Author: Heather Holland

U.S. Trade Representative Proposes Up to $1.5 Million Dollar Vessel Entrance Fee on Chinese Built Vessels Entering U.S. Ports and Phased Requirement to Export Increasing Percentage of U.S. Goods on U.S.-flagged, U.S.-operated and U.S.-built Vessels.

Author: Rachel Amster

Summary. On Friday, February 21, 2025, the Office of the U.S. Trade Representative (“USTR”) issued a notice of proposed agency action in connection with a Section 301 investigation of China’s targeting of the maritime, logistics and shipbuilding sectors for dominance (the “February 21st Notice”).

• USTR proposes fees of up to $1,000,000 per entrance of any vessel of a Chinese maritime transport operator.
• USTR proposes fees of up to $1,500,000 per entrance to U.S. port of a Chinese-built vessel by any maritime transport operator.
• USTR proposes fees of up to $1,000,000 per vessel entrance to U.S. port to any maritime transport operator with prospective Chinese-built vessel orders.
• Following progressive increases, 15% of U.S. goods exported must be by U.S.-flagged vessels by U.S. operators, of which 5% must be U.S-flagged, U.S.-built vessels, by U.S. operators by the seven-year anniversary of the action.

Background. On April 22, 2024, the USTR initiated an investigation into China’s targeting of the maritime, logistics, and shipbuilding sectors for dominance following the filing of a Section 301 petition by five labor unions on March 17, 2024. As part of that investigation, USTR held a public hearing on May 29, 2024, and subsequently issued a report on its findings. Per the February 21st Notice, the USTR determined that China has targeted the maritime, logistics, and shipbuilding sectors for dominance. USTR additionally determined that China has accomplished its goals and disadvantaged U.S. companies, workers, and the U.S. economy generally. The February 21^st Notice also determined that, ass of 2023, China’s share of the shipbuilding market is over 50%, an increase from 3% in 1999. China’s ownership share of the commercial world fleet is over 19% as of January 2024. Additionally, China controls production of 95% of shipping containers and 86% of the world’s supply of intermodal chassis among other components and products.

Proposed Action. The February 21st Notice proposes the following fees:

• Service Fees on Chinese Maritime Transport Operators:
  • Up to $1,000,000 per entrance of any vessel of that operator to a U.S. port; or
  • $1,000 per net ton of the capacity of any vessel of that operator per entrance.
• Service Fee on Maritime Transport Operators with Fleets Comprised of Chinese-Built Vessels:
  • Up to $1,500,000 per vessel entrance fee for international maritime transport; or
  • Fee based on the percentage of Chinese-built vessels as outlined below; or
    • For operators with 50% or greater of their fleet comprised of Chinese-built vessels, up to $1,000,000 per vessel entrance to a U.S. port.
    • For operators with between 25%-50% of their fleet comprised of Chinese-built vessels, up to $750,000 per vessel entrance to a U.S. port.
    • For operators with up to 25% of their fleet comprised of Chinese-built vessels, up to $500,000 per vessel entrance to a U.S. port.
  • An additional fee of up to $1,000,000 per vessel entrance to U.S. port if the number of Chinese-built vessels in the operator’s fleet is 25% or higher.
• Service Fee on Maritime Transport Operators with Prospective Order for Chinese Vessels.
  • An additional fee based on the percentage of vessels ordered from Chinese shipyards as outlined below; or
    • For operators with 50% or greater of their vessel orders from Chinese shipyards or vessels expected to be delivered by Chinese shipyards over the next 24 months, up to $1,000,000 per vessel entrance to a U.S. port.
    • For operators with between 25%-50% of their vessel orders from Chinese shipyards or vessels expected to be delivered by Chinese shipyards over the next 24 months, up to $750,000 per vessel entrance to a U.S. port.
    • For operators with up to 25% of their vessel orders from Chinese shipyards or vessels expected to be delivered by Chinese shipyards over the next 24 months, up to $500,000 per vessel entrance to a U.S. port.
  • A fee of up to $1,000,000 per vessel entrance to a U.S. port if 25% or more of the total number of vessels ordered by that operator, or expected to be delivered to that operator, are ordered or expected to be delivered by Chinese shipyards over the next 24 months.
• Service Fee for Maritime Transport via U.S.-built Vessels: The proposal also includes a scheme for reimbursement to marine transport operators of the aforementioned additional fees in an amount of up to $1,000,000 per entry into U.S. port of a U.S. built vessel through which the operator is providing international maritime transport services.

The February 21st Notice also proposed the following restrictions on services to promote the transport of U.S. goods on U.S. vessels.

• International maritime transport of all U.S. goods, such as capital goods, consumer goods, agricultural products, and chemical, petroleum or gas products to comply with the following schedule:
  • As of the date of action: at least 1% of U.S. products per calendar year exported by vessel must be exported on U.S.-flagged vessels by U.S. operators.
  • Two years after the date of action: at least 3% of U.S. products per calendar year exported by vessel must be exported on U.S.-flagged vessels by U.S. operators.
  • Three years after the date of action: at least 5% of U.S. products per calendar year exported by vessel must be exported on U.S.-flagged vessels by U.S. operators, of which 3% must be U.S-flagged, U.S.-built vessels, by U.S. operators.
  • Seven years after the date of action: at least 15% of U.S. products per calendar year exported by vessel must be exported on U.S.-flagged vessels by U.S. operators, of which 5% must be U.S-flagged, U.S.-built vessels, by U.S. operators.
• U.S. goods to be exported on U.S.-flagged, U.S.-built vessels, but may be approved for export on non-U.S.-built vessels if the operator providing international maritime transport services demonstrates that at least 20% of U.S. products per calendar year that the operator will transport by vessel will be transported on U.S.-flagged, U.S.-built ships.

