Hong Kong – Leading Global Logistics Hub – By Mark Millar

Hong Kong is one of the world’s leading logistics hubs. Its strategic location makes it both the Heart of Asia – half the world’s population are within a five hour flight, and China’s Gateway – providing access into and out of the world’s second largest economy and fasting growing consumer market.

Business Confidence is High

Complementing its leadership role as a global logistics hub, Hong Kong is also one of Asia’s leading international business centres – with 3,580 regional office and regional headquarters. Hong Kong is the 11th largest trading entity in the world and business confidence levels are high.

The 2010 Business Confidence Survey conducted by the British Chamber of Commerce in Hong Kong found very high satisfaction levels amongst business, with 97% of respondents describing the business environment in Hong Kong as ‘somewhat’ or ‘very’ satisfactory. The major reasons cited for this high level of satisfaction were identified as geographical location, taxation system, communication network, public security and safety, infrastructure and free port status.

Trade and Logistics the largest of the Economy’s Four Pillars

The world class infrastructure and free port status are significant ingredients in Hong Kong’s enduring success as a leading logistics hub. Long established as a regional trading hub and global sourcing centre, Financial Secretary John Tsang recently confirmed that, of Hong Kong’s four economic pillars, “Trade and Logistics” is the largest – accounting for 24.1 % of GDP and 24% of employment.

In the 2010 global rankings of cargo volumes, Hong Kong is the world’s number one cargo airport and the third largest container seaport.

World’s largest Air Cargo Hub

For the last 15 years, Hong Kong International Airport (HKIA) has been the world’s busiest airport for international cargo. In 2010, HKIA handled 4.1 million tons of cargo, enabling Hong Kong to overtake Memphis USA to become the world’s largest cargo airport.

HKIA’s well established global network, accumulated critical mass, extensive connectivity and ecosystem-wide efficiencies all combine to enable Hong Kong’s long standing leadership position in air freight – as both a global Hub and a major Gateway. HKIA hosts 90 airlines operating 5,800 flights per week – linking Hong Kong to 117 international destinations worldwide, plus 40 destinations in mainland China. This global network of airline connectivity far surpasses that of Hong Kong’s closest neighbours – see chart below.

Hong Kong International Airport is an important part of the local economy – over 30% of Hong Kong’s total exports move by air freight, representing over USD$100 million of products. A record 50 million passengers passed through the airport in 2010 and the aviation sector as a whole represents 8% of GDP and employs over 250,000 people in Hong Kong.

The airport runs on a dual runway system providing for 60 air traffic movements per hour, and averaging 880 daily aircraft movements.
Hong Kong has an enviable reputation of providing security, transparency, efficiency, speed, and connectivity, which together with its longstanding free-port status makes it the number one choice of transhipment hub.

Products that are high value, have short product life cycles, are perishable or are needed urgently, have an intrinsic need-for-speed and therefore gravitate to the air-freight mode of transport. Consequently, within complex, global supply chain ecosystems, Hong Kong is the default Global Hub and China Gateway for such critical shipments.

World’s third largest Container Port

Similarly in the ocean freight sector – which accounts for over 95% of world trade – Hong Kong’s far-reaching connectivity and extensive global network make it the largest container port in South China.

Within the South China cluster, the multiple ports process a total of 60 million containers (TEU) per year – of which over 23 million are handled in Hong Kong.

Ranking number 3 in container ports worldwide, Hong Kong’s nine container terminals are all privately owned and operated with a total of 24 berths. Being served by 80 international shipping lines, providing 450 container-liner services per week to more than 500 destinations worldwide, Hong Kong is a major trans-shipment hub.

Even as the expanding China ports handle more direct cargo movements in and out of the mainland, Hong Kong will leverage it’s long and distinguished history as a leading nautical base and continue to expand its role as a leading international trans-shipment hub and regional marine services centre.

Government Support for Logistics Industry

The Hong Kong Government fully supports the trade and logistics sector – the Secretary for Transport and Housing confirmed that the Government has “undertaken a number of measures and studies which would help upgrade our facilities for more efficient freight movements and supply chain activities”.

Hong Kong has recently signed the Framework Agreement on Hong Kong – Guangdong Cooperation which will advance cooperation between the two territories – across many sectors. Financial Secretary Tsang noted that maintaining close ties with the mainland “will further reinforce Hong Kong’s leading position in the global supply chain and enhance our strengths in trade and logistics.”

In his 2011 budget address, the Financial Secretary John Tsang vowed to ensure that Hong Kong can cope with air traffic growth and to reinforce the maritime service cluster.

