On April 17, 2025, the U.S. Trade Representative (the “USTR”) released a revised proposal implementing service fees on Chinese vessel operators and owners, as well as operators of Chinese-built vessels, following a set of public hearings that took place last month. This notice revises an earlier proposal, released in February of 2025, that was unveiled after a lengthy investigation into China’s impact on the U.S. maritime, logistics, and shipbuilding sectors.

The USTR notably scaled back several aspects of its earlier proposal. Among other changes, the USTR removed fees that had been proposed based on the percentage of vessels ordered from Chinese shipyards, and removed fleet composition fees that were based on the percentage of Chinese-built vessels in an operator’s fleet. 

The new set of proposed service fees are also subject to a delay in implementation and will not be imposed immediately.  An implementation period of 180 days applies and no fees will be imposed until October 14, 2025.  In addition, the notice states that the proposed fees are not intended to be cumulative, suggesting that only one fee can apply to a given vessel, creating potential ambiguities for any operators or owners subject to overlapping requirements. 

There are several notable exemptions to the fees (set out in Annex I – IV of the rules) that turn on ownership or control of the vessels in question, as well as for smaller bulk carriers and for certain short-voyage vessels.  There are also provisions that contemplate suspension of certain fees for vessel owners that order and take delivery of U.S.-built vessels in compliance with the proposed rule.  Some high-level details of the new fees proposed are set forth below.

Service Fee Details

• Annex I applies a service fee on Chinese (including Hong Kong or Macau) “vessel operators” and “vessel owners of China”. Generally speaking, these fees would appear to broadly apply to entities more than 25% owned or controlled by Chinese persons, including entities that have been listed as “Chinese Military Companies” by the U.S. Department of Defense, as well as ocean common carriers that are majority-owned or controlled by the PRC government (as defined in the proposed rule). The fees are graduated on a net ton basis and increase over time. The definitions of both a “vessel operator” and a “vessel owner of China” are tied to the entities that are identified on the vessel entrance and clearance form (CBP Form 1300 or its electronic equivalent) maintained by U.S. Customs and Border Protection. These designations will no doubt be of importance in connection with the appropriate designation of the “operator” responsible for payment of any fees, or which entities may or may not be considered a “vessel owner of China” and fall within the scope of the rule.
• Annex II applies a service fee on vessel operators of Chinese built vessels as defined in the rule.  There is a phased fee tied to the higher of: (i) net tonnage of the arriving vessel or (ii) containers discharged, and which increases over time.  Fees are owed by the vessel owner and a suspension of this fee is available for up to three years if the vessel owner orders and takes delivery of a U.S. built vessel of equivalent or greater net tonnage as provided in the rule.  There are several exemptions to the coverage of the Annex II fee including for U.S. government cargo, certain U.S.-owned or flagged vessels, vessels arriving empty or in ballast, certain smaller capacity and short-voyage vessels, special purpose-built vessels for the transport of chemical substances in bulk liquid forms, and “Lakers Vessels.”
• Annex III applies a service fee on vessel operators of foreign-built vehicle carriers, based on the CEU capacity of the entering non-US built vessel. A suspension of this fee is available for up to three years if the vessel owner orders and takes delivery of a U.S. built vessel of equivalent or greater net tonnage as provided in the rule.
• Annex IV applies restrictions on liquified natural gas (LNG) exports per vessel in a calendar year, whereby for all LNG intended for export in a calendar year, such exports must be exported by U.S.-built, U.S.-flagged, and U.S.-operated vessels gradually over the next 22 years (beginning at 1% from April 2028 up to 15% by April 2047).  This is a form of export control and licensing with respect to LNG exports.
• Annex V derives from a separate directive made in Executive Order 14269, and proposes to apply tariffs on ship-to-shore cranes and cargo handling equipment of China, to assess additional duties on various products from China at the levels proposed therein (from 20 – 100%).

 Next Steps

 A new public comment period has opened leading up to a May 19, 2025 hearing so there is still an opportunity to weigh in and influence the direction of the final rule.  Requests to testify at a public hearing are accepted until May 8, 2025 and comments on the rule will be accepted until on or before May 19, the opening date of the USTR’s next hearing.

For further information or questions, please contact a member of the Seward & Kissel team.