Trump Admin. Proposing Requiring US-Built Ships to Handle Some Exports
The U.S. government is considering requiring a small proportion of exported goods, both containerized and not, and including liquified natural gas, to be carried on U.S.-flagged ships by U.S. operators, with the proportion climbing over time, and, eventually, with U.S.-built ships also required.
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These mandates are part of a Section 301 investigation on Chinese subsidies to its shipbuilding, maritime and logistics sectors, which the administration says burdens U.S. commerce and leaves it vulnerable due to overreliance on a global rival.
The Federal Register notice says that "appropriate and feasible action may include one or more" of the options it lays out. The notice has not yet been published, but was made public after 6 p.m. EST on Feb. 21.
One set of options says that in 2025, 1% of exports will have to be on U.S.-flagged vessels by U.S. operators; and after two years, it has to be 3%. After three years, 5% have to be U.S. flagged, and 3% have to be on U.S.-built ships, and after seven years, 15% have to be U.S. flagged, and 5% U.S. built.
A different option says "U.S. goods are to be exported on U.S.-flagged, U.S.-built vessels, but may be approved for export on a non-U.S.-built vessel provided the operator providing international maritime transport services demonstrates that at least 20 percent 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."
Currently, shipments between U.S. ports -- including to Hawaii and Puerto Rico -- are required to go on U.S.-built ships, under the Jones Act.
The Office of the U.S. Trade Representative said it's asking commenters to offer opinions on "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. In commenting on proposed actions, 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."
USTR will hold a public hearing on the proposed actions March 24, and the deadline to request to appear there is March 10; comments are due by March 24. The docket number for written comments and rebuttal comments is USTR-2025-0002. The docket number for requests to appear is USTR-2025-0003.
The Section 301 investigation was initiated after a request from shipbuilding and metal unions during the Biden administration (see 2404170029); that request suggested a $1 million docking fee.
Thepropasl notice said that China decided it wanted to dominate in shipbuilding and logistics, and has gone from 5 percent of global tonnage in 1999 to more than 50% in 2023. Chinese companies own 19% of the commercial fleet worldwide. It said that kind of dependence is risky for the U.S.
Peter Harrell, a former Biden White House supply chain resilience strategist and sanctions expert, posted on Linkedin that this notice is at least as big a deal as the changes to investment screening also announced late Feb. 21 (see 2502240051).
He wrote, "If this comes into effect, it will very likely provide strong incentives for international shipping lines to use Japanese and Korean shipyards, as well as incentives for U.S. shipbuilding. It'll also be interesting to see how operators try to game the system through complex corporate form and ownership transactions...something many shippers are already adept at. Plus, we have to expect that it will drive up shipping costs to and from the U.S., though likely at rates that, while being noticed by industry, are not specifically felt by U.S. consumers."
Vespucci Maritime CEO Lars Jensen posted on Linkedin that the proposal left him "somewhat speechless."
Jensen, who is based in Copenhagen, said, "The economic burden on US exporters and importers will be huge." He added, "If the intention is to drastically increase costs for US importers and make US exports uncompetitive, this proposal is likely to do the job."
Some U.S. exports are low-margin such as hay, and so it's not clear whether they would still be exported if shipping prices were substantially higher.
The proposal doesn't talk about the trade-offs to importers or exporters, but its aim is to create economic incentives to benefit the U.S. cargo shipbuilding industry and allied countries' shipbuilding industries, and to provide a counterweight to China's intervention in its shipbuilding market; and, at least nominally, to convince China to stop subsidizing its shipbuilders and logistics industries.