HONG KONG 2005

The Customs and Excise Department is primarily responsible for the collection of revenue on dutiable goods and the prevention of its evasion, the suppression of narcotics trafficking and abuse of narcotic drugs, the prevention and detection of smuggling, and the protection of intellectual property rights. It has an establishment of 4 939 staff. The department also enforces legislation to protect consumer interests, safeguard and facilitate legitimate trade and industry, uphold Hong Kong's trading integrity and fulfil relevant international obligations (See also Chapter 5).

The department is responsible for the collection of excise duties derived from dutiable commodities stipulated in the Dutiable Commodities Ordinance. These are liquor, tobacco, hydrocarbon oil and methyl alcohol. During the year, the excise duties collected amounted to $6.62 billion, of which 50.8 per cent came from hydrocarbon oil, 36 per cent from tobacco, 13.1 per cent from liquor and 0.1 per cent from methyl alcohol, representing an increase of 1.2 per cent over 2004.

The department also assesses the taxable values of motor vehicles under the Motor Vehicles (First Registration Tax) Ordinance for the purpose of levying first registration tax. In 2005, the department registered 95 motor traders and assessed the provisional taxable value on 44 956 vehicles.

Dutiable commodities in Hong Kong are stored in warehouses licensed by the department (bonded warehouses) after import or local manufacture. Removal of dutiable commodities is subject to a permit being issued by the department and the commodities can only be released for local consumption upon payment of duty.

A new mode of customs clearance service for passengers, the Red and Green Channel System was implemented on November 1 at all air, land and sea entry points. The introduction of the system enabled the department to enhance revenue protection on dutiable goods.

During the year, the department detected a total of 4 233 cases of abuse of the duty-free concessions, involving a total of 2.22 million cigarettes. The number of cases detected and the cigarettes involved represents an increase of 40 per cent and 0.2 per cent respectively when compared with 2004.

The department maintained its vigorous enforcement action against illicit cigarettes activities. In 2005, 5 895 offenders were arrested and 100.6 million sticks of illicit cigarettes were seized, an increase of 9 per cent and a decrease of 40 per cent respectively over 2004.

At the same time, Hong Kong Customs continued its efforts to stamp out the transnational cigarette smuggling in concert with overseas customs administrations. Timely and proactive exchange of intelligence to monitor suspicious cigarette shipments resulted in significant seizures of illicit cigarettes in the Asia-Pacific region and in Europe.

Illicit fuel including marked oil (commonly known as 'red oil'), detreated oil and illicit motor spirit was still being used illegally as fuel for vehicles in 2005. To tackle the problem, Hong Kong Customs sustained its blitz operations to eliminate filling stations, marked oil detreating plants and storage for such fuel. Simultaneously, surprise fuel-tank checks were also conducted to detect and deter the use of illicit fuel by road vehicles. Enforcement actions were mounted at sea and land boundaries from time to time to prevent the smuggling of illicit fuel.

The number of black spots for illicit fuel activities was contained at around 27 as a result of the department's vigorous enforcement action. The department closed 1 085 illicit oil filling stations, 22 marked oil detreating plants and one synthetic petrol plant. A total of 950 people were arrested. Altogether, 1.17 million litres of various types of illicit fuel, valued at $11.61 million, were seized, a decrease of 31 per cent and 13 per cent respectively compared with 2004. The decline in the quantities of illicit fuel seized was attributed to the department's effectiveness in combating illicit fuel activities.

The department continued to take vigorous enforcement action to prevent and suppress the unlawful manufacture, distribution and trafficking of dangerous drugs; trace, confiscate and recover proceeds from illegal drug activities; and prevent the diversion of chemicals for illicit manufacture of dangerous drugs and psychotropic substances.

The Customs Drug Investigation Bureau is a dedicated team of the department which combats drug trafficking activities. It exchanges intelligence and cooperates closely with the Hong Kong Police and various relevant law enforcement agencies in other jurisdictions in the fight against drug traffickers both locally and at the international level.

In 2005, the department dealt with 103 drug trafficking cases, neutralised four drug attenuating and manufacturing centres and 13 drug distribution centres. It seized 16.3 kilograms of heroin, 242.1 kilograms of ketamine, 102.4 kilograms of cannabis, 4.2 kilograms of cocaine, 19 kilograms of methamphetamine, 1 808 tablets of MDMA ('ecstasy') and 27 718 tablets of other psychotropic drugs. A total of 624 people were arrested for drug-related offences. Through cooperation with Mainland and overseas law enforcement agencies, a total of 220.4 kilograms and 3.6 litres of various drugs were seized and 47 people arrested.

