Create a Trading company in Hong Kong
Estimate time to read: 6 min
Hong Kong is the world’s 8th largest exporter of merchandise trade, according to the World Trade Organization (WTO), and the 17th largest exporter of commercial services in the world in 2019.
This article lists information on the different aspects of running a trading company in Hong Kong.
Why Establish a Hong Kong Trading Company?
One of Asia’s prominent commercial and trade hubs in Hong Kong. Because of its open trade policies, one of the main guiding forces as to why investors are willing to establish a trading business in Hong Kong. The imposition of duties on the export and import of products does not apply.
The Department of Trade and Industry of Hong Kong imposes imports or licenses only if there is a genuine need to do so, such as to fulfill Hong Kong’s obligations to its trading partners to address public health and safety concerns or to address internal security requirements.
The inclusion of the Hong Kong-China Free Trade Agreement, which is the Closer Economic Partnership Agreement (CEPA), is another big advantage of establishing a trading business in Hong Kong. With CEPA, Hong Kong-based corporations and any products manufactured in Hong Kong have exclusive access to the mainland China market and gain zero tariffs as long as it is supported by a Certificate of Hong Kong Origin.
Table of contents
Establishing a Hong Kong Trading Company
Before you start a trading company in Hong Kong, you must register your company with the Hong Kong Companies Registry and successfully get your Certificate of Incorporation.
Next, you will need a valid import/export license from the local government authorities, depending on the products you either wish to export or import into the country.
Requirements for a License (Import/Export)
A valid import/export license must be consolidated from the specific government departments in Hong Kong, depending on what kind of products you expect to import or export.
The different goods or products that need an import/export license in Hong Kong are detailed below.
Import/Export license for controlled chemicals:
An import/export license must be received from the Customs and Excise Department of Hong Kong if you wish to import or export approved chemicals.
Import/Export license for dutiable goods:
You must obtain an import/export permit from the Customs and Excise Department of Hong Kong if you want to import or export dutiable products. According to the Dutiable Commodities Ordinance, dutiable goods consists:
- Tobacco products such as cigars, cigarettes, smokeless tobacco products
- Alcoholic liquors such as brandy, whisky, gin, rum, vodka.
Import/Export License for the import or export of animals or birds:
To import animals or birds into Hong Kong, you must acquire an import permit from the Import and Export Division, Agriculture, Fisheries, and Conservation Department. An import/export license from the Endangered Species Protection Division, Agriculture, Fisheries and Conservation Department must be acquired for the import/export of endangered animals, plants, or species. Additionally, to import live mammals, birds, or reptiles, an import permit must be issued.
Import/Export license for pharmaceutical products:
You must acquire an import/export license from the Pharmaceuticals Import/Export Control Unit, Pharmaceutical Service, Department of Health, if you want to import or export pharmaceutical goods, medications (including Chinese medicine), and certain hazardous drugs.
Stimulants, hypnotics, tranquilizers, and sedatives are the most common types of dangerous drugs. Opium, methamphetamine, cannabis, cocaine, and amphetamines are other examples. An import/export license must be acquired from the Chinese Medical Council of Hong Kong to import/export Chinese herbal medicines.
Import/Export License for rice:
In Hong Kong, rice is a staple food and is thus intended as a reserved commodity under the Reserved Commodities Ordinance’s subsidiary regulations. You must apply for an import/export license under the Rice Control Unit of the Trade and Industry Department if you wish to import or export rice into or from Hong Kong.
Import License for Radioactive substances and irradiating apparatus:
To import radioactive substances and irradiation systems, an import license must be acquired from the Department of Health.
Import/Export license for textiles:
Unless clearly and explicitly exempted, imports or exports of textiles (including shipments of textiles of non-Hong Kong origin) must be regulated by a legal import/export license granted by the Director-General of Trade and Industry.
Note that for sensitive markets and non-sensitive markets, the license criteria differ. Sensitive markets include imports from and exports to mainland China, and exports to the USA.
