To regulate investment and operation of foreign shipping companies in China and protect the legitimate rights and interests of investors, the Chinese Ministry of Communications and the Ministry of Foreign Trade and Economic Cooperation have promulgated the Provisional Regulations on the Examination and Approval of Wholly Foreign-funded Shipping Companies, permitting foreign shipping companies to set up wholly owned shipping companies in China. Major stipulations are as follows:
1). An applicant for the establishment of a wholly owned shipping company must meet the following requirements:
a. It should have experience of no less than 15 years in shipping business;
b. It should have had a permanent representative office approved by the Ministry of Communications for no less than three years in the port city where the solely owned shipping company is to be located;
c. Its regular passenger or cargo ship should call no less than once a month at a harbor in the city where the solely owned shipping company is to be located (those who operate shipping routes in the forms of joint consignment, shipping space swap and joint operation and who have obtained operation permits for such routes are deemed to have met the relevant requirements);
Foreign shipping businesses that are engaged in tramp transport should have a stable source of shipment in China.
d. Its operations in China are free for two successive years from any violation of the Chinese laws, administrative statutes and relevant regulations.
2). To apply for the establishment of a wholly owned shipping company, the applicant should submit the following documents:
a. Application;
b. Feasibility study report;
c. Articles of corporation;
d. Legal documents and credit status documents of the applicant;
e. A letter of entrustment from the legal representative of the wholly owned shipping company and the name list and resume of the members of the Board of Directors;
f. Sample of the bill of lading;
g. Xeroxed copy of the permit for operating shipping routes and documents approving the permanent representative office; and
h. Other documents requested by the Ministry of Foreign Trade and Economic Cooperation and the Ministry of Communications.
3). Rules and Procedures for Examination and Approval
a. The application by a foreign shipping business for the establishment of a wholly owned shipping company in China must be examined and approved in accordance with the shipping agreement between the Chinese government and the government of the foreign shipping business and pertinent legal documents.
b. The Ministry of Foreign Trade and Economic Cooperation and the Ministry of Communications are authorized to examine and approve foreign shipping companies' applications for the establishment of wholly owned shipping companies in China.
c. Applicants should submit required documents to the responsible department of foreign trade and economic cooperation in the host province, autonomous regions and municipalities directly under the central government, which will conduct a preliminary examination of the submitted documents and then forward the applications that have passed the preliminary examination to the Ministry of Foreign Trade and Economic Cooperation for further examination and approval, with a copy to the Ministry of Communications.
d. The Ministry of Foreign Trade and Economic Cooperation will examine the forwarded documents and consult with the Ministry of Communications. After reaching a consensus, the Ministry of Foreign Trade and Economic Cooperation will issue a permit, by means of which the applicant receives the Approval Certificate for Enterprises with Foreign Investment.
e. After the application is approved, the applicant should register with and get a business license from the administration of industry and commerce within the stipulated period of time and obtain an operation permit from the Ministry of Communications for a wholly foreign-funded shipping company prior to commencing its operations.
4). Business Scope and Registered Capital
The approved wholly foreign-funded shipping company or its branch is allowed to conduct the following business activities for its parent company: cargo solicitation, signing the bill of lading, freight clearance, and signing service contracts.
The registered capital of a wholly foreign-funded shipping company should be no less than US$1 million.
5). A wholly foreign-funded shipping company is allowed to establish branches in other port cities, as long as the following requirements are met:
a. The registered capital of the wholly foreign-funded shipping company has been paid off and the company has been in operation for a full year;
b. The parent company has liners (including joint consignment, shipping space swap and joint operation) that call the port city where the branch is to be located;
c. The parent company has had a permanent representative office approved by the Ministry of Communications for no less than a year in the port city where the branch is to be located;
d. The operations in China of the wholly foreign-funded shipping company and the parent company are free for one year from any violation of the Chinese laws, administrative statutes and relevant regulations; and
e. The wholly foreign-funded shipping company should add US$120,000 to its registered capital for each branch it establishes.