There were 14.88 million vehicular traffic movements through the three land boundary control points at Lok Ma Chau, Man Kam To and Sha Tau Kok in 2005, an increase of 2.8 per cent over the previous year.

Four kiosks for processing southbound private cars were set up at the Lok Ma Chau Control Point in September in addition to the four for northbound traffic which were introduced in 2004. The additional kiosks have reduced the processing time of private cars by providing a one-stop service for immigration and customs clearance.

In March, the department installed LED display boards at customs kiosks at the Lok Ma Chau, Man Kam To and Sha Tau Kok control points to give truck drivers visual rather than verbal instructions about inspections. As a result, the average clearance time for each vehicle has been reduced by about one to three seconds.

The Red and Green Channel System for passenger clearance at all air, land and sea entry points opened on November 1. The department's new system facilitates passenger clearance, enhances revenue protection of dutiable goods and aligns Hong Kong with international customs practice. Under this mode of customs clearance, incoming passengers are required to make their customs declaration by choosing to pass through either the Red Channel or Green Channel. Passengers use the Green Channel unless they have any dutiable goods or prohibited/controlled items in which case they go through the Red Channel.

The completion of boundary control point improvements during the year helped accelerate the flow of passengers and vehicles. The new cross-boundary bridges at Lok Ma Chau, Sha Tau Kok and Man Kam To control points opened in early 2005, improving cross-boundary vehicle flow at the three control points. The improvement works for Lo Wu Footbridge were also completed in January and have improved passenger flow.

There were also improvements for ferry passengers during the year. In February, China Ferry Terminal extended its opening hours during weekends and public holidays — 7am to 2am instead of 7am to 10pm.

Smuggling between Hong Kong and the Mainland remained a cause for concern. Price differences between the two places and import controls on certain items in the Mainland were the main factors underlying the problem. In 2005, the department detected 289 Hong Kong/Mainland smuggling offences, arrested 339 people and seized contraband worth $271.8 million.

Goods commonly smuggled to the Mainland included computer parts, electrical and electronic appliances, vehicles and vehicle parts, mobile phones and accessories, and silver slabs. Increasing demand caused an upsurge in the smuggling of Chinese tonics such as American ginseng and precious metals (for example, silver and nickel) to the Mainland. However, the smuggling of marked oil to the Mainland subsided during the year following the administrative control measures taken by the department to ensure that the fuel was supplied for genuine marine use.

The items most commonly smuggled into Hong Kong from the Mainland during the year were cigarettes, motor spirit, meat and poultry. Smugglers usually made false declarations on manifests and made use of concealed compartments or contraband mix-loaded with cargoes to avoid customs inspection. The Streptococcus suis and avian flu cases on the Mainland reduced local demand for illicit meat and poultry thus causing a drop in such smuggling.

Customs officers at the boundary control points, seaport and airport are equipped with 3-in-1 handheld detectors which have strengthened their capacity for detecting smuggled narcotics/explosive/chemical warfare agents. The department continued to liaise closely with the Hong Kong Police, and other local and overseas law enforcement agencies, in a concerted effort to combat smuggling. Enhanced cooperation with the Mainland authorities — including exchanging information and mounting parallel operations at boundary control points on land and at sea — continued to produce satisfactory results.

The department constantly reviews its performance pledges and ensures they are fulfilled through the delivery of quality services and it regularly reviews the standard of its services in consultation with four customer liaison groups on air freight, sea freight, cross-boundary transport and the dutiable commodities trade thus ensuring public accountability.

The Integrity Steering Committee, led by the Deputy Commissioner, launched a series of publicity and educational campaigns on staff integrity and healthy lifestyle in 2005 with the aim of underpinning the strong culture of professional ethics and probity among staff members.

During the year, the committee produced an inspiring VCD, Staff Integrity: Professional Commitment to instill a culture of maintaining staff integrity in the profession; updated the 'Code on Conduct and Discipline' for staff members; issued a booklet, Conduct and Discipline, to over 2 200 staff encouraging them to uphold the principles of integrity, honesty and a healthy lifestyle; and published the quarterly newsletter The Pine for staff members to share their personal experience in developing a healthy lifestyle. The committee also organised a departmental seminar-cum-gala day in May to promote a high degree of integrity, healthy living and happy family life. More than 1 700 staff participated in the event.