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CONTENTS
CHAIRMAN’S MESSAGE
as proposed by the European Liner Asiana and ANA also came under all and every single itemised cost.
Affairs Association (established scrutiny. Requests for information They should be required to charge
May 2003), shippers worry that were said to have been received in accordance with their tariffs and
shipping lines would introduce from both the EC and the US Dept any violation should be punished.
new charges or adjust charge of Justice (DOJ). To f a c i l i t a t e t h i s r e q u i r e m e n t ,
levels without any restrictions or a licensing system should be in
obligation in the post-conference S u b s e q u e n t l y, B r i t i s h A i r w a y s place for shipping lines, airlines,
period. To European shippers, this reportedly paid up to US$700 and freight forwarders/logistics
might not be a big concern since million to the DOJ for both companies. Indeed, the Council has
fierce competition among shipping passenger and cargo fuel surcharge been urging the SAR Government to
lines mean very competitive terms setting. Other airlines were also establish such a licensing system for
for them. However, Asian shippers reported to have 'settled' sums for improvement of tariff transparency,
fear that while shipping lines are transgressions in discussing and and protection of shippers against
heavily discounting to the European setting fuel surcharges. carriers' misdeeds such as wrongful
shippers, the lines would seek release of cargo at destination,
revenue compensation elsewhre, i.e. Last year, anti-trust regulators once c a rg o l o s s a n d d a m a g e , e t c . A t
from Asian shippers through layers again went scouting for law breakers present, protection to shippers is far
of local charges. and searched several major air insufficient. Shippers are entrusting
cargo freight forwarders' offices, in millions worth of cargo to freight
And there is room for them to an extension of the airlines' probe. forwarders who need only a normal
exploit Asian shippers. Asian EGL, Kuehne+Nagel, Expeditors, Business Registration to operate.
exporters are obliged to ship with Panalpina and Schenker were There are many cases that freight
the nominated lines under FOB reported in the media to have been forwarders just close their offices
terms and overseas buyers insist on targetted by the investigations. to evade liabilities and are free to
purchasing in FOB terms because just set up another company with
then, they could make use of their As a consequence, the local Hong a new name and continue doing
large global freight volumes to Kong Association of Freight the same type of business. These
negotiate better terms with shipping Forwarding and Logistics Ltd., freight forwarders tend to offer very
lines. Meanwhile, on the other end, HAFFA, has stopped publishing its favorable terms to their overseas
Asian shippers have to contend with Ancillary Charges Guideline since agents in order to secure business
the burden of Terminal Handling October 2007. The guideline is simply and the Hong Kong shipper would
Charges along with many other local that: a reference list of ancilliary have to ship with them under
charges. charges which have been put together nomination.
a m o n g H A F FA a n d t h e C o u n c i l .
The same situation extends to the air Although not binding, the guideline The Council is exploring the
freight market as well. Regulatory serves as a reference for the market feasibility of continuing to publish
authorities from Europe, the US and and provides caps on local charges. a guideline of ancilliary charges to
with cooperation with those from Though not regulatory in nature, the replace that of HAFFA's. In doing
Asia, have raided offices of major guideline serves as a sticking point so, we hope to establish a market
airlines as part of their investigation if and when unscrupulous service reference and hope to remind all
into airlines' collective pricing over providers try to levy outrageous shippers that before shipment,
surcharges and alleged price-fixing charges against shippers. it is important to ask for a full
on cargo operations. From European quotation that lists out all charges–
media reports, BA, Air France, The Council considers that at origin, freight, and at destination.
KLM, SAS, Lufthansa and Cargolux improvement in the transparency Shippers should pay attention also
were visited in February 2006, and o f c h a rg e s w o u l d b e a b i g h e l p . to all other terms and conditions
some reports said Japan Airlines, Shipping lines, airlines and freight to ensure that there would be no
Cathay Pacific, Singapore Airlines, forwarders should be required to unexpected charges, a fact of life in
LAN, Polar Air cargo, Korean Air, publish their full tariffs that list out an unregulated market environment.
Shippers Today
CHANS’ ADVICE
Richard Chan
delivery (III)
insurance for
more than
20 years,
out of which he worked for a leading
shipping company, a P&I Club and
a transport liability mutual Club and
also insurance brokers. Throughout
these years, he has been handling
transport related claims and giving
loss prevention and transport contract
We previously wrote that the Hong was no precise date for this, it was
advice. He is now Director and co- Kong Court of Appeal on 13 July clear from the judgment of Stone J
founder of Sun Mobility Insurance and 2007 held the forwarders liable in the court below that this was no
Claims Services Ltd. which specialises in
transport liability claims, loss prevention
to pay the seller for US$873,028 later than 22 April 2003. The Court
and contract advice. Richard has plus interest and costs in the cargo of Appeal was content to use this
been very active in the transport and misdelivery claim. On 6 Nov date.
transport liability insurance industries,
and has been in much demand in
2007, the Court of Appeal issued a
giving seminars organised by insurance further short Judgment dealing with As for the rate of interest, the Court
organisations. He graduated from Hong two points: (i) interest and (ii) the of Appeal saw no reason to depart
Kong Polytechnic with a Prefessional
Diploma in Business Studies Transport
forwarders' application for leave to from what is the usual: 1% above
in 1984, and obtained the qualification appeal to the Court of Final Appeal. prime. Although the seller had
of MCIT and ACIArb. in 1987 and 2000 contended for a higher rate, there
respectively. He holds an MBA degree
awarded by University of East Asia. Interest was very little, if any, evidence to
Email: richardchan@sun-mobility.com justify this.
In the judgment handed down on
13/7/2007, damages in the sum of Accordingly, there would be interest
US$873,028 were awarded in the at the rate of 1% above prime rate
Simon Chan seller's favour. These damages, for the period from 22 April 2003
is Director
unliquidated in nature, were in to 13 July 2007 (the date when the
and co-
founder of respect of the misdelivery that took judgment of the Court of Appeal
Sun Mobility place when the seller's goods were was handed down) and thereafter
Insurance
handed to the buyer without the at judgment rate until payment.
and Claims
Services production of the bills of lading. "Prime rate" means the prime rate
Ltd. He of lending of the Hong Kong and
deals in transport liability insurance
In a contractual claim, interest Shanghai Banking Corporation from
brokerage plus provision of unique
transport risk management services. usually runs from the date of breach time to time during the relevant
He has extensive risk assessment, (the date when the cause of action period.
marketing and sales experience in
marine insurance products in Greater
accrued) but the courts are of course
China. Simon is a highly experienced entitled, in the exercise of the broad A p p l i c a t i o n f o r l e ave t o t h e
marine, multi-modal and logistics discretion they have regarding Court of Final Appeal
risks manager in Asia Pacific. Before
becoming a transport risk manager, he
interest, to use a date which may
had extensive operational experience be more appropriate, for example, The damages awarded against the
in the transport industry. He assumed where the loss does not immediately forwarders being in the nature of
managerial roles in airlines and
container shipping companies. Simon
arise: see McGregor on Damages unliquidated damages, there is no
received a B.A., (Hons) degree from the (17th Edition) at paragraph 15-065 appeal as of right under section
University of Hong Kong and attended to 15-066. In the present case, the 22(1)(a) of the Hong Kong Court of
the Institute of Chartered Secretaries
& Administrators . He was awarded
cause of action (both the breach of Final Appeal Ordinance, Cap.484.
a Master of Business Administration contract and conversion) accrued at
in Finance and E-commerce by the the time when the misdelivery took As for the application under section
Hong Kong University of Science and
Technology.
place (which was the time that the 22(1)(b) of the Ordinance, the
Email: simonchan@sun-mobility.com seller sustained its loss when it lost forwarders had advanced seven
the relevant goods). Although there grounds said to be points of great
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CHANS’ ADVICE
general or public importance. be shown: see Chao Keh Lung For the above reasons, the Court of
v D o n X i a ( 2 0 0 4 ) 7 H K C FA R Appeal dismissed the forwarders'
The Court of Appeal refused leave 260. None existed in the case in application for leave to appeal to the
under section 22(1)(b) of the question. Court of Final Appeal.
Ordinance. The Court of Appeal
referred to the Grounds of Appeal
set out in the Notice of Motion
taken out by the forwarders: Simon Chan Richard Chan
Director Director
(1) The first two grounds related E-mail: simonchan@sun-mobility.com E-mail: richardchan@sun-mobility.com
to the argument on the differences 10/F., United Centre, Admiralty, Hong Kong.
between straight and negotiable Tel: 2299 5566 Fax: 2866 7096
bills of lading. While the Court E-mail: gm@sun-mobility.com Website: www.sun-mobility.com
of Appeal accepted that this did CIB A MEMBER OF THE HONG KONG CONFEDERATION OF INSURANCE BROKERS
involve an area of law that is Multi-modal transportation involves far more complicated liability regime than port-to-
important, the Court of Appeal did port or airport-to-airport carriage. Pure international sea or air transport often affords
not see that the contentions raised better protection by international conventions. Conversely, multi-modal transport entails
by the forwarders were reasonably a variety of operational risk elements on top when the cargo is in- transit warehouse
arguable for the reasons gone into in and during overland delivery. Fortunately, these risks are controllable but not without
the judgment given by the Court of deliberate efforts. Sun-Mobility is the popular risk managers of many multi-modal
operators providing professional assistance in liability insurance, contract advice, claims
Appeal on 13 July 2007.
handling, and as a matter of fact risk consultant for their staff around-the-clock.
