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Anti bribery legislation begins to bite in Australia

: Cargo Archive Stories Issue #218; Wednesday, 03 October 2012

IN earlier editions of this magazine we have brought you articles about the provisions of the US Foreign Corrupt Practices Act and the introduction of new UK legislation aimed at bribery in the UK and beyond the UK if there is a UK connection. The the UK legislation is even more stringent than that in US.

At the same time, we have also addressed proposed legislative change in Australia which would make our own existing “anti – bribery” legislation more aligned with the UK legislation. Part of that would be effected by removing our current “trade facilitation” defence to an offence which allows a lower level of “facilitation payment” in certain circumstances. The effect of that amendment would require all Australian companies to review their corporate policies and stop paying even those “facilitation payments”.

Reports from the US regularly include reference to fines against US companies involved in illegal activity. For example the US Securities and Exchange Commission reported in August that a California-based enterprise systems firm had agreed to pay a US$2 million penalty to settle charges that it violated the Foreign Corrupt Practices Act.

Corrupt payments
The Australian media is now focusing more heavily on the issue and question how many major deals overseas have somehow been the subject of corrupt payments to assist trade. In many cases they try to attribute knowledge or culpability at Reserve Bank level. This includes the well – known issues associated with Australia’s “Securency” and “Note Printing” companies and allegations that practices in securing overseas contracts may have breached Australian law. As far back as July 2011, the Australian Federal Police exercised search warrants at the business premises of the companies and the homes of their former executives seeking information on alleged bribes paid to foreign officials to secure contracts overseas.

Those steps by the Australian Federal authorities seem to be ending in prosecutions. In August 2012, the former company secretary and cfo of Securency pleaded guilty to one charge of false accounting, which Justice Elizabeth Hollingworth said involved “a false and elaborate attempt to justify” the payment of commissions to promote the company’s banknote supply business in Malaysia.

Avoiding jail
At that time however the judge agreed not to impose a jail sentence on the basis that the defendant had agreed to give evidence against other officers of other companies in trials to be held against them. Those is not an unusual event as those who first agree to plead guilty and give evidence often avoid jail for their actions. In this case the “agreed” offence was one of “false accounting”, described as a “mid-range offence” aimed at hiding illegal payments by senior employees under pressure from those senior employees. Even in the absence of documentary evidence of those payments, the oral evidence of the former executive was seen as valuable.

This is all taking place at the same time as competition regulators find continued success in actions again those airlines involved in alleged “cartel” behaviour to fix various prices for air cargo services both here and overseas. This has included “agreed” findings of fault here (with fines) and in the US as well as US actions and fines against a Japanese freight forwarding company. More recently an Australian High Court challenge by Garuda Airlines challenging the authority of the ACCC to bring action against it for cartel behaviour due to “sovereign immunity” was unsuccessful. The High Court upheld on 7 September 2012 the right of the ACCC to pursue those actions as they were based on commercial actions not those of the Indonesian State, which would be protected by the Foreign State Immunities Act.

So what is the messages from all of this? If companies have not already taken serious note of these bribery and competition issues, they should do so immediately. The investigating authorities are having successes with some providing more evidence in actions against other and potentially larger defendants.

Companies must now introduce proper practices and training to ensure that these types of provisions are not breached and to ensure their corporate culture actively opposes such actions. Remember that the UK legislation puts a positive obligation on companies to ensure that no bribery takes place and it is a good idea to adopt similar measures here and ensure that companies can show that all possible steps were taken to stop offending activity – and that such policies and procedures and how they were implemented are able to be produced when the regulators arrive.

Emirates upbeat on Aust, with a Qantas deal ‘delivering great opportunities’

: Cargo Archive Stories Issue #218; Wednesday, 03 October 2012

AIR freight may be struggling in the wake of continuing global economic turmoil, but it hasn’t dented the optimism expressed by Hiran Perera, Emirates SkyCargo, senior vice president -Cargo Planning and Freighters who was in Australia this week to meet key forwarders and shippers ahead of the carrier’s planned November launch ofB777-300ER flights to Adelaide - and to meet senior executives of proposed alliance partner Qantas Freight, writes Chris Hurd..

