The Year of the Ship

FOR the People's Republic of China shipping market, entry into the World Trade Organisation (WTO) will give rise to the creation and implementation of a more open policy. This should create a freer and more accessible environment for overseas shipping enterprises.

PRC shipping legislation is now faced with the task of meeting the requirements set out under GATS, and honouring commitments by the Chinese government to create and assure a fair, free, sound and efficient competitive shipping market whilst, at the same time, protecting and safeguarding the needs of the PRC national shipping industry.

The direct impact of admission to the WTO will no doubt be characterised by the type of restructuring now being made, and in the pipeline, for the prevailing system of Chinese shipping legislation, as follows:

1. A much more comprehensive international shipping administration legal system will be constructed in the PRC by the Chinese government, with the purpose of placing under the coverage of enforceable laws international maritime transport operation, international ship agency, international freight forwarding, international shipmanagement, international crew management, tariff filing, logistics services, shipping enterprise regulations, transport bidding, transport project bidding, shipping information publication, and other matters.
2. More emphasis will be placed on legislation in administrative management, while civil commercial norms are further enhanced and amplified. The government sector will be poised to act as a referee rather than as a participant in market competition whilst stepping up supervision and control of the market in order to ensure a healthy and fair market environment.
3. After WTO entry, the Chinese International Shipping Administration Law System (CISALS) will continue to reflect legislative efforts in terms of national shipping policies with the aim of upgrading the level of legislation, thereby increasing legislative influence on a state level rather than on local or even departmental rules and regulations. This should considerably reduce the proportion of interim measures, ministerial orders, sector regulations and notices in force so as to assure the stability and authority of the laws and policies, and in the process satisfy the requirement and principle of transparency under the WTO.
4. After WTO entry, CISALS will continually allow a more open market and establish the principle of national treatment indiscriminately, and incriminatingly eliminate differences in regulations applicable to domestic and foreign entities in terms of taxation, market accessibility, administrative procedures etc. Governmental functions will be chiefly focused on regulation and control of the international shipping market on a macro level, thereby simplifying formalities and reducing procedures for application and approval. The 'examination and approval' scheme will eventually be changed into a 'registration' scheme, and control of market entry will be gradually relaxed. In most international shipping business areas, business qualifications will normally be obtainable by way of registration.
5. Following admission to the WTO, CISALS will continue to attach more importance to establishing satisfactory Chinese modern shipping enterprises and fleet systems. This should create a more favourable environment for the development of Chinese shipping enterprises and fleets from a legal point of view, thus improving and enhancing their competitiveness in domestic and international shipping markets.
6. The restructuring of CISALS will be stricter in terms of legislative procedure, with more attention being paid to investigation and proof in the process of legislation and investigation, and review in the implementation process. The legislative technique will be more scientific so as to ensure that legal norms are clear, specific and workable, in the process abandoning the previous guiding principle of 'being general rather than specific' in legislative activities. In the meantime, the pace of legislation will be considerably stepped up.

On January 1, 2002, the PRC International Shipping Regulations were promulgated and became operative. These regulations comprehensively regulate and govern international maritime transport operation (including non-vessel-operating carriers) and their auxiliary activities, incoming and outgoing, in Chinese ports, such as the business of international ship agency, international shipmanagement, international cargo handling, international storage and warehousing and container handling.

The regulations set out in detail the conditions of acquiring qualification for carrying out international maritime transport operations and their auxiliary activities. The regulations also establish the 'doctrine of registration' applicable for achieving qualification to engage in these activities, in place of the former 'examination and approval' process.

It is the first time the business of non-vessel-operating carriers (NVOCCs) has been addressed in Chinese shipping administrative policy, and regulations have been dealt with in detail. According to the regulations, the operator should register its B/L with the competent Transportation Department of State Council (TDSC) if it runs an NVOCC business. The operator should only sign his/her registered B/L. At the same time, the operator should submit guarantee funds to a specific bank account within the Chinese territory, normally in the sum of RMB800,000. He/she should also pay RMB200,000 for each additional branch operation. Meanwhile, a judicial person should be established in the PRC to run NVOCC business in China.

To encourage fair market competition, and to assert the market discipline of international maritime transport, the regulations establish the tariff filing system by law. The regulations provide that the published and the contract tariff of the international liner carrier and NVOCC should be filed with a competent TDSC. The published tariff refers to the tariff printed on the tariff book of the international liner carrier and NVOCC, while the contract tariff refers to the ones agreed by the liner carrier and the owner of the cargo or NVOCC. The published tariff becomes valid after 30 days of registration, and the contract tariff after 24 hours. Both the liner carrier and NVOCC should comply with the valid registered tariff.

In addition, the regulations address the conditions and forms of foreign investment in international maritime transport operation, and their auxiliary activities. Foreign investors could, if permitted by the competent TDSC, set up Chinese-foreign JV companies or co-operation enterprises to operate in international shipping, international ship agency and other international maritime auxiliary activities. Within the JV or co-operation enterprises, operating international shipping and agency business, the percentage of the foreigner's investment should not exceed 49 per cent. If permitted, foreign investors could also establish Chinese-foreign JVs, co-operation or sole-investor enterprises to provide shipping services to their owned or operated vessels.

It is also worthwhile to note that the PRC Port Law, PRC Shipping Act, PRC Navigation Channels Administration Law and PRC Crew Act are in the process of being drafted or deliberated, and are expected to come into force in the near future.