8/F, CHINA HONG KONG CENTRE, 122-126 CANTON ROAD, TSIM SHA TSUI, KOWLOON, HONG KONG.

TEL: (852) 2796 3121 FAX: (852) 2796 3719 EMAIL: enquiry@haffa.com.hk WEBSITE: http://www.haffa.com.hk

AIRFREIGHT SUB-COMMITTEE

Chairman: KERRY FREIGHT (HONG KONG) LTD – Mr. Kenneth Ko / Mr. Sammy Mak

Vice Chairman: A-SONIC LOGISTICS (H.K.) LTD – Mr. Cliff Sullivan / Mr. James Chan

Members: HELLMANN WORLDWIDE LOGISTICS LTD

INFINITY CARGO EXPRESS LTD

NAF NORTHERN OCEAN FREIGHT LTD

RCS LOGISTICS LTD

RHENUS LOGISTICS ASIA-PACIFIC LTD

THE JANEL GROUP OF HONG KONG LTD

CARGO FREIGHT SERVICES LTD

DHL GLOBAL FORWARDING (HONG KONG) LTD

DIMERCO AIR FORWARDERS (HK) LTD

SEA-AIR LOGISTICS (HONG KONG) LTD

I. Liaise with the Civil Aviation Department (CAD)

A. New Requirements of Regulated Agent Regime (RAR) with effect from 15 July 2013

Since the official announcement of the new requirements of RAR made in late

February 2013, more than 8 information sessions were organized by the CAD to

brief the industry stakeholders on the changes. In addition, apart from an

information session on 23 April 2013 dedicated to Members, in collaboration with

the Hong Kong Shippers’ Council (HKSC) and Tradelink, HAFFA organized

two sessions of RAR seminar targeted for consignors on 08 July 2013. In the

seminars, the HAFFA Chairman Ir Dr Paul Tsui gave a briefing on the

requirements, highlighted the details of cargo operations and impact on

consignors. Both HAFFA and HKSC representatives hosted lively audience-

driven discussion following the presentation sessions.

In response to numerous enquiries and comments

from Members, HAFFA carried out rounds of in-

depth dialogue with CAD aiming at ironing out the

many concerns and issues that members were facing.

In the course of discussion regarding Known

Consignor (KC) / Account Consignor (AC)

recognition with CAD (in particular under the

scenario of co-loading and triangular trade), it was

realized in late May 2013 that a KC / AC with

multiple sites within and/or outside Hong Kong

(where items, products, goods or consignments

designated as air cargo are prepared, packaged

and/or stored) is an important rule for KC / AC

recognition under the minimum requirement of the

International Civil Aviation Organization (ICAO)

and EU.

To minimize the operational disruption and

disturbance to the stakeholders as many consignors

had already signed the new KC declaration form at

that time, HAFFA counter-proposed and CAD accepted that instead of signing many KC forms by one KC,

each KC is allowed to sign one single KC form and use an Appendix to list the addresses of all such sites

where air cargo is packed. To meet the needs of our members, a best practice including flow chart,

explanatory notes, illustrative example and a template of Appendix were circulated to all members for

reference via Special Circular dated 30 May 2013.

Besides, HAFFA has been working closely with CAD to review all relevant documents including but not

limited to “Form of Application for Registration as RA”, “Handling Procedures for RAR” and

“Requirement Document for Consignor”, and urged CAD to compile a list of “Frequently Asked Questions

(FAQ)” to facilitate RA to carry out the new requirements. Members are kept constantly informed of the

RAR updates via News and Special Circulars. It was gratifying to learn that no reports of operational

disruptions have been received since the implementation of the enhanced RAR in July.

B. HAFFA Professional Seminar (Aviation Security Independent Validators – EU ACC3)

Hong Kong is granted “green” status and is exempted from this requirement at present

Currently the EU requires air carriers to obtain the “Air Cargo or

Mail Carrier operating into the Union from a Third Country Airport”

(ACC3) designation. With effect from 01 July 2014, ACC3

designation will only be valid upon a successful EU Aviation

Security Validation performed by an Independent Validator

accredited by an EU Member State. It is known that only several

countries/regions (including Hong Kong) around the world are

granted “green” status and they are exempted from this mandatory

requirement at present. All airlines, Ground Handling Agent (GHA),

RA and KC of the other places e.g. ASEAN (Association of

Southeast Asian Nations) countries are required to be independently

validated or otherwise all their air cargo should be undergone

screening process (likely x-ray screening) before entering EU.

