HONG KONG - BOATING EQUIPMENT AND SUPPLIES - ISA9306 SUMMARY This article titled: "The Boating Equipment and Supplies Market in Hong Kong", dated June 1993, was prepared by Willien Ha, American Embassy - Hong Kong. The article consists of 19 pages and contains the following subtopics: OVERVIEW STATISTICAL DATA MARKET ASSESSMENT BEST SALES PROSPECTS COMPETITIVE SITUATION MARKET ACCESS TRADE PROMOTION OPPORTUNITIES A. OVERVIEW Sector Summary Boating in Asia Pacific waters, or "Asia's Caribbean", remained firmly in the world industry spotlight during 1992-1993 as increasing numbers of North American, South American, European and Australasian builders set up sales networks in this fast-growing sector. Two-thirds of the world's population live in Asia's Caribbean, and increasing wealth led by Japan and then the so-called "four tigers" of Korea, Taiwan, Hong Kong and Singapore is filtering down through class levels and rubbing off on neighboring countries which are themselves now experiencing economic upturns. Leisure time is a right, sporting lifestyles an achievable expectation, and watersports are suddenly in vogue. In 1992, Hong Kong had a total import market of US$ 31.2 million worth of boating equipment and supplies. The USA had a big share, holding up 47.6 percent (US$ 14.85 million) of the import market. Ninety-one percent of this US$ 14.85 was for the import of outboard motors. As compared to the 1991 figure, there was a drop of 36 percent in the import of outboard motors, mainly as a result of new legislation aimed at restricting large engines. Please refer to section (E) below for detailed explanations. Subsector Summary Hong Kong is an island and is surrounded with pleasure boating harbors. While most of the pleasure boats are locally constructed "junks", these boats are generally equipped with a wide variety of modern accessories, where American manufacturers excel. American made motors are also in heavy demand. Up-scale pleasure boats also constitute a small, but highly lucrative market. Hong Kong itself has experienced mixed fortunes since Tiananmen Square, which sparked a massive middle-class exodus to Canada and Australia and depressed the boat market. Large infrastructure projects, such as the new airport, mean an influx of multi-national engineers and construction executives who are historically inclined to buy boats during their stay. Many emigres are returning with their "safety valve" passports, and massive industrial investment in Southern China, particularly by Hong Kong and Taiwanese businessmen, seems likely to make the China Coast the world's economic dynamo this decade. Demand to support this development is already strong, spearheaded by sales of modern commercial ferries and inter-island craft that now ply between Hong Kong, Macau and various Pearl River ports in the hinterland. Heavy car and truck traffic gets clogged at the Hong Kong-China border, and ferry timetables are not always convenient, so new-breed businessmen have begun turning to private motor yachts, nicely tax-deductible, to fulfil their needs. For the purpose of this Industry Subsector Analysis report, a number of subsector products were selected for the study. The selected products are outboard motors, radar apparatus and navigational aid apparatus, and other navigational instruments and apparatus such as sonar, echo sounder, fish finder, aquameter, speedometer, fuel gauge sensor, direction finder, GPS receiver, radar, VHF transmitter, etc. Please note that every effort has been made to identify statistical data related to marine (specifically pleasure craft related) use only, but census figures available are gathered in accordance to the "make" of the product, rather than to their use. Besides that when the boating equipment and supplies are imported into Hong Kong, the importers did not specify in great detail the goods imported. Sometimes the items are merely grouped into categories as "other navigational instruments" without identifying statistics for each item. Therefore, statistics indicated below are estimates for reference only. B. STATISTICAL DATA Boating Equipment & Supplies (U.S. Dollars Million) (% Gain/Loss) Est. Avg. Ann. Growth Next 3 Year 1990 1991 1992 Years Import Market 27.92 33.91 31.20 +10% Local Production 5.30 3.45 4.20 +5% Export 4.58 3.04 3.65 +5% Re-Export 13.44 15.86 23.00 +10% Total Market 15.20 18.46 8.75 +10% Imports from U.S. 19.14 21.06 14.85 +10% Exchange Rate 7.75 7.75 7.75 Future Inflation Rate Assumed: 11% 1992 Import Market Share USA Japan Italy U.K. 47.6% 39.8% 9.0% 8.0% Receptivity Score (1-5): 3 The receptivity score (5 means extremely receptive) reflects the degree of satisfactory performance of the U.S. manufacturers. The reason for the rating mainly lies in the competitive price of the boating supplies and equipment. C. MARKET ASSESSMENT Market Demand. In 1992, a total of 5,461 pleasure boats were registered with the Marine Department. A detailed breakdown of the number of vessels by type and length are indicated below. The purpose of this chart is to give the readers an idea of the number of pleasure vessels registered in Hong Kong. Through the