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Sky Connection pledges to fight Hong Kong tobacco proposals


First published: March 1, 2010

Source: The Moodie Report

Sky Connection pledges to fight Hong Kong tobacco proposals
HONG KONG. Government proposals to abolish inbound tobacco allowances for travellers would have a severe impact on cigarette sales, notably at shops on the border with the Chinese Mainland. That’s according to leading travel retailer Sky Connection, which says it is already lobbying vigorously against the proposals, announced last week by Hong Kong Financial Secretary John Tsang.

Sky Connection operates Arrivals (as well as Departures) shops at Hong Kong International Airport and serves inbound travellers from China at its shops on the land border.

CEO Baker Salleh told The Moodie Report: “In the worst case scenario, our cigarette business on the land borders would be down by double digits if we lose the entire inbound allowance. The border business is very significant for cigarette sales.”

He added: “We are lobbying hard against the proposals, and we hope that they won’t be passed, at least in their current form. There is a provision for small quantities to be carried by passengers for their own consumption, and at the moment that is being interpreted as 19 sticks or a single cigar. It may be that we can raise this limit for personal consumption. Our view is that 60 sticks is still very much within personal consumption limits.”

Inbound duty free allowances in Hong Kong had already been slashed in April 2007 from 200 sticks to 60 (or 15 cigars or 75g of other manufactured tobacco) per person.

“The impact this time would be less severe in terms of Dollar impact, as going from 60 sticks to zero is clearly not the same as going from 200 to 60,” Salleh said. “Until we know exactly what is contained in the bill to be passed, we can’t quantify the full impact. Even if we got the limit raised back to 60 sticks, or even 40, it would still help drive some footfall into the shops, where we could then offer passengers other products. But in the worst-case scenario, there would be no allowance and the Arrivals business would be gone.”

Currently all inbound passengers, regardless of country of origin, are subject to the 60-stick cigarette limit. In theory, passengers arriving from other international airports with a carton are subject to Hong Kong Customs duties on 140 of the 200 cigarettes, though the rule appears to be policed through random checks on passengers rather than across the board.

Under the new proposals, passengers would face having to pay the full duty on a carton of cigarettes, or face confiscation. Salleh said: “It’s still unclear how this would be enforced, or what measures would be taken, as there is no detail in the government proposals as yet. In the meantime, we are arguing that these proposals do nothing to assist in the government’s public health drive, and also would not play any role in tackling the issue of smuggling or grey market cigarettes, as duty free is a well-regulated, controlled environment.”

The proposals outlined in last week’s budget now pass to Hong Kong’s Legislative Council to be drafted into law. If passed, new rules would then be issued by Customs & Excise to the industry. The current timeframe for passing the legislation is the third quarter of this year.

Written by Dermot Davitt

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