USTR targeted action ramifications following Chinese maritime investigation

On 17 April 2025, the Trump administration announced targeted action (the “301 Action”) in response to the USTR’s findings of unfair practices by China affecting U.S. commerce. Following a 180-day phasing in period, those actions include:

1. Fees on vessel owners and operators of China based on net tonnage per U.S. voyage, starting at $50/NT and increasing incrementally over the next three years.
2. Fees on operators of certain Chinese-built ships based on the higher of net tonnage or per container, starting at $18/NT or $120/container and increasing incrementally over the next three years to $33/NT or $250/container.
3. Fees on foreign-built car carrier vessels based on their capacity, starting at $150 per CEU capacity of the entering non-U.S. built vessel.

The actions are non-cumulative and if more than one fee might apply, only one fee will be applied. The fee is assessed at the first U.S. port within the U.S. customs territory and if a vessel makes multiple U.S. entries before transiting to a foreign destination, the fee is assessed per rotation or string of U.S. port calls. For fees levied on foreign-built vessels, fee remissions are available for up to three years for vessel operators that order and take delivery of U.S.-built vessels of equivalent size.

A second phase of action is planned with restrictions on transporting LNG via non-U.S. vessels set to begin after 3 years and increase incrementally over 22 years. The delayed implementation on restrictions on U.S. LNG exports was made to address capacity constraints and in response to public comments pointing out that currently there are no U.S.-built LNG vessels and only one U.S.-flagged LNG vessel.

The 301 Action builds on executive order No 14269 issued by the Trump administration on 9 April 2025 called “Restoring America’s Maritime Dominance”. While the executive order of 9 April focuses on rebuilding the U.S. maritime industries and workforce and incorporates elements of the bipartisan Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act (“SHIPS Act”) first introduced in December 2024, the 301 Action is aimed squarely at countering China’s dominance in the maritime sector. As directed by the 9 April order, the USTR is also seeking public comments on the proposed tariffs on ship-to-shore cranes and other cargo handling equipment.

The full ramifications of the 301 Action are still being considered, including whether at least some parts might be challenged in front of the US courts, but for those contracts governed by English law there are a number of potential issues for consideration. We have highlighted some of those below arising in the context of shipbuilding contracts, charters, leases and contracts for second hand sale.

Shipbuilding
China is the global leader in shipbuilding, estimated to have had more than 50% of the global commercial shipbuilding market in 2024. In response to public comments, the USTR has determined not to impose any fee based on fleet composition, as was originally proposed, but instead to impose a fee on maritime transport using any Chinese-built vessels assessed on a per tonnage or per container fee basis, whichever fee is higher.

This fee is applied regardless of the operator, the commodity transported or whether for import or export. However, to shield U.S. interests or industries from what the USTR considered a disproportionate economic impact, there are exceptions for:

1. Vessels enrolled in certain U.S. Maritime Administration programs (i.e. the Maritime Security Program and Tanker Security Program);
2. Vessels arriving empty or in ballast;
3. Vessels below certain size or capacity thresholds;
4. Vessels engaged in short sea shipping (i.e. voyages of less than 2,000 nautical miles from certain U.S. ports);
5. Certain U.S.-owned companies’ vessels; and
6. Certain specialised export vessels.

Some shipbuilding contracts have expressly anticipated that the USTR investigation might lead to port fees for Chinese built vessels and addressed the effect in those contracts. Most will be silent. Where contracts are silent, we expect that buyers and sellers will look to see whether the 301 Action will have an impact on:

Sanctions clauses (e.g. might the 301 Action count as a “sanction” under such clauses?);
Force majeure clauses (e.g. might the 301 Action qualify as a force majeure event?); and
Change in law provisions (e.g. if any change in law provisions include US law, will the 301 Action effect the contract through that avenue?)

