Navigating the United States Trade Representative (USTR) Notice of Action in Section 301 investigation of China’s targeting the maritime, logistics, and shipbuilding sectors for dominance (“USTR 301 China Service Fee”)
Navigating the intricacies of the USTR 301 China Service Fee involves understanding the new regulations and fees imposed by the USTR on various maritime transport services with a Chinese nexus. These measures are part of a broader effort by the US government to address China's strategic initiatives in the maritime, logistics, and shipbuilding sectors.
Section one of this article provides an overview of the USTR 301 China Service Fee and addresses frequently asked questions (FAQ). Section two examines the impact of the USTR 301 China Service Fee on charter parties.
Section one - FAQs
What is the USTR Section 301 China Service Fee?
On 17 April 2025, the Office of the United States Trade Representative issued a revised Notice of Action imposing specific service fees on maritime transport services provided by Chinese operators and shipowners, Chinese-built vessels, and foreign-built vehicle carriers. Additionally, certain maritime transport services for US Liquefied Natural Gas (LNG) are restricted.
What are the fees imposed, and where can they be found?
The fees and restrictions are detailed in five separate Annexes found in the Notice of Action:
| Annex | Description |
| I | Service fee on Chinese vessel operators and vessel owners of China |
| II | Service fee on vessel operators of Chinese-built vessels |
| III | Service fee on vessel operators of foreign-built vehicle carriers |
| IV | Restriction on certain maritime transport services (LNG) |
| V | Tariffs on ship-to-shore (STS) cranes and cargo handling equipment of China – not yet finalised and subject to public hearing on 19 May 2025 |
Are the fees cumulative?
No, the various fees are not cumulative. LNG vessels are subject only to Annex IV, while vehicle carriers are subject solely to Annex III. For all other vessels, it must first be determined whether the Annex I fees apply. If Annex I fees do not apply, then Annex II fees on Chinese-built vessels may be applicable.
When will the first fees be imposed?
The first fees will be implemented on 14 October 2025.
Annex I: Service fee on Chinese vessel operators and vessel owners of China
Annex I broadly defines a “Vessel owner of China” or a “Vessel operator of China”. This includes owners/operators headquartered in the People’s Republic of China (PRC), Hong Kong, or Macau, as well as any entity “controlled by” or subject to the jurisdiction of these regions.
Who can be caught by Annex I?
Annex I encompasses any entity with the following conditions:
| Conditions | Details |
| Country of citizenship | PRC, Hong Kong, or Macau on the VECS submitted to the US CBP office upon entry into the US |
| Headquarters location | PRC, Hong Kong, or Macau |
| Ownership or control | Owned or controlled by a citizen or citizens of the PRC, Hong Kong, or Macau |
| Jurisdiction or direction | Owned by, controlled by, or subject to the jurisdiction or direction of the PRC, Hong Kong, or Macau |
| Entity nationality | National or resident of the PRC, Hong Kong, or Macau |
| Entity Organisation | Organised under the laws of, or having its principal place of business in the PRC, Hong Kong, or Macau |
| Voting interest | 25% or more of the entity’s outstanding voting interest, board seat, or equity interests held by the governments of the PRC, Hong Kong, or Macau, or any citizen subject to their jurisdiction |
| Ocean common carrier | Operating assets directly or indirectly owned or controlled by the governments of the PRC, Hong Kong, or Macau |
How will fees be calculated under Annex I, and who is required to pay?
For all vessels subject to Annex I, upon entry into the US, the operator will be required to pay US Customs and Border Protection (CBP) a fee calculated based on the vessel's net tonnage.
| Effective date | Fee per net ton |
| 14 October 2025 | $50 |
| 17 April 2026 | $80 |
| 17 April 2027 | $110 |
| 17 April 2028 | $140 |
Annex II: Service fee on vessel operators of Chinese-built vessels
A Chinese-built vessel not subject to the Annex I fees can be subject to the Annex II fees.
How is a Chinese-built vessel defined?
