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International Air Cargo Forum 2000 in Washington DC, USA

29 September 2000


Customs and the Air Cargo Industry: A Strategic Partnership

Ladies and Gentlemen,

    I am delighted to join you all at the International Air Cargo Forum 2000 here in the capital of the United States of America, and to have the opportunity to share with this distinguished gathering of international experts from different sectors of the air cargo industry some of the key measures we have implemented at the Hong Kong International Airport to facilitate the movement of cargo. Speaking as a proud member of the Hong Kong Customs, I am particularly glad to note that what we are doing in Hong Kong has attracted your notice and our effort is being recognized.

    I am going to talk about what we have done in building up a strategic partnership with the air cargo industry, how we are realizing our potential as a cargo hub and what challenges lie ahead.

Strategic Partnership

    The traditional role of Customs as an enforcement agency has expanded. We are emerging prominently as a business partner to industry players in the cargo processing chain. We in Hong Kong are fully committed to building and maintaining this strategic partnership with the industry in order to reinforce Hong Kong's status as an international air transportation hub. We are helping to maintain the competitive edge of the local industry through the provision of first-class service to our customers worldwide. At the same time, we are still forever mindful of that traditional role as the law enforcement agency with a specific control responsibility. I shall describe for you three measures that have served to reinforce our commitment in this strategic partnership.

Performance Pledge


    Former TIACA President Walter Johnson mentioned in an article in the March 2000 issue of TIACA Times entitled "Hong Kong Airport Leads the Way in Setting Customs Standards" that "The concept of Customs establishing performance pledges and measuring their own performance against these performance pledges sets a standard for customs service around the world." This is a highly complimentary statement, and we have, indeed, taken performance pledge as standard practice.

    The concept of customer satisfaction has been adopted as an essential part of the service culture in Hong Kong. It is also an important measurement of the quality of our output. To promote customer service within the Department, we introduced in the early 90's a system of performance pledges in a number of service areas, including air cargo clearance, where the performance standard could be measured objectively in terms of time needed to achieve certain customs actions. 

    Through the setting of a system of performance pledges, we have built layers of quality service on top of the traditional concept of enforcement. The traditional approach, paying little regard to business needs, tends to create a great deal of uncertainties for businesses and individuals. On the other hand, we must recognize that it is a big concern to enforcement agencies that enhancements in facilitation could make it difficult for them to comply with their control mandate. 

    We need to put these two aspects in proper perspective. This partnership does not necessarily have to be a zero sum game where enforcement has to be sacrificed for gains in facilitation, or vice versa. We can actually make this a win-win situation for both the enforcement agencies and the business operators. What we need to do is to find a way to satisfy the requirements of both parties, and from our experience, the solution lies in timeliness, transparency and predictability. You will be pleased to know that these factors have now become something very basic that are expected of public service in Hong Kong. 

    To a great extent, explicit performance pledges serve to avoid any mismatch of expectations. For businesses, they want the basic assurance and certainty so that they can formulate with accuracy their investment strategy and resource planning. For enforcement agencies, it is simply a matter of our getting the full information in a timely manner so that we can do our job properly. These requirements are not contradictory and competing measures. Nor are they mutually exclusive. There is clearly commonality of purpose with differences in emphasis. 

    Our performance pledges in air cargo processing cover two principal areas of work. One area concerns cargo data processing in which we pledge to inform airlines what customs action is required on individual consignments within 45 minutes of the receipt of flight manifests. For consignments which require customs inspection, we pledge to complete an examination within 80 minutes of receipt of the cargo with proper documentation. 

    These performance targets are subject to continuous reviews, and new standards are set whenever we are able to improve upon our service. So far, the system of performance pledges has proved to be an effective management tool which doubles as drivers for continuous improvement and commitment in the delivery of our service.

Memorandum of Understanding (MOU)


    Another example of how we have built up the strategic partnership that has worked to our mutual benefit is the Memorandum of Understanding (or the MOU) between Customs and individual cargo operators in the airport. Signed at the inauguration of our new airport at Chek Lap Kok in 1998, it was basically an agreement to cooperate on a common platform in air cargo clearance. The MOU states as a common objective for Customs and the cargo operators that we shall seek to develop ways to achieve a balance between effective control and trade facilitation.

