MAGAPOWER GARMENTS LTD. v. DIRECTOR-GENERAL OF TRADE AND INDUSTRY

HCAL3199/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST
NO.3199 OF 2001

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D E C I S I O N

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1. This is the applicant's application for leave to judicial review the decision of the respondent refusing an export license application made by Good Harvest Knitting Factory Ltd ("Good Harvest"). The decision of the respondent was communicated by a letter dated 18 April 2001.

Background

2. The applicant is a manufacture of textile products. By an undated purchase order, the applicant contracted to sell to Good Harvest 4,000 pieces of 100% woven calculation bag ("the goods") for export to the United States of America.

3. On 3 April 2001 the applicant submitted an export license application to the Trade and Industry Department in respect of the goods for Good Harvest. In the application, the applicant declared that the goods were of Hong Kong origin in accordance with Condition (2) of the Condition of License issued by the respondent.

4. Condition (2) states that :

"Goods covered by this licence must be of Hong Kong origin. Goods claiming Hong Kong must have undergone principal processes in Hong Kong. These are processes which permanently and substantially change the nature, shape, form and utility of the raw materials used, as laid down by the Director-General of Trade and Industry in certificate of origin circulars."

5. Under Certificate of Origin circular no.2/1999 issued by the respondent, in order that textile articles will be considered to be of Hong Kong origin, the cutting of fabric and sewing of cut pieces into products have to be carried out in Hong Kong.

6. On 9 April 2001, the Customs and Excise Department visited the applicant's premises to inspect the goods. On that occasion, a Customs and Excise officer also interviewed Madam Chan Kiu Chun, a director of the applicant, and took a record of interview from her under caution.

7. By a letter dated 18 April 2001, the respondent informed the applicant of the director's decision to refuse the export license application. The reason given was that the sewing of the goods was done outside Hong Kong contrary to the conditions for the issue of export license. The reference to the sewing of the goods in this letter is a mistake. What the respondent had wanted to say was that the cutting process of the goods was done outside Hong Kong.

8. The applicant then sought a classification of the goods by the United States Customs Service. By a letter dated 6 June 2001, the US Customs Service ruled that the goods were of Hong Kong origin.

9. The applicant then through its solicitors entered into a series of correspondence with the respondent to challenge the decision to refuse the export licence application.

10. On 27 July 2001, the Customs and Excise Department gave notice in writing to the applicant through its solicitors that prosecution would be instituted against the applicant and Madam Chan for making false statement in the export licence application.

11. On 8 August 2001 and 8 September 2001, information were laid against the applicant and Madam Chan respectively for the offence of making false statement in the export licence application, contrary to section 36(1)(a) and 36(A) of the Import and Export Ordinance, Cap.60.

12. On 5 November 2001, the present leave application was made. On 14 November 2001, I directed that the application be listed for hearing with notice to the respondent. Shortly before this hearing on 1 March 2002, the respondent filed an affirmation to oppose the application. The respondent also appeared by counsel today to oppose the application.

The hearing

13. The applicant indicated at the outset of this hearing that it was improper for the respondent to appear today and to turn the leave application into an inter parte hearing. It is also submitted that the respondent's affirmation had taken the applicant by surprise and that time is needed to consider or deal with it.

14. As to whether it is proper for the leave application to proceed on an inter parte basis, it is plain that the court does have power to direct for the leave application, which is usually made ex parte on paper in the first instance, to be listed for hearing with notice to the respondent. The respondent may then appear and make submissions. There can be no objection in principle to such a course being taken or for a leave application to proceed on inter parte basis.

15. Under paragraph 1.3.2 of the Practice Directions relating to application to judicial review, it is within the court's power to direct for the leave application to proceed orally and on inter parte basis. The observation of Litton JA in Ho Ming-sai v. the Director of Immigration [1994] 1 HKLR 21 at 28 that it is not intended that the court should at the leave stage entertain elaborate arguments on the facts and the law, does not preclude the leave application from being proceeded on an inter parte basis. Indeed if leave application should only proceed on ex parte basis, there would have been no need for this observation to be made.

