For discussion FCR(96-97)86
on 13 December 1996

ITEM FOR FINANCE COMMITTEE

HEAD 31 - CUSTOMS AND EXCISE DEPARTMENT
Subhead 603 Plant, vehicles and equipment
New Item "Procurement of two sector patrol launches"

Members are invited to approve a commitment of $81,706,000 for the procurement of two sector patrol launches.

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PROBLEM
PROPOSAL
JUSTIFICATION

Increase in smuggling activities
Deficiencies of the existing Customs fleet
Procurement Timetable
FINANCIAL AND STAFFING IMPLICATIONS
Seizure Statistics 1991-1995

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PROBLEM

Customs and Excise Department (C&ED)'s existing fleet of patrol launches is inadequate to provide effective customs control to cover Mirs Bay, Tolo Harbour and the waters off the Sai Kung Peninsula which are becoming more and more prone to smuggling activities.

PROPOSAL

2. The Commissioner of Customs and Excise (C of C&E), with the support of the Secretary for Trade and Industry, Secretary for the Treasury and Secretary for Security, proposes to procure two additional patrol launches at a non-recurrent cost of $81,706,000 to provide effective customs control coverage at these waters.

JUSTIFICATION

Increase in smuggling activities

3. Maritime traffic, in particular, the movement of Chinese territorial vessels (CTVs), has been on the increase in recent years. CTVs carry cargoes for import/export/transit between the coastal cities of China and Hong Kong. The number of CTVs arriving Hong Kong has increased by 28%, from 75 154 in 1991 to 96 272 in 1995. The cargo throughput carried by CTVs increased by 61%, from 10.4 million tons to 16.7 million tons during the same period.

4. Since 1993, there has been a rising trend of smuggling by using CTVs instead of speed boats. CTVs can carry large quantities of contraband goods, usually in consignments under false declaration. As a result, whilst the number of cases and arrests have decreased, the total value of goods seized has increased. The total value of goods seized increased by 220%, from $119.9 million in 1991 to $383.2 million in 1995. A table showing the relevant statistics in the past five years is at Enclosure 1.

5. While electrical appliances and left-hand-drive vehicles continue to be smuggled to China, dutiable cigarettes, dutiable hydrocarbon oil, slaughtered meat and live pigs are smuggled into Hong Kong. Smuggling of these items not only affects the revenue in Hong Kong and in the neighbouring regions, but also causes serious health hazards to the local community.

6. Traditionally, CTVs from the well-developed cities along the Pearl River estuary and the south-western coast of Guangdong such as Shekou, Zhuhai, Dongguan, Taiping, Yangjiang and Zhanjiang came to Hong Kong via the western waters. In recent years, with the development of new seaports such as Yantian, Nano, Aotau, Weidong, Shanmei and Shantau along the south-eastern coast of Guangdong, more and more CTVs are now coming to Hong Kong via Mirs Bay and the eastern waters. According to intelligence collected by C&ED, nearly half of the smuggling vessels from China now penetrate into the territory via the latter route.

Deficiencies of the existing Customs fleet

7. At present, C&ED has a fleet of four patrol launches. Three were commissioned in 1986. We deploy these three launches to patrol the waters and cargo loading points in the following areas of Hong Kong -

1. from Deep Bay to north of Lantau, guarding approaches to Hong Kong via Kap Shui Mun;
2. from south of Lantau to south-west of Hong Kong Island, guarding approaches to Hong Kong via West Lamma Channel and East Lamma Channel; and
3. the south-east of Hong Kong Island, guarding approaches to Hong Kong via Tathong Channel.

A map showing the deployment of existing Customs launches is at Enclosure 2.

8. C&ED acquired the fourth launch in 1993. This launch serves as relief to the three launches during docking and maintenance. On average, each launch needs to undergo two months docking and maintenance in a year. The relief launch was in use for 196 days out of 253 days available for relieving other launches in the first ten months of 1996.

9. Therefore, there is no regular customs presence in Mirs Bay, Tolo Harbour and the waters off Sai Kung Peninsula, covering extensive waters and long coastlines which provide numerous cargo loading points for smuggling vessels from the seaports in the south-eastern part of Guangdong. It is not operationally feasible to deploy the existing launches to cover this area as that would make Customs capabilities too thin to be effective in all areas.

10. The current arrangement is for the Marine Police to be on the look out for smuggling vessels during their routine patrol in the east area. However, the prime objectives of the Marine Police are general policing, protection of life and property as well as anti-illegal immigration. They are not always able to accord priority to customs-chartered assignments, nor do Police officers have the training and experience to search for and handle contrabands which are under the charge of C&ED.

