medicines, and dangerous drugs: Pharmaceutical products can be introduced into the country, and medicines, including Chinese medicine and dangerous drugs, can be exported from the country, only if they are licensed by Pharmaceuticals Import/Export Control Unit, Department of Health, which is under the Pharmaceutical Service Narcotic drugs can be classified into four main types: stimulants, prodromal hypnotics, tranquilizers, and sedatives. Some of the narcotics discussed are opium, morphine, heroin, cannabis, cocaine, and amphetamines. To carry on the import/export of Chinese herbal drugs, medical practitioners in Hong Kong will need the import/export license that the Chinese Medical Council of Hong Kong can provide.  
• Import of Food Items
  • Importing frozen confectionery: Prior permit approval of the frozen confectionery importation must be obtained before the Food Safety and Center, Environmental and Health Department. Manufactured by approved sources are the only ones that can be shipped into the country.
  • Importing frozen or chilled meat and poultry: Traders in chilled/frozen meat or poultry must apply for a license to import such frozen/chilled food items from the Food and Environmental Hygiene Department’s Import Registration Office.
  • Import of milk or milk beverages: The Center of Food Safety, the Food and Environmental Hygiene Department allows the import of milk and milk products on the previous permission only. Importation is only allowed when the source of manufacture must be approved. 
• Import/Export license for hazardous chemicals: A license is issued concerning scheduled chemicals that permit exporting or importing depending on which case applies. Now the hazardous non-pesticide chemicals include chemical substances that necessitate regulations as stipulated in the Stockholm Convention on Persistent Organic Pollutants or the Rotterdam Convention on the Prior Informed Consent of Certain Hazardous Chemicals and Pesticides in International Trade.
• Import/Export license for pesticides: Pesticides, if you want to import or export, you should apply for an Import and Export License at the Plant and Pesticides Regulatory Division, Agriculture, Fisheries and Conservation Department.
• Import license for plants: When you need to ship or import plants into Hong Kong, it requires that you secure a Plant Import License from the Plant and Pesticides Regulatory Division, Agriculture, Fisheries and Conservation Department first. However, the injection of the plants produced in mainland China into the licensed area will be exempt from the onsite inspections. Correspondingly, the exemption also covers the entry into the distressed exporter’s periphery of cut flowers, fruits, and vegetables for consumption, from mainland China and any other countries.
• Import/Export license for radio transmission equipment: Every electronic device that supports radio or TV reception, such as computers, smartphones, televisions, or a radio, must be accompanied by the import or export permit issued by the Licensing Unit, Office of the Telecommunications Authority.
• Import/Export License for rice: The food that can be heated and eaten easily is no exception. For this reason, rice is included in the regulated commodities under the subsidiary legislation of the Reserved Commodities Ordinance. Anyone who plans to import or export rice into or out of Hong Kong is required to obtain an import/export license approved by the Trade and Industry Department under the Rice Control Unit.
• Import/Export license for rough diamonds: Arrangement for the import of rough diamonds can only be done by obtaining a valid Kimberley Process Certificate (Import) from the Director General of Trade and Industry. 
• Import/Export license for strategic commodities: Although Hong Kong is a trade-free zone, there is still a good number of items that are under regulation authority. The import/export of strategic goods will be subject to an import/export permit, which is an important document issued by the Strategic Trade Controls Bureau of the Department of Trade and Industry. While the export and reexport or transshipment of controlled goods are also subject to the same licensing process, other controlled goods not destined for export or trans-shipment are not regulated. Nevertheless, most controlled goods become exempted from licensing requirements when they are in transit i.e they are going to leave Hong Kong forever by any means of transportation, including shipping or aircraft, except for the case of controlled goods where it is difficult to monitor such as nuclear, chemical, or biological weapons. Tactical goods consist of deliberately manufactured weapons, weapons systems, explosive devices, ballistic missiles, precision machine tools, high-performance computers, sophisticated communication systems, and various nuclear materials, etc.
• Import/Export license for textiles: For the import or export of textiles (including the export of non-Hong Kong origin textiles), a valid import/export license must be issued by the Director-General of Trade and Industry, unless otherwise exempted. Please take note that the licensing requirements differ for markets of a sensitive nature and those of a non-sensitive nature. For instance, two main markets where there is a high level of volatility are imports from and exports to mainland China and exports to the USA.
• Import license for radioactive substances and irradiating apparatus: To import radioactive substances, irradiating apparatus, or any other consignment that emits or incorporates ionizing radiation, an import license should be obtained from the Department of Health.

Import and Export Declaration Requirements in Hong Kong

As per the Import and Export (Registration) Regulations, to transport any items or goods, excluding the exempted items, one needs to file the import/export declaration with the Commissioner of Customs and Excise within 14 days after the item was brought into or exported. To comply with this requirement, each service provider must acquire authority from the Government.

