VZCZCXYZ0002
OO RUEHWEB

DE RUEHHK #0733/01 1120933
ZNR UUUUU ZZH
O 220933Z APR 09
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7442
INFO RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC IMMEDIATE

UNCLAS HONG KONG 000733 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM 
 
E.O. 12958: N/A 
TAGS: ETRD EWWT HK
SUBJECT: HONG KONG RESPONDS ON SFI EXTENSION 
 
¶1. (U) This is an action request.  See paragraphs 2, 9, and 
¶11. 
 
¶2. (SBU) Summary and Action Request: In productive April 21 
discussions on the future of Hong Kong's SFI pilot program, 
Hong Kong Government (HKG) senior officials proposed to SFI 
Director Todd Horton two options for a way forward.  Option 
One would extend the SFI pilot an additional six months to a 
year, following a consultation period within the HKG and with 
the private sector.  Option Two would effectively end the 
pilot program on April 30, 2009, as stipulated in the 
exchanges of letters between the governments of the United 
States and the Hong Kong Special Administrative Region.  Post 
seeks DHS/CBP guidance on our response to the Hong Kong 
Government by April 28.  End Summary and Action Request. 
 
¶3. (SBU) On April 21, Department of Homeland Security, 
Customs and Border Protection, Secure Freight Initiative 
(DHS/CBP/SFI) Director of 100% Scanning Todd Horton, 
accompanied by SFI Program Manager Adam Wysocki, CBP Attach 
Richard Powell, and Consulate officers discussed extension of 
the SFI pilot program in Hong Kong beyond its April 30 
expiration date with Hong Kong Trade and Industry Department 
(HKTID) Deputy Director General Vivian Lau.  Senior officials 
from Hong Kong's Commerce and Economic Development Bureau 
(CEDB) and the Hong Kong Customs and Excise Department (HKCE) 
also attended. 
 
¶4. (SBU) Lau asked Horton for a Washington update on SFI 
developments and the U.S. 9/11 Act of 2007, whereby Congress 
mandated that all U.S.-bound containers must be scanned at 
foreign ports by mid-2012.  Horton noted that DHS Secretary 
Janet Napolitano approved on April 6 a DHS-internal 
memorandum calling for the adoption of a "risk-based 
approach" to deploying SFI systems.  On April 1, CBP Acting 
Commissioner Jayson Ahern, in testimony to the House Homeland 
Security Appropriations Subcommittee, stated that the mandate 
for 100 percent scanning of containers needed to be 
"thoughtfully reconsidered."  Horton also reported that in 
late March, four major international terminal operators (APM 
Terminals - Netherlands; PSA International Pte Ltd. - 
Singapore; Hutchison Port Holdings Americas; DP World - 
Dubai, UAE) wrote to DHS Secretary Napolitano expressing 
agreement with a multilayered risk-based approach for 
improved cargo security of containers entering the United 
States.  In their letter, the four operators stated support 
for an approach whereby they could charge a fee for cargo 
scanning and also recommended that scanning programs be 
implemented in ports that already have CSI or Megaports 
programs in place.  In other developments, Horton indicated 
the Port of Busan, Korea commenced SFI operations on March 
18, 2009, and that Government of Japan officials, interested 
in SFI operations to complement their Megaports program, had 
recently visited Busan. 
 
¶5. (SBU) In response, Lau reiterated negative international 
sentiment toward the U.S. mandate to achieve 100 percent 
scanning for U.S.-bound containers by mid-2012.  She claimed 
that members of the World Customs Organization (WCO) and the 
World Shipping Council, in particular, had responded 
negatively to Hong Kong's involvement with SFI and added that 
participation "hurts Hong Kong's reputation as a proponent of 
free trade."  She also quoted from and took affront to a 
European press article that mischaracterized Hong Kong as a 
"high risk" port, due to its participation in SFI. 
 
¶6. (SBU) On the extension of Hong Kong's SFI pilot, Lau 
stated that she had carefully studied the U.S. proposal for 
continuing the SFI pilot program in Hong Kong, provided to 
her by CBP Attach Powell the week preceding the April 21 
meeting.  Lau stressed that "the trade" continues to express 
concerns regarding the continuation of the SFI pilot program. 
 Furthermore, the pilot phase of SFI in Hong Kong had been 
successful over its 18-month span, and every "pilot" must 
have some end point, Lau said. 
 
