Airlines criticize UK government plan to increase air passenger duty

First this from the U.S. Air Transport Association:

The new duty on a one-way Economy class flight from the United States to the UK will now cost $90 – up from $60.

“The decision to revise and further increase the UK duty is a revenue raiser for the government under the guise of environmental protection,” said ATA President and CEO James C. May. “The funds collected do not go to environmental projects, and yet the taxes take money from airlines that they could otherwise invest in more fuel-efficient and greenhouse gas-efficient technologies. This is an illegal action, which we expect to be settled in the courts.”

The ATA says the extraterritorial move by Britain is in violation of the Convention on International Civil Aviation and claims its member airlines, representing 90 percent of U.S. passenger and cargo traffic, have saved 2.5 billion metric tons of carbon dioxide since 1978 – equal to taking 18.7 million cars off the road each year.

Because the tax is levied only on long distance flights that transit to and from Britain, it risks damaging the tourism industry in the UK as well as hurting primarily UK airlines. RyanAir is not happy:

Ryanair has hit out against increases in Air Passenger Duty (APD), claiming that the rise will “devastate UK tourism”.
The airline today said that the increase in APD for short-haul traffic from £10 to £11 in 2009 and to £12 in 2010 has been criticised as “regressive, damaging to the UK tourism industry and devastating for regional airports”.
Ryanair blasted the tax which had been billed as an environmental tax since it was introduced, claiming that “not one penny” of the tax has so far been put towards environmental issues. Ryanair added that the tax “fails to reward airlines, such as Ryanair, which invest in brand new aircraft and operate younger, cleaner, more environmentally friendly aircraft”.

Even IATA is criticizing the plan:

“The chancellor wisely abandoned plans to introduce aviation duty, the proposed per plane tax, on the grounds that this is no time for introducing greater instability in the airline industry — a catalyst for economic growth. Unfortunately, the wisdom stopped there. Adding millions of pounds to the cost of travel from the U.K. will not help the chancellor set the U.K. economy back on a growth path. We have the right diagnosis but the wrong prescription,” said Giovanni Bisignani, IATA’s director general and CEO. “This is another cash grab by the treasury, thinly disguised as an environmental measure. The U.K. government already admits that the current GBP 2 billion take from APD more than covers the cost of aviation’s climate change impact. Airlines take their environmental responsibility seriously. In this year alone, IATA-led efficiency measures have saved over 14 million tons of CO2. How much CO2 will the increased APD save? The blunt instrument of taxation does nothing to improve environmental performance.”

And the TimesOnline says the brunt of the tax will be borne by business travelers:

Once again, as we saw last week, it is business travellers who are expected to cough up for what is touted as a way of reducing the environmental impact of flying but in reality is no such thing. No matter that aviation is about to be included in the European Union’s Emissions Trading Scheme. In fact, aviation lobbying body BAR UK argues that the Department of Transport’s own statistics show that aviation’s contribution “already exceeds its environmental costs by over £100 million per annum”.

Anti-Government protesters shut down Bangkok International Airport UPDATE: PAD to end all protests, claims its goals were achieved.

Update – 12-2-2008, 08:15 PST: With the Prime Minister stepping down and his political party dissolved by the Constitution Court, the PAD (anti-government protesters) have claimed victory – for now:

Within a few hours after the Constitution Court dissolved People Power Party, People’s Alliance for Democracy, which had led seizures of the Government House and two Bangkok airports, declared an end to their demonstrations.

“We have won a victory and achieved our aims,” media mogul and PAD founder Sondhi Limthongkul said, reading a statement to reporters.

Cargo and military flights have resumed as of today, so that’s good for the trade community. However, passenger flights remain grounded and previous reports from authorities in Thailand indicated it would take some time before the airport was fully operational again. That being said, I imagine they will work quickly and most likely allow some planes to start ferrying long-stuck tourists out of Thailand.

