Hong Kong and Russia: Legal Guide for Foreign Trade

 

September 30, 2024

BRACE Law Firm ©

 

The Asia-Pacific region is currently one of the fastest-growing regions in the world, as it includes both developed nations and countries with significant potential for rapid economic growth. Within the region, the Special Administrative Region of Hong Kong (Xianggang) stands out; although it is part of China, it possesses autonomous jurisdiction and a high degree of independence in developing its external relations.

Legal Status and Legal System of the Special Administrative Region of Hong Kong (Xianggang)

The most significant stage in Hong Kong's history was 1984, when the governments of China and the United Kingdom signed a declaration on its return to China. According to this declaration, the 99-year lease of Hong Kong by the British ended on July 1, 1997, and the territory returned to China. [1]

The transition period policy that mainland China applies to Hong Kong warrants specific mention. The territory has been granted broad autonomy for 50 years. Until 2047, foreign policy and defense remain within the competence of the Central Government of China, while Hong Kong itself controls its monetary system, duties, legislation, police force, and immigration policy. Today, Hong Kong exists as a separate small state with its own currency (the Hong Kong dollar), laws, international dialing code, police, and border and customs control.

Unlike mainland China, whose legal system generally aligns with the civil law family, the Hong Kong legal system belongs to the Anglo-American common law family. It maintains links with other common law jurisdictions by applying their precedents and appointing judges to Hong Kong courts from other common law jurisdictions pursuant to Article 92 of the Basic Law of Hong Kong. [1] This explains the recognition of case law as one of the sources of Hong Kong law. [2]

The system of sources of Hong Kong law is as follows:

• The Basic Law, consisting of the text of the law itself and amendments made by the National People's Congress. The Basic Law is an act of constitutional significance;
• Laws of the PRC listed in Annex III to the Basic Law;
• Previously effective laws prior to 1997 adopted as Hong Kong laws by the Standing Committee of the National People's Congress, including case law (common law and rules of equity established in such cases): ordinances and subordinate acts adopted by the Legislative Council and signed by the Chief Executive of the Hong Kong Administration;
• Administrative orders of the Chief Executive of the Hong Kong Administration;
• Chinese customary law.[3]

Mainland Chinese laws do not apply in Hong Kong, except for those specified in the list provided in Annex III to the Basic Law of Hong Kong. These include:

• Resolution on the Capital, Calendar, National Anthem, and National Flag of the People's Republic of China;
• Resolution on the National Day of the People's Republic of China;
• Declaration of the Government of the People's Republic of China on the Territorial Sea;
• Nationality Law of the People's Republic of China;
• Law of the People's Republic of China on the National Flag;
• Regulations of the People's Republic of China concerning Diplomatic Privileges and Immunities;
• Regulations of the People's Republic of China concerning Consular Privileges and Immunities;
• Law of the People's Republic of China on the National Emblem;
• Law of the People's Republic of China on the Territorial Sea and the Contiguous Zone;
• Law of the People's Republic of China on the Garrisoning of the Hong Kong Special Administrative Region;
• Law of the People's Republic of China on the Exclusive Economic Zone and the Continental Shelf;
• Law of the People's Republic of China on Judicial Immunity from Compulsory Measures in Relation to the Property of Foreign Central Banks;
• Law of the People's Republic of China on the National Anthem;
• Law of the People's Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region.[4]

While Chinese is the official language of the PRC, the Basic Law of Hong Kong recognizes two official languages: Chinese and English. Permanent residents of Hong Kong have their own passports and can enter more countries visa-free than other Chinese citizens. Meanwhile, mainland Chinese citizens must obtain special permission to enter Hong Kong.[5]

There is a common misconception that Hong Kong is an offshore zone.

As a reminder, an offshore jurisdiction provides preferential business conditions provided the company operates outside the territory. Furthermore, "offshore" may refer to a business registered in such a zone.

