Statement by Commissioner of Customs and Excise

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Following is the full text of the statement by the Commissioner of Customs and Excise, Mr Raymond Wong Hung-chiu, at today's (January 29) press conference:

In my last Year-end Statement, I said that the Department would maintain crackdowns on piracy, illicit cigarettes, illicit fuel and drugs as our top priorities in 2002 and, with the advocacy of developing Hong Kong into an international and regional transportation and logistics hub, take an active role in complementing the work for enhancing the logistics trade in Hong Kong. I am now glad to report that, with the dedication and concerted efforts of my colleagues in the Department, we have made significant achievements in the above aspects. On enforcement, the Department reorganised its investigation work and established the Intelligence and Investigation Branch, taking full responsibility for enhancing the Department's abilities in intelligence collection and analysis, and risk management, so that more effective enforcement operations could be taken. The move has proved to be effective in containing the problem of smuggling of dutiable commodities and copyright piracy.

The growth in the movement of both cargo and travellers in and out of Hong Kong was significant in 2002. On the front of land boundary control points, we have adopted various measures to enhance the efficiency of vehicle and passenger clearance so as to speed up cargo movement. We record an increase of 4.6 per cent and 8.4 per cent in the volume of containers and passengers respectively handled by the Department last year. Despite the increased workload, the Department has continued to improve the quality of our service on various fronts. The following is an account of our achievements in 2002, which covers four major areas: -

A. Achievements in Enforcement;

B. Advancement on Trade Facilitation;

C. Progress in Customs Cooperation; and

D. Development in Internal Organisation.

A. ACHIEVEMENTS IN ENFORCEMENT

(1) Revenue Protection

(a) Fight against Illicit Fuel

There was an increase in seizure of illicit fuel from 1.63 million litres of hydrocarbon oil in 926 cases in 2001 to 2.14 million litres of hydrocarbon oil in 1 229 cases in 2002, mainly due to the rise of illicit motor spirit activities in the territory and our enhanced enforcement operations.

The Department seized 1.05 million litres of smuggled diesel oil in 334 cases in 2002, reflecting a slight increase as compared to 0.9 million litres in 310 cases in 2001.

As for illicit motor spirit, 561 986 litres were seized in 716 cases in 2002, denoting a drastic increase as compared with 231 214 litres seized in 351 cases in 2001.

The economic adversity in 2002 led to an increased demand for illicit fuel due to its lower price. To tackle the illicit fuel problems, the Department has strengthened the enforcement actions and adopted the following multi-pronged strategy:-

(i) enhancing enforcement capability through launching territory-wide operations by pooling resources from different bureaux within the Department and other government departments against illicit filling stations. The notable one was the "Red Coral Operation" conducted with the Hong Kong Police in September 2002 by mobilising about 400 enforcement officers, which successfully smashed a black spot at Nai Wai, Tuen Mun supplying illicit detreated oil on a large scale;

(ii) promoting the use of intelligence in operations against illicit filling stations. Intelligence-led operations were carried out to eradicate illicit filling stations by realising the marker tactic;

(iii) adopting the strategy of "tackling the fuel problem at source". Customs officers were tasked to escort and verify oil deliveries leaving oil depots to prevent illegal syndicates from diverting the oil for illicit use;

(iv) reinforcing boundary control against illegal importation of fuel. We detected a revival of smuggling of illicit fuel from the Mainland to Hong Kong in late 2002. Based on related intelligence, the Department carried out joint operations to enhance checks against suspicious cross-boundary vehicles so as to suppress the inflow of illicit fuel via local boundary control points. Meanwhile, we procured special equipment to assist our frontline officers in detecting the illicit fuel smuggled from the Mainland efficiently and effectively.

With the multi-pronged strategy, the Department smashed 705 illegal filling stations in 2002, denoting 44.8 per cent increase when comparing with 487 in 2001. Following our vigorous enforcement actions, the number of local black spots for illicit fuel activities dropped from 35 in 2001 to 27 at present.

In 2002, a total of 414 users of illicit fuel were prosecuted. They were fined in the range of $500 - $10,000 and imprisoned from seven days to two months. Operators were fined in the range of $400 - $10,000 and imprisoned from seven days to eight months, whereas smugglers were imprisoned from one month to 12 months. There were a total of seven cases of disqualification of driving licence from six to 15 months involving repeated offenders.

