Business License for Trading company
Here you would find all the information on several aspects of administering a trading business in Hong Kong.
Hong Kong is at the 13th spot on the list of countries that have the most extensive trading economy in the world and is also prominently known as the preeminent trade and commercial center in Asia. In 2016, Hong Kong had a total goods trade value of $7,596.2 billion which is an increase from the last of year of about 5% to 10%. This is why many people are looking for a business license for a trading company in Hong Kong.
A significant factor that contributed to the status of Hong Kong as one of the largest trading economies in the world is the free trade policy. Free trade policy, as in a sense, means Hong Kong does not impose any charges on the export or the import of the goods as well as reduces any other restrictions that are there in such a trade.
As per Hong Kong Trade and Industry Department, the trading business license in Hong Kong is required solely if there is a legitimate requirement to satisfy commitments undertaken by Hong Kong to meet public health, internal security demands or safety, or its trading allies.
Here you would find all the information on several aspects of administering a trading business in Hong Kong so that a person who is hoping to apply for a business license for a trading company knows what is important for the business.
If a person is about to start a business in Hong Kong that would be engaging in any export or import activities, the person would need to obtain the particular license for the import and export depending on whether the person is dealing in non-controlled goods or controlled goods.
For instance, the controlled products include the ones like food products, animals, petrochemicals, drugs, products, tobacco, and cigarettes. And since it is only the controlled goods that need the import and export trading business license in Hong Kong, a person opening a company for this business has to get the license issued by the particular governing agency.
But after you have decided about the business that you want in Hong Kong, you would first need to register the company and obtain the Certificate of Incorporation. After this comes the step of issuing a license for the business activities.
Import & Export Permits and Licenses
As mentioned above, depending on the kind of products that the person intends to export or import, a genuine and valid trading business license of Hong Kong must be obtained. This license would be acquired from the appropriate government departments in Hong Kong. The goods and products that require a license for the import or export in Hong Kong has been shared in details below:
Import or Export license for textiles
For a business that conducts import or export of textiles, which also includes the export of the non-Hong Kong origin textiles, the person opening the business would need to issue a legitimate export or import business license for the trading company by the Director-General of Trade and Industry.
There are situations where the person might be specifically exempted from this obligation. Also, it has to be noted that the licensing requirements vary for the non-sensitive markets and the sensitive markets, that includes exports to and imports from mainland China and the exports to the USA.
Import or Export license for strategic commodities
Even though Hong Kong has a free trade anchorage, some specific products are subjected to control. And for the export and import of these regulated products, the person would need to issue the trading business license in Hong Kong by the Strategic Trade Controls Branch of the Trade and Industry Department.
Also, it must be noted that the products which are being transshipped or re-exported are also subjected to the same licensing obligations. Nevertheless, regulated products that are in transit via Hong Kong, are ordinarily not obligated to be registered by a license. The strategic products include high speed and high-density integrated circuits, nuclear materials, sophisticated communication systems, high-performance computers, high precision machine tools, explosives, arms, and ammunition.
Import or Export license for rough diamonds
Issued by the Director-General of Trade and Industry, a valid Kimberley Process Certificates (Import) and Kimberley Process Certificates (Import) is required for the import or export of rough diamonds for the person intending to start this business.
Import or Export License for rice
Under the subsidiary ordinances of the Reserved Commodities Ordinance, rice is registered as a reserved products as it is a staple food in Hong Kong. Hence, if a person wants to start a business that indulges in the import and export of rice into and from Hong Kong, they would need a business license for the trading company under the Trade and Industry Department’s Rice Control Unit.
Import or Export license for radio transmission equipment
For the export and import of radio transmitting equipment in Hong Kong, a valid import or export trading business license of Hong Kong is required to be issued by the licensing unit, Office of the Telecommunications Authority.
Import license for plants
A plant import license from the Plant and Pesticides Regulatory Division, Fisheries, Agriculture, and Conservation Department must be issued for the person who wants to import plants into Hong Kong. Nonetheless, the import of plants that have been produced in mainland China is excused from the licensing requirement. Also, the exemption is implemented for the import of cut flowers, vegetables, and fruits for consumption, from mainland China and the other countries.
Import or Export license for pesticides
In case a person wants to export or import pesticides, they would need to obtain the business license for the trading company from the Plant and Pesticides Regulatory Division, Fisheries, Agriculture, and Conservation Department.
Import or Export license for hazardous chemicals
For a person who wants to begin a business for the importing or exporting of scheduled chemicals, a valid import or export license is required. At present, chemicals that are subjected to control as per the Rotterdam Convention on the Prior Informed Consent Procedure or the Stockholm Convention on Persistent Organic Pollutants for Specific Hazardous Pesticides and Chemicals in International trade are the non-pesticide hazardous chemicals.
Import of Food Items
This includes the following trading business license in Hong Kong:
- Import of milk or milk beverages: For importing milk or milk beverages, the person has to acquire a prior permission from the Center for Food Safety, Food, and Environmental Hygiene Department. Also, it must be noted that the importation is permitted only from the authorized sources of manufacture.
- Importing frozen or chilled meat and poultry: Anyone who wants to indulge in the business of importing frozen or chilled meat and poultry would need to apply for the trading business license of Hong Kong from the Food and Environmental Hygiene Department’s Import Registration Office.
- Importing frozen confectionery: For importing frozen confectionery, the person has to acquire a prior permission from the Center for Food Safety, Food, and Environmental Hygiene Department. Also, it must be noted that the importation is permitted only from authorized sources of manufacture.