figures, U.S. manufacturers will have a better picture of the size of the Hong Kong market, in terms of the number of vessels and need for boating equipment and supplies. No. of Vessels Registered with Hong Kong Government Marine Department (1992) Length Type (in meter) Yacht 5 6 7 8 9 0 Total Under 5 4 3 4 13 1,235 12 1,271 5 - 8 82 119 143 44 1,408 35 3 1,834 8 - 11 148 98 289 17 44 68 11 675 11 - 14 81 48 381 1 3 282 5 801 14 - 17 32 29 303 1 177 542 17 - 20 5 4 162 78 249 20 - 23 2 46 1 1 3 53 23 - 26 15 2 17 26 - 29 6 2 8 29 - 32 5 5 32 - 35 1 1 2 35 - 38 38 - 41 1 1 41 - 44 Over 44 1 1 1 3 Total 355 303 1,356 75 2,692 658 22 5,461 Note: Yacht refers to pleasure crafts whose owners register their license no. through the various yacht clubs in Hong Kong Type #5 refers to auxiliary powered yacht Type #6 refers to inboard engined launch or motor cruiser Type #7 refers to outboard engined launch or motor cruiser Type #8 refers to inboard or outboard engined run-about or ski-boat Type #9 refers to inboard or outboard engined junk, locha or native craft Type #0 refers to inboard or outboard powered catamaran or trimaran In 1990, Hong Kong imported a total of 118 motorized pleasure boats with 22 vessels from the U.S. The U.S. took up 14 percent (US$ 3.64 million) of the total import market (US$ 26 million). The following year, U.S.'s share was 18 percent (US$ 5 million) of the total import market of US$ 27.5 million. In 1992, the Hong Kong Government modified the "Imports and Exports Classification List" from the previous edition (1988) upon full adoption of the harmonized system. The statistics showed that a total of 648 sailboats (non inflatable), non-inflatable rowing boats, and canoes, and vessels for pleasure or sports were imported into the colony. These imports accounted for US$ 36.7 million with U.S. taking up 19 percent (US$ 6.9 million) of the total import market. The overall statistics show that Italy is U.S.'s main competitor in terms of high end pleasure crafts while Taiwan dominates the low end market. It is important to note that most Taiwan manufactured vessels use American engines and accessories. End-User Profiles. As mentioned above, large infrastructure projects, such as the new airport at Chek Lap Kok, mean an influx of multi-national engineers and construction executives who are historically inclined to buy boats during their stay. Hong Kong has long been an important regional center in the Asia-Pacific region. Its central location and excellent external communication links have made Hong Kong attractive to overseas companies not only for business, but also as a convenient base from which to supervise other offices in neighboring countries. With the significant economic development in the Asia-Pacific region in recent years, Hong Kong's regional role has become increasingly important. A recent survey conducted by the Hong Kong Government Industry Department identified 1,345 regional representatives by overseas companies in Hong Kong. They include 588 regional headquarters and 757 regional offices. The U.S. has the largest number of regional headquarters in Hong Kong, with 206 companies, followed by Japan (74 companies) and the UK (73 companies). The major lines of business of the regional headquarters included wholesale, retail, import and export activities, followed by real estate and business services, manufacturing and finance and banking. The multi-national companies, large trading companies, banks and financial companies are end-users of medium-priced and up-scale pleasure boats. Pleasure boats are bought as symbols of wealth and fortune, as entertainment tool for business contacts, and as recreational benefits for staff. These end-users also tend to have large offices and budgets. They are image conscious and have a comparatively high portion of Western employees, with a preference of high quality pleasure boats and boating equipment. The political uncertainty of Hong Kong after 1997 caused an exodus of wealthy, learned upper and middle class Hong Kong citizens to flee to advanced countries such as USA, Canada, Australia. Many emigres are returning with their "safety valve" passports. These are also another group of end-users of the boating industry. D. BEST SALES PROSPECTS Outboard Motors (HS 84072100) (U.S. Dollars Million) (% Gain/Loss) Est. Avg. Ann. Growth Next 3 Year 1990 1991 1992 Years Import Market 23.51 26.18 21.11 +10% Local Production 5.30 3.40 4.20 +5% Export 4.58 2.99 3.65 +5% Re-Export 10.76 10.79 14.77 +10% Total Market 13.47 15.80 6.89 +10% Imports from U.S. 18.55 20.01 13.56 +10% Exchange Rate 7.75 7.75 7.75 Future Inflation Rate Assumed: 11% 1992 Import Market Share USA Japan Belgium China 64% 33% 2% 1% Radar Apparatus (HS 85261000), Radio Navigational Aid Apparatus (HS 85269100) (U.S. Dollars Million) (% Gain/Loss) Est. Avg. Ann. Growth Next 3 Year 1990 991 1992 Years Import Market 2.97 4.50 4.58 +10% Local Production 0 0 0 +0% Export 0 0 0 +0% Re-Export 1.89 2.66 4.34 +10% Total Market 1.08 1.84 0.24 +10% Imports from U.S. 0.29 0.58 0.49 +10% Exchange Rate 7.75 7.75 7.75 Future Inflation Rate Assumed: 11% 1992 Import Market Share Japan USA U.K. Taiwan Other 