Hong Kong’s Customs Duty Landscape for Cross-Border Trade

Hong Kong’s reputation as a leading global trading hub is fundamentally linked to its status as a free port. The Hong Kong Special Administrative Region (HKSAR) does not levy customs tariffs on imports or exports, making it one of the world’s most open economies for international trade. This duty-free environment, combined with a strategic network of trade agreements, positions Hong Kong businesses to maximize competitive advantages in global markets.

As of 2025, Hong Kong continues to strengthen its free port policy while expanding its network of free trade agreements (FTAs) to provide preferential market access for businesses engaged in cross-border trade. Understanding how to leverage these trade agreements can result in significant cost savings and competitive advantages for Hong Kong-based enterprises.

Understanding Hong Kong’s Free Port Status

Hong Kong’s free port status is enshrined in its trade policy framework. Unlike most jurisdictions that impose tariffs on imported goods, Hong Kong maintains a fundamentally open trade regime with no tariff quotas, surcharges, or value-added tax systems for the vast majority of products.

What “Free Port” Means in Practice

The designation as a free port means that 99% of goods can enter and exit Hong Kong without incurring customs duties. This applies to both raw materials and finished products, making Hong Kong an attractive location for:

• Import-export trading companies
• Manufacturing operations that source materials globally
• Distribution centers serving Asia-Pacific markets
• Transshipment and logistics operations
• E-commerce businesses with international customer bases

Exceptions to the Duty-Free Rule

While Hong Kong maintains a broadly duty-free environment, excise duties are levied on four specific product categories, regardless of whether they are imported or locally manufactured:

Product Category	HS Code	Duty Rate
Liquor	Various	HKD 169 per liter of pure alcohol
Tobacco (Cigarettes)	Various	HKD 2,618 per kilogram
Hydrocarbon Oil	2709-2710	HKD 4.268 per liter
Methyl Alcohol	2905	HKD 4.268 per liter
Motor Vehicles	Various	40-115% based on engine size

2025 Developments in Free Port Status

In 2025, Hong Kong authorities have reaffirmed their commitment to maintaining the territory’s free trade status despite evolving global trade dynamics. Following the U.S. announcement on April 2, 2025, of a 34% tariff on Chinese and Hong Kong imports (effective April 9, 2025), Hong Kong authorities explicitly stated they would not implement retaliatory tariffs, maintaining their commitment to free port principles.

Additionally, Hong Kong has introduced new classifications for digital goods and e-commerce imports in 2025, with enhanced digital customs processes reducing declaration times to minutes. The de minimis threshold remains at HKD 1,000, meaning shipments under this value are exempt from formal customs declarations.

CEPA: The Foundation of Mainland China-Hong Kong Trade

The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) represents the most significant trade agreement for Hong Kong businesses. Signed on June 29, 2003, CEPA was the first free trade agreement concluded by Mainland China and serves as a comprehensive framework covering trade in goods, trade in services, investment, and economic cooperation.

Zero-Tariff Benefits Under CEPA

The cornerstone benefit of CEPA is zero-tariff treatment for Hong Kong products imported into Mainland China, provided they meet the CEPA rules of origin requirements. Since implementation, CEPA has delivered substantial savings to Hong Kong businesses:

• Cumulative tariff savings: Over RMB 10.2 billion (approximately USD 1.39 billion) by end of 2024
• Trade volume: Total trade in goods between Mainland China and Hong Kong exceeded HKD 4.8 trillion (approximately USD 613.92 billion) in 2024
• Product coverage: All products manufactured in Hong Kong that meet CEPA rules of origin qualify for zero tariffs

CEPA 2025 Enhancements: Agreement II

On March 1, 2025, the Second Agreement Concerning Amendment to the CEPA Agreement on Trade in Services (Agreement II) entered into force, bringing substantial new benefits for Hong Kong service providers and businesses:

Enhancement Area	Key Changes
Market Access Liberalization	Lowered or removed thresholds in financial services, construction, engineering, testing and certification, telecommunications, motion pictures, television, and tourism
Legal Framework Flexibility	Hong Kong-invested enterprises can now adopt Hong Kong law and choose arbitration seated in Hong Kong
Business Operation Requirements	Removed the three-year substantive business operation requirement for most service sectors
Greater Bay Area Priority	Some liberalization measures rolled out first in Guangdong-Hong Kong-Macao Greater Bay Area