Investment in Infrastructure Mega Projects

In order to further consolidate Hong Kong’s position as a regional logistics hub and capitalise on our competitive edge in handling high-value goods and providing high value-added services, the government has three infrastructure mega projects in the works.

The Hong Kong-Zhuhai-Macau Bridge – 29.6 kilometres long – is expected to open in 2016. This bridge will enhance the efficient, cost-effective movement of cargo between Hong Kong and the western Pearl River Delta – still very much the heart of Guangdong province’s manufacturing base.

The new bridge “bears strategic and symbolic importance to Hong Kong” said Eva Cheng, Secretary for Transport and Housing and – the improved connectivity will expand our cargo hinterland and open up new consumer markets, bringing new impetus for our freight and logistics sector.

Container Terminal 10 – within the ocean freight sector, much of the container movements are mid-stream trans-shipments, and so the government has commissioned a feasibility study on the development of a tenth container terminal.

Third Runway – at the airport, the current two runway system will be at maximum capacity by 2015 – a new daily flight handling record was set on 30 March 2011 with 983 aircraft movements. Hence, within the framework of the Master Plan 2030 Study, the Airport Authority is now evaluating the feasibility of building a third runway – which is being called for by businesses large and small, throughout both the industrial and the logistics sectors.

Sustainable Competitive Advantage

Hong Kong’s sustainable competitive advantage as a leading global logistics hub will revolve around three pivotal competencies – best in class international transhipment hub, centre of excellence for logistics skills and leadership in e-logistics.

As a transhipment hub, Hong Kong will continue to grow. In 2011, the International Air Transport Association (IATA) forecast that Hong Kong will be the world’s fastest-growing air cargo market, “growing 12.2 per cent annually over the next two years” such that cargo volumes will increase to 5.3 million tonnes in 2014.

From the e-logistics perspective, increasingly widespread adoption of e-freight initiatives throughout the international air and ocean cargo sectors is increasing efficiencies whilst providing environmental benefits such as reducing paperwork. Within the cross border trucking sector, introduction of electronic submission of road cargo information enables seamless customs clearance at the land boundary control points. GPS communications technology is now also widespread in the fleet management of trucking companies, with the On-Board Trucker Information System (OBTIS).

Firmly reinforcing its position as a leading regional centre of excellence for logistics industry skills and talent development, Hong Kong is home to 60 educational and vocational training institutions, offering more than 1,000 programmes and courses related to logistics and shipping. Government funded training allowance s benefit small and medium enterprises.

Conclusion

Looking to the future, I am very confident that Hong Kong will continue its role as a leading global logistics hub – by means of its strategic location, its business-friendly government and its sustainable competitive advantage.

Industry and government together envisage Hong Kong’s future positioning as a global logistics hub providing high value-added services and handling high value products – as well as strengthening its role as the logistics gateway to mainland China, with the support of state-of-the-art infrastructural facilities and trade facilitation measures.

Achieving the number one position of the world’s air cargo hubs and maintaining its position as the world’s number three sea container seaport, Hong Kong is indisputably one of the world’s leading logistics hubs – enabling effective and efficient global supply chain ecosystems.

Mark Millar

Mark Millar MBA, PMHKLA, FCILT

Mark Millar leverages over 20 years of global business experience to provide independent Consulting, Education and Advisory services that create value for clients by improving the performance of their logistics and supply chain activities in China and the Asia Pacific region.

Acknowledged as an industry thought leader, clients have engaged Mark as Speaker, Moderator, Master of Ceremonies or Conference Chairman at more than 200 functions in 17 countries – including Hong Kong, Singapore, China, Macau, Vietnam, Kazakhstan, Dubai, India, Philippines, Malaysia, Thailand, South Korea, England, USA and Australia. His articles are regularly published by trade magazines in five languages in seven countries.

Mark serves on the advisory board of several leading organisations and his industry contributions have been recognised with a number of accolades, including being named in the “Who’s Who of Power Players in Supply Chain Management in China”, the “Pro’s-to-Know Thought Leaders in Supply Chain” and as “One of the most Progressive People in World Logistics”.

Contact him at mark@markmillar.com

Announcing the launch of Freightlinkup.com

3PLwire.com is proud to announce the launch of our new online logistics and supply chain directory FreightLinkUp.com – the premiere directory for supply chain and logistics related companies.

This website will provide an avenue for logistics and supply chain related companies to highlight and market their services to companies throughout the supply chain. For the past 5 years, 3PLwire.com has been a leading company in the online world bringing the latest in third party logistics news and information. This new 3plwire website will bring a dedicated reader base and substantial web traffic to freightlinkup.com, offering greater exposure to companies who list their services and capabilities.

