Chairman’s Message (Annual Report 2016)

Coping with a year of surprises and unexpected events

Its been a hectic year at the Hong Kong ShippersCouncil as we charted through rough waters in the world of logistics. It was all hands on deck to protect the interests of shippers from obstacles such as block exemptions, shrinking market competition and unexpected bankruptcy.

At the start of the year, we rallied against the granting of a block exemption order to shipping lines who were seeking exemptions from various Hong Kong competition laws such as vessel and slot sharing, vessel operations, technical cooperation to commercial issues, just to name a few; we saw no reason why special privilege had to be given to the liner industry.

Hong Kong shippers have been supporting shipping liners by allowing them to grow and prosper in the past decades and shipping lines have paid little attention to shippers well-being in return. We believe it is our duty to maintain a procompetition business environment for Hong Kong and urged the Competition Commission not to grant the block exemption demanded by the liners and mobilised other groups.

Then in March came the good news of a dramatic fuel price drop followed by the Civil Aviation Departments cancellation of the Cargo Fuel Surcharge from 1st April 2016. Lowering surcharges, or better yet removing all of them, will help the industry regain a competitive advantage despite high operation costs.

The Financial Secretary mentioned in his 2016- 17 Budget that the government would be implementing a Trade Single Window project that would allow submission of over 50 trade documents to the government through a single avenue. We supported this cost-efficient process but voiced concerns such as whether it would disrupt the current trading flow and damage efficiency and flexibility, both of which are vital to the success of our trading and logistics sectors. We called for early engagement of all stakeholders in working out the requirements, designing the new system and creating a full impact assessment.

Shippers were also reminded o f t h e implementation of SOLAS (Safety of Life at Sea) Amendments in Hong Kong. This requires shippers to declare verified gross mass (VGM) of containers to shipping lines and terminals before loading onboard; this is calculated through certified weighing machines or by adding up the weight of individual packages, dunnage materials, pallets and tare weight of the containers.

Then we were reminded again of the challenge of finding the right Single Window model for Hong Kong with the Commerce and Economic Development Bureau (CEDB) conducting a three month consultation on a Hong Kong Trade Single Window (SW) from late April 2016.

Its hoped that the new approach would replace the highly inefficient one and provide a one-stop and standardized system of logging of all trade documents. The Shippers Council pressed ahead and argued that the SW portal must be carefully crafted through extensive consultation with all stakeholders and maintaining flexibility of the existing system is important for Hong Kong to thrive as a global logistics hub.

Mid-year, there was another uphill battle to maintain competitiveness in the shipping trade as we saw the emergence of the increasing market concentration in the liner market.

Several major merger-and-acquisitions took place such as the one between Hapag-Lloyd and CSAV, poised to become the fourth largest shipping line in the world, which was announced in December 2015.

Undoubtedly, there is a growing trend of shipping mergers and the balance of power is beginning to shift, but more importantly, these mergers and alliances will inevitably lead to a rapid market saturation and diminish competitiveness within the shipping trade. We brought these important issues to the fore to help shippers better prepare and prevent shipping lines from being given any more special privileges.

Towards the end of the year came some welcoming news about some invaluable opportunities from the so-called Belt and Road, which promises new drivers and markets for some 65 countries that are covered by the B&R map.

We were reminded that Hong Kong is the worlds very first IPO centre, the worlds first offshore RMB centre, the worlds fifth forex trading centre and the worlds seventh largest bank centre, as well as the leading centre for cross-border investment businesses. B&R will bring ample opportunities and thus it is invaluable to ensure that Hong Kong actively immerses itself in these upcoming opportunities.

Towards the end of the year came the unfortunate bankruptcy news of Hanjin Shipping liner, which ranked 7th in terms of capacity; its alliance partners, namely COSCO Container Line, KLine, Yang Ming Line and Evergreen Line.

The Shippers Council received many calls as the news of receivership reached the public as ships were arrested at multiple ports and terminal operators, stevedores, feeder contractors, freight forwarders acting as NVOCCs, trucking and depot contractors, ship-owners, financial institutes, container leasing companies, bunkers, pilots and even port authorities were affected. Unfortunately, shippers suffered the most because of the skyhigh costs of disrupted supply chain.

 

The Council took the initiative to approach the SAR Government, several law firms, insurance institutes and companies in the wake of the incident and found out that there were holes in the current trade protection and risk mitigation system. We therefore urged the government to take a leading role in working out a solution with professionals and the private sector to help the local importers and exporters to mitigate the risk.