CEPA Rules of Origin Requirements

To qualify for CEPA zero-tariff treatment, Hong Kong manufacturers must meet specific rules of origin criteria. CEPA employs multiple approaches to determine origin eligibility:

1. Product Specific Rules of Origin (PSRs)

CEPA currently covers approximately 1,900 items with Product Specific Rules. These rules use different criteria depending on the product:

• Change in Tariff Heading (CTH): Applied to 17% of covered products (including chemical and metal products, electronic products and components). Products must undergo sufficient processing in Hong Kong to result in a change in tariff classification.
• Value-Added Requirement: Applied to 15% of covered products (including electronic and optical components, watches and clocks). A minimum 30% value must be added in Hong Kong, counting only Hong Kong-origin raw materials, local labor costs, and product development costs.

2. General Rule of Origin

For products not covered by PSRs, a general rule based on regional value content (RVC) calculation applies. Traders can choose between two calculation methods:

• Build-up method: Calculates the value added in Hong Kong as a percentage of total product value
• Build-down method: Calculates the non-Hong Kong content and subtracts from total value

3. Direct Transport Requirement

Goods must be transported directly from Hong Kong to Mainland China to claim zero-tariff preference. If transshipment through a third location is necessary, goods must remain under customs control in the third jurisdiction.

Obtaining a Certificate of Hong Kong Origin – CEPA

To claim CEPA benefits, exporters must obtain a Certificate of Hong Kong Origin – CEPA (CO(CEPA)) from either the Trade and Industry Department (TID) or one of the five Government Approved Certification Organizations (GACOs):

• Federation of Hong Kong Industries
• Hong Kong General Chamber of Commerce
• Chinese General Chamber of Commerce
• Chinese Manufacturers’ Association of Hong Kong
• Indian Chamber of Commerce Hong Kong

Manufacturers must first register their factories and products with TID. The Customs and Excise Department conducts factory inspections as part of the registration process to verify manufacturing capabilities.

Hong Kong’s Free Trade Agreement Network

Beyond CEPA, Hong Kong has established a strategic network of free trade agreements with key trading partners worldwide. As of 2025, Hong Kong has signed nine FTAs with the following economies:

Trading Partner	Date Signed	Date Entered into Force	Key Benefits
Mainland China (CEPA)	June 2003	January 2004	Zero tariffs on all Hong Kong origin goods; extensive service sector liberalization
New Zealand	March 2010	January 2011	Tariff elimination on most goods; services market access
EFTA (Iceland, Liechtenstein, Norway, Switzerland)	June 2011	October 2012	Tariff elimination; investment protection; IP rights
Chile	September 2012	October 2014	Tariff reduction/elimination; services liberalization
Macao	October 2017	January 2018	Mutual tariff-free access; services cooperation
ASEAN (10 member states)	November 2017	February 2021 (full implementation)	Phased tariff elimination; services and investment liberalization
Georgia	June 2018	February 2019	Tariff elimination on most goods; services market access
Australia	March 2019	January 2020	Tariff elimination; services liberalization; investment protection
Peru	November 2024	Pending ratification	Tariff elimination; services and investment provisions

ASEAN-Hong Kong FTA: Expanding Southeast Asian Market Access

The ASEAN-Hong Kong Free Trade Agreement (AHKFTA) represents Hong Kong’s largest multilateral FTA, covering 10 Southeast Asian nations: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. (Note: Timor-Leste became ASEAN’s 11th member state on October 26, 2025, but is not yet party to AHKFTA.)

Tariff Reduction Schedules Under AHKFTA

Hong Kong provides immediate tariff-free access to all ASEAN products upon entry into force. ASEAN member states have committed to phased tariff elimination on varying schedules:

ASEAN Countries	Tariff Elimination Timeline	Coverage
Brunei, Malaysia, Philippines, Thailand	Within 10 years	Approximately 85% of tariff lines
Indonesia, Vietnam	Within 10 years	Approximately 75% of tariff lines
Cambodia, Laos, Myanmar	Within 15 years	Approximately 65% of tariff lines
Singapore	Immediate	100% (Singapore is a free port)

2024 Protocol Amendment

In 2024, Hong Kong and ASEAN signed the First Protocol to Amend the AHKFTA, significantly expanding the Product Specific Rules (PSR) of origin coverage from approximately 200 tariff lines to almost 600. This enhancement makes it easier for Hong Kong manufacturers to qualify for preferential tariffs when exporting to ASEAN markets.