In each instance, save in the event of a very expansive definition of sanctions, we expect the answer will be that the 301 Action will not give rise to any new contractual rights or obligations under shipbuilding contracts, as the 301 Action does not target the cost of construction or prohibit the use of vessels for particular voyages (save perhaps LNG vessels in the second phase), but makes their operation more expensive. Merely making the cost of operation higher on certain voyages will not usually be sufficient to entitle a buyer to terminate a contract. However, if a shipbuilding contract has a very expansive definition of sanctions, e.g. one that refers to economic penalties or incentives applied in respect of the Chinese shipbuilding industry, rather than a specific shipyard, it is possible that the 301 Action might bite. Such clause would need to be carefully reviewed to understand what the ramifications might be, including whether a buyer or seller might have the right to suspend and/or terminate the contract.

While the direct impact of the 301 Action on existing shipbuilding contracts is likely to be limited, the indirect impact may be greater as buyers, put off by the 301 Action and similar negative sentiment from Washington, look to see whether they have grounds to terminate contracts on alternative grounds, e.g. delay and technical defects. No doubt both shipyards and buyers will pay particular attention to such matters over the coming months.

Chartering
Where time charters are in place, the port fees imposed by the 301 Action are, unless specifically negotiated, likely to fall on charterers under most standard forms of time charterparty as “port charges” and similar costs that are usually for the account of charterers. However, with many charterparties containing significant additional clauses, this general position should be considered in the context of each set of charter terms.

Under voyage charterparties the position may well be different, with common forms of voyage charterparty such as the Asbatankvoy form including obligations on owners to pay “all dues and other charges on the Vessel” albeit that charterers are to pay for “any unusual taxes, assessments and governmental charges which are not presently in effect but which may be imposed in the future on the Vessel”. Those now entering into voyage charterparties that involve calling at a US port should now carefully consider the liability for those port fees and, if the payment obligation differs under the 301 Action from the liability under the charterparty terms, how the relevant reconciliation is to take place and specific reference made to avoid any misunderstanding as to which party is liable.

Leasing
Many Chinese companies are involved in the leasing market, including sale and leaseback transactions whereby those companies are the owner of the relevant vessel(s) and charterers, many who are not Chinese, operate them.

One of the USTR’s aims is to disincentivize the use of Chinese shipping services and the definitions of “Chinese Vessel Operators” and “Vessel Owners of China” are therefore purposefully broad so as to catch a wide range of entities. The terms encompass any citizen of, entity incorporated in, or the government of the People’s Republic of China (PRC), Hong Kong, or Macau as well as entities whose headquarters, parent entity’s headquarters, or parent entity’s principal place of business is the PRC, Hong Kong, or Macau. Additionally, entities owned by, controlled by, or subject to the jurisdiction or direction of the PRC, Hong Kong, or Macau will be considered Chinese, which includes where 25 percent or more of the outstanding voting interest, board seats, or equity interest is held directly or indirectly by any combination of the before mentioned entities.

If caught within these definitions then the related vessels will be subject to fees when calling at the US, unless one of the listed exceptions applies.

Given the prevalence of Chinese lease financing in the market, and the broad scope of the 301 Action targeting Chinese operators and owners, it may be that having financing through for example a sale-leaseback arrangement where the registered owner is a SPV controlled by a Chinese leasing house is sufficient for fees to be assessed on the vessel. As to who will be liable to pay those fees, we expect that under most leasing arrangements, that it will be the charterer’s obligation to pay such fees because leasing documents traditionally pass on the liability for operational costs to the charterer. That said, specific terms should always be checked.

Second hand sale
As to the market for second hand vessels, there has been discussion that the value of Chinese built vessels might fall in the second-hand market because of action by the USTR. Given that rumours of potential action as a result of the USTR investigation have been swirling for some time, we expect that many buyers and sellers of second-hand vessels will have taken the possibility of the 301 Action into account in negotiating terms.

For those second-hand vessel sales taking place under the standard terms, such as the Norwegian Sale Form, the 301 Action is unlikely to provide grounds for buyers to refuse to take delivery, unless a bespoke clause has been added to the standard terms that would allow a buyer to back out of the contract (e.g. with a Chinese seller and a very widely drawn sanctions clause). That seems unlikely, so we expect all, or almost all, second hand sales will be unaffected by the 301 Action.

In summary, it is expected that the direct contractual effect of the 301 Action under English law governed maritime contracts will be limited. The indirect effect, as parties try to manoeuvre themselves as a result of the commercial and political impacts of the 301 Action may be far greater.