A Chinese-built vessel is defined as one built in the PRC and identified as such on the Vessel Entrance or Clearance Statement (VECS) submitted to the US CBP office upon entry into the US.
How much should a Chinese-built vessel pay?
Upon entry into the US, the operator of a Chinese-built vessel must pay the higher of:
| Effective date | Fee per net ton | Fee per container |
| 14 October 2025 | $18 | $120 |
| 17 April 2026 | $23 | $153 |
| 17 April 2027 | $28 | $195 |
| 17 April 2028 | $33 | $250 |
Are there any carveouts?
The fees on a particular vessel will be suspended if the vessel owner orders and takes delivery of an equivalent US-built vessel within three years.
Notable exemptions to the Annex II fees include the following Chinese-built vessels:
| Exemptions for Annex II fees | Description |
| (i) | US-owned or US-flagged vessels enrolled in the Voluntary Intermodal Sealift Agreement, the Maritime Security Program, the Tanker Security Program, or the Cable Security Program |
| (ii) | Vessels arriving empty or in ballast |
| (iii) | Vessels with a capacity equal to or less than: 4,000 twenty-foot equivalent units, 55,000 deadweight tons, or an individual bulk capacity of 80,000 deadweight tons |
| (iv) | Vessels entering a US port in the continental United States from a voyage of less than 2,000 nautical miles from a foreign port or point |
| (v) | US-owned vessels, where the US entity owning the vessel is controlled by US persons and is at least 75 per cent beneficially owned by US persons |
| (vi) | Specialised or special-purpose-built vessels for the transport of chemical substances in bulk liquid form |
| (vii) | Vessels principally identified as “Lakers Vessels” on CBP Form 1300, or its electronic equivalent |
Do the exemptions to Annex II fees (Chinese-built vessels) also apply to Annex I fees (owners or operators of China)?
No, the exemptions only apply to Annex II fees related to Chinese-built vessels.
Annex III: Service fee on vessel operators of foreign-built vehicle carriers
What about vehicle carriers?
Provisions relating to vehicle carriers can be found in Annex III: Service fee on vessel operators of foreign-built vehicle carriers.
Starting 14 October 2025, any non-US-built vehicle carrier will be required to pay a fee of $150 per car equivalent unit capacity of the vessel. This fee is payable at the first US port of entry.
How many times a year will the fee apply under Annex III?
Annex III does not limit the number of times the fees can be assessed per year.
Are there any carve-outs in Annex III?
Similar to Annex II, the fees on a particular vessel will be suspended if the vessel owner orders and takes delivery of an equivalent US-built vessel within three years.
Annex IV: Restriction on certain maritime transport services (LNG)
What about LNG?
Starting 17 April 2028, 1% of LNG exports from the US shall be transported on US-flagged and US-operated vessels, with a gradual increase to 15% by 2047. LNG export licenses will be revoked if the applicable thresholds are not met. A suspension of the restrictions on a particular vessel will apply if the vessel owner orders and takes delivery of an equivalent US-built vessel within three years.
What is Annex V?
Annex V addresses tariffs on ship-to-shore (STS) cranes and cargo handling equipment from China, including containers, chassis, and ship-to-shore gantry cranes. A consultation period is scheduled for May, with a public hearing held on 19 May 2025. The proposed fees related to Annex V could be revised or withdrawn following the hearing:
What are the fees under Annex V?
| Item | Percentage |
| Containers | 100% |
| Chassis | 100% |
| Chassis parts | 100% |
| Ship-to-shore gantry cranes | 100% |
Notable ambiguities within the USTR 301 China Service Fee
The USTR 301 China Service Fee lacks clarity in several areas, leading to numerous inquiries from members. The USTR is anticipated to address some ambiguities as we approach 14 October 2025. This section will address some of the more common questions received by the Association.
Who is a “vessel operator” in the vessel entrance or clearance statement (CBP Form 1300)?
The entity is identified as the operator of the vessel whose name appears on the vessel entrance or clearance statement (CBP Form 1300). CBP Form 1300, defines a vessel operator as “Operator as listed on the Certificate of Financial Responsibility (COFR), water pollution: unless other verifiable charter or lease arrangement indicates otherwise”.
