China: logistics sector takes notable leaps once with FTZ

More than 3,500 companies in related industries contribute around 28% of the Shanghai district’s GDP.

High-quality warehousing space in the FTZ totaled 780,000 m2 in October 2013, and this figure is expected to rise to 210,000 m2 by 2015 with the completion of several major projects, according to intelligence to the global commercial property and real estate services adviser CBRE.

From Q3 2013, there remained a strong discrepancy in vacancy rates between logistic properties in Puxi (1.4%) and Pudong (22.4%), Shanghai’s old and new urban districts, respectively.

The FTZ’s original Framework Plan introduced policies in direct connection with the logistics industry, such as relaxation of limitations on the share of foreign ownership in shipping enterprises, under which foreign-owned vessel management may be established in the Shanghai FTZ.

Moreover, there are the relaxation of restrictions on cargo relay via Shanghai Port by foreign ships owned or indirectly owned by Chinese-invested enterprises, the relaxation of limitations on the share of foreign ownership in ship management enterprises, under which wholly foreign-owned enterprises may be established in the Shanghai FTZ and establishment of an international ship registration system, under which a controlling share of foreign investment is permitted for the registering entity.

In terms of ship transportation, Shanghai retains a wide margin in its title as the world’s busiest port in terms of cargo volume (7 of the 10 busiest are located in China). In 2013, container throughput at Yangshan Port rose 3.3% to a record 33.6 million TEUs, having previously surpassed Waigaoqiao Port in late 2012.

As an indication of the potential for further growth in the industry, only 5.5 of cargo was classified as international transshipment, compared with over half of shipments in Hong Kong. With the simplified Customs procedures adopted in the FTZ, this imbalance is likely to correct itself over the coming years.

Shanghai comprises of 4 bonded districts: the Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone.

One of 4 bonded zones comprising the FTZ, Yangshan Free Trade Port Area, offers facilities and exemptions on import tariffs as long as goods remain within the zone.

Air Cargo into the FTZ flows through the Pudong Airport Comprehensive Free Trade Zone, where players like China Cargo Airlines, Lufthansa Cargo and UPS have all established operations. DHL was selected as the first company to set up international transshipment operations in the Pudong Airport Comprehensive FTZ (part of the larger Shanghai Free Trade Zone), including a new international transit air route linking Leipzig to Tokyo.

This entails 24-hour processing of overseas cargo (receiving, sorting, and dispatching), in cooperation of Shanghai Airport Customs and Shanghai International Airport Entry-Exit Inspection & Quarantine Bureau.

Similar to elsewhere in the FTZ, air shipments through Pudong Airport are unimpeded by customs procedures or import duties. With international transshipments surging as a result, companies like DHL plan to add more routes in the coming years to keep up with demand.

The FTZ offers several Customs policies to benefit logistics operations in the Zone. Companies are afforded the option of delivering overseas shipments to the zone using just a shipping bill, rather than a formal customs declaration.

In April 2014, the General Administration of Customs launched a “single window” pilot project at Yangshan Port integrating functions which, outside the zone, are separately executed by CIQ, Border Control, and Customs.