Update on proposed abolition of China MSA SPRO approval and enquiries regarding Qianhe

Proposed abolition of SPRO approval

As Members should be aware, Chinese law requires owners of ships carrying oil or other hazardous cargo in bulk, or any vessel over 10,000gt, to have made a contract with a qualified clean up company (SPRO - ship pollution response organisation), prior to calling at any Chinese port. The requirement has been in force since 1st January 2012.

To date, owners have relied on the MSA's published SPRO list in order to evaluate the qualification of a SPRO. However, the Ministry of Transport published a Notice on 18th March 2015, abolishing the SPRO qualification approval process. The IG has been informed by its legal advisor in Beijing that the abolition of the approval process will take effect following the formal amendment of the regulation, which is currently awaiting the State Council's approval. Under the proposed amended regulation, MSA will no longer publish any list of qualified SPROs and will only conduct random inspections of their equipment and capability. Instead, shipowners will be obliged both to check the capability of the SPROs with whom they contract and to ensure that the requirements are complied with.

Until the new regulation takes effect, we are advised that owners may still refer to the MSA last published SPRO list for choosing their SPRO.

Enquiries about Qianhe

The Club is aware that certain investigations are taking place into Qianhe, one of the largest SPROs in China, by the customs authority in China. The IG is closely monitoring the situation through the IG's lawyer in Beijing, who is in touch with the China MSA, local MSAs and Customs authorities. Although investigations into Qinghe have been reported by the media, no formal statement has been issued by the Customs Authority, the MSAs or Qianhe to clarify the position.

As of today, Qianhe remains a qualified and approved SPRO and their status in this regard remains valid and has not been revoked. However, it appears they are not responding to communications and it is reported that Qianhe personnel and vessels have been detained for the purposes of the Customs investigation, so it is unclear whether they would actually be able to respond to any spill.

Under the circumstances, the legal advisor of IG in Beijing, after reviews of the model SPRO agreement and the Chinese Contract Law, has recommended the following steps to concerned Members:

For Members that have vessels calling a Chinese port within the next 30 days:

Members with annual contracts with Qianhe may wish to consider contracting with an alternative SPRO. In this regard, unless they are in a position to give Qianhe the contractual 30 days' notice, they should first contact Qianhe to ascertain whether they are in a position to respond. If there is conclusive evidence that they are not (eg. Owner's local agents may ask Qianhe to show whereabouts of their vessels and their management and personals, if Qinghe can not show or not repond, Owner should keep the evidence), there may be a right to suspend or terminate the Qianhe contract and enter into an agreement with another SPRO straightaway, in order to mitigate the risk of non-compliance with PRC regulations and failure of Qianhe SPROs to respond. This will depend on the terms of individual Members' contracts with Qianhe and we suggest that Members take PRC legal advice in that regard. Members may also contact the Club for assistance.

Members that do not have vessels calling at a Chinese port within the next 30 days:

Members that do not have vessels calling within the next 30 days should be in a position to give Qianhe the contractual 30 days' notice; they may therefore wish to consider terminating their contracts with Qianhe in accordance with Article 5 of the SPRO Agreement, giving Qianhe 30 days' notice of termination, with a view to then signing with another SPRO in port and such contracts becoming effective from the date of termination of the Qianhe contracts.

Members who have not contracted with Qianhe SPROs, their consortium or their agencies are not recommended to do so by the Club, given the uncertainty regarding the ability of Qianhe to respond.

Further advice will be provided to Members when the PRC authorities provide a clear position. In the meantime, we will keep Members updated with any developments.

Members who have questions regarding the above may seek the Club 's advice through their usual contact for SPRO matters.

Staff Author