SECRETARY CHERTOFF'S MEETING WITH CHEUNG KONG

C O N F I D E N T I A L SECTION 01 OF 03 HONG KONG 001470

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STATE FOR EAP/MCGANN, EAP/CM
NSC FOR WILDER

E.O. 12958: DECL: 04/08/2031
TAGS: PTER PREL PGOV ECON EWWT HK CH
SUBJECT: SECRETARY CHERTOFF'S MEETING WITH CHEUNG KONG
CHAIRMAN LI KA-SHING

Classified By: Consul General James B. Cunningham. Reasons: 1.4 (d, e)
.

Summary
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1. (C) On March 31, U.S. Department of Homeland Security
Secretary Michael Chertoff met with Hong Kong business leader

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and port operator Li Ka Shing at Li,s request to discuss
port security. Secretary Chertoff outlined the U.S. desire
to find a way to improve maritime security without impeding
the flow of commerce; technology held out the promise of a
common-sense solution. Li emphasized his eagerness to work
with the USG and his hope that past misunderstandings of his
position and interests would not be repeated. End Summary.


2. (C) On March 31, Homeland Security Secretary Michael
Chertoff met with Cheung Kong (Holdings) Chairman Li Ka
Shing; Cheung Kong is the parent company of Hutchison Port
Holdings, a major global port operator. Susan Chow, Deputy
Group Managing Director of Hutchison Whampoa, and Gerry Yim,
head of the Americas, Middle East and Africa for Hutchison,
accompanied Li. Hutchison's terminal in Hong Kong, inter
alia, hosts a test site for the Integrated Container
Inspection System (ICIS) which Secretary Chertoff visited on
April 1 (septel).

Li seeks to clear up misunderstandings
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3. (C) Chairman Li explained that he wished to meet with
Secretary Chertoff because there had been misunderstandings

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about him in the past. Li explained that he had come to Hong
Kong in 1940, during the Sino-Japanese War. For almost
thirty years after 1949, when the Communists came to power,
Li never visited China. Instead, he worked in Hong Kong to
build his business. After Deng Xiaoping came to power, and
the Chinese established their investment company CITIC, he
was asked to be on the board. It was difficult to say no to
that request, but some people in Washington have
misunderstood Li's presence on the CITIC board.


4. (C) Li emphasized that he had always sought a friendly
relationship with the United States, and said that if anyone
in the USG wanted to meet with his people, in any country of
the world, he would always instruct them to be available and
to answer any questions. He would authorize access to his
companies' books -- something he had never done for any other
country. Li had always considered the United States to be an
excellent country, and his company was always on the lookout
for additional investment opportunities in the U.S. If the
USG had questions about Li's operations, for example, in
Panama, he would welcome a team, as long as it was on a
friendly basis.

Secretary Chertoff describes U.S. port security goals

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5. (C) Secretary Chertoff thanked Chairman Li for his
willingness to cooperate. We live in a complicated world,
the Secretary continued, and Li's company is a major player
in the maritime sector. The security of the United States
depends on preserving freedom of movement and freedom of
trade, and a security system so rigid that it stopped trade
would be self-defeating. We want a "win-win" outcome, with
better security and, in particular, better port security.
Stopping and physically searching every container would
effectively close down the ports, said the Secretary, an
untenable approach to security. We know that you share our
interests: if a bomb went off in a container shipped from
your port it would seriously damage your company.


6. (C) We are exploring how to use technology to get a
better level of information, the Secretary continued, and so
are placing radiation monitors at all our own ports, and
ideally will also place them overseas, once we have convinced
governments and port operators of the need. The ICIS system
that Hutchison is testing is an interesting combination of
radiation monitors and x-ray scanning of the containers. If
we could have something like that in the ports where

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containers are loaded for U.S. destinations, then we might be
able to offer expedited treatment at the U.S. port. That
would be a competitive advantage for those originating ports.
We want to be tough-minded about assessing the effectiveness
of the monitoring system. So, we had to be mindful of public
perceptions: we need not only increased security, but also
the perception that security has increased. That may mean
having law enforcement officers on site to ensure that the
monitoring is secure. By working together, the Secretary
concluded, we can significantly elevate the level of
container security.

Hutchison eager to cooperate
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7. (C) Li Ka Shing agreed on the need to secure shipping and
promised his companies' full cooperation. He added that if
the U.S. equipment was the best, that was what he would
purchase. He asked Gerry Yim, head of Americas, Middle East
and Africa, to describe what Hutchison has done so far. Yim
explained that they have accumulated images of 1.5 million
containers; Hutchison executive John Meredith had called on
Homeland Security last week to discuss how these images could
be used. Yim reiterated Li's message that Hutchison wanted
to work together with Homeland Security, and added that there
were some people whose comments were having an "unhelpful"
effect on public opinion.


8. (C) Secretary Chertoff responded that it was true there
were limits as to what could be done regarding public
opinion. As for the images, there might be software that
could read the images. Eventually we will develop an
algorithm to "red-flag" problematic containers. Another area
of concern that impacts Hong Kong specifically is that many
cargoes are trans-shipped here; if they are loaded from
ship-to-ship, would they avoid the screening process? Yim
acknowledged that this was a problem, but said that they were
working on something that checks the container while it was
on the crane. (Note: During the port visit, terminal
representatives told Secretary Chertoff that in fact there
are few ship to ship direct transfers. End note).


9. (C) The Consul General observed that not only the U.S.,
but other countries should be interested in the security that
an ICIS-like system could provide. Yim answered that
Hutchison was working with the World Customs Organization to
develop global standards. The CG also noted that Li's
operations included several mainland ports, so that he would
play an important role beyond Hong Kong in implementing a
higher level of security. Li reiterated that his interests
were identical to the USG's; he could not afford to have a
single container with anything illegal inside. Even if they
were checking 99 percent now, they needed to go to 100
percent. Even if it cost them more, they had to do it.


10. (C) Secretary Chertoff observed there were other kinds
of problems with screening technologies. For example, if
radiation tolerances were set too low, there were many false
positives, but if they were set too high, there was an
increased danger of harmful material getting through. A
likely solution would be to set low tolerances, but match the
information against a baseline reading calibrated to the
manifest before actually stopping the container, in order to
reduce the number of false alarms. Yim said that the
technology existed, but somebody would have to pay for it.
If the USG were to pick a technology and mandate it, then the
costs would be equal for all operators. Secretary Chertoff
responded that it was necessary to give shippers and port
operators a market-based incentive to participate, such as
expedited service. We want a system that could meet our
security needs without harming the shippers' and operators'
business model.


11. (C) The Secretary told Li that he appreciated his
cooperation. We are committed to security and want to make
sure it makes business sense for the private sector to
cooperate with us. In closing, Li told Secretary Chertoff
that his staff was welcome to visit any of Hutchison's port
operations worldwide, and that he would make sure that
Meredith knew of his offer.

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12. (U) Secretary Chertoff's party has cleared this cable.

Cunningham