The February 21st Notice also proposed actions to investigate anticompetitive practices from Chinese shipping companies, restricting National Transportation and Logistics Public Information Platform (LOGINK) access, or banning or continuing to ban terminals at U.S. ports and U.S. ports from using LOGINK software.

Important Dates and Comment Submission.

• A hearing on this proposed action is set for March 24, 2025, at 10 A.M in the main hearing room of the U.S. International Trade Commission.
• Comments are due by March 24, 2025.
• Requests to appear at the hearing and submit testimony are due by March 10, 2025.
• Post-hearing rebuttal comments will be due seven calendar days after the last day of the public hearing.

The USTR is specifically requesting comments on the following topics:

• The level of the burden or restriction on U.S. commerce arising from China’s targeting of the maritime, logistics, and shipbuilding sectors for dominance.
• The appropriate trade to be covered by responsive actions, including the type and level.
• Whether the proposed fees or restrictions on services are appropriate, including the type of services to be subject to fees or restrictions, the level of fees or restrictions, the structure of any fees, restrictions, or reimbursement of fees on services.
• USTR requests that commenters specifically address whether a proposed action would be practicable or effective to obtain the elimination of China’s acts, policies, and practices.

If you have any questions and/or are interested in filing a comment, please contact: David Monroe, Brendan Collins, Oliver Krischik, Mike Smith, Rachel Amster, or John Kester. David Monroe can be reached at dmonroe@gkglaw.com, Brendan Collins can be reached at bcollins@gkglaw.com, Oliver Krischik can be reached at okrischik@gkglaw.com, Mike Smith can be reached at msmith@gkglaw.com, Rachel Amster can be reached at ramster@gkglaw.com, and John Kester can be reached at jkester@gkglaw.com.

Late Sunday evening, March 2, 2025, the Treasury Department announced that it is suspending the enforcement of the imposition of fines and penalties under the Corporate Transparency Act (the “CTA”) against U.S. Citizens and Domestic Reporting Companies. While the enforcement of the CTA will not be pursued against those reporting companies who do not file, compliance with the CTA nevertheless is still required by the applicable extended deadlines – March 21, 2025, for most legal entities. The Treasury Department also stated that it will be issuing proposed rulemaking that will significantly narrow the scope of the reporting requirements to foreign reporting companies only which, if enacted, will substantially lessen the reach of the CTA.

Based on this latest update, which as history suggests, may change, we recommend the following:

1. The CTA has not been repealed. Compliance is still required by the applicable extended deadlines.
2. For those legal entities that opt not to comply with the reporting requirements (i.e., not file a BOI report), the Treasury Department has stated that it will not enforce the penalties or fines. This, however, may not provide a defense to penalties and fines if the Treasury Department changes course (or is ordered to enforce the CTA).
3. Given the uncertain and constantly changing status of the CTA, there is risk for companies that do not file by the deadline.

We are monitoring this evolving issue and anticipate further updates between now and March 21, 2025. We will keep you apprised of the latest developments. Please feel free to reach out to Rich Bar (rbar@gkglaw.com) or Frank Beninato (fbeninato@gkglaw.com) if you have any questions.

GKG Law Wins Major Victory for NVO Against Shipper Who Refused to Pay Detention and Demurrage Charges

By John H. Kester

GKG Law recently prevailed in an action brought against a non-vessel operating common carrier (“NVO”) before the Federal Maritime Commission (“FMC” or the “Commission”) by a shipper alleging violations of the Shipping Act of 1984 and the Ocean Shipping Reform Act of 2022 (“OSRA 2022”). The shipper had refused to pay more than $1 million in detention and demurrage charges and was seeking a refund of more than $1 million of such that it had paid the NVO.

The Complainant had wrongly contended that the NVO was contractually responsible for all detention and demurrage charges assessed, while GKG asserted that the NVO was only responsible for any such charges it caused to accrue. GKG also presented evidence that much of the delays triggering the charges at issue were caused by systems failures at the shipper’s own warehouse.

In an Initial Decision issued in January 2024, the Chief Administrative Law Judge, Erin Wirth, flatly rejected the complaint, holding that the shipper had failed to establish that the NVO had violated the Shipping Act, and explicitly recognized that pursuant to Commission rules and regulations, the NVO was entitled to pass through detention and demurrage charges to its customers, unless the charges were attributable to the NVO. After a thorough review of extensive invoices and related correspondence dating back over a period of years, the Presiding Judge concluded that the NVO had acted reasonably and exercised due diligence in passing through the detention and demurrage charges at issue. Judge Wirth also recognized that passing through such charges was consistent with the parties’ negotiated rate agreements and in compliance with the NVO’s tariffs. The Initial Decision further recognized, as had been pointed out by GKG, that the shipper’s reliance on certain OSRA 2022 provisions was misplaced given that the shipments at issue predated enactment of OSRA 2022.

Following the Presiding Judge’s Initial Decision, the shipper filed Exceptions to the full Commission. The Commission rejected the Complainant ‘s Exceptions to the Initial Decision in its entirety. Instead, the Commission affirmed the initial Decision and dismissed all of the Complainant’s claims with prejudice.

Both the Initial Decision and the subsequent Commission Order affirming it mark a major victory for NVOs and confirm their ability to pass-through detention and demurrage charges to those parties ultimately responsible for payment of the charges.

Please contact us if you have any transportation-related (or other litigation-related) issues. Brendan Collins may be reached by telephone at (202) 342-6793 or by email at bcollins@gkglaw.com; John H. Kester may be reached at (202) 342-6751 or by email at jkester@gkglaw.com; Rachel Amster may be reached at (202) 342-2542 or by email at ramster@gkglaw.com.