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Five year after the free-trade deal between Hong Kong and China came into effect, the jewelry industry has yet to benefit from it.

The Closer Economic Partnership Arrangement (CEPA) between the two markets, which came into force on January 1, 2004, allows a range of Hong Kong –made products, including jewelry, to enter the mainland free of import duty.

However, Hong Kong jewelry manufacturers believe that it will take a while for them to fully enjoy the benefits of CEPA owing, among other things, to the “very complicated” rules in the mainland.

“The concept of CEPA is beneficial to our business, but its implementation is another question. China’s laws and regulations are very complicated and each province and city or town has different rules. There are no standard rules yet,”said King Li, chairman of the Hong Kong jewelry and jade Manufacturers Association.

Mr. Li said the association is in the process of finding out more about the guidelines to help its members avail themselves of CEPA’s benefit.

Another reason jewelry companies are in no rush to avail themselves of CEPA is the 17-percent value added tax that is automatically imposed on imported jewelry, making Hong Kong –made jewelry still not very competitive price-wise, said the chairman of the Hong Kong jewelry Manufacturers Association, Aaron Shum. This despite the waiving of the import tariff rates of between 23.3 percent and 35 percent under CEPA.

“The Chinese market is still not mature,”said Mr. Shum.” There are still many restrictions. However, CEPA has a good advertising effect for Hong Kong jewelry, Already, consumers in China perceive merchandise”

Manufacturers specializing in more upscale designs have also expressed hesitation about exploring the sales potential in China as they believe demand in the market for higher-end designs will remain limited in the next few years.

Mr. Li said: Best sellers in China at the moment are those pieces retailing from around US$200 to US$300 apiece. This means that there are limits on the materials a manufacturer can use in order for the jewelry to remain I that price range, One can make only very basic designs and use basic materials such as diamonds or jadeite Given this limitation, our jewelry will not be very competitive because our overheads and our workmanship cannot be covered at that price.”