The advantages of an offshore jurisdiction include:

• The absence of taxation or very low rates. Instead of traditional taxes, companies generally pay an annual fixed fee;
• Simplified registration and business management. Document verification is minimal or non-existent;
• The ability to manage a company without a physical office. Unlike most jurisdictions, many offshore zones allow business registration without leasing a legal address within the country;
• Full confidentiality. Data on company participants, including directors and managers, is not disclosed to third parties (including foreign law enforcement) and is not publicly accessible.[6]

While such conditions benefit businesses, they also harm their reputation. Registration in an offshore zone implies that the founder's documents were likely not verified and business oversight is minimal. This creates opportunities for money laundering and other illegal activities, which is why investors and potential partners generally distrust offshore companies.

These features distinguish an offshore jurisdiction from "onshore" and "midshore" jurisdictions. Onshore refers to states without tax incentives (USA, UK, etc.). A midshore is a jurisdiction that complies with international legal standards but offers companies favorable tax conditions (Cyprus, Singapore).

The Ministry of Finance of Russia has approved an official list of offshore zones,[7] and Hong Kong is absent from this list, although it was included until January 1, 2018, when it was removed from the previously effective Order of the Ministry of Finance of Russia No. 108n dated November 13, 2007 (expired on July 1, 2023).

Regarding requirements for legal entities, Hong Kong is a midshore; therefore, a company will not be considered an offshore entity in Hong Kong. Along with favorable business conditions, this is one reason why Hong Kong is popular among entrepreneurs: a business established here can count on the trust of both partners and clients.

Development and the inflow of foreign capital directly depend on the maturity and freedom of the economic system. The taxation system and procedures are of particular importance, as they play a primary role in attracting international business. Hong Kong has its own tax system, separate from mainland China, and ranks 2nd in the world for the convenience of its tax systems. In Hong Kong, the following are mandatory: property tax (15% rate), salary tax (2–17% depending on income level and other circumstances), and corporate/profit tax (7.5–16.5%). Additionally, there is a stamp duty, withholding tax on royalty payments, and excises on tobacco and strong alcohol.[8]

The simplicity of the tax system is accompanied by the ease of paying taxes: on average, a hypothetical company spends only 34.5 hours paying taxes (less only in Bahrain), with a relatively low tax burden on company activities (only 21.9%, compared to 46.2% in Russia and 59.2% in the PRC). [9]

International Agreements of Hong Kong and Bilateral Agreements Between Hong Kong and Russia

In 2023, the global inflow of foreign direct investment into Hong Kong totaled USD 112.7 billion, allowing the country to rank 4th in the world after the USA (USD 310.9 billion), mainland China (USD 163.3 billion), and Singapore (USD 159.7 billion).[10]

Current Free Trade Agreements:

• Mainland and Hong Kong Closer Economic Partnership Arrangement (signed in Hong Kong on June 29, 2003);
• Hong Kong, China – New Zealand Closer Economic Partnership Agreement (signed in Hong Kong on March 29, 2010);
• Free Trade Agreement between Hong Kong, China and the Member States of the European Free Trade Association (signed in Schaan on June 21, 2011);
• Free Trade Agreement between Hong Kong, China and Chile (signed in Hong Kong on September 7, 2012);
• Hong Kong and Macao Closer Economic Partnership Arrangement (signed in Hong Kong on October 9, 2015);
• Free Trade Agreement between Hong Kong, China and Georgia (signed in Hong Kong on June 28, 2018);
• ASEAN–Hong Kong, China Free Trade Agreement (signed in Jakarta on March 28, 2018);
• Free Trade Agreement between Hong Kong, China and Australia (signed in Hong Kong on March 26, 2019).

In addition to free trade agreements, Hong Kong has signed investment promotion and protection agreements with 23 states. A similar agreement with Russia is currently under negotiation. Hong Kong has also concluded comprehensive double taxation avoidance agreements with approximately 43 states.

