LegCo Paper No. CB(1)1682/96-97
(These minutes have been
seen by the Administration)
Ref: CB1/PL/TI/1

LegCo Panel on Trade and Industry

Minutes of meeting held on Tuesday, 15 April 1997, at 8:30 am in Conference Room B of the Legislative Council Building

Members present :

    Hon NGAI Shiu-kit, OBE, JP (Chairman)
    Hon SIN Chung-kai (Deputy Chairman)
    Hon Mrs Selina CHOW, OBE, JP
    Hon CHAN Kam-lam
    Hon CHAN Yuen-han
    Hon Paul CHENG Ming-fun
    Hon Ambrose LAU Hon-chuen, JP
    Dr Hon LAW Cheung-kwok

Members attending :

    Hon Fred LI Wah-ming
    Hon Howard YOUNG, JP

Members absent :

    Dr Hon HUANG Chen-ya, MBE
    Dr Hon Philip WONG Yu-hong
    Hon James TIEN Pei-chun, OBE, JP
    Hon Martin LEE, QC,
    Hon Henry TANG Ying-yen, JP

Public officers attending :

    Item IV

    Mr Stanley YING
    Deputy Director-General of Trade

    Items IV and VI

    Mr TAM Wing-pong, JP
    Deputy Secretary for Trade and Industry

    Mr Raymond LI
    Acting Commissioner of Customs and Excise

    Item V

    Mr Augustine CHENG
    Deputy Secretary for Trade and Industry

    Mr Paul HUI
    Registrar of Travel Agents

    Item VI

    Mr John CHAN
    Head of Trade Controls
    Customs and Excise Department

    Item VII

    Mr M J T Rowse, JP
    Business and Services Promotion Unit

    Mr Michael WONG
    Assistant Director
    Business and Services Promotion Unit

    Mrs Brenda YIP
    Principal Management Services Officer
    Business and Services Promotion Unit

Clerk in attendance:

    Miss Odelia LEUNG,
    Chief Assistant Secretary (1)1

Staff in attendance :

    Mr Kenneth KWOK,
    Senior Assistant Secretary (1)2

I.Confirmation of minutes of meeting

(LegCo Paper No. CB(1)1267/96-97)

The minutes of the meeting held on 4 March 1997 were confirmed.

II.Date of next meeting and items for discussion

(List of outstanding items for discussion (1996-97) tabled)

2.Members agreed to defer the next regular meeting of the Panel from 13 May to 19 May 1997 at 2:30 pm to discuss the following items -

  1. Update on renewal by the US of China’s Most Favoured Nation Status; and
  2. Prepayment of goods and services.

III.Information papers issued since last meeting

3.Members noted the following papers issued since the last Panel meeting on 4 March 1997 -

  1. Paper No. CB(1)996/96-97 - information paper from the Administration on the legal possibility of using copyright as depicted on labels of consumer articles to prevent parallel importation; and
  2. Paper No. CB(1)1004/96-97 - the Chinese version of the Administration’s information paper on the proposed expansion of Government’s electronic data interchange system.

IV .US import measures on textile and clothing products

(LegCo Paper No. CB(1)1231/96-97(01))

4.Deputy Secretary for Trade and Industry (DSTI) briefed members on the joint factory visits. In gist, on 14 January 1997, Customs officers of the US and Hong Kong jointly visited 56 factories engaged in the production of the ten categories of textile and clothing products subject to additional US import measures and the four categories put on the US "watchlist". The US government was satisfied with the inspection results and would lift most of the additional measures. DSTI added that the Administration was examining whether the import requirements for documentation and the continuous term bond sufficiency which were to be introduced were discriminatory measures against at Hong Kong products. Should this be the case, Hong Kong Government would make further representation to the US Government to have such measures removed. He emphasised that notwithstanding the positive outcome of the joint factory visits, the Administration would continue to step up enforcement action against illegal transhipment activities.

