Remarks of Capt. Wei Jiafu
President and CEO, China Ocean Shipping (Group) Company
April 1, 2003
2003 Liner CEO Forum
Boston, MA
|
|
Remarks of Capt. Wei Jiafu |
|
|
Good Morning, Ladies and Gentlemen: First, allow me to thank the Massachusetts Port Authority and the Journal of Commerce Group for inviting me to speak at this forum. It is my pleasure to address a topic as important as security issues with you. Today, I will talk about the role we are playing as a transportation/sea carrier in the combined efforts in securing the international supply chain. The Scope of COSCO Group as a Transport Service Provider Committed to Security. September 11th has truly changed the world we live in. It has shocked reasonable people worldwide and reshaped security requirements for the entire spectrum of human society.
COSCO Group have fully developed ship-owning companies in the mainland Chinese ports of Shanghai, Tianjin, Guangzhou, Dalian, Qingdao, Shenzhen, and Xiamen. We also have overall control of shipping companies in Hong Kong and Singapore. As of today, COSCO own 467 vessels with the total DWT of 18,540,000 and chartered in 83 vessels with the total DWT of 5,640,000. COSCO vessels calling USA ports are container ships, dry bulk carriers, general cargo ships, heavy lift ships, and oil tankers. COSCON usually have about 30 container ships call the USA ports on regular weekly trade routes. There are approximately 200 non-container ships can call the US ports annually out of our non-container fleet. COSCO Container Lines (COSCON), located in Shanghai, owns 111 vessels and has 3 chartered-in vessels, combining over 220,000 TEU’s. COSCON operates 50 trade lanes. The vessels make about 300 direct calls monthly at every large port in China to connect with the world. COSCO Bulk carriers Co., Ltd, extends into Tianjin, Qingdao, Shenzhen, Xiamen, Hong Kong and Singapore with a current capacity of nearly 200 dry bulk carriers of over 11 million DWT. COSCO Guangzhou has developed a specialty in heavy lift capacity. It owns and operates over 110 vessels including general cargo vessels, lash ships, heavy derrick vessels, ro-ro vessels, log carriers and multi-purpose vessels. COSCO Group also owns and operates oil tankers, LPG carriers through Dalian Ocean Shipping. COSCO’s scope of operations is truly global, and we are dedicated to promote the open flow of world trade in the new security-conscious environment. COSCO has established an integrated systematic operation and management system based on ISO Quality Management System standards, the Environmental Management System standards and the Occupation Health & Safety Assessment System Standards. We take safety as a vital ingredient for the enterprise. COSCO is fully committed to ensuring our security procedures to reduce the threat of a terrorist attack via the conveyance of international trade. What Does It Mean To Be Committed As an International Sea Carrier? Governments of all countries are concerned about the safety, especially the safety of the cargo and ships entering their ports, none more so than the United States of America. Many new rules have been passed in an effort to keep US citizens safe from the danger of illegal cargoes or weapons of mass destruction that might travel by ship, air, or road across international borders. I would like to discuss specifically, international ocean shipping industry. In the industry, we recognize the potential for danger caused by an insecure supply chain, and pledge to ensure the safety of the cargo we carry. International liner shipping provides regular, scheduled services connecting U.S. exporters and importers with virtually every country in the world. Liner shipping vessels make more than 22,000 calls at ports in the United States each year or more than 60 vessel calls a day. Therefore, our industry is very critical to the US international commerce safety. I would like to share with you what COSCO (as an example of what shipping lines are doing) has done to comply with new regulations and rules designed to ensure the safe movement of ships and cargo in international transportation. 1. The US Customs C-TPAT (Customs – Trade Partnership against Terrorism) Program. COSCO was one of the first carriers to join the C-TPAT. We appointed a senior member of our staff to act as internal Security Officer both in Beijing and here in COSCO Americas, and a C-TPAT team was created to support the Security Officer. We have carefully examined our security programs, personnel security measures and notified all service providers about our new security requirements. We have also agreed to be randomly inspected by the US Custom Services when it is necessary. In conjunction, we will be audited annually by the US Customs. As a sea carrier, the above projects are some of our short-term compliance issues. We truly understand that a secured international supply chain requires all of us work together, each enhancing our security procedures, standards, internal control and technology. Externally we need to continuously work with our customers, port authorities, and terminal operators to contribute in international supply chain safety. The Cost Factor Threatens Combined Security Efforts As much as we are striving to work together to implement these new security procedures, the cost factor of complying with the government regulations runs the risk of causing stringent competition and conflict between carriers, carrier and shipper, carrier, terminal operator and port authority, due to the thin profit margin of maritime businesses.