(b) Fight against Illicit Cigarettes

During the year, we continue with our stringent enforcement actions against illicit cigarettes, with a total seizure of 181 million sticks of cigarettes, which is 46.7 per cent lower as compared to the seizure of 340 million sticks of cigarettes in 2001. The drop in the quantity of cigarettes seized in 2002 was mainly attributed to the success of the Department to stop transnational smuggling syndicates to make use of Hong Kong as a transhipment centre by having intercepted 24 transhipment cases involving 204 million sticks of illicit cigarettes in 2001. According to different sources of intelligence, the smugglers had changed their smuggling routes to evade Hong Kong in order to avoid a great loss upon interception of their smuggled cigarettes by the Department. Consequently, the Department intercepted only one transhipment case involving 8.2 million sticks of cigarettes in 2002.

In 2002, the number of cases effected amounted to 20 133 and 2 598 offenders were arrested, which is a rise of 13.9 per cent and 59.9 per cent respectively when compared to 17 678 cases effected and 1 625 offenders arrested in 2001. Separately, in 2002, buyers of illicit cigarettes were fined in the range of $150 to $1,200, whereas peddlers were fined in the range of $750 to $18,000 and imprisoned from seven days to 18 months.

Overall, the Department in 2002 achieved encouraging results on combating illicit cigarettes through vigorous enforcement action. On the sale and purchase of illicit cigarettes, the number of persons arrested in 2002 increased by 60 per cent over 2001. The number of black spots for sale of illicit cigarettes declined from about 100 in early 2000 to 23 in recent months. The Department's action has successfully reduced the supply of illicit cigarettes and contained the problem of illicit cigarettes.

(2) Anti-narcotics

In 2002, the notable increase in both vehicular and passenger traffic across the land boundary has added pressure to the Department on fighting against cross-border drug trafficking activities. Therefore, the Department has taken pre-emptive measures which focused on stemming the flow of drugs coming into Hong Kong for local consumption through close cooperation with the Mainland authorities.

The Department arrested 765 drug offenders, including 215 arrested at the land boundary control points, a decrease of 7.4 per cent overall when compared with 826 in 2001. Among the arrested persons, 94 were involved in major drug offences. The drug offenders arrested at land boundary control points has a notable rise of 29.5 per cent from 166 in 2001 to 215 in 2002. A total of 20 drug distribution centres were smashed. The number of drug offenders under the age of 21 arrested for contravention of the Dangerous Drugs Ordinance decreased by 34.1 per cent from 44 to 29. Most of the offences committed by the young offenders were related to possession of psychotropic drugs. During the year, officers seized 12.4 kilograms of heroin, 33.7 kilograms of ketamine, 29 703 tablets and 2.1 kilograms of MDMA ("ecstasy"), 384.4 kilograms of cannabis, 25.8 kilograms of methamphetamine ("ice"), 7.6 kilograms of cocaine and 42 774.5 tablets of other psychotropic tablets.

Heroin remains the predominant drug of abuse in Hong Kong, followed by ketamine and "ecstasy". The trend on psychotropic substance abuse, once on a spiral rise, has shown some encouraging signs of abatement. This was largely attributable to the Government's vigorous enforcement actions and the preventive education and publication on drug abuse.

During the year, notable results were achieved on the front of cross boundary and international cooperation. Seizures as much as 364.9 kilograms of heroin, 1 851 tablets of MDMA, 5.18 kilograms of herbal cannabis, 5 kilograms of "ice" and 1 kilogram of cocaine were effected in the Mainland, Thailand, Taiwan, Netherlands and the United States as a result of intelligence exchange and cooperation between the Department and our global counterparts. Furthermore, 31 drug criminals of various nationalities were successfully netted overseas in connection with the drug seizures.

(3) Anti-piracy

Under Customs vigorous enforcement action, piracy activities continued to be under control. During the year, we detected 11 477 copyright cases, a decrease of 6.7 per cent as compared with 12 301 cases in 2001. A total of 1 410 persons were arrested in the operations, representing a decrease of 16.4 per cent as compared with 1 686 persons in 2001. In addition, the Department, through intelligence collection and analysis, focused on enforcement efforts against piracy activities at source. During the year, a total of 120 storage godowns were smashed. This represented an increase of 12 per cent as compared with 107 storage godowns in 2001. As a result, there was an increase of 3.2 per cent in the seizure of pirated compact discs (about 9.24 million) by the Department in 2002 as compared with the seizures (8.95 million) in 2001. The total value of pirated compact discs seized was increased from $179.5 million in 2001 to $193.7 million in 2002, representing an increase of about 7.91 per cent.

