LegCo Paper No. CB(1) 1445/95-96
(These minutes have been seen
by the Administration)
Ref : CB1/BC/24/95/2

Bills Committee to study the
Dutiable Commodities (Amendment) Bill 1996

Minutes of the Meeting held
on Wednesday, 24 April 1996 at 8:30 a.m.
in Conference Room A of the Legislative Council Building

Members Present :

    Hon Ronald ARCULLI, OBE, JP
    Hon Mrs Miriam LAU Kin-yee, OBE, JP
    Dr Hon HUANG Chen-ya, MBE
    Hon CHAN Yuen-han
    Hon NGAN Kam-chuen
    Hon SIN Chung-kai

Public Officers Attending :

Mr M J T Rowse
Deputy Secretary for the Treasury
Miss Vivian SUM
Principal Assistant Secretary for the Treasury (Acting)
Mr Anthony Watson-Brown
Senior Assistant Law Draftsman
Mr Michael CHIK
Assistant Commissioner of Customs and Excise
Mrs Virginia SZETO
Superintendent, Customs and Excise Department

Staff In Attendance:

Miss Kitty CHENG
Assistant Legal Adviser 2
Ms Estella CHAN
Chief Assistant Secretary (1)4
>Miss Anita SIT
Senior Assistant Secretary (1)6

Election of Chairman

Hon Ronald ARCULLI was elected Chairman of the Bills Committee.

Meeting with the Administration

2. At the invitation of the Chairman, Mr M J T Rowse briefed members on the objectives and the themes of the Dutiable Commodities (Amendment) Bill 1996 (the Bill) as set out in the relevant Legislative Council Brief. Members proceeded to examine the Bill clause by clause.

Clause 3. Application

3. In reply to members, Mr Michael CHIK advised that the definition of "marked oil" was set out in the Dutiable Commodities Ordinance.

Clause 5. Drawback

4. Regarding the proposal to repeal the Section on drawback, Mr CHIK explained that before 1989, duty had been collected on raw materials for the manufacture of dutiable goods. In the case of local manufactured beer, duty was collected at the wort stage before fermentated as beer. In the case of locally manufactured cigarettes, before 1987 duty was collected on tobacco leaves before they were manufactured into cigarettes. The manufactured goods became non-dutiable when they were exported and the Government would refund the duty paid in respect of these goods. This kind of refund was referred to as drawback. After the respective years, duty was collected only after the manufacturing process and no duty would be collected if the manufactured goods were to be exported. Hence, the Section on drawback had become obsolete. He also advised that export of duty-paid goods could be refunded if they were duly exported according to the refund provisions, but this type of refund was not regarded as drawback.

Clause 6. Regulations

5. In response to an enquiry about the control over the movement of dutiable goods to and from different types of warehouses, Mr CHIK explained as follows:

(a) General bonded warehouses were confined to those warehouses which were located at the entry points of the territory such as at the airport, the Kowloon Station of the Kowloon Canton Railway and the Container Terminal. As these warehouses were well-established and the Administration was confident about the integrity of the management of these warehouses, permits were not required for the transfer of goods from incoming carriers to these warehouses. However, a permit would be required for the transfer of goods from these warehouses to other warehouses or to the market;

(b) A public bonded warehouse was a term introduced in this Bill. Public bonded warehouses were general bonded warehouses not situated at the entry points of the territory, therefore permits were required for the transfer of goods from incoming carriers to these warehouses and for the removal of goods from these warehouses to other warehouses or to the market; and

(c) Licensed warehouses were hydrocarbon oil installations which were big establishments in Hong Kong. It had been an established practice that licensees of these warehouses could issue a voucher or a pass to their employees to remove hydrocarbon oil from the warehouses without having to apply for a permit for each movement. The Commissioner of Customs and Excise monitored the movement of hydrocarbon oil by verifying the returns made by the hydrocarbon oil companies on the quantities released or exported. Under this practice, the voucher or pass issued to an employee by these establishments could effectively serve as a permit. The amendment to Sections 6(1) by adding a new paragraph (aa) to it was to provide the legal basis for this established practice by spelling out explicitly that the Commissioner was empowered to authorise licensees to issue such permits.

Clause 7. Board may determine fees, etc.

