The Government has given approval for airlines and shipping firms to impose an insurance surcharge on export cargo. Exporters said the surcharge would increase their operating costs at the same time they were being hit by the global economic downturn. Many overseas buyers had reduced or cancelled their orders, they said. Acting Secretary for Commerce and Industry Raymond Young told legislators on Tuesday the Government had given the green light for 34 airlines to introduce a cargo insurance surcharge of 50 HK cents to HK$1 per kilogram for all export shipments from Hong Kong. 'The airlines have explained that the surcharge is aimed at recovering the extra cost arising from the increase in their insurance premiums,' Mr Young said. Following the terrorist attacks in the US, insurance companies had imposed a 0.05 per cent insurance surcharge on air freight, he said. 'In the wake of the September 11 attacks in the United States, insurance companies worldwide have increased the premium for insurance relating to air transport after reviewing their risk assessment strategies,' he said. Mr Young said under the provisions of the bilateral air services agreements, airlines must apply to the Civil Aviation Department for approval to impose a surcharge. The Civil Aviation Department had given its approval after consulting the Hong Kong Shippers' Council. 'After the September 11 attacks, cargo insurance premiums have gone up throughout the world,' Mr Young said. 'Having considered factors such as the operating cost of the airlines and the interests of users, the Civil Aviation Department is of the view that the surcharge is not unreasonable.' Mr Young played down the impact of the surcharge on SAR exporters. 'We are aware that the surcharges will lead to an increase in air freight transport costs, which in turn pushes up the operating costs of the affected enterprises,' Mr Young said. 'But since this is a global problem, the competitive edge of Hong Kong has not been undermined.' The imposition of the surcharge will increase the operating costs of Hong Kong's trading sector by about 0.14 per cent, according to government economists. It could reduce its gross margin by about 0.11 per cent. Mr Young said the Government would continue to keep a close watch on latest developments but said it was not in a position to interfere with insurance sector pricing. Eddy Lee Sau-hang, president of the Hong Kong Economic and Trade Association, said the surcharge would add an extra burden to exporters who had been suffering from the economic downturn. 'Although the surcharge is not very high, it will add to the operating cost of exporters,' he said. He hoped insurance companies could reduce premiums once the war on terrorism had come to an end. Legislator Bernard Charnwut Chan, who represents the insurance industry, said the increase was a worldwide trend. He said it was necessary to wait until the political situation had become stable again before insurance premiums could come down.