At the manufacturing level, pirates now turn to operate limited-scale workshops using computers and CD writers to replicate pirated discs inside small industrial or domestic flats to evade Customs detection. The scale of these workshops has become smaller and smaller as a result of Customs raids. In 2002, we successfully smashed 41 workshops with 1 350 CD Writers and 430 000 pirated compact discs worth $9.15 million. At retail level, pirates could only adopt stealthy modus operandi such as through "self-service" at unmanned stalls and "pre-order sale" (i.e. customers pay first at the shop but collect the discs later at somewhere else with the receipt) to sell a small amount of discs.

In applying new technologies to tackle Internet piracy and other computer crime problems, we have established the Computer Forensic Laboratory in August 2002 to process digital evidence gathered from the Internet and other computer-related offences. Since the establishment of the Computer Forensic Laboratory, the Department has used more than $ 6.6 million to procure the necessary equipment. So far, the Computer Forensic Laboratory has handled a total of 62 cases.

To counter the involvement of young people in street-level peddling of pirated compact discs, apart from maintaining vigorous enforcement actions, we have also strengthened efforts in public education. The Government has promoted students' and young people's awareness on intellectual property during schools and community activities. The Government has also launched a TV and radio Announcement in the Public Interest in July 2002 to appeal to young persons to stay away from the copyright piracy activities. Information pamphlets were distributed to students before the summer holidays.

The above measures have been proved effective. 162 juveniles (105 males and 57 females) under 16 were arrested for involvement in piracy activities in 2002, representing a decrease of 41 per cent (a decrease of 39 per cent in males and 44 per cent in females) when compared with 273 juveniles (172 males and 101 females) in 2001. Besides, the Department and the Social Welfare Department (SWD) have jointly implemented a referral scheme since April 2002, whereby juvenile offenders who need appropriate counselling and assistance will be referred to SWD for the service. So far, 8 referrals have been made involving juveniles at ages between 12 and 14. The feedback from the SWD has been good about their follow-up actions on the young people and the scheme will continue.

(4) Anti-counterfeiting

In 2002, we cracked down on trademark counterfeiting through repeated and focussed raids at the known black spots as well as intelligence-led operations against large-scale counterfeit activities. We detected 839 cases involving offences under the Trade Descriptions Ordinance and arrested 641 persons. Total seizures amounted to 8.76 million pieces of counterfeit goods at a total value of around $205.3 million.

(5) Anti-smuggling

(a) Fight against Goods Smuggling

Smuggling of general merchandise between Hong Kong and the Mainland is still a matter of serious concern for both sides. The number of detected smuggling cases increased from 187 in 2001 to 226 in 2002. The majority of the cases were Mainland-bound. High-value and small-size goods such as hard disks, mobile phones and electrical appliances were the hot items smuggled to the Mainland. Notwithstanding a slight overall increase in the number of cases, the total seizure value of cross-boundary smuggling cases decreased by 43.6 per cent from $507 million in 2001 to $286 million in 2002. This was mainly because syndicates tended to smuggle small volume of goods in each trip and there was a declining trend of smuggling vehicles and vehicle parts to the Mainland in 2002.

(6) Involvement of Mainland Visitors in Customs-Related Offence

In 2002, with the improvement of boundary crossings and the relaxation of restrictions for Mainland residents visiting Hong Kong, criminal syndicates tended to recruit more Mainlanders holding two-way permits to take part in illicit cigarettes, illicit fuel, copyright piracy, counterfeit goods, dangerous drugs and smuggling activities. During the year, the Department prosecuted 573 visiting Mainlanders in connection with Customs-related offences, representing a drastic increase over 400 per cent, when compared with 99 visiting Mainlanders prosecuted in 2001.

(7) Anti-illegal Textile Transhipment

The use of intelligence and risk management in the blitz check operations have increased the Department's effectiveness in stopping illegal transhipment activities with the same level of manpower resources. During the year, Customs officers examined 28 603 textile consignments during 1 058 blitz checks and detected 349 cases of illegal textile transhipment with seizures worth $59.10 million. The number of cases detected and the value of seizures have increased by 10.8 per cent and 8.5 per cent respectively in 2002 as compared to 2001.

