USTR Action Against Chinese-Built, Operated and Owned vessels - Charter party Implications
Members will be aware of the ‘Proposed Actions’ published by the Office of the U.S. Trade Representative, or USTR, in February 2025 that would have widespread ramifications for the shipping industry. Those proposals for substantial port fees followed an investigation commenced by the Biden administration into what it referred to as China’s dominance of maritime, logistics and shipbuilding sectors.
Following a period of consultation with industry that has resulted in many changes to those ‘Proposed Actions’, the USTR confirmed on 17 April 2025 that the following fees will be applied and phased in from 14 October 2025 to Chinese owned, operated and built vessels:-
Phased Fees on Maritime Transport Services – Annex I
A phased fee on Chinese vessel operators and vessel owners will apply. This fee, based on the net tonnage of the vessel, is assessed against any vessel with a Chinese operator or owned by an entity of China (as defined in Annex I).
If a vessel makes multiple U.S. entries before transiting to a foreign destination, this fee is assessed per rotation or string of U.S. port calls. The fee will be set at $0 for the first 180 days, will then be set at $50/NT, and will increase incrementally over the next three years. The fee will be charged up to five times per year, per vessel.
Phased Fees on Chinese-built vessels – Annex II
This fee is based on the higher of (i) a fee based on the net tonnage of the vessel, or (ii) a fee based on per container.
If a vessel makes multiple U.S. entries before transiting to a foreign destination, this fee is assessed per rotation or string of U.S. port calls. The fee will be set at $0 for the first 180 days and increases incrementally over the next three years (see Annex II). The fee that will apply is the higher of one based on the net tonnage of the vessel or per container discharged in the USA and will be charged up to five time per year, per vessel.
Certain Chinese-built vessels are not subject to the fee, including: certain vessels enrolled in certain U.S. Maritime Administration programs (e.g., the Maritime Security Program and Tanker Security Program); vessels arriving empty or in ballast; vessels below certain size or capacity thresholds (capacity equal or less than 4,000 TEU, 55,000 DWT, or individual bulk capacity of 80,000 DWT); vessels engaged in short sea shipping (i.e., voyages of less than 2,000 nautical miles from certain U.S. ports); certain U.S.-owned companies’ vessels; and certain specialized export vessels. A vessel operator is eligible for a fee remission for up to three years if it orders and takes delivery of a U.S.-built vessel of equivalent size.
Phased Fees on Vessel Operators of Foreign Vehicle Carriers – Annex III
This fee is assessed on any foreign-built vehicle carrier based on its Car Equivalent Unit (CEU) capacity (see Annex III). The fee will be set at $0 for 180 days, and will then be set at $150 per CEU capacity of the entering non-U.S. built vessel. An operator could receive a fee remission for up to three years if it orders and takes delivery of a U.S.-built vessel of equivalent or greater capacity within that time period.
A vessel operator will be eligible for a fee remission for three years if it orders and takes delivery of a U.S.-built vessel of at least equivalent size.
Restrictions on certain Maritime Transport – Annex IV
Following comments received in public consultation about the lack of U.S. built or flagged LNG carriers, implementation against LNG carriers has been delayed.
After three years (2028), USTR imposes a restriction to require the use of U.S. vessels for the maritime transport of a certain percentage of LNG exports, as set out in Annex IV.
An operator or its non-compliant LNG vessel may be licensed to operate for up to three years as if the requirement is met, if that operator orders and takes delivery of a U.S.-built LNG vessel of equivalent or greater capacity within that time period.
Are the fees cumulative?
The USTR advises that the above actions are not cumulative – only one fee will be applied under the terms of the respective Annex.
The fees are assessed in the following order:
- If an LNG carrier, the vessel is subject to Annex IV only.
- Vehicle Carriers (as identified on CBP Form 1300), are subject to Annex III.
- Vessels that meet the conditions of Annex I will be subject to the fee imposed under Annex I.
- Vessels will be subject to Annex II if Annex I and Annex III do not apply.
Charter party Considerations
Who Pays?
The ‘vessel operator’ is liable to pay the fees in the first instance in advance or on arrival.
The ‘vessel operator’ will be the party that is named as such on the Customs and Border Protection Form 1300 (CBP Form 1300). This is likely to be the same party named on the vessel’s COFR.
Should parties intend to incorporate an indemnity for these fees into a charter party, consideration should be given to the creditworthiness of the counterparty from an early stage.
Tax or Port Charge?
Members are advised to review existing charter parties and consider how any clause relating to fees, tariffs and taxes may allocate the costs burden of these fees. Though referred to as fees within the decision and sometimes as port fees within industry commentary, as these are fees paid to the government and therefore akin to a tax it remains unclear as to how these will be treated at law within charter parties without express wording. The category of fee may also impact on the allocation of responsibility- some of the fees relate to the size of the vessel (net ton), whilst others on the amount of cargo (Car Equivalent Units and Containers).
Time Charters are likely to already place taxes and dues upon the Charterer. However, the position under standard form voyage charters may differ, as some (like GENCON 94) split obligations for dues, taxes and other charges between Owners and Charterers.
With ASBATANKVOY, Charterers’ responsibility will depend upon the date on which the charter party was signed, as the wording only allocates ‘any unusual taxes, assessments and governmental charges which are not presently in effect but which may be imposed in the future on the Vessel or freight’.
Standard Clauses
Specific wording should be considered to clearly allocate responsibility for these fees to avoid disputes as to which party is liable.
Prior to 17 April, INTERTANKO had published standard clauses that expressly address the impact of U.S. fees. These are now being updated from the original draft following the publication of the USTR actions on 17 April.