For companies that manufacture high-tech goods in Southern China, the use of Hong Kong as a trans-shipment hub is akin to jumping on a high-speed conveyor belt straight towards global markets. Hong Kong’s prime position next to Guangdong province – China’s manufacturing powerhouse – means that goods can quickly move from factory to air freighter to end markets FAST.
Let’s look at why and how companies that manufacturer in South China – particularly tech-product manufacturers – are using Hong Kong’s free port status and other advantages to make global trade more efficient.
Hong Kong’s unique role
As a Special Administrative Region (SAR) of China, Hong Kong is both part of, and separate from, China at the same time. Unlike Mainland China, Hong Kong is a free port where there are no customs tariffs on most imported or exported goods. Mainland China does not levy taxes on Hong Kong goods.
This tariff-free trading holds real advantages for companies moving goods between Southern China and global trading partners, allowing them to transport goods globally without hefty tariffs or complicated customs procedures slowing them down.
Hong Kong’s unique policies on money, finance, trade, and customs are possible because of China’s “one country, two systems” concept, which allows co-existence of socialism and capitalism within China’s borders.
Hong Kong as a Transshipment Hub for South China Manufacturers
As a manufacturing hub, Southern China churns out an array of high-value electronics products. These range from essential electronic components to the latest gadgets that fuel our digital world. But how do these valuable goods get from factories to markets around the globe? For many, they make a pit stop in Hong Kong.
In terms of transportation into and out of Hong Kong, we’ll focus mainly on air freight and trucking. That’s because, for tech products, very little freight moves any other way, as this chart shows.
There are three primary benefits of using Hong Kong as a trans-shipment hub: favorable customs and tariffs, strong air freight capacity to major global gateways, and an excellent logistics infrastructure. Let’s look at each, in turn.
FAVORABLE CUSTOMS AND TARIFF TREATMENT
Free ports like Hong Kong have no customs tariffs. This means when companies move their products through here, they don’t need to worry about additional costs or complex tariff regulations. They get the advantage of straightforward shipping with reduced financial burden. Pretty good, right?
Another perk is Hong Kong’s efficient customs clearance procedures. No one likes paperwork and long waiting times. Hong Kong Customs prides itself on providing speedy clearances without compromising security measures. Products get where they need to be faster than you can say “export.”
There’s an added benefit if you work with 3PLs like Dimerco Express Group, which has achieved China’s highest level of Authorized Economic Operator (AEO) status. AEO certification validates a provider’s credentials as a safe, secure shipper and enables faster, smooth customs clearance.
Some China-based manufacturers store finished goods in a China FTZ warehouse in order to apply for a VAT rebate from the Chinese government before the goods are sold to a Chinese buyer. But inconsistencies among customs authorities at different China ports can make this FTZ solution difficult. In these cases, items can be shipped to Hong Kong and then be immediately re-imported for a buyer in China to avoid double taxation on the same goods. This is known as the Hong Kong U-turn strategy.
STRONG AIR FREIGHT CAPACITY TO MAJOR GLOBAL GATEWAYS
Hong Kong International Airport (HKIA) is the world’s busiest international cargo airport. More than 100 airlines operate flights from the airport to over 180 cities across the globe. Flights are frequent and many go direct to your destination markets. These direct connections are important for short-shelf-life tech products where rapid time to market is critical. Dimerco regularly arranges consolidated air freight services for South China manufacturers that take advantage of the company’s frequent fixed flight schedule between Hong Kong and major US and Europe gateways.
Hong Kong International Airport can also play a role for freight moving into China. For instance, if flight frequency to the end destination in China is limited, a trans-shipment via Hong Kong can sharply improve delivery times.
A major semiconductor company needed faster shipment of component parts from Taiwan to a customer’s factory in Zhengzhou in inland China. Dimerco routes freight via Hong Kong followed by a same-day transfer to Shenzhen via cross-border trucking. From there, freight connects with regular air freight service to Zhengzhou, cutting delivery times by several days.
EXCELLENT LOGISTICS INFRASTRUCTURE
Hong Kong’s is a service economy. Its manufacturing has shifted to the mainland and, consequently, local manufacturing accounts for only 1% of Hong Kong’s GDP. While it’s not a manufacturing mecca, Hong Kong is certainly a global finance and logistics powerhouse.
All the world’s top logistics providers, including Dimerco, have established strong capabilities here for freight forwarding, Hong Kong warehousing services, and customs clearance support. Services are sophisticated and providers have the know-how to advise shippers on the most effective strategies to control costs for both freight shipments and customs duties and taxes.
Here’s an example. South China produces a large volume of cell phones and portable computers that contain built-in lithium batteries. These goods require dangerous goods inspection and not all airports are well-equipped in this regard. Hong Kong has sophisticated air cargo inspection systems and security screening for air exports for fast, efficient handling. These advancements are another reason businesses are attracted to Hong Kong as an export hub.
Trucking Services between Hong Kong & China
We’ve talked a lot about the advantages of Hong Kong as a trans-shipment hub for South China manufacturers. What we haven’t talked about is the one thing that stands between South China and Hong Kong’s airport: about 30–60 miles.
The most efficient way to move that freight is via cross-border trucking, so it’s important to find a 3PL partner that can provide coordinated, time-definite service to meet precise flight schedules.
From Dimerco, cross-border trucking services are available Southbound and Northbound either FTL (Full Truck Load) or LTL (Less Than Truckload). Dimerco has its own fleet of trucks to operate these cross-border movements, which allows flexible scheduling and operations management. FTL service runs twice daily with 24/7 track and trace visibility on all shipments.
Dimerco’s cross-border trucking team handles on average 100 FTL and 200 customs declaration a day or up to 1,000 FTL and 3,000 customs declarations every month between South China and Hong Kong.
For shippers worried about congestion and disruptions at the border on truck shipments, such as those that happened during COVID, creative solutions are available. For instance, Dimerco is one of a select few global forwarders that worked with the Airport Authority of Hong Kong on a pilot program to move cargo from South China direct to Hong Kong International Airport (HKIA) via an ocean feeder service.
Want to Explore a Trans-shipment Strategy for Your China-Produced Goods?
We’ve explored the many advantages of Hong Kong as an efficient trans-shipment gateway for high-tech products made in Southern China.
Favorable customs and tariff treatment? Yes. Hong Kong is a free port where there are no customs tariffs on most imported or exported goods.
Strong connections to other global gateways? Yes. Hong Kong International Airport is the world busiest cargo airport offering the fastest, most economical shipping lanes in the world.
Excellent logistics infrastructure? Yes. Hong Kong’s economy depends on super-efficient importing and exporting.
If you’re interested in exploring what a Hong Kong trans-shipment strategy can do for your business, contact Dimerco today and let’s start a conversation.
