Development of Seamless Rail-Based Intermodal Transport Services in Northeast and Central Asia

Development of seamless rail-based intermodal transport services in Northeast and Central Asia

Report on Transport Facilitation procedures and documentation in Republic of Korea

1. Introduction

A mission to the Republic of Korea was conducted by a staff member and a consultant of the UNESCAP Transport Division for the express purpose of collecting information on border crossing procedures and documentation in the ROK. The NRL expert from ROK working with the Transport Division assisted the mission team in arranging meetings with the relevant government agencies and freight forwarding organizations, as well as organizing travel within the ROK.

The mission was conducted from 11-14 April 2016, during which period visits were made to:

 The Busan Port Authority in Busan City;  The Hanjin Container Terminal and the rail sidings at Busan New Port North;  The Korea Customs Service at Busan New Port;  The Busan Port Authority at Busan New Port  The Ministry of Oceans and Fisheries in Sejong City  The Korean International Freight Forwarders Association in Seoul

This report outlines and reviews the main points of discussion at all meetings,

1. Meeting with Busan Port Authority, Busan City

Meeting held at the headquarters of the Busan Port Authority (BPA) at 1000 hours on 11 April 2016. Present at the meeting were: Park Ho-Chul, Senior Director, BPA; Park JI-Seon, Assistant Manager, BPA; Chun Dong-Hee, Assistant Manager, BPA; Park, Jeongsu, NRL Expert, UNESCAP Transport Division; Fedor Kormilitsyn, Economic Affairs Officer, UNESCAP Transport Division; and Peter Hodgkinson, Consultant UNESCAP.

(i) Connection of Busan Port to Vladivostok and the TSR

Busan Port is handling an increasing volume of cargo to/from Vladivostok, either for loading to/from the Trans-Siberia Railway (TSR) or for transfer between northeast China and ROK or between Chinese origins and destinations. For example, automobiles for Moscow move from Busan via Vladivostok and the TSR, while cargoes originating in Heilongjiang Province of China move by rail to Vladivostock and thence by sea to Chinese ports via Busan, for distribution to other Chinese provinces. The latter cargo flow occurs because the rail distance between the origin in Heilongjiang Province and Vladivostok is only 300 km, whereas the rail distance to the nearest Chinese port (Dalian) is 1,000 km. Chinese rail rates are too expensive to transport cargo directly by rail.

In another case, China is importing logs from Russia for furniture manufacture and re-export from Harbin. Proximity to the TSR should suggest an advantage for transport of furniture in containers by rail, but the reality is that the Russian rail tariff is too high. The tariff for transport of a 40ft container from Harbin to Finland is about US$ 4,000 by rail and only US$ 500 by sea. By comparison, transit time by rail is about 14 days, but sea transit time is twice this number of days. In this case also containers are transported from Harbin to Finland via Vladivostok and Busan, demonstrating that the cargo is more price, than time, sensitive.

(ii) Border crossing problems

Substantial delays are occurring in ports and at land borders within the Northeast Asia to Europe corridor, owing to inconsistencies in the application of customs regulations between neighbouring countries. These problems are compounded by the failure of a majority of governments to introduce EDI (Electronic Data Interchange) and the single window concept across their borders. It is considered that governments are slow to take these initiatives owing to concerns about transparency, but that if these problems can be overcome, there will be a WIN-WIN situation for all concerned.

(iii) Problems related to imbalanced cargo flows

The imbalance of westbound and eastbound cargo volumes constrains the cost effectiveness of the TSR and limits the ability of rail to match cheap sea tariffs. Russia and the CIS countries do not generate sufficient export volume.

(iv) BPA views on customs procedures and documentation issues

People transporting goods are the people who must declare goods. In the case of goods arriving in Vladivostok, the shipping line must declare the cargo manifest. Then the party arranging the rail transport must prepare and submit the relevant documents. For dangerous goods special certificates may be required and transit times will be long.

