Opinions of the General Office of the Ministry of Transport on Promoting the Transformation, Upgrading and Healthy Development of the Shipping Industry

The English version is for reference only. If there is any inconsistency or conflict between the English and Chinese version, the Chinese version shall prevail.

Department (commission) of transportation of each province, autonomous regions, direct-controlled municipality, transportation and port authorities of Tianjin and Shanghai, Navigation Authorities of the Yangtze River and the Pearl River, each directly affiliated maritime safety administration, China Classification Society, China Ship-owners’ Association, and each central shipping conglomerate:

As a large maritime country, our shipping industry is an important support of the national economy, export trading and the social development. Under the influence of the slowdown of the domestic economy, serious excess capacity, increase of operating costs and other factors, the current shipping market still has an imbalance between supply and demand and continues to be weak, which will have a negative effect on the operation of national economy, social stability and safety of production. To carry out the spirit of the Circular of the State Council on Issuing the Implementation Plan (2013-2015) on Shipbuilding Industry Accelerating the Structural Adjustment to Promote the Transformation and Upgrading (Guo Fa [2013] No. 29), in accordance with the general requirement of steady growth, adjusting structure, promoting development, and to have a positive response to the current grim situation faced by the shipping industry, now the following opinions on promoting transformation, upgrading and healthy development of the shipping industry are put forward as follows.

I. Eliminate old ships and optimize the structure of transport capacity.

(I) Reduce inventory capacity and optimize fleet structure. Adjust and extend the policy on old vessels and single-hull tankers being scrapped and updating ahead of schedule to December 31, 2015, and encourage old ocean vessel and coastal vessels to be scrapped ahead of schedule. To actively promote the standardization of inland ships, guide old river transport vessels to accelerate elimination and renovation, the central government and local governments will provide funds annually as subsidies during the period 2013 - 2015. Strictly enforce the mandatory retirement system according to ship’s age, ships reaching mandatory retirement age must be scheduled to exit the market.

(II) Regulate domestic capacity increment. Encourage the construction of vessels that meet new international standards, new conventions, new ship safety and environmental protection energy-saving standards. Boost coastal dry bulk vessel capacity and orderly develop. Strictly control Chinese nationality international voyage vessels to concurrently engage in domestic transportation. Continue to control the domestic coastal and Yangtze River passenger transportation of dangerous goods to improve new business entities, and to orderly run transport of dangerous goods shipping capacity in accordance with total control, the principle of merit-based selection. Continue to strengthen the capacity of the Yangtze River dry bulk macro.

(III) Support industry self-regulatory organizations to strengthen capacity development. Support the China Ship-owners' Association to strengthen sectoral coordination, and organize shipping companies to join forces to overcome difficulties.  Port, maritime and other relevant administrative departments support the ship-owners’ association for organizing shipping companies to carry out the measures of storage capacity and etc.

II. Strengthen policy guidance and promote transformation and upgrading of the shipping industry.

(IV) Promote specialization and intensive management. Support shipping companies and shipping enterprises to strengthen cooperation and joint ventures. Regulate investment in domestic shipping industry of shippers, and optimize the rational allocation of social resources, and guide shippers and shipping companies to enter into long-term cooperation agreements to promote win-win scenarios. Improve market access threshold, and increase the domestic coastal inter-provincial transport operators’ minimum size criteria from 2000 gross tonnage capacity to 5000 gross tons, and correspondingly increase the minimum capacity standard of inland waterway transport operators. Support shipping corporate mergers and acquisitions, and integration of business resources. Support enterprises to deepen internal reforms and strengthening of institutional innovation, and improve the corporate governance structure, and improve the ability to avoid risk. Promote corporate mergers and acquisitions, and develop large-scale, specialized enterprises, and the implementation of the "going out" strategy.

(V) Develop new economic growth points. Nurture and develop cruise shipping, and allow flag of convenience funded multi-point anchored cruises along the coast. Develop the policy of a Shanghai international shipping center and free trade zone, international tourism on Hainan Island, the advantages of a cross-strait economic zone for Taiwan, and promote cruise ship finances, ship age, fees and other aspects of policy innovation. Support enterprises to expand into new business areas, and extend business scope relying on the container transport molten iron demonstration project.  Implement the shipping policy in the Framework Plan for the China (Shanghai) Pilot Free Trade Zone to develop shipping finance, insurance, maritime arbitration and other modern shipping services.

(VI) Promote the development of a cross-strait shipping industry. Allow trunk liners approved for registration on both sides for north China to Taiwan routes for piggyback strait transshipment. Support cruise routes to open up in the four destinations. At this stage, allow enterprises on both sides of the straits to have trial voyage charter cruises; allow foreign cruises approved on international routes to directly anchor in ports on both sides, but not as the cross-strait passenger transportation.

(VII) Promote safe and green development. The application of liquefied natural gas (LNG) in water transportation will be accelerated; LNG powered vessels experimental conversion will be implemented; and exemplary projects of LNG powered vessels in inland waterways will be carried out. Energy saving and emission reduction plans of water transportation will be implemented and vessel efficiency standards will be formulated. Subsidies will be replaced by incentives, which will be given to qualified projects of energy saving and emission reduction. Safety rules and regulations will be improved; safety supervision will be strengthened; and emergency response capability will be enhanced.

III. Enhance market supervision and create a favorable environment for development

(VIII) Cancel a number of administrative approval requirements. The administrative approval requirements to be cancelled include reviews for M&A among international shipping/vessel operators, approval requirements for international shipping agency, approval requirements for inland waterway vessel and crew services, designation of commercial/mutual insurance institutions in the coverage of civil liability insurance of oil pollution damage from ships, designation of sites of ship building, repairing and waterborne ship dismantling. More studies will be conducted to propose the cancellation of a number of other administrative approval requirements.

