- Hong Kong is a major re-exporter of agricultural goods to mainland China due in part to its free port (no import duties) and free trade agreement (CEPA) with the mainland.
- Hong Kong re-exports a significant share of its fresh fruits (e.g. tropical fruits, grapes, stone fruits, and citrus), luxury goods (e.g. cigarettes, alcohol, and chocolate), extracts/natural gums, and grey market goods (e.g. frozen beef) to mainland China.
- The re-exportation of agricultural goods is a multi-billion dollar business that involves suppliers from all over the world including Thailand, South Africa, USA, Chile, France, United Kingdom, and Italy.
Located on China’s southern coast where the Pearl River meets the South China Sea, Hong Kong is a sprawling urban metropolis that is home to one world’s busiest deep-harbor ports. Although smaller in area than the city of San Antonio, Texas, Hong Kong is an economic juggernaut whose 2014 GDP was larger than that of Chile, Pakistan, New Zealand, Qatar, and the Philippines to name a few countries. Hong Kong’s economic success has its roots in its British colonial past and accompanying free market policies. Upon its handover to mainland China in 1997, Hong Kong immediately became a Special Administrative Region (SAR), a status designed to ensure business would continue to thrive under China’s new governing policy of “one country, two systems”. In 2001 there was concern that China’s accession to the World Trade Organization (WTO) would undercut Hong Kong’s lucrative trade relations with the mainland. The worry was that WTO member states would be able to out-compete Hong Kong for the Chinese import market once China agreed to lower its import tariff regime in line with WTO membership requirements. In order to shore up Hong Kong’s status as a trade hub, China and Hong Kong signed the Closer Economic Partnership Arrangement (CEPA) in 2003, an agreement that laid the groundwork for a zero-percent import tariff rate between the two systems. CEPA guaranteed that commercial trade between Hong Kong and the mainland took precedence over any foreign agreements that could potentially disrupt the one country, two systems principle.
The adoption of CEPA, powerful as it was, only mirrored Hong Kong’s free trade policy with the rest of world. Hong Kong’s busy international port has a zero-percent import duty rate for all trade, giving exporters an extra incentive to ship their goods to Hong Kong as opposed to mainland ports. If taken further, thanks to CEPA, a zero-percent import tariff structure exists for mainland China if goods are first imported by Hong Kong and then re-exported into the mainland. For agricultural goods, it is nearly a carte-blanche for suppliers to bypass tariffs and safeguard profit margins by using Hong Kong as a go-between. Goods such as frozen beef, which have a general import tariff rate of 25% (of the value) in mainland China, have a zero-percent rate in and out of Hong Kong. A virtual free-trade backdoor was unlocked when CEPA was adopted on top of Hong Kong’s free trade port.
For international suppliers of agricultural goods, Hong Kong and China not only have separate import tariff structures, but also separate quality control and food security administrations. In mainland China, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) is responsible for import-export food safety, while in Hong Kong its Centre of Food Safety regulates food trade for the SAR. Consequently, asymmetrical import regulations can appear, with mainland China sometimes banning certain agricultural goods while Hong Kong chooses to keep the proverbial door open for imports. In the case of frozen beef, as of mid-2015, mainland China had maintained its 2000 ban on US beef over bovine spongiform encephalopathy (BSE or ‘mad cow’) concerns. Meanwhile, Hong Kong has continued imports of US beef unabated. It is unknown exactly how much US beef is re-exported into mainland China. In general, there is limited information on the type and amount of agricultural commodities that are shipped to Hong Kong, but ultimately destined for dinner tables in the mainland. This short brief will attempt to shed light on which agricultural good are imported by Hong Kong and re-exported to China.
In order to determine which agricultural goods are being re-exported to mainland China, ChinaAg compared the proportion of imports (from the world excluding China) to exports (only to mainland China). Hong Kongese production of agricultural goods must be taken into consideration as well since these goods would likely be exported alongside foreign-produced imports. However, with the exception of a few processed food products, Hong Kong is not a major a producer of agricultural goods and only grows small amounts of fresh commodities. In addition to domestic Hong Kong production, local stocks and warehouse inventory of agricultural goods must also be taken into consideration. Processed agricultural goods such as cigarettes, liquor, and other commodities can be stored for long periods of time and may be imported one year, but exported the following year. To minimize confusion from stock/inventory, ChinaAg examined the import and re-export volumes of agricultural goods over a multiyear period. After careful analysis, ChinaAg found that Hong Kong re-exports of agricultural goods generally fall into four broad categories:
- Fresh Fruits
- Luxury Goods
- Extracts & Natural Gums
- Grey Market Goods
The reasoning behind Hong Kong’s re-exportation varies according to the agricultural goods in question, but logistics and its status as a free port always play a role. For fresh fruit suppliers, Hong Kong’s streamlined customs clearance system and readily available cold storage facilities ensure their goods don’t spoil before they reach the market. For luxury goods suppliers, the lack of import tariffs protect the profit margins for their high-priced goods. For niche product suppliers, Hong Kong’s status as a trade hub ensures their goods always find a buyer. Finally, grey market goods are products that are banned from mainland ports but nevertheless find their way in via Hong Kong.