The BPA Senior Director considers that document processing at borders can be accelerated if information is generated as part of a single window base which is made available electronically to all ports and border posts throughout the route. It was suggested that the cargo manifest should be used as the single information base

Consignments must be declared as bonded cargo for inland destinations, for which the originating customs authority will issue an “under bond” transportation certificate and will affix customs seals which cannot be broken until the consignment arrives at its final destination – unless it is stopped en-route for inspection.

Border clearance procedures should involve quarantine inspection first, followed by customs declaration and inspection (if required), then collection of customs duties. This is the procedure applied by the ROK authorities. The introduction of EDI will be essential for the instantaneous dissemination of the single data set to multiple border control authorities. It was noted that EDI had been applied in ROK since 1995.

It was suggested that UNESCAP should propose a format for a single data base and then conclude an MOU with the participating countries for application of this system.

2. Visit to Busan New Port North Container Terminal (12 April 2016)

(i) Port facilities

The existing container terminals at Busan New Port are:

 The North Container Terminal with a total berth length of 4,300 metres and a design capacity of 5.7 million TEU per year. This terminal can accomodate 13 vessels at a time and is divided into three sections, one operated by Hanjin and the other two by a joint venture between DP World and Samsung. Container stacks in this terminal are worked by high capacity RMGs (rail mounted gantry cranes).

 The South Container Terminal with a total berth length of 3,600 metres, accommodating 11 vessels at a time, can handle 3.52 million TEU per year. This terminal is divided into two sections, both operated by Hyundai Corporation. Container stacks are worked by straddle-carriers.

Photo 1: Terminal 1, Busan New Port Photo 2: Terminal 2, Busan New Port

(ii) Port rail connections

Both terminals are rail served, although only the North Terminal regularly receives and despatches trains at present. Korean Railways (Korail) operates container trains mostly between Uiwang ICD near Seoul and Busan. Trains, comprising 33 wagons (66 TEU), are hauled by electric locomotives to the Busan New Port station, about 6km north of Terminal 1 (See Figure 1 below). At this station, traction is changed to diesel and trains are hauled directly (and intact) into the loading/unloading tracks at Terminal 1. There are 4 such tracks, each with a length of about 1,000 metres. None is electrified, even for the first few metres, meaning that trains cannot be placed or extracted by mainline electric locomotives.

The railway loading/unloading sidings at Terminal 2 are understood to be outside of the port boundary, which will impose additional constraints on the competitiveness of rail.

Busan New Port Railway Station

Source: Busan Port Authority, Busan Port Information Brochure (2016)

Figure 1: Layout of Busan New Port, showing rail access and loading/ unloading tracks

The rail sidings at Terminal 1 are worked by 4 RMGs (Rail Mounted Gantry cranes). Containers are lifted from rail wagons to yard trailers for movement to container stacks behind the berths. This system involves at least two container lifts between wagons and the container stacks, as compared with only a single lift for containers brought in directly by

4 road. In some cases, where yard trailers are unavailable, containers are grounded beside the railway tracks and require an additional lift to reach the stacks (as illustrated in Photo 3). Clearly the multiple handling imposed on containers moved to the port by rail puts rail at a competitive disadvantage with road transport. This factor, coupled with the short haulage

distance to/from Seoul, would largely explain the loss of mod al share by rail.

Photo 3: Container transfer from Photo 4: Four siding tracks under wagon to stack the RMGs

3. Meeting with Korea Customs Service, Busan New Port

Meeting held at the offices of the Korea Customs Service, near Busan New Port at 1545 hours on 12 April 2016. Present at the meeting were: Kwon Oh-ju, Senior Customs Inspector, New Port Import Facilitation Section, Korea Customs Service; Chun Dong-Hee, Assistant Manager, Overseas Business & Cooperation Department, BPA; Park, Jeongsu, NRL Expert, UNESCAP Transport Division; Fedor Kormilitsyn, Economic Affairs Officer, UNESCAP Transport Division; and Peter Hodgkinson, Consultant UNESCAP.

Main points of discussion

(i) Customs procedures: imports

1. When import consignments arrive for clearance at the port, Customs require just two documents: a sea import cargo manifest and a discharged cargo declaration.1 Both documents are provided in electronic format to customs by shipping lines, 24 hours before vessel arrival in the case of manifest data.

