China
Shipowner Eligibility
In order to be eligible to register a ship in China pursuant to the Regulations, the shipowner must be one of the following:
- Chinese citizen(s) with a residence or principal business office located within China
- Enterprise legal person(s) established pursuant to Chinese law with the principal business office located within China
- Chinese government authority
- Chinese State-owned organization with legal person status
- Chinese State-owned enterprise with legal person status
The Registration Authority is given discretionary power to decide if ships owned by shipowners other than the ones listed above must be registered in China.
Shipowners who are enterprises established pursuant to Chinese law with their principal business offices located within China may register ships in China. However, in order for such a company to be eligible for registering its ships in China, the company must be a Sino-foreign joint venture company with the share of the Chinese partner(s) being no less than 50% of the company's total shares. In other words, a foreign company can only be a minority shareholder of a company eligible to register ships in China.
About the Flag
China is located in eastern Asia bordering the East China Sea, Korea Bay, Yellow Sea and South China Sea between North Korea and Vietnam. It is a Communist state with its capital at Beijing. Standard Chinese or Mandarin, Yue (Cantonese), Hu (Shanghainese), Minbei (Fuzhou), Minnan (Hokkien - Taiwanese), and various dialects and minority languages are spoken. The President is the Chief of State and the Premier is the Head of Government. There is a unicameral National People's Congress. The legal system is a complex amalgam of custom and statute, largely criminal law. A rudimentary civil code went into effect in the late 1980s. Continuing efforts are being made to improve civil, administrative, and commercial law. China is a member of the UN and the IMO.
China has moved from a Soviet style centrally planned economy to a more flexible and more productive framework with some market elements although still under Communist control. Air pollution, soil erosion, and the steady fall of the water table in the North threaten the county's economic growth. Exports include textiles, garments, footwear, toys, machinery and equipment. Leading trade partners are Japan, the Untied States, Germany, South Korea, and Russia. The currency is the Yuan.
The law on vessel registration is the Regulations of the People's Republic of China on Ship Registration (issued by the State Council on June 2, 1994. Document No. 155) and the Interim Measures for Registration of Mortgage over Ships under Construction (issued by the State Marine Safety Administration on June 9, 2009) (the "Regulations"). The local Marine Safety Administrations are the governmental entities responsible for the registration of ships in China (the "Registration Authority").
Company Formation
Two basic forms of companies may be established pursuant to Chinese law, a limited liability company or a company limited by shares.
A limited liability company is required to have no more than fifty shareholders, whereas a company limited by shares is required to have at least two but no more than two hundred initial subscribers (unless it involves a transformation of a State-owned company). A Shareholders' Meeting is the highest authority of a company (whether it be a domestic company, a wholly foreign owned company or a Sino-foreign joint venture company), whereas a Sino-foreign joint venture company may choose its Board of Directors to be the highest authority. For a limited liability company, the required number of directors of a board must be no less than three but no more than thirteen. However, for those relatively small limited liability companies, the shareholder(s) may choose to appoint an executive director rather than appointing a board of directors.
For a company limited by shares, the required number of directors of a board must be no less than five but no more than nineteen. Either a limited liability company or a company limited by shares is required to have a supervisory board with no less than 3 supervisors. However, for those relatively small limited liability companies, the shareholder(s) may choose to appoint one or two supervisors rather than setting up a supervisory board. There is an annual license inspection process which a company in China must follow. It is believed that the identity of officers, directors and shareholders of a company is accessible by the public in China.
Taxation
Companies registered in China are subject to a business tax at the rate of 5% and income tax at the rate of 25%. Enterprises which have already established prior to 16 March 2007 (the date on which the new Income Tax law was promulgated) and have been granted lower tax rates shall, according to the relevant regulations of the State Council, continue to enjoy such preferential tax treatment for a maximum period of five years from the date of promulgation of this new Income Tax Law. Enterprises which currently enjoy tax exemptions for a fixed term shall, according to the relevant regulations of the State Council, continue to enjoy such preferential tax treatment until the fixed term has elapsed. Australia, Canada, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Norway, Spain, Switzerland, the United Kingdom, the United States and many East Asian countries have double taxation agreements with China.
