Customs Clout For China

By Thomas Timlen

In China, years of growth have brought with them the challenge of maintaining the capacity to handle the expanding flow of commerce, affecting the movement of all cargo types by all modes of transport. Adding a supply chain security dimension to traditional tasks has exacerbated the situation.

Some stakeholders have made improvements in response to market pressures, and there have also been government-backed efforts to implement programs and related regulations to facilitate transport while enhancing security. However, these have presented their own issues.

Bosco Lau, vice president and CEO of Winning Logistics Services, said bottlenecks are a result of the Customs department increasing the frequency of inspections, but for a short while they did not have sufficient manpower to cope with the increased inspections. “This resulted in long delays of cargo clearance, and uncertainty regarding when the cargoes will be cleared,” he said.

Insufficient manpower is not the only cause for concern for project cargoes in China; regulatory hurdles are also a factor.

“Any parties involved in a China-based supply chain of heavy-lift or breakbulk cargo, should be very careful about the local customs system,” cautioned Zhao Jin Hai, AAL’s general manager for China. “If their cargo needs to transship within a China port/inland location – in other words, if same needs to be custom cleared at the ‘inland place’ – it must be carried on from the port to that place under a bonded service requiring the use of bonded vehicles. However, such a bonded service permit is only possible with the support of the party that’s going to clear the customs.

“Under some to-order bills of lading, it is sometimes very difficult to know who’s going to do this and whether they will cooperate,” Zhao added.

In a bonded service, transportation equipment such as a barge or truck must be registered and approved by the Chinese Customs authority. Each bonded service also requires a hefty security deposit as guarantee, money that’s held by Customs to prevent a possible breach of customs duties.

To make matters worse, Zhao added that a bonded service is expensive, and waiting for protracted communications and procedures to be completed can be very costly and time consuming.

“To date,” he said, “I do not see any simple solution except detailed checking in advance, although even then some details are not possible to obtain prior to getting a shipment confirmed.”

 

Maintaining Competitiveness

While such challenges hamper the efficiency of Chinese Customs, some improvements might be in store. Global Project Logistics Network member Protranser International Logistics Co. Ltd. has seen some market-driven improvements.

Leo Liu, Protranser’s Shanghai-based marketing manager, noted that China’s supply chain stakeholders have taken proactive steps. “After many years of development – from shipper and warehouse to trailer companies – they have all updated not only hardware but also software to increase efficiency and safety.”

Protranser metro export to Singapore. Credit: Protranser Cargo Operations

According to Liu, such improvements have not necessarily been the result of a need to comply with specific supply chain security regulations, but rather to meet a desire to maintain competitiveness in a tough market.

Having acknowledged areas of improvement, Liu recognized that there are still particular issues to be mindful of when moving project cargo through China’s supply chain.

“For river transport for project cargo in southwest regions of China, we suggest that it is necessary to pay more attention to management and coordination of all related subcontractors,” Liu said. Failure to do so can result in unwanted delays and/or additional costs, such as barge detentions.

“In short,” he said, “China developed too quickly.”

He felt that the time has come for a period of reflection during which systemic inadequacies can be addressed, thereby allowing companies to pay more attention to commercial consequences and sustainability.

He also emphasized the need for coordination: “The key point is to coordinate different subcontractors to manage any barge or truck detentions. First, engage partners that have a rich knowledge in management of project cargo; second, engage reliable subcontractors and; third, maintain a good relationship with the shippers and arrange experienced staff to supervise the operation.”


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Myriad Of Support

David Zhou Yi, a senior partner at Co-Effort Law Firm LLP in Shanghai, takes a holistic view. He pointed out that as the administrative agency with law enforcement competency, Chinese Customs clearly plays an important role in supply chain security.

But among Chinese government agencies, Customs is not alone in terms of supply chain security-related initiatives. Yi explained that other competent government agencies are also actively putting effort into construction, innovation and application of supply chain systems, evidenced by a number of high-level regulations recently issued. These include an official notification from the Ministry of Commerce and the Ministry of Finance on the Construction of China’s Supply Chain System. This involves three areas of focus: standardization of logistics, a platform of supply chain and tracking systems for important products, and a list of key national standards.

Meanwhile, the State Council has issued official guidelines known as Actively Pushing Forward Innovation and Application of Supply Chain. “This is the first time the State Council has made specific deployment for innovative development of the supply chain with particular inputs on the tracking system, intellectualization of supply chain and supply chain finance,” Yi said.

Turning to practical advice for project cargo movements, Yi felt that while choosing the carrier for land transportation, qualification of the enterprise should be carefully verified, which according to the relating regulations, is classified into five grades.

“Consignors should appoint qualified and suitable carriers to transport the cargo,” Yi explained. “Prior due diligence and on-site checks of the special transport vehicles and technical equipment are necessary. Cargo owners and EPCs are suggested to look into the carrier’s insurance inter alia the maximal amount of the liability insurance, and if appropriate to coordinate with the carrier to set down a complete supply chain plan.”

Chinese legislation has improved to enable movement of breakbulk and heavy-lift cargo. Credit: AAL

Yi also pointed out that while, according to Chinese Highway Safety Protection Regulations, only one permit is needed for transportation of project cargo in China, it takes some time to process and obtain such a permit in practice.

“When the vehicle and cargo combined exceeds certain dimensions, escort planning should be in place with escort personnel engaged for each segment of the transport. So, the time required and the expenses involved in this regard must be taken into account well beforehand,” he said.

 

Improvements On The Way

Turning to water transport, Yi explained that national and local authorities have issued some carriage transportation regulations covering reporting and approval systems for carriage of project cargo, and joint administration by maritime and fairway authorities, among others.

“In 2016,” Yi said, “the Ministry of Transport and the National Development and Reform Commission of the PRC published 16 demonstration projects of multimodal transportation, each of which has highlights for reference by the cargo owners and EPCs in procuring safe and quality services. PRC local counsel’s advice should be sought for avoiding legal or compliance exposure purposes.”

Is there any room for optimism that improvements will be made to address today’s concerns? Jack Zhou, AAL’s planning manager for China, believes that there is, in view of legislative and infrastructure initiatives. “In the last 20-plus years, there has been significant reform and opening-up of Chinese legislation to enable movement of breakbulk and heavy-lift cargo. In addition, the Chinese government has also taken heavy-lift inland transportation into consideration when building roads and bridges and, for example, advertising boards, traffic lights, highway interchanges and so on, all of which have over 5-meter clearance.

“Highways and bridges are also built to have sufficient weight capacity to meet the requirements of the transportation of heavy-lift cargo transport vehicles. Meanwhile, shipping terminals also now have vast experience with breakbulk cargo and are willing to offer support. In addition, government at all levels encourages the trade of same.”

Knowing what to expect, practicing due diligence, and heeding the advice of experienced professionals can mitigate potential time consuming and costly difficulties.

 

Thomas Timlen is a Singapore-based freelance researcher, writer and spokesperson with 28 years of experience addressing the regulatory and operational issues that impact all sectors of the maritime industry.

Image credit: AAL

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