The U.S. Trade Representative (USTR) announced a detailed strategy aimed at moderating China's influence in maritime sectors while promoting American shipbuilding through a structured fee system for Chinese vessels and operators. Following a 13-month investigation and complaints from U.S. trade unions, the USTR issued a final action on Chinese-built ships and owners and operators, along with other proposed actions to combat unfair Chinese trade practices.
Background
On March 12, 2024, multiple U.S. labor unions filed a petition with the USTR stating that China's strategic efforts to dominate the maritime, logistics and shipbuilding sectors significantly disadvantaged U.S. companies and workers. The USTR's investigation concluded that China's actions are unreasonable and a burden to U.S. commerce. These findings led to the determination on Jan. 20, 2025, that responsive action is necessary. (See Holland & Knight's previous alert, "U.S. Proposes Port Fees on Chinese-Built Ships and Operators to Counter China's Shipping Dominance," March 5, 2025.)
The USTR received nearly 600 comments in response to the proposed actions and held public hearings held on March 24 and March 26, 2025. The USTR proceeded to implement the proposed actions, as well as new proposed actions, with a number of modifications/exemptions and a two-phased implementation. Although the scope of some fees is not as substantial as those proposed in February 2025, the final action also broadens the scope in other areas, including liquefied natural gas (LNG) exports and all foreign-built vehicle carriers. The final action also leaves open to interpretation many key provisions.
The First Phase
The initial phase introduces a 180-day grace period during which no fees will be charged. Thereafter, a fee structure will be applied to Chinese vessel owners and operators based on net tonnage per U.S. voyage. Starting at $50 per net ton, the fees will increase annually by $30 increments, reaching $140 per net ton by 2028. Fees are capped at five assessments per year, applied at the first point of entry.
Non-Chinese operators using Chinese-built vessels will face fees at a lower rate – $18 per net ton or $120 per discharged container, rising incrementally until 2028, maxing out at $33 per net ton or $250 per container. Additional penalties based on fleet composition were considered but dropped due to opposition from U.S. exporters and logistics providers.
Foreign-built vehicle carriers (not just Chinese-built) will incur fees based on Car Equivalent Unit (CEU) capacity, set at $150 per CEU post-grace period. An operator could receive a fee remission for up to three years if it orders and takes delivery of a U.S.-built vessel of equivalent or greater capacity. But as written, to qualify, both the order and delivery would have to occur within that time period.
The Second Phase
Starting April 17, 2028, the second phase mandates that a portion of U.S. LNG exports use U.S.-built vessels, phased in over 22 years to accommodate industry adjustments. Revisions to the original proposal include provisions based on port rotation rather than individual port calls, protecting smaller U.S. ports.
Exemptions and Cap
In response to public comments critical of the consequences of the proposed scope of fees, the USTR has included multiple exemptions for categories of U.S. owners and categories of Chinese-built vessels outlined in Annex II. The USTR has explicitly determined that the fees will not be cumulative. The final action outlines a preferential order for applying fees. Specifically, a vessel designed to carry LNG is subject only to Annex IV, a vehicle carrier is subject solely to Annex III, a vehicle operated or owned by a Chinese entity will be subject to the fees imposed under Annex I, and all other vessels will be subject to Annex II when Annexes I and III do not apply.
Additionally, the final action adds a cap and clarifies that when a vessel makes multiple U.S. entries before transitioning to a foreign destination, the fee will be assessed only once per rotation or string of U.S. port calls, up to a maximum of five times a year per individual vessel under both Annex I and II.
Service Fee on Chinese Vessel Operators and Vessel Owners of China (Annex I)
The USTR has determined to assess a port call fee on any vessel with a Chinese operator or that is owned by an entity of China as defined in Annex I. The fee is to be assessed on a net tonnage basis. The rate of the fee is set to increase incrementally from $50/net ton on Oct. 14, 2025, to $140/net ton on April 17, 2028.
Service Fee on Vessel Operators of Chinese-Built Vessels (Annex II)
The USTR has determined to assess a port call fee based on the higher of either 1) a fee assessed according to the tonnage of the vessel or 2) a fee assessed on a per-container basis. These fees are also set to increase incrementally over a period of three years. For those fees according to tonnage, the increase is from $18/net ton on Oct. 14, 2025, to $33/net ton on April 17, 2028. For those fees assessed per container, the increase is from $120 per container on Oct. 14, 2025, to $250 per container on April 17, 2028.
