VZCZCXRO0892
RR RUEHCN RUEHVC
DE RUEHGH #0296/01 2140546
ZNR UUUUU ZZH
R 010546Z AUG 08
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7018
INFO RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEFHLC/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHOO/CHINA POSTS COLLECTIVE
RUEHKO/AMEMBASSY TOKYO 0340
RUEHGP/AMEMBASSY SINGAPORE 0164
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 7588

UNCLAS SECTION 01 OF 03 SHANGHAI 000296 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM AND EB 
STATE PASS USTR FOR STRATFORD/WINTER/ALTBACH/KATZ 
DOC FO ITA - DAS KASOFF, CMCQUEEN, ESZYMANSKI 
TREASURY FOR OASIA - DOHNER/HAARSAGER/CUSHMAN 
NSC FOR KURT TONG, JONATHAN SHRIER 
TREASURY FOR OASIA - CUSHMAN, WINSHIP 
 
E.O. 12958: N/A 
TAGS: ETRD PGOV ECON BEXP KIPR EAIR CH
SUBJECT: SHANGHAI CUSTOMS:  EMPHASIS ON TRANSPARENCY AND CUSTOMER 
SERVICE 
 
REF: 07 SHANGHAI 815 
 
SHANGHAI 00000296  001.2 OF 003 
 
 
¶1.  (SBU) Summary: In a July 22 meeting, the Shanghai Customs 
Director General Sun Yibiao welcomed the "close relationship" 
between Customs and the Consulate over the past three years and 
discussed areas for future cooperation.  Sun emphasized the 
importance of input from the Consulate and the U.S. business 
community in improving service.  In addition, Sun noted his 
continued support of the Container Security Initiative (CSI) and 
promised to explore ways to enhance coordination.  As part of 
the effort to streamline efficiency, Shanghai Customs plans to 
expand the pilot program of paperless clearance from exports to 
imports.  On IPR issues, Sun said that, in accordance with the 
May 2007 SED Agreement, Shanghai Customs is sharing information 
on counterfeits through the General Administration of China 
Customs in Beijing.  End Summary. 
 
¶2.  (U) As part of an ongoing dialogue, the CG hosted Shanghai 
Customs Director General Sun Yibiao for a lunch on July 22.  Sun 
was joined by Shanghai Customs General Office Director Wang 
Rongjun, General Office Deputy Director Liu Yongqi, Division 
Chief of Supervision and Control Zhang Yaping, and Foreign 
Affairs Office Deputy Director Ding Ye.  Other Consulate 
officials included Foreign Commercial Service (FCS) Chief, 
Agriculture Trade Office (ATO) Chief, Container Security 
Initiative (CSI) Deputy Chief, and Econoff. 
 
Collaboration - A Long-Term Priority 
------------------------------------ 
 
¶3.  (SBU) Sun thanked the CG for his cooperation and support 
over the past three years and noted the strength of the ties 
between the two sides.  He also welcomed long-term collaboration 
and deeper cooperation with the Consulate.  The CG noted 
Shanghai AmCham's direct dialogue with Shanghai Customs, saying 
AmCham has been impressed by the excellent information exchange. 
 A recent AmCham Shanghai survey concluded that Customs service 
was improving, but added that U.S. companies still want China 
Customs to make regulations and procedures more transparent, as 
well as make the clearance process speedier. 
 
Shanghai Customs Welcomes Business Input 
---------------------------------------- 
 
¶4.  (SBU) DG Sun said that Shanghai Customs relies heavily on 
the Consulate and the U.S. business community for suggestions on 
ways to improve their operations.  These suggestions are taken 
seriously and implemented when possible.  He particularly 
welcomed the liaison mechanism with AmCham, which provides an 
ongoing dialogue on key customs issues and   an official channel 
to address new questions and concerns as they arose.  Liu added 
that Shanghai Customs would welcome more input on specific 
requirements from the U.S. business community on how to improve 
its operations.  Shanghai Customs is willing to provide training 
as necessary to the U.S. business community.  Companies can also 
readily obtain information through the Customs website or by 
consulting with customer service representatives.  Shanghai 
Customs also tries to provide accurate and timely information 
through its Chinese and English websites. 
 
Transparency is Paramount 
------------------------- 
 
¶5.  (SBU) According to Sun, Shanghai Customs works to be 
transparent on the implementation of all its rules, regulations 
and procedures.  It makes extra effort to communicate with 
companies so they know what is expected.  It is in Customs own 
interest to make sure the relevant rules and regulations are 
available to the public through training, websites, and customer 
service representatives.  In addition, Customs has a "hearing 
system" that allows companies to appeal if they feel they have 
been unjustly treated.  Sun welcomed further input from the 
Consulate and the U.S. business community on ways to increase 
transparency. 
 
Official Cooperation Welcome Too 
-------------------------------- 
 
SHANGHAI 00000296  002.2 OF 003 
 
 
 
¶6.  (SBU) In a response to the CG's inquiry about concrete ways 
the two sides could cooperate, Sun said he favors more programs 
such as the Trade and Development Agency-funded training program 
on intellectual property rights (IPR) that concluded in July. 
Shanghai Customs will look into and elicit ideas on course 
content regarding the idea suggested by Beijing China Customs 
officials to hold training on trade facilitation.  Sun opined 
that training and exchange of experiences on security issues, in 
particular risk management, would be the best method to promote 
trade facilitation.  The two issues exist in a delicate balance. 
 Another possible interest for training is on product 
classification.  Sun also noted that the Shanghai Customs 
College not only trains China Customs officials, but it also 
trains Customs officials from around the world and thought it 
would be worthwhile to cooperate on the training of these other 
officials as well. 
 