6.Members were concerned that if the power of determining the conditions to be attached to liquor licences was transferred from the Governor in Council to the Municipal Councils, the Councils might have different policies in respect of liquor licensing and thus might come up with two different sets of conditions to be applied to the liquor licences under their respective purview. The Administration undertook to further examine the implications of having two authorities to determine the licence conditions, and the limits to the power specified in the existing provisions of the Ordinance, if any.


7. A member informed the meeting that the Liquor Licensing Board of the Urban Council used to determine the conditions to be attached to the liquor licences issued by the Council. In a recent court case, the court ruled that the Council was not empowered to determine the conditions under the existing legislation. The Administration undertook to obtain the details of the court case for Members' reference.


(Post-meeting note: Details of the court decision in this case provided by the Administration were circulated to members vide LegCo Paper No. CB(1) 1333/95-96 dated 1 May 1996)

Clause 9. Seizure of things used for commission of offences

Clause 11. Goods embarked for export not to be relanded

8. In reply to members, Mr CHIK explained that under the present provisions, the power of seizure of vehicles used for the commission of an offence did not apply to those of "public transport" and taxis were defined as a kind of "public transport". The Customs and Excise Department (C&ED) therefore could not seize a taxi for investigation even if the taxi was found to be carrying a large quantity of dutiable goods. He added that in the actual enforcement, the Department seldom seized any vehicle unless a vehicle was found to have a false compartment or a false tank for concealing dutiable goods/oil.

9. Members pointed out that many taxis were not owner-driven but were mostly on hire purchase financed by financial institutions. If taxis were liable to be detained and subsequently forfeited in the enforcement of the proposed provisions, the owners or the institutions that financed the taxis would be exposed to a much greater risk of financial loss, even though they might not be involved in any illicit traffic of dutiable goods using taxis. The Administration agreed to examine the impact of taking out taxis from the exempted category of "public transport" on concerned but innocent parties in this regard.


10. At member's request, the Administration agreed to provide information on how the existing provisions under Section 15 had been applied and enforced, and in particular the following details:

(a) statistics on past cases concerned with smuggling of dutiable goods using vehicles with a breakdown based on the type of vehicles involved. In respect of cases involving taxis, there should be information on the respective proportions of taxis that were owner-driven, rentee-driven and taxis on hire purchase; and

(b) the types and number of ships that had been seized.


Clause 10. Restrictions on dealing with and possession of certain goods

11. Members noted that the phrase ‘all such diligence' was used in the proposed subsection 17(11), while ‘due diligence' was used in the existing subsection 23(2). They also enquired if there was any difference between "due diligence" and "reasonable steps", the latter being a term often used in other ordinances. The Administration would consider the suggestion to change "due diligence" to "reasonable steps" and also look into changing the phrase with a view to maintaining consistency within the Ordinance.


Clause 12. Removal of goods from ships, vehicles or aircraft

12. Members noted that the phrase " in the absence of evidence" should read "in the absence of evidence to the contrary" in the amendment to Section 23(2).


13. Members noted that the proposed addition of Sections 23(4) and 23(5) was intended to introduce control over the movement of dutiable goods in a vehicle not covered by a permit. They enquired about the reason for not applying the proposed provisions to ships and aircraft but only to vehicles. Mr CHIK explained that dutiable goods carried by ships and aircraft would be transferred to the general bonded warehouses upon arrival. No permit was required for this movement as explained previously in this meeting. As for vehicles carrying dutiable goods coming into Hong Kong by road, a permit was required for the transfer of dutiable goods from the vehicles to warehouses. Because of the increasing road traffic across the border, C&ED found it increasingly difficult to exercise control over the vehicles scattered about the land border points awaiting the issue of permits. To resolve the problem, Sections 23(4) and 23(5) were introduced to empower the Commissioner to direct these vehicles to transfer dutiable goods to a warehouse or a Customs and Excise warehouse for easier control.

14. Members noted that trains were not a type of carrier included in Section 23(3) which stated that -

"In the absence of evidence to the contrary, goods thrown overboard from any ship, vehicle, or aircraft shall be deemed to have been unlawfully removed therefrom in contravention of this section."

Members pointed out that someone on board of a train could also throw dutiable goods off the train to other persons. The Administration undertook to check if there was another existing provision covering this act.


