Revised PRC Maritime Code: Key considerations for managing contractual risk

Where it applies, it has the potential to affect the rights and obligations of parties throughout the supply chain and produce outcomes that differ from those commonly encountered under English law and other familiar maritime frameworks. These changes may alter the allocation of contractual risk, requiring market participants to reassess their exposure and, where appropriate, their contractual arrangements. 

This article identifies three developments that are likely to have impact on the allocation of contractual risk in international carriage involving Chinese ports.  It considers how these developments interact and the coordinated contractual response that parties should consider to preserve commercial certainty.

Three aspects of the revised Code deserve particular attention:

• The mandatory application of the Code to contracts of carriage involving Chinese ports
• The expansion of carrier’s responsibilities and the definition of “carrier”
• Changes to limitation periods that may significantly affect claim handling.

Mandatory Application of the Code

The revised Code introduces a mandatory conflict of laws rule. Where a contract of carriage provides that the port of loading or discharge is in China, Chapter IV of the Code will apply compulsorily in relation to, amongst other things, the rights and obligations of the carrier, liability for cargo loss or damage, the available defences and limitation regimes, and delivery obligations. 

For many carriers, the most significant consequence may not be the content of the Code itself, but the assumption that existing documentation will continue to produce familiar legal outcomes.

Parties cannot avoid the mandatory application of Chapter IV merely by incorporating the terms of a governing charter party into the bill of lading.  While incorporation remains the conventional mechanism for extending a chosen contractual regime to a bill of lading, the threshold for successful incorporation is deliberately high reflecting a policy of ensuring that the holder of the bill of lading is not bound by terms that are insufficiently brought to their attention. 

The immediate practical question is whether existing documentation still achieves the intended allocation of risk. 

Carriers may wish to:

• Review governing law assumptions for trades involving Chinese ports
• Revisit incorporation wording and Clause Paramount provisions
• Consider whether wording traditionally used bills of ladings, eg clauses (1) and (2) of CONGENBILL 2022 remain appropriate, or whether amendments are desirable to achieve the intended allocation of contractual risk.

Expanded Carrier Responsibility and Definition of “carrier”

Although the revised Code largely aligns with the Hague-Visby Rules, it departs from them in several important respects.  

Most notably, the carrier’s period of responsibility has been extended beyond the traditional port to port regime to cover the period from receipt of the cargo through to its delivery.  This potentially broadens the carrier’s exposure across the logistics chain. 

The Code also expands the definition of “carrier”. In addition to the contractual carrier, it recognises the actual carrier and other parties performing the carrier’s obligations, including those involved in receiving, loading, handling, stowing, carrying, keeping, caring for, unloading or delivering the cargo. Consequently, port operators, terminal companies and warehouse providers may fall within the definition of “actual carrier”.

Cargo interests may pursue claims against any or all of these entities, while those entities may in turn rely on the statutory defences and limitation available to carriers under the Code. 
For many carriers, this may affect not only their liability exposure but also the downstream contractual arrangements supporting the carriage of goods.

Carriers may therefore wish to:

• Review agreements with terminal operators, warehouse providers and other logistics partners
• Consider whether existing indemnity and liability provisions appropriately reflect the revised allocation of risk
• Review the operation of Himalaya clauses alongside the statutory protections introduced by the Code.

Claims Handling: A Different Approach to Limitation Periods 

The limitation period for cargo claims (carried by sea) remains one year. However, the revised Code adopts a significantly more flexible approach to limitation than many common law jurisdictions.

Where a claimant demands performance, the limitation period may be interrupted and begin running afresh. Depending on the circumstances, repeated interruptions may significantly extend the overall period within which claims may be commenced.

For claims handlers, this development is likely to have practical consequences extending beyond legal analysis.  Communications intended to preserve commercial relationships may also have implications for limitation, reinforcing the importance of robust claims handling procedures and accurate record keeping.

Practical considerations include:

• Review internal claims handling procedures
• Ensure personnel are alert to the potential effect of communications on limitation
• Maintain comprehensive records of correspondence and demands relating to cargo claims. 

Managing Contractual Risk

Taken together, these developments point to a broader contractual risk issue. Contractual mechanisms that have long been regarded as conventional may not operate in the manner parties expect where the revised Code applies. 

For trades involving Chinese ports, carriers should periodically review their governing law provisions, incorporation wording, Clause Paramount drafting and downstream logistics arrangements to ensure their contracts remain fit for purpose.

As the revised Code is interpreted by the Chinese courts and its practical application develops, BIMCO will continue to monitor these developments closely.  This includes assessing whether evolving commercial practice necessitates revisions to existing documentation or the development of new contractual solutions to address emerging commercial risks.  

BIMCO’s standard contracts and clauses are developed in response to the evolving needs of the industry. Members and industry participants who identify areas where legal or commercial developments have created uncertainty, or where existing standard documentation no longer adequately addresses emerging risks, are encouraged to share their experiences with the 
BIMCO Contracts & Clauses team at contracts@bimco.org.  Industry feedback plays an important role in informing whether existing standards should be revised or whether new contractual solutions are required. For advice on the application of the revised Code to particular circumstances or contractual arrangements, parties should seek advice from their legal advisers or P&I Club.

Ultimately, the revised Code is a reminder that contractual certainty cannot be taken for granted. As legal frameworks evolve, the contracts supporting international trade must evolve with them.