Fresh Fruits: >100,000 MTs re-exported annually
Grown throughout Southeast Asia where it is known as the “king of fruits”, durian was the number one re-exported fruit in terms of total volumes. In 2014, Hong Kong imported ~358,200 MTs of durian and exported ~332,500 MTs, meaning roughly 93% of all imports were shipped to mainland China. When considering all shipment volumes from 2010 to 2014, Hong Kong re-exported 89% of all imports on average. Equally as impressive is that Thailand had a near monopoly on the Hong Kong durian trade. Thai supply has steadily increased over time, denoting healthy market growth. In 2014, Hong Kong’s durian imports totaled just under US$280 million.
The next largest fruit commodities that were re-exported were tropical exotics which included passion fruit, jackfruit, lychees, carambola (e.g. starfruit), and pitahaya (e.g. dragon fruit). In 2014, Hong Kong imported ~202,500 MTs of exotics and exported ~173,000 MTs, thus 85% of all imports were re-exported. From 2010 to 2014, total re-export volumes averaged 75% of all imports. Despite 2014’s higher re-export rate vs. the overall average, exotics cannot be characterized as a growth commodity since more than 90% of volumes were re-exported in 2011 and 2012. As with durian, Thailand was the dominant supplier, however Vietnam supplied a small but modest share. Overall, Hong Kong imported US$150 million of tropical exotics in 2014.
Following tropical fruits, grapes were imported and re-exported by Hong Kong in high volumes. In 2014, Hong Kong imported ~194,500 MTs and exported ~146,100 MTs, equating to a 75% re-export rate. From 2010 to 2014, total re-export volumes averaged 76% of all imports. Grape re-exports can be characterized as a growth market, though this growth has slowed as imports increased marginally from 2013 to 2014. Despite having lower trade volumes than the above mentioned exotic fruits, the import value of grapes was much higher, with Hong Kong imports totaling US$492 million in 2014. Hong Kong’s supply base was diverse and included Chile (top supplier), the USA, Australia, Peru, and South Africa.
Fresh Fruits: <100,000 MTs re-exported annually
Returning to tropical fruits, Hong Kong re-exports a significant amount of guavas, mangoes, and mangosteens. In 2014, Hong Kong imported ~60,300 MTs and exported ~36,600 MTs, equating to a 61% re-export rate. When examining 2010 to 2014 volumes, Hong Kong re-exports averaged 64% of all imports. Taking a closer look, import volumes have steadily declined over the five year period while the proportion of re-exports have remained stable, denoting a shrinking market. In 2014, the import value for guavas, mangoes, and mangosteens totaled ~US$75 million. Similar to other tropical fruits imports, Thailand was the top supplier, though the Philippines acted as a modest secondary supplier.
Stone fruits, or fruits with a pit surrounded by a sweet fleshy outer-layer, were also re-exported in modest amounts. In 2014, Hong Kong imported nearly 58,000 MTs of cherries and exported ~36,300 MTs, equating to a 63% re-export rate. Overall from 2010 to 2014, total re-export volumes averaged 51% of all imports. Given the difference between the 2014 rate and the five year average, cherries were a growing market. In 2014, cherry imports netted the second highest values (behind grapes), with Hong Kong imports totaling US$337 million. However, 2013 import values were just under US$200 million, so it is unknown if the 2014 value was a market spike or a new baseline. Chile was the top cherry supplier, followed by the USA, Australia, Canada, and Argentina.
Though its import volumes were somewhat lower than cherries, plums were re-exported at a higher rate. In 2014, Hong Kong imported more than 18,000 MTs and exported ~13,400 MTs, equating to a 75% re-export rate. From 2010 to 2014, total re-export volumes averaged 81% of all imports. Plums were not a growth commodity as import volumes fluctuated from year-to-year. Hong Kong imports were valued at just under US$40 million in 2014. Like cherries, Chile was the top supplier of plums, followed by the USA, and Australia.
