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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 4 989 .
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 5).
The department is responsible for the collection of excise duties derived
from dutiable commodities stipulated in the Dutiable Commodities Ordinance.
These are liquors, tobacco, hydrocarbon oil and methyl alcohol. During
the year, the excise duties collected amounted to $6.48 billion, of which
53.5 per cent came from hydrocarbon oil, 34.2 per cent from tobacco, 12.2
per cent from liquors and 0.1 per cent from other alcohol products, representing
a decrease of 2.35 per cent over 2002.
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 2003, the department
registered a total of 46 motor traders and assessed the provisional taxable
value on 36 536 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.
Before April 1, 2003, the bonded warehouses for dutiable
liquor and tobacco operated under the physical supervision of the department
while the oil companies' and breweries' warehouses adopted the open system
whereby no physical supervision by the department was necessary. The Government
proposed in 2002 to phase out the physical supervision requirement with
an open system, which control is based on risk management strategies including
stricter licensing criteria, random checking, documentary verification,
as well as post-transaction auditing. The proposal had the general support
of the trade. The necessary legislative amendments were passed by the
Legislative Council in February 2003 and the open system was implemented
with respect to all liquor and tobacco bonded warehouses from April 1,
2003 and to distilleries bonded warehouses from October 1, 2003 onwards.
The system has introduced a more flexible business environment for the
warehouse operators and reduced their compliance cost.
To strengthen its work in revenue protection, the department has installed
an Immigration Control Automation System at control points since February 2003
to verify the eligibility for duty-free concessions of incoming passengers travelling
on Hong Kong Identity Cards. As provided for by amendments under a Dutiable
Commodities (Exempted Quantities) Notice in July 2002 (Dutiable Commodities
Ordinance, 109G), an incoming passenger aged 18 or above who travels on a Hong
Kong Identity Card and has spent 24 hours or longer outside Hong Kong is eligible
for the concession. Officers of the department stationed at control points can
use the system to check quickly whether a passenger is eligible for the concession.
The system has enhanced the efficiency and effectiveness of enforcement against
abuse of the duty-free concession. In 2003, 53 228 incoming passengers
declared possession of excessive duty-free goods and 1 547 passengers were arrested
for undeclared excessive duty-free goods, representing increases of 133.4 per
cent and 162.6 per cent over 2002.
The department continued its vigorous enforcement action
against illicit cigarettes. During the year, 4 540 offenders
were arrested and 152.6 million sticks were seized, an increase of 74
per cent and a decrease of 16 per cent, respectively, over 2002. The decline
in the quantities of illicit cigarettes seized was attributed to the department's
effectiveness in combating illicit cigarette activities, causing distributors
and peddlers to reduce stock.
Illicit fuel including marked oil (commonly known as 'red
oil'), detreated oil and illicit motor spirit continued to be used illegally
as fuel for vehicles. To tackle the problem, in addition to enforcement
action taken at sea and land boundaries sustained operations were mounted
to eliminate filling stations, detreating plants and storage places for
such fuel. Surprise checks were also conducted to detect the use of illicit
fuel in road vehicles.
Resulting from the department's vigorous enforcement action,
the number of 'black spots' for illicit fuel activities continued to be
restricted to around 27. The department closed 897 illicit oil filling
stations, 22 detreating plants and 32 storage places. A total of 974 persons
were arrested. Altogether, 2.42 million litres of various types of illicit
fuel, valued at $17.93 million, were seized. The duty potential of the
seized illicit fuel amounted to $9.27 million, an increase of 18.4 per
cent compared with 2002.
The department continued to take vigorous enforcement action to prevent and
suppress the unlawful manufacture, distribution and trafficking of dangerous
drugs, and to trace, confiscate and recover proceeds accrued in illegal drug
activities. It also enforces 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 illicit drugs. The bureau's main
functions are to conduct investigations and surveillance to combat illegal
manufacture, trafficking or use of drugs. In addition, the department
works closely with the Police Force and various drug enforcement agencies
in other jurisdictions in exchanging intelligence and arresting drug criminals.
In 2003, the department dealt with 61 drug trafficking cases,
and neutralised one heroin attenuating centre and eight drug distribution
centres. Officers seized 12.7 kilograms of heroin, 4.3 kilograms of herbal
cannabis, 13.7 kilograms of cannabis resin, 7.3 kilograms of cocaine,
3.5 kilograms of methamphetamine ('ice'), 12.2 kilograms of ketamine,
51 141 tablets of MDMA ('ecstasy') and 29 680 tablets of other psychotropic
drugs. A total of 723 persons were arrested for drug-related offences.
The department participated in joint operations with international drug
enforcement agencies. As a result, 1 533 kilograms of various
types of drugs were seized and 27 traffickers arrested in such joint operations
overseas.
In 2003, vehicular traffic movements through the three control points at Lok
Ma Chau, Man Kam To and Sha Tau Kok increased by 6.1 per cent to 13.18 million
compared with 2002.
The Lok Ma Chau Control Point Expansion Project Phase II
was completed in the third quarter of 2003. Improvement works covered
the expansion of the passenger terminal, improvement of the cargo examination
facilities, reprovisioning of the existing vehicle processing kiosks,
and the installation of two sets of a Vehicle X-ray Inspection System.