Currently, the following agreements are in force between Russia and Hong Kong:

• Agreement between the Government of the Russian Federation and the Government of Hong Kong on Air Services dated January 22, 1999;
• Agreement between the Government of the Russian Federation and the Government of Hong Kong for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income dated January 18, 2016;
• Agreement between the Government of the Russian Federation and the Government of Hong Kong on Mutual Exemption of Visa Requirements for Citizens of the Russian Federation and Permanent Residents of Hong Kong dated April 23, 2009.

Structure of Hong Kong’s Foreign Trade and Trade Turnover with Russia

In 2023, total exports from Hong Kong amounted to USD 575 billion. Compared to 2022, the value of goods supplied from Hong Kong decreased by USD 35 billion (in 2022, goods worth USD 610 billion were supplied). The main destinations for Hong Kong's exports in 2023 were China, the USA, India, the UAE, Vietnam, Japan, Thailand, and the Netherlands.[11]

In 2023, Hong Kong exported the following goods:

• Electronic integrated circuits;
• Telephone sets, including telephones for cellular networks or other wireless networks;
• Other apparatus for the transmission or reception of voice, images, or other data, including apparatus for communication in a wired or wireless network;
• Gold (including gold plated with platinum), unwrought or semi-manufactured, or in powder form;
• Automatic data processing machines and units thereof (computers); magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data;
• Diodes, transistors, and similar semiconductor devices; photosensitive semiconductor devices, including photovoltaic cells whether or not assembled in modules or made up into panels; light-emitting diodes;
• Diamonds, whether or not worked, but not mounted or set;
• Turbojets, turboprops, and other gas turbines;
• Jewelry and parts thereof, of precious metal or of metal clad with precious metal.[12]

Total imports into Hong Kong amounted to USD 654 billion in 2023. The value of goods imported into Hong Kong decreased by USD 13.6 billion (in 2022, goods worth USD 668 billion were imported).[13]

The largest trading partners for imports into Hong Kong in 2023 were China, Singapore, Japan, South Korea, the USA, Malaysia, Switzerland, the United Kingdom, and Vietnam.

The import structure in 2023 was represented by the following main types of goods:

• Electronic integrated circuits;
• Telephone sets, including telephones for cellular networks or other wireless networks, and other apparatus for the transmission or reception of voice, images, or other data;
• Gold (including gold plated with platinum), unwrought or semi-manufactured, or in powder form;
• Jewelry and parts thereof, of precious metal or of metal clad with precious metal;
• Automatic data processing machines and units thereof (computers);
• Turbojets, turboprops, and other gas turbines;
• Diodes, transistors, and similar semiconductor devices;
• Diamonds, whether or not worked, but not mounted or set;
• Petroleum and petroleum products.

Statistical data for 2023 between Hong Kong and Russia is not available. The latest data is from 2021, when the trade turnover between Russia and Hong Kong was USD 2,166,749,839. Russian exports to Hong Kong in 2021 totaled USD 1,614,842,310. Russian imports from Hong Kong in 2021 totaled USD 551,907,529.[14]

The trade balance between Russia and Hong Kong in 2021 was positive at USD 1,062,934,781. Compared to 2020, the surplus decreased by 30.02% (USD 455,937,615).

Hong Kong's share in Russia's foreign trade turnover in 2021 was 0.2760%, ranking 56th. Hong Kong's share in Russian exports in 2021 was 0.3285%, ranking 51st. Hong Kong's share in Russian imports in 2021 was 0.1881%, ranking 57th.