16. As to the affirmation filed by the respondent shortly before the hearing, it is true that it was made late and should have been filed earlier. The hearing was set down as early as 23 November 2001. However, considering all the circumstances and in particular the matters below, I have decided against adjourning the leave application and will proceed with it today.

The merits of the application

17. The applicant says that the affirmation takes it by surprise because of the exhibits thereto. In the affirmation, the respondent had exhibited an import notification and an export notification. The former shows that the fabric in question was imported from the Mainland. The latter contains the applicant's declaration that the fabric had not undergone any principal manufacturing process in Hong Kong. The export notification came about as a result of the applicant exporting the fabric from Hong Kong to the Mainland for the cutting process to be carried out. The conclusion that the respondent draws from these notifications is that the fabric from which the goods were made was produced outside Hong Kong.

18. Mr Shum for the applicant informs the court that the applicant's case is that the fabric was manufactured in Hong Kong and therefore he needs time to deal with this. He points out that the import notification only shows that the fabric was imported from the Mainland. While he accepts that Madam Chan had in her interview with the Customs and Excise officers said too that the fabric was imported from the Mainland and delivered to the applicant accompanied by the import notification, he argues that Madam Chan never admits that the fabric was manufactured outside Hong Kong.

19. I find the distinction sought to be drawn to be one without a difference. There is no conceivable reason for fabric manufactured in Hong Kong to be re-imported into Hong Kong from the Mainland and to be re-exported to the Mainland for the cutting process. Madam Chan in her affirmation in support of this application never asserted that the fabric was produced in Hong Kong. All she said in paragraph 8, and very carefully said, is that she told the Customs and Excise officer that the goods were from fabrics provided locally (my emphasis). She never explained, too, the declaration in the export notification. Mr Shum has not indicated what the applicant could or would like to offer or deal further with regard to these apparent inconsistencies.

20. The relevance of the point about the place where the fabric was manufactured is this. The applicant says that the respondent's decision to refuse the export licence application is irrational and unreasonable because it is at variance with the ruling of the United States Customs Service. But the US decision is made on the basis that the fabric was said to be manufactured in Hong Kong. It is evident from the written ruling under the section "Facts" that the fact acted upon by the United States Customs Service is that the yarn was said to be from the Mainland and then woven into fabric in Hong Kong. Under the United States place of origin rules, the place of origin is the place where the manufacture of the fabric takes place. Hence, if the fabric was produced in Hong Kong, then the place of origin would have been Hong Kong. The so-called inconsistency between the respondent's decision and the United States ruling becomes unreal once the factual basis is made clear and clarified.

21. There is also a second ground for the applicant's application which relates to the respondent's rule for determination of the place of origin of textile made-up goods. The respondent's rule as set out in circular no.2/99 is that the cutting and sewing processes, being two of the principal manufacturing processes, had to be done in Hong Kong before textile made-up goods can claim to be of Hong Kong origin. The applicant says that this rule is inconsistent with the United States place of origin rule, which makes reference to the place of origin of the fabric in determining the place of origin of textile made-up goods. The applicant says that the respondent's failure to have regard to the United States rule on place of origin renders the respondent's rules on place of origin unreasonable.

22. This second ground for challenge would not have been open to the applicant if the fabric in question was produced outside Hong Kong, it then becomes irrelevant to consider whether there is any inconsistency between the Hong Kong rule and the United States rule. But quite apart from that and without having to consider the respondent's affirmation, it is plain that this challenge is unarguable. As Mr Kwok for the respondent submits, Hong Kong is an independent customs region. Hong Kong rules of origin is formulated by the respondent with regard to a number of factors. While the relationship of Hong Kong with her trade partners and also the practices of her trade partners are matters to be considered, the respondent has also to take into account a variety of other factors in formulating our rules on place of origin. The other considerations alluded to by Mr Kwok in his submissions include the obligations of Hong Kong under the WTO, the circumstances of Hong Kong and the trend and development in the international trade community. There can be no doubt that Hong Kong is entitled to formulate rules on place of origin that may or may not conform with those of her trade partners. It is also to be noted that goods from Hong Kong apart from being exported to the United States, may also be exported to other places. In short, the suggestion that the respondent has acted unreasonably in formulating a set of rules on place of origin that do not conform with that of the United States has no merit at all.