Re: Threat of seaports closure: Obviously since the PAD has announced that they will end all protests there is no longer a threat of closure to the seaports. However, the PAD has indicated that they will protest again should the now ex-PPP (People Power Party) come back to power again.

I did hear back from my carrier contacts in Thailand. They both indicated that the PAD threatened to seize the seaports only if they were attacked at the airports. They also emphasized that this was more rumor than fact, despite news reports of a PAD spokesperson threatening the seaports. Currently all ports are operating as normal and they do not expect any disruption to operations.

Update – 12-1-2008, 23:15 PST: Breaking development – the Constitution Court of Thailand has dissolved the ruling People Power Party (PPP) and banned the executive board members from politics for 5 years. This means the current Prime Minister, Somchai Wongsawat, must step down. Hat tip to blogger Thailand Jumped the Shark, who links to this piece from Bloomberg:

Crowds at Suvarnabhumi Airport, which has been occupied for eight days by anti-government protesters demanding Somchai’s resignation, erupted in cheers after the ruling was announced. Somchai is in Chiang Mai attending a cabinet meeting.

One of the many goals of the PAD (anti-government protesters) has been the dissolution of the ruling PPP and the resignation of Somchai. This move by the court was widely predicted, since the members of the court were picked by the military government in power after the coup of 2006. It remains to be seen whether the PAD will pack up and leave or continue to stay at the airports.

Update – 12-1-2008, 17:30 PST: Here are two separate reports fresh from the Bangkok Post about the economic toll the closing of the airports is doing to Thailand.

First, orchid exporters say their losses could be as high as THB 800 million (roughly USD 23 million) if the Suvarnabhumi Airport remains closed through December 10th:

Suwan Hiranworawuttikul, president of the Royal Horticulture Association of Thailand, said orchid growers were losing between 50 million and 100 million baht a day because their flowers cannot be shipped out of Suvarnabhumi Airport.

“Orchid demand peaks in December and about 20-30% of orchid sales come from this period. Moreover, orchid prices during the peak season are about 300% higher than in normal periods,” he said.

Thailand each year exports orchids worth four billion baht and market demand has been rising by an average of 20% a year. The busiest time of the year for shipping orchids abroad by air is between Dec 10 and 21.

Basically, the orchid export industry is being ruined. And as the article points out, it’s just a matter of time before overseas buyers look to other countries instead of Thailand. Once that happens, unless the quality and service is vastly inferior to Thailand’s, it will be some time before that business returns to Thailand.

In another report the Transport Minister claims that they can get the cargo terminal up and running again by tomorrow:

He also stressed that three related agencies – Airports of Thailand (AoT), the Civil Aviation Department and the Customs Department – were told to be ready to start operations in two days.

He said that King Kaew Road had not yet been blocked by protesters and police officers needed to be stationed there as soon as possible, adding that police would take responsibility to protect the road from the PAD and ensure a clear path for cargo.

The Thai Airfreight Forwarders Association (Tafa) asked the Department of Civil Aviation yesterday to co-ordinate with AoT to allow freighters to land at Suvarnabhumi. It also asked the government to rent aircraft from neighbouring countries to serve its temporary needs.

The PAD seized both Bangkok airports last Tuesday. The damages to the Thai economy to date are estimated to have been at least three billion baht a day in lost shipment value and opportunities.

I say don’t hold your breath – I’d be surprised if this happened tomorrow, if at all. The government, for all intents and purposes, is in exile up north in Chiang Mai and is largely ineffectual. Neither the police nor the military prevented the PAD (anti-government protesters) from taking over the airport and shutting down flights. Not to mention that it serves PAD interests to continue to maintain control over the airport and prevent cargo operations from returning to normal. They might be convinced to allow “emergency” cargo shipments, such as medicines, to be ferried in and out under their supervision, but allowing police and customs officials to re-enter and take control of a key part of the airport? I highly doubt it.