After tropical fruits, grapes, and stone fruits, the last type of fruit that was re-exported in great quantities was citrus fruits. Among citrus, oranges had the highest total volume while mandarins had the highest re-export rate. In 2014, Hong Kong imported ~181,600 MTs worth of oranges and exported nearly 41,000 MTs, equating to a 23% re-export rate. From 2010 to 2014, total re-export volumes averaged 32% of all imports. A declining re-export rate and stagnant import quantities denotes a weakening market. The USA (e.g. California) was the top supplier, followed by South Africa and Australia. Regarding mandarins, in 2014, Hong Kong imported 16,135 MTs and exported 9,622 MTs, equating to a 60% rate. From 2010 to 2014, total re-export volumes averaged 71% of all imports. South Africa was the dominant supplier, followed by Taiwan and Australia. As with oranges, the mandarin market can be characterized as stagnant due to erratic import quantities and re-export rates. Despite this, in 2014, Hong Kong’s import values for oranges were a robust ~US$207 million, while mandarins were much more modest at just under US$25 million.
Continuing with citrus, in 2014, Hong Kong imported ~70,200 MTs of lemons and limes and exported ~24,100 MTs, equating to a 34% re-export rate. From 2010 to 2014, total re-export volumes averaged 31% of all imports. Similarly to cherries, Hong Kong import values for lemons and limes spiked in 2014 to ~US$110 million (compared to ~US$36 million in 2013). It is unclear if this recent surge represents the new market norm or if it is a temporary trade spike. South Africa and the USA were the top suppliers, while Argentina and Turkey were small secondary suppliers. Lastly, in 2014, Hong Kong imported ~15,600 MTs of grapefruit and exported 6,523 MTs, equating to a 42% re-export rate. The five year volumes averaged 40% of all imports. Hong Kong’s grapefruit market was very stable, with minimum trade fluctuations. Thailand and South Africa were the top suppliers, while Israel and the USA were small secondary suppliers.
Luxury Goods: Tobacco Cigarettes
As a processed commodity that has an extended shelf-life, re-exports of cigarettes were significantly more difficult to calculate than perishable commodities such as fresh fruits. To complicate matters further, Hong Kong exports more cigarettes to mainland China than it imports globally. In 2014, Hong Kong imported ~24,600 MTs of cigarettes and exported ~29,900 MTs, equating to a 121% re-export rate. This figure is consistent with the 2010 to 2014 average when 122% of all imports were re-exported. A re-export rate above 100% implies that Hong Kong is manufacturing cigarettes domestically and re-exporting them alongside imports. Hong Kong itself does not cultivate tobacco and must rely on imports for the raw materials. From 2010 to 2014, Hong Kong imports of unmanufactured tobacco averaged ~15,300 MTs annually, while global exports averaged 623 MTs annually. After combining the net imports of unmanufactured tobacco with those of cigarettes, Hong Kong’s re-export rate from 2010 to 2014 averaged 69% of combined unmanufactured tobacco and cigarette imports. This re-export rate would naturally be lower if the additional cigarette product materials (e.g. filter, paper, and carton) were included.
This fact notwithstanding, cigarettes are a major re-export product thanks in part to Hong Kong’s zero percent tariff. Mainland China has a 25% import tariff rate (ad valorem) for WTO members and a 180% for non-members. Interestingly, Hong Kong’s supplier base was fluid, often dramatically changing every few years. In 2013 and 2014, South Korea and Serbia were the top suppliers, while in 2011 and 2010 Germany and Malaysia were the leading suppliers. Japan was a strong secondary supplier for the entire period. Curiously, 2012 trade data was not disclosed by Hong Kong. The import values of cigarettes alone are significant. In 2014, Hong Kong imported US$475 million worth of cigarettes, the second largest sum (after wine) of any agricultural re-export considered in this report.
Luxury Goods: Spirits
It may come as a slight surprise that whiskey or gin were not the top re-exported liquors – after all Hong Kong was a British colony for over 150 years. Instead it is French cognac (brandy) that rules the former Crown colony. In 2014, Hong Kong imported 4.8 million liters of brandy/cognac and exported 1.9 million liters, equating to a 40% re-export rate. From 2010 to 2014, total re-export volumes averaged 43% of all imports. The top supplier of course was France, while Singapore was a strong secondary supplier. However, nearly all of Singapore’s supply originated from France, meaning that a fair amount of French cognac was re-exported twice (by Singapore and Hong Kong) before reaching the mainland. In 2014, Hong Kong brandy/cognac imports were valued at US$215 million. Impressive as this figure is, Hong Kong’s brandy/cognac re-export market has been stagnant due in part to Xi Jinping’s anti-corruption and anti-extravagance campaign. Launched in November 2012, the austerity campaign has had a dampening effect on the consumption of high-end liquors within China.