In the structure of Russian exports to Hong Kong in 2021, the main share of supplies consisted of:

• Precious metals and stones (Commodity Nomenclature of Foreign Economic Activity (the "TN VED") code 71) – 59.49% of total Russian exports to Hong Kong (41.25% in 2020);
• Chemical products (TN VED codes 28 – 40) – 17.01% of total exports (7.73% in 2020);
• Machinery, equipment, and vehicles (TN VED codes 84 – 90) – 10.64% of total exports (2.44% in 2020);
• Mineral products (TN VED codes 25 – 27) – 6.16% of total exports (8.45% in 2020);
• Food products and agricultural raw materials (TN VED codes 01 – 24) – 3.23% of total exports (5.16% in 2020);
• Metals and metal products (TN VED codes 72 – 83) – 2.83% of total exports (4.99% in 2020).[15]

Cooperation and Foreign Trade with a Hong Kong Company

Hong Kong companies engaged in import and export actively participate in sourcing various types of goods, including raw materials, machinery, parts, and a wide range of consumer goods. There are three main types of sourcing activities:

• Supplying goods manufactured in Hong Kong;
• Sourcing goods from across the region for re-export;
• Sourcing goods for shipment from one country directly to the destination country, bypassing Hong Kong territory.

The import business of Hong Kong trading companies is mainly conducted through agents or dealers. These trading companies usually specialize in one product area and represent one or more foreign brands. Their trade map typically covers Hong Kong, mainland China (or parts of it), or other Asian countries.

Due to the development of trade support services in mainland China, trading companies increasingly ship goods for sale in international markets. Some of these goods are either transshipped through Hong Kong or sent directly, bypassing the territory.

Hong Kong handles a significant portion of mainland China's foreign trade. In 2023, Hong Kong became mainland China's fourth-largest trading partner after the USA, Japan, and South Korea; simultaneously, the mainland was Hong Kong's largest source of imports, accounting for 43.5% of total imports, and its largest export market, accounting for 55.5% of total exports in 2023.[16]

Below, we examine the specifics of foreign trade with a Hong Kong company, specifically: how to check a Hong Kong counterparty, what nuances to consider when concluding a contract, and customs clearance specifics.

Legal Due Diligence of a Company in Hong Kong

Import-export trading firms in Hong Kong are generally small, employing fewer than 10 people on average. As of December 2023, there were 166,362 import-export trading firms in Hong Kong, most of which are small and medium-sized enterprises. In early 2024, the Companies Registry reported that in 2023, the total number of local companies reached 1,430,758, an increase of 39,080 over 2022.[17]

Any company entering or expanding in the Hong Kong market must implement a robust strategy to verify the legitimacy and good standing of potential commercial partners. Whether establishing new business relationships, engaging traders, or welcoming potential clients, it is crucial for companies to thoroughly understand the identities of these organizations and individuals.

Legal due diligence on a company helps mitigate the risk of partnering with organizations that are unregistered, non-compliant with local regulations, or involved in fraudulent or illegal activities. Such diligence is essential for maintaining compliance and protecting business operations.

To find information on companies in Hong Kong, one can use the Hong Kong Companies Registry’s Integrated Companies Registry Information System (icris.cr.gov.hk).

Access to this portal allows for two methods of searching:

• A free search provides basic company details, such as the registration date, company status, registered address, directors, company secretary, and the nature of activities;
• A paid search provides access to a more comprehensive company search report. This report includes previous company names (if any), copies of filed documents (annual reports, charges, etc.), and litigation history (if publicly available).

While ICRIS is the most reliable source, there are other channels for gathering information:

• Lands Department (https://www.landsd.gov.hk/en/index.html): to search for real estate titles associated with the company;
• Inland Revenue Department (https://www.ird.gov.hk): allows for verification of the company's registration status;
• Online directories: Business directories may provide additional details such as contact information and industry affiliation. These websites are generally not affiliated with the Hong Kong government, so information accuracy may vary.[18]

There are three main categories of import-export trading firms:

• Intermediary trading firms that bring sellers and buyers together without adding significant value to the process. These firms perform simple sourcing operations, usually identifying goods manufactured in the mainland or Hong Kong and shipping them to foreign markets. They rely on their specialized regional sourcing knowledge and low supply costs as their primary competitive advantages.
• Trading companies with some value-added services. Many firms now source raw materials for their suppliers and finance these materials. They often use letters of credit from their clients as security to obtain financing for their purchase orders. Other firms develop subcontractor relationships with various factories, exercising significant control over production management, including quality control.
• Trading companies with complex services. In some cases, exporting firms add so much value to their traditional activities that it becomes difficult to label them merely as exporters. For example, some firms design and manufacture components for their supplier factories to produce finished goods, which the firms subsequently export. These firms add value primarily through their design team, and their competitive advantage lies in their ability to design products that sell well in target markets.[19]

