Yunpu Jiahang: Hong Kong and Shenzhen can Cooperate on Truck Flighting E-Cigarettes

This news has drawn a lot of attention across the industry as Hong Kong was a major trans-shipment point for e-cigarette products in China before the ban was imposed. 2FIRSTS interviewed He Jianjun, the General Manager of Shenzhen Yunpu Jiahang Technology Service Co., Ltd. and one of the initiators of the Shenzhen Airport White List for Electronic Vapor Products.

General Manager He’s view is that it will be quite a difficult thing if Hong Kong really intends to reverse the “ban on the re-export of e-cigarettes and other heated tobacco products.” That's because the Legislative Council of Hong Kong will face plenty of opposition, multiple rounds of debates and voting if it wants to modify the ban, a law that entered into force only half a year ago. Given this, He floated a middle-ground solution: Hong Kong airports can establish preposition warehouses in Shenzhen and coordinate Hong Kong customs and Shenzhen customs to open truck flights. Truck flight is a mode of transport in which an airline establishes a regular surface transport route between a warehouse and the transit terminal. It is operated as an extension service of air transport. In effect, transporting goods via truck flights is equivalent to having already handed off transporting goods by air. In this system, it can ensure that goods from preposition warehouses bound for Hong Kong can be directly transported to Hong Kong airports' international cargo terminals via truck flights without the risk of staying in the territory of Hong Kong. 

Below is a transcription of the interview: He Jianjun, General Manager of Shenzhen Yunpu Jiahang Technology Service Co., Ltd.

2FIRSTS: Hello, General Manager He. We learned that Hong Kong imposed a ban on the trans-shipment of e-cigarettes this April. Did you know why the policy was introduced?

He Jianjun: On April 30 this year, Hong Kong brought its Smoking (Public Health) (Amendment) Ordinance 2021 into effect, which prohibits the sale, manufacture, import, and promotion of e-cigarettes, heated tobacco products, and other next-generation tobacco products. Offenders are subject to a maximum fine of HKD$50,000 and imprisonment of six months, but consumers are still allowed to use e-cigarette products. The ordinance also prohibits next-generation tobacco products from being trans-shipped through Hong Kong when brought in by truck or ship for onward transport overseas, but air trans-shipment cargoes or articles staying in a vessel during transit are exempted.

Before the ban, about half of China's e-cigarette exports, which was approximately 500,000 tons every year, we're going through Hong Kong for transit to other countries. Its adjacency to Shenzhen, the vaping capital of the world, and its status as a global transportation hub have given it an edge in both transportation convenience and capacity. Adding to this is the fact that Hong Kong airports adopt the same safety inspection rule as European, American, South Korean, and Singaporean airports. In other words, only MSDS reports and no identification reports for air transport of dangerous goods are necessary when e-cigarette products are trans-shipped through Hong Kong. This saves e-cigarette enterprises from spending plenty of time and money on dealing with the identification report for air transport of dangerous goods and other affairs.

Following the introduction of the ban on April 30 e-cigarette products can only be trans-shipped by vehicles for direct export in Hong Kong without entering its territory. In essence, the transporting channel for e-cigarette products going through Hong Kong was cut off. E-cigarette products can only be transported from airports in mainland China and consequently, the identification report for air transport of dangerous goods becomes necessary as transporting e-cigarettes that contain e-liquids and battery is risky to a certain degree. Getting this report costs quite some time and money. That's why many of them have chosen to trans-ship their products through Incheon, South Korea (Incheon airports only require MSDS reports like Hong Kong airports) for transit transports.

2FIRSTS: Lately, we have heard that Hong Kong may reverse the ban. Have you heard of the news?

He Jianchun: In fact, this news has been circulating since the beginning of the year, but it hasn't become a reality even now. In my opinion, it will be quite difficult to reverse the ban. After all, the ban was brought into force as recently as this April. It's for sure that Hong Kong's Legislative Council will face quite some opposition if it really intends to modify or amend a law that is in place for only about half a year. Against the backdrop, a middle-ground solution may be a better choice. For example, Hong Kong can establish preposition warehouses in Chinese mainland cities, say, Shenzhen or Dongguan, and coordinate Hong Kong and Shenzhen customs to open "truck flights" as an extension service of air transport. In this way, goods can be put under customs supervision after being placed in the preposition warehouses and can be cleared through customs in Shenzhen or Dongguan. Then the goods can be transported straight to international cargo terminals of Hong Kong International Airport via truck flights without needing to stay in the territory of Hong Kong.

2FIRSTS: Your proposal is great. Actually, in the case of the e-cigarette industry, ensuring good coordination with Shenzhen is enough.

He Jianjun: You're right. Whether the proposal can translate into reality depends on the coordination between Hong Kong and Shenzhen. If the Hong Kong government has other concerns, some "list systems" can be used as alternatives to the proposal, for example, issuing a limited number of license qualifications or greenlighting several companies at a time for centralized transportation. I think both the preposition warehouse solution and the license system solution are feasible.

2FIRSTS: In fact, no one knows for sure whether the ban will be lifted, but those concerned may be discussing the solutions as the news spreads further and wider lately. Many people, especially those in the e-cigarette industry, must be expecting a removal of the ban.

He Jianjun: Yes, many people are hoping so. But I think the best solution is still via airports in the Chinese mainland. Shenzhen airports have greatly facilitated the transportation of e-cigarette exports by setting up a white list system as a very good example. When it comes to the matter of safety, there is no national or regional boundary as a leader from the Civil Aviation Administration of China said during an investigation of the e-cigarette industry. Since the "MSDS-only" safety inspection rule is adopted and works out pretty well at airports in Hong Kong, South Korea, Europe, and the United States, maybe the Chinese mainland can learn from their successes and develop a "credit-based entry system" according to China's reality. For example, the white list assessment mechanism can be upgraded, including enterprises with excellent credit in a white list and carrying out a pilot program requiring only the MSDS without needing to provide the identification report for air transport of dangerous goods among the enterprises on the list. As one of the leading areas of China's reform and opening up, Shenzhen is pioneering in its DNA. So Shenzhen may be a good choice for piloting the idea. If it works out well in Shenzhen's airports, the successful experience can be applied to other airports.

If we take a look at the development course of the whole e-cigarette industry, we will see that the rapid development stage of the industry has been over. Now, the country has introduced the licensing system and issued the licenses to manage the e-cigarette industry. Besides, e-cigarette enterprises cherish their credit very much as it's not easy to apply for a license. Therefore, the e-cigarette industry is attaching more importance to ensuring compliance with the law and is getting better and better. Meanwhile, the products are growing much safer compared with a couple of years ago. As far as I'm concerned, piloting the idea in more airports is feasible. After all, if the e-cigarette industry develops faster, more people will join it and supporting services will be constantly improved.