Perera has been in the airline Industry for more than 23 years. He joined Emirates Airline in 1986 as a cargo instructor and has since worked in various capacities within Emirates SkyCargo. He was involved in the development of the freighter operation within Emirates from the onset, playing a key role in developing and expanding the 747 freighter network.
He is also involved in the assessment/development of the future freighter fleet, currently comprising four Boeing 777-Fs, two 747-400Fs and two 747-400ERFs.
Perera has an MBA from the University of Bradford, UK and a Post Graduate Diploma from the Chartered Institute of Marketing, UK.

Perera gave the go-head to start freighter flights to Sydney last year.
“The Australian economy is still quite strong compared to other trading partners and there is significant demand for imported goods.” (Emirates Skycargo does not push outbound cargo too much as it has significant payload contracts ex Hong Kong. From Australia the freighter is routed via Hong Kong to offset costs). “We started off with one flight but demand quickly warranted a second flight and now we operate three flights a week with a fourth doing ad-hoc rotations when required. Global demand is still trending weak but Australia is performing to expectations for us.”

Emirates and Qantas have announced a co-operation pact which is before the Australian regulatory authorities. Perera sees some “wonderful opportunities based on the extensive network coverage” that could be offered should the proposed deal get the go ahead but was reluctant to comment further as there had been no detailed discussions with Qantas Freight on how the pact would actually work. He met briefly with senior Qantas Freight management and both carriers identified opportunities for growing trade and developing new markets, particularly in the mining and agricultural (perishables) sectors. He said detailed discussions would follow if the regulation authorities approved the closer ties.

Dubai-based Emirates senior management have always maintained a strong policy of remaining independent and running the airline without resorting to alliances and this will not change, even with closer ties to Qantas, he said. The proposal with Qantas was ‘more a bilateral agreement between two carriers’ and both would remain independent.
“Both airlines will still be free to work with other airlines; the main benefit will be for industry and consumers.”

Both Emirates’ and Qantas’ fleets are very much geared to the A380, with Emirates the world’s largest operator of the aircraft. If the collaboration pact is cleared, the two airlines will jointly offer 98 weekly services between Australia and the UAE gateway city of Dubai including four daily A380 flights.
The A380 with a full passenger load can limit cargo uplift, particularly at certain times of the year. Should significant growth return to markets, Perera said he would look at increasing freighter flights to meet demand – though at this stage that was unlikely.

“From a capacity point of view Qantas will continue to operate via Singapore, so it would not be a problem,” said Perera.
“We have significant belly capacity on passenger aircraft serving Australia for the foreseeable future. The A380 with a full passenger load ex Dubai can still carry between 10 and 13 tonnes. In addition to the A380 we also operate the versatile B777-300ER to Perth, Brisbane, Melbourne and the new Adelaide services.

“With a passenger load factor of 75 per cent, we can carry anything between 14 and 24 tonnes per flight. When we get large outsize freight movements such as mining equipment it is relatively easy to use the interstate trucking services to carry it to Sydney for carriage on our freighters.”

Etihad and Virgin’s alliance is expected to offer significant competition, with Etihad expected to be operating from more Australian ports with feed from Virgin, but Perera does not see cargo capacity overkill offered in what is a relatively small market and says he welcomes competition.

“Emirates has always faced competition and thrives on it,” said Perera. “It makes us a better, more innovative airline. We focus on our service excellence and on delivering an excellent product. Competition is good for the consumer. It gives them choice.”

Perera said he does not think there will be excess capacity problems for Australia and that the market will grow sufficiently to support new services.
“Capacity is often weight restricted at certain times of the year, which is why we introduced the freighters to this market; they have subsequently proved themselves. I expect global markets particularly in Europe and the USA to slowly start improving. Australia has a strong economy along with heavy investment in the mining sector. Africa is emerging as a mining heavyweight. In the years to come I see more air freight moving out of Perth.”

Perera also sees good growth in the agricultural sector particularly with Emirates’ extensive global networks. It now serves 126 destinations in 74 countries in Europe, the Middle East, Africa, the Indian subcontinent, North America, South America, and Asia-Pacific. This year Emirates increased its European network to 34 destinations, with new services operating to Dublin, Barcelona and Lisbon. Lyon and Warsaw will bring the European network to 36 destinations, when they come online on 05 December 2012 and 06 February 2013 respectively.

Looking ahead, Perera is optimistic and sees steady growth in the air freight sector for the next five years.

