VZCZCXRO7573
RR RUEHCN RUEHVC
DE RUEHGH #0510/01 3290523
ZNR UUUUU ZZH
R 240523Z NOV 08
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7356
INFO RUEHOO/CHINA POSTS COLLECTIVE
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEFHLC/DEPT OF HOMELAND SECURITY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHKO/AMEMBASSY TOKYO 0419
RUEHGH/AMCONSUL SHANGHAI 7958

UNCLAS SECTION 01 OF 03 SHANGHAI 000510 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM AND EB 
STATE PASS USTR FOR STRATFORD/WINTER/KATZ 
USDOC FOR ITA DAS KASOFF, MELCHER, OCEA-SZYMANSKI 
TREASURY FOR OASIA - DOHNER/HAARSAGER/CUSHMAN 
NSC FOR SHRIER, LOI 
TREASURY FOR OASIA - CUSHMAN, WINSHIP 
DEPT FOR DOE HQ FORRESTAL NNSA FOR BSHORTER PASS TO WTOBEY AND 
DHUIZENGA 
 
E.O. 12958: N/A 
TAGS: ETRD EWWT PGOV ECON BEXP CH
SUBJECT: EXPORT GROWTH RATE PLUNGING SAYS SHANGHAI CUSTOMS 
 
SHANGHAI 00000510  001.2 OF 003 
 
 
¶1.  (SBU) Summary:  Shanghai Customs Director General Sun Yibiao 
and Consul General (CG) discussed trade trends, the Megaports 
initiative, the Container Security Initiative (CSI), and 
opportunities for further cooperation during an October 31 
courtesy call.  According to Sun, the growth rate of exports to 
the United States has halved since the beginning of 2008 
although the total volume continues to increase.  To cope with 
limited resources, Shanghai Customs relies on risk management 
and coordination with other Customs units in the Yangzte River 
Delta.  Sun said Shanghai Customs remains committed to strong 
cooperation with the Consulate, including such projects as CSI, 
Megaports, and possible future training opportunities.  On 
resumption of the Megaports project, suspended because of "U.S. 
arms sales to Taiwan," Sun avoided predicting when collaboration 
would continue but assured the project will resume as soon as 
Beijing gives the green light.  End summary. 
 
Growth Rate in Exports Steeply Declining 
---------------------------------------- 
 
¶2.  (SBU) DG Sun said the rate of export growth has markedly 
declined since the beginning of 2008; however, the total volume 
of exports continues to climb.  From January through September, 
Shanghai Customs processed a total export and import volume of 
USD 1.96 trillion worth of goods, and container throughput was 
roughly 20 million TEU.  (Note: As a point of comparison, total 
container throughput for 2007 was 26.15 million TEU.  End note.) 
 Part of the total trade volume processed by Shanghai Customs 
includes the city of Shanghai's total trade volume, which 
reached approximately USD 400 billion during the first nine 
months of 2008.  Shanghai Customs tariff revenue for the period 
amounted to RMB 147.7 billion (USD 21.7 billion). 
 
¶3.  (SBU) The rate of export growth to the United States has 
been particularly hard hit, DG Sun said.  The current growth 
rate of exports to the United States is 11.6 percent, compared 
with 22 percent from the same period in 2007.  The growth rate 
of imports from the United States continues to rise; it 
currently stands at 15 percent, compared with an 11.6 percent 
growth rate during the same period in 2007.  Shanghai Customs 
processed a total trade volume of USD 40.9 billion with the 
United States over the first nine months of this year.  Total 
exports were USD 28.3 billion, and total imports were USD 12.5 
billion. 
 
¶4.  (SBU) Sun added that these numbers do not yet fully reflect 
the impact of the financial crisis, which is bound to have an 
even heavier toll on global trade.  He estimated that although 
the rate of import growth is much higher than that of exports, 
the growth of imports into China will also slow as Chinese 
consumers and companies begin to feel the pinch. There is 
already a decline in the component parts being imported for 
assembly.  Overall decrease in demand for imports will be "next 
year's problem" said Sun.  Sun also noted a sharp increase in 
shipments returned to China because companies on the receiving 
end had gone bankrupt. 
 
Building on a Strong Relationship 
--------------------------------- 
 
¶5.  (SBU) Sun noted the strength of ties between Shanghai 
Customs and the Consulate and said he hopes to build on the 
already strong relationship.  Shanghai Customs values input from 
the U.S. business community and U.S. Consulate on how to improve 
its operations.  In addition, Shanghai Customs appreciates 
opportunities for formal training opportunities, noting the 
success of the TDA-funded IP training that took place during 
three separate sessions at Shanghai Customs College between 
November 2006 and August 2008. 
 