(IX) Enhance supervision of domestic shipping market. Regulation on the Administration of Domestic Water Transport will be carried out in order to gradually improve the integrity management system of domestic shipping enterprises and vessels and the system of alarm and supervision for operational qualifications. A record system of domestic container liner transport will be established in order to keep records of route and freight information. Supervision of operation in domestic shipping market will be enhanced; acts of unfair competition disturbing the market will be punished, focusing on practices of forced agency and fees for domestic vessels by some ports. Industrial associations will be encouraged to conduct self-discipline measures to prevent vicious price competition and maintain price stability.

Supervision of the Mainland-Taiwan shipping market will be enhanced; record system of container shipping freight for Mainland-Taiwan lines will be improved and acts of unfair competition such as “zero freight” and “negative freight” will be effectively stopped; comprehensive search and supervision functions of Automated Identification System (AIS) for Mainland-Taiwan vessels will be enhanced and more resources will be placed in the investigation of foreign vessels engaging in illegal shipping between the Mainland and Taiwan.

(X) Enhance the supervision of the international shipping market. Since January 1, 2014, freight for international container liners will adopt the precise filing mode to further regulate market order. Pooling of international container liners, which may violate Regulations on International Ocean Shipping and impair fair competition, will be investigated and punished according to law.

(XI) Enhance safety supervision. Berthing management of large dry bulk, container and oil ships/tankers outside design specifications will be strengthened. Berthing management rules in costal ports will be studied and formulated. Standardization of safe production or safety management system of shipping enterprise will be promoted and regulated to further improve safety supervision and management. Inspection and supervision of old foreign vessels outbound/inbound from Chinese ports will be enhanced.

IV. Reduce the burden on enterprises and increase their competitiveness

(XII) Standardize administrative charges. Cancellation and exemption of a number of administrative charges will be carried out. These include vessel certification fee, bilge analysis fee, maritime mediation fee, oil slick recovery fee, costal radio, telegram and telephone fee, review fee for vessel safety inspection application, etc. The standardization of administrative charges will be further studied.

(XIII) Cut and regulate unreasonable service charges. Seven charges including escort fees for over length, capsize, over-draft and special vessels inbound/outbound costal ports, escort fees for vessels inbound/outbound the Yangtze River, escort fee for LGN vessels, sample test fee in container opening inspection, onboard contamination removal fee for international vessels before exiting domestic ports, oil boom setting fee during bunkering operations, and coal physical inspection fee in domestic transportation will be cancelled. The charges for sampling, preparation, testing and supervising loading of solid bulk cargo which may liquefy in water transport will be standardized according to reasonable costs instead of loaded cargo weight.

(XIV) Further standardize port charges. Study and put forward policy on adjusting the standard of port operational charges, and perfecting price management mechanisms of ports. Do a good job in lowering 20% of the pilotage of vessels on the main line of the Yangzi River. No port is allowed to conclude an agreement with a Liner Company of foreign trade and charge fees for loading, unloading and dispatch.

(XV) Standardize the charge of ship trading service institutions. Separate the service fee of ship trading and the ship trading price, and change to charging service fee as quota per times and limit the quota. Ships whose assets transfer between a wholly owned company and a holding company of shipping group and involving change in ownership and ships which change ownership due to annexation and reorganization are free to trade.

V. Strengthen measures and promote service quality and level

(XVI) Strengthen information guiding services Strengthen dynamic monitoring of shipping markets and economic operation analysis on water transport and publish market information such as shipping capacity at regular intervals. Support and guide intermediary agents to publish information with regard to freight index, industrial cycle index and etc. Build and perfect an honest system for all shipping markets and release honest records of operators.

(XVII) Promote service level of ports. Further excavate the potential of existing infrastructure by means of wharf transformation, and strengthen the system construction of collecting and distribution of ports. Improve the construction of facilitation and informatization of ports. Improve the efficiency of the port service.

(XVIII) Promote service level of pilotage. Organize to enforce the project of “Sunshine Pilotage”, enforce sunshine dispatch, rationally provide tugs, publish the work procedure and establish a system of recording poor pilotage. Cancel the requirement of compulsory pilotage for Chinese ocean vessels in and out of Taicang port, and combine the upward extending project of the Yangtze Estuary Deepwater Channel, cancel the compulsory pilotage for domestic ships from the sea into the river.

(XIX) Improve the manner of administrative management. Change the manner of administrative management, and strengthen post supervision after examination and approval of market access. Perfect the management information system of water transportation, and carry out online administrative licensing, filing and license management. Simplify management procedures, and besides the existing cash deposit and business insurance, experimentally implement the NVOCC liability guarantee which is for bank guarantees to substitute cash deposits. For Chinese crew on international navigation ship, implement a physical examination, and meanwhile award the two certificates of Health Examination Certificate of International Travel and Crew Health Certificate of Ocean Vessel of the People's Republic of China.

(XX) All levels of transportation departments, harbor and fairway departments and maritime institutions shall pay special attention to the specific implementation of these opinions. All units shall clear the responsible department and person in charge, confirm the work goals and tasks, and strengthen inspection and supervision. All levels of Transportation Department, Harbor and Fairway Department and Maritime Institution shall further transform the functions, strengthen services, and combining with actual condition of the department and of the local region, actively study and introduce policies and measures to improve the transformation, upgrading and healthy development of the shipping industry.

General Office of the Transportation Ministry (seal)

August 26, 2013

Provided by Lawyers Working Committee of Pudong New Area