63% 11% 10% 4% 12% Other Navigational Instruments & Apparatus (HS 90148000) (U.S. Dollars Million) (% Gain/Loss) Est. Avg. Ann. Growth Next 3 Year 1990 1991 1992 Years Import Market 1.44 3.23 5.51 +10% Local Production 0 0.05 0 0% Export 0 0.05 0 0% Re-Export 0.79 2.41 3.89 +10% Total Market 0.65 0.82 1.62 +10% Imports from U.S. 0.30 0.47 0.78 +10% Exchange Rate 7.75 7.75 7.75 Future Inflation Rate Assumed: 11% 1992 Import Market Share Japan USA Italy Norway Other 47% 14% 13% 6% 20% E. COMPETITIVE SITUATION Domestic Production. According to statistics available from the Hong Kong Trade Development Council, 1991 recorded 429 establishments in the local ship building industry, with 7,184 employed in this industry. Pleasure/sport yachts and cabin cruisers are major export items of Hong Kong's ship building industry. In 1991, Hong Kong exported 42 motorized pleasure crafts valued at US$ 11.2 million and 103 non-motorized pleasure crafts worth US$ 593,000. Hong Kong also manufactures workboats for local users, including trawlers for fishing; dredgers, barges and landing crafts for cargo-handling; fire-fighters, police/customs' patrol boats. Ships produced include passenger coasters such as ferries and catamarans. Hong Kong companies have also set up manufacturing bases in China to produce ocean-going liners and container ships. Local boat builders fall into two categories. One, the traditionalists who use wood hull construction methods and build junks. Two, yards which use modern hull construction techniques using fiberglass and steel for the production of high unit value motor cruisers. The traditional Chinese junk, the backbone of the local boat building industry, only recorded sales of US$ 2.37 million in 1990. Hong Kong boat builders have seen the bottom knocked off their business by inexpensive imports from Taiwan, Thailand and the Philippines and quality yachts from Europe. About 80 percent of the boat/shipyards are small establishments having 10 or fewer employees, majority of which are repairers servicing local fishing boats and pleasure crafts. There are only 10 shipyards employing more than 100 workers. They are mostly boat/ship builders as ship building is a very labor intensive industry requiring highly specialized technicians. Hong Kong mainly manufacturers boats of 10 to 20 meters of length. Though it is technically feasible to custom-build boats of up to 70 meters, space of most shipyards is not sufficient for large ship fabrication. Most boats are made of glass reinforced plastic (GRP), a lighter and more durable material. Large boats, however, must have steel bodies of sufficient strength. Pleasure crafts are mainly exported to the U.S. and EC, where Taiwan is the major competitor. Hong Kong's cruisers are superior in design and quality. Boats are usually custom-built to end-user' specifications. Hong Kong also produces parts and accessories for pleasure crafts. Windsurf sails, outboard engines and stern drives are produced for local, Asia and the U.S. markets. Imports. As noted above, Hong Kong's main source of pleasure boats are imported from Italy (high-end), Taiwan (low-end) while the U.S. takes the lead in the middle range. U.S. dominated Hong Kong's import market of outboard motors. This is interesting to note that in 1990, 1991 and 1992, some 19 percent, 26 percent and 25 percent respectively of these outboard motors were re-exported to China. Incidentally, in the past few years, there were reports on the successful and unsuccessful capture of U.S.'s version of "rum runners", caught smuggling stolen vehicles and others consumer goods, such as audio visual equipment, cigarettes, small home appliances from Hong Kong into the China. These rum runners (or nicknamed "Dai Fai" in Chinese) were equipped with powerful outboard motors that often beat the speed of the local coastal guards. As a result, the Marine Department issued notice (dated June 1990) announcing that the horse power rating of all pleasure boats fitted with more than one outboard engine cannot exceed 448 kilowatts (600 horse power). Exemptions for licenses issuance will only be granted in certain circumstances. Similar rules apply for fuel tanks: the fuel tanks of such pleasure vessels cannot exceed 817 liters (180 gallons) without the prior approval of the Director of Marine. Japan took the lead (90 percent) in exporting direction finders (DF) into Hong Kong while USA's Loran sea system dominated the market of radio navigational aid apparatus (80 percent). As for radar, Japan dominated the market by supplying 90 percent of the radar equipment for Hong Kong's market while the USA took up 5-8 percent of the pie. In areas of other marine electronics, the USA held 70 percent of the GPS receiver market while Japan took the remaining 30 percent. In the area of "other navigational instruments" such as sonar, fish finders, depth sounders, countries like Japan (40 percent), Taiwan (25 percent) and USA (25 percent) dominated Hong Kong's import market. As for VHF transmitters, Japan imported 50 percent of Hong Kong's needs while the rest of the market was shared by the USA (20 percent), the U.K. (15 percent) and Taiwan (5 percent). U.S. Market Position & Share. In terms of shipping of pleasure crafts into Hong Kong, interviews with leading importers of pleasure crafts indicated that as a result of the worldwide recession, U.S. manufacturers have cut their production. For example, the USA used to offer 10 production lines with pleasure crafts of different sizes. Now they only keep 2-3 product lines to hang on. Therefore, to the consumers, there are not many choices to choose from. As mentioned above, the USA took the lead in the export of outboard motors to Hong Kong. The USA took up 64 percent of Hong Kong's import market. Japan followed closely by taking up 33 percent of the import market. As for radar and navigational aid apparatus, major boating equipment and accessories importers indicate that it was a tug of war between the U.S. and Japan, each holding about half of Hong Kong's import market. But as for "other navigational apparatus", Japanese manufactured products are more popular. Competitive Factors. The most important competitive factors for the industry are price, quality and service. Interviews with local companies indicate that U.S. suppliers are generally ignoring their export market. A consensus opinion is that U.S. manufacturers are not responding "quickly" enough for their agent/distributors and/or customers. A possible answer to this phenomenon is that when compared to the U.S. domestic market, Hong Kong's market is viewed as being relatively small. Therefore, if U.S. suppliers want a greater share in this market, they should be more responsive and competitive with their counterparts, such as Japan, U.K., Italy, etc. Japan is the major competitor for the U.S. because it serves the mid market which is dominated by U.S. firms. Besides that, the proximity of Japan to Hong Kong enhances Hong Kong companies to find Japanese companies to fulfil their rush orders. The success of the industry also rests largely on the collective ability to anticipate and respond to the changes presented in an increasingly demanding and competitive marketplace. A substantial commitment to provide more timely assistance to consumer questions and concerns will be helpful. F. MARKET ACCESS Import and Export Regime Hong Kong is a free port and one of the world's best examples of an "open market economy". Hong Kong is a member of GATT in good standing. There is no legislation or practice which restricts access to the Hong Kong markets by foreign exporters or which mandates preference for locally manufactured products. Hong Kong companies (and the Hong Kong Government itself) do not have any predisposition to any one supplier--and are far more inclined to purchase based on the terms of price, delivery, quality and service. Import duties are levied only on tobacco, alcoholic liquors, methyl alcohol, some hydrocarbons, and nonalcoholic beverages. A modest declaration charge and an assessment of 0.05 percent is made on imports and exports to fund the Hong Kong Trade Development Council. Technical and safety standards are not used as a political or trade control mechanism, and they are normally accommodated with little difficulty. The Hong Kong Government imposes restrictions on the export of high-technology products to COCOM-proscribed countries, such as the People's Republic of China. Restrictions on trade with China were relaxed significantly by the United States in 1991. Textiles are subject to import and export licensing because of the territory's obligations under agreements with the USA and other countries. The import of munitions, firearms and fireworks is strictly forbidden. Useful contact: Customs and Excise Department 8/F, Harbour Building 38 Pier Road Central Hong Kong Tel: (852) 852-3324 Fax: (852) 542-3334 Marine Department 21st Floor Harbour Building 38 Pier Road Central, Hong Kong Tel: (852) 852-3001 Fax: (852) 541-7194 Guidelines for Selecting an Agent or Distributor in Hong Kong One of the best ways to sell products in the Hong Kong market is through the use of agents or distributors. An agent takes orders in your name. Distributors act in their own name, and may stock products purchased from you for resale. The choice of whether to use an agent or a distributor depends on your business, and the type of relationship with which you are the most comfortable. You may also find that your local distributor has good contacts in China, which can be used to expand your sales to this enormous market. Working with agents and distributors in Hong Kong is very much like working with an agent in the United States. Hong Kong uses British common law as the basis of its legal system, and unlike many other countries, has no special legislation regarding agents or distributors. Any contract which does not contain illegal or unconscionable provisions is allowed. In other words, virtually anything you can agree to with your agent, and put into a written contract, is acceptable and enforceable. There are no restrictions on territory, nor any requirements for a notification grace period upon termination of the agency agreement. Because of the similarities of Hong Kong law to US practices, FCS Hong Kong does not recommend any text