Cross-border limit on baby milk may breach trade rules

A cap on the amount of milk formula travellers can take out of Hong Kong could breach World Trade Organisation rules.

The government announced this month it planned to limit the number of cans people can take across the border to two.

The move was aimed at preventing parallel traders from buying formula in the city and reselling it in Shenzhen at higher prices, creating a shortage.

They can escape mainland tax by claiming the formula is for their own use and costs less than 5,000 yuan (HK$6,159) in total.

Eugene Lim, a Hong Kong tax partner of international law firm Baker & McKenzie, said the two-can quota could contravene the General Agreement on Tariffs and Trade (GATT). The agreement prohibits any quantitative import or export restrictions between WTO members.

But Lim, co-head of the firm's Asia Pacific Regional Customs and International Trade Steering Committee, said: "The quota appears to be aimed at preventing hand-carried exports for parallel trading and the limitation to two [cans] is to ensure it is limited to personal use."