Registration and Documentation
One of the documents required for ship nationality registration, ship mortgage recording, and bareboat charter registration in China is a Ship Ownership Registration Certification (the "Owner's Certificate"). To obtain an Owner's Certificate, a shipowner must submit for examination by the local Registration Authority documents sufficiently evidencing the shipowner's legal identity, all technical information and materials concerning the ship, and the original and a photocopy of documents evidencing the ownership of the ship. A shipowner may only register its ownership over a ship with a Registration Authority at a place of the shipowner's residence or principal office (the "Port of Registry"). No ship is allowed to be registered in two or more Ports of Registry in China. The Port of Registry shall be the port of nationality of the ship ("Port of Nationality") and is defined by law as "a port where a shipowner's principle business or residence is located". Therefore, it appears that all major ports in China qualify as Ports of Registry.
Within seven days from the date such documentation is received by the Registration Authority and upon approval, an Owner's Certificate and an ownership registration number will be issued, and the following information will be entered into the Ship Registry:
- Name and call sign of the ship
- Port of Nationality, registration number and registered mark/logo of the ship
- The name, address and legal representative of the shipowner
- Method and date of obtaining the ownership of the ship
- Date of the ownership registration
- Name of the builder, and the building date and place of the ship
- Former name, nationality of the ship and date of cancellation or termination of original ship registration
- Information regarding common ownership, if owned by more than one owner
- If not used by the owner itself, the name, address and legal representative of the lessees under bareboat charter or operator of the ship
- If mortgaged, information regarding the recording of such mortgage
In China, no ship is allowed to have a "dual-citizenship" by registering in two countries. Thus, any ship which is registered in a foreign country must first terminate or cancel its foreign registration before registering in China. The first documentation requirement for nationality registration is an Ownership Certificate.
For ships purchased from abroad which have been previously registered in a foreign country, a certificate issued by the original ship registration authority certifying the cancellation of the original registration or the pending cancellation of the original registration or the pending cancellation of the original registration upon re-registration must also be submitted for registration.
Both permanent and provisional registrations are available in China. The Certificate of Registry for a permanent registration has a duration of five years, while the duration of the Certificate of Registry for a provisional registration is usually no longer than one year. According to the pertinent provisions of the Regulations, a provisional ship registration is applicable to the following ships:
- Newly built ships to be sold abroad (to be registered at the place where the ship is built)
- New ships purchased from abroad (to be registered at the responsible Chinese Embassy or Consulate in a foreign country)
- Ships built in a different locality in China (to be registered at the place where the ship is built)
- Ships being built in a foreign country (to be registered at the responsible Chinese Embassy or Consulate in the foreign country)
- Ships chartered from abroad under a bareboat charter (to be registered with responsible ship registration authority by submitting the bareboat charter and certificate issued by the original registration authority certifying the cancellation or pending cancellation upon re-registration of the original ship registration)
Chinese laws and regulations are very restrictive regarding foreign shipping companies establishing shipping operations in China
Bareboat Charter Registration
There are three different kinds of bareboat charter ship registrations in China. Ships with Chinese flags which are chartered bareboat domestically must be registered before sailing with the responsible ship Registration Authority by presenting the Ownership Certificate, Ship Certificate of Registry, and an original and one photocopy of the bareboat charter agreement. Upon approval, the charter will be entered on the Ownership Certificate and Ship Registry, and a Bareboat Charter Ship Registration Certificate will be issued to the lessor and lessee.
Ships with foreign flags chartered bareboat by Chinese entitles from abroad must be registered before commencement of the charter with the Ship Registration Authority at the place where the lessee resides or has its principal office by presenting the original and a photocopy of the bareboat charter agreement, valid ship technical certificates, and cancellation or pending cancellation upon re-registration of the original registration issued by the original registration authority. Upon approval, a Bareboat Charter Ship Registration Certificate and Provisional Certificate of Registry will be issued, and the original country of registration will be entered into the Ship Registry.
Ships with Chinese flags chartered bareboat abroad are to be registered in the same way as ships with Chinese flags chartered bareboat domestically. Upon approval, the responsible Registration Authority shall terminate or cancel its original registration, and issue two originals of the Bareboat Charter Ship Registration Certificate.
The duration of the Certificate of Registry for a provisional registration of a ship chartered from abroad under a bareboat lease may correspond to the duration of the charter, but shall be no longer than two years. For a bareboat charter with a duration longer than two years, the duration of the provisional ship registration may be renewed before its expiration.