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It must be mentioned that although whether for costs reasons or to avoid we have been talking about for many
the total number of containers moving regulatory controls by the Mainland years, and which the Government
through Hong Kong has not fallen, the authorities, the need for the Hong said back in 2002 that it will build, is
composition of container traffic has Kong-Zhuhai-Macau Bridge becomes still going through a feasibility study.
shifted over the past few years. Ocean imminent. This Bridge brings Hong Worse still, it seems to have suddenly
freight is not growing, and may even Kong and the Western PRD within disappeared from the radar of
be falling slightly, while transshipment a 30-minutes radius and is vital if Government's infrastructural projects,
cargo has surged and the growth of Hong Kong is to capture the cargo as it is not even included in the current
river trade appears to be tapering off. from this source. The Chief Executive Chief Executive's infrastructural
This change is worth noting as it affects has in his policy address included development program.
the strategies that Hong Kong should this Bridge as one of the ten major
adopt to face future challenges. infrastructural projects committed by Many industry players have reflected
the Government. We really need to to me their concern about the lack of
Despite much effort over the past few push ahead with this project. logistics land for further development
years to narrow the price differential of the industry. This insufficiency of
for cargo handling between Hong Kong Whilst enhancement of logistics land is also hampering the growth
and the Shenzhen ports, we have not infrastructure is important, that alone o f t r a n s s h i p m e n t c a rg o w h i c h i s
been able to make further reduction is not enough. Neither can we afford to developing rapidly and which offers
beyond the existing differential of sit back and wait. The stiff competition a buffer to the decline or sluggish
around US$260 per container. Fuel cost that Hong Kong already faces can only growth of ocean freight. The logistics
remains a nightmare as international intensify in the years ahead. For years industry does not have the luxury of
fuel prices continue to escalate. I have been calling on the Government time. If Hong Kong seeks to retain
Although DTTN (Digital Trade and to assist the industry to breakthrough its competitive edge in the field
Transportation Network) is in place and into value-adding and other areas of of logistics, it is high time that the
OBTIS (On-Board Trucker Information excellence. Some progress is made in Government seriously focus on the
System) is proceeding into the proof of the development of electronic logistics, genuine needs of the industry and
concept stage, more time is needed by though it may be a while before we are perform its job as facilitator. I reiterate
the industry to catch up with electronics able to reap the benefits. Progress is my call to the Government for action to
logistics. Compounding these however slow in the provision of land be taken.
difficulties is the fact that Guangdong's which is almost a pre-requisite for the
export trade may slow down as more development of value-added logistics.
factories move further inland as a
result of recent regulatory controls Many logistics operators have already
targeting labour-intensive and polluting moved to the Mainland simply
industries in Guangdong. As Hong because they have not been able to
Kong's cargo is mainly sourced from find suitable places for operation in
South China, reduction of Guangdong's Hong Kong. The Logistics Park which
exports will most certainly adversely
impact Hong Kong. Our share of the
pie, which is not really growing, may
be further reduced.
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benefit from the sustained expansion in industrial upgrade will generate huge January 2008, may have additional cost
intra-regional trade, especially sales to opportunities for Hong Kong as a implications. Meanwhile, the RMB
the mainland, where economic growth technology marketplace, especially for exchange rate has been appreciating. It
will remain at a double-digit rate in machinery and equipment for advanced is estimated that a 10% appreciation of
2008, despite further policy curbs production and green manufacturing. the RMB would translate into a 2-4.5%
in response to signs of overheating. rise in production costs. So if labour
Notwithstanding successive interest Challenging production costs account for 15-30% of the total
rate rises and a reduction in the tax environment production costs, just the rise in wages
on deposit interest, retail sales were and RMB appreciation in the past two
up 15.9% in the first three quarters An unceasing demand from the years alone has already resulted in an
of 2007, vis-à-vis 13.7% in 2006. mainland will surely bring glad tidings. estimated increase of 6-12% in the
Consumption growth is expected to But changes in processing trade total production costs. To compound
stay strong next year, as the prevailing policies will pose a challenge for Hong problems, the recent product recalls,
positive wealth effect deriving from Kong exporters and manufacturers. dominated by toys, will also increase
rising wages and the stock market Now that promoting the transformation safety compliance costs, whereas
should remain largely in place, while and upgrade of the processing trade soaring commodity prices will jack
the government also seeks to rely more and restricting the development of high up input costs, especially for precious
on consumer spending, rather than energy-consumption, heavily polluting metals and stones, as well as plastic
investment and exports, as the driver of and resource-intensive industries are raw materials due to high oil prices.
economic growth. the mainland's long-term development
objectives, it will continue to make Likely performance of selected
On the external front, mainland adjustments to processing trade polices. Hong Kong exports
exports will moderate somewhat, Such policy changes, covering VAT
as foreign demand, not least US rebate adjustment, expansion of the Given a stable demand due mainly
demand, is forecast to slow. In all restricted/prohibited category and to the continued popularity of digital
likelihood, however, such impact access threshold for processing trade products in overseas markets and
will not be substantial. According to enterprises, could have significant sustained demand for parts and
the World Bank, if US consumption impact on Hong Kong manufacturers, components from the mainland,
contracts by the equivalent of 1% perhaps in terms of mode of operations, Hong Kong's electronics exports,
of GDP, China's economic growth use of technologies, sources of raw which account for over half of Hong
is estimated to be lowered only by materials, manufacturing localities as Kong's total overseas sales, will stay
0.2-0.5 percentage point. Indeed, well as production costs. as the growth leader. For clothing, a
China, the world's third largest exporter continued shift in US and EU orders
in 2006, has overtaken the US as the However, rising labour costs present from other production bases back to
second largest since the beginning the greatest challenge to Hong Kong Hong Kong and the mainland, amid
of 2007, and is expected to surpass manufacturers. In the PRD, labour low levels of US quota utilisation
Germany as the largest in the near costs that comprise wages, social and the removal of EU textile quotas
future. Hong Kong should therefore security contributions and other next year, should partly offset the
further benefit from the mainland's welfare benefits have increased by moderation in foreign demand. For
healthy appetite for materials and semi- some 25% over the past two years, toys, sales will be clouded by the
manufactures for export production. while the new Labour Contract Law, recent recalls, although the impact
In addition, the mainland's continued which will come into effect from should not be substantial, given Hong
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The performance of Hong Kong's travel • They are also advised to monitor regulatory developments in overseas
and tourist sector looks promising markets, covering environmental laws and safety measures too, and
next year, thanks to the US dollar's diversify into selected emerging markets, especially oil exporters and
substantial cumulative depreciation countries with sustainable domestic demand.
against major currencies, which raises
the purchasing power in Hong Kong of • Services exports should moderate slightly in tandem with the slower
tourists from many long-haul markets. growth of merchandise exports, though the prospect of exporting trade-
Hong Kong's themed promotion of related services and travel services should stay largely constructive.
its being a host city of the Olympics
Games, expansion of the individual • While the mega-sized IPOs seen in 2006 in Hong Kong are not repeated
travel scheme for mainland visitors to this year, listing of mainland enterprises of reasonably large size will
cover currently 49 cities (including all remain frequent next year.
provincial capitals of Pan-PRD), plus
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In 2007, we celebrated the 10th and Japan, and solid growth in most parts The overall export business of Hong
anniversary of the establishment of the of Asia and Eastern Europe. Kong is not dismal, if manufacturers react
SAR and our reunification with the proactively to the challenges. Although the
motherland. It was a memorable year in Although the outlook is favourable, we weakness of the US market, being dragged
many aspects. The value of total exports must be attentive to the looming challenges down by its housing market downturn
of Hong Kong reached a record high at arising from both our production and and sub-prime mortgage problems, will
HK$2,212 billion in the first 10 months market sides. In particular, Hong Kong be the main downside factor in the period
of 2007, registering an increase of 9.4% manufacturers are facing a major crisis with ahead, there are positive developments
compared to the same period in the the sudden changes in the processing trade in other parts of the world. The robust
previous year, thanks to the hard work of policy by China's Central Government, Mainland market is expected to be the
Hong Kong manufacturers and exporters. such as banning the import of certain main driving force of Hong Kong exports,
key raw materials and implementation and many other emerging markets in
Looking ahead to 2008, the global of deposit for certain imported materials. Asia, the Middle East, Eastern Europe
picture looks promising although the Meanwhile, the recent massive recall of as well as in Southern America remain
pace of economic expansion may be toys and other products that were made in fairly strong. These markets will help
slightly slower than in 2007 owing to the China have hit badly some of those in the offset the softness of the US market.
envisaged sub-par growth in the United international export business.
States, one of Hong Kong's major markets. The Hong Kong Exporters' Association
Despite the uncertainties stemming These are the challenges that we must will continue to work hard to form the
from the US economy, there are positive squarely address to ensure Hong Kong best export business environment, not
developments in other parts of the world, exporters' sustainable development. just in Asia but the world, to help Hong
including the thriving mainland Chinese It is about time for us manufacturers Kong exporters grasp significant and
economy, continued expansion in Europe and exporters to review our production emerging opportunities.
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for luxury and consumer goods; China's countries' direct trade with China. Asia's export platform. In recent years,
entry into the World Trade Organization China has witnessed substantial foreign
(WTO) in 2001, which inserted the China's new role as an export platform investment from major global logistics
country into the multilateral trade will have important consequences for players, including DHL.
liberalization process; and the signing the logistics industry. First, the industry
of the Trade in Goods Agreement with will need to cope with more volume In late 2006, DHL Global Forwarding
ASEAN in 2004 as part of the ASEAN- and increased traffic frequency, as established a new Logistics Center
China Free Trade Agreement, which China's imports and exports are likely at Shanghai's Waigaoqiao Bonded
granted exporters in South East Asia to grow further. For instance, trade Logistics Zone (WBLZ), which
access to the 1 billion people in China.3 between China and ASEAN is expected is the largest bonded logistics
to exceed $200 billion in 2008, double zone in China. DHL also operates
However, research indicates that the figure in 2004. Second, the industry similar infrastructure in Guangzhou
another important factor may be at play would need to cater for supply chains Huangpu, Yantian, Shenzhen Futian,
here, which is China's changing role that are integrating north-south along Beijing, Nanjing, Songjiang, Jiutin
in the global pattern of manufacturing. the ASEAN-China axis. New transport and Shenzhen Nanshan. Incorporating
The Economist Intelligence Unit networks and logistics nodes would advanced technology, these facilities
(EIU) found that China has emerged have to be established to quickly and perform the multi-functional role of
as the "destination of choice" for final efficiently convey components from an international transfer, distribution,
assembly and processing of goods. neighbouring countries to China, and procurement centre to facilitate
Parts and components produced transport them from the ports/airports t h e e ff i c i e n t a n d s m o o t h f l o w o f
across the Asia-Pacific are shipped to to factories in the interior of China, goods. They have been specifically
China for the last stages of production and finally return the finished products built to facilitate China's growth and
before being exported to markets back to the ports/airports for export to development as Asia's export platform.
in North America or Europe. 4 This the West.