11. Whenever the Marine Police make any seizure/arrest in connection with Customs offences, they hand back the case to C&ED for follow-up investigation, including the detention and detailed searching of the vessels and cargoes as soon as possible. Thus, either a Customs launch has to leave its beat and travel a long distance to the scene of arrest to take over the case from the Police, or the Police launch has to leave its beat to rendezvous with the Customs launch. This arrangement is far from satisfactory as it gives rise to delays in the handling of the case and diverts the Police or Customs launches from their normal beats. There were twenty such cases in the first ten months of 1996.

12. C of C&E therefore proposes to procure two additional patrol launches, one to cover Mirs Bay, including Tolo Harbour and the other to cover the waters east of Sai Kung Peninsula. With the two additional launches, C of C&E will be able to step up action in the interception and search of suspect vessels and cargoes. Providing C&ED with the capability to cover the whole of the territorial waters of Hong Kong will go a long way towards the safe-guarding of Hong Kong’s separate Customs territory status in the years ahead. A map showing the proposed deployment of the Customs launches is at Enclosure 3.

Procurement Timetable

13. The proposed procurement timetable of the two launches is as below -

FINANCIAL AND STAFFING IMPLICATIONS

14. C of C&E and the Director of Marine estimate that the non-recurrent cost of procuring two launches is $81,706,000. Details of non-recurrent cost are as follows -

15. As regards paragraph 14(a), the estimate of $69 million is for the design and construction of two 27 metres long launches.

16. As regards paragraph 14(b), the estimate of $1 million is for the purchase of two inflatables and accessories.

17. As regards paragraph 14(c), the estimate of $300,000 is for the purchase of two sets of typhoon mooring buoys placed at typhoon shelters for the two launches.

18. As regards paragraph 14(d), the estimate of $600,000 is for the purchase and installation of radar system for navigation and surveillance of suspected vessels, and radio telephone systems for communication.

19. As regards paragraph 14(e), the estimate of $3,332,000 is for the purchase and installation of specialised equipment, including thermal imager system, fire arms, computers and mobile phones for the two launches.

20. As regards paragraph 14(f), the estimates of $40,000 is for the purchase of marine stores including nylon ropes, marine paint and life saving equipment.

21. As regards paragraph 14(g), the estimate of $6,000 is to meet the expenses payable to the Office of the Telecommunications Authority for the installation of radio equipment for the two launches.

22. As regards paragraph 14(h), the estimate of $7,428,000 represents a 10% contingency on the cost items set out in the paragraph 14(a) to (g).

23. The estimated cashflow is as follows -

24. C of C&E estimates that the annual recurrent expenditure will be $47,541,000, made up as follows -

25. As regards paragraph 24(a)(i), the estimate is to meet the cost of additional Customs staff for operating the two launches and conducting search on vessels. In 1998-99, the estimate of $4,229,000 is for the recruitment and induction training for 62 C&ED officers in the second half of 1998-99. From 1999-2000 onwards, an annual staff cost of $40,925,000 is for 103 C&ED officers to man the two launches. There are 15 officers in each crew and a total of 90 officers will be required to man the two launches round the clock. Together with the 13 operational reserve posts, the total requirement is therefore 103 (seven Senior Inspectors of Customs and Excise, seven Chief Customs Officers, 27 Senior Customs Officers and 62 Customs Officers).

26. As regards paragraph 24(a)(ii), the estimate of $710,000 is for Marine Department staff (two man-months of Surveyor of Ships, 7.5 man-months of Ship Inspector, 11 man-months of Artisan and 0.5 man-month of Clerical Officer II) to provide maintenance service for the two launches.

27. As regards paragraph 24(b), the estimate of $1,080,000 is to cover fuel and oil consumption of the two launches.

28. As regards paragraph 24(c), the estimate of $106,000 is to cover consumable and other recurrent expenses, including service charges for mobile phones and computer transmission.

29. As regards paragraph 24(d), the estimate of $3,800,000 is for Marine Department to cover costs for the purchase of parts, overhaul of machinery/ equipment and contractors’ labour, and $920,000 is to cover maintenance service on other equipment items such as thermal imagers, radars, radio-transceivers, public address system, echo sounders, global positioning system, computers and mobile telephone.

30. If Members approve the proposal, we shall include the necessary provision in the 1997-98 Estimates.

Trade and Industry Branch
Security Branch
Finance Branch
December 1996

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Enclosure 1 to FCR(96-97)86

Seizure Statistics 1991-1995

Note 1 :

The % of change for the total value of seizure from 1991 to 1995 is 220%.

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