《系统工程》课程教学资源（英文文献）Research on the Free Trade Zone Policy and the Development of International Logistics at Ports

ResearchontheFree TradeZonePolicy and theDevelopment of International Logistics at PortsLIUWei, WANGXue-feng(International Shipping Department, Shanghai Maritime University, Shanghai 200135)Abstract: The port is an important link in the transportation system of international logistics.The paper discusses the issue of a free trade zone policy and the development of international logisticsin ports, showing the positive effects of the performance of a free trade zone policy on constructinginternational logistics hubs, strengthening the transshipment functions of ports and enhancing thecompetitiveness ofthe port enterprises.Key words:free trade zone; policy,port, international logistics

Research on the Free Trade Zone Policy and the Development of International Logistics at Ports LIU Wei，WANG Xue-feng (International Shipping Department, Shanghai Maritime University, Shanghai 200135) Abstract: The port is an important link in the transportation system of international logistics. The paper discusses the issue of a free trade zone policy and the development of international logistics in ports, showing the positive effects of the performance of a free trade zone policy on constructing international logistics hubs, strengthening the transshipment functions of ports and enhancing the competitiveness of the port enterprises. Key words: free trade zone; policy; port; international logistics

In the transportation system ofcompetitiveness. With the developmentinternational logistics, sea transportationofeconomicglobalization,competitionisbeyonddisputethemost importantin East Asia and the Asia-Pacific regionmeans of transportation, with portsis intensifying. China faces an urgentbeing the point of convergence forchallenge to develop a number ofinternational logistics. Currently, withinternational to logistics hubs andthe rapid development in internationalcosmopolitan cities along the coastalcontainer logistics, the enlargement ofregions to play pivotal roles in China'svessels and convergence of sea routesengagement in regional economichave become two major trends incompetition.maritime container transportation.InGeographically, most of the bondedpursuit of scale based economiccanes in China are situated at theperformance, container vessels areconvergence point of internationalcontinuously being enlarged, withshipping logistics, including ShanghaiPanama-plus containerWai Gaoqiao Bonded Zone, Shenzhenvessels~8000TEU in operationBonded Zone, Tianjin Port Bonded one,Shipping companies, in order to operateZhan.iagang Bonded Zone, Ningbomore economically,need to reduce theBonded Zone, Xiamen Bonded Zonenumber of times that large vessels makeand Fuzhou Bonded Zone. They are allberth in ports; with the goal oflocated within or adjacent majoroccupying berths in only one hub ininternational trade ports and therebyeach shipping district. At the same time,have a geographic advantage in thecore routes need to be established indevelopment of international logisticskeeping with the enlargement ofIf China' bonded zones and portscontainer vessels.Therefore, thecan be integrated and free trade policyestablishment of hubs is an importantcan be exercised, the basis requirementsway for aofmoderninternational logistics,i.ecountry to increase itsopenness, completeness and uniqueness,competitiveness in sea transportationwould be met. This would provide theand increase its overall internationalprerequisite for the establishment of

In the transportation system of international logistics, sea transportation is beyond dispute the most important means of transportation, with ports being the point of convergence for international logistics. Currently, with the rapid development in international container logistics, the enlargement of vessels and convergence of sea routes have become two major trends in maritime container transportation. In pursuit of scale based economic performance, container vessels are continuously being enlarged, with Panama-plus container vessels~8000TEU in operation. Shipping companies, in order to operate more economically, need to reduce the number of times that large vessels make berth in ports; with the goal of occupying berths in only one hub in each shipping district. At the same time, core routes need to be established in keeping with the enlargement of container vessels. Therefore, the establishment of hubs is an important way for a country to increase its competitiveness in sea transportation and increase its overall international competitiveness. With the development of economic globalization, competition in East Asia and the Asia-Pacific region is intensifying. China faces an urgent challenge to develop a number of international to logistics hubs and cosmopolitan cities along the coastal regions to play pivotal roles in China's engagement in regional economic competition. Geographically, most of the bonded canes in China are situated at the convergence point of international shipping logistics, including Shanghai Wai Gaoqiao Bonded Zone, Shenzhen Bonded Zone, Tianjin Port Bonded one, Zhan.iagang Bonded Zone, Ningbo Bonded Zone, Xiamen Bonded Zone and Fuzhou Bonded Zone. They are all located within or adjacent major international trade ports and thereby have a geographic advantage in the development of international logistics. If China' bonded zones and ports can be integrated and free trade policy can be exercised, the basis requirements of modern international logistics, i.e. openness, completeness and uniqueness, would be met. This would provide the prerequisite for the establishment of

