The Customs and Excise Department is primarily responsible for the collection of
revenue on dutiable goods and the prevention of its evasion and the suppression of
narcotics trafficking and narcotic drugs abuse, as well as the prevention and
detection of smuggling of contraband, and the protection of intellectual property
rights. It has an establishment of 5 202 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 $6.96 billion, of which 47.7 per cent was from hydrocarbon
oil, 38.8 per cent from tobacco, 13.4 per cent from liquor and 0.1 per cent from
methyl alcohol, representing a total increase of 5.1 per cent over 2005.
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 2006, the department registered 41 motor traders and assessed
the provisional taxable value on 42 594 vehicles, resulting in the collection of
$4.34 billion first registration tax by the Transport Department.
Dutiable commodities in Hong Kong are stored in bonded warehouses licensed
by the department after import or local manufacture. Removal of dutiable
commodities is subject to a permit being issued by the department and the goods
can only be released for local consumption upon payment of duty.
In 2006, the department detected 9 537 cases of abuse of the duty-free
concessions, involving 2.85 million cigarettes. The number of cases detected and the
cigarettes involved represented increases of 249 per cent and 62 per cent respectively
when compared with the 2005 figures.
In 2006, some 10 702 offenders were arrested and 78.75 million sticks of illicit
cigarettes were seized, a decrease of 32 per cent and 22 per cent respectively over
On international cooperation, Hong Kong Customs continued its commitment to
stamp out transnational cigarette smuggling in concert with overseas customs
administrations. In 2006, by monitoring suspicious shipments and through
intelligence exchange, 10.65 million cigarettes, 4.75 million of which were illicit, were
seized in Germany and Panama.
Due to high oil prices, illicit fuel including marked oil, commonly known as 'red
oil', detreated oil and illicit motor spirit continued to be sought by local drivers as fuel
for their vehicles in 2006. To tackle the problem, Hong Kong Customs, apart from
taking sustained enforcement action to shut down all the illicit filling stations,
marked oil detreating plants and places where they are stored, launched a publicity
campaign to warn drivers against using illicit fuel. Simultaneously, surprise fuel-tank
checks were conducted to deter the use of such fuel. Enforcement actions were
stepped up at sea and at land boundaries to prevent the smuggling of illicit fuel.
As a result of the department's vigorous enforcement action, the number of
'black spots' where illicit fuel activities were carried out, was reduced to 21. In 2006,
836 offenders were arrested and 890 000 litres of illicit fuel seized, a fall of 12 per
cent and 24 per cent respectively when compared with 2005 figures. The decline in
the amount of illicit fuel seized was due largely to the department's ongoing anti-illicit
fuel operations and the success of the publicity campaign.
The department continued to take vigorous enforcement action to prevent and
suppress the unlawful manufacture, distribution and trafficking of dangerous drugs;
to trace, confiscate and recover drug proceeds from illegal drug activities; and to
prevent the diversion of chemicals used for the illicit manufacture of dangerous
The Customs Drug Investigation Bureau tracks down drug trafficking activities,
exchanges intelligence and cooperates closely with both local and overseas law
enforcement agencies to combat drug trafficking.
In 2006, the department dealt with 80 drug trafficking cases and neutralised
three drug storage and distribution centres. It seized 46.9 kilogrammes of heroin,
53 kilogrammes of ketamine, 103 kilogrammes of cannabis, 11.2 kilogrammes of
cocaine, 550 grammes of methamphetamine, 24 683 tablets of MDMA, commonly
known as 'ecstasy' and 55 032 tablets of other psychotropic drugs. Some 590 people
were arrested. Through cooperation with Mainland and overseas law enforcement
agencies, 16.5 kilogrammes of various drugs were seized and 14 people arrested.
The Tuen Mun Cross-boundary Ferry Terminal, providing cross-boundary ferry
services between Tuen Mun and Zhuhai, commenced operations on November 3,
2006. A new unit with an establishment of 26 officers has been formed to provide
customs clearance services at the terminal.
Smuggling between Hong Kong and the Mainland continued. In 2006, a total of
202 smuggling cases were detected, 388 people arrested and over $265 million
worth of smuggled goods seized. Evasion of tariff or duty as well as other import and
export regulatory controls is the major incentive for smuggling.
Computer parts, electrical and electronic appliances, and precious metals such as
silver and nickel were common items smuggled from Hong Kong to the Mainland.
Due to the price difference between the duty-exempt marked oil sold in Hong Kong
and the light diesel oil sold on the Mainland, the year saw an upsurge in the
smuggling of marked oil. The increase in sales tax on vehicles on the Mainland in
April 2006 prompted a sharp rise in the smuggling of dismantled vehicles from Hong
Inbound smuggling activities subsided during the year. Common items smuggled
into Hong Kong from the Mainland included cigarettes, pirated optical discs, and
meat and poultry.
The department continued to liaise closely with the Police and other local and
overseas law enforcement agencies to make concerted efforts to combat smuggling
activities. Cooperation with the Mainland authorities was enhanced through the
exchange of intelligence and the mounting of parallel operations at the land
boundary control points and at sea.