Questions have arisen regarding whether these definitions apply to bareboat charters or finance leases, and whether technical managers or commercial managers could be considered operators. Further queries have arisen about whether "operator" can be a time charterer or voyage charterer. This would ultimately turn on commercial contractual negotiation. However, it may apply to a bareboat charterer or a long-term time charterer.
What should members do if they wish to modify the ‘operator’ responsible for the COFR?
Any members contemplating modifying the “operator” responsible for the COFR should first consult with their domestic insurance company issuing the COFR guarantee to ensure the new entity has proper legal standing to be named as COFR operator.
There are multiple operators “candidates” in the COFR water pollution regime, and parties can generally agree to designate the party responsible. It is likely that having a short-term or intermediate charterer might not be what is contemplated, given the weaker or more temporary nature of their nexus to the ship.
Does the Annex I fees apply to finance leases?
The USTR 301 China Service Fees Annex I will likely apply to ship finance arrangements involving a sale-leaseback, where the registered owner is a Special Purpose Vehicle (SPV) controlled by a Chinese leasing entity. These arrangements typically specify that charterers are responsible for operational costs, including such fees. Members are advised to review their leasing agreements, as they may contain specific provisions regarding this matter.
Would a foreign owner having a Hong Kong-based company registration to maintain a vessel’s Hong Kong flag be considered a “vessel owner of China”?
There is some ambiguity regarding this matter. A foreign company can register its vessel under the Hong Kong flag by registering the owning company in Hong Kong as a foreign entity. It is unclear whether this will be regarded as ownership by a Hong Kong company. If the Hong Kong-flagged vessel's Registered Owner has an address in Hong Kong and identifies the "Country of citizenship" as Hong Kong on the vessel entrance or clearance statement to CBP, it is possible that it may be considered a "vessel owner of China" under Annex I (e)(1).
How frequently will the fee be charged each year, and when does the year start for calculating the maximum of five fee assessments per year?
The fee will be charged up to five times a year per vessel for Annexes I and II. Annexes I & II do not define “per year”. It is unclear whether the maximum of five fee assessments will be assessed (i) per calendar year, (ii) from the date of the first paid fee, (iii) the CBP fiscal year, or (iv) from April 17 as the date of the Notice of Action.
If the Annex II fee applies per container, is it adjusted depending on the container size?
No, Annex II uses the definition of “container” in Article 1 of the Customs Convention on Containers, which does not differentiate between 20-foot and 40-foot containers.
Would Annex II fees apply to containers discharged in Canada and Mexico with an ultimate destination in the US?
It may do, as the operator must report the total number of containers discharged “with an ultimate destination in the Customs territory of the United States”.
What does “deadweight tons” mean, as referred to in the list of exempted vessels in Annex II?
Currently, there is no technical clarification on whether this means deadweight tonnage (DWT) or cargo weight.
What does a vessel with a capacity of “55,000 and 80,000 deadweight tonnes” mean, as referred to in the list of exempted vessels in Annex II?
Currently, there is no technical clarification on the exact meaning of either 55,000 or 80,000 deadweight tonnes. It is reasonable to infer that this refers to the vessel’s DWT.
This likely applies to dry and liquid bulk carriers only. It is unclear whether “individual bulk capacity of 80,000 deadweight tonnes” refers to cargo capacity or to DWT.
What does a vessel “specialised, or special purpose-built vessels for the transport of chemical substances in bulk liquid forms” mean in Annex II?
Currently, there is no technical clarification on the exact meaning.
Are all Chinese-built chemical tankers “specialised for transporting chemical substances in bulk liquid form” exempt from Annex II fees?
It appears so irrespective of the vessel’s DWT.
Is there a limit on the number of fees assessed per year in Annex III?
No, as opposed to Annexes I and II, Annex III does not limit the number of fees assessed per year per vessel.
Section two - the impact of the USTR 301 China Service Fee on charter parties
What effect will the USTR 301 China Service Fee have on charter parties?