Update – 12-1-2008: Protesters threaten to seize sea ports.
The news is coming fast and furious regarding the ongoing political strife in Thailand. There’s too much to link and excerpt to, but needless to say the airports are still shut down; perishable and high-value exporters are getting killed since they can’t air freight anything out of Bangkok directly. Perishables traders are being especially hurt since they can’t utilize the cold storage facilities at Suvarnabhumi Airport and simply can’t get product out. I’ve read reports that even if the airport siege was lifted immediately and they were allowed to get back to business it would take a minimum of a week just to get the IT systems tested and back online, not to mention that there are reports that some of the protesters have wrecked equipment.

But the worst news I have heard yet for the trade community comes buried in this lengthy article from The Nation newspaper in Thailand, where the PAD (anti-government protesters) have threatened to seize the Eastern sea ports, where the vast majority of sea-borne trade in and out of Thailand is handled.

The PAD may also try to seize seaports on the Eastern Seaboard if the takeover of the airports fails to force the premier out of office, Suthi Atchasai, a PAD leader from the East, told protesters at Suvarnabhumi yesterday.

If this happens Thailand will truly be cut off from the world. While the closing of the airports is a major blow to their economy, the vast majority of trade to and from Thailand is conducted by sea. Seizing and shutting down the major sea ports to the country will literally strangle trade and choke the country as goods will be unable to enter or exit the country. The situation on the ground is constantly changing and this is just a threat at this point – so take it with a grain of salt – but considering these are the same people who have managed to seize and shut down both major airports, it’s not unrealistic to think it could happen. I’ve reached out to a couple of my contacts in the shipping line industry as well as one of the major consolidators there to see what their take on the situation is. Once I have an answer I’ll report more tomorrow.

Original Post:

And with it’s closure, these thugs (because that’s exactly what they are) have assured Thailand’s economic destruction. Tourism is one of the biggest industries in Thailand, employing roughly a million people and accounting for 6% of the economy, according to this report from CNN. The airport these protesters have shut down is the still fairly new international gateway to Thailand, the giant Suvarnabhumi Airport, which handles 45 million passengers and three million tons of cargo per year, according to the same report from CNN. 370 flights a day normally go through Suvarnabhumi Airport, all of which are now stopped.

Best way to tarnish your country’s image, scare off current and potential investors, crimp international trade, kill your tourism industry, and completely obliterate any hope for an economic recovery during the impending global economic slowdown? Try storming the main international gateway for your country and shutting it down, stranding thousands of economically valuable tourists and international businessmen making front page news worldwide and earning travel warnings from major trade partners and tourist origin countries during the peak tourism season which runs from October to February. Congratulations, idiots, you’ve succeeded!

The English language newspaper Bangkok Post issues an editorial critical of the protesters’ (known as the PAD) move to shut down the airport.

Beyond the day’s immediate chaos, the impact of the PAD’s reckless action on the country’s tourism industry will be immense and difficult to rectify.

Even before the PAD attempted its boneheaded move to partially block access to the civil airport yesterday, up to 14 countries had already issued advisories warning their citizens to avoid non-essential travel to Thailand, and to exercise caution if they do visit.

According to Apichart Sankary, president of the Association of Thai Travel Agents, the protracted political tension is estimated to be costing the country 400 million baht each day in lost tourist revenue.

The National Economic and Social Development Board (NESDB) has a similarly gloomy story to tell.

Due to the higher cost of travelling and our domestic disturbance, foreign tourist arrivals were down 16.5% while the average rate of occupancy at hotels around the country dropped to 45%.

Tourism-related revenue accounts for about 6% of the national economy, and had been forecast to reach about 700 billion baht this year – a goal that is unlikely to be met now.

Some of the countries that have issued travel warnings to stay away from Thailand: The Philippines, Taiwan, Singapore, UK, China, Japan, France, New Zealand, and Australia.

The BBC has reports on UK citizens stuck at the airport, including one traveler who said that the protesters were checking luggage at gunpoint.

Meanwhile, authorities and the Tourism Authority of Thailand are taking responsibility to evacuate the thousands of tourists from the airport and put them up in neighboring hotels.

