What Is CEPA and How Hong Kong Companies Can Get Tariff-Free Access to Mainland China

CEPA is the free trade agreement between Mainland China and Hong Kong covering trade in goods, trade in services, investment, and economic and technical cooperation. For goods, CEPA can provide zero-tariff treatment when a product meets Hong Kong rules of origin and the applicable certification procedures.

What Is CEPA and What Does It Cover?

CEPA is the Mainland and Hong Kong Closer Economic Partnership Arrangement. The Hong Kong Trade and Industry Department describes CEPA as a framework agreement supported by four agreements covering goods, services, investment, and economic and technical cooperation.

The Mainland and Hong Kong first signed CEPA in 2003. Supplements and subsidiary agreements have expanded the framework since then, so a current eligibility review should use the legal text now in force.

For goods, the main benefit is zero tariff treatment for goods of Hong Kong origin that satisfy the CEPA rules of origin. The Trade and Industry Department notes that exclusions apply to certain prohibited goods and products covered by relevant international commitments.

What Is the Current Legal Basis for CEPA Trade in Goods?

CEPA trade in goods is primarily governed by the Agreement on Trade in Goods. The Trade and Industry Department states that the agreement was signed and came into effect on December 14, 2018, then was implemented on January 1, 2019.

A current review should use the consolidated Agreement on Trade in Goods. The TID legal text page records that the consolidated version was last amended on June 26, 2024.

Chapter 4 of the Agreement on Trade in Goods covers rules of origin and implementation procedures. Its annex contains Product Specific Rules of Origin that must be checked against the relevant tariff classification.

Does a Hong Kong Company Automatically Get CEPA Zero Tariffs?

A Hong Kong company does not automatically make its goods eligible for zero tariffs. Corporate domicile and product origin are separate tests.

The practical result is straightforward. A trading company that buys goods outside Hong Kong and re-exports them to Mainland China does not acquire Hong Kong origin merely because the invoice comes from a Hong Kong company.

For a broader view of incorporation, CEPA, and Mainland investment rules, see vOffice’s guide to using a Hong Kong company for China market entry.

How Do CEPA Rules of Origin Determine Hong Kong Origin?

CEPA rules of origin determine whether a product can be treated as an originating good of Hong Kong. The Trade and Industry Department sets out different routes based on material origin and production activity.

Goods Wholly Obtained or Produced in Hong Kong

A product may qualify when it is wholly obtained or produced in Hong Kong under the Agreement on Trade in Goods. This route does not depend on testing non-originating materials against additional transformation rules.

Goods Produced Exclusively from Originating Materials

A product can also qualify when it is produced in Hong Kong entirely from originating materials. The manufacturer still needs records supporting the origin status of those materials.

Goods Produced Using Non-Originating Materials

If production uses non-originating materials, the business should first check the Product Specific Rule against the Mainland 8-digit tariff code. A PSR can require a tariff classification change, RVC, a specified manufacturing process, or a combination of criteria.

If the product is not covered by a PSR, the General Rule applies regional value content. TID sets the threshold at a minimum RVC of 30% under the build-up method or 40% under the build-down method.

How Does Accumulation of Mainland Materials Change the RVC Test?

CEPA allows originating goods or materials from the Mainland to count as originating when they are incorporated into a product manufactured in Hong Kong. This mechanism is known as accumulation.

Accumulation has an additional Hong Kong contribution floor. Certificate of Origin Circular No. 7/2018 states that RVC calculated without the value of Mainland-originating goods or materials must still reach at least 15% under the build-up method or 20% under the build-down method.

The 30% and 40% thresholds therefore do not complete every RVC analysis. A manufacturer using Mainland-originating inputs needs to run both tests before relying on the accumulation rule.

Which Processes Are Too Minor to Create Hong Kong Origin?

Minimal operations do not create Hong Kong origin by themselves. The Agreement on Trade in Goods prevents simple handling work from being used as the sole basis for origin.

TID examples include repacking, simple assembly or disassembly, affixing labels, simple mixing, and other basic operations listed in the agreement. The exact rule still needs to be checked against the product and its PSR.

Moving goods into a Hong Kong warehouse, changing labels, or repacking them therefore does not create CEPA eligibility on its own. The manufacturer needs production and value creation that satisfy the relevant origin rule.

Which Documents Are Needed to Claim CEPA Zero Tariff Treatment?

A CEPA claim needs both origin documentation and the correct customs procedure. A goods shipment should be reviewed against the following items before export.