According to Annexes I to III, the vessel operator is responsible for calculating, reporting, and remitting fees. However, parties may have agreed to distribute liability differently in their contracts. The specifics will depend on the contractual language and the nature of the fee, tax, or port charge.
Existing charter parties
Members should review their existing charter parties to ensure that they understand the consequences of exposure to the USTR 301 China Service Fee.
Under most standard time charters, charterers would likely be ultimately responsible for the USTR 301 China Service Fee, but the position is not entirely straightforward and there may be special circumstances, additional provisions or amendments in the charter that make owners responsible. Owners should also bear in mind that it is the operators who will be obliged to pay the service fee initially. In view of the potential size of the service fee, charterers may attempt to dispute responsibility if there is any arguable basis for doing so.
Under most standard voyage charters, owners/disponent owners are likely to be responsible for the USTR 301 China Service Fee, but again, the charter may contain specific provisions which alter the position. In fact, the Asbatankvoy form provides that charterers are responsible for “any unusual taxes, assessments, and governmental charges that are not currently in effect but may be imposed in the future on the Vessel”.
Frustration
It is generally not sufficient to frustrate a contract because it has become more expensive to perform. The fact that it has become more onerous or more costly for one party than he thought is not sufficient to bring about a frustration, (The Euginia [1963] 2 Lloyd’s Rep. 381 at 390 (per Lord Denning M.R.) 1
Force majeure
Under English Common Law, there is no generally applicable concept of force majeure; instead, the applicable common law doctrine is frustration. Force majeure will only be relevant if the parties have included a relevant clause in the contract.
Many contracts include force majeure clauses, which depend on their specific wording and the event in question.
While standard time charters will typically not contain such clauses, many voyage charters and COAs include them. If broadly defined, covering any event beyond the affected party's control, the USTR 301 China Service Fee might qualify as a force majeure event.
Additionally, some clauses may encompass 'hardship' terms that could be applicable.
Future charter parties
If the charter requires or allows the vessel to trade to the US and if the vessel would be subject to the USTR 301 China Service Fee, it would be sensible for members (whether owners or charterers) to insert a specially agreed clause into future charters making responsibility for the service fee clear.
There are a number of clauses in circulation which achieve this result. Many of these clauses seek to make charterers expressly responsible. Some of those clauses give owners additional protection by providing that they are entitled to refuse to proceed to the US unless charterers advance funds for the service fee. Other clauses (which may be appropriate where the vessel is Chinese-owned, operated or built) make owners expressly responsible for the service fee.
Clauses disseminated before 17 April, when the USTR issued a final notice of action, may require revisions.
Where neither owners nor charterers are willing to pay the service fee, it may be appropriate to exclude US trading.”
Time bars
Members should check their contracts for any time limits in particular there may be clauses requiring claims to be notified within relatively short periods.
Due diligence
Given the significant size of the fees, determining whether a party can fulfil their obligations under the charter party is crucial. Therefore, it is essential for members to conduct thorough due diligence on their counterparties to ensure they are financially secure and capable of meeting any charter party obligations.
Intermediate charters
The USTR 301 China Service Fee will pose significant challenges for charterers in the middle of a charter party chain if all relevant terms are not strictly back-to-back. These terms encompass not only the allocation of liability for the USTR 301 China Service Fees but also associated clauses, including time limits, and law and jurisdiction provisions.
Mediation
Mediation is an alternative to arbitration or litigation, in which a neutral third party helps resolve disputes. It is non-binding unless a settlement agreement is signed and confidential. Mediation lets parties explore options and maintain control over negotiations.
Given the changing landscape of geopolitical events, members may wish to consider inserting the BIMCO/LMAA Arbitration Clause, which provides for both mediation and arbitration.
Assisting members
The association has a global team focused on trade and geopolitical issues to support members. For questions or assistance, please contact your Skuld claims handler. Updates will be provided in the FAQ section as the situation evolves.
Acknowledgements
Winter & Co, Glenn Winter
Reed Smith LLP, Leigh Hansson
Reed Smith Richards Butler LLP, Lianjun Li