Priority Rules Governing Movable Property Mortgages under Civil Code
Civil Code movable property mortgages rank strictly by Zhongdengwang registration timestamp, defeated only by statutory repair liens and ten-day superpriority.
Article 416
Meaning
Statutory super-priority rule granting a seller or credit provider securing the purchase price of movable property senior ranking over pre-existing floating mortgages covering the same debtor assets. Under Chinese civil law, article 416 creates a statutory exception to the standard first-in-time priority regime governed by central registry timestamps. The purchase money security interest established under this provision protects equipment vendors and acquisition financiers who fund specific asset acquisitions.
Registration on the central registry within ten days after the buyer receives physical delivery of the equipment secures priority over prior registered floating mortgages granted by the buyer. Failure to register within the statutory ten-day grace period forfeits super-priority status, dropping the security interest back into standard priority ranking based on actual filing date.
Grace Window
Ten-day registration windows dictate whether acquisition financing maintains absolute priority over existing institutional lenders. Under article 416, the grace period calculation begins on the exact calendar day following physical delivery of the machinery to the buyer factory floor. Shipping documents, bills of lading and port delivery receipts serve as primary evidence in determining when delivery occurred.
Foreign equipment manufacturers selling high-value production machinery to Chinese buyers on deferred payment terms must execute public filings within this window to prevent subordination to pre-existing bank mortgages.
Coverage Limit
Coverage boundaries under article 416 restrict super-priority benefits strictly to the purchase price of the specific movable property delivered. Financing extensions covering operational expenses, working capital or collateral beyond the delivered asset derive no super-priority protection. Where multiple purchase money security interests exist over the same asset, priority among them follows the standard chronological order of registration under general civil code principles.
Conflict Priority
Enterprise floating mortgages automatically yield priority to properly registered purchase money security interests under article 416. Institutional lenders holding global floating encumbrances cannot block purchase money creditors from executing preferential claims against specified new equipment upon default.