Following on the heels of cognac was whiskey. In 2014, Hong Kong imported 4.2 million liters and exported ~745,600 liters, equating to a relatively low 18% re-export rate. From 2010 to 2014, total re-export volumes averaged 28% of all imports. Based on trade figures, Hong Kong is more willing to consume whiskey imports as opposed to brandy/cognac. Unsurprisingly, the United Kingdom (UK) was the top supplier while Singapore acted as a secondary supplier. The UK supplied the vast majority of Singapore’s whiskey that was later shipped to Hong Kong, meaning British whiskey had a dominant position in the Hong Kong market. In 2014, Hong Kong imported US$74 million worth of whisky, a substantial drop in value when compared to brandy.
Luxury Goods: Bottled Wine
Prior to 2008, Hong Kong actually levied import duties on both wine and beer. Once these duties were eliminated in February of that year, trade in both commodities naturally increased. However, despite CEPA, mainland China can still levy import duties on non-Hong Kong-made wine. Regardless, from 2008 to 2012, Hong Kong imports of bottled wine jumped 70% from approximately 26.8 million liters to 45.6 million liters. As previously mentioned, in late 2012, China curtailed consumption of luxury goods such as wine as part of the country’s anti-extravagance campaign and imports stagnated as a result. In 2014, Hong Kong imported 45.2 million liters and exported 16.6 million liters, equating to a 37% re-export rate. From 2010 to 2014, total re-export volumes averaged 35% of all imports. Hong Kong’s wine market can therefore be characterized as stable but sluggish. As with brandy/cognac, France was the dominant supplier; following France was Australia, the USA (e.g. California), and Chile. In 2014, Hong Kong bottled wine imports were valued at US$878 million, the largest sum of any agricultural good that is re-exported in high volumes. Impressive as this figure is, bottled wine imports topped US$1.1 billion in 2011. Wine industry representatives are optimistic that the market will rebound. In early 2015, the CEO of Vinexpo, the world’s largest international wine and spirits exposition, predicts Chinese wine consumption will increase roughly 25% from 2014 to 2018. If this proves true, Hong Kong is excellently placed to take advantage of this market growth.
Luxury Goods: Chocolate (Processed Retail Products)
Chinese chocolate consumption perhaps has the greatest market potential for growth. In late 2012, Chinese per capita consumption was estimated at 0.1 kg while the average Japanese and American citizen consumed an estimated 1.1 kg and 4.4 kg per year, respectively. In 2013, the Spanish chocolate producer, Natra, established an office in Hong Kong in anticipation of a surge in consumption. In 2014, Hong Kong imported 32,620 MTs and exported ~10,100 MTs, equating to a 31% re-export rate. From 2010 to 2014, total re-export volumes averaged 30% of all imports. Based on trade figures, this surge in consumption has yet to fully materialize as Hong Kong imports and re-exports remained flat from 2013 to 2014. However, in early 2015, the President of Hershey International (US chocolate company) predicted Chinese chocolate sales to increase from 2014’s US$2.7 billion to US$4.3 billion by 2019. Not only would the USA benefit from such growth but also Italy and its European counterparts. Italy was Hong Kong’s top supplier, followed by the Netherlands, Germany, the USA, and Belgium.
Extracts and Natural Gums
Extracts and natural gums are harvested plant and insect byproducts that can be used as food additives (e.g. thickeners, emulsifiers, and flavors), pharmaceutical ingredients (e.g. demulcents), adhesives, and dyes (e.g. seed lac, shellac), to name a few applications. In Hong Kong, these products are generally traded in small volumes (<500 MTs annually) and have a more diverse network of suppliers when compared to other re-export agricultural goods. Hop extracts, used primarily by the brewing industry, were supplied by the USA and Belgium. In 2014, Hong Kong imported 481 MTs of hop extracts and exported 232 MTs, equating to 48% re-export rate. From 2010 to 2014, total re-export volumes averaged 50% of all imports. The trade figures denote a stable market with minimal growth. In 2014, Hong Kong imports were valued at US$5.7 million.