“I remain confident in the Australian freight market,” said Perera. “However, it all depends to a certain extent on how quickly Europe and to a lesser extent the US markets recover. The entire world is now inter-linked, so we really need a global recovery. I don’t think the problems will last forever. It tends to be cyclical. When it does recover,Australia is going to be very well placed to take advantage of new opportunities.”

Cybercrime almost impossible to control or eradicate - Troels Oerting

: Cargo Archive Stories Issue #218; Wednesday, 03 October 2012

EUROPE’s new online crime centre faces an almost insurmountable task, its incoming chief Troels Oerting has said.
“There is no absolute security, that is a myth,” said Oerting, who from January will run the European Cybecrime Centre (ECC) - an offshoot of the EU’s joint police body Europol.

There already are some 3.4 billion possible Internet Protocol (IP) addresses which assign numerical labels to computers and devices connected online and that number is set to increase exponentially.
“We will soon have 4.2 billion billion billion billion billion billion billion billion addresses. And the police need to find the owners of these [if there is an investigation],” Oerting said.
He added that more than 200 billion spam emails are being sent every day and that 46 new malicious codes aimed to steal online data are being created every second.

Some (mainly Asian and Russian area) intelligence services are on the list of culprits that increasingly use the Internet to steal data to gain inside advantages on trade. Activists, hackers and organised crime also are becoming more active.

Unlike conventional crimes such as cocaine smuggling, police are often unable to trace online crimes which are committed easily, quickly and invisibly. It can be hard to distinguish between a cyber attack by a “clever” teenager and one committed by a criminal or state organisation.

The way forward, said Oerting, is to create better legal norms and public awareness and to ensure that what is illegal in the “offline world” is also illegal in the online one.
He said his new centre will combat intrusion, fraud, intellectual property theft and child sexual exploitation.
Oerting said one country he had visited has a two-year backlog of child sexpoitation cases.

The centre hopes to co-ordinate with member state authorities and other EU agencies to ensure they do not overlap on investigations.
It will post liaison officers to the European Commission and the European External Action Service as well as to EU agencies.
Oerting noted that funding remains a problem in some of the smaller EU member states where there is no budget to investigate online cross-border crimes.

“I hate to say it, but when we invite [people] to meetings about Europol investigations, half of the most critical countries don’t come. They haven’t the money to fund travel,” he said.
Meanwhile, some Internet Service Providers (ISPs), even when faced with a court order, are now asking law enforcement agencies for EUR25 for each IP address they provide.
Oerting said child sexual abuse cases can entail thousands of IP addresses. “One country couldn’t afford it, so we [Europol] paid it,” he explained.

Hiekle Hijmans, an official from the European Data Protection Supervisor (EDPS), a Brussels-based EU agency, said authorities must ensure data protection rights are respected while tackling the problem.

“The fight against cyber crime often takes place in a pro-active preventive manner by trying to link individuals who are not yet suspected of crime,” he said on the scattergun methods used by some police forces.

He pointed out that ISPs cannot be asked to carry out general monitoring of the personal information they store: “Systemic monitoring of content by the providers is highly intrusive.”

Some member states, like France, allow police to use a “legalised Trojan horse” to spy on potential cyber criminals, Myriam Quemener, a French magistrate and cyber crime expert, said.
She noted that French police officers attempt to reach out online anonymously to make contact with criminals.

HK logistics mission scores highly with NZ’s industry

: Cargo Archive Stories Issue #218; Wednesday, 03 October 2012

A HIGH-powered trade mission from Hong Kong to New Zealand recently scored a triple success: Building trade in both directions while at the same time bolstering the logistics framework to make it all happen smoothly.

Four successes, in fact: The mission participants also set out to strengthen the role of Hong Kong as a two-way portal for trade with mainland China and Macau.
Indicative of the logistics aspect of the mission – with air cargo likely to benefit substantially – was the choice of Willy Lin as co-leader in tandem with Margaret Fong.
Fong is deputy chief executive of the Hong Kong Trade Development Council (HKTDC), which organised the mission.
Lin is chairman of the Hong Kong Shippers’ Council, a peak industry body which has done much to create a level playing field for shippers and service providers, in the air cargo sector as well as maritime and land transport.