Import or Export license for pharmaceutical medicines, products, and dangerous drugs
A business license for a trading company must be applied to the business in which activities related to the import or export pharmaceutical products, medicines that also includes the Chinese medicines, and specific dangerous drugs exist. The license would be issued by the Pharmaceuticals Import or Export Control Unit, Pharmaceutical Service, Department of Health.
The drugs that are categorized as dangerous drugs are sedatives, tranquilizers, hypnotics, and the stimulants. The examples of these drugs are the amphetamines, cocaine, cannabis, heroin, morphine, and opium. For importing or exporting Chinese herbal medicines, the permit has to be acquired from the Chinese Medical Council of Hong Kong.
Import or Export License of animals or birds
In order to import any birds or animals into Hong Kong, a person would need to apply for the license from the Import and Export Division, Fisheries, Agriculture, and Conservation Department. For endangered species, plants, or animals, the person would need to get the import or export trading business license of Hong Kong from the Endangered Species Protection Division, Fisheries, Agriculture, and Conservation Department.
Import or Export license for controlled chemicals
A valid license has to be obtained from the Customs and Excise Department of Hong Kong for the business that would indulge in the import or export of controlled chemicals.
Import or Export license for dutiable goods
A valid and genuine trading business license of Hong Kong has to acquire for the business that intends to indulge in the import or export of dutiable goods from the Customs and Excise Department of Hong Kong. As per the the Dutiable Commodities Ordinance, these products are:
- Methyl alcohol
- Hydrocarbon oils such as light diesel oil, kerosene, aircraft spirit, and motor spirit
- Tobacco products such as smokeless tobacco products, cigars, cigarettes, etc.
- Alcoholic liquors such as vodka, rum, gin, whiskey, brandy, etc.
As per the export and import obligations for the registration, each person who exports or imports any products or articles, which excludes the exempt products, has to file an import or export declaration with the Commissioner of Customs and Excise.
This declaration can be submitted electronically through the service providers who have been delegated by the government, and it has to be done 14 days after the importation or the exportation of the products. And this needs to be after the trading business license of Hong Kong has been issued for the process to begin.
The Hong Kong Customs and Excise Department would thoroughly inspect all the export or import related documents to clear the imported products that are to be exported. When it is considered fit, the Customs Department might also initiate a physical examination of the cargo.
For clearing the imported dutiable goods, the person who is importing them has to submit a ‘Removal Permit’ to the Customs Department. Furthermore, the license holder has to keep in mind the following things while dealing with the dutiable products:
- The quantity, packing, and description of the products has to match what has been mentioned on the permit.
- The products have to be removed from the releasing place and then dispatched directly to the designated receiving point.
- The products have to be removed within the authorized removal date and time.
Documents that are needed for the export or the import clearance are:
- Invoice or packing list.
- Bill of airway bill, lading or any other related document.
- Other records such as the import or export license, removal permit, etc.
Import and Export Taxes
There aren’t much taxes applied on the products that are imported and exported in a Hong Kong business, but there are a few that have been explained below for the afterwards when a person get the business license for a trading company and begins the operation of the business:
- Excise Duty: In Hong Kong, the excise duty is imposed on only four types of products which is irrespective of the fact that they are locally manufactured or imported. And the products that are subjected to the excise duty are methyl alcohol, hydrocarbon oil, tobacco, and liquors.
For the methyl alcohol, hydrocarbon oil, and the tobacco, the excise duties are priced at fixed rates per unit quantity while the liquors are imposed with the duty by assessing the various percentages based on the alcoholic concentration of the liquor.
- VAT or GST: The good news here is that Hong Kong does not impose the goods and services tax or the value-added tax.
- Customs Fees: Since Hong Kong is a free port, there are no customs fees imposed on the exports and the imports.
Import and Export Financing
The importance of the trade finance has also grown along with the growth of the international trade. And currently, many financing options are available for the companies that are into trading in Hong Kong who have the trading business license of Hong Kong. The principal trade finance instruments that promote trade in Hong Kong comprise:
- Export credit insurance: It is a cargo insurance on the products that insures them against loss, theft, damage, and shields the exporter against non-payment by the customer. The export credit insurance can help in financing as it can be utilized as a collateral against which any bank can provide loans at a much lower rate due to the reduced risks.
The ECIC also called the Export Credit Insurance Corporation of Hong Kong issues insurance policies that are approved by any bank as a valuable collateral for trade finance. There are about 70 banks in Hong Kong that have accepted the ECIC procedures as the relevant collateral.
- Short-term finance: Most of the leading banks in Hong Kong render the short-term finance options for those companies who have the business license for a trading company and have started the company. A few of the short financial commodities include import/export loans, revolving loans, overdraft, term loans, etc.
- Letters of Credit: The most widely utilized trade finance instrument is the letter of credit and is one of the most effective methods for any bank to finance the import or export trade. This is primarily a letter that is issued by the bank of the customer and guarantees the payment to the exporter.
With the benefits of the trading business license of Hong Kong, Hong Kong-based trading firms can easily get profits from the Free Trade Agreement (FTA) that is between the mainland China and Hong Kong. The Closer Economic Partnership Arrangement (CEPA) of mainland and Hong Kong is a reciprocal free trade agreement between the two countries done in 2004 where the Hong Kong made products gain advantageous passage to the mainland China market.
Hong Kong provides the ideal business environment for trading firms who have the Business License for the Trading company.