The Hong Kong Shippers’ Council was established to protect and promote the interests of its members and all Hong Kong shippers in general on matters relating to the transportation of merchandise by sea, land and air. The Council operates under the policy guidance of an Executive Committee composed of representatives from 15 major trade associations in Hong Kong.
The Council derives its broad-based representation and membership from these trade associations. The Executive Committee is served by a secretariat comprised of a staff of eight. Although the Council’s activities are basically aimed at serving its members, the benefits from the very existence of the Council go to all shippers and traders in Hong Kong.
The Council does not enter into rate agreements or service contracts with Conferences or individual carriers for or on behalf of its members. Instead, the emphasis is on ensuring that shippers should be able to negotiate freight rates in an open market environment and on a level playing field with the carriers. When the global financial turmoil was having its effects on the shipping and transportation sectors, starting in the last quarter of 2008, the Council continued to update members by issuing Notices on cargo fuel surcharges and other charges that lines would arbitrarily impose and the manner these charges were put on the shipping bill for both air and ocean freight.
As of October 2008, all EU and non-EU carriers which took part in conferences operating on trades to and from the EU were required by law to end their conference activities, in particular price fixing and capacity regulation, on those trades. Liner carriers are allowed to continue to take part in consortia. Block Exemption Regulation 823/2000 allows shipping lines to engage in operational co-operation for the purpose of providing a joint liner service, but not to fix prices.
The Council communicates to its members regularly via fax, email and its website, www.hkshippers.org.hk. Among the benefits of membership in the Council are regular updates on the latest trade situation and freight rates, including shipping statistics, laws and regulations for the region, and new charges and surcharges. The bi-monthly publication Shippers Today features articles and reports on the latest developments in logistics, maritime and aviation, as well as the on the services provided and the service providers.
The Council alerts shippers on vital contract information that is happening in the trade, conducts research and advises shippers of the findings. The Council also organises orientation visits to ports and other logistics and shipping facilities in Hong Kong and the Mainland, and holds seminars and conferences to disseminate current issues.
The Council’s function
On the regional and local level, the focus of the Council is primarily to ensure that an open and competitive freight market exists. This is achieved through government policies and other tools to ensure that market practices are transparent and in which shippers’ interests are protected. Moreover, local as well as regional infrastructure and facilities should be sufficient and highly efficient so that services in the distribution and transport of cargo meet shippers’ needs. More importantly, charges for these services must be fair and transparent, and not dominated by monopolies or cartels. Most of the businesses in Hong Kong, particularly in logistics and shipping and transport of cargo, are small and medium companies, and we try to be vigilant in ensuring that they are not taken advantage of and enjoy fair market prices.
The Council is an active participant in the government’s consultative mechanism and closely cooperates with related organizations and institutes. The Council is represented in Hong Kong General Chamber of Commerce’s Logistics and Shipping Committee, the Hong Kong Trade Development Council’s Logistics Services Advisory Committee, the DTTN’s Industrial Training Advisory Committee, E-Freight Advisory Group, in Hong Kong Customs advisory groups, and in various other entities where the voice of the shippers need to be heard and are therefore represented.
The Council represents and defends shippers’ interests in dealing with carriers and service providers. The Council monitors to see if sufficient competition exists in the market; that charges and surcharges are justified with sufficient transparency; that proper payment mechanisms are in place which are convenient and cost effective to shippers; that service standards are set properly, reviewed and upgraded regularly. Shippers, carriers and their service providers are partners in the sense that shippers need good carriers and service providers to provide transportation and logistics services. However, there will always exist the commercial relationship between service providers and consumer, in that carriers and logistics service providers always want more revenue while shippers naturally want to pay the least cost to remain competitive.