The business environment for Hong Kong trading firms is becoming increasingly complex amid a growing trend toward direct deals between clients and manufacturers, known as "disintermediation". In response, Hong Kong traders are adapting to provide more value-added services in addition to finding more competitive sources of supply. For example, Hong Kong traders help their foreign clients inspect goods produced by manufacturers to ensure they meet procurement standards and monitor production schedules to meet delivery deadlines. Hong Kong traders also assist foreign buyers in coordinating production when buyers experience a sudden surge in orders and require rapid turnover.

The operations of small and large trading firms differ significantly. Smaller firms are typically strong in introducing foreign products to the mainland market. In most cases, they specialize in one area, such as medical equipment, and represent some foreign brands as agents or distributors. Larger trading firms are typically strong in sourcing products from the region. They usually have regional or even global supply networks and do not specialize in only one type of product.

Hong Kong's import-export trading sector provides services mainly in the form of offshore buying and selling of goods. Given Hong Kong's location and the relocation of Hong Kong's manufacturing bases to the mainland, especially the Pearl River Delta, mainland China is the primary source of offshore trading activity. Hong Kong manufacturers are diversifying their production activities into other low-cost countries.

Preparation and Conclusion of a Foreign Trade Contract with a Hong Kong Company

The mandatory conditions of a supply contract include details on the parties, the subject matter, and the quantity. A contract with a Hong Kong company is no exception. Without mandatory conditions, a contract will not be recognized as concluded and, therefore, is invalid; if all mandatory conditions are present, the remaining contract terms may be established in relation to other contract terms or in accordance with rules formulated in legislation.

In practice, when drafting a sales contract, the following terms should be included:

• Details on the parties. It should be noted that a Hong Kong company's registered address is used only for receiving correspondence from government agencies and banks. This address should not be used as the company's mailing address for commercial purposes. On all informational materials, websites, and business cards, the registered address and the actual/mailing address must be separated.[20]
• Subject of the contract.
• Quality requirements.
• Product price and payment methods. Hong Kong companies can conduct settlements in all major freely convertible currencies. Restrictions on receiving or sending payments in controlled currencies (e.g., yuan) may arise from the counterparty or the bank. A Hong Kong company may have accounts in PRC yuan; however, it should be noted that not all Chinese counterparties can conduct settlements for foreign trade transactions in yuan, as a Hong Kong company is considered a foreign entity in the PRC, and transactions between Chinese and Hong Kong companies are treated as foreign trade transactions. To conduct foreign trade operations in yuan, a Chinese company must obtain special permission from the PRC government. If a Chinese company lacks such permission, settlements for export-import activities are conducted in US dollars.[21]
• Delivery terms.
• Product acceptance terms.
• Liability of the parties. Note that a Hong Kong company is typically only a trading intermediary and lacks substantial assets. Even in the event of a successful dispute resolution in a Hong Kong court, a foreign buyer may discover that the Hong Kong counterparty has no property from which to recover liquidated damages and penalties.[22]
• Applicable law. If the contract does not specify the choice of law, Hong Kong law will apply, which is based on English law and belongs to the common law system. If the parties' rights and obligations are not detailed in the contract, the outcome of applying Hong Kong law may differ significantly from the application of Chinese law.[23]
• Dispute resolution methods. Hong Kong, an international center for legal and arbitration services, offers several effective methods for dispute resolution, each with unique procedures and advantages that ensure fairness and efficiency. These methods include arbitration, mediation, and traditional litigation, which may be used depending on the specifics of the case, the parties' wishes, and relevant legal requirements. Arbitration holds a central place in Hong Kong’s legal practice, especially for international commercial and investment disputes. This procedure is attractive to parties due to its efficiency, confidentiality, and ability to yield rapid decisions, which is particularly important in a dynamic economic context. The Hong Kong International Arbitration Centre has been operational since 1985.[24] Unlike arbitration, mediation in Hong Kong is a less formalized process where a neutral third party (a mediator) helps the parties reach a mutually acceptable solution. Mediation does not involve a binding decision, allowing parties to maintain control over the outcome. Mediation is particularly valued for its ability to prevent the breakdown of business relationships and its effectiveness in resolving personal and family disputes in Hong Kong, where maintaining relationships is vital.[25]