In case the duration of a bareboat charter agreement is to be extended, the lessor and lessee shall apply for extension with the responsible Registration Authority 15 days before the expiration of such duration by presenting the Bareboat Charter Ship Registration Certificate together with the original and a photocopy of the extended charter agreement. During the term of the bareboat charter, the lessee shall not apply for transfer of bareboat charter registration without a written consent from the lessor.
Vessel and Yacht Eligibility & Survey Requirements
The Regulations are silent on the topics of vessel eligibility and survey requirements. However, an Inspection Certification Booklet issued by responsible vessel inspection authorities is required in order to register a ship which will fly the Chinese flag. Further, the following documents are required in order to register a ship to fly a Chinese flag which is intended to sail internationally:
- International Tonnage Measurement Certificate
- International Vessel Load Line Certificate
- Cargo Vessel Structural Safety Certificate
- Cargo Vessel Equipment Safety Certificate
- Rated Passenger Number Certificate
- Passenger Vessel Safety Certificate
- Cargo Vessel Wireless Telegraph Safety Certificate
- International Oil and Grease Prevention Certificate
- Vessel Safe Sail Certificate
- Other relevant technical certificates
For ships which are intended to sail domestically, the shipowner must submit the Inspection Certificate Booklet and other valid technical certificates of the vessel for registration.
China Classification Society performs surveys and issues certificates on behalf of the Chinese Government. Under certain circumstances, inspections may be performed and certificates issued by other internationally recognized classification societies.
Crewing
The crew of ships with Chinese flags shall be Chinese citizens. Should foreign crew be truly required, submission to and approval by departments of the State Council responsible for transportation shall be necessary. The crew of a Chinese ship shall hold the appropriate Seaman's Qualification Certificate of China.
Mortgages
Ship mortgages are recorded with the Registration Authority where the vessel is registered; there is no central mortgage registry in China. In this respect, there seems to be no requirement on nationality of the ship. To record a mortgage of a ship over 20 GRT (the Regulations are silent on mortgage recording of ships weighing less than 20 GRT), the following documents must be presented:
- Application in writing signed by both the mortgagor and mortgagee
- Owner's Certificate or Ship Building Contract
- Ship Mortgage Agreement
If the ship is owned by more than one shipowner, certificate evidencing that owners having more than two-thirds of the common ownership in the vessel (or an agreed percentage of ownership) have agreed to grant the mortgage must also be provided.
Subsequent mortgage recordings for the same ship are allowed, but relevant documentation concerning the other mortgage must be provided. The date of ship mortgage recording is the date of the written application, which will be recorded in the Ship Registry. The first application in time will be the first in line in terms of priority.
Mortgages over ships under construction can also be recorded with the Registration Authority at the place where the shipyard resides. This new implemental policy enables the shipyards to obtain more bank facilities during the construction period.
The following requirements should be met in order to apply for mortgages over ships under construction:
- The mortgagor is a qualified shipbuilding company under PRC laws and regulations
- The mortgagee is a qualified financial institution which is eligible to advance loan facilities
- The ship under construction is in the absolute ownership of the mortgagor
- In case of subsection construction, construction of the ship has already started and at least one or more subsection is completed; in case of monolithic construction, the keel laying of the ship is completed
- The ship is valuated by a qualified valuer, and the mortgagor and the mortgage must confirm acceptance of such valuation in written
- The secured amount under the mortgage shall not be higher than the value of the ship (as valuated by a valuer at the time of applying for the mortgage registration)
- The creation of such mortgage is not prohibited by any other laws or regulations
Prior to delivery of a ship, the mortgagor and the mortgagee shall arrange to register the release of mortgage over ships under construction with the Registration Authority.
Fees
There is a license fee or port fee levied on shipowners by the local tax authority or custom authority respectively. Companies and individuals owning and using ships within China are subject to a "usage tax" (license fee). The rate of such usage tax, depending upon the total tonnage of a particular ship, ranges from Renminbi ("RMB") 3 Yuan per NRT per year (for ships equal to or less than 200 net tons) to RMB 6 Yuan per NRT per year (for ships equal to or exceed 10,001 net tons). Ships with foreign flags and ships with Chinese flags chartered to foreign business entitles sailing among ports within China and ships with foreign or Chinese flags used by Sino-foreign joint venture companies are levied with a ship tonnage tax. The ships subject to the tonnage tax will no longer be required to pay the usage tax. The tonnage tax may be paid for a three-month period or a thirty-day period at a time. The rate of the tonnage tax for a three-month period, depending upon the total tonnage of a particular ship, ranges from RMB 1.5 Yuan (for ships equal to or less than 500 NRT) to RMB 9.3 Yuan (for ships equal to or exceed 10,001 NRT). The rate for a thirty-day period will be 50% of the rate applicable to a three month period for a ship of the same total NRT.