In the local and regional trade sphere, the most common points of contention that require constant monitoring are freight rates and related charges like Documentation Fee, Peak Season Surcharge, Bunker Adjustment Factors, Currency Adjustment Factors, Congestion Surcharge, War Risk Surcharge, Terminal handling Charge (THC), Equipment Exchange Charge. Carriers have become creative in recent years and come up with new charges such as ‘Container Seal Charge’ and the Depot Fee, both of which the Council protested and demanded to be rescinded.
The Council provides the essential links for the government and commercial operators with shippers who are the end users of logistics services. At present, the Council is represented on all major government logistics related committees and advisory groups that include the Logistics Development Council and its various Task Forces. The Chairman of the Council has also been appointed as Sheppard, M-Logistics Task Force. Council representatives also sit in the Port Development Council, Port Development Advisory Group, Port Operations Committee, Sea Cargo Liaison Group, Logistics Training Advisory Committee (ITAC), Tripartite Meeting for Logistics Industry (Labor and Manpower Bureau), Regulated Agent Regime (RAR) Task Force, Road Cargo System (ROCAS) Working Group, Special Task Force on Mainland Government’s OPT Policy Changes, and so forth.
The Council acts as a conduit between shippers and users of the port and airport cargo faciltiies of Hong Kong, and conveys their needs and requirements to the government and other industry stake holders. At the same time, the Council is mandated to defend shippers’ interests in the process of policy formation and execution. The Council’s input is crucial to logistics-related research and surveys regularly carrie dotu by Govenrment to plot the future direciton of Hong Kong, including its economic aims and infratructure. These have included the Port Cargo Forecasts, Port Master Plan 2020, Advance Cargo Information (ACI)/Road Cargo System(ROCAS), Onboard Transport Information System (OBTIS), Digital Trade and Transport Network (DTTN), Kai Tak Site Development Plan, HK2030, Qualification Framework for logistics industry, CEF training needs assessment, among others.
China links
The Hong Kong Shippers’ Council takes as its area of responsibility not only Hong Kong, but because of the relocation of manufacturing industries in the 1980s across the boundary in southern China, to Shenzhen and the PRD as well. Hong Kong is the primary entrepot to the Chinese mainland and the port and airport form part of the Hong Kong logistics hub. If re-exports to and from the Chinese mainland are included, accoridng to HKTDC.com’s Economic Relations With The Chinese Mainland, about 15% of the Mainland's foreign trade was handled via Hong Kong in 2010. The figure will be higher if transhipment of goods to and from the Mainland via Hong Kong is also included.
According to Hong Kong government statistics, in 2010, 62% of re-exports were of China origin and 53% were destined for the Mainland. According to China's Customs statistics, Hong Kong is the third largest trading partner of the Chinese Mainland after the US and Japan, accounting for 7.8% of its total trade in 2010. As such, Hong Kong has transformed over the years into the shipping and transport hub for the the Mainland. Hong Kong now has the world's busiest airport for international cargoes and the world's third busiest container port.
The links between Hong Kong and the Mainland’s economy include capital investment—the HKTDC says that by the end of 2010, among all the overseas-funded projects approved in the Chinese Mainland, 45.4% were tied to Hong Kong interests. Cumulative utilized capital inflow from Hong Kong amounted to US$456.3 billion, accounting for 42.3% of the national total.
Some 592 Mainland companies are listed in Hong Kong, comprising H-share, red-chip and private companies with total market capitalization of US$11.9 trillion, or 57% of the market total.
Because of these links, Hong Kong is considered the most important transportation hub in the region. The Hong Kong port, which handled of container cargo in 2010, is the favoured port for goods coming out of the world’s largest manfuacturing basin, the Pearl River Delta. The same companies that make up the Hong Kong port’s container terminal facilities, have set up port facilities across the border, in Shenzhen and Guangzhou. These are closer to the manufacturing centres in the south but Hong Kong retains its hub status because of its outstanding attributes.
Hong Kong’s free port status, streamlined Customs, efficient transport infrastructure, multimodal logistics, free market policies supported by banking, financial, legal, insurance services of world class standards, have made the Hong Kong port the preferred port through which goods manufactured or processed in the Mainland are shipped out of to destinations within Asia or Europe and the US. This has what has made the Hong Kong port the world’s busiest for over 20 years. Today, it is the world’s third busiest container port.
