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HONG KONG IS HUB FOR PIRATED U.S. GOODS

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"The most anticipated sequel of the decade," boasts the box for "Rebel Assault II," the hot new Star Wars computer game. And if that doesn't grab you, the price will: less than one-sixth the cost of the real thing.

It's a pirated copy, bought as easily as a cup of Chinese tea, for just $9 from a store that was raided only a few months ago on suspicion of peddling fakes.The shop is in a three-story arcade identified by U.S. officials as a piracy center. Other stores offered fake Microsoft software, including a shoddily packaged flight simulator with "3D Cluds" (Clouds) for $7.70.

Hong Kong has long been famous for fakes, from Rolex watches to Cartier bags. But U.S. officials now worry that it is also becoming a distribution export center for pirated CDs and high-value software from neighboring China.

China's 34 CD factories, some financed with Hong Kong money, have an annual production capacity of 90 million for a home market of at most 5 million, U.S. officials say.

That leaves up to 85 million CDs floating around, some of which, U.S. officials believe, may be coming through Hong Kong on their way overseas.

Ronny Tsang, who heads the Hong Kong customs' anti-piracy bureau, says he understands that fakes hurt key U.S. firms. But he rejects the claims that Hong Kong should be doing more to curb its distribution role.

Under Hong Kong law, designed to safeguard its status as a free port, customs cannot stop pirated goods being shipped through the British colony unless they are unloaded, he said.

The United States "cannot just say that `you are the world's policemen and you must follow our legislation,"' he said.

He also hinted that the United States could be doing more to educate its people: "Most of the American tourists here look for counterfeit goods."

Hong Kong customs seized 581,000 pirated CDs and laser discs in 1995, valued at more than $3.6 million - more than double the 1994 figures. Last May, penalties for piracy were increased, with first-time offenders risking up to two years in jail and big fines for selling copies.

At the busy China-Hong Kong border, offenders risk a $3,234 fine for every fake CD brought into the colony, as well as imprisonment. The fine used to be $129.

Tsang said the authorities are still waiting to see whether the new laws will be a deterrent. On Friday, it was business as usual in the many shops in the arcade.