for an agency agreement. You may use an American text, or simply draw up your own agreement. As with any understanding, the more complex the contract, the more likely it will be that you will need legal counsel in drafting the text. This has nothing to do with any special complexities of Hong Kong law, however, but simply the necessity of clarity in legal documents when large sums of money are involved. The types of agents and distributors you will find in Hong Kong are very similar to those found in the United States. You will find "rack jobbers," who simply stock retail stores with standard items. There are also stocking distributors, who generally require higher commissions than other agents, but since they buy for their own account your risks in international sales are lower when dealing with them. You will also find agents who provide sales, engineering and technical support for complex systems. Regardless of the type of agent you are seeking, Hong Kong has a plethora of qualified individuals and companies. Americans are often surprised by the diversity of the business sectors seen on the business cards of Hong Kong agents. It is not uncommon for a company to deal in a wide variety of products--everything from chicken parts to airplane parts. This is often quite distressing to Americans, who expect their distributor to "stick to the knitting." Although it is a good idea to make certain that a potential distributor has experience in the specific sector of interest to your company, you should not be overly concerned when local distributors are widely diversified in the sectors in which they sell. This is completely in line with Hong Kong custom and practice. Often the managing director of a company will want to list all businesses with which he or she is directly affiliated. Each of these businesses will be discrete units, with specialized management and salespeople. In some cases, each division will be led by a family member, who will have specialized schooling or skills. Where a member of the younger generation would form an independent company in the United States, it is common practice in Hong Kong for a child to retain an affiliation with the parent. Because of this practice, the companies may appear to be more widely diversified than their US counterparts, although this difference is more form than substance. One area in which Americans may have trouble with distributors in Hong Kong is with their perception of the loyalty of their local agent. Americans have complained that as soon as they get an agent trained, he or she either drops them, or leaves them for a competitor's product, taking the client list with them. This is a problem which should not be underestimated, and one where American exporters must take preventative action prior to signing a contract. FCS Hong Kong offers the following advice: 1. Be careful about granting an exclusive agency too soon. Before you agree to exclusivity, have either very good references on your partner, or some experience. Some Americans have found that the local agent wants an exclusive agreement to BLOCK the sale of the American's product in the market. This occurs when the agent already represents a competitor, and wants to keep competition to a minimum. 2. Be cautious about how much technical information you give potential agents before you have had sufficient experience with them. Intellectual property is often difficult to protect, and the copying of products is endemic in Asia. Be very careful of any potential agent who requests too much technical information, drawings, or specifications before an agreement is signed. Supply technical data in increments, as your negotiations on the agency agreement progress; not giving too much, but sufficient to determine the capability and sincerity of your potential partner. Theft of intellectual property is prohibited by local law, but prevention of piracy is less expensive and more effective than retrospective legal action. 3. Pay close attention to your agent in the first few months of the agreement. Make certain that there is an appropriate level of sales activity after an agreement is signed. Although individual markets develop at differing rates, monitor the progress toward sales of your product to assure it is progressing at the appropriate rate. If you do not see sufficient progress, take immediate action. Warn your agent that you want more activity, and terminate the agreement if nothing happens. Make sure your agreement specifies how much activity should occur, and include remedies, such as a probation period, in which you can terminate the agreement for cause. 