On factory-based enforcement activities, Customs officers conducted 45 229 consignment checks, 1 860 consignment and factory inspections and 230 audit checks.

Altogether 253 manufacturers and exporters were prosecuted for offences relating to illegal transhipment of textiles and clothing, and offending goods valued at around $160 million were seized.

(8) Consumer Protection

Our role in consumer protection is to ensure that toys, children's products and consumer goods supplied on the market are reasonably safe; gold and platinum contents on jewellery are correctly marked; and goods sold to consumers are of the weights and measures they pay for.

We prosecuted three persons and 18 companies for trading toys and children's products which did not meet the prescribed safety standards or specifications. Products involved included children's cots, baby-walking frames, playpens, bottle teats, children's high chairs and baby strollers. Four persons and 37 companies were prosecuted for trading unsafe consumer goods which included pillows, facial cream, construction adhesive and body warmers, etc. Ten persons and six companies were prosecuted for failing to comply with the Gold and Platinum Marking Orders and 59 persons and two companies for selling goods short of purported weight or using defective or inaccurate weighing equipment in trade. Besides, the Department has organised seminars for leading department stores, chain-shops, small and medium enterprises to promote traders' awareness in complying with the Toys and Children's Safety Ordinance and the Consumer Goods Safety Ordinance.

(9) Control of Rough Diamonds

Since 2003, a number of economies in the world have implemented the international certification scheme for rough diamonds, which was initiated and supported by the United Nations and developed by the "Kimberley Process", with a view to stopping the use of diamond trade as the money source for fuelling armed conflicts, activities of rebel movements and illicit proliferation of armament. In order to safeguard Hong Kong's interest as a trading hub of diamond in this region, the Government also needs to enforce relevant control measures. On January 2, 2003, the Import and Export (General) (Amendments) Regulations 2002 came into operation, which provides the legal backing to the implementation of certification scheme. Both the certification and registration systems will be administered by the Trade and Industry Department and enforced by our Department.

(10) Strategic Trade Control

To ensure that there is no blockage of free flow of advanced technology for legitimate commercial and research use while at the same time to prevent Hong Kong from being used as a conduit for the proliferation of weapons of mass destruction, it is necessary for Hong Kong to maintain a comprehensive and stringent control over the import and export of strategic commodities. In 2002, Customs officers examined 112 630 packages of imported and exported cargo, conducted 3 409 licensing checks and carried out 223 investigations. Altogether 33 persons/companies were prosecuted, resulting in total fines of $1.34 million. Strategic commodities worth $70,858, including sodium fluoride, encryptors, Cal.45 magazines and springs, were seized.

B. ADVANCEMENT ON TRADE FACILITATION

Smooth flow of cargoes and people at our borders is essential for maintaining Hong Kong as an important trading, transportation and logistics hub in Asia. To this end, the Department plays an important role in facilitating the movement of cargoes and travellers at our control points. In 2002, the Department cleared a total of 18.6 million twenty-foot equivalent units (TEUs) cargo containers, 12.4 million cross-boundary vehicles and 160 million travellers at the control points.

The growth in the throughput of cross-boundary goods vehicles in 2002 is particularly significant. Comparing with 2001, the average number of goods vehicles passing through the three vehicular land boundary control points in 2002 increased by 7 per cent reaching 26 816 vehicles per day. Among the three land boundary control points, i.e. the Lok Ma Chau Control Point, Man Kam To Control Point and Sha Tau Kok Control Point, the busiest is the Lok Ma Chau Control Point, with a daily average throughput of 18 447 goods vehicles in 2002, representing an increase of 8.6 per cent when compared to 2001. To cater for the increases in the traffic throughput, we have adopted the following measures to facilitate speedier clearance of goods vehicles.

(1) Re-engineering of Customs Procedures to Shorten the Clearance Time

Since March 1, 2002, a series of measures have been introduced by phases at the three land-boundary control points to streamline the goods vehicles clearance procedures. The average clearance time for a laden goods vehicle has been reduced from 45 seconds to 33 seconds and that for an empty goods vehicle has been reduced from 20 seconds to 16 seconds. The average clearance capacity for goods vehicles is enhanced from about 90 in 2001 to the current rate of about 120 per lane per hour, representing a remarkable improvement of 33.3 per cent.