"triangular journey", with China acting Just recently, DHL Express announced
as a manufacturing or processing China's logistics infrastructure its intention to build a new USD 175
middleman, is transforming the country is playing catch-up. Fixed-asset million North Asia Hub in Shanghai to
into Asia's 'export platform'. investments in logistics-related sectors complement our other hubs in Hong
hit USD 126 billion (CNY 940 billion) Kong, Incheon, Bangkok, Singapore
Serving the Export Platform in the first three quarters of 2007, up and Sydney. Our hubs in Shanghai and
18.8 per cent year on year.6 More Hong Kong will connect the Yangtze
What does this mean for the logistics railways, highways, roads, airports River and Pearl River industrial zones
industry? and ports are being planned or being to the rest of world, helping to service
upgraded. An example is the new port China's future logistics needs as the
The supply chains in the Asia-Pacific of Yangpu in China's southernmost export platform for Asia.
are fragmenting, resulting in different province of Hainan, which the
parts of production being carried out government hopes will become a In the past, the celebrated Silk Road
in different countries. Advances in gateway for the expected rise in the connected the Middle Kingdom to
technology and communications have China-ASEAN trade.7 the West. In this millennium, when
also enabled companies to split up China is once again at the middle of
their supply chains into even smaller Foreign logistics operators, with their trading activity in Asia, we at DHL
tasks and put those tasks in areas international networks and professional are confident that our services and
where they are done best and more cost expertise, also have a crucial role to infrastructure are ready to meet the
effectively.5 play in supporting China's burgeoning challenge of facilitating the new trading
international trade and new function as landscape in the Asia-Pacific.
In addition, supply chains seem to
be integrating north-south, along an
ASEAN-China axis, to accommodate 1
EIU, Trading Up: A New Export Landscape for ASEAN and Asia, Hong Kong: EIU, 2007.
the new reality of China becoming 2
Martin Bulard, "China: Middle Kingdom, World Centre", Le Monde diplomatique, August 2005.
the export platform of Asia. Indeed, 3
The Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Co-operation ASEAN and China
(Trade in Goods Agreement) was signed by the ASEAN and China Economic Ministers at the 10th ASEAN Summit in Vientiane,
intra-ASEAN trade has declined (the Lao PDR on 29 November 2004 and came into force on 20 July 2005. Two protocols incorporating further tariff concessions
share of ASEAN countries' exports 4
were subsequently signed in 2006.
EIU, Trading Up: A New Export Landscape for ASEAN and Asia, Hong Kong: EIU, 2007.
destined for other ASEAN countries 5
EIU, Trading Up: A New Export Landscape for ASEAN and Asia, Hong Kong: EIU, 2007.
dwindled from 22.4 per cent to 20.9 per 6
Anna Bartram, "Logistics investment in China tops $126bn", China Economic Review, 21 November 2007.
cent) compared to individual ASEAN 7
Susan Geng, "Yangpu to be gateway for ASEAN trade", Cargonews Asia, 12 November 2007.
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them maintain their competitiveness UPS recently made investments that operations around the world. Moving
and protect their businesses, in the face will change the logistics landscape of ahead, the company will use its
of volatile challenges beyond their China, India and Japan. knowledge and expanding capabilities
control, ranging from changing trade to connect suppliers and customers
policies, surging production and raw In August 2007, UPS started construction one-to-one.
material costs and the likelihood of a of the UPS International Air Hub in
down-spiraling US economy that may Shanghai, China. The new hub is being The vision of One-to-One, as put
further affect more parts of Asia. built on a parcel totaling 1 million square forward by our former Chairman and
feet and slated to complete towards the CEO Mike Eskew, refers to offering
Asia end of this year. Rapid expansion is more options for our customers to
planned to a sorting capacity of 17,000 meet their supply chain needs; more
Although the US slowdown will likely pieces per hour. bundling solutions that target market
constrain growth in the EU and Japan, segments like healthcare, high tech and
led by the Chinese mainland, the Following this in September, UPS was retail; presenting one point of customer
dynamic growth of developing Asia granted the authority to operate six daily contact supported by a specialized
will largely remain unscathed from the flights between the U.S. and Nagoya, team; and having the right technology
global slowdown. Intra-regional trade Japan, in addition to its daily service to for customers to easily request services
should continue to be an area of growth Tokyo and Osaka. UPS will be able to like notifications, shipment status, etc.
for the industry in 2008. connect these flights to its new air hub in
Shanghai, China. Japan has the world's 8 New UPS Products for 2008
Asian markets are vitally important to second largest gross domestic product
UPS and the company sees true, long- and the opening of air lanes between To e q u i p o u r c u s t o m e r s w i t h t h e
term growth potential in the region. Nagoya and Shanghai will improve our right tools to take on their supply
According to MergeGlobal, the industry services to customers throughout Asia, chain challenges in the new year, we
CAGR for intra-Asia trade in terms of especially China and Japan have strengthened Asia's portfolio of
tonnage from 2004 to 2009 is 7.6%. products and services with eight new
UPS will continue to grow our business Starting January 2008, UPS Jetair products. Three are unique freight
through the strategic expansion of our Express has formed a strategic alliance products as they are rooted in both
network, infrastructure and portfolio of with leading local logistics player AFL. the integrator and freight-forwarding
services in order to help our customers The partnership significantly expands business models. Four are consumer
navigate global commerce. We expect accessibility to UPS services in India technology products including the
intra-Asia trade to continue to flourish and exponentially increases UPS access industry first UPS Paperless Invoice
as manufacturers capitalize on the points for customers with international and UPS Returns, which come as a
comparative cost advantages offered express delivery requirements to more direct result of the annual US$1billion
by different economies in Asia, greater than 200 locations. U P S i n v e s t s i n t e c h n o l o g y. T h e
integration between Asian economies and eighth product, UPS Clinical Trials
more intra-Asia Free Trade Agreements. Renewal Vs Transformation is targeted at the pharmaceutical and
biotechnology companies where they
More businesses will turn to reliable Overall, UPS remains very confident need biological products to be shipped
supply chain services providers with about Asia in the year of the Earth Rat, internationally.
a strong network in Asia to help them which signifies a time of renewal, or as
with supply chain management in UPS sees it, a time of transformation. The greening of the supply chain will
order to become more competitive. Tr a n s f o r m a t i o n h a s b e e n a k e y drive continuing attention to fuel,
UPS's strategic focus is on developing component of UPS's long term success, packaging, waste minimization and
business in Asia, in particular the large as we grew from a small messenger flexible mode shifts that balance speed
and growing economies of China, India business on a bicycle in 1907 to be a to market of air transit with lower
and Japan. leader in global logistics today. carbon options from ocean and ground.
Companies will seek paperless options
Milestones With 100 years of industry experience, for Customs documentation and
UPS has extensive intellectual capital visibility tools to enhance planning;
In fact, to meet market demands and as and has put in place innovative supply network optimization with routing/
testaments of our commitment to Asia, chain capabilities and technology in its scheduling/dispatch.
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SUPPLY CHAIN
MANAGEMENT
European benchmark study: Labour and Customs European supply chain structures
The Netherlands scores best on
qualitative location factors From a qualitative perspective, the As a result of market developments and
N e t h e r l a n d s s c o r e s e x c e l l e n t l y, cost factors, companies opt increasingly
A recent benchmark study, comparing in particular in terms of labour to supply the European market through
the relative attractiveness of 21 flexibility, as seen in hiring and firing hybrid supply chain structures. This
European cities, shows that the regulations. The Netherlands' high means applying different supply chain
Netherlands offers excellent locations rating for Customs regulations is also solutions for different customers,
for European supply chain activities, to its advantage. The Dutch Customs regions or product types. Locations
reported NDL/HIDC which represents authority is known for its efficient chosen for European supply chain
the logistics sector in the Netherlands. working procedures and pro-business operations should therefore be related
T h e m a i n d r i v e rs for the leading attitude. This is also supported by to their purpose. The competitive
position of the Netherlands are the the recent outcome of the Logistics position of the Netherlands is favorable
labor conditions and the regulatory Performance Index published by for companies that supply the European
and customs environment, along with The World Bank, in which the Dutch market via an EDC structure as well as
competitive costs for transport, and customs regime even scores best in the for those that use an RDC structure.
the availability of intermodal transport world.
solutions. A digital copy of the report 'High
Transportation quality, competitive costs' can be
The benchmark study 'High quality, downloaded from www.hidc.nl.
competitive costs' was conducted by In order to present an accurate
Holland International Distribution indication of how the various locations NDL/HIDC represents the logistics
Council (HIDC) and Buck Consultants relate to total supply chain costs, the sector in the Netherlands and helps
International (BCI), and compares costs for both inbound transport (from international companies make a
different cities as location for central source to DC) and outbound transport smooth entry into the European market
European distribution centers(EDCs) (from DC to customer) were taken into or restructure their supply chain
or regional distribution centers (RDCs), account in the study. Even though the through the region's leading gateway,
by analyzing various business case Netherlands does not have a reputation the Netherlands. All NDL/HIDC's
scenarios in the high tech, spare parts, for being a low-cost country, the study services are free of charge and without
lifestyle and med tech industries. This showed that the transport tariffs to obligation.
benchmark study covers a broader and from the Netherlands are lower
scope than other studies by taking into than in the other European countries For more information about the
account total supply chain costs from surveyed. The strong position of the benchmark study, please contact the
source to market, as well as qualitative Dutch sea- and airports, the abundance local representative of NDL/HIDC:
factors, such as physical accessibility, of European transport services from NDL/HIDC Asia, Ms. Karin Rancuret,
quality of labor, availability of transport the Netherlands and the central location Regional Director Asia, tel, +852
solutions and regulatory climate and within the European market, contribute 2297 3544 (Hong Kong office), e:
customs regime. to these competitive transport costs. k.rancuret@hidc-asia.com.
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The product and service suites were the concept of DTTN to a lot more Critical mass
rolled out in October 2006 and the people. Internationally, one of the
partnerships are now in place for tasks that we're facing is to create a "First of all, one has to keep in mind that
Hong Kong's own Digital Trade and connection between DTTN and other SMEs don't trade with SMEs. SMEs
Transportation Network. DTTN for similar platforms elsewhere. The look to receive orders from the bigger
short, the platform is owned and operated national single window concept is a companies, the likes of Li & Fung in
by DTTNCo, an associated company of very strong trend that is emerging, Hong Kong, Wal - Mart in the US,
Tradelink Electronic Commerce Limited particularly in Asia and you can Metro, and so forth.