2. Customs then check these documents for missing items or suspicious cargoes.

3. If it is decided that cargo is suspicious, X-ray scanning is used in the terminal.

4. If X-ray scans indicate possibility of illegal goods, container is brought to off-port customs inspection site and is completely discharged for inspection.

11 Samples of these documents are given in Attachment 1.

5. If consignment consists of dangerous goods, agricultural products etc, other documents, such as bills of lading, certificates of origin, commercial invoice and packing list, etc, will be required.

6. If initial checks do not reveal anything suspicious, Customs check documents in the terminal , and then do random inspection (of about 5% of arriving cargoes) to attempt to match details on documents with actual cargo.

7. In fact, Customs can perform different types of inspection, including:

a) Inspect all cargo in a container; b) Random inspection of part (e.g. 10%) of cargo in a container; c) Get results of scientific tests d) Scan with X-ray equipment

8. In summary, for 95% of incoming cargo, only an EDI and document check is conducted; physical inspections are conducted for only 5% of imported cargo. EDI checks apply to about 80% and other document checks to about 15% of import cargo. In the case of the latter, scanned copies are sent to Customs by agents or forwarders.

9. Importers are required to pay tax within 15 days after customs inspection, before consignments may be cleared.

10. If containers are directed to the Customs inspection site, all cargo is removed and inspected. If consignment is found to be illegal, Customs determine the penalties to be applied.

(ii) Customs procedures: exports

Most export consignments are cleared at inland locations, such as Uiwang ICD, but some are cleared sat the port. No documents need to be attached, but the Customs Export Declaration form must be submitted.

4. Meeting with Ministry of Oceans and Fisheries and KMI

Meeting held at the office of the Ministry of Oceans and Fisheries in Sejong City at 1000 hours on 14 April 2016. Present at the meeting were: Nam Jaeheon, Director Port Policy Division, Ministry of Oceans and Fisheries (MOF); Lee Hyungmin, Deputy Director, Port Logistics Division, MOF; Kim Gyuserb, Deputy Director, Port Policy Division, MOF; Hwang Sang-Ho, Director, Port Development Division, MOF; Yang Sung-hwan, Port Management Division, MOF; Kim Eun-woo (Grace), Senior Reseacher, International Logistics Research Department, Korea Maritime Institute (KMI); Kim Sara, Researcher, Port Investment & Operation Department, KMI; Park, Jeongsu, NRL Expert, UNESCAP Transport Division; Fedor Kormilitsyn, Economic Affairs Officer, UNESCAP Transport Division; and Peter Hodgkinson, Consultant UNESCAP.

Main points of discussion

(i) Presentation: UNESCAP Seamless Transport Project

The scope and objectives of the project were presented briefly by F Kormilitsyn.

(ii) Presentation: Yes! U-Port system (Lee Hyungmin, MOF)

Yes! U-Port is an integrated maritime and port logistics service model providing real time monitoring and control of port assets. The model was developed under Project 21 Consolidated National Logistics Information Service, one of the e-government initiatives of the Republic of Korea Government commencing in 2003.

Yes! U-Port comprises five separate, but connected, systems designed to:

(a) Support port operations including the arrival/departure procedures of vessels and port facility management (Port-MIS or Port Management Information System) (b) Locate the position of cargo from inland to the ocean (GCTS, or Global Cargo Tracking System) (c) Provide for vessel tracing and public order on the sea (GICOMS, or Vessel Monitoring System) (d) Provide for port security and safety and controlling entry of vehicles and persons to ports (PSS, or Port Security System)

These four basic systems are integrated through a Shipping and Port Integrated Data Centre (SP-IDC) and a Data Recovery Centre (DR) which backs up the information of the SP-IDC.

It has to be noted that while the PSS controls and records the entry of trucks and cargo to ports, it does not cover the entry of trains to ports. These are covered by an independent railway vehicle tracking system, which has not been integrated into the Yes! U-Port system.

Further, the Yes! U-Port system is not harmonized with the MIS systems of other countries. While the ROK, China and Japan have been discussing standardization of information, no agreement has yet been reached.