Certificate of Hong Kong Origin – Form AHK

To claim preferential tariffs under AHKFTA, exporters must obtain a Certificate of Hong Kong Origin – Form AHK. Special requirements apply for goods subject to Regional Value Content (RVC) rules:

• Manufacturers must provide a Proforma Cost Statement detailing RVC calculations
• The statement must support Factory Registration applications or amendments
• Documentation must demonstrate that sufficient value has been added in Hong Kong

Hong Kong’s Application to Join RCEP

The Regional Comprehensive Economic Partnership (RCEP) is the world’s largest free trade agreement, covering 15 member economies: China, Japan, South Korea, Australia, New Zealand, and the 10 ASEAN member states. RCEP members collectively account for approximately 70% of Hong Kong’s total merchandise trade.

Current Status of Hong Kong’s RCEP Application

Hong Kong submitted its formal application to join RCEP on February 21, 2022. As of December 2025, Hong Kong is not yet a member, but significant progress has been made:

• September 2024: The RCEP Joint Committee adopted Procedures for Accession, creating a formal pathway for new members
• September 2024: ASEAN economic ministers issued a joint statement supporting Hong Kong’s accession (along with Sri Lanka, Chile, and Bangladesh)
• 2024: Hong Kong Legislative Council delegations visited ASEAN countries (Malaysia, Indonesia, Singapore) and Japan to lobby for support

Strategic Significance of RCEP Membership

RCEP membership would provide Hong Kong businesses with unprecedented access to key markets, particularly:

• Japan and South Korea: Hong Kong currently has no bilateral FTAs with these major trading partners
• Enhanced supply chain integration: Cumulation of origin across all 15 RCEP members would enable more complex regional value chains
• Streamlined customs procedures: Unified rules of origin and documentation requirements
• Services sector opportunities: Enhanced market access for Hong Kong’s competitive service industries

The Role of the Trade and Industry Department

The Trade and Industry Department (TID) plays a central role in administering Hong Kong’s trade agreements and origin certification system. Key functions include:

Origin Certification Authority

Under the Export (Certificates of Origin) Regulations of the Import and Export Ordinance (Cap. 60), the Director-General of Trade and Industry has the authority to:

• Issue Certificates of Origin for goods manufactured, processed, or produced in Hong Kong
• Establish and update origin criteria in accordance with WTO Agreement on Rules of Origin
• Register factories and verify manufacturing capabilities
• Approve Government Approved Certification Organizations (GACOs) to issue certificates

Types of Certificates Issued

TID and authorized GACOs issue several types of origin certificates:

• Certificate of Hong Kong Origin: General certificate for standard exports
• Certificate of Origin – Processing: For goods subject to processing arrangements
• Certificate of Hong Kong Origin – CEPA: For claiming zero tariffs under CEPA
• Certificate of Hong Kong Origin – Form AHK: For ASEAN-Hong Kong FTA benefits
• Certificate of Hong Kong Origin – New Zealand: For New Zealand FTA benefits
• Certificate of Hong Kong Origin – Georgia: For Georgia FTA benefits
• Certificate of Origin – Re-export: For re-exported goods
• Certificate of Origin – Re-export (Movement Confirmation): For transshipment verification

Application Requirements and Timeline

Businesses seeking Certificates of Origin must comply with the following requirements:

Requirement	Details
Business Registration	Exporters and manufacturers must possess valid Business Registration
Factory Registration	Manufacturers must obtain Factory Registration before applying for CO
Application Timeline	Applications must be submitted at least 2 clear working days before consignment departure
Electronic Submission	All applications must be submitted through electronic service
Penalties for Non-Compliance	Maximum fine of HKD 500,000 and 2 years’ imprisonment under Import and Export Ordinance

FTA Transhipment Facilitation Scheme

Recognizing Hong Kong’s role as a major transshipment hub, the Customs and Excise Department launched the FTA Transhipment Facilitation Scheme on December 20, 2015. This scheme allows consignments routed through Hong Kong to qualify for FTA preferential tariffs, provided they remain under customs control while in Hong Kong.