¶7. (SBU) Given the fast-approaching April 30 termination 
date, the Hong Kong Government (HKG) has "insufficient time" 
to extend or roll over the existing SFI pilot agreement 
before its termination, said Lau.  She indicated the HKG 
would need at least one month, possibly two, to reach 
internal consensus and brief "the trade," though she would 
work to minimize this timeframe.  However, the SFI systems 
"would have to be shut down" until an agreement could be 
reached. 
 
¶8. (SBU) Horton told Lau that to relocate the SFI equipment 
deployed in Hong Kong to other ports would cost more than to 
continue local operations, where USG, HKG, and Modern 
Terminals, Ltd. (the operator) had already made large 
investments.  Further, any movement away from the current 
operational SFI status in Hong Kong would send a negative 
message.  "Why stop a security program that is functional and 
operationally effective?" he asked.  Horton agreed that SFI 
in Hong Kong is beyond the "pilot" stage and rather than 
extending the pilot for a specific duration (i.e., six months 
to a year), suggested that SFI cooperation in Hong Kong 
continue until one or both governments opted out of the 
program.  Horton noted that other ports participating in SFI 
utilize existing Container Security Initiative (CSI) 
protocols to handle operational issues such as adjudication 
of alarms, eliminating the need for a renewed SFI agreement. 
Horton noted another possible option would be for the current 
SFI terminal operator in Hong Kong (Modern Terminals, Ltd.) 
to continue scanning operations and providing data on 
U.S-bound containers to CBP with or without the direct 
day-to-day participation of Hong Kong Customs, as is 
successfully done at the Port of Southampton, United Kingdom. 
 CBP officers would then adjudicate alarms based on screen 
data and request assistance from Hong Kong Customs officials 
on a case-by-case basis.  Horton stressed to Lau that a 
shutdown in systems operations while the two governments 
negotiated only a short extension to the existing SFI pilot 
agreement seemed unnecessary and undesirable and DHS might 
prefer to move the equipment to a port where the USG 
investment could gain longer-term returns. 
 
¶9. (SBU) Lau reported that Hong Kong could not accept the 
notion of an informal, open-ended continuation of the SFI 
program (i.e., one not based on a written understanding), nor 
could it accept a program absent direct Hong Kong government 
participation.  She summed up the discussion and offered two 
possible options for the SFI pilot in Hong Kong, going 
forward: 
 
Option One - The SFI pilot program would conclude as 
scheduled on April 30, 2009, pending an agreement to extend 
the existing arrangement.  Once consultations conclude and an 
agreement is reached, the SFI pilot could be extended for a 
period of six months to one year, to allow CBP to collect 
additional scanning data.  The scanning equipment would be 
shut down during the HKG's internal deliberations and 
consultations with "the trade," which Lau estimated could 
take "one to two" months.  Lau undertook to minimize as much 
as possible the "consultations" period, but would need 
notification by DHS/CBP to go forward prior to the April 30 
expiration date.  She promised to engage "the trade" as soon 
as she is notified that the U.S. Government would accept this 
option. 
 
Option Two - The SFI pilot would conclude on April 30 as per 
the existing exchanges of letters of July 27, 2007 and April 
29, 2008.  The SFI scanning equipment would be shut down and 
CBP could re-deploy equipment from Hong Kong, thus concluding 
a successful 18-month SFI pilot project between the U.S. 
Government, the Hong Kong Government, and Hong Kong's private 
sector. 
 
¶10. (SBU) Horton said he would pass the offered options to 
DHS/CBP leadership in Washington, DC for guidance on a way 
forward, and would report our response to Hong Kong 
immediately.  For her part, Lau again assured she would 
expedite deliberations with "the trade" if Option One were 
chosen, but stressed the need for a response no later than 
April 30.  Cargo scanning data collection could then resume 
under a new understanding. 
 
¶11. (SBU) Action Request: Request Department/DHS/CBP provide 
decision no later than April 28 (WashDC time) on the 
preferred option from the two provided on paragraph 9.  End 
Action Request. 
 
¶12. (U) This cable was reviewed at Post by SFI Director 
Horton and CBP Attach Powell. 
 
DONOVAN