Import and Export Customs Clearance Procedures in Hong Kong

The Hong Kong Customs and Excise Department will have the duty to go through the import or export documents of any commodity after clearing all types of goods imported or exported. Customs has the power to verify physical cargo either individually or randomly as and when considered necessary.

The importer has to duly submit the permits to the ‘Removal Permit’ to the Customs Department so that all the concerned goods can be cleared from customs. A permit holder should take note of the following points when dealing with dutiable commodities: 

• Goods must be removed within the approved removal date and time.
• Goods must be transported directly from the releasing place to the designated receiving point.
• The description, quantity, and packaging of the goods must match the details specified in the permit.

The documents that are required for import/export clearance include: 

• Manifests
• Make sure that there is a bill of lading, air waybill, or any other type of such document as well
• An invoice or Packing list is required
• Other papers including import/export licenses, remove permits, etc

Import and Export Customs, VAT/GST, and Excise Duty in Hong Kong

• Customs Fees: Hong Kong is a free port and it does not levy any after import border fees and excises for exports.
• VAT or GST: It can be said that Hong Kong currently does not collect a value-added tax and goods and services tax.
• Excise Duty: Hong Kong is only liable to the excise tax on four types of imported goods which are liquors, tobacco, hydrocarbon oil, and methyl alcohol. These items can be levied whereas for fuels like tobacco, hydrocarbon oil, and methyl alcohol the duties are charged at a specific rate per unit of quantity. For liquors, duty is at different percentages because of the varying measures of the spirits which go from the lowest percentage for spirits with the lowest alcohol strength to the highest percentage for spirits with the highest alcohol strength.

Trade Financing Options for Trading Companies in Hong Kong

Along with the rise and expansion of international trade, it has become a factor that is of utmost importance which is trade financing. In particular, at this stage, the trading companies in Hong Kong have a few financing options for them. The major trade finance instruments that facilitate trade in Hong Kong include:

• Letters of Credit: The Letter of Credit holds the pride of being the trade financing instrument that is in high demand by banks for trading between import/export partners. The purpose of this letter is to verify that funds have been made available by the buyer’s bank to be used to make payment to the exporter.

• Short-term finance: Practically every bank in Hong Kong – from primary banking companies in addition to their respective branches, offers short-term finance options to trading enterprises. Among the short-term financial services are term loans, overdraft returns, revolving credits, and import/export credits among other things.
• Export credit insurance: Export credit insurance is an insurance policy that pays the loss incurred by the insured as well as the loss of property of the exporter against the buyer’s default. The policy for insurance applies financing by making the policy act as collateral against which banks charge lower rates for loans. This occurs since the risks are diminished with the policy in place. The Export Credit Insurance Corporation (ECIC) of Hong Kong provides insurance over which banks accept it as the strongest commitment for trade refinances. It is common knowledge that the Hong Kong banking system has approximately 70 banks that will recognize ECIC policies as pledges.

Advantages of Trading Companies in Hong Kong with Mainland China under CEPA

One of the advantages of trading companies in Hong Kong is that Hong Kong trading companies can use FTA between Hong Kong and China (Mainland).

The Mainland and HK Closer Economic Partnership Arrangement (CEPA) is a bilateral free trade agreement between China and Hong Kong that has been in effect since January 2004. With CEPA in force, Hong Kong-based companies and Hong Kong-produced products will enjoy preferential access to the mainland China market if they meet the prescribed criteria.

Especially, all the products made in Hong Kong that are exported to mainland China will have zero tariffs and duties. To claim the tariff preference, each consignment of products that is exported to the mainland shall be identified with the CEPA Certificate of Hong Kong Origin issued by the Trade and Industry Department or any of the five Government-approved Certification Organizations (i.e. the Hong Kong General Chamber of Commerce and Industries; Federation of Hong Kong Industries; the Chinese Manufacturers’ Association of Hong Kong and the Chinese General Chamber

CEPA incorporated a clause that allows certain qualified Hong Kong-based service providers can readily and speedily penetrate the mainland China market.

Additionally, CEPA plays the role of a facilitator in trade and investment between Hong Kong and the mainland not only in the field of customs clearance facilitation but also in areas such as trade promotion, transparency of laws and regulations, etc.

Streamlined Business Setup and Trade Support Services for Trading Company in Hong Kong

Hong Kong presents an ideal business setup for the financial services of trading firms, including the creation, a process that may be facilitated by a professional services firm to avoid wasting time and resources.

Besides that, your professional service provider can enable you to get import/export licenses and also aid in customs documentation, customs clearance, and many more.

How FastLane Group Can Help?

The incorporation service from FastLane Group helps set up a trading company for clients and identify all formalities required from beginning to end. The process of registration is handled by us and we ensure that the process runs smoothly so you don’t have to worry about document preparation, name reservation, and submission to official authorities. 

With the depth of knowledge of our experts, we can also provide cooperate services such as company secretary, accounting, audit, and so on based on our client’s needs. 

Contact us now to find out more about how we can support your success!