The Hong Kong port, which has services to Asia, the transpacific, Europe and the rest of the world, provides some 400 container line services per week connecting to nearly 500 destinations. In 2010, the port handled around 24 million TEUs. About 70% of these containers are handled around the Kwai Chung-Tsing Yi areas where there are 24 berths operated by five different terminal operators. Hong Kong is blessed as a natural deep-water harbour and the Kwai Tsing basin has a water depth of 15.5 metres. Most of the world’s biggest container ships are seen regular discharging or loading cargo at the Hong Kong port’s container terminals.
Cargo coursing through Hong Kong is either bound for the Mainland such as raw materials for production, parts for processing, or goods for distribution within Hong Kong, Asia, or the Mainland. This cargo is then either reloaded for onward distribution on container ships, or loaded on trucks or river barges for crossboundary delivery to Mainland locations.
On the airfreight side, the Hong Kong International Airport (HKIA), which was ranked the busiest airport in the world as of 2010, surpassing the USA’s major hub airport in Memphis. It is an excellent transhipment point for high value spare parts, electronic components, semiconductors, electronic goods, luxury fashion goods, garments on racks and high couture garments, healthcare and laboratory services, and other critical air cargo requirements. These are just some of the time-sensitive products that are handled through the HKIA, where there is a critical mass of services that contribute to high speed handling, swift delivery to destination, last-minute airside handling facilities, with courier operators offering earlier cut-off and delivery times. With its high connectivity and concentration of flights with 61 flights per hour during peak hours. Goods are trucked or flown all the way from manufacturing centers in the south and from as far away as north and central China, just to catch flight connections at the Hong Kong airport which has 24-hour service all year round.
The key piece of Hong Kong cooperation with the Mainland would be CEPA or the Hong Kong-Mainland Closer Economic Partnership Agreement. The terms of CEPA were stipulated and signed on June 29, 2003, even before China’s accession to the World Trade Organisation. CEPA covers 3 broad areas, the first being trade in goods which stipulates that all goods of Hong Kong origin imported into the Mainland enjoy tariff free treatment, upon applications by local manufacturers and upon the CEPA rules of origin being agreed and met. The agreement on trade in services allows Hong Kong service suppliers preferential entry into various Mainland service areas. Thirdly, the facilitation on trade and investment allows both sides to enhance co-operation in various areas to improve the overall business environment.
Under the “one country, two systems”, Hong Kong maintains an independent judiciary, a low and simple tax system, free market principles, financial and insurance systems that follow international standards. Hong Kong has not only strengthened its basic economy but has made sure the links to the Mainland are sound and in many ways unobstructed. Large investments have been put into the infrastructure that physically links the Mainland with Hong Kong to ensure efficient and smooth flow of people and goods between the two places.
The Hong Kong-Zhuhai-Macao Bridge (HZMB) started in construction Dec 2009, to be completed in 2016. The bridge consists of three parts, the main bridge and boundary crossing facilities of Hong Kong, Zhuhai and Macao, and link roads of the three places. The HZMB is of special strategic value in further enhancing the economic development of Hong Kong, Macao and the Western Pearl River Delta region (Western PRD).
The Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link (XRL) will be 26-km long, running from the terminus in West Kowloon to Shenzhen, Dongguan and Guangzhou with significantly reduced journey time. More importantly, it will become part of the 16,000km national high-speed rail network now being developed in full steam in the Mainland. Travelling time from Hong Kong to Beijing and Shanghai will be shortened to about 10 and eight hours respectively. The project’s completion date is in 2015.
