But still room for improvement, says industry group By waiving the duty on an additional few hundred Hong Kong-made products, the third phase of the Closer Economic Partnership Arrangement (Cepa) will see all the city's products heading to the mainland tariff free. Among other things the pact loosens requirements on qualifications for Hong Kong watches - a move welcomed in the trade. But the Federation of Hong Kong Industries said there was still room for improvement. The first two phases of Cepa granted duty-free status to 1,108 types of Hong Kong products being sold to the mainland. Cepa III, which takes effect on January 1, removes import taxes on the remaining products - an additional 261 classes of goods, including fruit juices, anoraks and spectacles. Cepa III has also removed the requirement that watches must have 30 per cent of their value-added production done in Hong Kong to qualify. Instead, the city's manufacturers need only furnish proof that the design, assembly and quality control were done locally to qualify. 'The watch industry will react positively to Cepa III,' said Tommy Leung Liang-rong, vice-president of the Hong Kong Watch Manufacturers Association. 'This requirement caused our industry a lot of problems in calculating the 30 per cent limit, which was difficult, and costing time and money. As a result, the response from the industry to Cepa was not enthusiastic initially.' Mr Leung estimated only a few hundred people were employed in Hong Kong producing watches that fell under Cepa. For instance, Peace Mark Holdings, a Hong Kong-listed watch manufacturer where Mr Leung is managing director, has so far exported only $2 million worth of watches to the mainland under Cepa since the pact came into force on January 1 last year. With Cepa III, Peace Mark would more than double its sales of watches sold under Cepa and hire up to 100 more workers. Federation chairman Kenneth Ting Woo-shou urged the Hong Kong government to ease restrictions on importing labour to resolve the shortage of skilled labour.