Hong Kong will press the mainland authorities to modify local-content rules in the Closer economic partnership arrangement (Cepa) to make it easier for watchmakers to export their products across the border, according to Secretary for Commerce, Industry and Technology John Tsang Chun-wah. The Hong Kong government hoped the changes could be made 'very soon', Mr Tsang said at the opening of the Hong Kong Watch and Clock Fair yesterday. 'Industry representatives have indicated to us that it would be difficult for the industry to benefit from the current arrangements. They have proposed to modify the rules to enable more local manufacturers to benefit from Cepa,' he said. For a product to qualify for tax-free export status to the mainland under Cepa, at least 30 per cent of its production must be completed in Hong Kong. Tommy Leung Yung, a vice-president of the Hong Kong Watch Manufacturers Association, said the 30 per cent benchmark was difficult to determine and required independent accountants to verify, a costly process in terms of time and money. The Hong Kong watch industry has urged the scrapping of the 30 per cent rule and proposed another set of criteria, namely that the design, assembly and quality controls, as well as payment for brand and intellectual property royalties, be done in Hong Kong. 'I'm sure more watchmakers will consider moving part of their manufacturing back to Hong Kong if they erase the 30 per cent requirement,' said Stanley Lau, the managing director of Hong Kong's Renley Watch Manufacturing. So far, fewer than 20 applications for Cepa benefits have been received from watchmakers. Hong Kong is the world's second-largest exporter of watches. The United States is the biggest market for Hong Kong watches and clocks, followed by the mainland. In the first half of this year, Hong Kong's watch and clock exports rose 8 per cent to US$2.66 billion, of which 14.2 per cent went to the mainland. Last year, Hong Kong's watch and clock exports grew 9 per cent to $5.4 billion. Hong Kong watchmakers do most of their manufacturing in Shenzhen and Dongguan, which produce 700 million watches a year. The two cities account for more than 70 per cent of the world's watch production. This year's Hong Kong Watch and Clock Fair has 766 exhibitors, 6.4 per cent more than last year's.
