USTR Seeks Public Comment on Proposed Action in Section 301 Investigation of China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors

The Office of the United States Trade Representative (“USTR”) announced its proposed actions under Section 301 of the Trade Act of 1974 (“Section 301”), in connection with its Investigation of China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance (the “Proposed Action”) on February 21, 2025. 

In short, the Proposed Action includes a variety of recommended remedies, including (1) imposing significant port fees on Chinese vessel operators and other operators of Chinese-built vessels, and operators with orders for new vessels being built in Chinese yards, and (2) implementing requirements for mandatory use of U.S.-flag and U.S.-built vessels to carry fixed percentages (increased annually) of U.S. exports. 

At this time, the Proposed Action is not final and USTR is seeking public comment by March 24, 2025, as discussed further below. Given the role that ocean transportation plays in the economy, the Proposed Action would have far-reaching effects to the extent it is adopted. Accordingly, vessel owners and operators and other interested parties in the industry should consider commenting on the Proposed Action and/or appearing at the upcoming hearing with respect to how the Proposed Action may affect them and their industry. In addition, at a minimum, shipowners, operators, charterers, and shippers should start considering their operations, contracts, and how the Proposed Action may affect them. 

It is worth noting that in the days since USTR released its Proposed Action, the Trump administration has taken several significant steps focused on promotion of the U.S. shipbuilding and maritime industry, including measures drawing revenue from the proposed Section 301 fees:

1. Creation of a Shipbuilding Office: President Trump announced plans to establish a new office of shipbuilding within the White House. The Office of Maritime and National Capacity is organized within the National Security Council and aims to revitalize domestic ship production.
2. Tax Incentives: The administration plans to offer special tax incentives to encourage investment in both military and commercial shipbuilding.
3. Executive Order Under Consideration: An executive order (“EO”) is under consideration that includes measures to support U.S. shipbuilders. A draft order, which has been circulated in recent days throughout the maritime industry, reportedly includes a directive that USTR impose, through the ongoing 301 investigation, tonnage-based fees on Chinese-built and Chinese-flagged ships (or vessels in fleets that contain such ships) entering the United States. However, at this point, the EO is still in draft form and has not been signed or released to the public.

Background

Section 301 authorizes USTR to investigate foreign trade practices and impose measures on foreign countries found to violate U.S. trade agreements or engage in acts that are “unjustifiable,” “unreasonable,” or “discriminatory” in ways that burden U.S. commerce. USTR’s powers under Section 301 are quite broad. 

In March 12, 2024, five major U.S. labor unions filed a Section 301 petition regarding alleged acts, policies, and practices of China to dominate the maritime, logistics, and shipbuilding sector. The petition was accepted, and on April 17, 2024, USTR initiated an investigation. Following its investigation, on January 16, 2025, in the last days of the Biden Administration, USTR published its report and determined that China’s practices were “actionable”.[1] 

In connection therewith, USTR published the Proposed Action and is now seeking public comments from interested parties. Comments must be submitted via USTR’s online portal (https://comments.ustr.gov/s/) no later than March 24, 2025. USTR has also scheduled a public hearing on the proposed actions on March 24, 2025, in the main hearing room of the U.S. International Trade Commission located at 500 E Street S.W., Washington, D.C. 20436. Interested parties may request to appear at the hearing no later than March 10, 2025, and the request should include a summary of the proposed testimony and may be accompanied by a pre-hearing submission. Remarks at the hearing are limited to five minutes. 

Proposed Action

The Proposed Action includes the following fees and service restrictions:

Fees

• Chinese maritime transport operators will be charged a fee:
• up to U.S. $1,000,000 per vessel entrance to a U.S. port; or
  • up to U.S. $1,000 per net ton of the vessel’s capacity per entrance to a U.S. port.
• Chinese maritime transport operators with fleets comprised of Chinese-built vessels will be charged:
• up to U.S. $1,500,000 per vessel entrance to a U.S. port;
  • fees based on the percentage of Chinese-built vessels in the operator’s fleet:
• up to U.S. $1,000,000 per vessel entrance at a U.S. port if greater than 50 percent of the fleet;
  • up to U.S. $750,000 per vessel entrance at a U.S. port if between 25 percent and 50 percent of the fleet; or
    • up to U.S. $500,000 per vessel entrance at a U.S. port if between 0 percent and 25 percent of the fleet; or
• an “additional” fee up to U.S. $1,000,000 per vessel entrance to a U.S. port if the number of Chinese-built vessels in the operators fleet is equal to or greater than 25 percent.
• Maritime transport operators with prospective orders for Chinese vessels:
• an “additional fee” based on the percentage of vessels ordered from Chinese shipyards:
• up to U.S. $1,000,000 per vessel entrance at a U.S. port if greater than 50 percent of their vessel orders in Chinese shipyard or vessels expected to be delivered by Chinese shipyards over the next 24 months;
  • up to U.S. $750,000 per vessel entrance at a U.S. port if between 25 percent and 50 percent of their vessel orders in Chinese shipyard or vessels expected to be delivered by Chinese shipyards over the next 24 months; or
    • up to U.S. $500,000 per vessel entrance at a U.S. port if between 0 percent and 25 percent of their vessel orders in Chinese shipyard or vessels expected to be delivered by Chinese shipyards over the next 24 months; or
• a fee up to U.S. $1,000,000 per vessel entrance at a U.S. port if 25 percent or more of the total number of vessels ordered by an operator, or expected to be delivered to the operator, are ordered or expected to the delivered by Chinese shipyards over the next 24 months.
• The Proposed Action also includes a proposed “refund” for additional fees, on a calendar year basis, up to U.S. $1,000,000 per entry into a U.S. port of a U.S.-built vessel through which the operator is providing international maritime transport services. However, the Proposed Action does not include any further details as to the timing of refunds or the process to obtain a refund. 

