I. Introduction: Why Pay Attention to Hainan’s Closed – loop Operation?

In the context of today’s globalized economy, the construction of free trade ports has become a key measure to promote regional economic development and international trade. The construction of Hainan Free Trade Port is one of the most prominent initiatives. It is a major strategic deployment by the state to promote a higher level of opening – up and build an open – world economy. The concept of “closed – loop operation” is at the core of Hainan Free Trade Port’s construction.

The essence of the closed – loop operation is to turn the whole island of Hainan into a special customs supervision area. In this special area, the customs supervision model will undergo significant changes, and the rules for the flow of goods and trade will be implemented according to new standards. This article focuses on the systematic impact of Hainan Free Trade Port’s closed – loop operation on international freight logistics, deeply analyzing the changes, opportunities, and challenges, and providing valuable references for relevant enterprises and practitioners.

II. Comparison of International Freight Modes Before and After the Closed – loop Operation

Current Mode

Currently, Hainan adopts the traditional port supervision model for international freight. Under this model, all goods entering and leaving the port need to go through a strict customs declaration process. When importing or exporting goods, enterprises are required to submit detailed customs declaration documents to the customs, including information such as the type, quantity, and value of the goods. The customs will review and inspect the goods based on these documents to ensure that they comply with relevant laws, regulations, and supervision requirements. Although this model ensures effective customs supervision, it also increases the customs clearance time and cost of goods to a certain extent.

Mode After the Closed – loop Operation

After the closed – loop operation, Hainan will implement a new supervision model of “opening the first – line, controlling the second – line, and allowing free flow within the island”.The “first – line” refers to the border between Hainan and overseas. After the closed – loop operation, except for the goods on the negative list, goods can freely enter and leave between Hainan and overseas. This means that enterprises will enjoy more convenient customs clearance policies when importing or exporting goods, greatly improving the efficiency of goods circulation.

For example, for some technology products and raw materials that are not on the negative list, enterprises no longer need to go through the cumbersome customs declaration procedures and can quickly transport the goods into or out of Hainan.The “second – line” is the border between Hainan and the Chinese mainland. At this border, the flow of goods will be managed according to import and export regulations.

This is to ensure a reasonable connection between the markets of Hainan and the Chinese mainland and prevent regulatory loopholes. For example, goods from the Chinese mainland entering Hainan or goods from Hainan entering the Chinese mainland need to be supervised according to the corresponding import and export standards.

Visual Comparison Chart

The following table simply compares the changes in the goods flow path and supervision nodes before and after the closed – loop operation:

Comparison Items	Before the Closed – loop Operation	After the Closed – loop Operation
Goods Flow Path	Mainland – Traditional Port – Customs Supervision – Overseas; Overseas – Traditional Port – Customs Supervision – Mainland	Mainland – Second – line Customs Supervision – Hainan – Free Entry and Exit at the First – line (Except for Negative List) – Overseas; Overseas – Free Entry and Exit at the First – line (Except for Negative List) – Hainan – Second – line Customs Supervision – Mainland
Supervision Nodes	Comprehensive Supervision at Traditional Ports	Simplified Supervision at the First – line (Except for Negative List), Effective Supervision at the Second – line

III. Direct Impact on International Freight

3.1 Revolutionary Improvement in Customs Clearance Efficiency

After the closed – loop operation, overseas goods entering Hainan will be subject to simplified or even exemption from customs declaration. For many enterprises, this will greatly save customs clearance time. In the past, when importing goods, enterprises had to spend a lot of time preparing customs declaration documents and waiting for customs inspection. Now, except for the goods on the negative list, most goods can quickly enter Hainan.Transshipment goods will also be allowed to flow freely within the island without a storage time limit.

This is a major advantage for international transshipment business. For example, a batch of Southeast Asian fruits that previously had to go through cumbersome transshipment procedures at other ports can now be directly transported to Hainan, stored and allocated freely on the island, and then transferred to the Chinese mainland or other regions according to market demand. Through a case simulation, we can see that the time cost of transshipping a batch of Southeast Asian fruits through Hainan to the Chinese mainland will be significantly reduced. What originally might have taken several days for transshipment may now only take one day or even less.

3.2 Adjustment of Tariffs and Cost Structure

In terms of tariffs, the import of goods into Hainan will be exempt from tariffs and import – related taxes (except for goods on the positive list). This means that enterprises will save a large amount of costs when importing goods. For example, for some high – end consumer goods and machinery and equipment that are not on the positive list, enterprises do not need to pay high tariffs and import – related taxes when importing, which will greatly reduce the procurement costs of enterprises.

