Trading to China during COVID-19

Blocking the return of COVID-19 into China

The Chinese authorities have introduced a COVID-19 protocol for ships arriving at PRC ports. Two of the key components of this protocol are:

• If a crew member tests positive or has symptoms of COVID-19 prior to arriving at a PRC port, this must be reported
• Crew who have joined the vessel within 14 days of arrival at a PRC port must be tested for COVID-19 upon arrival. Our experience with testing in PRC shows a high instance of crew testing positive even where they are completely asymptomatic and/or have previously tested negative

The Chinese authorities’ reaction to a positive test can differ from port to port but it is common for affected crew to be placed under quarantine ashore, at the Member’s expense. Additionally, the vessel is likely to be placed in quarantine for a period of at least 14 days.

Towards the end of the quarantine period, the authorities may insist that all crew are tested again.  If there are any positive results, despite having been in isolation, the quarantine cycle starts over again.

Planning Crew Changes

Until recently it had not been possible to conduct crew changes in PRC. However, at time of writing, the authorities are allowing crew changes, subject to certain restrictions, which in practice can cause the vessel to be significantly delayed and/or the requested crew change denied.

Considering the testing protocol for recently joined crew, we recommend that all crew changes are carefully considered and planned. Ideally, they should be arranged for no less than 14 days before arrival at a Chinese port or, preferably, after departing from China.

Cargo Operations Under Quarantine

During quarantine, cargo operations might be permitted, depending on the cargo and the port. Be aware, however, the authorities may decide to suspend cargo operations.

The authorities may also require the quarantine of any shoreside personnel (including stevedores) that have boarded the vessel or had contact with the crew. This quarantine is for a minimum period of 14 days, which is at Member’s expense. There may also be a requirement that the vessel remains at the berth, incurring a daily charge, rather than proceeding to an anchorage.

Delays and Cargo Delivery Issues

Where there are significant delays, cargo issues may arise. These can be critical for cargoes with a limited life, such as soya beans from the Americas. Shipowners should liaise closely with charterers on cargo care matters in these circumstances, making a careful record of any inspections or monitoring of cargo that takes place.

There are reported instances where vessels have been ordered by authorities to discharge all cargo in the first Chinese discharge port when the bills of lading call for multi-port discharge. This raises a risk of a claim for delivery at the wrong port or mis-delivery, which is outside the scope of standard P&I cover.  In the absence of an express requirement under a charterparty, a carrier cannot be compelled to deliver at a port other than one named in the governing bill of lading. Possible solutions include switching bills of lading to reflect the new discharge port or for the carrier to accept a letter of indemnity. If faced with this situation, approach your usual contact at North.

Vessels experiencing long delays could be at risk of having class and flag certification expiring while waiting. If a significant delay which will impact class and statutory surveys is anticipated, ship operators should contact their class and flag.

Australian Trade Dispute

It isn’t just COVID-19 that has the potential to cause delays. The deterioration in relations between China and Australia has been widely reported in the news, with China taking a series of trade actions against a range of Australian exports.

There are reports that import quotas for coal from Australia have tightened, resulting in cargoes not being discharged. The crew on vessels carrying coal on this trade should be aware of the potential for delays and the risks from the cargo as detailed in the IMSBC Code. Our Cargo Care checklist on coal cargo which supplements the IMSBC Code advice can be found here.

There are concerns that a further escalation could hit the import of other cargoes such as iron ore.

COVID-19 and the Contract of Carriage

Cargo interests who suffer losses as a result of an onboard outbreak of COVID-19 might seek recovery from the carrier by arguing the vessel is unseaworthy, therefore a breach of the contract of carriage.

English Law

From an English law perspective, difficult questions are likely to arise; such as whether the outbreak is an attribute of the ship that is capable of affecting its seaworthiness, and how the obligation on the carrier and its delegates to exercise due diligence to ensure the vessel is seaworthy operates in these circumstances.

Chinese Law

In June 2020, the PRC Supreme Court issued guidance which included:

• a ship might be held to be unseaworthy if, at the commencement of the voyage, it is not fit to take measures to control COVID-19 or does not have sufficient ‘certified healthy crew’
• a vessel is not unseaworthy merely because it has berthed at an area affected by COVID-19 or if the crew test positive for COVID-19
• carriers will not be found to have deviated from the agreed or customary route to diagnose COVID-19 or to quarantine, provided the shipper is given notice
• carriers will not be liable for delays caused by port traffic restrictions in place because of COVID-19
• a carrier is not liable for discharging at a safe place “adjacent to the original discharge port” due to berthing restrictions

Care should be taken in relation to this advice. Any planned diversion from the discharge port named in the bill of lading could be considered a deviation from the contract of carriage. Discuss this with your usual contact at the Club before taking action.

Find out more

Read more in our full briefing on trading to China during COVID-19 here.

Trading to China? For the latest information, always check with your agent and North Members can access MyGlobeView here.