The Customs and Excise Department is primarily responsible for the collection of revenue and the prevention of revenue evasion concerning dutiable goods, 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 5 169.

The department also enforces legislation to protect consumer interests, safeguard and facilitate legitimate trade and industry, uphold Hong Kong's trading integrity and fulfil international obligations (see also Chapter 6).

The department is responsible for the collection of excise duties derived from the dutiable commodities stipulated in the Dutiable Commodities Ordinance. These are alcoholic beverages, tobacco, hydrocarbon oil and other alcohol products (i.e. methyl alcohol and ethyl alcohol). During the year, the excise duties collected amounted to $7.34 billion, of which 56.9 per cent came from hydrocarbon oil, 33.3 per cent from tobacco, 9.7 per cent from alcoholic beverages and 0.04 per cent from other alcohol products, representing a decrease of 1 per cent over 1999.

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 2000, the department registered a total of 135 motor traders and assessed the provisional taxable value of 56 776 vehicles.

The department continued its vigorous enforcement action against cigarette smuggling in 2000. Contraband cigarettes are commonly smuggled into Hong Kong from the Mainland by cross-boundary goods vehicles or river trading vessels. During the year, about 134.4 million contraband cigarettes were seized, a decrease of 43.8 per cent compared with 1999.

With stepped-up enforcement action and enhanced intelligence exchange and co-operation with Guangdong Customs, the smuggling of petrol from the Mainland to Hong Kong was brought under control. However, marked oil (commonly known as 'red oil'), detreated marked oil and synthetic petrol continued to be misused as fuel for vehicles. To tackle the problem of illicit fuel, apart from action taken at sea and land boundaries, operations were mounted to wipe out illegal filling stations, illicit oil detreating plants and synthetic petrol manufactories, and to stop the use of illicit fuel in road vehicles.

Legislative amendments to the Dutiable Commodities Ordinance were passed in June to facilitate prosecution of offenders and to introduce a new driving disqualification order for those persons convicted more than once for illicit fuel offences involving the use of vehicles. The maximum fine for illegal dealing in marked oil or detreated marked oil was also increased, from $200,000 to $1 million. As a result of the vigorous enforcement action taken and the enhanced deterrent effect on offenders, the department had reduced the number of illicit filling stations from an estimated 110 in 1999 to around 50 in 2000.

The use of rapeseed oil as fuel for vehicles emerged in September. However, most of the oil sold in illegal retail outlets was vegetable oil mixed with kerosene or diesel, which could cause irreparable mechanical problems in diesel engines. The problem was contained following immediate enforcement action taken by the department.

In 2000, the department neutralised 38 illicit oil detreating plants, eight synthetic petrol manufactories and 578 illicit filling stations. Altogether, 4.53 million litres of various types of illicit fuel were seized in 1 443 cases. The duty potential of the seized illicit fuel amounted to $9.81 million.

The department continued to take vigorous enforcement action to prevent and suppress the unlawful manufacture and distribution of dangerous drugs as well as trafficking in them. It also enforced the Control of Chemicals Ordinance, which aims at preventing the diversion of chemicals for illicit manufacture of dangerous drugs and psychotropic substances.

The Customs Drug Investigation Bureau is the department's major investigative arm in combating narcotics. Its main functions are to conduct investigations and surveillance to combat illegal manufacture, trafficking or use of drugs. The department works closely with the Police Force and also various drug enforcement agencies in the Mainland and overseas in the exchange of intelligence and arrest of drug criminals.

In 2000, the department dealt with 71 major drug trafficking cases, as well as neutralising four heroin attenuating and 21 distribution centres. Officers seized 45.8 kilograms of heroin, 61.4 kilograms of cannabis, 5.5 kilograms of cocaine, 55.8 kilograms of methylamphetamine ('ice'), 91 178 tablets of MDMA ('ecstasy') and 134 921 tablets of other psychotropic drugs. A total of 815 persons were arrested for drug-related offences.

During the year, the department confiscated assets worth $548,000 derived from drug trafficking and shared in drug trafficking proceeds of $7 million confiscated by a foreign government. Drug-related assets worth $850,000 were restrained pending confiscation. The department conducted 2 040 investigations into money laundering. One person was convicted and sentenced to seven years' imprisonment for such an offence.

In 2000, vehicular traffic movements through the three control points at Lok Ma Chau, Man Kam To and Sha Tau Kok increased by 8.5 per cent to 11 207 031 when compared with 1999.