(Tradelink) and partly owned by the see how it would be of tremendous
Hong Kong Government. benefit for DTTN if all these networks "Therefore, we have developed an
were to spring up and were all approach to DTTN that you could
DTTNCo operates an electronic platform interconnected. In fact, DTTN users describe as the hub - and - spokes
that provides interconnection among the would be interconnected not just for method. We sign up a large user - this
trade, logistics and finance industries transactions with logistics suppliers could be a major freight forwarding
to facilitate the exchange of electronic in Hong Kong but also with their company or a large buying company -
documents and information. overseas counterparts - their buyers, and when they come online, their many
their sellers elsewhere. This is how we partners or customers, including SMEs,
DTTN is on its way to achieving its can make use of DTTN to complete would automatically be users of the
ultimate aim that would showcase the supply chain automation effort." DTTN platform," explains Yue.
its viability to the rest of the world -
achieving critical mass. The network's While multinational conglomerates "So what we've done in terms of
functions and products have been that make up the companies in Hong recruiting customers so far, since
developed to cater not just to one part Kong's trading and logistics industries DTTNCo's launch in October 2006, is
of the trading community, or to the do electronic trading and SMEs do that we have enlisted more than 3,000
logistics community, or the shipping and understand and see the need of going customers, including lots of bigger users
transport community - but for all these digital if they were to conduct business and lots of SMEs. And our approach
sectors to interact in one smooth flow of with them, there are still some who ensures that larger users would bring
commercial transactions. hold back. "There is still a bit of inertia in a cluster of SMEs. In the case of
in the industry about going electronic," a big trading company, for instance,
"DTTN is a first for Hong Kong and comments Yue. "Some can understand the SMEs could be small suppliers,
a first for the world. The concept has the concept and see the need for or accessory suppliers. In the case of
already caught on in other places - the migration from paper to e-documents, freight forwarders, then these would be
general concept that they call a 'national but for some it is a bit of a hassle simply the shippers using the forwarder. Again,
single window' which is a phrase coined because even if a certain company A the shipper could be several SMEs or
by the UN. We've already achieved is connected, another trading partner, a large one, the likes of DHL which
this with the combination of Tradelink company B, may not be. Hence, this you would consider a big shipper with
and DTTN," said Justin Yue, Chairman is why I said at some point we need to many 'users', the users in this case being
of DTTNCo, meaning a connection reach critical mass so that when new their customers like the larger electronic
between the trading community and the users come online, they can use DTTN companies in Hong Kong. And on the
logistics and trading platform. not only to link up with their buyers, but other end of the spectrum, DHL has
with the suppliers as well as with the small users such as an SME sending a
"This year, we will keep driving our logistic providers (shipping lines, freight small parcel. So they all come in as one
recruitment of users. We need to sell forwarders, airlines)." hub - and - spoke or cluster, under DHL.
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Kong. At that time, the freight forwarding not be that big but it does increase their "This year, we will keep driving our
company had a team of a hundred people efficiency and makes them more accessible recruitment of users. We need to sell the
to process orders by telephone or by fax. to bigger partners than other SMEs with concept of DTTN to a lot more people.
They reckoned that if they were to switch no electronic network capabilities." Internationally, one of the tasks that we're
over to using DTTN - - processing all facing is to create a connection between
the orders through the DTTN system by Yue explained that the government is a DTTN and other similar platforms
their computer system - - they would shareholder in DTTN, with an ultimate elsewhere."
need 90 less people from the team and shareholding of 21%. "Eventually,
monthly savings would amount to some DTTN would have to be financially DTTN is connected to shipping lines
HK$300,000," commented Yue. self-sufficient but right now, we've not through the portals of INTTRA, GT Nexus,
reached the break-even point. But that and soon to Cargo Smart. With airlines,
"Of course, for SMEs the savings will will come. DTTN users can connect via Traxon.
Youship.com revolutionises
container shipping
Settling orders online
Maersk Line launched on January 15 a schedule of when to deliver your
by credit card
the online shipping service for small container to Modern Terminals at the
businesses, Youship.com through the Hong Kong port. Different rates quotation
on Youship.com
website www.youship.com. Intended
for small direct shippers and freight "With this new service, youship.com
forwarders in the Greater China area, has taken the traditional shipping their shipping date and cargo volume,
one can ship up to five containers only process and turned it on its head in from 20ft, 40ft or 40ftHC containers, and
via the service. The website provides order to meet the needs of customers can follow the prices on each of the trade
high transparency, with real - time rate who prefer to buy online. We're giving lanes. The online booking works on a
checking and availability of space, even the smaller customer more control– first - come, first - served basis, and lower
without prior registration. The system the customer will experience Youship. rates are available for early bookers.
works with great similarity as online com as a revolutionary new service,"
booking of airline seats - the sooner the explains Jensen. "We believe the market Orders can be completed in less than
shipment period, the more expensive the has been waiting for this type of service. 10 minutes and there is a window of 60
cost. Youship.com offers space guarantee with minutes to complete an order and pay for
immediate confirmation and an all - in, it, since supply is constantly changing.
"The cost quoted on Youship.com is all up - front, attractive price to customers For registered customers, it is simpler
inclusive, a port - to - port, all - water directly on the website." - - just point and click in order to book
cost. There are no surprise charges once the shipping date and cargo volume.
you've booked your container and paid Along with 17 different trade lanes out Once the order is placed and paid, they
for the booking with Visa or Mastercard," of Hong Kong (including AE7, AE10, automatically get an E/Doc confirming
said Lars Jensen, director Youship.com. AU2 and IA2), Rotterdam and Antwerp, the order. The E/Doc is their space
"You are also given the choice of paying a new lane from Rotterdam to Yantian, guarantee – even when booking 8 weeks
in advance for destination fees, or just Shenzhen, will soon be put into service. in advance. Youship.com's policy is never
leave that up to the consignee on the to overbook; however, should a rolling
other end." The new service eliminates the need for occur a full refund is of course given,
time - consuming manual workflows, along with space on the next vessel.
The new online service operates on 17 phone calls back and forth, and
different trade lanes out of Hong Kong subsequent additions of local and floating Maersk Line (www.maerskline.com) is
(Modern Terminals Ltd). Once you surcharges. Clear information on pricing a global liner shipping company with
have selected the date and port for the and availability is accessible online and more than 500 container vessels and over
container's shipment, you are given in real time. Customers simply choose 1,900,000 containers.
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Instead of carriers having to add a perils of unpredictable fuel markets. line with the predictions of most
separate premium to the freight to cover analysts forecasting growth in
risks on the significant bunker price In conclusion, a few words on how 16-20% range (total trade average).
fluctuations, a floating BAF following we anticipate the market to develop in Capacity increases are coming into the
bunker price fluctuations will ensure 2008: Generally, we predict a healthy trade, however, we expect this to be
that the services offered to shippers to a demand growth with large regional moderate as carriers due to fuel price
higher degree reflect the actual cost of increases reduce their service speed and
transportation at any given time. incorporate more buffer time to account
for port congestion.
We have noted that in some trades it has Industry profits in 1H 2007
proven easier to explain and argue for a reached US$40/FEU….by Overall, we estimate the market
floating BAF and therefore the degree of w ill globally add approxim a t e l y
application varies (from trade to trade). comparison bunker prices 13% capacity compared to 2007.
Many shippers realize that the concept is have increased by US$180/ This will result in a supply demand
right and that they need to work together scenario which will continue to be
FEU through 2007 alone!
with carriers towards mitigating the risks fairly balanced, however, there is no
of wildly fluctuating bunker prices. The doubt that the growing costs and trade
floating BAF is important to the overall imbalances in general will put financial
stability and health of the industry – and differences. The slowdown in the pressure on our industry.
to everyone's benefit. We will be looking US economy is counter-balanced by
forward to discuss the floating BAF with European growth resulting in continued We are looking forward to an exciting-
our business partners in Asia and are high demand in the Asia-Europe trade. -and challenging—new yea r an d
confident that we in 2008 together will wish you all a happy, healthy and
be able to find a solution minimizing the Currently our expectations are in prosperous 2008!
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Container shipping
outlook 2008E
by Charles de Trenck, Head of Regional Transport
Citigroup Investment Research
charles.detrenck@citigroup.com
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Figure 1. Transpacific Asia to US '000 TEU Monthly Profiles, 2004-2008E trend of deterioration within overall
efforts at damage control, and yet
should also see a worsening of the
downturn. Weak demand and low
rates follow on from the continued
unraveling of the US property bubble.
Figure 2. Asia to US TEU Volumes and US West Coast TEU Volumes, YoY Percent Change
As of November 2007, carriers were
scrambling to go back to customers
for emergency fuel surcharges (ie, to
recover part of what was not covered in
annual contracts). The effect for Nov-
Dec 2007 was expected to add about
$20/TEU to nominal rates, though
carriers were generally believed to be
operating close to or in the red in 4Q07
in the Transpacific.
A s i a - Eu rop e t r ade s (a nd
contributions to the balancing act)
Source: Ports; PIERS; Citi Investment Research
The Asia-Europe trade, combining the
US export recovery just beginning (but will take time to have an impact on profits)
North Europe and the Mediterranean,
should in 2008 be the largest trade in the
has been higher volume growth in US to several percentage points below 2H06 world by box volume, if, as expected,
Europe, where a weaker dollar has begun (for instance, as seen by a weekly 2008 trade Asia to Europe grows more
to drive export growth. Containerisation series published by the JOC based on rapidly than to the US. Because the run
International and others have discussed submissions from Drewry), despite rate of growth had been at 20% levels
these developments recently. fuel and other costs being higher. This for most of 2007, congestion was feared
means that effective rates ex-surcharges in many North Europe ports.
Transpacific to US rates are hurting. At the same time, the rates
are not as weak as they might have In August and September, overall growth
Based on an understanding (rather than been expected given the deceleration slowed to about 16-17% and slowed even
forecasting) of demand, also based on in trade, partly due to damage control further in October, before rebounding to
capacity growth as well as shifts in early in 2007, and partly due to the 19% in November. We had been expecting
costs, US$ Rev/TEU tracking is the emergency nature of record high base case growth to hold 15% levels into
other part of the puzzle. bunker costs. 2008, which we have considered to be the
average case for the trade several times in
In the Transpacific 2H07 rates remain We think 2008 will follow a similar 2006-07. But data is now pointing to the
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Figure 3. Container Growth Out of Asia, 2006-2007 (Nov-Dec est) 2008 at the $500/ton level, affect
demand through reduced buying
power given tighter spending abilities
of consumers, while also affecting the
nominal pricing of $/TEU rates (higher),
particularly in the stronger Asia-Europe
trade in 2007. In the Transpacific,
container lines have reported difficulties
passing on higher fuel costs. Many
contracts in the Transpacific in fact have
a flat or fixed or semi-fixed fuel costs
written into the contract.