Natural gums (excluding gum arabic) include turpentine gum, balsams, seed lac, and other naturally occurring resins. In 2014, Hong Kong imported 204 MTs and exported 82 MTs, equating to a 40% re-export rate. From 2010 to 2014, total re-export volumes averaged 51% of all imports. Hong Kong imports have significantly shrunk over the five year period, marking it as a market in decline. The top suppliers were Ethiopia, Kenya, and India. In 2014, Hong Kong imports totaled US$5.4 million. Another market in decline was vegetables saps and extracts (e.g. ginseng, poppy straw). In 2014, 165 MTs were imported and 12 MTs were exported, equating to a 7% re-export rate. From 2010 to 2014, re-exports averaged a much higher 56% of all imports from 2010 to 2014. The decline was likely due to increased ginseng production by the mainland’s traditional Chinese medicine (TCM) industry. Thailand and India were the top suppliers. In 2014, imports were valued at US$2.9 million.
Grey Market Goods: Frozen Beef
Grey market goods are agricultural products that have been banned by mainland China, but nevertheless find their way to market by being routed through Hong Kong. US beef is such a product that operates in this grey area. In 2003, China banned US beef after a case of Bovine Spongiform Encephalopathy (BSE), also known as mad cow disease, was detected in Washington state. Two years later, Hong Kong banned US beef imports, but reopened imports for boneless beef in 2006. Also in 2006, mainland China partially lifted its ban, allowing the US to export beef from cattle up to 30 months old. However, US beef suppliers complained that sanitary certificates for their beef were not being issued in a timely manner by China. The ban was still in-effect, just under a less official form. In 2013, Hong Kong finally lifted its ban on bone-in beef imports from the US. As a result, from 2012 to 2013, Hong Kong imports of US frozen beef more than doubled from approximately 47,000 MTs to 113,200 MTs. In 2014, the US accounted for a third (~135,000 MTs) of Hong Kong’s total frozen beef imports (401,200 MTs).
Out of the 401,200 MTs of frozen beef imported in 2014, Hong Kong exported roughly 54,000 MTs to Vietnam and only 35 MTs to mainland China. On the surface, it appears that Hong Kong was either re-exporting it to Vietnam or consuming the imported beef domestically. Regarding the first point, US beef representatives have claimed that their beef is being re-exported to Vietnam before being shipped on to mainland China, adding another layer of obfuscation. If this is indeed occurring, it is not reported in official trade figures as Vietnam hasn’t recorded any beef exports to mainland China since 2004. Interestingly, in June 2015, Japanese frozen beef, which is also banned by mainland China over BSE concerns, was found in high-end Shanghai restaurants after being smuggled in fruit containers across the Laos-Yunnan border of southern China. A similar smuggling operation was discovered in Dalian in northern China a few months earlier, though this time US frozen beef was entering the mainland directly under the cover of falsified customs clearance forms. While none of these cases directly link to Hong Kong, it bears considering, however, how much beef Hong Kong actually consumes.
According to the latest available data, in 2002, Hong Kong’s per capita consumption totaled 23.3 grams of beef per day or approximately 8.5 kgs per year. In 2014, Hong Kong had a population of 7.2 million and if its average citizen consumed a generous 17 kgs per year (double that of 2002), Hong Kong would only need 122,550 MTs of beef to feeds its population. The net imports (imports minus exports) for that year were just over 346,800 MTs. Even if 2002 consumption were tripled, the gap between net imports and consumption is still significant. Albeit a rough estimate, it appears that approximately 224,200 MTs of frozen beef imports disappeared from Hong Kong in 2014. This sum may seem extraordinary, but a professor from Beijing’s China Agricultural University stated that up to 2 million MTs of beef was smuggled into mainland China in 2012 and 2013. Additionally, in June 2015, China arrested no less than 21 smuggling syndicates and seized more than 100,000 MTs of meat (chicken, pork, and beef), some of which was passed through Hong Kong before being seized. There is no doubt that Hong Kong is being used as the transshipment point for smuggled beef, however the exact volumes and nature of the trade has yet to be fully made clear.
