Trading with China – new uncertainties to affect import and export cargo
The revised Maritime Code of the PRC came into effect on 1 May 2026. The effects may be far-reaching for China trade exposed companies and their insurers.
What you need to know
Article 295(2) provides that Chapter IV of the Code has mandatory application for international carriage of goods by sea contracts, where the port of loading or port of discharge is within the territory of the PRC. This is notwithstanding any choice-of-law clauses selecting a different governing law. Potentially far-reaching implications include:
- significant enforcement risk for foreign companies;
- uncertain outcomes due to undefined terms used in the Code; and
- individual judges' decisions risk diverging as between different provincial courts.
Our client alert of 20 April first flagged this development: https://www.ashurstperkinscoie.com/en/insights/revised-prc-maritime-code-impact-on-china-related-international-shipping-contracts/
As provisions that impact all cargo with a PRC origin or destination, these are a notable development for trading partners of PRC companies. The changes are aligned with recent trade measures aimed at protecting PRC institutions and interests such as tariffs, sanctions, blocking sanctions and currency-of-payment terms.
What you need to do
Individual businesses should reassess their exposures and any mitigating strategies. Do not wait for implications to emerge as incidents or disputes come before the PRC courts.
The new Code
Article 295(2) provides (in an unofficial translation from Shanghai Maritime University): "An international carriage of goods by sea contract where the port of loading or the port of discharge is within the territory of the People's Republic of China shall be governed by the provisions of Chapter IV of this Code."
Article 45, which is situated within Chapter IV of the revised Code, provides (in the same unofficial English translation): "Any clause in a contract of carriage of goods by sea or in a bill of lading evidencing such contract or other transport document that violates the provisions of this Chapter shall be null and void. A clause that purports to transfer the benefit of the cargo insurance to the carrier, or any similar clause, shall also be null and void. The invalidity of such clauses shall not affect the validity of the other clauses in the said contract, bill of lading, or other transport document."
Particular implications
- Any change in the Code will naturally create some risk of uncertainty including about the scope and interpretation. For example, does "other transport document" include charterparties or is Article 45 confined to bills of lading, waybills and consignment notes? A voyage charterparty fits within the high-level description set out in Article 43, namely "[A] contract … whereby the carrier, against payment of freight, undertakes to carry the goods entrusted by the shipper from one port to another by sea." Other jurisdictions characterise a bill of lading to be a different genus of document from a charterparty but this may not be a foregone conclusion under the revised Code.
- If Chapter IV of the revised Code and a chosen foreign law conflict, this could disrupt trade in unexpected ways. The laws that are typically chosen to govern maritime transport (eg, English, Singaporean or Hong Kong law) are based on binding legal precedent, which gives certainty to commercial participants. In the PRC, the decisions of provincial maritime courts may not be binding (either for future decisions of that provincial court or other courts). In time, if "Judicial Interpretations", "Guiding Cases", "Typical Cases" or "Guiding Opinions" are available from the Supreme People's Court of the PRC, this would promote consistency. However, this is not as strong a safeguard as a system where legal judgments are binding. A provincial maritime court may find reasons to exercise its discretion in particular cases.
- PRC courts' decisions that run counter to established doctrine on any fundamental matter, such as the right of the holder of bill of lading to demand delivery of the goods, could in future impact the availability of marine cargo insurance and disrupt trade finance.
- Most bulk commodities shipped to Chinese ports will be in a chartered ship. There is likely to be a chain of charters. The carrying ship will issue a bill of lading for the goods and it is standard for bills of lading to be issued 'without prejudice' to the terms of one or more charterparties. A ruling under the Code which is inconsistent with the laws governing those charterparties will lead to losses and disputes up the chain of charterparties, and may lead to further disputes at the enforcement stage.
- The Inter-Club Agreement between P&I insurers and the principle of implied indemnity were extensively revisited following a decision of the Wuhan Maritime Court of the PRC dated 31 August 2018 (COFCO East Ocean Oils & Grains Industries (Zhangjiagang) Co Ltd & Anr v Grand Changjiang Shipping Ltd & Anr [2014] WHFSZ No 01352), and in subsequent arbitration and litigation in the English courts in Sino East Transportation Ltd v Grand Amazon Shipping Ltd [2025] EWHC 1990 (Comm). Interaction between bill of lading and charterparty terms may reach a new level of complexity as a result of the changes to the Code.
- Wider aspects such as the principles of General Average and the (until now) established balance between those principles and a carrier's obligation of pre-voyage seaworthiness may also be in question.
If you would like to discuss any aspect of these changes, please get in touch with us.
Authors: Hazel Brasington, Consultant; Jordon He, Junior Associate
Contributing Authors: Sylvia Tee, Partner; Katherine Huang, Counsel; Yihan Wang, Legal Manager
