Hong Kong worries that stricter reporting rules will reduce efficiency

In many ways, the difficulty Hong Kong is having in getting to grips with the United States Container Security Initiative can be attributed to a clash of business cultures.

While the Hong Kong government at times trips over itself to get out of the way of the private sector, the US is arguably the most regulated business environment in the world.

In a nutshell, in its effort to prevent the global supply chain (or that reaching into the US, anyway) from being a vehicle for acts of terrorism, the Bush administration is telling the rest of the world how to trade.

Only an organisation with the weight of the world's most lucrative consumer base squarely behind it would have such temerity.

The carrot? The US says shippers who comply will have faster access to the US market. Whether local exporters agree with the way it is being enforced or not, it is an offer they cannot refuse.

Washington's first salvo in its war against terrorism by container has been fired against the ubiquitous cargo manifest, the list that details what is in the box.

Historically, local traders have had 14 days to make amendments to the manifest of the goods they sent, flexibility which has allowed for last-minute consolidation and pre-booking of space during peak periods, such as in the lead-up to Christmas.

It is these unique levels of flexibility, in line with Hong Kong's free port status, that have been the backbone of our world-class levels of efficiency.

But local ingenuity will be severely challenged on February 2, from which date all manifests will have to be submitted with unprecedented levels of data accuracy 24 hours before the vessels leave the port. No amendments to the manifest will be allowed after the vessel sails and penalties for non-compliance will include heavy fines, lengthy customs delays and 'no load' directives from US Customs.

With more than 6,000 boxes leaving the port each day for the US, even a 10 per cent non-compliance rate would cause chaos at the congested Kwai Chung container terminal. It is a worrying thought, given that shipping lines, which will bear the brunt of all punitive actions, in the past week have said between 50 per cent and 90 per cent of US-bound cargo would have been rejected had the regulations been in effect.

The Hong Kong Liner Shipping Association has scheduled a meeting of its steering committee next week, which will present members with some difficult decisions.

The key will be finding a delicate balance between rejecting all cargo not in line with the regulations and, in an effort to keep the supply chain from grinding to a halt, accepting goods in defiance of what has been a badly implemented new regime. After all, it is the exporters who are their customers, not US Customs.

However, it is unlikely to come to a showdown.

According to a forwarder who spoke with US Customs delegates in town last week, the department will assess degrees of non-compliance; for example, cases of neglect, gross neglect and perhaps fraud.

It is thought Customs is likely to shy away from 'no load' orders or even penalties against containers shipped by exporters who fall into the first category.

Wide-eyed American officials, by some reports, have for the past few weeks been shocked (others have shown quiet admiration) after discovering the 'procedural flexibility' of the export practises at our free port.

Whatever their reaction, it has become increasingly obvious they understood only a small portion of what they were proposing with the container manifest initiative. They certainly knew very little of the impact it would have on the way Hong Kong does business.

Presumably, the Bush administration believes any level of procedural compliance is better than none, which is why, despite being told by most sectors that a one-year grace period would be needed, it rammed home the new regulations.

The dearth of US knowledge has been perhaps best illustrated by its selection of February 2 - smack in the middle of Chinese New Year - to mark the end of the 60-day grace period and begin the penalty phase.

They obviously have not seen the ghost town that is Lower Albert Rd near the government offices during China's most important public holiday of the year.

It is true that the regulations are meant to be globally applied on that date, but given that Hong Kong handles more cargo destined for the US than any other port in the world, the date may have warranted more careful consideration.

At least when they become alarmed at the paltry levels of compliance on launch day they will have no one official to complain to.

Russell Barling is the Post's transport and logistics correspondent

Graphic: OPIN16GET