Chinese Ship Fees Suspended, Drawing Pushback

As part of the recent trade agreement between the United States and China, both countries have agreed to suspend for one year the fees they levied on each others’ vessels.

President Donald Trump’s administration’s reversal on this issue—for fees that took effect in October as part of the administration’s efforts to rebuild U.S. shipbuilding—has generated pushback from maritime workers concerned with U.S. shipbuilding and maritime capacity.

Because the revenues from the Section 301 fees were supposed to go directly to support U.S. shipbuilding, unionized maritime workers are reacting to their suspension. They, along with shipyards themselves, strongly support the effort to rebuild American maritime capacity. The Congressional Budget Office estimated the Section 301 fees could have raised $260 million to $320 million per year.

In a comment filed with the USTR’s office November 7, four unions (the Industrial and Service Workers International Union, International Association of Machinists, International Brotherhood of Electrical Workers and International Brotherhood of Boilermakers) wrote, “By suspending 301 remedies for one year, the U.S. government is introducing uncertainty at the very moment when confidence and long-term planning are most essential. Shipyards, suppliers, investors and apprentices cannot operate under indefinite delays and shifting expectations. The responsive actions tied to the Section 301 investigation are not merely symbolic. Disincentivizing the purchase and operation of vessels built by the People’s Republic of China (PRC) is a necessary foundation for rebuilding American maritime capacity. This delay materially weakens that foundation.

“On behalf of the workers ready, willing, and able to rebuild a strong American maritime sector, we respectfully urge USTR to reaffirm and maintain the responsive actions announced in connection with the Section 301 investigation. We further encourage USTR to reengage directly with shipyards, labor unions, suppliers, and workforce programs to maintain momentum and confront China’s ongoing market distortions. Coupled with other administration actions and the passage of legislation in Congress, we can rebuild the sector.”

The Section 301 vessel fees are new service fees on Chinese-built vessels, Chinese-owned/operated vessels and foreign-built vehicle carriers entering U.S. ports, implemented by the Office of the U.S. Trade Representative (USTR). They could have amounted to an extra $20,000 per vessel for each port call for any vessel both built in China and operating under Chinese control.

The fees are based on the higher of a per-ton rate or a per-container rate and are calculated based on net tonnage or container count. The final U.S. fees for Chinese vessels were announced by the USTR on April 17 and took effect October 14. The fees were part of a series of administration actions to remedy what it alleged were unfair Chinese trade practices in the shipbuilding and maritime spheres. The funds collected were intended to help support and fund domestic shipbuilding in the United States. The fees were multi-tiered and complicated, with partial exceptions for LNG tankers and a system for shippers to apply for exemptions.

The original proposal included a 100 percent tariff on Chinese-made ship-to-shore cranes, used by many U.S. ports. The Chinese company Shanghai Zhenhua Heavy Industries Company Limited (ZPMC) is estimated to manufacture roughly 80 percent of STS cranes in use at U.S. ports, with the Maritime Administration estimating a total of 209 cranes by that one company at use in U.S. ports. The U.S. federal authorities and port operators have raised concerns about potential cybersecurity and infrastructure risks.

The USTR’s vessel fees were opposed by West Coast ports dependent on Asian container traffic, as well as by giant U.S. retailers like Walmart and Target, which import many of their goods from China and other Asian countries. They argued that the vessel fees, coming on top of tariffs, would raise prices of imported consumer goods. Global shippers like Maersk also opposed them. On November 5, Maersk announced orders of 12 LNG-powered vessels from Chinese shipyards.

China dominates global shipbuilding and builds and sells far more vessels than the United States. This meant the reciprocal ship fees disproportionately hurt Chinese interests, as well as the interests of global shippers. Chinese-affiliated carriers accounted for an estimated 10 to 12 percent of port calls in the United States. The United States, by contrast, only has 188 flagged commercial ships in ocean trade and makes few, if any, port calls in mainland China.

China retaliated to the U.S. fees with its own fees on U.S.-linked ships. The country maintains tight control over the export of rare earths critical to computer chips and everything they power, from advanced weapons systems to artificial intelligence. As part of the November trade deal, China agreed to suspend export controls on rare earths it announced on October 9. China also agreed to terminate various Chinese investigations targeting U.S. companies in the semiconductor supply chain, including its antitrust, anti-monopoly and anti-dumping investigations.

The SHIPS Act, which would turn into law most of the measures in Trump’s April 9 Executive Order, “Restoring America’s Maritime Dominance,” has not yet been passed by Congress.