In listing your company on freightlinkup.com, you will be able to highlight your company name, website, logo, address, phone, email, contact person, summary of services, and much more.  Additionally, each company that purchases a platinum package will be entitled to two months of free banner advertising on 3PLwire.com.

To view the various package offerings please visit the following link:

http://www.freightlinkup.com/submit

Incoterms 2010 – DAT and DAP

The International Chamber of Commerce (ICC) has announced the launch of the new rule changes to Incoterms® 2010 which will be kicked off during a September event in Paris. The official implementation of the new rules are scheduled to take place during January of 2011.

On September 27th – 29th, the ICC will hold a series of practical masterclasses on the Incoterms® 2010 rules and provide a detailed presentation of the new rule changes that will be incorporated into the new Incoterms® 2010.

This revision, the first since 2000, will aim to adapt changes that have occured in global trade over the last ten years. According the ICC website, the reason for the changes include:

“The importance of cargo security, the resulting new obligations on traders, developments in container transport, and the 2004 revision of the United States’ Uniform Commercial Code, which resulted in a deletion of the former US shipment and delivery terms.”

Although the book has not been officially released, details on the ICC website show that the most glaring changes to the 2010 version will be the elimination of 4 Incoterms® including, DDU, DEQ, DES, and DAF. Two new terms will be added; DAT and DAP, bringing the new total of Incoterms® to 11.

Incoterms® 2010 will be arranged into the following groups:

Any Mode of Transport

CIP – Carriage and Insurance Paid
CPT – Carriage Paid To
DAP – Delivered At Place
DAT – Delivered At Terminal
DDP – Delivered Duty Paid
EXW – Ex Works
FCA – Free Carrier

Sea and Inland Waterway Transport Only
CFR – Cost and Freight
CIF – Cost, Insurance and Freight
FAS – Free Alongside Ship
FOB – Free On Board

In addition to the 11 rules, Incoterms®2010 will include:

* Extensive guidance notes and illustrative graphics to help users efficiently choose the right rule for each transaction;
* New classification to help choosing the most suitable rule in relation to the mode of transport;
* Advice for the use of electronic procedures;
* Information on security-related clearances for shipments;
* Advice for the use of Incoterms® 2010 in domestic trade

This interpretation is provided as a guide only.

Incoterms® are published by the International Chamber of Commerce and are available on their website and official publication “Incoterms® 2010″. For a complete and official overview please refer to the ICC’s publication.

May Containerized Import Data Update – Zepol.com

On June 5th, we completed the data for May in our U.S. Customs trade data tool, TradeIQ. For the fourth month in a row, import shipments increased, rising 5.68% over April. May 2010 shipments also rose greatly over the previous year, up a whopping 19.55% over May 2009.

Below is a table showing port regions of the world where shipments originated:

Port Region	May 2010Shipments	Percent Change over Apr 2010	Percent Change over May 2009
Asia	559,534	7.63%	23.13%
Europe	109,796	1.57%	14.5%
Central America (includes Mexico)	58,644	3.18%	5.64%
South America	22,148	-0.88%	21.99%
North America	9,508	10.56%	-2.41%
Unknown	8,211	-8.85%	8.74%
Australia	6,868	-6.67%	-1.44%
Africa	3,618	-16.69%	28.57%
Totals	778,327	5.68%	19.55%

While Asian trade looks strong for May 2010 relative to April 2010 and May 2009, a glance at quarterly shipments since quarter three of 2007 shows that the regions’ shipments have yet to return to pre-recession levels. Though June data is needed before we can compare the performance of quarter two, we can see that with 1,470,958 shipments, quarter one is up 13% over the same quarter in 2009, but still down 7% from 2008.

Below is a chart of Asia’s quarterly shipments, starting with Quarter 3 of 2007:

The collection methods used by U.S. Customs for AMS data can lead to an overstatement of shipments for some ports, as imports and exports from Prince Rupert and Vancouver are often recorded as imports for the U.S. Moreover, the data includes shipments from empty containers, may overstate totals from transshipments, and may contain other data anomalies as well.

Zepol‘s U.S. Customs trade data is derived from Bills of Lading entered into the Automated Manifest System. This information represents the number of House manifests entered by importers of waterborne containerized goods. This indicator is the earliest data available for the previous month’s trade activity.

Kevin Palmstein is the Director of Marketing and Product Development for Zepol Corporation. Zepol is the leading provider of United States trade information. Zepol’s products, TradeIQ™ and TradeView™, provide access to the latest U.S. Import Customs trade data and U.S. Import/Export Census trade statistics respectively. To learn more about Zepol, visit www.zepol.com and read their trade data blog, www.zepol.com/blog.

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