The explosive growth of online retail is bringing opportunities across the air logistics chain, but risks too – including from lithium batteries and undeclared dangerous goods, report Donald Urquhart and Will Waters.
The rise of e-commerce has provided a major boost to the air freight sector, helping to bring much-needed growth back to a market that had been broadly stagnant for several years. Understandably, companies across the air logistics chain are keen to take advantage of its growth, although it brings certain risks too – not least because of the potential presence of undeclared dangerous goods or lithium batteries within its midst. And so, carriers and other players in the chain are having to find ways to eliminate or minimise the risks while profiting from the benefits.
Lithium batteries have been at the forefront of safety concerns within air cargo for some years, heightened since the fatal crash in 2010 of a UPS B747 freighter that was known to be carrying bulk shipments of lithium batteries suspected of causing an on-board fire that brought the aircraft down. Since then, their carriage has been increasingly scrutinised, leading to additional safety processes and restrictions in terms of their carriage as air cargo.
Lithium-metal batteries have been banned for several years as cargo on passenger aircraft because of concerns about their potential to spontaneously combust and their resistance to fire-suppression systems. And in 2016, the International Civil Aviation Organization (ICAO) placed an “interim” ban on the shipment of lithium-ion batteries on passenger aircraft, until new packaging standards are developed, after tests by the US Federal Aviation Administration (FAA) indicated that these rechargeable battery types carry a similar fire risk to that of their non-rechargeable counterparts.
They remain banned from being transported as mail or cargo on passenger aircraft unless they are installed in or packed with equipment. And, under pressure from pilot unions, several airlines have also barred bulk shipments of lithium batteries on freighter aircraft.
But the potential danger has taken on new dimensions with the ever-growing e-commerce trade, much of which originates in Asia and passes through international postal systems. While most e-commerce traffic is innocuous in dangerous goods (DG) terms, a significant proportion contains lithium batteries that travel at some stage of their journey within the air transport system.
Although properly manufactured and declared e-commerce shipments containing these batteries are generally problem-free, it is the minority of undeclared, mis-declared, or under-declared shipments and those containing either counterfeits or batteries from substandard manufacturing that are of the greatest concern, according to IATA and other associations. Indeed, IATA was one of several signatories to a joint letter last year to regulators in numerous countries calling for tougher enforcement of international transport regulations imposed on lithium battery manufacturers and shippers. Alongside the US and European rechargeable battery associations PRBA and RECHARGE, and The International Air Cargo Association (TIACA) IATA emphasised that the major safety concern “lies not with correctly shipped batteries, but the wilful disregard of the regulations by rogue manufacturers and shippers”.
And it is not just lithium batteries that are a cause for concern: a quick search shows a whole range of items that meet the classification criteria for dangerous goods being sold on internet sites with no reference to their need to be shipped in compliance with dangerous goods rules.
One leading air cargo DG expert has described the threat to air cargo from unidentified and unlabelled hazardous materials in shipments resulting from online auction sales and retail sites such as eBay as “the Wild West of dangerous goods”. And the head of network operations and aviation at one of the major global air express operators recently told CAAS that lithium batteries in e-commerce cargo “keep me awake at night”.
Despite outreach efforts from bodies such as IATA, online retailers, including giants such as Amazon, have been found guilty and fined for multiple breaches of dangerous goods regulations involving the transport by air of shipments including lithium ion batteries and flammable aerosols. But the fines are small, and change is slow to come.
AIR CARGO’S GATEKEEPERS
In the meantime, for air cargo, weeding out the bad from the good involves players from across the air logistics chain: shippers who are obligated to properly declare the goods they are shipping; freight forwarders or postal organisations depending on how these goods are shipped; cargo handlers – whether third party, or self-handled – and ultimately the carrier itself.
But the often small-scale shippers involved in e-commerce tend to be less aware of the risks or the rules associated with the transport, packaging, and labelling of batteries and other dangerous goods – and even less likely to have received DG training. They are also more difficult to target with education campaigns because of their dispersed nature, despite recent and coordinated education efforts by IATA and the Universal Postal Union (UPU).
Adding another layer of complexity is the fact that e-commerce shipments can come into the air freight system in two forms: as traditional air cargo on an air waybill (AWB), or via the postal system on a Universal Postal Union (UPU) CN-38 delivery bill. While this has always been the case, the massive growth of e-commerce raises has magnified the challenges.
IATA continues to stress the need for the air cargo sector to be vigilant over shippers trying to circumvent regulations and deliberately shipping dangerous cargo. Ultimately, the responsibility for what goes on their aircraft lies with airlines, although in practice it is air cargo handlers that are the gatekeepers to ensuring that cargo to be uplifted is as it is supposed to be − whether or not the cargo comes via the postal system.
While Asia is obviously a key origin region for e-commerce traffic, southern China’s Pearl River Delta region has historically been its epicentre, producing vast portions of what is sold on e-commerce websites – presenting particular opportunities and challenges for the region’s air cargo communities.