Customs Committed to Container Security Initiative 
--------------------------------------------- ----- 
 
¶6.  (SBU) Sun emphasized that Shanghai Customs is committed to 
continued cooperation on the Container Security Initiative 
(CSI), which targets high risk containers bound for the United 
States.  Since the inception of the program in 2005, Shanghai 
 
SHANGHAI 00000510  002.2 OF 003 
 
 
Customs has received approximately 750 requests for inspection 
from DHS.  Of the total number of requests, Shanghai Customs has 
carried out 530 inspections (roughly 70 percent).  Sun added 
that Shanghai Customs endeavors to respond to each request, but 
some containers have already left port by the time the request 
is received.  In Sun's view, the current system works well and 
is a symbol of the good cooperation between the two sides. 
 
Megaports - Waiting on the Green Light from Beijing 
--------------------------------------------- ------ 
 
¶7.  (SBU) CG pressed Sun on the resumption of the Megaports 
initiative in Shanghai, which had been put on hold in October 
because of "U.S. arms sales to Taiwan."  Sun acknowledged the 
importance of the project in Shanghai as the pilot project for 
China; however, he is waiting for approval from the General 
Administration of China Customs (GACC) before the project can 
get underway again.  Sun gave no further indication of when the 
project could resume.  (Note:  The initiative began its 
implementation phase in January 2008, and there have already 
been three meetings between Shanghai Customs/GACC and DOE 
officials.  The October meeting, which had been postponed once 
already due to the Summer Olympics, was set to finalize details 
on installation of radiation detection equipment. End note.) 
 
6 Percent of GACC Staff for 25 Percent of China Exports 
--------------------------------------------- ---------- 
 
¶8.  (SBU) Sun emphasized Shanghai's significant role in China's 
trade with the outside world, processing over 25 percent of 
China's imports and exports.  Not only does it handle trade for 
the greater Shanghai metropolitan area, but also the entire 
Yangzte River Delta.  It is also China's largest customs 
operation with 46 sections and 3,000 officers, which constitutes 
about 6 percent of GACC's total staff.  To maximize the 
effectiveness of limited resources, Sun said Shanghai Customs is 
pushing for greater integration with other Customs units, 
particularly in the Yangtze River Delta.  Key to this effort is 
the e-clearance system, allowing exporters to clear goods at 
other Customs units in the Delta region before they reach 
Shanghai for shipment.  Shanghai Customs is also one of the 
oldest Customs units in China, dating back 325 years. 
 
Transparency and Trade Facilitation Highest Priority 
--------------------------------------------- ------- 
 
¶9.  (SBU) Sun emphasized that Shanghai Customs works to be 
transparent in the implementation of all its rules, regulations 
and procedures, as well as follows WTO guidelines.  It also 
conducts risk management according to international best 
practices and employs a risk classification system for companies 
that export and import.  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."  Sun emphasized the effectiveness of the 
system, noting that from January to September, Shanghai Customs 
investigated over 2,000 smuggling cases, valued at approximately 
USD 450 million. 
 
¶10.  (SBU) Part of its efforts to be transparent and improve 
services includes cooperation with such non-governmental 
agencies as AmCham Shanghai.  Shanghai Customs makes an extra 
effort to communicate with exporters and importers and maintain 
consistency between all transactions.  (Comment:  The U.S. 
business community consistently applauds Shanghai Customs for 
its outreach efforts but note risk management efforts still lag 
somewhat behind international norms.  Shanghai Customs is also 
known for being one of the most consistent customs units in 
China for its implementation of valuation and clearance 
procedures.  End Comment.) 
 
¶11.  (SBU) Sun also took pride in Shanghai Custom's trial run 
with a paperless clearance system.  Sun said the trial run had 
been approved by Beijing and was currently used only on outbound 
air and sea freight on a limited basis.  This new system has 
 
SHANGHAI 00000510  003.2 OF 003 
 
 
thus far been successful in streamlining the clearance system 
and is now being considered for import clearance as well.  Once 
Beijing deems the test on paperless clearance for exports 
successful, it will be expanded to include imports.  The 
paperless clearance system is part of Shanghai Customs goals of 
better trade facilitation, Sun said. 
CAMP