International representation
The Hong Kong Shippers’ Council is a founding member of most global shipping forums. The United States, Japan and Europe have the biggest shippers’ organisations comprising several smaller ones. Annual meetings provide the forum for discussion and the pooling of information relating to issues affecting each other’s region. At the end of each meeting, a joint declaration is prepared and signed by all the participating shipping councils and associations, containing an outline for the course of action planned for the next year on a national, regional or global level.
In September 2006, the Global Shippers’ Forum was formed and has become the summit meeting for delegates from all corners of the world. The Federation of ASEAN Shippers’ Councils includes most Asian shippers’ associations while the Cross-Strait China Shippers’ Alliance is composed of shippers’ organizations in the Mainland, Taiwan, Hong Kong and Macau. In respond to the repeated calls from shipper groups for reform, the UN Commission for International Trade and Law (UNCITRAL) proposed a set of new rules known as the Rotterdam Rules to replace the old international convention of Hague’s Rules, Hagues and Visby Rules and Hamburg Rules. Up to October 2009, 17 countries including the U.S. have signed to support the rule, while UK is considering and China has given its verbal support. Whereas, EU has shown great concern and requested for further refinement before giving its consent. The UN will require 20 members’ signatures before formally endorsing it. The Council has given its comments, mainly requests for clarification, through the Global Shippers’ Forum. The Council will continue its involvement in this issue and ensure shippers’ interests are maximized in the new conventions and the local laws that would be erected accordingly.
Rotterdam Rules
In respond to the repeated calls from shipper groups for reform, the UN Commission for International Trade and Law (UNCITRAL) proposed a set of new rules known as the Rotterdam Rules to replace the old international convention of Hague’s Rules, Hague and Visby Rules and Hamburg Rules. Up to October 2009, 17 countries including the US have signed to support the rule, while the UK is considering and China has given its verbal support. The EU, however, has held out and has requested for further refinement before giving its consent. The UN will require 20 members’ signatures before formally endorsing it. The Council has given its comments, mainly requests for clarification, through the Global Shippers’ Forum. The Council will continue its involvement in this issue to ensure that shippers’ interests are maximized in the new conventions and the local laws that would be erected accordingly.
To protect shippers’ interests, in the global sphere the Council joins forces with other shippers’ councils in the world to instigate reforms in the regulatory regime and maritime liability, establish a standard performance assessment scheme for freight forwarders and other service providers, and basically to speak in a concerted effort to be more effective in getting results from governments. Shippers’ councils in the world are also developing more structured organizations to increase their influence. The Asian Shippers’ Council was formed in 2004 which consisted of major shippers’ organizations in Asia. In September 2006, the Global Shippers’ Forum was formed which a sort of summit is meeting for shipper delegates in the world. There are also the Federation of ASEAN Shippers’ Councils and Cross-Strait China Shippers’ Alliance. The later is composed of shippers’ organizations in the Mainland, Taiwan, Hong Kong and Macau. The Council is an active member of these international and regional organizations, attending regular meetings that are usually on an annual basis and exchanging information on developments in their respective markets.
In recent years, the number of shipper representatives attending international forums such as the Global Shippers’ Forum and the Asian Shippers’ Meeting has marked the beginning of a stronger, more unified shippers’ voice in the world arena. These forums have opened up discussions on issues and changes in the developed economies that would impact emerging trading nations like China, India and other Asian powerhouses. The European Shippers’ Council, for instance, has been a primary force in European reforms repealing the liner block exemption. Supply chain security and surcharges and ancillary charges are also a staple discussion point for the shipping forum.
Security
The Council’s function includes monitoring all issues relating to cargo security, like the 24-hour Rule, Advance Cargo Manifest, International Port and Ship Security Code (ISPS Code), Regulated Agent Regime (RAR), U.S. Government’s 100% scanning requirements for air and sea cargo, the US 10+2, and related charges like Advance Manifest Charge, Data Amendment Charge, Port Security Charge, among others.
