USTR’s $1.5M Port Fee Proposal on Chinese Ships Sparks Industry Confusion Over Critical Definitions

A new U.S. Trade Representative proposal targeting Chinese maritime operations with substantial port fees has sparked significant concerns within the shipping industry due to ambiguous definitions that could create widespread uncertainty, according to a detailed analysis by Holland & Knight’s International Trade Group.

Following an investigation conducted during the former Biden Administration, the USTR determined that China’s targeting of maritime sectors was “unreasonable” and burdensome to U.S. commerce. In response, the USTR last month proposed hefty new port charges—up to $1 million per U.S. port call for Chinese-operated vessels and up to $1.5 million for Chinese-built vessels.

One of the primary concerns centers on the undefined term “Chinese Maritime Operator” and the critical term “operator,” according to Holland & Knight, which notes that this ambiguity becomes particularly problematic in an industry known for complex international holding company structures and voting agreements that can obscure the true nationality of controlling entities.

“Without the necessary precision in the regulatory language, stakeholders in the maritime industry have found it challenging to understand the full impact of the proposed actions on their businesses,” notes the Holland & Knight analysis.

The ambiguous wording of the proposal raises several critical questions, including whether vessels owned by U.S. companies but flagged under Hong Kong registry would face penalties, and how fees would apply to ships built in third countries using Chinese components.

Another significant concern is the potential for double charges, as the proposal doesn’t clarify whether a vessel that is both Chinese-built and operated by a Chinese company would face multiple fees for each U.S. port call, according to Holland & Knight’s analysis. Similarly, there’s uncertainty about how fees would apply to containerships making multiple U.S. port visits during scheduled routes.

Drewry previously noted that for typical containerships servicing the main U.S. trade routes, the estimated tariff fee could be between approximately $222 and $500 per TEU, and between $2 million and $3 million per sailing.

The proposal also introduces a progressive cargo preference requirement, mandating that U.S. exports gradually shift to U.S.-flagged vessels – from 1% immediately to 15% within seven years. However, industry experts question whether U.S. shipyards, which largely lack facilities for efficient production of large containerships, can meet this ambitious target even with substantial federal support.

Earlier this week, President Trump announced the establishment of a White House office of shipbuilding and tax incentives for domestic shipbuilders aiming to “bring this industry home to America where it belongs,” according to Trump. The Trump Administration is also reportedly preparing an executive order aiming to revitalize America’s struggling shipbuilding sector, which currently builds fewer than five ships annually compared to China’s 1,700.

Regardless, the maritime industry faces potential market disruption if the USTR’s measures are implemented. Analysts suggest cargo might be redirected through Mexican and Canadian ports before entering the U.S. or limit U.S. port calls to major gateway ports to avoid penalties. The increased costs could ultimately impact consumer prices as retailers absorb the new fees.

Notably, Holland & Knight points out that existing legislation already provides similar remedies. The Federal Maritime Commission currently has authority under the Shipping Act to impose fines up to $1 million per port call and bar carriers from U.S. trades when necessary.

“This proposal lacks detailed information but may be intended as a strategic move to benefit future trade negotiations and seems well intentioned in its efforts to bolster U.S. shipbuilding,” concludes Holland & Knight. “Regardless, the proposal has generated uncertainty that could have significant implications for contractual agreements, including the allocation of costs between owners, operators, technical managers and charterers, as well as responsibilities under a respective charterparty.”

A hearing on the controversial proposal is currently scheduled for March 24, 2025, and public comments are open until then. Maritime stakeholders are strongly encouraged to participate in the consultation process as the industry grapples with these potentially far-reaching regulations.

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