US’ Wide-Ranging Fees on Chinese-Linked Vessels Set to Increase Costs and Cause Disruptions in Maritime and Shipbuilding Industries

Introduction

Following from the general uncertainty regarding the tariffs (“US tariffs on China“) sought to be imposed by the United States of America (“US“) on the People’s Republic of China (“China“), the US Trade Representative’s (“USTR’s“) issued final proposals on 17 April 2025, seeking to: (i) impose fees on Chinese-owned, Chinese-operated and/or Chinese-built vessels; and (ii) instead shift towards favouring US-built, US-flagged and US-operated vessels. This marks a landmark moment for the global maritime and shipbuilding sectors.

China has responded to warn that the new fees will ultimately fail in their stated aim of revitalising the US shipbuilding industry, and will be detrimental to all parties, drive up global shipping costs, disrupt the stability of global production and supply chains, increase inflationary pressure within the US, and harm the interests of US consumers and businesses.

This Update covers the significant aspects of these proposals, including the categories of fees to be imposed across two phases, and the available exemptions. It also discusses their potential impact on various businesses (especially for container carriers, car carriers and larger tankers, such as very large crude carriers) which look to be the hardest hit by the imposition of these fees.

Background to the USTR Initial Proposals

USTR Initial Proposals and Draft Executive Order (“DEO”) 

In February 2025, USTR initially proposed to: (i) levy fees of up to US$1.5 million per port call on operators of Chinese-built vessels or vessels from fleets that include Chinese-built vessels; (ii) levy fees of up to US$1 million per port call for Chinese vessel operators; and (iii) shift domestic exports to vessels that are operated, flagged and built in the US (“USTR Initial Proposals“). The USTR Initial Proposals followed USTR’s completion of its investigations into China’s maritime sector and development plans (which began in April last year), and its ruling that China allegedly has an unreasonable dominance in the shipbuilding, maritime and logistics industries. This alleged violation of US trade laws is also the same basis being put forth for proposals regarding, among others, US tariffs on China.

The administration of US President Donald Trump then issued a DEO dated 27 February 2025 setting out its plan to levy tonnage-based fees for docking at US ports on any vessel that is part of a fleet that includes: (i) vessels built in China; or (ii) Chinese-flagged vessels, regardless of where the individual vessel itself is built or flagged, for each visit to US ports, and to push allies to act similarly or face retaliation. However, the DEO did not include the original USTR proposal language stating that port fees on fleets would be imposed when Chinese-built vessels account for 25% or more of vessels operating, slated for delivery or on order, and did not put a dollar value on these fees or say how they would be calculated.

The stated aim of these proposals was to revive the US domestic maritime industry and its domestic shipbuilding sector, as well as to weaken China’s alleged increasing economic and military dominance in these areas, including the latter’s hold on the US$150 billion (approximately S$200 billion) global ocean shipping industry. To illustrate:

1. Market share: The China shipbuilding industry accounts for over 50% of the aggregate capacity for merchant vessel cargo that is produced globally every year, which is a tenfold increase from its 5% share in 1999. In contrast, the US shipbuilding industry, which peaked in the 1970s, now comprises only a tiny slice of the aggregate output for the industry. Notably, many major players in the ocean carrier industry have a sizeable portion of their respective fleets or their respective orderbooks originating from shipyards in China.

2. Dependency / reliance: Further, US trade across the Pacific Ocean is heavily dependent on Chinese vessels, with roughly 17% of US container imports originating eastward arriving aboard Chinese carriers.

Final Executive Order (“FEO”) and Indications of Revision of Proposals 

These proposals received largely negative feedback from stakeholders across various industries, who feared that, if implemented, there would be reduced availability of vessels required to transport US coal and energy, agriculture, as well as manufactured goods and exports, among others, to the global market. This might in turn reduce the competitiveness of US products in global markets, increase costs all round (with the corresponding question of who would eventually bear the brunt of the same), and employment losses. 

Therefore, on 9 April 2025, the FEO on US shipbuilding was signed, which did not include the language on port fees previously present in the DEO, and which instead directed USTR to coordinate with other government agencies to enact “the actions, if any, that the USTR determines to take”. Further, having acknowledged that these proposals were initially put forth to target large container vessels carrying retail goods, and without thoroughly assessing other potential implications (such as for commodities flows), there were indications that these proposals might be revised by USTR.

