The present Rice Control Scheme has been in operation since 1st January 1955, when Government appointed as approved stockholders/ importers 29 firms who had substantial performance in the post-war rice trade or whose connections overseas were known to be sufficiently good, and who could command sufficient finance to hold the stocks stipulated to prevent sudden shortages of supply to the domestic market. A further 9 firms who had some post-war import performance or special overseas connections were added to the list of approved stockholders/importers in 1957. These firms were, and still are, granted import quotas related to domestic market demand at any given time; at present the quarterly quota is 88,000 tons, divided into 110 units, each representing a basic quantity of 800 metric tons. This basic quantity may be adjusted by means of optional percentage increases or decreases to cover seasonal variations in market demand. These increases have invariably been taken up in full by all quota holders, even when purely commercial considera- tions would have suggested holding off.
(a) Legal Basis
2. THE RICE CONTROL SCHEME
The legal basis of the Rice Control Scheme is the Importation and Ex- portation (Reserved Commodities) Regulations enacted by the Governor- in-Council in 1954. Registered importers/stockholders must observe the Conditions of the Scheme stipulated by the Director of Commerce and Industry; current Conditions are attached as Appendix I. A list of reg- istered importers/stockholders, which also shows the number of units. held, and the countries from which they normally import, is at Appendix II; a list of wholesalers (who are not registered or controlled) is at Appendix III. Retailers, who are believed to number between 2,400 and 3,000 are not controlled in any way.
(b) The Method of Operation
The object of the Scheme is to ensure regular and adequate supplies of rice to consumers, at reasonably stable prices, and to provide a reserve stock for emergency purposes (which also has a cushioning effect on prices in the event of unforeseen fluctuations of supply in the exporting countries). The method adopted has been to use the minimum controls needed to attain these limited objectives, consistent with avoiding violent disruption of the traditional domestic trading pattern. First, the number
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of importers is restricted to a level which is considered to be an optimum to enable normal and emergency import requirements to be met efficient- ly, which facilitates adequate and effective control, and which allows a competitive selling element to make itself felt. The activities of stock- holders/importers are kept under close surveillance at all times to ensure that they fulfil their obligations under the Scheme. Second, the powers of the Director of Commerce and Industry under the Importation and Exportation (Reserved Commodities) Regulations, 1954, enable him to control not only the volume but also the source of supplies, stocks and sales. The percentage adjustment of quarterly quotas, previously referred to, equates the supply of rice to demand, and thus exerts an indirect, but effective stabilizing influence on prices. The grade of rice to be purchased is not stipulated, as importers are in a better position to match what is available with what the trade needs.
As however, Hong Kong buys 95% of its requirements of rice from other countries and there is no subsidy from public funds, price fluctua- tions in the sources of supply are inevitably reflected in domestic whole- sale and retail prices. The rice supply position is kept under constant review, and modifications in import patterns, as import statistics demon- strate, reflect changes in the harvest or other conditions of a particular supplier. (See paragraph 3(b) below).
(c) Reserve Stocks
Under the provisions of the rice control scheme, registered importers/ stockholders are obliged to keep 44,000 tons of rice (i.e. half the standard quarterly quota of 88,000 tons) as a reserve stock against emergencies. At an average Colony consumption of 1,000 tons a day, this represents about six weeks' supply.
In addition, importers require a working balance of about 25,000- 30,000 tons to provide for rice in transit, minor interruption in supplies, etc. and thus, at any one time, the Commerce and Industry Department normally ensures that approximately 70 to 75 thousand tons of rice (i.e. about 2 months' supply) is in stock. In recent years stocks have been as high as 120,000 tons (1962) and as low as 62,000 tons (1965). The maximum stock in 1966 (August) was 99,000 tons and the minimum (December) 47,000 tons.
(d) Price Structure and Selling Arrangement
The price structure of the trade is complex in detail, but straight- forward enough in principle. Importers buy from their suppliers f.o.b.
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