What’s Happening with the Chinese-Built Ship Fees?

Next month, large fees on Chinese-built ships calling on U.S. ports goes into effect. They’re not going to be as enormous as U.S. Trade Representative (USTR) Jamieson Greer initially proposed, but they’re still substantial. To put it mildly.

Ocean freight carriers rather than shippers are charged these fees. However, we all know carriers try to pass on such expenses to shippers through higher freight rates or fees of their own. Thus, the fee has the chance to be impactful for shippers. But not only in potentially increased shipping costs. Before we get into that, let’s look at how the fees themselves have been adjusted.

Adjusted Chinese-Built Ship Tax

Here’s how Mark Szakonyi described the revised tax on Chinese ships in a Journal of Commerc (JOC) article:

The revised US plan to tax Chinese tonnage released last month is staggeringly less disruptive to the shipping industry than what was first released in February but still stands to increase shipping costs.

Most container lines will be on the hook for approximately $1 million per voyage, a significant climbdown from the $1 million to $1.5 million per port call initially outlined when the plan was introduced by the [USTR] on Feb. 21. That plan would have cost the industry $24 billion, according to maritime analyst Lars Jensen.

The fee isn’t a flat rate pre ship. It’s actually based on tonnage. Ships built in Chinese shipyards or operated by a China-based carrier will initially be subject to $50 fees per net ton of capacity per voyage that calls upon an American port or ports. The fee is to escalate each year through 2028:

• Oct. 14, 2025: $50 per net ton 
• April 17, 2026: $80 per net ton 
• April 17, 2027: $110 per net ton 
• April 17, 2028: $140 per net ton 

For more details, the full text of the USTR fact sheet on its action to impose these fees is included at the end of this post.

Carriers Adjusting Because of Fee

Per voyage fees the USTR is imposing vs. per port call fees Greer initially proposed is a massive difference in this Chinese-built ship tax. However, the million dollars per voyage range fees are still a great deal of money that carriers are adjusting for in order to save hundreds of millions of dollars.

Keith Wallis wrote an article for the JOC last week outlining how carriers are moving Chinese-built ships out of U.S. loops:

The Premier Alliance of Ocean Network Express (ONE), HMM and Yang Ming Marine Transport is revamping a trans-Pacific service to avoid the US Trade Representative’s fees, and other major carriers are expected to follow suit.

Carriers say the deployment of non-China-built ships won’t be the most efficient for their networks but balk at fees that will initially equate to $1 million per voyage. The savings that come from removing China-built vessels from US services could increase to ultimately more than $500 million per year by April 2028, as the severity of the tariffs ratchets up over the next three years.

Ocean Network Express and HMM have confirmed that the Asia-Mediterranean segment of the current Mediterranean Pacific South 2 (MS2) service will operate as a standalone service, renamed Mediterranean 2 (MD2), starting early next month. The trans-Pacific leg of the MS2 will be incorporated into the alliance’s existing Asia Gulf Express 2 service, which will be rebranded as the Gulf Pacific South 2 (GS2) as of next week, limiting the deployment of 10 Chinese-built ONE container ships currently operating the MS2 service to the shortened MD2 route.

That brings us to the other way these fees could affect shippers. Carriers changing services and loops, perhaps in less efficient ways, could impact service times and availability for imports and exports to and from the U.S. I don’t expect this to be a massive impact for shippers, but it will be something to monitor.

The fees are obviously meant to disincentivize the use of vessels made in and operated by China, which is determined by both the Biden and Trump Administrations to use predatory and unfair practices to dominate the international shipping industry. Additionally, it has an element of incentivizing the use of American-built ships.

Clearly, the disincentivization is already starting to happen with some carriers already adjusting their voyages and others expected to follow suit. We’ll see how things continue to play out with the Chinese-built ship fees.

As promised, here’s the full text of the USTR’s fact sheet about the fees:

FACT SHEET: USTR Takes Action to Bolster U.S. Shipbuilding

ENDING CHINESE SHIPBUILDING DOMINANCE: Today, the Office of the United States Trade Representative took action on the Section 301 Investigation of China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance to eliminate China’s acts, policies, and practices targeting the maritime, logistics, and shipbuilding sectors for dominance. These actions balance the need for action and the importance of limiting disruption for U.S. exporters.

• This investigation found that China’s acts, policies and practices are unreasonable and burden or restrict U.S. commerce.
• Through its increasingly aggressive and specific targeting of these sectors, carried out through a wide range of unfair and anti-competitive non-market practices, China has largely achieved its dominance goals, severely disadvantaging U.S. companies, workers, and the U.S. economy.
• Ships and shipping are vital to U.S. economic security and the free flow of commerce. Globally, more than 80 percent of goods are transported by sea. By value, ships move 61 percent of U.S. international goods trade with Asia and 45 percent of U.S. international goods trade with Europe.
• These responsive actions will disincentivize the use of Chinese shipping and Chinese-built ships, thereby providing leverage on China to change its acts, policies, and practices, and send a critically needed demand signal for U.S.-built ships.
• This decision is based on the Section 301 investigation which included a two-day public hearing, nearly 600 comments from the public, consultations from other government agency experts, and USTR cleared advisors.
• Seven Members of Congress participated in the hearing:  the Chair and Ranking Member of the China Select Committee, Rep. Moolenaar (R-MI) and Rep. Krishnamoorthi (D-IL); Sen. Baldwin (D-WI), Rep. DeLauro (D-CT), Rep. Deluzio (D-PA), Rep. Dingell (D-MI), and Rep. Norcross (D-NJ).

TARGETED AND PHASED ACTION TO REVERSE CHINESE DOMINANCE AND TO RESTORE AMERICAN SHIPBUILDING: These actions are designed to precisely target the underlying issues, while mitigating potential disruptions to global shipping and U.S. exports and accounting for the specific concerns of U.S. workers, farmers, and companies. These actions will occur in two phases over a reasonable period of time to allow businesses to adjust.  For the first 180 days, applicable fees will be set a zero.

• In the first phase actions, after 180 days:
  • Fees on vessel owners and operators of China based on net tonnage per U.S. voyage, increasing incrementally over the following years – the fee would start at $50/NT in 180 days and increases by $30/NT per year over the next three years;
  • Fees on operators of Chinese-built ships based on net tonnage or containers, increasing incrementally over the following years – the fee would start at $18/NT or $120 per container in 180 days, and would increase by $5/NT per year, or the same proportional yearly amount per container (e.g., in year 2, to $154 per container), over the next three years; and
  • To incentivize U.S.-built car carrier vessels, fees on foreign-built car carrier vessels based on their capacity – the fee would start at $150 per Car Equivalent Unit (CEU) capacity of the entering non-U.S. built vessel in 180 days.
• The second phase actions will not begin for 3 years:
  • To incentivize U.S.-built liquified natural gas (LNG) vessels, limited restrictions on transporting LNG via foreign vessels. These restrictions will increase incrementally over 22 years.

Furthermore,

• Fees on Chinese vessel operators and owners and Chinese-built ships are assessed per U.S. voyage, not per port call. These fees are imposed on a given ship no more than five times per year.
• Fees are not “stacked,” meaning only one fee will be assessed per U.S. voyage.
• Upon proof of order of a U.S.-built vessel, fees or restrictions on an equivalent non-U.S.-built vessel are suspended for up to three years.
• Fees on Chinese-built ships effectively do not cover Great Lakes or Caribbean shipping, shipping to and from U.S. territories, or bulk commodity exports on ships that arrive in the United States empty.