Being a pioneer, the HAFFA Chairman Ir Dr Paul Tsui has already

received formal EU accreditation as the EU Aviation Security

Validator for EU ACC3 and he was the first Asian obtaining EU

accreditation. The list of EU accredited vaildators is available at:

https://webgate.ec.europa.eu/ksda/openAccess.htm.

A professional seminar on this topic was successfully held on 21

January 2014. Ir Dr Tsui briefed the latest requirements of ACC3

and independent validator with an aim to provide advice to

Members and industry stakeholders. Thanks to the enthusiastic

support of Government Authorities and Industry, there were over 80

distinguished Government representatives, guests and Members

attended the seminar and it was concluded after a fruitful Question

and Answer session.

C. Future Development of Air Cargo Security

HAFFA, industry stakeholders, Security Bureau (SB) and

CAD always exchanged views on the future development

of air cargo security in different occasions. It was revealed

that US Transport Security Administration (TSA) so far has

no concrete plan to implement 100% screening for

freighters. However, given the concern about the actual

compliance level of KCs in fulfilling the enhanced

requirements after KC signed the new forms, the green status of EU ACC3 for Hong Kong could not be

easily retained. As such, HAFFA urged the CAD to start developing up-stream screening programme.

Detail requirements on up-stream screening and a roadmap/timeframe for implementation should also be

established as soon as possible because it would take time for the industry to get prepared and fully

implement such programme. Besides, the establishment of on-airport “Centralized screening and CFS

facilities” should be explored / considered to cater for the imminent need of SMEs in the light of this

principle.

D. Secure Air Freight Enclosure (SAFE) Pilot Program

Further to our Annual Report 2012, we are delighted to update Members of

the latest progress of the SAFE project. The pilot program of the SAFE has

completed and the result was duly deliberated at the meeting of the

Subcommittee on Industry Development (SID) under the Hong Kong

Logistics Development Council (LOGSCOUNCIL) on 18 November 2013.

Funded by the LOGSCOUNCIL, SAFE, as an additional function of OBTIS (On-board Trucker

Information System), is designed to enhance airfreight security during transportation. It features real-time

monitoring of airfreight against unauthorized tampering en route from the off-airport depot to the Cargo

Terminal Operators (CTO) inside the airport. This HKPC (Hong Kong Productivity Council) patented

design is a cover for either a pallet or a full truck. It is designed in such a way that it can operate with

OBTIS or any other GPS-based fleet management systems. 129 trucks and 2 trucks participated in the free

trial of pallet SAFE cover and full-truck SAFE cover respectively. It aimed to evaluate both the technical

and operational feasibility of SAFE and identify areas for improvement during the commercialization stage.

A HAFFA meeting was arranged with CAD on 24 February 2014 for the authority to assess the device. The

initial views from CAD are positive and encouraging. It is HAFFA’s intention to obtain CAD’s written

confirmation that the SAFE device can be considered as one of secured transport measures for upstream

screening acceptable to the Authority in the future.

II. Liaise with Airport Authority Hong Kong (AAHK)

Monthly Aggregated Air Cargo Statistics Since the operations of Cathay Pacific Cargo Terminal (CPCT) in 2013, due to commercial sensitivity

(sensitive information re stock market), CPCT (operating CX, KA and LD only) confirmed that they could

only release their cargo statistics to the Airport Authority Hong Kong (AAHK) / Government Agency but

were not allowed to release to the public.

It is indeed very essential for the industry to obtain monthly air cargo statistics (by origin / destination) like

what Hactl and AAT are providing nowadays in order to analyze the future freight demand and formulate

business plan. HAFFA also received members’ concern of incomplete air cargo statistics due to lack of

CPCT figures and this resulted in failing to analyze the trend of cargo market. The negative impact is not

only on local but also overseas when they have to plan the routing.

