Under the Enhanced Productivity Programme (EPP), Customs and Excise Department is required to deliver a saving of $91.5 million over three years from 2000-01 to 2002-03, equivalent to 5% of its baseline operating expenditure. As the bulk of the Department's operating expenditure is on personal emoluments, the savings will inevitably have to come mostly from the deletion of posts. In the three EPP years, we plan to delete 287 posts to yield a saving of $79.9 million in salary payment and reduce the expenditure on personnel related allowances and departmental expenses by $2.9 million and $8.7 million respectively to achieve the saving target.

Of the 287 posts that we plan to delete over the three EPP years, we expect half of them (146) to come from the implementation of an "Open Bond System" in 2002-03 which aims to remove the requirement for Customs attendance at bonded warehouses for dutiable goods.

At present, dutiable goods including liquor, tobacco and tobacco products imported into or manufactured in Hong Kong are required to be stored in bonded warehouses licensed under the Dutiable Commodities Ordinance (Cap. 109) until duty is paid or duty liability is acquitted (such as on export or being entered for concessional use). The warehouses are controlled under a closed bond environment in which Customs attendance is required to supervise the physical movements of the dutiable goods, vanning and devanning and all operations-in-bond such as sampling, blending, bottling, denaturing, remarking, repacking and destruction, to protect Government revenue.

Under the Open Bond System, Customs attendance at the warehouses will be removed. Instead, warehouse operators will be held responsible for ensuring the safekeeping and accurate reporting of the dutiable goods in the warehouses through a regime of self-regulation. We shall monitor and control compliance through alternative strategies such as the application of strict licensing criteria and operating conditions and through compliance activities such as documentary verification, random checking and post-transaction auditing. These arrangements will provide sufficient safeguards against the loss of Government revenue.

We have launched a pilot scheme since January 2001 to try out the System for six months with five randomly selected warehouses, with a view to gathering useful information and experience to facilitate our consideration on and preparation for the full implementation of the System. Should the outcome of the pilot scheme suggest that an open bond system is feasible and will not give rise to a higher risk of revenue loss, we aim to implement the system in June 2002, after taking into account the time needed to complete the necessary legislative amendments.

Following the implementation of the Open Bond System, we shall be able to save 146 posts with a saving of $36 million. This is a typical example to illustrate that if we care to review and change the way that we do our business, there are always benefits to gain.

We do not intend to give a detailed account here on the specific measures taken to deliver the other 141 posts as they can be found in our EPP reports. Instead, we would like to share with you the method we used to identify these posts.

To start the process, we held meetings with the Heads of our Major Formations in mid 1999 to provide them with a clear understanding of the EPP and invited them to work out their manpower saving proposals. We have determined right from the beginning that we should allow full participation of our Heads of Major Formations in designing their respective plans because we believed that as they were the ones who managed their day-to-day business they should be in the best position to identify the areas where there were scope for manpower savings. At the Headquarters level, we only set down the target savings in each of the three EPP years and the two basic principles for them to follow, which are -

ĄDthere should be no downgrading of the level and quality of our services; and

ĄDno staff redundancy should arise as a result of the implementation of the proposals.

The approach we adopted encouraged the Heads of our Major Formations to critically examine their work processes and procedures, work priorities, organization structure, manpower deployment, etc. As a result, they were able to come up with a great variety of manpower saving proposals through different ways to enhance productivity. As these proposals were worked out by the Major Formations having regard to their specific situations and operational needs rather than being imposed on them, we see such a strong sense of ownership of these proposals that we are confident of their smooth implementation.

Apart from involving all our Major Formations in devising the EPP plan, we also attach great importance to consultation with our staff as the success of the plan depends very much on the support of a committed workforce. In this respect, we have held regular consultation sessions with our staff through the Departmental Consultative Committee and meetings with our staff associations to explain our EPP plan to them and to address their concerns. We have also publicized our EPP plan in our departmental newsletter for general information. We shall continue to consult our staff on future changes to the EPP plan, if any, and keep them abreast of the progress of the implementation of the plan.


Customs and Excise Department




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