5.In response to a member’s enquiry, Acting Commissioner of Customs and Excise (C of CE (Atg)) said that during the joint visits to 56 factories, 17 were suspected to have violated regulations against illegal transhipment. The Administration had collected sufficient evidence to prosecute these factories pending completion of the investigations.

Admin. 6.On members’ concern about the position of these factories in the whole industry as far as output was concerned, Deputy Director-General of Trade (DDG of T) said that there were about 3,000 registered factories in the field. Given that textile and clothing products were classified into tens of categories and that the output of a factory varied throughout a year, it would be difficult to give a meaningful comparison unless very specific criteria in terms of product, volume and time period were provided. The most important thing was that the Administration had established an effective mechanism to curb illegal transhipment and was dedicated to this task. DSTI added that the US would not be lifting most of the import measures if the output of these factories was significant. In view of members’ concern, the Administration agreed to provide as far as possible statistical information in this area for members’ consideration.

7.As regards the effects of US measures on employment opportunities in Hong Kong, DDG of T responded that it was difficult to apportion such effects since the employment situation was affected by a variety of factors. The Administration could only provide general statistics on the employment situation. The US import measures were imposed in June 1996. At the end of the third quarter of 1996, the working population in the textile and clothing sector dropped by 17.5% over the same period in 1995. The figure in 1995 as compared with that in 1994 also showed a drop of 19.07% before the US import measures came into play. In fact, the export volume of some of the products within the ten categories increased rather than decreased after the imposition of the US import measures, whereas a reduction was seen in the export volume of products outside the ten categories. Therefore, it was difficult to quantify the effects of the import measures.

8.Regarding the reasons for the constant total export volume of the textile and clothing products despite a continuous drop in the workforce in that sector, DSTI responded that the main reason was the increase in productivity of the workforce.

9.On the possibility of abolition by the US government of all import measures on Hong Kong products, DSTI replied that this would only come about when the quota system was eliminated altogether in 2006. As a matter of fact, not all the US import measures were targetted solely at Hong Kong; and many were also applied to other exporting countries. The Administration would continue to ensure that the quota system would not be abused and that any US import measures would not discriminate against Hong Kong. The Customs & Excise Department (C&ED) would continue to conduct factory inspections to combat illegal transhipment activities in a way that would not cause undue disruption to normal production activities.

10.In response to a member, the Administration confirmed that after 1 July 1997, Hong Kong would remain an independent member of the World Trade Organization (WTO) and could resort to WTO for settling unresolved trade disputes.

V.Regulatory mechanism on outbound travel industry

Travel Industry Compensation Fund

(LegCo Paper No. CB(1)1231/96-97(02))

11.Members noted that travel agents were at present required to contribute 0.35% of the outbound package tour fare to the Trade Industry Compensation Fund (TICF) as Fund levy and 0.15% to the Travel Industry Council (TIC) as Council levy. The Administration suggested to reduce the Fund levy by 0.2% while keeping the rate of the Council levy unchanged.

12.Members were concerned about measures for passing the benefits of the reduction in levy rate onto consumers. DSTI replied that as the reduction was only 0.2% which was a very small amount in real term, it might not be reflected in the package tour fare. However, a large travel agent could save cumulatively over one million dollars per year which could then be used to improve services. TIC was currently examining ways for transferring any benefit brought about by the reduction to consumers. A member opined that given the keen competition in the travel industry, travel agents would be prepared to use any savings to improve services to attract customers.

13.In response to a member, DSTI confirmed that the TICF Management Board could raise loans in the event of insufficient fund for paying out ex gratia payment upon the default of a major travel agent during peak business periods such as the Lunar New Year. He added that there was no ceiling on the amount of loans. The Board could also consider other measures such as releasing ex gratia payment by phases.

