CHINA TARGETS ILLEGAL AGENCIES IN CRACKDOWN OVERSEAS CARGO FIRMS FLOOD SHANGHAI

CHINA TARGETS ILLEGAL AGENCIES IN CRACKDOWN OVERSEAS CARGO FIRMS FLOOD SHANGHAI

China is moving to curb the sudden surge in cargo agents, especially overseas firms, rushing to set up shop in Shanghai, the country's largest port and commercial hub.

Since mid-July, the city has approved 102 international cargo agencies, of which 46 are Chinese-owned, 48 joint ventures and the rest foreign-owned.A local newspaper said last week that there are more than 400 cargo agents operating illegally in the city, mainly backed by Hong Kong and Taiwan interests.

"Cargo agents, especially overseas-funded agents, must obey Chinese regulations," Zhang Shixiang, secretary general of the city's foreign trade office, said recently.

"Shanghai authorities will only give approval for establishing joint cargo agencies to those foreign offices with good reputation and ones that obey rules," he said.

Authorities said they won't close the illegal firms but will ask state-run companies not to use them, in hopes of drying up their business.

A conference will be held shortly among international cargo handlers and the municipality meeting to discuss the wider problem, Mr. Zhang said.

He said action was becoming urgent because of a "chaotic" business climate thanks to the rush of new agents. Industry executives said regulating them is difficult because many operate without licenses or even proper offices.

China has 96 regular container routes to overseas destinations with some 860 sailings a month. Seven more routes link ports on the southern Pearl River to Hong Kong with nearly 1,000 monthly sailings.

China's container handling capacity has risen 25 percent a year in recent times to more than 5 million metric tons last year, government figures show.

While Shanghai's total volume slipped last year to 165 million tons from the record 176 million of 1993, it still ranked third busiest in the world terms, according the harbor bureau. Container volume rose 1.3 percent to the equivalent of 1.2 million 20-foot boxes.

The move to impose some control on agents comes shortly after publication of the first national regulations on the business.

The Ministry of Foreign Trade and Economic Cooperation stipulated minimum registered capital of $1 million for those dealing with maritime transport, $800,000 for air and $600,000 for road. The capital must be increased proportionally if an agent engages in more than one line.

Once approved, the firm will have an initial operating period of 20 years.

Firms seeking approval for a foreign-funded international shipping agency must "be related to companies dealing in international shipping organizations," the ministry said. They are required to have a minimum three years' operating experience, "management and professional personnel qualified for the business, stable cargo sources and agency outlets."

Foreign-funded agencies are allowed to book space, lease or charter ships and other carriers, handle international intermodal business and provide warehousing, and container packing and emptying.

Documentation, including bills of lading, customs declarations, applications for inspection, insurance and settlement of freight charges also are permitted.

For many decades, freight forwarding and related services were the monopoly of China National Foreign Trade Transport Corp. Sinotrans, as it is commonly known, is an arm of the ministry.

While that monopoly held, overseas companies generally formed joint ventures with Sinotrans, which has about 90 bulk carriers, boxships and other vessels aggregating 2.5 million deadweight tons and leases other ships every year.

Sinotrans handles more seaborne cargo in China than any firm other than state-owned China Ocean Shipping Co.