Imagine this scenario: You are an exporter in China. Shipping goods around is easy like a breeze. You only need to declare customs once to get your goods to destinations across and out of the country. Such a smooth, time-saving process not only benefits the logistics and freight transportation industries but also the national economy, making China more competitive in the world. This is what the "Electronic Customs Thoroughfare", or ECT, is trying to achieve.

ECT is a pan-China project to improve the efficiency of customs clearance through a common electronic platform. Once implemented, exporters will no longer need to cut through layers of red tape before their goods get shipped. Besides national, regional and local customs, ECT also requires co-ordination by sea ports, highway checkpoints, airports, border patrols, warehouses, tax authorities, banks and shipping companies. The scale of the project is enormous.

Forging ahead

Within the ECT framework, the Hong Kong SAR Government has been working hard in recent years to co-ordinate with mainland China's efforts. One important task is to integrate the work flow of the Hong Kong Customs and Excise Department with that of mainland China's customs procedures. The Department has, for example, supported the "Two Checks at One Spot" plan for the Western Corridor. It has also collaborated with China Customs to study the concept of "one-stop customs clearance". In addition, it has introduced the use of electronic seals for imported cargo. All of these steps show that Hong Kong is well-prepared to fit into mainland China's ECT plan.

"To implement ECT, both mainland China and Hong Kong have to study their differences carefully to create a seamless system," said Timothy Tong, former Commissioner of Customs and Excise, Hong Kong

In May, the former Commissioner of the Hong Kong Customs and Excise Department Timothy Tong stressed the SAR Government's determination to turn ECT into reality on the regional level. Attending the opening ceremony of the Pan-Pearl River Delta Customs Forum, Tong said the Customs and Excise Department has three major goals in the foreseeable future: to become part of mainland China's "electronic ports"; to strengthen the role of Hong Kong as a springboard connecting mainland Chinese and overseas markets and as a catalyst for the economic development of the Pan Pearl River Delta (PRD) region; and to continue to strengthen the co-operation with regional customs authorities in its effort to fight smuggling, drug trafficking and activities that infringe on intellectual property rights.

Based on these premises, ECT is expected to not only improve the customs clearance procedures between mainland China and Hong Kong, but also benefit local enterprises. For them, ECT is going to improve the transparency and speed of customs procedures, reduce logistics costs and eventually increase the competitiveness of local industries.

Hong Kong Container Tractor Owner Association Chairman Ricky Wong says that many PRD-based manufacturing companies have started to notice certain disadvantages of running their business there, such as inadequate electricity supply and increased operating costs. Because of this, they are considering moving north- or westward. Once ECT is implemented, these companies are likely to be motivated to use Hong Kong's ports and logistics facilities. But Wong says that there are certain container safety control issues that need to be addressed.

ECT will benefit Hong Kong in the long haul.

Joseph Leung, SIMX Project X & Trade Cooperation Association Chairman, believes that ECT will open up the logistics market and benefit Hong Kong in the long run. He is not too concerned about the safety issues that Ricky Wong refers to. However, he thinks that attention should be paid to the exchange of documents between the two regions to ensure adequate communication.

To realise this grand scheme, what kind of obstacles will Hong Kong face? Timothy Tong says that under the "One Country, Two Systems" principle, Hong Kong and mainland China are two independent customs jurisdictions. "To implement ECT, both sides have to study carefully the differences in export and tax regulations and the requirements for customs clearance to create a seamless system," he says. "In addition, when rolling out ECT, customs on both sides must apply advanced technology, such as Global Positioning System and electronic seals, to control the flow of goods and monitor the clearance procedures in a way that prevents criminal activities. This will strengthen the confidence of Hong Kong's trade partners in regard to the safety of their goods."

In August 2006, the National People's Congress of China discussed the feasibility of "Two Checks at One Spot" at the Western Corridor during the first reading of a related bill. The bill was not passed because of the differences in opinion on whether this process belongs to the jurisdiction of Shenzhen or Hong Kong. When the bill was resubmitted for discussion in October, it was passed and the Hong Kong SAR was granted the right to control the Hong Kong side of the checkpoint along the Western Corridor. This is the first cross-border checkpoint between Hong Kong and Shenzhen that uses the "Two Checks at One Spot" concept.