Import/Export license for rough diamonds:
Approved Kimberley Process Certificates (Import) and Kimberley Process Certificates (Export), provided by the Director-General of Trade and Industry, shall serve the import or export of raw diamonds.
Import/Export license for radio transmission equipment:
For the import or export of telecommunication equipment, and import/export permit provided by the Licensing Unit of the Office of the Telecommunications Authority is required.
Import of Food Items:
- Frozen or chilled meat and poultry importers must apply for an import license from the Import Registry Office of the Food and Environmental Hygiene Division.
- You must receive prior approval from the Center of Food Safety, Food, and Environmental Hygiene Department to import frozen confectionery. Note that importation is only allowed from authorized sources of supply.
- You must receive prior approval from the Center for Food Safety, Food, and Environmental Hygiene Department to import milk or milk drinks. Note that importation is only allowed from authorized sources of supply.
Import/Export license for strategic commodities:
While Hong Kong is a port of free trade, it is subject to regulation over some commodities. A particular import/export authorization issued by the Strategic Trade Controls Division of the Trade and Industry Department is required for the importation or export of certain regulated commodities. It should be noticed that regulated products that are re-exported or transshipped are still subject to the same license provision.
However, regulated goods in transit, i.e., goods that stay in a vessel or aircraft at all times while they travel through Hong Kong, are not usually necessary to be regulated by a license, except for especially vulnerable products, such as nuclear, chemical, or biological weapons. Militarygrade weapons, explosives, high-precision machine machines, high-performance devices, automated networking networks, nuclear materials, high-speed and high-density integrated circuits are critical commodities.
The Hong Kong Customs and Excise Department will closely review all import/export-related records for clearance of imported products or goods to be exported. The Customs Department can also carry out a physical inspection of the cargo, if and when it considers it necessary.
The importer must apply a ‘Removal Permit’ to the Customs Department to clear imported dutiable products. In dealing with dutiable goods, a permit holder can take care of the following points:
- Remove materials within the authorized date and time of removal
- Remove items from the place of release and transmit them directly to the specified points of receipt
- Product details must suit what is on the document.
Required documents for import/export clearance include:
- Bill of lading, airway bill, or any other similar document,
- Invoice or packing list,
- And other documents such as import/export license, removal permit, etc
Under the Import and Export (Registration) Regulations, any person who imports or exports any products or items (except for exempt goods or items) must within 14 days after the goods or articles have been imported or exported, file an Import/Export Declaration with the Customs and Excise Commissioner. The declaration can be submitted electronically by service suppliers appointed by the Government.
Fees and Taxes
In Hong Kong, due to its free port identity, there are no customs fees, VAT, or GST. The government, however, imposes excise duties on four categories of items. This is whether they’ve been manufactured or produced locally. In comparison, beer, cigarettes, hydrocarbon oil, and methyl alcohol are among the four types of products.
The value of trade financing has also grown with the rise of foreign trade. There is a range of funding solutions available for Hong Kong trading firms at present. In Hong Kong, the main trade financing instruments that promote trade include:
Export credit insurance:
Export credit insurance is a goods freight insurance that insures the goods against destruction, theft, and loss and protects the exporter from the purchaser’s non-payment. The insurance scheme can help to lend as it can be used as leverage to which, as risks are minimized, banks charge cheaper prices for loans. Insurance schemes approved by banks as valuable collateral for trade financing are issued by the Hong Kong Export Credit Insurance Corporation (ECIC). ECIC policies have been approved by about 70 banks in Hong Kong as valuable collateral.
Letters of Credit:
The Letter of Credit is the most commonly used tool of trade finance and is an efficient way of funding import/export trade for banks. A Letter of Credit is a letter provided by the bank of the buyer which assures the exporter’s payment.
However, almost all major banks in Hong Kong provide trading companies short-term funding options. Term credit, overdraft, revolving loans, import/export loans, etc. are some of the short-term financial goods.
Hong Kong provides trading companies with the ideal market climate, and while you can choose to self-incorporate a trading company, it is advisable to employ a professional services company to save time and money.