international logistics hubs in China1 The Free trade zone policy isOnly in this way can logistics focusingthe sine qua non in the establishmenton bonded zones and ports be trulyof international logistics hubsintegrated in to the international supplyFrom international practices wechain. The specific function and policymay conclude that major manufacturingdesignated to the ports by the Statecountries, such as Pusan in Korea,would undoubtedly promote theAntwerp in Belgium, Hamburg indevelopment of international trade andGermany, Tokyo and Yokohama inlogistics, increase international transitJapan, Long Beach and Los Angeles inthe US, all have or have had hubs.Twovolume, and significantly impact theroute network of China's linerof the leading ports in the world, Hongtransportation system. These wouldKong and Singapore, are bothpromote the development of Chinainternational logistic hubs, with a bigshare of transit volutes. They have aregular ship companies as well as thedevelopment of bonded zones alonghighly efficient free port system, whichChinalacksports, and promote thetimely realizationof a national strategy in which severalOver the Past two decades, the portmajor container ports in our coastalof Dubai has become increasinglyregions evolve into internationalimportant in international sealogistics hubs while Shanghai becometransportation and has become a hub foran international center for shippingtraffic, the largest distribution center forThe implementation of a free tradecargo and entrepot trade center in thezone policy in ports is of greatMiddle East. It is one of the 4 largestsignificance to China's development ofentrepot trade ports and the 13th largestcontainer port in the world. Althoughinternational logistic hubs andinternationallogistics.in ports. We canhubs that are geographically superiorreview it from the followinghave emerged in its neighboring regijs,perspectives.such as Aden and Salala, the port ofDubai has generated tremendousvolumes in the supply of goods with the

international logistics hubs in China. Only in this way can logistics focusing on bonded zones and ports be truly integrated in to the international supply chain. The specific function and policy designated to the ports by the State would undoubtedly promote the development of international trade and logistics, increase international transit volume，and significantly impact the route network of China’s liner transportation system. These would promote the development of China regular ship companies as well as the development of bonded zones along ports, and promote the timely realization of a national strategy in which several major container ports in our coastal regions evolve into international logistics hubs while Shanghai become an international center for shipping. The implementation of a free trade zone policy in ports is of great significance to China's development of international logistic hubs and internationallogistics.in ports. We can review it from the following perspectives. 1 The Free trade zone policy is the sine qua non in the establishment of international logistics hubs From international practices we may conclude that major manufacturing countries, such as Pusan in Korea, Antwerp in Belgium, Hamburg in Germany, Tokyo and Yokohama in Japan，Long Beach and Los Angeles in the US, all have or have had hubs. Two of the leading ports in the world, Hong Kong and Singapore, are both international logistic hubs, with a big share of transit volutes. They have a highly efficient free port system, which China lacks. Over the Past two decades, the port of Dubai has become increasingly important in international sea transportation and has become a hub for traffic，the largest distribution center for cargo and entrepot trade center in the Middle East. It is one of the 4 largest entrepot trade ports and the 13th largest container port in the world. Although hubs that are geographically superior have emerged in its neighboring regi}s, such as Aden and Salala，the port of Dubai has generated tremendous volumes in the supply of goods with the