Hong Kong companies may use rectangular seals (standard seal) and small round seals (small seal). The rectangular seal of a Hong Kong company with a space for a signature (the "Signature stamp") is the company’s primary seal used on all commercial documents. The seal must contain the signature of the company's authorized person (by default, the company director). A seal without a signature is invalid; however, a signature may be executed without an ink seal if the corresponding text is present in the document itself. The small round seal is used for daily operational certifications and marking courier documents. This seal does not require a signature and is not used as the actual company seal on contracts and invoices. A possible use when executing a multi-page contract is to place the round seal on each page and the rectangular seal with a signature on the final page.[26]

A Hong Kong company's corporate seal (the "Common Seal"), which leaves an embossed impression on documents, is used in a limited number of cases to grant documents legal force. One such case is the issuance of a company stock certificate. In commercial practice, the Common Seal may be used when a contract or transaction is concluded with a person who receives no benefit under the agreement, or when there is a gratuitous assignment of rights. Furthermore, documents such as guarantees, deeds of property transfer, and general powers of attorney require the use of the Common Seal. Use of the Common Seal must be authorized by a director's resolution. In routine operations and standard commercial documents, this seal is not used.[27]

Customs Clearance of Cargo in Hong Kong and Russia

Hong Kong is a free port and does not levy customs duties on imports and exports. There are also no tariff quotas or surcharges, value-added tax, or general services tax. Excises are levied on only four types of dutiable goods: alcoholic beverages, tobacco, hydrocarbon oil, and methyl alcohol.

For example, for alcoholic beverages with an alcohol strength not exceeding 30% by volume measured at 20 degrees, and any wine, the duty rate is 0%. For beverages with an alcohol strength exceeding 30% by volume measured at 20 degrees, the duty is calculated as follows:

• If the volume of alcohol in the bottle does not exceed 1 liter, the first USD 200 is taxed at 100%, and the remainder at 10%;
• If the volume exceeds 1 liter – according to the formula A = D x L, where A is the duty amount, D is the duty per liter, and L is the volume in liters. The duty per liter is assessed based on the value per liter at 100% for the first USD 200 and 10% for the remainder.[28]

Duty is levied on methyl alcohol and any mixture containing methyl alcohol at a rate of USD 840 per hectoliter measured at 20 degrees, plus USD 28.10 per hectoliter for every 1% by which the alcohol strength exceeds 30% by volume.

For tobacco, duty is paid at the following rates:

• For every 1,000 cigarettes – USD 3,306;
• Cigars – USD 4,258 per kilogram;
• Chinese prepared tobacco – USD 811 per kilogram;
• All other types of manufactured tobacco, except tobacco intended for cigarette manufacture – USD 4,005 per kilogram.

For hydrocarbon oil, duty is paid at the following rates per liter:

• Aviation fuel – USD 6.51;
• Motor gasoline (leaded gasoline) – USD 6.82;
• Motor gasoline (unleaded gasoline) – USD 6.06;
• Light diesel oil – USD 2.89;
• Ultra-low sulfur diesel – USD 2.89;
• Euro V standard diesel – USD 0.00.[29]

Generally, all cargo imported into or exported from the HKSAR by air, land, or sea is subject to customs control, which is primarily carried out by inspecting documents such as manifests. Physical inspection of goods, if necessary, is mainly conducted on a selective basis.