(iii) Statistics on Container Logistics (Kim Gyuserb, MOF)

Busan (19.47 million TEU), Incheon (2.53 million TEU) and Gwangyang (2.33 million TEU) collectively account for 94% of the national throughput of international containers (25.68 million TEU) in the ROK in 2015. Three countries account for more than 50% of the container trade through ROK ports. Of the national container trade volume, about 31% repre sents trade with China, 13% trade with the USA and 12% trade with Japan.

Some 90.5% of Busan’s container throughput is transported by road and the balance (9.5%) is transported by rail. The fact that nearly 50% of Busan’s container throughput is sourced within a short road haul of the port largely partly explains why the road modal share is so high, but with 22% of this throughput sourced within the Seoul region, a higher rail share might reasonably be expected. For example, 22% of 19.47 million TEU is 4.28 million TEU,

7 of which only about 450,000 TEU, or 10.5%, was rail-hauled in 2014. The rail distance to Busan New Port from Uiwang ICD is about 428 km, which is an economic rail haul and compares with a road haul of 380 km. In this situation, the rail share should be close to 50% of the catchment volume, or about 2.1 million TEU.2

No railway service is offered between Uiwang ICD and Incheon Port, given the fact that 92% of that port’s container throughput is sourced within the Seoul region.

In the case of Gwangyang Port, nearly 90% of the port container throughput is transported to and from the port by road and the balance (just over 10%) by rail. Since 75% of port container throughput is sourced within a short road haul of the port, it is hardly surprising that the road share should be so high.

(iv) Status of Korea-China and Krea-Japan Sea-Land Intermodal Transportation (Kim Eun Woo, KMI)

Presentation contained an outline of on-going analysis and discussions between the ROK and China, and the ROK and Japan concerning the development of short-sea intermodal transportation. The analysis and discussions focus on existing Ro-Ro ferry services between 3 ports in ROK and 7 ports in China (centring on Incheon-Qingdao), and between a single port in ROK (Busan) and 2 ports in Japan.

In the case of ROK-China services, there are no truck operating area restrictions in ROK, while in China the operating area extends from Shandong to Jiangsu Province. Some 10,000 truck operating licences have been issued for these services. In the case of ROK-Japan services, there are no restrictions on truck operations within the Busan area.

Several new initiatives are being assessed, including: transportation of conventional road trailers, instead of specialized transfer trailers, on Ro-Ro vessels; and transportation of rigid trucks or prime-movers plus trailers by Ro-Ro services linking logistics centres in ROK with those in China. The latter initiative targets the carriage of cosmetics and fresh food between producing and consuming locations in either country.

The initiatives do not extend to railways, as it was claimed that the domestic operation in China (Qingdao-Dalian??) of ferries equipped with rail decks demonstrated poor financial results.

Among the commercial and/or policy initiatives agreed between ROK and China in order to promote the development of intermodal Ro-Ro services are:

 For ROK, a 40% reduction in the tariff warranty fee, exemption of cargo entry and departure fees, and a new inspection office on the wharf at Incheon Port;  For China, implementation of One-Stop Service including quarantine and customs inspection, as well as issuance of operating licences.

Among the initiatives agreed between ROK and Japan are:

2 Passage in italics represents the author’s analysis of the situation.

 For ROK, extension of the exemption described in Ordinance on Special Provisions for Automobile Management until 31 December 2018  For Japan, addition of one more port (Hakata) to the agreement

Following the presentation, details of:

 Road vehicle regulations applying between countries; and  Full documentation requirements for moving cargo between ROK and China and ROK and Japan were requested from the KMI representatives who agreed to provide same,

5. Meeting with Korea International Freight Forwarders Association

Meeting held at the office of the Korea International Freight Forwarders Association (KIFFA) in Seoul at 1600 hours on 14 April 2016. Present at the meeting were: M.S.Cha, Vice- Chairman, KIFFA; Kyeong-Gyu Cho, Director Business Division KIFFA; Teack-Gyoo Im, Deputy General Manager Business Division, KIFFA; Hyun Kyung Lee (Stella), Manager, Seojoong Logistics Co., Ltd (S J Logistics); Eun Ah Choi, Manager, Seojoong Logistics Co., Ltd (S J Logistics); Park, Jeongsu, NRL Expert, UNESCAP Transport Division; Fedor Kormilitsyn, Economic Affairs Officer, UNESCAP Transport Division; and Peter Hodgkinson, Consultant UNESCAP.