Hong Kong Air Cargo Terminals Ltd (Hactl) has been quick to respond to the rise of e-commerce volumes, thanks to its Hong Kong Air Cargo Industry Services (Hacis) subsidiary with its reach into southern China. Originally created to help offset the rise of airports in southern China with growing cargo handling abilities and cheaper costs, Hacis has traditionally worked with freight forwarders in China to consolidate cargo that can then be sent by bonded truck across the border, complete with air waybill, to the Hactl facility at Hong Kong International Airport for screening and uplift. The concept was ground-breaking for Asia and has proved a very successful linchpin of Hactl’s business, one that is now expanding into the e-commerce realm.
“In the last two years we’ve been expanding the network,” which now stands at eight cargo depots, says Vivien Lau, managing director of Hacis and executive director of Hactl. “We are now expanding into those non-airport locations and those that are also close to the factory base.
“But then also we are seeing with e-commerce development there are some e-commerce distribution centres being set up in various locations in southern China,” and that led to the idea of having a dedicated express truck link between Hactl’s Hong Kong facility and newly established e-commerce mail handling centres in Jiangmen, Heshan, Kaiping, Jinjian and Qianhai.
“Cargo is consolidated at these centres by freight forwarders and, because with e-commerce there is a necessity of connecting with the last mile, the cargo is converted from a general cargo master air waybill to a postal CN-38 delivery bill. It’s the easiest and also the most cost-effective (way), compared with using the integrators,” Lau says.
But the challenge of lithium batteries continues to require considerable vigilance. “The mis-declarations are still happening and we are supporting China Post on dealing with those parcels,” Lau explains. “We’ve come to an agreement with China Post that we have an extra screening process and also if there is any suspicion, we will take it out and send it back.
“These procedures have been formalised and we are very happy with the results. So we are minimising the risk, but then I must say in the past year we have gone through a bit of a learning curve on how we can spot those things. We did go through at least two or three runs and then we trialled the new procedures.”
Further south, Singapore-based ground handler SATS has also been very active in pursuing the transitioning e-commerce cargo market. At Changi Airport, SATS has built one of the world’s first airside e-commerce facilities – the SATS eCommerce AirHub – as a result of cooperation with Singapore Post. The postal authority has been an early mover among its counterparts in jumping on the e-commerce bandwagon − so much so that Chinese e-commerce giant Alibaba has taken a stake, recently raising it to just over 14%.
The US$21 million SATS eCommerce AirHub caters not only to SingPost but all carriers at the Singapore hub and increases Changi’s e-commerce mail sorting capability, in response to growing online retail volumes. The new 6,000sqm facility features technology that SATS says increases processing capacity more than threefold, while lowering turnaround time for international e-commerce mail.
A fully automated mail sortation system increases mailbag processing to more than 1,800 an hour – up from 500 – and processing time is also reduced by 50%. Traceability will also be improved at the SATS eCommerce AirHub, allowing customers to track and trace their mail via a data interface.
Grappling with the same potential problem for undeclared, mis-declared and under-declared lithium battery and other dangerous goods products, SATS highlights that all postal items shipped via air transport under a CN38 delivery bill or as cargo documented under an air waybill are governed by international regulations as per IATA, ICAO, and the UPU.
“Shippers or their handling agents are made aware of dangerous goods (DG) such as lithium battery restrictions included on international postal services,” says Yacoob Piperdi, executive vice president of gateway services at SATS. “Whether shipping via e-commerce or as air cargo, SATS has in place processes that check for undeclared or non-compliance to DG regulations pertaining to mail, e-commerce or general cargo through handling by trained personnel, security screening, system and processes in our warehouses before the loading and uplift onto the aircraft.”
Piperdi continues: “Whilst it is not always possible to know the contents in mailbags or e-commerce packages, we institute a robust system and processes within SATS eCommerce AirHub to ensure the detection of DG contents in mailbags or packages before loading in the containers.” One such process is the x-ray screening of every mail bag, Piperdi says, adding: “Any potential suspicion of non-compliance, a process is in place where the postal authorities are alerted and contents are checked with security personnel presence before it could be approved or authorised for uplift onto the aircraft.”
While conversion from CN38 to AWB and vice versa is routinely done in various locations, including Singapore, “what is important, and this is where we place much attention, is accurate documentation, weight checks, scrutiny of cargo type, and application of the required security and safety checks”, Piperdi notes. He adds that while there are regulations governing the responsibilities of the shippers and freight forwarders declaring their items for transport by air cargo, or e-commerce/mail, SATS ensures all its handling personnel are trained in the IATA DG handling as part of its core basic training programme.
Also, as part of SATS corporate responsibility in contributing to the air freight industry. it conducts industry outreach ‘DG awareness’ workshops for shippers, freight forwarders, airlines and business partners. Through these, SATS shares the common ‘non-conformances’ detected and updates to the latest DG regulatory requirements or changes − especially those involving lithium batteries. A total of 10 sessions were conducted from last year up to the first quarter of this year, with close to 700 participants, Piperdi says.
Although some shippers embrace these education and awareness sessions at Singapore and other e-commerce hubs and origin hotspots, their overall effect is difficult to measure and unlikely to deter all rogue shippers determined to try to shortcut the correct channels. Until regulators put more resources into enforcement, additional layers of screening by proactive and well-trained air cargo handlers can help carriers grow their e-commerce traffic and sleep easy at night.