Thai authorities evacuated about 3,000 tourists from Bangkok’s international airport, more than 15 hours after anti-government protesters seized its main terminal, forcing the airport’s closure.

“The airport is just a scene of chaos,” said John Watson, chief executive officer of Diethelm Travel Group in Bangkok, Thailand’s biggest inbound tour operator. “Communication has basically broken down. Passengers are feeling very intimidated seeing people walking by with masks, knives, wooden clubs and iron bars.”

The Economic Times from India says Thailand will be hard pressed to meet their USD 17 billion target for tourism in 2008. And this report from the Bangkok Post says the latest events could push many tourist operators into bankruptcy, adding further pressure to the economy:

The latest tensions could force many operators into bankruptcy, coming just weeks before the peak of the tourist season over the year-end holidays.

Apichart Sankary, president of the Association of Thai Travel Agents (ATTA), said the PAD protest Tuesday would have a massive impact on the industry.

“Don’t think that the Thai tourism business will grow next year. It’s dying now because of the political problems. In the best case, we might just see flat growth,” Mr Apichart said.

Another tourism expert said the attempts by the PAD to close Suvarnabhumi airport reflected the “lawless society” in Thailand.

“Do you know when the country’s image is destroyed, it’s very difficult to revive it in a short period? What does Thai hospitality look like now, when there are clashes and violence inside the country?” he said.

Bloomberg says that the Thailand Stock Index rose on perceptions that the chaos may end soon, but ends with the troubling news that hotel and resort operators are falling.

Forbes points out the obvious, that the urban support protesters have generally enjoyed may disappear as the economy continues to suffer amidst the global downturn.

But “in Bangkok, the middle classes are politically very, very fickle,” and with the weakening bhat and rising job losses, they may be increasingly worried about the economic impact of the instability, said Michael Montesano, professor in Southeast Asian politics at the National University of Singapore. Popular support could shift toward harsher expedients by soldiers and police to bring to an end the airport occupation and demonstrations in the capital. “One of the reactions of the Thai middle classes to economic insecurity is to be very intolerant of disorder and to be willing to tolerate fairly extreme measures against the disorder,” Montesano noted.

Asia Sentinel labels the protesters “fascist thugs” and openly questions whether they have had help from the Thai military, who should be providing security to the airport and to international travelers.

How did the PAD thugs manage to seize Bangkok International Airport? Airports are supposed to be high security areas. Thai airports are controlled by the Thai military. It is obvious that the Thai military, who staged an illegal coup in 2006, have quietly supported the PAD’s actions. It is obvious that the military is unwilling to provide basic security to air travelers and air crew. But they are happy to rake in huge salaries associated with their control of the Airports Authority. Foreign governments and airlines should reconsider whether the authorities in Thailand are willing to provide international standards of safety and security.

For the best blogosphere coverage on the crisis, at least in my opinion, check out Bangkok Pundit. Just keep scrolling.

10+2 / Importer Security Filing interim final rule published

Well, it’s official: U.S. Customs and Border Protection’s (CBP) Importer Security Filing (ISF), formerly known as “10+2″, has been finalized. The interim final ruling was published in the Federal Register yesterday, November 25th, while a press release was issued by CBP on Monday the 24th. Following are several pertinent links from the DHS/CBP websites explaining the ruling:

Official press release from Department of Homeland Security (DHS)

DHS Fact Sheet: New Cargo Security Requirements for Maritime Carriers and Importers

U.S. Customs and Border Protection FAQ

The interim final rule will take effect 60 days after publication, so it has an effective date of January 26, 2009. The good news for the trade community is that CBP will delay compliance to 12 months after the interim rule takes effect. According to the fact sheet linked above, this means:

CBP will show restraint in enforcing the rule. CBP will take into account difficulties that importers may face in complying with the rule as long as importers are making a good faith effort and satisfactory progress toward compliance.

In addition, CBP will conduct a review to determine any specific compliance difficulties that importers and shippers may experience in submitting all 10 data elements 24 hours before lading. The structured review will cover a range of enterprises, from small to large, and will include both integrated and nonintegrated supply chains.