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activity that cannot be avoided. it did earlier in the cycle. And because variances over the entire year, but also
hedging in 2007 has been riskier, the a distinct slowing in recent months,
Of the carriers that seek to hedge about average container line has generally been which coincided with the rise in oil
half their costs, this may be more true more negatively impacted by higher fuel prices to $90+/bbl levels in 2H07.
at some and not other parts of a cycle. costs in 2007-08 than in 2005-06, though
In 2004, 2005 and even 2006 it was experiences vary greatly as well. Based on industry discussion, and in our
much easier to hedge during earlier view, some Asia-Europe services have
parts of oil's upward trajectory. Slowing vessels and the impact on increased vessels from eight to nine per
capacity loop, but this has not been standardized
One can argue that any one period could (and could be subject to shifts based on
and should be treated like any other period. Container lines began talking of slowing fuel prices), and many debates exist.
But the reality is financial managers – container vessels in the Asia-Europe trade Some comments in industry have also
as share investors might too – look at in 2005. In 2007-08 it appears this has been made that some vessels missed
different parts of a chart differently. The been implemented with some success, terminal berthing windows, which
higher the price, the higher the risk. And with several loops having increased contributed to congestion.
the risk of entering into an oil derivative from eight to nine vessels. The impact
designed to make money on the way up is higher vessel capital outlays of one Yet, although many are operating nine
when the price of the underlying is already extra vessel per loop in return for lower vessels in a loop, most continue to order
high is higher than when it was lower. fuel costs for the nine vessels in the loop batches of 8x13,000 TEU ships rather
Hedge too much at a high point, followed as a result of lower fuel consumption at than 9x13,000TEUs. This tends to
by a leg down, and one can generate a slower speeds. We also believe this was show how driven the industry still is by
loss, when an uncovered position would combined with some strategic vessel owner/CEO decisions without the same
earn you money. withdrawals by Maersk and longer slack consideration to operational practicality.
season capacity reductions by the major
Another feature of oil hedging contracts alliances. Between these two effects, In many ways, we also now may be
is that they use collars and caps, designed the approximate 5-6% excess of ships seeing that the so called standard
to hedge oil within a certain trading delivered over demand growth was Korean 8,400TEU design isn't as
range. When oil trades out of a band, the effectively absorbed in 2007 (at least efficient as first thought and quite a
oil hedge loses its effectiveness. based on market perception). few people may now be getting their
fingers burned by seeing the so called
The point is hedging appears riskier, We performed a study on vessel speeds jump to 8,400TEU as a mistake, as
and/or less effective, in 2007-08 than of a carrier and found significant speed may some of the 12,500-13,000 TEU
Figure 5. Long Term Container Demand and Supply Versus Rates, GDP, Bunker, Vessel Charters, 2000 – 2010E
2000 2001 2002 2003 2004 2005 2006 2007E 2008E 2009E 2010E
Container Rates $/TEU (unweighted) 1,236 1,135 1,032 1,181 1,244 1,302 1,280 1,284 1,241 1,195 1,218
Container rates growth (%) 1.9 -8.2 -9.0 14.5 5.3 4.6 -1.7 0.3 -3.3 -3.8 2.0
Asia Outbound Rates $/TEU 1,817 1,544 1,340 1,661 1,821 1,822 1,610 1,699 1,610 1,519 1,567
Asia O'bound rates growth (%) 2.1 -15.0 -13.2 24.0 9.7 0.0 -11.6 5.6 -5.3 -5.6 3.1
Container 3500TEU vessel charter % chg 17.0 -24.0 -27.3 79.8 38.8 7.9 -31.1 22.0 -10.0 -10.0 5.0
Rev/TEU $ ref only (CIR core basket) 1,146 1,031 960 1,135 1,237 1,303 1,225 - - - -
Cost/TEU $ ref only (CIR core basket) 1,077 1,006 934 987 1,025 1,085 1,157 - - - -
Bunker Rotterdam $/tn 380 CST 138.4 117.4 133.7 152.9 155.3 234.0 293.0 346.0 415.0 370.0 330.0
Bunker Rotterdam % chg 48% -15% 14% 14% 2% 51% 25% 18% 20% -11% -11%
Container demand/TEUslot moves (%) (1) 12.7 -0.2 11.2 16.9 13.6 12.1 10.8 9.5 8.1 8.9 9.3
World GDP growth (CIR Nov 07) (%) 4.7 1.5 1.8 2.9 3.8 3.4 3.9 3.7 3.4 3.7 -
Container to GDP multiplier (X) 2.7 -0.1 6.2 5.8 3.6 3.6 2.7 2.8 2.4 2.4 -
Container scrapping in % TEU fleet est 0.3 0.6 1.1 0.4 0.1 0.0 0.2 0.2 0.4 0.6 0.3
TEU Standing FCC Fleet '000 TEU adj 4,847 5,432 6,004 6,538 7,178 8,117 9,458 10,929 12,503 14,227 15,984
Fully cellular cap growth ex-scrap (%) (2) 9.7 12.1 10.5 8.9 9.8 13.1 16.5 15.6 14.4 13.8 12.3
Simple capacity less demand (excess in ppts) (1) – (2) -3.0 12.3 -0.7 -8.0 -3.9 1.0 5.8 6.1 6.3 4.9 3.0
Total Trade TEU/Standing TEU Slots (X) = slot turnover 14.5 12.9 13.0 13.9 14.4 14.3 13.6 12.9 12.2 11.6 11.3
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Figure 7. Fleet on Order by Carrier, May '07 Vs Nov '07 known quantity some three years out.
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been used for bulk transport in 2007). opportunities to bottom, leaving room to find negative correlations between
This will become a greater concern at for rebounds by 2010. But forecasting nominal excess supply and rates.
the back end of 2008 when deliveries the bottom and therefore the rebound
will start to accelerate again. For the pattern remains subjective at this stage. One final trend we note for 2008-09 is
moment, concern should shift to the an expected decline in vessel financing,
structure of demand deceleration. We track correlations for many of our particularly for 10,000+TEU vessel
data series for the period 1990 – 2010E. types for 2011 delivery, with certain
APL has been back at the orderbook Many of the relationships are not very European owners likely to be more
during 2007 and this shows up as APL strong, however we continue to find affected. More specifically, owners
catching back up to just below the average a positive relationship between US$/ who have relied on structured German
of the fleet on order as a percent of TEU rates and cargo demand, rates and financing should see a drying up of
orderbook. Otherwise, the usual suspects vessel charter costs. We also continue funding for new vessel projects.
(CMA, COSCO, Zim, etc) remain the
orderbook leaders in terms of their fleets Figure 9. Correlations Reference, 1990 – 2010E
on order. Yang Ming has accelerated a
Rates & cargo grth 0.61
lot over the last few months, although
Rates & world GDP 0.30
some is also data which may have been
Asia outbound rates & cargo grth (from ’95) 0.40
entered a little late. Nonetheless, Yang
Asia rates & Avg rates (from ’95) 0.70
Ming surprises by having an aggressive
3500 TEU charter and Asia rates (from ’95) 0.73
orderbook out to 2012. Other late
3500 TEU charter and Avg rates 0.87
bloomers include COSCO and Zim.
Rates & capacity growth -0.33
Asia Rates & cap excess (from ’95) -0.67
2009 and beyond (low trust factor
Rates & cap excess -0.63
for forecasts)
Source: Citi Investment Research
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Transpacific carriers'
outlook for 2008
Shipping lines comprising the and compelling need for a viable rate recover increased West Coast trucking
Transpacific Stabilization Agreement structure that encourages adequate costs which may arise from legislative
( T S A ) ( w w w. t s a c a r r i e r s . o r g ) carrier reinvestment." and/or regulatory changes, such
announced in 4Q 2007 their 2008-09 as implementation of the transport
revenue/cost recovery program, Elements of the plan proposed by worker identification card (TWIC) and
saying that the program addresses TSA include: the proposed Los Angeles-Long Beach
rising operating costs expected this harbor truck plan.
year. Other factors cited include * Freight rate increases of US$400
freight rates that continue to lag per 40ft container (FEU) for US West According to JS Lee, senior
operating costs; limited cost recovery Coast port-to-port and door cargo, executive VP of Hanjin Shipping
in 2007-08 that has added to current and US$600 per FEU for all other Co Ltd and a member of TSA's
rate pressures; record fuel prices traffic, including intermodal and US executive committee, transpacific
making floating bunker charges a East Coast all-water shipments. container lines still anticipate a 7%
top priority; uncertainty over the to 8% increase in basic operating
outcome of labor negotiations on * Restoration of a floating bunker costs apart from fuel– inland
the US West Coast that will put fuel surcharge–broken out from base rail and truck charges, container
pressure on US East Coast services; rates and adjusted on a regular basis to handling at destination US ports, and
and transportation infrastructure that reflect bunker fuel price fluctuations repositioning of empty containers
remains a concern going forward. –in all contracts that have had bunker back to Asia after cargo has been
surcharges mitigated, capped or folded delivered at US interior points.
TSA said the voluntary guideline into base rates. He added that carriers also must
revenue/cost recovery program for address increased costs that were
the 2008-09 contract season, which * A US$400 per FEU peak season not recovered in current contracts.
is subject to all applicable filing surcharge will be applied to all Beyond that, he said, restoring
and consultation requirements, shipments on TSA member line carrier revenues to sustainable levels
addresses rising operating costs in vessels during the period of June of profitability cannot be done in a
the coming year, including record 1 through October 1, 2008, subject single year, and the market should
marine fuel prices in 2007-08. In to adjustments relating to the be prepared for a continuation of this
combination with further steps to timing, duration and strength of initiative in 2009-10 contracts.
be taken in 2009-10 contracts, it the 2008 peak.
also will establish over time a level A TSA survey of member line
of profitability required to meet TSA said their member lines also operating costs relative to freight
anticipated asset and service expansion intend to modify the timing of rates shows current rate levels well
in the Asia-US freight market. service contracts, extending 2008-09 below break-even costs for nearly
contracts by an additional two all carriers on most route segments.