Paperless - The Wave of the Future 
---------------------------------- 
 
¶7.  (SBU) Regarding Shanghai's trial run with a paperless 
clearance system, Sun said it was approved by Beijing and was 
currently only focused on outbound air and sea freight on a 
limited basis.  This new system has thus far been successful in 
streamlining the clearance system and is now being contemplated 
for import clearance as well.  (Note:  All major ports in the 
YRD, including Ningbo, Suzhou, and Zhangjiagang are using the 
system.  Currently close to 100 percent of all duties and 75 
percent of all documents are collected by the paperless, e-Port 
system.  The trial period for paperless clearance began in 
January 2008. End Note.) 
 
¶8.  (SBU) Once Beijing deems the test on paperless clearance for 
exports has been successful, it will be expanded to include 
imports.  In response to a suggestion from ATO Chief Batwin, who 
noted that importers will need training on the paperless system 
before it is implemented effectively, Sun said that he would 
welcome cooperation with the U.S. Consulate on the matter.  Sun 
believes the paperless import clearance system will be well in 
place before the 2010 World Expo in Shanghai.  Such systems are 
necessary to cope with the 80,000 TEU, worth USD 2.5 billion, of 
imports and exports that transit the Port of Shanghai on a daily 
basis.  Sun said it is impossible to inspect this volume of 
goods and noted that the paperless clearance system is a part of 
Custom's risk management strategy. 
 
The Two Risks:  Companies and Commodities 
----------------------------------------- 
 
¶9.  (SBU) The focus of the system is both on companies and 
commodities, both of which are classified according to risk. 
Companies are divided into three categories according to their 
"credibility."  Those that are deemed to have the highest degree 
of credibility are given a higher degree of "trade 
facilitation."  These companies must operate under certain 
standards and sign agreements that they will uphold all Customs 
regulations.  Customs then keeps records on all the companies to 
ensure they are compliant.  For companies with bad records, the 
highest degree of scrutiny is given.  Customs recognizes that 
some companies make honest mistakes and works to rectify those 
situations.  Also, some commodities are more "risky" and draw a 
higher degree of scrutiny.  For those commodities that have a 
high credibility rating, they merely need to transmit their data 
online and pay the customs duty for their goods to be released. 
Customs can go to the business and inspect the documents as 
necessary. 
 
Container Security Initiative Working Well 
------------------------------------------ 
 
¶10.  (SBU) CG noted that the U.S. Container Security Initiative 
(CSI) is working well and thanked Shanghai Customs for their 
cooperation.  CSI Deputy Chief Raymond Hinds noted that his 
office occasionally comes across an issue on the weekends when 
the Shanghai Customs Office is closed.  Zhang, who is 
 
SHANGHAI 00000296  003.2 OF 003 
 
 
responsible for cooperation with CSI, agreed there is good 
cooperation on the CSI program between the two sides.  He said 
there is a system to handle requests on the weekends and 
holidays under special circumstances.  The CSI bilateral 
agreement, however, does not provide for weekend or after hours 
inspections on a routine basis.  Nonetheless, Sun indicated a 
willingness to consider making a more regular channel to deal 
with weekend requests.  He suggested that the United States make 
a written request and said this would have to be cleared in 
Beijing. 
 
Cooperation on IPR through Beijing 
---------------------------------- 
 
¶11.  (SBU) In response to an inquiry about how Shanghai Customs 
is implementing the May 2006 SED agreement on sharing of IPR 
enforcement information, Sun said that Shanghai is actively 
sharing information under the framework.  However, the 
information is exchanged at the General Administration of China 
Customs level in Beijing.  In addition, Shanghai Customs shares 
IPR enforcement information with other ports with which it has 
information exchange programs in place such as Rotterdam.  Sun 
emphasized that Shanghai Customs continues to be vigilant 
against exports and imports of pirated and counterfeit goods. 
 
Comment 
------- 
 
¶12.  (SBU) Shanghai Customs' cooperation with the Consulate and 
U.S. industry has continued at a rapid clip since the beginning 
of the year.  Customs has been very responsive to working level 
requests from CSI, ATO, and FCS.  Shanghai Customs has warmly 
hosted several U.S. delegations, including SED Envoy Ambassador 
Holmer.  Shanghai Customs even completed the US Trade and 
Development Agency-sponsored IPR training programming that had 
been postponed because of the U.S. filing of the IPR-related WTO 
cases.  Our collaboration on the Megaport Ports initiative is 
also moving along nicely.  In addition, AmCham Shanghai 
continues to be very pleased with Shanghai Customs's continued 
support for their cooperation program and ongoing dialogue. 
Although there have been rumors that Sun might transfer to 
Beijing, we are confident that our strong cooperation with 
Shanghai Customs will continue even if Sun moves on. 
JARRETT