Clause 14. Value of goods and assessment of ad valorem duty

15. In response to members' enquiry, Mr CHIK explained that the duty for cigarettes was assessed on the basis of quantity, while the duty for dutiable liquors was assessed on the basis of the value of the goods. A list setting out the open market values of all dutiable liquors, not cigarettes, was maintained by C&ED for this purpose.

Clause 19. Section added - 34A. Declaration by persons entering Hong Kong

16. Members observed that there was a lack of conspicuous signs at the entry points to Hong Kong to inform arriving passengers what the dutiable goods were. They also opined that with Section 34(A) introduced, people coming into Hong Kong, be they tourists or residents, should be given notice of what goods were dutiable before their arrival. For example, information leaflets on dutiable goods could be distributed to passengers of incoming carriers. The Administration agreed to make improvements in these aspects.


Clause 21. Section added - 38A. Duty exempt goods dutiable in certain cases

17. Members queried the interpretation and application of the term "possesses for sale". It seemed difficult to ascertain whether a person in possession of dutiable goods, which were exempt from duty, had the intention to sell the goods, if the person did not himself sell, expose for sale or offer for sale such goods. The Administration agreed to provide further explanation in this regard.


Clause 22. Sections substituted - 40. Presumptions

41. Import manifests to be evidence of import

18. Members noted that the proposed amendments to the provisions in respect of presumptions were intended to make the provisions fairer and to make them compatible with the human rights legislation. It however appeared that the onus was on the person being charged for possession of dutiable goods to provide evidence to prove the contrary. They were concerned that the provisions might in effect make it more onerous for the person being charged.

19. Members also observed that the quantities (500 or more cigarettes and 5 litres or more of liquor) specified under the proposed Sections 40(a) and 40(b) were much higher than those for which duty was normally exempted. They queried if the proposed provisions would carry the implication that if a person was in possession of an amount of dutiable goods less than the quantities specified, the goods were deemed to be exempt from duty.

20. Mr CHIK explained that under the existing provisions, any person in possession of goods to which the Ordinance applied was presumed to have in possession of dutiable goods, irrespective of the quantity. Under the proposed provisions, the presumptions had effectively been relaxed particularly in the case of possession of cigarettes or liquor as the amount for which the goods were presumed to be dutiable was rather generous. In the case of hydrocarbon oil, C & ED had found it difficult to prove that the oil was dutiable particularly where trucks crossing the land border with their tanks filled with oil transferred the oil to other vehicles. The proposed presumptions in this respect would provide a practical tool for determining if the oil was dutiable.

21. In explaining the technical aspects of the proposed provisions, Mr Anthony Watson-Brown said that if an innocent person was charged under the proposed presumptive provisions, the person could produce evidence to indicate that the circumstances were not as alleged. The onus of proof was on the Government to produce rebutting evidence to establish beyond reasonable doubt that the circumstances were as alleged. People who had actually committed an offence would have difficulty in producing evidence which would prove otherwise. In that case, the Government could discharge its burden of proof by relying on the presumptions. Under the existing provisions, the onus was on the person to repudiate the presumptions on the balance of probabilities.

22. After discussion, members were concerned that the innocent might not be adequately protected in the course of enforcement of these provisions. At members' request, the Administration agreed to provide more detailed explanations for the proposed amendments to the presumptive provisions, taking into account the concerns expressed by members.


23. Members agreed that the Committee would continue to examine the Bill from Clause 22 onward at the next meeting.

Any Other Business

24. Dr Hon HUANG Chen-ya indicated that he would withdraw his membership from this Committee after this meeting but would like to be kept informed of the progress of the Committee's deliberations by receiving the relevant papers.

25. Members agreed that the next two meetings of the Committee would be held on 1 May 1996 and 22 May 1996, both at 8:30 am.

26. (Post-meeting note: The meeting on 1 May 1996 was cancelled owing to the absence of a quorum. Members were informed that the next meeting would be held on 22 May 1996 at 8:30 am vide LegCo Paper No. CB(1) 1329/95-96 dated 1 May 1996)

The meeting ended at 10:30 am.

LegCo Secretariat
21 May 1996

Last Updated on 10 December 1998