14.On common causes for default of travel agents, the Registrar of Travel Agents (RTA) responded that the Administration had not conducted any systematic study on the issue. Past incidents were isolated cases. Default of travel agents was attributed to various reasons, for example, poor management, keen competition, and unscrupulous practices. There was no conclusive evidence to suggest a common cause for default. DSTI added that with the implementation of the licensing system, a stringent regulatory mechanism had already been put in place. There were many non-renewal cases each year but most of these were voluntary. In the recent Observers Travel incident, no element of deception was found.

15.Regarding the amount recovered from the liquidation of the Observers Travel Enterprise Co. Ltd., DSTI indicated that the proceedings had not been completed and it was not possible at the present stage to give a confirmed figure.

16.In conclusion, DSTI said that subject to the support of the Panel and the approval of the Financial Secretary (FS), the proposed reduction would take effect by the end of April 1997.

Definition of "carrying on business as a travel agent" under the Travel Agents Ordinance

(LegCo Paper No. CB(1)1231/96-97(03) & (04))

17. Members noted that Kwun Tong District Board (DB) members had raised concerns about the definition of "carrying on business as a travel agent" under the Travel Agents Ordinance (TAO), Cap. 218, and requested clarification on whether it constituted a contravention of the TAO on the part of DB members’ office or other non-profit-making organizations in organizing outbound tours through licensed travel agents. DSTI clarified that whether a person was considered carrying on business as a travel agent would be determined objectively based on the totality of facts including the frequency of activities and the motive, in particular whether such activities were conducted for commercial purposes. If there was an agreement between the DB member’s office and the travel agent such that commission would be payable to the former, it would likely constitute an offence under the TAO. In the Administration’s view, to avoid any uncertainty as to the commission of an offence under the TAO, it was advisable to pay tour fares direct to the travel agent which would immediately issue a franked receipt. This would also offer the maximum protection to consumers in case of default of a travel agent.

18.DSTI added that where a suspected infringement occurred, RTA would issue a warning letter to the organization concerned to discourage it from organizing a similar activity again. However, should the organization ignore the warning and continue to organize similar activities, RTA would consult the Attorney General on whether prosecution should be taken.

19.In response to a member’s enquiry as to whether a one-day visit to Shenzhen would be considered an outbound tour after 1 July 1997, DSTI clarified that a tour to any place outside Hong Kong would be regarded as an outbound tour.

Admin. 20.A member enquired whether it would be in order for a DB member’s office to act as a middleman between residents and a licensed travel agent such that neither collection of tour fares nor receipt of commission were involved. DSTI said that prima facie, this should not contravene the TAO. He would consult the Attorney General’s Chambers on the matter and provide a written response. The member was of the view that to put the matter beyond doubt, the Administration should consider amending the law or issuing guidelines to clarify the position.

VI.Weapons of Mass Destruction (Control of Provision of Services) Bill

(LegCo Paper No. CB(1)1231/96-97(05))

21.At the Chairman’s invitation, DSTI briefed members on the Bill. In gist, the purpose of the Bill was to prohibit the provision of services that would or might assist the development, production, acquisition or stockpiling of weapons of mass destruction, or the means designed for the delivery of such weapons, irrespective of whether or not the development, production, etc. was carried out in Hong Kong. The Bill was necessary as it would demonstrate to Hong Kong’s major trading partners the territory’s determination to follow the highest standard of control on strategic commodities accepted by the international community. The ultimate purpose was to enable Hong Kong to continue having access to high technology goods for legitimate industrial, commercial and research uses.

22.On members’ further questions about the reasons for introducing the Bill, DSTI clarified that this was not introduced as a result of any particular cases of illegal importation of missiles to Hong Kong or for the fact that the United Kingdom was a signatory to certain international conventions or treaties. In fact, the Hong Kong Government had decided to introduce the Bill some time ago but the drafting had taken up a lot of time. In drafting the Bill, the Administration had made reference to similar legislation in the United States, Australia, Germany and Canada.

