Additional Fees Imposed by the US on China-Built Ships: Legal Risks

In our previous newsletter, we highlighted the United States Trade Representative’s (USTR) plan to introduce new port fees targeting China’s shipbuilding and maritime transport sector, sparking significant debate within the global shipping industry. This plan proposes the imposition of additional fees, up to $1.5 million, for each instance where a vessel constructed in China or registered under a Chinese flag of convenience calls at U.S. ports.

Recent developments indicate that uncertainty is growing, and concerns are escalating. The Chairman of the US Federal Maritime Commission (FMC), Louis Sola, has suggested that the fees collected from China-built ships should be used to support the American shipbuilding industry. Sola stated, “We need to fight fire with fire, “emphasizing the need to counteract the subsidies China provides to its shipbuilding sector.

Recently, the CEO of MSC, the world’s largest ocean carrier, expressed to CNBC that the proposed fines could have ‘very, very significant’ implications for the maritime industry’s ability to service the U.S. market, with potential financial impacts reaching up to $20 billion annually. Similarly, Maersk, the second-largest ocean carrier, currently operates a fleet comprising 20% Chinese-built vessels, with 79% of its orderbook tied to shipyards in China. CMA CGM’s fleet, by comparison, consists of 41% Chinese- built ships, with 54% of its newbuild orders originating from Chinese shipyards.

Industry experts and economists worldwide have unanimously highlighted that this action is expected to disrupt global trade flows, drive inflation, and diminish consumers’ purchasing power.

“Most recently, Joe Kramek, Chairman of the World Shipping Council, issued a warning that these measures could have a substantial impact on employment levels at U.S. ports and lead to increased consumer prices.

Leading container shipping companies have proactively sought to offset the impact of these fees by investing in U.S. port infrastructure. This strategy has been positively received by the Trump administration, with some political analysts describing it as an early victory.

Analysis of vessel movements using various tracking tools indicates that many shipowners and charterers have started redirecting Japan-built vessels to the U.S. Gulf, anticipating significant price fluctuations in the coming days.

Conversely, the heightened risks associated with operating Chinese-built ships in the U.S. market have led many companies to increasingly avoid engaging with these vessels. This shift in preferences is disrupting supply and demand dynamics within the industry, further complicating pricing mechanisms for vessels and cargoes out of US

Amid persistent uncertainty, cargo transport contracts originating from the U.S. are undergoing substantial revisions. Pricing for future shipments has become increasingly complex, with many agreements now secured under highly specialized terms.

The potential introduction of additional U.S. port fees targeting China-built vessels is intensifying uncertainty across the global shipping industry. The legal implications of these measures are particularly significant, as they may lead to various compliance challenges. For instance, companies that previously entered into long-term charter contracts with Chinese shipowners—primarily for transporting goods from U.S. ports—must carefully reassess and amend these agreements. It is vital to incorporate provisions that clearly define how any additional costs linked to U.S. port fees will be allocated to avoid future disputes

For new contracts:

• The allocation of port fees and which party will bear these additional costs should be explicitly stated.
• Force majeure clauses should be expanded, as new taxes and regulatory changes may necessitate contract renegotiation.
• Cost-sharing mechanisms between shipowners, charterers, and cargo owners must be clearly defined.

Protection & Indemnity (P&I) clubs are preparing to introduce new coverage structures to address the growing financial and legal risks posed by these additional port fees. Some operators may face increased insurance premiums and risk assessments when transporting cargo to the US.

The anticipated outcomes of these measures include the following:

• A decline in the number of China-built vessels calling at S. ports, as operators seek to evade additional costs.
• Financial strain or even default for some companies due to significant disruptions in freight rates.
• The potential redirection of China-built vessels to alternative markets such as Europe, South America, the Pacific, or the Middle East.
• The emergence of Japan and South Korea as preferred shipbuilding alternatives, as shipowners aim to minimize their reliance on China-built vessels

Ultimately, the US-imposed port fees on China-built ships could trigger long-term structural changes within the global shipping industry. Legal uncertainties and market fluctuations necessitate more cautious contract management for businesses.

⇒ Companies should carefully review contract details before signing new shipping agreements and ensure that terms and cost-sharing mechanisms are explicitly defined.