Service Restrictions

In addition to the above fees, the Proposed Action includes restrictions on services aimed at promoting the transport of U.S. goods on U.S. vessels. In that regard, the international maritime transport of all U.S. goods (e.g., capital goods, consumer goods, agricultural products, and chemical, petroleum, or gas products), must comply with the following schedule: 

The Proposed Action also includes a requirement that U.S. goods are to be exported on U.S.-flagged, U.S. built vessels, but may be approved for export on a non-U.S.-built vessel provided the operator providing international maritime transport services demonstrates that at least 20 percent of the U.S. products, per calendar year, that the operator will transport by vessel, will be transported on U.S.-flagged, U.S.-built ships. 

Other Actions

In addition, the Proposed Action included a recommendation that relevant U.S. agencies take actions to reduce exposure to and risk from China’s promotion of the National Transportation and Logistics Public Information Platform (“LOGINK”) or other similar platforms, including investigating alleged anticompetitive practices from Chinese shipping companies, restricting LOGINK access to U.S. shipping data, or banning or continuing to ban terminals at U.S. ports and U.S. ports from using LOGINK software. 

Key Takeaways

• Open Issues: While the Proposed Action listed a number of proposed fees and restrictions, the descriptions are generally vague and include no regulatory details or necessary definitions for implementation. For effective implementation, many of the proposals will need to be fleshed out further before a final rule is adopted.
• For example, many requirements are based on who the vessel “operator” is, but that term is not defined, and there is no standard definition of “vessel operator” in U.S. law; it can vary depending on the particular legal or regulatory requirements at issue. There is also no indication how affiliated companies would be treated in the fleet-wide analysis of the origin of vessels or newbuilds.
  • In addition, the Proposed Action sets maximum fees (“at a rate of up to $1,000,000 per entrance”) but does not include any analytical principles, policies, or procedures to determine how the U.S. government would set the actual fees for specific vessels (e.g., how will fees be adjusted based on vessel type, cargo type, trade, volume, export status, and/or other factors, etc.).
• Status of the Proposed Action: The Proposed Action is only a set of proposals at this stage and the various fees and service restrictions are not yet final. At this time, it is unclear whether USTR will ultimately impose all, some, or any of the proposals included in the Proposed Action. However, given the lack of specificity and open issues, public comment and testimony at the public hearing by interest parties may help shape what form the final rules takes.
• Timeline: The public hearing is scheduled for March 24, 2025, and the deadline for public comments also closes on March 24, 2025. Section 301 cases are supposed to be completed within one year, which would require the rule to be finalized by April 17, 2025, and then implemented 30 days after. However, the White House may extend that period up to 180 days.
• Given the lack of specificity in the Proposed Action and the anticipated wide-ranging opposition from inside the United States (from importer, exporters, manufacturers, retailers, etc.) and also outside the United States (shipowners, shippers, associations, governments, etc.), it will be challenging for USTR to finish this process and publish a workable final regulation within the one-year timeframe. However, given the velocity of other recent administration trade actions, an implementation of some or all proposed measures in April cannot be ruled out.
• Contract Review: In the interim, vessel owner and operators and other actors in the industry should review their existing and prospective contracts and consider how the Proposed Action may affect them and whether they may have any applicable relief. For example:
• Which party is responsible for port fees (typically the charterers) and are there any exceptions or restrictions that may be applicable;
  • Does the contract include tariff or sanction provisions that may be applicable; or
  • Would the Proposed Action constitute a force majeure event, a change in law, or a material adverse change such that certain rights such as suspension of performance, substitution of vessel, or termination may be applicable?