and later expanding the practice in otherAlishan free trade zone, which wasestablished in 1985.ports of Japan. The measures, byIts throughput of containers in 2002selecting 2 to 3 ports from the 11international hubs of 4 regions acrossreaches 4. 2 million TEU, an increase of20%.Although many of the importJapan, aimed at reducing the ports' costsgoods entering the Alishan free tradethrough centralizing container supply tobetter compete with major hubs-.Localzone are for transit to other countries,they will undergo short term warehouseauthorities of Taiwan, on the basis of anprocessing in the zone. The free tradeAsia-Pacific center of transit, developedzone has attracted more than 125free trade ports fronts. According to itsshipping companies and over95 airlineplan, apart from the existing ports ofcompanies and there are now 2 ,400Keelung, Taizhang and Kaohsiung,doneatic and multinational corporations.more free trade ports, such as theAt present, in China's largestTaoyuan Freight Zone, and the port ofTaipei will soon be opened. Good fromcontainer ports, Shanghai Port andShenzhen Yantian Port, internationalthese ports will be free from customstransit volume accounts for less than 1declarations, and ports will issue 72-hour entry visas to overseas business% of the total volume, while in the portsof Hong Kong, Singapore, Kaohsiung,people, including those from theKobe and Yokohama, the figures areMainland. The Ports will enjoy a highdegree of autonomy in manage the40%,7096.53.4%21%and15%respectively. At the samewarehousing,transfer and deepprocessing of freight, and will be free oftime, countries and regions in East Asiaand the Asia-Pacific region. all adoptingport taxes, excise and sales tax. In ordermeasures to enhance the portsto realize its goal of becoming the centerinternational competitiveness.Theof logistics in north and East Asia, TheKorean government plans to developJapanese government put forward apolicy to establish.ports while implementing acorresponding favorable policy ofSpecial port areas, initiating a pilotproject in North Kyushu Port in 2003reducing their fares. In particular, the

Alishan free trade zone，which was established in 1985. Its throughput of containers in 2002 reaches 4. 2 million TEU，an increase of 20%.Although many of the import goods entering the Alishan free trade zone are for transit to other countries , they will undergo short term warehouse processing in the zone. The free trade zone has attracted more than 125 shipping companies and over 95 airline companies and there are now 2 ,400 doneatic and multinational corporations. At present, in China’s largest container ports, Shanghai Port and Shenzhen Yantian Port, international transit volume accounts for less than 1 % of the total volume，while in the ports of Hong Kong, Singapore, Kaohsiung, Kobe and Yokohama, the figures are 40%，7096，53. 4%，21% and 15% respectively. At the same time，countries and regions in East Asia and the Asia-Pacific region. all adopting measures to enhance the ports‘ international competitiveness. The Japanese government put forward a policy to establish. Special port areas，initiating a pilot project in North Kyushu Port in 2003 and later expanding the practice in other ports of Japan. The measures，by selecting 2 to 3 ports from the 11 international hubs of 4 regions across Japan, aimed at reducing the ports' costs through centralizing container supply to better compete with major hubs-.Local authorities of Taiwan, on the basis of an Asia-Pacific center of transit, developed free trade ports fronts. According to its plan, apart from the existing ports of Keelung, Taizhang and Kaohsiung, more free trade ports, such as the Taoyuan Freight Zone, and the port of Taipei will soon be opened. Good from these ports will be free from customs declarations, and ports will issue 72- hour entry visas to overseas business people, including those from the Mainland. The Ports will enjoy a high degree of autonomy in manage the warehousing，transfer and deep processing of freight, and will be free of port taxes, excise and sales tax. In order to realize its goal of becoming the center of logistics in north and East Asia, The Korean government plans to develop ports while implementing a corresponding favorable policy of reducing their fares. In particular, the

