Tradelink Talk spoke with the Commissioner of Customs and Excise, Mr Timothy Tong, who discussed the Department's extensive application of information technology, their role in smoothing local logistic flows and the challenges they face due to the growing economic bonds between Hong Kong and the mainland of China.

IT is the word

Having served in the government for over 30 years, Timothy Tong has witnessed the growing importance placed on information technology, and points out that it's actually a change that has been going on for many years.

"When I was working in the then Trade Department some twenty years ago, the quota system was already well developed," he recollects. "The introduction of an electronic system to handle everything was the first major e-initiative experienced - not only by the Department, but also by the government."

In the 1990s, Mr Tong worked for the Geneva office of what was then called the Trade and Industry Branch. It gave him his first real glimpse of international e-commerce practices, before he switched over to the security field near the end of the decade.

During his tenure in the Security Bureau, Hong Kong made the decision to give its citizens the Smart ID card - one of the first microchip-based IDs in the world - which Commissioner Tong now praises for its convenience and potential for additional uses. "The Smart ID card not only represents advanced technology applied to immigration control, it also has great potential for trade and public sector management," he insists.

But he also emphasises the need to beef up IT security to combat the possibility of new forms of crime. "It could definitely lead to the birth of e-crime, such as theft of private personal data, not to mention new forms of money laundering," he says. He also sees the need for corresponding changes to be made to Hong Kong's laws. "We should bear in mind that despite the indisputable need to rely on high technology, we must also have the backing of laws to regulate and enforce its correct usage."

IT in Customs

Nevertheless, the Commissioner is quick to reaffirm the necessity to use electronic systems in customs procedures. "The government has a long history of adopting IT," he notes. "In our department, the turning point came in 1999-2000 when, after careful evaluation, a new style of management was introduced that involved comprehensive use of information technology. The E-system is a MUST."

The Department is currently applying 32 electronic systems in its daily operations, including six major systems:

• the Customs Control System (CCS) for processing permit applications, cargo profiling and maintenance of intelligence and prosecution records
• the Air Cargo Clearance System (ACCS) that exchanges cargo information with air cargo operators
• the Case Processing System (CAPS) that processes cases
• the Land Boundary System (LBS) for capturing information on cross-boundary vehicles at land boundary control points
• the Government Office Automation (GOA) Programme used throughout the government for effective communication and information sharing; and
• the Electronic Data Interchange System for Cargo Manifest (EMAN) for receiving and processing air, rail and sea transport cargo manifests

The other 26 systems are broadly divided into various external and internal functions. Externally, the systems support the Department's role in areas such as the textile trade, product origin identification, trade declarations, import/export licensing and risk grading, weapons brokers' records, handling of controlled chemicals and dutiable goods. Internally, these systems help with the Customs Department's administration, documentation, investigation and maintenance of operational records.

The Department's commitment to technology is continuing, with the development of new systems to cope with an ever-increasing demand, and numerous infrastructure projects on the government's agenda. To cite a couple of examples: an enhanced LBS will be put into operation when the Hong Kong-Shenzhen Western Corridor begins operation in a couple of years; and the second stage of the widely-adopted EMAN will start in April 2005.

Another major initiative to speed up customs clearance at the land boundary is the proposed Electronic Road Cargo Manifest System (ROMAN), through which operators can provide essential cargo information to the Department in advance, allowing them to cut processing time at border control points.

"We still need more advanced, comprehensive networks like the Digital Trade and Transportation Network (DTTN) System," Timorthy Tong admits, noting that the DTTN network, being built to facilitate information flow within the local logistics industry, is expected to significantly increase efficiency when it enters service in 2005.

Fostering faster trade

Today, following a government policy decision to strengthen Hong Kong's role as a logistics hub, the Customs and Excise Department's role has expanded from law enforcement to logistics, with increasing focus on facilitation.

Rapid increases in passenger and cargo flows through Hong Kong, especially since the Mainland introduced its economic reform programme and its open market policies, has brought with it a booming mainland consumer market. This has created immense business opportunities-but simultaneously placed enormous pressure on local logistics enterprises and the Customs authorities on both sides of the border.

"Large volumes, fast handling, cost savings and accurate risk management are our four main work philosophies," Mr Tong explains. In order to cope with the heavier workload, which is created by the ever-growing demand for logistics, he says the Department is committed to improving service quality while working to maintain efficiency. "Meanwhile, we never stop seeking ways to save time and labour costs."

Constant innovations such as the Automatic Vehicle Recognition System, Vehicle X-Ray Inspection System and the Unified Road Cargo Manifest help speed up customs clearance. Various cargo transshipment services targeting air, land or sea, or the intermodal flow of all three, provide one-stop clearance services for logistics service providers; while systems like EMAN and the proposed ROMAN help simplify the data exchange required in cross-border cargo flow.

"Our work has extended from the border," explains Mr Tong, noting that systems like ROMAN will help the Department make processing decisions before trucks reach the border. This facilitates the traffic flow at control points, enhancing efficiency. "A more conducive business environment is fostered when we effectively help lower the operating cost for industry players."

Timothy Tong emphasizes the work of the Customs and Excise Department is to support trade and industry: "If we succeed in lowering their costs, it's a help; if not, we become a hindrance."

But wider application of information technology in Customs clearance procedures also raise concerns about invasion of privacy and demands for the protection of logistics information. "Transparency must be attained," he admits. "We are held accountable to logistics stakeholders, so it's essential to let them know how and what we are doing with the data."

The Commissioner also highlights the work done by the Department in its battle against pirated goods. "The defense of brands helps sustain and encourage overseas investment. This maintains Hong Kong's status as a world import/export centre, and an international logistics hub. It also serves as the local trade and industry's growth driver," he maintains.

The challenges of Mainland China

However, it is the Mainland where perhaps the Department's greatest challenge lies. The mainland is now the world's largest exporter and its imports are also growing rapidly in volume. In 2003 alone, its total merchandise trade volume exceeded US$851 billion in value, 44.3% higher more than 2000.

Due to its geographic proximity, Hong Kong has benefited from the Mainland's tremendous growth: in the first seven months of 2004, an average of 27,200 goods vehicles passed through the land boundary control points daily. Together with rail cargo flows, some 68.45 million packages were transported between the two places in a month.

This mutual reliance between Hong Kong and the Mainland has encouraged both customs departments to work together more closely. "Besides the extension to 24-hour customs services at the border, we are developing a customs mechanism based on mutual trust and recognition of both parties' expertise. This includes methods such as virtual seals, that are identified by both departments," the Commissioner explains.

Timothy Tong believes the main challenges ahead lie in maintaining the implementation of high technology solutions to deal with an escalating and ever-expanding workload - and the continuing demands for customs and excise procedures to be handled in a faster and more cost-effective manner.

Ultimately, the Commissioner says, the Department's objectives are two-fold. "Customs never faces inward - it is about working with outside parties," he insists. "We must achieve better administration and management internally, and at the same time respond speedier to the trading community and customs departments worldwide - the Mainland's in particular."

Whatever the future, IT will certainly play a major role in the evolution of the Department in a new era of international trade and commerce.