(2) Additional Lanes for Clearance at the Lok Ma Chau Control Point

Starting from December 1, 2001, the Department has increased the total number of lanes for clearance of goods vehicles between 10pm and midnight at Lok Ma Chau from two to six. As a result, the daily average throughput during this time slot rose from 236 in November 2001 to 694 in November 2002, representing an increase of 194 per cent.

Furthermore, since October 1, 2002, the total number of lanes for clearance of goods vehicles between midnight and 7am at Lok Ma Chau has been increased from two to three. As a result, the daily average throughput of goods vehicles between midnight and 7am rose to 1 216 in the fourth quarter of 2002. When compared with the corresponding period in 2001, the daily average throughput of goods vehicles during this time slot increased by 92.4 per cent (i.e. from 632 to 1 216 vehicles).

Although the traffic at the land boundary control points is very busy, our survey indicates that a considerable number of cross boundary goods vehicles are able to make multiple crossings within the same day. In 2002, the percentage of goods vehicles making multiple boundary crossings per day is as follows: -

(a) one crossing per day: 28 per cent

(b) two crossings (one round-trip) per day: 52 per cent

(3) Automatic Vehicle Recognition System

In order to speed up the clearance of cross-boundary vehicles, we have started to install a total of 42 sets of CCTV cameras of the Automatic Vehicle Recognition System (AVRS) at the three land-boundary control points since May 2002. AVRS is a computer system equipped with digital cameras and infrared detectors to capture and digitize the images of vehicle registration numbers for automatic inputting into the Land Boundary System (LBS) for target-matching. With AVRS, Customs can reduce the clearance time for each vehicle by three seconds. By the end of December, 40 sets had been installed. Presently, with the exception of two sets of uninstalled CCTV cameras, the system is running very smoothly and efficiently. The last two sets of CCTV cameras will be installed in concurrence with the refurbishment works at the two customs kiosks at Lok Ma Chau Control Point to be completed by the second quarter of 2003.

In other areas other than the road mode transport, the Department has also implemented a number of initiatives to facilitate trade and travel. A summary is provided in the ensuing paragraphs.

(a) Air-Land Intermodal Transhipment Service

To facilitate the speedy delivery of express cargoes between the HKIA and the Mainland, an express cargo operator in Hong Kong has launched the air-land intermodal forwarding service for transhipment cargoes in September 2002. Currently, a total of three air cargo operators have launched the air-land intermodal transhipment service for transhipment cargoes between the HKIA and various designated points in the Mainland.

To facilitate the speedy movement of air transhipment cargoes, the Department offers one-stop clearance service for cargoes conveyed under this mode of service. Air transhipment cargoes, which have been cleared by Customs once at the HKIA will normally not be examined again at the land boundary check point if the seal attached to the truck is intact. To maintain the competitive edge of cargo handling services in Hong Kong, the demand for such service from the industry is expected to increase in the coming years.

(b) Electronic Data Interchange - Manifest (EMAN)

To step up facilitation for the trading community, we joined with the Trade and Industry Department and the Census and Statistics Department to embark on developing the EMAN system. The system will provide a one-stop channel for submission of manifests in respect of cargo transported by rail, ocean/river and air, which will then disseminate the manifest data received to different government departments for various purposes. The first phase of EMAN which focuses on building an infrastructure for receiving cargo manifests electronically will come into service in April 2003. The feasibility study for the second phase which will enhance the backend systems' efficiency in processing cargo manifests has just been completed. The study established the feasibility of implementing the second phase of EMAN at the one-off cost of $65 million and recurrent expenditure of $12 million per annum respectively. The earliest roll out date for the second phase of EMAN is expected to be in 2005. The project when fully completed will considerably streamline the process of trade control and enhance Government's ability in monitoring the import and export of cargoes and compiling related statistics.

The feasibility study for ROMAN was concluded in June 2002. The consultancy study recommends that the electronic submission of road manifests is technically feasible and that the Government should proceed with the implementation of ROMAN. In this regard, the Government is preparing to further consult the cargo industry on ROMAN.