Any persons importing or exporting any items, except those exempt from customs duties, are required to file accurate and complete import/export declarations within 14 days after the import/export of the item.

There are six types of declarations in Hong Kong:

• Import declaration for non-food items;
• Import declaration for food items;
• Export/re-export declaration for exported/re-exported goods, excluding clothing and footwear manufactured in Hong Kong;
• Export declaration for clothing and footwear items manufactured in Hong Kong;
• Declaration for the import of goods exempt from the declaration fee;
• Declaration for the export/re-export of goods exempt from the declaration fee.[30]

For imports, the fees payable upon filing declarations are:

• Non-food items – USD 0.20 for the first USD 46,000 of the goods' value and USD 0.125 for every additional USD 1,000 or part thereof, rounded to the nearest 10 cents;
• Food items – USD 0.20 per declaration regardless of value.

For exports, regardless of whether they originate from Hong Kong or not, the fees payable upon filing declarations are USD 0.20 for the first USD 46,000 of the goods' value and USD 0.125 for every additional USD 1,000 or part thereof, rounded to the nearest 10 cents.

It should be noted that the fee for each import and export declaration must not exceed USD 200. This cap has applied to goods imported into, exported from, or re-exported from Hong Kong since August 1, 2018.

A penalty is charged for every declaration not filed within 14 days after the import or export of goods.

If the total value of goods specified in the declaration does not exceed USD 20,000:

• The penalty is USD 20 for filing the declaration within 1 month and 14 days after import or export;
• USD 40 for filing the declaration within 2 months and 14 days after import or export;
• USD 100 for filing the declaration after 2 months and 14 days after import or export.

If the total value of goods specified in the declaration exceeds USD 20,000, the above penalties double to USD 40, 80, and 200, respectively.

In Hong Kong, a penalty may be imposed on any person who underpays the import or export declaration fee, in an amount not exceeding twenty times the underpaid amount (but not more than USD 10,000) for each filed import/export/re-export declaration. Any person who receives a penalty demand notice from the Hong Kong government must make payment within 14 days from the date the notice was issued.

For transporting cargo from Hong Kong to Russia, the following types of transport may be used:

• Air delivery – the best option for urgent, careful delivery of high-value goods, perishable products, and precious items;
• Sea transport – for transporting multi-ton and bulky cargo;

• Multimodal transport – using multiple types of transport.

The first stage of customs procedures is providing the necessary documentation. When shipping cargo from Hong Kong, you will need to provide commercial invoices, contracts, packing lists, and other documents confirming the characteristics and value of the goods. Ensuring correct and accurate documentation will help avoid delays and problems at customs. Next is the passage of cargo through customs control. This includes checking the cargo for compliance with the customs laws and regulations of both Russia and Hong Kong, as well as paying necessary duties, taxes, and fees. It is important to comply with import and export rules to avoid delays and penalties.

For some types of cargo, such as hazardous or controlled goods, special permits or licenses may be required. When transporting medicinal products or goods with high electronic components, additional permits may be required to ensure safety and regulatory compliance.

For some types of agricultural products, restrictions may be introduced by the government authorities of both Russia and Hong Kong. For example, by Order of Rosselkhoznadzor No. FS-ARe-7/3668-3 dated February 10, 2021, due to the deterioration of the epizootic situation regarding African swine fever in Hong Kong, temporary restrictions were introduced on the export to Russia from Hong Kong of wild pigs, domestic pigs, pig slaughter products, and pork products manufactured in Hong Kong.[31]

By Order of Rosselkhoznadzor No. FS-KS-7/26645 dated September 24, 2020, due to the outbreak of highly pathogenic avian influenza in Russia, it was established that for the export of poultry products to Hong Kong, live poultry, hatching eggs, genetic material, and poultry products that have not undergone thermal or other processing guaranteeing the destruction of avian influenza viruses must be produced in regions of the Russian Federation where no outbreaks of highly pathogenic influenza A have been registered.[32] In April 2024, Hong Kong lifted avian influenza restrictions for 23 Russian regions.[33]

One should keep in mind that many restrictions, prohibitions, and requirements may be established, requiring verification before launching import or export processes between Russia and Hong Kong.