To conform to the security standard of the International Civil Aviation Organisation (ICAO), the Hong Kong Aviation Security Programme which is enforceable under the Aviation Security Ordinance, introduced a requirement to strengthen the security of air cargo. Under this requirement airlines can carry only consignments of cargo, courier and express parcels or mail on passenger flights from a Regulated Agent, a Known Consignor or consignments which have been subjected to other security controls. The Regulated Agent Regime is a system under which a cargo handling agent, freight forwarder or consignor of air cargo can be qualified as a Regulated Agent.
The Hong Kong scheme took effect on March 6, 2000. There are now over 1,000 Registered Agents with CAD (list is available at Aviation Security/Regulated Agent Regime at www.cad.gov.hk/) Under the regime, a Regulated Agent or an airline operator is required to apply security control measures on consignments of air cargo received from shipper who is not a Known Consignor unless the goods are exempted cargo.
Under the existing Regulated Agent Regime (RAR) which is part of the air cargo security system in Hong Kong, freight forwarders ask their customer shippers to sign Known Consignor (KC) Declarations, if the freight forwarders know about the shippers. Shippers that have signed the declarations would become KCs and their shipments would have a much lower chance of being inspected. Shipments from non-KCs, on the other hand, go through X-ray checks at cargo terminals, unless they are shipped on freighters. The other requirements in the RAR and other security measures include random checking.
Meanwhile, International Civil Aviation Organisation (ICAO), the organisation that looks after civil aviation affairs, has been conducting audits of air security systems all over the world, including Hong Kong. Two major requirements of cargo security are information on security measures of the place/factory where the cargo is packed and information about personnel handling the cargo. If the manufacturer is already under the US C-TPAT voluntary supply chain control measures, then they have an advantage.
The difference with Hong Kong and other countries is that in other places, manufacturers and shippers on the airway bill are usually the same. But in Hong Kong and South China, the two are different entities. Manufacturers could be an OEM factory in Guangdong or outer provinces, while shippers are usually companies in Hong Kong.
As an international hub, Hong Kong is subject to auditing by the ICAO which has deemed its security features lacking in certain aspects. Therefore, to bring air cargo security up to par with internationally accepted standards, the Hong Kong Civil Aviation Department has formed a task force with the industry’s participation, including airlines, air cargo terminals, freight forwarder and shipper representatives, to come up with commonly accepted measures that should not hinder the trade or be a burden to exporters.
The Council and HAFFA (Hongkong Association of Freight Forwarding & Logistics) believe that the proposals have strong merit both to the benefit of the shippers and in fulfilling the requirements of internationally accepted standards. And without a proper set of security standards, the cargo flow from Hong Kong to its trading partners will be in danger of being disrupted.
The proposals have been accepted by ICAO and the CAD and related organisations are now crafting ways to implement the additional measures.
Dangerous Goods Awareness Training
The Council has joined the organisations in Hong Kong providing dangerous goods training recognised as fulfilling the training requirements.
To tackle the problem of hidden dangerous goods (DG) inside air cargo consignments, ICAO has imposed a requirement that staff of freight forwarders, regardless of whether they are involved in the direct processing of DG, should receive DG training commensurate to their functions (www.cad.gov.hk/english/DGAC.html). This requirement has been stipulated under Chapter 4 of Part 1 of ICAO Technical Instructions (TI) for the Safe Transport of DG by Air 2005-06 edition and Section 1.5 of the IATA DG Regulations (DGR) 2006 edition.
Meanwhile, under the Dangerous Goods Training Recognised as Fulfilling the Training Requirement for Shippers and Freight Forwarders under Regulation 7 of Dangerous Goods (Consignment by Air) (Safety) Regulations Cap. 384A of the Laws of Hong Kong, the following categories of Personnel of Shippers and Freight Forwarders who are subject to dangerous goods training requirement:
Shippers and persons undertaking the responsibilities of shippers
Staff of freight forwarders involved in processing dangerous goods
Staff of freight forwarders involved in processing cargo (other than dangerous goods)
Staff of freight forwarders involved in the handling, storage and loading of cargo