This is particularly valuable for businesses that:

• Consolidate shipments from multiple origins in Hong Kong
• Store goods temporarily in Hong Kong warehouses before final export
• Repackage or relabel products in Hong Kong without substantial transformation

Practical Strategies for Maximizing FTA Benefits

Step 1: Conduct an FTA Eligibility Assessment

Before pursuing FTA benefits, businesses should assess which agreements apply to their products and markets:

• Identify target export markets covered by Hong Kong FTAs
• Determine the applicable tariff rates in destination markets with and without FTA benefits
• Calculate potential duty savings to determine if compliance costs are justified
• Review product-specific rules of origin to assess qualification likelihood

Step 2: Ensure Compliance with Rules of Origin

Meeting rules of origin requirements is essential for claiming FTA benefits. Key considerations include:

For CEPA (Mainland China):

• Verify your products are covered by Product Specific Rules or can meet the General Rule
• Maintain detailed records of manufacturing processes and material sourcing
• Calculate value-added content accurately, including only Hong Kong-origin materials and local labor
• Ensure direct transport from Hong Kong to Mainland China
• Register your factory and products with TID before first application

For ASEAN FTA:

• Review enhanced Product Specific Rules covering nearly 600 tariff lines (as of 2024 amendment)
• Prepare Proforma Cost Statements for products subject to RVC requirements
• Consider cumulation opportunities that allow materials from ASEAN countries to count toward origin
• Ensure goods are transported directly or remain under customs control if transshipped

Step 3: Obtain Necessary Certifications

Proper documentation is critical for claiming FTA benefits:

• Factory Registration: Complete initial registration with supporting documentation of manufacturing capabilities
• Certificate Applications: Submit applications at least 2 working days before shipment through TID or authorized GACOs
• Supporting Documentation: Maintain records of material sourcing, production processes, and cost calculations
• Compliance Audits: Be prepared for Customs and Excise Department factory inspections

Step 4: Implement Proper Record-Keeping Systems

Robust documentation systems are essential for:

• Demonstrating compliance during audits or verification procedures
• Supporting certificate applications with accurate data
• Tracking duty savings and ROI on FTA utilization
• Responding to importer queries or customs requests in destination markets

Step 5: Stay Updated on FTA Developments

Trade agreements evolve over time through amendments, tariff phase-in schedules, and new accessions:

• Monitor TID announcements and trade circulars for origin criteria updates
• Track tariff elimination schedules to anticipate when additional products become duty-free
• Review protocol amendments that may expand product coverage or simplify procedures
• Follow Hong Kong’s RCEP accession progress for potential new market access opportunities

Case Applications: How Businesses Can Leverage Trade Agreements

Example 1: Electronics Manufacturer Exporting to Mainland China

Scenario: A Hong Kong-based electronics company manufactures smartphone accessories using imported components and local assembly.

FTA Strategy:

• Register factory and products with TID for CEPA certification
• Source some components from Mainland China to count toward RVC calculation under CEPA’s flexible accumulation rules
• Perform substantial assembly and quality control operations in Hong Kong to meet 30% value-added requirement
• Obtain CO(CEPA) for each shipment to Mainland China
• Achieve zero-tariff treatment, saving 8-15% in customs duties compared to non-CEPA imports

Example 2: Garment Trader Supplying ASEAN Markets

Scenario: A Hong Kong trading company sources garments from regional suppliers and exports to Southeast Asian retail chains.

FTA Strategy:

• Establish light manufacturing operations in Hong Kong (labeling, quality control, packaging)
• Source raw fabrics from ASEAN countries to utilize cumulation provisions under AHKFTA
• Perform final finishing processes in Hong Kong to meet origin criteria
• Obtain Form AHK certificates for shipments to Thailand, Vietnam, and Indonesia
• Benefit from phased tariff reductions: 5-10% duty savings in Year 1, scaling to zero tariffs within 10 years

Example 3: Food and Beverage Company Expanding to Australia

Scenario: A Hong Kong food manufacturer produces premium tea products blended and packaged in Hong Kong using imported tea leaves.