Hong Kong’s status as an international trade hub and re-exporter of agricultural goods to China rests on a solid foundation. Its efficient supply chain logistics, free port, and free trade agreement (CEPA) with the mainland guarantee the smooth flow of goods while safeguarding the profit margins of suppliers. Additionally, under the “one country, two systems” policy, Hong Kong can choose to import agricultural goods that have been banned by the mainland, giving China some flexibility on how it conducts trade with other countries. Combined, these advantages make Hong Kong an attractive destination for foreign goods. In the future, these advantages could be diminished if China decides to reduce its import tariff rates to those found in Hong Kong. For instance, in June 2015, China and Australia signed a bilateral free trade agreement that will eventually cut import tariffs to zero percent for nearly all goods. For Australian exporters, the duty-free benefits of Hong Kong’s port suddenly evaporated with the stroke of a pen.
Despite the potential pitfalls of free trade agreements, Hong Kong’s status as a major re-export market for agricultural goods will remain firmly in place. This is particularly true for goods such as fresh fruits, Hong Kong’s modern logistics infrastructure and efficient port ensure these perishable goods do not spoil before they hit the market. In addition, mainland demand for foreign grown imports have been on the rise owing to domestic quality issues and perceived risks of pesticide contamination. The re-export market for luxury goods such as liquor and wine should remain stable, with growth dependent on the easing of China’s austerity campaign which has curbed consumption since its unveiling in late 2012. Demand will rebound once the campaign loosens its grip and allows consumption, buoyed by China’s rising middle class, to grow. The re-export market for extracts and natural gums, niche products (e.g. hop extracts, ginseng extracts, etc.) traded in small volumes, will shrink in the short term owing to China’s recent lackluster beer output and its overproduction of ginseng. Furthermore, the liberalizing of mainland markets will limit growth opportunities in the long term as suppliers shift to cities that are situated closer to the products’ end-buyers (e.g. food processors and manufacturers).
Finally, the murky re-export trade of grey market goods like frozen beef will only intensify the longer the mainland maintains its bans on Japanese and US beef in the face of its ballooning demand for high quality foreign imports. The bans, triggered by bovine spongiform encephalopathy (BSE or ‘mad cow’) detections in 2001 in Japan and in 2003 in the USA, have led to the development of sophisticated beef smuggling rings that bypass all safety protocols that could potentially guard against BSE-infected beef. A middle ground must be reached where at least a portion (boneless or in-bone beef) of US and Japanese beef is permitted legally and safely to enter the mainland, thus undercutting the profit margins of smugglers. It should be noted that despite the lengthy nature of these bans, the USA only began lifting its own BSE ban of European beef after 15 years. Pending the detection of further BSE outbreaks, mainland China will eventually open its market to US and Japanese beef. Once this occurs, Hong Kong’s robust beef re-export market will decline rapidly and reach a level more in line with its own consumption needs.
 Not all agricultural goods imported in Hong Kong qualify for mainland China’s zero-percent CEPA tariff regime. For instance, fish and other aquaculture products must be “born and bred” in Hong Kong to qualify. In addition certain vegetables (e.g. spinach, squash) must be “harvested or collected” in Hong Kong, while some confectionary products must be processed first in Hong Kong. http://www.tid.gov.hk/english/cepa/tradegoods/files/mainland_2015.pdf
 According to a USDA report, Hong Kong is a noted producer or pasta, bakery products, canned food, processed seafood, dairy products, seasonings, and spirits (e.g. baijiu). http://www.usfoods-hongkong.net/res/mns/00351/HK1412%20-%20Exporter%20Guide%202014.pdf
 It is difficult to approximate the ratio of raw tobacco to cigarette weight since it varies according to each individual cigarette producer’s manufacturing (often times a trade secret) and packaging process. Additionally, it is assumed that all unmanufactured tobacco imports in Hong Kong were used for the manufacture of cigarettes, a highly unlikely scenario. The influence this had on the re-export rate would be inverse that of the inclusion of non-tobacco cigarette materials. Therefore, there was a canceling out effect when considering these two factors. The exact scale of this effect is beyond the scope of this report.
 Hong Kong is a free port and does not levy any customs tariff (i.e. border tax) on imports and exports. However, it levies an excise duty (i.e. inland tax) of HK$1,906 for every 1000 cigarettes. http://www.customs.gov.hk/en/passenger_clearance/duty_free/
 Similar to cigarettes, Hong Kong levies an excise duty on liquor of 100% of its value. Any liquor with an alcoholic strength of more than 30% by volume measured at a temperature of 20℃ qualifies for the duty.
 Elimination of tariffs for many agricultural goods will gradually take effect over the next two to eleven years: http://dfat.gov.au/trade/agreements/chafta/fact-sheets/Pages/fact-sheet-agriculture-and-processed-food.aspx