not serve the third function found in negotiable bills of lading, namely, as a
document of title, which is preferred by Chinese banks to obtain security when
issuing letters of credit.
In the absence of a negotiable transport document for rail carriage, a car trader in
Chongqing has to approach a financial intermediary who assumes the risks before a
bank issues a letter of credit. The intermediary, called the Chongqing Logistics
Financing Service Co. Ltd. (CLFS)
6 was established by the local government in
Chongqing on 25 December 2017 to serve as a one stop shop in the delivery of
integrated financial services to traders operating in the Chongqing PFTZ. After
surveying the market for three months, CLFS decided to apply rules of maritime
law in railway carriage based on Chinese maritime, contract and property laws to
create a negotiable railway bill. In June 2018, a tripartite contractual arrangement
was reached among Chinese railway carriers, importers and banks to use a negotiable railway bill that secured the letter of credit for a pilot shipment of cars from
Germany to China. This solution was welcomed by various organizations in China,
including the Ministry of Commerce, the People’s Bank of China, leading commercial banks
7 and numerous PFTZs. The High Court in Chongqing also extended
support and recognition to this ingenuity through organization of three conferences
on the topic and favorable comments from the Director. In the future, CLFS aim to
prepare the ground for promulgation of Chinese legislation allowing the issuing of
negotiable railway transport document similar to bills of lading and create consensus
for adoption of similar rules internationally through amendment of railway liability
conventions.
8
The solution created by CLFS is indeed innovative and captures the history and
soul of using negotiable transport documents in maritime trade in addition to the
consequent practices that surround letters of credit. However, one has to be mindful
that the traders in Chongqing approached the local government to assist them in
meeting their trade finance needs after the opening of new train routes connecting
China with Europe. Aside from the complexities that may arise in implementing the
proposal of CLFS, such as, multiplicity of regimes governing carriage by rail along
the Eurasian railway corridors and the prolonged negotiations that may be necessary
to establish consensus internationally for introducing negotiability in railway consignment notes, it must be appreciated that the trade finance requirements of Chinese
6 http://cqlfn.com/index.html, accessed 17 April 2019.
7 Bank of China, China Merchants Bank, China Construction Bank, Agricultural Bank of China,
Industrial Bank, Industrial and Commercial Bank of China.
8 The above information is gleaned from an interview conducted by the authors with Mr. Wensheng
Zhang, Deputy General Manager and Mr. Jim Liu, Director of Development Planning of Chongqing
Logistics Finance Service Co. Ltd. on 29 December 2018 at South West University of Political
Science and Law (SWUPL), Chongqing, China. The authors conducted field research in China in
2018 using funding support from the Swedish Foundation for International Cooperation in Research
and Higher Education and University of Gothenburg. A special thanks to Prof. Yongmei Chen and
Dr. Shunag Liang from SWUPL for engaging with us on various aspects of the BRI, assisting with
translations of the Chinese text and organising interviews.
Maritime Rules for Rail Carriage: China’s Initiative to. . .
41
document of title, which is preferred by Chinese banks to obtain security when
issuing letters of credit.
In the absence of a negotiable transport document for rail carriage, a car trader in
Chongqing has to approach a financial intermediary who assumes the risks before a
bank issues a letter of credit. The intermediary, called the Chongqing Logistics
Financing Service Co. Ltd. (CLFS)
6 was established by the local government in
Chongqing on 25 December 2017 to serve as a one stop shop in the delivery of
integrated financial services to traders operating in the Chongqing PFTZ. After
surveying the market for three months, CLFS decided to apply rules of maritime
law in railway carriage based on Chinese maritime, contract and property laws to
create a negotiable railway bill. In June 2018, a tripartite contractual arrangement
was reached among Chinese railway carriers, importers and banks to use a negotiable railway bill that secured the letter of credit for a pilot shipment of cars from
Germany to China. This solution was welcomed by various organizations in China,
including the Ministry of Commerce, the People’s Bank of China, leading commercial banks
7 and numerous PFTZs. The High Court in Chongqing also extended
support and recognition to this ingenuity through organization of three conferences
on the topic and favorable comments from the Director. In the future, CLFS aim to
prepare the ground for promulgation of Chinese legislation allowing the issuing of
negotiable railway transport document similar to bills of lading and create consensus
for adoption of similar rules internationally through amendment of railway liability
conventions.
8
The solution created by CLFS is indeed innovative and captures the history and
soul of using negotiable transport documents in maritime trade in addition to the
consequent practices that surround letters of credit. However, one has to be mindful
that the traders in Chongqing approached the local government to assist them in
meeting their trade finance needs after the opening of new train routes connecting
China with Europe. Aside from the complexities that may arise in implementing the
proposal of CLFS, such as, multiplicity of regimes governing carriage by rail along
the Eurasian railway corridors and the prolonged negotiations that may be necessary
to establish consensus internationally for introducing negotiability in railway consignment notes, it must be appreciated that the trade finance requirements of Chinese
6 http://cqlfn.com/index.html, accessed 17 April 2019.
7 Bank of China, China Merchants Bank, China Construction Bank, Agricultural Bank of China,
Industrial Bank, Industrial and Commercial Bank of China.
8 The above information is gleaned from an interview conducted by the authors with Mr. Wensheng
Zhang, Deputy General Manager and Mr. Jim Liu, Director of Development Planning of Chongqing
Logistics Finance Service Co. Ltd. on 29 December 2018 at South West University of Political
Science and Law (SWUPL), Chongqing, China. The authors conducted field research in China in
2018 using funding support from the Swedish Foundation for International Cooperation in Research
and Higher Education and University of Gothenburg. A special thanks to Prof. Yongmei Chen and
Dr. Shunag Liang from SWUPL for engaging with us on various aspects of the BRI, assisting with
translations of the Chinese text and organising interviews.
Maritime Rules for Rail Carriage: China’s Initiative to. . .
41