For goods exported from the Chinese mainland through Hainan, the tax refund will be advanced to the stage of entering Hainan. This allows export enterprises to obtain tax refund funds more quickly, accelerating the turnover of enterprise funds. The costs of freight enterprises will also be affected. Due to the reduction of tariffs and the improvement of customs clearance efficiency, various costs of freight enterprises during the transportation process, such as storage costs and customs declaration costs, will be effectively controlled.

3.3 Birth of a New International Freight Hub

After the closed – loop operation, Hainan will gradually transform from a “transit point” to a “distribution center”. With the improvement of customs clearance efficiency and the adjustment of tariff policies, Hainan will attract more international goods to be distributed here.The types of international freight expected to grow mainly include international transshipment LCL (Less – than – Container – Load) goods, cross – border e – commerce warehousing and distribution, and cold – chain logistics and temporary storage of high – value goods.

The international transshipment LCL business will develop rapidly due to Hainan’s favorable policies. Enterprises can consolidate goods from different regions in Hainan and then transport them to all over the world. The cross – border e – commerce warehousing and distribution will also face new opportunities. Hainan can serve as a warehousing center for cross – border e – commerce, quickly distributing goods to the Chinese mainland or other countries and regions. In terms of cold – chain logistics and temporary storage of high – value goods, due to Hainan’s policy advantages and geographical location, more cold – chain goods and high – value goods will be stored here temporarily, waiting for further transportation.

IV. Support of Supporting Policies and Infrastructure

Policy Innovation System

During the closed – loop operation of Hainan, a series of policy innovation systems have been introduced to support the development of international freight. The policy of free and convenient cross – border capital flow allows enterprises to settle and exchange funds more freely in cross – border trade, improving the efficiency of enterprise capital use.

The policy of the safe and orderly flow of data provides a guarantee for the digital operation of enterprises, enabling enterprises to conduct information exchange and business operations more conveniently. The opening of shipping policies, such as the ship registration policy for “China Yangpu Port”, has attracted more shipping enterprises to register their ships in Hainan, enhancing the agglomeration ability of Hainan’s shipping resources.

Hardware Facility Upgrades

To meet the development needs of international freight after the closed – loop operation, Hainan has comprehensively upgraded its hardware facilities. The Yangpu International Container Hub Port has been expanded, increasing the port’s throughput capacity and container handling capacity. The freight capabilities of Haikou Meilan and Sanya Phoenix airports have also been improved, with an increase in freight routes and flight frequencies. At the same time, Hainan has built an island – wide intelligent logistics system and advanced customs supervision technology, improving the efficiency of logistics and the accuracy of customs supervision through intelligent means.

V. Potential Challenges and Risks

Regulatory Challenges

Controlling the “second – line” faces technical and implementation difficulties. How to ensure the reasonable flow of goods while effectively preventing smuggling and other illegal activities is an important challenge for customs supervision departments. It is necessary to establish advanced supervision technologies and strict implementation mechanisms to strengthen the supervision of goods.

For example, using big data, the Internet of Things and other technologies to monitor the flow of goods in real – time and strengthening the inspection of personnel and vehicles.The risk of smuggling cannot be ignored. Due to Hainan’s special tariff policies, it may attract some lawbreakers to engage in smuggling activities. Therefore, it is necessary to establish a perfect prevention mechanism and strengthen cooperation with the customs on the Chinese mainland and other law – enforcement departments to jointly combat smuggling.

Competitive Pressure

In the process of developing international freight, Hainan Free Trade Port will face a competitive and cooperative relationship with mature free trade ports such as Hong Kong and Singapore. These mature free trade ports have accumulated rich experience and resources in the field of international freight and have strong competitiveness. Hainan needs to give full play to its own advantages, such as geographical location and policy advantages, to form a differentiated competition with these mature free trade ports.

At the same time, the diversion effect of ports on the Chinese mainland also needs attention. Some goods that might have originally chosen Hainan may choose other ports due to preferential policies or other factors of ports on the Chinese mainland. Hainan needs to take corresponding countermeasures, such as optimizing services and reducing costs, to attract more goods to choose Hainan.

