Introduction

The U.S. government is considering unprecedented port fees on vessels with Chinese ties, imposing charges ranging from $500,000 to $1.5 million per port call on Chinese-built ships and fleets with a Chinese nexus. These measures are the alleged remedies to an investigation which found that China’s dominance in shipbuilding and maritime logistics violated U.S. policy. These fees could have far-reaching legal, economic, and geopolitical consequences.

While the regulatory framework is still developing, the proposed fees could lead to legal disputes, disrupt charter rates, impact vessel asset values, and shift global trade flows. Stakeholders across the shipping industry should carefully assess the implications of these measures and prepare for implementation of these measures.

Legal and Procedural Background

The U.S. Trade Representative (USTR) launched an investigation in 2024 into alleged unfair trade practices by Chinese shipyards. By January 2025, the USTR determined that these practices were unfair and “actionable” under Section 301 of the Trade Act of 1974, which grants the President broad authority to impose trade restrictions in response to unfair foreign practices. Historically, such actions have targeted specific products or materials, but this is the first time a measure of this scale has been proposed against an entire industry.

The current proposals include a $1.5 million per entry fee for Chinese-built vessels calling at U.S. ports and a $1 million per entry fee for vessels owned by Chinese maritime operators. Additionally, similar fees could be imposed on operators that have placed orders with Chinese shipyards over the next two years. The proposal also includes a phased increase in U.S.-flag shipping requirements, mandating that up to 15 percent of U.S. exports must be transported on U.S.-built and U.S.-flagged vessels over the next seven years.

Industry groups, companies, and governments worldwide have contested the policy foundation for these fees. There is also a significant likelihood of litigation, as affected stakeholders may challenge the validity of the measures on administrative, constitutional, and procedural grounds.

Potential Charterparty Disputes

One of the most immediate consequences of these proposed fees will be the legal disputes between owners and charterers over cost allocation and operational risks. In time charters, charterers typically bear port costs, but given the extraordinary nature of these fees, disputes will likely arise over whether they qualify as standard port charges or as an unforeseen governmental levy that should be absorbed by the shipowner. The situation is even more complex for voyage charters, where freight rates may have been negotiated before the fees were announced, leading to potential conflicts over whether additional costs should be passed to cargo interests. The unprecedented nature of the fees allows for ambiguity in their definition and, as a result, in is unclear who will bear these costs.  It may be that how they are invoiced will provide further clarity as to how they will be defined and whether they will form part of the ‘port fees and expenses’ which are for charterers’ account.  

Delays at U.S. ports due to compliance checks and fee processing could also lead to off-hire disputes. Given the unprecedented nature of these fees and the scale of implementation, such delays are quite likely in the initial phase of any roll out. Charterers may attempt to place vessels off-hire if such delays disrupt operations. Owners, on the other hand, may argue that delays caused by government-imposed restrictions are outside their control and should not trigger off-hire claims.

The question of deviation could further complicate matters. Some shipowners may seek to avoid U.S. ports altogether, which could lead to claims from charterers that such actions constitute an unjustified deviation or breach of employment obligations. In cases where avoiding U.S. ports becomes commercially necessary, charterers may push back, insisting that the owner either comply with the original voyage plan or provide an alternative solution.

A further challenge arises from the vague definitions in the proposed rules. The U.S. has not clearly defined what constitutes a “fleet” or a “Chinese maritime operator.”  It is unclear whether any decisions stemming from the proposed action will include such definitions, or whether regulatory authorities will look to other areas of U.S. law to divine these definitions. If the government applies these terms broadly, companies that do business with Chinese shipyards or operate mixed fleets could find themselves unexpectedly subject to the fees. Shipowners may consider restructuring their fleets to separate Chinese-built tonnage from non-Chinese vessels, while charterers may challenge fee applications if they believe that leased tonnage or affiliated companies are being unfairly classified.  Charterers may also seek warranties or indemnities related to the presence of any Chinese-built vessels in an owner’s “fleet.”

Market Disruptions: Impact on Freight and Hire Rates

Beyond the legal disputes, the proposed fees could have significant economic consequences, particularly for freight and hire rates. Owners will inevitably attempt to pass on these extra port fees or levies to charterers. This could lead to higher freight rates on U.S. trade routes or increases in cost of goods if charterers have to absorb these costs. This increase will be particularly pronounced in trans-Pacific container shipping, dry bulk commodities such as grain, coal, and iron ore, and energy trades involving LNG, crude oil, and refined products. As a result, some cargo interests may seek alternative routing strategies, redirecting shipments to non-U.S. ports such as Vancouver, Manzanillo, or Caribbean transshipment hubs before moving goods into the U.S. market via rail or feeder vessels.

The introduction of these fees will also create a two-tier charter and S&P market. Non-Chinese-built vessels, unaffected by the fees, will become significantly more valuable, leading to increased hire rates for such tonnage. In contrast, Chinese-built vessels may suffer declining hire rates as demand for them diminishes, particularly for voyages involving U.S. ports. This divide will likely affect asset values, with Chinese-built vessels facing potential devaluation, making them less attractive on the secondhand market.

The long-term impact of these measures on shipbuilding orders is also concerning. If the proposal moves forward, shipowners may begin shifting orders away from Chinese yards in favour of South Korean and Japanese builders to avoid future regulatory risk. Over time, this could alter the global shipbuilding landscape, weakening China’s dominant position and strengthening competitors in other regions.

Trade Flow Disruptions and Alternative Routing

Another major risk lies in China’s potential response. If the U.S. implements these fees, China may retaliate by imposing its own countermeasures, such as additional port fees on U.S.-affiliated vessels, restrictions on U.S. energy exports, or diplomatic pressure on allied nations to oppose the measures. Such actions could further fragment global trade, exacerbating inefficiencies and increasing market volatility.

Conclusion: Uncertainty Ahead for Shipping Markets

The proposed U.S. port fees on Chinese-built vessels represent a fundamental shift in maritime trade policy, introducing a new layer of complexity for shipowners, charterers, and cargo interests. The legal disputes surrounding cost allocation, deviation claims, and fleet classification will be significant, with arbitration and litigation likely to play a key role in determining how these costs are distributed.

At the same time, freight and hire rates are poised for volatility. Non-Chinese-built vessels will likely see increased demand and higher rates, while Chinese-built ships may struggle to maintain their market value. Owners likely to take steps to segregate their fleets and charterers could face risks related to fleet structure. Shipbuilding orders could shift away from China, while global trade flows may be restructured to minimize exposure to U.S. restrictions.

As these measures evolve, stakeholders must closely monitor developments, review their existing charterparty agreements for risk exposure, and consider fleet restructuring options to navigate the shifting regulatory landscape. The full extent of the impact remains uncertain, but one thing is clear: the maritime industry must prepare for a rapidly changing trade environment where regulatory intervention will play a decisive role.

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