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CSIS Conference of the Securing Asia's Transportation Infrastructure - Hong Kong, China's Experiences (English Only)

28 April 2003

Ladies and Gentlemen,

This is my first visit to the United States since I assumed the position as Commissioner of Customs & Excise of the Hong Kong Special Administrative Region in July 2001. I am delighted to be here this morning, and am grateful to the Centre for Strategic and International Studies for inviting me to speak at this important Conference which is being attended by such a distinguished audience.

The theme of this session is securing Asia's transportation infrastructure. Indeed the issue of securing one's transportation infrastructure against possible terrorist attack has attracted a great deal of attention following the tragic event of September 11th. Governments, mindful of the vulnerabilities inherent in the conduct of international trade, are requiring Customs administrations to take on a more proactive role in protecting national security from the threat of terrorism. While it could be argued that Customs administrations have always had a responsibility for such matters, it is very clear that governments have now placed a much higher priority on this issue. This increased focus on security has, however, raised the important question as to whether Customs administrations and industry can ensure security with facilitation or will we see the work undertaken by governments and industry over the last ten years in fostering facilitation being swept away in favour of tightened security measures.

During the past year, the subject of security and facilitation has been intensely debated in many international forum, including, amongst others, the G8, the World Customs Organization (WCO), the International Maritime Organization and APEC, just to name a few. I believe a consensus has now emerged that trade control and facilitation should be seen as two sides of the same coin. Effective control measures helps facilitate legitimate trade movement and create opportunities for business. On the other hand, countries that are not able to demonstrate the security of their supply chain will be regarded as higher risks and their consignments will probably be subject to more stringent customs control. In turn, faced with the prospect of tightened control and possible delays that would arise as a result, businesses are likely to seek alternative sources of products from places that are considered safer and therefore enjoy less stringent control.

Today, the challenge faced by all of us is how to enhance security without impeding legitimate trade and avoid unnecessarily increasing costs to it. I believe that this is achievable. This morning, I would like to share with you Hong Kong Customs' experience in this respect.

Hong Kong Experience

As you are probably aware, Hong Kong was the world's 10th largest trading entity in 2001. Our economy is heavily dependent on trade. Hong Kong is an important transportation hub in the Asia Pacific Region. We are connected to no less than 560 destinations by 540 flights and 50 container vessels each day. We have the busiest port and airport in the world in terms of container and cargo throughput respectively. In 2002, we handled 19 million TEUs at our port, or 52,000 TEUs each day. Of this throughput, around 6,300 TEUs were destined for the U.S and this account for about 10% of containers coming to your ports. Our airport handled 2.5 million tonnes of air cargo last year or 7,000 tonnes each day. On the land side, there are around 27,000 trucks moving goods via 3 boundary control points connecting Hong Kong with Southern China.

While Hong Kong has been one of the safest cities in the world and the risk of Hong Kong becoming a target of terrorist attack is low, we cannot take it for granted that we will be immune from the threat of terrorism. There is a strong need for us to implement measures that would enhance the security of our transportation infrastructure. Indeed, as one of the world's major trading port and as a responsible member of the global community, Hong Kong is strongly committed to working with the international community to safeguard the global trading system against potential threats from terrorists.

As you are probably aware, we have already put in place a very effective system of export control over strategic commodities. We meet the highest non-proliferation standards set for the control of weapons of mass destruction (WMD) and we practice probably the most stringent trade and customs control regime over WMDs. We are also one of the pioneers in introducing control of rokering activities for WMDs. I shall not elaborate on these now as my colleague from the Trade and Industry Department will make a presentation on this subject later in the afternoon. Now, I should just like to highlight a few initiatives we have taken on board to enhance the security of our import/export infrastructure during the past year or so:

>enhancing our risk management capability through the strengthening of our intelligence capabilities ;

>investing in modern equipment for speedy identification of suspicious cargo;

>enhancing cooperation and partnership with the Trade;

>enhancing cooperation with local and overseas law enforcement agencies in the exchange of information and intelligence; and

>lastly, setting up of an effective counter terrorist response infrastructure.

Risk Management

As you would no doubt appreciate, with the huge volume of cargo passing through our border every day, effective Customs control has to be exercised on the basis of risk management.

We are acutely aware of the importance of establishing an effective intelligence system in supporting our risk assessment work. In July last year, we carried out a major revamp of our intelligence set up. We have established a dedicated Intelligence Bureau with 221 officers and have actively promoted the use of intelligence and risk management in our daily operations. With the intelligence support rendered by the Bureau, the number of smuggling cases effected and the number of persons arrested between July and December 2002 have increased by 31% and 17% respectively when compared with the statistics of the first 6 months of last year.

Apart from strengthening our intelligence set up, we have also taken steps to enhance the capability of our intelligence databases. We have recently rolled out Phase 1 of the Single Trader Database which pulls together trader information of all importers and exporters maintained by the Department. In developing this system, we have accorded different grading to the traders based on risk factors such as company background, shipment history and compliance records etc. The STD provides a very useful tool for conducting risk assessment in our operations. As a longer-term initiative, we are also planning to develop a central intelligence IT system embracing sophisticated functions to support our intelligence analysis and risk assessment work.