4. Make certain that your agreement contains provisions restricting the agents' activities in your industry sector after termination of the contract. This is to prevent the agent from simply using the time with you to become trained in the technology, and to acquire a client list. Covenants can be included in an agency agreement which prohibit the agent working in the same industry for specific periods of time after the contract is terminated. By following these steps you can find, as have hundreds of other American companies, that working with an agent or distributor in Hong Kong can be an effective way of doing business. Getting paid The preferred method of quoting is "cif" or "c and f" in HK$. U.S. and other freely convertible currencies may be accepted for bids and pro forma invoicing. Terms of payment depend on the relative negotiating strength of the buyers and sellers. US suppliers should seek to obtain letters of credit or sight draft terms when dealing with buyers who are not well known to them. Asking for a letter of credit is a standard business practice, and your potential customer will not interpret this as a sign of mistrust. The Consulate General does not enter directly into trade disputes between American and Hong Kong commercial parties. The Hong Kong Foreign Commercial Office can furnish the names of Hong Kong law firms if the need arises. Hong Kong is the region's leading finance center with 163 fully licensed banks (20 with American ownership). Letters of credit, document collection and international remittance are widely available. All licensed banks are authorized to provide loans to residents and nonresidents. Risk of financing receivables can be readily evaluated via locally available credit information. Prospective exporters should make use of banking relationships to determine credit risk. The importance of trade finance to the territory has resulted in a high level of bank efficiency in providing import payment services. The local currency, the Hong Kong dollar (HK$), is freely convertible and there are no regulations that hamper inward or outward remittance of capital or profits. Currently the HK$ is pegged at 7.78 to the US$ and has fluctuated little since the inception of the linked rate policy in 1983. Selling to the Hong Kong Government The Hong Kong Government Supplies Department (GSD) is responsible for the procurement of goods and services required by the government. The GSD will usually purchase by open tender, with decisions based on price, quality and delivery. "Selective tender" and "single tender" are rare. The GSD gives no preference to any particular source of supply from any country or organization. American companies now enjoy a 33 per cent market share of GSD purchases, which approached US$ 1 billion in 1992. Tenderers have six weeks to prepare their offers. Tenderers are urged to submit offers with at least a 30-day validity period. Payment is usually effective by check within 30 days of delivery. All tenderers can receive an assessment of their bids, successful or not. Total bid prices and names of the successful tenderers are published weekly in the Government Gazette. For information about a subscription to the Government Gazette, contact: Mrs. Ruby Kam Information Officer Publication Sales Office Government Information Services 1 Battery Path Central Hong Kong Tel: (852) 842-8802 Fax: (852) 537-1543 Potential suppliers must first be prequalified with the GSD. To become a "Registered Supplier" and regularly receive the GSD's tender notices, companies must provide background information about the goods that they offer. The GSD evaluates this information and selects qualified suppliers for inclusion on its register. To contact the GSD: 12 Oil Street North Point Hong Kong Fax: (852) 807-2764 Tel: (852) 802-6102 Tlx: 61675 HKGSD HX Trademarks Trademarks are registered in Hong Kong under the Trade Marks Ordinance, which is based on Britain's Trade Mark Act of 1983. Every trademark, even if already registered in the USA, UK or elsewhere, must satisfy all the requirements of the Hong Kong Ordinance before it may be accepted for registration in the territory. Only owners of registered trademarks may sue for infringement. Trademarks for Services The Intellectual Property Department of Hong Kong allows registration of trademarks for services (also known as "service marks"). Trademarks used to identify services such as banking, advertising, insurance, construction, transportation and retail sales services (such as retail trade names) can be registered on the Trade Marks Register and enjoy the near monopoly protection accorded registered trademarks. In the case of a conflict between two applications for an identical or similar mark for similar services, the registrar will give priority to the application filed earlier. Consequently, companies, partnerships and individuals in service industries are advised to apply to register their valuable trademarks immediately. The registration process will probably take from one to three years. Patents Hong Kong does not provide for the original grant of patents. A grantee of a British patent or a European patent with a British designation may apply within five years of its date of issue for re-registration in Hong Kong. Copyright The Copyright Ordinance protects every original literary, dramatic, musical or artistic work with an author who was domiciled or resident in Hong Kong or in a Berne Convention country when the work was made or first published. The law covers software as a literary work. Enforcement of the ordinance is vested in the Customs and Excise Department and has been historically vigorous. Designs Any person who has registered