Hong Kong manufacturers say they are considering paying customs tariffs and value-added tax on re-exports to China after a recent change in policy covering mainland packaging and paper-processing joint ventures. About 20 representatives of Hong Kong industry bodies returned last night from talks with Beijing officials to clarify the policy change, which China said was aimed at recouping millions of yuan in lost customs revenue. In June, the Ministry of Foreign Trade and Economic Co-operation said all packaging and paper-processing joint ventures would be required to export their semi-processed products to Hong Kong before selling them on the mainland, from July 10. The policy is designed to crack down on manufacturers selling their semi-processed products directly in China to avoid value-added tax of 17 per cent and sales tax of 23 per cent. Philip Wong Yu-hong, treasurer of the Chinese General Chamber of Commerce, said the ministry was expected to give an answer within days to a request by the delegation for a grace period of six months on the new policy. He said Hong Kong manufacturers were studying an acceptable tax rate. 'If paying more tax can solve the problem, we will not rule out the possibility,' he said. The delegation met senior officials from the ministry and the Hong Kong and Macau Affairs Office as well as a customs duties committee under the Ministry of State. Mr Wong said some factories were suffering from the policy change. 'Some paper-product factories in the Zhujiang delta have cut their productivity while others have ceased operations,' he said. 'Not only enterprises but also the four million workforce in the region will be affected by the new policy.' He said Hong Kong's competitive edge in international markets would be adversely affected because of the enormous rise in production costs involved. The chairman of the Hong Kong General Chamber of Commerce, James Tien Pei-chun, said the policy was not feasible. 'We are not talking about money only but the capacity of all the cross-border check points and the harbour terminals. The policy is not feasible and will bring inconvenience to the whole community of Hong Kong,' he said.