(d) Electronic Data Interchange - Dutiable Commodities Permit (EDI-DCP)

Traders importing or exporting dutiable commodities, which include alcohol, tobacco, hydrocarbon oil and methyl-alcohol, need to apply for a Dutiable Commodities Permit (DCP). With a view to providing greater convenience to these traders in doing business, the EDI-DCP system was developed in 2001 to facilitate the application and processing of DCPs electronically. With the roll out of EDI-DCP, traders no longer need to submit their applications in person at our offices, and the processing time for a permit is shortened from two working days in the past to half a working day. Following the completion of all testing, the system rolled out successfully on January 10, 2002. Ever since its roll out, the system has been running smoothly and well received by the traders. It is now a totally paperless environment for DCP applications. Traders may lodge DCP applications at their own office or at any Tradelink Service Centres. They can also pay duty through designated bank or Internet bill payment service.

(e) Open Bond System

There are currently 44 bonded warehouses, which are for the storage of liquor and tobacco, operating under the Closed Bond System in Hong Kong. The Customs and Excise Department implemented Open Bond system (OBS) Pilot Scheme respectively in five randomly selected bonded warehouses in 2001. The results were satisfactory and the scheme was well received by the industry. We intend to extend OBS to all bonded warehouses in the near future. By then, no Customs officers would attend the bonded warehouses to physically supervise the movement, storage and processing of the goods. Customs control will instead be exercised through documentary verification, checks and post-transaction auditing. This should bring significant benefits to the industry, including enhancing the facilitation to the trade and reducing compliance costs.

The legislative process to give effect to the operation of the OBS is near completion. The OBS will be implemented upon the passage of the amendment Bill. The Department and the trade are both prepared for its implementation. The tentative date for the new system to commence operation is April 1, 2003.

(6) New "Customs Clearance Cubicle"

To protect the privacy of passenger undergoing baggage examination and to make smooth the passenger flow, a new Customs facility for passenger clearance had been in operation since November 13, 2002 at the Arrival Hall of HK-Macau Ferry Terminal. The "Customs Clearance Cubicle" was made of translucent glass panels and equipped with CCTV and recording system for closer supervision and monitoring of the clearance process. Besides, examination counters connected with baggage conveyance belt are installed inside the cubicle whereas X-ray baggage checker and walkthrough metal detector are brought together to facilitate different levels of search conducted by Customs officers based on risk assessment. The three-month trial started on November 13, 2002 would be completed by mid-February 2003. Initial feedback indicated that passengers and terminal operators generally welcomed the new clearance facility for improvement in smooth passenger flow. We contemplate to extend the new clearance facility to other control points in phases.

(7) Container Security Initiative

In the aftermath of the September 11 Incident, the US Customs has introduced new measures to address the risks of terrorist attacks through containers destined for the US. These include the Container Security Initiative and the 24-Hour Rule on Submission of Advance Cargo Data.

In a nutshell, the CSI comprises four core elements: (1) establishing security criteria to identify high-risk containers; (2) pre-screening those containers identified as high-risk before they arrive at US ports; (3) using technology to quickly pre-screen high-risks containers; and (4) developing and using smart and secure containers.

As a leading logistics hub, we fully recognise the importance of enhancing the security of the world's maritime trade through strengthened Customs cooperation at seaports. Having consulted the stakeholders in the supply chain and taking into account a host of factors such as ocean container security, impacts on trade as well as port efficiency and competitiveness, the HKSAR Government decided to cooperate with the US Government on CSI. This was signified by the signing of a Declaration of Principles (DoP) by the HK Customs and the US Customs Service on September 23, 2002. Under the DoP, the two administrations are committed to exchanging information and working together closely to facilitate the identification, screening and sealing of high-risk containers destined for the US.

After the signing of the DoP, we have started several rounds of discussions with the US Customs on the implementation details of a CSI Pilot Scheme in Hong Kong. In the meantime, we have maintained close liaison with the stakeholders of the shipping industry to update them on the latest development of the CSI programme and to understand more about their concerns. At the present stage, we are discussing with the US Customs on the practical arrangements of the CSI Pilot Scheme, such as the mode of exchanging intelligence as well as stationing of US Customs officials in Hong Kong, etc.

C. PROGRESS IN CUSTOMS COOPERATION

In 2002, Hong Kong Customs continued to participate actively in the Asia-Pacific Economic Cooperation Sub-committee on Customs Procedures (APEC/SCCP) and World Customs Organization (WCO). We also maintained a close working relationship with our Mainland counterpart and other overseas Customs administrations/law enforcement agencies.