To further enhance the Customs' capabilities in processing the ever-increasing numbers of cross-boundary passengers and vehicles and to alleviate traffic congestion at the Control Point, the Lok Ma Chau Control Point Expansion Project Phase II has commenced, and is scheduled for completion in 2003. The Phase II project covers expansion of the passenger terminal and cargo facilities, and installation of fixed X-ray vehicle inspection systems.

To facilitate Hong Kong's development as an international and regional air cargo hub, the Air Cargo Transhipment (Facilitation) Ordinance came into effect in May. Under the ordinance, the licensing control over certain categories of transhipment cargo was relaxed, with the aim of facilitating the smooth flow of cargo at the Hong Kong International Airport without compromising the integrity of Customs controls.

The first regional air express cargo hub at the airport for processing express transhipment cargo to and from Seoul, Taipei, Osaka, Singapore and Manila began full-scale operation from November. To facilitate the hub's operation, with an average daily throughput of 3 200 consignments, special and expeditious Customs clearance arrangements have been provided.

In 2000, the department detected 413 smuggling offences, arrested 535 persons and seized contraband goods worth $252.7 million. Smuggling between Hong Kong and the Mainland remained a cause for concern.

Goods commonly smuggled to the Mainland included vehicles, vehicle spare parts, electrical appliances, computer parts, marked oil, optical discs and vegetable oil. Cross-boundary vehicles, river trading vessels and fishing boats were the means of conveyance frequently employed by smugglers. Smuggling of vehicles and marked oil to the Mainland continued to be the main concerns: 22 left-hand drive vehicles, one right-hand drive vehicle and four dismantled vehicles were seized. The seizure of marked oil dropped to 2.9 million litres. There was a downward trend in the smuggling of electrical appliances. The total value of such goods seized decreased from $25.55 million in 1999 to $15.13 million in 2000.

Inbound smuggling involved mainly cigarettes and frozen meat. Hong Kong continued to be exploited as a transit point for smuggling counterfeit cigarettes but the situation was alleviated compared with 1999. Altogether, officers seized 17 million counterfeit cigarettes originating in the Mainland and being sent to a number of countries via Hong Kong. The total quantity of frozen meat seized was 301 064 kilograms, compared with 556 183 kilograms in 1999.

The Customs maintained close liaison with the Police Force and overseas law enforcement agencies in exchanging intelligence and this contributed considerably to the successful interdiction of smuggling. Enhanced co-operation with the Mainland authorities in exchanging information, operational assistance and mounting of parallel operations at the boundary crossing points continued to produce good results.

All recruits to the Customs and Excise Department go through basic training at the department's training school, at Tai Lam. During the year, 15 Inspectors and 35 Customs Officers passed out of the school. Apart from induction training, the department provides local and overseas vocational training necessary for its staff to discharge their duties in investigation and prosecution. It also organised training courses for other customs administrations as part of its international co-operation efforts. In 2000, a total of 30 officers from the Customs Administrations of the Mainland received training in Hong Kong and officers of the department conducted a training course in Macau for 20 officers of the Macau Customs Administration.

The final phase of the Air Cargo Clearance System (ACCS) was successfully implemented in February, setting up further interface functions with air cargo operators. The success of the ACCS marked the commitment of the department towards facilitation of the air cargo industry. About half of the incoming flights are capable of submitting cargo information to the ACCS prior to flight arrival and enjoy the benefit of pre-arrival cargo clearance electronically. To meet the growth of transhipment cargo arising from the air cargo hub operation in Hong Kong, the department commissioned a feasibility study for a system upgrade in late 2000. To facilitate the transhipment of cargo, the department also plans to provide cargo clearance services to the new Hong Kong Airport Marine Cargo Terminal Operator through the system.

In 2000, the department put much effort into building up its internal information technology infrastructure. As a result, almost all offices of the department are linked by over 280 terminals providing access to the Internet, e-mail and office automation applications. The improved infrastructure has greatly enhanced communication among individual officers through the use of the computer network. More terminals will be added in the coming years.

In an attempt to combat cyber crime, the department has set up a Computer Analysis and Response Team comprising officers who are well trained in computer forensics. This team will help front-line enforcement officers in collecting digital evidence at the scene of crime. The department has also endeavoured to enhance Customs officers' knowledge in computer forensics. A thematic group has been formed to facilitate sharing of case experiences and transfer of skills.

The department's seventh set of performance pledges was published, together with the department's vision, mission and value statements. These reinforce the department's commitment to quality service. For better public accountability, the department regularly reviews the quality of its services with four customer liaison groups connected with the air freight, sea freight, land-boundary transport and dutiable commodities trades. A home page was set up to provide comprehensive information about the department to the public through the Internet.