23.In response to a member, DSTI said that provisions of the Bill would not touch on matters of national security. On the definition of weapons of mass destruction, DSTI replied that it was based mainly on the lists of prohibited items specified in relevant international agreements.

24.A member pointed out that under clause 4(1)(b) of the Bill, a person who believed or suspected on reasonable grounds that the services he provided might assist the development, production, acquisition or stockpiling of weapons of mass destruction would commit an offence. He considered this provision over-stringent. Another member was concerned that a shipping company might not necessarily know the nature of goods under shipment. There was also the possibility that a consignor deliberately provided false information about the shipment. Under these circumstances, it would be unfair to hold the shipping company liable. DSTI and C of CE (Atg) said that similar provision would be found in other legislation e.g. the Dangerous Drugs Ordinance, Cap. 134. Whilst C&ED would be responsible for collecting evidence, it would rest with the court to decide on each case whether a person was guilty of an offence. Where there was no prima facie evidence to show that a person had knowledge of the goods under shipment, it was most unlikely that the Administration would take prosecution action.

25.In response to members, DSTI further clarified that it was lawful to engage in transaction of strategic commodities provided that the relevant licences were obtained. The Bill only aimed at controlling any activities taking place in Hong Kong involving trading of certain specified types of weapons which were strictly forbidden.

VII .Business and service promotion

(LegCo Paper No. CB(1)1231/96-97(06))

26.A member queried the reasons for not modelling on Singapore in setting up an economic development board to oversee the whole economy. Director, Business and Service Promotion Unit (D/BSPU) explained that Singapore and Hong Kong upheld different philosophies in running their economies; Singapore had a command economy and the government played a steering role in economic development, whereas the Hong Kong Government only played a facilitating role. If a board or committee was set up to oversee every aspect of the economy, it would be very demanding on board members in terms of both time and expertise.

27.On overlap of functions among groups and committees set up with the same objectives to promote businesses and services, D/BSPU said that there were not too many such bodies and their respective functions were different. Inevitably there might be overlap to a limited extent but this could be tackled through cross-membership to enable different bodies to be kept informed of the work of each other. For example, Dr Victor FUNG was a member of both the Services Promotion Strategy Group and a similar committee of the Trade Development Council (TDC).

28.Regarding the possibility of TDC taking over all the responsibilities for promoting businesses and services, D/BSPU responded that TDC’s traditional role was to promote trade in manufactured goods. Though its role was recently expanded to include trade in services, this was only one facet of business and service promotion. The focus of BSPU would be broader and BSPU would endeavour to ensure that all services in Hong Kong were geared up for the international economy.

Admin. 29.Members sought clarification on the differences in duties among BSPU, a similar Task Force under the FS and an Ad Hoc Group under the Trade and Industry Branch (TIB). D/BSPU explained that BSPU would consolidate and take over the jobs of the latter two groups which had been dissolved. On the work of BSPU in the coming year, D/BSPU said that on the helping business stream of work, BSPU would work with relevant branches to implement the recommendations in the pilot studies under the Helping Business Programme. This would be a numerical way of measuring the achievements of BSPU. As regards the promotion of services stream of work, while the Task Force under the FS did set an action agenda, the actions to be taken straddled across various branches and did not fall within the sole purview of BSPU. It would therefore be difficult at this stage to give a definite work programme. The Administration would report BSPU’s work to members in about a year’s time.

30.Referring to paragraph 8 of the information paper, a member asked for the reasons for inadequacy of TIB in coordinating services promotion efforts. D/BSPU clarified that given the diversity of services and the number of cross-services issues, it was impractical to entrust services promotion to just one branch. The Administration therefore concluded that a dedicated unit was required for effective coordination.

31.In response to the Chairman’s enquiry about priority in promoting a particular service sector in 1997/98, D/BSPU replied that the Administration did not have any priority area in mind and would decide on the matter after consultation with the business community.

32.The meeting ended at 10:30 am.

Legislative Council Secretariat

23 May 1997

Last Updated on 21 August 1998