Exactly what “show restraint” means is beyond me, but I imagine it will get fleshed out in the weeks to come. Bottom line, it sounds like CBP is going to take a soft approach during the first year to help get all the importers in line with the requirement. As an importer, hopefully you’ve been considering the pending impact of this regulation for awhile, but if not here are some of your options:

1. DIY: Do-it-Yourself: You’ll need to have a system in place for transmitting the data elements electronically to CBP. You’ll have to coordinate with your overseas suppliers and your transportation service provider to gather the necessary data elements on each and every shipment far enough in advance to transmit the data to CBP at least 24 hrs before the cargo is laden on a vessel. There are various software and systems providers (GT Nexus, LogNet, etc.) out there who have been actively working on an automated solution for importers to be able to gather the necessary data and transmit to CBP directly themselves or via a third party. Which brings me to the next option…..

2. Rely on an “agent”: To the best of my knowledge, there is no set definition for what constitutes an “agent” in CBP’s eyes. An agent can be your licensed customs broker, your freight forwarder / logistics provider, or some other third party. Whoever you use, they will need a current power of attorney and of course must have a system capable of transmitting the data elements to CBP electronically. You’ll need to set up the necessary processes so that your agent can be assured of receiving all the necessary data elements within the time frame needed for transmission 24 hrs before the cargo is laden on a vessel. Remember, too, that the burden for complying lies on the importer, so if and when CBP starts coming down on importers for failing to comply, the damages will be for the importers account, not your agent who screwed up.

If you have no idea what I’m talking about or for those of you who have heard of “10+2″ but would like to learn more, I’ll excerpt the pertinent details from the official links I posted above:

Importer Security Filing (ISF) Overview:

The Importer Security Filing and Additional Carrier Requirements interim final rule will help prevent terrorist weapons from being transported to the United States by requiring both importers and carriers to submit additional cargo information to U.S. Customs and Border Protection (CBP) before the cargo is brought into the United States by vessel.

What are the existing requirements for carriers and importers?

Carriers are currently required to submit advance cargo information for vessels no later than 24 hours before the cargo is laden aboard a vessel at a foreign port. This is commonly referred to as the “24-Hour Rule.” Carriers are not currently required to submit vessel stow plans or container status messages to CBP.

Under existing requirements, importers of record are required to file entry information with CBP within 15 calendar days of the date of arrival of a shipment at a United States port of entry. Inaddition, within 10 working days of the entry of the merchandise, entry summary information must be submitted. Importers are not currently required to submit advance cargo information to CBP.

What are the new requirements for carriers?

* Vessel Stow Plan: Carriers must transmit the stow plan, via the Automated Manifest system (AMS), secure file transfer protocol or email, so that it is received by CBP no later than 48 hours after the carrier’s departure from the last foreign port. For voyages less than 48 hours, CBP must receive the information prior to the vessel’s arrival at the first port in the U.S. The stow plan must include the vessel name, vessel operator and voyage number. With regard to each container, the vessel stow plan must also include the container operator and the equipment number, equipment size and type, stow position, hazmat code, port of lading and port of discharge.
* Container Status Messages (CSM): CSMs must be submitted to CBP daily for certain events relating to all containers laden with cargo destined for the U.S. by vessel. Carriers must submit a CSM when any of the required events occurs if the carrier creates or collects a CSM in its tracking system reporting that event. For each CMS submitted, the following information must be included: event code being reported, container number, date and time of event being reported, status of the container (empty or full), location where the event took place, and vessel identification associated with the message if the container is associated with a specific vessel. This must be done no later than 24 hours after the message is entered into the carrier’s equipment tracking system.

What are the new requirements for importers?

