One day after Five Democratic Senators wrote to the White House urging swift action under Section 301 of the Trade Act of 1974 (19 U.S.C. § 2411) “to hold China accountable and reverse the decimation of our maritime strength and capacity inflicted over the last two decades,” USTR Friday released a pre-publication copy of its proposed response to the “unreasonable” maritime, logistics, and shipbuilding policies of the People’s Republic of China’s (PRC), detailed in a report issued in the final days of the Biden Administration. The proposal, generally consisting of “one or more” vessel entrance fees in the range of $1 million per entrance, is open for public comment until March 10, 2025. U.S. importers should consider providing comments as USTR’s proposal for additional fees does not expressly address the extent to which those fees might be passed through and levied on U.S. commerce.
Background
On March 12, 2024, labor unions petitioned USTR to investigate the acts, policies, and practices of the PRC to dominate the maritime, logistics, and shipbuilding sector. USTR investigated, concluding in its report that the PRC has targeted these sectors for dominance and has employed increasingly aggressive and specific targets, including with regard to market share and in national five-year plans, in pursuing dominance. USTR determined that the PRC has largely achieved its dominance goals, severely disadvantaging U.S. companies, workers, and the U.S. economy generally through lessened competition and commercial opportunities and through the creation of economic security risks from dependencies and vulnerabilities.
Proposed Action
USTR proposes a list of potential actions under Section 301(b), to be applied alone or in combination. The proposed actions include:
- Service fees on international maritime transport by PRC vessel operators — up to $1M per vessel entrance at a U.S. port or $1K per ton of capacity, per vessel entrance at a U.S. port, whether or not the particular vessel was PRC-built; and/or
- Service fees on international maritime transport by PRC-built vessels — up to $1.5M per vessel, or on sliding scales ranging from $500k to $1M per vessel entrance at a U.S. port based on the proportion of the vessel operator’s fleet that is PRC-built; and/or
- Service fees on maritime operators with orders for PRC-built vessels — sliding scale from $500k to $1M per vessel entrance based on the proportion an operator’s vessel orders or anticipated near-term deliveries with PRC shipyards; or a $1M per vessel entrance charged to all operators whose vessel orders or anticipated near-term deliveries from PRC shipyards exceed 25% of the total. Unlike the foregoing three fees, this one is not limited to international maritime transport.
In addition to the foregoing fees, USTR has also proposed a counterbalancing system for refunding operators up to $1M per vessel entry at a U.S. port by a U.S.-built vessel through which an operator is providing international maritime transport services.
Beyond the imposition of fees, USTR also proposes to erect a series of restrictions on the international maritime transport of “all U.S. goods,” requiring that specified percentages of annual exports must occur on U.S.-flagged vessels by U.S. operators, on the following schedule:
- On the date of USTR action, 1 percent of U.S. products exported by vessel;
- Two years after USTR action, 3 percent of U.S. products exported by vessel;
- Three years after USTR action, 5 percent of U.S. products exported by vessel, of which 3 percent must be U.S.-built vessels;
- Seven years after USTR action, 15 percent of U.S. products, of which 5 percent must be U.S.-built.
Moreover, for individual operators, USTR proposes to require that U.S. goods be exported via international maritime transport on U.S.-flagged, U.S.-built vessels, and to condition approval for using non-U.S.-built vessels on at least 20 percent of the operator’s annual transportation of U.S. goods being done on U.S.-flagged, U.S.-built ships.
Finally, from a systemic standpoint, USTR proposes to restrict interface with China’s National Transportation and Logistics Public Information Platform (LOGINK) in order to “reduce exposure and risks,” to “recommend{} that relevant U.S. agencies investigate alleged anticompetitive practices from Chinese shipping companies,” and to consider negotiating with allies and partners to counteract PRC policy and reduce dependencies in these sectors.
USTR’s Sweeping Proposal Leaves Key Details to be Further Developed through Comments from the Trade
Beyond the critical question of which service fee (or fees) USTR might ultimately move to impose, USTR’s proposal is silent on several significant questions that may affect the extent to which any actions undertaken are felt elsewhere in supply chains. To begin with, it is unclear whether there might be a mechanism to limit the extent to which vessels and vessel operators can pass through additional fees to shippers, including U.S.-based companies. The Administration’s simultaneous development of related policies provides further angles for comment. For example, commentators could suggest these fees as additional bases for standing up the President’s proposed External Revenue Service.
Other terms will require further clarification to ensure business certainty. USTR’s description of the proposed fee(s) as applying to “international maritime transport” and on the “entrance of any vessel to a U.S. port” leaves it ambiguous how the proposed fees would apply to foreign-originating vessels making multiple U.S. ports their port of call. U.S. Customs and Border Protection regulations oblige, e.g., foreign vessels to make formal entry even when traveling between domestic ports, but this may or may not conform to USTR’s conception of “international maritime transport.” Likewise, because “vessel operator” is undefined, it is unclear whether creative redesignation of a company’s existing fleet could yield a compliant “operator” having a higher proportion of non-PRC-built vessels or non-PRC vessel orders for purposes of a sliding scale fee.
With respect to the proposed shipping restrictions, USTR’s plans for enforcing the restriction vis-à-vis any individual shipment are not clear. As was seen in the recent deployment and pause of certain de minimis restrictions for Chinese shipments under Section 301, CBP’s enforcement capacities may not be suitable for administering these restrictions. In sum, there are ample areas for targeted public comment that may help shape USTR’s final action.
Request for Comment and Public Hearing
USTR has requested comments concerning the burdens attributable to PRC policy regarding maritime, logistics, and shipbuilding sectors, the appropriate trade to be covered by USTR actions, and the appropriateness of the proposed fees and restrictions, 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.”
Requests to appear at the public hearing are due by March 10 via comments.ustr.gov (Docket No. USTR-2025-0003). Written comments are requested by March 24 via comments.ustr.gov (Docket No. USTR-2025-0002), which is also the planned date for the public hearing.
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CLK’s supply chain management practice has extensive experience assisting companies with supply chain matters, including accessing favorable policy outcomes to support supply chain logistics.