" We' ve alr eady seen significant months, to expire on June 30, 2009. At the same time, bunker fuel
carrier redeployments that reflect the This will give shippers the benefit prices rose by 34% during the first
deteriorating economics in the high- of two additional months at 2008 nine months of 2007 alone, from
cost transpacific market, relative to contract rates, and will also mean that an average US$295 per tonne in
other trades," said TSA chairman and future 12-month contracts will have January to an average $395 per ton
American President Lines Ltd CEO, July 1st start dates. during September. An internal TSA
Ron Widdows. "Given cost increases survey reveals that this $100 per
expected through the end of 2007 Finally, carriers said they plan to ton difference in price–taking into
and into 2008, and the potential for include provisions in upcoming account typical vessel capacity, actual
service disruptions, there's an obvious contracts that will enable them to lift based on effective capacity and
52 Shippers Today
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utilization, fuel loading prices, fuel for some carriers, financial viability administrator Brian Conrad, "cargo
consumption per day, sailing time are threatened if we are not able to demand in 2008-09 may well
and a pro rated share of fuel cost share these costs more equitably moderate further amid uncertainty
for repositioned empty containers- with the customer base. It's not a in the housing and credit markets. It
-translated into a $132 million sustainable situation." is also clear, however, that carriers
increase in aggregate fuel costs paid will be seeking out markets and
by TSA lines in September over Service levels and operating deploying vessels and equipment
January to move the same volume of flexibility will be particularly where the economic conditions
freight. In October fuel prices reached important in the coming contract year. are most favorable, so we see an
record levels and an average for the Independent industry analysts forecast continuing healthy supply/demand
month of $436 per ton, suggesting 7-9% cargo demand growth in 2008 balance in the transpacific even at
an aggregate fuel bill of about $150 – the same or slightly higher than somewhat lower levels of growth,
million higher than in January 2007. predicted for 2007. TSA anticipates should that scenario develop."
new transpacific vessel capacity to
Increases in the TSA bunker increase by 5.2% growth among Widdows added that shippers are
surcharge, from $455 per FEU TSA members, and 6.3% across the already looking to their carriers
in January to $680 per FEU in entire trade, and potentially less in to help them avoid potential
October, only partially addressed the event that there is not sufficient delays in 2008 as longshore labor
these rising costs, due to the lag improvement in the economics. negotiations intensify on the US West
time in calculation and to the pace Allocations of new capacity are Coast toward a July 1st contract.
and extent of fuel price increases, being driven by the high-growth Asian terminals are additionally
the TSA said. And in a number of Asia-Europe and intra-Asia trade experiencing congestion, said
contracts, caps and other restrictions lanes, with smaller ships cascaded Widdows, and delays as demand
even further prevented meaningful out of those trades accounting for outpaces expansion throughout the
cost recovery as fuel prices spiked much of the new capacity scheduled region, even though there has been
throughout 2007. for the transpacific. some reduction in the pace of growth
in volumes to the US. "There will be
"Lines will, of necessity, be pressing "Despite positive economic signs many variables affecting service and
the issue of a full, floating bunker such as recent US employment schedules next year, making service
charge very seriously in upcoming figures and 3.9% GDP growth in third choice and contingency planning all
contract negotiations," Widdows quarter 2007," said TSA executive the more important," he predicted.
explained. "We understand that this
is a major item in the overall rate
structure and that shippers are looking
for pricing stability over the 12-month
contract term. But the market must
understand that fuel prices are far too
volatile, and ocean carriers are far too
exposed to fuel cost fluctuations over
a 7,000 to 10,000-mile, 12 to 18-day
one-way sailing, to lock in a single
price for a year." Noting that airlines,
railroads and truckers all collect full,
floating fuel surcharges, he added
that container lines are particularly
vulnerable to fuel cost impacts, and
failure to recover those costs amounts
to a hidden subsidy imposed on them.
"At current price levels, fuel is no
longer just another cost component,"
Widdows stressed. "We're at a point TSA is a research and discussion forum of 14 major container shipping lines serving
where service levels at minimum and, the trade from Asia to ports and inland points in the US.
Shippers Today 53
OCEANS
54 Shippers Today
PORTS
56 Shippers Today
PORTS
Shippers Today 57
PORTS
C S AV N O R A S I A i s p a r t o f t h e
C S AV G r o u p , w h i c h i s b a s e d i n
Valparaiso, Chile, and is the largest
shipping company in Latin America.
I n 4 Q 2 0 0 7 , C S AV N O R A S I A
announced the switching of the
I s t a n b u l c a l l t o t h e We s t b o u n d
voyage on its Asia Black Sea
Service (ABS). The first vessel
on this route was the Loa voy
748 which started the rotation at
Xingang on November 26 and
reached Istanbul on December 21.
D a C h a n B a y Te r m i n a l O n e i s
located at Da Chan Bay Terminal,
Xi Xiang Road South, Bao An
District, Shenzhen, PRC 518102. CSAV NORASIA top management, from left to right: Pablo Gonzalez, Mauricio
Te l . ( 8 6 ) 7 5 5 2 7 9 1 0 0 6 8 ; E m a i l Ramirez, Hans Moller, Guillermo Ginesta, Mario Da-Bove, Hernan Martinez, Cristian
commercial@DaChanBayOne.com. Ulloa and Dheeraj Bhatia.
58 Shippers Today
SECURITY
The European Shippers' Council (ESC) has voiced would be submitted prior to arrival in the first US port.
concern about the US advance trade data initiative For importers, the proposal sets forth 10 elements that
known as the 10+2 security programme. The proposal, are required for shipments consisting of goods intended
according to the US National Industrial Transportation to be entered into the US as well as goods bound and/or
League (NITL), would require both importers and delivered to a foreign trade zone (FTZ).
carriers to submit additional information on cargo to
Customs and Border Protection (CBP) before the cargo These 10 data elements must be transmitted by the
is brought into the US. importer and consist of the following:
"ESC considers that the proposal is another bureaucratic • manufacturer (or supplier) name and address;
burden for European companies" trading with the US, • seller name and address;
said ESC Secretary General Nicolette van der Jagt. The • buyer name and address;
ESC said it will ask the European Commission to call
• ship to name and address;
on the US to not apply this rule to the European Union,
• container stuffing location;
and instead, apply the mutual recognition concept in
• consolidator (stuffer) name and address;
relation to new programmes such as the Authorized
Economic Operator programme. That programme will • importer of record number/ FTZ applicant
become operational as of July 2009. identification number;
• consignee number(s);
"We welcome the fact that the European Commission • country of origin; and,
has already expressed concern that the 10+2 rule does • commodity harmonized tariff schedule of the US
not respect the SAFE Framework established by the (HTSUS) number (provided up to the 6 digit level).
World Customs Organization (WCO) since it goes far
beyond" what is recommended by the WCO. "Apart For freight remaining on board (FROB), five elements
from this we are not sure whether European exporters must be provided and include:
are willing to exchange commercially very sensitive
information with their trading partners," van der Jagt
• booking party name and address;
added.
• foreign port of unloading;
The long anticipated notice of proposed rulemaking • place of delivery;
(NPRM)—the Advance Trade Data Initiative otherwise • ship to name and address; and,
known as "10+2" was formally published on January • commodity HTSUS number.
2 in the Federal Register. The proposal would require
both importers and carriers to submit additional The purpose of the new rule is to better evaluate the
information on cargo to Customs and Border Protection potential risk of smuggling weapons of mass destruction
(CBP) before the cargo is brought into the US. The through the use of oceangoing cargo containers before
NPRM is focused on imports entering the US by water. goods are loaded on vessels destined to the US. While
The due date for comments is March 3, 2008. Under the the NITL is currently analyzing the latest proposal, last
proposed program importers will have to file 10 data
year it told CBP that while it believes the program's
sets with CBP at least 24 hours prior to foreign lading
objective is correct, the 10+2 initiative needs to take
of the cargo onto a vessel bound for the United States.
into account the hundreds of thousands of shippers
Carriers will have to file an additional two data sets. All
carriers (except for ships exclusively carrying cargo in that utilize different types of supply chain strategies.
bulk) would be required to submit a vessel stow plan not It pointed out that this could make full compliance
later than 48 hours after departure from the last foreign difficult. To view a copy of the NPRM, visit www.nitl.
port. For voyages of less than 48 hours, the stow plan org/E7-25555.pdf.
60 Shippers Today
SECURITY
C-TPAT expanded to
air carriers
US Customs and Border Protection (CBP) has The survey had 68 responses with nearly 80 percent
announced that it is expanding participation in the stating that they are certified at "Tier 2" or "Tier 3"
v o l u n t a r y p r o g r a m k n o w n a s t h e C u s t o m s Tr a d e levels. When asked why they chose to participate in
Partnership Against Terrorism (C-TPAT) to air carriers CTPAT, by a 2-1 margin—respondents believed they
and third party logistics providers (3PLs) by early would be conferred tangible benefits such a fewer
2008 ( NITL Notice , November 30, 2007). inspections, less delays and reduced costs. For a
complete breakdown of the survey results, visit www.
Earlier this month CBP released its minimum security nitl.org/C-TPATSurveyResults.pdf.
criteria for air carriers. It is continuing to study
how similar criteria can be expanded to 3PLs. One Meanwhile, Notice also reported in November that
difficulty faced by the CBP with respect to 3PLs is the House Appropriations Committee is considering
how their supply chains can be fully vetted so as to a provision to a funding bill that would accelerate the
ensure the chain’s integrity. current timetable requiring that 50% of air cargo on
passenger aircraft be inspected within 18 months and
At a recent meeting of the League’s Select Committee 100% of all cargo in passenger planes within 3 years.
on Security and Ocean Transportation Committee,
members discussed the relative merits of participation The current timeline for inspecting such cargoes was
in C-TPAT. At these meetings, members also shared included in the Implementing the 9/11 Commission
their perspectives on the program, including the Recommendations Act of 2007 and signed into law
merits and benefits of CTPAT participation versus the earlier this year. The House Appropriations provision
relative costs. would shorten the 50% mandate from 18 to 10 months.
In January, NITL Notice published the results of The League is working with a broad-based industry
a survey of members of the National Industrial and coalition to counter this provision and isconsidering
Transportation League on their views on the relative a joint letter to the Committee in opposing the
merits of participation in the voluntary security accelerated timetable. Among the arguments to be
program, C-TPAT. made is that it was only a short few months ago that
Congress passed, and the President signed into law,
The ten-question survey was prompted over concerns t h e c u r r e n t r e q u i r e m e n t s o n a i r c a rg o s c r e e n i n g .
expressed over the relative value of the programme Further, that Congress should allow the Transportation
particularly in view of subsequent initiatives which Security Administration (TSA) to implement current
call for the eventual scanning of all cargoes’ and requirements before establishing new mandates.
advance manifest and trade data submissions such a
"10+2" (Notice, January 4). Additionally the group will point out that "doubling"
the amount of cargo inspected within 10 months is an
Overall most respondents expressed positive arbitrary formula that will divert, not focus, necessary
e x p e r i e n c e s w i t h C - T PAT. M o s t i n d i c a t e d t h a t resources and slow implementation of the 9/11 bill.
they have been in the program for more than three
years, have had good experiences in working with Finally the group will point out that it fully supports
Customs and would recommend to other companies TSA current mandates for screening air cargo as set
that they participate in C-TPAT. forth in the 9/11 bill.