Approaching the goal

Attendants of the Pan-Pearl River Delta Customs Forum in May explored ways in which mainland China and Hong Kong can collaborate in making one-stop customs clearance a reality.

Like Rome, ECT cannot be built in one day, especially when the legal systems and cultural backgrounds of mainland China and Hong Kong are considerably different. All details need to be co-ordinated with utmost care so as to build a
common foundation.

Lawrence Cheung, Principle Consultant (IT Industry Development) of the Hong Kong Productivity Council, concurs. He says that cultural and language differences make it crucial for both sides to work together to correct any initial errors and omissions when customs declarations are being filled out. But Cheung is optimistic about the contribution ECT will make to the logistics and freight transport industries of Hong Kong. "Time is of utmost importance for the logistics business," he says. "If a system can reduce bureaucracy and simplify complicated procedures, then it can save the industry valuable time and reduce costs."

The support and enthusiasm for the ECT concept is unmistakable - from the SAR Government to government-subsidised bodies to private enterprises. The Hong Kong Productivity Council has, for example, started the R&D on an On-Board Trucker Information System (OBTIS), a location-based intelligent transport solution for the logistics and trucking industry to improve operational efficiency and competitiveness.

Earlier this year, the Council approached the Customs and Excise Department to discuss the possibility of applying OBTIS to the electronic advance cargo information system in Hong Kong, due to launch in 2009. The two parties struck an initial agreement on the collaboration.

The Green Lane, which rolled out in May 2006, is another effort - this time by the local logistics industry - to speed up the cross-border customs clearance process. It provides one-stop electronic customs clearance at a logistics centre near the Huanggang border crossing, making the trip to and from China much faster.

It is apparent that the implementation of a one-stop customs clearance system has become a mission for both the public and private sector in Hong Kong. In mainland China, foundation work that culminates to the concept of ECT has been laid down over the years. In October 2006, China Customs and the provincial government of Fujian proposed for the first time the introduction of several pilot provinces to test the ECT concept - Fujian, Zhejiang, Guangdong, Jiangxi, Hubei, Hunan, Guizhou and Jiangsu. This January, the customs authorities of ten cities signed an agreement on customs reforms. The ten cities are Fuzhou, Xiamen, Hangzhou, Ningbo, Shantou, Nanchang, Wuhan, Changsha, Guiyang and Yinchuan. They will play an important role in the testing of a modernised customs clearance system.

Double-edged sword

The various local efforts in mainland China to modernise their customs clearance systems raise the issue of whether there has been redundancies. Anthony Wong of the Hong Kong Logistics Association says a smoother system could be a double-edged sword for Hong Kong. It can, on one hand, attract investors from mainland China to use Hong Kong's re-export facilities. On the other hand, it can reduce mainland China's reliance on Hong Kong for its role as an entrepot. To maintain balance, it is paramount that all participants in this scheme work together closely to analyse, assess and coordinate all the developments.

Commenting on the Green Lane concept, Timothy Tong says the Customs and Excise Department has been paying close attention to its development so it can introduce measures that fulfill the needs of the local industry.

Cheung of the Productivity Council says that Green Lane was off to a difficult start due to legal and cultural differences between Hong Kong and mainland China. However, he believes that it will not become obsolete when ECT is introduced. On the contrary, he says, its usage is likely to increase after Hong Kong Customs has made the appropriate steps to link up with China's electronic customs clearance system.

This March, the Customs and Excise Department sent a delegation to Beijing and Shenzhen to understand how their electronic customs clearance systems work. Another delegation was sent to the Netherlands in June as part of its effort to study the developments of customs clearance worldwide.

It is perhaps premature to judge whether ECT is beneficial to Hong Kong. Looking at the global market, creating an integrated electronic customs system is certainly the way to go. Amid this global trend, it seems that Hong Kong will gain advantages by being a facilitator in mainland China's implementation of the grand scheme. After all, Hong Kong with its strong service and logistics foundation and its close ties with mainland China, plays an indispensable role in global trade. Being a part of the ECT would propel the city upwards and forwards.