1. Mainland 8-digit tariff code. The code identifies the relevant PSR and the data required for the CO(CEPA).
2. Factory Registration. The Hong Kong manufacturer concerned must hold Factory Registration with the Trade and Industry Department before it becomes eligible to apply for a certificate. Related obligations can also apply to subcontractors.
3. Production and costing records. These records support the origin claim and may be requested during verification.
4. CO(CEPA). Each consignment claiming tariff preference must be supported by a valid certificate.
5. Direct consignment evidence. Zero tariff treatment applies to goods transported directly between the two sides under CEPA.
6. Importer declaration. The importer must actively declare zero-tariff eligibility, origin information, and supporting documents under the importing customs requirements.

The Hong Kong Customs and Excise Department enforces the CEPA certification system. Its work includes factory inspections, origin verification, costing checks, boundary checks, and investigations into suspected malpractice.

How Does the CEPA Claim Process Work When Goods Enter Mainland China?

The goods process should start before shipment. The exporter and manufacturer need a clear origin basis before they apply for a CO(CEPA).

1. Identify the Mainland 8-digit tariff code for the product.
2. Check the applicable PSR. If no PSR applies, test the General Rule RVC.
3. If Mainland-originating materials are used, test the 15% or 20% accumulation floor as well.
4. Confirm that Hong Kong production goes beyond minimal operations where the relevant rule requires more.
5. Complete Factory Registration for the Hong Kong manufacturer concerned.
6. Apply for a CO(CEPA) for the qualifying consignment.
7. Confirm direct consignment and importer declaration requirements before customs clearance.

Certificate of Origin Circular No. 5/2018 also states that one CO(CEPA) can only cover one batch of goods entering the Mainland at the same time. One certificate can cover up to 20 product items that qualify for CEPA zero tariff preference.

What Happens If the CEPA Origin Requirements Are Not Met?

Mainland Customs may request more information when origin needs verification. The request can involve the importer and, through the Hong Kong Customs and Excise Department, the exporter or manufacturer in Hong Kong.

If origin information cannot be verified through the interconnection network when the import declaration is made, customs may release the goods at the importer’s request after a deposit is paid under the applicable rules.

Mainland Customs may also deny zero-tariff treatment if the goods or CO(CEPA) fail to meet Chapter 4 or if the relevant parties do not meet their origin obligations. TID also requires manufacturers, exporters, and importers to retain origin evidence for at least three years or for the period required under the applicable laws.

A supply chain decision should therefore account for production cost, documentation, customs procedure, and tariff savings together. Zero tariff treatment only adds value when the production model still makes commercial sense after those costs are included.

How Is CEPA Treatment for Goods Different from Services?

CEPA uses different mechanisms for goods and services. Goods depend on origin and customs procedures, while services depend on sector commitments and Hong Kong Service Supplier status where required.

Amendment Agreement II for trade in services was implemented on March 1, 2025. TID states that the general three-year substantive business operations period was removed for most service sectors, although substantive business operations remain required and a few sectors retain period requirements.

For a juridical person, TID lists indicators such as paying profits tax in Hong Kong, owning or renting business premises, and employing Hong Kong residents as more than half of staff. The exact requirements still depend on the service sector.

Can Foreign Investors Use CEPA Through a Hong Kong Company?

Foreign-source capital does not automatically prevent access to CEPA. Eligibility still depends on the rules applying to the goods or services entering the Mainland market.

For goods, a foreign-owned company still needs to establish Hong Kong origin under the ROO. For services, an external investor can receive preferential treatment if the entity meets the definition and requirements of a Hong Kong Service Supplier.

Founders who do not yet have a Hong Kong entity can review the structure, documents, and timeline in vOffice’s Hong Kong Private Limited Company guide. Incorporation remains a separate workstream from CEPA eligibility.

When Is a Hong Kong Company Still Not Enough for Mainland China Operations?

A Hong Kong company does not replace a Mainland entity when the business activity must be carried out by a local operating company. Licensing, local employment, invoicing, regulated activity, or an operating presence can create that need.

If your model requires an operating entity in the Mainland, compare CEPA planning with the process for registering a company in China. The two structures can serve different functions and should not be treated as automatic substitutes.

How Should You Set Up a Hong Kong Company If CEPA Is Relevant?

Test CEPA eligibility before changing the supply chain or building a new structure. For goods, start with the HS code, PSR, material origin, production flow, and RVC. For services, start with the sector commitment and HKSS requirements.

Once the Hong Kong function is clear, the corporate setup can follow that business need. Founders who need an entity to perform a commercial role in Hong Kong can review vOffice’s Hong Kong company registration service, which covers incorporation and setup support according to the selected package.