The diversification of the functionnew port of Kwangyang is attractingship-owners with its lowfares.Recently,of ports is realistic and inevitable.Theport-related charges have been furthercombination of ports and bonded zonesreduced to increase the number ofthrough free trade can give full play totransit.the multiple functions of ports. Ports canMost international hubs haveevolve from pure land and waterimplement free port policies, and whattransportation hubs into the leadingChina needs in its development ofplatform of providing service to theinternational logistic hubs is a softwarehinterland economy,and employ theenvironment of hubs, i.e.favorablediffusion, radiation and comprehensivepolicies. Free trade zones and free portoperationfunctions of ports.Ports likemechanisms are the popular andthese boast a complete range of porteffectiveinstrumentsofinternationalindustries which can work for loadinglogistic hubs which play a vital role inand unloading, warehousing and transit,port operations and thepromotion oftheas well as a group of port enterpriseseconomy. After China's accession intowhich workfor production,thecapitalthe World Trade Organization, tariffsmarket, the commoditymarket and otherhavebeenreduced and willbereducedsocial markets. In this way, both afurther. However, this will by no meanscomprehensive mufti-industry logisticslessen the importance of hubs with theindustry in ports and an industry districtcharacteristicsoffreeports.Hubswithalong the ports are established.The purpose of a free trade zonethe characteristics of free ports not onlyresemble free ports, but also play thepolicy in ports is to attract theinternational transit of goods, to increaserole of hubs, thusgeneratingtremendousconvenience for containervolume of entrepot trade, and thustransportation, the major modern meansenhance the country's status in the globaloftransportationeconomyandpromotethedevelopment2 The Free trade zone policy inof the national economy. A port mustincrease the proportion of transitports enhances the transit function ofinternational logistic hubscontainers, especially international

new port of Kwangyang is attracting ship-owners with its low fares. Recently, port-related charges have been further reduced to increase the number of transit. Most international hubs have implement free port policies, and what China needs in its development of international logistic hubs is a software environment of hubs, i.e. favorable policies. Free trade zones and free port mechanisms are the popular and effective instruments of international logistic hubs which play a vital role in port operations and the promotion of the economy. After China's accession into the World Trade Organization, tariffs have been reduced and will be reduced further. However, this will by no means lessen the importance of hubs with the characteristics of free ports. Hubs with the characteristics of free ports not only resemble free ports, but also play the role of hubs, thus generating tremendous convenience for container transportation, the major modern means of transportation. 2 The Free trade zone policy in ports enhances the transit function of international logistic hubs The diversification of the function of ports is realistic and inevitable. The combination of ports and bonded zones through free trade can give full play to the multiple functions of ports. Ports can evolve from pure land and water transportation hubs into the leading platform of providing service to the hinterland economy，and employ the diffusion, radiation and comprehensive operation functions of ports. Ports like these boast a complete range of port industries which can work for loading and unloading, warehousing and transit, as well as a group of port enterprises which work for production, the capital market, the commodity market and other social markets. In this way, both a comprehensive mufti-industry logistics industry in ports and an industry district along the ports are established. The purpose of a free trade zone policy in ports is to attract the international transit of goods, to increase volume of entrepot trade, and thus enhance the country's status in the global economy and promote the development of the national economy. A port must increase the proportion of transit containers, especially international

transit business rather than hinterlandtransit containers, if it is to become atrue international logistic hub. Thesupply alone is crucial to the develop ofconvergence of the supply of goods andinternational container logistic hubs,because become the function ofthe geographical location of ports areinternational transit can a the transit portreasons that hubs can attract largevolumes of transit goods with a greatfor major liner companies and a trulynumber of branch line networks andinternational sea transportation logistictrunk lines covering the globe. Shippinghub. Currently the world shippingcompanies, by consistently using theseindustry is quite centralized and choicehubs, can gain considerable guaranteesof major liner companies for transitfor freight. On one hand, shippingports can virtually determine if a port iscompanies are willing to do so toable to become an internationalacquire more goods and, on the othercontainer logistic hub. Becoming ahand, the companies will have moretransit port for a major liner companyleeway in providing transit for their owncan bring tens of thousands of TFU infreight. With the"Matthew Effect" ingoods and significantly impact on thethe container industry,the importance ofexpansion of throughput.In 2001, withhubs will continue to grow.the acquisition of Maersk Sealand bymeans of a low price ,throughput at theFrom 1990 to 2003, the throughputof containers in three major ports ofport of Danjungpalapas in MalaysiaChina increased dramatically: Shanghaisoared 390% over the year before and(460,000 to 11.25 million TEU)reached 2.0Smillion TEU, while theShenzhen (30,000 to 1065million TEU)port of Singapore, having lost Maerskand Qingdao(140,000 to 4. 2millionSealand, dropped to 1 .52 million TEU.TEU).Shanghai and Shenzhen climbedWith the expansion of throughput, linerdensity and international routes , theto the 3rd and 4th largest in the world.This year, Shanghai is expected tothree ports of Shanghai, Shenzhen andexceed 13. 80 million TEU. AlthoughQingdao have attracted the containerthe throughput of containers in China'ssupplies of their neighboring portsmajor ports has reached a high level,However,faced withfierce competition