Shippers Today 61
CHINA TRADE
Wuhan, in central China, is forging ahead with dramatic capacity at its central China plant in
Wuhan to 300,000 vehicles a year by
transport infrastructure developments, writes Sam Chambers
2008, and building a second facility to
from Hubei province add capacity of 150,000 units per year.
62 Shippers Today
CHINA TRADE
use of the State Council's grant on its section of the tunnel that lies beneath Singapore and Thailand. The airline
'experimental' status. the country's longest river. Advanced started flying in May 2006 with three
technology is being used in the massive Airbus 319s. It plans to add six Airbus
News from the press conference showed project being carried out some 60 A320s and 11 short-range Airbus aircraft
the main body of Wuhan Railway meters under the river. The 3.6 km by end-2008.
Station will be completed before the long tunnel is set for completion by the
Spring Festival; Tianxingzhou Road/ end of 2008 and will make it easier for In other airline news, under a code
Railway Yangtze Bridge, with a total vehicles to cross the Yangtze River. share agreement with Air China, rapidly
investment of RMB16.7 bn, will be expanding Austrian Airlines has started
completed and put into operation in A t t h e e n d o f D e c e m b e r, Wu h a n daily calls at Wuhan. The CAAC said
2008. Wuhan Railway Station, with a Yangluo Yangtze River Bridge, the fifth mid-December that it has also approved
total investment of RMB14 bn, will be Yangtze River Bridge in the city, started the application of setting up a new air
completed in 2009 and make Wuhan operation. The bridge has also become freight company called Uni-top. The
the fourth largest railway hub in China. the 8th largest suspension bridge in the new company will be based at the
world at 1,280 metres in length. airport, with a focus on domestic and
In the summer last year, Canada's overseas cargo transportation. Uni-top
Bombardier Transportation won a The second terminal building of Tianhe Logistic Company and Autel Intelligent
contract for rail signaling equipment Airport will be completed and put into Technology Co Ltd will invest RMB135
worth US$91 million. The new trial operation before the Spring Festival, mn and RMB15 mn respectively in Uni-
system will manage high-speed trains increasing the capacity of this airport to top. It plans to rent two Boeing 747-300
traveling at speeds of up to 300 km 13 mn passengers annually. The third aircrafts and one 747-400 to undertake
per hr, along nearly 1,000 km of rail terminal building and the runway are the services, as reported by sources.
line between Wuhan and Guangzhou. expected to start construction soon and
The new system is scheduled to enter will increase the capacity of the airport Wuhan Port Group, an enti t y t h e
commercial operation in January 2010 to 35 mn passengers annually. mighty Shanghai International Port
and there is speculation that Japan's Group invested in nearly three years
bullet trains will be used on this route. When it comes to aviation, Wuhan really ago, operates six terminals handling all
Meanwhile, work has started on the is the envy of just about everywhere else cargo. Officials in Wuhan expect the
city's first subway. A total of seven lines in China. While Beijing has become city to handle 450,000 TEU in 2007
are planned—from a logistics point of quite restrictive on granting rights (up 100,000 from 2006), and to crack
view, should help ease road congestion. for new airlines, Wuhan's aviation 1 mn TEU by 2010. The municipal
liberalisation experiment has allowed government, on listening to shippers'
Telecommunications network gear- plenty of new firms to get the blessing demands, are targeting a project for
maker, Nokia Siemens Networks, said of Central authorities, making the city 24/7 Customs clearance.
last autumn it had won an expansion a vibrant air hub. A large air cargo
order for network equipment for a logistics park is now being built. Meanwhile, CIG Yangtze Ports will
proposed Hefei-Wuhan railway line invest RMB150 mn in building a dock
in China. Nokia Siemens said the A potentially huge and significant for heavy and large-sized goods in the
railway line would be 360 km long and moment in the easing of China's aviation Yangluo Port in Wuhan. The project will
operational by early 2009. structure took place in July last year in start construction at the beginning of
Wuhan. China's General Administration 2008 and is expected to finish in mid-09.
Eight expressways that connect Wuhan of Civil Aviation (CAAC) granted
with nearby cities will be completed in private carrier East Star Airlines the On the box front, CIG has an 85%
2008, making the neighbouring eight rights to operate international flights. stake in the two-berth Phase I of
cities within an hour's access from The significance? In a bid to shield the Wuhan International Terminal Port and
Wuhan and making Wuhan—as the big three, state-run airlines, Beijing has, is planning to take a 40% stake and
China Daily put it, more 'outstanding' until last July, insisted that no airline can develop four berths in Phase II. After
as a transportation hub. gain international flight rights until it has the Phase II expansion is completed in
been operating for at least three years. 2010, Wuhan International Terminal's
Construction work is speeding up East Star, based in Wuhan, only started capacity will increase to 1.2 mn TEU.
on the first tunnel to pass under the operations in May 2006. The airline It will be the largest box port in western
Yangtze River. Workers in Wuhan have now calls at Hong Kong and Macau. and central China, and will account for
now completed three-quarters of the It has also applied to operate flights to 80% of Wuhan's total throughput.
Shippers Today 63
CHINA TRADE
64 Shippers Today
TRADE
The Labor Contract Law of the that had the labor contract signed with means that a labor contract does not
People's Republic of China will come the laborers were less than 20 percent have a fixed expiry time; the length of
into force on January 1, 2008. This is and individual economic organizations the duration of the labor contract not
a most important work in the field of saw an even lower rate; the survey also to be determined dose not mean that
legislation over the last 10 years, with revealed that more than 60 percent of such expiration time doesn't exist. As
a major breakthrough in the existing employment units usually signed short- long as there are no legal provisions
labor law, as well as in many aspects term labor contract with the workers, or conditions of the terms agreed by
of local policies. Since October 2007, mostly once a year, and some even both parties, the parties shall continue
as the date of implementation of the more versions in a year. As a result, to fulfill the obligations under the
labor contract law neared, cases have this has affected the stability of labor labor contract. A non-fixed term labor
occurred from time to time that surprise relations. The new Labor Contract Law contract is not a permanent one, and
dismissal of the old corporate staff, hereinabove is to solve the problem of does not mean that workers therewith
forcing staff to take a "voluntary" short-term contracts by expanding the may be arbitrary in actions and shall
resignation and re-sign a labor contract, scope of labor contracts without a fixed comply with the labor regulations of
so that the employees had to accept period where applicable. such unit and the relevant provisions
"zeroing" of the length of service in of the Labor Law. Once the situation(s)
the service unit. Even a small number Non-fixed term labor contract is that provided by the law have occurred,
of employers are found to have an employing unit and the workers such non-fixed term labor contract
illegal implementation of economic shall agree to terminate such contract may also be lifted. There are three
eliminating by one-time dismissing a without determining the time for situations that may cause dissolving a
large number of workers with a labor expiration thereof. Many people believe labor contract without a fixed term: (1)
contract signed. This has triggered a that such a labor contract is an "iron where the Employer and the Worker
high degree of community concern. rice bowl", "life tenure" and that there therewith have an agreement; (b) where
was no fixed deadline for dissolving a the Worker has an illegal behavior
Article 14 of the Labor Contract labor contract once signed. Therefore, or in illness or with an injury, thus
Law many workers always try everything not competent in work; (3) economic
possible to sign a non-fixed term labor retrenchment. These situations are in
In China's enterprises, the short-term of contract with employers. On the other consistency with the regulations for
the contract is found quite common. In hand, employers consider the non-fixed lifting a fixed-term labor contract.
2005, the National People's Congress term labor contract to be a "life-long
Standing Committee had a national burden", and trying to evade the legal Article 14 to the Labor Contract Law
labor inspection, which revealed that in obligation therein. provides that a labor contract without
small and medium-sized enterprises and a fixed term shall be concluded
non-public-owned enterprises, those In fact, no specific termination time accordingly in respect of any worker
66 Shippers Today
TRADE
with over 10 years of continuous cannot determine how much this risk change. In exchange, Huawei offers
employment in a work unit, employing might be. Before the implementation a higher standard for economic
units in the initial implementation of the new labor contract law, there compensation than the new Labor
of the labor contract system, or re- will probably be major adjustments in Contract Law stipulates, for a total of
establishment of state-owned enterprise human resources management policies up to RMB 1,000 million. Under the
that is to restructure a labor contract, in many enterprises. rule of "First resignation, then compete
and such worker in the employing for a post", all staff in the voluntary
unit has a continuous work period for October 22, 2007, Wal-Mart global departure would be granted by Huawei
ten years, and less than a decade from p r o c u r e m e n t h u b i s s u e d a l a y o ff the corresponding compensations. The
the mandatory retirement age, or for notice, the global total of more than compensation package is as per "N
a second time to sign a fixed period 200 employees would be given an +1". N is for work age in the Huawei,
of labor contract, when such worker "unprincipled dismissal", of which e.g. a Huawei employee has a monthly
is consent to the renewal of a labor Chinese staff were about half of the salary of RMB 5,000 yuan, and 60,000
contract, in addition to the proposal number. would be the bonus for a year; if such
proposed by such worker to sign a employee Huawei has work ed for
fixed-term contract. In the City of Dongguan, Guangdong, eight years, then he would be given
China, a sports hardware factory the final amount of compensation of
Where employing units having had an forced more than 1,000 workers "to be RMB 10,000 yuan (wages + year-end
employment with workers on the date recruited only after demission", that is, bonuses equally shared), multiplied by
of the expiration of one year and did one hand is to sign a letter for voluntary the "8 +1", totaling 90,000 yuan.
not enter into a written employment demission whilst the other hand to sign
contract with such workers shall be a new contract. The Huawei event immediately became
deemed as such employers and workers a hot topic in social circles, producing
have made a non-fixed term labor Also in Huizhou, another city a tremendous demonstration effect.
contract. Employers, who have violated in Guangdong Province, a daily It is generally considered that the
this law and failed to make a labor necessities manufacturer requested a purpose of Huawei is trying to write
contract without a fixed term with such number of 2,500-contracted employees off the seniority of the old employees,
workers, shall pay such workers twice to sign a new contract, which would and have their length of service
the monthly wage since the date of be effective on the date of January 1, recalculated, avoid staff working
a labor contract without a fixed term 2008. At the same time employees continuously for 10 years and signing a
shall be signed. were asked to sign a labor contract to fixed-term labor contract. To ultimately
terminate the original "agreement". circumvent the Article 14 to the new
Impact of Labor Contract Law on "Labor Contract Law", in advance, it
Enterprise H u a w e i Te c h n o l o g i e s C o . , L t d . attempts to convert the possible "long-
Shenzhen introduced the "Regulations term contracted" staff to "short-term
The final version of the labor contract on Compensation for Lifting or contracted" staff. Huawei responded,
law has the provisions of Article 14 Termination of Labor Relations," however, that this adjustment is a
as that, workers in meeting " having which encouraged more than 7,000 old normal practice of human resources.
