Domestic U.S. shipping interests are closely monitoring a United States Trade Representative (“USTR”) proposal for import and export trades involving Chinese vessels. The proposal’s extraordinary service fees and restrictions are anticipated to have a near-term effect of escalating certain ocean shipping costs. Vessel operators, non-vessel operating common carriers, and the beneficial cargo owners that purchase those services will be impacted. Comments are due by March 24, 2025, and the USTR must issue its final proposal on or before April 17, 2025.
Five labor unions petitioned for this investigation on March 12, 2024, alleging that China exerts unreasonable and discriminatory policies that provide an unfair advantage across maritime industries. The USTR initiated the investigation on April 17th of that year. In a report issued on January 16, 2025, the USTR determined that China’s objective of dominating the maritime, logistics, and shipbuilding sectors represents an unreasonable risk to United States commerce. This is understood by the USTR as part of the China’s Military-Civil Fusion strategy that aims to leverage state and commercial power to develop advanced technologies and strengthen the People’s Liberation Army. This initiative will increase supply chain risk and reduce resiliency, deprive market-oriented businesses of opportunities, and allow for extraordinary control over these vital sectors.
USTR Proposed Fees and Restrictions
The USTR proposes significant service fees on certain maritime services as well as other industry restrictions in response to these identified threats:
- Chinese vessel operators will be charged up to $1,000,000 per entrance of any vessel at a U.S. port or $1,000 per net ton of vessel capacity.
- Vessel operators will be charged up to $1,500,000 per entrance of any vessel at a U.S. port based on a tiered schedule for the percentage of Chinese-built vessels in their global fleets.
- Vessel operators with pending orders for Chinese-built vessels will be additionally charged up to $1,000,000 per entrance of any vessel at a U.S. port based on a tiered schedule for the percentage of vessel orders with Chinese shipyards.
- Service fees will be remitted to operators at $1,000,000 per entry to a U.S. port of a U.S. built vessel.
- Exports of U.S. goods are restricted to U.S.-flagged, U.S.-built vessels by U.S. operators under a seven-year escalation plan That begins with requiring 1% of U.S. products to be exported on U.S.-flagged, U.S.-operated vessels immediately, increasing to 3% within two years, 5% within three years (3% of which must be U.S.-built), and up to 15% by 2032 (5% of which must be U.S.-built). Exceptions may be granted for vessels not built in the U.S. if it can be shown that over 20% of U.S. products per year are transported on U.S.-flagged U.S.-built vessels.
- The USTR will also restrict U.S. shipping data from China’s National Transportation and Logistics Public Information Platform (LOGINK) and may ban U.S. ports from using the platform.
USTR Public Comment Request
Public comment is requested in response to these proposed actions. The USTR is specifically seeking comment on three points: (1) the level of burden or restriction on U.S. commerce arising from China’s targeting of the maritime, logistics, and shipbuilding sectors for dominance; (2) the appropriate trade to be covered by responsive actions, including the type and level; and (3) whether proposed fees or restrictions on services are appropriate, including the type of services to be subject to fees or restrictions, the level of fees or restrictions, the structure of any fees, restrictions, or reimbursement of fees on services. Industry stakeholders are encouraged to provide comments on the feasibility of implementing these requirements that consider factors such as U.S. shipyard capacity, availability of U.S.-flagged vessels, export competitiveness, costs, and supply chain efficiency.
Comments must be submitted to the USTR’s portal by March 24, 2025. The Docket Number is USTR-2025-0002. A public hearing will also be conducted on March 24th.
Scale of Possible Maritime Sector Impacts
The outsized role of China in international ocean shipping is greater than many would expect. China’s global tonnage of shipbuilding market share grew from less than 5% in 1999 to over 50% in 2023. China owns over 19% of the commercial world fleet, controls production of approximately 95% of the world’s shipping containers, and 85% of the world’s intermodal chassis. As of 2023, China’s maritime foreign trade contributed more than one-third of global marine shipping, with Chinese coastal ports handling 4.96 billion tons of foreign trade cargo.
The impact of these proposed fees and restrictions will by no means be felt equally by all vessel operators, but there is no doubt that for some the financial and operational burden will be great. This is of course intended by the action as is the long-term objective of strengthening domestic U.S. shipbuilding. Commercial users of those services including cargo owners and the NVOCC intermediaries they use can be expected to shoulder the cost through higher rates charged by vessel operators and through the net restriction in global shipping capacity. Additionally, these measures could potentially lead to retaliatory actions from China, further complicating international trade dynamics and escalating tensions in the already-complex U.S.-China economic relationship.
Jonathan Todd is Vice Chair of the Transportation & Logistics Practice Group at Benesch Law. He may be reached by telephone at 1-216-363-4658 or by e-mail at jtodd@beneschlaw.com.
Phil Nester is Senior Managing Associate with the Transportation & Logistics Practice Group. He may be reached by telephone at 1-216-363-6240 or by e-mail at jpnester@beneschlaw.com.