He said the mission’s objectives included sharing supply chain intelligence to build a better platform for distribution of New Zealand food and wine via Hong Kong.
During their visit to New Zealand, the group spent some time looking at operations at Auckland International Airport and its logistics ‘city’, as well as calling on logistics companies and port facilities.
Interaction with members of the Customs Brokers & Freight Forwarders Federation was a highly useful aspect of the program, according to mission participants.
Also indicative of the mission’s status was HKTDC’s choice of Fong as co-leader. She is the trade organisation’s deputy executive director and has an impressive background in transport and tourism as well as trade. She has held senior positions in Hong Kong and represented the SAR in the United States.

Among others in the 15-strong delegation was Alex Chu, China beachhead adviser for New Zealand Trade & Enterprise.
Bonnie Shek, HKTDC’s well known (and popular) director for Australia and New Zealand, said the food and wine logistics services mission was a ‘first’ for which her organisation had high hopes.
“I’ve been in this role for eight years and it’s the first time a mission like this has been organised. It’s quite exciting, actually!”
While she and HKTDC were confident the project would generate major ongoing business eventually, it was appreciated that more work remained to be done. “It’s a first step, linking up companies.”
Shek said that HKTDC hoped a reciprocal mission to Hong Kong could be organised, suggesting that an ideal platform would be at the time of the Asian Logistics and Maritime Conference in November, an event which is also organised by HKTDC.
Identifying partnership and collaborative marketing opportunities for the China market was an important aspect of the mission, Shek pointed out. “Companies are looking beyond Hong Kong.”
On the web: www.hktdc.com

Aust, NZ mull next CER steps

: Cargo Archive Stories Issue #218; Wednesday, 03 October 2012

IN a collaboration that is appropriate to the topic, the Productivity Commissions of Australia and New Zealand are undertaking a joint study on where the pioneering Closer Economic Relations (CER) regime should head, building on the benefits to both countries of its 30 years to date, writes Kelvin King.

An interim report for discussion has just been released, identifying some 20 policy initiatives for consideration.
Air services and marine freight are among the issues, with a recommendation that remaining restrictions on the single trans-Tasman aviation market be removed.
The report suggests waiving CER rules of origin (RoO) where tariffs are at five per cent or less, on the basis that at this level there is no incentive for third parties to engage in trans-shipment and thus no need for the associated RoO.

Further, it envisages reducing any tariff items still exceeding five per cent to that level or less by 2015, thereby terminating RoO completely and eliminating costly compliance.
In another area of relevance to the cargo sector, the report recommends that ‘where it is cost-effective, quarantine and biosecurity agencies in Australia and New Zealand should continue to develop common systems and processes and enhance their current joint approach to risk analysis’.
“While a single economic market provides the ‘direction of travel’ for the bilateral relationship, how far future policy initiatives go ultimately must emerge from good public policy processes focused on achievement of net benefits,” said Gary Banks, who chairs the Australian Commission.

Banks recently announced that he will be retiring in December, after heading the commission for 15 years.
Murray Sherwin, his New Zealand counterpart, commented that “CER has been a very successful venture, with initiatives that would not have been possible with any third country. There is more that can be achieved, to the benefit of both Australia and New Zealand.”
Other major initiatives include business law, occupational licensing and capital and labour flows. The draft report claims there is also significant potential for each government to cooperate with and learn from the other in policy development and evaluation.

In a number of areas, such as mutual recognition of dividend imputation, the report says that more work is required to assess the potential for net benefits. For others, such as monetary union, the Commissions have concluded that they would not generate net benefits and should not proceed.
The interim report also outlines some enhancements to CER governance arrangements to help meet the challenges of the future, building on the informality and flexibility which have served the relationship well.
Initial reaction from stakeholders has been mostly favourable, with some reservations. Phil O’Reilly, chief executive of BusinessNZ, expressed disappointment that the double taxation of company income had not received more attention.

“This is the largest unresolved issue for business in both countries,” he said.

“Currently, companies based in Australia or New Zealand with operations in the other country have their profits taxed twice, since neither country recognises the other’s system for offsetting tax credits. This is a sharp disincentive to trans-Tasman business and is an obvious issue for the Productivity Commissions to address. Hopefully this issue will feature in the final report in December.”

The interim report is available on both agencies’ websites:

www.pc.gov.au
www.productivity.govt.nz