a design in Britain enjoys the same rights as if the certificate was issued in the UK with an extension to Hong Kong. Automatic protection for original designs without registration is also conferred by the Copyright Ordinance (1973). Passing Off Owners of unregistered trademarks may not sue for infringement of those marks. They may sue in "Passing Off", a common law tort, unique to British law, which requires the trademark owner to prove acquired reputation in the mark and actual damage caused by se of the mark by the other party. Useful contact: Director of Intellectual Property 15/F, Queensway Government Offices 66 Queensway Central Hong Kong Tel: (852) 867-2817 Key Contacts: A.A. Company 1st Floor SPA Centre 53-55 Lockhart Road Wanchai, Hong Kong Tel: (852) 529-7202 Fax: (852) 861-3644 The Boatique Shop 10-11, Ground Floor Aberdeen Marina Building 8 Shum Wan Road Aberdeen, Hong Kong Tel: (852) 555-9355 China International Trading Enterprise 236 Aberdeen Main Road 21st Floor Aberdeen Industrial Building Aberdeen, Hong Kong Tel: (852) 552-0178 Fax: (852) 873-00679 Concord Ltd. Ground Floor 19-21 Wing Lok Street Central, Hong Kong Tel: (852) 543-3118 Dodwell Engineering - Engine Dept. 10th Floor, Tower 2 Metroplaza 233 Hing Fong Road Kwai Fong, New Territories Hong Kong Tel: (852) 410-6545 Fax: (852) 401-2507 Faithful Marine Company 24 Po Chong Wan Shum Wan Road Aberdeen, Hong Kong Tel: (852) 554-1541 Fax: (852) 873-1893 Far East Yacht Specialists Ltd. 3rd Floor, Hong Kong Diamond Exchange Bldg. 8-10 Duddell Street Central, Hong Kong Tel: (852) 525-7015 Fax: (852) 877-2222 MAS Marine Ltd. 107 Hutchison House Murray Road Central, Hong Kong Tel: (852) 526-5359 Fax: (852) 868-0087 Megayacht Marine Suite 1407, 14th Floor Dah Sing Financial Centre 108 Gloucester Road Wanchai, Hong Kong Tel: (852) 598-5033 Fax: (852) 498-4008 Mustang Marine Co. B9 Marina Cove Arcade Ho Chung, Sai Kung Hong Kong Tel: (852) 719-0720 Fax: (852) 358-0179 New Town Marine Ground Floor 168 Gloucester Road Wanchai, Hong Kong Tel: (852) 893-1838 Fax: (852) 893-6996 OMC Asia 35-47 Tsing Yi Road Tsing Yi Island New Territories, Hong Kong Tel: (852) 431-2210 Fax: (825) 433-0185 Ronsil Development Ltd. 703 Hung On Mansion 177-181 Jaffe Road Wanchai, Hong Kong Tel: (852) 511-7819 Fax: (852) 507-5489 Simpson Marine Ltd. Aberdeen Marina Tower 8 Shum Wan Road Aberdeen, Hong Kong Tel: (852) 555-8377 Fax: (852) 783-4014 South China Marine Unit 2, Ground Floor, Aberdeen Marina Tower 8 Shum Wan Road Aberdeen, Hong Kong Tel: (852) 814-0555 Fax: (852) 873-5689 Thunderbird Marine Ltd. Lot 18, Tao Fung Shan Road Shatin, Hong Kong Tel: (852) 604-7582 Fax: (852) 694-8768 1997 and the Future of Hong Kong At midnight, on June 30, 1997 Hong Kong will become a "Special Administrative Region" (SAR) of the People's Republic of China. The treaty between Great Britain and the PRC which created the SAR of Hong Kong guarantees the future existence of the current territory as a capitalist enclave until at least the year 2047. The Chinese speak of "one country, two systems," which has become the standard way of describing what is anticipated in Hong Kong after 1997. A similar system has been negotiated for the Portuguese colony of Macau, with the transition taking place in 1999. While it is impossible for anyone to predict the future of Hong Kong with certainty, current indicators suggest that the People's Republic of China will abide by the Hong Kong Accords. The reasons for this optimism are as follows: 1. The PRC has invested heavily in Hong Kong. In fact, the PRC is the largest investor in the territory (estimated US$ 15 billion). This investment is predicated on the assumption by the PRC Government that their capital will continue to generate income well beyond 1997. The PRC has been profiting from its Hong Kong investment for years, and there is no logical reason to assume that they would now want to destroy this source of income--especially at a time when Hong Kong "belongs to them." 2. China needs Hong Kong's infrastructure to sustain its current policy of fostering economic growth. Indeed, the growth targets set by the PRC Government would be utterly impossible without the use of Hong Kong's banks, trading companies, and the container port facilities. Over 60 percent of all Chinese exports flow through the port of Hong Kong. 3. The current PRC leadership has pointed with pride to the economic growth of the southern regions of China, indicating that this is a model for the rest of China. This growth is a direct result of Hong Kong investment and management. Hong Kong has created over 3,000,000 jobs in southern China through its investment over the last few years. To explain this, a Chinese Communist leader was quoted as saying, "Just because capitalists use a certain method to run their economy, doesn't make it a capitalist method." The liberalization of China has been based on Hong Kong models, with this likely to continue. 