During the year, we hosted the following conferences/ meetings successfully in Hong Kong: -

(i) The Ninth WCO Regional Conference of Heads of Administrations for the Asia Pacific Region;

(ii) The 23rd Customs Cooperation Conference with the Korea Customs Service in November;

(iii) The Fourth Meeting of the Joint Customs Cooperation Committee(JCCC) between the European Community and Hong Kong in December; and

(iv) The 2002 Annual Review Meeting between Customs General Administration of China and Hong Kong in December.

We maintained a close working relationship with our Mainland counterpart and overseas Customs administrations/law enforcement agencies to suppress and detect transnational crimes. Some significant cases in 2002 are as follows: -

In Hong Kong

(i) Interception at the Hong Kong International Airport of cocaine smuggling case using internal concealment method. The first case was by a Colombian man with 1.4 kilograms of cocaine sealed in 99 pellets and the second case involved 2.375 kilograms of cocaine sealed in 150 pellets by a Venezuelan man and a Colombian man.

(ii) The seizure of 125 grams of cocaine concealed on the body of a German woman at the Hong Kong International Airport.

In the Mainland

(i) The seizure of 357 kilograms of heroin and the arrest of three persons in Yunnan, China as a result of a joint operation among Hong Kong Customs, Mainland Public Security Bureau (PSB), Mainland Customs, US Drug Enforcement Administration (DEA), Office of Narcotics Control Board of Thailand (ONCB), and Royal Thai Police (RTP).

(ii) The seizure of 1 148 cartons of VCD on board two Chinese fishing vessels.

In other Overseas Countries

(i) The seizure of 1 851 tablets of ecstasy and 5.18 kilograms of herbal cannabis with the arrest of five men at Schiphol Airport of Amsterdam, Holland.

(ii) The seizure of 7.5 kilograms of heroin with the arrest of five drug traffickers in Bangkok, Thailand.

(iii) The seizure of 3 kilograms of "Ice" with the arrest of a drug courier from Hong Kong at Incheon Airport in Seoul, South Korea and the neutralisation of a transnational drug trafficking syndicate.

(iv) The seizure of 5 kilograms of "Ice" and 1 kilogram of cocaine with the arrest of two American Chinese in Los Angeles, the US.

To enhance cooperation and foster a strong partnership with the cargo industry, 16 Memoranda of Understanding under the "Watch-out" Programme were signed with representatives from associations and commercial operators of container terminals, airfreight terminals and cross-boundary transport industry on December 9, 2002. The Watch-Out Programme aims to enhance the partnership with the cargo industry and to heighten the industry's risk management awareness and capability in cargo handling. The ultimate goals of the Watch-Out Programme are to enhance the operational efficiency of cargo clearance, reduce the cargo examination rate, and speed up cargo flows.

(1) Signing of Airport Co-operative Arrangement

The Department has signed an airport-to-airport co-operative arrangement with our Korean Customs counterparts at the Incheon International Airport in April 2002. This was the first time Hong Kong Customs entered into a direct airport-to-airport co-operation with an overseas Customs counterpart. The "Memorandum of Arrangement" enables contact points to be set up for direct exchange of information on air passengers and cargoes that are in transit, departing or bound for one of the two Airports and that are suspected or known to be connected with Customs offences such as illegal trafficking of narcotic drugs and smuggling of contraband.

D. DEVELOPMENT IN INTERNAL ORGANISATION

(1) Reorganisation of the Department

We are actively promoting the use of intelligence and risk management in Custom's operations. To this end, we have re-organised the investigation work of the Department and established the Intelligence and Investigation Branch (I Branch) in July 2002.

Since its establishment, the Branch has conducted a number of territory-wide operations and intensive investigations by pooling resources from various bureaux, which have been proved effective in containing the problems of smuggling, illicit fuel, illicit cigarettes and copyright piracy. From July to December 2002, with the aid of intelligence, the Department conducted a total of 15 territory-wide large scale operations against criminal syndicates involving in duty-not-paid cigarettes and illicit fuel activities, and seized 1.49 million sticks of duty-not-paid cigarettes and 180 000 litres of illicit fuel. In addition, the Intelligence Bureau issued more than 8 000 pieces of strategic and specific operational intelligence in the latter half of the year (July to December), which assisted Customs officers in taking appropriate enforcement actions. During the period, the enforcement capability of the Department had been greatly enhanced, with 1 013 cases detected and 908 persons arrested. This represented an increase of 12 per cent and 33 per cent, when compared with 908 cases and 690 arrested persons in the first half of the same year.