In addition, the installation of a total of 42 sets of an Automatic Vehicle
Recognition System (AVRS) at the Lok Ma Chau, Man Kam To and Sha Tau Kok
Control Points to expedite the processing of vehicles was completed in
May. The application of the AVRS shortens the Customs clearance time of
each laden goods vehicle by three seconds, on average. Together with the
implementation of a series of simplified Customs clearance procedures
for vehicles, the average clearance time for a laden goods vehicle has
been reduced from 45 seconds to 30 seconds and that for an empty goods
vehicle from 20 seconds to 16 seconds.
To facilitate the flow of cross-boundary passenger traffic,
the operating hours for passenger clearance at the Lok Ma Chau Control
Point have been extended from 0630-2400 hours to round-the-clock operation
since January 27, 2003.
To expand Hong Kong's air services network and to enhance
its transport links with the Pearl River Delta region, the first cross-boundary
ferry service for transit passengers between the Hong Kong International
Airport and ports in the Pearl River Delta commenced operation in September.
Passengers using this service do not need to go through Customs, Immigration
and Quarantine clearance in Hong Kong. A new express cargo terminal to
handle air-land-sea transhipment mails and cargo will commence operation
in 2004. Simplified clearance procedures will be put in place to facilitate
the express cargo flow.
In 2003, the department detected 282 smuggling offences, arrested 356 persons
and seized contraband worth $525 million. The total value of seizures increased
by 86 per cent compared with 2002. Smuggling between Hong Kong and the Mainland
remained a cause for concern. The duty gradient leading to price differences
between Hong Kong and the Mainland was still the main factor underlying the
problem.
Goods commonly smuggled to the Mainland included computer
parts, electrical and electronic appliances, marked oil and optical discs.
Container tractors, box-type lorries and private cars were commonly used
for smuggling on land. Apart from being stashed among declared cargoes,
contraband of small size was concealed inside toolboxes and driving compartments
of vehicles. Trailer chassis were sometimes modified to provide false
compartments for concealing contraband. At sea, river trade vessels, fishing
vessels and motorised sampans were commonly used for smuggling. The smuggled
goods were usually hidden inside fuel tanks or secret compartments in
these vessels.
A rising trend observed in 2003 was the smuggling to the
Mainland of container loads of high-value merchandise such as computer
parts and electrical and electronic appliances. During the year, the Customs
detected 12 such cases and the value of seizures amounted to $232 million.
Cigarettes and meat were the main items smuggled into Hong
Kong from the Mainland. Altogether, 65.94 million sticks of illicit cigarettes
originating from the Mainland were seized. There was also an emerging
trend in the smuggling of light diesel oil and motor spirit into Hong
Kong. During the year, officers seized 21 670 litres of light
diesel oil and 432 265 litres of motor spirit in the inbound
traffic.
The department's anti-smuggling capability has been strengthened
by the installation of the two sets of the Vehicle X-ray Inspection System
at the Lok Ma Chau Control Point in March. These inspect vehicles and
container lorries by means of instant X-ray scanning. The technology applied
has proved efficient in curbing smuggling. Two additional sets of a Mobile
X-ray Vehicle Scanning System are also being procured. For operations
at sea, four high-speed pursuit craft were procured to reinforce the Customs
fleet, enhancing the department's deterrent patrol and interception power
in Hong Kong waters.
Two Explosive Detector Dog teams were formed in September
to increase the department's capability in the detection of explosives.
The department continued to liaise closely with the Police
Force and law enforcement agencies in other jurisdictions in exchanging
intelligence and this contributed considerably to the successful interdiction
of smuggling activities. Enhanced cooperation with Mainland counterparts
in exchanging information and mounting parallel operations at the land
boundary crossing points continued to produce satisfactory results.
Since April, carriers have been able to submit electronically their cargo manifests
for air, ocean, river and rail modes, a service that facilitates trade and heightens
the efficiency of government operations.
The department published its 10th set of performance pledges, together with
its 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 the four customer liaison groups connected
with the air freight, sea freight, cross-boundary transport and dutiable commodities
trades. A home page on the Internet provides comprehensive and updated departmental
information to the public.
The department's priority task during the SARS outbreak was to maintain an
uninterrupted service to the public including customs clearance at all control
points and at the same time to provide sufficient protection to its staff, especially
those on front-line duties.
The preventive measures taken included providing staff with
protective gear such as face masks, gloves, gowns and shoe covers. Cleaning
materials were provided to individual offices according to their respective
operational needs. Safe and hygienic conditions were maintained at offices
and workplaces, and public facilities were sterilised.
The department also ensured there was timely dissemination
of relevant and useful information to staff, including information about
the disease, precautionary measures to be taken, and guidelines on the
proper use of protective gear, cleaning equipment, tools and vehicles,
as well as the handling of any arrested persons having SARS symptoms.
In addition, the department set up a working group headed
by an Assistant Commissioner to coordinate and monitor its preventive
and follow-up measures, and it also established a system for staff to
report on any matter involving SARS, such as contact with a person suspected
to be infected. Overall, the department's preventive measures were successful,
with no members of its staff contracting the disease through their daily
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