SECURE FREIGHT INITIATIVE IN HONG KONG

C O N F I D E N T I A L SECTION 01 OF 02 HONG KONG 000615

SIPDIS

STATE FOR EAP/CM

E.O. 12958: DECL: 03/25/2024
TAGS: ETRD ETTC EWWT PARM PREL PTER HK
SUBJECT: SECURE FREIGHT INITIATIVE IN HONG KONG

REF: A. SECSTATE 28824

B. HONG KONG 333

Classified By: Consul General Joseph Donovan, reasons 1.4 b/d.


1. (U) Post appreciates Ref A instructions and seeks
additional guidance. See paragraphs 2-3 for action request.


2. (SBU) Action Request. Post requests Washington guidance
on the following questions:

--Ref A instructs Post to provide the information in the
non-paper to the Hong Kong SAR government (HKSARG) "and
industry partners." Modern Terminals, to date, is our only
SFI industry partner, though other terminal operators have
expressed interest in the program. We recommend that we
provide the paper only to Modern Terminals. Please confirm.

--During every round of bilateral SFI negotiations in 2007
and 2008 between the USG and HKSARG, Hong Kong Trade and
Industry Department (HKTID) officials requested information
on the trade facilitation value of SFI participation, i.e.,
how did Hong Kong shippers, exporters or terminal operators
benefit from participation. Additionally, HKTID Deputy
Director General Vivian Lau raised the lack of verifiable
trade facilitation benefits during a February 19, 2009
meeting with a visiting U.S. Senate STAFFDEL (reftel B). We
expect HKTID to raise this issue during our discussion of a
six month extension. How should we respond to the HKG's
concerns regarding trade facilitation benefits?

--HKTID is keenly following SFI developments in ports around
the world and the statements of foreign governments,
international organizations and DHS officials regarding the
viability of 100% scanning of containers. During the
February 19 meeting with the U.S. Senate STAFFDEL (reftel B),
HKTID's Vivian Lau stated that international consensus was
growing that 100% scanning would not be achievable or
sustainable. We expect HKTID to raise this issue during
our discussion of a six month extension of the pilot program.
How should we respond?


3. (U) Action Request, continued. Post noted some errors in
the reftel A version of the non-paper. To ensure clarity,
Post requests Washington agencies review and approve Post's
corrected version of the non-paper prior to distribution to
HKSARG and industry partner.

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NON-PAPER ON SECURE FREIGHT INITIATIVE
--------------

FUTURE OF SFI IN GENERAL

The U.S. Government (USG) supports the general goal of
expanding scanning abroad and has learned some significant
lessons from current operations in Hong Kong and other
locations. As expected, these Secure Freight Initiative
(SFI) pilots have presented numerous challenges (financial,
logistical, diplomatic, and technical) that the USG is
working to address. The USG is finalizing an expansion plan
for future SFI deployments with the goal of maximizing
security benefits while minimizing disruptions to foreign
port operations and the global supply chain. The USG is
committed to working closely with the trade community,
industry, and foreign partners once the details of this
strategy have been finalized.

SFI AT MODERN TERMINALS LTD. IN HONG KONG

Extending the pilot in Hong Kong for at least an additional
six months will allow CBP to continue testing the feasibility
of integrated scanning and offer opportunities to address
past technical challenges, most notably systems performance.
Additional time for testing will provide the USG access to
invaluable data needed to resolve current and future
technical challenges found at high-volume, transshipment
ports such as Hong Kong and further assess
the feasibility of 100% scanning at such ports.

CBP has made a large investment to meet its commitment and
ensure that the SFI systems deployed in Hong Kong perform
consistently and with minimal impact to port operations.
Regrettably, the time required to achieve this standard took
longer than anticipated as necessary equipment modifications
were not finalized until February 2009. The total USG
investment in Hong Kong is estimated at USD 4.5 million.


HONG KONG 00000615 002 OF 002


During bilateral discussions on April 25, 2008 between the
USG and Hong Kong Special Administrative Region Government
(HKSARG) concerning cooperation under SFI, it was mutually
agreed that the scanning systems in use were in need of
upgrading.

In September 2008, Customs and Border Protections (CBP)
purchased the Integrated Container Inspection System (ICIS)
from Science Application International Corporation (SAIC) for
USD 1.2M with upgrades to allow for more accurate data
collection and reduce system downtime.

Upgrades included exchanging the Vehicle and Cargo Inspection
System (VACIS) source, upgrading internal and external
systems components, and conversion to a fiber optic data-line
with a greater capacity to manage and transmit larger data
files produced by the system. These upgrades were completed
in February 2009.

The Implementing Recommendations of the 9/11 Commission Act
("9/11 Act") of August 2007 mandate that a container loaded
on a vessel in a foreign port shall not enter the United
States unless that container is scanned by Non Intrusive
Inspection (NII) and radiation detection equipment before
loading onto the vessel.

CBP will be responsive to the legislative requirements of the
9-11 Act. Ending scanning operations in Hong Kong would pose
a substantial setback towards identifying possible solutions
to the complex challenges of scanning containerized cargo in
transshipment and high-volume ports as well as meeting the
legislative requirements.

End non-paper.



4. (C) Ref A requested Post's feedback on alternative
options. We provide it below:

--USG PARTNERS DIRECTLY WITH THE TERMINAL OPERATOR: Post
does not believe that the HKSARG would enthusiastically
embrace this option. The HKSARG may/may be willing to allow
Modern Terminals Ltd. to continue to scan and send data
directly to CBP. However, resolving alarms remains a key
component to the SFI program. We believe that the HKSARG,
citing lack of legal authority, would not allow U.S. CBP
officers working with Modern Terminals Ltd. to adjudicate
alarms. The HKSARG's unspoken concerns may also include how
Beijing would react to U.S. law enforcement officials
carrying out actions in Hong Kong's territory. Reftel A
states that this option would revert back to the original
setup prior to concluding agreements with the Hong Kong
Government. However, Post notes that prior to concluding the
SFI agreement, the ICIS equipment was not calibrated and
alarms were ignored.

--REMOVE ALL ICIS EQUIPMENT: Post does not have feedback on
this option at this time.
DONOVAN