USTR proposed a cumulative scheme of “Fee on Service” of Chinese maritime operators and operators using Chinese-built vessels for U.S. port calls:

• Chinese Vessel Operators: Chinese operators will be charged a rate of up to$1,000,000 per entrance of their vessels into a U.S. port, or at a rate of up to $1,000 per net ton of such vessel’s capacity.
• Vessel operators with fleets comprised of Chinese-built vessels: Vessels built by Chinese shipyards, regardless of the operator’s nationality, will incur a fee of up to$1,500,000 per U.S. port call. The exact fee will be determined by the operator’s percentage of Chinese-built vessels in their fleet, with an additional $1,000,000 charged per U.S. port call if 25% or more of the operator’s fleet consists of Chinese-built vessels.
• Vessel operators with prospective orders for Chinese-built vessels: Vessel operators may be charged an additional fee based on the percentage of their order books that relate to orders from Chinese shipyards with delivery anticipated over the next 24 months.
• Remission of Service Fee: Each calendar year, operators will be eligible for a refund of fees based on the number of U.S. port calls conducted by their U.S.-built vessels.

The USTR Report also proposes to implement a seven-year schedule to increase the use of U.S.-flagged vessels in the carriage of U.S. goods. This will apply to capital goods, consumer goods, agricultural products, and chemical, petroleum, or gas products.
The intention of the USTR’s actions are that, within seven years of the implementation of the Service Fee:

• 15% of U.S. goods exports will be carried on U.S.-flagged vessels by U.S. operators;

and, of that 15%,

• 5% of U.S. goods exports will be carried on U.S.-built vessels, which are U.S.-flagged and operated by U.S. operators.

An exception may be granted for U.S. goods exported on a non-U.S.-built vessel, provided the operator can demonstrate that at least 20% of U.S. products transported each calendar year will be carried on U.S.-flagged, U.S.-built vessels. USTR’s notice of proposed action has raised concerns within the industry, particularly due to the lack of clarity in its language and the approach to enforcement. Open consultations are scheduled in Washington DC for 24 March, at which 124 companies have indicated a desire to speak. Clearly, more time will be required to address industry concerns.

A big question for operators will be how the “Service Fee” is interpreted under ongoing contracts. Whether it is considered a “due” or a “tax” or a “penalty” may lead to a different interpretation of which party is required to pay for any “Service Fee” imposed. Taken in context, we would suggest that the “Service Fee” appears to be a penalty against any Chinese maritime transport operators, or maritime operators which have a fleet comprised of Chinese-built vessels for their services. According to the statutory language of Section 301, USTR may impose either “duties or other import restrictions on the goods” or “fees or restrictions on the services of [a] foreign country.” Therefore, the qualifying term “Service” (in the phrase “Service Fee”) is likely a reference to the transportation services that are Chinese-related, rather than referring to any specific services provided by U.S. ports or customs provided.

We would therefore suggest that the “Service Fee” falls outside what would be considered a regular port fee. Ultimately, the nature of “Service Fees” will depend on USTR’s further guidance and the enforcement of the fee. How it is apportioned between the parties to any maritime contract will be a question that can be addressed on a contract-by-contract basis.

Although referenced several times in the proposed USTR action, “maritime transport operator” is not defined. In the context of the maritime industry, this wording can be interpreted as going beyond simply vessel ownership. EU Regulations adopting similar language have taken a broader view, using these terms to cover registered ownership, beneficial ownership, commercial operation, and technical operation. As matters stand, it is not clear which entity involved in the voyage would be considered the “maritime transport operator”. This is not just legal pedantry. Depending on the entities involved, the question of who is the “maritime transport operator” could have an effect on whether a service fee applies at all. That is, taking the vessel owner to be the maritime transport operator may give one result, but conducting the analysis from the perspective of the charterers may provide a different result.

Adding to the complexity is the question of whether a Hong Kong-based operator will be considered a “vessel operator of China”, despite Hong Kong’s Special Administrative Region status. While the USTR’s proposed actions do not explicitly reference Hong Kong, recent U.S. administrative measures indicate that Hong Kong may be treated as part of the People’s Republic of China (PRC) for these purposes. Questions regarding “Maritime Transport Operator” We would therefore suggest that the “Service Fee” falls outside what would be considered a regular port fee. Ultimately, the nature of “Service Fees” will depend on USTR’s further guidance and the enforcement of the fee. How it is apportioned between the parties to any maritime contract will be a question that can be addressed on a contract-by-contract basis.

For example, recent retaliatory tariffs imposed on the PRC also apply to Hong Kong. Additionally, USTR’s Section 301 report incorporates data from Hong Kong when outlining China’s dominance in shipbuilding and ship ownership. However, it remains to be seen whether Hong Kong will be subjected to the proposed actions.

The language of the proposed USTR action provides for “a fee to be charged to that vessel’s operator.” This suggests that the fee would be owed by the relevant maritime transport operator, and would not attach to the vessel itself. It remains to be seen how USTR will apply these service fees. From an enforcement perspective, it would make sense that these service fees are applied against the particular vessel that is within U.S. jurisdiction, as opposed to (or jointly with) the maritime transport operator, because the U.S. may not have jurisdiction over the latter.

USTR’s proposed action has moved beyond the notice and comment period, with the public hearing concluded on March 24, 2025. The hearing saw lively debates, with strong opinions on both sides regarding its potential industry impact. Supporters argued that the fee is necessary for economic and policy recalibration, while critics warned of increased costs and broader economic repercussions extending beyond maritime transportation to industries such as agriculture, energy, and tourism.

Some key issues identified in this article remain unresolved following the hearing. In the meantime, we will continue to advise market participants on their potential exposure as the rulemaking process advances.