Delay

23. Apart from the lack of merits, there is also undue delay in this application for leave. The decision of the respondent was communicated on 18 April 2001, but the leave application was only made on 5 November 2001. Order 53, rule 4(1), RHC provides that an application for leave to apply for judicial review shall be made promptly and in any event within three months from the date when grounds for the application first arose. It is therefore plain that the present application was made outside the three months' period. That being so, it constitutes undue delay : R. v. Dairy Produce Quotas Tribunal ex parte Caswell [1990] 2 AC 738, see also Hong Kong Civil Procedure 2002 Vol.1 paragraph 53/14/40. While the court has power to extend the period within which the leave application shall be made, the power will only be exercised upon good reasons being shown by the applicant. In the present case, the applicant's explanation is that in order not to jeopardize its relationship with the Customs and Excise Department, having regard to the pending investigation against the applicant, the applicant had refrained from taking out judicial review proceedings. However, in about August 2001, it became apparent to the applicant that it would be blacklisted by the United States Customs Authority as a result of this matter. Accordingly the applicant decided to and did subsequently take out this leave application. I am of the view that this explanation of the applicant is insufficient to amount to good reasons for the purpose of extending the time for making the leave application.

24. Firstly, as early as 27 July 2001, the Customs and Excise Department had indicated its intention to prosecute the applicant and its director. The information was subsequently laid on 8 August 2001 and 8 September 2001. Any desire to preserve the relationship with the Customs and Excise Department would have become academic latest by September 2001. Not only that. Even after the applicant became aware that it would be blacklisted by the United States Customs Authority in August 2001, there was a lapse of nearly three months before the present leave application was issued.

25. The applicant has given no explanation in its application or in the supporting affirmation for the inaction. Mr Shum at this hearing explains that the time was taken up for seeking legal advice and also seeking the support of its fellow traders. Quite apart from the fact that this is not supported by the evidence before the court, it is an explanation which cannot amount to good reason.

26. Mr Shum has argued that the delay has not occasioned any prejudice to the respondent nor being detrimental to good administration. This is irrelevant. Unless and until the applicant has shown good reasons for the delay, the question of prejudice or detriment to good administration does not arise for consideration. In short, I am of the view that there has been undue delay in taking out the leave application and that no good reason has been given to account for the delay. Accordingly the extension of time sought is refused.

27. For the reasons indicated above, it is evident that this leave application has no prospect of success. This being the case, there is no useful purpose to be served by adjourning the leave application and granting to the applicant time to deal with the respondent's affirmation. The application should be dismissed and I so order.

Costs

28. The respondent asks for costs of the application to which the applicant opposes. The respondent argues that not only is the leave application wholly devoid of merits, but that there is an alternative remedy available to the applicant under section 6 of the Import and Export Ordinance. Section 6 of the Import and Export Ordinance provides that any person aggrieved by the decision of the respondent may lodge a written objection with the Chief Secretary for Administration for the consideration of the Chief Executive. It also provides that the Chief Executive may enlarge the time for making the objection beyond the 14 days time limit set out in the section. Therefore, the applicant could still proceed under section 6 notwithstanding that the US Customs ruling was only obtained in June 2001. The applicant, on the other hand, argues that it is not necessary for the respondent to take part in this leave application and so the costs should not be awarded in his favour.

29. In my view, this leave application is one without merits. I also accept the submission that it is open to the applicant to lodge an objection against the decision of the Director under section 6 of the Import and Export Ordinance instead of proceeding with an application for judicial review. I do not accept that the respondent should not have taken part in this leave application. Once the respondent takes the view that the application has no merit, it is only proper for the respondent to intervene at an early stage so as to save costs and time.

30. In the circumstance, the respondent should be awarded the costs of this leave application to be taxed if not agreed.

Conclusion

31. For the reasons set out above, the applicant's application for leave to apply for judicial review is dismissed with costs to the respondent to be taxed if not agreed.