Reed Smith Client Alerts

Readers, especially those dealing with Chinese shipyards, refund guarantors, shipowners or charterers, may be aware of the need to register certain types of cross-border security granted by entities based in the People’s Republic of China (PRC) with the State Administration of Foreign Exchange (SAFE) in order to protect the value of that security.1 If a cross-border security/guarantee agreement is not duly registered with SAFE, in some cases PRC banks may refuse requests from the security/guarantee provider to effect foreign currency payments out of the PRC under that security/guarantee.2

Despite the liberalisation of the PRC government’s control over cross-border security via the Regulation on Foreign Exchange Administration of Cross-border Security (together with its operational guidelines, the Rules) published by SAFE in 2014, there are still various requirements that may need to be satisfied to ensure that cross-border security/guarantees granted by PRC entities are duly registered with SAFE.

This article sets out some of the practical steps that can be taken to help ensure that a cross-border security/guarantee is duly registered with SAFE. It is worth noting, however, that the Rules are complex and the SAFE requirements applicable to any given cross-border security/guarantee should be considered on a case-by-case basis.3