Maritime stakeholders should consider commenting on how a Proposed Action to impose unprecedented port fees on vessels with a nexus to China would impact operations. They should also examine structures involving Chinese-built ships or vessels owned/managed by Chinese entities to minimize risk.
The U.S. has had an ongoing Section 301 Investigation into allegedly “unfair” Chinese shipping practices. The latest from that investigation is a proposal to charge fleets with Chinese built ships a “port fee” up to $1.5 million per visit. Even vessels not built in China could face charges of $500,000 if they belong to a fleet with a Chinese built ship.
Legal and Statutory Background
As noted below, the President has broad authority under existing law and the Constitution to implement these restrictions, as detailed below. Section 301 of the Trade Act of 1974 grants the President, through the Office of the United States Trade Representative (“USTR”) significant authority to investigate and take action to respond to certain foreign trade practices. Prior to the first Trump Administration, the United States used Section 301 authorities to pursue dispute settlement at the WTO. President Trump changed the narrative on these procedures to target, especially, Chinese companies and foreign metals producers in his first administration.
“USTR requests comments with respect to…whether the proposed fees or restrictions on services are appropriate.”
USTR, Notice of Proposed Action
Following the initiation of the investigation, the USTR undertakes an analysis to determine if the alleged conduct is unfair or violates U.S. rights under trade agreements. If the USTR’s determination is affirmative, it then decides what action, if any, to take. As USTR is in the Executive Office of the President (“EOP”) and not an independent agency, the President has the final say on any actions.
Timing, Implementation, Litigation
On timing, by law, a decision has to be reached by April 17, and comments are due March 24. Any such decision must be implemented by 30 days after this. However, the Government (or petitioners) have the authority to institute further delays to implementation.
It is also possible that Litigation could commence after the USTR decision. Decisions by the Government are subject to the Administrative Procedures Act (“APA”) and reviewable by courts. To overturn a decision, it must be shown that an action is “arbitrary and capricious.” This is generally a deferential standard to the government. However, there are many gaps in the investigation reports. Particularly, there is no evidence that USTR has engaged in the comments they have received.
Support and Opposition
The Public Docket relating to the proceeding is also interesting. Many governments and parties with similar interests and values to the U.S. have opposed earlier stages of the investigation, which were less severe. For example, the EU, Norwegian Ministry of Trade, World Shipping Council, European Community Shipowners Association, International Chamber of Shipping, and others have opposed earlier forms of relief. With the latest iteration, it is likely that more stakeholders will be affected and submit comments. Such comments bolster the administrative record, which both improves administrative decision making and give courts more of a record to review if this proceeds to litigation.
Planning and Protection
Impacted stakeholders should review their fleet structures and consider changes which could shield them from some of the proposed fees. However, given the preliminary nature of the proceedings at the moment, it would likely not be prudent to make changes yet. The current draft leaves limited information with which to plan, and there are likely to be several more steps prior to implementation.