transit containers，if it is to become a true international logistic hub. The convergence of the supply of goods and the geographical location of ports are reasons that hubs can attract large volumes of transit goods with a great number of branch line networks and trunk lines covering the globe. Shipping companies, by consistent1y using these hubs, can gain considerable guarantees for freight. On one hand, shipping companies are willing to do so to acquire more goods and, on the other hand, the companies will have more leeway in providing transit for their own freight. With the ”Matthew Effect" in the container industry, the importance of hubs will continue to grow. From 1990 to 2003，the throughput of containers in three major ports of China increased dramatically: Shanghai (460,000 to 11.25 million TEU) Shenzhen (30,000 to 1065million TEU) and Qingdao(140,000 to 4. 2million TEU ).Shanghai and Shenzhen climbed to the 3rd and 4th largest in the world. This year, Shanghai is expected to exceed 13. 80 million TEU. Although the throughput of containers in China's major ports has reached a high level, transit business rather than hinterland supply alone is crucial to the develop of international container logistic hubs, because become the function of international transit can a the transit port for major liner companies and a truly international sea transportation logistic hub. Currently the world shipping industry is quite centralized and choice of major liner companies for transit ports can virtually determine if a port is able to become an international container logistic hub. Becoming a transit port for a major liner company can bring tens of thousands of TFU in goods and significantly impact on the expansion of throughput. In 2001，with the acquisition of Maersk Sealand by means of a low price ,throughput at the port of Danjungpalapas in Malaysia soared 390% over the year before and reached 2.0Smillion TEU，while the port of Singapore, having lost Maersk Sealand, dropped to 1 .52 million TEU. With the expansion of throughput, liner density and international routes , the three ports of Shanghai , Shenzhen and Qingdao have attracted the container supplies of their neighboring ports. However, faced with fierce competition

companies are adjusting their operationfrom neighboring ports, internationallogistic centers with characteristics ofand development strategies. The focusfree ports must be set up in ports tofor the strategic goal of logistics, as wellattract containersfor, transit overseas, toasforthedevelopmentofa logisticbecome transit ports for major linernetwork and its management, would bethe general trend of global procurementcompanies and to provide a tax-free,production and operation.convenient platformfortransitbusiness3 The effect of a free trade zoneIt is an inevitable choice forpolicy on the expansion of transit inmultinational companies to transferportsservices, such as warehousing,Overthepasttwopackaging, LCL, and distribution, toregions with low labor and land costs.decades, economic globalization haspicked up speed. This has resulted inMultinational companies procure finalgreat strategic impact on the shippingproducts in regions within and adjacentand port industries of the world. Theto these countries, and have thememergence and rapid development ofundergo simple processing such asmultinational corporations has greatlywarehousing, labeling and LCL. Theenhanced economicglobalization,products are then shipped to salesinfiltration, interdependence and tradeoffices overseas. This can be conceivedliberalization, increasing demands onas some logistic value-addingplayers in international logistics,procedures being transferred fromShippers require that carriers adapt toabroad to home, elongating the valuethe changing environment, set up achain. After entry, some products withhigh tariffs(e.g. cars) can first be storedcomplete logistic network,transport rawmaterials and products using a variety ofin the port, and be imported aftertransportation modals and door-to-doorfounding the purchaser, thus postponingthe taxes and reducing capital costs.transportation, manage operationsBonded zones combining free tradethrough a supply chain, and providecustomers with high-efficiency,low costzones and ports or ports with flee tradevalue-added service.Multinational

