Yu-Lai Jin October 5 2022 China's latest policies on coastal carriage KaiRong Law Firm | Shipping & Transport - China Yu-Lai Jin Shipping & Transport IntroductionDevelopment of China's coastal carriage policiesCommentIntroduction"Coastal carriage" in this article refers to the domestic transport of foreign trade containers between China's coastal ports, normally falling within the category of the state's right of coastal transport. For the consideration of sovereignty and national security, as well as the protection of domestic shipping enterprises engaged in coastal transport, most countries do not allow foreign countries or only allow regional member countries, to undertake coastal carriage. After decades of development, China's latest coastal carriage policy has evolved to partially open for foreign-owned non-five-star flag ships.Development of China's coastal carriage policiesPhase one: not open to foreign ships or foreign shipping companiesThe legal basis is as follows:Article 4 of the Maritime Law of the People's Republic of China (PRC) provides the following points:Maritime transport and towage services between the ports of the PRC will be undertaken by ships flying the national flag of the PRC, except as otherwise provided for by laws or administrative rules and regulations.No foreign ships may engage in the maritime transport or towage services between the ports of the PRC unless permitted by the competent authorities of transport under the State Council.Article 22 of the Regulations of the PRC on International Ocean Shipping provides that foreign international shipping operators may not carry out shipping between Chinese ports, including in disguised forms such as using rented Chinese ships or shipping space, or exchanging the shipping space.Phase two: partially open to Chinese non-five-star flag shipsOn 27 September 2013, the Ministry of Transport (MOT) of the PRC issued the Announcement on Pilot Implementation of Coastal Carriage by Chinese Non-five-star Flag Ships Engaged in International Voyages in Shanghai. This allows Chinese-funded shipping companies to make use of their wholly owned or controlled non-five-star flag ships conducting international voyages to engage in the coastal carriage of foreign trade import/export containers between domestic coastal open ports and Shanghai Port, with Shanghai Port as the international transit port.Phase three: further open to Chinese non-five-star flag shipsOn 1 June 2015, the MOT issued the Announcement on the Pilot Implementation of Several Shipping Policies in National Pilot Free Trade Zones. This stipulates that Chinese-funded shipping companies registered in mainland China may use their wholly-owned or controlled ships on international voyages flying the non-five-star flag to engage in the coastal carriage of foreign trade import/export containers between domestic coastal open ports and open ports in the free trade zones, with open ports in the free trade zones as the international transit ports.The announcement extends the opening scope to the ports of other free trade zones other than Shanghai Port.Phase four: partially open to foreign-owned non-five-star flag shipsOn 29 November 2021, the MOT issued the Announcement on the Pilot Program for Foreign International Container Liner Companies to Carry out Coastal Carriage with Non-five-star Flag Ships for International Voyages. This allows non-five-star flag international voyage ships of eligible foreign international container liner companies to carry out pilot schemes to test the coastal carriage of foreign trade containers between the Port of Dalian, Tianjin, Qingdao and the Yangshan Port of Shanghai Port, with the Yangshan Port as the international transit port. The pilot period will expire on 31 December 2024.Meanwhile, foreign international container liner companies must also comply with the principle of reciprocity. That is, the countries (including landlocked countries and city-states) and regions where the actual controllers of the companies are located, the places of actual business registration and the places of registration of the operating ships are explicitly open to the enterprises of China in their coastal carriage business.CommentIt is said that the applications from companies such as Maersk or OOCL to carry out coastal carriage according to the latest policy have been formally approved, and the first voyage was completed in June, 2022. This latest policy will be beneficial to the development of the Shanghai International Shipping Hub and Lin-gang Special Area of China (Shanghai) Pilot Free Trade Zone and will also create more opportunities for foreign shipping companies to compete in the new business area of coastal carriage in mainland China.For further information on this topic please contact Jin Yu-Lai at Shanghai Kai-Rong Law Firm by telephone (+86 21 5396 1065), fax (+86 21 5396 1204) or email ([email protected]). The Shanghai Kai-Rong Law Firm website can be accessed at www.skrlf.com.