It is also worth noting the importance of classifying goods by customs codes. The classification of goods determines the applicable customs duties and the customs control regime. Incorrect classification may lead to incorrect duty collection or hinder the process of obtaining customs clearance. It is important to have a specialist who accurately determines the classification of the cargo.

Hong Kong plays a significant role in the economy not only of the Asia-Pacific region and China but also of the entire world. Due to prolonged British influence, Hong Kong developed an economy modeled after the Western standard, allowing it to transition from the status of a seaport to one of the world's largest financial centers with the most favorable business conditions, home to a vast number of international companies.

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References

1. The Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China. Adopted at the Third Session of the Seventh National People's Congress on April 4, 1990. Promulgated by Decree No. 26 of the President of the People's Republic of China on April 4, 1990. Entered into force on July 1, 1997. "Hong Kong e-Legislation" website.
2. Petrykina N.I., Tyurina D.D. An Unconventional Model of Administrative Autonomy: PRC-Hong Kong. A Russian Researcher's Perspective. MGIMO University website.
3. Annex III to The Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China. Adopted at the Third Session of the Seventh National People's Congress on April 4, 1990. Promulgated by Decree No. 26 of the President of the People's Republic of China on April 4, 1990. Entered into force on July 1, 1997. "Hong Kong e-Legislation" website.
4. Petrykina N.I., Tyurina D.D. An Unconventional Model of Administrative Autonomy: PRC-Hong Kong. A Russian Researcher's Perspective. MGIMO University website.
5. Can Hong Kong be Called an Offshore Jurisdiction? Dispelling the Myth and Explaining How to Open a Company. September 24, 2024. "VC.ru" website.
6. Order of the Ministry of Finance of Russia No. 35n dated March 28, 2024, On Approval of the Special List of States and Territories Providing a Preferential Tax Regime and (or) Not Providing for the Disclosure and Provision of Information During Financial Operations (Offshore Zones).
7. Worldwide Tax Summaries. Hong Kong SAR. PwC website. June 28, 2024.
8. Fainschmidt R.I., Fedorenko D.O. Transformation of Hong Kong's Role in the Context of Economic Processes in the Asia-Pacific Region. Journal "Locus: People, Society, Cultures, Meanings", 2020, Vol. 11, No. 3.
9. Economic and Trade Information: Hong Kong. "HKTDC RESEARCH" website.
10. Annual International Merchandise Trade Statistics. Hong Kong. "TrendEconomy" website.
11. Trade between Russia and Hong Kong in 2021. "russian-trade.com Russian Foreign Trade" website.
12. Import and Export Trade Industry in Hong Kong. "HKTDC RESEARCH" website.
13. Where can you go to find out company information in Hong Kong? "Logan&Partners" website.
14. Import and Export Trade Industry in Hong Kong. "HKTDC RESEARCH" website.
15. Services in Hong Kong. Frequently Asked Questions (F.A.Q.). "China Window" website.
16. Who is the Actual Counterparty when Concluding a Contract: A Chinese or Hong Kong Company? "CNLegal Blog on Chinese Legislation".
17. Dispute Resolution in Hong Kong. "IncFine" website.
18. Services in Hong Kong. Frequently Asked Questions (F.A.Q.). "China Window" website.
19. Information from the official website of the Customs and Excise Department of the Hong Kong Special Administrative Region.
20. Information from the Rosselkhoznadzor website.
21. Hong Kong Lifted Restrictions on Supplies of Poultry Products from Russia. Website of the Federal Center for the Development of Export of Agricultural Products of the Ministry of Agriculture of Russia.