The Intelligence Bureau is now developing an IT database and comprehensive risk indicators so as to build up the Department's risk-profiling capability in both cargo and passenger clearance process. Our ultimate aim is to achieve a higher targeting accuracy and a reduction of searches with a view to enhancing Customs enforcement capability and facilitating trade.

(2) One-Stop-Shop Customer Service Centre

To further enhance our service to the public and reduce costs, we have completed a study in 2002 and are planning to set up a Customer Service Centre at the second floor, Harbour Building. The Centre will provide a one-stop-shop counter service in relation to the application of all types of controlling documents, including licences, permits by the traders. It will therefore bring all services now carried out in various counters at different locations into a single office.

Serving as a window of the Department to the general public, a Customer Help Desk will also be set up at the Centre to provide on-site advisory service to customers. Walk-in visitors who wish to lodge complaints against improper Customs actions or provide information to aid suppression of Customs offences can also be properly served. A Customer Service Team will be established to ensure the standard of service quality provided at the Centre.

We expect that this new single-window approach, coupled with the re-engineered operation mode of the counter service and the value-added services of the Help Desk would enhance our customer service in terms of both quality and productivity. The Department is now proceeding to arrange the works and the service centre is expected to come into operation in early 2004.

(3) Training

The Department recognises staff as the greatest assets of the organisation and so, attaches great importance to training.

In the year, the Department delivered 333 in-house basic, technical, refresher and specialist training courses offering 7 667 training places to our officers. The Department also sent 1 168 officers overseas to receive training, including two directorate grade officers and a Principal Trade Controls Officer who received training on administration and management skills at renowned universities in USA and the UK. Apart from learning the best practice from other overseas customs administrations and organisations, the officers can gain much wider overseas exposure through such training. At the same time, the Department also organised specialised courses on investigation and valuation techniques, intelligence analysis, risk assessment and narcotics control for overseas Customs officials.

For the purpose of developing self-learning culture within the Department, we maintained 11 self-learning centres for our staff to enhance their knowledge. As a pilot scheme for future implementation of e-Learning programme in the Department, we organised a one-month e-Learning test run engaging the participation of 100 officers. The test results were encouraging for launching the e-Learning programme, which will enable our officers to study at their own pace and time through the Internet.

(4) Enhanced Productivity Programme (EPP)

Under the EPP, we have delivered total savings of $92.8 million over three years from 2000-01 to 2002-03, equivalent to 5 per cent of our recurrent operating expenditure, involving the deletion of 286 posts and reduction of $10.6 million in general departmental expenses.

In support of the Government's continued effort to reduce public expenditure, we shall reduce our operating expenses by $36.6 million, equivalent to 1.8 per cent of the Department's recurrent expenditure, in 2003-04 through the deletion of 73 posts and reduction of $12.8 million in general departmental expenses.

The deletion of posts are made possible by implementing a series of measures to improve our efficiency and productivity, namely -

(a) re-prioritisation of work;

(b) re-organisation of duties;

(d) improvement of productivity through office automation and application of information technology;

(e) enhancement of efficiency through a wider application of the intelligence-led mode of operation; and

(f) outsourcing of some support services.

While keeping the non-essential spending to the minimum, we shall ensure that essential spending to support the Department's various functions and activities are maintained at the meet-the-appropriate-demand but not excessive level so that its operation will not be adversely affected and its quality of service will not be lowered.

(5) Information System Strategic Study (ISSS)

The ISSS aims at assessing the current IT infrastructure and requirements of the Department in light of the latest trend of technologies and recommending a departmental IT strategic plan with regard to the Department's business and operational strategies. The ISSS is approaching its conclusion and the study report is expected to be finalised by early 2003.

F. CONCLUSION

Trade and tourism will continue to be our most important economic drivers in the years to come. In addition, the Government has also pledged to strengthen Hong Kong's position as Asia's premier transportation and logistics hub. We will continue to proactively support the development of the logistic industry by way of strengthening our clearance efficiency, improving facilities at the control points, developing relevant IT projects and entering into partnership with the industry. On the other hand, we will continue to pursue intelligence-led enforcement operations vigorously against piracy, illicit cigarettes, illicit fuel and drugs. With our concerted efforts and the spirit of "Commitment and Excellence", I am confident in providing the best quality service to the public in the coming year.

End/Wednesday, January 29, 2003

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