FTA Strategy:

• Review Hong Kong-Australia FTA rules of origin for processed food products
• Perform blending, quality control, and packaging operations in Hong Kong to achieve substantial transformation
• Apply for Certificate of Hong Kong Origin for Australian shipments
• Eliminate Australian import duties (typically 5% for processed food products)
• Use duty savings to offer more competitive pricing in the Australian market

Government Support Programs for FTA Utilization

BUD Fund (Dedicated Fund on Branding, Upgrading and Domestic Sales)

The Hong Kong government provides financial support through the BUD Fund to help businesses leverage FTA opportunities. The fund provides:

• Funding support for individual non-listed Hong Kong enterprises
• Projects to develop brands in FTA economies
• Business upgrading and restructuring initiatives
• Domestic sales promotion in Mainland China and FTA markets
• Coverage for market research, product development, and market entry costs

SME Export Marketing Fund

Small and medium-sized enterprises can access the SME Export Marketing Fund to offset costs associated with:

• Participation in trade fairs and exhibitions in FTA markets
• Export documentation and certification expenses
• Market research and promotional activities

Challenges and Considerations

Administrative Compliance Costs

While FTAs offer duty savings, businesses must weigh these benefits against compliance costs:

• Documentation: Time and resources required to prepare certificate applications and supporting documentation
• Record-keeping: Systems needed to track material sourcing, production processes, and cost calculations
• Factory Registration: Initial registration fees and ongoing compliance with inspection requirements
• Staff Training: Ensuring personnel understand rules of origin and certification procedures

For low-value shipments or products with minimal tariff rates in destination markets, the compliance costs may exceed duty savings.

Rules of Origin Complexity

Different FTAs employ varying rules of origin criteria, creating complexity for businesses exporting to multiple markets:

• Product-specific rules differ between agreements
• Value-added calculation methodologies vary
• Cumulation provisions differ in scope and application
• Documentation requirements are not standardized

Businesses must develop expertise in each applicable FTA’s specific requirements or engage specialized consultants.

Supply Chain Considerations

Qualifying for preferential origin treatment may require adjustments to established supply chains:

• Sourcing more materials from Hong Kong or FTA partner countries
• Relocating certain production processes to Hong Kong
• Maintaining minimum inventory levels in Hong Kong for processing operations
• Adjusting logistics to ensure direct transport requirements are met

U.S. Tariff Situation in 2025

In 2025, Hong Kong businesses face new challenges in the U.S. market following tariff announcements:

• April 2, 2025: U.S. announced 34% reciprocal tariff on Hong Kong imports (effective April 9, 2025)
• May 2, 2025: De minimis duty-free treatment eliminated for Hong Kong products imported to the U.S.
• Hong Kong has maintained its free port status and has not imposed retaliatory tariffs
• 89% of surveyed Hong Kong companies have implemented supply chain restructuring in response

These developments underscore the importance of diversifying export markets and maximizing benefits from Hong Kong’s FTA network in Asia-Pacific, European, and Latin American markets.

Future Outlook: Hong Kong’s Trade Agreement Agenda

RCEP Accession Progress

Hong Kong continues to prioritize RCEP accession as a strategic objective. With strong support from ASEAN member states and formal accession procedures now in place, membership could materialize in 2025-2026, subject to approval from all existing members.

RCEP membership would represent Hong Kong’s most significant trade agreement expansion, providing:

• Access to Japan and South Korea markets without separate bilateral FTA negotiations
• Enhanced competitiveness versus non-RCEP competitors in regional markets
• Streamlined customs procedures across 15 economies
• Opportunities for regional value chain integration

Potential New FTA Negotiations

Hong Kong continues to explore additional FTA opportunities with strategic trading partners. Potential future agreements could include:

• United Kingdom (post-Brexit standalone FTA)
• Canada
• India
• Additional Latin American economies

Digital Trade and E-commerce Provisions

Future FTA enhancements are likely to focus on digital trade facilitation, including:

• Electronic certificates of origin and customs documentation
• Cross-border data flow provisions
• E-commerce facilitation measures
• Digital services market access

Hong Kong’s 2025 introduction of digital customs processes and updated classifications for digital goods positions the territory well for these developments.

Greater Bay Area Integration

The Guangdong-Hong Kong-Macao Greater Bay Area initiative continues to deepen economic integration, with CEPA serving as the legal framework. Future enhancements may include:

• Further regulatory alignment in key sectors
• Expanded mutual recognition of professional qualifications
• Enhanced cross-border movement of business personnel
• Innovation and technology cooperation provisions

Disclaimer: This article provides general information about Hong Kong trade agreements and customs duties. Tax and trade regulations are subject to change. Businesses should consult with qualified tax advisors and trade compliance specialists for specific guidance on their particular circumstances.