China Shipbuilding: Industry, Shippers Prep for Tariffs

Domestic U.S. shipping interests are closely monitoring a United States Trade Representative (“USTR”) proposal for import and export trades involving Chinese vessels. There is an ongoing Section 301 investigation prompted by domestic industry concerns about China’s industrial ambitions in sectors that are critical to U.S. economic and national security. The outsized role of China in international ocean shipping is greater than many would expect. China’s global tonnage of the shipbuilding market share grew from less than 5% in 1999 to over 50% in 2023. China now owns more than 19% of the commercial world fleet, 85% of the world’s intermodal chassis, and it controls production of approximately 95% of the world’s shipping containers.

Service fees and restrictions arising out of the USTR’s investigation will have a near-term effect of escalating certain ocean shipping costs. Commercial users of those services are expecting to see higher rates charged by vessel operators and through the net constriction of global shipping capacity.

China Shipbuilding Strategy Under Review

Five labor unions petitioned the USTR for the Section 301 investigation on March 12, 2024, alleging China exerts unreasonable and discriminatory policies that provide it with an unfair advantage across international maritime industries. The USTR initiated its investigation on April 17 of that year. In a report issued on January 16, 2025, the USTR determined China’s objective of dominating the maritime, logistics, and shipbuilding sectors presents an unreasonable risk to U.S. commerce. This is understood by the USTR as part of the China’s Military-Civil Fusion strategy, the initiative of which will increase supply chain risk and reduce resiliency, deprive market-oriented businesses from opportunities, and allow for extraordinary control over these vital sectors.

The USTR found on April 17, 2025, that China has methodically targeted the maritime, logistics, and shipbuilding sectors for global dominance over the past thirty years. The initiative included a series of overlapping national strategies such as its Five-Year Plans, the “Made in China 2025” initiative, as well as sector-specific policies to achieve its objectives. China is understood to have implemented top-down plans to gain global share in these sectors through non-market advantages such as direct and indirect state subsidies; preferential access to land, credit, and raw materials; suppressed labor costs and lack of effective labor rights; state-directed mergers and restructuring to create “national champions;” and export incentives and market access barriers to foreign competitors.

The USTR determined these interventions enabled Chinese firms to undercut global competition, seize market share, and set the terms across the global maritime industry and supply chains. Moreover, China’s targeting of the maritime industry has had profound and adverse effects on U.S. interests, including:

• Displacement of U.S. Firms:  As China’s share of global shipbuilding and logistics markets has grown, U.S. companies have lost market access, commercial opportunities, and investment returns;

• Reduced Competition:  China’s global overcapacity has impacted U.S. businesses and workers by depriving fair competition and commercial opportunities; and

• Supply Chain Vulnerabilities:  Increased dependency on Chinese-built ships, marine equipment, and logistics infrastructure has created economic security risks and undermined U.S. supply chain resilience.

Early Proposed Fees and Restrictions Very High

Market stakeholders expressed widespread concern about the initial proposal for tariffs and other restrictions on Chinese interests in the U.S. trades. The USTR initially proposed significant service fees on certain maritime services as well as other industry restrictions in response to these identified threats. For example, Chinese vessel operators would be charged up to $1,000,000 per entrance of any vessel at a U.S. port or $1,000 per net ton of vessel capacity. Vessel operators would be charged up to $1,500,000 per entrance of any vessel at a U.S. port based on a tiered schedule that is commensurate with the percentage of Chinese-built vessels in their global fleets. Exports of U.S. goods are restricted to U.S.-flagged, U.S.-built, vessels by U.S. operators under a seven-year escalation plan. Exceptions may be granted for vessels that are not built in the U.S. if it can be shown that over 20% of U.S. products per year are transported on U.S.-flagged, U.S.-built vessels.

Newly Proposed Fees and Restrictions

In response to its findings in April of this year, the USTR announced the initiation of a rulemaking process for robust remedial measures that are expected to include:

• Imposing additional tariffs on Chinese ships, marine equipment, and related logistics service;

• Importing restrictions on Chinese-built vessels and maritime services;

• Enhanced scrutiny of Chinese investments in U.S. maritime and logistics sectors; and

• Supporting domestic industry through federal investment and incentives for U.S. shipbuilding and logistics firms.

The tariff burden for vessel owners and operators has gained the greatest attention, the proposal of which will impose tariffs in two phases. The first phase is intended to begin on October 14, 2025, and Chinese vessel owners and operators would pay $50 per net ton landed at U.S. ports, which escalates annually until reaching $140 per net ton in 2028. All other vessel operators of Chinese-built vessels would pay the higher of $120 per container or $18 per net ton landed at U.S. ports, which escalates annually until reaching $250 per container or $250 per net ton in 2028. The second phase is intended to begin on April 17, 2028, so that total LNG exports on U.S. built, U.S. flagged, and U.S. operated vessels must meet 1% of all utilized vessels, which then steadily escalates to 15% in 2047.

Considerations for U.S. Businesses and Stakeholders

The USTR’s newly proposed rule is more targeted in its application and timeline than earlier proposals. The potential for short to mid-term cost increases on the U.S. trades is nonetheless real because Chinese-made vessels and operators currently hold a significant share of the global shipping market. The long-term view is that a reinvigorated maritime industrial base in the U.S. coupled with and a diversified fleet across steamship lines may yield economic and strategic advantage for domestic stakeholders. The potential for retaliatory and countermeasure efforts from China is also real and could negatively impact U.S. trades as well as overseas operations.

One thing is certain. This action by the USTR marks a decisive shift in U.S. trade policy, reflecting a broader strategic effort to confront systemic practices in the maritime sector. The Benesch team is closely monitoring USTR developments from the perspective of our broad experience in ocean contracting, counseling shippers, intermediaries, and carriers, and developing trade and compliance strategies that can help market participants reduce their net exposure and lessen the effect of supply chain disruptions.