Position Paper on Transshipment Licensing of Air CargoPosition Paper on Transshipment Licensing of Air Cargo
Hong Kong Coalition of Service Industries
June 1997

1. With the opening of the new airport at Chek Lap Kok next year Hong Kong is set to improve its position further as a leading aviation hub of the region. In line with the vast opportunities that lie ahead, the regulatory framework governing our aviation industry needs also to be modernised in order that the full potential for business in Chek Lap Kok is exploited. In this paper we wish to highlight in particular the need for change in the regulatory system affecting transshipment air cargo.
2. Under existing legislation (The Import and Export Ordinance Cap. 60 Section 31) "transhipment" is defined as import and re-export and subject to various licence and permit control governing goods in and out of Hong Kong. The application process for documentation may take up to two months. Although many types of transhipment air cargo are not subject to control, classification is a time consuming and sometimes painful process. Usually, transhipment air cargo will only stay in the airport for a few hours waiting to be connected to other flights. Often the connecting flight is missed due to time spent on classification. This has caused serious delay to airfreight cargoes and hence undermined air cargo throughput especially for time-sensitive commodities. By contrast, many neighbouring territories have much simpler procedures for transshipment of air freight. As a result, many airlines are now avoiding Hong Kong for transhipment of, for example, electronics items. Such a legal definition is costing Hong Kong dear.
3. Unlike other mode of transportation, transhipment air cargo is always kept within the airport customs boundary and under the control of Hong Kong Customs. Airlines and cargo terminal operators can produce movement details at any time when requested by the Authorities. This is so as the movement of all air cargo through Hong Kong is recorded at all times whilst within the air cargo terminal by computers. As such transhipment for air freight is not a fully import-and-export activity. Because of the different nature of air transport where time is of the essense, such goods should be treated as "transit" to enable them to pass through quickly.
4. Under the Import and Export Ordinance (Cap 60 Section 31) "transit" is defined as goods remaining in the same vessel or aircraft transiting Hong Kong. In our view, the definition of "transit" should be expanded to include transhipment air cargo within the airport customs boundary, making such cargo no longer subject to import and export licensing control.
5. The total volume of air freight transhipment for 1996 is 217,500 tonnes. It is estimated that the projected loss to Hong Kong as a transhipment hub because of the current narrow definition of transit which does not encompass through-terminal transhipment would be 110,000 tonnes per year. Expanding the definition of transit would thus do much to expand Hong Kong's position as an air freight hub and hence facilitate Hong Kong's competitive position in trade vis-a-vis neighbouring territories.
6. The expansion of transshipment traffic through Hong Kong carries an increased level of importance with the expanded handling capacity brought about by the opening of the new airport. The increased volume of transshipment through Hong Kong will help to maintain the cost of handling imports and exports and will therefore be most beneficial to the competitiveness of Hong Kong's international trade.

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