(i) Current status of KIFFA Bill of Lading (KIFFA)

 KIFFA grew out of the Korean Air Cargo Association which was established in 1969 and the Korean Multimodal Transport Association which was established in 1992  The KIFFA Bill of Lading has been in use since 1997 and is based on the FIATA Bill of Lading with some small differences  The KIFFA B/L is used by 450 companies, and the FIATA B/L by 300 companies  In common with the FIATA B/L, the KIFFA B/L assigns responsibility of the forwarding company for the goods from the time they are taken into its charge at the place of receipt to the time they are delivered to the consignee at the place of delivery  Unless written notice of loss or damage to goods is given to the forwarder by the consignee within a specified period of time after delivery, handing over of the goods to the consignee is prima facie evidence of delivery of the goods by the forwarder as described in the B/L  The FIATA and KIFFA B/Ls differ in their specification of the time allowed for notice of loss or damage: 6 consecutive days after delivery in the case of the FIATA B/L and 3 consecutive days after delivery in the case of the KIFFA B/L  The FIATA and KIFFA B/Ls also differ in respect of limitation of liability of the forwarder for loss or damage to the goods: - The FIATA B/L limits forwarder liability to an amount not exceeding twice the freight charges under the contract for multimodal transport (in accordance with UNCTAD/ICC Rules)

- The KIFFA B/L limits forwarder liability to an amount not exceeding the freight charges under the contract for multimodal transport (in accordance with UNCTAD/ICC Rules)

(ii) Experience of one forwarder in transporting cargo on Northeast Asia-Europe routes (Presentation by Hyun Kyung Lee, SJ Logistics)

 SJ Logistics is involved in cargo transportation on the Trans-China, Trans-Mongolia and Trans-Siberia railways, as well as through Central Asia  The company’s primary focus is on container transport, but it is also involved in bulk and project cargo transport  A major problem flagged was that transit customs procedures are applied at every border crossing point.

Ocean

Rail Astan Astana a

Dostyk Alashankou Almaty

Sary-Agach Heurgoeus Altynkol Tashkent Incheon Jinan Wuwei Busa Lianyungang n

Border control post

Source: Presentation by SJ Logistics, Seoul, 14 April 2016

For example, in the case of cargo moving from the ROK to Tashkent (see map above), containers are off-loaded at one of three Chinese ports: Lianyungang, Qingdao or Rizhao. Here they undergo transit customs clearance before being loaded to rail for the journey to Tashkent. En route, they are stopped at the following border crossing points, where they again undergo transit customs clearance: Khorgos (Heurgoeus), China; Altynkol Kazakhstan; Sary-Agach (border between Kazakhstan and Uzbekistan). Normally, transport of containers from Seoul to Tashkent is estimated to take 25 days, of which 6-8 days would be needed for transit customs clearance in port and at borders.

 Border crossing procedures, together with normal time allowances, are given in following diagram

► Ocean from Busan/Incheon to Lianyungang/Qingdao(Jiaozhou)/Rizhao : 2~3 Days ► TCR service from Lianyungang/ Lianyungang/Qingdao(Jiaozhou)/Rizhao to Destination : 18~24 Days ► Total T/Time : About 25 Days

KOR CHN CIS

Lianyungang Alashankou Dostyk P.O.L Qingdao 6~8 1~2 Destination days days 2~3 Rizhao Heurgoeus Altynkol 5~6 days days

• Exporting • Transit custom • Transit custom • Transit custom • Arrival from Korea clearance at port clearance at the clearance at border • Apply for block train border of KZH for all • Issue railway bill • Checking containers • Imbalance/inspection Container/Seal • X-ray inspection check

5~6 days 1~2 days Source: Presentation by SJ Logistics, Seoul, 14 April 2016

Border crossing procedures involve cross-checking physical consignment with documents, mostly with the assistance of X-ray scanners, as well as checking of container seals. For the Trans-China route, most difficulty was reported with Kazakhstan Customs whose regulations are considered to be “strict” and “conservative” and whose penalties are very severe when requirements are not met.