Chinese-built vessels that are nonetheless exempt from the fee include certain vessels enrolled in certain U.S. Maritime Administration programs (e.g., the maritime security programs MSP, TSP, CSP and VISA), U.S. government cargo, vessels arriving empty or in ballast, vessels below certain size or capacity thresholds, vessels engaged in short sea shipping (i.e., voyages of less than 2,000 nautical miles from certain U.S. ports), certain U.S.-owned companies' vessels and certain specialized export vessels.
Vessel operators are also eligible for a fee remission for up to three years if that vessel operator orders and takes delivery of a U.S.-built vessel of equivalent size, with additional U.S. build requirements applicable to a variety of specific vessel components/categories.
Service Fee on Vessel Operators of Foreign-Built Vehicle Carriers (Annex III)
The USTR as determined to assess a port call fee against foreign-built vehicle carriers based on CEU capacity. This section does not apply only to Chinese-built vessels but instead targets "Non-U.S. built vessels" more broadly. This fee is to be assessed against vehicle carriers at a rate of $150/CEU beginning on Oct. 14, 2025.
Fee remission is available for up to three years to owners of the non-U.S. built vessel carriers if those owners order and take delivery of a U.S. built vessel of equivalent or greater capacity within that time period.
Restrictions on Maritime Transport Services (Annex IV)
The USTR has determined to require a minimum quantity of LNG exports be carried on U.S.-built vessels to begin in three years, on April 17, 2028. The mandated quantity is based on an incremental scale of minimum percentage beginning at 1 percent and increasing to 15 percent on April 17, 2047.
The action contemplates restriction of LNG export licenses for non-U.S. vessels/vessel owners if the applicable thresholds are not met. A pathway for suspension of the restrictions for up to three years on a vessel is provided if the owner orders and takes delivery of a U.S.-built vessel of equivalent or greater LNG capacity, which is subject to unique LNG-specific U.S. build and rebuilding requirements for LNG vessel components.
Additional Tariffs on Ship-to-Shore Cranes and Cargo Handling Equipment (Annex V)
The USTR has also proposed additional duties on certain ship-to-shore (STS) cranes and other handling equipment in response to President Donald Trump's direction in Executive Order 14269 issued on April 9, 2025. The USTR explained that the proposed action is intended to combat vulnerabilities arising from overreliance on Chinese production of these assets, which may create opportunities for China to manipulate the supply of critical components and materials essential to U.S. maritime infrastructure.
The USTR has proposed implementation of additional duties of up to 100 percent on STS cranes manufactured, assembled or made using components of Chinese origin or manufactured anywhere in the world by a company owned, controlled or substantially influenced by a Chinese national, along with additional duties of up to 100 percent on certain cargo handling equipment of China. The list of certain cargo handling equipment to which these duties would apply includes containers, chassis and chassis parts.
The USTR is inviting public comments on the proposed tariff actions on STS cranes and cargo handling equipment and will hold a public hearing on May 19, 2025. The USTR is particularly interested in comments pertaining to:
- the specific products to be subject to the increased duties and whether any particular project should be added or removed from the list
- the level of the increase in the rate duties proposed
- whether the increase should take effect in 180 days or over a phase-in period of six to 24 months
Interested parties can submit their comments and requests to appear at the hearing through the USTR's electronic portal. Written comments on the proposed actions are due by May 19, 2025.
Interpretations of Key Terms
In response to concerns over lack of clarity, the USTR specified the entities against which these fees would be assessed by including definitions in each annex. Despite these additions and clarifications, significant enforcement uncertainty remains and many details remain open to interpretation. Careful consideration of the applicability of the actions on specific operations and interests is highly recommended.
Conclusion
The USTR's actions are designed to counter China's dominance in the maritime, logistics and shipbuilding sectors, ensuring fair competition and safeguarding U.S. commerce. The revisions made by the USTR in drafting the final proposal demonstrate that the USTR intends to stay the course, but also a willingness to make modifications in some situations. Holland & Knight's International Trade Group and Maritime Team remain available to help clients navigate the USTR's actions.