from neighboring ports，international logistic centers with characteristics of free ports must be set up in ports to attract containers for; transit overseas, to become transit ports for major liner companies and to provide a tax-free, convenient platform for transit business. 3 The effect of a free trade zone policy on the expansion of transit in ports Over the past two decades，economic globalization has picked up speed. This has resulted in great strategic impact on the shipping and port industries of the world. The emergence and rapid development of multinational corporations has greatly enhanced economic globalization, infiltration, interdependence and trade liberalization, increasing demands on players in international logistics, Shippers require that carriers adapt to the changing environment, set up a complete logistic network，transport raw materials and products using a variety of transportation modals and door-to-door transportation，manage operations through a supply chain，and provide customers with high-efficiency, low cost value-added service. Multinational companies are adjusting their operation and development strategies. The focus for the strategic goal of logistics, as well as for the development of a logistic network and its management, would be the general trend of global procurement, production and operation. It is an inevitable choice for multinational companies to transfer services, such as warehousing, packaging, LCL, and distribution, to regions with low labor and land costs. Multinational companies procure final products in regions within and adjacent to these countries, and have them undergo simple processing such as warehousing，labeling and LCL. The products are then shipped to sales offices overseas. This can be conceived as some logistic value-adding procedures being transferred from abroad to home，elongating the value chain. After entry，some products with high tariffs(e.g. cars) can first be stored in the port, and be imported after founding the purchaser, thus postponing the taxes and reducing capital costs. Bonded zones combining free trade zones and ports or ports with flee trade

zone policies will be the ideal placehubs. Therefore, freight from all ports infor multinational companies to set upChina must be transited overseas.distribution centers.According to the transit policy report is-With China 's relatively high tariffssued by Shanghai international shippingat present, costs will increasecenter, the world's largest oceandramatically if transit cargo must gotransportation company, Maerskthrough an import-export process.Sealand, has set up Japan and HongSecond, entrepot trade often involvesKong routes in Dalian, Tianjin andtransfer of ownership. If suchQingdao, using Yokohama as transitport for the freight of the West Americatransaction is to be taxed, ports willsignificantly lose their attraction.Third,line and using Hong Kong for the freightthe problem of transit also existsof the Europe and Mediterranean linesAlso it has setup Hong Kong andbetween domestic trunk line ports andbranch line ports. If freight has alreadyKaohsiung mutes in Ningbo, Fuzhouapplied to customs for export duringandXiamen,u-.吨Kaohsiungastransitports for the freight of the West Americaloading in a breach line port, and if thereis no tax-free zone in the trunk lineline and using Hong Kong for the freightof the West America and Europe lines.port, the transit freight must apply asecond time to customs, making it lessP&o Nedlloyd has set up Japan, Koreaand Hong Kong routes in Dalian andconvenient than transit overseas.3.1 The situation of overseasTianjin, using Yokohama and Osaka astransit for international linertransit ports for the freight of the Northcompanies in ChinaAmerica and Europe lines and usingPusan for the freight of the Europe lineFor a long time, due to the naturalAlso it has setup a Hong Kong route inconditions of ports and other factors,there have been no container hubsDalian, Tianjin,among China's ports. Besides, theNingbo, Fuzhou, Xiamen andmanagerial region and policies asHuangpu, and freight from all ports canregards international entrepot trade inuse Hong Kong for transit.China lags behind that of international