    The MOU sets out the need for full interface between the computer systems of the cargo operators and Customs. It also sets out the obligation of the cargo operators to provide Customs with electronic cargo data and to handle consignments in accordance with Customs instructions transmitted electronically in the form of pre-defined constraint code. In return, Customs would develop clear operational guidelines for the cargo operators to follow for the purposes of transparency and compliance. The signing of the MOU demonstrates further the commitment of both parties towards mutual cooperation and the level of importance we attach to establishing a strategic partnership between us.

    Implicit in the MOU is the recognition by cargo operators of the need for Customs control in the movement of air cargo using different modes of transportation and handling facilities. It is well understood that Customs offences, such as drug trafficking, smuggling of prohibited articles, diversion of precursor chemicals and illicit trade in pirated goods are prejudicial to the economic, social and security interests of our society and to the interests of all parties involved in the legitimate trade. 

    The occurrence of offences against customs laws on the one hand necessitates Customs to increase surveillance and control on the import and export of air cargo. On the other, we are fully aware that any increase in import and export control could result in additional expenses and costly delays for businesses engaged in the air cargo industry. We have to remain sensitive to each other's needs in finding solutions to the most mundane of our problems. And we would find these solutions through mutual understanding, trust and respect. 

Air Cargo Customer Liaison Group


    The third example of how we have built up the strategic partnership is the Air Cargo Customer Liaison Group which has been set up since 1992 as a dedicated channel to promote that spirit of cooperation. We wish to ensure that issues of concern to the air cargo community are addressed to the fullest possible extent and in the most open and transparent manner. The Liaison Group provides a regular forum for our senior staff to meet and discuss face to face with those from the industry who have day-to-day business contacts with us.

    The Air Cargo Customer Liaison Group has proved to be an effective means in fostering the strategic partnership with the industry players, including air carriers, terminal operators, express operators and freight forwarders. The views and suggestions collected from their participation, both positive and negative, have served as motivators for improvement of our service. At the same time we have taken the opportunity to explain to our industry counterparts in the first instance Customs policies and requirements to ensure their maximum understanding and cooperation.

Air Cargo Hub

In 1998, we opened our new airport at Chek Lap Kok. With new facilities housed in a cluster of stunning architecture, the new airport has actualized to a fuller extent Hong Kong's potential as an international transportation hub than ever before. We now handle more than two million tonnes of cargo annually, and the figure is steadily on the rise. We have Memphis on our mind and meeting our ultimate potential has been the principal driver for Customs to seek to enhance even further our partnership with the cargo operators. We have found our way through the application of information technology and implementation of legislation. 

Air Cargo Clearance System (ACCS)


    We decided at the planning stage of the new airport to develop a dedicated computer system with the dual purpose of enhancing enforcement and facilitating the clearance of air cargo at the new airport. This resulted in the creation of the Air Cargo Clearance System (or the ACCS) - the system that we are using now for the efficient clearance of the large volume of air cargo. I think many of you here, who have business ties to our airport, should have benefited in one way or another from the convenience this system has brought to the air cargo clearance process in Hong Kong.

    For those of you who are not familiar with the ACCS, it is basically a computer system equipped with state of the art technology, specially designed by our experts to shadow the movement of each piece of consignment coming into and going out of Hong Kong. The ACCS provides a direct system interface and electronic communication between Customs and the cargo operators in the airport for the exchange of cargo data and Customs clearance instructions. The capability of the system covers all types of cargo, including perishable goods, general merchandize, consolidation shipments, express consignments and even packages handled by on-board couriers.

    All cargo operators based in our airport have joined ACCS which now has blanket coverage of all cargo coming through the airport. The setting up of the ACCS is strong evidence of our determination to work in a strategic partnership with the industry for the economic well-being of Hong Kong. With the support of the cargo operators, the system has maintained 100% service availability with shortened clearance time for air cargo. This has worked to the advantage of both the business sector and us, the enforcement agency.

