Agenda 1. 1. Relevant ant entities es 2. 2. Legislati ation - - PowerPoint PPT Presentation

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Carlos Duque Simões

Macau, 17 November 2011

Closer Economic Partnership Arrangement

1. 1. Relevant ant entities es 2. 2. Legislati ation

• n - CEPA Annex

exes es 3. 3. CEPA PA Suppl plements ements 4. 4. CEPA PA Certificati ation

• n Requirements

ements 5. 5. Formal al vs. Material al Requirements ements 6. 6. Renewal al Proces ess 7. 7. Dual Challenges nges 8. 8. Corporat rate e Acqui uisitions

• ns

9. 9. Busines ness Suspens pension

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10. 10. Experi riences ences of MSS 11. 11. Final al Remarks

Agenda

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• MES has a department

exclusively dedicated to CEPA: “CEPA Information Center“

• 1. Relevant Entities

Macau appointed entity is Macau Economic Services (MES) Justice Department and IPIM also have relevant roles

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• List of products covered

(Annex 1)

• Rules of Origin (Annex 2)
• Procedures for verification of

Origin (Annex 3)

• 2. Legislation – CEPA components

Trade in Goods Trade in Services

• Commitments for Liberalization

(Annex 4)

• Definition of Service Supplier

(Annex 5)

• Trade and Investment

Facilitation (Annex 6)

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It has been subject to seven (7) supplements: i. Supplement I – signed on 29 October 2004 ii. Supplement II – signed on 21 October 2005

• iii. Supplement III – signed on 26 June 2006
• iv. Supplement IV – signed on 2 July 2007

v. Supplement V – signed on 30 July 2008

• vi. Supplement VI – signed on 11 May 2009
• vii. Supplement VII – signed on 28 May 2010
• 3. CEPA Supplements

Macau CEPA Agreement was signed between Macau and PRC on 17 Oct. 2003

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• Macao manufacturers may submit petitions twice a year

(before 15 February and 15 August) to have those items in the subsequent phases of CEPA.

• DSE will enter into consultations with the Customs

General Administration on the rules of origin for the products upon confirmation by the Ministry of Commerce.

• The two sides shall promulgate the relevant rules of
• rigin (before 01.06 and 01.12 each year).
• Mainland shall (no later than 01.07 of the same year

and 01.01 of the following year respectively) apply zero tariff treatment to these products.

• 3. CEPA Supplements

For products not covered under CEPA, it is always possible to take advantage of CEPA as an open agreement:

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• Macao manufacturers are required to submit

information on their production facilities and

• ther details of the products to the Certificate
• f Origin Issuance Division of DSE - Macao

Economic Services (1st step)

• Upon verification, the applicants may then

submit to the Division the properly completed “CEPA CO Application Form”, “CEPA Specific CO” and the original and duplicate of related business invoices (2nd step)

• 4. Requirements for CEPA

Certification of Goods

For CEPA, the administrative procedures for claiming zero tariff benefits are:

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• 3 years of substantive business operation in

Macao » For certain activities the min. is 5 years

• Commercial registration
• Relevant certificates issued by professional

bodies

• Other required documents » for activities or

providers under license

• 4. Requirements for the CEPA Certification for

Service Suppliers

Requirements for obtaining the MSS Certificate (Annex 5 of CEPA 2003):

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• Company can be recognized as Macau Service Supplier

(“MSS”) only when it has engaged in substantive business operations in Macau for 3 years

• Substantive business operations are defined as 3

consecutive years of business activities

• The criteria above are established by Annex 5 of CEPA,

and supported by documents such as:

• Commercial Certificate issued by Macau Companies

Registry

• Receipts of Corporate tax payments
• Certificate of ownership of rental agreement of

business premises

• At least 50% of the payroll comprised by Macau

residents

• 5. Formal vs. Material Requirements

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• 6. Expiry of Certification and Renewal Procedures

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• CEPA License has a validity of 2 years
• 2 weeks prior to expiry date, license must be

renewed, in order to maintain the same (a longer license or an automatic renewal process are not available)

• CEPA certificate (for the same business

activity of the license) may only be applied during the 90 days period upon the license issuance

• 6. Renewal Procedures

Execution of the Declaration by the applicant should be certified in Chinese

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i. by a Macau Government Notary or ii. by one of the five Macau Notaries officially recognized by the Chinese Authorities; and

• iii. further verified, examined and sealed by

China Legal Services (Macao)

• 6. Renewal process

The license holder shall submit the following documents:

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i. Certificate of the Macau Services Supplier (MSS) Application ii. Copy of the Applicant identification document

• iii. Copy of the first services supplier

certificate granted to the license holder

• iv. Declaration(s) dully filled and signed by the

applicant, one for each number of Certificate of MSS that the license holder intends to request

• 7. Dual Challenges

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For Macau Manufactures (MM) there will be mostly commercial challenges:

• a distributor has to be selected and appointed or
• a distribution network has to be set up;
• Right commercial contacts or partners;
• right pricing and marketing strategy;
• targets markets to be researched and identified.

• 7. Dual Challenges

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BUT for a MSS PRIOR to this there will be other issues:

• To set up a proper office structure in mainland China;
• to retain people both locally and from outside mainland

China;

• to handle certifications from various authorities of

mainland China, namely at provincial level;

• to comply with all regulatory requirements of the

specific service industry; PLUS The commercial challenges

• 8. Corporate Acquisitions

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• MSS is partially acquired by or merged with a foreigner

services supplier (more than 50% of the share capital);

• Interruption of one (1) year after the acquisition will

MSS status be reinstated;

• If acquisition is below 50% threshold, CEPA license

shall remain valid and unaffected upon acquisition;

• If MSS shareholding is taken by another Macau or

mainland China corporation (which eventually becomes the majority shareholder), such fact is not relevant for CEPA

• 8. Corporate Acquisitions

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• CEPA essentially allows for foreign investors to

benefit from Macau as a springboard to the mainland market IF:

• The foreign investor identifies a local Macau

partner with a suitable strategy and size for the mainland market and

• The investor complies with the 50% threshold,

with other shareholder retaining control of the MSS or MM

• Maintenance of CEPA status implies continuity of

Macau operations

• If Macau operations are suspended for a significant

period, MSS will be prevented from producing renewal documents

• Mainland operations could be jeopardized by

problems affecting Macau operations

• The Macau base (“root”) has to stay healthy
• 9. Business Suspension

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• Often CEPA is our additional certification but

not an effective offer or provision of services in mainland China

• A local partner (in mainland China) is

sometimes necessary to know the market better and overcome the legal or regulatory requirements

• A foreign partner might also be necessary to

bring the know how and or the capital required for a venture in a new and bigger market

• many applicants keep CEPA certification while
• n hold for market or business opportunities
• 10. Experiences of MSS

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• Since January 2004 to October 2011, 415 MSS

supplier certificates were issue

• MSS require additional assistance in

identifying legal hurdles in mainland China

• Information channels, help desks and qualified

consultants are essential to help MSS in knowing better the mainland framework and

• vercoming any regulatory and administrative

hurdles in mainland China

• Not strictly a Government project, but Macau

and mainland China Governments shall develop joint efforts for this second wave

• 11. Final Remarks

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Thank You!