Issues in the Initial Adaptation Period

Enterprises will face a learning curve and compliance costs in the initial stage of the closed – loop operation. The new policies and supervision models require enterprises to spend time and energy to learn and adapt, and enterprises also need to invest a certain amount of costs to ensure compliant operations. The cultivation of the international shipping network also takes time. Hainan needs to attract more shipping enterprises and cargo owners to participate, establish a perfect international shipping network, and improve Hainan’s influence in the international freight market.

VI. Long – term Outlook: Impact on the Global Freight Pattern

Reorganization of Regional Trade Flows

Hainan will become a new fulcrum for the South China Sea trade route. Its unique geographical location enables it to connect Southeast Asia and the Chinese mainland, becoming an important hub for regional trade. Through Hainan, goods from Southeast Asia can more conveniently enter the Chinese mainland market, and goods from the Chinese mainland can also be quickly transported to Southeast Asia and other regions through Hainan. Hainan will play a “double – gateway” role in connecting Southeast Asia and the Chinese mainland, promoting the development of regional trade.

Co – development of Industries and Freight

The co – development of airport – related economy and air freight will be realized. With the improvement of the freight capabilities of Haikou Meilan and Sanya Phoenix airports, more airport – related industries, such as electronic information and biomedicine, will be attracted to settle in Hainan. The development of these industries will drive the growth of air freight demand, and the development of air freight will further promote the prosperity of airport – related industries.The cold – chain logistics and tropical agricultural product trade will also develop rapidly.

As a tropical region, Hainan is rich in tropical agricultural product resources. After the closed – loop operation, the development of cold – chain logistics will provide guarantee for the transportation of tropical agricultural products, enabling more tropical agricultural products to be exported to domestic and international markets. In terms of bonded display and freight of high – end consumer goods, Hainan’s special policies will attract more high – end consumer goods enterprises to conduct bonded display in Hainan, which will drive the development of relevant freight business.

Innovation in Green and Smart Freight

In terms of innovation in green and smart freight, Hainan will actively promote the application of new – energy cargo ships and green ports. The use of new – energy cargo ships can reduce carbon emissions and achieve green development of freight. The construction of green ports can improve the operational efficiency and environmental protection level of ports. The pilot application of blockchain in cross – border freight documents will also bring changes to the freight industry. Through blockchain technology, the electronic and intelligent management of freight documents can be realized, improving the authenticity and security of documents and reducing freight costs.

VII. Suggestions for Relevant Enterprises

Freight Forwarders

Freight forwarding enterprises need to adjust their business models. They can strengthen their business layout in Hainan and carry out more international transshipment LCL, cross – border e – commerce warehousing and distribution, and other businesses by taking advantage of Hainan’s policy advantages. At the same time, they should strengthen communication and cooperation with the customs and other supervision departments to ensure the compliant operation of their businesses.

Shipping Companies and Airlines

Shipping companies and airlines need to optimize their routes. They can increase the number of routes and flight frequencies to Hainan and include Hainan in the global shipping and aviation network. They should adjust their transportation strategies according to the characteristics of Hainan’s freight demand to improve transportation efficiency.

Manufacturing and Trading Enterprises

Manufacturing and trading enterprises need to re – layout their supply chains. They can regard Hainan as an important node for raw material procurement and product sales, and use Hainan’s tariff policies and customs clearance convenience to reduce the operating costs of enterprises. They should strengthen cooperation with local enterprises in Hainan to jointly explore the market.

New Entrants

New entrants can pay attention to the potential market opportunities in Hainan. For example, they can enter the fields of cross – border e – commerce, cold – chain logistics, and high – end consumer goods. They should fully understand Hainan’s policy environment and market demand and formulate reasonable development strategies.

VIII. Conclusion: Hainan as a New Benchmark for China’s Opening – up

The closed – loop operation of Hainan Free Trade Port has important strategic significance for the “Belt and Road” international logistics network. It will become an important bridge for China to strengthen trade exchanges and economic cooperation with countries around the world, promoting the in – depth implementation of the “Belt and Road” Initiative. The closed – loop operation is not the end but a new starting point for Hainan’s institutional opening – up. In the future development, Hainan will continue to explore and innovate, making greater contributions to the development of international freight and global trade.

Here, we invite readers to continue to pay attention to the follow – up development of Hainan Free Trade Port and jointly witness Hainan’s rise in the international freight field.

Distribution Map of Major Freight Facilities in Hainan (A relevant picture can be attached here)

Index of Relevant Policy Documents

• Overall Plan for the Construction of Hainan Free Trade Port
• Measures for the Administration of Special Customs Supervision Areas in Hainan Free Trade Port, etc.