USTR Final Proposals

Details 

On 17 April 2025, USTR issued its press release with its final proposals (“USTR Final Proposals“) on the matter, titled “USTR Section 301 Action on China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance” (available at the USTR website at www.ustr.gov). Broadly, the approach taken appears to be as follows:

1. Per tonnage / container, per voyage: Per tonnage or per container fees will apply to Chinese-linked vessels, with fees to be imposed per US voyage (more details below).

2. Not per port call, not per percentage of fleet or orders: USTR departed from the imposition of flat individual fees per port call and declined to impose these fees based on the percentage of Chinese-built vessels in a fleet or on prospective orders of Chinese vessels, as originally set out in the USTR Initial Proposals.

3. Assessment of fees: The fees for Category 1 and Category 2 below will be charged up to five times per year, per vessel. With respect to Category 3 and Category 4, the USTR Final Proposals are silent as to whether there is any similar limit which applies.

Phase 1 of the fees will kick in within 180 days from 17 April 2025, as follows:

1. Category 1 (Chinese-owned or operated): Fees on Chinese vessel owners and Chinese vessel operators will be charged as follows:
   • Effective as of 17 April 2025, a fee in the amount of US$0 per net ton for the arriving vessel.
   • Effective as of 14 October 2025, a fee in the amount of US$50 per net ton for the arriving vessel.
   • Effective as of 17 April 2026, a fee in the amount of US$80 per net ton for the arriving vessel.
   • Effective as of 17 April 2027, a fee in the amount of US$110 per net ton for the arriving vessel.
   • Effective as of 17 April 2028, a fee in the amount of US$140 per net ton for the arriving vessel.

• Category 2 (Chinese-built): Fees on non-Chinese vessel operators of Chinese-built vessels will be the higher of the following two fee calculation methods:
  • Effective as of 17 April 2025, a fee in the amount of US$0 per net ton for the arriving vessel (or US$0 for each container discharged). 
  • Effective as of 14 October 2025, a fee in the amount of US$18 per net ton for the arriving vessel (or US$120 per container).
  • Effective as of 17 April 2026, a fee in the amount of US$23 per net ton for the arriving vessel (or US$153 per container).
  • Effective as of 17 April 2027, a fee in the amount of US$28 per net ton for the arriving vessel (or US$195 per container).
  • Effective as of 17 April 2028, a fee in the amount of US$33 per net ton for the arriving vessel (or US$250 per container).

3. Category 3 (non-US built car carriers): Fees on non-US built vessels carrying cars will be charged as follows:
   • Effective as of 17 April 2025, a fee of US$0 on the entering non-US built vessel.
   • Effective as of 14 October 2025, a fee in the amount of US$150 per Car Equivalent Unit (“CEU“) capacity of the entering non-US built vessel.

Phase 2 of the fees will begin in three years to incentivise US-built vessels carrying liquified natural gas (“LNG“) (“Category 4“). In this regard, from 17 April 2028, 1% of all LNG intended for exportation by vessel must be exported by US-built, US-flagged and US-operated vessels. This percentage will increase incrementally from 17 April of each subsequent year, to 15% by 17 April 2047. 

Exemptions

In recognition of the fact that US shipyards, which presently build approximately five vessels per year, will need significant time in order to compete on an even keel with China (which has an output of more than 1,700 vessels built per year), USTR has set out the following applicable exemptions:

1. Category 2 exemptions: The Category 2 fees do not apply to the following Chinese-built vessels:
   • Small vessels: Vessels with a capacity of equal to or less than: (i) 4,000 Twenty-Foot Equivalent Units (TEU); (ii) 55,000 deadweight tons (“DWT“); or (iii) an individual bulk capacity of 80,000 DWT will be exempt.
   • Short voyages: Vessels entering a US port in the continental US from a voyage of less than 2,000 nautical miles from a foreign port or point will be exempt.
   • Great Lakes ports: Both American and Canadian vessels that call at Great Lakes ports will be exempt.
   • Commodities exports: Also exempt are vessels arriving at US ports in ballast to load exports such as wheat and soybeans. Bulk exports like coal or grain will be exempt.
   • Chemical substances in bulk liquid forms: Specialised or special purpose-built vessels for the transport of chemical substances in bulk liquid forms will also be exempt.