The interim final rule requires Importer Security Filing (ISF) importers, as defined in the interim final rule, or their agents to provide eight data elements, generally no later than 24 hours before the cargo is laden aboard a vessel destined to the United States, for shipments consisting of goods intended to be entered into the United States and goods intended to be delivered to a foreign trade zone (FTZ). Those data elements include:

* Seller;
* Buyer ;
* Importer of record number / FTZ applicant identification number;
* Consignee number(s);
* Manufacturer (or supplier);
* Ship to party;
* Country of origin ; and
* Commodity Harmonized Tariff Schedule of the United States (HTSUS) number.

The rule provides flexibility for importers with respect to the submission of four of these data elements. In lieu of a single specific response, importers may submit a range of responses for each of the following data elements: manufacturer (or supplier), ship to party, country of origin, and commodity HTSUS number. The ISF must be updated as soon as more accurate or precise data becomes available and no later than 24 hours prior to the ship’s arrival at a U.S. port.

The ISF will also need to include two data elements that must be submitted as early as possible, but no later than 24 hours prior to the ship’s arrival at a U.S. port. These data elements are:

* Container stuffing location; and
* Consolidator

In addition, the rule requires that the Importer Security Filing for shipments consisting entirely of foreign cargo remaining on board (FROB) and shipments consisting entirely of goods intended to be transported in-bond as an immediate exportation (IE) or transportation and exportation (T&E), must provide five elements. Importer Security Filings for IE and T&E shipments must be submitted no later than twenty-four hours before the cargo is laden aboard a vessel destined to the United States and Importer Security Filings for FROB must be submitted any time prior to lading. The following five data elements must be submitted for FROB, IE and T&E shipments:

* Booking party;
* Foreign port of unlading;
* Place of delivery;
* Ship to party; and
* Commodity HTSUS number.

How should importers file the ISF?

Electronically:

The current approved electronic data interchange systems for vessel stow plans are vessel Automated Manifest System (AMS), secure file transfer protocol (sFTP), and email. The current approved electronic interchange system for container status messages is sFTP. The current approved electronic data interchange systems for Importer Security Filings are vessel AMS and the Automated Broker Interface (ABI). CBP will publish a notice in the Federal Register if a different or additional electronic data interchange systems are approved.

Who can file the ISF?

The ISF importer or his agent will be responsible for filing the complete, accurate, and timely importer Security Filing. For the purposes of the interim final rule, ISF importer means the party causing goods to arrive within the limits of a port in the United States. For foreign cargo remaining on board, the ISF Importer is construed as the carrier. For immediate exportation (IE) and transportation and exportation (T&E) in-bond shipments, and goods to be delivered to a foreign trade zone (FTZ), the ISF importer is construed as the party filing the IE, T&E, or FTZ documentation with CBP.

If you are a U.S. importer, I strongly recommend you click on the links above and read everything that’s there. Here are some other resources for you from alternate sources:

Tuttle Law

APL – link to the actual text in the Federal Register (lengthy PDF file)

Barnes/Richardson Law Firm

10+2 Community Forum

China: Urban unemployment to increase next year

Chinese officials say the outlook is “grim”:

Urban unemployment has begun to rise and will increase next year, Yin Weimin, minister of human resources and social security, said on Thursday.

“Stabilising employment is the top priority for us right now,” said Mr Yin, in comments reflecting growing worries about the potential threat to social stability.

“The current situation is grim, and the impact is still unfolding,” he said. “Since October, our country’s employment situation has been affected along with changes in international economic conditions.”

China’s official urban unemployment rate is 4 per cent. But this figure includes only registered urban residents. Tens of millions of rural migrants who have moved to cities to work in factories over the past decade are generally not included in unemployment data if they lose their jobs.

Chinese officials know that rising unemployment means potentially volatile civil unrest in their country, as the slowing economy means there aren’t enough jobs available for those entering the workforce. While 7.5% GDP growth would be means for celebration in most Western industrialized nations, some economists say that China needs to maintain at least 8% growth in order to generate enough jobs to make the labor force happy. I imagine we’ll see more export tax rebate increases to encourage further export growth – or perhaps even the return of low-end, labor intensive manufacturing to the Pearl River Delta.

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