zone policies will be the ideal place for multinational companies to set up distribution centers. With China 's relatively high tariffs at present, costs will increase dramatically if transit cargo must go through an import-export process. Second, entrepot trade often involves transfer of ownership. If such transaction is to be taxed，ports will significantly lose their attraction. 'Third, the problem of transit also exists between domestic trunk line ports and branch line ports. If freight has already applied to customs for export during loading in a breach line port, and if there is no tax-free zone in the trunk line port，the transit freight must apply a second time to customs, making it less convenient than transit overseas. 3.1 The situation of overseas transit for international liner companies in China For a long time，due to the natural conditions of ports and other factors, there have been no container hubs among China 's ports. Besides, the managerial region and policies as regards international entrepot trade in China lags behind that of international hubs. Therefore，freight from all ports in China must be transited overseas. According to the transit policy report is￾sued by Shanghai international shipping center, the world's largest ocean transportation company，Maersk Sealand, has set up Japan and Hong Kong routes in Dalian，Tianjin and Qingdao, using Yokohama as transit port for the freight of the West America line and using Hong Kong for the freight of the Europe and Mediterranean lines. Also it has setup Hong Kong and Kaohsiung mutes in Ningbo, Fuzhou and Xiamen, u-.吨Kaohsiung as transit ports for the freight of the West America line and using Hong Kong for the freight of the West America and Europe lines. P&0 Nedlloyd has set up Japan，Korea and Hong Kong routes in Dalian and Tianjin, using Yokohama and Osaka as transit ports for the freight of the North America and Europe lines and using Pusan for the freight of the Europe line. Also it has setup a Hong Kong route in Dalian, Tianjin, Ningbo，Fuzhou，Xiamen and Huangpu，and freight from all ports can use Hong Kong for transit

Ports likeOsakainternational transits ofLCL arebasically all carried out overseas. OnceKobe, Yokohama, Pusan, Hong Kong.hubs implementing free trade zoneKaohsiung and Singapore以charge morepolicies are established, thethan China's ports. In that~, sincedomestic freight must transit throughtransportation of these two containerswillbecomemoreconvenient.Thethese ports, the costs to the freightimpact is as follows:owners increases,whilethe linercompanies enjoy less profit. Currently(1)International FCL does notthe entrepot trade volume of China'srequire overseas transitWe will discuss severalbonded zones and neighboring portsaccountforatrivial shareof thetotalcircumstances according to Regulationsof the People's Republic of China onvolume.Akeymeasure,whichcanbeadopted and be a free trade zone policyInternational Marine Transportationand tract and encourage shippingwhere foreign shipping companies arecompanies,alongwithlogisticsnot allowed to engage in the transportsdon of domestic routes, including,companies ,to provided LCL services indifferent places.whether FCL is car-Tied by China's liner3.2The role of a free trade zonecompanies or byFCL carried by foreignpolicy in the expansion ofliner companies; whether the shipmentinternational transit in portsport or destination port is a Chinese portor a foreign one.Containerfreight inContainertransportation can be divided into Full1)For FCL carried by China's linerContainer Cargo Loads(FCL) and Les-companies,sincethe companies canhan Container Cargochoose hubs within China and do notLoad(LCL).Currently most ofrequire overseas transit, this wouldinternational transits of FCL are carriedincrease liner companies'profitabilityand reduce the owners'transportationout overseas.Taking Shanghaias anexample, international transit containerscosts. This can only be achieved if theaccount for less than 1 % of the port'shub is a "free port. Otherwise, even ifthe port has all the" hardware"container throughput. On the other hand

Ports like Osaka, Kobe，Yokohama，Pusan, Hong Kong, Kaohsiung and Singapore以charge more than China 's ports. In that~，since domestic freight must transit through these ports，the costs to the freight owners increases，while the liner companies enjoy less profit. Currently the entrepot trade volume of China’s bonded zones and neighboring ports account for a trivial share of the total volume. A key measure，which can be adopted and be a free trade zone policy and tract and encourage shipping companies, along with logistics companies ,to provided LCL services in different places. 3.2The role of a free trade zone policy in the expansion of international transit in ports Container freight in Container transportation can be divided into Full Container Cargo Loads(FCL) and Les￾han Container Cargo Load(LCL).Currently most of international transits of FCL are carried out overseas. Taking Shanghai as an example, international transit containers account for less than 1 % of the port's container throughput. On the other hand, international transits of LCL are basically all carried out overseas. Once hubs implementing free trade zone policies are established, the transportation of these two containers will become more convenient. The impact is as follows: (1)International FCL does not require overseas transit We will discuss several circumstances according to Regulations of the People's Republic of China on International Marine Transportation, where foreign shipping companies are not allowed to engage in the transports don of domestic routes, including; whether FCL is car-Tied by China's liner companies or by FCL carried by foreign liner companies; whether the shipment port or destination port is a Chinese port or a foreign one. 1)For FCL carried by China's liner companies, since the companies can choose hubs within China and do not require overseas transit, this would increase liner companies' profitability and reduce the owners' transportation costs. This can only be achieved if the hub is a "free port. Otherwise, even if the port has all the” hardware