2. Orders of US-built vessels: For the Category 2, Category 3 and Category 4 fees, vessel owners could be eligible for a suspension of the fees for a period not exceeding three years, if they order and take delivery of a US-built vessel of equivalent or greater net tonnage, or of equivalent or greater CEU, or of equivalent or greater LNG capacity measured in cubic feet (as the case may be). Vessel owners will be eligible for the remission upon order of, and until delivery of, the US-built vessel. If the vessel owner does not take delivery of the US-built vessel within three years, the fees will become due immediately. Proof of the order must be provided on demand, and may include information such as order and contract information related to the order.

Implications

Notwithstanding revisions made to the USTR Initial Proposals, there remain immense implications following from the USTR Final Proposals, especially in the present climate surrounding US tariffs on China.

Among others, businesses should be aware of the increased costs of ocean transportation aboard Chinese-owned, Chinese-operated and/or Chinese-built vessels intending to make US voyages, and, given China’s market share of ocean transportation, the reduced availability of vessels that may qualify for the purposes of avoiding these costs. Businesses may want to take advantage of the present six-month window for such ocean transportation before the USTR Final Proposals kick in, as well as the exemptions available for smaller vessels, shorter voyages, commodities exports and chemical substances in bulk liquid forms. For instance, businesses may want to take note that:

1. Bulk carriers: The present exemption for vessels not exceeding 80,000 DWT may significantly soften the immediate impact which implementation of port fees may have on the bulk carrier market, given that a typical Panamax bulk carrier has a carrying capacity between 65,000 to 80,000 DWT. The exemption may also lead to a stratification of the bulk carrier market, such that smaller Panamax vessels call at US ports, with larger bulk carriers avoiding US ports.

2. Other non-container carriers: Further, the present exemption for small vessels not exceeding 55,000 DWT may effectively exempt smaller tankers (smaller than Medium Range (“MR“)), LNG carriers, general cargo vessels and other non-container carrier vessels, from the imposition of the fees.

3. Key affected segments: As such, the key affected segments that may suffer most from the imposition of the fees would primarily be container carriers, car carriers and larger tankers (MRs and larger).

4. Impact on backhaul voyages and freight: While some exporters, traders, and ship owners / operators may welcome the exemption on vessels loading cargoes in bulk for export from US ports, that exemption is unlikely to earn cargo interests a reprieve from freight increases and/or vessel supply, given the requirement for vessels to arrive in ballast condition. That pre-requisite effectively removes any possible backhaul that ship owners and operators may earn from US port calls.

Further, vessel owners of Chinese-built vessels, car carriers and LNG carriers, should be aware of the general push towards favouring US-built, US-flagged and US-operated vessels for US voyages (albeit with a longer runway for Phase 2 for LNG carriers), as well as the corresponding suspension of fees if there is an order and delivery of a US-built vessel of equivalent or greater capacity within three years.

Businesses should remain cognisant as well that USTR is proposing tariffs on ship-to-shore cranes and other cargo handling equipment, to address China’s alleged overwhelming production of ship-to-shore cranes, intermodal chassis and shipping containers, as well as its alleged increasing shares of other components and products. USTR will convene a hearing on the same on 19 May 2025. These proposed US tariffs could, if implemented, further increase costs in the maritime and shipbuilding industries.

Affected businesses that are concerned about these increased costs and the corresponding reduction in competitiveness of their products due to the same, may want to consider redesigning their production, supply and transportation chains to keep costs low. It is crucial for companies to stay informed about these developments and consider alternative strategies to mitigate the impact on their operations. If alternative transportation options are selected, businesses should also factor in the possibility that there may be overcrowding, congestion or labour strikes along popular alternative transportation routes, and clogged border crossings in the event that alternative air or land transportation options are selected.

Conclusion

In the round, a climate of uncertainty, increased trade disruption and inflationary pressures, is expected to persist following the USTR Final Proposals, for the short- to medium-term future at the very least.

Please do not hesitate to reach out to our Team if you have any questions regarding this Update or the implications for your business.

The Chinese version of this Legal Update is accessible here.