COSCO has taken on extra work, additional staff, and cumbersome working hours to comply with new government regulations. Many other shippers, terminal operators, and port authorities have also met similar burdens. In addition, we know that governments around the world also are spending billions of dollars on homeland security initiatives, especially the US Government. I learned recently that US Coast Guard has a rough cost estimate of $6 billion (US) over 10 years to comply with the ISPS Code. And the funding mechanism has not been discussed yet. That is only one the estimate security cost from the US Coast Guard. I do not believe that the steamship industry can absorb these security charges as a cost of doing business. The steamship business is marginally profitable as it is. All of us have heard the recent stories of carriers losing hundreds of millions of dollars in the past year because of falling freight rates and higher operating costs. If carriers now begin to absorb these new costs of security, more lines will fall into financial difficulty. If some carriers absorb some of these charges to gain a competitive advantage, they are hurting not only themselves but also our entire industry. We all know that ocean cargo rates are lower today than they were 20 years ago or even 5 years ago. Yet our costs of doing business continue to increase every year. However, the money we get for carrying cargo has decreased to the point that one carrier lost over $300 million (US) last year. Another recently announced that it lost over $200 million (US)! That is half a billion US dollars in losses from just two steamship lines! These are not the only lines that have lost money. They are the ones that lost the most. They have plenty of company, as many lines lost money last year! All of us have squeezed every possible cost savings out of our suppliers, and out of our own operations. Long before September 11th, many carriers realized that they could not get much more in the way of cost reductions from their vendors and terminal operators. Now, with greater regulation, requiring more care in loading, transporting, and delivering cargo, our costs have increased, and will increase more as time goes on. The events of September 11th forced many changes on all of us. Moreover, for those of us in this room, it will continue to transform our industry. These changes soon will become a routine part of doing business, including closer cooperation and communication among everyone with an interest in the safe transportation of cargo. Although compliance and close cooperation will add cost to the transportation chain, there is also bright side of our combined efforts among the US and other Governments worldwide, shippers, carriers, terminal operators and port authorities. After everything is digested, our international supply chain will be more efficient. However, if the US Governments does not come up with a real plan to gradually implement new regulations at a realistic speed, no one in this chain will be able to absorb the sudden increase of security cost especially under many very severe global economic uncertainties. Now is the time for all of us to calculate the costs and gains as a result of all efforts we have put in for safe commerce, and rationalize the cost among the people who gain the most from our combined efforts. Conclusion Security effort is a constant work in progress. Our combined efforts to ensure a safe and secure international commerce will eventually push supply chain management to a seamless level, a level of service efficiency, information transparency and all related technology advancement. A sound security system needs scientific standard and procedure setting, precise execution and practical government regulation. When the supply chain becomes international, the requirements for cooperation become even more challenging and important. We need motivated and combined efforts to achieve the success of international supply chain security. Finally, I want to thank the Massachusetts Port Authority for taking a keen interest in our business. COSCO started first direct call to Port of Boston last year thanks to our good cooperation. In the past year, Massachusetts Port Authority has continued to help not only COSCO, but also helped our partners, K Line, Yang Ming Line, and Hanjin Line, to be successful here. In addition, I want to thank Massachusetts Port Authority and Journal of Commerce Group again in organizing this forum. It is very constructive for all of us, government officials, shippers, shipper associations, carriers and port authorities to discuss this very important issue face to face. I believe forum like this can help us understand each other more, bring us closer to build a successful international supply chain security system in a better, more practical and efficient way. Thank you.
|
