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Maritime Issues in China

U.S.-Sino trade is at an all-time high. Chinese manufacturers ship over $400 billion worth of products to the United States every year. At the same time, U.S. manufacturers ship approximately a quarter of that to China, and that number is growing, making China the U.S.’s third largest export market after Canada and Mexico. China has a growing economy and a growing middle class, suggesting that this trend will continue.

With the increase in trade comes the potential increase of legal issues. When issues arise, a U.S.-based company may seek to obtain a maritime lien against the property of a Chinese counterparty. This often occurs when the two parties go to federal court to dispute a business claim or a tort claim and the court rules in favor of the U.S. party. Such a lien may be against the other party’s ship.

Similarly, a buyer may want to purchase a ship from a Chinese company and want to know whether there are liens attached to that ship. Unlike in the U.S., the process for obtaining information about maritime liens in China is not simple.

Obtaining a Lien on a Chinese Ship

To obtain a lien on a ship, a petitioner must go to a Chinese court and request that the ship be arrested. If the request is granted, there is a registration of claims process following the arrest.

Obtaining a lien against a ship will depend on whether the other party had the legal right to enter into the deal with the U.S. party. This is based on the articles of association of the Chinese counterparty and is subject to those specific rules. If this is satisfied, the Chinese party can legally have a debt obligation to another party.

Obtaining Information About a Lien

Obtaining information about a lien in China is not simple. China does not have a ledger that lists maritime liens against ships. Such information is private. To obtain that information, one must petition the court for it. In addition, one can petition a Chinese Maritime court to issue a summons for anyone holding a lien against the ship in question. Parties holding a lien must respond to the summons within 60 days or risk forfeiting their lien, per the Chinese Special Maritime Procedure Law.

The Measures for the Registration of Vessels provide rules for owning and registering a ship in China. This includes the rules that the party owning and registering the ship must be a Chinese citizen who lives in China or has his or her principal place of business in China, or be a Chinese corporation with its principal place of business in China. In the case of foreign investment into the business, the Chinese legal person or persons must own not less than 50% of the corporation.

Is your business involved in international trade? Does it use international waterways to conduct its business? Speak with a lawyer who is experienced and knowledgeable in the maritime field. Speak with the Kolodny Law Firm.

(image courtesy of Igor Ovsyannykov)

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