Port B for transits.This is in line withnecessary, for a number of reasons itstill cannot change the means of transits.the regulation that all freight must firstAccording to current policies, allgo through entrance and departureprocedures to enter and leave China. Thefreight must first go through entranceand departure procedures to enter andonly change is that Port A is used as theleave China. If some goods areplace for entrance and departuretransferred from one port in China (Portprocedures, while Port B is within theA) to another one(Port B ) to leaveborder and outside the customs"China, or enter China from a port(Port B2) For FCL carried by foreign liner) and then are transferred to anothercompanies, if the shipment port ordestination port is a Chinese one, andport(Port B ), the re-salt is that in theformer case what happened in Port B isthe transit port is also in China, foreignconceived as leaving China, and in thecompanies are not allowed to engage inlatter case what happened in Fort B issuch business. The reason for thisconceived as entering China. Because ofrequirement is that transportation amongthis, the owner of the goods in Port Aports in China is considered as domesticwould choose not tomaketransit inPortcircumlittoral transportation andBfor the sake of convenience inaccording to Regulations of the People'sentrance and departure procedures,Republic of China on Internationalwhile the liner companies would chooseMarine Transportation; foreign shippingto make transits overseas to reducecompanies are not allowed to engage inprocedures and meet the needs of thesuch operations. Most countries in theowner. It should be stipulated that whenworld have adopted this practice, and theWTO has no specific rule about itgoods being imported or exported inPort A have gone through entrance andUnder the free port policy, free portsdeparture procedures, and when theywithin the borders and outside thecustoms can be considered as specificwill make transits in Port B, these goodswill be regarded as entering and leaving"flying lands" and foreign linerChina in Port A. Only in this way willcompanies can receive approval tothe owner and liner company chooseengage in thetransportation of FCL

necessary，for a number of reasons it still cannot change the means of transits. According to current policies, all freight must first go through entrance and departure procedures to enter and leave China. If some goods are transferred from one port in China ( Port A ) to another one(Port B ) to leave China, or enter China from a port(Port B ) and then are transferred to another port(Port B )，the re-salt is that in the former case what happened in Port B is conceived as leaving China, and in the latter case what happened in Fort B is conceived as entering China. Because of this, the owner of the goods in Port A would choose not to make transit in Port B for the sake of convenience in entrance and departure procedures, while the liner companies would choose to make transits overseas to reduce procedures and meet the needs of the owner. It should be stipulated that when goods being imported or exported in Port A have gone through entrance and departure procedures, and when they will make transits in Port B，these goods will be regarded as entering and leaving China in Port A. Only in this way will the owner and liner company choose Port B for transits. This is in line with the regulation that all freight must first go through entrance and departure procedures to enter and leave China. The only change is that Port A is used as the place for entrance and departure procedures, while Port B is within the border and outside the customs". 2) For FCL carried by foreign liner companies, if the shipment port or destination port is a Chinese one, and the transit port is also in China, foreign companies are not allowed to engage in such business. The reason for this requirement is that transportation among ports in China is considered as domestic circumlittoral transportation and according to Regulations of the People's Republic of China on International Marine Transportation; foreign shipping companies are not allowed to engage in such operations. Most countries in the world have adopted this practice, and the WTO has no specific rule about it. Under the free port policy, free ports within the borders and outside the customs can be considered as specific ”flying lands" and foreign liner companies can receive approval to engage in the transportation of FCL