Contact
Maritime Safety Administration of the People's Republic of China
11 Jianguomennei Avenue
Beijing 100736
China
Tel: [86] (10) 6259 2588
Fax: [86] (10) 6259 2875
Email: enmsa@msa.gov.cn
Website: en.msa.gov.cn/
Stockholm Agreement 96
IMO Convention 48
* IMO amendments 91
* IMO amendments 93
SOLAS Convention 74
SOLAS Protocol 78
SOLAS Protocol 88
LOAD LINES Convention 66
LOAD LINES Protocol 88
TONNAGE Convention 69
COLREG Convention 72
CSC Convention 72
CSC amendments 93
SFV Protocol 93
STCW Convention 78
STCW-F Convention 95
SAR Convention 79
STP Agreement 71
STP Protocol 73
IMSO Convention 76
INMARSAT OA 76
INMARSAT amendments 94
INMARSAT amendments 98
IMSO amendments 2006
IMSO amendments 2008
FACILITATION Convention 65
MARPOL 73/78 (Annex I/II)
MARPOL 73/78 (Annex IV)
MARPOL 73/78 (Annex V)
MARPOL Protocol 97 (Annex VI)
London Convention 72
London Convention Protocol 96
INTERVENTION Convention 69
INTERVENTION Protocol 73
CLC Convention 69
CLC Protocol 76
CLC Protocol 92
FUND Convention 71
FUND Protocol 92
FUND Protocol 2003
NUCLEAR Convention 71
MARPOL 73/78 (Annex III)
PAL Protocol 76
PAL Protocol 90
PAL Protocol 02
LLMC Convention 76
LLMC Protocol 96
SUA Convention 2005
SUA Protocol 2005
SALVAGE Convention 89
OPRC Convention 90
HNS Convention 96
OPRC/HNS 2000
BUNKERS CONVENTION 01
ANTI FOULING 01
BALLASTWATER 2004
NAIROBI WRC 2007
HONG KONG CONVENTION
HNS PROT 2010
Cape Town Agreement 2012
SUA Convention 88
SUA Protocol 88
IMO Conventions
Status of Conventions China
IMO Convention 48 x
SOLAS Convention 74 x
SOLAS Protocol 78 x
SOLAS Protocol 88 x
SOLAS Agreement 96
LOAD LINES Convention 66 x
LOAD LINES Protocol 88 x
TONNAGE Convention 69 x
COLREG Convention 72 x
CSC Convention 72 x
CSC amendments 93
SFV Protocol 93
Cape Town Agreement 2012
STCW Convention 78 x
STCW-F Convention 95
SAR Convention 79 x
STP Agreement 71
Space STP Protocol 73
IMSO Convention 76 x
INMARSAT OA 76 x
IMSO amendments 2006
IMSO amendments 2008
FACILITATION Convention 65 x
MARPOL 73/78 (Annex I/II) x
MARPOL 73/78 (Annex III) x
MARPOL 73/78 (Annex IV) x
MARPOL 73/78 (Annex V) x
MARPOL Protocol 97 (Annex VI) x
London Convention 72 x
London Convention Protocol 96 x
INTERVENTION Convention 69 x
INTERVENTION Protocol 73 x
CLC Convention 69 d
CLC Protocol 76 d
CLC Protocol 92 x
FUND Protocol 76
FUND Protocol 92
FUND Protocol 2003
NUCLEAR Convention 71
PAL Convention 74 x
PAL Protocol 76 x
PAL Protocol 90
PAL Protocol 02
LLMC Convention 76
LLMC Protocol 96
SUA Convention 88 x
SUA Protocol 88 x
SUA Convention 2005
SUA Protocol 2005
SALVAGE Convention 89 x
OPRC Convention 90 x
HNS Convention 96
HNS PROT 2010
OPRC/HNS 2000 x
BUNKERS CONVENTION 01 x
ANTI FOULING 2001 x
BALLASTWATER 2004 x
NAIROBI WRC 2007 x
HONG KONG CONVENTION