    We have not been complacent with what we have achieved so far. Before we reach the capacity limit of the existing system, we are already studying how we can upgrade the system to deal with the anticipated exponential growth of express cargo in the next few years. We have spent some US$23 million in setting up the original system, and we are planning to spend another US$5 million in the next two years in enhancing the system to enable us to stay ahead of the game. 

Legislation


    We have also been active on the legislative front to complement our administrative measures in actualizing Hong Kong's potential as an international air cargo hub. We proposed an omnibus bill near the end of the last legislative session to facilitate the movement of air transshipment cargo through Hong Kong. The whole legislative exercise was completed within an exceptionally short period of time signifying total concurrence of our legislators in our common objective. 

    Before the enactment of the amendment, all transshipment cargo, regardless of nature, were subject to the same licensing control and customs clearance requirements as if they were actually imported into and then re-exported from Hong Kong. This means that import and export licences had to be obtained for all controlled items before the goods could be sent to Hong Kong for transshipment. The application process sometimes took as long as a few days to complete. These requirements were set in those days when transshipment cargo were not as popular as they are today, and cargo information was not readily available prior to the arrival of the shipment. 

    With the new mode of air operation and the advent of more user friendly information technology, the situation has changed drastically over the last few years, laying the very foundation for transshipment cargo facilitation in Hong Kong. We have removed the licensing requirements for the transshipment by air of the commonly carried goods, including computer parts, pharmaceutical products and foodstuffs. The facilitation does not include goods such as munitions, dangerous drugs, infectious materials and hazardous wastes which are sensitive items requiring higher level of control.

    Following the enactment of the new law in May this year, we simplified correspondingly Customs clearance procedures at the airport to facilitate the movement of such air transshipment cargo. The new procedures have been well received by the industry and air transshipment cargo has seen a quantum jump in volume. 

Challenges Ahead


    Looking forward, one of the big challenges ahead is the expansion of this new facilitative arrangement for air transshipment cargo to include other modes of transshipment cargo. We have begun discussing with individual cargo operators in formulating operative arrangements for the efficient movement of air cargo on transshipment to and from the southern part of Mainland China through the sea route or via the land border. This would be the natural progression for the expansion of this principle. 

    Under this concept which we have labelled "the bonded expressway", transshipment cargo after arrival by air would be cleared in the usual way and put on dedicated trucks or vessels right at the airport and conveyed to Mainland destinations within the shortest possible time frame. The reverse cycle runs in a similar way for Mainland export cargo coming to Hong Kong to take advantage of the sophisticated air connection network in our first-class international airport, widening the opportunity for more cargo to be transshipped through Hong Kong. 

    Hong Kong Customs will give full support to these new initiatives and design corresponding facilitative arrangements with the cooperation of the individual operators concerned, paying particular attention to our unique enforcement responsibility. We would aim to implement our check just once and avoid having the cargo subject to multiple Customs formalities during different stages of import and export through different Customs checkpoints.

    In fact, we are seeking to expand even further the concept of "bonded expressway", while keeping to the principle of maintaining a secure monitoring system to ensure transshipment cargo will not be illegal diverted during its passage from the point of entry to the point of exit. This concept, I believe, can be implemented successfully through the application of technology in both physical tracking and audit trail, resulting in the minimum need for Customs interference on the movement of cargo.

    This is only the start. Our ultimate goal is to develop a one-stop Customs cargo clearance facility for all intermodal transshipment cargo. 

    We are also cognizant of the fact that the increasing use of logistics service and the growing popularity of e-commerce will pose unprecedented challenges to the air cargo industry. More and more cargo will be put on air transfers and the challenges will come from the increasing demand for a faster, more reliable and higher value-added transportation service. We have to make full preparation now to meet these challenges head on.

    Again, the solution lies in cooperation, determination and commitment among members of the industry. I can assure you that Hong Kong Customs will stand ready as a close partner with you in striving towards the long-term objective of the air cargo industry.


    Thank you.

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