Efforts on Sanshui Port Closure Stymied, but Re-opening

UNCLAS SECTION 01 OF 02 GUANGZHOU 000128

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SENSITIVE
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STATE FOR EAP/CM
USDOC FOR 4420/ITA/MAC/MCQUEEN, CELICO, DAS LEVINE
STATE PASS USTR
STATE PASS FEDERAL RESERVE BOARD FOR SCHINDLER
USPACOM FOR FPA

E.O. 12958: N/A
TAGS: ECON EWWT PGOV CH
SUBJECT: Efforts on Sanshui Port Closure Stymied, but Re-opening
Promised by FAO

(U) This document is sensitive but unclassified.


1. (U) Summary: Members of an American Pyrotechnic Association
(APA) delegation, the firework industry's main lobby group, told
Congenoffs January 26 that the November 1 closure of Guangdong's
Sanshui port, which handles approximately 60 percent of all
fireworks shipments to the United States, continues to wreak havoc
in the U.S. industry. Following numerous inquiries by the Consulate
on behalf of the APA - and a refusal by local officials to meet the
issue - a Guangdong Foreign Affairs Office official told Congenoffs
that the Sanshui port should re-open in the near term, thus avoiding
any market damage. End summary.

Background
--------------


2. (U) On November 1, the Sanshui Port in Guangdong's Foshan city,
closed all shipments from the port, reportedly due to failed
inspections and multiple accidents (none were fireworks-related) in

2006. The Sanshui port handles about 400-500 containers of
fireworks per week (approximately 60 percent of China's fireworks
exports). U.S. fireworks-procurement companies have been scrambling
to deal with the issue, as they may have had only one week's prior
notice of the Chinese decision. Currently there are only two
functioning ports that can handle fireworks shipments, Guangzhou's
Nansha Terminal (with capacity of about 80-100 containers) and a
port in Shanghai, which has even lower capacity. The APA is
concerned that if fireworks shipments do not increase by March 1,
their supply will be significantly harmed around the July 4 season.
Firework production has not ceased production, thus Sanshui port has
been forced to fill surrounding warehouses with thousands of
containers of explosive fireworks, leading to a possible safety
risk.

Consulate Efforts on Behalf of APA
--------------


3. (U) Prior to arrival in Guangzhou, the American Pyrotechnic
Association (APA) group - four representatives, including APA
President Stephen Frantz and Executive Director Julie Heckman - had
held meetings about the Sanshui port closure with officials in
Beijing and in Liuyang and Changsha (both in Hunan province).
Liuyang, the historic birthplace of fireworks, is presently home to
most of the world's fireworks manufacturing.


4. (U) Throughout December the Consulate's Economic/Political
section (as well as Foreign Commercial Service) staff made many
attempts to arrange meetings for the APA with the Sanshui port
authorities and Foshan government officials, all of which were
refused. On January 11, the Consulate sent a dipnote to the
Guangdong FAO requesting a meeting with the Vice Governor, which was
also refused. Finally on January 24, the Foshan government declined
a meeting request because the issue was deemed a matter of "internal
affairs."


5. (U) On January 25, Consular Section Chief and Congenoff held an
emergency meeting with Guangdong FAO Deputy Director Luo Jun, and
requested meetings with Sanshui and Foshan authorities. Congenoffs
noted that the Sanshui Port closure affected U.S. and Chinese
companies, with annual shipments totaling over $179 million.
Congenoffs also highlighted U.S. congressional interest. On January
26, Luo told Congenoffs he could not arrange any meetings, but he
noted that an announcement would be forthcoming on an undisclosed
date regarding the reopening of Sanshui Port and that all Fourth of
July orders would arrive in time.

APA Meeting: Moving Forward
--------------


6. (SBU) On January 26, APA representatives told Congenoffs that in
the past 40 years, there has never been a single fireworks shipping
accident related to U.S.-bound fireworks. Moreover, for 15 years,
the fireworks business has had a rather smooth development in China.
APA President Frantz said that three fireworks-related explosions,
widely reported in the media, had created a "crisis situation" for
the industry. Two of the explosions occurred on ocean-going vessels
with Europe-bound cargo and one occurred at Hunan's Changsha port
involving unpackaged fireworks. One of the shipping accidents
involved a vessel owned by the Korean firm Hyundai, which sends
about 75 percent of all fireworks products to the United States. In
reaction to the explosion, Hyundai ceased all fireworks shipment.

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Additionally, the Changsha port explosion was related to unpackaged
fireworks materials that were improperly labeled.


7. (SBU) As a result, the APA group came to China focusing on three
issues: shipping, ports and classifications. Frantz said that the
number of shipping companies handling fireworks cargo had dwindled.
Ports such as Sanshui have closed or limited fireworks shipments.
Factory workers such as those in Liuyang have been poorly trained in
properly labeling fireworks for shipment.


8. (SBU) Congenoffs promised to continue pursuing the issue and
explained that the Sanshui port closure was not related directly to
fireworks, but instead to a history of accidents, failed inspections
and rampant smuggling. Congenoffs encouraged the APA to support
information exchanges between Chinese safety authorities and their
U.S. counterparts in order to build better trust and to share best
practice methods.

GOLDBERG