The Office of the United States Trade Representative (“USTR”) is seeking public comments on proposed actions under the Trade Act of 1974 (“the Act”).  The proposed actions target China’s maritime, logistics, and shipbuilding sectors, including up to a $1.5 million U.S. port entry fee on operators of Chinese-built vessels. 

Background

Section 301 of the Trade Act of 1974 addresses unfair foreign practices affecting U.S. commerce and allows USTR to respond to actions that burden or restrict U.S. commerce, following an investigation.  In this case, the USTR initiated an investigation in April 2024 after a petition from five national labor unions expressed concerns about China’s impact on the U.S. maritime sector.  Upon investigation, USTR concluded that China’s targeting of the maritime, logistics and shipbuilding sectors for dominance is unreasonable, burdens or restricts U.S. commerce, and is therefore actionable under Section 301.  USTR is now soliciting public comments on its proposed actions in response to China’s policies that USTR deems burden U.S. commerce. 

USTR investigation & proposed actions 

The USTR argues that China’s massive subsidies and preferential treatment for state-owned enterprises have allowed it to dominate over 50% of the global shipbuilding market, up from 5% in 1999. According to USTR, China has employed “increasingly aggressive” tactics in pursuing its dominance of the maritime, logistics and shipbuilding sectors.  For example, USTR contends that China’s economic plans contain market targets that require Chinese companies to displace foreign companies in existing markets, resulting in China controlling production of 95 percent of shipping containers, among other dominance. 

USTR proposed actions

The USTR is considering several actions, including those described in brief below:

• Charging operators up to $1.5 million per entry for Chinese-built vessels arriving at U.S. ports. 
• Charging operators up to $1 million per vessel owned by Chinese maritime transport operators arriving at U.S. ports.
• Similar fees on maritime operators with vessels on order from Chinese shipyards to be delivered over the next two years.
• Gradually increasing the percentage of U.S. exports that must be transported on U.S.-flagged and U.S.-built vessels, starting at 1% and rising to 15% over seven years. 

See the USTR report for more details on USTR’s proposed actions.  

Impact of USTR proposed actions 

These proposed actions could have broad implications for global shipping, U.S.-China trade relations, and the future of the American shipbuilding industry. 

The proposed U.S. tariffs and restrictions on Chinese-built vessels could have significant financial and operational impacts on vessel operators, particularly those relying on Chinese-built ships for U.S.-bound trade. For example, the proposed $1.5 million per entry fee for Chinese-built vessels will have different levels of impact on vessel operators depending on the vessel type, whether container ships, bulk carriers, or tankers, and trade routes.  This could make chartering Chinese-built ships for U.S. routes un-economical, forcing operators to either pass on costs to charterers or seek alternative vessels. 

The market reality of these financial and operational impacts would be significant and vary among the major markets: (1) containership vessels, (2) dry bulk carriers, and (3) tankers. 

For containership vessels, many of the largest global carriers (Maersk, MSC, COSCO Shipping, CMA CGM) operate Chinese-built vessels, either owned or chartered. The U.S. is a major container trade market, so avoiding U.S. ports is not a viable option for these operators.  The fee is a fixed cost per port call, meaning vessels on frequent, scheduled services in Asia–U.S. transpacific routes will be hit hardest.  It is possible that the global liners could apply a U.S. port entry surcharge to recover part of the cost from cargo owners.  However, these measures will eventually affect the American customers.  Another consideration may be for the operators to reallocate Chinese-built vessels to Europe, Asia and other non-U.S. trades. 

As to bulk carriers, most of which are Chinese built, the U.S. is also a major exporter of grain, coal, and iron ore.  The ability of vessel operators to pass through additional costs they may incur by USTR actions varies by contract vehicle, like contracts of affreightment, voyage charters, time charters, and spot charter.  Each contract will require careful review to determine the best path forwards.  For example, if an operator has already chartered out a Chinese-built vessel under a long-term time charter, passing these additional costs may not be straightforward, as the charter rate is fixed. It would require renegotiation for cost-sharing.

The U.S. is also a major exporter of crude oil and refined products.  Therefore, tanker operators will need a different analytical lens as they consider mitigating financial impacts in the face of regulatory turbulence. 

Potential opportunities for U.S. flag vessels 

The USTR’s proposed actions may provide an opportunity for the U.S. shipbuilding market.  The financial disincentives for using Chinese-built vessels may prompt shipping companies to invest in U.S.-built ships to avoid significant fees, potentially revitalizing the U.S. shipbuilding industry. Mandated percentages of U.S. exports on U.S. flagged vessels could lead to an expansion of the U.S. fleet, creating more opportunities for U.S. domestic operators. However, the current U.S. shipyard capacity may pose challenges in meeting increased demand for new vessels.

What next?

The global shipbuilding community may rally to advocate for its positions in response to the USTR’s proposed actions.  After all, the USTR’s proposals at this stage, are not a matter of law.  In fact, the USTR is inviting comments regarding its potential trade actions.  To facilitate comments, the USTR has scheduled a public hearing on March 24, 2025, where industry stakeholders, policymakers, and the public can present their views. USTR is encouraging written comments from interested parties by the same date via the public docket in the USTR Comments Portal. 

This case is one of many trade measures and regulations developing across the globe.  Trade measures, even those which are not yet law, could lead to short-term or even long-term disruptions to global supply chains and increased logistic costs and delay in delivery of goods.  It is no secret that today’s world economy relies on the interconnectedness of global trade. The question remains whether the global supply chain is resilient and ready enough to face this change.