 Block container trains comprising 53 wagons (106 TEU) are now operated on a daily frequency between Lianyungang Port and Khorgos (service commenced 15 December 2012). Transhipment between gauges at Altynkol is achieved by

 Relative overall transit and border crossing delay times normally experienced on the TSR and TMR routes are given in the following table:

Route Overall transit time Port or border delays (days) (days) Trans-Mongolia 12-17 6-7 (Busan/Incheon-Tianjin- Ulaanbaatar) Trans-Siberia 33 10-14 (Busan-Vostochny-Moscow) Source: Presentation by SJ Logistics, Seoul, 14 April 2016

Delays due to border control procedures are excessive in Tianjin and Vostochy owing to complicated documentation requirements

 In general, each consignment is accompanied by a FIATA B/L and a railway consignment note (usually the SMGS form), in addition to multiple customs or other border control forms

 While some documents are transmitted electronically, all consignments must in addition be accompanied by hard copy documents

 No difficulty in completing transport documents was reported, but the forwarder complained of excessive border control documents, the requirements of which differ markedly between neighbouring countries

 Examples of completed documents were provided by the forwarder (see Attachment 2)

Attachments

1. Korea Customs Service: documents required for initial screening

A. Shipping manifest

B. Discharged cargo declaration

2. S.J. Logistics Group: examples of completed documents

A. Certificate of Origin

B. Commercial Invoice

C. Ocean Bill of Lading

D. Railway (SMGS) Consignment Note

Attachment 1: A. Shipping Manifest (Korea Customs Service )

Attachment 1: B Discharged cargo declaration (Korea Customs Service)

Attachment 2: A. Certificate of Origin (SJ Logistics)

Attachment 2: B. Commercial Invoice (SJ Logistics)

COMMERCIAL INVOICES 1.Shipper/Exporter/Beneficiary 8.No. & date of invoice

9.No. & date of S/C

10.L/C issuing Bank 2.For Account & Risk of Messrs. Remarks :

CONTAINER/SEAL NO.:

3.Notify Party

SAME AS ABOVE

4.Port of loading 5.Final destination INCHEON, KOREA ULAANBAATAR, MONGOLIA 6.Carrier 7.Sailing on / or about June 10, 2016 11.Marks and numbers of 12.Description of goods 13.Quantity 14.Unit-Price 15.Amount PKGS (PCS) (KRW) (KRW) BIBI SOFA 8 160,000 1,280,000 BIBI SOFA 8 160,000 1,280,000 WOOD SOFA 14 280,000 3,920,000 STEEL SOFA 11 300,000 3,300,000 WOOD CHAIR 8 150,000 1,200,000 WOOD CHAIR 4 150,000 600,000 LOWTAGE CHAIR 6 110,000 660,000 WOOD TABLE 10 94,000 940,000 STEEL CHAIR 32 35,250 1,128,000 WOOD CHAIR 11 150,000 1,650,000 WOOD TABLE BASE 2 180,000 360,000 WOOD TABLE BASE 2 250,000 500,000 WOOD TABLE BASE 20 49,000 980,000 WOOD TABLE BASE 4 420,000 1,680,000 WOOD TABLE BASE 20 45,000 900,000 WOOD TABLE BASE 2 750,000 1,500,000 WOOD TABLE BASE 4 170,000 680,000 WOOD TABLE BASE 2 185,000 370,000 WOOD TABLE BASE 11 275,000 3,025,000 WOOD TABLE BASE 8 76,500 612,000 /////////////////////////////////////////////////////////////////////////////////////////////////////////////////////// TOTAL 26,565,000

Attachment 2: C. Ocean Bill of Lading (SJ Logistics Group)

Attachment 2: D. Railway (SMGS) Consignment Note (SJ Logistics Group)