In Jan 2025, the U.S. Trade Representative determined that China’s dominance of the maritime, logistics and shipbuilding sectors is unreasonable and burdens/restricts U.S. commerce and is therefore “actionable” under Section 301 of the Trade Act of 1974 (Section 301).
In response to this, the USTR proposed taking action by imposing new port charges of up to $1 million per U.S. port call for Chinese-operated vessels and up to $1.5 million per port call for Chinese-built vessels While the USTR’s aim is to rebalance trade and reduce China’s dominance in the shipbuilding sector, the responses have been divided, with critics warning that the unintended consequences could be severe, particularly for U.S. agriculture, energy exports, and small-to-mid-sized ports.
Existing Laws
The Federal Maritime Commission (FMC) currently has authority under several existing statutes to address practices similar to those outlined in the USTR proposal. Under the Shipping Act of 1984, the FMC may limit certain pricing practices and take action against ocean carriers controlled by foreign governments. It may also bar carriers from operating in U.S. trades or calling at U.S. ports, and impose fines of up to $1 million per port call. These provisions apply when foreign laws or practices affect U.S. ocean-borne trade. These authorities have been in place for many years and continue to be available for use.
Proposed Actions
The USTR proposal outlines two key measures:
- Service Fees on Chinese Maritime Transport Operators:
- Up to $1 million per vessel entrance into a U.S. port, or
- Up to $1,000 per net ton of the vessel’s capacity per port call.
- Additional Fees for Chinese-Built Vessels:
- Up to $1.5 million per port call, or
- A sliding scale based on the percentage of Chinese-built vessels in the fleet, or
- An extra fee of up to $1 million if over 25% of the fleet is Chinese-built
- Fees Based on Orders from Chinese Shipyards:
- A sliding scale fee based on orders over the next 24 months, or
- Up to $1 million per port call if 25% or more of new vessel orders are from Chinese shipyards
- Refund Mechanism:
- Operators using U.S.-flagged vessels may be eligible for refunds of up to $1 million per entry, annually.
Who Do the Fees Affect?
These port fees target a broad swathe of the maritime industry. Over one-third of all commercial vessels globally were built in China in 2022, a figure projected to rise to over 55% soon. As such, the new policy has implications for the world maritime trade, including :
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U.S.-based carriers operating Chinese-built ships
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Foreign container lines making frequent U.S. port calls
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Agricultural and energy exporters dependent on ocean freight
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Small and mid-sized ports rely on diverse carrier calls
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Consumer-facing companies dependent on international trade
How Do They Affect the Maritime Industry?
According to the Chamber of Shipping of America, these fees could impact up to 83% of container ships, 68% of car carriers, and 46% of chemical tankers calling at U.S. ports. The maritime industry warns that these levies will ultimately impact American and global businesses:
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Raise shipping costs: A $1.5 million fee on a 60,000-ton export grain vessel approximately translates to a $25/ton increase
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Limit vessel availability: Owners are already declining U.S. service requests
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Shift trade routes: More cargo may be rerouted through Canadian and Mexican ports
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Clog domestic infrastructure: Increased use of trucks and trains from alternative ports will burden U.S. roads and rail
In essence, the very vessel operators the USTR hopes to support may be driven out of business by these policies.
Concerns Over Ambiguity in the Proposed Actions
There are growing concerns about the lack of clarity in the USTR’s proposed actions. It is unclear whether U.S. companies operating Chinese-built or flagged vessels or those with Chinese financing, would be subject to the proposed fees.
There are also questions about how the fees would apply—whether a ship built and operated by Chinese entities could face double charges, or if container vessels calling multiple U.S. ports would be charged once or at each stop. The proposal does not address whether U.S.-owned, Chinese-built ships would be affected, which could unintentionally impact U.S. businesses and allies.
Concerns extend to the cargo preference provision, which may be difficult to meet given the current capacity of U.S. shipyards. The proposal also lacks a transition period for operators to adapt.
If implemented without clarification, these measures could raise shipping costs and impact U.S. trade policy. Operators might avoid U.S. ports, routing goods through Canada or Mexico instead. Ultimately, increased costs could pass down the logistics chain and affect consumers.
Myths Busted
Myth: The fees only affect Chinese vessels. Any fleet with Chinese-built vessels is affected, even if owned and operated by non-Chinese companies.
Myth: The fees will quickly lead to a revitalised shipbuilding sector. U.S. shipyards build fewer than 10 ships a year; China builds over 1,000. Scaling up will take years.
Myth: Consumers won’t notice. Higher transportation costs are already being passed on, affecting prices of grain, fuel, and consumer goods.
Questions Answered
Why is the USTR proposing these fees?
To counter China’s dominance in global shipbuilding and encourage domestic investment.
How will this affect international trade?
It may disrupt trade negotiations, increase transport costs, and lead to strained relationships with other countries.
Who benefits? Short-term beneficiaries may include shipbuilders in Japan and Korea. Long-term gains are speculative and dependent on domestic investment.
After Effects
The policy, if enacted in full, could reduce U.S. exports by 12% and cut GDP by 0.25%, according to a study cited in recent hearings. Agriculture, coal, and petroleum sectors face the highest risks. Additionally, these levies could discourage careers in maritime, affecting enrolment in training academies and long-term workforce availability.
Looking Ahead
The United States Trade Representative is expected to revise the policy based on stakeholder feedback. There’s growing pressure to pivot towards positive incentives such as subsidies, tax breaks, and government-backed shipbuilding initiatives that encourage domestic growth without penalising active operators. There are calls for the policy to balance strategic ambition with operational realities. Stakeholders argue that encouraging equitable market access and adequate and effective protection for U.S. shipping interests requires collaboration.
An article by the Economic Times states that President Donald Trump’s administration is considering softening its proposed fee on China-linked ships visiting U.S. ports after a flood of negative feedback from industries that said the idea could be economically devastating.
Conclusion
The proposed port fees on Chinese-linked vessels aim to address a legitimate concern: China’s near-monopoly on shipbuilding. However, critics worry that the solution currently on the table could inadvertently deny fair competition, destabilise supply chains, and harm the very industries it seeks to protect. It is therefore critical that designs are made keeping the global maritime in mind, with an inclusive strategy focused on long-term growth, strategic investment, and shared responsibility.
FAQs
1. What is the goal of the port fees on Chinese ships?
To reduce reliance on Chinese-built vessels and promote the U.S. shipbuilding industry.
2. Who is affected most by these fees?
U.S. exporters, agriculture producers, small ports, and U.S.-owned fleets operating Chinese-built vessels.
3. How are companies reacting?
Many are adjusting contracts to shift costs, reducing U.S. port calls, or exploring alternatives in Canada and Mexico.
4. Is the policy final?
No. The USTR is still reviewing stakeholder comments and may revise the proposal.
5. What alternatives are being suggested?
Incentives for domestic shipbuilding, modernising infrastructure, and expanding international collaboration.
6. What does this mean for the average consumer?
Higher costs for goods and potential delays in shipments due to limited vessel availability.
7. Will this affect international trade relations?
Yes, especially with countries heavily reliant on Chinese-built vessels or trade routes passing through U.S. ports.
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