4. Historically, the PRC has never taken actions which were specifically designed to damage Hong Kong business interests. Even during the depths of the cultural revolution in China, Hong Kong was considered "off limits." There is no indication that this is going to change. If one were to paint the most likely post-1997 scenario, given current economic and political indicators, it would be of Hong Kong continuing as it is today. Most observers agree that there may be certain areas where the inexperience of Chinese administrators may cause a deterioration of some services, although this will be gradual, and without a substantive effect on the overall functioning of business. A second scenario, which is not considered the most likely, must be contemplated: A political and economic status quo in Beijing underlies most predictions about the future of Hong Kong. While it is conceivable that this could occur over the next few years, forces for reform in China are gathering strength. The situation remains very volatile, but if economic reformers achieve a dominant position in PRC politics, the cloud hanging over Hong Kong's future could dissipate very rapidly. With Chinese society achieving political openness, an improvement of human rights, and adherence of the PRC government to conventions regarding the proliferation of weapons of mass destruction, the entire picture for Hong Kong could radically change for the positive. A drastic reform in China, coupled by acceptance of these reforms by the United States and Europe, could leave Hong Kong as the model for the entire Chinese society. The current boom in Hong Kong would be expanded exponentially to meet this challenge. Although few observers see this as the most likely scenario, the possibility of reform in the PRC positively affect Hong Kong should not be dismissed. If recent signs from the 14th Party Congress are any indication, a strong reform movement in China appears to be gathering strength. Companies interested in the Hong Kong market should watch the political and economic changes in China very carefully, since the vitality of Hong Kong is directly tied to China's future. Reliance on newspaper accounts, which often prefer reporting on negative or sensational developments, should be counterbalanced with other sources of information. Far too many American companies are currently avoiding Hong Kong out of a misguided fear of the developments slated for 1997. This risk of missing a profitable opportunity must be counterbalanced against the political risk presumed for 1997. Since selling in Hong Kong generally does not require a huge commitment of funds, because of the possibility of using agents and distributors, few companies should avoid Hong Kong out of fear of losing assets through the changes due in 1997. We urge potential exporters to give Hong Kong more than a cursory evaluation when assessing the market potential of various Asian countries. G. TRADE PROMOTION OPPORTUNITIES Many promotional vehicles are open to suppliers to introduce and develop their services in the Hong Kong market. These include: - special trade fairs and exhibitions - advertising in the media and other public relations activities - holding seminars - in-store promotions - joint promotions with wholesale and retail outlets Hong Kong is a major conference and exhibition center. Hundreds of international exhibitions are held annually. The Hong Kong Conference and Exhibition Center has 180,000 square feet of exhibition space and will soon be expanding. Television is a widely used medium with an estimated daily audience of 5.27 million out of a population of 5.8 million. As one of the largest centers in the world for Chinese language publications, the territory produces 600 publications, including 51 Chinese newspapers and 2 English daily newspapers. Advertising agencies, including many of international standing, offer a full range of services. Suppliers should provide technical catalogs in English, and desirably in Chinese, for distribution to agents and firms. Company brochures are particularly useful when visiting Hong Kong for the first time. English-Chinese business cards are a must. Conferences and exhibitions scheduled within the next 24 months include: Hong Kong Boat Show 1993 26 February 1993 - 1 March 1993 Club Marina Cove Clear Water Bay, Hong Kong (Promotion Consultant) Media Services 1102-3 Hennessy House 313 Hennessy Road Wanchai, Hong Kong Tel: (852) 893-9672 Fax: (852) 838-1875 Theme: A display of sailboats, motor yachts, fishing boats, sports fashion shows, marine gear, ski boats, sport cruisers and outboard engines. NOTE: As of publication date, two rival marina clubs that offer berth facilities are contemplating doing their own boat show in 1994. Therefore no definite date has been set confirmed for next year's show. Trade Journals: Asian Boating (Asian Sports Publications Group) Sai Kung P.O. Box 116 Hong Kong Tel: (852) 791-0556 Fax: (852) 791-0782 Fragrant Harbour Publications Ltd. 1011 Block B Sea View Estate North Point, Hong Kong Tel: (852) 566-8120 Fax: (852) 807-3162 Boating Supply Guide Marina Ventures HK Ltd. Room 2001 Pacific Place Two 88 Queensway Hong Kong Tel: (852) 522-3653 Fax: (852) 868-1741SOURCE: National Trade Data Bank and Economic Bulletin Board - products of STAT-USA, U.S. Deparment of Commerce.
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