Given AAHK, being a neutral

platform and cargo facilitator, is the

best party to consolidate the air cargo

statistics from all air cargo terminals

and timely release the aggregated

figures (or provisional aggregated

figure) to industry (i.e. statistics of

previous month to be released by mid

of current month), HAFFA made an

official request through the platform

of the AAHK Cargo Facilitation

(Cargo FAL) Committee. HAFFA

re-iterated that the minimum standard

for a forwarder to be able to use the

data would be:

1. Statistics must be at least by country (if by station is not feasible)

2. Statistics should timely be released within 2 weeks

3. Data for import, export and transshipment should be separately shown but not under the column of

“Loaded” and “Unloaded” in which transshipment data was included, such mixed data would be of no

use

In response, AAHK wrote a letter to the Board of Airline Representatives (BAR) given the required data

was owned by airlines. However, BAR/AAHK ultimately declined HAFFA’s request and explained that by

country level was still too sensitive as some destinations might only be served by one single carrier. HAFFA

is now finding way out to resolve the issue. The concern has been brought out to Mr. Clement Cheung,

Commissioner of Customs and Excise and the Department will explore the possibility of providing the

required cargo statistics to the industry.

III. Liaise with IATA

A. IATA Annual Financial Review (AFR)

In year 2011, IATA-Hong Kong initiated a

discussion on AFR, advising that according to

IATA Resolution 801 S1.1.4.1(b), they were

required to conduct annual examinations of the

financial standing of IATA agents. If any

forwarder failed in the assessment, IATA would

base on local financial assessment criteria to

collect additional Bank Guarantee (BG) from it.

HAFFA brought out many concerns to IATA. In

particular, agents would need to spend

additional resources to support the financial

assessment annually but there was no fair

reciprocal arrangement in return.

In view of the obvious negative impact and the

fact that the AFR is implemented based on IATA resolution, HAFFA joined efforts with FIATA and the

Federation of Asia Pacific Aircargo Associations (FAPAA) to escalate the said issues to the IATA-

Headquarter for discussion at the IATA World Cargo Symposium in March 2012. Following numerous

deliberations, taking into HAFFA’s views, a proposal to exempt Hong Kong IATA cargo agents from

AFR implementation was submitted to the IATA / FIATA Consultative Council (IFCC) in February 2013

and it was duly endorsed. The proposal was then recommended to IATA Cargo Agency Conference (CAC)

in March 2013 for final approval but unfortunately it was not adopted.

Wordings of the proposal were reviewed and re-submitted to the IFCC for discussion again at its meeting

on 19-20 February 2014. Out of the meeting, IFCC accepted HAFFA’s counter-proposed wordings and

this item was put forward to IATA CAC (March 2014) meeting for adoption. Indeed, AFR is an unfair

conduct to the IATA cargo agents. Nowadays, IATA cargo agents settle the bills through CASS with BG

to individual airline that already implies sufficient financial security for airlines. It is not necessary to

perform financial review on an annual basis. HAFFA will endeavor to fight for the AFR exemption with

a view to protecting the interests of IATA cargo agents in Hong Kong.

B. Cargo Agency Modernization Programme (CAMP)

Today’s IATA Cargo Agents act in many cases as freight forwarders (principals rather than true agents

of the carriers) and conduct business with airlines as their shipper customers. Given the evolving

business relationship

between cargo agents and

carriers, as mentioned in

our Annual Report 2013,

IATA and FIATA are

instituting “Cargo

Agency Modernization

Programme” (CAMP)

which is intended to

replace current IATA

resolutions in future. It is

foreseen that the existing

IATA cargo agency

programs will be

replaced by two new

programs:

1. Global IATA Cargo Agency Program (GICAP) This program will replace the existing programs (Resolutions 801, 803, 805, 809, 813) and will be cloned

based on the 805 program. It targets at direct clients or forwarders in niche markets who may wish to

continue to be agents of airlines. This program will continue to be governed by the IATA Cargo Agency

Conference (CAC), under which forwarders with a healthy financial background are not required to pay

Bank Guarantee (BG). Even for those forwarders needed to pay BG, they have to submit BG to IATA

only but not individual airline. Forwarders will not subject to Annual Financial Review unless there is

default of payment.

2. IATA/FIATA Air Cargo Program (IFACP) This program will better suit to the present state of the industry where forwarders are essentially

customers/principals of the airlines. This will likely be the program of choice for the vast majority (over

90%) of the forwarders worldwide. It will be administered jointly by FIATA and IATA, outside the IATA

Cargo Agency Conference structure. There will be a freight forwarder agreement under this program.