Modern Equipment

To enable our officers to screen suspicious cargo expeditiously and thereby minimizing possible disruption to the efficient movement of cargo, we have invested heavily in modern inspection equipment. We have deployed two mobile x-ray vehicle scanning systems for checking cargo since August 2001. Recently, we have upgraded one of the systems by installing an additional Radiation Threat Detection System for detecting neutron and gamma radiation. Last month, two fixed x-ray vehicle scanning systems costing US$7.3 million each have been put into operation at the Lok Ma Chau land boundary control point, and we are currently in the process of acquiring two more mobile x-ray vehicle scanning systems for use at our port. We have also procured a wide range of modern inspection equipment such as radiation detectors, ion-scanners, portable narcotics and explosive detectors etc. to enhance the detection capability of our frontline officers. We have also started to train explosive detector dogs to support frontline operations. In terms of the deployment of modern technology to detect suspicious cargo, I believe that we are among one of the best equipped Customs administrations in the Asia Pacific Region.


Customs' Business Partnership

Hong Kong Customs has a long history of developing and maintaining a strategic partnership with the business. We view this partnership as the key to finding a proper balance between compliance and facilitation.

We have since 1994 established Customer Liaison Groups for our major clients. These Groups meet on a regular basis during which views are exchanged on various Customs issues and matters of mutual concern. Through these forum, we are able to tap the views of the industry on various new security measures and formulate policies which are responsive to their needs.

More recently, we have launched the "Watch-Out Programme" to enhance supply chain security and risk management in cargo clearance. Through the implementation of the Programme:

participants are encouraged to report suspicious consignments to Customs through designated contact points;

participants are requested to provide advance cargo information to us for pre-screening and enhancing cargo clearance efficiency;

participants are encouraged to apply risk management principles in their internal procedures for handling cargo; and

trainings are arranged for participants & staff to enhance their awareness in detecting possible illegal activities.

So far we have signed 15 MOUs with representatives of the transportation and trucking industry, container terminal operators and air cargo terminal operators.

Co-operation with Law Enforcement Partners

The threat of terrorism sees no national border. It is therefore important that we exchange information and intelligence with our overseas law enforcement partners in a timely manner. In this regard, Hong Kong Customs has been maintaining very close working relationship with law enforcement agencies of our major trading partners. To date, we have entered into Customs Cooperative Arrangements with 11 countries. We have also provided full support to the WCO intelligence network and participate actively in the WCO's Task Force on Security and Facilitation of the International Supply Chain. The Task Force is being charged with the responsibility of working out a series of measures to protect the international trade supply chain from acts of terrorism or other criminal activities, while ensuring continued improvements in trade facilitation.

Container Security Initiative

At this juncture, I should like to say a few words about the CSI. Joining the CSI is a clear demonstration of HKSARG's commitment to work closely with the international community to enhance the security of ocean-going containers.

As the world's busiest container port, Hong Kong fully recognizes the importance of ensuring the security of the world's maritime trade system. Implementing the CSI will serve our own interests in that it will help to strengthen the security of our port, deter terrorists from using our port to convey weapons of mass destruction and help expedite clearance of our US-bound cargo at the US ports.

On 23 September last year, I signed a Declaration of Principles with Commissioner Bonner in Hong Kong signifying Hong Kong's commitment to join the pilot scheme. We were then one of the first ports in Asia to join the CSI. Since then, we have maintained a close dialogue with US Customs colleagues to discuss details of implementation. I am glad to learn that the US team will soon be arriving in Hong Kong to kick start the CSI pilot scheme. I very much look forward to working closely with them in enhancing the security of our container traffic to the U.S.

Counter Terrorists Measures

Since the September 11th incident, we have stepped up intelligence exchange with the Police, the Immigration and overseas law enforcement partners. We have set up a Steering Committee on Anti-Terrorism chaired by one of my Assistant Commissioners to map out and coordinate strategies for countering terrorist threats. We have also formulated a Terrorist Attack Response System which provides necessary guidance to our staff on when and what precautionary or proactive action should be taken in response to different levels of threat assessment. Indeed, since the outbreak of the war in Iraq, we have heightened the alertness of our frontline officers and increased the checking of both passengers and cargo at airport and the port.


The 9.11 and other terrorist attacks have brought about unprecedented challenges to the international community. A concerted global effort is required to ensure the continued secure operation of our trading system. Hong Kong, as a responsible member of the international community, is fully committed to playing an active role in this respect. We are determined to maintain ourselves as one of the safest and mostly stringently managed tracking port. As explained earlier, we have already taken a series of measures to strengthen the security of our import and export infrastructure. These are built in the existing stringent and effective strategic trade control system which are already in place.

However, enhancing security of the trade supply chain cannot be achieved by the government alone. While Customs plays a significant role, business can play an equally important part, in particular in enhancing supply chain security, by providing advance cargo information to Customs for risk profiling, reporting suspicious shipments and applying advance technology to enhance cargo security. Customs and industry must work in concert to achieve the dual objectives of security and facilitation.

Thank you.

Customs & Excise Department
April 2003

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