The two-day closure of Hong Kong International Airport (HKIA) had not impacted air cargo as of late Tuesday, although future delays appear inevitable. Given the volume of freight that passes through the airport -- 5.1 million metric tons in 2018—any disruption of air traffic can hinder cargo departures.
Air freight carriers, including Cathay Pacific, FedEx, Qatar Airways and Hong Kong Air Cargo were reporting on-time departures from Hong Kong as of Tuesday afternoon. However, cargo is also shipped on passenger planes, and all passenger flights had been cancelled.
Thousands of demonstrators have occupied HKIA for two days in protest of police brutality. There’s no word on when regular passenger service will resume.
Hong Kong remains a major logistics hub for the electronics industry, and HKIA reported 58,000 cargo-related “air traffic movements” in 2018. Since the U.S.-China trade war has commenced, Hong Kong’s role as a “middleman” in the electronics supply chain has grown in import.
The U.S. “first-sale” rule levies tariffs on the value of a transaction between a manufacturer and a middleman or distributor. These costs are usually lower than “second sale” transactions to end-customers. If a Chinese company sells a product to a Hong Kong exporter, that's considered a first sale. Once a customer buys the product, that's a second sale.
A lot of commerce passes through HKIA. Although bulk electronics goods are generally transported by sea, air cargo is widely used for expedited shipments or orders that have already been delayed for some reason.
Delayed orders cascade upward in the supply chian. OEMs and EMS providers want their bills of material to arrive in factories just prior to assembly. If any part of that order is delayed, manufacturing lines remain idle. Factories could lose up to $10,000 per hour in downtime.
Electronics distributors are often called upon to fill these gaps or supply substitute devices. Air shipment is often the best transport option.
A good portion of those shipments are destined for China, which is served by HKIA. The airport has established cargo depots at strategic locations in China’s Pearl River Delta. This enables a better relationship with cargo sources and facilitates the flow of goods via Hong Kong, enhancing HKIA’s role as a key link in China’s supply chain.
HKIA also expedites customs clearance by providing integrated electronic data interchange (EDI) linkage between eight major air cargo operators and the Customs & Excise Department.
According to HKIA, benefits include:
- Allowing pre-arrival customs clearance, covering all types of cargo down to the “house” air waybill level;
- Providing a “priority consignments” facility and automatic assignment of default constraint codes; and
- Enabling authorized service providers to provide cross boundary bonded truck services to Mainland China.
Non-interruption of air-freight services -- so far -- augers well for Hong Kong. If protests end and the airport resumes operations, it could still take several days to rebook passenger flights and adjust airline operations back to a regular schedule, according to airport officials.
However, disruptions may have repercussions beyond flight delays. The Wall Street Journal has reported continued unrest in Hong Kong could hurt business confidence in the major trading hub and even push the economy into recession. Protests in Hong Kong started in June in response to a proposed extradition bill by China, which has since been suspended. The demonstrations have evolved into a more demanding pro-democracy movement.