Payment can be done through CASS and BG is not required as long as there is no default of payment.

Forwarders in Hong Kong should be better off under the new programs with increased cash flow and a

reduced cost of BG. It is expected that both programs will be launched simultaneously in Q1 2015.

HAFFA Chairman, under his capacity being the CAMP Working Group Member, will introduce the

program and brief the impending changes to the IATA Cargo Agency Programme to Members at the

forthcoming Annual General Meeting (AGM) on 29 April 2014.

C. 100% E-Freight Implementation for Import General Cargo in Hong Kong

Several special Business Working Group (BWG) meetings were convened in 2013 to explore the

feasibility of implementing 100% e-freight WITHOUT pouch for IMPORT general cargo. The design

principles of this initiative based on:

1. Forwarder at origin would send their own commercial documents using electronic means directly to

destination forwarder, broker or consignee without given the physical pouch to carriers.

2. Commercial documents of more than 95% of shipment are handled under e-process, they are

printed only when necessary or demand from Customs and Excise Department for inspection.

3. Forwarder could check their Customs response or release code through Hong Kong warehouses

system, Forwarder in-house system or external system where most convenience.

4. Forwarder would use the electronic commercial documents for further process with consignee or

other related party.

To proceed further with the initative, the BWG

will define the “to-be” e-process and run pilot

trials. If everything goes smooth, full

implemention will be carried out in Q4 2014. By

then, no pouch will be shipped along with the

import general cargo.

While HAFFA is 100% dedicated to the e-

freight project, we have reiterated to IATA and

BWG Chairman a principal message that quite a

number of areas of the current process with the

airline, Cargo Terminal Operator (CTO) and

Hong Kong Customs & Excise Department (HK

Customs) are not really the electronic process. In

result, the direction currently leading by BWG is

purely focusing on the improvement of forwarders’ procedure, to make it electronically instead of looking

into the whole supply chain (forwarder-CTO-airlines-HK Customs) and make it really e-freight. It was

underlined that forwarders are happy to move forward but definitely not partial electronic and partial

manual, which brings no benefit to us as a result.

IV. Liaise with Carrier Liaison Group (CLG), HACTL, AAT and CPCT

A. AVSECO X-ray Service Fee Increment

During the regular meetings with CLG and Cargo Terminal Operators (CTOs) in November 2013, it was

unveiled that the sole service provider (AVSECO) demanded a substantial increase in x-ray screening

service charge (two digits increment). Given not only airlines and CTOs were directly affected but also

forwarders and shippers, HAFFA and the Hong Kong Shippers’ Council (HKSC) expressed the grave

concerns of the industry to the Security Bureau (SB) and Transport and Housig Bureau (THB).

A meeting was convened among CLG, CTOs and AVSECO on 29 November 2013. As a result of the

meeting, AVSECO agreed to temporarily suspend the x-ray service charge increase and explore to

establish a charging mechanism acceptable to the industry. Subsequently, SB and THB also updated HAFFA of the same message. In conclusion, the industry strongly requested AVSECO for transparency in the

cost breakdown and providing justification for any charges adjustment in future.

B. Dangerous Goods Working Group (DGWG)

In response to the changes in the 55th

Edition IATA DGR (2014) (with effect

from 01 January 2014) particularly on

lithium battery under Section IB,

CLG–DGWG and HAFFA worked

together to provide an update of the

Best Practice (BP) with operational

guidance for Members and the

industry. Apart from the key changes

to Section IB regarding the

requirement of Shipper’s Declaration

for Dangerous Goods (DGD), some

comments previously received for BP

010 were also incorporated into the

new BP011. The relevant documents

were disseminated to all Members on

11 December 2013 via News and

uploaded onto the HAFFA website.

C. HAFFA Executive Committee Visited CPCT

A visit to CPCT was organized dedicated to HAFFA Executive Committee and Airfreight Sub-committee

on 20 January 2014. The presentation and terminal tour arranged by CPCT were very informative and

impressive. Apart from gaining a better understanding on the new facilites and the enhanced operational

flows at the new cargo terminal, participants also took this opportunity to provide comments and

feedback to CPCT for their future service enhancement.

Date: 23 April 2014

(END OF REPORT)