been with an employing unit for over employees with over eight years, before The old staff getting onto the new
10 years of continuous work" or "for the New Year's Eve in 2008, shall posts would be more dynamic for the
a second fixed-term labor contract" take the initiative for the resignation enterprise. Meanwhile, it denied the
conditions can be made with the procedures, then 1-3 years of labor intention to have the previous work
employing units a "non-fixed term contracts would be resigned with them ages of the old employees converted
labor contract." This provision has after the competition for a post with into "zero."
caused many entrepreneurs' concern the company. All their jobs, wages
that the employment enterprises will and benefits would remain unchanged, Some senior judges and lawyers
face greater difficulty in autonomy except the labor contract and seniority considered that, because the relevant
on firing, i.e. high cost; enterprises would be once again signed for a judicial interpretations have not yet
Shippers Today 67
TRADE
introduced, whether the practice of then assumed that paying economic intended to circumvent the relevant
Huawei spending money to encourage compensation occurs in 3 years, the provisions of the labor contract law;
nearly 10,000 employees to resign eight-year work age shall then be and in some enterprises, this has been
and have a competition for a new removed, with only later three years of done by a small number of people to
post could really circumvent the compensation received. seek their own interests. Such practices
labor contract with no fixed term is are actually contrary to the provisions
still unknown. Such practice in an It is understood that regarding to of the labor contract law, and have not
enterprise might face an adventure. the "labor contract law," the draft only caused harmonious impact on
Buyouts cannot be used as the simple of the implementation details has stable labor relations, but also damaged
way to solve a series of problems such been worked out, and now is seeking the legitimate rights and interests of
as the health care period, annual leave o p i n i o n s f r o m d i ff e r e n t p a r t i e s . workers, and nor conducive to the
and the length of service. Under the Meanwhile, the judicial interpretation development of enterprises.
current practice of Huawei, the so- of the Law will also recently be
called "demission" of the Huawei introduced by the Supreme People's In accordance with the provisions
staff is not a real leave off their post. Court, and is expected to define of the labor contract law, employing
Instead, all the staff would continue the situation mentioned above. units have established a labor relation
to work. In legal terms, demission is I f t h e n e w l a w, b e f o r e a n d a f t e r with laborers from the date of
marked as: the handling of handover to its implementation, meets a large employment of the workers. After the
recover the card, and payment of wages number of avoidance measures, implementation of the labor contract
stopped, and social security stopped, judicial interpretation might be cover law, as long as workers continue
file transferred, handling registration the concept of "the contract signed to work in this unit, labor relations
of the unemployed, rather than relying within one year after being dismissed is deemed as continuous; even a
on staff to submit a single report on may be treated as a continuous labor "resignation" and/or a "voluntary
the resignation. So, although Huawei contract." In the foreign practices, a agreement" have formed to change
provides recalculation of seniority contract re-signed within one month the labor contract, nor can it change
with that employees have to agree, to three months, shall be deemed as a the fact of such "labor relation". And
the statute is greater than agreement, continuous labor contract. also, Employers cannot circumvent the
the "left" staff's working age can not statutory obligations.
be re-calculated, and but deemed as Law Working Committee of the
a consecutive term. According to the National People's Congress Standing Labor Contract Law on the provisions
"Labor Contract Law," Article 14 Committee: Interpretation of the of the labor contract with no fixed time
provides that in the same unit for 10 Authority limit is targeted mainly at labor and
years or more, employees shall have employment in the short-term labor
the right to sign a non-fixed term labor Prior to the implementation of the labor contracts and the prominent problem
contract the employer. contract law, some enterprises intend to in a one-year labor contract, and even
dismiss employees, or force employees the more common situation where
As for Huawei to pay compensation, it to take a resignation, resulting in the signing contracts for several times in
may be seen as the future of economic workers in the service unit to get a a year. The purpose is to encourage
compensation paid to the workers as "zero" for the continuous length of the and guide the Employers and workers
the early part thereof. Because the service. to sign a longer duration of a labor
length of service of staff could not be contract, in attempt to construct stable
really written off, Huawei's practice is Law Working Committee has said labor relations and enhance laborers'
to have the economic part paid to the that these practices have aroused identification with the employing
workers as an advance payment. For widespread social concerns and strong units, improving labor enthusiasm and
example, a Huawei staff has been in reactions. Employers adopt these promoting a long-term development.
eight years, the staff has received the practices for different purposes: some
first eight years of payments this time; had a misreading or misunderstanding Prior to that the Labor Contract Law
After re-signing a labor contract, and of the labor contract law; some comes into effect, employing units, in
68 Shippers Today
TRADE
Shippers Today 69
Hutchison Port Holdings (HPH) has named ECT President, Jan Henrik von Sydow became
Westerhoud, as division director for North Europe, it was reported late Executive Director on 1 Jan 2008
in 2007 by World Cargo News online. This cluster includes all HPH's of Kerry Logistics, based at the
operations in Belgium, France, the Netherlands and Germany plus all of head office in Hong Kong, Sydow
Scandinavia and the Baltic, including Russia. The appointment, it was is responsible for all international
reported, marks a split in HPH's European control, as Richard Pearson freight forwarding business.
headed all HPH operations in Europe as CEO of what was until recently Henrik von Sydow joined Kerry
called Hutchison West Ports, based in the Port of Felixstowe. Previously Logistics from Baltrans Logistics
the European head office, the Felixstowe office will now cover the as the Director of Corporate
UK and all of the Mediterranean, including the East Med. Likely to be Strategy in 2007. Gary Wilcock
renamed Hutchison Central Europe, it is headed by Clarence Cheng, has been appointed Managing
formerly the unit's CFO under Pearson. Westerhoud commented that Director of Europe for K er r y
Hutchison's decision to split Europe into two major divisions gives ECT Logistics. In his new function,
a boost. It will bring ECT closer to the global centre of operations in Wilcock is responsible for the
Hong Kong. From being a subsidiary reporting to Felixstowe, ECT now Group's business operations in the
oversees more than half of Europe. Westerhoud joined HPH in mid-2004 UK, Spain, Central Europe and
as president of in Rotterdam. Europe's biggest container terminal Western Europe. Wilcock joined
operator, ECT handled 5.5M TEU in 2006 and has just handled the Kerry Logistics from Trident
container that represented the Port of Rotterdam's 10 millionth TEU in International as the Managing
2007. World Cargo News online Director of UK in 2002.
70 Shippers Today
The European Liner Affairs Association Lufthansa Cargo AG has announced
(www.elaa.net) has elected as its new the appointment of Flight Captain Kay
Chairman, Ulrich Kranich, a member of Kratky as the new General Manager
Hapag Lloyd's executive board, with effect of Jade Cargo International, with
from 1 January 2008. He succeeds the effect from 1 Jan 2008. The Board of
Mediterranean Shipping Company's Gian Directors had already appointed him
Luigi Aponte. Headquartered in Brussels, the caretaker General Manager of the
ELAA was set up in May 2003 to represent German-Chinese cargo carrier, based
Ulrich Kranich
the liner shipping companies of the world in in Shenzhen, in September 2007.
the European Commission’s review process of Regulation 4056/86. Kratky was previously in charge of
The ELAA acts as a contact point for the EC throughout its on-going Transport Management and Flight
consultation and review process. Chris Bourne, formerly MD of O p e r a t i o n s a t L u f t h a n s a C a rg o .
MOL (Europe) Ltd, was named Executive Director of ELAA from Claus Richter moves from Lufthansa
1 Sept 2007. The association counts among its members A P Møller/ Passage Airline to take over as VP
Maersk, Atlantic Container Line AB (Grimaldi), China Shipping Transport Management and Flight
(Group) Co, CMA-CGM Group, COSCO, CSAV (Compañia Sud- Operations of Lufthansa Cargo. He
Americana de Vapores S A), Evergreen Marine Corp (Taiwan) Ltd, was formerly Manager Operational
Hamburg Südamerikansiche Dampfschiffahrtsgesellschaft KG, Support and Deputy Manager of Flight
Hapag Lloyd, Hanjin Shipping Co Ltd, Hyundai Merchant Marine Operations of Lufthansa Passage
Co, Ltd, Kawasaki Kisen Kaisha, Ltd, Malaysia International Airline. Meanwhile, Hjoerdis Stahl,
Shipping Corporation (MISC), Mediterranean Shipping Co S A head of Lufthansa Cargo handling
(MSC), Mitsui OSK Lines, APL Co Pte Ltd, NYK Line (Nippon organisation in Frankfurt, is leaving
Yusen Kaisha Line), Orient Overseas Container Line Ltd, United the company at her own request and
Arab Shipping Co (SAG), Yang Ming Marine Transport Corp, and is presently on leave. A decision on a
Zim Israel Navigation Co Ltd. successor will be taken shortly.
Shippers Today 71
EVENTS
William Fung, Group Managing Director of Li & Fung Limited, will give the Keynote Address at the Opening of the
2008 edition of Prime Source Forum (www.primesourceforum.com) scheduled for 1st & 2nd April at the Hong Kong
Convention & Exhibition Centre. Dr Fung joins the many distinguished speakers taking part in the Forum including
Rufus Yerxa, Deputy Director General of the World Trade Organisation (WTO), who will update the expected 400
participants on the latest trade situation from the perspective of the WTO.
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With Lawson Fashion, organizations have the flexibility to implement precisely the applications that suit their
current business needs, and add additional modules as the requirements change. With the addition of each
new application, organizations can experience the benefits of enhanced integration and power of collaboration
between the applications.
For more information on Lawson Fashion solutions and customer references, please visit www.lawson.com/Fashion.
C O M PA N Y B AC KG R O U N D
Lawson Software provides software and service solutions to 4,000 customers in manufacturing, distribution,
maintenance and service sector industries across 40 countries. Lawson's solutions include Enterprise Performance
Management, Supply Chain Management, Enterprise Resource Planning, Customer Relationship Management,
Manufacturing Resource Planning, Enterprise Asset Management and industry-tailored applications. Lawson
solutions assist customers in simplifying their businesses or organizations by helping them streamline processes,
reduce costs and enhance business or operational performance. Lawson is headquartered in St. Paul, Minnesota, U.S.,
and has offices around the world. Visit Lawson online at www.lawson.com.
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